Click here to listen to Rick’s column: Download doing_business_with_friends.mp3

Which is likely to be the wiser business deal�one with a friend or one with someone you don’t like? All else being equal, you might be better off doing business with the person you dislike. Making business deals with friends can carry a high risk for both the transaction and the friendship.

A case in point. The son of one of my clients set out to buy a house from a couple who were friends of his. The deal was made informally, without the involvement of attorneys or real estate agents. The house needed some updating and repairs before the buyer could move in.

The buyer was assured by his bank that he would have no trouble obtaining a loan. However, the process was going to take longer than either he or the sellers expected. If he waited until after the closing to make repairs, he would have trouble getting the house into livable condition before he had to be out of his rented apartment. The sellers assured him that he could go ahead and do the repairs before the closing.

The buyer, despite his eagerness to get into the house, realized the inherent risk in spending money to update a house he did not own. He came up with a plan he thought would protect both parties. He drafted an amendment to the purchase agreement specifying that, should the purchase not go through, the sellers would reimburse him for the cost of any repairs he had made.

The sellers refused to sign the agreement. How, they asked, could the buyer not trust them? They were going out of their way to be helpful by letting him have access to the property before the closing�and he wanted them to sign a contract? They weren’t willing to accept the risk of having to pay for the repairs if the deal failed, even though they would get their money back by increasing the price of the updated house if they had to put it back on the market.

The buyer wisely decided his best choice was to wait until after the closing before he so much as washed a window in the house. Yet his attempt to get an agreement in writing left all the parties angry. The transaction survived, but the friendship didn’t.

In this case, the buyer’s attempt to get a written agreement about the repairs was a good idea with bad timing. Had it been included in the original purchase agreement, the parties might have been able to negotiate a satisfactory arrangement.

The moral to this story isn’t necessarily, "Don’t ever do business with a friend." As someone with clients who become friends and friends who become clients, I know that business relationships among friends are common. I also know they can and do work well.

The moral is to proceed with caution and common sense. The wisest approach is to put the transaction on a businesslike basis from the beginning. This includes involving professional advisors as appropriate, just as you would with any transaction. It’s far easier if both parties start out with the expectation that agreements will be put in writing and standard business procedures will be followed. Trying to switch from friendship to business in the middle of a transaction only creates mistrust and misunderstandings.

If you begin discussing a business deal with a friend, and that person is not willing to proceed in a businesslike manner, you know up front that this arrangement is not likely to work. Then you can change your mind before you jeopardize both your investment and your friendship.

Just a reminder for KFG clients to send us a copy of  your 2005 tax return when you have it completed and filed.  You can fax it, email a scanned copy, or snail mail it to us in care of Darla.  Thanks.

Click here to listen to Rick’s column:  Download your_call_is_important.mp3

Our phone system via the Internet. Even screening for unwanted sales calls can now be automated. The cost ranges from $10 a month for a residential phone to $1,500 a year for a small business like KFG.

Being able to get my voice messages via my Blackberry was almost enough to seal the deal right then and there. Still, I called several local phone companies to see what a typical digital system would offer. Interestingly, I found out that a digital system can provide almost everything an online system does. The initial cost is considerably higher, as you’ve got to buy the equipment. However, if you can afford the up-front expense, it is cheaper in the long run than the annual fee of an online provider.

One idea I’ve considered for several years is an automated phone system. I say “considered” because rambling around in some firm’s automated telephone system is one of my pet peeves and often leaves me screaming, “I just want to talk to a human!” Still, eliminating this time-consuming task could free my staff to be more efficient. For example, we get at least two sales calls a day from all types of financial wholesalers. Screening those calls alone could save us 10 minutes a day, or 40 hours a year.

It became clear to me that I needed to find out how my clients felt. Turning to technology for the effortless answer, I created an eight-question survey at www.surveymonkey.com and emailed it to my clients. In two days a majority had responded.

The result? Most considered it important to have a live human answer the phone. Most also said they would be okay with automation if it would result in a very short and easy commute to a human being.

My business is very “high touch,” delivering personal service. My assumption is that my clients deserve to speak to a human when they call. I also know they deserve the good service that comes with higher staff efficiency.

It’s a dilemma. For now, my search for the right solution continues.

Our Tuesday workshop is almost full.  We have two seats left for each session.  If you would like to attend, give us a call today at 343-1400 or go to the website and register there.

We are experiencing an inordinate number of "non-responses" to recent email requests for updated information for upcoming reviews.  Please check your spam blockers and make sure that you approve the following email address, which is Darla’s address:

darla@kahlerfinancial.com

Please be sure that you are receiving email from this address. As always, we would appreciate your timely response to our requests for updated information. Our goal is always to have the most accurate and updated information possible on your accounts.  For those assets that are not held through TD Ameritrade (like your 401(k)’s, life insurance policies, annuities, real estate, etc.) our only source of accurate and updated information is you.

Thanks to the 66% of you who responded to our recent on-line survey about our phone system!

In that survey, we asked you how important it was that your incoming calls were personally answered. Over 90% of you said it was important or crucial to have the phone answered personally. And about two-thirds of you still said it was important or crucial to have a person answer the phone even if it meant increased fees or lower efficiency.

However, the majority of you said it would be okay to have your incoming call answered automatically if the message was short and you could reach a live human being easily. Here were some of your comments:

• "Having an automated greeting would only be tolerable if it was BRIEF, if the system made it easy to reach real people, and most of the time you reached those people rather than their voicemail."
• "KFG has a reputation for high end service, and being a cut above the mainstream. An automated phone system would take you down a notch.
• "A lot of automated greetings are way too long. If it could be precise and to the point, we would tolerate it more."
• "I just don’t want to be put through a lengthy automated phone routing, like one gets when one calls so many places these days."
• "We’re always greeted and helped in a most timely and friendly manner. Unless this will be a money saving or time saving deal for Kahler, I’d say keep it as it is."

I am still researching phone systems and options and am still undecided about the eventual direction we will go. Right now, I am leaning toward answering our phones personally most of the time and having a very efficient automated system that will answer them when everyone on the staff is busy in client meetings or on the phone.

Again, thank you so much for your input. If you hadn’t completed the survey, or you have something more to add, please feel free to make additional comments here.

CLICK HERE TO LISTEN TO RICK’S COLUMN: Download can_i_afford_it.mp3

"Can I afford this?" It’s a question we commonly ask when we’re considering a purchase. That’s true whether "this" is a four-dollar fruit smoothie or iced coffee, a suit on the clearance rack, an expensive pair of shoes, a vacation cruise, a weekly housecleaner, or a new car.

Honestly, for the majority of my clients, the literal answer to that question would generally be "yes." Many of them are retired or close to retirement age, and they have assets and cash flow at a sufficient level for them to be able to buy or do most of what they might want.

If you have a two-million-dollar investment portfolio and an income of $50,000 to $100,00 a year, of course you can afford things. You could walk into a dealership and buy a brand-new Hummer, or you could book a cruise to any place you wanted to go. And it’s absurd to say you "couldn’t afford" an expensive cup of coffee any time you wanted one. Heck, you could even go whole hog and have a scone or a muffin with it.

Yet, if I went through the list of examples in the first paragraph and asked my clients whether they could afford each one, a good many of them would answer "no" to several.

However, they wouldn’t literally be saying, "I can’t afford that." More accurately, it would be, "To me, that isn’t worth what I would have to pay for it," or, "There are other ways that I would rather spend my money."

When you decide whether to spend a certain amount to buy or do something, you aren’t only thinking about how much disposable income you have. You are deciding whether the amount you spend will bring you an item or experience that is of value to you. That’s a separate question, one we don’t often think of in those terms.

Just because you could afford to buy something at full price doesn’t mean you think it’s worth full price. That’s why many of my wealthier clients continue to shop for bargains and to stop and think before they buy. That’s why some of them make a habit of buying clothes of excellent quality, but waiting until they are on sale. That’s why others travel in the off season or find other creative ways to see the world on a budget.

The flip side of this idea, of course, is that no matter how much of a bargain something might be, it’s of no value to you if you don’t want it. For me, a steeply discounted cruise represents a wonderful opportunity for a family vacation. If you get seasick in the bathtub and think the only way to get away from it all is to go backpacking in the mountains, that bargain cruise would give you no value at all.

What if you aren’t currently in the enviable position of being able to afford most of what you want? Learning to ask yourself the right questions before you buy might help you get there sooner.

Don’t limit your thinking to "Can I afford that?" If you have $20 of disposable income in your wallet, you probably can buy the movie popcorn or the Italian soda. Try asking instead, "Will this give me real value for what I spend?" or, "Will I get more value if I spend that money another way?"

You might still decide to get the popcorn, or instead you might put the money toward an IRA, a health club membership, or next week’s groceries. It all depends on what value you feel you’re getting for your money.

CLICK HERE TO LISTEN TO RICK’S COLUMN: Download bloomberg_rates_kfg_top_planning_firm.mp3

I recently came across a quote from award-winning writer Robert Silverberg that pretty much summed up how I wanted to open this article:

“My temperament is not inclined toward more self-promotion than is absolutely necessary for my professional well-being.”

Those of you who know me well, know that I let life keep my ego in check. Occasionally however, some exciting news shines down upon us here that is somewhat difficult to suppress. And since it affects you and your decision to have Kahler Financial Group provide you with financial planning and investment services, I feel it is appropriate to share it.

In the August 2006 issue of Bloomberg’s Wealth Manager’s magazine, Kahler Financial Group was honored as one of the top financial planning firms in the nation.

The survey, which ranks firms by the size of the average client’s assets, ranked Kahler Financial Group as the largest financial planning firm in a seven state area. Those states include: South Dakota, North Dakota, Montana, Utah, Wyoming, Nebraska, and Iowa. Add the state of Minnesota, and shockingly, KFG is the second largest firm in the surrounding eight state area and third in a ten state area when you add Kansas and Oklahoma.

Bloomberg limits their listing to the 400 planning firms in the nation. When compared to the entire United States, KFG is 126th, up from 212th last year.

Now, here is another startling fact; KFG is the largest or second largest financial planning firm in over 50% of the United States, that’s 26 states in all! Here is a complete list of those states and our ranking withing the state:

• Maine – 1st
• New Hampshire – 1st
• Kentucky – 1st
• Rhode Island – 1st
• Mississippi – 1st
• Arkansas – 1st
• West Virginia – 1st
• Idaho – 2nd
• Oregon – 2nd
• Louisiana – 2nd
• Vermont – 2nd
• Conneticut – 2nd
• New Mexico – 2nd
• North Carolina – 2nd
• South Carolina – 2nd
• Nevada – 2nd
• Wisconsin – 3rd
• Michigan – 3rd
• Tennessee – 3rd
• Alabama – 3rd
• Missouri – 4th
• Colorado -5th
• Texas – 5th

I just can’t help but to be especially proud of our team here at KFG, your team actually, and the stellar work that takes place here. Once again, we wish to thank you for your continued business and trust. As important as this news is to us, we realize that it would not be possible without our clients and our support in the business community.

I wish you a happy and safe summer, and I look forward to speaking with you soon.

Download not_your_mothers_medicare.mp3 CLICK HERE TO LISTEN TO RICK’S COLUMN: 

By now, Medicare Part D is old news. Medicare recipients have picked their way more or less successfully through its tangled thickets and managed to enroll in one or another of its many drug plans.

That doesn’t mean, however, that you can breathe a sigh of relief and assume you’re finished with the complications of modern Medicare. Enter Medicare Advantage, formerly the plan known as Part C.

Some significant changes have been made to this plan for 2006. If you use Medicare yourself, or someone in your family does, you may already know about some of these changes. They appear to be part of a growing trend of offering more options within Medicare and doing so through private businesses.

The original Medicare program is still available, and for many people it still may be a good choice. Those enrolled in this plan usually will also need a Part D plan to pay for prescriptions and a private Medigap policy to cover copays, deductibles, and other gaps in basic Medicare coverage.

Those choosing the new Medicare Advantage instead of traditional Medicare do not need to have separate Medigap coverage. The types of Medicare Advantage Plans include:

· Health Maintenance Organization (HMO) plans. These require that you receive care from medical providers within a designated network. Most of them include drug benefits.

· Point of Service (POS) Plans. Like HMO plans, these have a network of preferred providers. They also provide reduced benefits for providers or facilities outside the HMO network and may or may not offer drug benefits.

· Regionally Expanded Preferred Provider Organization (PPO) plans. These are similar to POS plans but cover services by network providers in a larger geographic area.

· Provider-Sponsored Organization (PSO) plans. Instead of a network, these cover services provided by physicians who are part of a particular organization, such as a regional hospital.

· Medical Savings Accounts. This may be an option for some Medicare recipients.

The details of these plans are far too complicated to describe fully here. What is important is to become aware that they are available. If you or someone in your family are covered by Medicare, it would be wise to find out more about these new options. Even if you have had a traditional Medicare plan for years, that doesn’t necessarily mean it is still the best coverage for your needs.

One of the best places to find out more is through the Medicare website at medicare.gov. Another source of valuable information is the Medicare and You 2006 booklet, which current Medicare recipients should have received in the mail. If you don’t have this, you can download it from the website or call 800-633-4227 (800-MEDICARE) and ask for a copy to be mailed to you. You might also be able to get a copy at a local senior citizens’ center.

The idea of wading through pages of information to find out more about Medicare plan options is not likely to be appealing. It’s a challenge to keep up with the changes in the system. Still, making the effort can be worthwhile. The more you know, the more likely you are to be able to choose the plan that best fits your needs.

If you are currently on Medicare, keeping up to date may mean reviewing your own plan periodically, asking questions, and getting help from friends or family members if you need it. If you have parents on Medicare, you might offer to help them do some research. This will even have an extra benefit for you—just think how knowledgeable you’ll be by the time it’s your turn.