This week, Rowene in Oklahoma thinks it's time to dump her stock broker and find a new one -- but she's not sure how to go about it. In Ohio, Roger is trying to find out just how much the average American pays in federal state and local taxes.
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How do I go about changing stock brokers?
-- Rowene H., Stillwater, OK
Ask around. Get a few names. And then go talk to them.
Finding a good broker is a lot like finding a good doctor. You need to spend a little time first to find out if you like them -– and trust them. A lot of what makes the relationship work is the chemistry, and only you can decide whether it works or not.
Unfortunately, a lot of brokers press pretty hard for your business from the time they say hello. So make it clear from the top (right after: “Not bad, thanks, how are you?”) that you’re talking to several brokers and haven’t made up your mind. Don’t be afraid to call back with questions you might have forgotten about. And we mean any questions -– no matter how basic they may seem.
The responses to these questions will tell you a lot about a prospective broker. If they don’t have time to answer all your questions before you sign on, how much of their attention do you suppose you’ll get after you’ve turned over your money?
One of the most important questions is: how -– and how much -- do they paid? Many people who spend hours grilling a car salesman about each little item on the price sticker don’t have a clue how much they’re paying their broker in fees. And brokers rarely volunteer this information.
Most brokers who are managing your account -– advising you which stocks or funds to invest in –- get a fixed percentage of the account total. So as your account grows, so does their fee. But they may also get paid extra fees to steer you to funds or investments offered by their firm. (You don't want that: you want someone who picks the best investment -- regardless of where it's coming from.)
Some brokerage firms also steer their customers' stock transactions to their own trading desks to generate commissions. Or they get paid by another trading firm to steer trades their way -– a perfectly legal practice called “payment for order flow.”
So take the time to find out where your money is going. And whatever you do, don’t sign anything or hand over financial statements on the first meeting. Not until you’ve met a few candidates and had a chance to size each of them up. Then decide.
A lot of people skip this step and don’t take the time to get to know a broker before getting right down to business. Sure, it takes a little more work to interview several brokers first. But it’s your money. Before you turn it over to someone –- whose advice could make or lose you a bundle -– you should know a lot more about them than what’s on their business card.
(After this column was published, we heard from a state securites regulator in Vermont who made an excellent suggestion: before you hire a broker, check with securities regulators in your state. You can find out if the broker is properly registered, how long they've been in business and whether or not they have a record of complaints or diciplinary actions. You can find the address and phone number for the securities regulator in your state at the North American Securities Administrators Association's Web site.)
SHAMELESS IN SEATTLE
How often can a person file Chapter 7 (bankruptcy)? If I file Chapter 7 on people who have loaned me money, and I later form a LLC, and get them to "invest" in the LLC, can the LLC then file against them?
--Dana T.,Seattle, Wash.
We have no legal expertise in bankruptcy law. But if you solicit money from “investors,” knowing full well that you plan to run off with the money by declaring bankruptcy, it seems to us you would be deceiving those investors and could be convicted of fraud.
Or at least you should be.
I have often wondered: what is the total tax burden on the average household? There are a lot of hidden and buried taxes in products we buy and those that we use: gasoline, telephone, electric and water as well as consumer goods that contain the taxes that corporations must pay as well. I have never seen this figure computed.
-- Roger S., Hamilton, Ohio
There are several ways you could come up with this number, but our favorite is the annual calculation done by the Tax Foundation known as Tax Freedom Day. That’s the date each year that represents the number of day’s worth of income required to pay your share of state, federal and local taxes.
This year, Tax Freedom Day came on April 17, which means it took 107 days worth of your annual income (or 29.1 percent) to pay your total tax burden. (In Ohio, your Tax Freedom Day arrived on April 14, just in time to file your return.)
The Tax Foundation’s annual calculation also breaks down where that money goes: Uncle Sam gets 70 days worth of income (19 percent) and state and local government gets the rest (10.1 percent, on average.) Of the total, 38 days labor go to pay income taxes, 30 days to pay federal and state insurance programs (like Social Security and unemployment insurance.) Sales and excise taxes eat up 16 days of your paycheck, property taxes cost you 11 days of labor, and corporate taxes represent 9 days. About 3 days are spent earning the money to pay “other” taxes.
After rising steadily through the 1990s, the average tax burden peaked in 2000, when it took until May 3 (or 33.6 percent of annual income) to pay the average tax bill. Thanks to tax cuts and the recession of 2001, the tax burden fell sharply, but it began rising again last year.
Who was president of Proctor & Gamble in 1993?
-- Dewey W., Lancaster, Texas
Edwin L. Artzt lead the consumer products giant from 1990 to 1995.
Among the company's milestones on his watch were the introduction of a new corporate logo, a major restructuring, annual sales of $30 billion and global expansion that saw more than half of all revenues generated outside the U.S.
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