Financial companies face new, strict rules

This article was originally published by Bankrate.com on Tuesday, July 7, 2009.

By Katherine Reynolds Lewis

Highlights
The proposal will likely change as it goes through Congress.
Officials hope the financial meltdown will spur passage of the proposal.
A new agency will be able to write rules that promote transparency.

President Barack Obama has proposed overhauling the U.S. regulatory structure to create a consumer-oriented regulator, consolidate existing agencies and set more strict rules for financial companies.

For individuals, the proposal offers greater consumer protection and relief from the hidden fees and confusing disclosure documents that have become commonplace in the market for mortgages, credit cards and other banking products.

Both houses of Congress must approve legislation for the plan to become law and the proposal will likely change along the way.

"There's going to be a big push to get it done before the end of the year," according to David Min, associate director for financial markets policy at the Center for American Progress, a Washington, D.C.-based progressive think tank. "A lot of it depends on how the banking sector does in the next six months."

Can You Believe What You Read on the Web?

This article was originally published by Parade on Sunday, June 21, 2009.

Recently, a man identifying himself as a representative of Belkin, a major technology company, offered to pay people to post five-star reviews of its products on Amazon.com. When the incident was discovered, Belkin President Mark Reynoso expressed "surprise and dismay" over "unethical practices like this," and the company took steps to have any tainted reviews removed from the site. Yet businesses do spend about $1.6 billion a year on "word-of-mouth" advertising, promoting their goods to bloggers and to people who use social-media websites like Facebook, according to the research firm PQ Media.

Now the U.S. government is considering requiring people who write about products or services on the Internet to inform readers if they received compensation.

The Federal Trade Commission expects to vote on new marketing rules this summer, which would be the first revision to its endorsement guidelines since 1980. "When you're being paid to promote a product, you usually have to disclose the relationship between you and the advertiser," says Richard Cleland, an FTC assistant director.

But even if the FTC tightens its rules, experts encourage people to remain skeptical when reading opinions posted on the Web. "Go and talk to other people you trust," says Paul Rand, president-elect of the Word of Mouth Marketing Association. “Google the authors and see what else they’ve written." If you discover that a writer only posts glowing reviews about one company's products, look for other sources of advice.

— Katherine Reynolds Lewis

Regulators Urged to Review Target-Date Funds

This article was originally published by Financial Planning on Thursday, June 18, 2009.

By Katherine Reynolds Lewis

Government regulators should standardize the naming of target-date funds and require mutual fund companies to assume a fiduciary duty in providing such funds to retirement plans, witnesses told a joint hearing of the Labor Department and the Securities and Exchange Commission.

"We believe there should be a consistent standard, although we don't believe there should be a mandate on investment options," said Mark Wayne, speaking on behalf of the National Association of Independent Retirement Plan Advisors. "Fund managers should explain in plain English what the landing point will be."

The plummeting market of 2008 cost investors dearly—up to 30 percent drops in some funds targeted to 2010—and has focused attention on target-date funds, since they are often the default choice in employer retirement plans.

Haggle anywhere -- even at Kmart

This article was originally published by Msn.com on Tuesday, June 9, 2009.

Retail prices are a lot more negotiable than you might think. But before you go out and try to play hardball to get a discount, learn the rules of the game.

By Katherine Reynolds Lewis

You see an item you want in your local big-box store. The price seems too high. You ask for a discount -- and you get it!

This scenario may seem far-fetched, but expert negotiators say it occurs every day in retail outlets across the U.S. With consumers restricting their spending, store owners need every sale they can close, even if it means accepting a smaller profit.

"Retailers, particularly a number of the high-end retailers, are in real trouble given the current recession, and they're willing to bargain," said Joel C. Huber, a marketing professor at Duke University's Fuqua School of Business.

That's not to say it's easy to win unadvertised discounts. The art of the haggle is an intricate dance, and you must know the steps before you venture onto the dance floor.

And you have to be willing to ask.

"The thing people don't understand about the retail industry, especially brick-and-mortar stores, is that prices aren't fixed," said Albert Ko, a co-founder of bargain-hunting site CheapCheapCheap.com. "With the economy, it's all about the numbers and getting goods sold. . . . They're willing to listen and work with you."

Parents flock to prepaid college plans

This article was originally published by Msn.com on Friday, Feb. 6, 2009.

The bear market has made 529s that let you pay tomorrow's tuition at today's prices attractive. But they come with strings -- and states might not be able to keep their promises.

By Katherine Reynolds Lewis

If you thought paying for college was hard before last year, talk to some parents who had invested their kids' college cash in the stock market.

The past year's losses have crushed many parents' dreams of saving enough for their children's higher education or even a substantial chunk of that bill.

That's why a growing number of parents are turning to prepaid 529 plans, state-sponsored programs that let you pay today's prices for future tuition. Although some plans require students to attend a state university, most states let you use the money at any accredited higher-ed institution.

"When everything's going well in the markets, people think they can go it alone," said Kathleen McGrath, the director of Pennsylvania's tuition account program bureau. "When things get rocky, that's when they want the safety of the prepaid plan."

The Great College Savings Fiasco

This article was originally published by Msn.com on Thursday, Jan. 15, 2009.

529 plans, sold for a decade as the 1-stop solution to paying for college, haven't performed as advertised. And for many families, there's a better option available.

By Katherine Reynolds Lewis

Mention "college savings" to a financial professional and you'll likely be steered to a 529 plan.

In the decade since these investment accounts were created, they've become practically synonymous with college savings. Savingforcollege.com and the College Savings Plan Network are exclusively focused on 529 plans, for instance.

But many parents who have invested in 529s, counting on the market to help cover the soaring costs of college, would've been better off putting the money under their mattresses.

The plummeting stock market has erased many if not most gains. The balance could be less than the parents have contributed. And parents of older children, in particular, don't have much time to make up losses before they need to pay tuition.

Margot Black, a Los Angeles writer and publicist, put $15,000 into a 529 plan for her toddler son, only to see the account lose 40% of its value in less than a year.

"It was heartbreaking to watch," Black said. "The 529 plan is sold to parents as the no-hassle investing fund. . . . I honestly thought we had done such a good job upfront that we could relax."

Simply put, 529 plans don't live up to the hype. Though they remain a good choice for some, you should understand the trade-offs and alternatives before putting your college fund into one of these heavily marketed plans.

What $2 Gas Means to You

This article was originally published by Msn.com on Thursday, Dec. 4, 2008.

The cost of driving has plunged since gasoline topped $4 a gallon in July. But if fuel is cheaper, why are airfares still so high? And can you lock in today's low prices?

By Katherine Reynolds Lewis

Falling gas prices offer a glimmer of hope amid the relentless bad news about the U.S. economy.

The nationwide average for a gallon of regular was $1.90 on Monday. Drivers in Kansas City, Mo., are enjoying what looks to be the nation's cheapest fuel at the moment, rapidly approaching $1.40 a gallon.

A $1 drop in the price of gas puts about $1,250 a year back into a typical family's wallet, said Scott Bernstein, the president of the nonprofit Center for Neighborhood Technology, and prices have fallen twice that much since their $4.11 peak in July. They're even a buck below where they were last Thanksgiving. "It's good news for cash out of pocket," Bernstein said.

The biggest winners? Poor and middle-class households that spend a disproportionate share of their incomes on energy.

"Those are the folks who are the most stretched, and in percentage terms, they'll get the biggest benefit," said Gus Faucher, the director of macroeconomics at Moody's Economy.com.

The respite at the pump buoyed consumer confidence in November despite persistent fears about a recession and job losses. "When gas prices went up, consumers really pulled back," said Dianne Kremer, an analyst at BIGresearch, a consumer research company.

Layaway Makes a Comeback

This article was originally published by Msn.com on Wednesday, Nov. 12, 2008.

No credit? No problem! Some businesses are dusting off a budget-friendly strategy familiar to your parents and grandparents. Now you can even get a replacement hip that way.

By Katherine Reynolds Lewis

After falling out of favor when credit was cheap and easy, the layaway is back.

"We have seen a huge increase," said Michael Bilello, the senior vice president of business development for eLayaway, which offers layaway plans for everything from big-screen televisions to hip replacements. "This is something fiscally responsible Americans are going to use."

Kmart even hired Kate Gosselin, a star of the reality television show "Jon & Kate Plus 8," to tout layaway as a sensible way to budget for Christmas while keeping gifts out of the house and safe from children's prying eyes.

Down Payments are Back

This article was originally published by Interest.com in October 2008.

If you're buying a home this fall, you'll need a down payment of anywhere from 3% to 25% of the purchase price, depending on your lender, your credit score and where you're buying.

Just a couple of years ago, almost anyone could get 100% financing. Down payments were a relic of the '80s and '90s, sort of like Pac-Man and grunge rock.

But such irresponsible lending is why foreclosures are at a record high, the banking industry is collapsing and the economy is headed for a serious recession.

How to Survive a Bad Economy

This article was originally published by Interest.com in September 2008.

It's hard to stay calm when every other day seems to bring news of another financial crisis.

A record number of families are in foreclosure, energy prices are soaring and hundreds of thousands of jobs have been lost this year. Banks are going bust and billion-dollar government bailouts are propping up much of the financial industry.

One thing is clear: The economy is in trouble, and that could mean less money for you and your family.