Time Is Money (And Health)
The key to a successful financial advisory practice and, evidently, to good health can be summed up in two words--time management. According to a survey of nearly 300 advisors by the Financial Planning Association and Vestment Advisors, principals at the most profitable practices (which the survey defines as those earning more than $500,000 a year) are good delegators who let others handle much of the nitty-gritty of running an office so they can focus on developing client relationships. The upshot: More of their time is focused on the money-making aspects of the business even as they work fewer hours, which in turn gives them more time to exercise, do their own thing and, presumably, be more healthy.

Advisors who don't delegate as well spend too much time doing office management chores at the expense of meeting with clients. As a result, they spend more time on the job while making less money, which heaps on the stress while leaving less time for exercise or quality time for themselves.

"We find an amazing amount of stress among advisors," says Peter Vessenes, CEO of Vestment Advisors, a financial industry consulting firm in Chanhassen, Minn., that he operates with his wife, Katherine. He recalls working with one 30-year-old advisor a couple of years ago who was about to become a $1 million producer and was taking home $300,000 annually, but was on high blood pressure medicine and sleeping pills. Vestment approached the FPA about doing a study to gauge the health of financial advisors as a whole.

The survey of 297 FPA members was conducted in August, with follow-up questions in mid-October to account for this autumn's market mayhem (or at least the early part of it). Among the findings from the report, 2008 Health of Advisers, 37% of respondents said they were in terrific health. The remaining 63% said lack of time was preventing them from doing required things to improve their health.

The report makes a direct correlation between poor practice management, too much stress, and less-than-ideal health. Of those advisors earning less than $500,000 a year, 79% said paperwork was a cause of stress. That compares with 19% who earn more than $500,000. Among advisors below the $500,000 mark, 71% say that a lack of downtime is creating stress at home. That figure was 9% for those earning more than $500,000, who also were 15% more likely to exercise an hour or more a week than the sub-$500,000 group. And of the 10% of advisors who said they were unhappy with their professional life, none came from the $500,000-plus group.

Regardless of income, last year's severe market downturn impacted advisors across the board. According to the follow-up questions in October, 90% of respondents said market conditions increased their stress levels, and 31% said the market had affected their sleep. Part of that came from increased workloads as advisors spent more time communicating with clients during those difficult times. Before September 1, 14% of advisors spent 15 to 19 hours a week meeting with clients and 9% spent 20 to 24 hours a week. As of mid-October, those numbers increased to 23% and 17%, respectively. And while just 3% of advisors spent more than 25 to 29 hours a week with clients before September 1, that rose to 9% in October.

As of September 1, 34% of advisors said they worked 41 to 50 hours a week, and 31% worked 51 to 60 hours. This includes weekends and working from home. Twelve percent said they worked 61 to 70 hours, and nearly 5% said they worked at least 71 hours a week.

But all in all, advisors appear to be a healthy lot. "We compared our findings with statistics on the overall population from the Centers for Disease Control, and financial planners exercise more, eat healthier and smoke less than the average American," says Rebecca King, the FPA's research business development analyst.

401(k)s Getting KO'd
You'd think 401(k) plans would rank right up there with mom and apple pie, but the nasty downturn that decimated the 401(k) landscape has stoked a backlash from people who claim defined contribution (DC) plans have failed in their role to fund the great American retirement. Critics say DC plans don't get people to save enough, don't prevent people from making bad investment decisions and, in the case of the recent downturn, can ravage portfolios just as people near retirement age.

"I can't think of a worse retirement system than the one we have," says Alicia Munnell, director of the Center for Retirement Research at Boston College. "Even in the best of circumstances I never thought 401(k)s would produce enough retirement income. Even before this financial crisis it was clear we needed a new tier."

The new tier of retirement accounts described by Munnell would supplement declining Social Security replacement rates for low-wage workers and provide some security for middle- and upper-wage workers relying mainly on their 401(k)s to supplement Social Security. This idea is a work in progress with several questions needing to be answered, such as who's responsible for the contributions; should payments be in lump sums or annuities; and should this then be in a DC format dependent on market performance or an account that can provide a targeted return.

In October, two Congressional hearings that examined the nation's current retirement system essentially put DC plans on trial as witnesses pointed out their flaws and posited possible alternatives. One witness, Teresa Ghilarducci, a professor at The New School for Social Research in New York, proposed a plan where people contribute 5% of salary into a guaranteed retirement account overseen by the government. Investors would be guaranteed an annual 3% return, adjusted for inflation.

In the 12 months between October 9, 2007 and October 9, 2008, the value of equities in retirement plans sank about $4 trillion, evenly divided between defined contribution and defined benefit plans. Of that, $1.1 trillion evaporated from 401(k) plans. Which leads to the question: Why are people picking on 401(k) plans when the bear market has hammered retirement assets across the board?

"IRAs are in the same boat," says Michael Scarborough, president of Scarborough Capital Management, which specializes in 401(k) advisory services. "I'd submit that 401(k)s are in a helluva lot better position because people are completely on their own when they make IRA investment decisions. At least with 401(k)s, an investment committee reviewed the investment choices and there's a broad smattering of options."

Steven Lipper, director of retirement marketing at Lord Abbett, says he believes the angst directed against 401(k)s is driven by the need to vent anger and affix blame for account balances that went south. "There are only three candidates to provide retirement security--government, employers and yourself," he says. "If you don't want to do it yourself, that leaves the other two. If the government funds your retirement, it'll be done through an inefficient intermediary, and I'm not sure that solves the problem."

Pamela Hess, director of retirement research at Hewitt Associates, says 401(k)s have been continually tweaked since they were introduced in 1978. "We're refining it more and more, and it's getting to a good place," she says. "But given the realities of Social Security and pension plans, 401(k) plans are the primary retirement savings vehicle for most people. We have to make it work because there's nothing else out there."

Morningstar Names Managers Of The Year
Morningstar named its 2008 fund managers of the year, although it was a stretch to call any of the recipients genuine "winners."

Fund performance was so dismal last year, for example, that the domestic stock manager of the year, Charlie Dreifus of the Royce Special Equity Fund, lost nearly 20%.

"Why give out awards when everyone's year-end statement is swimming in red ink?" Morningstar added in announcing the awards. "Because limiting losses was difficult to do, yet incredibly valuable." Morningstar also noted its fund manager awards are meant to recognize long-term performance and strong stewardship, not just a single year's results.

In naming Dreifus domestic manager of the year, Morningstar cited his dedication to buying "only stocks that trade at a steep discount to his intrinsic-value estimates." He also demands high returns on invested capital and clean accounting.

"Thus, when accounting scandals hit and people lose faith in companies' risk controls, Royce Special Equity is a good place to be," Morningstar said.

The fund lost 19.5% in 2008, which was 1,400 basis points better than the category average. The fixed-income managers of the year were Bob Rodriguez and Tom Atteberry of the FPA New Income Fund, who were credited with predicting the mortgage meltdown.

"From his perch in Los Angeles, Rodriguez had a good view of the insane housing speculation and the crazy mortgages behind them," Morningstar said.

The fund steered clear of risk before the meltdown hit in 2007, which cost it returns in the short run, but led to a gain of 4.3% in 2008. That's 920 basis points better than the average intermediate-term bond fund. "That's a remarkable feat in the bond world, where winners and losers are usually separated by 30 basis points," Morningstar said.

The international managers of the year were David Samra and Dan O'Keefe of the Artisan International Value Fund. They did an "outstanding job applying a deep-value strategy overseas," Morningstar said, adding that investment discipline limited their losses to 30.1% in 2008. "Although that's not pretty, it's a far sight better than the 47% loss posted by the average foreign small/mid-value fund and the 43% loss at MSCI EAFE," Morningstar said.

LTC Costs Up, But Increase Has Slowed
Long-term health care (LTC) price hikes have basically increased in line with inflation since 2002, according to a study of 2008 LTC costs by John Hancock Life Insurance Company. That's a slower average growth rate than during the 1990s, but LTC remains a pricey proposition that's only going to get pricier.

Last year, the average cost of a private nursing home room was $204 a day, or $74,460 annually, up an average of 3.2% per year since 2002. The average cost of a semiprivate nursing home room was $183 a day, or $66,795 annually, for an average annual increase of 2.7% during that period.

"In the 1990s, the costs of care, particularly nursing home care, rose at a far faster pace," said Marianne Harrison, president, John Hancock Long-Term Care Insurance. "Nevertheless, at this rate baby boomers are looking at spending a startling $750,000 to $1.25 million for a three- to five-year long-term care event 30 years from today."

The average monthly charge for an assisted-living facility in 2008 was $2,962, or $35,544 a year. That jumped an annual average of 4% since 2002. Meanwhile, the cost for home health aides last year was $19 an hour, a 1.4% average annual increase during that period.

Harrison suggests buying just the basic amount of coverage needed without a lot of frills, adding that a total benefit pool lasting three to five years with a daily benefit reflecting the current cost of care in the patient's area, along with a consumer price index-linked compound inflation option, should provide affordable coverage that will grow with time.