Steve Braun

Jul. 14, 2006 - Cool Financial Tools

I recently came across some cool financial tools at FidelityLabs, a part of the Fidelity Investments empire best known for its mutual funds.

The first tool is called "Savings Rate Finder" and it is pretty slick.

By simply entering your zip code, the Savings Rate Finder will list the banks in your area that offer the highest interest rates on local savings accounts, money market funds, and certificates of deposit (3 months to 5 years; various investment amounts). There is also an option to compare online savings accounts. Results are displayed quickly in order from the highest interest rates to the lowest.

The second tool is called "Free Checking."

Again, by just entering your zip code, this tool will list the banks in your area that offer free checking accounts. Of course, "free" can mean many different things, including the fact that you may still pay some fees. (Go figure! But that's banking for you.) So this tool allows you to click on the specific account name to see all of the details about the minimum initial deposit amount, various fees, and other services offered (i.e., online banking, bill pay, debit/credit cards, etc.). It also provides a phone number and web link for further information.

What I Like Best

Most of us just don't have the time, energy, or knowledge to shop around for the best interest rates or free checking accounts at various banks. Tools like these put the power in consumers' hands with considerable convenience. It sure beats sifting through the phone book, search engine results, bank websites, or making a bunch of phone calls.

A Few Caveats

Keep in mind that these tools are experimental and are in "beta" testing. They do have some quirks and bugs to work out.

My biggest complaint is data integrity. I happen to know (because it's my business to know) that much of the data displayed in the Savings Rate Finder is at least 2 weeks old. That also makes me question the accuracy of the Free Checking data. Fidelity can do better and I hope they eventually take care of this issue. For the time being, just be sure to follow up and check out the facts with each bank before you make any commitments.

One glaring hole is that there is no data on credit unions. Many times credit unions offer the most competitive interest rates and free checking accounts. Of course, anyone can open a bank account but credit union membership is usually restricted by some criteria. That may be the reason why Fidelity left credit unions out of the picture. Ideally, however, they should include credit union information.

Go ahead and give these tools a try. You may make or save some money. Leave a comment so others can benefit from what you've learned.

• Post A Comment!

Jul. 16, 2006 - Tools

Posted by Anonymous

What I would like is a retirement calculator that is more sophisticated than the average ones I've seen. For example, I plan to invest aggressively for the next 14 years, less aggressively for the next 6 years after that, retire, and then still invest so that I have a rate of return somewhat above the assumed rate of inflation. Most calculators take one rate until retirement, and then assume you will stop investing or assume you will continue to invest aggressively. I've played around with Excel, but it seems to me that I shouldn't need to be programming my own. Thoughts?

Shawn Abigail

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Jul. 17, 2006 - Reply to Shawn

Posted by stevebraun

I agree there is a need for such a tool. Unfortunately, most tools are simplistic as you state. They're so simplistic that they are almost useless.

I eventually created my own proprietary retirement planning model for use with my clients. It took about 6 months to develop but that's because I made it sophisticated and flexible to many situations. It essentially replicates the flow of income and investments over a person's life -- from the working years right through retirement. The model accounts for pensions, Social Security, and investments. On the investment side, there is also the ability to juggle investment returns as well as the mix of assets (stocks, bonds, cash, etc.). Taxes, mandatory distributions, determining which assets to spend first, part-time income, the sale of a business -- these are all things that are factored in as well. The list goes on.

You can probably create a similar model in Excel if you want to invest the time. Or, you could have me run a few scenarios for you. Contact me via email if interested.

I would caution you, however, about fluctuating expected investment returns based on your perceived risk-taking. For example, to assume that you will earn higher returns for taking greater risks over the next 14 years may lead you to a false sense of security. What if those returns don't materialize? You may be building your retirment plan on a pipe dream.

A more conservative approach would be to assume investment returns at or below historical averages for stocks, bonds, etc. Then, let your "risk-taking" be measured by the amount of exposure you take to different asset categories. For example, you might start out risky at 100% stocks. After 14 years you might knock that down to 60% stocks, 30% bonds, 10% cash. During retirement, you might opt for 40% stocks, 40% bonds, 20% cash. That way you don't have to guess at returns, but just alter you mix based on the amount of risk you want to assume. Your total portfolio return will then reflect your risk-taking.

Hope that helps.

Steve

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