Three Local Churches Split From Denomination

Citing concerns over the Presbyterian Church's (U.S.A.) liberal direction, three local churches will be leaving to join the smaller and more conservative Evangelical Presbyterian Church.

For Covenant Presbyterian Church in West Lafayette, Ind., their dismissal was granted on Tuesday by the Wabash Valley Presbytery – a regional governing body in the PC (USA). The presbytery voted 115 to 2 in favor of dismissal.

The West Lafayette congregation, which has over 1,000 members, had been trying to leave the PC (USA) for more than a year but the presbytery had placed an administrative commission in charge of the church to prevent a split.

Similar events took place for First Presbyterian Church of Frankfort and First Presbyterian Church of Nappanee, which were both also granted dismissal this week.

David Henderson, pastor of Covenant and also part of the leadership for New Wineskins Association of Churches – a network of churches discontent with the PC (USA) – explained that there was concern the denomination was accepting a wider range of theological positions that local leadership didn't agree with, as reported by the Journal and Courier.

"There was also disagreement over what it meant to be faithful to Jesus' teaching in certain areas of ethics, such as in the area of sexuality," Henderson explained, according to the local newspaper.

The dismissal agreement with the Presbytery of Wabash Valley includes a payment of $975,000 by the three churches and a transfer of ownership by the presbytery of each church's property, the Journal and Courier reports.

"We were determined to let love have the last word, not disagreement or frustration or hurt. And I think it has," Henderson commented to the local newspaper.

The three churches will officially split on April 15, according to the local publication, and a joint closing worship service with the Wabash Valley Presbytery will be held around that time.

In recent years, a growing number of congregations have voted to leave the PC (USA) – the largest Presbyterian denomination in the country – and join the Evangelical Presbyterian Church. Some date the beginning of the exodus to 2001 when the General Assembly – the highest governing – would not affirm the singular saving Lordship of Jesus Christ. Also, a 2006 decision by the General Assembly that some believe allowed leeway for the ordination of partnered homosexuals led to more splits.

This year, the denomination's 173 presbyteries are voting on a proposal to delete language in the constitution that requires clergy to live in "fidelity within the covenant of marriage between and a man and a woman, or chastity in singleness." Approval by a majority of the presbyteries would allow for the ordination of non-celibate gays and lesbians.

[By Lillian Kwon, Christian Post Reporter]

Some Things I've Noticed About Pastoring

- It is a very rewarding position
- It is a very painful position
- It cost you your life
- One mistake can cancel a thousand rights
- There is no time clock it is 24 hrs a day 7 days a week and 52 weeks a year...
- Your mind is always on the church.
- It requires nerves of steel and guts to stand up to people who oppose the Vision
- Good people will become casualties of the Vision ... If they can't see it by now they never will
- You have to learn to say good bye
- Decisions are made not based on one person or one group of people but they are made by what is best for the Body(Congregation) as a whole. (This perhaps is one of the most difficult)
- Sometimes the right decisions are the most painful
- Somebody in the church always knows better

[from The daily story of a growing church by David Boggs]

Pastor Jim Bradford Is Selected To Lead The Assemblies of God

With An Emphasis on Church Planting

Less than a week after Assemblies of God announced John Palmer’s resignation as General Secretary, his replacement is named, Dr. James Bradford, who says he’s looking forward to the new challenge.

“The Assemblies of God is at a wonderful moment right now, nationally. We’re seeing the emergence of a lot of young leaders, very creative leaders. A whole new emphasis on planting new churches, revitalizing existing churches and I hope to especially be a part of fueling that process and encouraging young leaders.” says Dr. Bradford.

Dr. Bradford is currently the pastor of Central Assembly of God. To read Pastor Jim's blog, click on the list of pastor blogs in the right column of this Blog.

The Executive Presbytery unanimously appointed him and he’ll assume the duties of the General Secretary’s office immediately. Those duties include keeping records of the minutes, official documents and issuing the credentials for the 35,000 AG pastors and ministers. Bradford will continue as pastor of Central Assembly through Easter.

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Nepotism in the Church

In an organization which promotes very high standards of ethics and morality, the church is practicing nepotism as being acceptable. For years, church leaders have hired, promoted, paid, and protected their wives and family members - effectively doubling their household income. Leaders that pay their wife as secretary, administrative assistant, or office manager with church funds, claim the benefits of loyalty and confidentiality. God only knows how often it also protects secrecy.

Nepotism is the practice of allowing employment and economic policies that permit favoritism toward one's family. It includes giving favored employment positions to family members as well as encouraging business transactions with other family members.

I don’t think it’s possible for a leader to fairly evaluate the work of his or her spouse. Even if it were possible (and I don’t think it is), the simple perception of wrongdoing that arises in the minds of the others is reason enough to consider such relationships to be inadvisable and unethical.

Church leaders are more involved in the business of the church today than ever. Some even appoint their own Finance Committee (which opens the door to conflicts of interest, and closes the door to independent thinking and review). Some pastors even appoint their wife as local church Treasurer, a clear conflict of interest which should never happen.

Clergy leaders are expected to establish a reputation (and live up to it). Their conduct determines their reputation. And the people they serve expect their conduct to be scrupulous.

Conflict of interest refers to a situation where a person’s financial or professional loyalty or objectivity in doing his job may be compromised by an outside interest of the person. We are used to hearing the term used with respect to outside business ownership interests of executives or public officials. For non-executives, the concept comes up more vaguely in conjunction with issues like trade secrets, confidentiality, and non-compete clauses. The term also refers to nepotism.

Of all entities, the church should never cause or allow any decision, action, condition or organizational circumstance that is illegal, imprudent, or in violation of commonly accepted ethics. The church should be committed to strict compliance with all issues of morality and ethics. Committees have a duty to help protect the assets of the church and to report reasonable suspicions of non-compliance in the church. The church must be a place where the reporting of unethical situations is welcomed.

Leaders must be committed to providing an environment in which people will, in good faith, report reasonable suspicions of compliance violations in the church. Church members, committees, and employees of the church must be encouraged to attempt to resolve their concerns by reporting them to church leaders. If they feel uncomfortable addressing their concerns at the local level, or wish for any other reason to address them elsewhere, they should be allowed to make their reports directly to the highest offices of the organization. If that is not acted on, ethics violations could be reported to the public.

Church leaders should never allow conditions, procedures, or decisions that are unsafe, undignified, unnecessarily intrusive, or that fail to provide appropriate care and support, confidentiality and privacy. The godly leader would never cause or allow conditions that are dismissive, unfair, unsafe, unprofessional or undignified. He should never operate without written personnel policies that clarify personnel rules for staff, provide for effective handling of grievances, and protect against wrongful conditions such as nepotism and grossly preferential treatment for personal reasons; discriminate against any staff member; nor fail to apply the standards of the Church’s mission and values.

Accountability to God is vital, but people form their impressions of leaders and churches by looking at the outward appearances (1 Samuel 16:7). The basis for establishing and developing ethical standards is stated clearly by the Apostle Paul in 2 Corinthians 8:21 (NIV): “For we are taking pains to do what is right, not only in the eyes of the Lord but also in the eyes of men.” Or, as the New American Standard puts it in verses 20 and 21, “taking precaution that no one should discredit us in our administration of this generous gift, for we have regard for what is honorable, not only in the sight of the Lord, but also in the sight of men.” Standards, drawn from Scripture, are fundamental to operating with integrity.

The first sign of an unethical leader is when he begins accusing everyone else of being unethical, and attempts to create a secret environment. Look into that leader's ethics immediately. You will almost always find conflicts of interest and nepotism.

When it comes to ethical acts and decisions, church leaders have a special obligation that transcends that of, say, a corporate leader. Church leaders have a responsibility to make sure the leadership they provide is expansive, embracing not only diligence and accuracy but also imagination and creativity and an ethical dimension that addresses moral obligations and decision making.

Interestingly enough, nepotism began in the church and gained its name after the church practice in the Middle Ages, when some Catholic popes and bishops — who had taken vows of chastity, and therefore usually had no children of their own — gave their nephews positions of preference such as were often accorded by fathers to sons. Some nephews, however, were in fact illegitimate sons of popes – thus, in older dictionaries it is possible to find "nephew" defined as "illegitimate son of an ecclesiastic". Several popes are known to have elevated nephews and other relatives to the cardinalate. Often, such appointments were used as a means of continuing a papal "dynasty". For instance, Pope Callixtus III, head of the Borgia family, made two of his nephews Cardinals; one of them, Rodrigo, later used his position as a Cardinal as a stepping stone to the papacy, becoming Pope Alexander VI. Coincidentally, Alexander elevated Alessandro Farnese, his mistress's brother, to the cardinalate; Farnese would later go on to become Pope Paul III. Paul also engaged in nepotism, appointing, for instance, two nephews, aged fourteen and sixteen, as cardinals. The practice was finally ended when Pope Innocent XII issued the bull Romanum decet Pontificem in 1692. The papal bull prohibited popes in all times from bestowing estates, offices, or revenues on any relative, with the exception that one qualified relative (at most) could be made a Cardinal.

It began in the church and an attempt was made to preclude it from the church. It is past time to finish that effort.

Worship Leader in American Idol Top 36

Felicia Barton, a worship leader at Freedom Fellowship Church of God in Virginia Beach, Virginia, has been selected to be in the top 36 of Season 8 of American Idol.

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10 Ways to Avoid the Arrogance of Power

Something naturally happens to people who stay in power too long. Its called arrogance.

This happens most often in churches (for various reasons). Few positions in government or industry hold as much power at times as ministry. And if you are prone to be a take charge person, you can quickly find yourself taking a bit too much joy in your position of power ... joy that many times will evolve, over time, into arrogance. A godly leader will look for ways to avoid this.

The "Great Leadership" blog recently featured a list of ten ways that you can avoid the arrogance of power ... and I thought that they would be good as a reminder to those of us in ministry:

1. Encourage and reward dissent.
2. Spend time with the people you serve.
3. Read and answer your own email.
4. Be visible and accessible.
5. Have regular “fireside chats” with randomly selected, vertical slices of the people you serve.
6. Do regular “deep dives” with as many departments as possible.
7. Don't spend too much time in the office.
8. Conduct regular surveys in a way that tells you what people are really thinking.
9. Work with a coach or mentor who’s willing to get in your face and tell it like it is.
10. Leverage technology and social networking, allowing feedback.

[from MMI Weblog by Todd Rhoades]

"Empowered" for the 21st Century

Pentecostal-charismatic scholars are meeting this week in Tulsa, Okla., to discus the movement's future as part of the Commission on Holy Spirit Empowerment in the 21st Century.

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Obituary - Rev. G. Curtis Flippo

The Rev. G. Curtis Flippo, age 77, of Cordova, Alabama (Argo community) went home to be with the Lord on Sunday Februrary 15, 2009. He was formerly employed at Bessie Mines.

Brother Flippo was a minister in the Church of God of Prophecy; he was also a renowned pianist and recording artist. He was a member of the Cordova Church of God of Prophecy. He also served in the Prison Ministry since 1982.

Funeral services will be Wednesday February 18, 2009 at 2:00 pm in the New Horizon Memorial Chapel. Pastor Gary Smith and Rev. Bobby Patterson will officiate. Burial will follow in New Horizon Memorial Gardens.

Visitation was Tuesday night 6-8 pm at the funeral home.

He was preceded in death by his parents, George and Willie Lee Flippo, and his brother, Edward Flippo.

Survivors include his wife of 60 1/2 years, Patsy Flippo; his children, Michael Flippo and wife Mary Sue of Kissimmee, FL, Janis Smith and husband Pastor Gary of St. Cloud, FL, Steve Flippo of Sumiton and Dirk Flippo of Cordova; daughter-in-law, Bonnie Flippo; grandchildren, Clarke Flippo, Jeffrey, Stacey and Tyler Smith, Dirk Flippo, Jr. and Erica Belan; great grandchildren, Mia and Jude; sisters, Margaret Samons and husband Walter of Dora and Kathryn Ricker and husband Bill of Snowtown; brothers, Charles Flippo and wife Marilyn of Snowtown and Donald Flippo and wife Annette of Dora; several nieces, nephews and a host of friends.

New Horizon Memorial Funeral Home in Dora, Alabama directing 648-2323.

Why do people insult other people?

I believe those who insult others do this to make themselves feel more superior. By putting someone else down, you falsely elevate your position (but only in your mind; to the outside world, you look even more inferior).

Insulting is a sign of immaturity, and immaturity is frowned upon in this society.

The act of insulting others is particularly common among people who are deeply insecure. If you're not feeling good about yourself, you try to bring other people down to your level.

Christ-like leadership never uses insults against God's precious people. "But whoso shall offend one of these little ones which believe in me, it were better for him that a millstone were hanged about his neck, and that he were drowned in the depth of the sea." Matthew 18:6.

"But if you give them a hard time, bullying or taking advantage of their simple trust, you'll soon wish you hadn't. You'd be better off dropped in the middle of the lake with a millstone around your neck. Doom to the world for giving these God-believing children a hard time! Hard times are inevitable, but you don't have to make it worse — and it's doomsday to you if you do." (Matthew 18:6-7 MSG)

God's Design for Trans-Local Church Leadership

Leaders are often selected because of who their father was, or because of who they or their family is connected with in the organization, financial contributions, or outside political connections. These are the criteria or qualifications organizations frequently use when selecting trans-local leaders.

But the major criteria that is usually ignored is spiritual maturity. The marks of spiritual maturity are often minimized or even ignored. The concept of real, vital, spiritually mature leaders to oversee the church is foreign in some cases. "Remember those who led you, who spoke the word of God to you; and consider the result of their conduct, imitate their faith . . ." (NASB) Heb.13:7.

The scripture is very specific. The Holy Spirit says that we are to imitate the faith of our leaders. It does not give us an option. But, it tells us to look for three things before we follow anyone’s spiritual example. First, he must have sufficient experience in proven leadership in the church (not just a couple of years here or there). Second, the leader must have been a teacher of the Word of God. That means the leader was an effective teacher. Third, we must evaluate “the result of the leader’s spiritual life before imitating him.” What does it mean to evaluate a leader’s spiritual life? It means to look at the spiritual character or spiritual maturity and ask, “Are they spiritually mature?” If so, then imitate them; if not, look for someone else.

What does spiritual maturity look like? The depth of a man’s spiritual maturity is a mark of the depth of his love-walk with Jesus, and his service to people.

The church must be biblically organized; our leaders must fulfill the responsibilities that God has given them out of the overflow of their relationship with Him, and they must be spiritually mature, or it is all meaningless. True Godly leaders are committed to these principles. This is why it is safe for the writer of Hebrews to say, "Remember those who led you, who spoke the word of God to you; and considering the result of their conduct, imitate their faith . . ." Heb. 13:7. Spiritual leadership is “followable.” You will not have to be made or forced to follow a leader who has spiritual maturity and a heart for God (remembering that God is love). It will not be a dynamic, spiritually growing church unless there is servant leadership.

The presbuteroi and episkopoi are of most importance. Any organization rises or falls based upon its leadership. The former name simply means “elders,” that is, older ones, and the latter, “overseers.” The term presbuteroi is used in Scripture to denote old men, and to designate a class of officers somewhat similar to those who functioned in the synagogue. Elders (presbuterous) are synonymous with overseers or bishops. The former connotes their dignity, and the latter their function.

Leaders in the church are to be different from the world’s concept of leadership. (Jesus states that biblical leadership is contrary to that practiced in the world). Jesus tells us that leaders are to be servant-leaders. In Matthew 23:10-12 He said, “And do not be called leaders; for One is your Leader, that is, Christ. But the greatest among you shall be called your servant. And whoever exalts himself shall be humbled; and whoever humbles himself shall be exalted.”

Again in Mark 10:42-45, “ . . . You know that those who are recognized as rulers of the Gentiles lord it over them; and their great men exercise authority over them, But it is not so among you, but whoever wishes to become great among you shall be your servant; and whoever wishes to be first among you shall be slave of all.”

Our Lord uses two very important words in this last passage. They are the Greek words for servant and slave. Lenski summarizes the meaning of the passage wonderfully, “A [servant] is one who is intent on the service he is rendering to others. Greatness in the kingdom is measured by the readiness and the amount of blessed ministrations rendered to Christ’s people. Whether they reward and exalt us for this service or not makes no difference. The idea is carried to its climax. One may will with a holy will to be 'first,' above even those who are 'great' in the kingdom. The way to attain this height is to be your slave . . . the humblest and lowest of all servants who actually slaves for others for Christ’s sake, and who despite all his slaving is ready to be left without reward of honor.”

God is looking for spiritually qualified leaders to lead. He is looking for Daniels and Jeremiahs who are standing for Him today and will remain committed to Him when everyone else has abandoned Him. He wants leaders who know the truth and stand for truth, and He seeks leaders whose hearts long for Him (Ps. 42:1-2) - hearts that want to know Him deeper and love Him more. God is not interested in leaders who administrate well and are great teachers and preachers if there is no passion for Him! That is the message of Revelation 2:4. Joseph is a great example of a Godly leader who ran from sin and remained true to Jehovah God even when honored by a pharaoh. The great saints of old were men of holiness, men committed to God. They were not men who did clever things, or ruled with an iron fist. They loved God and wanted a closer relationship with Him than they had yesterday. God is looking for David; not his older brothers. He is looking at the hearts of men, not the outward appearances, as man does. When a man longs and seeks after God day-after-day, Godly, spiritual maturity follows over time. It is the passion for God that develops a leader. It is a passion that grows with time and turns the man back to God. It is the mark of actual maturity, and the marks are evident in his walk among the people. It takes years to develop, but the passion must start somewhere in his life.

God’s leadership qualifications are outlined in 1 Timothy 3 and Titus 1. These are actually marks of spiritual maturity. They define the type of leader God wants. These qualifications or marks of spiritual maturity were true of the Abrahams, Moseses and the Davids of our times as well as the more ordinary Stephens, Aquilas, Timothys and Marks. God is not looking for perfect men, but men whose pattern of life evidences the marks of Godly, spiritual maturity. Unfortunately, many good Christian brothers and sisters are selected for leadership for the wrong reasons. They do not evidence the marks of spiritual maturity required in 1 Timothy 3 and Titus 1. These wonderful brethren may be selected because they are wealthy, politically connected or influential in the church. They may be professionals, the social elite, charismatic, educated, church founding fathers or significant donors. But if the lives of leaders do not have the marks of spiritual maturity as outlined in 1 Tim. 3 and Titus 1, then the church has selected those whom God has rejected as leaders.

Among the other scriptural attributes, Godly leaders are to be gentle. No poison-pen threatening letters. No superiority attitude. No intentional intimidation. The Godly leader does not lord over God's kingdom, and does not exercise authority just because he can. The Greek word translated as “gentle” is epiekh and it literally means “forbearing, gentle, and yields his rights.” It has a sense of gentleness and grace, but the key thought is that he is willing to yield his rights. The Godly leader must not insist on having his own way; in fact, he must be willing to yield his rights. He has an eternal focus. This does not mean that he never speaks up, and on occasions may not be able to support a decision. But the pattern of his life is that he yields his rights.

The Godly leader will not be arrogant. Ne never looses sight of the fact that he is not the only person on earth who can hear from God. The Greek word in scripture means that he encourages others at his own expense. He does not promote himself. He does not seek his own honor. Instead, he gives honor to others, not judgement.

The Godly leader is not contentious. The Greek word is amacon. It literally means “not argumentative, non-verbal violence, or peaceable.” It has the idea that the leader does not always express his opinion about everything and every topic. This type of person is usually an arguer or debater. He usually feels strongly about the topics and wants to influence the decision. He usually wants to be the “king of many mountains.”

But, the Godly leader seeks unity of purpose and mind among those he serves. The Apostle Paul gives us direction when he writes, ". . . make my joy complete by being of the same mind, maintaining the same love, united in spirit, intent on one purpose." (NASB) Phil. 2:2. The goal is to have one mind, and to be intent on one purpose. That does not mean that the “one mind” is the one of the leader. Together with those they serve, they are to seek the direction of the Lord. The same thought is repeated in Romans 12:16.

The Godly leader will not be quick-tempered. He must be longsuffering and slow to anger. He seeks to bring others along. The goal of a trans-local leader is to shepherd the shepherds. The goal is not personal honor, personal wealth, nor personal wishes. The goal is to oversee the church of Jesus Christ and to be a good shepherd.

The Godly leader will not focus on money. It will not always be about money - every meeting, every letter, every discussion. This qualification means that the leader is not a lover of money (which is the root of all evil). His focus in not on money. His life is not centered on money. If it were, he would have a difficult time in making financial decisions, especially when it comes to trusting the Lord to supply all the needs of his office. He will not feel it necessary to pressure churches, ministries, nor people about money.

The Godly leader manages his own house well. Here is the verse, "He must be one who manages his own household well, keeping his children under control with all dignity . . ." (NASB) 1 Tim. 3:4. The Greek word translated as “manages” is proistamenon. It has the same root that "ruling” comes from in 1 Timothy 5;17. In 1 Tim. 5:17 we saw that the leader must be a caring and loving person. That begins at home. He was also to lead by his Godly spiritual character. That is the same idea here. The leader must have demonstrated his ability to lead by having shepherded his family first. There is more to this requirement than just organizational stuff . It looks at the man’s heart for his family. His wife will not be abused nor treated with a lack of respect publicly nor privately. His children will testify of his love, affection, and spiritual maturity. So will his extended family. The family usually reflect the character and life of their parents, because children model mom and dad. The children are barometers of the character of a leader’s walk with Jesus. These are important marks of maturity. They are insights into the man and his life.

A leader’s responsibility in the body of Christ is first and foremost one of servitude. He is a servant-leader. His priority is to serve and then to lead. Leaders dare not view individual ministry responsibilities as acquisition of power or influence! Christ did not intend for eldership to be a position of personal honor, prestige or glory. Jesus’ instruction to His disciples was that their role was one of service (being a servant) and slaving for others. The people should be at the top of the church’s organization chart, with the leaders at the bottom and not the reverse. Jesus speaking of the Gentiles in Matthew 20:25-28 said, "You know that the rulers of the Gentiles lord it over them, and their great men exercise authority over them. It is not so among you . . . just as the Son of Man did not come to be served, but to serve . . ." Any organizational structure is inherently vulnerable to abuse. To reduce the human tendency to acquire power and obtain influence, lines of responsibility and accountability within the leadership team should be clearly outlined and followed, or centralization of responsibility (or authority) will occur, usually to a small group within the leadership, or to one man.

God is not looking for attractive leaders, charismatic leaders, warm leaders, leaders who can develop superb church organization, create multiplied programs, creatively use slick gimmicks, or anything else. He is not interested primarily in excellent oratory, warm worship services, raised hands, “worship songs,” or large offerings. There is nothing wrong with these things, but God is looking for holy, spiritual, committed and responsible leaders who honor Jesus above themselves. He is looking for men who long to know Him and love Him. He is looking for men who are seeking and searching for Him just as Moses, David, and Paul did.

The conclusion is simple, for God the central issue is the elder’s heart-love for Jesus. That love relationship will change him and those to whom he ministers. It is a mark of spiritual maturity. It is the mark of a walk with Jesus. This was the characteristic that Jesus was looking for in Peter. Jesus told Peter, who is every leader’s fellow-elder, that there was only room for one thing in his life - that was loving Jesus - “tend My lambs” - “shepherd My sheep.”

Dealing With Critics

Abe Lincoln once said: "If I were to try to read, much less answer, all the attacks made on me, this shop might as well be closed for any other business. I do the very best I know how - the very best I can; and I mean to keep doing so until the end. If the end brings me out all right, what's said against me won't amount to anything. If the end brings me out wrong, ten angels swearing I was right would make no difference."

Wow. I can't think of anyone that this could apply to more than today's pastor.

Let's face it ... if you're not coming under some fire and attacks, you're probably not being very effective. Attacks and confrontation are just part of being in ministry. But Lincoln had a great perspective on his critics:

1. He acknowledged the existence of his critics. Abe knew he had critics. No doubt he knew their names and what their overall beef was with him. But it did not steal his passion for doing what he thought was right.

2. While he acknowledged that there were attacks against him, he didn’t feel the necessity to answer every one of his critics. As Lincoln put it, if he did this, he might as well close up shop. It would consume the time he needed to actually do his job.

3. He realized that all he could do is all he could do. He is motivated by doing his best; not by making people happy.

4. He kept perspective. Lincoln knew that his long-term success was determined, not by his short-term critics, but by the long-term results of his actions.

As you think of President’s Day … think of how you deal with your critics. And what can you learn today from Abe Lincoln?

[from MMI Weblog by Todd Rhoades]

Death Notice - Curtis Flippo

Life-long friend, minister and musician Curtis Flippo (Alabama) went to be with the Lord this afternoon. The memories are many, but most of all, Curtis Flippo was a witness to the saving grace of Jesus Christ. His prison ministry touched thousands. His music touched just as many.

Personal Financial Stewardship - Mutual Funds

Mutual funds are hazardous to your wealth.

Most investors sustained serious damage to their wealth last year -- damage that, in many cases, will be difficult to recover from. Certainly Wall Street titans, reckless lenders and irresponsible home buyers all deserve their share of the blame.

But one part of the financial world has not received much scrutiny for its role in the evaporation of investor wealth, and that is the mutual fund industry.

Mutual funds control the majority of Americans' retirement assets through 401(k)s, IRAs and annuities. Sadly, a gullible public has bought into the idea that steady investments in mutual funds, regardless of market conditions, is the way to make their financial dreams come true. This is one of the biggest fallacies of investing, and why mutual funds are hazardous to your wealth.

To give you a sense of just how flawed the buy-and-hold philosophy advocated by the mutual fund industry was in 2008, just look at the numbers. According to the mutual fund industry's own Investment Company Institute, investors lost almost $3.7 trillion in mutual funds in 2008. Yet how often do you read about mutual funds leading the public down a losing path? How often do you hear about a fund manager whose performance was drastically lower than the benchmark?

My problems with mutual funds don't stop merely at poor performance or inept fund managers. There are serious problems with mutual funds that have more to do with the design and structure of these investment vehicles. In fact, there are so many fundamental flaws inherent with mutual funds that they have become obstacles to successfully growing your investment portfolio -- chiefly:

1. The fund's interests are at odds with yours

Mutual fund companies have one primary objective: to make a profit. Unfortunately, this profit is not for you, but for them. While I will never disparage a company for having a self-interested goal of making a profit, when that profit comes at the expense of your best interest it deserves condemnation.

2. No transparency of holdings

A murky understanding of what securities you own at any given moment is another fundamental flaw of mutual funds. This lack of transparency essentially leaves you guessing about what you own and why. I can't think of a more unsettling feeling in a bear market than not knowing if you have exposure to toxic assets.

3. No transparency of fees

Here again we have a lack of clarity, but this time it's about what kind of fees you are paying. Sure, mutual funds are required to tell you they charge fees, but do you really know what you're paying for? In this bear market, the last thing you need is to be hit with some obscure cost you don't understand. But mutual funds are able to bury the specifics of their often very high management fees, which means you really have no idea what you are being charged.

4. All invested, all the time

The charter of most equity mutual funds compels the fund's manager to be allocated to stocks in virtual perpetuity. Most funds must maintain a significant allocation to the market no matter the conditions. It doesn't matter if stocks descend to near Depression-era values, according to their charter most fund managers must remain almost fully invested. To be sure, a small percentage of funds don't have that restriction, but most do.

5. Peddling bad advice

Perhaps the most onerous of these flaws is the bad advice that mutual funds dish out. Fund companies have incentive for you to be in the market all of the time because that's how they make money. It doesn't matter if the market undergoes a downward spiral the likes of what it did in 2008. The mutual fund folks want you to stay the course, and that's what they'll advise you to do.

Advocating buy-and-hold investing is the backbone thesis of most mutual funds. A fund company will never tell you to move to cash when things get tough because it's just not in their best interest. Because most mutual funds must stay fully invested all the time, their concern for managing risk is secondary to their concern for keeping you fully invested.

[by Doug Fabian, president of Fabian Wealth Strategies and editor of the Successful Investing and ETF Trader newsletters]

Donors Want Financial Transparency for Churches

Christian nonprofit groups and churches are being urged by donors to be more forthcoming about their spending amid the economic downturn and massive alleged fraud cases involving money managers like Bernard Madoff.

Now more than ever, donors who give money to these groups are looking for more than basic financial information.

"Historically, we've only disclosed what we've had to. We tend to hold information close to the vest that we probably should share," said Dan Busby, acting president of the Evangelical Council for Financial Accountability (ECFA), a voluntary group that sets financial standards for its nearly 1,400 churches and nonprofit members.

Those groups and other charitable institutions have not been the direct targets of increased scrutiny by the government and public in the wake of the banking industry crisis and scandals involving financiers like Madoff — who's accused of costing investors, including some charities, about $50 billion in a Ponzi scheme.

But financial transparency is becoming more important, even as some religious groups report a decline in charitable giving.

"There are those (churches and nonprofits) I think that are afraid of disclosing information for fear of what the donor public might think about how they're using the funds," Busby said.

The public is more skeptical of institutions and closely scrutinizes where they're putting their money in these sour economic times, said Craig Parshall, senior vice president and general counsel for the National Religious Broadcasters. The group, which has 1,400 members, held its annual convention in Nashville this week.

Rick Young, who runs a Houston-based construction company, has given to Christian nonprofits for years and is being especially vigilant now. He uses Web sites like www.Charitynavigator.org and www.Give.org to research organizations and won't donate to groups that conceal their finances.

"I'm not giving to pay some executives to pad their pockets," Young said. "I'm giving for people to do God's work. I don't think anybody needs to get paid half million or $1 million a year for running a 501c3 (nonprofit group). I think that would be excessive."

Last year, Iowa Republican Sen. Charles Grassley, a ranking member on the Senate Finance Committee, investigated six Christian broadcast ministries to find out if they were misusing their money or abusing their nonprofit status.

The targeted ministries, which are not NRB members, have denied wrongdoing and some have turned over financial information. The investigation hasn't yet been completed.

"When you look at Madoff, the Wall Street situation and even Grassley, we're well aware we have to be called to a higher standard of accountability," Parshall said. "The average family is struggling. They have to choose whether to keep donating or not. They're going to want to see transparency."

Busby noted most churches are not required to file the same kinds of IRS forms as some nonprofits, but said churches and nonprofits should be releasing revenue, expenses, assets and liabilities.

"In tight economic times when donors are hurting financially and they're stretching their dollars to give to churches and charities, they're just simply more concerned about their dollars making a difference," he said.

Tim McDermott, president and general manager of contemporary Christian music radio station KSBJ in Houston, said the nonprofit station is audited annually by an outside firm.

"Transparency is important because the people that are giving to us, they need to have the access to know their money is being spent wisely," McDermott said.

[Associated Press. All rights reserved.]

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