Tuesday, June 12, 2018

Women Are Changing the World of Wealth

On Wall Street and elsewhere, the management and deployment of Big Money has traditionally been men's work.  That's changing, as two names in the news remind us:

Catherine Keating has left Commonfund to become CEO of BNY Mellon Wealth Management. In an interview last year she explained why the investment management industry needs diversity.

Laurene Powell Jobs holds an MBA from Stanford and controls billions left by her late husband, Steve Jobs. As described in this feature in The Washington Post, her approach to impact investing and philanthropy is impressive.

P.S. You've got to chuckle  at Silicon Valley's reaction to the name of Powell Jobs' project, Emerson Collective. "Emerson? Emerson? Never heard of him. What was his startup?"

Sunday, June 10, 2018

Are Ponzi Schemes Going Crypto?

In 2016 investors lost over $2 billion in 59 Ponzi schemes. That's just in the U.S. Opportunities to lose a fortune are global.

And now a new world of money-losing opportunities confronts incautious investors online. "Hundreds of technology firms raising money in the fevered market for cryptocurrencies are using deceptive or even fraudulent tactics to lure investors," The Wall Street Journal warns.

For helpful background, see "Cryptocurrencies and Online Marketing: Legitimate Business or Pyramid and Ponzi Schemes?"

As the authors point out, ICOs (Initial Coin Offerings) aren't necessarily frauds. Many are crowdfundings by wannabe entrepreneurs, with investors buying tokens as digital stock certificates. Unregulated penny stocks for the digital age!

Could ICOs become a significant threat to the wealth of HNWIs?

Tuesday, June 05, 2018

An unusual obituary

Here it is, as published in the Minneapolis Star-Tribune.  Evidently it was picked up by other papers around the world also.  I won't spoil it for you, but I do recommend the comments as well.


Sunday, May 27, 2018

Should She Neutralize Her Ex's Estate Plan?

Query to The Ethicist in The New York Times magazine:
I am divorced. I recently learned from one of my children that my ex is leaving them uneven shares of his wealth. He’s leaving less to our son, the child he dislikes. His rationale is that this particular child has poor money-management skills 
My will, so far, is divided evenly. As I’ve told my children repeatedly, I love them equally, and I want this love reflected in my will.  
Should I change it to give more to the child disliked by his father, in order that the children come out more or less equal? Would the other child, our daughter, feel slighted and less loved?
Yes, use your will to equalize things, rules The Ethicist, and explain your strategy to your daughter.

As for the son's lack of money-management skills, "you can solve that problem (as your ex-husband could have) by putting the money in a trust."

Wednesday, May 23, 2018

Wealth is just luck?

I was very surprised to read this article in MIT's Technology Review: If you're so smart, why aren't you rich?  Turns out it's just chance.

It's a report on a computer simulation done it Italy that purports to show that luck is more important than intelligence, social skills or talent in acquiring wealth.  The problem with computer "simulations" is that the biases are built into the algorithms at the outset.  As with statistics, you can manipulate your way to any result you wish.  The report is an attempt to put an academic gloss on the left-wing economics the "you didn't build that" crowd is always spouting.

I was thinking of doing an article on it, but I'm afraid it would be too political.  Perhaps I could include it as a "Dangerous Idea" in an article that includes a couple other odd notions? 

I've always understood the definition of "luck" to be when preparation meets opportunity.  I'm confident that the Italians did not define it that way, but as random chance.

Tuesday, May 08, 2018

A big surprise on the revenue front

April was the best month in history for the federal government, according to the CBO.  Revenue exceeding expenses by a record $218 billion.

Could this be attributable to the December tax reform?

Thursday, May 03, 2018

Private Equity: The Bigger They Come...

Theranos and founder Elizabeth Holmes raised $700 million from mostly wealthy investors without ever having to provide financial statements audited by an independent public accounting firm.

Rarely have so many high-profile figures been known to have lost so much money on a single investment.

Investors who lost hugely on Theranos, the company built around a magically simple blood test that didn't work, include the family of Education Secretary Betsy DeVos, Walton heirs, Rupert Murdoch and Mexican tycoon Carlos Slim.

Although Theranos' big-name investors lost plenty – the Walton family had invested $150 million – presumably their standard of living will not be affected. Mere millionaires who jumped at the chance to invest along with the big shots may not shrug off their losses so easily.

Wednesday, May 02, 2018

Should Brits Kill Their Death Tax?

The Resolution Foundation believes the UK inheritance tax should be abolished. Potential heirs should not celebrate. The foundation wants the inheritance tax replaced with a Lifetime Receipts Tax. This levy, to be paid by the receipients of gifts, would be imposed cumulatively on gifts over £3000 at rates of 20 or 30 percent. The first £125,000 a Brit received would be exempt.

The present inheritance tax has a 40 percent rate.

Tuesday, April 24, 2018

“The Last Gentleman on Wall Street”

Spooky coincidence:

On the back of the business section of today's New York Times, a full-page age ad from Brown Brothers Harriman with a clever headline – "Should you talk with your children about your wealth before they Google you?"

Inside, Robert  D. Hershey Jr.'s obituary for one of Brown Brothers most celebrated former employees: Richard Jenrette.

After Harvard Business School, Jenrette "joined Brown Brothers Harriman, the very model of an old-time Wall Street firm, whose oak-paneled ambience included roll-top desks, a large coal-burning fireplace and oil paintings of the founders. He spent two years there as a portfolio manager — one client was Greta Garbo — before leaving at 30 to start his own firm…."

Jenrette's partners were two Yalies he met at B school – Bill Donaldson and Dan Lufkin. Their firm, Donaldson, Lufkin and Jenrette, was "the first Wall Street securities firm started from scratch since the early 1930s." DLJ specialized in smaller growth stocks and in the 1960s that was a road to riches.

Donaldson and Lufkin eventually left the firm. Jenrette sold to Equitable Life and devoted his extremely high net worth to his passion for historic preservation. Several remarkable houses he restored and refurnished are held in a non-profit he founded, Classical American Homes Preservation Trust.

"Gone With the Wind" inspired Jenrette's love of antebellum houses. He must have purchased and preserved more white columns than any other American. Some may be seen on the Roper House in Charleston, South Carolina, where he died.

Roper House

Jenrette never married. His remarkable collection of houses, he said, were like his children. 

Thursday, April 19, 2018

Monday, April 09, 2018

Our Founder in 1942

Eight years after launching the Merrill Anderson Company, our founder was on a roll: he was elected president of the New York Financial Advertisers.
Good looking, wasn't he?

That wasn't Merrill's first appearance in The New York Times. Using Times Machine we found this item in an April 29, 1923 report on an AAU gymnastic meet.


Indian club swinging, popular in Victorian times, was losing favor in the 1920's, but it endured long enough to be a gymnastics event at the 1932 Olympics.

Our founder may not have been a gold medal club swinger, but he was a champion high jumper. And he captained the track team at Amherst.

Wednesday, March 28, 2018

Name a Corporate Trustee – But How Big?

The New York Times' latest Wealth Section includes a welcome column on living trusts (if you ignore the sidebar claiming that revocable trusts must file annual tax returns) as well as a plug for naming a corporate trustee in order to avoid family dissension.

The plug comes with a caution from attorney William D. Zabel: Don't name a local bank.

Why does Zabel think trustors should go big bank? He feels hometown banks, attorneys and accountants are tempted to favor some family members over others. The Times offers as example a situation where an out-of-state son-in-law and his wife have spent years battling "the locals" and her hometown siblings.

Small town trust departments aren't always ideal, but the services of megabanks also have bitter critics. On balance, isn't a capable hometown bank a reasonable choice for nonbillionaires?

Wednesday, March 21, 2018

Some Go Downmarket, Some Go Up

Goldman Sachs has been catering to investors with at least ten million and preferably fifty. Now Goldman is expanding its adviser forces and targeting lesser wealth. Hard to imagine a Goldman robo adviser, but we may see one.

Meanwhile, Merrill Lynch hopes to move up into Goldman's traditional market. Merrill's new effort will include the services of specialists in estate planning and family counseling – areas once associated with Bank of America's U.S. Trust unit.

Which wealth management giant is on the right track? Possibly both. Vast numbers of Boomers are reaching their retirement decade with a million or two or three. At the same time, the relatively small number of the really rich is growing, and becoming really richer.

Competition to serve both groups must be fierce, as I realized when strolling the streets of Portsmouth the other day. Our fair city has scores and scores of restaurants and gift shops for tourists. We also appear to have at least as many wealth management firms, plus assorted hedge funds and socially-conscious institutional investors.

Upmarket condos. full of wealth management prospects,
 have replaced aged warehouses on Portsmouth's waterfront.
Hoping to make money from people with money? You are not alone.

Sunday, March 18, 2018

Should Impact Investors Shun “a Solid Return”?

In his Wealth Matters column, Paul Sullivan defines impact investing as "a movement that aims to force social change by minimizing or eliminating investors’ exposure to companies that harm the world and achieve a solid return."

Impact investors can't be that masochistic. Perhaps Sullivan meant "while still achieving a solid return." (Remember the days when The New York Times had copy editors?) 

Still, the definition is couched in unnecessarily negative terms. Why not call impact investing "a movement that aims to maximize investors' exposure to companies that improve the world"?

As the column suggests, the popular meaning of "impact investing"  has become fuzzy. Narrowly defined, impact investors are those who deploy significant sums to start or back socially desirable projects or efforts. Defined more broadly, as wealth management marketers have been quick to do, impact investors are merely today's equivalent of socially conscious investors. 

The old-timers, however, might shudder at the idea of labeling Exxon an impact investment, even if the oil company does have a diverse board. 

Thursday, March 15, 2018

The Case Against Actively Managed Funds,1953

Sixty-five years ago, as now, there were those who believed that mutual fund managers failed to earn  their keep.

This example comes from a review of Louis Engel's How to Buy Stocks. in the  April 20, 1953 edition of The New York Times:
[F]rom 1937 to 1950, fourteen of the biggest and best known mutual funds whose assets were wholly invested in common stocks showed a net gain on their holdings of only 2.2 per cent…. In contrast, the Standard & Poor’s index for ninety representative stocks showed an increase during this same period of 4.1 per cent.

Wednesday, March 14, 2018

Conservation Easements, Real and Syndicated

Million-dollar houses keep sprouting up in the seaside village your obedient blogger calls home, but remnants of our rural past remain, thanks in part to conservation easements.

With easements, landowners can retain basic ownership while giving up, say, development or subdivision rights. In a hot real estate market such as ours, giving up such rights often leads to a drastic reduction in the property's market value. If the landowner donates the easement to a qualified entity, the reduction in value may be claimed as a charitable deduction.

Yet no good idea, it seems, goes unplundered. The Wall Street Journal reports on "the opaque world of syndicated conservation easements, transactions giving some investors tax breaks worth more than the amount they originally invested in the property."
In a syndicated easement, the organizer recruits investors who buy a piece of a partnership. The organizer identifies property, buys it, makes the donation and then parcels out the deduction. The syndicated deals are particularly popular in the Southeast, and their backers say they efficiently promote conservation by getting tax deductions to people who have the income to use them.
The key, critics say, is often an inflated and unrealistic appraisal and a relatively small network of advisers and charities supporting the transactions. The disclosures identified just 38 appraisers involved in the 552 deals.
According to IRS data, investors in syndicated conservation easements reap tax deductions averaging about 4 times their original investment.  Some do even better.

Too good to last?

Thursday, March 01, 2018

Tomorrow's Wealth Manager?

Amazon's Alexa is the voice that empowers our voices. We can summon news or music, order shampoo or groceries, turn on the lights….

The next step seems inevitable:

Alexa, what's my equities to fixed income ratio today? 

Today your ETF portfolio is 87 percent equities and 13 percent fixed income.

Alexa, rebalance to 80 percent equities, 20 percent fixed.

Rebalancing done. I've sent the trade details to your phone. 

Can Alexa take over the personal investing business without the ability to offer investment advice?  Sure. Millennial passive investors may see that disability as a plus.

Tuesday, February 27, 2018

Bitcoin Explained for Kids (and us Dummies)

From a kids section in last Sunday's New York Times. Can't find the graphic online, so I scanned it. (Click image to enlarge.)


Wednesday, February 21, 2018

School Killer's Trust Fund

Is Nickolas Cruz, the Parkland school shooter, entitled to a public defender? Or is he wealthy enough to hire his own lawyer? The question arises because the teenager's adoptive mother, recently deceased, left him a $800,000 trust fund.

Monday, February 19, 2018

There's Always a Way to Beat the Market

Recent example of market beating: investors boosting their returns with bets that stock prices would keep calm and carry on. Exchange traded products linked to VIX, a volatility index, emerged to make betting on low volatility easier.

Then volatility exploded with a vengeance. Some bettors lost big. Two ETPs quickly folded.

It's just another chapter in the same old story, according to this comment from The 10 Point for February 16:
Jan Rogers Kniffen wrote: “In the early 1980s the strategy of holding a ‘diversified’ portfolio of junk bonds worked well, until the market for junk crashed, people lost fortunes and some went to jail. Then, every pension fund manager (including me) got pitched on ‘portfolio insurance.’ It worked well until the crash of ‘87 when everything cascaded down and funds lost fortunes. Then there was the ‘craze’ for investing in a ‘diversified’ portfolio of mortgage-backed securities. That worked well until the crash of the housing market. Low-vol strategies are the same, they will work well until the market changes—whoops, the market changed.”
The next market beater? Who knows?  But remember the wisdom of Sir John Templeton: "The four most dangerous words in investing are: 'this time it's different.'"

Thursday, February 15, 2018

Website renovation

Every 20 years or so the Merrill Anderson Company overhauls its website. The expiration date on the current site is coming up.  Does anyone have suggestions for how we might improve it?


Saturday, January 27, 2018

UK's First Bitcoin Heist: a Midsomer Mystery

Moulsford, Oxfordshire
The English village of Moulsford, the setting for several Midsomer Murders, just experienced the UK's first Bitcoin robbery. Four hooded men in black broke into a cyber-currency trader's house, tied up his wife, and forced him to transfer "a fortune in Bitcoin" to them.

The Thames Valley Police are investigating, although without the help of Detective Inspector Barnaby. 

Monday, January 15, 2018

The Guys Who Give Tulips a Bad Name

Christian Day, a professor at Syracuse University law school…has written about bubbles and panics. He said that comparing Bitcoin to the tulip craze was unfair to tulips…. 
            – John Schwartz in The New York Times
Those of us who find cryptocurrency mania difficult to fathom can learn from Nellie Bowles' fascinating sketches of the young guys who are busy creating cryptocurrency investment opportunities in San Francisco.  (Not that 20-somethings appear young in that milieu. See Bowles' earlier magazine piece on the city's teenage techies.)

Worried that clients will lose their shirts on Bitcoin or alternative cryptocurrencies? Then suggest they buy a sweater for emergency use. Hodlmoon.com will provide one stitched with the logo of whatever cryptocoinage they're betting on.

Saturday, January 13, 2018

Bring Back the Three Martini Lunch!


OK, full disclosure. Even in his young, Mad Men days your obedient blogger could never do more than one martini. I don't even like martinis. But I'd happily quaff one at a business lunch rather than go with the new flow –  wooing clients at cardio workouts.

Thursday, January 11, 2018

Sorta, Kinda But Maybe Not Really Fiduciary

Some investment advisers are fiduciaries, others sell products. Telling the difference has never been easy.

Leading discount brokers, for instance,  invite investors to talk with representatives who aren't paid commissions. Does that make them fiduciaries? Not in the view of The Wall Street Journal.
Investors who seek advice from discount brokerage firms might assume the counsel they get is impartial, given how these firms have rejected the old Wall Street model of working on commissions.

In fact, advisers at some of the biggest discount brokerage firms make more money if they steer clients toward more-expensive products, according to disclosures from the firms and people who used to work at them. That means customers could end up with investment products and services that are costlier than they need.

Fidelity's reps, for instance, get a small cut (0.04%) when a customer buys ETFs. Their financial incentive is more than twice as great (0.10%) if they sell managed accounts or annuities. Reps especially proficient at directing customers to pricey products get bonuses.

Fidelity, Schwab and TD Ameritrade all pay incentives to representatives for referring clients to registered investment advisers. "These advisers charge clients an annual percentage of their assets, and the discount brokerage firms receive up to 0.25% annually on assets committed to the advisers."

This year, at long last,  the SEC is expected to weigh in on the fiduciary issue. But the emphasis appears to be on disclosure rather than behavior. (Why should brokers call themselves "financial advisers"?) Knut A. Rostad of the Institute for the Fiduciary Standard asks, "Are commercial sales rules increasingly redefining the very meaning of fiduciary advice?"

Saturday, December 30, 2017

What Will Baby 2018 Bring Us?

The great American illustrator J.C. Leyendecker originated the contemporary concept of
representing the new year as a baby, starting with his New Year’s cherub that welcomed in 1907 on a December, 1906 issue of The Saturday Evening Post.

Leyendecker went on the create new year baby illustrations for a generation of Post readers, often putting the tot in a setting that suggested a trend of the times.

Baby 1910 had only vestigial wings but, thanks to the Wright brothers biplane, he could actually fly!


Baby 1934 had reason to worry about the stock market. Still,  if he bought and held, he could have retired as one of the richest members of the Silent Generation.


We end this year with stocks at new highs, so baby 2018 is entitled to toot his horn, just as baby 1937 did. Will he be showered with Bitcoin instead of confetti? 

Friday, December 22, 2017

Who is Fiction's Best Known Executor?

[TV keeps rerunning "It's a Wonderful Life," so we'll repeat this 2006 post.]

Come now! 'Tis the season when the answer should be at the tip of your tongue:

"[Jacob Marley's] sole executor, his sole administrator, his sole assign, his sole residuary legatee, his sole friend and sole mourner" was . . . Ebeneezer Scrooge.

Flinty old coot, Ebeneezer Scrooge. Happily, the Christmas spirit(s) set him right.

"It was always said of him," Dickens tells us, "that he knew how to keep Christmas well, if any man alive possessed the knowledge.

"May that be truly said of us, and all of us!"

Wednesday, December 20, 2017

The Tax Act's Marketer in Chief

President Trump advised Congressional Republicans to make their tax legislation palatable by communicating simply, the Washington Post reports. Talk tax cut, not tax reform. A big, beautiful tax cut. Biggest ever (well, not quite, but still pretty big).

To his great credit, the President questioned the Walmart-pricing approach to setting tax rates. What's with this 39.6%, 38.5% nonsense?

Reportedly, the President feels the most marketable tax rates are multiples of five. Congressional Republicans didn't achieve that simplicity, but at least the new rates are free of percentage points.

Monday, December 18, 2017

HNWIs Will Have Seven Years to Die Prudently

The rush to pass the tax bill sows confusion. David Leonhardt in the NY Times, for instance, assumes the doubling of the federal estate tax exemption, like the lowered income tax rate for corporations, is intended to be permanent.

Not so, according to this Times report and other sources. Along with the personal income tax changes, the higher estate exemption will expire after 2025.

Grey-haired High Net Worth Individuals may wish to plan their demise accordingly.

Saturday, December 16, 2017

Wealthy Donor's Bitcoin Dilemma

You've already used up your $5-million plus estate and gift tax exemption. Now you want to pass  along another asset, worth $2 million, to your heirs.

Should you make the transfer immediately and pay federal gift tax? Or wait until next year, when you'll pay no tax because the new tax legislation will double the exemption?

A no-brainer? Not necessarily, suggests Paul Sullivan in his Wealth Matters column. If that $2 million is in Bitcoin, who knows its value in 2018? $20 million? $50 million? You might be smarter to pay tax on $2 million this year.

Or, you might wait for the Bitcoin bubble to burst. No $50 million, no $2 million, no tax problem.

Thursday, December 14, 2017

Nothing Beats an Aston Martin for Christmas

Is your wealthiest client still looking for "something special" to give her husband this Christmas? How about an Aston Martin?

No, not the car. Too common. Think boat.


The Aston Martin AM37 will cost your client about $1.64 million ($2.1 million for the souped-up version). Beauty seldom comes cheap.

Your client's husband already owns a superyacht? Then she might consider the latest superyacht accessory – the Aston Martin Neptune, a three person submarine. Order now for delivery in a year or so. Price: about $4 million.

Wealth isn't always a burden. Cannily deployed, it's fun.

Sunday, December 10, 2017

Tax Plans Stranger Than Fiction

 Generally, well-compensated employees should pay income tax at higher rates than business owners and investors. 

However, certain high-income business owners should pay tax at a marginal rate of 85.2%.

Haste and input from billionaires have produced weird taxation possibilities.

Friday, December 08, 2017

Don't Like the Parrot? How About Bitcoin?


Eager investors are getting rich quick with Bitcoin. But  Bitcoin reminds an Economist blogger of  a certain parrot. A real live currency it ain't.
It seems that every day, Bitcoin seems to hit a new high. But the reported price can move up and down by $1,000 or so within a few hours. This might have made it a great investment for those who got in at the right price and are nimble enough to get out in time. But it doesn't make it a useful means of exchange. When the price is rising fast, those who use bitcoin will be reluctant to part with it; when the price falls, those who sell goods will be reluctant to accept it.

Thursday, November 30, 2017

Inheritance REDUCES Inequality?

As great wealth spreads from generation to generation, it provides more and more people with smaller and smaller inheritances.  Maybe, The Times (London) suggests, inheritance actually reduces inequality.  Not likely, but there's some interesting Swedish research.

Wednesday, November 29, 2017

Death Taxes on Life Support

Estates of the newly deceased have long been a tax target. Augustus, the first Roman emperor, imposed the vicesima hereditatium or "20th of inheritance" in 6 AD. 

Have death taxes finally run their course?

Could be, according to The Economist. Australia, Canada, Russia, India, Norway and Sweden are among the countries that have abolished their death duties.

Although the US Congress seems unlikely to abolish the federal estate tax this year, the exemption might be raised high enough to eliminate tax for families that are not at least entry-level rich.