Monday, November 24, 2014

Rockefeller Family Office Is on the Move

The View from 30 Rock
Photo by 
André Lage Freitas via Wikimedia Commons
When I was a kid, occasionally my father would mention he'd dropped off a bookbinding job or picked up a check at the Rockefeller family's office. Wow! Who knew a family could have its own office?

The Rockefeller's office dates back to 1882. In 1933 it moved into the newly built 30 Rock. Now the family has found a better rental in an adjoining Rockefeller Center building. The New York Times marks the pending move with this salute to Room 5600. (The "room" once encompassed three high floors in what my father knew as the RCA building.)

The investment-management arm of the office, Rockefeller & Co, was spun off some years ago and now seeks business from outside the family. You'll find it at 10 Rock.

Friday, November 21, 2014

“The richest old generation we’ve ever seen”

By the time Depression Babies finished school, they had become The Silent Generation. They were relatively small in number, and that fact turned out to be their good fortune. In the post-WWII boom the supply of entry level jobs exceeded demand. Though housing prices seemed to be going through the roof (a house worth $8,000 in 1945 was selling for two or three times as much by 1960) homes proved to be a great investment. 

The result, according to Bloomberg Businessweek:  Generation Rich.

Bunny Mellon’s Awesome “Alternative Investments”

Sotheby's went all out to market the sales of Bunny Mellon's art, jewelry and home furnishings. The effort has paid off.

Mrs. Mellon's art sold for $158.7 million, well above estimate. Last evening the sale of her jewelry and other interesting objects began. Prices often exceeded estimates by two or three times.

An apple-tree brooch crafted for her by Verdura was estimated at around $3,000. It sold for $26,250.

Said to be even bluer than the Hope Diamond, her magnificent blue diamond pendent sold for more than twice its estimate, fetching $32,645,000. (Prices include buyers premium.)

Bunny Mellon, an heiress twice over, surely had a good eye for
valuable objects. But I bet she never bought for investment. The old advice about profiting from art and collectibles – buy and hold what you like – still applies.

Monday, November 17, 2014

What If Everyone Knew Your Net Worth?

You might be less inclined  to buy a Bentley,  and you might increase your saving and investing. The same applies for your wealth management clients.

Read Carl Richards column, which includes this napkin sketch:

Wednesday, November 12, 2014

Less Banking, More Wealth Management?

Fitch, the rating agency, has seen the future of U.S. banking. It's wealth management.
Wealth management, including advisor-based guidance and asset management, provides recurring sources of income and requires less capital usage than traditional bank loan products.  Wealth management services can strengthen and make stickier relationships with good customers, which tend to provide additional deposit funding, as well as opportunities for cross-selling a bank's core products, such as mortgage lending.

Wednesday, November 05, 2014

Can a Work of Art Be More Valuable When Not One of a Kind?

In the world of art and collectibles, rarity usually adds value. Uniqueness can be almost priceless.

Here's a contrary example: Giacometti's "Chariot," which just sold at Sotheby's for $101 million. The sculptor produced 'Chariot" in an edition of six, and in this case, Felix Salmon asserts, lack of uniqueness added value.

Monday, November 03, 2014

What Do the Wealthy Like to Read About?

Trusts. Trusts are a regular feature in Penta, Barron's magazine for readers worth five million or more. For example . . .

How to Bust a Trust, an introduction to decanting. Divorce Trusts, for situations where a prenup isn't in the cards. Incentive trusts, the conceptual pros and practical cons.

Note to trust marketers. Make sure your prospects and customers are well read: Ask about Merrill Anderson's newsletters.

Wednesday, October 29, 2014

Digital Wealth Management

Online investing is heating up.

Wealthfront just grabbed another $70 million in financing. Personal Capital raised another $50 million. Charles Schwab announced its own robo-advisory service.

Will the Boomers' children be the generation that abandons face-to-face investment services?

Monday, October 20, 2014

“The Father of Estate Planning"

Give a birthday shout-out to Charles Ives, the American composer born 140 years ago, October 20, 1874. Life insurance was Ives' day job, and when the federal estate tax came along, he realized there was a better way to sell insurance than to ask, "How much do you love your wife?"

The photo below shows Ives in 1913, the year the federal income tax was introduced. The federal estate tax followed in 1916, and two years later his most noted nonmusical work appeared: "Life Insurance with Relation to Inheritance Tax."


Friday, October 17, 2014

Paying Death Tax With Art

A beach scene by Winston Churchill
Winston Churchill's daughter Mary Soames died last June at age 91. To help pay her death duty, the estate has offered 38 paintings by her father.

Should our estate tax include a similar AIL (Acceptance in Lieu) scheme?

Wednesday, October 15, 2014

Mobile Video, Live-Banker Mortgages, Gunless Hunting


Fifty years is only yesterday or ancient history, depending on which ads from 1964 you look at.

Video on the run. In the 1950's Texas Instruments and an Indiana company developed a popular novelty: a little transistor radio. Sony took the idea and ran with it. Now Sony was taking the next step, a portable TV. (You thought mobile viewers didn't start falling off curbs until iPhones came along?)


Live-Banker Mortgages. Five decades ago, private banking aspired to meet the requirements of elite borrowers who didn't always fit the standard mold. Their needs would be evaluated and perhaps met by actual bankers wearing suits. Those days must seem long, long ago to Ben Bernanke, who couldn't talk a computer into refinancing his mortgage.


Gunless hunting. Men with guns were a staple of Chase Manhattan's nest egg ads. But times were changing. Wildlife needed conserving, some said. Chase responded by offering this new age hunter.

Friday, October 10, 2014

Slicing Up Art to Save Estate or Gift Tax

If a painting is worth, say, $4 million, what is a one-quarter interest in the painting worth?

$1 million? Not necessarily, at least not for transfer tax purposes. The Elkins case could prove a game changer, reports Paul Sullivan.

Taking advantage of deep valuation discounts for fractional interests isn't always easy. If you give each of your three children a quarter interest in your Van Gogh, each will be expected to take possession of the painting for one quarter of the year. An alternative method – spotlighted by Christies – might be to gift the art and rent back.
Big wins by taxpayers in estate or gift tax cases have a potential down side. Pressure mounts to "close the loopholes." Senator Sander's bill calling for a 65% estate tax also takes aim at minority discounts.

Wednesday, October 08, 2014

"Treat customers like humans, not as transactions. "

Seems obvious, but it's being cast as the key take-away from the Comcast debacle last summer.  Does the need to become accessible to customers across all communication platforms apply to wealth managers?

I was interested to learn that no one likes 1-800 numbers any more, due to their association with telephone trees and long wait times.

Tuesday, October 07, 2014

Estate Surtax Spreads to Non-Billionaire Estates

That proposed 65% tax plus surtax on billionaire estates seems to have trickled down. The bill Senator Sanders has introduced in the Senate calls for the 10% surtax to apply to estates over $500 million.

Half a billion here, a quarter billion there , , ,

Monday, October 06, 2014

Art As Toxic Investment

Damien Hirst, “Moxisylyte” (2011)
Hundreds of dot paintings from Damien Hirst's workshop are are now on sale at galleries worldwide. (You may remember Hirst's shark.)

Peter Schjeldahl, The New Yorker's art critic, offers potential investors a cautionary comparison:
Just as no law forbids the sale of bundled credit-default swaps on bundled subprime mortgages, no agreed-on aesthetic principle invalidates paintings that are churned out by proxy and then bid up at auction as fungible commodities.
Before their clients plunge into Damien's dots, wealth managers may want to suggest a nice conservative hedge fund.

Saturday, September 27, 2014

Thursday, September 25, 2014

A 65% Estate Tax For Billionaires?

While Republicans work to again reduce the top federal estate tax rate to zero, Senator Bernie Saunders counters with an even more unlikely proposal: an estate tax with rates ranging from 40% (for estates of $3.5-$10 million) to 65% (for estates over $1 billion).

Joseph B. Thorndike comments, "It’s one thing to ask rich people to pay more of the cost of government. It’s another thing entirely to tell those rich people that they are just too damn rich."

The estate-tax charitable deduction now allows wealth to stay in the family by flowing tax free into family foundations. To redistribute billionaire estates through taxation, the deduction would have to go. Can you see that happening?

Wednesday, September 24, 2014

University Endowments Record Double-Digit Returns

Yale's endowment recorded a 20.2% investment return for the fiscal year ending June 30, keeping up with the torrid pace set by the S&P 500.

Reported results from other university endowments:

Dartmouth, 19.2%

MIT, 19.2%

Penn, 17.5%

Harvard, 15.4%

Originally this post erroneously credited Dartmouth's results to Brown.

Friday, September 12, 2014

Background on the inversion mania

From the Tax Analysts blog, which I believe is open to the public. Key takeaway:

Here is the ultimate irony in the story: Investment bankers hired by a foreign multinational confronting acquisition by a U.S. corporation alerted the administration, the politicians, and the country to the imperatives of “economic patriotism.”
It was all part of AstraZeneca's defense against a hostile takeover.

Wednesday, September 10, 2014

It's Not Easy Being Fiduciary

The NY Times reports on the plight of two Deutsche Bank private bankers who were forced out because they balked at pushing DB products – notably, a fund of funds. (Funds of funds answer the perceived demand for investment products that carry even higher annual expenses than regular hedge funds.)

According to this petition to the Supreme Court of the State of New York – we don't have DB's side of the story – the two found "staying fiduciary" was a losing battle.

As big banks try to grow bigger, sales tends to overwhelm service. One result: a marketing opportunity for smaller, fiduciary-minded institutions. 

Thursday, September 04, 2014

Perils of Going Public, Performed Way Off Broadway

"Trading Practices," a participatory production performed in an old building on New York's Governors Island, dramatizes the rise and fall of a family business. The NY Times finds the show "resourceful, whimsical and wearing."

Too bad the production had to open this summer, just after the upheaval at a New England supermarket chain demonstrated that truth trumps fiction. (Rumors that a top tunesmith-lyricist duo has started work on "Market Basket, The Musical," could not immediately be confirmed.)

Monday, September 01, 2014

1954: So Near And Yet . . .

Sixty years ago Container Corp. was running ads featuring contemporary artworks. Some still look pretty cool. This one, for instance, with a portrait of Teddy Roosevelt by Joseph Hirsch.


By contrast, this 1954 Bankers Trust ad shows every one of its 60 years. A married woman with business judgment? Tax savvy? Foresight? Financial literacy? How unthinkable!

Give BT a little credit, though. It was willing to settle for a co-executorship.


Thursday, August 28, 2014

Market Basket: Main Street Beats Wall Street

A multibillion-dollar company fires its CEO, replacing him with two outsiders clearly less qualified.

Reason? a bitter, seemingly endless family feud.

Result? Astonishingly, a revolution, an upheaval that drew nationwide attention.

Market Basket's employees refused to work and took to the streets to demonstrate. Loyal shoppers boycotted the stores. Day after day and week after week, the company hemorrhaged millions.

Last night the revolt succeeded.  The fired CEO, Arthur T. Demoulas, is back on the job and will buy the 50.5% of the company that his side of the Demoulas family does not already own.

Arthur T. did a great job of building a debt-free company. Now we'll see if he can revive an indebted one.

The financial planning lesson
Back in Estate Planning 101, we learned the expected progression of a successful business: A small company grows, attracts outside capital and eventually goes public. Once the company's shares are publicly traded, family members who wish to liquidate their holdings can do so at a price set by the market. With luck, family members remaining active in the business retain a large enough minority interest to maintain effective control.

Maybe that's how it worked in the 20th century. These days, a company such as Market Basket could not long survive if its shares were publicly traded. Corporate raiders (sorry, "activist investors") would swoop in swiftly to maximize shareholder value.

A few businesses have managed to go public while maintaining family control, although Wall Street tends to resent the strategy. Why invest in, say, The New York Times Company, when shares available to the public have insignificant voting power compared to shares held by the family?

For the private investor, the answer may be that it's smart to own part of a company whose management is free to work toward long-term goals.  Mark Zuckerberg certainly values that freedom.

Related post: The Family Business Fight That Just Won't Stop

Wednesday, August 27, 2014

Good Advice From a 108-Year-Old Investor

Selling short helped Irving Kahn prosper in 1929. In the Thirties Benjamin Graham converted him to value investing.

 Here Kahn, age 108 and still investing, is interviewed by The Telegraph.

Tuesday, August 26, 2014

Is Investment Advice Too Expensive?

 After WWII, when the wealthier members of the Greatest Generation opened investment management accounts at a bank or trust, their annual expense was probably about 1.5% to 2% – half a percent as a management fee plus one percent or more in "full-service" brokerage commissions.

These days, investment management fees tend to be higher but, with luck, transaction costs are lower. Total annual running costs probably are about the same.

Could change be coming at last? Will relatively low-cost online services lead to a price war? As we suggested recently, not necessarily – at least not in the high-net-worth segment of the market. The sums multimillionaires pay for investment services don't seem so extravagant when you consider the cascade of fees they face when traveling.

This year, hotels will collect more than $2 billion from fees they tack on to their room rates. My favorite: a $25 fee for putting your own can of Coke to cool in the minibar.

By the time a high-net-worth investor returns home, he or she may see wealth management as a bargain.

Monday, August 25, 2014

What Does It Cost to Invest?

Someone has $100,000 to invest. What will it cost? Peter Dunn dares to tackle that complicated question here.

For more on investors' expenses, see An Emerging Price War.

Will the cost of investment advice actually decline? There's room for doubt. Like mental health therapists. investment therapists aren't selected on the basis of cost alone.

Saturday, August 23, 2014

A Plug For Revocable Trusts

Two morals may be drawn from this Wealth Matters column:

1. If you want to change your name, do it right. Otherwise your ability to exercise a power of attorney may be compromised.

2. Despite –and also because of – the popularity of durable powers of attorney, creating a revocable trust may be the more prudent way to go.

Thursday, August 21, 2014

Warren Buffett, Investment Marketer of the Year?

In his letter to shareholders last spring, Warren Buffett revealed that he had instructed his trustee to invest mostly in a very low cost S&P index fund. He recommended Vanguard's.

"in the five months that followed," the WSJ reports, "investors poured $5.5 billion into the Vanguard fund, or about three times more than during the same period the previous year."

Has indexing finally reached the tipping point and become the default way to invest?

Saturday, August 16, 2014

Better Wealth, Better Health

If you're willing to improve your financial future by contributing to a 401(k) plan, most likely you'll also take steps to improve your future health. See Your 401(k) is Healthy, So Maybe You Are, Too in the NY Times.

Michael Waraksa, a collage freak, put together this apt illustration for the Times story.

Monday, August 11, 2014

Private Bankers Are Not Fiduciaries

J.P. Morgan's investment specialists are held to fiduciary standards. Morgan's private bankers are not. Do private bankers push the bank's own funds when cheaper or better alternatives might be available? In recent months both the Office of the Comptroller of the Currency and the Securities and Exchange Commission have been investigating.

The WSJ story notes that Morgan's funds most often outperform their Lipper averages. And because the bank charges an extra 0.5% annually for holding outside funds, Private Bank clients may find Morgan's own funds less expensive.
See the SEC's page of advice for mutual fund investors here.