Advising the women millionaires

Did you know that most of the young millionaires in the UK are women? So reports this article, which offers provocative thoughts on what women want from their financial advisers.

Do women generally prefer to deal with women advisers? Or are women like my late mother-in-law still around? Daughter of a Wall Street mogul, she was financially astute herself but refused to believe a woman banker or broker could have a useful thought in her head.

Is estate tax reform coming?

According to this morning’s Wall Street Journal (subscription required), the Senate is close to a compromise on reforming the estate tax. We have no details as yet on tax rates or effective dates, but the smallest exemption being discussed is $3 million.

There will undoubtedly be additional adjustments, such as elimination of carryover basis, perhaps an additional exemption for family owned businesses.

Reportedly the White House is holding out for total repeal, which is unlikely. According to the Journal, advocates of repeal in the House are likely to accept the compromise.

The target for passage is the end of summer, which means before the August recess (around the ERTA anniversary?). I put the chance of passage of a compromise by August at 75%, because according to Tax Notes the repeal wing is quite strong, strong enough to see that something happens. Yet the Democrats have proved tenacious enough in blocking certain judges and the Bolton nomination that there is no chance for a stand-alone estate tax repeal bill passing. If Kyl strikes a compromise, the Senate Republican leadership is likely to endorse it, and I doubt Bush would veto it.

If the estate tax is changed, Merrill Anderson will have marketing materials in response.

Selling financial services with newsletters

Haven't posted for awhile because I was in Washington DC at the PrimeVest National Sales Conference. Merrill Anderson creates PrimeVest's client newsletter, and we do this with an unusual sales model. Each individual rep buys copies of the newsletter, for his or her clients (or other usage) and pays for the newsletter through commission reduction. Thus, Merrill Anderson has to sell each rep individually, for the most part.

Do the newsletters work? We didn't get any stories along the lines of "I distributed X copies of newsletters and received Y inquiries." We do have plenty of satisfied customers, and they did report getting comments on a fairly regular basis.

More important, usage of the newsletter is positively correlated with success as a PrimeVest registered rep. Overall, just 8% of PrimeVest reps have signed up for the newsletter. Among the "cream" of the brokers, those attending the National Sales Conference, we had a 27% market share. The top 25 reps constitute the "President's Club," and here we count 35% as our customers.

What do the newsletters do? Mostly, they put the face and contact information of the rep in front of the client. The content is polished and professional, good for the rep to associate with.

Drop me an email if you'd like to see a sample.

Private banks and trust companies: a broker's-eye view

Wealth management? You'll find it offered at any big brokerage firm. How does the service offered by private banks and trust companies differ from the brokerage version?

Here's a broker's eye view, from Registered Rep magazine.

Private banks offer more sophisticated service, catering to the customer rather than "pushing product."

Private banks and trust companies offer in-house expertise in trusts and estates and high-end tax advice.

“They are able to manage all aspects of trust accounts in-house, an increasingly important fact with the aging boomer population.”

And, "at the end of the day, it's also partly marketing. Private banks, quite simply, are chi-chi."

As the Registered Rep article illustrates, the battle for wealth-management business can be intramural. In this case it was Schwab vs. Schwab's U.S. Trust unit.

Anybody care to share other examples of brokers and trust new-business people duking it out to gain or keep a client?

From the databank

Percentage of people with net worth of $10 million or more who say they have no will, trust or healthcare proxy:
37
Percentage of affluent Americans who feel that wealth has made them happier:
46
Percentage of those with $10 million or more who say that money brings more problems than it solves:
29
Percentage of those with $10 million or more who worry that they won't be rich enough to support their desired lifestyle in retirement:
19
Median amount of wealth that those with $10 million or more say they would need to feel financially secure for life:
$18.1 million

Source of data: November 2004 HNW Inc. survey, commissioned by PNC Advisors.

2,270,000 millionaires

That's Merrill Lynch and Capgemini's assessment of the current Hign New Worth market in the U.S., according to this study. The study is as of the end of 2003, and that figure is a 14% over the 2002 number.

Is anyone else worried about the flattening yield curve?

I'm surprised that more people aren't alarmed--especially Alan Greenspan inthis recent testimony before Congress--about the fact that long rates have fallen as the Fed has raised short-term rates during the past year. One might think this a sign of economic weakness ahead--are there many exceptions to this well-known market observation?

When money talks, are you listening?

For the edification of wealth-management marketers, the latest Class Matters articles in yesterday's New York Times served up a cornucopia of quotes regarding those who possess large amounts of money, new or old:

Michael Kittredge (sold Yankee Candle Co. for about $500 million):

Successful people like to be with other successful people. "Birds of a feather." *** If you order a $300 bottle in a restaurant, the guy at the next table is ordering a $400 bottle.

[Really big] money makes a lifestyle. It creates a division between the old money and the new.

Roger Horchow (sold catalog business for $117 million):

The only people who are truly class conscious are the second tootsie wives of men with big bankrolls.

Dr. Nina Chandler Murray, psychologist, an 85-year-old relative of the Poor (as in Standard and Poor's) family:

Coming from a New England background, you had a honed discipline of what was expected. Showing off money was a sin.

What has happened in America is that achievement is so important that everyone wants everyone else to know what they have done. And in case you don't know, they want to tell you with a lethal combination of houses, cars and diamonds.

They have just a colossal amount of money. But they don't have any confidence in how they're living. For instance, one woman calls up her interior decorator every morning to find out what kind of flowers she should have. This seems sad.

Nelson Aldrich, old-money author of a book titled (surprise!) Old Money:

For many self-made men, homes, boats and even membership in expensive clubs are trophy signs of wealth. But for the older money, a boat may well be part of a tableau that has to do with family, with his grandparents and his children. It is part of his identity.

Michael Thomas, Wall Streeter turned novelist:

Ultimately, the new money becomes as insular as the old money, because it gains the power to exclude.

Shame has somehow gone out the window.

Letitia Lundeen, antiques dealer on Nantucket:

The old money doesn't like to spend money because they worry about whether they can make it again. Even when they can spend it, they often think it's vulgar and unnecessary.

Arlene Briard, Nantucket taxi driver and long-time resident:

Class has a certain grace. Just because you can go to Chanel and buy a dress does not mean you have class. A person who just pays their bills on time can have class.

Wealth managers must zero in on each client's attitude toward money. But have a care. Generalizations about New Money and Old Money don't always do well in crash tests against reality.

New Money? The Americans with the most are Bill Gates and Warren Buffett — two guys who probably couldn't look flashy if you paid them.

Old Money? The name most likely to be found on people's lips these days is . . . Paris Hilton!

Can this potion turn prospects into clients?

Sounds simple enough. Before you give your next seminar, just spray the room with oxytocin!

How big is the dynasty trust market?

Bigger than I thought. Guess a number before proceeding.

For those who are not familiar with them, Dynasty Trusts are perpetual private trusts. Under the common law, only charitable trusts were permitted an infinite life, while private trusts were governed by the wonderfully intricate "rule against perpetuities." As a practical matter, private trusts usually could not last much longer than a century. Which, one might think, should be plenty.

But the era of very high estate tax rates created an incentive to make trusts last longer, and so the Dynasty Trust was born. Several states reformed or abolished their rules against perpetuities to make such arrangements possible.

The strategy has born fruit. SSRN-Jurisdictional Competition for Trust Funds: An Empirical Analysis of Perpetuities and Taxes by Robert Sitkoff, Max Schanzenbach reveals that according to banking records, through 2003 about $100 billion has been placed in Dynasty Trusts. Interestingly, states that abolished their perpetuities laws but retained income taxes on Dynasty Trusts did not share in the bonanza. Thus,states do not share in the good fortune driectly through tax revenues, but only from the greater employment associated with trust management.

If the estate tax is repealed, will the market for Dynasty Trusts wither? Or is the urge to leave a permanent family financial legacy strong enough to sustain them without tax benefits?

"What's a special-needs trust, Doc?"

From a recent Forbes article on planning for special-needs children:

Parents are aware of the need to make plans, but 66% say there is little financial planning information available that focuses on children with special needs. Surprisingly, 85% parents turn to their doctor for financial advice.

Should trust business-development programs give more attention to this market segment?

If not, why?