Monday, October 31, 2005

Great commercials: Where there's a Beetle, there's an heir

Back in the golden days of advertising, Doyle Dane Bernbach did cool commercials for a poor-man's Porsche known as the Peoples Car, or, as Hitler liked to say, the Volkswagen. Stuart Elliott of The New York Times in his weekly webletter recalls a classic spot involving inheritance:

A Reader Writes:
I enjoyed your recent item about favorite commercials. One of my absolute favorite spots of all time is the commercial directed by Joe Sedelmaier for Volkswagen in which the guy leaves his entire estate of "one hundred billion dollars" to his nephew, Harold, who drives a Beetle. I still remember a great line from the spot: "To my business partner Jules, whose only motto was, 'Spend, spend, spend,' I leave nothing, nothing, nothing."

Stuart Elliott replies:
Thanks, dear reader, for the memory. The commercial, called "Funeral," is also one of my faves. It was created by Doyle Dane Bernbach in New York, now part of the DDB Worldwide unit of the Omnicom Group. Doyle Dane also created other classic VW ads like "1949 Auto Show," my all-time best, and "Think small."

The "Funeral" commercial, from 1969, is included on lists of best commercials compiled by Advertising Age and TV Guide, among others. The commercial shows a procession of Cadillac limousines and other big cars headed to a funeral as a man speaks in a voiceover narration. The genius touch was that it soon becomes apparent that he is dead and reading his will aloud.

"To my wife Rose who spent money like there was no tomorrow, I leave $100 and a calendar," the man intones. "To my sons Rodney and Victor, who spent every dime I ever gave them on fancy cars and fast women, I leave $50 in dimes."

Then, after the dig at Jules and "other friends and relatives who also never learned the value of a dollar'' - to whom he leaves a dollar - the man talks about Harold. Harold is shown wiping away a tear as he drives his VW Beetle at the end of the procession.

"Finally, to my nephew Harold," the man says, "who ofttimes said, 'A penny saved is a penny earned,' and who also ofttimes said, 'Gee, Uncle Max, it sure pays to own a Volkswagen,' I leave my entire fortune of one hundred billion dollars."

(The script for "Funeral" comes courtesy of the book "When Advertising Tried Harder" by Larry Dobrow (Friendly Press, 1984).

Friday, October 28, 2005

Hedge funds: Trick or Treat?

Hedge funds may be more witches' brew than magic potion, says Mike Palmer of The Trust Company of the South.

Curiously enough, hedge-fund frauds are virtually nonexistent in Europe. In this CNN-Money article, Amanda Cantrell explains why.

The $12,000 annual exclusion is on the way

It's not official yet, but Professor Gerry Beyer reports here that the annual exclusion is expected to rise to $12,000 next year. The last bump was in 2002, and with inflation relatively calm in recent years I'm surprised that we've accumulated the 10% needed for the boost already. But there you have it--it means your 2005 marketing materials will have to be discarded at year-end.

Thursday, October 27, 2005

One man's tax incentive is another man's loophole

In order to promote more charitable giving this year, the Katrina Emergency Tax Relief Act lifted the limit on the deduction for cash post-Katrina charitable gifts from the usual 50% to 100% of AGI. And the gifts don's have to be hurricane related. The thinking was, generous donors might have used up their deduction limit already with all of this year's natural disasters. This way, they can keep on giving to their usual charities as well.

Sound like a fair formula for getting the rich to part with their wealth for a good cause? Not to the New York Times— In Hurricane Tax Package, a Boon for Wealthy Donors. This "little-noted" provision is problematic because taxpayers are evidently more enthusiastic about it than expected. Congress thought the revenue loss would be $819 million, but already private estimators have projected a $1 billion to $3.5 billion "cost" to the U.S. Treasury.

To me, that's a sign of a successful tax initiative, but the Times is apparently more worried that some wealthy donors might reduce their tax bill to zero this year, as well as the revenue shortfall. Who favors dynamic revenue scoring now?

Wednesday, October 26, 2005

Wellington Mara left a Giant estate plan

Wellington Mara, the NY Giants owner who died yesterday, could remember the days when pads were paltry and helmets were leather. The Mara family has been an owner of the Giants for 80 years. Today's NY Times reports that Wellington did all he could to keep the Maras' 50% interest in the family:
As recently as two years ago, John Mara [Wellington's son] said the family had taken the steps to structure the team's ownership so that federal estate taxes would not be so onerous that they would prompt the sale of the team. The goal was to avoid what happened in Miami, where estate taxes and feuding among the trustees of Joe Robbie's estate led to the sale of the Dolphins to H. Wayne Huizenga in 1994.

But in 1995, despite acknowledging that steps had been taken to ensure an orderly transfer of the team within the family, John Mara told The New York Times: "It will be hard to keep control and pay the taxes, that is true. The estate tax laws are so severe. I think we've done some careful planning, which we believe will allow us to carry on control of the organization. But it will be difficult to do."

John Mara says he and his 10 siblings all have ownership interests in the Giants. In addition to lifetime gifts, Wellington Mara is believed to have used the marital deduction, trusts, limited partnerships and life insurance in crafting his estate plan.

Thursday, October 20, 2005

Year-end tax planning for mutual fund distributions

The good news for mutual fund owners as a group this year is that distribution of capital gains are projected to reach $22 billion, up sharply from last year's $6 billion, according to Capital Gains Fuel Tax Code Debate. The bad news, of course, is that taxes will have to be paid on the gains, even if they are reinvested. A bill to change that tax treatment has faltered as attention has turned to hurricane relief and other unfinished tax business.

Saturday, October 15, 2005

Where's my trust fund check, Dude? I'm outtahere!

According to a Trusts and Estates study cited in this week's Barron's (subscribers only), nine out of ten heirs switch advisers soon after receiving their inheritances.

Are you wooing your young trust heirs as vigorously as you should be? Sounds like you have little to lose and lots to win.

According to Barron's, J.P. Morgan Private Bank does its wooing by inviting young heirs to gatherings in exotic locales, like St. Tropez.

Your marketing budget probably doesn't have room for that, but what about more modest gatherings, offering a combo of financial learning and socializing. A dinner cruise, maybe? A day on the ski slopes? You can think of something.

Top Wealth Managers in the U.S., 2005

Merrill Lynch, Citigroup, UBS, Wachovia and Charles Schwab lead this year's Barron's list (subscribers only) of the top 40 private Banks, just as they did last year. Several names in the top 20 moved up or down a notch. Suntrust hopped up three slots, from 21 to 17.

Newcomers to the top 40 included T. Rowe Price Private Asset Management and Boston Private Bank and Trust.

Friday, October 14, 2005

Here's $5 billion. Can you quintuple it?

That's what Jack Meyer did for Harvard over the last 15 years, generating the highest endowment returns of any university in the country. But it wasn't good enough for folks at Harvard, because they expect such returns without having to pay the managers market rates to get them. A successor was named today:
Harvard Names New Head of $25.9 Billion Endowment Fund - New York Times

The article is silent on the compensation plan for the new managers--not too surprising, as transparency is what did in the last regime. It should be noted that the payments to Meyer that outraged the alumni were entirely performance based, the result of beating well established benchmarks over a period of years. We'll all be watching to see how Harvard does in the future.

Hedge funds, red flags and colorblind investors

An October 7th panel discussion entitled, "Lessons From the Swamp -- What We Can Learn from the Bayou Debacle," attracted about 140 investors, regulators, academia and portfolio managers to the Yale School of Management last week. “There were ‘screaming red flags‘ that with proper due diligence investors could have picked up on,” said one panelist.
And it's likely investors will be fooled again, said Stuart Robinson, an FBI agent who supervises the white-collar investigative squad in Fairfield County.

"I'd like to propose to you that it is overwhelmingly likely that there are other Bayou's out there," he said. "Just because Bayou got caught, nothing has truly changed. It's an industry geared to very smart people that get in over their heads so they commit criminal acts. These are folks . . . who are geared toward reporting perfection in their professional lives."

For some managers who aren't realizing the results they want, "lying is the only way to earn a living the way they are accustomed to," Robinson said.
In fact, "the next Bayou" seemed to have emerged already. A few days earlier, Lehman Brothers charged a West Coast hedge-fund firm, Wood River Capital Management, with fraud. The SEC followed with charges that two of Wood River's funds had invested nearly two-thirds of their assets in one stock while promising clients diversified investments.

The stock, a tiny wireless venture called Endwave, repaid Wood River's faith by losing most of its value.

Yesterday's Wall Street Journal (subscribers only) commented:
As investors and securities firms assess possible losses related to the ailing hedge fund Wood River Partners LP, questions are growing about how sophisticated market participants overlooked a series of red flags surrounding the firm.
Investors, institutions and wealthy individuals, have been pouring money into hedge funds at a prodigous rate. Question is, how many wealth managers can match Yale's David Swensen in his ability to pick top-performing funds and avoid the disasters?

And even if you have a "second Swensen" on your team, hedge funds can be a dicey game for your clients. See The Guardian's cheery news item: World's hedge funds face crisis as Refco suspends trading.

Planners: Business booming; mutual funds losing luster

That's the conclusion drawn here from a recent survey of financial planners around the country. What's the key?
A number of advisers echoed the sentiments of Frank Geremia, president of Geremia Financial Services LLC, an Edison, N.J., firm with $50 million under management. "The farther away we get from 9/11, the more people are getting into the markets," he said. "They're more active and less passive."
Mutual funds are evidently being displaced by Exchange Traded Funds, though they remain dominant.

Wednesday, October 12, 2005

Yale and Harvard's Dueling Geniuses - FORTUNE

Following up on this post from Mr. Macdonald, here's an interesting comparison of the key investment managers for the endowments at Harvard and Yale. Note that one helpful contributor to Yale's success has been exploiting the expertise of Yale alumni at below-market rates. Also that the manager has left about $1 billion on the table--that's the additional compensation he would have been paid had he performed the exact same work on Wall Street.

And it's a dispute over compensation that is driving Harvard's best managers away.

Monday, October 10, 2005

Hone your marketing skills with psychoeconomics

Want to triple the amounts that employees invest in the 401k plans you handle?

Like to hike the interest rate in a consumer loan offer by four percentage points and still attract just as many new customers?

Check out this Forbes article on Sendhil Mullainathan, a “genius” student of behavioral economics.

Thursday, October 06, 2005


I went on a cruise to Alaska the third week of September, which was terrific except that I seem to be having a hard time catching up on everything. So the blog has been pushed to the back burner.

But I was thinking about it, even during the cruise. Although it's probably true that the cruise industry was invented for affluent retirees, my impression was that the customers are not quite as affluent as I expected. Most would not qualify as traditional trust prospects, certainly not at larger institutions. But they are part of the "mass affluent," which trusts departments and divisions are courting more and more. Princess was able to deliver a very high quality, "individualized" vacation experience to a heterogeneous group of 3,000. It wasn't cheap, yet my sense was that we got very good value for the money.

Except the day of the storm, when we all got seasick, but that's the risk one takes.

Lessons here for the trust and private bankers?

Saturday, October 01, 2005

Merrill Lynch clients have millions

From the cover story in the Oct. 3 Barron’s:

BOB HOPE ONCE CALLED a bank a place that will lend you money if you can prove you don't need it. He might as well be talking about brokers and their increasing pursuit of well-heeled customers -- a chase in which Merrill has a leg up on the competition. Of the nearly $1.2 trillion in individual assets with its brokerage unit, 39% are from clients who have between $1 million and $10 million with Merrill, while another 33% come from clients who've parked more than $10 million with the firm.