According to a survey released this morning by Spectrem Group, which polled investors worth $25 million or more, close to half of all respondents believe they could do a better job of financial planning than their advisers. And only about half were satisfied with the “knowledge and expertise” of their adviser and his or her ability to “deal with complex financial issues and problems.”Why? Most of the respondents were self-made millionaires, they didn't inherit their wealth. Contrary to what Merrill Anderson preaches, these people believe that if they have proven themselves in a business or a profession, mastering investment skills should not present a problem. But even worse,
They believe (fairly or not) that private banks and Wall Street firms today are more interested in products than providing custom financial advice.Maybe all that cross selling wasn't such a good idea?
I once had an “old-timer” from Wall Street sum up the investment banking/advisory business to me, as follows: “We don’t want to steal your money, but we will if we have to.”
Yes, miscast. So we realized last evening after watching "Hercule Poirot's Christmas."
How do you turn dividend and interest income into tax-deferred capital gain? Temporarily, anyway, the answer seems to be ETNs (Exchange-Traded Notes).Fieldpoint will administer funds worth billions at the outset, offering banking, investment and estate management advice. Chief Executive Kevin McCabe, who used to work at JP Morgan Chase (JPM), believes Fieldpoint will also offer its clients excellent networking opportunities. Clients will be offered the opportunity to share ideas with each other, including investment opportunities.The Dow Jones story also notes that Rockefeller & Co., the outgrowth of the old Rockefeller family office, is gearing up to seek more outside business. Judging from their web site, that definitely includes trust and estate business:
Wealthy individuals often express their dislike of established private banks, citing poor service and product pushing . . . .
Because of our firm’s heritage, we are particularly attuned to the needs of families managing wealth transfer across generations. We understand the nuances of administering long-term trusts and the role that education and mentoring play in helping children and grandchildren to manage the responsibilities of wealth.Overall, Dow Jones notes, total wealth serviced by private banks grew by 25% last year.
As a corporate fiduciary, we offer impartiality and objectivity in administering payments. We are experienced and flexible when working with individual co-trustees or outside advisors.
Our subsidiaries, The Rockefeller Trust Company (New York) and The Rockefeller Trust Company (Delaware) deliver a cost-effective full range of trust and estate services . . . .
Leverage, double counting (as when a manager's fund of funds invests in the firm's own hedge funds) and valuation issues make the size of the hedge-fund market hard to judge. Estimates range from $2.48 billion down to $1.25 billion.When reporting their assets under management, hedge funds typically refer to the amount of money they have attracted from investors -- a practice long established by mutual funds and other investment firms. Many hedge funds also borrow money to increase their "leverage," which amplifies their potential returns (and potential losses). In recent months, as the market turmoil has forced many funds to cut back on their borrowing, it has become evident that some were adding in the borrowed money when reporting their size. For example, bond fund Y2K said it had assets under management of $2 billion as recently as July. But after a tough summer, London-based parent Wharton Asset Management UK Ltd. said the fund actually had less than $100 million in investor capital, and that most of the rest had been borrowed.
Three years ago, [Ezra] Glass co-founded a lifestyle-management company in Rockville named Serenity Now, a name inspired by an episode of the television show "Seinfeld." It's modeled on similar lifestyle-management firms in vogue in Europe, where clients pay a membership fee for round-the-clock advisers who can cater to their every need, including entree into chic clubs and restaurants. Glass's clients pay a membership fee that ranges from $450 to $1,500 a month.Apple Retail Stores Revamp:
It's not uncommon to find people dropping in to hang out, use the Internet or let their children play on the Macs on low-legged tables. Personal blog entries, complete with snapshots of the authors in the store, are sometimes written on the spot.
"We try to pattern the feeling to a 5-star hotel," said Apple's retail chief, Ron Johnson. "It's not about selling. It's about creating a place where you belong."* * *The "one-to-one" personal training service that Apple stores launched two years ago is also becoming more popular, Johnson said. He declined to give specific growth figures.
For $99 a year, a customer gets up to one hour a week to learn about a wide-range of subjects tailored to the customer's interest or abilities. The program is for beginners and experts alike and can cover how to set up computers, make movies, build Web sites or put together a scrapbook or family newsletter.
From its inception, One Laptop Per Child posed a threat to the personal-computing dominance of software giant Microsoft and chip maker Intel. Mr. Negroponte's team, drawn from MIT, designed a machine that didn't use Windows or Intel chips. It uses the Linux operating system and other nonproprietary, open-source software, which users are allowed to tinker with.This year, says the WSJ, Bill Gates announced Microsoft would offer developing countries a software package that includes Windows, a student version of Microsoft Office and educational programs. Total price? $3.00.
Last year, Intel, which normally doesn't sell computers, introduced a small laptop for developing countries called the Classmate, which currently goes for between $230 and $300. It has marketed the computer aggressively, although it stands to make little money on the initiative. But it hopes to prevent rival Advanced Micro Devices Inc., or AMD, whose chips are in Mr. Negroponte's competing computer, from becoming a standard in the developing world.
Mary has a little XO,What's the XO? It's the brainchild of a certified nut case, Nicholas Negroponte, founder of the MIT Media Lab.
It's powered by the sun.
And everywhere that Mary goes,
She learns and has some fun.
While children are by nature eager for knowledge, many countries have insufficient resources to devote to education—sometimes less than $20 per year per child (compared to an average of $7,500 in the United States). By giving children their very own connected XO laptop, we are giving them a window to the outside world, access to vast amounts of information, a way to connect with each other, and a springboard into their future.Wealth managers and their clients talk a lot these days about leaving legacies that amount to more than just money. One Laptop Per Child sure seems to fill the bill.
George, at his full retirement age of 66, expects a benefit of $2,000 a month. His wife, Martha, at her full retirement age of 66, expects a benefit of $1,000 a month.Caution: Serial double-dipping is such a cool gambit that even some Social Security officials don't know about it.
The strategy: Martha files for a reduced benefit on her own at age 63, or $800 a month. George, at age 66, files for just a spousal benefit, based on Martha's earnings. He would get $500 a month as Martha's spouse. (Yes, Social Security allows George to get half of what Martha was projected to receive at her full retirement age.) Then, at age 70, George applies for benefits based on his earnings history. With the "delayed retirement credit" (the additional dollars one receives for waiting until age 70 to claim Social Security), George's benefit would be 32% higher, or $2,640 a month.
Social Security would stop George's spousal benefit of $500 a month because he's entitled to the $2,640, based on his own earnings, at age 70. Again, for this to work, George must wait until his full retirement age or later to file for a spousal benefit.
Philanthropy is a core element of wealth management for most families. Registered Rep magazine reports that more and more brokers are recognizing that fact and discussing the subject with their clients. According to a survey done by the magazine with Schwab, some 79% of brokers say that they will talk about philanthropy, though a much smaller number feel comfortable initiating such discusssions.Elaine E. Bedel, a fee-only financial advisor with Bedel Financial Consulting in Indianapolis, says her background working in the trust department of a bank gave her the knowledge to speak confidently with clients about charitable giving. It’s usually a discussion that takes place in her initial meeting with a client, she says.What if the client isn't charitably minded?
Raymond F. Rivas, a financial advisor with Atherton Wealth Planning in Atherton, Calif. says, in fact, that he takes a rather blunt approach. “I usually say, ‘Look, you have a lot of money here. What are you going to do for others? You have two choices when you pass away. Are you going to give your social capital to the IRS, so they can decide how to distribute it, or are you going to take your social capital and decide yourself how to distribute it among your fellow Americans.’”That's been Jim Macdonald's defense of the unlimited charitable deduction—who wants to let Washington spend the money? But they keep spending it whether they have it or not. I'm wondering whether my taxes might go down a bit if we share some of the charitable largess with the IRS?
Reid's unanimous consent request stipulated that after two hours of debate, the Senate would either vote to cut off discussion of the measure or move on to consider competing amendments by Assistant Minority Leader Trent Lott, R-Miss., and Finance Committee Chair Max Baucus, D-Mont.
Lott's amendment would repeal the AMT outright and extend expiring tax provisions by one year. Baucus's amendment would provide a one-year AMT patch without offsets and a two-year, offset extenders package.
The fact that Baucus was willing to drop offsets for the AMT patch indicated possible movement toward compromise and resolution of this long-overdue tax problem. But Minority Leader Mitch McConnell objected (and it only takes one to defeat a unanimous consent motion), arguing for a "clean" bill with no offsets at all.
As Google’s historic August 2004 IPO approached, the company’s senior vice president, Jonathan Rosenberg, realized he was about to spawn hundreds of impetuous young multimillionaires. They would, he feared, become the prey of Wall Street brokers, financial advisers, and wealth managers, all offering their own get-even-richer investment schemes. Scores of them from firms like J.P. Morgan Chase, UBS, Morgan Stanley, and Presidio Financial Partners were already circling company headquarters in Mountain View with hopes of presenting their wares to some soon-to-be-very-wealthy new clients.The teachers were among the greatest investment thinkers and scholars:
Rosenberg didn’t turn the suitors away; he simply placed them in a holding pattern. Then, to protect Google’s staff, he proposed a series of in-house investment teach-ins, to be held before the investment counselors were given a green light to land.
Ms. Brown . . .now lives in a 3,000-square-foot house in Nevada, gets her own massages at least once a week and has a private Pilates instructor. She has traveled the world to oversee a charitable foundation she started with her Google wealth and has written a book, still unpublished, “Giigle: How I Got Lucky Massaging Google.”By unofficial estimate, "1,000 people each have more than $5 million worth of Google shares from stock grants and stock options."
In his Science Journal column (subscription), The Wall Street Journal's Robert Lee Hotz reports on recent studies suggesting that our brains are built to look on the bright side. Optimists, the Duke finance scholars discovered, worked longer hours every week, expected to retire later in life, were less likely to smoke and, when they divorced, were more likely to remarry. They also saved more, had more of their wealth in liquid assets, invested more in individual stocks and paid credit-card bills more promptly.In only one profession does optimism seem a drawback: The law. Pessimistic law students at UVa "got better grades, were more likely to make law review and, upon graduation, received better job offers."
Yet those who saw the future too brightly -- people who in the survey overestimated their own likely lifespan by 20 years or more -- behaved in just the opposite way, the researchers discovered. Rather than save, they squandered. They postponed bill-paying. Instead of taking the long view, they barely looked past tomorrow. Statistically, they were more likely to be day traders. "Optimism is a little like red wine," said Duke finance professor and study co-author Manju Puri. "In moderation, it is good for you; but no one would suggest you drink two bottles a day."
It has been said that Generation Y, people born between 1978 and 1992, are likely to be the first generation in history that are financially worse off than their parents," said [Robert Monahan, senior estate planner at Australian Executor Trustee].Have you noticed a similar trend in this country?
Grandparents seem to be picking up on this dramatic shift in fortunes and using their wills to do something about it.
A new study from U.K.-based Davies Hickman, commissioned by British Telecom, says the old view of money is “formal, conservative, ‘leather and wood,’ exotic locatons, polo, Bentleys and yachts.” The new rich, by contrast, are more interested in “stealth wealth” and “demonstrating their individuality and uniqueness.”Perhaps we should let the experts have the last word:
True — to some extent. Today’s rich are obviously different from Old Money. Yet I’m always surprised at how thoroughly today’s rich try to mimic the established wealthy. The aristocratic sport of polo, for instance, is thriving in Palm Beach and the Hamptons — Old Money haunts taken over by New Money.* * *Nelson Aldrich, the Aldrich scion and author of “Old Money,” explained to me once how New Money craves the respect and status of Old. New Money may make fun of the “snooty blue-bloods,” but privately the new rich spend much of their time trying to join their boards, win their friendships and, most of all, get their approval. And considering the alternative, all New Money wants to be Old Money some day.
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Fitzgerald (updated): "The new rich are very different."
Hemingway: "Yes. They have more money."Horton Foote's Dividing the Estate, a play about family interdependence, love, hate and estate planning, had a limited run, Sept. 27 to Oct. 28, to critical acclaim in New York City. The producers are hoping to bring it back in the spring. If it's on the boards again, wealth advisors and their clients are well-advised to see the production.
Acting IRS Commissioner Linda Stiff, echoing her predecessor, former IRS Commissioner Mark Everson, has maintained that the IRS must prepare its forms and processes for the filing season strictly according to current law, regardless of impending tax legislation. Stiff has said the IRS will need 10 weeks from the date of any currently pending tax bill's enactment to begin processing returns. Late enactment will affect return processing for up to 50 million taxpayers and will delay up to $75 billion in refunds, Stiff said.I can't agree with Olson's assessment. It might make sense to do nothing, to suspend the printing of the forms, to avoid incurring costs that will almost certainly be wasted, and perhaps to focus Congressional attention on the urgency of the situation, but relying on the heads of the taxwriting committees for preparing tax forms would be foolish.
But [National Taxpayer Advocate Nina] Olson said at a National CPA/IRS Tax Issues Meeting in Washington that she has received no satisfactory response after repeatedly requesting clarification on what prevents the IRS from preparing for the filing season by anticipating legislation.
Olson acknowledged that 'putting odds on what Congress will do is very, very difficult.' However, the heads of the congressional taxwriting committees have written to the IRS outlining the parameters of alternative minimum tax relief they intend to pass before the end of the year. Olson said it makes sense, given the circumstances, to program the systems in anticipation of the law changes.
Most bank trust departments are undercharging for their services, according to the Fiduciary Income Report analysis of stand-alone trust companies.The report also revealed that salaries are the biggest expense at trust departments, and that they have surprisingly small marketing budgets. I think I knew that already.
The report is a study of trust companies' income and expenses, examining both profit margin and return on assets.
According to the report's authors, trust companies that focus or limit their services to one or two account categories (such as, personal trusts, employee benefit, investment management agencies, or custody accounts) report significantly higher profit margins.
Trust companies on average netted 23 cents for every dollar of gross revenue, significantly higher than average net earnings reported by bank trust companies.
I recently received a vitriolic diatribe from a friend who died of cancer four years ago. In her will, she ordered her diary entries transcribed and sent to each person she wrote about. Her executor was, I guess, legally bound to follow her wishes, but should he have, knowing that this would more than likely hurt the recipients?What do you think the executor should have done?
[T}he past half-century has been one in which a beautifully simple concept—owning a broadly diversified list of investment-grade stocks (and/or bonds) at low cost, investing for the long-term rather than speculating for the short-term, designed for fund investors who buy and hold for the long-term—has become a complex, expensive, confusing exercise in, to a greater or lesser degree, speculation, giving rise to a huge depletion of wealth for the 100 million American families who own mutual funds.In Black Monday and Black Swans, Bogle widens his gaze, contemplating the human frailties that contributed to the Crash of '87 and the Mortgage Derivatives Meltdown of '07:
In that half-century period, we—at least, too many of us—have tried lots of clever, faddish ways to gather more assets from the investing public—option-income funds, “government plus” funds, short-term global funds, adjustable-rate preferred-stock funds, to say nothing of funds investing in “sin” stocks, etc. Nearly all of them have come and gone, and fund failures have now risen to an annual rate of about 5 percent. Not bad? Only until you realize that at that rate, a decade hence, fully one-half of today’s 4700 equity funds will be gone—consigned to the dustbin of history.
. . . probability is a slippery concept when applied to our financial markets. We use the term risk all too casually, and the term uncertainty all too rarely. This distinction was first made by the late University of Chicago economist Frank H. Knight, who spelled it out in his seminal work, Risk, Uncertainty, and Profits, in, well, no uncertain terms.Later in the speech, Bogle returns to themes covered in his 2005 book, The Battle for the Soul of Capitalism.
Here’s what Knight wrote:
. . . uncertainty must be taken in a sense radically distinct from the familiar notion of Risk, from which it has never been properly separated. The term “risk,” as loosely used in everyday speech and in economic discussion, really covers two things which . . . are categorically different. The essential fact is that “risk” means in some cases a quantity susceptible of measurement, while at other times it is something distinctly not of this character. A measurable uncertainty, or “risk” proper, is so far different from an immeasurable one that it is not in effect an uncertainty at all.
Knight continues:
The facts of life in this regard are in a superficial sense obtrusively obvious and are a matter of common observation. It is a world of change in which we live, and a world of uncertainty. We live only by knowing something about the future; while the problems of life or of conduct at least, arise from the fact that we know so little . . . in business as in other spheres of activity. We act according to (our) opinion, of greater or less foundation and value, neither entire ignorance nor complete information, but partial knowledge.
[C]apitalism has changed for the worse. In a half-century we’ve moved from an ownership society where individual shareholders owned 92 percent of all stocks and financial institutions owned only 8 percent (Chart 6) to an agency society in which institutional shareholders now own 74 percent of all stocks. But we haven’t changed the rules. These mutual fund and pension fund managers have largely ignored the interests of their principals—fund shareholders and pension beneficiaries. To restore balance to the system, we need a new fiduciary society in which the interests of these 100 million principals—the last-line investors of America—come first.
I was talking to a Jaguar salesman last week and asked him what the hardest part of his job was.
“You can’t tell who’s rich anymore,” he said. “It used to be if someone walked in with jeans and a T-shirt I could ignore them or ask them to leave. Now that guy could be a billionaire. You have to be nice to everybody these days.”
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