Reinventing Investment Service

When the going gets tough, investors need fiduciaries, as we posted recently. Private banks and trust companies and legions of registered investment advisers can fill the bill. Provided you're High Net Worth.

Not so rich? Can't afford fees and expenses of two or three percent a year?  That's a problem. To obtain guidance inexpensive enough to please John Bogle, you would need to settle for an adviser whose previous job was flipping burgers.

O.K. Let's think outside the box. How about a virtual fiduciary? See The Wealth Manager For Rich Geeks.

This virtual fiduciary is called Wealthfront, and its CEO says, “We add very little value, and we price accordingly.” Wealthpoint offers ETF portfolios created by algorithm.  Fees and expenses are minimal.

Check out Wealthfront's inviting web site, a marvel of simplicity. Notice the promotional video. 

For comparison, I visited Vanguard, Fidelity and T. Rowe Price online. Each site was full of information, but none offered a simple, easy path for putting one's money to work. (I'm guessing fund companies would find it difficult, for legal and other reasons,  to create such a path.)

With skimpy stock and bond returns expected for a while, a truly inexpensive investment service has clear appeal. Even John Bogle might applaud a service that takes advantage of ETFs while removing the temptation to trade them.

Is Wealthfront on to something?

Related Post: Wealthfront's CEO is the same Andy Rachleff we linked to in "Private Banking " Dissected.

Auctioning Brooke Astor's Stuff

Next month Sotheby's will auction off items from the late Brooke Astor's Park Avenue duplex and her country place, Holly Hill. Above, a detail from her portrait by Aaron Shikler,  expected to fetch $10,000-$20,000.

Below, a portrait of an Aberdeen Angus bull by Herbert Haseltine. Like Shikler, Haseltine was popular with the high-society set, and Astor owned a number of his bronzes.

Will collectors be eager to acquire Astor's knick-knacks? We'll see.

“Private Banking” Dissected

What are the pros and cons of having a private banker? Private banking as an ex-VC guy sees it. Note the comments, including one praising GRATs.

How different are the truly rich?

Very different.

Willing and able to pay $455,352 in annual apartment maintenance fees.

Why Executors Always Should Look in the Barn

After the death of Baroness Gisela von Krieger in 1989, lawyers settling her estate found this remarkable asset in the family's Greenwich, CT barn.

At Gooding's Pebble Beach auction, the 1936 Mercedes-Benz 540 K Special Roadster sold for $11,770,000. You can read all about the car – only 30 were built and perhaps a dozen survive – and the Baroness here.

Should “Bankable Personas” Survive as Estate Assets?

Bill Cosby reportedly nudged Massachusetts to consider a statute that preserves a deceased celebrity's identity as an estate asset for 70 years. Already passed by the Massachusetts Senate, the legislation will become law if approved by the House. Massachusetts then would  become the 16th state to establish the right of publicity as an inheritable asset.

Leon Neyfakh surveys the pros and cons of preserving a celebrity's identity in this Boston Globe article.

•

Mad Men era note: Before Bill Cosby became a familiar father figure on sitcoms, he gained television stardom on I Spy. In that show Robert Culp and Cosby played CIA types, traipsing around the world under cover as a tennis player and his trainer/manager. A few NBC affiliates were so shocked by a black leading man they refused to run the show. For at least the first two of its three seasons on NBC – a big-deal network back then – I Spy was pretty cool.

Was That Sam Israel Laughing?

The case of Sam Israel and the ponzi scheme he called Bayou just keeps getting weirder:  Goldman, Still Playing In Bayou's Mud.

SmartMoney: Hail and Farewell

The September issue of SmartMoney will be its last, on paper. Times are tough for magazines. As Rupert Murdoch takes The Wall Street Journal mainstream to compete with The New York Times, he may feel less need for a personal-finance publication.

SmartMoney hopes to continue online. Generally, web sites seem sorry substitutes for print publications.  Magazines on the iPad look more promising. A touch screen allows readers of, say, The Economist to leaf through articles and skip or return to ad pages much as print readers do. But judging from SmartMoney's announcement, the publication is destined to be little more than a web site.

SmartMoney launched in 1992. Seems like only yesterday to some of us. In reality it was a world without smart phones. Wall Street was a place where ordinary folks thought twice before going to the expense of buying stocks. At Schwab in 1991, SmartMoney recalls, the average price of a trade was about $76. And that was a bargain compared with "full-service" commissions.

Haven't read SmartMoney much since my working days. At its best the content had a bit of an edge. One of the last examples, perhaps, is this column from Brett Arends. Though Mitt Romney may have paid at least 13 percent in federal income tax for the last ten years, as he announced today, he probably paid more for investment management.

Tying Strings on Trusts

"…of sound mind, good moral character and temperate financial habits."

Do you qualify? How do you define those "temperate financial habits?" No more than three credit cards? No home-equity loan? No junk bonds? Evidently the folks at Northern Trust understood the requirement well enough to decide on a distribution to a trust beneficiary. See Getting Heirs to Do Your Bidding.

Laura Sanders' survey of string-tying reminds us that modern testators and trustors really have to watch their language. For instance, must a beneficiary's "spouse" be of a particular gender? Do "descendants" include a child conceived with frozen sperm?

When the Going Gets Tough, Investors Need Fiduciaries

Two icons of the investment world have looked ahead, and what they see isn't pretty.

Bill Gross, the bond king, says the cult of equities is dying. Jeremy Siegel and others point out that Gross confuses stock appreciation with stock returns. Even so, Gross makes his case: subpar returns appear likely for several years.

John Bogle, the Vanguard founder, terms this the worst time for investors he's ever seen. The outlook for stocks is poor, and “the outlook for bonds over the next decade is really terrible.”


That's not even the bad news. In Bogle's view, the whole financial-services system is broken. “A culture of short-term speculation has run rampant,” he writes in his latest book, “superseding the culture of long-term investment that was dominant earlier in the post-World War II era.”

Bogle's proposed remedies, as summarized by The New York Times:

He advocates taxes to discourage short-term speculation. He wants limits on leverage, transparency for financial derivatives, stricter punishments for financial crimes and, perhaps most urgently, a unified fiduciary standard for all money managers: “A fiduciary standard means, basically, put the interests of the client first. No excuses. Period.”

Agreed. In a perfect world all investors, even "the little guy," would receive the same kind of unbiased guidance offered by the best corporate trustees and advisory firms.

In the real world, it's a tall order.

A clipping from "The Clash of Cultures"

How to Pay Off the National Debt

Wealth managers and their clients can stop worrying about the fiscal cliff. Allan Sloan has a Modest Proposal that will erase not only federal deficits but the entire National Debt.

As real life moves beyond parody, columnists like Sloan face a daunting challenge. How do you make fiction sound stranger than fact? The Washington Post apparently feared we'd take Sloan's idea seriously. Hence the warning, "Budgetary satire."

Hollywood screenwriters also have it tough. How on earth do you satirize Congressional politics? Reviewing "The Campaign."the new comedy with Will Ferrell and Zach Galifianakis, New York Times film critic A. O. Scott concludes that you probably can't:

[T]here may be comfort in the thought that the American people would never elect clowns like these to any office. But then a glance at some of the clowns we do elect, perhaps especially to our national legislature, might lead you in the opposite direction. Really, the movie could not possibly go far enough unless the screenwriters (Chris Henchy and Shawn Harwell) had abandoned all invention and transcribed the script directly from C-Span. 

As for Wall Street, just imagine a screenwriter pitching his over-the-top financial farce: "This brokerage firm installs new trading software, see? It runs amok and costs them a fortune. All because they can't find the 'off' switch!"

Doesn't Sloan's scheme to take  the Fed public sound more plausible?

If you see a cliff, which way do you run?

We're running toward the fiscal cliff.  The Democrats have already announced a plan to let all the Bush tax cuts expire, so they can start fresh in the spring.  The sequester is on the way, and firms will soon be sending out legally required pink slips.

Businesses are running away from the cliff.

They have more at risk, after all.