“I've left the country. You're Disinherited!”

English expats may find it more difficult to disinherit their relatives, The Telegraph reports. 

Wonder what rules apply to Americans domiciled outside this country.

Financial Reform: The "F" Word

Elaine Morgillo regularly contributes a personal finance column to our Sunday paper. Today she suggests that financial reform should extend beyond banks too big to fail and gamblers using financially-engineered products.

For years, the regulation of financial advice and financial advisers has been widely criticized, both from within and outside the industry. Numerous studies have concluded individual investors are confused about the differences between financial advisers. Many financial advisers, myself included, continue to be frustrated by the inconsistencies, gaps and contradictions in our regulatory environment. 

It continues to astound me that so little regulation currently exists to impose a set of standard qualifications or rules for everyone who provides financial or investment advice to consumers. Certain types of advisers are held to the highest fiduciary standards (the "f" word that many in my industry attempt to avoid) when providing advice to clients. The heart of the fiduciary concept is to always place the interests of the client above all others. This precept should be embraced by and required of all of us, but it isn't.

Efforts to impose a fiduciary standard on investing's sell side have experienced rough going. Could better labeling ("I'm a sales agent, she's an adviser") work better? Maybe not. What would you call those who offer advice for a fee but also act as investment brokers – and maybe sell insurance on the side?

Related posts
Is There a Fiduciary in the House?

Sell Like a Fiduciary, Quack Like a Pony?

Distributing Her Husband's Estate

A Christmas story.

The Pain Trade Is All About Down-Capture

Rich and ever-changing is the language of investing. Terms new to me include

The Pain Trade. That's how hedge fund managers refer to their work this year, Financial Times reports. Through November the average hedge fund is down more than 4 percent for the year.

Up-capture. Making money.

Down-capture. Losing money.

Too much down-capture means investors are falling out of love with hedge funds, according to Reuters.

That love affair may always have been more about sizzle than steak. By one reckoning, Dealbook notes, hedge funds averaged an annual return of 6 percent from 1980 to 2008. That's a mere 40 basis points more than Treasury bonds returned. Over the same period, stocks as measured by the S&P 500 did much better, averaging well over 9 percent per annum.

Don't count hedge funds out just yet. Some do achieve awesome returns, and picking winners may be easier than we realized. See A Bunch of Academics Think They've Figured Out How To Tell If A Hedge Fund Will Outperform The Market.

Taxes and economic growth

From Forbes: Obama is an Awful Economic Historian.

However, I'm less certain that additional tax rate cuts are needed today.  It would be better to get a semi-permanent tax code, instead of one riddled with expiration dates.

A good film for trust officers?

Scott Martin of The Trust Advisor has a rave review for George Clooney and the new film, "The Descendants."  However, I suspect that the film does not make a case for a corporate fiduciary.

About That Favicon

If Jim Gust's post resulted in identification of this blog's new favicon, It escaped me. So I'll explain.

In its early days, The Merrill Anderson Company was a little ad agency trying to look mature in the eyes of stodgy bankers. The company letterhead featured a discreet Merrill Anderson monogram, printed in brown ink on buff paper. The first rough sketch must have looked something like this:

By the 1960s, the company needed a mod look. The resulting abstraction of the monogram – twin peaks plus one – may not have been the art department's finest design solution, but it did inspire a welcome switch from buff to white stationery.

The new asset hoarders

Senator Grassley joins me in a key concern.

Coming, the Eternity App?

"Siri, according to Ben Kunz at Bloomberg Businessweek, this could be the beginning of an eternal friendship. "

Guess Virtual Me really will need a perpetual dynasty trust.

Apple Stores: The New Disneyland

Apple's fifth New York City store opens in Grand Central Station today. The WSJ offers a telling statistic:

More people now visit Apple's stores in a single quarter than the 60 million who visited Walt Disney Co.'s four biggest theme parks last year….

Marketing moral: The Secret of Sales is Service.

Our favicon

I have added a favicon to the blog, which is that tiny graphical element that appears to the left of the blog's name if you have it on a bookmark list, or on your toolbar.  It's rather small, so if you've had trouble making it out, here it is:

Can anyone explain why this favicon is appropriate for this blog?  Or, why I might think so, even if you disagree? You probably need to be an old-timer to get it.

Wealth Management: Suffering in Translation

A comment on a recent post linked to this money-management blurb. Fun reading.

According to its web site, Sphinx Asia actually is based in Panama.

Christmas Price Index

Once upon a time, a playful bank economist (oxymoron?) measured inflation by calculating changes in the cost of the gifts given in The Twelve Days of Christmas. Decades later, his whimsey has become quite a production.

Fight over Huguette Clark's Estate

Huguette Clark's estate is back in the news, propelled by reports that in 2005, at age 98, she made two wills within six weeks. The first benefited mainly her relatives. The second, which was offered for probate, left family members nothing.

Readers new to the story should see this MSNBC photo gallery for background on the Clark family,

Greenwich Money Managers Win Millions

Three Greenwich, Connecticut money managers now have a lot more wealth to manage: their Powerball jackpot.

Stimulus, for the record

The CBO has revisited the consequences of the stimulus legislation.

“Siri, Let's Look At My Trust Fund”

The digital age is revolutionizing the ways people deal with their wealth.

Exhibit A: More and more private banking clients expect the same mobile access to their accounts they enjoy with their online broker.

Exhibit B: Dwolla, one guy's simple, inexpensive method of handling financial transactions via mobile phone. If his idea catches on, credit card systems could become as obsolete as the telegraph.

Hints on the Steve Jobs estate plan

AppleInsider reports Steve Jobs' wife to manage $4.6 billion trust of Disney shares.

The trust will be Disney's largest shareholder. Not clear at the moment whether it is a charitable trust, which would have a dramatic estate tax impact. If it is, Jobs' surviving spouse would have plenty to live on for life just from the trustee's fees.

Steve Jobs Outgained Warren Buffett

From a Bloomberg column speculating on whether Steve Job's estate will sell his massive holdings in Apple and, via Pixar, Disney:

Jobs bought Pixar from “Star Wars” producer George Lucas for $5 million in 1986 and invested $50 million more in the computer animation company over a decade, according to a person with knowledge of the situation who wouldn’t speak publicly. When Jobs died, the Disney stake was worth $4.35 billion.

Excluding dividends, that marks an 18.5 percent annual return through Oct. 5, based on $55 million invested at the end of 1986. In that span, Warren Buffett’s Berkshire Hathaway Inc. produced a 15.4 percent average yearly gain, using historical prices from Global Financial Data and returns compiled by Bloomberg:

Rein In Donor-Advised Funds?

Donor-advised funds are private charitable foundations for the rest of us. Amounts transferred to the fund are deductible, subject to the usual rules. Investment earnings accumulate tax free. And unlike charitable foundations, donor-advised funds need not pay out at least 5% a year to charitable recipients.

Cool idea! And popular. In her NY Times op-ed, Ray Madoff describes donor-advised funds as the fastest growing charitable vehicle in the United States, now holding about $25 billion.

That's good news for Fidelity and all the other fund managers, who collect an extra 1% or so yearly in addition to their normal investment fees. Good public policy? Not without tightening the rules, Madoff believes:

Congress should enact rules that require donor-advised funds to distribute all of their assets to real public charities within seven years of their contribution. In addition, Congress should make clear that private foundations cannot meet their payout obligations by making gifts to donor-advised funds.

Would you agree?

From Schwab's web site, a clear, simple promo for its donor-advised fund.

Should Wealth Management Work Like an Apple Store?

Ron Johnson, architect of Apple's Retail Stores, in the Harvard Business Review, as quoted at MacRumors:

People come to the Apple Store for the experience -- and they're willing to pay a premium for that. There are lots of components to that experience, but maybe the most important -- and this is something that can translate to any retailer -- is that the staff isn't focused on selling stuff, it's focused on building relationships and trying to make people's lives better. That may sound hokey, but it's true. The staff is exceptionally well trained, and they're not on commission, so it makes no difference to them if they sell you an expensive new computer or help you make your old one run better so you're happy with it. Their job is to figure out what you need and help you get it, even if it's a product Apple doesn't carry. Compare that with other retailers where the emphasis is on cross-selling and upselling and, basically, encouraging customers to buy more, even if they don't want or need it. That doesn't enrich their lives, and it doesn't deepen the retailer's relationship with them. It just makes their wallets lighter.

An Eighteenth-Century Steve Jobs?

Thomas Bentley

A while back we called your attention to Josiah Wedgwood, the master marketer who may have invented direct mail. Regina Lee Blaszczyk suggests more credit be given to Wedgwood's partner:

In the 1760s, a backwoods British potter named Josiah Wedgwood joined big-city merchant Thomas Bentley and created one of the world's first design-driven companies. Wedgwood and Bentley were remarkably like [Steve] Jobs and Steve Wozniak, the co-founder of Apple Inc. Wedgwood and Wozniak were both geeks with deep knowledge of the technology. Bentley and Jobs were design futurists who could imagine how consumers might respond to new products. 

Was it Thomas Bentley who thought of direct mail? In any case, he seems to have anticipated Jobs by opening a special Wedgwood store to sell the company's clean, modern designs.

EU resolution

Notes on capital flight and forced repatriation. Somehow, I don't think this is going to end well.

Congress Goes Bipartisan!

We were wrong. Despite the more-taxes, less-spending deadlock, Congressional Democrats and Republicans can get along just fine together. All it takes is the right incentives –  at the expense of us taxpayers, naturally.

Sarah Palin Bashes Congress

Sarah Palin's ghostwriter does a tidy job of bashing Members of Congress for getting rich off Wall Street. He or she includes one of my favorite Mark Twain quotes:

"There is no distinctly native American criminal class except Congress." 

What does the collapse of MF Global portend?

Another way to put that question is, if the customer's money is gone, why hasn't Jon Corzine been arrested yet?

This item is fascinating, and disturbing.  It links to a statement by a broker who has shuttered her business and gotten out of the commodities and futures markets because she believes that they are on the brink of complete collapse.  There's also quite a bit of political hyperbole, so I'm uncertain how much to believe.

But there's no doubt that a regulatory failure of this magnitude shouldn't have happened.  Crony capitalism indeed.

Canadian Writes Best-Selling Investment Book

O Canada, you're a nation making waves. First Adbusters, a Canadian activist group, came up with the idea to Occupy Wall Street. Now, as of November 17, Andrew Hallam, a Canadian school teacher, has the best-selling investment guide on Amazon: Millionaire Teacher, the Nine Rules of Wealth You Should Have Learned in School.

Hallam writes simply and clearly (that's not easy, folks!). Judging from a quick sampling, he does a nice job of coaxing readers to live within their means in order to put aside a little money for investment.

In the U.S., Hallam notes, as of 2009 most homes valued at a million dollars or more were not owned by millionaires. "The majority of million-dollar homes were owned by non-millionaires with large mortgages and expensive tastes."

Welfare For Millionaires?

What do Senator Tom Coburn of Oklahoma and Atlantic contributer Daniel Indiviglio have a common? Like most Americans, they either don't know or don't remember the difference between an income-tax deduction and an income-tax credit.

If you're in the 35% tax bracket, every $1 of home-mortgage deduction saves you 35¢. (If you're Warren Buffet, you save 17¢.) Whatever your tax bracket, every $1 of child-care credit saves you $1.

You cannot add up dollar amounts of deductions and credits to arrive at total "tax breaks."

Nevertheless, Senator Coburn's report is entertaining and/or infuriating in spots. Who knew 18 income millionaires received an average of $11,113 in unemployment benefits in 2009? And why are we still paying all those assorted farm subsidies to the top 1%?

The Executor Was a Shirker

Another case illustrating the advisability of naming a corporate executor – and a reminder that IRAs are not probate assets.

IN RE ESTATE OF KAMPEN

How the Congressional Rich Get Richer?

From tonight's 60 Minutes: Congress: Trading stock on inside information?

Rich Kids Worth Remembering on Veterans Day

In 1916 a bunch of overprivileged young Yale men, including a Rockefeller and a Taft, used their privilege to launch their own private air corps.

They formed The First Yale Unit, “a privately funded air militia that became the founding squadron of the U.S. Naval Air Reserve and whose members were among the first to ship overseas and fight for their country in World War I."

You can read about them in The Millionaires' Unit.

On Veterans Day, let's be grateful for the time when great wealth was understood to impose great obligation – especially if your old man was a Wall Street banker.

H/T to the Yale Alumni Magazine blog.

401(k)s Can Spell Inheritance Trouble

In the WSJ Carolyn Geer spotlights potential problems (such as the impossibility of "disinheriting" a spouse without the spouse's consent). See Battles Over Retirement Accounts.

Can Family Office Revenue Replace Debit Card Fees?

Government regulators, general public … nobody likes bank fees relating to credit cards or debit cards. Can megabanks replace this  revenue with fees for managing megawealth?

Wells Fargo will give it a try with Abbot Downing, a bank for the super rich. Formed from Wells Fargo Family Wealth and its Lowry Hill Investment Advisor, Abbot Downing will be headquartered in Chicago with branches nationwide.

 Let's see, BofA's infamous $5-a-month fee would have brought in $60 per customer per year.  Assuming an annual fee of 0.5% of assets under management, a multifamily office should bring in $250,000 per $50-million customer per year. Is Wells Fargo on to something?

 •

The name of the new family-office brand comes from a famed Concord, New Hampshire company of the 19th century.  Abbot Downing made the almost indestructible Concord Stagecoach.

Photo via Wikimedia Commons

Buffalo soldiers guarding a Concord stagecoach, 1869

Defending the Top 1%

Leave it to a Yale man to do the job right.

What's In Your Retirement Fund?

Superficial Pension Audits a Risk to Trust Banks and Others, reports American Banker. Precise valuation of interests in hedge funds and private equity must be difficult. How much of a discount do you take for illiquidity?

And what if the "interests" don't even exist?

Unlikely? Yes. Impossible? No. See The Emperor's New Securities.