Saturday, December 31, 2011

A Winter Sport For Mitt Romney?

If the former Governor of Massachusetts were not otherwise occupied this winter, he might enjoy ice fishing near his house on New Hampshire's Lake Winnipesaukee.                                                                                                                        
Fifty years ago, the trust pros at Chase Manhattan thought ice fishing upscale enough to feature in this nest egg ad. The setting is not Winnipesaukee but Connecticut's Lake Waramaug.

Friday, December 30, 2011

Let's Remember Pearl Harbor

Seriously. You'll feel better about the year ahead if you do.

On December 7 we commemorated the 70th anniversary of the attack that propelled the U. S. into World War II. Sadly, this year's gathering of veterans who survived the onslaught will be the last; their number is dwindling.

Seventy years ago, America was struggling out of the Depression. One out of five homes (and the great majority of farms) lacked electricity. The war brought shortages and gas rationing.

In the Pacific the Japanese wreaked havoc. (I later knew a couple of kids whose families had spent the war interned in the Philippines.)

In Europe, Germany had occupied most of western Europe and invaded the Soviet Union.

Today? Even poor American families have electricity. Most have air conditioning. Germany is helping keep the rest of Europe afloat financially. Japan sends us Sony flat-panel HDTVs.

This post is written by a blogger old enough to remember hearing FDR's "Date which will live in infamy" speech live. Believe me, by WWII standards, the problems and worries facing us in 2012 seem almost trivial. Many troubles are of our own making. Sobering up from a massive financial binge is no fun, but we're making slow progress.

Who knows? Even the Presidential election campaign could turn out to be entertaining. Not likely, though.

For fiduciaries both corporate and individual, 2012 will bring new investment uncertainties and who knows what tax puzzlements. Nevertheless, Happy New Year!

Thursday, December 29, 2011

Tuesday, December 27, 2011

Why Congress Won't Tax Other Millionaires?

Adjusted for inflation, the net worth of members of Congress has more than doubled since 1984. The top 25 Congressional wealthholders are an interesting mix of New Money, Spousal Money and Old, Trusteed Money.

When Wealthholders Only Rang Once

Here's a list of CEO's headquartered here in New York and their phone numbers. Go see them. Ask how this airline's printed flight schedule could be improved.
That was my marketing assignment, circa 1957. My phone calls requesting appointments always got through, answered by the CEO's secretary or, once or twice, by the great man himself. Phone calls were serious business in those days.
Phone calls were still serious business a few years later, when I began to learn how major trust companies worked. "One reason we assign each client to a team," I heard time and again, "is so that client phone calls will be answered, always." 

If the client's trust officer was not at his desk, I was told, the client was put through to the investment officer, or to one of the team's administrative assistants. Every call was answered by someone  – someone who knew the client and was familiar with the client's account. That, at least, was the goal.

Today? The number one complaint investors have about their brokers is that their calls are not returned, much less answered satisfactorily. 

I know, nobody considers phone calls serious business any more. (Now texting, that's important!) Nobody but the caller. Then and now, even unimportant clients want to feel like important clients. When you return a call promptly or take the time to send a newsletter article on a topic of interest to a client, you're practicing timeless good marketing.

H/T to The Trust and Estates Prof for calling attention to this survey. 

P. S. Speaking of those survey findings, why does anyone go to his or her broker for an estate plan? 

Monday, December 26, 2011

Huguette Clark Owed Millions in Gift Tax

For an eccentric recluse, Huguette Clark seemed to have had her affairs in good order, thanks to her lawyer and accountant. Now the accountant has resigned as an executor of her $400 million estate, amid charges that Huguette – and now her estate – owe the IRS some $90 million in gift taxes and penalties.

Obvious question: Who received those humongous gifts?

Saturday, December 24, 2011

The new 2% recapture tax

One thing you think you know about Social Security, it's a flat tax that applies the same to all earners, up to the wage base. 

Not anymore.

A new recapture tax was attached to the extension of the 2% payroll tax holiday for two months.  Those over the wage base will lose that 2% tax break through a recapture tax.  At double the wage base, the 2% benefit will be gone.  In other words, we just added another bubble to the income tax, well below the $250,000 that "millionaires" earn.

HT: TaxProf Blog.

Friday, December 23, 2011

A One-Percenter Christmas

A Gilded Age one percenter, that is. Teri Tynes' tribute to Christmas in the New York City of the 1880's links to this report on the shocking commercialization of the Holiday. (How commercialized? Pre-stuffed Christmas stockings!)

The Vanderbilts, Astors and other one-percenters of the Gilded Age needed wealth management. Trust companies rose to meet the need. The United States Trust Company of New York, founded in 1853, "led all New York institutions in deposits" by 1886. 

When you visit Tynes' Walking Off the Big Apple, enjoy her Nighttime Stroll to See the Holiday Lights of Greenwich Village. You would need to be a current one-percenter to own one of those houses on W. 10th Street.

Seasons Greetings!

Wednesday, December 21, 2011

“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.

Sunday, December 18, 2011

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?

Friday, December 16, 2011

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.

Wednesday, December 14, 2011

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.

Tuesday, December 13, 2011

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.

Monday, December 12, 2011

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.

Friday, December 09, 2011

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.

Monday, December 05, 2011

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.

Friday, December 02, 2011

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.

Thursday, December 01, 2011

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.

Tuesday, November 29, 2011

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,

Saturday, November 26, 2011

“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.

Thursday, November 24, 2011

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.

Wednesday, November 23, 2011

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:

Tuesday, November 22, 2011

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.

Monday, November 21, 2011

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.

Saturday, November 19, 2011

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.

Friday, November 18, 2011

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."

Wednesday, November 16, 2011

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%?

Tuesday, November 15, 2011

The Executor Was a Shirker

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

Friday, November 11, 2011

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.

Monday, November 07, 2011

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

Wednesday, November 02, 2011

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.

Thursday, October 27, 2011

Parenthood: A Lose-Lose Financial Quandary?

Here's the parental dilemma:
A. Put the kids through college
B. Save enough to retire
    Choose one
About 50 percent of parents choose plan A. Conventional financial planning wisdom says that's usually a mistake. See Will Kids Ruin Your Chance at Retirement?

Choose B and the kids will rack up a mountain of debt, currently averaging somewhere around $25,000 for new grads and growing yearly.

Those who have already chosen Plan A may benefit from SmartMoney's imaginative new guide to retirement destinations: places mostly likely to offer part-time jobs.

Those who chose plan B at least know where their children are: either back living at home or Occupying Wall Street.
Warning: Readers who have recently seen their kids graduate with minimal debt should not assume they have dodged the bullet. Grandkids ahead.

Wednesday, October 26, 2011

It’s the Top 0.1%, Stupid!

Occupy Wall Streeters may think of the top 1% as filthy rich. Most are merely overachieving professionals and executives. For truly fat cats, Look to the top 0.1%. And even higher.
Top 1% = $368,238 (20.9% of income)
Top 0.5% = $558,726 (16.8% of income)
Top 0.1% = $1,695,136 (10.3% of income)
Top 0.01% = $9,141,190 (5% of income)
The graphic accompanying this NY Times article shows today's one percenters to be salary and bonus rich, in contrast to the dividend collectors of the 1920s. Note the greatest income disparities existed back in the Gilded Age: "In the late 1890s, when the average American worker’s weekly wage was less than $10, John D. Rockefeller was earning about $192,000 a week."
Will a growing desire to "soak the millionaires" doom any chance of sensible tax reform and simplification? 

Most Americans Don't Have Wills

Neither do about 70 percent of  Brits, according to The Telegraph's salute to National Write a Will Week. 

According to a Harris Interactive study, about 55 percent of Americans die without a will.

Tuesday, October 25, 2011

Rush Limbaugh’s Estate Plan

Rush Limbaugh, during a discussion of the possible estate tax on Steve Jobs' billions:
Every year estate planners want to talk to me about estate planning and it seems that they think that the primary objective of any estate planning is going to be to keep money away from the government.  So they want to structure trusts, charitable donations, foundations, any number of things, and I always say to 'em, "Yeah, but the problem with doing that is I am getting rid of all my money before I die." 
Four times married, Mr. Limbaugh has no children.

Monday, October 24, 2011

Steve Jobs postscript

Last week, Apple closed their retail stores worldwide so that employees could participate in a company-wide remembrance of their founder. Apple has now posted the video of that event here.  Note, this seems to only work with Safari.  Norah Jones was delightful, and the speeches were thoughtful and moving.

60 minutes did a piece related to the upcoming Jobs biography. AppleInsider has links to that video, plus links to extra material, here.

Tuesday, October 18, 2011

Higher Incomes = Greater Giving

Almost one out of every four charitable dollars comes from donors with incomes over $500,000. This elite subset of The One Percent accounts for an even larger share of giving to charities other than religious organizations. Economix illustrates with charts.

Saturday, October 15, 2011

"There Is Nothing Like a Trust Fund”

From five decades ago, October 1961, here's an enthusiastic ad for living trusts. Prosaic art and headline, but the body copy starts strong, "Money and trust funds were made for each other," and ends stronger: "There's nothing like a trust fund to keep families and family funds together. "

You can almost forgive the copywriter for addressing "the man" and ignoring the woman.

Wednesday, October 12, 2011

Secretary 3.0

In the days of Mad Men (and now Pan Am and The Playboy Club) the boss had a secretary.

Times change. In recent decades many minor executives have had to fend for themselves, while CEOs have relied on Secretary 2.0: the executive assistant.

Times are changing again. Meet Secretary 3.0.

(You didn't think Steve Jobs would stop changing the world just because he died, did you?)

Tuesday, October 11, 2011

Jobs and taxes

Steve Jobs, that is.  Much speculation already about his estate plan.

This item from the NYPost is, well, just stupid.  Essentially, it says basis step-up will apply to all of Jobs' estate assets, so capital gains taxes will be avoided by an early asset sale.  That supposedly justifies the promise of their headline, but they are silent on the more important question of death taxes.

Yahoo points out an intriguing factoid.  Before Steve went for the liver transplant, he and his wife created two trusts and transferred all their real estate to them, according to California land records.  Those trusts could be the receptacles for the rest of his wealth. If he already transferred the assets, he may have achieved true financial privacy.

Finally, surprisingly, the Trust Advisor Blog also overpromises with its headline that the Jobs estate plan will be tax free.  They don't have any access to the will or trust documents, so this is just speculation. However, they add the interesting twist that:
Completely under the radar, SEC filings reveal that Jobs was also busy moving the rest of his material wealth — 5.5 million shares of Apple stock and 138 million Disney shares, a memento of his other baby, the animation company Pixar — out of his estate and into a trust.
 That could be one or both of the trusts holding the real estate.  If the trusts qualified for the marital deduction, or perhaps the charitable deduction, then yes, there may not be much in the way of federal estate tax.  The commenters to the article point out the lack of info for making such a supposition.

Friday, October 07, 2011

Thursday, October 06, 2011

John Markoff on Steve Jobs

John Markoff must have been determined to produce an obituary worthy of its subject. In the print edition of the NY Times, his tribute to Steve Jobs starts on a quarter of the front page and continues for a full page inside.

Markoff reminds us that Jobs was very much a child of the countercultural late 1960's and early 1970's. Some CEOs get to the top by going to Harvard. Steve went to India, sampled LSD and never looked quite right wearing a suit.

There are those of us who, like Steve Jobs, think Steward Brand's Whole Earth Catalog was the greatest paperback ever published. Keep that in mind when client-facing with older Boomers. Especially Californians.

Tuesday, October 04, 2011

Inheritance Reduces Wealth Inequality

From Barron's Penta blog:
According to a major wealth study produced earlier this year, inheritances are an equalizing force that mitigates the inequalities found in American household wealth.

Interesting notes on the Durbin amendment and debit card fees

From Richard Epstein.

I use credit cards myself, but I should probably switch.

The Top One Percent Revisited

Who's the "Top One Percent"? links to charts showing how much wealth or income Americans at the top enjoyed in the aggregate. What about the individual income and net worth threshholds?

Incomewise, you need north of $380,000 a year to rank as a One Percenter.

For net worth, you need a lot more than $1 million. Last year, Spectrem estimates, about 7% of U.S. households possessed a net worth of a million or more. About 0.9% of households possessed $5 million or more, so you would need almost that much to rank as a net worth One Percenter.

 Most likely, a number of "Occupy Wall Street" protesters are the offspring of millionaire households. They still want to see the unemployment rate go down. And some wouldn't mind seeing the One Percenters who packaged  subprime mortgages go to jail.

Monday, October 03, 2011

Who’s the “Top One Percent”?

What a social-networked mush-up "Occupy Wall Street" turns out to be. Cursory browsing among the protest supporters took me to faith-based foundations, socialist groups  and academia, now joined by such mainstreamers as Hollywood celebs, labor unions and  Move On. The WP's Ezra Klein offers a primer, including a link to We are the 99 Percent.

And who is the other One Percent? Depends on whether you're talking income or net worth, as Catherine Rampell explains in this Economix post. Note that income inequality has increased significantly in recent years; the more extreme imbalance in net worth has changed little for decades.

Sunday, October 02, 2011

Friday, September 30, 2011

Andy Rooney

You'll get your last regularly scheduled "A Few Minutes With Andy Rooney" this Sunday. Rooney may not be entirely happy that 60 Minutes is laying him off at age 92.

Rooney doesn't write about high finance much, but in one of his later columns he did rise to defend an oppressed minority:
It's time we started being nicer to the rich.

People of this Country should be aware of the contribution made by those who make a lot of money. For too long they have been aligned by politicians, trashed by journalists and portrayed in a bad light by such artists of novelists and motion picture producers. If they rich were an ethnic group they could make the case that they are the persecuted victims of financial profiling. ***

Candidates for office and the majority of the electorate talk and act as if the rich got where they are by luck or dishonesty. Nowhere do we hear anyone say they did it with ability and hard work. No one says it is the financially successful people who make the wheels go 'round.
Rooney remembers the days when a bankroll was a bankroll, not a piece of plastic:
There's something about having a thick stack of money in your pocket that gives you a feeling of wellbeing. I smile more when I have money in my pocket. *** Most of us get no kick at all from a computer printout of a bank's idea of our net worth. What we want is that lump in our pocket.
Now that we're going to have to pay the bank a monthly fee to use those plastic debit cards, carrying a wad of currency may be an idea whose time has come … again.

Tuesday, September 27, 2011

Evidence That Investment Education Works

After Google's IPO seven years ago, hundreds of shareholding Google employees became millionaires. Brokers, advisory firms and trust bankers circled about. Google took protective action, launching what amounted to a university of investing,. Lecturers included Nobel Prize winner Bill Sharpe, Burton Malkiel and John Bogle.

Did Google's initiative help newly rich employees hold on to their wealth? Yes, in at least one case. At president Obama's Mountain View town hall meeting, it was Doug Edwards, Google's 59th employee, who asked, "Would you please raise my taxes?"

Monday, September 26, 2011

Is Your Social Networking Professional?

Thanks to the Yale Alumni Magazine blog for calling attention to The Unprofessional Sides of Social Media and Social Networking. Although Christina Skinner's prize-winning essay discusses the social networking of young lawyers, others who need to appear professional may find food for thought –and online discretion.

Saturday, September 24, 2011

Millionaires, Real Millionaires and Billionaires

John Steele Gordon in The Washington Post joins those pointing out that Americans with incomes over $1 million do pay more income tax: Five myths about millionaires.
According to the IRS, those with adjusted gross incomes of more than $1 million paid an average of 23.3 percent in federal income taxes in 2008; those earning between $100,000 and $200,000 paid 12.7 percent; and those earning between $50,000 and $100,000 paid 8.9 percent. Half of American families don’t make enough money to pay income taxes at all.
Wish Gordon's column didn't perpetuate the confusion between people with net worths of $1 million or more and people with incomes of $1 million or more. (Gordon assumes a net-worth of $1 million can generate interest of $50,000 a year. That's far from safe and easy these days.)

In The New York Times, Paul Sullivan discusses Warren Buffett – who is a billionaire, not a millionaire – and his secretary, who clearly makes a lot more than the average executive assistant. Sullivan's description of the president's proposed phase-outs of certain exemptions and deductions suggests they could inflict serious pain, moving people with income exxceeding the 28% bracket into effective rates far higher than 35%.

Oh, well. As Ron Lieber points out, at least some of these poor souls might avoid the AMT.

How to Tell a Billion From a Million

Thursday, September 22, 2011

Taxpayers, Real and Imaginary

Was yesterday's New York Times article on taxing the rich as peculiar as it seemed? One reason high-income Americans pay tax at lower rates than in other countries is that the great majority actually do pay. Greece may tax the rich at higher rates. So what? Greece is the Olympic champion of tax evasion. Does not collecting a 50% tax raise more revenue than not collecting a 40% tax?

And, please, could journalists stop referring to those "top 400 taxpayers" who seem to live higher and higher on the hog? Repeat members of the 400 club are scarcer than … Greek taxpayers.

Wednesday, September 21, 2011

The Girl With the Family Office

Stieg Larsson's Millennium Trilogy seemed a promising choice for light summer reading – an escape from offshore tax shelters and the world of wealth management.

Except it wasn't. In The Girl With the Dragon Tattoo, Lisbeth Salander steals a fortune. Using her hacking skills, she moves 2.5 billion Swedish kroner, stashed abroad by a bad guy, into her own offshore accounts.

The Swedish films made from Larsson's stories skip over her subsequent wealth management arrangements. It is the print version of The Girl Who Kicked the Hornet's Nest that tells us about Lisbeth's family office on Queensway Quay, Gibraltar.

Tuesday, September 20, 2011

Age and Investing

Looking for highly capable investors? Start by avoiding people under 50 or over 80. (And remind those over-80s to set up living trusts!) See Jeff Marshall's blog post: Investing Skill Can Decline with Age.

Sunday, September 18, 2011

172 Tax Breaks and What They Cost

This Washington Post graphic shows what each tax break is expected to cost this year and allows you to sort breaks by category, such as education or health. Altogether these tax subsidies almost equal tax collections.

Friday, September 16, 2011

From Laughter to Lamentation

Six years ago I used this quote in a blog comment because it seemed funny. Now . . .

Congress is the single strongest argument against Intelligent Design.
 --Alan Abelson, Barron’s, 5/23/05

Contentious Trusts

Across the pond, The Society of Trust and Estate Practitioners has handed out its Private Client Awards 2011/2012. My favorite:

Contentious Trust and Estates Team of the Year: Taylor Wessing LLP

Tuesday, September 13, 2011

The Luxury of Getting Away From It All

Fifty Septembers ago, when Chase ran this ad, movers and shakers could still get away from it all (except for those pesky "investment cares"). No mobile phones … no e-mail … no Internet access. What luxury!

Quote of the day:

From Megan McArdle:

Providing stimulus through payroll tax cuts that are financed with tax hikes on other people is like trying to boost your household income by making your wife pay you to mow the lawn.

Monday, September 12, 2011

Mitt Romney's Parable of The Faithless Fiduciary

Marc Thiessen in The Washington Post:
Heated exchanges notwithstanding, the fact is that Romney and Perry both agree that Social Security is being run as a criminal enterprise. In his book, “No Apology,” Romney writes: “Suppose two grandparents created a trust fund, appointed a bank as trustee, and instructed the bank to invest the proceeds of the trust fund so as to provide for their grandchildren’s education.” (Yes, he really chose a “trust fund” as an example.) “Suppose further that the bank used the proceeds for its own purposes, so that when the grandchildren turned eighteen, there was no money for them to go to college. What would happen to the bankers responsible for misusing the money? They would go to jail.

Friday, September 09, 2011

No more tax patents

By 89-9, the Senate passed the patent reform legislation that, among other things, bars future patents on tax strategies.  An estimated 150 such patents have been issued, and 160 are pending, but no more. A distinction is made for tax preparation software, which can still be protected. 

In the old days laws firms used their caches of Private Letter Rulings as a type of intellectual property.  When a firm had a favorable ruling from IRS for one client's strategy, they would share that information with other clients, but not other law firms.  Private Letter Rulings were jealously guarded, they were potent new business tools. Then Tax Analysts successfully sued to make public redacted versions of the Private Rulings, to let everyone in on what the IRS was thinking.

When your tax code is so complicated that compliance strategies can be deemed so unobvious that they are patentable, when lawyers will treat IRS correspondence as trade secrets, I think you have a serious problem. Merely outlawing tax patents isn't the solution.  Radical simplification is needed.  First, go back to Reagan's 1986 Tax Code.  Next, eliminate all deductions for personal expenses--charitable gifts, property taxes, mortgage interest.  Sure, some tax lawyers will lose some business, but the economy will be much better off.  And the feds will have a whole lot more revenue.

Knight regs. are withdrawn

Fees paid for investment management services are subject to a floor of 2% of AGI.  Trust fees are generally fully deductible. In Knight in 2008 the U.S. Supreme Court held that the 2% rule should apply to investment management fees paid by a trustee to an outside investment advisor. Going further, the Court held that only fees incurred because the assets were in an estate or trust (such as trust accounting fees) are fully deductible, and any expenses that individuals might also incur are subject to the 2% of AGI limitation.

IRS has had some trouble with the regulations implementing this decision, particularly on the issue of unbundling of trust fees into components.  The Proposed Regulations on the subject were withdrawn on September 6.  New hearings will be held in December, and new Regs. won't take effect before 2013.

Wednesday, September 07, 2011

For Steve Jobs fans

I'm one, you must know by now.

Here is one person's take on Steve Jobs' 10 Best Quotes for Advertising Agencies.  Actually, I was underwhelmed by the quotes, but each one includes a link that sources it. So I'm really linking for the links. Those interviews cover a wide time frame.  The Wired interview from 1993 is especially interesting.

Monday, September 05, 2011

Can Investment Advisers Save the Economy?

Savers and investors continue to suffer from an income famine. Yields on CDs are negative. Ditto for real, after-tax yields on ten-year Treasuries. Belatedly, financial journalists have realized that policies intended to bring banks back to life are toxic for savers and investors. 

That's not the worst of it. What's bad for savers and investors is bad for the economy – especially now, as the great tidal wave of Boomers are reaching retirement age. Ordinarily, many business managers and professionals up their spending as they prepare to retire. It's time to expand the cottage at the lake into a real retirement home … launch and equip a retirement business .… take more time off and treat the grandkids to a Disney cruise.

With Boomers suffering from the  income famine, they're not likely to tap their nest eggs to augment consumer spending. Unless ….

When investment advisers help their clients realize income through interest-paying deals that aren't too dicey, plus sturdy income stocks, they're doing more than helping their clients. They're helping save the economy.

Friday, September 02, 2011

This easy $4.2 billion tax hike should not be controversial

From the Washington Post.

That's not the 10-year total, which is the way we usually talk about tax hikes and breaks.  That's just one year. So, $42 billion in ten years.  You know, we might make a down payment on getting rid of the AMT with this!

Thursday, September 01, 2011

Retirement: a Low-Stress Alternative to “The Number”

If I want to retire, according to conventional marketing messages, I need to reach a number. Say my number is $1.2 million. When I hit that target I can retire and withdraw 4% a year.

 If only it were that simple. At retirement, volatility in the markets  could chop my expected $1.2 million down to $900,000. (Yikes! I'll never be able to stop working.)

Or volatility could temporarily supersize my nest egg, to $1.5 million or more. (Whoopee! I'll live large for the next 30 years.)

Wouldn't my risk of deep despair or dangerous euphoria be sharply reduced if I set an income target and invested accordingly?

Suppose I want $40,000 a year. If I prepare by building a portfolio from income stocks and a bond fund or two, my chances of success are pretty good. Even if Wall Street goes berserk the year I retire, my dividend and interest income should remain close to expectations.  (The Great Recession hardly dented this blogger's modest investment income. Dividend increases pretty much balanced out dividend cuts.)

David Van Knapp is an author who loves dividends. He favors setting a retirement-income target and investing primarily in stocks known for increasing dividends..

Hardly a new approach. After the Great Depression vaporized his hot-shot portfolio, grandfather promised himself he'd never again buy a stock that didn't pay decent dividends. And he retired in solid comfort.

Should this low-stress approach to retirement investing be encouraged? Or is it an anachronism, unfit for a "total-return" era, where most retirement investing is highly regulated and fewer Americans are accustomed to "living on income"?

Digitally Incommunicado?

Have trouble reaching your clients and prospects? Do they have trouble reaching you? Not surprising, wrties Frank Bruni in The New York Times:
You hear so much about how instantly reachable we all are, how hyperconnected, with our smartphones, laptops, tablets and such. But the maddening truth is that we’ve become so accessible we’re often inaccessible….

Tuesday, August 30, 2011

Should Philanthropy Be Purposeful or Public?

Dealbook's Andrew Ross Sorkin takes Steve Jobs to task for his lack of public philanthropy. There is no "hospital wing or an academic building with his name on it." See The Mystery of Steve Jobs Public Giving and the comments thereon.

One comment, from AB, cites a 1985 interview: Jobs indicated that the practice of philanthropy was more demanding than most billionaires would tolerate. There's more to it than giving a sum sufficient to get your name on a building.
Interviewer: You could spend all of your time disbursing your money.
Jobs: Oh, you have to. I'm convinced that to give away a dollar effectively is harder than to make a dollar. 
Want a Steve Jobs building? Here's the amazing spaceship come to earth that will become Apple's new campus. I'm guessing that Cupertino will consider it a contribution to the civic good.

Friday, August 26, 2011

Something to cheer you up

Responding to JLM's post below, here's the best summary post I've found so far about Steve Jobs, a collection of video highlights:

I haven't looked at all of them, but don't miss the fourth one, his 1983 conference presentation that ends with the "1984" ad for Macintosh.  As great as that ad was, it was even more powerful, and emotional, in the context of his presentation.  I'd love to see the rest of that program.

There's conjecture that the Jobs resignation was less about his health and more about locking in the services of Tim Cook as the successor CEO. I'd like to believe that.

Thursday, August 25, 2011

Ten Reasons You May Need to “Cheer Up”

Negative real, after-tax yields on Treasury bills and notes. Investors must pay the government to hold their money.
Stock market full of sound and fury, signifying nothing.
Likelihood of double-dip recession said to grow.

Congress plans return to work. Prospect causes citizenry to cringe in fear and loathing.
Republican refusal to raise income tax rates triggers renewed interest  in consumption tax.
Gap between very rich and the rest of us expands, making future of estate tax hard to predict.
Unemployment remains stuck around 9 percent.
Banks foreign and domestic waver. Even Warren Buffett cannot save them all.
Seemingly endless supply of foreclosed homes kills demand for new ones.
Steve Jobs, the man who changed the world, resigns as Apple CEO.

A tip of the freshly-brushed fedora to Rob Bamberger, who played this recording on Hot Jazz Saturday Night.

Monday, August 22, 2011

Investment Yields: Back to the Fifties?

Ancient investment folk wisdom: because stocks are risky, they must reward investors with dividend yields higher than the interest paid by bonds.

For generations that rule of thumb endured, weakening only when stock-market madness exploded in 1929. Crash and Depression restored the traditional order. Not until the late 1950s, as the notion of growth stocks took hold, did stock yields dip below bond yields. And there they stayed. By 1961, when Chemical Bank ran the ad shown here, well-chosen stocks seemed so reliable that Chemical could promise "investment growth with peace of mind."

Fifty years later, that selling proposition might get you committed.

How wary have investors become? Well, according to today's charts from, stocks once again yield more than bonds.

Friday, August 19, 2011

Stock Market Volatility = Gift Tax Saving

Stock market gyrations may be causing you gastric distress, but volatility does have an estate planning upside. The Wall Street Journal points out that higher than normal volatility may justify a steeper than normal discount when gifting shares in a privately-held business.

(Clients will be able to transfer publicly traded shares pretty cheap, too, if the market keeps plunging.)

Monday, August 15, 2011

Stop the Mutual Fund Merry-Go-Round?

Photo: Wikimedia Commons
Once upon a time, a Merrill Lynch broker made a pitch for the company 401(k) plan. Could we see the prospectuses for the proprietary funds he proposed to use? Of course, he said.

Did we ever see a prospectus? Of course not.

In theory, regulations required that an investor receive a prospectus before purchasing fund shares. In practice, brokers selling high-expense, low-performing funds could not comply. They were schooled to use Plan B: Make the sale first, deliver the prospectus later.

That memory cropped up as I read David Swensen's tirade against The Mutual Fund Merry-Go-Round.  Yes, "investors should take control of their financial destinies, educate themselves, avoid sales pitches and invest in a well-diversified portfolio of low-cost index funds." But asking fund salespeople to hand out more informative prospectuses, offer index-fund alternatives and generally act like fiduciaries? I fear that's still not practical.

Warren Buffett Wants Multimillionaires to Pay More Tax

From Buffett's op-ed in today's NY Times:
I would leave rates for 99.7 percent of taxpayers unchanged and continue the current 2-percentage-point reduction in the employee contribution to the payroll tax. This cut helps the poor and the middle class, who need every break they can get.

But for those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more — there were 8,274 in 2009 — I would suggest an additional increase in rate.

My friends and I have been coddled long enough by a billionaire-friendly Congress.
 Back in the day, the federal government sometimes imposed a surtax when the going got rough. Wouldn't a 10% surtax on millionaires and a 20% surtax on decamillionaires be the simplest way to tax the richest?

Friday, August 12, 2011

“We Want to Hold Your Hand . . .”

Investment firms have learned they must communicate with clients in a time of crisis. (Even a small T. Rowe Price investor like this blogger recently received two e-mailed advisories.) Most clients don't expect advisers to offer solutions; they simply want reassurance that their adviser is paying attention.

Check out Deal Journal, which has used Wordle to convert various firms' 'don't panic" letters into something like art.

Thursday, August 11, 2011

“Family Offices” For the Rest of Us

George Soros intends to turn his hedge fund into a family office managing billions and billions. Lesser wealth, in the hundreds of millions, also may justify setting up a free-standing family financial services firm. For the rest of us, Bloomberg reports, multifamily offices now seek clients with as little as $5 million.

Wednesday, August 10, 2011

Good Grief, They're Slashing EVERTHING!

Here's how my new issue of The New Yorker arrived in the mail today. Wall Street's tremors must be shaking the whole city.

Four Hundred Years of Bubbles

From SmartMoney, a crash course on financial crashes. There were more bubbles where these came from, notably the stock market bubble, fueled by buying on margin, that burst in 1929.

Monday, August 08, 2011

The Great (Delete Recession) Contraction

Anyone turning to The Times business section this morning – "On Wall Street, traders and strategists trekked to their offices on Sunday in scenes reminiscent of the fateful weekend before Lehman Brothers collapsed in 2008" – knew this wasn't going to be a good day.
 Double-dip recession ahead? No. Don't call it a recession. What we have, as Ezra Klein in The Washington Post illustrates with a chart, is something special. Economist Kenneth Rogoff, co-author of "This Time is Different,"  calls it the second Great Contraction.

A lot of deleveraging remains to be done before we put the second Great Contraction behind us. As for the stock market, the next saros cycle isn't expected to start for another seven years or so. (Well, maybe a bit sooner, if you believe Warren Buffet's guesstimate). Meanwhile, the hordes of Boomers hoping to retire towards the end of the decade may have several years to load up their portfolios with bargain stocks.

The challenge for investment pros? How to convince their Boomer clients that Wall Street's bad news is their good luck.

I watched President Obama on MSNBC today . . .

. . . and it appeared to me that the Dow broke through the 11,000 barrier while he was talking.

I did not get a sense that any new ideas are on the horizon.

Form 8939 was released on Friday

Here is the announcement.

This is the Form for opting out of the 2010 estate tax, choosing the carryover basis instead, and telling IRS what the asset values are in the estate.  Only the very largest estates need be concerned--I'm looking at you, executor for George Steinbrenner.

The due date is November 15, 2011, and extension opportunities will be limited.  That's because, even though it's a short filing window, it's an overly long window since the date of death for all affected estates.

The budget deal

Robert Samuelson offers a spin-free review.

Wednesday, August 03, 2011

A Reverse Mortgage By Any Other Name . . .

View from Malaga villa

Danske Bank sales pitch to Scot living in Malaga, Spain: Borrow against your house with our equity release plan. You'll get income for life, and your daughters will pay less Spanish inheritance tax when you die.

Reality: Bad idea.

How bad is this recession?

Derek Thompson at The Atlantic highlights four shocking graphs. We are far, far from real recovery.

Monday, August 01, 2011

How to Sell Performance

As the stock market surged in the 1980s, even the staid house of Morgan joined the ranks of banks and trusts that launched ad campaigns. This Morgan ad from 1986 offers a classic definition of "performance." (Note that a quarter century ago, a mere $2 million made one wealthy enough to gain Morgan's attention.)

Does the dashing gent in the photo look familiar? James Goodfellow now serves as chairman of Fiduciary Trust International.

Related post: A Classic Ad from 1985

Wednesday, July 27, 2011

The Great Communicator

At the risk of repeating myself, here is what President Ronald Reagan wrote in his diary on Tuesday, November 1, 1983:

Last night the Repub. Sen. very irresponsibly refused to pass an increase in the debt ceiling which is necessary if we're to borrow & keep the govt. running. *** I sounded off & told them I'd veto every d--n thing they sent down unless they gave us a clean debt ceiling bill. That ended the meeting.

Tuesday, July 26, 2011

The Nifty Fifties: People's Capitalism

The Advertising Council seems to have invented "People's Capitalism" in the early 1950's, seeking to encourage widespread stock investing. G. Keith Funston of The New York Stock Exchange picked up the ball and ran with it, and in 1956 General Electric jumped on the bandwagon with this ad.

 In 1952 only 6 percent of Americans owned stocks. How is People's Capitalism doing these days? Pretty good, though somewhat slowed by the Great Recession. The exact answer depends on how you define stock investing.

In 2005, according to a Census Bureau estimate, only a third of white Americans, and less than 10 percent of blacks or Hispanics, owned stocks directly on through mutual funds.

From the PBS archives comes a brighter picture. By the end of the 20th century the average American was indeed a capitalist:
Recently Gallup found that 54 percent of Americans own "individual stock, a stock mutual fund or in a self-directed 401(k) or IRA." That's down from 65 percent in 2007, but still a majority. Slightly fewer Americans pay federal income tax.

Who's most likely to own stocks? Gallup found that 87 percent of Americans making over $75,000 own shares. Also, Republicans, men and postgraduates are much more likely to hold stocks or mutual funds than Democrats, women and less-educated people.