Insights into the world of high- and ultra-high net worth investing
December 1, 2009- Vol 3, Issue 48
When you work with a top client
throughout his or her life, you have an opportunity to ensure that the client's family stays with your firm beyond the
current generation. Financial legacies are often lost when
wealth passes from generation to generation, so building intergenerational connections can
ensure both a successful transfer of assets - and an advisory relationship
that endures after your original client passes on.
As the Democratic leadership in
Congress has looked for ways to simultaneously create jobs and reduce the deficit, a key person they have
turned to and continue to rely on is Allen
Sinai. Sinai now fears the US is in the "mother
of all jobless recoveries" and that the economic policies of the Obama administration are
There is a hidden cost associated with most active funds, writes Mark
Kritzman of Windham Capital Management in this guest contribution.
The typical active fund is more than 90% correlated with the market. Yet
their relatively high active management
fee is applied not just to the fund's active component but to its market
component as well.
This month, many
advisors are working on next year's
business plans. For
many, those plans will end up like a
black hole in space - lots of energy will go in and little or
nothing will come out. Dan Richards
shows how to avoid getting sucked into this black hole.
With the new Roth conversion rules about
to be lifted next year and a "one-time special offer" available
to allow investors to spread the tax bite of conversion over two years,
more and more Roth conversion calculators
are showing up every day. Be wary, says Dave Loeper of Wealthcare Capital. If you use one of these calculators, don't say he
didn't warn you about how misleading the results can be.
Retired Marine Patrick Gould has just published a book, Prudent Decision Making in an Imprudent World,
and his theories prove useful for understanding
decision-making in all arenas, not just those that involve
life-and-death decisions. He applies many of his theories of risk, reward,
preparation, security, and asset management to the financial world, working
from modern portfolio theory and ultimately offering a practical decision
In our letters to the Editor,
one reader comments on Dan Richards' article last week,
Lastly, we highlight submissions to Advisor
We welcome guest submissions from our
readers. For more information, here are our guidelines.
If you are experiencing problems
opening or navigating through our newsletters, we can send you a text-only
version. Please send an email to firstname.lastname@example.org requesting the "text-only" version.
If you have received this newsletter
in error, or you do not wish to receive future newsletters, please reply to this email with the word "unsubscribe"
in the subject line.
How can you reach out and build that sustaining bridge between
generations? Nancy Opelia offers ten ways advisors can establish
working relationships with their clients' children.
Ten Ways to Connect with Your
Sinai: Jobless Recovery and the Failure of Current Economic Policies
economy is in recovery, albeit a jobless one, and its shape will be an
"L" with an up-tilt at the bottom, Sinai says - in other words,
the recovery will be slow and uneven. "It may look like a
recovery to some, but not to those looking for jobs."
Allen Sinai: Jobless Recovery and
the Failure of Current Economic Policies
Cost of Active Management
Rather than pay active fees on total assets, including those that provide
market exposure, an investor could achieve essentially the same result
before fees by allocating most of the portfolio to an index fund with the
residual allocated to a pure alpha fund that nets out market
exposure. Mark Kritzman's example illustrates this hidden cost of
Hidden Cost of Active Management
the Black Hole of Business Planning
This year, resolve
to make your business planning efforts pay off with real change.
Consider using some of Dan Richards' ideas to avoid the black hole effect -
devoting lots of energy to those planning efforts without generating usable
Avoiding the Black Hole of Business
Roth or not to Roth, That is the Question
Don't use Roth conversion calculators that relinquish control of the
analysis to an over-simplified user interface. If the inputs do not require
careful thought and introspection, simplifying assumptions buried behind in
the interface might lead to highly misleading and costly answers. Such
systems give a false sense of security at the expense of our clients'
To Roth or not to Roth, That is the
Patrick Gould draws heavily from his twenty-year career in the US
military, during which he was a commander and instructor. The stories he
relates share common bonds of preparation, information gathering, and risk
Think Like a Marine
In our letters to
the Editor, one reader comments on Dan Richards' article last week, Tapping
into Today's Number One Client Concern, and another comments on our article
two weeks ago, Bruce Greenwald on Positioning First Eagle's Funds.
Letters to the Editor
from Advisor Market Commentaries
So, what are the state unemployment data signaling? They are indicating
that the rate of firing has slowed significantly and that hiring could
commence soon, if it already has not.
"While Pundits Play 'Gotcha,'
the Unemployment Situation Improves" by Paul Kasriel of Northern Trust
As a result, investors spend the vast majority of the time with the value
of their stock holdings below their prior high. In fact, as illustrated in
the following chart, since 1926 investors in U.S. large cap stocks
spent 33% of the time watching the values of their stock portfolio fall,
38% of the time watching them recover and only 29% of the time watching
them hit new highs.
"Routinely 'Under Water'"
by Michael Nairne of Tacita Capital
So why the reaction by the markets [to the potential Dubai default]? Because I think many participants know that
the potential for there to be a serious correction is quite real. When
anything as relatively small as Dubai spooks the market, it should serve as a warning sign.
The world has priced in 5% GDP growth for the US and much of the developed world in the equity and
commodity markets. Either we have to get that or the markets are going to
have to come back to the reality of what I think is going to be a much
lower growth figure.
"Why I am an Optimist" by
John Mauldin of Millennium Wave Advisors
in Advisor Perspectives
Our newsletter goes to over 80,000 RIAs, wealth managers, and financial
advisors. See how you can deliver your message to our sophisticated
Lexington, MA 02420