Wealth management

Enrique Vasquez is a most interesting person. I’ve gotten to know him over the years and have found him to be someone with a firm eye toward the future. Many times he will say, “It’s where I want to be.” Two and a half years ago, Vasquez succeeded the highly personable and knowledgeable David Reedy, one of the founders of Terra Securities which evolved into Genworth Financial Securities and Genworth Financial Advisors, both based in Schaumburg, Ill., the companies that Vasquez now heads. Actually, he moved into the top position as president and CEO at the ripe age of 39. I like to tease him with the fact that I have sneaks of such vintage and that two of my children are older than he is. Still, his background is fascinating. He has a B.S. in accounting from Kean College and an MBA in international finance from Fordham. He began his career with Societe Generale as a financial supervisor and then went over to GE, rising rapidly to become a vice president of GE Financial. Genworth Financial Securities has focused on helping tax and accounting professionals become successful wealth managers for over a quarter of a century and today has more than 2,400 independent representatives licensed in all 50 states. “My goal is to help clients fulfill their dreams by providing wealth management solutions,” says Vasquez. “Our vision at Genworth is to be the partner of choice for the independent financial professional with a focus on accountants and tax preparers.” Under his guidance, Genworth has developed a consultative culture working one-on-one with representatives. “We know that representatives need a strong partner to provide advanced training and support,” notes Vasquez, “so our practice management tools are delivered by seasoned specialists in a way that is customized to the needs of each representative.” In fact, it is noted that Genworth provides representatives with more than 300 training opportunities each year with meetings offered in more than 30 locations across the U.S. Vasquez winks when he is referred to as being so successful. But he points out that figures back him up. “On average, our representatives have been able to grow their business by 20 percent per year. The average tenure for our representatives is seven years.” He expects that to continue to grow. “The future. It’s certainly where I want to be.”

Fidelity Investments has begun offering a Web-based retirement-planning tool, Fidelity Retirement Income Evaluator, aimed at helping advisors create and manage retirement plans for clients.

The Virginia Society of CPAs debuted an "Ask a CPA" e-mail program that promises free answers to personal financial questions within three business days.

Accounting firm Grant Thornton has launched a Financial Services Group in the United Kingdom that combines its old Financial Markets Group with the financial services practice it acquired from its merger with RSM Robson Rhodes in the U.K.

CEOs of Fortune 100 companies are receiving increasingly valuable financial planning perks, according to a new study.

Doris Rubenstein is the Principal Consultant of PDP Services, based in Minneapolis, and has over three decades of experience in the field of philanthropy. Her book, The Good Corporate Citizen: A Practical Guide (John Wiley & Sons, 2004), is a landmark work in addressing the complexities of planning and administration of charitable giving and volunteer programs for business. She is a member of the Philanthropic Advisors Network and pays dues to the National Committee on Planned Giving (NCPG) which provides both educational programming and ethical standards for those who work in this field. “Those who belong to the NCPG know that one of their major themes is “Leave a Legacy,” she says. “The idea is that those who make bequests and other deferred gifts can make a long-term impact not only on the beneficiary organization, but on their descendents as well. This legacy is supposed to be a point of both pride and unity for their family.” She said it was surprising then to read a report conducted by the Indiana University Center on Philanthropy for the Bank of America, Bank of America High-Net-Worth Philanthropy Study,which seemsto refute the whole legacy concept that NCPG has been promoting for nearly two decades: For 86.3 percent of respondents, “giving back” is more important than “leaving a legacy.” In fact, only 26.1 percent of respondents cited “leaving a legacy” as a motivator for their philanthropy. Rubenstein points out that there is only a very small group of mega-wealthy individuals who inherited their money. “Much of their wealth is measured in what they control through past legacies deposited in family foundations. Members of the Rockefeller and Ford families are still intimately involved in the policies of the foundations that bear their names.” In effect, she notes, the majority of high-net-worth persons are self-made. “They worked hard to make their money, and they appreciate the institutions that helped them along the way. Indeed, the report shows that entrepreneurs are the most generous donors.” She feels that as an accountant, the principal concern for the client is taxes. But, are taxes the principal concern of the client when deciding to make a major gift? She says that many in the nonprofit sector have been deeply concerned about the impact of the proposed estate-tax repeal on giving. “Evidently, high-net worth donors do not share this concern since 56.1 percent responded that their giving would remain the same regardless of the existence or non-existence of an estate tax. Even the deductibility of charitable gifts is not a major factor in the mind of 51.7 percent of these wealthy donors.” She adds that two factors seem to make the difference in the decision of high-net-worth individuals to make big donations: Being asked, and their emotional connection to the charity. However, the survey showed an amazing correlation between the person’s volunteer hours and the dollars they donated to the same charity: $620 dollars were donated per hour for those volunteering up to 50 hours per year; the figure jumps to $927 at 100 hours of volunteer time. Still, it’s readily admitted that volunteering is the best way to make that emotional connection by developing an experience of trust, admiration, and respect for the organization itself. It allows the individual to see the inner operations and feel the spirit of the organization. Rubenstein believes that all of this still does not deny the reality that some wealthy persons do want to leave a legacy of some sort. “This was cited as a motivator by those 26.1 percent of the Bank of America study. The forms a legacy can take are still numerous: The family name on a summer camp cabin, an endowed scholarship fund at their alma mater, a family foundation that will continue to reflect long-held values.” So, we come down to the question of how and why the accountant’s high-net-worth clients give to charities? Do they compare to the profile drawn in the Bank of America report? Remember, very few of their giving decisions are made on the basis of their tax deductibility. As Rubenstein points out, “It’s your job to remind them of this part of their finances, but the decision is ultimately in their hands.”

It will probably come as no great surprise that there are plenty of retired people living in Florida and that many professional services firms cater to the elderly. Clearly, a trusted CPA firm is certainly a good place to turn to for a financial professional to handle eldercare needs. Add to this the fact that the U.S. Census Bureau says that within three years, approximately 40 million people in this country will be 65 years or older. What’s rather alarming is that 30 percent of all known cases of fraud are committed against the elderly; that’s considered twice the normal rate. So, what can be done? Who to trust? No one, of course, has the patent on catering to the elderly, and there are plenty of top notch CPA/Financial Planning firms doing it. However, one came to mind recently when this firm purposely took the concept to the next level and developed what it called FamilyFirst Elder Planning Services. The idea was to provide seniors and their families with a safety net. The range was a wide one from providing financial expertise and professional assistance, to safety and well being, to even hurricane preparation. Friedman, Cohen, Taubman & Company in Plantation, Florida, has a special division assists its elderly clients in continuing to live an independent lifestyle by catering to their individual needs and keeping their families informed. The firm says that FamilyFirst can benefit everyone who has time constraints but who want to help a loved one in need to maximize and maintain their independence. In short, they look to relieve the pressures of managing one’s own financial affairs, or help that loved one make the most of their resources and financial choices. “We understand the pressures that families encounter when having to make financial choices for an aging loved one,” says Tracey Kinker-Gebert, CPA Manager of the firm’s Elder Planning Services. “We have devised this program that not only helps relieve the burdens of managing financial affairs, but keeps a close eye on the client’s routine activities and overall well-being. This is extremely comforting for relatives who may not live close to their elderly family members.” Kinker-Gebert, who was recently elected as the Chair for 2007-2008 Elder Care Committee for the Florida Institute of Certified Public Accountants, developed the FamilyFirst program. “As our client base aged, our experience and love for working with the aged along with the opportunities for elder financial exploitation, the need for such services became apparent.” The firm’s FamilyFirst Elder Planning Services assists its elderly clients in making the best financial decisions in their retirement years. From guardianship reporting to routine financial, accounting and tax transactions, the program acts as a safety net for seniors and their families. This program allows clients to integrate FamilyFirst’s custom services into every aspect of their life, meeting their initial needs and modifying the plan as their needs change. The firm says that FamilyFirst provides periodic reports to family members regarding their loved one’s financial activities, offers to coordinate home inspections and home maintenance and also creates in-depth weather protection plans. Its advisors also help coordinate with geriatric care managers, home healthcare providers, investment advisors, attorneys and other professionals to ensure the clients are receiving the proper protection and care.

The government is frustrated over seniors' difficulties with the expanded Medicare menu. Evidently, having so many choices has led to confusion, rather than informed decisions.Maybe they should seek advice from corporate executives, who face a similar dilemma deciphering their compensation alternatives. While highly paid employees may appear to suffer from nothing worse than an abundance of riches, many are wasting money through inaction or ill-advised choices. The effects of these decisions on their retirement plans can be significant. It's an opportunity for wealth advisors to serve a unique market niche.

SEC ADOPTS FRAUD MEASUREThe Securities and Exchange Commission voted to adopt a sweeping anti-fraud rule that targets money managers who deliberately mislead investors.

Microsoft has launched Microsoft Money Plus, an update to its personal financial software targeted at consumers, entrepreneurs and small businesses.

The future of the accounting profession will be largely determined by its response to escalating talent shortages and other challenges of the post-regulatory-reform era, says a distinguished group of leaders in this field. The Robert Half International Financial Leadership Council recently met and recommended a number of strategies for addressing these issues. It’s all set forth in a new report, Charting the Future of Accounting, Finance and Audit Professions. The Council, which represents a diverse range of leaders from the corporate world, public accounting firms, industry associations, and top accounting universities in the U.S. and Canada, discussed the impact of changing workforce demographics on today’s accounting landscape and the recruitment and retention challenges associated with these shifts. Some of the key findings and recommended solutions are:

Albridge Solutions has added mutual fund and exchange-traded fund research to its Albridge Wealth Reporting software.

I attended a breakfast meeting the other day with executives from The Money Management Institute, which is a national organization for the managed account solutions industry. The Institute represents portfolio manager firms and sponsors of investment consulting programs, and the leading advocate for the industry on regulatory and legislative issues. Its membership list reads like a Who’s Who of firms that offer financial consulting services to individual investors as well as related professional portfolio management companies, among others. Present at the meeting were Christopher Davis, its President, Kevin Hunt, Chairman of the Board of governors and Executive Vice President of Old Mutual U.S. Holdings, Len Reinhart, President of Lockwood, an affiliate of Pershing, and Mary Deatherage, Senior Vice President, Wealth Management, at Smith Barney. It was a fascinating group who discussed various aspects of financial planning for clients including certain case studies and how they were dealt with. I learned that as recently as five years ago, financial planning for clients was pretty much handled by wirehouses for the planning and CPAs for the taxes. That has now changed dramatically, they say. Because of the advent of the Baby Boomers and their needs toward retirement, and the fact that people are retiring at an earlier age (57) than ever before, not to mention the broker/dealer and SEC business going on, CPAs are now replacing wirehouses in dealing with financial planning and investments. In fact, it was mentioned that insurance agents as financial advisors have slid downward somewhat because people simply don’t want to get involved with advisors who take commissions. It looks like it’s a question of trust, and many CPAs who have substantial financial planning practices tell me that clients are rather edgy whenever the CPA raises the specter of an insurance policy or certain investments that appear to have commission-strings attached. So, the CPA who is doing fee-based or fee-only planning is rising rather rapidly, especially fee-only. It is also interesting to note that the managed account solutions market grew at a healthy 6.7 percent to reach $1.34 trillion in assets just in the first quarter of this year alone. According to figures furnished, it outpaced the S&P 500 index, which returned only .64 percent during the same quarter. What also came out of this meeting is the fact that those who use financial planners are more loyal to their advisor than individuals who use full-service brokers or investment advisors and that client loyalty is built on responsiveness and investment returns. According to the Spectrem Group in its Affluent Market Insights for 2007, once advisors have turned a prospect into a client, they must retain that client. “As important as investment returns, low fees and low expenses are, they are not the primary driver of loyalty among the affluent. Simply returning phone calls promptly is the best method for advisors to develop loyalty. It is also important to investors that advisors provide a contact if he or she is not available.” In addition, Spectrem says that “giving “gifts at holidays, remembering birthdays and providing free tickets to special events does not develop loyalty.” Hmmm. How about a box of imported, dark chocolate? Does the trick for me.

Large companies in the United States are getting better at managing potentially critical business risks, according to a new study.

Although there are reams of literature and generally accepted guidelines stating that people typically spend 75 percent to 80 percent of their pre-retirement income during retirement, some advisors have found that's not necessarily the case.In fact, some say the spending levels are about the same.

By now, your clients should have heard the term "REIT," or real estate investment trust, in the investment world, but they may be wondering what one is and how it works.First, they should know that REITs are not new. They've been around for more than 45 years. However, it has only been since the 1990s that REITs have gained popularity.

IRS RULES ON PARTIAL TERMINATIONThe Internal Revenue Service ruled that a partial termination of a qualified plan occurred where 23 percent of a plan's participants were no longer active due to the closing of one of the employer's four locations. Therefore, all plan participants were fully vested.

The Certified Financial Planner Board of Standards has now bolstered its ethical standards for financial planners who can use its CFP certification designation. The intent is to get the American consumer to the point of trusting that their financial planners who have this particular mark will be placing the clients’ interests well ahead of their own. According to Karen Schaeffer, who chairs the CFP’s Board of Directors, the demand for financial planning is high and growing. “Each day millions of Americans must make important financial decisions, from Baby Boomers on the verge of retirement to the younger generations looking for ways to build their nest eggs.” She adds, “As company-sponsored pensions are being replaced by self-administered 401(k)s and IRAs, and as more responsibility for medical coverage shifts to individuals, Americans today are often required to make a broader range of fiduciary decisions than the decisions their parents made, and more people are finding professional financial planning assistance a necessity.” Interestingly-enough, in a recent survey commissioned by the CFP Board, 97 percent of the more than 1,100 participants identified trustworthiness a the most important factor they considered when looking for a professional financial advisor. That’s pretty much where that code of ethics and practice standards come in, and it also helps to explain the CFP Board’s dedication (and rightly so) in making ethical financial planning available to the public. By the way, some recent updates to these ethical standards, which take effect in July of next year, significantly strengthens the ethical requirements for the more than 55,000 CFP professionals. The CFP people even help the consumer by listing a series of questions that a consumer might want to consider when retaining a financial planner, such as: What experience do you have? What services do you offer? What is your approach to financial planning? Will you be the only person working with me? How will I pay for your services? How much do you typically charge? Could someone besides me benefit from your recommendations? Have you ever been publicly disciplined for any unlawful or unethical actions? Can I have it in writing? I love that last one! According to Schaeffer, “Integrity, competence, and the desire to create trusting relationships with consumers are the cornerstones of CPR certification.” The CFP people deserve a big ovation. They certainly are following through on that.

You might be surprised what qualifies as an unforeseen circumstance for the partial exclusion of gain on the sale of a personal residence. Under this special rule, taxpayers are allowed to exclude gain up to a reduced maximum exclusion amount under Section 121(c) if the sale is due to a change in place of employment, health, or unforeseen circumstances even though it was used for less than two of the five preceding years as the personal residence.

My friends at the Aurora Financial Group, especially Roccy DeFrancesco, clued me in on what they consider the seven deadly sins of many financial advisors. They say they have seen over the past 40 years a weakness in the advice that any advisors have given. And, here they are: Sin 1: Failing to look at the biggest asset: the house. Most of the financial advisors, Aurora says, are comfortable talking about all the rest of the clients’ assets and investments but when it comes to their mortgage, they note that their eyes glaze over. Sin 2: Failing to advise clients that they could better protect the equity in their house from litigation, natural disaster, downsizing of employment, or down turns in property values. Sin 3: Exposing themselves to possible litigation for not advising clients of all the best investments in terms of their risk tolerance and particular needs. Sin 4: Specializing in areas such as business insurance, college planning, retirement planning, health plans, business continuation, et al, without looking at the big picture for the client that requires a global review of the client’s situation. Aurora says it is vital that advisors surround themselves with people and companies that they can trust so that they can address the bigger picture for all of their clients. Sin 5: Not keeping up with and understanding all the concepts that could be a benefit to the client. Surely, the biggest concern that most clients have is adequate planning for retirement so that there are enough funds for a successful plan, but how many people have adequately planned? Clearly, not enough. Sin 6: Chasing the whale but overlooking the mainstream clients. As Aurora likes to put it, you are more likely to build a successful business on the principles of working with the masses than trying to close the china egg, which may never happen. Sin 7: Not earning the hearts of the clients to the point of getting referrals to be a simple and automatic process. Aurora points out that clients have more choices and have better business acumen that they had in the past. So, they are looking for the value added of working with someone. Keep in mind that people today are able to access more current information by use of search engines and the Internet. Accordingly, financial advisors really need to work hard and to focus on that value added concept.