Life Insurance Planning

Reproduced with the expressed written consent and permission from Robert L. Moshman, Esq., author of the The Estate Analyst. To contact Bob Moshman to be included on his distribution list of his monthly newsletter, e-mail Bob at bmoshman@optonline.net.

Actors, musicians, athletes, and Kardashians can become famous overnight, but notoriety doesn’t automatically mean financial security; sadly, it usually ends up meaning the opposite. Lottery winners and other windfall recipients often follow a similar path, even if their “stardom” is limited to local friends, neighbors, and family.

Celebrity wealth can evaporate along with fleeting fame. Celebrities also attract lawsuits, moochers, and scam artists. Professional athletes have all of these issues but in a condensed career that can be over with a single injury.

Let’s examine the special financial planning challenges of these estates.

Shooting Stars

Blazing a path across the sky, a star can be born suddenly and in brilliant fashion. This has been especially true in the age of the Internet and social media.

Until recently, for example, few people outside of South Korea had heard of a chubby singer in sunglasses known as “Psy.” Then his new song went viral. He sold only 100,000 physical copies of his new song—not enough to become wealthy.

However, with the new economics of music, “Gangnam Style” was viewed more than 900 million times on YouTube, netting Psy $1 million. The video was also downloaded more than 3 million times on iTunes, netting him $2.6 million. Fame led to product endorsements for $5 million. Stock in YG Entertainment, Inc., which manages Psy’s career, rose dramatically, thereby increasing Psy’s family’s wealth by $30 million (on paper) and increasing the company’s worth by $200 million.

All of this happened in the course of 6 months.

It is possible that Psy’s artistry will endure with one masterpiece after another like Mozart or The Beatles. On the other hand, there are long lists of previous one-hit wonders. Remember the Baha Men? Perhaps not. But you might remember their one-and-only hit, “Who Let the Dogs Out,” from 2000, which was ranked the third most annoying song of all time by Rolling Stone in 2011.

Actor Richard Harris, now remembered for playing the role of Albus Dumbledore, recorded “MacArthur Park,” a seven-minute song that peaked at #2 on the Billboard Hot 100 in 1968. In 1992, humorist Dave Barry’s readers selected it as the worst song ever recorded, but perhaps “Who Let the Dogs Out” could now compete for this distinction.

 The career of Harris, in particular, should be illustrative to Psy. Folks may recall the verse: “Someone left the cake out in the rain; I don’t think that I can take it, ’cause it took so long to bake it, and I’ll never have that recipe again.” But fads fade away, and interest decays into contempt. Harris relied on his acting career and other endeavors without ever finding musical success again. Psy’s career may consist of cameos as “the guy who once did the horsey dance.”

Planning With Stars

A celebrity with some sudden wealth may not be as easy to work with as a self-made entrepreneur who has learned to live without wealth and is instinctively conservative about planning for the future. Businesspeople may have a better grasp of financial and investment strategies and may be more disciplined about achieving goals.

“Stars and athletes are hard to represent,” warns attorney Martin Shenkman, “because you have to convince them not to rely on their circle of followers and advisors.” The fact that other teammates are working with a particular investment advisor doesn’t ensure the capabilities of that advisor.

Shenkman also warns about celebrities who succumb to peer pressure and take unnecessary risks.

“You almost have to undo the mis-education these stars have received about what planning should be,” says Shenkman. “They often hear wild stories about successes and they want to get in on the action. Some of these investments sound questionable, and some ventures smack of worse, including potential tax problems. So you have to guide the athlete past all of these preconceived notions and back to fundamental planning.”

Several basic planning techniques come to mind for someone of wealth who requires basic tax planning and asset protection. There are retirement plans, irrevocable life insurance trusts, domestic asset protection trusts, setting up LLCs and FLPs, and almost always a combination of these techniques.

Is there a particular technique or game plan that would suit the typical celebrity?

“There’s no such thing as a ‘standard trust’ or an ‘athlete plan.’ Looking for a magic bullet is a mistake,” says Shenkman.

Instead, he applies “the LEGO approach,” i.e., using building blocks.

“Evaluate what works for a particular client first,” Shenkman advises, “and start with proven planning components to put together the framework of the plan. The creativity of planning is to then take the LEGO in the toolbox and customize it into the right building plan for the client.”

Sport Careers

Well known estate planners Richard A. Oshins Martin J. Shenkman, Robert S. Keebler, and Eido M. Walny recently collaborated on a Webinar and PowerPoint presentation concerning estate and financial planning for athletes.

Oshins points out that typical athletes have a relatively short window for their entire career. For many, this is only the years spanning from about ages 20 to 35.

That career window may close suddenly. The average player in the National Football League is 27 years old and earns $1.9 million annually. But the average NFL career is only 3.5 years (Bloomberg Business Week, January 27, 2011.)

For Major League Baseball, career lengths vary a great deal. Nolan Ryan pitched for 27 years (1966 and 1968 through 1993). By comparison, Larry Yount was not as fortunate. In 1971, Yount was announced as a relief pitcher for the Houston Astros, but his elbow “popped” while he was warming up. His career was over. Ironically, his younger brother had a 20-year baseball career—Robin Yount was inducted into the Hall of Fame in 1999.

The Sports Cliché

Walny describes a classic example of an athlete’s attempt to get his financial planning in place. 

A huge, corn-fed young man from the Midwest came out of a “Big Ten” school and made it to the NFL as an offensive lineman. “I don’t want to fall into the same old traps,” he told his financial advisors. “I want to save my money.” He voluntarily agreed to live on a budget and work with a professional advisory team. He was heading in the right direction.

Then the vices of the League caught up with him. Spending began to exceed the budget, first slowly, then more rapidly. After a while, the financial advisor reminded him of his goals. “Don’t worry,” said the sincere young man, “we’ll pick this all up on the next contract.”

“But ‘NFL’ stands for ‘Not For Long,’ especially for offensive linemen,” points out Walny. “Flash-forward, the young man blew all his money, no ‘next contract’ ever came, and he ended up living in a stereotypical it’s-not-going-to-happen-to-me story.”

Insurance = Good

Where might one begin with an athlete’s plan?

“Contrary to the general perception,” says Walny, “a good place for athletes to start is permanent life insurance. I’m a big believer in insurance and the value that can be derived. Athletes get homeowners and car insurance, so expanding into life insurance is easy for them to understand.”

“You do have to combat the perception that purchasing insurance means you are going to die,” notes Walny. So the emphasis should be on the asset protection and investment benefits as opposed to the death benefits.

“Remember,” says Walny, “life insurance is a unique asset class that has tax-free accumulation and proceeds that avoid income taxation. With the higher rates that became effective in 2013, this is even more of an advantage. Insurance can be structured as a class of assets that creditors cannot attack, e.g., when it is held by a properly formed and funded irrevocable life insurance trust (ILIT).”

Walny also likes having the insurance as a starting point for more sophisticated planning that may include a beneficiary defective inheritor’s trust (BDIT), which can be ideal with athletes. If insurance is held in the BDIT instead of a separate ILIT, the athlete can access the buildup in value of the insurance if there are hard times.

“With a life insurance policy asset to work with,” he explains, “we can design an ILIT to provide added strategic function. However, the ILIT involves ongoing gifts to pay premiums. Without an ILIT, insurance is still valuable and can be put into a BDIT. The BDIT needs to be in the conversation because it has a self-sustaining method of paying for premiums inside the trust without ongoing gifts and Crummey powers. A BDIT also provides more control than an ILIT. For many athletes and stars, having multiple trusts can provide incremental protection, even from the athlete or star’s own fiscal irresponsibility.”

Career Earnings and Endorsements

“The threshold discussion is where athletes are in their career because that dictates what they can and can’t do,” notes Shenkman.

“If they are getting on in their career, have they amassed assets?  A young athlete just turning pro may have low endorsement value, so he can set up an LLC and sell endorsement interests to the LLC in trust and get it out of his estate in a prospective way before there is value. This might be wishful thinking, but it may work well. A more established athlete might benefit from the same planning, but the value of the endorsement contracts may be significant, and that will affect what planning can be done.”

Consider the value of endorsements for Michael Jordan. Although Jordan was earning $30 million per year in NBA salary at the end of his Bulls contract, his overall career earnings of $90 million only placed him 87^th on the all-time earnings list compiled by HoopsDoctor in 2012. The top earner of all time on that list was Kevin Garnett with $328,562,000, based on a longer career and more recent earnings.

Yet Michael Jordan currently has a net worth estimated at $650 million (despite a $138 million divorce settlement). The majority of his wealth came from Nike and other endorsements, plus good long-term investments. Today, Jordan continues to earn $80 million annually in endorsements—10 years after the end of his basketball career. 

Not every player gets the same endorsement opportunities or investment advice. Teammate Scottie Pippen earned $108 million in NBA salary but had fewer endorsements. He also made some mistakes, such as buying a jet and calling it “Air Pip,” two bad ideas in one. Some have suggested that Pippen has struggled financially of late.

Antoine Walker, who had NBA career earnings of $110 million, ended up in even worse financial shape and had to declare bankruptcy. His was a stereotypical example of lavish spending on too many cars, gambling sprees, and supporting a posse and family of 70 people.

BDITs for Athletes

A beneficiary defective inheritor’s trust (BDIT) is a good technique for an athlete for several reasons.

A BDIT involves having a family member, such as a parent, set up a trust and gifting $5,000 to start it. An athlete can then sell assets to the trust (but never gift to it). Because the athlete is not the settlor of the trust, the athlete can be one of the trustees, but it is generally advisable to utilize an institutional co-trustee in one of the domestic asset protection jurisdictions such as Alaska, Delaware, South Dakota, or Nevada.

A professional athlete is often the right age and has parents or other benefactors who can set up the BDIT. Athletes may also have significant assets of endorsement contracts that can be sold to a BDIT. Oshins suggests setting up a separate entity for non-salary income, such as endorsements, funds from autograph shows, or appearance fees, and that entity can be sold to the BDIT.

Instead of giving money out to family and friends and having them run off, funds can be earned inside the BDIT (e.g., by the business owning endorsement contracts that the athlete sells to the BDIT). The trustee can then hold the authority to take care of everyone.

“This locks in loyalty,” notes Oshins. If hangers-on turn on the athlete or girlfriends break up with the athlete, the trustee is informed and makes sure the trust funds are protected.

Some estate planning professionals have clung to older planning techniques and have been slower to take advantage of the BDIT. Oshins notes that part of the problem is that advisors need to learn how to explain the concept to clients.

Shenkman confirms this observation. “Planners fall back into a pattern of not using new techniques,” he said. “The comfort of an old shoe is common, even when better styles are available. Be mindful of differentiating a great technique from a clever technique that is mainly for getting the thought process going. On the other hand, practitioners can become too comfortable with their well-worn drafting tools. If you draft the way you did 10 years ago, then you are doing a disservice to your clients.”

Shenkman also provides an example concerning the use of favorable trust jurisdictions. “Most practitioners use the client’s home jurisdiction for every trust. But that is not always the right answer, especially for clients with the wealth and challenges of a professional athlete. I would not ask if a trust should be in one of the key DAPT jurisdictions; rather, I would ask if there is any reason NOT to do it in one of the four best jurisdictions.”

Meanwhile, Oshins has noted a growing appreciation for the effectiveness of the BDIT.  “People who do the BDIT love it,” he says. “Many life insurance companies employ it and have set up training sessions for their staff.”

The proof is in the results.

“I did a BDIT for a client and sold 30% of the business to a BDIT,” says Oshins. “The family could end up paying no estate tax and still control 70% of the business. It is working very well. I did another one for a wealthy family with many kids and moved hundreds of millions of dollars out of the estate very successfully.”

For the athlete, a BDIT with an outside manager may be better than a domestic asset protection trust, which is self settled (i.e., the athlete gifts assets to the trust). In contrast, the athlete gifts nothing to a BDIT, so it may be more impenetrable to creditors and others.

“Once you see all the legs of the octopus,” says Oshins, “the BDIT makes sense.”

Twin BDITs

Even though the BDIT works for transfer tax purposes (with assets growing outside of the athlete’s estate) and creditor protection, the athlete, with a track record as his own worst enemy, serving as a trustee, could be the Achilles’ heel of the arrangement.

“Most of the athletes form an FLP or LLC for the ancillary assets instead of having the trust hold these assets directly. Some have family members employed. And they buy a house for their mom. But the athlete may not be disciplined enough to control these entities.”

The solution, says Oshins, is to set up two separate BDITs, one with the athlete and his associates as trustees, and another with only a professional trustee who buys a house for the athlete, invests in life insurance, and establishes a portfolio of conservative investments. If the athlete commits a crime or is exposed to liability, the conservative portfolio will provide future security. If the structure is raided, even by the athlete on a spending binge, the independent trustee can hold the fort.

“The conservative BDIT is your atom bomb money,” explains Oshins. “If everything goes bad, then there is at least a house, life insurance, and funds. And if you have professional advisors for the investment portfolio and something is done improperly, they can be held accountable.”

Walny concurred with this approach. “Athletes do get into trouble with their own control. It is difficult in professional sports because athletes keep up with the wealth displays of others. At the end of the day, it is useful if the athlete is not in a position to have to say no to family and friends but can instead direct them to the trustee. This takes a lot of stress off the athlete. This is true of a BDIT or any other trust—empowering athletes to concentrate on what they are good at.”

Shenkman notes that the BDIT addresses a fundamental element, i.e., the psychology of the athlete. He compares it to what happens to lottery winners.

“It is very hard for people to realize that you can blow through a big pot of money at a shocking pace. Everyone understands the rainy day concept. This is the piggy bank that even the client can’t break into. Everyone wants to be in control, but you need some funds that are immune from coercion and even mistakes you might make yourself.”

Many thanks to my distinguished guests for their excellent input. Robert S. Keebler, CPA, MST, AEP (Distinguished) is a Partner with Keebler & Associates, LLP, Green Bay, Wisconsin; Richard A. Oshins, JD, LLM, AEP (Distinguished) is a Partner with Oshins & Associates, LLC, in Las Vegas, Nevada; Martin M. Shenkman, CPA, MBA, JD, PFS, AEP (Distinguished) is a Principal at Shenkman Law, PC, in Paramus, New Jersey; and Eido M. Walny, JD, EPLS, AEP, is with Walny Legal Group, LLC, in Fox Point, Wisconsin.

Reposted from WealthManagement.com & Trust & Estates | By Gregory Monday & John T. Brooks

According to the Florida Supreme Court, an attorney’s activities fall under ethical disclosure rules whenever he participates in a business transaction with a client, even if he’s not a principal (for example, buyer or seller) in the transaction.  In The Florida Bar v. Doherty,¹ the Florida Supreme Court disbarred an attorney for attempting to sell annuities to an elderly client without notifying the client in writing that the attorney would receive a commission in the transaction.  Although many of us would never broker the sale of annuities to our clients—especially after the Glenn Neasham affair!² — The Doherty decision reminds us that there’s a broad range of activities that may require written disclosure and written consent under the ethical rules governing business transactions with clients. 

What Happened?

Brian Doherty was a Florida attorney who also provided financial planning and investment services to clients and was licensed to sell certain investment products, including annuities.  In July and August of 2006, Doherty applied to purchase annuities on behalf of his client, an elderly widow.  If the transactions had proceeded, Doherty would have received a 7 percent commission, which would have been applied against a debt that Doherty owed to the annuity provider.  Further, it appears that Doherty deliberately chose to apply for annuities whose commissions he wouldn’t forfeit if the client died during a “chargeback” period.  As it happened, the client died on Aug. 19, 2006, before she could purchase the annuities.

The referee who reviewed the matter recommended that Doherty be found guilty of violating two of the Rules Regulating the Florida Bar.  The first was Rule 4.17(a)(2), under which an attorney may not represent a client if there’s a substantial risk that the representation will be materially limited by the attorney’s personal interests.  Doherty didn’t challenge the referee’s recommendation under that rule.  However, the referee also recommended that Doherty be found guilty of violating Rule 4-1.8(a), relating to business transactions with clients.  Doherty challenged the second recommendation, arguing that the rule was inapplicable in his case.

Rule 4-1.8 states that an attorney shall not “enter into a business transaction with a client” unless the transaction is fair and reasonable to the client, the attorney discloses to the client in writing of the terms of the attorney’s interest in the transaction and the desirability of the client seeking separate counsel in the matter and the client gives informed, written consent.  The Florida Rule closely parallels rule 4-1.8(a) of The American Bar Association’s Model Rules of Professional Conduct.

In his defense, Doherty didn’t assert that he gave the written disclosure or received the written consent required under Florida Rule 4-1.8.  Rather, he argued that his role as a broker in the proposed annuity transaction didn’t constitute engaging in a business transaction with the client, because Doherty wasn’t a principal in the transaction—he wasn’t selling anything to her or buying anything from her.  The court, however, rejected Doherty’s narrow interpretation of the rule.

Court Ruling 

The court held that Rule 4-1.8 “encompasses a scope of dealing broader than simply those between a lawyer and his or her clients as the principals to the transaction.”  The court cited a number of examples in prior Florida cases, such as an attorney investing in a company that was in direct competition with his client’s company, an attorney taking over his client’s role as chairman and CEO and an attorney making a secured loan to a client.  The court also cited a case in which the Ohio Supreme Court held that providing financial planning services to a client constituted engaging in a business transaction with the client and, thus, required written disclosure under Ohio’s Code of Professional Conduct.

The referee and Florida’s Supreme Court threw the book at Doherty because of some egregious aggravating factors.  Doherty wrote himself into the client’s estate plan as personal representative and trustee, and the estate planning instruments were written to grant the trustee authority to purchase annuities only from the annuity providers to whom Doherty owed money.  Further, Doherty had previously been suspended by the New Hampshire bar for two years. 

Lesson Learned

Despite these special circumstances, however, it’s important not to lose sight of the decision’s central point: An attorney who participates in any capacity, other than as legal counsel, in a business transaction involving a client should play it safe and follow the same disclosure and consent rules that would apply if the attorney and the client were principals in that transaction.  This includes those attorneys daring enough to provide financial planning services to their clients—especially if they will receive a commission or other advantage from a client’s decision to pursue a particular investment.

Endnotes

1. The Florida Bar v. Doherty,No. SC10-332 (March 29, 2012).
2. Leslie Scism “Annuity Case Chills Insurance Agents,” The Wall Street Journal, (March 18, 2012).

This is one of the reasons why we, at The Ultimate Estate Planner, Inc., have put together various programs and products, as well as provide individual business coaching, in the area of developing successful referral relationships.  Ultimate Estate Planner President, Philip Kavesh, has successfully built a multi-disciplinary practice utilizing affiliated financial advisors for over 20 years.  He is licensed as both an estate planning attorney and financial professional and he legally and ethically does this referral process with his law firm clients on a day to day basis. He shows you how and even provides you the tested and proven forms for this referral process in his program entitled, Successful Referral Relationships that Actually Work!. 

This post has been brought to you by The Ultimate Estate Planner, Inc., providing practical, tested and proven technical and marketing products to help estate planning professionals throughout the country build their practices.  If you are interested in a personal consultation for your office regarding how to make your office more efficient and how to improve the productivity of your attorneys, staff and advisors, contact us today at 1-866-754-6477 to find out how you can receive a free 30 minutes consultation.  Connect with us on Facebook, Twitter or LinkedIn.

Source: WealthManagement.com

Reposted from Forbes.com | By Robert W. Wood

What a week! First an unprecedented IPO, then marriage. Yes, Facebook’s Zuckerberg Marries His Longtime Girlfriend Priscilla Chan. And California marriages are, well different, as California divorce lawyers–aka “family lawyers”–will tell you.

The water cooler debates about taxing Mark Zuckerberg have been vitriolic for weeks now–not to mention the endless likes and dislikes over the expatriation of one-time co-founder Eduardo Saverin. It’s only natural that we’ll all worry over this one too. After all, what does this latest one-two development mean for the Zuckerberg family tax return?

Joint v. Separate? Mr. Zuckerberg and his new wife could file married filing separate or married filing joint for this year, even though they married part-way through the year. While 95% of married couples file joint tax returns, you might be surprised to find that the tax savings by filing jointly are often small. If Mr. Zuckerberg hopes to keep assets separate–more about that below–he’s better off filing separately.

Separate v. Community? One of the big issues in California and the handful of other community property states is separate v. community. What each person acquires prior to marriage is separate property. That means all the billions Mr. Zuckerberg had before tying the knot remain his separate property.

But you might be surprised how that can get confused over time. If there’s a prenup–and I presume there is–it might say that no matter what, it stays separate. But separate property can be transmuted into community property not only by agreement but by actions too. Seemingly innocuous acts–like one person making a mortgage payment on their spouse’s separate residence–can have an impact.

Business and Investment Management? One of the biggest risks is where a couple works together or even undertakes joint management of assets or business interests. What is considered a contribution to the community can become murkier still. Even if Mr. Zuckerberg’s Facebook stock and cash are all separate up until he marries, earnings from his work at the company during marriage are generally considered community. That is likely to include more options in the future.

Gifts During Marriage? One thing that’s not a tax problem during marriage is the gift tax. Married taxpayers can give as much property as they want to their spouse during marriage free of gift tax. So if Mr. Zuckerberg wants to give his bride a billion dollar wedding gift of Facebook stock, there’s no gift tax.

There’s no income tax either, unless she sells it. Then, because her tax basis in the shares would be the same as the stock’s basis was in her husband’s hands before the gift, she would pay tax on the gain on sale.

Divorce Rules. Sorry to be a killjoy, and I truly wish the newlyweds well. But the biggest and most important tax rules about marriage apply to its unwinding. Since these tax rules only work on unwinding a legal marriage and not on any form of cohabitation, they remain a gross tax inequity the gay marriage debate has never thoroughly addressed.

Like gifts during marriage, property transfers incident to divorce don’t trigger gift or income taxes. Alimony or spousal maintenance if structured properly is income to the recipient spouse and deductible by the payor spouse. Child support is neither deductible to the payor nor income to the child or the recipient spouse with custody.

All these rules may sound simple and they are simple to state. But the tax cases in which they are misapplied and audited are legion.

Robert W. Wood practices law with Wood LLP, in San Francisco.  The author of more than 30 books, including Taxation of Damage Awards & Settlement Payments (4th Ed. 2009 with 2012 Supplement, Tax Institute), he can be reached at Wood@WoodLLP.com.  This discussion is not intended as legal advice, and cannot be relied upon for any purpose without the services of a qualified professional.

This post has been brought to you by The Ultimate Estate Planner, Inc., providing practical, tested and proven technical and marketing products to help estate planning professionals throughout the country build their practices.  Connect with us on Facebook, Twitter or LinkedIn.

Source & Photo Credit: Forbes.com

By L. Paul Hood, Jr., Esq. & Emily Bouchard

A prospective new client contacts you about working with him and his partner.  Within minutes you learn that they are unmarried with each having children from prior relationships as well as one of their own together.  Do you experience a thrill of excitement at having such a complex and fascinating potential couple to work with, or does this scenario strike fear in your heart?  If you’re like most of the estate planners we work with, fear would be your first response.  Are you aware that your prospective client is most likely afraid as well, but for different reasons?

In Estate Planning for the Blended Family (Self-Counsel Press 2012), we identify and discuss 11 fears that clients can have when it comes to the estate planning process.  These fears include everything from confronting fear of death, to fear of the estate planning process itself.  On the other side of the equation, the biggest concern for the estate planner (or should be if it’s not already) is the likelihood of conflict of interests within the blended family system.

The reality is that estate planners need to be able to manage their own emotions, as well as those of their clients, around these fears and potential conflicts.  It’s not enough to understand the intricacies of estate planning vehicles to avoid taxes and transfer assets efficiently – it’s also necessary to make sure you are addressing the core concerns (and yes, fears) that are part of the process.  These fears prevent people from doing estate planning, or cause them to procrastinate.  Fears lead to avoidance strategies that cause costly and unnecessary delays in estate planning.  More often than not, people tend to avoid the conversations that could move the process along smoothly due to a lack of awareness about how to have the conversations effectively. 

Estate planning for the blended family client can present some of the most challenging work that an estate planner ever does.  One of the reasons why this is so is that most professionals in the field of estate planning aren’t sufficiently trained or experienced in the “human side” of the process, which is the “heart” of estate planning.  Most attorneys, accountants, and financial advisors are trained in the “head” side of estate planning.  The key to successfully navigating the often treacherous waters of estate planning for the blended family is properly balancing the head and heart. 

On Tuesday, May 8th, the first in a series of three teleconferences on Blended Family Estate Planning will commence.  This 90-minute presentation will dive into the key issues of the initial consultation and successful engagement of couples with a blended family. Participants learn how to address emotionally charged issues and fears that keep the planning process from moving forward, as well has how to move when a client shuts you down or shuts you out.  Specifics related to property ownership and distribution will be addressed along with who should be considered for key fiduciary roles.   The training provides a comprehensive introduction to estate planning for the blended family, and in so doing, marries the “head” and the “heart” of estate planning. 

In the second session to be held on Tuesday, May 15th, attention is focused on the lifetime planning options that are available or advisable to blended family couples. 

And last, but certainly not least, in the final session to be held on Tuesday, May 22nd, the various issues that are attendant to testamentary estate planning for blended family clients are addressed, as well as some post-death administration issues.

To sign up for this timely and important series and to receive a complimentary copy of our book, which includes a CD with forms, visit www.ultimateestateplanner.com.

If you have any questions, please feel free to contact Emily or Paul at estateplanning@blended-families.com.  You can also contact The Ultimate Estate Planner, Inc. at 1-866-754-6477.

Emily Bouchard and L. Paul Hood, Jr. © 2012

More babies means greater demand for good old-fashioned cash-value life insurance. Young couples tend to buy life insurance to protect their families and babies are making a comeback.

In fact, what has been called a “baby bust” in the United States is now over, according to a January report from Demographic Intelligence, published by W. Bradford Wilcox, associate professor of Sociology at University of Virginia, Charlottesville.

In the wake of The Great Recession (2008-2012), the total fertility rate and the number of U.S. births fell more than 7 percent from 2007 to 2010, says Wilcox’s “U.S. Fertility Forecast.” The report projects that the total fertility rate will rise from 1.93 children per woman in 2010 to 1.98 children per woman in 2012. Also, the United States will register more than 4 million births this year.

Births are rising for at least three reasons, the report says. The number of American women in their prime childbearing years is rising, and many families are deciding to have children earlier rather than later, reversing a recent trend in the opposite direction. Americans put the ideal family size at 2.66 persons in 2010, up from 2.39 persons in the late 1990s.

“Many women put off having a child in the wake of The Great Recession,” Wilcox says. “Now, we think more women and couples have decided to go ahead and have a child—especially that second or third child that they put off at the height of the recession.”

Major findings of the report include:

• A rise in the number of births is expected to continue in 2012 and 2013. Some 4.06 million children were estimated to have been born in 2011.
   
• The Hispanic share of births has been dropping since 2007 for the first time in the tracking of U.S. birth trends. The share of Hispanic births was expected to drop from a high of 24.6 percent in 2007 to 23.4 percent in 2012.

• Births are rising fastest among college-educated women 30 years of age and up.

Wilcox adds that insurance companies should benefit from a particular increase in birth rates among the more educated and affluent demographic group.

Life insurance sales appear to be reflecting this trend. Total life insurance sales grew 4 percent in new annualized premiums in 2011, and insurers issued 2 percent more individual life policies than they did in 2010, according to LIMRA, Windsor, Conn. This is only the fourth time policy sales have risen in the past 30 years.

In addition, the MIB Group, Braintree, Mass., reports that life insurance applications were up 6 percent in 2011.

LIMRA expects that in 2012 and 2013, life insurance sales, based on annualized new premiums, should rise 28 percent. Generation Y, persons born between 1981 and 1995, will be entering their family years. Meanwhile, Generation Xers, born between 1965 and 1987, are spearheading the increase in households with young children. In addition, the U.S. Hispanic population is rising along with Asian immigration, according to a 2011 report by the Society of Actuaries, Schaumberg, Ill. and L.L, Global Inc., Windsor, Conn. The report is entitled “Guaranteed Uncertainty: Socioeconomic Influences on Product Development and Distribution in the Life Insurance Industry.”

As long as the economy continues to grow, the use of life insurance should grow worldwide, says J. Francois Outreville, finance professor with the International Center for Economic Research, Montreal, in a 2011 working paper. Longer life expectancies are important variables that lead to the purchase of life insurance, according to his study, “The relationship between insurance growth and economic development”

Although the economy is improving and people are buying life insurance, they are playing it safe with whole life instead of universal or variable universal coverage, LIMRA data suggest. Whole life premiums increased 9 percent in 2011 from 2010—marking the sixth consecutive year of positive growth.

Many are turning to whole life insurance because it pays high guaranteed rates of 3 percent—at least two percentage points less than the crediting rate paid on cash value. With whole life, families can build a nest egg they can tap through a policy loan if necessary.

“The biggest driver of individual life insurance growth was whole life,” says Ashley Durham, LIMRA’s senior research analyst. “It’s the only product to produce positive growth in each of the past five years.”

Premium and cash-value guarantees coupled with lifetime coverage, she says, alleviate leading concerns for buyers, which likely are compounded during times of economic uncertainty.

This post has been brought to you by The Ultimate Estate Planner, Inc., providing practical, tested and proven technical and marketing products to help estate planning professionals throughout the country build their practices.  Connect with us on Facebook, Twitter or LinkedIn.

Source: RegisteredRep.com, April 17, 2012, Author: Alan Lavine
Photo Credit: lifehappens.org

Reposted from RegisteredRep.com | By Jerry Gleeson

inancial advisors and RIAs may have more handholding to do with clients. The glum outlook for American retirement appeared little improved with the release this week of two separate reports that showed continued worker skepticism about their prospects.

In its annual survey on the state of retirement, the Employee Benefit Research Institute said the percentage of workers who feel confident about having enough money for a secure retirement is at just 14 percent, statistically unchanged from a year ago.

It remains at the lowest level since EBRI began its annual survey 22 years ago. It also showed that just 21 percent of workers were getting advice from an FA, down from 33 percent two years ago.

Meanwhile, the Certified Financial Planner Board of Standards reported poll results that found 49 percent of respondents were worried about their retirement savings, and 44 percent don’t feel any better about their financial security than they did a year ago.

It wasn’t all gloom. EBRI found that 81 percent of eligible workers are contributing to workplace retirement plans, a figure that has remained relatively stable over the past three years. And the CFP poll found solid optimism among respondents about their financial shape in the months to come—51 percent were “more positive” about their financial situation a year from now, while just 9 percent were “more negative.”

Stronger optimism could support the economic recovery, CFP Chief Executive Kevin Keller said. Concern about their current financial conditions appeared uppermost in the minds of the respondents in the two polls.

“Retirement is not Americans’ major concern. Right now job security and financial security are,” Jack VanDerhei, EBRI’s research director, said during a conference call with reporters this week. “Many workers report they have virtually no savings and investments.”

Indeed, 58 percent of workers with less than $35,000 in income report having less than $1,000 in savings. The percentage of workers who feel they are on track with their retirement savings is just 31 percent, down from 44 percent in 2005.

“Workers are falling further behind, and they know it,” said Mathew Greenwald, co-author of the report.

Scott Mings, associate vice president of Hensley & Mings, a Raymond James & Associates practice in Greenwood, Ind., said he was surprised at the dropoff in Americans using FAs. He said he doesn’t get a lot of pushback on the fees he charges, although questions about fees tend to come up more often during tougher economies.

And more people are investing on their own, he added, spurred on by marketing campaigns by large on-line brokerages that encourage a do-it-yourself approach.

“The market’s going to have to show people some positive returns. Quite frankly, there hasn’t been a lot of added value from advisors on 401(k)s; maybe that’s a reason for a little bit of the dropoff,” Mings said. “If you’re getting advice but your accounts aren’t growing, then what’s the value of the advice?”

EBRI’s finding that 81 percent of eligible workers are contributing to workplace retirement plans bodes well for both investors and advisors; 64 percent of those who contribute to such plans say they are “very” or “somewhat” confident that they will have enough to retire comfortably on, while just 48 percent of those who don’t contribute to such plans feel that way.

The workplace is a good place for advisors to grab a larger share of the market, Greenwald said, as plan sponsors seek ways to help their employees manage money in 401(k) and other plans.

“I think that’s a natural,” he said. “I think there’s various ways a lot of people are going to step up to the plate and try to get more involved in managing money in retirement…It’s just a question of how it’s going to get done. I think we’ll see a lot of experimentation and a lot of success in that area.”

EBRI surveyed more than 1,200 workers and retirees by telephone in January. The CFP telephone survey polled 1,000 Americans across broad income ranges on March 1-4.

Pessimism about economic prospects abounded in the EBRI report. Just 16 percent of workers and 11 percent of retirees were “very confident” that their investments would grow in value; 8 percent of workers and 10 percent of retirees said they were “very confident” that the economy would grow an average of at least 3 percent a year over the next 10 years.

To offset reduced retirement savings, many workers are resigned to postponing retirement and working longer. EBRI noted that workers who expect to retire at age 70 or older has risen from 12 percent in 2002 to 26 percent this year.

But it may not be an option for many, EBRI warns. While 70 percent of workers expect to work for pay in their retirement years, just 27 percent of retirees report actually doing so. Greenwald said many workers underestimate their prospects for this period.

“In many occupations it’s difficult to get the job done as people get into their 60s,” he said. “So the plan to work longer is positive in some respects but risky in other respects.”

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Source: RegisteredRep.com

Greatest Love of All
Reposted from Trust & Estates | By Michael K. Kirsch

Ever since Whitney Houston’s death on Feb. 11 at age 48, rumors have been circulating about her estate. Would her ex-husband, Bobby Brown, seek to gain control of the money? Did Whitney protect her daughter, Bobbi Kristina, with a trust, or will everything be paid to her at once, since she is 18?

Life Insurance Lawsuit
We know that shortly before her death, Whitney won a court case brought by her stepmother over a $1 million life insurance policy that John Houston, Whitney’s father, had left to Whitney. Barbara Houston, her stepmother, said the policy was supposed to pay off the money that Whitney’s father and stepmother borrowed from Whitney to buy their New Jersey condo. Whitney held a private mortgage on the condo.

Barbara sued after Whitney refused to credit the life insurance money against the mortgage. In December, eight years after John died, an appeals court judge ruled in Whitney’s favor because Barbara didn’t have any documents to prove the insurance policy was meant to cover only the mortgage loan. As the judge noted, its impossible to legally determine what the deceased would have wanted, beyond what’s spelled out in the documents. Had John’s attorneys set up a trust to accept the life insurance proceeds and use them to pay off the loan, his wishes would have been clear, and none of the ensuing legal in-fighting would have been necessary.

Assets in Estate
How much was Whitney worth? Some have speculated that Whitney’s estate will be worth between $10 and $20 million. Others claim she was broke. Back in 2001, she signed the biggest record deal in history, for six albums and $100 million in guaranteed royalties. She died owing Arista three records, so a big chunk of that $100 million could be lost. Regardless of its current value, Whitney’s estate is expected to benefit from the boost in sales since her death. Her estate reportedly has made $700,000 in royalty payments since her death. In August 2012, a movie she did with Jordan Sparks called “Sparkle” will be released. She also owned a home in New Jersey, once worth $6 million, but recently listed for under $2 million.

The Will
As it turns out, Whitney had a will, which was executed on Feb. 3, 1993. The 19-page will names her only child, Bobbi Kristina, as the primary beneficiary. According to the terms of the will, the assets will be placed in a trust with one-tenth of the principal paid to her at age 21, one-sixth at age 25 and the remaining balance at age 30. A codicil to the will dated April 14, 2000, appointed Whitney’s mother, Cissy Houston, as executor and her brother and sister-in-law, Michael and Donna Houston, as trustees. Reportedly, Bobbi Kristina has been struggling with substance abuse issues for years, much like her mother did.

Distributions made outright to a client’s heirs have no protection from the variety of risks to which personally held assets are exposed. Once distributed, the heirs can use those assets as they choose and the assets can be subject to their creditor’s claims. However, bequests that are kept in trust for the benefit of the heirs enjoy protection from creditors, predators (including ex-spouses), irresponsible spending and future estate taxes.

Whitney’s death serves as a reminder to estate planning professionals to make sure their client’s estate plan includes more than a simple will and that they update documents every few years. For the majority of clients with even a modest amount of assets, a will isn’t enough. A properly funded trust, with detailed distribution provisions specifically tailored for your client’s beneficiaries and based on your client’s wishes, is the best way to protect your client’s loved ones.

Celebrities are, for the most part, very difficult clients to deal with when it comes to estate planning. They’re used to having things done for them, and they would rather not deal with all of the issues involved. Many celebrities start the planning process, but never actually finalize it. A number of music/sports stars have died without completing a will. That list includes Sonny Bono, John Denver, Jimi Hendrix and Steve McNair.

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Source: trustandestates.com
Photo Credit: cmgworldwide.com

By Philip J. Kavesh, J.D., LL.M. (Tax), CFP^®, ChFC, California State Bar Certified Specialist in Estate Planning, Tax and Probate Law

I and many practitioners have over the years built successful practices on what I call the “middle market”, that is, estates valued anywhere from $500,000 to $5 million.

This level of estate planning practice faces a number of challenges today unlike any we have had in the past.  Our services have become commoditized into mass produced documents, with increasing low-priced competition from the internet, do-it-yourself packages, non-attorney paralegals and bargain-priced attorneys.  Plus, with the new $5.12 million Federal Estate Tax exemption amount for 2012, there is now reduced need for advanced--level estate tax planning and post-death administration. 

Should You Even Stay in the Under $5 Million Market?

Given all these challenges, I have heard many practitioners say that it is time to quit the under $5 million market.  I couldn’t disagree more. 

First, the greatest potential market share is comprised of less than $5 million estates.  I have read various statistics which estimate that estates over $5 million represent less than 2% of the overall estate planning market.

Second, the middle market consists mainly of those described as the “Millionaire Next Door” (profiled in the famous New York Times’ bestseller of the same name by Thomas J. Stanley).  These are the “Moms and Pops of America”, the great unserviced, silent majority, who don’t typically have a long-term, fixed attorney relationship.  Maybe they have worked with an attorney here or there for a specific matter or maybe for a “one-shot” estate plan, but they have basically been “orphaned” by the legal profession.  These are the easiest people to reach, close and get to refer their other friends to you.

Third, if you have a high net worth practice, by also offering planning to the middle market you can generate the cash flow you need to live on while you are “hunting white elephants”.

Fourth, you can develop a volume practice in this middle market that will allow you to retire someday!  If you have only a few, high net worth, “high touch” clients that require you to always be meeting with them, it will be much harder to transition them and it will be a far greater risk if you try; if you lose a few large clients, that’s a big hit on your total revenue.  If you have more of a volume practice, you can gradually turn over your clients to your junior associates and phase down (that’s what I’ve done).

Assuming that I have now convinced you to stay in this middle market, how do you overcome each of the challenges that I’ve pointed out and not only survive, but thrive?

Fight Back Against Commoditization and Low-Priced Competition

Some practitioners have just ignored these issues and have decided to do something completely different (or the opposite), focusing only on the “high touch” approach, over-servicing a few clients at higher fees.  The problem is, in this middle market, will there be enough of these types of clients willing to continue to pay significantly higher fees?  Will you be able to generate enough consistent cash flow?  And, if so, how much constant work will you have to put in for each client, that will effectively reduce your net profit? 

Consider the possibility of having two practice models side-by-side, like low and high end models in a Mercedes Benz showroom.  Maybe you can retain your high touch model for larger estates and a different model for estates under $5 million.

My approach to the under $5 million market is different than the high touch model.  I accept that we have become a “commodity” and show prospective clients why mine is better.  Where in any industry there is a Coca-Cola, there’s always room for a Pepsi.  You can actually leverage off the marketing done by the other competitors in your market.  Check out what they offer versus what you offer and show people how to comparison shop as part of your “consumer education” marketing approach.

For example, you can emphasize the importance of counseling as a part of what they get when they work with you, an estate planning attorney.  Emphasize that attorneys have, in the past, been called “counselors at law” and how important it is to see a skilled professional to assist with important choices, such as the following. Who should be the Trustee? Should there be Co-Trustees?  Independent Trustees? Distribution Trustees?  Who should be guardians?  Who should be the health decision makers?  How and when should each beneficiary receive his or her inheritance in the best manner?  And, of course, there is the counseling necessary to resolve special issues with blended families (children of prior marriages), LBGT couples, business succession planning, specific bequests and equalization formulas.  Emphasize how there are many decisions to be made, even before “filling in the form” or preparing their document - - and that “one-size-fits-all” planning may be the worst thing that people may do!

You also want to emphasize why your “hard package” (yes, your commodity!) is better and more complete.  This is also, of course, how you will justify the value of your higher fees.  This is not a technical article, but there are many unique features to your Basic Living Trust plan that probably do set you apart from plans of your competitors - - everything from “flexible” A-B trust provisions, HIPAA and Medicaid features, and custom-fit beneficiary trusts (lifetime, spendthrift, special needs and beneficiary defective asset protection trusts - - with special flexibility features like powers of appointment and trust protector powers). You can also emphasize the additional features of your overall trust plan, what I call the “support mechanisms” that make sure that the plan will actually work properly when the time comes - - things like title transfers, or adjunct materials like an Owner’s Manual and Health Document Emergency Card (such as Docubank).  You can also add on, for people with larger IRAs, a Stand-Alone IRA Inheritance Trust.  Finish by simply posing the question, “Do those other low-priced plans do all this?”

You also can emphasize service after the sale, which they don’t get from the low-priced competition.  Some practitioners utilize a maintenance program at an additional fee, but I favor a free service package approach with the under $5 million market.  I’m not going to get into here the reasons why.  In either case, you can provide such things as periodic updates or seminars as laws and planning techniques change, a newsletter, periodic review meetings and a free Trustee meeting when the time comes that the Trustor is disabled or passes.  Be sure to “show and tell” prospective clients all the things that set you apart.

Combating the Reduced Need for Advanced Level Estate Tax Planning and Post-Death Administration

Even in the middle market, there are still a few simple, advanced level building blocks that can be placed onto the Living Trust foundation.  The key is to emphasize not so much the estate tax benefits of these planning devices, but more so their asset protection benefits, income tax benefits and succession management benefits (keeping assets in the family).  When describing these simple advanced techniques to middle market clients, just like with your basic product, you want to emphasize how your advanced product is also superior.  Examples of these products are: Dynastic Flexible Irrevocable Gifting Trusts (“dynastic” may mean even utilizing another state situs and by “flexible” I mean power of appointment and trust protector features that permit change of Trustee, beneficiaries and how and when they get their inheritance); LLCs and Self-Settled Trusts, particularly if clients own a business or rental real estate (again, possibly in another state utilizing better asset protection laws); Life Insurance / ILIT, emphasizing estate building and its use later as a “family bank” to acquire more property and wealth or, for use in equalization of bequests, and designing them too as “flexible”); CRTs for sales of appreciated assets without capital gains tax; and, QPRTs as a way to hedge peoples’ bets about estate tax in times of uncertainty, particularly in the middle market where they may not want to make substantial gifts of investment assets they may need later to live on.

Your post-death administration may go down for estate tax purposes, but if you have done better lifetime planning, which includes continuing trusts for beneficiaries (even if they are beneficiary-controlled trusts), you clearly have more opportunity for next-generation planning, such as when testamentary limited powers of appointment need to be exercised.  And, even if clients come in for administration meetings where there is little more to do than a distribution deed, there is always an opportunity to make referrals to other professionals (who hopefully will refer back to you), such as a CPA or financial advisor, or to work with the client’s existing advisors and establish new business relationships.

Obviously, I could go on further in much more detail; however, given the limited space of this article, I trust that this will give you a good starting approach to being successful in the middle market.  Perhaps, in a future article, we can address another issue or “challenge” so many practitioners in this market face - - how do you attract and bring in these clients?

This post has been brought to you by The Ultimate Estate Planner, Inc., providing practical, tested and proven technical and marketing products to help estate planning professionals throughout the country build their practices.  Connect with us on Facebook, Twitter or LinkedIn.

Photo Credit: westbound415.com

Reposted from AdvisorOne

Whither wealth management? The industry will continue to undergo radical changes that began in 2008, according to a detailed, 30-page Aite Group wealth management report released Friday.

In a report that identifies the top 10 trends that Aite foresees for wealth managers in the coming year, the Boston-based research and advisory firm warns that many of those trends will affect business models, profitability pressures, investor requirements and more.

“Wealth management firms will be required to quickly and frugally rethink the way they do business in order to be successful in a challenging market environment," says Aite in the introduction to its “Top 10 Trends in Wealth Management, 2012” impact note.

Here are the Top 10 wealth management trends to expect in 2012:

1. Market Reshuffle, Continued. Breakaway brokers, acquisitions by broker-dealers and private equity firms and changes in how advisors and investors approach control over their money will affect the market in 2012, Aite says in its wealth management report.
   
   At the beginning of the crisis in 2008, Merrill Lynch and Wachovia Securities had to agree to be acquired, while Morgan Stanley and Smith Barney merged. “Given that these four firms represented around one-third of brokerage and advisory assets in the United States, a major portion of the wealth management market has been in transition ever since,” Aite notes.
   
   The bulk of financial advisors who decided to break away from their firm mostly comprised smaller producers who were unable to obtain a lock-in contract. Meanwhile, independent networks like LPL, Raymond James and Cetera that provided a new home for those advisors “will find plenty of opportunity in 2012,” Aite predicts.
    
2. Profitability Pressure.  The room is getting crowded as it becomes more difficult to maintain profit margins: more firms are entering the wealth management field even as lower activity levels by clients and asset levels that have not risen as hoped squeeze businesses.
   
   Competition, outsourcing and the need for economies of scale will continue to pressure wealth managers, Aite predicts.
   
   “Similarly, regulatory changes require investments in technology, staffing and training,” according to the report. “Large firms that have a tremendous amount of scale, like Merrill Lynch, have an easier time responding to increased client need for direct (i.e., online or mobile) access to their portfolios and financial information, and to justify the spending related to an online brokerage platform.”
    
3. Wealth Management Revenue for Banks.  Banks are retooling to serve high-net-worth and ultra-high-net-worth clients as the asset share held by mass-market and mass-affluent investors has fallen. As banks seek to replace income lost to new regulations, look to see them more determinedly move into the wealth management sector and woo clients to think of them as their primary service providers.
   
   “We expect more of the large banks to retune or rebrand their ultra-high-net worth groups to better capture this growing market, following on the footsteps of U.S. Bank’s and Wells Fargo’s recent re-branding of their ultra-high-net worth organizations (U.S. Bank’s Ascent Private Capital Management and Wells Fargo’s Abbot Downing group),” Aite says.
    
4. Business Model Changes. Investor behavior is changing, and so is firm behavior as profitability becomes harder to sustain. Another factor sure to exert substantial pressure on the field is the upcoming fiduciary standard, which likely will drive large firms more toward financial planning and fee-based services than a more sales-focused, commission-based approach.
   
   Aite’s analysts believe that more independence on the part of investors will require more accommodation by their advisors for their more autonomous behavior.
   
   “Advisors who can view their clients’ information online can more effectively service and provide the expert advice that investors appear to value,” the Aite report says. “In 2012, we expect firms to expand the role of client portals and to open up Web-based business applications to investors, particularly financial planning applications, in order to improve advisor productivity and investor engagement in the process.”
    
5. Self-Directed Investing.  Part of that more autonomous behavior by investors is self-directed investing, even among older clients and those with greater investable asset balances, says Aite in its “Top 10 Trends in Wealth Management, 2012” impact note. Client desires to control their own investments will require wealth managers to be able to accommodate those wishes, with platforms that allow more activities and provide more transparency on fees and performance.
   

   “Online trading platforms are no longer the bastion of the young and less wealthy,” the report says. “Based on Aite Group’s Q4 2011 survey of 1,010 investors, high-net-worth households with more than $1 million in investable assets were more likely to consider an online brokerage firm their primary investment provider than households holding between $25,000 and $99,000 in investable assets.”

6. A Less-Than-Ideal Investment Climate.  Investors have become somewhat disillusioned with conventional investing and have turned more toward gold, the use of exchange traded funds rather than equity shares and more focus on trading and less on buy-and-hold strategies.
   
   “The safest bet, in our view, for 2012 is to invest in online trading capabilities. Investors are clamoring for these services, and online brokerages may see outsized revenue increases in times of high volatility. Retail brokerage income potential serves as a natural hedge to revenue drops experienced by lower fees and net interest income,” Aite says.

7. Copy Trading. Aite Group anticipates that this will be the year when copy trading makes serious inroads into retail investing.

   Copy trading is a byproduct of volatility and allows experienced traders to trade their own accounts (the constant), according to Aite. But it also allows retail traders (the multiplier) to tag along. The net effect from a volume perspective is that a trading desk’s copy-trading volumes grow in linear fashion as new traders join.

   “Copy trading is one emerging financial service holding promise because it improves the outlook of all three pillars of wealth management (asset gathering, trading volume and fees), particularly during this period of low yields and uncertain economic conditions.”

   Of the six leading copy-trading firms evaluated by Aite Group, two firms active in forex markets (Currensee and eToro) “possessed an investor experience and trading expert screening methodology worthy of further study.”

8. Mass-Affluent Retirement-Income Initiatives.  With so many investors in the mass-affluent and lower-mass-affluent tiers determined to work longer and defer the need to draw on their retirement assets, opportunities abound to provide planning and rollover opportunities for them—and for higher-asset wealth groups as well.

   More annuities and a more holistic approach to financial planning will mark this arena, Aite believes.

   “The boomers’ life story offers up seismic opportunities for retirement income planning opportunities for all segments, but real work still needs to be done to provide retirement income planning for those in the lower-mass-affluent region (from $100,000 to $250,000 in investible assets) and beyond (for the $250,000 to $1 million client).”

9. Advisors Seeking More Control.  Firms supporting advisors' practices and their more independent business models will find more opportunity as AUM fee-based models increase, says Aite in its “Top 10 Trends in Wealth Management, 2012” impact note.

   This trend fits well with the rise of fee-based business models, and managed accounts also offer overlay fees.

   “As the managed-account industry has evolved, we’ve seen the dominance of wirehouse firms become encroached upon,” Aite says. “Other channels have come to embrace separately managed account concepts due to improved overlay portfolio management and model-based investment management practices.”

10. Mobile Initiatives.  Applications that put investors in touch with their accounts anywhere, any time are becoming ever more important, but the segment of the wealth management industry that relies heavily on advisors to work with clients has not adopted such apps as quickly as wirehouses, Aite warns.
    
    But that is changing as both advisors and clients rely more heavily on being connected at all times.
    
    “The leading online brokerage firms?Fidelity Investments, Charles Schwab, TD Ameritrade, and E*Trade?have developed applications that allow individual investors to access their brokerage and banking accounts through mobile devices. These new technologies allow online brokerage firms to move closer to their customers,” Aite reports.

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Photo Credit: AdvisorOne.com