Archive for February, 2012

Surging Gas Prices Fuel Inflation Spike

U.S. gasoline prices jumped 0.9 percent in January, pushing overall consumer prices up at their fastest clip in four months and offering a reminder of the risks energy costs could pose to the economic recovery.

Still, the 0.2 percent increase in the Consumer Price Index reported by the Labor Department on Friday is unlikely to ring alarm bells at the Federal Reserve, which is trying to decide whether the economy needs another dose of monetary stimulus.

“(The data) doesn’t prevent another round of quantitative easing to stimulate the economy,” said Brian Kim, a currency strategist at the Royal Bank of Scotland in Stamford, Connecticut.

The rise in prices was just below analysts’ expectations of a 0.3 percent increase.

The gain in gasoline prices was the first in four months. Tensions in the Middle East have been pushing oil prices higher, leading to extra costs at the pump for Americans.

After rising throughout January, the national price for regular unleaded gasoline prices rose to $3.58 a gallon in the week through Monday, according to the Energy Information Administration. It had started the year around $3.32 a gallon.

The Labor Department report showed that after stripping out food and energy, the so-called core reading rose 0.2 percent, which was in line with expectations.

However, the report also showed the rate of core price increases in the twelve months through January unexpectedly climbed to 2.3 percent.

The increase in the 12-month core reading, which is seen as a barometer of inflation trends, might be read as a sign that inflation pressures are not subsiding as quickly as expected.

At the close of its January meeting, the Fed said it would likely keep interest rates at rock-bottom levels until at least late 2014. Fed Chairman Ben Bernanke expressed caution about recent improvements in the economy and left the door open to further Fed bond buying to boost growth.

U.S. stock investors shrugged off the inflation data. U.S. Treasury debt prices held at lower levels.

Earlier, world stocks hit a fresh 6-1/2 month high and the euro held above recent lows as hopes Greece will seal a long-awaited bailout deal next week fuelled risk appetite.

Overall consumer prices rose 2.9 percent year-on-year after increasing 3.0 percent in December. That was in line with economists’ expectations.

Moderating the monthly gain in core prices, used car and truck prices fell 1.0 percent and new vehicle prices were flat.

Source:   Money News

Posted by Steven Maimes, The Trust Advisor.



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Under Increased Scrutiny, Private Equity Firms Running Scared

Private equity has an image problem. What began a few months ago with questions about Mitt Romney’s background as chief of Bain Capital has ballooned into a tidal wave of legislative, regulatory and media attention — and much of it unflattering. Now the industry is working to fight back, as some fear that the bad press could lead to greater regulation.

“This is probably the most challenging period our industry has faced,” said one private equity industry executive, who spoke to The Huffington Post on condition that he not be named.

Before Mitt Romney entered the political fray, private equity firms — which specialize in pumping investors’ money into companies that aren’t listed on the U.S. stock exchange — enjoyed relative anonymity. Few people outside the business community had a detailed understanding of how they worked, and many of the firms in turn did their best to stay clear of the spotlight.

“We haven’t done a particularly good job of amplifying [what we do] because we haven’t been under attack before,” an executive at a global private equity firm said, also on condition that he not be named. “Do we have reason to be concerned? Hell yes.” He added: “The identity of the industry’s going to be shaped in 2012.”

Romney’s candidacy has brought intense scrutiny to how private equity operates and new accusations against the industry. In January, for example, a super PAC supporting Newt Gingrich released a half-hour documentary accusing Romney — and, implicitly, much of the private equity industry — of profiting on the backs of the employees of the companies he invested in. “Romney and Bain upended the company and gutted the workforce,” a narrator said in the video, referring to one company that Bain took over. “Now they were ready to make a handsome profit.”

“There’s a shortage of good stories about regular private equity. The story most people are aware of is Gordon Gecko meets Barbarians at the Gate,” said David Snow, CEO of PrivCap, a private equity trade media company, referencing the evil corporate raider portrayed by Michael Douglas in the seminal Oliver Stone film “Wall Street” and the best-selling book that chronicles the botched takeover of RJR Nabisco in the late-’80s. The industry is “making sure there’s a counter narrative to private equity firms as marauding barbarians,” he said.

“There has been scrutiny in an unhealthy way,” agreed Stewart Kohl, co-CEO of Cleveland-based Riverside Co., a middle-market private equity firm. “The risk is we will be treated as equivalent to the most vilified institutions that contributed to the global financial crisis of 2008.”

The recent criticism has led to a lobbying and public relations pushback, based in part on fears that all this anger could result in costly new legislative or regulatory controls. The industry might have reason to be nervous: Late last year, the Securities and Exchange Commission reportedly sent letters to a number of private equity firms in the U.S. notifying them that they were subject of an informal inquiry into how they value the private companies in which they invest.

The letter foreshadowed a bevy of new calls this past week from world leaders and U.S. legislators to raise taxes on private equity profits, known as carried interest. On Tuesday, Rep. Sander Levin (D-Mich.) introduced a bill that would tax carried interest as ordinary income at a rate of up to 35 percent, compared with its current 20 percent. Levin’s bill introduction coincided that day with the initial filing deadline of a Dodd-Frank provision requiring private equity firms to now register with the federal government.

On the frontline of the industry’s resistance is the Private Equity Growth Capital Counsel, the industry’s lead lobby, which recently launched a public relations campaign that in part chronicles what the industry regards as its most successful and fruitful investments. “We plan to aggressively defend against mischaracterizations and attacks that occur over the coming months,” Ken Spain, the lobby group’s vice president of public affairs and communications, said in a statement to The Huffington Post.

But the lobby group isn’t alone. Across the industry, private equity firms have begun to speak up, viewing Wall Street as something of a cautionary tale. They don’t want to meet the same fate as the big banks when it comes to federal oversight. “One day, we’re going to wake up and there’s going to be a set of laws regulations and restrictions that are going to make it difficult or impossible for us do what we do,” said Riverside’s Kohl. “We don’t want to be thrown out with the Wall Street bathwater.”

Source:  Huffington Post

Posted by Steven Maimes, The Trust Advisor.



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Concord Trust Company Launches In New Hampshire

The Concord Trust Company, a state-chartered, non-depository trust company, has been created in New Hampshire to enable high-net worth-families to take advantage of the state’s trust and estate tax laws.

New Hampshire was chosen because it has progressive trust and estate laws that are available to non-resident families, according to company officials. The Concord Trust Company (CTC) has been created to help non-resident families take advantage of these laws, according to the four founders of CTC.

Joe McDonald and Amy Kanyuk, trust and estate attorneys, and Ray Martin and Chip Martin, business and trust professionals, have created Concord Trust based in Concord, N.H.

Advisors often help their clients establish trusts in one of a handful of states with favorable tax, trust and banking environments. New Hampshire is one such state. It passed favorable legislation in 2006 and has enhanced it since then to make it favorable to creating trusts, according to CTC.

“Because of its recent legal reforms and low taxes, New Hampshire is among the most advantageous jurisdictions in the country in which to establish and administer trusts,” said McDonald, who is a CTC director. CTC provides unbundled trust and trust company administration services that allows trust portfolio management to be left with the family’s own investment advisors. CTC does not provide investment management services.

CTC provides formation, administration and virtual office support for ultra-high-net worth families interested in creating their own regulated private family trust companies, who might be discouraged by the cost and regulatory burdens of traditional family office structures in other states, says CTC.


Posted by Steven Maimes, The Trust Advisor.



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SEC Official: Common Wall St. Conversations Carry ‘Troubling’ Potential For Abuse

The Securities and Exchange Commission might betaking a closer look at common Wall Street practices that occupy an ethical gray area.

Certain routine conversations in the business world carry the potential for abuse, and can often be “troubling,” David Rosenfeld, co-head of enforcement at the SEC’s New York office, told a group of legal and financial practitioners earlier this month, according to Fox Business News. Some see the comments as a hint that the SEC may consider “expanding the definition of insider trading,” according to the report.

The SEC has been taking an aggressive stance against insider trading in recent months, with Chairman Mary Schapiro calling it a “problem of tremendous magnitude,” and the agency filing more than 100 cases related to insider trading between 2010 and 2011.

Among the SEC’s highest-profile cases ever was the successful prosecution of Raj Rajaratnam, a hedge fund billionaire who thanks to inside information made lucrative trades of Goldman Sachs and Google stock, among others.

At the same time, critics of the SEC say the agency’s focus is misplaced, and that it has done little to punish the people and institutions that helped bring about the financial crisis of 2008 — a near-meltdown of the national banking system in which insider trading played a relatively minor role.

For its part, the SEC says it has shifted its approach to financial-crisis prosecution cases in order to generate more charges that might stick. Meanwhile, the agency has pointed to its own record on insider-trading cases as proof that it is serious about stamping out financial misconduct.

SEC representatives have also complained that the agency simply doesn’t get enough federal funding to be as effective as it could be. In 2011, the budget for the SEC was $1.185 billion.

A spokesman for the SEC has indicated that Rosenfeld’s remarks this month don’t necessarily point toward an expansion of the agency’s definition of insider trading.

Source:  Huffington Post

Posted by Steven Maimes, The Trust Advisor.



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Every Advisory Firm Should Know What Technology They Need, Not What They Want

Understanding your “technology personality” will help streamline the decision process when it’s time to make changes to your office systems.

From time to time people ask me which technology vendors they should consider when upgrading their portfolio accounting capabilities: Advent, Black Diamond, Asset Book, Morningstar, someone else?

I often wonder what process was used to develop this short list because often times it appears to me that they are comparing apples and oranges. In trying to answer this question, I like to take a step back and look at the advisor’s real preferences.

Think of buying a car. You probably don’t put together a list of vendors first. Instead, you spend some time up front determining your general requirements — your “car personality” if you like.

How many passengers does the vehicle need to transport? Will you be using it to drive the kids to school or trash to the dump? What gas mileage do you need? How much are you are willing to pay?

Understanding your needs and preferences upfront helps you streamline your search and selection process. The same holds true for purchasing technology.

There are many quality vendors that serve the RIA marketplace, but in reality only a few are best suited to meet your needs.

So what does a personality test look like for portfolio accounting technology? A few key personality attributes should include your:

  • Need for operational control
  • Desire for efficiency (a high-quality solution) versus simplicity (an all-in-one solution)
  • Position on the technology adoption lifecycle curve

 Technology (or solution) adoption process, as described in
Geoffrey Moore’s book Crossing the Chasm

1. Operational Control – One of the biggest decisions a firm needs to make in regards to portfolio accounting is whether or not to outsource back office operations, and if so, then to what extent.

If your firm has a command-and-control-type personality and feels that keeping this function in house allows you to maintain a high level of service, than on-premise (client-hosted) software such as Advent Axys or Schwab’s PortfolioCenter may be worth consideration.

But if you feel that outsourcing your back office functions would allow your firm to better focus on your clients, your search should of course then focus on outsourced solution providers such as Orion Advisors or Tamarac.

Fortunately, outsourcing is not an all-or-nothing proportion. Solutions exist across a continuum of functions and services. Providers range from software as a service (SaaS), to reconciliation as a service (i.e. Accusource and B-Ready) to complete outsourcing.

Identifying your operational pain points and preferences will help you determine how much or how little you want to outsource your back office operations. This understanding will help you narrow down the list of potential vendors you should consider.

2. Best of Breed vs. All-in-One – Do you need to have the best tool for a specific job or are you happy to use a multi-tool like a Leatherman because it can do most of what you need and is easy to carry around?

It is important to understand how a provider will integrate in your current environment as well as your future state environment. Advisors need to map out what specific functions they need (CRM, document management, accounting, rebalancing, etc.) and what functions need to be integrated with one another.

Once you have the functional map drawn out, it is much easier to determine whether you want to purchase these functions from a single vendor or integrate products from multiple vendors. Both approaches have their benefits and drawbacks

Selecting different vendors for rebalancing, accounting and CRM will allow you to customize your technology capabilities to meet your specific needs. It will also mean you are managing multiple relationships, implementations and integration efforts.

A single integrated platform on the other hand, will reduce the number of relationships you need to manage, and all functions (in theory) should be integrated. Integrated vendors will have strengths and weaknesses across their platform. Not every module will be best in class, or best to meet your particular needs. You need to match your priorities against the strengths and weaknesses of the vendor.

3. Technology Adoption – Is your firm an early adopter, early majority or a “laggard” when it comes to technology?

Early adopters can have a great deal of influence, but this influence also comes with growing pains. Do you like to help shape a product’s feature set? Are you willing to help a new vendor work out the kinks?

Younger vendors may offer innovative technology but may not be as mature and consistent in terms of delivery. More established vendors will have legacy demands that slow down their ability to innovate, but their existing functionality is proven.

Some buyers are willing to be on the “bleeding edge” and others have no tolerance for it. Know where you fall in the technology adoption lifecycle and select potential vendors based on their experience as well as their functionality.

You might also be interested in …

How Do You Choose the Right Technology to Streamline Your Business (Free White Paper)

How to Choose & Use CRM Systems for Financial Advisors (On-Demand Webinar Replay)

How to Choose an Outsourcer (On-Demand Video)

How Advisors Are Using Technology Today (On-Demand Webinar Replay)

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Whitney Houston Leaves Behind a Legacy of Music and Estate Riddled With Confusion

Mere weeks after winning nine-year probate case against her own stepmother, glamour queen’s shock death and controversial financial shape raise the odds of much bigger courtroom battles ahead.

Whitney Houston’s management had barely squelched rumors that the 48-year-old diva and recovering cocaine addict had run out of cash before they had to confirm reports that she was dead.

The latest news is that she fell asleep in the bathtub and drowned after mixing prescription painkillers with alcohol.

Now, it’s the disposition of Houston’s remaining wealth that is becoming the object of public scrutiny — and giving advisors plenty to mull where their own clients are concerned.

If Houston’s lawyers were smart, they ironed out her estate plan a decade ago, the gurus tell me.

Back in 2001, she had just signed the biggest record deal in history — six albums, $100 million in guaranteed royalties — and the signs of her drug use were getting harder to hide.

That combination of massive incoming wealth and rising litigation and mortality risks should have been all the incentive her advisors needed to set up long-term trusts and iron out her will.

Unfortunately, that was also the moment at which her career and personal life started to unravel, so they might have missed their opportunity — and as details come out, we might see the grim results.

A very complicated decade

Part of the problem is that Houston’s last decade was extremely complicated, so the lawyers had less time than we might think to keep her affairs orderly.

When she signed that $100 million contract, she was already carrying her long-time husband, Bobby Brown, and a young daughter.

Her father, who had managed her career up to that point, was slowly dying of heart disease and seems to have been perpetually hurting for cash.

In 2002, he sued her for a round $100 million, claiming he was owed that much for helping her beat marijuana possession charges and negotiate her big record deal.

That suit dragged on well after his death before being dismissed in 2004, robbing Houston’s lawyers of vital time to move that money into an asset protection trust.

As long as the lawsuit was pending, those record company millions were simply too hot to hide — any judge would have considered such a move a blatant attempt to defraud an existing creditor.

Two years of relative quiet followed, but Houston spent a lot of that time in and out of rehab, so any claims she was in “sound mind and body” to sign any estate documents may not hold up without challenge.

Her divorce from Bobby Brown dragged on through most of 2007. Her lawyers were on the ball here: she had a prenuptial agreement cutting him out of her money and any legitimate claim to spousal support.

After that, she drifted out of the limelight. And now she’s gone.

Fighting her father’s example

Given the haphazard way the Houston musical dynasty used sophisticated planning techniques to manage its millions, we might expect to see Whitney’s estate reflect a mix of good and bad advice.

On the positive side, Bobby has no claim on her money, and now that daughter Bobbi Christina is legally an adult — and out of the hospital herself — he can’t try to get custody and the money that goes with that.

And Houston’s father earmarked a $1 million life insurance policy to cover the mortgage on his house, so someone over the years was on the ball there.

Unfortunately, if Whitney and her father used the same lawyers, we can expect fireworks ahead.

John Houston appears to have died without clearly stating whether the life insurance money was meant to go to Whitney — who loaned him the money for the house in the first place — or to pay off his debt to his daughter.

He left behind letters talking about how Whitney made an oral agreement to apply the $1 million toward the loan, but her lawyers successfully noted that nothing like that was spelled out in his actual will.

In November — a full eight years after John Houston died — the case finally wrapped up in Whitney’s favor.

Had the lawyers 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.

As the judge noted, it’s impossible to legally determine what the deceased would have wanted, beyond what’s spelled out in the documents.

How much was Whitney worth?

The big question is how much of Whitney’s money the lawyers managed to save.

She died owing Arista three records, so a big chunk of that $100 million from the 2001 contract could be forfeited right away.

Her 10-acre New Jersey property was once appraised as worth $6 million but more recently listed for well under $2 million — barely what she owes in taxes and mortgage payments.

While rumor has it she was calling friends to borrow $100 a few weeks ago, her people insist that she wasn’t hurting for cash.

She’d just wrapped her first movie in 15 years, and as her staff says, she didn’t work for free.

“People get paid to make movies,” they point out.

And estate planners get paid to make sure the movie money lasts. Let’s hope Whitney’s lawyers earned their fees.

Scott Martin, senior editor, The Trust Advisor.


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Key Private Bank Launches Delaware Trust Company

Industry Veterans Anne Marie Levin and Isabel Pryor join Key National Trust Company of Delaware to offer trusts for asset protection, tax savings and flexibility

Key Private Bank, the investment, trust and wealth management arm of KeyCorp (NYSE:KEY), has established Key National Trust Company of Delaware to provide trust services for wealthy clients and prospects seeking asset protection, tax savings and flexibility using Delaware’s favorable laws.

Key Private Bank has appointed two industry veterans to launch Key National Trust Company of Delaware.  Anne Marie Levin, senior vice president and national Delaware trust specialist, will be responsible for working with attorneys and accountants nationally to assist in managing sophisticated estate and tax planning considerations for high net worth clients.  Isabel Pryor, senior vice president and regional trust manager, will focus on the administration of the Delaware Trusts, including exercising sound fiduciary judgment, mitigating risk, and maintaining compliance.

“Building Key Private Bank’s capabilities to provide an array of trust services has been a strategic objective for the firm,” said Catherine O’Malley Kearney, director of trust administration with Key Private Bank.  “With the addition of Isabel and Anne Marie, we have taken significant steps to expand our presence and offer trust services for business owners, professionals, and other wealthy individuals who can benefit from Delaware’s favorable personal trust laws to save taxes and protect their hard-earned assets from creditors.”

Ms. Levin joins Key Private Bank from PNC Bank, where she served as vice president, Delaware trust specialist.  Previously, Ms. Levin was a senior estate trust counselor and fiduciary counsel at The Vanguard National Trust Company where she counseled clients who have high net worth and ultra- high net worth clients on sophisticated estate and tax planning options.  She was also a trust and estate planning attorney at Blank Rome LLP, a national law firm.  Ms. Levin earned her LLM in taxation from Villanova University School of Law, and her JD from Temple University School of Law.

Ms. Pryor joins Key Private Bank from Wells Fargo Bank where she served as vice president and a senior trust & fiduciary specialist. Previously, she was an assistant vice president at Wilmington Trust Company where she focused her work in the firm’s ultra-high net worth segment of its family wealth division.  Ms. Pryor’s professional experience includes delivering, managing, and executing customized and comprehensive strategies for estate, tax, retirement, and investment planning. Ms. Pryor earned her MBA from Eastern University and a BA in Political Science from the University of Massachusetts.  She holds the professional designation as a Certified Trust and Financial Advisor (CTFA).

About KeyCorp: KeyCorp was organized more than 160 years ago and is headquartered in Cleveland, Ohio.  One of the nation’s largest bank-based financial services companies, Key has assets of approximately $89 billion.   Key provides deposit, lending, cash management and investment services to individuals and small businesses in 14 states under the name of KeyBank N.A.  Key also provides a broad range of sophisticated corporate and investment banking products, such as merger and acquisition advice, public and private debt and equity, syndications and derivatives to middle market companies in selected industries throughout the United States under the KeyBanc Capital Markets trade name. For more information, visit

Source:  KeyCorp – PRNewswire

Posted by Steven Maimes, The Trust Advisor.


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Federated Investors’ Shares Down on Fund Rule Concerns

* Most of Federated AUM in money funds

* Schwab shares also decline on report of SEC action

Federated Investors Inc shares were down 5 percent in morning trading on concerns new rules could hurt its money- market mutual fund business.

The Wall Street Journal reported on Tuesday that the U.S. Securities and Exchange Commission was finalizing rules meant to stabilize the $2.7 trillion money-market mutual fund sector, which required much support from companies and federal agencies amid the financial crisis in 2008.

Asset manager Federated of Pittsburgh is among the largest managers of money-market funds, with $285.1 billion in such assets at the end of December out of its total managed assets of $369.7 billion. Its high percentage of money-market funds makes it vulnerable to changes in fund rules, and talk of a new SEC action sent the shares down, according to analysts Michael Kim of Sandler O’Neill and Jeff Hopson of Stifel, Nicolaus.

Fund industry executives have been consistent critics of the proposals under review by the SEC including the creation of capital buffers or allowing shares to “float” away from their traditional $1-per-share value. On a conference call with investors on Jan. 27, Federated Chief Executive Christopher Donahue suggested the company would file a lawsuit to block some new rules.

Shares in Charles Schwab Corp, another large money-fund provider, were also down in morning trading, Hopson noted.

Source:  Reuters

Posted by Steven Maimes, The Trust Advisor.


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Generation Y Doesn’t Trust The Stock Market, But Is Heavily Invested In Stocks

Growing up during America’s “lost decade” has certainly taken a toll on Generation Y, which has lived through the tech bust in 2000 and the financial catastrophe of 2008.

Forty percent of Gen Yers — 18- to 30-year-olds — say they will “never feel comfortable investing in the stock market,” according to a study from MFS Investment Management that was reported in The Wall Street Journal on Sunday.

Yet for all that pessimism, Gen Y is heavily invested in the market, as Journal columnist Carolyn T. Geer points out. Thanks to a six-year-old law that offers companies incentives for automatically enrolling employees in 401(k) plans, the number of twenty-somethings who are investing in stocks has grown.

The law, signed by President George W. Bush in 2006, most affected workers who were newest to the workforce, often Gen Yers. According to the Investment Company Institute and Employee Benefit Research Institute, which examined the portfolios of 23 million individuals with 401(k)s, the percentage of twenty-somethings with 80 percent or more of their 401(k) funds in the stock market grew from 55.3 percent in 2000 to 60 percent in 2010.

Generation Y encompasses 77 million Americans who have combined earning power of $1 trillion, according to MFS Investment Management. Saving is currently not a priority for a large portion of Gen Yers — 38 percent say they live from paycheck to paycheck.

Investing young, however, is key. Reuters reports:

According to data from Baltimore-based fund shop T. Rowe Price, if one saver puts away $500 a month from ages 21 to 30 and enjoys a 7 percent annual return, she will end up with almost a million bucks at age 65. That handily beats another saver who waits for that level of return until age 31 yet contributes all the way to 65, despite putting up $150,000 more than the first investor.

“Whether wealth is transferred to Gen Y from older generations or they generate it themselves, it is a demographic imperative that the financial services industry embraces younger investors,” William Finnegan, senior managing director of U.S. retail marketing for MFS, stated in the MFS study.


Posted by Steven Maimes, The Trust Advisor.



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