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Fidelity National Said in Exclusive Talks to Acquire SunGard

Bloomberg article by Alex Sherman


Fidelity National Information Services Inc., the payment-services provider, is in exclusive talks to buy SunGard Data Systems Inc. in a deal with an enterprise value of more than $8.3 billion, people familiar with the matter said.

While a deal isn’t imminent, Fidelity would pay with a mix of cash and stock if a transaction occurs, said the people, who asked not to be identified because the discussions are private. The split would be approximately 50 percent cash and 50 percent stock, one of the people said.

SunGard, which makes software for financial institutions, is owned by seven private-equity firms, including Silver Lake Management, Providence Equity Partners and KKR & Co. The Wayne, Pennsylvania-based company filed to go public in June. The company’s long term debt was $4.67 billion at the end of March, according to regulatory filings, while cash was $555 million.

Shares in Jacksonville, Florida-based Fidelity National climbed 4.1 percent to $65.85 at the close in New York, giving it a market value of almost $19 billion.

Representatives for Fidelity National and for SunGard co-owners Bain Capital, Providence, Silver Lake, TPG Capital, Blackstone Group LP, KKR and Goldman Sachs Group Inc.’s private-equity arm declined to comment.

SunGard was acquired by the private-equity firms for about $11 billion in 2005, when leveraged buyouts by large groups of investors were more popular. The firms have held on to SunGard through the financial crisis to allow banks, which use its financial services, to recover.

Fidelity National Financial Inc. spun off Fidelity National Information Services in 2006.


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Donald Trump Fails the Fiscal-Responsibility Test in His Fund Picks

MarketWatch article by Chuck Jaffe

Trump__2He doesn’t diversify, as most of his mutual fund holdings are from one company

Donald Trump is many things, but a thoughtful, properly diversified mutual fund investor isn’t one of them.

That became clear thanks to the 92-page Trump financial document that the Federal Election Commission released last week.

The document and the totals it purports to represent are nearly as controversial as the man. He claimed in the document filed July 15 that he had a net worth of more than $10 billion; as of June 30, when he formally declared that he was running for the Republican presidential nomination, he claimed a net worth of $8.74 billion.

There are hundreds of interesting numbers in the document, but I’ll leave most for others to decipher.

My interest was in the long list of marketable securities that make up his investment portfolio; there were 326 names, although a number of high-profile stocks like Apple, Microsoft and others appeared in multiple brokerage accounts. There’s no real telling how much money he has in marketable securities because the disclosure document puts investments in big ranges (think “$1,000,001-$5,000,000,” though he has a number of items that fall into higher and wider ranges), but that’s also not the real issue here.

No matter what you think of Trump’s politics, you probably wouldn’t want to follow his lead in mutual funds.

My interest was in The Donald as a fund investor, and once you get past the seven giant hedge-fund positions he holds favoring alternative investments (funds that an ordinary investor doesn’t have the cash to get into), he’s got 10 mutual funds that his constituency could go for if they wanted to invest like their favorite celebrity politician.

No matter what you think of Trump’s politics, however, you probably wouldn’t want to follow his lead in mutual funds.

Nearly all of Trump’s domestic open-end mutual funds are from the Baron Funds, a mid-sized fund family headed by the audacious Ron Baron. Trump has between $1 million and $5 million in Baron Asset, Baron Small Cap, Baron Focused, Baron Real Estate, Baron Growth and Baron Partners, with between $500,000 and $1 million in Baron Opportunity and Baron International Growth. There’s also between $100,000 and $250,000 in Baron Energy and Resources.

Baron Emerging Markets is listed twice as having between $250,000 and $500,000, once in the retail share class and once for the institutional class, which raises questions about whether Trump’s big investments are in the institutional class elsewhere, or if they are in the more pricey retail classes. (Baron’s institutional share class has a $1 million minimum investment, which makes it odd that the one fund disclosed as being for institutional investors actually shows an amount below that level.)

Trump is diversified internationally with at least half a million dollars in Invesco European Growth, at least $250,000 in Deutsche X-trackers MSCI Europe Hedged Equity, at least $100,000 in Parametric Emerging Markets and Deutsche X-trackers MSCI Japan Hedged Equity, and from $50,001 to $100,000 in iShares MSCI Japan. He also has between $100,001 and $250,000 in GAMCO Global Gold, Natural Resources & Income, a closed-end fund, and less than $15,000 in a Vanguard high-dividend fund.

While it may not be a surprise, as noted by Russel Kinnel, director of manager research at Morningstar, that “one brash New Yorker [Trump] would like another [Baron],” the Baron funds are not the shop that most experts would pick if you wanted most of your funds from the same place.


Posted by:  Steven Maimes, The Trust Advisor


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Envestnet Recognized as a Leader in Transforming Wealth Management

envEnvestnet, Inc. (NYSE: ENV) continues to earn top wealth management industry awards.

Bill Crager, President of Envestnet, received the Money Management Institute’s (MMI) Advisor Solutions Pioneer of the Year Award. MMI’s Pioneer Award is given annually to an individual who embodies MMI’s mission to serve as an advocate and catalyst for the growth of the managed investment solutions and wealth management sectors. MMI also named Envestnet the Advisory Solutions Technology or Service Provider of the Year.

In addition, Lori Hardwick, Envestnet Group President of Advisor Services, was selected by Private Asset Management as one of the 50 Most Influential Women in Private Wealth. Envestnet won Family Wealth Report’s (FWR) Best Outsourcing Solution Award, and Envestnet | Tamarac was one of five finalists in both FWR’s Portfolio Management and Client Communications & Reporting categories. Furthermore, Envestnet | PMC Chief Investment Strategist Tim Clift was named one of the 10 Most Important People in ETFs by’s “ETF Report.”

“Digital technology is changing the way advisors and their clients connect and transact, but we believe that, contrary to signaling the end of the financial advisor, it heralds the further empowerment of the financial advisor,” said Mr. Crager, who accepted the MMI awards at the Gateway to Leadership Industry Recognition Dinner in Charlotte, NC. “The entire Envestnet team is committed to providing advisors with the tools they need to harness this evolution, and provide the deep engagement their clients have come to expect. We are grateful to receive these accolades honoring our efforts to help advisors adapt to changes in their industry.”

Private Asset Management narrowed down its list of the 50 Most Influential Women in Private Wealth, which appeared in the May 2015 issue, using three main criteria—peer recommendations, the amount of responsibility held in current and previous roles, and significant impacts on private wealth management. Ms. Hardwick joined Envestnet shortly after its inception 16 years ago, and has played an influential role in helping to build the firm and its platform.

“I am humbled to be included among so many impressive role models for women in the private wealth space,” said Ms. Hardwick. “At Envestnet, our advisor-centric focus has been the driving force behind our growth through the years, and I am proud to be in a position to ensure advisors remain at the heart of what we do as we continue to grow.”

Envestnet received its FWR awards at the publication’s Second Annual Awards Dinner, held at New York’s Mandarin Oriental Hotel on March 15. The awards are designed to showcase technology providers in the global private banking, wealth management, and trusted advisor communities deemed to have demonstrated innovation and excellence during the previous year by a panel of distinguished judges.

“This recognition reflects the industry’s appreciation for the breadth of capabilities we provide advisors to create a unified wealth management process for serving clients and growing their businesses,” said Lincoln Ross, Executive Vice President, Advisory Services, Envestnet, who accepted the awards at the dinner. “We are glad to be acknowledged by prominent members of this industry as a significant force in wealth management.”’s “ETF Report” selected Mr. Clift as one of the 10 Most Important People in ETFs due in part to his role as a “gatekeeper” advising more than 100 exchange-traded fund (ETF) strategists on Envestnet’s open-architecture platform on how to better run their portfolios. Envestnet allows these ETF strategists to market their portfolios to advisors through unified managed accounts and other products.

“Advisors continue to choose ETF strategists as their preferred providers of access to the most promising strategies that the market has to offer,” said Mr. Clift. “Envestnet has pioneered research methodologies to help advisors identify the strategies that best fit their clients’ needs, and the recognition by’s ‘ETF Report’ validates our innovation and thought leadership in this fast-growing area.”

About Envestnet   

Envestnet, Inc. (NYSE: ENV) is a leading provider of unified wealth management technology and services to investment advisors. Our open-architecture platforms unify and fortify the wealth management process, delivering unparalleled flexibility, accuracy, performance, and value. Envestnet solutions enable the transformation of wealth management into a transparent, independent, objective, and fully-aligned standard of care, and empower advisors to deliver better outcomes. For more information on Envestnet, please visit


Posted by:  Steven Maimes, The Trust Advisor


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Tycoon’s Daughters Must Wait Ten Years to Inherit His $20 Million Fortune

New York Post article by Ross Toback  and Julia Marsh

Victoria and Marlena Laboz

Victoria and Marlena Laboz

Daddy Dearest real estate millionaire Maurice Laboz, who died earlier this year, doled out early-bird bonuses to his girls in his will as long as they marry right, get good jobs and don’t even think about having kids out of wedlock.

The Laboz girls — Marlena, 21, and Victoria, 17 — are set to inherit $10 million apiece when they turn 35. But they can get their hands on some of the dough beforehand if they follow Daddy’s rules for the straight and narrow. For example:

Marlena will get $500,000 for tying the knot, but only if her husband signs a sworn statement promising to keep his hands off the cash.

She nets another $750,000 if she graduates “from an accredited university” and writes “100 words or less describing what she intends to do with the funds” — with the trustees appointed by her dad to oversee her money responsible for approving her essay.

Both daughters get a big incentive to earn decent salaries by 2020. Each young woman is guaranteed to receive an annual payout of three times the income listed on their personal federal tax return. In a not-so-subtle nod to the taxman, their checks will be cut every April 15.

If the daughters have kids and don’t work outside the house, the trustees will give them each 3 percent of the value of their trust every Jan. 1. There’s one catch: The money flows only for a “child born in wedlock.”

The sisters could earn the same amount being “a caregiver” to their mother, Ewa Laboz, 58, whom their father was in the middle of divorcing. She got nothing in the will and has indicated that she will contest it.

“It’s a way to control things from the grave,’’ said estate lawyer Jeffrey Barr, who is not involved in the case. “You don’t see a lot of it, but it happens. People do it because . . . they think it’s for the good of the children.’’

Estate lawyer Oshrie Zak said the move is not surprising in this case.

“Accustomed to the control over others that their money affords them in life, the will is their last shot at controlling their loved ones,’’ he said of Laboz and other successful people.

Maurice Laboz signed the will in April 2014, about nine months before he died at age 77. He left behind a $37 million fortune.

He justified leaving his wife out of his will by citing a “prenuptial agreement, which limits her rights,” according to the document.

Ewa Laboz filed court papers last month contesting that, arguing she deserves a share of the pot because she was still married to her husband when he died.

The rest of Laboz’s fortune is set to go to charities, including The Michael J. Fox Foundation for Parkinson’s Research and Meals on Wheels.


Posted by:  Steven Maimes, The Trust Advisor


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Apple Considered BMW’s i3 As Model To Make Its Own Electric Car article by Martin Blanc

apple-inc-aaAccording to Manager Magazin’s report, published on Friday, last year, Apple Inc. (NASDAQ:AAPL) approached German automaker BMW to provide expertise to make an Apple electric car.

The publication revealed that the CEO Tim Cook visited BMW’s i3 vehicle production facility in Leipzig to get an insight on the electric car-manufacturing. It was also outlined that Apple intends to use i3’s design as basis for its self-driven electric vehicle.

Rumours about Apple’s electric car plans gained traction in February this year, when the company was said to be developing an automobile under a project dubbed Titan. In this regard, it was said that the company shifted its core operations labor to the car-making division. Hundreds of employees were reported to have been tasked with making an electric vehicle, which looked similar to a minivan.

The latest gossip has renewed speculation that Apple is serious to roll out its own electric car. In the last three months, rumours lost momentum, owing to the overwhelming success of the company’s iPhone, and its ecosystem’s strength overshadowing other projects.

In a recent research note, Berenberg Bank analyst Adnaan Ahmad stated that Apple would soon lose momentum as its flagship iPhone suffers negative growth in the upcoming quarters. He believes that the company’s overreliance on iPhone is a great disadvantage, and that the law of large numbers would soon hit Apple. Mr. Ahmed suggested that Apple should consider making its own electric vehicle, and said that it should acquire the famed US electric automaker, Tesla Motors Inc. (NASDAQ:TSLA).

For vehicles, Apple does provide its CarPlay service; this allows drivers to enjoy the company’s services from the car’s dashboard. However, Apple has remained quiet about its plans to enter the electric car market.

Electric car-manufacturing is expensive, and it cannot be said with surety that Apple would replicate iPhones’ success in its electric cars. It remains to be seen whether the latest scuttlebutt turns out to be true, and the company is ready to disrupt the electric automotive market with an Apple car.


Posted by:  Steven Maimes, The Trust Advisor


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Notes from Jon Stein on How to be a Better Advisor


Belay Advisor story by Steve Sanduski, MBA, CFP

Jon Stein, Co-Founder and CEO of Betterment, tells how he co-founded the company and built it into one of the fastest growing and most innovative investment firms in the country. It’s a great story about how a smart guy with a timely idea can marshal the resources and build a company that is reshaping how business is done in the investment world.

  • Advisors, you need to really focus on adding value above and beyond the investment management piece. As Jon said, “I think the investment management piece has been heading toward a commoditization for a long time.”
  • Think the Robo Advisors are just a bull market phenomenon? Think again. Jon said, “I think that there’s a misperception that we are somehow more sensitive to the downside. I think that we’re actually positioned to grow even faster during a market decline as people get upset about other investments they have and start looking for something consistent, something reliable, something that takes advantage of the best investment strategies regardless of market conditions.”
  • Taking a cue from Carl Richards, Jon said, “We seek to get to behavior gap zero. Our goal as an advisor is to get people the actual returns they deserve,” (as opposed to less than market returns due to behavioral faults).
  • Are you asking your clients about their preference for the tradeoff between trading and taxes? You should after considering this gem from Jon. “Customers who see that they have a taxable gain before they make a withdrawal or an allocation change transaction are 60% less likely to make that transaction than people who didn’t see that data.” In other words, as Jon noted in the interview, more than half of investors wouldn’t make a trade if they knew the tax implication of making the trade.
  • Jon has huge goals for the firm and said, “I do think we’ll be a multi-trillion dollar asset management company.” Listen to the interview for Jon’s take on where that money will come from.
  • Betterment has interesting demographics. Jon said the average age of their customers is 36 yet 25% of their assets are coming from customers who are 50 plus. So advisors, if you want to prosper over the next 10 years, you have to implement a strategy to partner with firms like Betterment, create your own online service, or else face a tortured death.
  • Jon shared what tools Betterment is developing to make pre-retirees and retirees more comfortable with working with them, and here’s a hint—it’s something most financial advisors do as part of their value-added service. Translation—Betterment is rapidly adding services that investors normally turn to financial advisors for.
  • Betterment has a “negative churn.” Listen to Jon explain what that means.
  • In terms of staff who interact with customers on a day-to-day basis, Jon says Betterment typically runs at a ratio of about 1 client-facing staff per 10,000 customers. A traditional financial advisor firm has about 1 advisor per 150 clients. Think about the implications of that!
  • Jon shares the one thing that keeps him up at night and it should keep you up at night too.
  • You don’t become a fast growing company without having good management strategies and Jon shared some of the apps, strategies, and philosophies he uses to manage the firm.


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Posted by:  Staff, The Trust Advisor



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How Citigroup Courts Wealthy Young Heirs: Teach Them to Buy Art

Bloomberg article by Margaret Collins

BUY-ART_One evening last month at Citigroup Inc. in downtown Manhattan, a group of 20-somethings spent $95,000 in a bidding war for a black-and white photo tapestry of the fashion model’s face. They were confident that the work by the prominent New York artist Chuck Close was worth the price.

That’s why there was a collective gasp when Tash Perrin, a senior vice president at Christie’s, revealed that the work didn’t sell when it was last auctioned in 2013.

The sale and money that the 40 participants used to bid with was fake, but the lesson on valuing and buying art was real. The attendees, from wealthy families in 18 countries, are poised to inherit enough money in coming years to purchase some of the items they were shown at the event — from Cartier earrings worn by Elizabeth Taylor to a Bjork album cover photograph. For firms like Citi Private Bank, teaching them how to invest in art is one tool to help retain the heirs when the family wealth is passed on to them.

“You don’t have the birthright to the next generation’s wealth,” said Money Kanagasabapathy at Citi Private Bank, who directs such events for clients’ children. “We want to continue to have the relationship with the family.”

Next Generation

In the past, wealth managers haven’t been so successful at keeping younger clients. On average, firms have seen almost half of the assets leave when a family’s wealth is being handed to the next generation, according to the latest figures from a report on global private banking by consulting firm PricewaterhouseCoopers.

Banks are trying to reverse that trend because an estimated $36 trillion is expected to transfer to heirs in U.S. households alone from 2007 to 2061, according to a 2014 study by the Center on Wealth and Philanthropy at Boston College. The figure swells when including billionaires worldwide, a majority of whom are over age 60 and have more than one child.

aaaaThe U.S. economic recovery also has accelerated parents’ desire to prime children for what’s coming, said Arne Boudewyn, a managing director in Wells Fargo & Co.’s Abbot Downing unit.

“Company valuations are higher than in past years, including family-owned and controlled companies,” said Boudewyn, whose clients generally have at least $50 million. “Many families who never seriously contemplated selling are now fielding offers they can’t refuse.”

Training Camps

Citi Private Bank’s event included a session on buying art because the asset class is increasingly seen as an investment, with global art sales hitting a record in 2014 as new collectors drove up prices for trophy works.

Yet art is an illiquid investment and difficult to value, as the team betting on Kate Moss found out. The millennials spent $95,000 of their fake $100,000 allotment on the piece in the mock auction.

Other banks including Credit Suisse Group AG, Deutsche Bank AG, UBS Group AG and Coutts, a unit of the Royal Bank of Scotland Group Plc, run training camps for clients’ children. Held in countries including Singapore and Switzerland, the programs usually span several days to more than a week and participants often fly in from around the world. The seminars — which cover topics such as sustainable investing, philanthropy, entrepreneurship or how to protect your family reputation and brand online — are free to attend while clients generally cover their own travel and accomodation.

Reviewing Art

During the Citi Private Bank event, experts from Christie’s helped participants review a mock catalog of about a dozen works. They advised each team on criteria to determine value: a work’s quality, rarity, condition and history of ownership.

Attendees then bid on pieces that have been, or will be, auctioned including an Andy Warhol polaroid print of Giorgio Armani and a pair of ear clips by Seaman Schepps formerly owned by the Duchess of Windsor. Perrin then showed the teams what the works really sold for so they could see if they spent their money wisely.

Wells Fargo’s Abbot Downing and U.S. Trust, a unit of Bank of America Corp., have a financial education curriculum with individual coaching instead of boot camps. Some parents or grandparents require heirs to take it before telling them how wealthy they are and what they will inherit, said Chris Heilmann, U.S. Trust’s chief fiduciary executive. In June, the bank added a program for teenagers as young as age 13.

The young adults who attended Citigroup’s event have jobs and even some master’s degrees, but their parents want them to hone skills that are unique to their wealth — such as bidding on a Picasso or taking over a family business, said Kanagasabapathy.

“There is no tolerance today for an incapable CEO,” he said.

Wealth managers like Citigroup said they hope the trainings will strengthen both family profits and bank loyalty.

“It’s easier to retain a client than to get a new one,” he said.


Posted by:  Steven Maimes, The Trust Advisor

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Janet Yellen is Ready to Raise Rates

MarketWatch article by Carolin Baum

yellinFederal Reserve policy makers are hoping, even praying, that no unexpected domestic development or international crisis intervenes to prevent them from taking the first baby step to normalize interest rates at the Sept.16-17 meeting.

Why? Fed officials point to a number of reasons: the unnatural state of a near-zero benchmark rate; the potential risk of financial instability; an improving labor market; diminishing headwinds; and yes, expectations of 3% growth just over the horizon.

Fed Chairman Janet Yellen, usually considered a member of the Fed’s dovish faction, sounded determined to act when she testified to Congress last week.

“We are close to where we want to be, and we now think that the economy cannot only tolerate but needs higher interest rates,” Yellen said during the Q&A. “Needs,” as in the patient needs his medicine.

What’s the urgency with an economy chugging along at 2-something percent and low inflation? I suspect Fed officials are terrified of being caught with their pants down, in a manner of speaking. Should some unforeseen event come along to upend the economy, the Fed’s arsenal would be dry. They’d like to put some space between their policy rate and zero.

Sure, the Fed has a balance sheet that can be expanded almost without limit. But policy makers are the first to tell you they have little experience with the extraordinary measures taken in response to the financial crisis.They’re much more comfortable with an interest-rate tool, preferably set at a level that enables them to engineer a negative inflation-adjusted rate should the circumstances warrant.

Even with several rounds of quantitative easing, no one at the Fed talks about the quantity of money. (Former Fed chief Ben Bernanke even called QE a “misnomer.”) Nor do Fed officials think about monetary policy the old-fashioned way: the idea that if the central bank puts out more money than the public wants to hold, people will spend it.

The goal of QE was to ease financial conditions. As explained by Bernanke in a November 2010 Washington Post op-ed, the Fed buys long-term Treasuries, which lowers risk-free rates and drives investors into riskier assets: stocks, corporate bonds and mortgage-backed securities. The rise in stock prices boosts consumer wealth, raises confidence and encourages spending, while the decline in corporate bond and mortgage rates stimulates investment and makes housing more affordable.

Mission accomplished? Last week, Yellen mentioned the situations in Greece (”difficult”) and China (weaker growth, skittish stock market) but neither sounded like much of an impediment to the Fed’s intended lift-off later this year. She implied that the preconditions for raising rates — further improvement in the labor market and a reasonable degree of confidence that inflation will move back to its 2% objective — had been satisfied.

The labor market continues to send mixed signals: the unemployment rate is at a seven-year low of 5.3% while the labor-force participation rate is near a four-decade low of 62.6%.

And what will instill confidence that inflation is headed back to the 2% target? Signs that actual inflation is heading back to the target. The personal consumption expenditures price index, the Fed’s preferred inflation measure, increased 0.2% in May from a year earlier. With food and energy excluded, the year-over-year increase is 1.2%. Both measures have shown a pick up in the latest three months. And Fed officials expect inflation to rise gradually to 2% once the “transitory effects” of earlier declines in energy and import prices dissipate.

Oops. Crude oil prices, which seemed to have stabilized following a 60% decline between June 2014 and March 2015, are sliding again on the prospect of Iranian oil entering world markets. On Monday, U.S. benchmark crude CLU5, +0.30%  settled below $50 for the first time since April.

And oil is just part of the story. If the Fed is looking for a reason to hold off on a September rate increase, it can look no further than commodities markets. The CRB BLS spot raw industrial price index, which includes economy-sensitive materials such as scrap metals (copper, steel and lead), rubber and zinc, has taken a dive to levels last seen in late 2009. The decline in raw materials prices will feed into the prices of finished goods. So the Fed’s confidence in inflation heading higher may be dashed once again.

The Fed scrapped its intended June lift-off because of concerns about the decline in first-quarter U.S. growth. Broad-based weakness in commodity prices is generally symptomatic of weak global demand. If the Fed is at all uncertain about its decision to start normalizing rates, it already has the excuse it needs.


Posted by:  Steven Maimes, The Trust Advisor

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Reasons To Believe That Stocks And The Economy Have Better Days Ahead

Forbes article by Robert Barone

Finance-Economy-It’s reasonable to ask whether you should continue to be bullish on the U.S. economy and equities when the media continue to emphasize a plethora of troubling issues including a flat lining manufacturing sector, an energy sector that is still contracting, and a new host of government taxes and regulations (from federal, state, and local authorities) that make it difficult for small businesses to remain viable. The purpose here is to assess those issues and put them into proper perspective.

Anyone who has paid any attention to business headlines knows that the oil industry continues to struggle. And now that the Obama administration has made its deal with Iran, a significant additional supply of oil will come to market by year’s end (unless Saudi Arabia cuts their production, unlikely). In addition, the Index of Industrial Production has been flat since last September, and capacity utilization is down nearly 2% since November. If it weren’t for the boom in the auto industry, this index would likely be much lower.

The weakness in manufacturing is a direct result of the rapid rise in the value of the dollar vis a vis other major currencies. As the value of the dollar rises, the U.S. trade balance deteriorates (fewer exports– mainly manufactured goods, more imports). The adoption of money printing and low interest rate policies by most other major central banks, while, at the same time, the Fed prepares to raise rates in the U.S., only exacerbates the dollar and manufacturing issues. Plus, weak foreign economies naturally demand fewer U.S. exports. I suspect that the ISM Manufacturing Index for July (release date: August 3) will not show much strength. Nor will July’s Industrial Production Index (release date: mid-August). And, the media will act as if a recession is approaching.

Besides the oil and manufacturing stories, in its mid-July report, the optimism index of the NFIB (National Federation of Independent Businesses – an association catering to small and medium sized businesses) took a huge 4.2 point plunge for its June reading, no doubt due to the plethora of new regulations passed by the various state and local governments including large increases in the minimum wage, continuing increases in benefit costs, higher taxes, and new interpretations and regulations promulgated by the Labor Department and other agencies. The Employment Cost Index is up more than 5% year over year, and, as a result, as reported in the Wall Street Journal (June 12), rising employment costs may cause businesses to rethink how they allocate staff, which could negatively impact the labor market going forward. Their press release concludes:

The government “continues to push regulation to compel firms to pay people more (minimum wage, overtime, ‘share the wealth,’ health care, sick leave), but does not ask them to produce more to justify the higher pay…”

Let’s put all of this into perspective. The first fact to recognize is that while the U.S. was once the bastion of manufacturing activity (auto, furniture, clothing…), it gave that up over the years to lower wage and benefit countries and became a “services” economy. (Does anyone remember the 1992 Presidential debates and H. Ross Perot’s “giant sucking sound” remark – referring to his belief that U.S. manufacturing jobs would go to Mexico if NAFTA (North American Free Trade Agreement) went into effect?) Today, manufacturing represents only about 12% of the U.S. GDP, and the oil industry only about 2.5%. So, while these are surely drags on economic activity, if the rest of the economy is doing well, economic growth still occurs.

The typical post-WWII recovery is led by autos, housing, and financials. The Great Recession ended nearly 6 years ago. But, these three sectors are just now taking off, indicating that the real (typical) recovery has just begun. (Auto sales averaging more than 17 million units at an annual rate over the past 4 months; housing starts up 9.8%; building permits up 7.4% – best since ’07; the National Association of Home Builder’s Index at a cycle high in both June and July.) The Fed’s Flow of Funds report for Q1 showed a much healthier consumer with debt/asset and debt/equity ratios at 15 year lows, the consumer’s ability to service debt the best it has been since the ‘80s, and home equity on consumer balance sheets the best since ’06.

To corroborate a stronger consumer, look at the Q2 earnings reports of the major banks. For example, Citi reported an 11% growth in retail lending, and Wells a 15% increase in credit card receivables. The Fed’s Beige Book (which is a summary of comments from U.S. businesses) was released on July 15th for the period mid-May to the end of June. It showed:

  • Increasing real estate construction activity, both commercial and residential;
  • Rising home sales and prices;
  • Strong growth in employment with labor markets tight where specialized skills are needed;
  • Growth in nonfinancial businesses, professional, and healthcare services;
  • Uneven activity in manufacturing and energy due to dollar strength and issues in oil and gas.

From all of this, it is clear that the consumer is spending and has the capacity to continue to spend. There are some clouds forming on the horizon, especially the disincentives caused by higher employment costs, taxes, and additional business regulation. But, the real economic recovery has just begun (led by housing, autos and financials).

As for those clouds that are still forming, something to worry about, but not imminent. Yes, manufacturing (12% of the GDP) will continue to struggle as long as the rest of the world is weak and continues the currency wars. And the energy industry will continue to be plagued by over supply and lower prices– not good for 2.5% of the economy, but great for the other 97.5%.

- Robert Barone (Ph.D., Economics, Georgetown University), an advisor representative of Concert Wealth Management, is a Principal of Universal Value Advisors (UVA), Reno, NV, a business entity.


Posted by:  Steven Maimes, The Trust Advisor


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5 Essential Life Documents For Common Law Couples

Forbes article by Judy Martel

common-law2A trip down the aisle rewards couples with more than the glow of wedded bliss. They also enjoy a variety of legal and financial advantages that are not available to unmarried couples.

“There are roughly 1,100 benefits afforded to married couples involving all facets of life, from not having to testify against a spouse to various legal parental rules to estate-planning benefits,” said Cyndy Ranzau, associate wealth strategy consultant with RBC Wealth Management.

Because unmarried couples lack the financial and legal benefits of their married counterparts, they may want to be vigilant in ensuring the proper documentation is in place to protect their finances.

Here is a rundown of essential documents and tips for maximizing your wealth plan outside of marriage:

1. A Will And Living Trust

The marital deduction, allowing tax-free transfers of wealth to spouses, doesn’t apply to unmarried couples, so planning is essential.

A will can ensure assets don’t automatically go to your surviving family members, which is what would happen if you were to pass away intestate.

“There is no way to get your assets to anyone other than next of kin unless you have a will,” said Van Pate, wealth strategy consultant with RBC Wealth Management.

To make your intent even more solid, consider getting a living trust, Ranzau advised. “A living trust is harder to contest than a will, because typically once a will is signed, you never look at it again.”

A trust, on the other hand, requires some effort to transfer and retitle assets in the name of the trust, signifying deliberate intent, said Pate. “If you prepare a trust in 2015 and live with it 10 to 15 years, it’s harder for a relative to come in after your death and say you were off your rocker when you signed it.”

Even if you have a living trust, you need a will for certain assets that remain outside the trust and to name guardians for minor children. In both the will and a trust, you can make your wishes clear about the distribution of assets after your death.

2. Power Of Attorney

There are different types of designated authorities to consider when it comes to your financial life, depending on how much power you want your partner to have.

A general power of attorney allows the person holding the power to handle all legal matters—including financial transactions—on behalf of the person who grants it. There can be a specified time limit or it can “spring” into effect under specific circumstances. This is called a springing durable power of attorney.

A general power of attorney “is written to cover the waterfront and allow the power-holder to act in any number of situations,” Pate said.

A financial power of attorney limits the holder to financial transactions. This designation is not necessary if there is a general power of attorney in place.

A power of attorney can be written as durable, meaning that its duration will be extended in the event you become incapacitated. “If you think about it, that’s when you need it the most,” said Pate. “If a general power of attorney is not written as durable, then the authority [to act on behalf of the other] ceases at the worst possible time.”

3. Health Care Proxy And Living Will

Just as with a financial or general power of attorney, one written to cover health care allows a specified person to make decisions regarding care on your behalf if you are unable to make them yourself. Sometimes this is referred to as a health care proxy.

In addition, you may consider drafting a living will that directs medical professionals on any end-of-life treatment. In some states, both the health care power of attorney and living will are combined into one document called an advance health care directive.

Consider sharing these documents with loved ones so everyone who might be involved is aware of your wishes and the identity of your decision-maker.

Documents vary by state, so be sure to follow the requirements where you live, said Pate. “Generally, they require witnesses, but not necessarily a notarized signature,” he added. Finally, Pate recommended keeping a copy of the document handy for emergencies.

4. Insurance Policies And Retirement Accounts

It’s all about the named beneficiaries with these documents, because the people you designate on the document will be the ones who receive the benefit, regardless of what your will or living trust states.

Common assets with named beneficiaries include insurance policies and retirement accounts, including IRAs, 401(k)s and 403(b)s. Also, some people title bank accounts as “payable on death” or “transferable on death.” Those accounts will go directly to the designated person named on the account when you pass away.

Finally, don’t forget contingent beneficiaries. If the person you name as primary beneficiary dies before you and you have named a contingent beneficiary, the asset will pass to your estate and be distributed per the terms of the will. If there is no will, the assets will pass to the next of kin.

Try to make sure the named beneficiaries are in line with your overall estate plan, Pate advised.

5. Application For Federal And State Benefits

Civil or common-law marriages are not recognized by the federal government for any benefits, said Pate. State laws vary, so you may want to do research to find out if you’re able to file a joint state tax return.

Laws for same-sex marriages also vary by state, with 37 states recognizing them, Ranzau said, adding that in late June the Supreme Court is scheduled to rule on whether they will be legal in every state. That could change the picture for spousal benefits at the federal level.

In the meantime, partners in a same-sex marriage interested in Social Security spousal benefits can go on the Social Security website, said Pate, and click on the link for frequently asked questions for such unions. “In each of the answers, it basically says they are processing some applications and if you feel you qualify, you should apply. But it doesn’t guarantee anything.”

Couples may automatically receive more benefits when they tie the knot.

The bottom line for unmarried couples is they can maximize their control by drafting or signing the proper documents to ensure each partner is protected—both legally and financially.

- Judy Martel blogs about wealth on and is the author of The Dilemmas of Family Wealth, published by Bloomberg.


Posted by:  Steven Maimes, The Trust Advisor


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