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Trust Performance Report: Institutions Earned Nearly $36 Billion on over $100 Trillion in Total Assets

Nearly a third of trust bankers say they plan to raise management fees in 2014.

bankerTrust bankers are no longer hesitant to increase revenue, based on Trust Performance Report’s annual survey of industry assets. The industry generated $35.7 billion in gross revenues on $103 trillion in total assets. This sets a new industry record, but 2014 may do so again. Nearly a third of trust bankers say they plan to raise management fees in 2014. While the rest may not be raising fees, they are more tightly enforcing their existing fee schedule, which is also boosting their bottom line.

Trust Performance Report, a sister publication of TRN, surveys bank trust divisions, national trust companies, and state-chartered trust companies. The survey is conducted annually in March. Complete findings and analysis are published in TPR’s 182-page report available on May 5.

Based on preliminary findings, trust institutions grew revenue by some 11 percent in 2013, compared to the prior year. Asset growth averaged nearly 13 percent, including net new account growth of 2 percent. Midtiers, those with assets between $1 billion and $10 billion, reported the strongest new account growth: 5 percent.

State Street’s $27 trillion in total assets edged out BNY Mellon’s long-held number one spot.

The asset base of institutions with over one trillion dollars in assets is dominated by custody accounts. However, in 2013, many of these nine (9) institutions reported strong growth in so-called traditional trust assets: personal trusts, managed retirement accounts, and investment management agencies. State Street reported a near 25 percent increase in traditional assets.

BNY Mellon, which edged out State Street in 2007 for the number one spot, reported just over $24 trillion in total assets. BNY Mellon was the only member of the exclusive Trillion Dollar Club to report a decline in total assets.

The remainder of the Trillion Dollar Club is comprised of Chase ($21 trillion), Citigroup ($11 trillion), Northern Trust ($5.6 trillion), Fidelity Management Trust Co. ($2 trillion), Wells Fargo ($1.7 trillion), U.S. Bank ($1.6 trillion), and the newest member Blackrock Institutional Trust ($1 trillion).

For more information on trust industry statistics and performance benchmarks, see the upcoming issue of Trust Performance Report 2014.

Source:  trustupdates.com

Posted by:  Steven Maimes, The Trust Advisor

Permalink:   http://thetrustadvisor.com/news/trust-performance-report

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Guarding Against Wire Transfer Fraud

WSJ Wealth Adviser article by Veronica Dagher

Advisers shouldn’t be embarrassed to ask clients to verify their identity

fin advAccording to his email, the client was vacationing with his wife in Spain and needed a wire transfer of $58,000 before the impending weekend.

Big mistake. A week later, the adviser is getting a message, a real one, from his client: Why was $58,000 transferred from my account?, it asked.

Kevin Taylor, chief compliance officer at Pershing Advisor Solutions, worked with that adviser and recounts the circumstances as a cautionary tale.

“There were plenty of red flags,” notes Mr. Taylor. For example, while the email carried the client’s real online address, it contained some grammatical errors.

The adviser’s biggest mistake: To shortcut the process, he told his firm’s custodian that he had verbally confirmed the request with the client. He hadn’t. If he had, he would have learned the client wasn’t in Spain.

In the end, the adviser had made an important client very unhappy. And he had to pay for the error out of his own pocket.

As more advisers fall victim to wire fraud, it’s crucial for them to carefully vet and verify transfer requests. Staff and clients both need education about the prevalence of scams.

Clients can be sensitive when they get questions about their requests, as it feels like they’re having to ask twice. But firms shouldn’t be embarrassed to seek proof that a transfer request is genuine, says Brian Hamburger, chief executive of MarketCounsel, a firm that helps advisers comply with financial regulations.

“Explain that emails are easily and frequently hacked and you’re trying to protect them,” he says.

Mr. Taylor, who is based in Jersey City, N.J., suggests advisers set up a key question and answer, or a code word or phrase, with each client. Examples: the client’s least favorite food followed by foreign country name, or a pet’s name followed by a unique sequence of numbers.

This should be a verbal key, not to be disclosed via email, Mr. Taylor says. The adviser can ask the client to always follow up any electronic instruction with a telephone call, when the key would be given.

Being too quick is dangerous. Have an established, mandatory hold time for any transfer requests gives associates time to review it. And those associates need to feel empowered to “just say no” if something seems wrong, especially if the transfer is to a third-party account.

Many cybercriminals strike late in the day or on Friday, before the weekend, in hopes that a sense of urgency prevails,” he says.

Advisory firm staff of course need basic training in online scams like phishing and in virus-protection practices. The firm also need to rehearse what it will do if someone does slip up and allows a virus to become embedded in the computer system by, say, opening an innocuous pdf file.

Often those viruses are used to detect confidential information such as client account numbers, along with user names and passwords. The first six to 12 hours are key, after that kind of hacking has occurred, to notifying financial institutions where those accounts are held, so they can be locked or monitored, Mr. Taylor says.

Source:  online.wsj.com

Posted by:  Steven Maimes, The Trust Advisor

Permalink:  http://thetrustadvisor.com/headlines/wire-transfer-fraud

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AmeriServ Trust Selects FIS TrustDesk to Help Advance Its Wealth Management Business

Press Release

Key Facts:

   – Multi-year account processing agreement enables AmeriServ to focus on supporting customers and growing its business, while controlling back office costs

   – FIS will provide real-time account processing, enhanced compliance, integrated portfolio management, customer online access and more

   – This continues a trend by financial institutions to leverage FIS’ best practices in outsourcing

FIS (NYSE:FIS), the world’s largest provider of banking and payments technology, announced that it has signed a new multi-year trust and wealth management account processing agreement with AmeriServ Trust and Financial Services Company, located in Pennsylvania.

Under the agreement, FIS will provide real-time account processing with FIS TrustDesk(R) , an outsourced solution. It also will deliver enhanced compliance, integrated portfolio management, flexible client reporting and FIS Client Point(TM), which will provide customers real-time, easy-to-use online access to their accounts.

The ability to improve its technology offerings, while updating and streamlining operations through an integrated platform, led AmeriServ Trust Company to make the change, which will unify multiple systems into one integrated, proven system that also compliments AmeriServ’s long-time relationship as an FIS core client.

It’s this core relationship that ultimately led AmeriServ to FIS — its leaders wanted a vendor who could serve as a true partner to them, understanding their business and anticipating their needs.

“AmeriServ’s relationship with FIS demonstrated the value of partnership, ” said Anthony Jabbour, EVP, FIS North American Financial Institutions. “Working together through our core banking relationship, FIS had shown AmeriServ leaders that it could be trusted to always do right by them. That trust, coupled with a proven platform that could support the bank’s growth, made this a perfect relationship for the bank.”

“We at AmeriServ Trust Company aspire to be the premier trust and financial services provider of choice in the communities we serve. We believe that FIS can provide us with the level of service and sophistication that we need in order to meet that objective,” said Gregor T. Young, IV, J.D., President and CEO, AmeriServ Trust & Financial Services Company.

AmeriServ Financial, the parent of AmeriServ Trust Company, is headquartered in Johnstown, Penn., and has 18 branches across the southwestern portion of the state. This deal continues a trend by financial institutions of all sizes to leverage FIS’ best practices in outsourcing, developed over its more than 40-year history of serving the back-office needs of the financial industry.

About FIS

FIS is the world’s largest global provider dedicated to banking and payments technologies. With a long history deeply rooted in the financial services sector, FIS serves more than 14,000 institutions in over 110 countries. Headquartered in Jacksonville, Fla., FIS employs more than 39,000 people worldwide and holds leadership positions in payment processing and banking solutions, providing software, services and outsourcing of the technology that drives financial institutions. First in financial technology, FIS tops the annual FinTech 100 list, is 434 on the Fortune 500 and is a member of Standard & Poor’s 500(R) Index. For more information about FIS, visit www.fisglobal.com.

Source:  Business Wire

Posted by:  Steven Maimes, The Trust Advisor

Permalink:   http://thetrustadvisor.com/news/fis-trustdesk


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Student Loans Can Suddenly Come Due When Co-Signers Die

NYT article by Richart Perez-Pena

debt-2For students who borrow on the private market to pay for school, the death of a parent can come with an unexpected, added blow, a federal watchdog warns. Even borrowers who have good payment records can face sudden demands for full, early repayment of those loans, and can be forced into default.

Most people who take out loans to pay for school have minimal income or credit history, so if they borrow from banks or other private lenders, they need co-signers — usually parents or other relatives. Borrowing from the federal government, the largest source of student loans, rarely requires a co-signer.

The problem, described in a report released Tuesday by the Consumer Financial Protection Bureau, arises from a little-noticed provision in private loan contracts: If the co-signer dies or files for bankruptcy, the loan holder can demand complete repayment, even if the borrower’s record is spotless. If the loan is not repaid, it is declared to be in default, doing damage to a borrower’s credit record that can take years to repair.

The bureau said that after a co-signer’s death or bankruptcy, some borrowers are placed in default without ever receiving a demand for repayment. The agency did not accuse loan companies of doing anything illegal.

Rohit Chopra, the bureau’s student loan ombudsman, said that he did not know how common the practice was, but that a steady stream of consumer complaints indicated it was becoming more frequent. He also said companies appeared to be doing it more or less automatically, combing public records of deaths and bankruptcies, comparing them to loan records and generating repayment demands and default notices.

What makes the “auto-defaults” odd is that they do not benefit the loan servicers and lenders, who usually go to some lengths to avoid putting loans into default. A number of investment funds sell securities backed by student loans, and Mr. Chopra said it was not clear whether forcing early repayment and defaults might be tied to the terms of those securities.

“The ways in which they’re exercised don’t seem to be in the best interests of their companies or the best interests of the borrowers,” he said. “It doesn’t seem that there is a thoughtful business decision.”

He would not name specific companies involved, but said, “Most of the larger players in the industry do have contracts that contain these options.”

Americans owe about $150 billion in student loans to private lenders. Both the government and private lenders usually transfer their loans to loan servicing companies.

The largest private lender, and by far the largest servicer of both government and private loans, is Sallie Mae, which did not respond to calls and emails seeking comment on Monday.

Borrowers often can have their loans released from the co-signer requirement if they have a few years of earnings and credit history, or have the loans transferred to a new co-signer. But the consumer bureau said that borrowers were not often aware of those options, and that even if they were, the loan companies made it difficult to exercise the options.

Mr. Chopra urged people to take advantage of such provisions when they could, adding, “Borrowers need to be aware that these defaults can seriously impair their credit profile,” making it hard to start a business, or buy a house or a car.

In the last decade, private student lending mirrored the mortgage industry: Lenders were willing to do business with many high-risk borrowers at high interest rates, partly to satisfy the demand for loan-backed securities. But the companies became more cautious after the recession hit and defaults soared, and they went from requiring co-signers on 67 percent of loans in 2008 to 90 percent in 2011.

As parents and grandparents age, Mr. Chopra said, problems with sudden defaults and repayment demands are likely to get worse.

Source:  nytimes.com

Posted by:  Steven Maimes, The Trust Advisor

Permalink: http://thetrustadvisor.com/news/student-loans

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New Tax Risks for Owning Overseas Assets

WSJ Wealth Adviser article by Arden Dale

‘Be alert to anything in a client profile that suggests international activity.’

intAmericans who have money, property or business dealings overseas will soon face greater tax scrutiny from Uncle Sam.

July 1 will mark a key stage of implementing the Foreign Account Tax Compliance Act, or FATCA, which Congress enacted in 2010 as way to crack down on offshore tax cheats.

For the last three years, individuals have been required to disclose more about their overseas holdings. But come this summer, foreign banks and other financial firms must start reporting to the Internal Revenue Service on their U.S. customers and most of their assets.

As a result, these U.S. taxpayers–as well as their financial and tax advisers–will be under more pressure to report their assets. And properly so. Those who stumble over increasingly complicated IRS rules face tax penalties, back taxes and, in some cases, even criminal charges.

“If you’re a wealth planner, you owe it to your clients to at least bring this up,” said Joan Crain, a wealth strategist for BNY Mellon Wealth Management, which manages $185 billion. Her group recently circulated a memo to clients on the upcoming change.

Ms. Crain noted that when taking in a new client or doing an annual review, her group asks if the person owns anything outside the U.S.

Most people with a bank or brokerage account overseas, or a foreign trust or mutual fund investment, already know as they must report foreign assets over $10,000 to the IRS each June on a special form known as a Report of Foreign Bank and Financial Accounts.

Yet fewer investors know that just two years ago, under the first stage of FATCA, the IRS started requiring more information on returns filed with the Form 1040. A wide range of foreign financial assets, including notes, securities and even bank accounts already reported in separate filings now must be disclosed if worth more than $50,000 or more.

Indeed, the rules are now quite complex and hold many traps for the unwary–and the penalties can be quite steep, said Scott Michel, a partner in the Washington, D.C., office of law firm Caplin & Drysdale.

“Advisers should be alert to anything in a client profile that suggests international activity, and suggest to clients that they provide full information about all foreign activity for the required filings,” he said.

Advisers can be in a bind, however, if they learn about accounts unknown to the IRS. They don’t have the kind of immunity an attorney gets under the attorney-client privilege, and could be subpoenaed if the IRS or Justice Department were to pursue more information about a client, Mr Michel pointed out.

That said, it’s important to direct a client to a tax attorney if there’s any question the person may not be reporting properly.

Courtney Weber, a wealth adviser with Truepoint Wealth Counsel in Cincinnati, said her firm is adamant that clients let advisers know where they stand–especially a client born overseas or who travels because they’re likely to own assets abroad.

For instance, she said the firm “fired” a client a few years ago after discovering he had reported to the IRS overseas accounts he had been hiding from the firm, which manages about $1.7 billion.

In another case late last year, a client of Ms. Weber came to her with a letter from a U.K. brokerage firm that warned it was dropping her account because it didn’t want the complication of reporting on U.S. customers. The woman, born in the U.K. but with dual citizenship, has to pay income on the U.K. account because the U.S. taxes Americans on worldwide income.

Ms. Weber helped the woman look around for a new brokerage firm in the U.K., though the client eventually found a suitable one through family members who still live there.

Client meetings at Truepoint include a member of the firm’s tax staff, because taxes are such an integral part of financial planning. The firm now requires a special agreement with any client for whom it prepares tax returns that discloses any foreign holdings.

“We can only help if we have all of the information, and a lot of clients really don’t know the depth at which some of this has to be reported,” said Ginger Ittenbach, tax director at the firm.

Source: online.wsj.com

Posted by:  Steven Maimes, The Trust Advisor

Permalink:   http://thetrustadvisor.com/news/overseas-assets

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Nine Most Valuable Collectibles

24/7 article by Vince Calio

No longer the sole domain of avid collectors, luxury collectibles are now considered viable alternative investments.

Prices of luxury items, such as classic cars, ancient Chinese ceramic art, and rare coins, have reached record amounts in recent years. Such items can be a good way for wealthy investors to diversify their long-term investment portfolios.

To track the value of popular luxury items, real estate consultancy firm Knight Frank created the Knight Frank Luxury Investment Index (KFLII). This luxury index tracks existing indices that measure the value of nine categories of luxury collectibles, including classic cars, fine art and rare coins. The index aggregates the weighted performance of the nine indices based on their market size and importance rank. To create its index, Knight Frank aggregates the nine existing indices and weights them by value and relative importance.

According to the KFLII, collectibles in some of the categories sold for record amounts last year. For example, a thimble-sized, 1,000-year-old Chinese bowl made during the Northern Song Dynasty that was bought at a garage sale for $3 in 2013 was subsequently sold at a Sotheby’s auction for $2.2 million in March 2013, a record price for the time. Last year, the “Pink Star” diamond was auctioned for $83 million.

Andrew Shirley, Wealth Report editor and head of Rural Property Research at Knight Frank, told 24/7 Wall St. that investors should consider collectible and luxury items as legitimate alternative investments. In the decade ending in the second quarter of 2013, the classic cars category in the KFLII rose by 430%, the most out of any luxury collectible in the index during that time. The considerable returns of rare stamps and coins of 255% and 225%, respectively, would also pique investors’ interests.

“I think people should be into collectibles and luxury items for the enjoyment as well as the prices,” said Shirley. “Whether it’s a classic car or a picture on your wall, you’re going to get real enjoyment from them, especially as the value of those items appreciate.”

However, investors should not treat collectibles the same as traditional investments. Shirley noted that, unlike the Standard & Poor’s 500 Index, the luxury collectible market is not a very liquid one, as prices for most of the items can only be determined through individual sales.

Some categories, such as wine, rose in value, in part, due to heavy demand, especially from China. “The Chinese are massive buyers of wine at the moment,” said Shirley. “Classic cars used to only be collected by people in Europe and the US,” said Shirley. “Now there’s more interest coming from Asia, but there’s still a fairly finite market of classic cars, so you’ve seen the value go up.”

24/7 Wall St. reviewed returns of the nine luxury collectible categories measured by Knight Frank for the period June 2004 to June 2013. Based on reports from auction houses, including Sotheby’s and Christie’s, we identified the most expensive collectible in each category sold at auction. To create its subindex for watches, fine art and jewelry, Knight Frank used individual indices published by Art Market Research. The KFLII incorporated prices in investment-grade wines from the Live-Ex Fine Wine 50 Index, which aggregates 50 wine components from the past 10 vintages of the five Bordeaux First Growths: Haut-Brion, Lafite Rothschild, Latour, Margaux and Mouton Rothschild. The KFLII included data on classic car prices from the Historical Automobile Group International Index, which aggregates price information from its database of more than 100,000 classic car transactions. Knight Frank relied on the Stanley Gibbons GB250 Index and the Stanley Gibbons Rare Coin Index to track the prices of collectible stamps and rare coins.

These are the nine most valuable collectibles.

car1. Classic Cars

> 10-yr. price change: 430%

> One-year price change: 28%

> Most expensive item sold: Ferrari 275 GTB/4 NART Spider (1967)

> Price at auction: $27.5 million

The car category measured by the KFLII rose by 28% in 2013 and by 430% in the 10 years ending June 2013. Both gains were greater than any other subindex over those periods. The market for classic cars does not seem to be slowing either. Two cars sold in different auctions set records in 2013. In July, a 1954 Mercedes-Benz Formula One racer sold at auction for $26.5 million, the highest price paid for a classic car at the time. However, the record was broken one month later, when a rare 1967 Ferrari 275 GTB/4 NART Spider sold for $27.5 million. The Ferrari was believed to have been purchased for between $8,000 and $14,000 in 1967.

2. Stamps

> 10-yr. price change: 255%

> One-year price change: 7%

> Most expensive item sold: Swedish Treskilling Yellow (1857)

> Price at auction: $2.1 million

While stamp collecting is centuries old, buying rare stamps as an investment is a relatively new behavior among wealthy investors, according to a recent New York Times article. In 2010, the world’s most expensive stamp — the Swedish Treskilling Yellow — sold for more than $2 million. According to Knight Frank’s Shirley, “Stamps are getting more publicity and more people are writing about them, helping to push up value,” and attract more investors to the market. This June, however, all records are expected to be broken when a one-cent magenta stamp issued by Britain’s former colonial government in Guiana will be auctioned off. The value of stamps rose 255% in the 10 years ending in June 2013, more than all luxury items except for cars and coins.”

3. Coins

> 10-yr. price change: 225%

> One-year price change: 9%

> Most expensive item sold: Flowing Hair U.S. silver dollar (1794)

> Price at auction: $10 million

The subindex for rare coins rose 9% for the year ending June 2013. Only the cars subindex rose more over that time. Two sales last year were high points for numismatists everywhere. The first, the Flowing Hair silver dollar, may have been the first metal U.S. dollar coin ever minted. The coin sold at an auction in January 2013 for a record $10 million. In November, a 102-year-old St. Louis man sold a rare U.S. coin collection for a staggering $23 million at an auction run by Heritage Auctions in New York City. Interest in coin collecting may have been stimulated last year by falling gold prices, as investors began seeking additional sources for returns. Interest is also increasing as the economy begins to recover from the recession that began in 2008, Michael Fuljenz, president, Universal Coin & Bullion, told Kitco, a metals news site. Optimism may be warranted: The index has returned more than 225% over 10 years.

4. Fine Art

> 10-yr. price change: 183%

> One-year price change: -6%

> Most expensive item sold: “Three Studies of Lucian Freud” (1969)

> Price at auction: $143 million

Fine art continues to be the most volatile luxury collectible measured by the KFLII, largely because of its subjective nature. While the art subindex fell 6% last year, prices are up 183% over a 10-year period, more than all but a handful of collectibles. The current record holder is Francis Bacon’s “Three Studies of Lucian Freud,” which sold for $143 million last year. In the contemporary art market, investors buy and sell works by so-called Flip Art artists, who mass produce their art often using cheap techniques. Because potentially hundreds of copies of the same piece are produced by the artist, investors can acquire multiple works and buy and sell them through online markets like Artnet, much like they would shares in a public company.

5. Wine

> 10-yr. price change: 182%

> One-year price change: 3%

> Most expensive item sold: Domaine de la Romanee-Conti (1978), 12 bottles

> Price at auction: $476,280

Prices of investment-grade wine with a documented history of price appreciation tend to be more volatile than most other luxury collectibles, second only to art. This is due primarily to the higher likelihood that tastes will change within the art and wine worlds. While the wine subindex increased only by 3% last year, it increased by 182% over the decade ending in mid-2013. Interest in wine may have increased last year due to a report by Morgan Stanley predicting a global wine shortage, although the argument has since been widely criticized. In fact, despite an overall reduction in vine acreage over the past decade or so, the International Organization of Vine and Wine reported higher production last year, particularly in Spain, France and Portugal. By far, most investment-grade wine comes from the Bordeaux region of France. However, it was a wine from Burgundy that set a new record. Twelve bottles of 1978 Domaine de la Romanee-Conti were sold for $476,280 at a Christie’s auction last year.

6. Jewelry

> 10-yr. price change: 146%

> One-year price change: 2%

> Most expensive item sold: “Pink Star” diamond (1999)

> Price at auction: $83 million

The jewelry subindex rose 51% over the five years ending in June 2013, more than the subindexes of all but a few collectibles. Articles of jewelry often consist of precious metals, such as gold, and gems. While the jewelry market is less volatile than many other collectibles, the price of particular gems can vary widely due to supply constraints and import bans. For example, the price of rubies dropped in the 1990s after the discovery of a large deposit in Myanmar, but it has since risen again, especially after the added pressure of the recently renewed U.S. ban on imports from Myanmar. Despite limited gemstone supply, the market for luxury jewelry is still thriving. The current record sale is for a 59.6-carat diamond known as the “Pink Star,” which sold for $83 million last year. In February, Sotheby’s had to acquire the diamond when the winning bidder was unable to pay.

7. Chinese ceramics

> 10-yr. price change: 83%

> One-year price change: 3%

> Most expensive item sold: Meiyintang “Chicken Cup” (16th century)

> Price at auction: $36 million

Despite recent doubts about the authenticity of Chinese ceramics due to a high volume of forgeries, the Chinese ceramics subindex rose by 83% in the decade ending in 2013. Interest peaked last year, when a 1,000-year-old Chinese bowl made during the Northern Song Dynasty, which was bought at a garage sale for $3, was subsequently sold at a Sotheby’s auction for $2.2 million. Considering the returns and high-value auction sales in 2013, investors may want to consider ceramics seriously. The market for early works of Chinese ceramic art does not appear to be slowing, either. Earlier this month, a Chinese art collector acquired a tiny, 500-year-old Ming dynasty white cup painted with chickens for a record $36 million at a Sotheby’s auction.

8. Watches

> 10-yr. price change: 83%

> One-year price change: 4%

> Most expensive ever sold: Henry Graves Supercomplication watch (1933)

> Price at auction: $11 million

The watch market subindex in the KFLII returned 83% in the 10-year period ending June 2013, but it only rose 4% in value for the year ending June 2013. Christie’s and Sotheby’s reported selling half a dozen watches for more than $2 million apiece between June 2012 and June 2013, significantly more than in previous periods. The most expensive watch ever sold at auction was the Henry Graves “supercomplication” watch by Patek Philippe, which sold for $11 million at a Sotheby’s auction in 1999. According to the 2014 World Watch Report by luxury items research firm Digital Luxury Group, global interest in Swiss luxury watches grew in 2013. Demand from China for luxury Swiss watches increased by 59.4%.

9. Antique furniture

> 10-yr. price change: -19%

> One-year price change: -3%

> Most expensive item sold: The Badminton Cabinet (17th century)

> Price at auction: $36 million

The antique furniture market measured by the KFLII dropped by 3% in 2013 and by 19% over 10 years, making it the only subindex to lose value. According to the Knight Frank’s report, “furniture continues to lose ground as antique styles decline in popularity with homeowners.” Furniture that was once considered classic such as china hutches and roll top desks have fallen out of favor. For collectors and wealth investors, however, there are still major pieces of antique furniture in the market. The Badminton Cabinet built in England in the 18th century fetched $36 million at a Christie’s auction in 2004, making it the most expensive piece of antique furniture ever sold.

chart l

Source:  247wallst.com

Posted by:  Steven Maimes, The Trust Advisor

Permalink:   http://thetrustadvisor.com/headlines/collectibles


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When Diamonds Are Dirt Cheap, Will They Still Dazzle?

NYT article by Robert H. Frank

Replication technology has the potential to affect the value of items that are now rare and expensive, everything from diamonds to paintings and autographs

A technique called chemical vapor deposition can produce diamonds, created from gases, that are virtually indistinguishable from mined diamonds.

A technique called chemical vapor deposition can produce diamonds, created from gases, that are virtually indistinguishable from mined diamonds.

As a seventh grader, I was lucky to land the job of ball boy for the Brooklyn Dodgers during their annual late-March exhibition games in Miami. The experience left me with fond memories — of Roy Campanella smoking a cigar as he stroked line drives in the batting cage, of a young Sandy Koufax throwing harder than seemed humanly possible and of an aging Jackie Robinson struggling to remain in the lineup.

Oddly, however, my most vivid memory is of the Dodgers’ longtime batboy as he sat in the locker room producing autographed baseballs. He’d twist his hand at odd angles as he scrawled replicas of the signatures of Duke Snider, Pee Wee Reese and other Dodger legends. To my untrained eye, the balls he inscribed were indistinguishable from those signed by the players themselves.

Handwriting experts probably could have identified his forgeries without difficulty, but technology has progressed considerably since then. In many domains, perhaps even including signed baseballs, it’s becoming possible to produce essentially perfect replicas of once rare and expensive things.

That’s true, for example, of diamonds and paintings. Renowned art originals will always be scarce, and so will high-quality mined diamonds, at least while De Beers holds sway. But what will happen to the lofty prices of such goods if there is an inexhaustible supply of inexpensive perfect copies? Economic reasoning can help answer this question. It can also shed light on how new technologies might alter traditional ways in which people demonstrate their wealth to others, or might change what society embraces as tokens of commitment and other gifts.

First, some background about the new technologies. For many decades, the best diamond facsimile was cubic zirconia. It is similar to a diamond in brilliance and clarity but it isn’t as hard as a diamond and could never fool an experienced jeweler. Recently, though, new processes have made it possible to culture diamonds that are visually identical to mined ones.

One such process, chemical vapor deposition, produces diamonds with a heated mixture of hydrogen and methane in a chamber at very low pressures. Writing for Smithsonian Magazine shortly after the technique was developed, Ulrich Boser described having taken a sample stone to a respected diamond merchant in downtown Boston, who inspected it carefully under a jeweler’s loupe. After pronouncing it a “nice stone” with “excellent color” and no visible imperfections, the jeweler asked where it came from. When Mr. Boser said it had been cultured in a lab 20 miles away, the astonished merchant inspected it again. “There’s no way to tell that it’s lab created,” he said.

In significant ways, the new cultured stones are actually better than many mined diamonds. The Gemological Institute of America classifies them as colorless or near colorless Type IIa stones, a premium category that includes only 2 percent of natural diamonds. The new stones also sidestep environmental and human-rights concerns that have plagued mined diamonds in recent years.

Progress has been almost as striking in the duplication of oil paintings. Chemical and spectral analysis of original works can now identify paint compounds and hues precisely. A Cornell University electrical and computer engineering professor, C. Richard Johnson Jr., and his collaborators have been developing ways to identify an artist’s signature brush stroke style by applying statistical modeling to 23 original works by Vincent van Gogh. To date, their efforts have been used mostly to help detect forgeries, but they will inevitably serve future copiers as well. Robots can already produce near-perfect copies of simple paintings. Skilled forgers have been fooling experts for centuries, but going forward, those artisans won’t keep pace with smart machines and 3-D printing.

Not even perfect replicas, however, will extinguish strong preferences for original paintings and mined diamonds. In the short run, price premiums for such goods are likely to persist, as collectors scramble for certificates of authenticity.

Longer term, those premiums may prove fragile. Wearing large diamonds, for example, will no longer be likely to signal significant wealth or attract admiring glances. Some people will ask, why not buy cultured stones and spend the difference on things that actually matter — or that are, at least, truly scarce? No matter how many new skyscrapers are jammed into the city, there will only be so many penthouse apartments with sweeping views of Central Park. When some of the superrich start using money formerly spent on diamonds to bid for those apartments, other bidders will feel pressure to follow suit.

Prices of famous paintings will be more stubborn. But replication technologies will be applied not just to artworks but also to certificates of authenticity. Even billionaires would be reluctant to pay $100 million for a Picasso of uncertain provenance.

Tumbling prices will transform many longstanding social customs. An engagement diamond, for instance, will lose its power as a token of commitment once flawless two-carat stones can be had for only $25.

Replication technologies also raise philosophical questions about where value resides. How heavily, for example, should museums invest in ownership of famous works? (As noted in my last column, this question looms large in Detroit’s current bankruptcy proceedings.) Perfect replicas would enable local museumgoers to see the Mona Lisa without having to cross the Atlantic. But would the experience of seeing the painting — a perfect copy or even the original somewhere other than the Louvre — be rendered less special?

Perfect replicas would enable even the poorest fans to own autographed baseballs. Original or a copy? No one would know the difference, not even an expert. But would a 10-year-old be just as delighted to receive one for his birthday as I once would have been?

Technology won’t eliminate our need for suitable gifts and tokens of commitment, of course. And such things will still need to be both intrinsically pleasing and genuinely scarce. But technology will change where those qualities reside.

Source: nytimes.com

Posted by:  Steven Maimes, The Trust Advisor

Permalink: http://thetrustadvisor.com/headlines/replication-technology


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Where The Rich Were Schooled

Bankrate.com article by July Martel

There’s a close relationship between higher education and wealth, but some universities can ask their alumni for a bigger donation, based on the size of their personal fortunes.

WealthInsight and Spear’s gathered data on millionaires around the world to uncover where they earned a college degree and what fields they studied.

Eight of the 10 universities with the highest number of rich alumni are based in the U.S. Universities in the U.S. account for 62 of the top 100.

The field producing the highest number of millionaires is engineering, though most of the engineering grads made money as entrepreneurs.

Read on to see where the super-rich earned their sheepskin.

10 Universities with the Richest Alumni

2-BarackNo. 1: Harvard University

The venerable Boston institution, the oldest university in the country, claims President Barack Obama and former President John F. Kennedy among its graduates. Famous dropouts include billionaires Bill Gates, co-founder of Microsoft, and Mark Zuckerberg, founder of Facebook.

No. 2: Harvard Business School

Michael Bloomberg, former New York City mayor and founder of Bloomberg LP, earned a degree here, as did David Rockefeller, who went on to become the CEO of Chase Manhattan Bank.

No. 3: Stanford University

The founders of Internet search site Google — Sergey Brin and Larry Page — are alums of Stanford, as is actress Sigourney Weaver.

No. 4: University of California

Former chief justice of the U.S. Supreme Court Earl Warren and Tom Anderson, co-founder of Myspace, are among the notable graduates of the Berkeley, Calif., campus.

No. 5: Columbia University

Hollywood producer David O. Selznick and fashion designer Mary McFadden graduated from this prestigious New York City university.

No. 6: University of Oxford

Many noted politicians, including 26 British prime ministers, graduated from this esteemed British institution. King Abdullah II of Jordan earned a degree here, as did 50 Nobel Prize winners.

No. 7: Massachusetts Institute of Technology

MIT-educated astronauts have been included in more than a third of the nation’s space flights, including Edwin “Buzz” Aldrin and Catherine Coleman. Alfred Sloan, former chairman of General Motors, earned his degree here in 1895.

No. 8: New York University

Actor and director Woody Allen graduated from NYU, as did actor Billy Crystal and fashion designer Tom Ford.

No. 9: University of Cambridge

Famed physicist Stephen Hawking earned a degree at this venerable British university, as did journalist and entrepreneur Arianna Huffington.

No. 10: University of Pennsylvania

One of the most famous billionaires in the world, Warren Buffett, is an alum of this university (he was rejected by Harvard Business School), as is Chad Hurley, co-founder and former president of YouTube.

Source: bankrate.com

Posted by:  Steven Maimes, The Trust Advisor

Permalink:  http://thetrustadvisor.com/news/where-the-rich-were-schooled

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IP Guru Says This Picture Is Worth $1 Billion To Samsung, What About Your Clients’ Family Albums?

Ad Age article by Mark Bergen

Apple-Samsung phone camera wars may have fueled a temporary bubble in the photo licensing arena but the Oscar “selfie” shows that intellectual property can be extremely valuable — and that trusts that hold it need nimble management.

ellen_oscar_selfie_3x2It was the tweet heard around the world, but was it worth $1 billion?

That was the value Publicis Groupe CEO Maurice Levy put on the star-studded Oscar smartphone “selfie” during an interview in Cannes earlier this week. He also immodestly took credit for it, which is a stretch because while Publicis buying arm Starcom Mediavest did broker Samsung’s sponsorship of the Oscars, the tweet itself was spontaneous, according to two sources with knowledge of Samsung’s marketing.

Now, without that $20 million Oscars sponsorship, Ellen DeGeneres would likely have taken the shot with her preferred iPhone, so Mr. Levy can indeed take some credit for setting the stage (the Wall Street Journal reported the agency negotiated with ABC to integrate Galaxy phones into the show).

But was it worth $800 million to $1 billion as claimed? The post so far has nabbed nearly 3.5 million retweets, the most ever. By Twitter’s count, it scored 32.8 million impressions in its first 24 hours. Waves of media coverage followed, yet little of it mentioned Samsung’s connection to the photo.

Run a Google search for “Oscar,” “Ellen” and “selfie,” and nearly 45 million links appear. Include “Samsung,” and the results fall below one million. A similar patterns emerges in news coverage: less than 30% of articles on the event had Samsung in the headline, according to LexisNexis.

“Is there value? Yes. Is it a straight impressions-equals-dollar value? No,” said Matt Wurst, VP at 360i.

“Any attempt to put a media value on that is arbitrary,” said Ian Schafer, CEO of Deep Focus, a digital agency. “Case closed.”

Regardless of the value of the selfie – now enshrined in a painting at Twitter headquarters – it shows just how far the Korean electronics company has come, and rival Apple has fallen. Samsung is telling better stories and just plain out-innovating its arch-rival in Cupertino. Another datapoint: Samsung racked up 453.3 million video views for its ads over the past year, according to Visible Measures. That’s four Super Bowls.

Samsung spends loads more on marketing than Apple on a global basis, which shouldn’t surprise anyone given Samsung sells fridges and TVs around the world. But Samsung has creeped up on Apple in U.S. ad spending as well, increasing $20.1 million to $614 million, compared to Apple’s $627 million in 2013, according to measured media figures (excluding search) from Kantar Media.

Apple, once the standard-bearer for confident storytelling in tech, is scrambling for answers. This week it added four new digital agencies to its roster.

The internal stress became clear earlier this week in emails between Apple VP of marketing Phil Schiller and longtime agency TBWA that surfaced during patent trial between the two companies. Mr. Schiller tore the agency for losing its edge against Samsung in early 2013. “Something drastic has to change,” he wrote. “Fast.”

It was the first visible crack in Apple’s confidence in its products, its marketing, and its market position. And it was written a year before the selfie heard around the world. Imagine what Mr. Schiller is saying now.

Source:  adage.com

Posted by:  Steven Maimes, The Trust Advisor

Permalink:  http://thetrustadvisor.com/news/forget-the-selfie

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Hello Kids–or Goodbye Assets

WSJ Wealth Adviser article by Norb Vonnegut

Weath managers need a formal plan to connect with clients’ childrenboomerkids (1)

Do you have a master plan for keeping your clients’ coming-of-age children as…well, as clients?

I didn’t really have one. That was a mistake.

The average adviser is around 50 years old, and the average client is a few years older. That means the children of our clients are reaching an age when they make independent financial decisions. What happens if they don’t feel much of an affinity with you?

Hello, next gen. Goodbye, assets.

“The attrition is about 90%,” says G. Ryan Ansin, president of the Family Office Association in Greenwich, Conn. FOA is a membership organization that delivers thought leadership to wealthy families around the world.

Baby boomers are passing down $15 trillion in total assets, Mr. Ansin notes. “If you don’t have a relationship with your clients’ kids, you’re going to lose. They’re going to Harvard, Yale and Stanford. And they’re going to meet the younger version of you.”

If you’re a 30-something adviser, you get it.

As a 50-something adviser, you might think, “Not my problem.” For you it’s a race: You service parents like crazy, and you win by retiring before the next generation can ACAT their trust funds out to the 2.0 version of you.

“Let the next guy wrestle with the defection of next-gen assets,” you’re thinking. “By the time he’s running my business into the ground, I’ll be stretched out on a Caribbean beach with an umbrella hanging out of a fruity rum drink.”

Hang on a sec.

You’re leaving money on the table. Waiting for it to be scooped up by some other adviser. Excuse me, since when has that worked for anyone in wealth management?

If you’re on a team, like so many advisers these days, it’s better to steer assets to a younger partner. Your business will be worth more when you sell it. And when you really are sitting on that beach, lolling away the hours, you’ll be happy in the knowledge that You 2.0 paid for a big chunk of your vacation.

So, here are a few thoughts about connecting with your clients’ children. Things I experienced in my practice. And things Mr. Ansin and I discussed.

Starting with the parents is a no-brainer. You can’t talk to their kids until they give you the OK. The trick is to demonstrate your expertise about the softer side of wealth transfer so parents incorporate you into the family dialogue.

Advise them to lose the kiddie-table mentality. The sooner children understand money, the better. So recommend a “UGMA-tutorial” account. (Stop Googling. You won’t find it. “UGMA-tutorial” is my label for a small account that’s used to teach the next gen about money.)

The amount can be $500 or $5,000. Size doesn’t matter. What’s important is that you have a reason for meeting with the children on a regular basis. The next time you schedule a quarterly review with the parents, why not carve off 30 minutes for the kids to discuss their UGMA?

Parents love the idea. You help them take a proactive step with their kids. As trustees of the UGMA, they retain control. And you have a fighting chance when the younger version of you makes a play for the family assets.

The right age to speak with children about investments is more art than science. I asked Mr. Ansin his thoughts.

He said early high school is a good time to help kids understand how a family created its wealth. What were the risks, the sacrifices? The “entrepreneurial flavor” is more important than understanding how much a family has. Or how much a child will inherit.

In the family-office arena, that can be a whole lot.

“One hundred million, five hundred million,” he says, “the numbers are hard to wrap your mind around.”

One last thing: There are less obvious benefits to a next-gen strategy: What parent doesn’t like an adviser who takes a genuine interest in his or her kids?

Source:  online.wsj.com

Posted by:  Steven Maimes, The Trust Advisor

Permalink:  http://thetrustadvisor.com/news/goodbye-assets

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