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Forbes: The Top 50 Wealth Managers

From Forbes

There’s no denying the rapid growth in the wealth management world, and our annual Top 50 Wealth Managers list is proof the industry continues to boom.

The Top 50 Wealth Managers oversee a combined $224 billion in assets. That’s roughly 15% of the entire RIA market.


listStill Booming: Top RIAs Keep Getting Bigger

There’s no denying the rapid growth in the wealth management world, and our annual Top 50 Wealth Managers list is proof that the industry continues to boom.

The Top 50 Wealth Managers oversee a combined $224 billion in assets. That’s roughly 15% of the entire RIA market.

The continual growth of this segment of the industry is the result of the demand for financial advice, and specifically, the shift to fee-based and fee-only investment advice.

Recent research from Cerulli Associates shows advisors in the RIA space are reaping the benefits of this shift in the industry. Assets in the registered investment advisor (RIA) channel have grown 8.8% annually over the five years ending in 2012. Total RIA assets stand at $1.5 trillion, according to Cerulli. The number of financial advisors in RIA space is also on the rise with an annual growth at a rate of 8%.

All that growth is coming at the expense of Wall Street’s more traditional brokerage firms. Though traditional brokerage firms still control most of the industry’s retail assets, Cerulli expects its market share and its total number of advisors to decline.

That’s not news to most RIAs including Canterbury Consulting which sits at the top of this year’s Top 50 list. The Newport Beach, Calif-based firm says its wealth management business for individuals is growing faster than its institutional business as more clients are choosing to ditch brokerage firms. Find out how Canterbury landed on our list for the first time, and how it plans to continue growing its $13 billion in assets over the next several years.

WE Family Offices is another new firm on this year’s list. The internationally focused firm manages some $2.7 billion in assets for clients who are mostly based out of Latin America. You might recognize some of the executives at the firm; Mel Lagomasino was CEO of GenSpring before her and her partners bought international wealth management firm to form WE Family Offices.

Also highlighted on this year’s list is Reston, VA-based Mason Investment Advisory Services. The $3.9 billion fir

m saw some impressive growth over the last year as assets jumped nearly 70% thanks to investment performance and net new assets flowing into the firm. Check out what helps Mason stand out from the rest of the pack.

The methodology for this year’s list has been adjusted a bit. For instance, we stopped including firms that run a hedge fund or mutual fund. For more on other changes and the reasoning behind them, RIA Database (the firm that helps create the lists for us) founder, Julie Cooling, explains.

Top 50 Wealth Manager Methodology

The registered investment advisor (RIA) world is diverse and ever changing. Over the past five years, RIA Database has worked closely with the staff at FORBES to identify the most relevant “true wealth management” criteria for ranking consideration.

The first couple of years, we focused exclusively on fee-only wealth managers.  As the growth of the hybrid RIA market has dominated new and many of the fastest growing RIA firms, we modified the criteria to include RIAs with a broker/dealer affiliation.

This year, RIA Database again compiled the 2013 Forbes Top Wealth Manager Ranking based on total assets under management as of March 31 (end of year data). RIAs were included if their primary business was wealth management services primarily to high net worth individuals. RIAs were excluded if they own and/or manage a mutual fund, hedge fund or broker/dealer.

In this year’s list, hybrid RIAs (broker/dealer affiliates) were again included, however we removed all firms that manage a mutual fund or a hedge fund even if it was not a dominant part of their RIA business. Broker/dealers, turnkey asset managers (TAMPs), and ETF strategists were also excluded. As always, firms with regulatory, civil or criminal disclosures were excluded from the list.


Posted by:  Steven Maimes, The Trust Advisor




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New Law Makes Tax Preparers Obamacare Advisers

Newsmax article by Courtney Coren

Tax-PlanningTax preparers and accountants now have the job of making sure their clients are educated about Obamacare’s tax implications.

“Many people don’t realize it’s the law, and you have to have insurance,” Iris Burnell, a Jackson Hewitt Tax Service adviser, told The New York Times. “They still think there’s a way to worm out of it.”

Portions of the new healthcare law, including the requirement to buy insurance, for certain employers to provide it, and subsidies to help individuals pay for it, were all written into the tax code.

Two tax-related healthcare provisions that will affect taxpayers when they file next year is the penalty for not having insurance and money owed if they received too much in government subsidies to help pay for their insurance.

Taxpayers who don’t buy insurance will have to pay $95 per adult or 1 percent of the income for the household to the federal government, whichever is more, but not more than $10,150 for individuals or $20,300 for married couples filing jointly. These penalties are expected to increase in future years.

Tax preparation companies such as Jackson Hewitt and H&R Block as well as tax software companies such as Intuit, maker of TurboTax, are offering customers healthcare reviews and calculators to help their clients understand what their potential penalties could be if they don’t purchase health insurance.

“Despite all the attention to the Affordable Care Act, many people — the average Joe on the street — are still confused about the law, the tax credits, the penalties,” Mark Ciaramitaro, vice president for healthcare enrollment services at H&R Block, told the Times.

H&R Block now advertises healthcare services on its website. “The name you trust for all your tax needs now also offers friendly, unbiased help when it comes to choosing health insurance.”

The three tax preparation giants have also teamed up with online health insurance brokers for clients to peruse if they are in need of coverage — Jackson Hewitt is working with GetInsured, H&R Block with GoHealth, and TurboTax with e-Health.


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Ruling Near on Fiduciary Duty for Brokers

WSJ article by Daisy Maxey

Some See Clues to a Standard for Brokers’ Investment Advice

The debate over a new level of protection for investors in their dealings with brokers may finally be nearing a resolution. And some investor advocates worry about the direction it seems to be taking.

The debate centers on whether brokers should be required to act in the best interest of their clients when giving personalized investment advice, including recommendations about securities, to retail investors.

The “best interest” standard is known as a fiduciary duty. Financial advisers registered with the Securities and Exchange Commission already are held to this standard. But brokers for the most part are held to a different standard, of “suitability,” which requires them to reasonably believe that any investment recommendation they give is suitable for an investor’s objectives, means and age.

The Dodd-Frank Act, signed into law in 2010, directed the SEC to study the matter, and permits the regulator to establish a fiduciary standard for brokers. In late February, SEC Chairman Mary Jo White said the commission would make a decision by year-end.

Meanwhile, the Labor Department is working on a separate proposal that could establish a fiduciary standard for brokers who give advice on retirement investing. It hopes to offer a proposal by August.

Dangerous Confusion?

adviAdvocates of a fiduciary standard for brokers argue that investors don’t understand the current rules. That leaves the door open to abuses by brokers intent on selling products that pay them a commission, whether those investments are the best option for the buyer or not, these advocates say.

“Those dealing with a broker are under the misconception that they’re dealing with a financial professional legally obligated to put their best interests first; that’s not the reality,” says Barbara Roper, the director of investor protection at the Consumer Federation of America.

The problem with the suitability standard is that “you can satisfy a suitable recommendation by recommending the worst of what’s suitable,” she says. “If a variable annuity is suitable, you can recommend a variable annuity offered by a shaky insurer with sky-high fees and poor investment choices.”

But applying the fiduciary standard to broker-dealers as it is now applied to investment advisers would add to brokers’ compliance and liability costs, with no certainty of additional protection for investors, says Gary Sanders, vice president of securities and state government relations for the National Association of Insurance and Financial Advisors in Falls Church, Va.

In fact, he says, such a universal fiduciary standard could end up hurting many investors. Lower- and middle-income investors often turn to brokers who are compensated through product commissions, he says, because such clients are less attractive to financial advisers who are compensated based on a percentage of assets under management. Higher costs could prompt some brokers to drop commission-based accounts in favor of more-lucrative accounts that charge a percentage of assets under management, leaving many lower- and middle-income investors without anyone to turn to for investment advice, Mr. Sanders says.

Critics also say a universal fiduciary standard would narrow the range of products brokers could offer, by limiting their ability to recommend investments that earn them a commission.

Plea for Flexibility

At the least, some in the brokerage industry say, any fiduciary standard for brokers should be more flexible than the one investment advisers now operate under.

“The SEC needs to be sensitive that not every relationship is the same and they need to preserve customer choice” by not constricting the range of products brokers can offer, as a standard like the one that now applies to registered investment advisers would, says Ira Hammerman, executive vice president and general counsel of the Securities Industry and Financial Markets Association, the major lobbying group for large broker-dealers.

He says he is also concerned that the Labor Department will act to treat brokers as fiduciaries when they give retirement advice. He says that could jeopardize the sale of commission-based products as retirement investments while permitting fee-based advising. “It becomes very expensive for rank-and-file retail investors,” he says.

But Tim Hauser, deputy assistant secretary for the Labor Department’s Employee Benefits Security Administration, says the department is working on a package of exemptions that would permit advisers to receive many of the forms of compensation they now receive, while also offering protections to make sure conflicts of interest don’t bias the advice they offer.

Some fiduciary-standard advocates are worried that regulators are heading for a middle ground that these advocates fear will fall far short of what’s needed. Those concerns were fueled in March of last year when the SEC issued a public request for data and analysis on the issue. The request set out assumptions and parameters for comment, including the assumption that a fiduciary duty would permit a broker-dealer to continue to receive commissions and compensation for principal trades. Another assumption: The offering of only proprietary products or a limited range of products wouldn’t in and of itself be considered a violation of the fiduciary standard.

The request also said a broker-dealer at least would need “to disclose material conflicts of interest, if any, presented by its compensation structure.”

Not Happy

The SEC said those assumptions and parameters don’t suggest the ultimate direction of any proposed action. Yet critics worry that a fiduciary duty following those parameters wouldn’t offer adequate protection for investors. And some say it would be more confusing for investors than existing standards.

“The concern is that the argument of the [brokerage] industry has been generally accepted,” says Knut Rostad, president of the Institute for the Fiduciary Standard. “If that’s the case, then to proceed, we will have the worst of all possible worlds. We will have a situation where every single broker and adviser will be able to say they’re a fiduciary, when the rule making would essentially be a commercial sales standard with a little bit of extra disclosure requirements.”

Ms. Roper of the Consumer Federation of America says, “If this is what an SEC rule would look like, it would weaken protection for investors and they should not move forward.”

SEC Commissioner Daniel Gallagher fueled worries when he said in March that the commission is concerned that new rules could have the unintended consequence of limiting investor choice, because broker-dealers could scale back full-service brokerage accounts for retail investors. But he also said the topic was “very much an open issue.”

“I haven’t given up hope,” says Ms. Roper.


Posted by:  Steven Maimes, The Trust Advisor



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Nuveen To Be Bought by TIAA-CREF in $6.25 Billion Deal

Chicago Tribune article by Becky Yerak

nuvMadison Dearborn bought Nuveen, then publicly traded, in 2007 at the height of the buyout boom for $5.8 billion.

TIAA-CREF plans to buy Chicago-based Nuveen Investments for $6.25 billion, a deal that gives local private equity firm Madison Dearborn Partners the chance to at least break even on a transaction it made in 2007 at the height of the buyout boom.

Nuveen, which has $221 billion in assets under management, is owned by an investor group led by Chicago-based Madison Dearborn.

Nuveen will operate as a separate subsidiary within TIAA-CREF’s asset management business. TIAA-CREF provides such retirement and financial services as mutual funds.

John Amboian will remain the chief executive officer of Nuveen, and Nuveen’s current leadership and key investment team will stay in place.

The addition of Nuveen brings TIAA-CREF’s total assets under management to about $800 billion. The deal, which includes debt, is expected to be complete by the end of 2014.

Madison Dearborn bought Nuveen, then publicly traded, in 2007 at the height of the buyout boom for $5.8 billion. Private equity firms typically hold their investments for a period of years and then sell them.

Nuveen distributes its investment products and services to retail and institutional investors primarily through intermediaries, including national and regional broker-dealers, independent broker-dealers and commercial banks and trust companies. It has long-standing relationships with such companies as Bank of America Merrill Lynch, Morgan Stanley Smith Barney, UBS and Wells Fargo. Nuveen was founded in 1898.

Its 2013 revenues were $1.08 billion, down from $1.1 billion in 2012, though up from $678 million in 2009, according to a recent filing. It made $45.2 million in 2013, compared with a $571 million loss in 2012.

That year had marked its third straight year of losses. Other private-equity investors that participated in the 2007 transaction included Merrill Lynch Global Private Equity, Wachovia Capital Partners, Citi, DB Investment Partners and Credit Suisse/DLJ Merchant Banking.


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Chances of Getting Audited by IRS Lowest in Years

Associated Press article by Stephen Ohlemacher

irs-audit-As millions of Americans race to meet Tuesday’s tax deadline, their chances of getting audited are lower than they have been in years.

Budget cuts and new responsibilities are straining the Internal Revenue Service’s ability to police tax returns. This year, the IRS will have fewer agents auditing returns than at any time since at least the 1980s.

Taxpayer services are suffering, too, with millions of phone calls to the IRS going unanswered.

“We keep going after the people who look like the worst of the bad guys,” IRS Commissioner John Koskinen said in an interview. “But there are going to be some people that we should catch, either in terms of collecting the revenue from them or prosecuting them, that we’re not going to catch.”

Better technology is helping to offset some budget cuts.

If you report making $40,000 in wages and your employer tells the IRS you made $50,000, the agency’s computers probably will catch that. The same is true for investment income and many common deductions that are reported to the IRS by financial institutions.

But if you operate a business that deals in cash, with income or expenses that are not independently reported to the IRS, your chances of getting caught are lower than they have been in years.

Last year, the IRS audited less than 1 percent of all returns from individuals, the lowest rate since 2005. This year, Koskinen said, “The numbers will go down.”

Koskinen was confirmed as IRS commissioner in December. He took over an agency under siege on several fronts.

Last year, the IRS acknowledged agents improperly singled out conservative groups for extra scrutiny when they applied for tax-exempt status from 2010 to 2012. The revelation has led to five ongoing investigations, including three by congressional committees, and outraged lawmakers who control the agency’s budget.

The IRS also is implementing large parts of President Barack Obama’s health law, including enforcing the mandate that most people get health insurance. Republicans in Congress abhor the law, putting another bull’s-eye on the agency’s back.

The animosity is reflected in the IRS budget, which has declined from $12.1 billion in 2010 to $11.3 billion in the current budget year.

 Obama has proposed a 10 percent increase for next year; Republicans are balking.

Rep. Ander Crenshaw, R-Fla., chairman of the House subcommittee that oversees the IRS budget, called the request “both meaningless and pointless” because it exceeds spending caps already set by Congress.

Koskinen said he suspects some people think that if they cut funds to the IRS, the agency won’t be able to implement the health law. They’re wrong, he said.

The IRS is legally obligated to enforce the health law, Koskinen said. That means budget savings will have to be found elsewhere.

Koskinen said he can cut spending in three areas: enforcement, taxpayer services and technology. Technology upgrades can only be put off for so long, he said, so enforcement and taxpayer services are suffering.

Last year, only 61 percent of taxpayers calling the IRS for help got it. This year, Koskinen said he expects the numbers to be similar. To help free up operators, callers with complicated tax questions are directed to the agency’s website.

“The problem with complicated questions is they take longer,” Koskinen said.

Your chances of getting audited vary greatly, based on your income. The more you make, the more likely you are to get a letter from the IRS.

Only 0.9 percent of people making less than $200,000 were audited last year. That’s the lowest rate since the IRS began publishing the statistic in 2006.

By contrast, 10.9 percent of people making $1 million or more were audited. That’s the lowest rate since 2010.

Only 0.6 percent of business returns were audited, but the rate varied greatly depending on the size of the business. About 16 percent of corporations with more than $10 million in assets were audited.

Most people don’t have much of an opportunity to cheat on their taxes, said Elizabeth Maresca, a former IRS lawyer who now teaches law at Fordham University.

Your employer probably reports your wages to the IRS, your bank reports interest income, your broker reports investment income and your lender reports the amount of interest you paid on your mortgage.

“Anybody who’s an employee, who gets paid by an employer, has a limited ability to take risks on their tax returns,” Maresca said. “I think people who own their own business or are self-employed have a much greater opportunity (to cheat), and I think the IRS knows that, too.”

One flag for the IRS is when your deductions or expenses don’t match your income, said Joseph Perry, the partner in charge of tax and business services at Marcum LLP, an accounting firm. For example, if you deduct $70,000 in real estate taxes and mortgage interest, but only report $100,000 in income.

“That would at least beg the question, how are you living?” Perry said.

Koskinen said the IRS could scrutinize more returns — and collect billions more in revenue — with more resources. The president’s budget proposal says the IRS would collect an additional $6 for every $1 increase in the agency’s enforcement budget.

Koskinen said he makes that argument all the time, but for some reason, it’s not playing well in Congress.

“I say that and everybody shrugs and goes on about their business,” Koskinen said. “I have not figured out either philosophically or psychologically why nobody seems to care whether we collect the revenue or not.”


Posted by:  Steven Maimes, The Trust Advisor



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Stephen Colbert: Your Sponsor-Skewering, Young-Skewing ‘Late Night’ Host

Ad Age article by Nat Ives

colberCBS has named Comedy Central’s Stephen Colbert to take over for David Letterman as host of “The Late Show” next year when Mr. Letterman retires.

The news caught many people off-guard, coming as quickly as it did after Mr. Letterman’s surprise announcement last week that he was ending his decades-long run as a late-night host. Where NBC had seemed to plan for transitions at “The Tonight Show” like it was a succession to a throne, CBS Corp. CEO Les Moonves had seemed to have been caught unprepared for Mr. Letterman’s departure.

But the speedy word that Mr. Colbert would take over the show suggests that Mr. Moonves had some plans in mind long before Mr. Letterman said he would exit.

“Stephen Colbert is one of the most inventive and respected forces on television,” Mr. Moonves said in a statement. “David Letterman’s legacy and accomplishments are an incredible source of pride for all of us here, and today’s announcement speaks to our commitment of upholding what he established for CBS in late night.”

The hire reunites Mr. Colbert with Mr. Moonves in a way: Mr. Colbert’s “Colbert Report” runs at 11:30 on Comedy Central, part of Viacom, which split from CBS in 2006.

More importantly, it brings CBS an increasingly well-known host — Mr. Colbert starred in Super Bowl commercials for Wonderful Pistachios this year — with strong appeal among younger viewers.

It also delivers “The Late Show” into the hands of a comedian who’s happy to both take sponsorship money and occasionally mock his benefactors. In 2012 Mr. Colbert mercilessly made fun of Wheat Thins, a sponsor, by reading its high-minded brand brief to the audience and viewers. The brief said the crackers are not “a creator of isolated, unsharable experiences,” Mr. Colbert said. They are “a snack for anyone actively seeking experiences” and “a connector of like-minded people.”

Kraft decided to consider the episode a net plus, but some advertisers might not be so calm.


Posted by:  Steven Maimes, The Trust Advisor


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The Private Trust Company Reaches $1 Billion in Personal Trust Assets

Press Release via PR Web

The Private Trust Company, N.A. (“PTC”), a wholly owned indirect subsidiary of LPL Financial Holdings Inc., announced a significant milestone for the company of surpassing $1 billion in personal trust assets, placing it among the financial services industry’s 30 largest banking institutions in the country, based on total fiduciary assets reported to the FFIEC in 2013.

PTC is a nationally chartered trust company that provides administrative trust services for individuals and families and specializes in delegating investment management to financial advisors both inside and outside of LPL Financial’s network of financial advisors. PTC helps financial advisors implement recommended trust strategies and fulfills the succession trust needs of their clients. And, LPL Financial Holdings Inc., through its wholly-owned subsidiary LPL Financial, is a leading independent provider of investment brokerage, advisory and custody services.

Bethany Bryant, President of PTC, cited LPL Financial’s commitment to expanding its capabilities to serve mass affluent, high-net-worth investors, their advisors and institutions as a key driver behind PTC’s success. “Our team at PTC has worked hard to develop a trust business that would be highly scalable,” said Ms. Bryant. “PTC’s significant growth in trust assets over the past 18 months is the result of that work and our complementary relationship with LPL Financial’s fast-growing high-net-worth business, our business partners and advisors.”

Andy Kalbaugh, LPL Financial Managing Director and Head of Institution Services, and Chairman of PTC’s Board of Directors, said, “PTC’s success underscores the tremendous opportunity that LPL Financial has in this market. PTC’s expertise in trust services have enabled LPL Financial to create a consultative platform of wealth management solutions for financial advisors that cater to the needs of high-net-worth investor clients. Moreover, we plan to continue to expand our offering to this audience by leveraging the proven capabilities of our technology. We congratulate our LPL advisors, Bethany Bryant and her team on surpassing the $1 billion milestone.”

Last year, PTC launched a turnkey Trusteed IRA solution, which enables any financial advisor, regardless of whether he or she is affiliated with LPL Financial, to provide clients who have significant IRA holdings with the ability to self-direct how their IRA assets are distributed to beneficiaries.

About The Private Trust Company

The Private Trust Company, N.A. (PTC) provides trust administrative services to approximately $1.1 billion in individual and family assets, and also serves as custodian for $110 billion in IRA assets. Licensed in all 50 states under its national banking charter, PTC serves as corporate trustee, co-trustee, or agent for an individual trustee while specializing in delegating investment management to financial advisors. PTC’s model allows for clients to utilize the experts at PTC to provide professional trust administrative services while outsourcing investment management services. The Private Trust Company is a wholly owned indirect subsidiary of LPL Financial Holdings Inc.


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IRA Rollover Ruling Stuns Advisers and Savers

MarketWatch article by Robert Powell

iraRetirement experts call it a game changer for the 50 or so million households in the U.S. that own an individual retirement account — an IRA.

Uncle Sam’s Tax Court just ruled that the one-rollover-per-year rule applies to all of a taxpayer’s IRAs rather than to each IRA separately. And that ruling, say experts, is in direct conflict with IRS Publication 590, the bible for IRAs.

“Industry leaders, financial advisers, and everyone else who handles IRAs are stunned,” said Denise Appleby, the editor and publisher of The IRA Authority

According to Appleby, there are two ways to move money between IRAs.

1.  Transfers, which are not reported to the IRS and not reported on a tax return. The IRA owner never touches the money. You can do this as often as you like, whenever you like, Appleby said.

2.  And rollovers. With this method, the IRA owner takes the money as a distribution and they have 60-days to rollover (put back) the amount in an IRA. And this, you can do only once per 12-month period, said Appleby.

According to Appleby, the IRS, through their publications and regulations, has said for at least 20 years that the rollover method applies on a “per-IRA” basis. In other words, if you have 10 IRAs, you can do 10 rollovers for the year (12-month period), as long as an IRA does it only once (or the year).

Here’s the guidance found in Publication 590, which everyone viewed as gospel:

“Generally, if you make a tax-free rollover of any part of a distribution from a traditional IRA, you cannot, within a one-year period, make a tax-free rollover of any later distribution from that same IRA. You also cannot make a tax-free rollover of any amount distributed, within the same one-year period, from the IRA into which you made the tax-free rollover.

“The one-year period begins on the date you receive the IRA distribution, not on the date you roll it over into an IRA.”

The IRS gives this example: You have two traditional IRAs, IRA-1 and IRA-2. You make a tax-free rollover of a distribution from IRA-1 into a new traditional IRA (IRA-3). You cannot, within 1 year of the distribution from IRA-1, make a tax-free rollover of any distribution from either IRA-1 or IRA-3 into another traditional IRA.

However, the rollover from IRA-1 into IRA-3 does not prevent you from making a tax-free rollover from IRA-2 into any other traditional IRA. This is because you have not, within the past year, rolled over, tax free, any distribution from IRA-2 or made a tax-free rollover into IRA-2.

Enter Alvan and Elisa Bobrow, who had a few IRAs.

In 2008, Alvan rolled over two distributions from his IRAs and took the position that the rollovers were valid because they were done in a timely manner, and involved different IRAs, Appleby wrote in her analysis of the court case. His position was that he had not broken any rules, as explained by the IRS in their publication for the past 20 years.

The IRS disagreed and determined that only one of the two rollovers was valid. So, Uncle Sam and the Bobrows went off to court. And the Tax Court — much to the surprise of all IRA experts — agreed with the IRS.

The mistake cost the Bobrows an additional $51,298 in income tax and a penalty of $10,260. Maybe they should be thankful; it could have cost them $31,000 more, according to Appleby. You can read the gory details in Bobrow v. Comm’r, T.C. Memo. 2014-21 .

So what was the bottom line? In essence, only one of the Bobrow’s distributions was eligible for rollover during the 12-month period. In fact, that Tax Court concluded that the Internal Revenue Code Section 408(d)(3)(B) limitation — the relevant section of the federal tax code — applies to all of a taxpayer’s retirement accounts and that regardless of how many IRAs he or she maintains, a taxpayer may make only one nontaxable rollover contribution within each one-year period.

In other words, we’ve all been operating under the impression that what was written in Publication 590 — you know, the IRS’ very own publication — was correct. But it’s not.

In fact, the Bobrow case highlights, according to Appleby, an important rule that we sometimes overlook: “If conflicting information is provided in multiple sources, one must consider the hierarchy and reliability of such sources. In this case, Publication 590 is not authoritative and is not considered official guidance. The Tax Code is the more authoritative, and supersedes any other guidance in the event of conflict.”

So what now?

Well, according to Appleby, the IRS will be changing its publications, changing what they have been saying for 20-plus years. The IRS will implement this change for everyone, everyone except the Bobrows who have to pay those penalties, starting Jan. 1, 2015.

You should plan ahead so that — starting in 2015 — you avoid making two or more IRA-to-IRA rollovers during a 12-month period. This 12-month (one-year) period is not determined on a calendar-year basis. Instead, it starts when the IRA owner receives the distribution, Appleby said.

And, check with your IRA custodian. According to Appleby, they need to change their IRA agreements, because those agreements say what the IRS has been saying for years — which means they are wrong.

And finally, Appleby said individuals should start moving money via transfers and not rollovers. “There are too many pitfalls with rollovers and none with transfers,” she said.


Posted by: Steven Maimes, The Trust Advisor


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Cooking Up Financial Planning Advice

WSJ Wealth Adviser article by Kelly Kearsley

cookingThe couple had been clients of adviser Joe Clark for three months when he scheduled a meeting at their house.

But this wasn’t a typical client meeting: Mr. Clark was coming to cook them dinner and dole out financial lessons in the process.

Mr. Clark, a passionate home chef, has discovered that cooking meals for his clients provides a unique way to educate them about financial planning and deepen the client relationship.

“There’s something special about sharing a meal. You really get people where they are the most comfortable,” said Mr. Clark, managing partner of Financial Enhancement Group, which manages $200 million for 134 clients in Anderson, Ind.

Mr. Clark usually cooks once or twice a month for new clients, and often their friends or family. But the meal is never just about the food.

As he chops and sautés, Mr. Clark continually draws comparisons between the cooking process and financial matters, from budgeting to retirement savings and even economics.

He planned to cook chicken Marsala for the new couple, who had also invited the husband’s brother and sister-in-law to attend the dinner. Mr. Clark started the meal by preparing a mirepoix, a mix of finely chopped onions, celery and carrots that serves as a base for many dishes.

“Most people skip the mirepoix,” he told the couple and their guests as he carefully diced the onion. “But you can’t achieve the same result by throwing a raw onion in at the end.”

He noted a similarity to tax planning: People compile their returns in April, complain about the result, and then do nothing about it. But to save on your taxes, you need to start planning early, long before the end of the year.

A few minutes later, as the adviser was dredging the chicken in flour, the brother brought up his concerns about the Federal Reserve’s bond-buying program.

Mr. Clark didn’t miss a beat.

He explained to him that the recipe calls for two cups of flour in the bowl, but what really matters is how much flour ends up on the chicken. “That’s a lot like quantitative easing,” he told the brother, comparing the amount of money that the Fed puts into the market to the flour in the bowl. What’s more important, he added, is the demand from businesses to borrow that money.

Mr. Clark finished browning the chicken on the stove and put the pan in the oven to finish cooking. Then, he showed the clients a photo of what the dish should look like once complete. He told them he started with that vision in mind and took specific steps in his cooking process to achieve that goal.

“Same with financial planning; we have to start with an end in mind,” he said.

The adviser stayed until nearly 10 p.m., enjoying the dinner and talking to the two couples about his financial-planning approach before cleaning up the kitchen and heading home. The brother who asked about the Fed’s QE program eventually became one of his clients.

Mr. Clark said that many advisers may not be able to cook for their clients. But he added most advisers have an outsider interest that they’re passionate about and that they can use to connect with clients and make the sometimes complex world of personal finance easier to understand.

“You should have something that drives you,” he said. “Whatever you do, be passionate and enthusiastic about it.”


Posted by:  Steven Maimes, The Trust Advisor


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Getting a CFP is a Lot of Work. Is It Worth It?

Reuters news by Hilary Johnson

CFP logo_2Steven Harp has run six marathons and is training for a punishing 140 mile swim-bike-run Ironman, but he says the most challenging thing he’s done recently is try to get Certified Financial Planner accreditation.

The 32-year old adviser with Northwestern Mutual sat for the CFP exam March 22, along with about 1,570 others. All hope that adding the initials CFP to their business cards will indicate expertise, credibility, and help build their businesses.

“It’s the most rigorous examination process I’ve ever been through,” Harp said. After 230 hours of study, just shy of the 250 hours the CFP Board of Standards recommends, he is still waiting to hear whether he passed. Last year only 63 percent of those who sat for the 10-hour exam passed. To do so, they have to demonstrate expertise on everything from the tax code to Social Security benefits and estate planning.

In addition to the exam, candidates for certification also must complete financial planning coursework, have three years of experience, and pass a background check.

Every hour of study was an hour Harp did not spent working in his shared $50 million practice, which he is trying to build by $2 or $3 million a quarter. “Every hour I’m out of work,” Harp said, “I’m not making money. That’s unnerving.”

Is the effort worth it? The CFP Board is spending about $10 million in marketing this year making that case to advisers and clients. It cites a sponsored study from consulting firm Aite Group that found brokerage teams that included a CFP holder generated 30 percent more revenue than teams without. Individual practitioners with certification did even better, producing 40 percent to 100 percent more than brokers without.

While they do not require advisers to get a CFP, Bank of America Corp.’s Merrill Lynch and Raymond James Financial Inc have incorporated the CFP education component into their new advisers programs, said Joe Maugeri, director of firm relations at the CFP board.

But some firms are less keen on CFP training, saying a link between certification and an adviser’s bottom line is not proven.

“Some firms don’t tie the ability to provide financial advice to a designation,” Maugeri said.

Maugeri cited “an ongoing problem – the proliferation of designations out there.” There are more than 15 different certifications that financial planners use, including Certified Investment Management Analyst (CIMA), Chartered Financial Consultant (ChFC) and Chartered Life Underwriter (CLU).

Currently, there are 69,500 active CFPs – only about 20 percent of financial advisers have the certification.


The CFP Board’s public relations push may be helping some advisers such as Marguerita Cheng, a 10-year CFP from Bethesda, Maryland, who have held the mark for years. In November 2013, she broke away from Ameriprise to form her own firm, Blue Ocean Global Wealth, and recently she has fielded one or two inquiries a month from potential clients who find her on the CFP Board’s “Let’s Make a Plan” website.

Cheng and Harp both say that going through the CFP training helped them to become better at their jobs, aside from its use as a marketing device.”It gave me the knowledge, the credibility and ability to be able to think about all the moving parts in one financial life. That is definitely beneficial,” said Cheng.

Harp says the process provided a roadmap for client communication, including explaining how he is paid, and asking about all relevant aspects of a client’s finances. He said he has more confidence about what conversations with clients should include.

“I was doing those things before, but it wasn’t well formatted,” he said. The CFP education “really lays it out in a straightforward way.”


Not everyone thinks the soup-to-nuts comprehensive training required for a CFP makes sense. Tom Sedoric, with the Sedoric Group of Wells Fargo Advisors, in Portsmouth, New Hampshire, has been in the business for 30 years and never did get the certification or all that expertise.

“I don’t know anything about estate planning, and I don’t know everything about the tax code, but I know where to find a resource,” Sedoric said. Instead of studying all those areas himself, he instead built a network of experts he and his clients could call in for those kinds of questions.

“To assume that I’m going to know everything about financial planning is unrealistic,” he said.

Nonetheless, Sedoric concedes that the business is changing. He’s just hired a new planner for his firm, and yes, that newbie is working toward a CFP.


Posted by:  Steven Maimes, The Trust Advisor


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