Archive for category Headlines

Here’s Who Wins The Battle Between Human And ‘Robo’ Advisers

MarketWatch article by Chuck Jaffe

robo humanYou can automate virtually all investment processes these days, so that an individual can get almost everything, from an investment plan to securities purchases and rebalancing, done on their own. But you can’t automate human emotion.

In a compelling drama that has seen the rise of “robo advisers” challenging the models of traditional financial planners, brokers and wealth managers, most people see this as some fight to the death between automatons and people, with either the Terminators or the human race ultimately being triumphant.

If you leave the drama at the movies, however, what you see is that both sides can peacefully coexist largely because they provide complementary services in very different fashions.

Yes, there will be a lot of casualties of both advisory firms and robo-adviser platforms in the next few years, but the ultimate winner in this contest is clear: It is the consumer, who will wind up with improved access to superior financial advice at a lower cost, and who is likely to start planning and managing his or her finances earlier in life as a result.

To see why the consumer wins, we must first look at the battle and break through the hype.

Robo advisers are automated investment services that promise to make financial planning and execution easy, inexpensive (or downright cheap) and even fun. Technically, they rely on algorithms and formulas to take the pain and uncertainty out of investing by building a portfolio (typically of low-cost exchange-traded funds), rebalancing it periodically over time, reinvesting dividends and more.

Whether it is the better-known options like Betterment, WealthFront, FutureAdviser, Motif Investing or new choices like SmartPlanner, Blooom or Charles Schwab’s new robo adviser, the idea is to come away with professional-grade help at minimal effort and cost.

All the individual investor really needs to do is answer some questions, provide some information, maybe choose a stocks-and-bonds allocation from a list of options (or maybe not, if the adviser selects one based on the client’s age), and the system does the rest.

The consumer also needs to decide which robo-adviser platform to use. For most robo sites I have seen, costs range from free (typically for a limited time or a small-dollar account) to 0.5% of assets under management. There can be flat fees monthly or annually. Some services limit investors to exchange-traded funds, while others offer more flexibility; most don’t allow investments in individual stocks. If harvesting tax losses is important to you, shop around until you find that feature. Some manage the entire portfolio, and have custody of your money, while others give advice and leave you to implement it yourself.

It is a high-tech approach to financial planning

The problem is that what most people want when seeking advice is the “high-touch” approach, the hand holding and human contact that provides the emotional discipline to stick with a plan when the going gets tough, and the knowledge that the plan really fits one’s personal situation.

The difference isn’t really about getting advice online compared with receiving it in person, because many traditional advisers and planners now use meeting and collaboration tools — coupled with video services like Skype — to offer their services over the Internet.

The contrast here is between getting advice from a computer-driven algorithm and from a human being.

(I should point out here that some services typically lumped in with robo advisers — notably Personal Capital and Vanguard’s Personal Adviser Services — are taking information that is input online but providing advice that is crafted and delivered by humans.)

Saving money and eliminating the expensive human factor — something the robo advisers crow about — is great until you recognize one simple fact: It isn’t the dollars and cents, but the ladies and gents.

Financial planning is all about the people — the emotions they feel, the desires they have, the fears they face, and the situations in life that are, mostly, unique to them.

You can’t “robo” retirement

Not in a world where some people will be offered early-retirement options by employers anxious to cut payroll, or where others will simply face job loss. Algorithms only work with appropriate inputs and don’t deal well with problems that fall outside their normal purview; if you’re like my neighbor who suffered a stroke at age 55 and was forced to retire at least 10 years early, or like the friend who has a special-needs child who will require care and financial support for the parents’ lifetime and beyond, a consumer-friendly online interface is limited in how much counsel it can provide.

You don’t need special situations, either. You can just be choosing what you want to do next in your life; “lifestyle planners” help clients not only reach their needs but decide how to achieve their dreams, whether that means retiring to the golf course, owning an inn in New England, or simply playing bingo every night in a comfortable retirement community.

A robo adviser can’t have those discussions with you.

And many people want to talk to someone when it comes to their complicated decisions and life choices; they want to hear how others handled situations and be offered options rather than computer-driven “solutions.”

Ultimately, even some of the staunchest supporters of robo advice recognize that their services are a great starting place — allowing investors to start small, cheap and easy — but that there may come a point at which the client wants to transition from cyborg help to human assistance.

That is fine; it doesn’t have to be an either/or choice. Moreover, robo advisers are new enough that hybrid services and human-touch options are evolving, so that consumers starting online today may be able to transition seamlessly to where the services they use down the line include real people whose job is to provide the emotional discipline that is not easily gained looking at a computer screen.

“Algorithms are great at solving stuff that an algorithm can solve. … Emotion and behavior plays as big a role as skill ever will; this isn’t just about spreadsheets and calculators,” said Carl Richards, a financial planner who has studied investor behavior and who recently wrote “The One-Page Financial Plan.”

“Of course, we have to be good with calculators and spreadsheets,” Richards added in an interview on “MoneyLife With Chuck Jaffe,” “but you can cut your own fingers off with a robo adviser just as quickly as with a non–robo adviser, so let’s get clear about this emotional component so we can use all these amazing tools we have access to and make a massive difference in our lives.”


Posted by:  Steven Maimes, The Trust Advisor


No Comments

Why Paying for Financial Advice Makes Sense

NYT article by Ron Lieber

payingIf you are lucky to earn more money than you need each month, there was probably a time when you could have used some advice about how best to spend, save and protect it.

But if you looked around for a big national firm that swore to do the right thing, you would not have found it. Doing it right means putting your interests first, investing in index funds or similar investments, making money only through reasonable fees and not commissions earned from pushing complex life insurance policies, and talking to you in depth about your entire financial life and your goals and dreams.

So when LearnVest came on the scene in 2009, there was cause for some optimism. The company’s goal was to bring financial planning to the masses for what is now a $299 upfront fee plus a $19 monthly subscription. Yet even with nearly $75 million in venture capital money to play with, it doesn’t have 10,000 customers signed up for its standard plan.

We know this because LearnVest reported that modest client number in the announcement late last month that it was being acquired by Northwestern Mutual, a giant insurance company. Northwestern Mutual has an army of 16,000 or so agents pushing things like variable annuities. So the announcement had the subtext of a kind of capitulation.

Sophia Bera, a planner in Minnesota, has clients in their 20s and 30s who are paying $99 to $199 a month, plus an upfront fee of $999 to $1,999 for taking in their personal financial histories and loading all of their data.  Credit Jenn Ackerman for The New York Times

That brings up two questions: Why is it so hard for any start-up or established company to provide the right kind of financial planning to large numbers of people? And what is so wrong with all of us that we are unwilling to pay for the good stuff when it is being offered?

Traditional brokerage firms once made plenty of money through commissions that paid their financial professionals over the many years that clients held onto certain mutual funds. This was often quite bad for the clients, since those commissions were paid for with high fees that came out of their annual returns. It was doubly bad when the funds almost inevitably underperformed basic stock indexes like the Standard & Poor’s 500.

Meanwhile, insurance agents sold those messy annuities or investments wrapped in complicated life insurance policies. Here, too, the salespeople drew handsome compensation, but the customers would often have been better off buying some cheap index funds and holding them for decades while purchasing some simple term life insurance on the side for $50 a month.

Customers and financial advisers who saw the light sensed that the best way for consumers to pay for advice was to hand over money directly to the advice giver, perhaps on an hourly or monthly basis or by paying 1 percent of their assets each year. But as LearnVest has now proved, even at a superlow price, it’s hard to get enough people to do that to build a big company.

“If you wave a magic wand and give me 100,000 customers, I can design a business that runs profitably,” said Michael Kitces, co-founder of XY Planning Network, a competing network of financial planners that offers monthly subscriptions. “But I have no idea how to get to 100,000 without blowing the whole thing up.”

Even when the advice is truly free, people sometimes don’t want it. As Kenneth Feinberg, the administrator of the Sept. 11 victim compensation fund, wrote in The New York Times last month, just 78 out of 5,300 eligible claimants took up the offer of assistance from Goldman Sachs, JPMorgan Chase and others, even though many of them were receiving seven-figure payments.

So what is so hard about talking people into it? Admitting that you need help is hard. There is shame in having gotten money wrong so far, or shame that you can’t figure it out or shame that it’s taken so long to start.

The industry, with all its various conflicts and bad actors, doesn’t do itself any favors either. “Woe to us and our profession that we’ve made it so hard,” Mr. Kitces said. “Our standards are so low that we’ve brought this upon ourselves.”

Then, there’s the financial commitment, which is right there in all of our faces if we work with advisers who make money only through fees that they charge us directly. Planners who are part of the XY consortium must offer a monthly subscription, and Sophia Bera, an adviser in Minneapolis, directly tackles the challenge of explaining it. She says she pays $135 each month for unlimited yoga and other friends pay the same thing for CrossFit or cable. If you’re going to pay that much to care for your body and entertain your brain, then logic would dictate paying about the same amount to make sure you’re saving and spending your money in a safe way.

So far, 27 clients in their 20s and 30s have signed up, paying $99 to $199 a month plus an upfront fee of $999 to $1,999 for taking their personal financial histories and loading in all of their data. It’s not coincidence that this is about five times what LearnVest charged. Ms. Bera used to work there and felt undervalued by the $19 monthly subscription fee. “I didn’t want to be the fast food of financial planning,” she said. (A disclosure: LearnVest posted a nice article on its website about my new book on children and money last month.)

What won me over to paying for financial planning wasn’t any lack of knowledge but a lack of time. As 2008 ended with the markets in free-fall, I knew I should sell some bonds and buy some more stocks to rebalance the various household retirement accounts. But it was going to be such a chore, and I was busy trying to figure out what was going on so I could write about it and calm people down. I didn’t ever make the time, and had I bought more stock at the bottom, it would have made an appreciable difference in our retirement balances today, let alone 30 years from now.

The growing complexity of our financial lives flummoxes plenty of people, too. The alphabet soup of I.R.A.s, F.S.A.s, H.S.A.s, 401(k)’s and 529s doesn’t go down all that easy.

Still, even a burning desire to finally pay for help doesn’t make it easy to find the right helper. Asking friends and family isn’t always useful, since they may have no idea if they are being ripped off. The first person we worked with ended up going to jail for stealing other people’s money.

In addition to Mr. Kitces’s fledgling network of professionals, the Garrett Planning Network offers a much longer list of possibilities of advisers who are willing to work by the hour instead of by the month. They are certainly worth a look, as are the planners affiliated with the National Association of Personal Financial Advisers, though they will often work only with people who have many hundreds of thousands of dollars to invest.

Then, there is the index fund giant Vanguard, which is slowly rolling out its Personal Advisor Services offering. With that service, clients with more than $100,000 to invest can pay 0.3 percent in fees each year to have Vanguard run their money for them plus call on a human adviser for guidance on other matters like savings, spending rates in retirement and tax minimization. People with more than $500,000 with Vanguard talk to the same person each time.

Northwestern Mutual, in its acquisition announcement, said that the LearnVest brand name would continue, as would its services. I hope it will. But when I spoke to its chief executive, John E. Schlifske, this week, he would not guarantee that the $19 LearnVest monthly planning fee would continue for even a single year. “I am convinced that they will have a major role in how we go to market around financial planning, but it may morph a bit,” he said. “As the subscription base grows, some of them may get handed off to people in our field.”

Here’s hoping that those insurance agents in the field agree to sign a fiduciary pledge to act in their clients’ best interests, put their money in basic index mutual funds instead of something more complex, give them simple term life insurance unless there is clear imperative to do otherwise and make all fees and commissions utterly transparent. Even in 2015, we’re still waiting for a big national firm to take these steps.


Posted by:  Steven Maimes, The Trust Advisor


No Comments

Advisors Ahead Founder Craig Pfeiffer To Be New MMI President

Money Management Institute announced Wednesday that Craig Pfeiffer, a seasoned wealth management executive and founder of advisor training firm Advisors Ahead, would be MMI’s new president and CEO. Pfeiffer succeeds Christopher Davis, who has president since MMI’s founding in 1997.

mmilogoPfieffer has more than 34 years of experience in the financial services industry, including 29 years with Morgan Stanley Smith Barney, where he was vice chairman and a member of the executive committee.

“Craig is an industry veteran with extensive relationships and throughout his career has pursued a passion for continuously elevating the professionalism of the investment advice industry,” said Joseph Schultz, MMI’s chair emeritus and senior vice president. Schultz has headed the search and selection committee for a new president since Davis announced his desire to step down in November.

In 2012, Pfieffer founded Advisors Ahead, a firm committed to developing the next generation of financial advisors by connecting college graduates with financial services firms. Clay Skurdal, who Pfieffer called “a trusted business partner for over 18 years,” will assume responsibilities as COO and will serve as president of Advisors Ahead’s talent solutions group.

Pfieffer will take on a more strategic direction and guidance role at Advisors Ahead as chairman.

“I know MMI and its members and believe wholeheartedly in their mission and principles,” Pfeiffer said in a statement. “Our ever-changing industry is continuously facing new challenges and opportunities, and MMI’s strengths will play a leadership role within the financial services sector and especially in the advisory solutions segment.”


, ,

No Comments

7 Habits of Chronically Unhappy People

Huffington Post The Blog post by Tamara Star

UnhappyI often teach about happiness and what has become exceedingly clear is this: There are seven qualities chronically unhappy people have mastered.

According to Psychology Today, University of California researcher Sonja Lyubomirsky states: “40 percent of our capacity for happiness is within our power to change.”

If this is true and it is, there’s hope for us all. There are billions of people on our planet and clearly some are truly happy. The rest of us bounce back and forth between happiness and unhappiness depending on the day.

Throughout the years, I’ve learned there are certain traits and habits chronically unhappy people seem to have mastered. But before diving in with you, let me preface this and say: we all have bad days, even weeks when we fall down in all seven areas.

The difference between a happy and unhappy life is how often and how long we stay there.

Here are the 7 qualities of chronically unhappy people.

1. Your default belief is that life is hard.

Happy people know life can be hard and tend to bounce through hard times with an attitude of curiosity versus victimhood. They take responsibility for how they got themselves into a mess, and focus on getting themselves out of it as soon as possible.

Perseverance towards problem-solving versus complaining over circumstances is a symptom of a happy person. Unhappy people see themselves as victims of life and stay stuck in the “look what happened to me” attitude versus finding a way through and out the other side.

2. You believe most people can’t be trusted.

I won’t argue that healthy discernment is important, but most happy people are trusting of their fellow man. They believe in the good in people, versus assuming everyone is out to get them. Generally open and friendly towards people they meet, happy people foster a sense of community around themselves and meet new people with an open heart.

Unhappy people are distrustful of most people they meet and assume that strangers can’t be trusted. Unfortunately this behavior slowly starts to close the door on any connection outside of an inner-circle and thwarts all chances of meeting new friends.

3. You concentrate on what’s wrong in this world versus what’s right.

There’s plenty wrong with this world, no arguments here, yet unhappy people turn a blind eye to what’s actually right in this world and instead focus on what’s wrong. You can spot them a mile away, they’ll be the ones complaining and responding to any positive attributes of our world with “yeah but”.

Happy people are aware of global issues, but balance their concern with also seeing what’s right. I like to call this keeping both eyes open. Unhappy people tend to close one eye towards anything good in this world in fear they might be distracted from what’s wrong. Happy people keep it in perspective. They know our world has problems and they also keep an eye on what’s right.

4. You compare yourself to others and harbor jealousy.

Unhappy people believe someone else’s good fortune steals from their own. They believe there’s not enough goodness to go around and constantly compare yours against theirs. This leads to jealousy and resentment.

Happy people know that your good luck and circumstance are merely signs of what they too can aspire to achieve. Happy people believe they carry a unique blueprint that can’t be duplicated or stolen from — by anyone on the planet. They believe in unlimited possibilities and don’t get bogged down by thinking one person’s good fortune limits their possible outcome in life.

5. You strive to control your life.

There’s a difference between control and striving to achieve our goals. Happy people take steps daily to achieve their goals, but realize in the end, there’s very little control over what life throws their way.

Unhappy people tend to micromanage in effort to control all outcomes and fall apart in dramatic display when life throws a wrench in their plan. Happy people can be just as focused, yet still have the ability to go with the flow and not melt down when life delivers a curve-ball.

The key here is to be goal-oriented and focused, but allow room for letting sh*t happen without falling apart when the best laid plans go awry- because they will. Going with the flow is what happy people have as plan B.

6. You consider your future with worry and fear.

There’s only so much rent space between your ears. Unhappy people fill their thoughts with what could go wrong versus what might go right.

Happy people take on a healthy dose of delusion and allow themselves to daydream about what they’d like to have life unfold for them. Unhappy people fill that head space with constant worry and fear.

Happy people experience fear and worry, but make an important distinction between feeling it and living it. When fear or worry crosses a happy person’s mind, they’ll ask themselves if there’s an action they can be taken to prevent their fear or worry from happening (there’s responsibility again) and they take it. If not, they realize they’re spinning in fear and they lay it down.

7. You fill your conversations with gossip and complaints.

Unhappy people like to live in the past. What’s happened to them and life’s hardships are their conversation of choice. When they run out of things to say, they’ll turn to other people’s lives and gossip.

Happy people live in the now and dream about the future. You can feel their positive vibe from across the room. They’re excited about something they’re working on, grateful for what they have and dreaming about the possibilities of life.

Obviously none of us are perfect. We’re all going to swim in negative waters once in a while, but what matters is how long we stay there and how quickly we work to get ourselves out. Practicing positive habits daily is what sets happy people apart from unhappy people, not doing everything perfectly.

Walk, fall down, get back up again, repeat. It’s in the getting back up again where all the difference resides.


Posted by:  Steven Maimes, The Trust Advisor


No Comments

Robin Williams’ Foolproof Estate Plan? How To Avoid Family Fallout

Hartford Courant article by Kevin Hunt

robin_williamsBy Hollywood standards, Robin Williams created an uncommonly sophisticated, tax-efficient estate plan before his tragic death by suicide in August 2014.

It appeared almost beyond dispute, with a real-estate holding trust and at least one other trust, covering everything from his Villa Sorriso (Villa of Smiles) mansion in Napa Valley — listed after his death at $29.9 million — to his “memorabilia and awards in the entertainment industry” designated for either his children or widow.

But as March ended, attorneys for the estate and heirs appeared before a probate judge in San Francisco Superior Court in an ongoing battle between Williams’ widow, Susan Schneider Williams, and three children from his first two marriages.

What went wrong?

“Kids fight over the china and silverware,” says Darren Wallace, an attorney and estate planner at Day Pitney’s Stamford office. “These are the things that get people upset.”

Aside from the entertainment-industry memorabilia, Williams also left his children the “tangible personal property” in the Napa Valley home. Schneider Williams, in a court filing, requested clarity on the meaning of “memorabilia” and asked that “jewelry” left for his Williams’ children exclude his watch collection. After their marriage in 2012, Robin Williams amended one of his trusts so that she could live in their 6,500-square-foot waterfront home in Tiburon, Calif., valued at $6 million, the rest of her life and retain most of its contents. In the court filing, she asks for all property in the Tiburon home, even items the trust specifically designates for the children.

Schneider Wiliams also filed a suit in December alleging that some of Williams’ clothing and photographs, among other possessions, had been taken from their home by his three children, Zachary, Zelda and Cody. To avoid a jewelry-watch-photo challenge, says Wallace, an estate needs specifics.

“We try to be very clear in the drafting,” he says. “It looks like, from some of the reports, that language used to dispose of these things was what I would call more general language. With a client like Robin Williams, where there’s clearly celebrity or even in the more routine case, with specialty assets you could identify as having particular financial or sentimental value like wine collections, a gun collection, a car collection or art or jewelry, it’s important not to rely on more general language. You can’t leave it up to interpretation.”

Wallace often recommends a Qualified Terminable Interest Property Trust, known as a QTIP (available in any state), for blended families because it provides for the surviving spouse while retaining control of the trust’s assets after the surviving spouse’s death. A surviving spouse could remain in the family home, for example, but the house and assets ultimately belong to the children.

“It allows for exactly the situation they’re dealing with,” says Wallace. “It might not make everybody happy, but at least it avoids this type of division where everyone is putting stickies on everything they’re claiming.”

Supplement a will or trust with side letters or guidance memos, for further clarity. “Express in very clear language, not necessarily legalese,” says Wallace, “the intentions carrying out the estate plan.”

Nobody likes a movie spoiler, but a spoiler alert for a will is not a bad idea. Give your children and other loved ones an indication what you will leave them.

“Set expectations,” says Wallace, “so the folks involved, in this case the widow and children, have some idea of what the plan might call for so they’re not learning about it for the first time following a tragic event. After they lose a loved one, they’re going to be grieving. They don’t want surprises.”

Philip Seymour Hoffman, who died of a heroin overdose in 2014, did not leave money for his three children because, as court documents revealed, he did not want trust-fund kids. He left his estimated $35 million estate to Mimi O’Donnell, his partner and mother of the children. Because they were not married, however, O’Donnell did not qualify for the estate-tax law’s unlimited marital deduction. That estate-planning blunder left Hoffman with a $15 million tax bill.

The recent court appearance of Williams’ heirs probably says more about the relationship between his widow and his three children than the thoroughness of his estate planning. The judge apparently agreed: He gave the heirs two months to resolve the dispute by themselves.


Posted by:  Steven Maimes, The Trust Advisor


No Comments

Morgan Stanley Profits Surge 60% On Trading And Wealth Management Performance

Forbes article by Antoine Gara

The corporate logo of financial firm Morgan Stanley is pictured on a building in San DiegoMorgan Stanley CEO James Gorman is hard at work building a wealth management business to provide stability and consistent earnings for the standalone investment bank, but a strong quarter for the firm’s trading desks never hurts.

On Monday, the bank reported a better-than-forecast 60% surge in first quarter earnings, bolstered by strong trading results, particularly in equities, and improving margins at its wealth management division.

Morgan Stanley reported adjusted earnings per share of $1.18 on net revenue of $9.9 billion, sharply exceeding estimates. Analysts polled by Bloomberg expected the bank to earn adjusted EPS of 78-cents on revenue of $9.19 billion.

Those results amounted to a 10% increase in revenue and a near 60% surge in profits. Excluding gains from a tax benefit on the repatriation of foreign earnings, Morgan Stanley’s 85-cents in EPS still beat estimates by a wide margin.

“This was our strongest quarter in many years with improved performance across most areas of the firm,” CEO James Gorman said in a statement. “It reflects our ongoing strategy to build platforms for growth while maintaining a prudent risk profile and disciplined expense management,” he added.

James Gorman, chief executive officer of Morgan Stanley, poses for a portrait following a Bloomberg Television interview

Trading proved a tailwind for Morgan Stanley in the quarter, surprising analysts. Equity trading revenue rose nearly 35% to $2.3 billion in the quarter, while fixed income currency and commodity trading rose over 11% to $1.9 billion. Those results belied expectations Morgan Stanley would fall short of competitors such as Goldman Sachs and JPMorgan, which reported surging trading revenues on heightened volatility in the quarter.

Analysts had the bank to post flat results versus year-ago figures. Fixed income currency and commodity trading was expected to fall 6.7% year-over-year to $1.54 billion, while equity trading was expected to come in at $1.81 billion.

Morgan Stanley’s growing wealth management division continued to show improving performance, signaling that Gorman remains on track in hitting strategic benchmarks set at the beginning of the year. The unit generated $3.83 billion in first quarter revenue, and $855 million in operating profits, in line with expectations.

With over $2 trillion in assets under management, wealth management is crucial to Gorman’s goal of de-emphasizing trading and increasing market share in more stable businesses like asset management. The unit hit a targeted pre-tax margin of 20% in 2014 and is expected by Gorman to reach pre-tax margins of between 22% and 25% by the end of the year. As of the first quarter, Gorman is on track to hit those targets – margins were 22% for the first quarter.

One area of weakness for Morgan Stanley was its investment bank, which reported declines in debt and equity underwriting revenue, hampered by falling loan volumes and a slow quarter for initial public offerings. The unit’s revenue of $1.17 billion fell slightly short of analyst estimated. However, M&A advisory revenues were a bright spot, rising over 40% to $471 million, bolstered by strong corporate merger and acquisition activity.

“Stronger-than-expected trading revenues (FICC & equities) more than compensated for softer-than-anticipated investment banking fees. Wealth Management and Investment Management approximated expectations,” Barclays analyst Jason Goldberg said in a note to clients.

As a result of strong earnings and bolstered capital levels, which passed Federal Reserve reviews in March, Morgan Stanley increased its quarterly dividend 50% to 15-cents a share. The bank also announced a $3.1 billion share repurchase authorization beginning this quarter and extending through mid-2016.

Morgan Stanley shares were rising over 1.5% in pre-market trading at $37.34. Shares have gained nearly 20% over the past-12 months.


Posted by:  Steven Maimes, The Trust Advisor


No Comments

DOJ Rolls Out Elder Justice Website

Wills, Trusts & Estates Prof Blog post by Gerry W. Beyer

DOJ The United States Department of Justice has launched the Elder Justice Website, as part of the Elder Justice Initiative designed to provide a coordinated federal response by emphasizing various public health and social service approaches to the prevention, detection, and treatment of elder abuse. 


The Elder Justice Act represents Congress’s first attempt at comprehensive legislation to address abuse, neglect, and exploitation of the elderly at the federal level.

On the Elder Justice Website, individuals will find information about how to go about reporting elder abuse and financial exploitation.  The website is intended to serve as a “dynamic resource” and will be updated to reflect any changes in the law and current news in the elder justice field.


Posted by:  Steven Maimes, The Trust Advisor


No Comments

Asset Protection in Estate Planning

The Spectrum article by Brent Shakespeare

Asset-ProtectionYou’re beginning to accumulate substantial wealth, but you worry about protecting it from future potential creditors.

Whether your concern is for your personal assets or your business, various tools exist to keep your property safe from tax collectors, accident victims, health care providers, credit card issuers, business creditors, and creditors of others.

To insulate your property from such claims, you’ll have to evaluate each tool in terms of your own situation. You may decide that insurance and a Declaration of Homestead may be sufficient protection for your home because your exposure to a claim is low. For high exposure, you may want to create a business entity or an offshore trust to shield your assets. Remember, no asset protection tool is guaranteed to work, and you may have to adjust your asset protection strategies as your situation or the laws change.

Liability insurance is your first and best line of defense

Liability insurance is at the top of any plan for asset protection. You should consider purchasing or increasing umbrella coverage on your homeowners policy. For business-related liability, purchase or increase your liability coverage under your business insurance policy. Generally, the cost of the premiums for this type of coverage is minimal compared to what you might be required to pay under a court judgment should you ever be sued.

A Declaration of Homestead protects the family residence

Your primary residence may be your most significant asset. State law determines the creditor and judgment protection afforded a residence by way of a Declaration of Homestead, which varies greatly from state to state. For example, a state may provide a complete exemption for a residence (i.e., its entire value), a limited exemption (e.g., up to $100,000), or an exemption under certain circumstances (e.g., a judgment for medical bills). A Declaration of Homestead is easy to file. You pay a small fee, fill out a simple form, and file it at the registry where your deed is recorded.

Dividing assets between spouses can limit exposure to potential liability

Perhaps you work in an occupation or business that exposes you to greater potential liability than your spouse’s job does. If so, it may be a good idea to divide assets between you so that you keep only the income and assets from your job, while your spouse takes sole ownership of your investments and other valuable assets. Generally, your creditors can reach only those assets that are in your name.

Business entities can provide two types of protection

Consider using a corporation, limited partnership, or limited liability company (LLC) to operate the business. Such business entities shield the personal assets of the shareholders, limited partners, or LLC members from liabilities that arise from the business. The liability of these owners will be limited to the assets of the business.

Conversely, corporations, limited partnerships, and LLCs provide some protection from the personal creditors of a shareholder, limited partner, or member. In a corporation, a creditor of an individual owner is able to place a lien on, and eventually acquire, the shares of the debtor/shareholder, but would not have any rights greater than the rights conferred by the shares.

In limited partnerships or LLCs, under most state laws, a creditor of a partner or member is entitled to obtain only a charging order with respect to the partner or member’s interest. The charging order gives the creditor the right to receive any distributions with respect to the interest. In all respects, the creditor is treated as a mere assignee and is not entitled to exercise any voting rights or other rights that the partner or member possessed.

Certain trusts can preserve trust assets from claims

People have used trusts to protect their assets for generations. The key to using a trust as an asset protection tool is that the trust must be irrevocable and become the owner of your property. Once given away, these assets are no longer yours and are not available to satisfy claims against you. To properly establish an asset protection trust, you must not keep any interest in the trust assets or control over the trust.

Trusts can also protect trust assets from potential creditors of the beneficiaries of the trust. The extent to which a beneficiary’s creditors can reach trust property depends on how much access the beneficiary has to the trust property. The more access the beneficiary has to the trust property, the more access the beneficiary’s creditors will have. Thus, the terms of the trust are critical.

There are many types of asset protection trusts, each having its own benefits and drawbacks. These trusts include:

  • Spendthrift trusts
  • Discretionary trusts
  • Support trusts
  • Personal trusts
  • Self-settled trusts

Since certain claims can pierce domestic protective trusts (e.g., claims by a spouse or child for support and state or federal claims), you can bolster your protection by placing the trust in a foreign jurisdiction. Offshore or foreign trusts are established under, or made subject to, the laws of another country (e.g., the Bahamas, the Cayman Islands, Bermuda, Belize, Jersey, Liechtenstein, and the Cook Islands) that does not generally honor judgments made in the United States.

A word about fraudulent transfers

The court will ignore transfers to an asset protection trust if:

  • A creditor’s claim arose before you made the transfer.
  • You made the transfer with the intent to defraud a creditor.
  • You incurred debts without a reasonable expectation of paying them.

- This material was prepared by Raymond James for use by Brent Shakespeare of Raymond James Financial Services, Inc.


Posted by:  Steven Maimes, The Trust Advisor


No Comments

Atlantic Trust Receives Delaware Trust Charter

New trust company offers wealthy families the benefits of Delaware law

Atlantic Trust, the U.S. private wealth management division of CIBC, announced today that it has received a Delaware limited purpose trust charter, enabling the firm to offer trust services beyond that already provided by its national trust company.

The state of Delaware has long been known as a leader in trust laws, offering wealthy clients more advantageous tax benefits, investment flexibility, control over trust terms and asset protection.

“As a leading advisor to families of wealth, Atlantic Trust is pleased to offer this important and valuable new trust service that can help our clients protect and maximize their wealth,” said Jack Markwalter, chairman and CEO of Atlantic Trust. “We’re so pleased to introduce this service and to announce that it’s being led by two senior and experienced professionals already in our firm, people who know our clients very well and their expectations on quality and service.”

Leading the Delaware trust team are Dee Ann Schedler, managing director and head of Atlantic Trust’s Wilmington office, and Gabrielle Bailey, wealth strategist and director of Delaware Trust Services.

“Although our status as a nationally chartered trust might have been sufficient, we decided that the more prudent way to go was to also obtain a Delaware trust charter,” said Markwalter. “Other states have attractive trust laws, but Delaware has always been considered a preferred jurisdiction for trust and estate attorneys because of its trust law flexibility and significant body of case law and excellent Chancery Court.”

Schedler has 28 years of industry experience and joined the firm in 2004. Bailey has more than 15 years of industry experience and joined Atlantic Trust in 2003. Reema Antonelli also recently joined the Wilmington team as a senior client service manager.

About Atlantic Trust

Atlantic Trust is one of the nation’s leading private wealth management firms, offering integrated wealth management for high-net-worth individuals, families, foundations and endowments. The firm considers clients’ financial, trust, estate planning and philanthropic needs in developing customized asset allocation and investment management strategies. Experienced professionals deliver a broad range of solutions, including proprietary investment offerings and a robust open architecture platform of traditional and alternative managers. Atlantic Trust operates in 13 full-service locations throughout the U.S. with $27.0 billion in assets under management (as of March 31, 2015). For more information, visit

About CIBC

CIBC is a leading Canadian-based global financial institution. Through our Retail and Business Banking, Wealth Management and Wholesale Banking businesses, CIBC provides a full range of financial products to individual, small business, commercial, corporate and institutional clients in Canada and around the world. CIBC owns a 41 percent equity interest in American Century Investments®, a major U.S. asset management company, serving financial intermediaries, institutions and individuals, and acquired Atlantic Trust, a premier U.S. private wealth management firm, in January 2014. You can find other news releases and information about CIBC in our Media Centre on our corporate website at

Source:   Atlantic Trust Private Wealth Management

Posted by:  Steven Maimes, The Trust Advisor



No Comments

How Artificial Intelligence Will Eliminate The Need For The Vast Majority Of Life Insurance Agents

Forbes article by Russ Alan Prince

insAll the professions are going to be reconfigured by artificial intelligence. The result will be fewer professionals and many of their roles “downgraded.”

Advances in artificial intelligence, also known as cognitive computing, are starting to cause a seismic shift in the professions. The eventual result is the eradication of many positions and the changing – usually lesser – roles for the “survivors” of this transformation.

All the professions such as investment advisors and accountants will be impacted. Life insurance agents will also be severely affected. While this paradigm shift is going to take years and is dependent on technological innovation, coupled with the speed of complementary social change, it is an eventuality.

The ability to source and construct life insurance portfolios, facilitate underwriting, and monitor policies can all be accomplished by the robo-life agent. Such an approach would often prove to be both substantially more efficient, a way to provide superior solutions, and considerably less expensive. It is these critical reasons, the vast majority of life insurance agent of today will, in time, become a relic of a previous generation.

There will be strong and determined opposition to this industry transformation. Certainly, many of today’s life insurance agents will do everything in their power to fight back. They will likely slow down the process, somewhat. Moreover, many of the life insurance carriers will also push back for this evolution of the distribution system will severely and detrimentally impact some of them resulting in consolidation. Nevertheless, advances in cognitive computing will ultimately make this industry transformation a fait accompli.

It is important to note, that even as today’s life insurance agents succumb, robo-life insurance agents will predominantly not directly replace them. People can certainly buy life insurance direct, but that is not having a meaningful effect on the sale of life insurance by agents. As the saying goes: “Life insurance is sold, not bought.” What will likely happen is that other professionals – primarily attorneys and secondarily accountants – will incorporate the services of robo-life insurance agent into their practices. Instead of taking a commission, they will take a dramatically lower fee. The significant cost savings will be passed onto the purchasers. It is also important to keep in mind that the traditional business models of attorneys and accountants will also be upended by artificial intelligence.

None of this is going to happen quickly. However, it will occur incrementally, and when it does occur the life insurance agent of today will pretty much become an anachronism. This will certainly be the case as the commission structure that supports agent-based distribution of life insurance is eradicated.

Very importantly… there will be exceptions. There will be a select percentage of innovative, forward-thinking life insurance agents who will leverage the technology and the accompanying changing industry dynamics to create tremendous value for others. These agents will, consequently, create considerable personal fortunes providing life insurance.


Posted by:  Steven Maimes, The Trust Advisor


No Comments

Untitled Document