There’s a turf war brewing over the nine-inch real estate on your clients’ tablet screens, and if you’re too busy staring at your own iPad, you’ll miss out.  

Figure a tablet computer is the hottest toy for high-net-worth Americans. Even low-end financial apps that focus on cash flow management and bill payment are getting millions of downloads.

And getting your name and contact information on those apps effectively makes you the go-to authority for those millions of Americans, each well-off enough to be playing with an iPad in the first place.

How you make that happen is high on the agenda for ByAllAccounts’ next free webinar this Thursday at 2 PM EST: “Are you an iPadvisor? The Essential Guide to Utilizing Tablet Technology For Your Practice ”

(Register HERE)

Becoming the iPad advisor  

And from there, it’s only a short cognitive hop to turning those apps into prospecting tools.

While I haven’t heard of any advisors who are using branded apps to aggressively prospect to strangers via the app store, I suspect there are already geniuses working on it.

Think about the psychology. Someone who sees your app doesn’t know who you are.

All they know is that they have a financial question and are turning to their iPad for the answers, instead of turning to an existing advisor.

That’s a classic opportunity.  Sure, people who download your app may not be in the right part of the country or have a big enough net worth for you to take them on as a client.

But think of it as a national media opportunity, like a spot on CNBC or Bloomberg TV.

Just getting your name out there plants the seeds in minds across the country that you’re the go-to person in your area.  You might not get any direct prospect calls from app users, but you might get your share of recommendations.

And for a service that’s not costing you any time or attention once it’s up and running, that’s not a bad trade at all.

Running a better meeting  

In the here and now, other apps can help keep local prospects and B-level clients on the line while you deal with the big fish.

Amp, designed by Boulevard R, is tailored for face-to-face prospect meetings and seems especially promising where it comes to small groups — think retirement plan participants or wealthy families who come in together.

“Say you’ve got a lunch-and-learn and you bring in 5 iPads tethered to a MiFi mobile hotspot,” says Matt Iverson, who runs Boulevard R’s product group and will be presenting at Thursday’s webinar.

“You can put the app in the hands of five people and in 10 minutes you’ve delivered way more value than you possibly could through the typical 60-minute presentation.”

Let them plug in their own financial data while you talk, and that value will add up even faster.

Remember, your app doesn’t have to restrict itself to assets you personally manage — account aggregation lets clients and prospects alike see what you can do with all their holdings.

And as a bonus, when you get their call, they’ve already pre-qualified themselves. The app does a lot of the heavy data gathering on its own.

Ultimately, that’s what tablet computers do best.

There’s a lot of effort going on in the financial services world to make these awesome little toys more serious, like desktops you can take home so the work never stops.

Keep it simple. Keep it fun. And keep it in front of as many people as possible.

Shunting business and assets to the most favorable jurisdictions was a time-honored element of tax planning process before growing public outcry against “fat cat” breaks got everyone riled up.

Now Apple — in the best of times the most beloved American corporation — is in the doghouse for booking as much revenue as it can through offices in places like Reno, Nevada.

The math is tempting enough. Apple alone saves 8.8% California state corporate income tax for every dollar it earns in Reno, where the state tax rate is zero.

Add up the other out-of-the-way subsidiaries in Europe, the Virgin Islands and other offshore havens and Apple’s saving $2.4 billion a year, or about 40% of its overall tax liability.

And since the national press has put it together, Apple stock is down a hefty 6% on the PR backlash.

The reaction definitely explains why the company didn’t draw attention to its out-of-state accounting.

“Perhaps Apple — with its young, socioeconomically elite customer base — does not want the negative publicity that a low effective tax rate could generate with groups like Citizens for Tax Justice and US Uncut,” notes Martin Sullivan, an ex-Treasury economist who crunched the numbers.

An open secret turns ugly

While news of Apple’s Nevada office came as a shock to iPad-loving New York Times readers a few weeks ago, it was an open secret in Reno.

Local TV reporters exposed Apple back in November by connecting the dots from obscure venture capital firm Braeburn Capital, which nominally operates in Reno, to the mothership.

Like an out-of-state trust, Braeburn exists to hold property out of reach of higher-tax jurisdictions. In Apple’s case, that wealth probably includes a big chunk of its $130 billion hoard of cash and long-term investments — famously more money than the federal government if not God.

Even if that money earned a scant 4% a year, that’s $5.2 billion in income that Apple is shielding from the bureaucrats in Sacramento.

Considering that the company only had $42 billion on its balance sheet three years ago, it’s a good bet that the internal returns — and the capital gain taxes saved — are much, much higher than that.

But whatever performance rate the company’s managers are earning, officials in both states are keeping quiet, even though reporters and public interest groups are having a field day.

The interest groups have crunched the numbers and announced that just the offshore tax havens alone cost California taxpayers $423 per household, while small businesses end up paying an extra $2,000 apiece to make up the gap.

Where state taxes can’t be raised on in-state entities, budgets get cut. People upset over Apple’s machinations point to underfunded schools, spiraling university tuition and other grinding symptoms of a statewide revenue shortfall.

In Nevada, on the other hand, welcoming companies like Apple generates incremental state revenue in the form of license fees and peripheral business.

It’s hard to tell how much Nevada or other domestic havens like South Dakota actually reap from rivals like California, but it’s likely that the corporations and wealthy individuals who shift their assets keep most of the gains.

Apple is far from alone

If it was just Apple being a bad guy here, the critics would have a lot more room to lambaste the late Steve Jobs and other management for setting up the company’s out-of-state arrangements.

But this isn’t Apple “thinking different.” Everyone with money — from successful corporations to high-net-worth family offices — has been doing this for decades.

Delaware made its mark on the national scene as a corporate tax haven but has since expanded its shield into the realm of personal trust.

Opening a subsidiary in the state has generally saved out-of-state corporations 15% to 25% of their state tax, according to researchers Scott Dyreng, Bradley Lindsey and Jackob Thronock — and that’s when management resists the temptation to move the parent company to Wilmington.

And of course, the absence of a state income tax for Delaware residents lures billions of dollars in trust assets from other jurisdictions.

As the national landscape changes, some of that money is heading to states like South Dakota and Delaware instead.

Microsoft, for example, has saved an estimated $1 billion in state tax owed to Washington, where it’s the biggest single employer, with a secretive Reno office of its own.

The state only charges 0.5% tax on royalty income Microsoft gets from licensing its software, but apparently that was too much for the big boys in Redmond to bear.

Microsoft doesn’t take a lot of grief for going where it will get the best deal. Neither do your clients who move their money across state lines.

If anything, most tax-friendly jurisdictions are willing to look the other way when it comes to disclosure and documentation, so it’s easy to keep an operation like Braeburn in the shadows unless dedicated reporters are actively nosing around.

Apple, however, built its business on being something special and above corporate realities. That perception is coming back to bite them.

Scott Martin, senior editor, The Trust Advisor

Permalink: http://thetrustadvisor.com/news/appletax

Few would argue that former Patriots linebacker Junior Seau accidentally pointed a handgun at his chest much less pulled the trigger, but the fate of his estate plan may get murkier with suicide in the background.

Seau was only 41 and was generally considered a happy guy in the pro football world after he retired two years ago.

The star linebacker didn’t lack for cash — he lived in a $3 million house in Oceanside — and owned a restaurant, a clothing line and other businesses.

He also left a live-in girlfriend, an ex-wife he was still friendly with and three kids behind, not to mention his grieving parents.

The question now is what happens to his worldly possessions.

Like most suicides, Seau doesn’t seem to have left a formal note behind beyond a few out-of-the-blue “I love you” text messages to his family.

He also seems to have skimped on the more traditional elements of estate planning. No mention of a will or trust has surfaced.

Otherwise, there might be less controversy over whether he wanted to leave his brain to science. The fact that the decision of how to dispose of his remains devolved to his ex-wife is probably a good indication on that front.

Cutting through the Hollywood hype

But even if he had a will, don’t believe the Hollywood vision of suicide being grounds in itself to challenge the deceased’s mental health, the lawyers agree.

“The ‘not-of-sound-mind’ argument would likely only work if the testator signed the will at the same time he committed suicide,” says Pablo Palomino, a San Diego estate planner.

That’s because the moment of suicidal despair usually comes well after the will or suicide note is signed. Depressed people have moments of clarity, and it would be up to the litigators to prove that the paperwork was executed in an incapacitated state.

Forensic evidence can reveal more about Seau’s mental state in his last hours, but unless there were clear signs of outside influence — kind of unlikely where a gigantic and clean-living linebacker was concerned — the judge might well allow the will in order to protect the deceased.

“Inflammatory evidence will not be admitted,” states Kentucky lawyer Thomas Miller.

And the longer the time period that passes between the will and the suicide, the more likely that the will will hold up in court.

Darren Findling, a Michigan lawyer, represented the children of a suicide a few years ago. His client wrote a simple “give the money to the kids” note and signed it, apparently in order to keep her assets out of her husband’s hands when she was gone.

“Following extensive litigation,” Findling says, the will was recognized as binding and the kids got the money.

Even life insurance can go through

Many suicides die without big estates to leave behind, much less big estate plans. Actor David Carradine famously hung himself with only a reported $40,000 to his name.

But compared to accidental celebrity deaths like Heath Ledger, Michael Jackson and Amy Winehouse, suicides can be relatively methodical in winding down their earthly affairs before ending their lives.

Junior Seau left behind at least $2.2 million in California real estate equity and an unknown amount of liquid assets.

Hopefully he also had life insurance to make things a little easier for his kids that he’s gone and unable to pay child support.

Surprisingly, states like California make insurance companies pay out on suicide, as long as the policy was purchased at least two years before the death.

We saw this most recently when “Soul Train” legend Don Cornelius shot himself and his ex-wife Victoria got $300,000 in death benefits.

For Junior Seau, the question might be whether an ex-football player could get affordable life insurance after so many hits on the head. That’s part of what the autopsy of his brain will presumably uncover.

He did “fall asleep” at the wheel a few years ago and drive his car off a cliff after a fight with a girlfriend, it’s true.

But until a few weeks ago, he seemed as happy as always, making his promotional appearances and waving at the crowd.

And he was careful enough in his youth to set up a $4 million foundation to help kids. Maybe he was careful enough to make sure his own kids were looked out for and his legacy under control.

Otherwise, it’s a good thing the people he left behind seem to get along so well.

We see a lot of families get ripped apart by fighting over an unclear estate plan. Even nuisance litigation can cost the legitimate heirs thousands, even millions of dollars.

So far, Seau’s ex-wife and recent girlfriend are cooperating. Let’s hope it lasts.

Scott Martin, senior editor, The Trust Advisor

Permalink: http://thetrustadvisor.com/news/suicide ‎

On paper, it’s a marriage made in heaven. Advisors are hungry for ways to farm out the investments, and asset managers are eager to sell their plug-and-play expertise.

But with just about everyone in the industry hawking their portfolio management solutions, it can be hard for advisors to pick through the noise and find the perfect partner.

“Many advisors think that once they get the operations — the plumbing — right that they are done,” says Paul Ahern, a principal at Winslow Capital Group.

“Not so. In fact, they are only halfway to success.”

To help Trust Advisor readers get a better sense of the plumbing their practices need, we’re putting together an in-depth map of the market listing who’s out there and what they offer advisors in particular.

“America’s Most Advisor Friendly Outsourced Asset Management Programs” will be ready for you on July 15.

We’re already hearing from advisors and consultants alike that outsourced portfolios are as hot as ever, but a lack of standardized jargon makes it hard for RIAs, family offices and independent brokerage reps to truly compare apples to apples.

UMA, SMA, TAMP

While “unified managed accounts,” or UMAs, are the current market darling, more traditional separately managed accounts (SMAs) and turnkey asset management programs  (TAMPs) still have their fans.

The distinction between them is really more tactical than anything else.

SMAs were structured as a new asset class, making them easy to incorporate into an existing advisory platform and fill out with stocks, bonds, mutual funds or what have you.

UMAs tend to import all the security selection, strategic allocation and rebalancing across the portfolio, effectively importing the skill of third-party managers the advisor picks out.

Unlike an SMA, the assets remain under the advisor’s custody, making bookkeeping and fiduciary compliance relatively straightforward, even across asset classes.

And for advisors looking to farm out the entire investment management function, a “turnkey” TAMP program provides the entire bundle, from due diligence through to the back office billing.

While the details vary, the underlying business proposition is the same: outsourcing is cheaper than doing it yourself, says Robert Ellis, a consultant at Fast Track Advisors.

“Outsourced asset management programs allow advisors to focus on what they do best, which is work directly with their clients,” he explains.

“When advisors sit on the same side of the table with clients and select the managers and programs, they improve the value add they provide, while reducing their direct responsibility for investment performance.”

Picking an advisor-friendly program

But to get back to Paul Ahern’s “halfway to success,” delegating one of the core traditional functions of the advisory profession — the security selection — can be a tense affair.

The advisor needs to let go.

And once the grip has loosened, it needs to stay loosened.

No constant second-guessing. No coming up with your own model portfolios “just in case.”

With the right program, even the due diligence is built in, so there’s not even any need to pick the right managers.

That’s when a third-party program really starts freeing advisors up to become pure relationship managers and work with clients and prospects.

“When an advisor affiliates with a TAMP relationship for access to open architecture, they are not just taking on another product line,” Ahern says.

“Rather, they are committing to an equivalent of a restructuring of their wealth management business model,” he adds. “If a TAMP is only ‘bolted on’ to an existing advisor product set and just another product among many, then all the advisor has achieved in increased complexity and cost.”

“Friendly” is relative

To achieve that level of commitment and trust, it helps to know that the vendor won’t seize on the relationship as an opportunity to prospect your clients away.

Not many asset protection programs work that way, and even if they did, the provider is unlikely to alienate everyone in the business by stealing one retail account.

Even at their most “unfriendly,” UMA and TAMP providers simply aren’t bound by the conflicting interests that might get a captive trust company or product provider, for example, into trouble.

Instead, the “friendliest” vendors distinguish themselves by going out of their way to give advisors more: more service, more options, better performance.

At a minimum, they need to have competent technology, a stable operating environment and a responsive client culture.

From there, execution is everything. They need to work with advisors to manage the transition from in-house to third-party management, Paul Ahern says.

And after that, they need to keep working with you to capture new efficiencies.

Maybe you can charge clients more than you do now in order to pass on the value you now add in the form of improved investment performance — or charge prospects less because your overhead is lower.

A good partner will help advisors work out the details there, as well as make suggestions on workflow changes, new policies and compliance implications.

In other words, a truly advisor-friendly asset protection program will function as an “advisor to the advisors,” playing a consultative role.

This is not a one-time transaction. It’s a long-term relationship, and unless everyone at the table understands that, the real benefits will remain elusive.

If you are a SMA, UMA, TAMP or other outsourced asset management program provider and would like to be included in this report, simply click here

Scott Martin, senior editor, The Trust Advisor.

Permalink: http://thetrustadvisor.com/news/advisorfriendlytarp ‎

Every advisor dreads the notion that his or her clients are looking to go elsewhere. And with 40% of investors thinking about making a move even though the market is nominally rising, nobody can afford to simply let them go.

But by the time they’ve made up their minds to tell you, it’s usually too late to convince them to stay.

Instead, the time to be alert for red flags is well before the formal relationship ends, forensic accountants say.

The first key, as the Watergate investigations brought home, is to follow the money.

If you notice that a client is opening new brokerage accounts or getting involved with investments you didn’t recommend, it’s a pretty good clue that you’re no longer the center of that financial universe.

You don’t have to be consulted on every decision your clients make, but they should be keeping you in the loop — especially if these new entanglements conflict with any financial planning you’ve done together.

Maybe your client suddenly thinks he or she can fly solo now, without your help. Or maybe there’s someone new in the picture, and nobody’s told you yet.

Either way, it’s a potential problem. And advisors need to be able to see these clandestine flows in order to figure out what to do about it.

That’s a powerful argument for a unified account management system right there.

As James Carney of ByAllAccounts told me recently, an advisor without a 360-degree view of all the assets — not just those under active management — is basically abandoning any claim on playing more than a peripheral role.

“You don’t want to be just a piece of the action any more than your client does,” he explained.

Getting ahead of the flows

Remember, aggregation is a double-edged competitive proposition. Since you can use it to prospect held-away assets in other advisors’ custody, you can also use it to see when other advisors are scoring wins that should have been yours.

Those flows mean it’s time to bring your best defensive game to the table. And the time to do that, says long-time investor psychology guru Jack Waymire of Paladin, is before you see the mystery checks to those other advisors start clearing.

“You should be on alert well in advance of any actual allocations to rival advisors,” he says. “There are covert red flags that an investor isn’t happy. At that stage, the relationship can sometimes be fixed. But by the time you see money actually move, that’s a fairly overt sign that it’s over.”

Waymire says the process of firing an advisor looks a lot like how things work when the relationship starts in the first place. At the beginning, prospects take a chance on you because they like you.

That’s your chance to prove that they can trust you with their money.

And then, you get the chance to demonstrate your expertise and earn that paycheck.

Client relationships get into trouble when that natural evolution from stranger to trusted advisor starts going backward.

There is such a thing as a bad question

It starts with an erosion of confidence, Waymire explains.

“In the overt form, this is when a normally docile client starts criticizing your decisions, second-guessing your advice,” he says.

“More covertly, they suddenly start asking questions. Why did you recommend this fund? Why funds and not ETFs?”

Many advisors are resigned to client second-guessing as part of the cost of doing business, another task in an already busy day.

And of course, some clients will always need you to explain your rationales and show your work before they sign onto any change in the portfolio or the plan.

But recognizing that a flood of new questions is actually a challenge to your expertise exposes a weakness in the relationship when it’s still early enough to shore up.

Waymire estimates that there’s maybe a 50/50 chance of saving the situation at this stage. All you have to do is answer the questions and soothe the suspicions that you don’t really know what you’re talking about.

If the situation gets much deeper, the odds of keeping the account drop to maybe one in five. This is the point when you discover that the client wants to see other people.

“It rarely comes as an ultimatum: improve performance or I’m gone,” Waymire says.

“The more subtle form is becoming a lot more common: I want to move part of this money to another advisor.”

The client can come up with any number of great arguments why advisor diversification makes sense. In theory, splitting the money protects against succession risk, correlation risk, group think, you name it.

But you might have used similar arguments to prospect a piece of other advisors’ accounts in the past, and you should know what they really mean when you’re on the other side.

Losing a piece of an account that was once yours to manage gives a competitor a toe in the door. He or she is hoping to widen that opening and capture a bigger share of the assets down the road.

Maybe it’ll work, maybe not.

From a trust point of view, what “diversification” really means is that instead of trusting you completely with 100% of that money, your client now only wants to risk 95% or 65% or half of those assets to you.

You might be all right being “just a piece of the action,” as James Carney of ByAllAccounts says, but it shouldn’t be your strategic goal.

You want to be the advisor digging new toeholds and converting vulnerable prospects — and not the one having it done to you.

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