Financial planning

Raymond James Financial Inc. announced an initiative that would require the restructuring of variable annuities offered through financial advisors at the firm's broker/dealer subsidiaries, Raymond James Financial Services and Raymond James & Associates.President and chief operating officer Chet Helck said that beginning in August, Raymond James will require all approved annuity providers to offer an alternative pricing structure that reduces client costs without impacting standard or optional benefits. The changes are designed to lower policy fees, create consistent commissions and reduce opportunities for confusion by simplifying offerings.

The Securities and Exchange Commission and the North American Securities Administrators Association have announced a national initiative designed to protect seniors from investment fraud and sales of unsuitable securities.The initiative, which builds on the success of cooperative efforts between the SEC and Florida regulators, in conjunction with the NASD, to crack down on senior investment fraud, will include targeted examinations to detect abusive sales tactics, aggressive enforcement of securities laws in cases of fraud against seniors, and active investor education.

Outside of tax preparation, few facets of accounting are as complicated and change as frequently as retirement and estate planning. Partly that is because of the enormous implications of taxes on these two areas. But it is also due to the changing demands of clients with each new generation of retirees.At this, the outset of the Baby Boomer generation, it is clear that clients are less responsive to complex reports and more interested in simple processes which they can participate in and understand via their own computers or over the Internet. Vendors of retirement and estate planning systems have responded to this need with a host of new collaboration tools and a dramatic improvement in comprehension for both the process and its reports.

A plan participant sometimes wants to provide a survivor annuity for a non-spouse beneficiary who is a child or other close relative of the participant, or a significant other who is not a spouse.Caution: If the participant has a spouse, a survivor annuity for a non-spouse beneficiary can be provided only if the spouse consents.

TRADING FUTURES ON DEBT SECURITIES: The Securities and Exchange Commission and the Commodity Futures Trading Commission have jointly proposed rules that would permit trading of futures on debt indexes in an effort to create a new class of tradable derivatives contracts.Futures contracts on debt indices that are allowed under the proposed rules would trade on futures exchanges subject to regulation by the CFTC. Securities futures on debt securities could be traded on futures exchanges and securities exchanges subject to regulation by the CFTC and the SEC. Under current regulations, trading futures on debt indices is essentially prohibited.

HBK SORCE and PRESQUE ISLE UNVEIL MERGER: CPA and business advisory firm Hill, Barth and King has merged Presque Isle Capital Management into its financial planning unit, HBK Sorce Advisory LLC.Terms were not disclosed.

Exchange-traded funds have been around for over a decade, but their growth in the past few years has attracted even the attention of outside rating services.The ETF channel now numbers over 200 funds with an aggregate $300 billion in assets. The growth in the marketplace gives advisors access to sectors in new ways that help maximize client service.

One wealth management strategy that has gained popularity in past years with many individual retirement account customers involves creating a limited liability company wherein the IRA accountholder is named the manager of the LLC.The accountholder retains control of all the assets held by the LLC. This includes having signature control over all accounts under the LLC on a day-to-day basis. Here's a quick run-down of some important facts.

LEVEY FETED BY AICPA: The American Institute of CPAs named Steven I. Levey, CPA, PFS, the recipient of its 2005 Distinguished Service Award - the highest honor bestowed by the institute's Personal Financial Planning Division.The award is given annually to a CPA who most enhances the overall quality of personal financial planning. Levey, managing director at Denver-based GHP Horwath PC, was recognized for his contributions to the profession, including substantial volunteer efforts for the AICPA, chairing eight conferences, serving on the PFP Executive Committee and the Professional Liability Insurance Plan Committee, and his current post as a commissioner on the National Accreditation Commission.

As an asset class, real estate is growing in importance to professional advisors and their clients. Not only did the asset class provide high returns in the past few years, but managers kept improving the opportunities for investments. Enthusiasm seems to be growing for the class in general, and for new offerings in particular.The run-up in prices over the last few years grabbed headlines. But from the 30 percent average pace of recent times, advisors expect that performance will drop into a more reasonable range, perhaps in the high single digits.

Are your clients making the maximum allowable tax-deductible contribution to their defined-contribution plans (as much as $49,000 in 2006)? Would they be interested in contributing much more if possible? If the answer is "Yes," they should consider a cash balance plan.A CB plan is a qualified retirement plan established for the owner of a business and his employees. Tax-deductible contributions are made to the plan in the form of managed assets (stocks, bonds, mutual funds, variable annuities, etc.) with the option of purchasing life insurance inside the plan.

SEC REQUIRES HEDGE FUND REGISTRATION: The Securities and Exchange Commission now requires hedge funds to register as investment advisors. Under the ruling, hedge funds will not have to register their individual funds. Rather, they have to provide basic information about the firm and are required to hire a chief compliance officer. Also, hedge fund firms are now subject to random inspections.Exceptions to the registration mandate include funds with less than $30 million under management, which will not have to register, although funds with $25 million or more are eligible for registration. Hedge funds that "lock up" their investors' money for two or more years or refuse to take new money can also avoid registration. The two-year loophole was meant to protect private equity and venture capital funds from getting caught up in the rule, but some managers invoked the exception to avoid registration.

In the current age of more stringent ethics codes and increased burdens on compliance officers, the level of compliance awareness in financial advisory firms has ratcheted up to new heights.During 2005, audits revealed that almost 80 percent of firms have some sort of conflict of interest not disclosed fully and fairly, with a majority of those issues centering on compensation streams - how and by whom the financial advisor is compensated.

It's not just the Baby Boom generation that is heating up the markets for financial planning and wealth management. Across the industry, the software is getting tighter, more polished and more capable.Driving these changes are four basic trends:

The most sweeping changes to federal bankruptcy law in over a quarter century went into effect in October 2005. Distressed businesses and their creditors face new challenges, and comprehensive pre-bankruptcy planning will now need to be undertaken by debtors to ensure a successful reorganization.CPAs can play an integral role in this planning process.

NASD ENFORCEMENT CHIEF STEPS DOWN: Barry Goldsmith, the enforcement chief of brokerage regulator NASD, will step down in March to return to private law practice, and his deputy James Norris was named as his acting replacement. Goldsmith, 56, will become a partner at law firm Gibson Dunn & Crutcher in Washington, a firm known for its securities practice. Goldsmith joined NASD, then known as the National Association of Securities Dealers, a decade ago. As enforcement chief, he led investigations into initial public stock offerings by big securities dealers and conflicts of interest involving research analysts, as well as mutual fund and hedge fund misconduct - including overseeing penalties against Merrill Lynch and Wells Fargo.According to NASD, the number of new enforcement actions under Goldsmith reached record levels, from 975 in 1995, to 1,399 in 2005. Fines collected rose to $127.5 million in 2005, from $5.3 million in 1995.

Business owners may face a number of issues when confronted with the death, disability or retirement of an employee, partner or shareholder.Some of the dilemmas they face may include paying off business debts, having sufficient funds to pay estate taxes, leaving behind a stable operating business, and preserving the value of the business assets for heirs or family members.

TREASURY, IRS FINALIZE ROTH 401(K) RULES: The Treasury Department and the Internal Revenue Service have issued final regulations regarding Sections 401(k) and 401(m) related to designated Roth IRA contributions.Roth contributions were added to the code by the Economic Growth and Tax Relief Reconciliation Act of 2001, and are effective for taxable years beginning after Dec. 31, 2005.

Over the next decade, the majority of the 79 million Americans girding for retirement will begin to withdraw from their savings. This group is more likely to live longer, control their investment decisions, and be more active than any generation in history. These facts lead to the conclusion that setting up retirement spending plans is likely to become a service demanded of every financial advisor.The number of variables complicates the task.

Personal financial records are a necessary part of our lives, but it's easy for clients to get overwhelmed by the volume of papers.According to the New York State Society of CPAs, the beginning of the year is an excellent time to get financial records in order. Here is some advice to help clients determine what they should keep and what they should purge.