Financial planning

MORNINGSTAR TO PURCHASE IBBOTSON: High-profile investment research and products provider Morningstar will buy privately held Ibbotson Associates - an asset allocation service concern - for $83 million. The deal is expected to close in the first quarter of 2006. Morningstar said that it would retain the Ibbotson brand and is currently in the process of assembling a transition team."Ibbotson's expertise in asset allocation and Morningstar's expertise in security selection and investment research is a powerful combination," said Joe Mansueto, chairman and chief executive officer of Morningstar, in a statement. "Our companies share many similarities, and we have a firm commitment to helping investors reach their financial goals."

Consumer-driven health plans?The plans loom large in strategic decision-making for employers. Most firms have heard of the plans by now, and feel compelled to think about offering one to their employees. Health reimbursement arrangements are the most commonly implemented plan, but the newly available health savings accounts are generating plenty of interest, too.

Factors such as changes to estate tax laws and the initial wave of retirement for the Baby Boomers will bring a year of significant change for financial advisors and their clients.According to a survey conducted by Impact Technologies Group Inc., a provider of financial sales software for the banking, capital markets and insurance industries, its annual industry trends forecast for 2006 predicted that action by the federal government to change the tax code and reform or repeal the estate tax will have the most impact on how advisors handle their clients' financial plans.

AMERIPRISE TO SETTLE TRADING CHARGES: Ameriprise Financial - the entity spun off by former parent American Express - and its broker/dealer arm agreed to pay $57.3 million to settle charges of illegal trading and brokerage misconduct.The Securities and Exchange Commission charged that Minneapolis-based Ameriprise Financial Services - the company's broker/dealer - failed to "adequately" disclose millions in revenue-sharing payments that it received from a group of mutual fund companies dating back to 2001.

Mutual fund portfolio managers used to be as inaccessible as the Wizard of Oz.Fund companies for the most part hid their ideas and activities behind a wall of wholesalers and scripted messages on brochures. When Morningstar began trying to contact portfolio managers in the late 1980s, their analysts often were greeted with phone hang-ups.

ISO 22222, the Standard on Personal Financial Planning, has been approved as an international standard. All ISO members (standardization institutes in approximately 150 countries around the world) can now adopt ISO 22222 as a national standard.According to Stuart Kessler, chairman of the International Standards Organization's blue-ribbon committee on personal financial planning, "ISO 22222 is by nature not legally binding, but a document of 'good practice' that can be applied voluntarily, unless there is a reference to it in legislation or it is part of a contract, in which case it might become binding."

GLOBAL BENCHMARK EN ROUTE FOR FINANCIAL PLANNERS: The upcoming International Standards Organization's 2222 standard is now in a final ballot, with the objective of achieving and promoting a globally accepted benchmark for individuals who provide the professional service of personal financial planning. This would be the first truly non-technical service standard for financial services.According to Stuart Kessler, managing director of RSM McGladrey Inc. and the chair of the ISO's blue ribbon committee on financing planning, "ISO 2222 will specify the ethical behaviors, competences and experience required of a professional personal financial planner. It describes and addresses the various methods of conformity assessment and specifies requirements applying to each of them."

Roth 401(k) accounts will - with the blessing of the Internal Revenue Service - make their debut effective Jan. 1, 2006.Unlike the 401(k), which is funded with pretax dollars, the Roth 401(k) is funded with after-tax dollars from the employee. Any employer match would remain taxable.

Financial planning is usually not a static process. When your clients ask you for advice in investing their resources, one of the more difficult tasks is getting them to make decisions on not only what their ultimate investing goals are (besides becoming wealthy or wealthier), but just how much risk they want to take along the way.As a client's economic and life conditions change, often their goals do as well. Many successful planning professionals find that periodic re-analysis of each client's holdings is a good idea. By examining how well a client's investment portfolio is performing and what progress is being made towards meeting a client's ultimate and near-term goals, you are best serving your clients, and very possibly generating additional fees for your practice.

* AMERIPRISE SETTLES ON SALES OF 529 PLANS: Ameriprise Financial Inc. will pay $1.25 million to settle an enforcement action brought by regulators over its sales of Section 529 college savings plans, the company said. Ameriprise neither admitted nor denied wrongdoing.Brokerage regulator NASD said that the action against broker and insurer Ameriprise was its first in a probe into Section 529 plan sales practices at 20 securities firms. Other investigations are ongoing.

Government officials now expect 401(k) plan sponsors to conduct periodic due diligence reviews. With respect to their 401(k) or other retirement plans, the problem is that most plan sponsors do not have the in-house resources to do so.This is not something that 401(k) plans historically did. On the heels of the recent mutual fund scandals, though, Labor Department officials indicated that sponsors had a duty to periodically investigate plans and benchmark funds and fees.

Last month, Refco, the largest futures and commodities broker, joined the ranks of some of the largest U.S. companies, such as Enron and WorldCom, whose fortunes - quite contrary to their financial statement presentation - reversed in bankruptcy overnight, wiping away billions of dollars in stock valuations from investor portfolios.Projecting a fictitious financial strength, Refco's financial statements, audited by Grant Thornton, hid as much as $430 million of massive debt due from its chief executive, Philip Bennett, to lure investors into purchasing Refco's stock at $22 a share during its initial public offering. Its IPO was underwritten by Bank of America, Goldman Sachs and Credit Suisse First Boston, and raised $583 million last August.

* FICPA HELPS RESIDENTS WITH FINANCIAL GOALS: Members of the Florida Institute of CPAs have reached out to help Floridians struggling with financial issues to get back on track through "360 Degrees of Financial Literacy," the nationwide initiative designed to provide financial education to the public."360 Degrees of Financial Literacy" task force members Ken Strauss, Doug Day, James Luffman, Alberto Manrara, Marty Prague and Nancy Soderholm are working with CPA volunteers from Tallahassee to Miami to offer financial literacy presentations that address issues including budgeting, saving, investing, credit cards and the financial effects of major life changes.

If you are an owner of a business, what would happen if you or a co-owner were to die suddenly?Large problems can result from the death, incapacity, resignation, etc., of one of the owners. How would the decedent's heirs liquidate the business interest to pay expenses and taxes? What would happen if an heir or an unknown outside buyer of the decedent's share decides to interfere with the business? Could the business or other owners afford to buy back the decedent's ownership interest?

In determining what property to contribute to a charitable organization, it is usually best to contribute appreciated property, i.e., property whose fair market value is higher than its basis in the donor's hands.This is because the appreciation in value of the property is not taxable to the donor even if the full fair market value of the property is deductible for income tax purposes. However, whether the full fair market value is deductible for income tax purposes depends on the type of property contributed.

KATRINA VICTIMS CAN TAKE LOANS FROM RETIREMENT PLANS: Employer-sponsored retirement plans, including 401(k) programs, will be allowed to make loans and hardship distributions to victims of Hurricane Katrina and members of their families, the Internal Revenue Service said.For the first time ever, the IRS and the Treasury and Labor Departments are providing broad-based relief to retirement plan participants affected by a major disaster.

The accountant is one of the catalysts of an estate-planning team - a group that should also include an attorney, a financial planner and a trust officer.The goal of this dedicated team is to help in the management, conservation and transfer of wealth, while considering the legal and tax ramifications, as well as the personal objectives, of the client.

The $11,000 gift tax annual exclusion ($12,000 for gifts made in 2006) is available only for gifts of present interests. A gift to a trust for the benefit of a particular beneficiary is usually a gift of a present interest only if the trustee is required to distribute all of the income of the trust no less frequently than annually. If a trust does not have income because its assets are invested in non-income paying property (e.g., unproductive real estate or artwork), a gift to that trust will be treated as a gift of a future interest.However, the exclusion is allowed for a gift in trust to a minor, if the trust property and the income from that property may be (but don't have to be) spent by or for the minor before he reaches age 21, and to the extent not so spent will pass to the minor when he becomes 21.

SEC HELPING INVESTORS, COMPANIES AFFECTED BY KATRINA: The Securities and Exchange Commission has joined the growing list of companies and agencies mobilizing to provide relief to the victims of Hurricane Katrina.The SEC divisions and offices that oversee publicly traded companies, accountants, mutual funds, brokerage firms and transfer agents, among others, are preparing relief measures, including extensions of filing deadlines and suspension of requirements to deliver documents to hurricane-affected areas.

The CFA Institute, the global concern that administers the Chartered Financial Analyst examination and credential, has elected its new board of governors.John Stannard, of Russell Investment Group, was elected chairman, while Vincent Duhamel, managing director of Goldman Sachs Asia LLC, will serve as vice chair. Both Stannard and Duhamel will serve one-year terms, effective immediately.