Wealth management

Mixing a fixed-income annuity into a retirement income account provides greater long-term wealth for investors than a portfolio of equity and bond investments alone, according to a study by MassMutual Financial Group.

California wealth management firms Kochis Fitz and Quintile Wealth Management said they plan to merge, effective Jan. 1, 2008, with the combined firm to be known initially as Kochis Fitz/Quintile until a new name can be found.

Did you know that women provide the lion's share, up to 70 percent, of the $350 billion AARP estimate of the total value of uncompensated caregiving last year in the U.S.? Yep, according to the National Center on Women and Aging, a majority of those female caregivers are employed, but are often forced to reduce their hours or retire early due to their caregiving responsibilities, which can end up costing them each a staggering average of $659,130 in lost wages, savings, benefits, and pension over a lifetime. To help the estimated 40 million women who will retire over the next two decades to achieve increased financial viability, retirement security, and avoid the negative consequences so often related to care giving, LifeSecure Insurance Company and the Women's Institute for a Secure Retirement (WISER) have partnered on a consumer awareness and education initiative. LifeSecure's marketing efforts will include special communications targeting female consumers and creating awareness of the issues. In addition, consumers will be directed to the comprehensive library of useful financial planning, caregiving, and related information at WISER's online data center (see www.wiser.heinz.org/portal). "At LifeSecure, we are committed to helping women overcome the extreme financial and other dangers so often associated with informal caregiving,” says Lisa Wendt, president and CEO. “Having a complete understanding and easy access to accurate and relevant information are probably some of the best weapons women can have in dealing with these issues.” Jeffrey Lewis, chairman of WISER, notes of the partnership, "Over the years, we've found that many people--and most women--simply don't have enough information about building a secure retirement or dealing with negative financial impacts of informal caregiving. The solutions they need begin with understanding and education.” WISER works to increase awareness of the structural barriers that prevent women's adequate participation in the nation's retirement systems. Created in 1996 by Teresa Heinz Kerry, chairman of the Heinz Family Philanthropies, its goal is to improve the long term economic security of millions of American women and men. It is an independent 501(C) 3 organization. LifeSecure Insurance Company (www.yourlifesecure.com) offers a new generation of long-term care insurance coverage. The company is focused on providing understandable, affordable coverage, and high levels of customer service and support. The intention behind all this is to help women feel financially secure and knowledgeable enough about a critical financial issue such as the informal caregiving environment.

Individuals managing their own assets receive no legal guidance on the standards for prudent investing.Fortunately, they can look to the Uniform Prudent Investor Act for guidelines. The act sets forth standards that govern the investment activities of trustees, and is currently the law in almost every state. While those standards do not apply to individuals managing their own assets, they do provide guidance on what the courts consider prudent investing.

SMHG BUYS 25% STAKE IN IPRO ONESanders Morris Harris Group, a financial services holding company, has acquired a 25 percent ownership interest in iPro One, a company that provides CPA practices with investment systems and products. Terms of the deal were not disclosed. IPro One has exclusive contracts with more than 1,000 CPA firms that provide investment products and services to clients. The company has signed letters of intent to purchase interests in CPA-affiliated advisory firms in several locations with a total of more than $1.5 billion in assets under management.

You’ve undoubtedly heard the term “rebalancing.” It has nothing to do with a highwire act although some in the financial community might say that’s exactly what it is. Rebalancing your portfolio is rather critical and it should be done at least annually so that your financial goals remain intact. I do know that many investors don’t even consider this. In fact, friends and family alike tell me that it’s just too time-consuming and besides, they know little about what it takes to do so. To counter this, I like to offer an example. Here’s one courtesy of my friends at First Investors: Take my friend Fred who has a portfolio of 60 percent domestic stocks and 40 percent bonds. He’s had this for the past five years and now it has an allocation of 69 percent domestic stocks and 31 percent bonds. So, over the five year period, stocks went up by 13.4 percent while bonds increased by 4.5 percent. What does this mean? It means that the portfolio wandered or as they call it in financial circles, “drifted.” So, Fred’s portfolio changed rather dramatically even though he did nothing about it for five years. What this also means is that even what appears to be positive developments can easily toss your entire asset allocation out of balance. This translates to a potential for risk coupled with the fact that your return may not be what you had already envisioned. Therefore, if you’ve had a portfolio just sitting there, you might want to reassess the investment priorities, review the securities, and rebalance if necessary. First of all, conducting an annual review requires you to identify whether any of the changes may require a financial response such as a new investment strategy. This may be true because you may have set up certain financial goals or lifestyle considerations which have now changed. Next, if you knew that every investment in your portfolio would throw off the same return year after year, then what would you need to rebalance? That’s not reality. A portfolio drift such as outlined above, can affect your asset allocation…and all to the negative. Finally, suppose your portfolio does need rebalancing. What can you do? The most cost-efficient way to do this is to change the allocation of future investment contributions. What does that entail? Well, you could continue investing the same amount on a regular basis in an overweighed asset while increasing contributions to underweighted investments until you feel that your target has been reached. Or, you can choose to make a lump-sum investment into the asset class that is underweighted. And, you can always sell existing investments that have become overweighted and use those proceeds to buy shares of assets that are then underweighted. Keep in mind that for the last option, mutual fund investors can usually shift money from one fund to another within a fund group without incurring a sales charge. Of course, you still have to consider any tax consequences. But the bottom line is portfolio maintenance. Don’t be inactive!

Nearly everyone can use lessons in financial literacy, and Dan Iannicola Jr., deputy assistant secretary for the U.S. Treasury Department's financial education office, provided suggestions on how women accountants can educate their clients.

I just reviewed the results of a couples retirement study conducted by TNS Canadian Facts for Scotiabank and was surprised to learn that when it comes to retirement, Canadian couples aged 50 and above simply don’t agree with each other on such important topics as finances and lifestyle. Apparently, according to the study, this lack of consensus comes from too little conversation. (So, what else is new?) The study looked at Canadian couples with at least one partner aged 50 or over and still working. It examined attitudes and planning for post retirement as well as financial and lifestyle priorities. Examples of such priorities include travel, spending time with family and friends, practicing healthy aging, and accommodations. (That last one refers to place of abode.) It also reflects the fact that less than one quarter of respondents claim to have had a thorough discussion with their spouse or partner about all aspects of retirement while 55 percent say they have a rather rough idea of how each other feels. Some 23 percent haven’t discussed it all, or haven’t discussed it as much as they should. (I love that “rough” idea.) In short, the results found that Canadian couples are most out of touch with each other in the areas of financial planning, financial concerns, and their outlook toward retirement. In fact, some 60 percent disagree on the basic question of whether or not they are even looking forward to retirement. (Oh, my, that’s not what I hear from my train buddies who are much younger than me and would retire at the drop of a dime.) Moreover, couples apparently also disagree when it comes to the role that family and friends will play in retirement, with only half agreeing. Surprisingly, in only eight percent of couples are both people primarily interested in spending time with their partner rather than with other family/friends or by themselves. (Ouch!) This Couples Retirement Study was conducted for Scotiabank using TSN Canadian Facts online panel. Respondents for the survey were couples who are married or in a common-law relationship, with at least one partner aged 50 or over, and working full-time. Household investable assets were at least $50,000. Of course, couples do share the same level of concern in their ability to retire comfortably with 65 percent saying that they are very or fairly confident they can do so. A full 44 percent of respondents, however, still do not have a formal financial plan. (Hmmmmm!)

SEC OKS RULE ON DEFERRED VARIABLE ANNUITIESThe Securities and Exchange Commission has approved a rule from the Financial Industry Regulatory Authority that would crack down on abusive sales of deferred variable annuities, particularly to senior citizens.

Life insurance agents and companies have always tried to find ways of making costs paid by business owners tax deductible.The situation became ridiculous a few years ago with outrageous claims about how Sections 419A(f)(5) and (6) of the Internal Revenue Code exempted employers from any tax-deduction limitations. Finally, the Internal Revenue Service put a stop to such egregious misrepresentations in 2002 by issuing regulations and naming such plans as "potentially abusive tax shelters" (or "listed transactions") that needed to be registered and disclosed to the IRS.

Radon Stancil and Rick Parkes own Diversified Estate Services, a financial planning firm, based in Cary, NC. They have been in practice for more than 30 years. They also co-founded the N.C. Educational Institute that was formed to teach continued education to other professionals as well as the public. In short, they are pretty knowledgeable fellows. They have come up with 10 smart financial ideas to help ensure that an individual’s retirement nest egg lasts a lifetime. And, here they are:

The Social Security Administration said monthly benefits would increase 2.3 percent for more than 54 million Americans in 2008.

It finally happened: The first Baby Boomer applied for Social Security this week. Kathleen Casey-Kirschling, a former teacher who was born at one second after midnight on Jan. 1, 1946, applied for Social Security benefits over the Internet, starting what is likely to be an avalanche of applications for retirement benefits.

At the recent annual convention of the Financial Planning Association in Seattle, Daniel Moisand, its chairman, made some rather interesting and vital comments to the more than 5,000 people in attendance at its final general session. Now, understand that Moisand knows what he is talking about. He is not one of the 100 most influential people in accounting according to Accounting Today, for nothing. Is there a more serious career than financial planning, Moisand asks? “Financial planning is not usually a matter of life or death, but it can be the difference between a dead life and an active life for our clients.” Moreover, he points out that financial planning is indeed very serious and very important. “I’ve practiced in various environments, under a few different employers, under a few different compensation plans. At the heart of my work for all these years has been the financial planning process and putting clients’ interests first even when legally I didn’t have to.” He notes that the financial planning process and a self imposed high standard of care were always present. “I can tell you without a hint of equivocation that I am not special in this regard. Thousands of you keep the financial planning process and the same high standard of care required of a fiduciary at the forefront of your operations every day, all the time, even if you could legally do otherwise.” From there, he segued into the lawsuit on broker/dealers. “Much has been made of FPA’s success in fighting the infamous broker dealer exception to the Investment Adviser Act. In many other countries, the idea that a financial adviser could be exempt from fiduciary duty seems silly and the idea that a financial planner could somehow get around that standard of care borders on lunacy. Around the globe the impact of following the financial planning process effectively is profound. One great learning, or should I say, one great reminder that came from our lawsuit regarding the broker-dealer exemption was that the whole is greater than the sum of its parts. The public needs an easy way to identify competent and ethical financial planners.” That brought a ringing applause. Moisand noted that there were many members (actually thousands) that were practicing within wire-house firms, with several more thousands as reps of other broker/dealer firms, including many being insurance agents, bankers, not to mention some 6,000 or so as fee-only practitioners. “Members from all corners of the profession supported our lawsuit and supported our position on standards. Our stand was largely an effort to bring value and meaning to terms like financial planner and financial planning. They all share the belief in the power of financial planning, full and fair disclosure, and giving advice with the clients’ interest first. They want to foster the value of financial planning and advance the financial planning profession.” He stressed that it didn’t matter where one worked, how they were credentialed, or how they were paid. He acknowledges that there are faux planners that might even work right next to you at your own firm. “To the public, you look and sound alike. The public must be able to easily pick us out from among a slew of pretenders. If the public is to benefit from our expertise, they must receive competent and ethical services that meet effective practice standards. If we are to earn and keep the public’s trust, we must be able to hold everyone in financial services accountable for their representations.” In conclusion, Moisand emphasized the fact that through the association’s lawsuit, despite all its differences, the group banded together and even strengthened its bonds to what they had in common. “It showed that if we keep our core beliefs at the fore, we are far stronger together than our differences might imply.”

Ontario Teachers' Pension Plan has acquired investment research company Glass, Lewis & Co., for $46 million, bringing ownership of the proxy advisory provider back to North America.

During my extended stay in college, my idea of prudent financial planning was to put enough aside to order extra cheese at Pizza Hut on Friday nights. Several decades later, Friday is still pizza night for me, and I've upgraded a bit since then. Now, in a week without any unforeseen expenses like a brake job or a cut and highlights for my wife and daughters, I can splurge on a double order of garlic knots.My rather modest financial portfolio aside, I saw recently that financial planning perks have swelled among the chief executives of Fortune 100 companies. Last year, more than 74 percent of Fortune 100 companies disclosed that their CEO received financial planning-related perks, versus just under 30 percent in 2005.

As a young man, I was a crewmember of a 747 that crashed on takeoff in Kenya. The airline's emergency planning helped me keep cool, think rationally and help save the lives of 90 of the 149 passengers.Today, as principal of a financial advisory firm in Irvine, Calif., I regularly see people approach retirement planning like an airline flight, hoping the unthinkable won't happen. But while the chances of a crash are remote, the financial markets are considerably less predictable. Few are prepared for the transition from earnings income to portfolio income.

STUDY: RIAS NEED TO DIFFERENTIATEA study commissioned by Pershing Advisor Solutions projects that as the market for financial services becomes even more competitive, registered investment advisors need to "fine tune" their area of expertise and promote their reputations of specialized knowledge in a given niche. The report said that specialization is crucial, given that consumers who seek financial advice are becoming more sophisticated in their market knowledge, and thus are sparking a growing demand for qualified individuals.

The many practitioners who conduct valuations in the normal course of their practices will shortly be required to follow, for the first time, detailed standards, because the Consulting Services Executive Committee of the American Institute of CPAs has issued a comprehensive professional statement of standards - Statement on Standards for Valuation Services No. 1, Valuation of a Business, Business Ownership Interest, Security or Intangible Asset."The AICPA developed the valuation standard to improve the consistency and quality of practice among its members who perform engagements that estimate values for various reasons," said AICPA president and CEO Barry Melancon, in a statement. "Congress, government agencies and accounting regulators have recently focused their attention on appraisal issues - such activity shows the importance of valuation to the business community and individuals. The standard promotes greater transparency and provides our members with a set of guidelines in the unique context of a CPA practice."

Leave it to the guys from Harvard, eh? Right now, when everybody and his cat are trying to figure out what’s happening in the stock market, three entrepreneurs out of Cambridge, Mass. are gathering the best financial minds in the business to figure it all out for you. It’s called Fantasy Investing and it can be found at www.updown.com. This is a Web site launched by these Harvard Business School students. Each partner, it is said, has a significant start-up experience, and shares a common vision to revolutionize the investing world. In effect, The UpDown is a community for stock investors.