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Archive for ‘Advisors’

To Increase Revenue Stop Selling

Forbes Contributor Mike Myatt posted an excellent article  entitled, “To Increase Revenue Stop Selling.” Bravo, Mike. Your point is important and holds especially true for financial services. This is a long term thinking vs short term thinking issue as well. And the reasons are practical as well.
Client acquisition is much harder than client retention.  It is much harder to bring in new client than to: put your client’s best interests before your own, avoid conflicts of interest, manage those conflicts you can’t avoind in the client’s best interest, help them diversify their holdings and disclose ALL costs to the investor — than to constantly have to bring in new clients.

In the discussion about extension of the fiduciary standard to brokers who advise individual investors, this is especially important. The antiquated culture at banks, BDs and insurance co’s is to reward the biggest “producers,”  while what investors need is the long term value added and problem solving you speak of. Short term, it is a big change, but long term, firms will have stickier, happier clients and a steadier revenue stream from a broader asset under management base.

A recent survey which I coordinated with fi360 and AdvisorOne.com shows tha the vast majority of brokers and investment advisors in the field want to put clients first–and if you think long term, it is in the advisor’s best interest to put their client’s best interests first at all times, as a fiduciary, than to have to look for the next sales customer.

You are absolutely right about changing the lingo as well. Think long-term client, rather than “prospect,” solving client problems and helping them meet their goals in a way that is in their best interest, and your client base will flourish. The investment advisor fiduciary model proves that this can be done. Do you know an investment advisor who is starving? No.

Banks, brokerage firms and insurance companies have to change how they offer advice, and they may have to separate advisors who really advise from salespeople who don’t have to act as fiduciaries — and those non-fiduciary salespeople ought to have a sales title, rather than one that implies an advisory, fiduciary relationship. Here is one place where the titles are very important.

Long term, changing the way these companies’ sales processes work can benefit their clients and themselves. The key is clients first, and long-term thinking.

Taxes and the 2012 Opportunity You Shouldn’t Refuse

Just as President Obama’s budget proposal has gotten everyone to talk about taxes, there are opportunities to make gift and estate arrangements that everyone should be aware of. Wealthy individuals and families still have an opportunity to use higher gift and estate tax exemptions to pass assets to their heirs if they act before these exemptions expire at the end of 2012.

Though, of course, none of us can predict when we will die, we can control how and when we make gifts. Individuals and couples with the foresight to make gifts in 2012 can take advantage of gift tax and estate tax exemptions that are scheduled to expire at year-end, so it would be wise to discuss these with your estate or tax strategist – and sooner rather than later in the year. There may be a rush to do this at year-end. The bottom line is, waiting to do this will result in your paying more taxes if, as scheduled, these temporary provisions sunset on December 31, 2012.

In 2012, individuals can make gifts of $5 million or couples can gift $10 million and not owe any tax on the gift. The tax rate on a larger gift is also lower in 2012, topping out at 35% for assets gifted in excess of the exemption. With some estate and gift planning techniques, investors can make additional trust arrangements and potentially shelter even more of their gift or estate from tax, depending on their individual circumstances.

But beware, if you wait, this favorable tax treatment for estates and gifts is scheduled to expire at the end of 2012.  According to Brett Ferguson, Senior Congressional Correspondent for Bloomberg BNA Daily Tax Report, “Obama wants,” to roll the estate and gift tax rates “back to the ’09 levels,” with a gift or estate exemption of “$3.5 million each and 39% top bracket,” for 2013.

Ferguson spoke on a tax panel at the Bloomberg Portfolio Manager Mash-up in New York on February 16, with attorneys Alan Gassman, of Gassman Law Associates, Stanley Ruchelman, of the Ruchelman Law Firm. Bloomberg reporter Margaret Collins moderated.

Higher Taxes in the Proposed Budget

President Obama’s Budget proposal, released this week, contains higher personal income tax rates, higher taxes on capital gains, and much higher taxes in dividends. The budget outlines rolling taxes back to the pre-Bush-Tax-Cut era, “to 2001 tax rates, a highest income bracket of 39.6% and a tax penalty,” Ferguson said.  Individuals making an adjusted gross income (agi) of $200,000 or couples earning more than $250,000 would pay 39.6% tax rate plus a surplus rate of 3.8%.

Perhaps what would hurt even more is a big hike in the tax investors would pay on dividends. Currently taxed at a top rate of 15%, as proposed, dividends would be taxed as ordinary income, just like taxable bonds, so the top rate would be 39.6%, and for individuals/couples earning in excess of $200,000/$250,000 the 3.8% surtax would kick in, the panel noted. The top capital gains would be 20% instead of the current 15%.

There is also a provision to eliminate the Alternative Minimum Tax, which generates $ 1 trillion, and replace it with a version of the so-called Buffett tax, imposing a minimum 30% tax on individuals earning more than $1 million a year, the panel said.

There is now a “sheriff’s mentality at IRS, Ruchelman said, now, it seems, “you make money and you give the IRS a preferred return. Before, you made money and hired people to drive the tax down as much as possible.”

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