February 10th, 2019

What’s Your Investment Process?

How to Conduct an Effective Client Review
How effective are your client reviews? Could they use a little fine tuning? If you answered yes, then you have come to the right place. It is that time of year – client reviews are now in full swing and gives us the opportunity to provide a resource that can help you prepare for success.
Three Questions to ask yourself before you get started
• What will drive the success of your advisory practice?
• What is your value proposition?
• What is the purpose of a client review?
The Role of the Review
• The discovery process and understanding desired outcomes
• Defining the client’s goals and what they are planning to achieve
• The role of the advisor: assisting in decisions about his/her future
• Helping the client understand decisions concerning his/her future
• Key Insight: Clients evolve over time
• Remember the client’s life is evolving and changing, so it is important for the trusted advisor to help their clients navigate these changes.
• How will you expand your business?
• An FA can strengthen the bond with their clients at every stage in the relationship.
Preparing for the Client Review
• What to Bring
• Prepare the documents in advance: client’s current goals and historical documents
• Role of the capital markets review
• Capital Markets Outlook (CMO) should be updated quarterly
Follow the 7-step client review process
1. Get started
2. Connect
3. Present CMO
4. Review Performance and Focus on Outcomes
5. Discuss Changes and Suitability
6. Expand the Relationship
7. Review Next Steps and Closure
Don’t forget to confirm the next appointment!

February 10th, 2019

Which Taxes Will Have An Impact This Season?

Making it even less likely that this tax will have an impact, gifts between spouses are unlimited, and certain gifts to others, such as payments for directly-paid tuition or medical expenses, are not counted as gifts.

Any direct gift to anyone other than your spouse is “taxable” to the extent they exceed the $15,000 annual exclusion amount and must be reported on a U.S. Gift Tax Return (Form 709), even though the gift may not be taxable due to the $11.4 million exemption.

So, if the estate and gift tax will not come into play for most of us, how could the higher limit leave our heirs paying more tax? The catch is in how your estate plan is set up. The estate tax exemption used to be much easier to breach for anyone with a house, life insurance and a modest retirement savings.

Consequently, estate plans were commonly designed to avoid the estate tax by using a revocable living trust with a “credit shelter” or “bypass” trust provision. This setup ensured that a deceased spouse’s estate tax exemption would be fully utilized to reduce the estate tax impact.

Instead of leaving all assets outright to a spouse, the credit shelter trust sent enough assets to use up the deceased spouse’s exemption to a trust that could support the surviving spouse by providing income and certain amounts of principal, but not giving the spouse full access to the funds.

This way, the money in the “bypass” trust would not be included in the surviving spouse’s estate. If left outright to the spouse, no estate tax would be due, but the assets, and any growth, would be taxable at the second spouse’s death, without the ability to use the first spouse’s estate tax exemption.

We now have a higher estate tax exemption and the exemption is portable between spouses, allowing a married couple to pass $22.8 million to heirs tax-free. That’s great, but many estate plans still include revocable trusts that call for some assets to pass to a credit shelter trust at the death of the first spouse. This is where the higher tax bill for heirs can come into play, but it is an income tax bill, not an estate tax bill.

When assets are transferred from an estate, the beneficiary’s cost basis for determining taxable gain or loss becomes the value of the assets on the date of the decedent’s death. This can mean a considerable tax savings if the assets had appreciated significantly in value.

Appreciated assets passing to a credit shelter trust receive a step-up in basis at the death of the original owner, wiping out any taxable gain at that point, but they will not receive a step-up in basis when the second spouse dies because they are not part of his or her estate. The estate tax was avoided on these assets on the second death, but the beneficiaries might have been better off if the assets were left outright to the spouse to take advantage of a second basis step-up.

The key here is that any trust documents you have should be reviewed to see if they still make sense given the higher estate tax exemption. Plans designed to minimize the estate tax should be revisited to ensure that they minimize income taxes the beneficiaries might pay given the new estate tax exemption amount.

There may be good reasons to keep the credit shelter trust language in place, perhaps with a revision to the formula determining the size of the credit shelter trust that gives the trustee some flexibility to adapt to changing tax laws, but planning might be better focused on minimizing capital gains tax for heirs rather than estate tax.

February 8th, 2019

What’s Your Investment Process?

Being able to share your investment process with your clients, as well as any regulator, is an important part of your role as a fiduciary. It’s also key to your business process!
From your advisor colleagues across our firms and our investment advisory sales and compliance staff, we’ve created a best practice guide to help you ensure you have a process, can articulate your process, or have the opportunity to find gaps that need filling in your process.
Follow this simple five-step process after you decide the first question: Are you creating individualized portfolios or are you creating models?
Step 1: Create My Investment Thesis/Philosophy

• Portfolio Example: I believe in broadly diversified risk based portfolios that combine both strategic and dynamic or tactical components.
• Model Example: I created a 60/40 model to do X for my clients in time horizons like Y.
Step 2: Conduct Research & Select Investments
Step 3: Determine Asset Allocation
• What factors are important to you when selecting investments (ex: tenure, cost, risk, etc.)?
Step 4: Implement Portfolilos/Models & Rebalance Upon Review
• Determine when and how models and investments will be reviewed and under what circumstances will changes be made. Confirm how you will rebalance and what would cause you to rebalance.
Step 5: Record My Decisions & Changes
• Example: Reviews and updates regarding asset allocation, investments and rebalancing are documented.

February 4th, 2019

Password Mania Solved… with Password Manager

It is nearly impossible to remember all of your passwords – particularly if you want to use strong logins that are difficult to crack. However, there is a solution. A secure password manager not only encrypts and stores your passwords, but will also help generate strong passwords using a combination of letters, numbers and special characters. Simply log in to the password manager and the program will automatically fill your username and password each time you visit the site that requires them.

January 29th, 2019

FINRA Annual Renewal Charges for 2019

The FINRA annual renewal charges for 2019 will be charged to your commission on the pay cycle beginning February 11.
As a reminder, we will be passing along your registration and branch renewal fees, charged by FINRA, with no markup.
Individual Renewal fees include:
An Annual FINRA Branch Office Renewal fee of $150 and a $20 FINRA Branch Processing fee will be charged to the supervisor or person-in-charge of any active branch office.
*Note: Registered Assistants will not be charged the $130 FINRA Advisor Fee.

January 15th, 2019

Famous People Who Failed to Plan Properly

It’s almost impossible to overstate the importance of taking the time to plan your estate. Nevertheless, it’s surprising how many American adults haven’t done so. You might think that those who are rich and famous would be way ahead of the curve when it comes to planning their estates properly, considering the resources and lawyers presumably available to them. Yet there are plenty of celebrities and people of note who died with inadequate (or nonexistent) estate plans.

Most recently

The Queen of Soul, Aretha Franklin, died in 2018, leaving behind a score of wonderful music and countless memories. But it appears Ms. Franklin died without a will or estate plan in place. Her four sons filed documents in the Oakland County (Michigan) Probate Court listing themselves as interested parties, while Ms. Franklin’s niece asked the court to appoint her as personal representative of the estate.

All of this information is available to the public. Her estate will be distributed according to the laws of her state of residence (Michigan). In addition, creditors will have a chance to make claims against her estate and may get paid before any of her heirs. And if she owned property in more than one state (according to public records, she did), then probate will likely have to be opened in each state where she owned property (called ancillary probate). The settling of her estate could drag on for years at a potentially high financial cost.

A few years ago

Prince Rogers Nelson, who was better known as Prince, died in 2016. He was 57 years old and still making incredible music and entertaining millions of fans throughout the world. The first filing in the Probate Court for Carver County, Minnesota, was by a woman claiming to be the sister of Prince, asking the court to appoint a special administrator because there was no will or other testamentary documents. As of November 2018, there have been hundreds of court filings from prospective heirs, creditors, and other “interested parties.” There will be no private administration of Prince’s estate, as the entire ongoing proceeding is open and available to anyone for scrutiny.

A long time ago

Here are some other notable personalities who died many years ago without planning their estates.

Pablo Picasso died in 1973 at the ripe old age of 91, apparently leaving no will or other testamentary instructions. He left behind nearly 45,000 works of art, rights and licensing deals, real estate, and other assets. The division of his estate assets took six years and included seven heirs. The settlement among his nearest relatives cost an estimated $30 million in legal fees and other related costs.

The administration of the estate of Howard Hughes made headlines for several years following his death in 1976. Along the way, bogus wills were offered; people claiming to be his wives came forward, as did countless alleged relatives. Three states — Nevada, California, and Texas — claimed to be responsible for the distribution of his estate. Ultimately, by 1983, his estimated $2.5 billion estate was split among some 22 “relatives” and the Howard Hughes Medical Institute.

Abraham Lincoln, one of America’s greatest presidents, was also a lawyer. Yet when he met his untimely and tragic death at the hands of John Wilkes Booth in 1865, he died intestate — without a will or other testamentary documents. On the day of his death, Lincoln’s son, Robert, asked Supreme Court Justice David Davis to assist in handling his father’s financial affairs. Davis ultimately was appointed as the administrator of Lincoln’s estate. It took more than two years to settle his estate, which was divided between his surviving widow and two sons.

January 15th, 2019

Four Tips for Planning a Career Change

Changing careers can be rewarding for many reasons, but career transitions don’t always go smoothly. Your career shift may take longer than expected, or you may find yourself temporarily out of work if you need to go back to school or can’t immediately find a job. Consider these four tips to help make the financial impact of the transition easier.

1. Do your homework

Before you quit your current job, make sure that you clearly understand the steps involved in a career move, including the financial and personal consequences. How long will it take you to transition from one career to the next? What are the job prospects in your new field? How will changing careers affect your income and expenses in the short and long term? Will you need additional education or training? Will your new career require more or fewer hours? Will you need to move to a different city or state? Is your spouse/partner on board?

You should also prepare a realistic budget and timeline for achieving your career goals. If you haven’t already done so, build an emergency cash reserve that you can rely on, if necessary, during your career transition. It’s also a good time to reduce outstanding debt by paying off credit cards and loans.

Assuming it’s possible to do so, keep working in your current job while you’re taking steps to prepare for your new career. Having a stable source of income and benefits can make the planning process much less stressful.

2. Protect your retirement savings

Many people tend to look at their retirement savings as an easy source of funds when confronted with new expenses or a temporary need for cash. But raiding your retirement savings, whether for the sake of convenience, to raise capital for a business you’re starting, or to satisfy a short-term cash crunch, may substantially limit your options in the future. Although you may think you’ll be able to make up the difference in your retirement account later — especially if your new career offers a higher salary — that may be easier said than done. In addition, you may owe income taxes and penalties for accessing your retirement funds early.

3. Consult others for advice

When planning a career move, consider talking to people who will understand some of the hurdles you’ll face when changing professions or shifting to a new industry or job. This may include a career counselor, a small-business representative, a graduate school professor, or an individual who currently holds a job in your desired field. A financial professional can also help you work through the economics of a career move and recommend steps to protect your finances.

4. Consider going back to school

You might be thinking about pursuing additional education in order to prepare for your new career. But before applying to graduate school, ask yourself whether your investment will be worthwhile. Will you be more marketable after earning your degree? Will you need to take out substantial loans?

In your search for tuition money, look first to your current employer. Some employers might cover the full cost of tuition, while others may cap reimbursement at a dollar amount. Generally, you’ll be able to exclude up to $5,250 of qualifying educational assistance benefits from your taxes.

In addition, it’s likely that you’ll have to satisfy other requirements set by your employer to be eligible for reimbursement benefits. These may include, and are not limited to:

  • Discussing course of study with a manager or supervisor prior to enrolling (and receiving approval)
  • Pursuing a degree or training that is job related
  • Maintaining a minimum grade-point average
  • Working a certain length of time for the company before taking advantage of the benefit
  • Meeting eligibility requirements for regular benefits

Check with your human resources department to learn more about tuition reimbursement qualifications. Be sure to find out whether you can continue to work at your company while you attend school part-time.

January 15th, 2019

Women: Are you planning for retirement with one hand tied behind your back?

Women can face unique challenges when planning for retirement. Let’s take a look at three of them.

First, women frequently step out of the workforce in their 20s, 30s, or 40s to care for children — a time when their job might just be kicking into high (or higher) gear.

It’s a noble cause, of course. But consider this: A long break from the workforce can result in several financial losses beyond the immediate loss of a salary.

In the near term, it can mean an interruption in saving for retirement and the loss of any employer match, the loss of other employee benefits like health or disability insurance, and the postponement of student loan payments. In the mid term, it may mean a stagnant salary down the road due to difficulties re-entering the workforce and/or a loss of promotion opportunities. And in the long term, it may mean potentially lower Social Security retirement benefits because your benefit is based on the number of years you’ve worked and the amount you’ve earned. (Generally, you need about 10 years of work, or 40 credits, to qualify for your own Social Security retirement benefits.)

Second, women generally earn less over the course of their lifetimes. Sometimes this can be explained by family caregiving responsibilities, occupational segregation, educational attainment, or part-time schedules. But that’s not the whole story. A stubborn gender pay gap has women earning, on average, about 82% of what men earn for comparable full-time jobs, although the gap has narrowed to 89% for women ages 25 to 34.1 In any event, earning less over the course of one’s lifetime often means lower overall savings, retirement plan balances, and Social Security benefits.

Third, statistically, women live longer than men.2 This means women will generally need to stretch their retirement savings and benefits over a longer period of time.


December 31 Deadline: Your Clients’ Top Five Planning Tasks

It’s easy to think of charitable contributions at year end, given the energy of the season. But, to increase your service to clients, consider sending a reminder to showcase the value add your planning expertise delivers to clients.
Depending on your client base, you can feature any of these items:
  • Max out company retirement plan contributions
  • Reduce taxable income
  • Review required minimum distributions
  • Do a Roth IRA Conversion
  • Defer and accelerate business expenses
  • Review estate plans
  • Prepare charitable donations and planned giving
  • Review health insurance and your health savings account
  • Check your flexible spending balance
  • Start thinking about next year!

January 2nd, 2019


End of year planning: Your Clients’ Top Five Planning Tasks

It’s easy to think of charitable contributions at year end, given the energy of the season. But, to increase your service to clients, consider sending a reminder to showcase the value add your planning expertise delivers to clients.
Depending on your client base, you can feature any of these items:
  • Max out company retirement plan contributions
  • Reduce taxable income
  • Review required minimum distributions
  • Do a Roth IRA Conversion
  • Defer and accelerate business expenses
  • Review estate plans
  • Prepare charitable donations and planned giving
  • Review health insurance and your health savings account
  • Check your flexible spending balance
  • Start thinking about next year!

December 28th 2018

IRS Announces 2019 Standard Mileage Rates

The IRS has announced the 2019 optional standard mileage rates for computing the deductible costs of operating a passenger automobile for business, charitable, medical, or moving expense purposes.

Effective January 1, 2019, the standard mileage rates are as follows:

– Business use of auto: 58 cents per mile may be deducted if an auto is used for business purposes (unreimbursed employee travel expenses are not currently deductible as miscellaneous itemized deductions)

– Charitable use of auto: 14 cents per mile may be deducted if an auto is used to provide services to a charitable organization

– Medical use of auto: 20 cents per mile may be deducted if an auto is used to obtain medical care (or for other deductible medical reasons)

– Moving expense: 20 cents per mile may be deducted if an auto is used by a member of the Armed Forces on active duty to move pursuant to a military order to a permanent change of station (the deduction for moving expenses is not currently available for other taxpayers)

You can read IRS Notice 2019-02 here.


The Ideal Client Experience – Spoiler: It Starts with You

For your clients, an experience with you isn’t only the annual holiday card. It’s how consistent you are with their annual client review meetings. It’s how you’re interacting with them and providing your expertise to answer their questions. And, in the end, it’s how you’ve made them feel over the years.

Two key factors in Starbucks’ success were planning their approach and systemizing the execution. So, how can you leverage solutions available to you to do the same?

Plan Your Approach: As you consider your plans for 2019, are you segmenting your services across your client base? Do you have an explanation of your services?

Systemize Your Process: Do you consistently deliver an engaging and authentic client experience? With time as our most precious commodity, it can be difficult to do and be effective at the same time. MyCMO can help you segment your client base specifically for marketing, so the most engaging messages are reaching the right audiences. You can ensure that your automated process for communications still provides an authentic experience.


December 31 Deadline: Your Clients’ Top Five Planning Tasks

It’s easy to think of charitable contributions at year end, given the energy of the season. But, to increase your service to clients, consider sending a reminder to showcase the value add your planning expertise delivers to clients.
Depending on your client base, you can feature any of these items:
  • Max out company retirement plan contributions
  • Reduce taxable income
  • Review required minimum distributions
  • Do a Roth IRA Conversion
  • Defer and accelerate business expenses
  • Review estate plans
  • Prepare charitable donations and planned giving
  • Review health insurance and your health savings account
  • Check your flexible spending balance
  • Start thinking about next year!


Life Insurance Opportunities Within the New Tax Laws

As a result of the Tax Cuts and Jobs Act of 2017, there are key changes that open the door to life insurance opportunities.  Some of the biggest changes on business tax is the reduction in the top corporate tax from 35% to 21% and the repeal of the corporate alternative minimum tax.  With corporate tax rates lower than individual income tax rates, more capital will be retained inside the business.  We are seeing life insurance sales opportunities in:
  • Key Person coverage on business owners and non-owner employees
  • Increase in split dollar opportunities as owners focus on retaining capital
  • Increase in non-qualified deferred comp plans
  • AMT repeal removes a potential disadvantage of corporations owning life insurance.  Can possibly lead to more redemption buy-sell and corporate-owned life insurance.
Key changes on individual income tax are as follows: the top individual tax rate was reduced from 39.6% to 37% and the standard deduction was doubled.  However, this has led to a reduction or elimination of itemized deductions.  Federal gift, estate and generational skipping transfer has been increased from $5 million per individual to $10 million.  It is worth noting that this law is set to sunset back to the current law after 2025. Opportunities in estate tax exposure include:
  • States with estate and inheritance taxes with lower exemptions
  • With new higher exemption potentially going lower in 2026, now is the time to take advantage of the higher amounts
  • For generational skipping trusts, the increase in the exemptions can be applied to old trusts that may not have had a proper allocation in the past
  • Long-term wealth transfer in trusts can be leveraged further with life insurance on senior or junior generations


Life Planning with “The Investor’s Journey”

Chances are, you already help your clients plan for the financial resources they’ll need for life’s big events.

How do you take that to the next level and ensure you’re helping your clients plan for the long term, not just for specific life events as they occur?
Ultimately, the answer comes down to your philosophies around how you work with your clients and what objectives you want to help them achieve. Do you have a thorough understanding of your client’s goals and, even more so, what their passions are in life?
If not, consider reviewing the details you know about your top three clients – not only financial goals, but their life goals. Then, using The Investor’s Journey, match up whether you’ve planned for their whole life, across each timespan – Build a Foundation, Use Your Wealth, and Make It Last.


Philanthropic Solutions

Charitable giving in the U.S. surpassed $410 billion in 2017, representing a 6% increase from the previous year, according to Cerulli Associates.1 Advisor Group and Pershing understand the importance of giving strategically.  With that in mind, there are several reasons to include philanthropy in wealth management plans.
  • Supports clients’ values and their philanthropic legacy
  • Helps to potentially minimize client tax liabilities
  • May leverage appreciated assets without incurring a tax liability
  • Provides education for the next generation about the value of charitable giving
When discussing your clients’ philanthropic wishes, consider the solutions that Pershing offers:
  • Donor-Advised Funds – A separately identified fund or account maintained and operated by a sponsoring charitable organization
  • Charitable Trusts – Lets your clients support their favorite charities, realize potential tax savings and provide for beneficiaries
Providing these solutions to your clients adds value to your firm, your advisors and your clients.
Not sure how to start the conversation?  What about fees and Agreements?
1The Cerulli Report—U.S. High-Net-Worth and Ultra-High-Net-Worth Markets 2018: Shifting Demographics of Private Wealth.

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