MEDIA REVIEWS – February 16-28, 2019

I really liked Dan Moisand’s column talking about dumb things that clients will do in a market downturn, that are not the typical “retreat to cash” response.

Ed Slott does his usual excellent job of providing advice about IRA distributions in the most tax-efficient possible way, and Greg Friedman of Private Ocean is going to be accused of being a rollup or consolidator if he makes any more purchases in the advisor space.

Articles that received a “high” relevance rating:

“Sheryl Garrett Steps Down from Her RIA”
by Karen DeMasters
Financial Advisor, February 2019
https://www.fa-mag.com/news/sheryl-garrett-steps-down-from-her-ria-42933.html?issue=312
Relevance: high

She’s leaving her position as CEO and chief compliance officer at Garrett Investment advisors, her RIA, but will continue her role at the Garrett Planning Network.  Justin Nichols will take over as head of the firm, and move it from Eureka Springs, AR to Manhattan, KS.  The firm includes 30 advisors throughout the U.S.  Garrett Planning Network has 250 member firms and is currently growing.  (p. ?)

“Tax Alerts for Advisors to Share with CPAs”
by Ed Slott
Financial Advisor, February 2019
https://www.fa-mag.com/news/tax-alerts-for-advisors-to-share-with-cpas-42889.html?issue=312
Relevance: high

Some clients will have taken their required minimum distributions before they knew about qualified charitable distributions, and missed out on the tax-efficient way to make charitable contributions for IRA owners who are age 70 1/2 or older.  Donor-advised funds don’t qualify, and neither do gifts made to private foundations.  Slott’s advice: for 2019, make sure clients don’t miss the QCD opportunity, reducing the AGI and making certain itemized deductions like medical expenses a bit higher.  The program will also know if the client qualifies for the Retirement Saver’s Tax Credit of up to $1,000 per person.

Slott also believes you should enter your Roth IRA contribution amount into the tax program, even though it will not appear on the tax return.  The program will have diagnostics that will determine whether the client qualifies for making the contribution (they don’t if they don’t have any earned income, or if their income is too high).  It will also record the basis of the contributions, which is helpful if the client needs to take early withdrawals (before age 59 1/2). 

Finally, make sure clients take their full RMD, because missing any or all of it carries a 50% tax penalty on the amount not withdrawn.   (p. ?)

“Fleeing to Cash Not the Only Investment Mistake”
by Dan Moisand
Financial Advisor, February 2019
https://www.fa-mag.com/news/fleeing-to-cash-not-the-only-investment-mistake-42894.html?issue=312
Relevance: high

Markets go down, and clients want to retreat to cash.  But bear markets are also time when “bad products” are pitched to clients.  Among them: Gold, pitched as protection against economic harm and an antidote to the doom of a dollar collapse.  Alternative investments get a lot of press during bear markets, but they include higher costs, greater risks and no guarantee they will navigate choppy markets.  Deferred annuities “guarantee” that the won’t go down in value.  Many carry high surrender fees or otherwise restrict access to the funds.  They also add complexity when converting money to Roth IRAs accomplishes more with less complexity.

Then there are complex options strategies, which are not free, and which require you to be right about which way the market is going to go, how far it will move and the time frame in which the move will occur. 

In all cases, the focus moves away from a sound long-term plan toward market timing and higher expenses.  (p. ?)

“On the Acquisition Trail”
by Eric Reiner
Financial Advisor, February 2019
https://www.fa-mag.com/news/on-the-acquisition-trail-42895.html?issue=312
Relevance: high

Greg Friedman, of Private Ocean, sold his Junxure CRM and closed two purchases of advisory firms.  The first was Mosaic Financial Partners in San Francisco, where he bought out founder Norm Boone and took on a management team that included Kevin Gahagan, Channing Hussy and Sabrina Lowell, and offices in San Francisco and Walnut Creek, CA.  Boone is busy retaining his Mosaic clients with the new firm.

Friedman also purchased Seattle’s Lakeview Financial Group, with $380 million under management, three owners and seven staff members.  Managing these multiple offices means holding twice-yearly company-wide meetings where everyone comes together, and employees visit other offices for days at a stretch to work alongside their new colleagues.  There is an internal company newsletter.  (p. ?)

The rest of the articles:

“Advisor’s Advice to Advisors: We Can Make the World a Better Place”
by Jeff Schlegel
Financial Advisor, February 2019
https://www.fa-mag.com/news/advisor-s-advice-to-advisors–we-can-make-the-world-a-better-place-42927.html?issue=312
Relevance: moderate

Matthew Ramer of MOR Wealth Management in Philadelphia gives 10% of his B Corporation’s profits back to the community each year, invests in funds screened for social responsibility, and encourages his eight staff members to engage in volunteerism.  Clients are encouraged to donate at least 0.3% of their earned income each year to charitable causes.  (p. ?)

“Last-Minute Tax Moves for Wealthy Clients”
by Jeff Stimpson
Financial Advisor, February 2019
https://www.fa-mag.com/news/last-minute-tax-moves-for-wealthy-clients-42930.html?issue=312
Relevance: low

The article says that many clients will file their taxes near the April 15 deadline.  The $10,000 cap on state and local taxes and higher standard deduction means the charitable deductions are harder to come by.  Fewer clients will be subject to AMT.  (p. ?)

“Advisors are Underutilizing Financial Technology”
by Raymond Fazzi
Financial Advisor, February 2019
https://www.fa-mag.com/news/advisors-are-underutilizing-financial-technology-42932.html?issue=312
Relevance: low

A Cerulli study says that 75% of advisors feel they could get greater leverage from their tech tools, 58% feel their clients value their access on mobile devices and 54% said clients value a “robust” tech platform.   (p. ?)

“Will Your Clients’ Kids Freeze You Out?”
by Tracey Longo
Financial Advisor, February 2019
https://www.fa-mag.com/news/will-your-clients–kids-freeze-you-out-42880.html?issue=312
Relevance: low

Apparently there is now a cottage industry of consultants who will help advisors bond with their clients’ heirs and help them keep managing those assets.  Richard Orlando, of Legacy Capitals (former director of Merrill Lynch’s Global Practice Management Consulting Group), conducts workshops and online training for advisors showing them how to engage their clients’ heirs.  His clients include J.P. Morgan, Merrill Lynch, Morgan Stanley, Raymond James and UBS.

The article tells us that many advisors never meet with the clients’ kids and fail to make them clients as well.  Gail Graham, former CMO of United Capital, now with Graham Strategy, says that firms need to serve multiple generations.  Typical of the examples in this article is the $50 million client whose heirs were on the verge of changing advisors—until the consultant was brought in to convince them to stay.  (p. ?)

“The Quality Factor Takes Center Stage”
by Evan Simonoff
Financial Advisor, February 2019
https://www.fa-mag.com/news/the-quality-factor-takes-center-stage-42888.html?issue=312
Relevance: low

The gist here is that following the slowdown in the 4th quarter last year, advisors should be focusing on “quality” firms.  There are a variety of measurements: free cash flow divided by total assets, ore return on equity combined with debt-to-equity and earnings viability.  Some managers take a “forward-looking approach.”  The article speculates about the prospects of General Mills, Disney, Procter & Gamble and a variety of tech companies.  (p. ?)

“The Four Transitions of Aging”
by Steve Gresham
Financial Advisor, February 2019
https://www.fa-mag.com/news/the-four-transitions-of-aging-42891.html?issue=312
Relevance: moderate

This is a VERY general article about helping clients navigate their elder years.  Ask clients what they want to do regarding their future health care.  Help clients navigate their declining mental faculties.  Help them find appropriate living facilities as they age.  And help them know when to give up driving.  (p. ?)

“The Art of Framing and Discovery”
by Russ Alan Prince and Brett Van Bortel
Financial Advisor, February 2019
https://www.fa-mag.com/news/the-art-of-framing-and-discovery-42892.html?issue=312
Relevance: low

Did you not know this?  “Discovery” is learning clients’ worldview, needs and wants, wishes and dreams.  It helps you determine what is meaningful to people.  “Framing” is the ability to communicate the value you provide to clients.  You want this message to resonate, so avoid jargon, and you want to link your recommended “financial services and products” with the agendas of your prospects and clients.  The article goes through, yet again, the author’s nine “high-net-worth personalities:” Family Stewards, Independents, Phobics, Anonymous, Moguls, VIPs, Accumulators, Gamblers and Innovators.  (p. ?)

“Bracing for Turbulence in Fixed Income”
by Jerilyn Klein Bier
Financial Advisor, February 2019
https://www.fa-mag.com/news/bracing-for-turbulence-in-fixed-income-42899.html?issue=312
Relevance: low

Are the Fed rate hikes over for now?  Global growth has slowed due to trade wars and tensions between the U.S. and its trading partners.  Where do you look for value in the bond markets?  Some are looking to sovereign debt in emerging markets, others to high yields, others ultra-short fixed income.  The article also mentions master limited partnerships and the value of Treasuries and U.S. agency securities.  (p. ?)

“Building Fortifications”
by Karen DeMasters
Financial Advisor, February 2019
https://www.fa-mag.com/news/building-fortifications-42900.html?issue=312
Relevance: low

What will the next bear market look like?  Companies and individuals have more solid balance sheets today than they did in 2008.  Some advisors are buying put options to protect their clients from falling markets.  Others are switching to alternatives and commodities.  Wealthier investors are rotating into private equity, real estate, hedge funds, infrastructure and natural resources.  The article cautions against retreating totally into bonds; instead create an income floor with an annuity, or move money out of stocks into real estate.  (p. ?)

“Waiting for the Shoe to Drop”
by Marla Brill
Financial Advisor, February 2019
https://www.fa-mag.com/news/waiting-for-the-shoe-to-drop-42903.html?issue=312
Relevance: low

We are told that managed futures programs are ideal for investors during bear markets, because their short positions make money.  The article mentions the Altegris Futures Evolution Strategy and Artivest.  (p. ?)

“Don’t Shun this Tax Election”
by Michael Nathanson, Joshua Nathanson, Matthew McKeown and Sean Kelly
Financial Advisor, February 2019
https://www.fa-mag.com/news/don-t-shun-this-tax-election-42906.html?issue=312
Relevance: moderate

Section 83(i) of the Internal Revenue code lets clients defer taxable income that would otherwise be recognized when stock options are exercised or restricted stock units are settled.  If the eligible corporation transfers qualified stock to an employee, then that employee can defer income (and the associated taxes) for up to five years.  The employee can make a Section 83(i) election within 30 days of exercising an option or settling a restricted stock unit, deferring the ordinary income that would otherwise be part of taxable income.  However FICA is not deferrable and must be paid, generally through withholding.  If the employee holds the stock for more than a year, the difference between the sale price of the stock and its fair market value when acquired would be taxed as a long-term capital gain or loss.

The article notes that not all companies would qualify; this election is only available for private companies in which at least 80% of employees are granted either options or RSUs.  Only employees who own less than 1% of the company can qualify, and the election does not always apply to state taxes.  (p. ?)

“To Counsel Clients Correctly, Avoid Partisanship”
by Damian Ornani
Financial Advisor, February 2019
https://www.fa-mag.com/news/to-counsel-clients-correctly–avoid-partisanship-42907.html?issue=312
Relevance: moderate

The author says you should check your own political biases at the door when attempting to counsel clients.  If you are perceived by a politically-charged client as being “of the other camp,” your advice will be rejected.  Communicate that your investment outlook and advice aren’t connected to any view of a politician or party.  No party is superior for stocks.  (p. ?)