The deal Congress made to avert the pending fiscal cliff could have been “much worse” for people in high-income brackets, Financial Advisor Magazine reports. While the deal raises taxes on high earners, it did not extend as harshly on wealthy people as expected. The deal also kept the tax code’s exemptions for estates and gifts, something some had feared would be eliminated.

The fiscal cliff deal passed by Congress last week has $600 billion in increased taxes, as well as spending cuts. The top tax bracket, which covers couples who make over $450,000 a year, or singles that make over $400,000 a year, now face a tax bracket of 39.6%.

Christopher Zander of Evercore Partners told the magazine that “the increases in taxes and limits to deductions are more favorable than expected.” He said that the fiscal cliff deal could have been much worse for wealthy people.

However, the deal raise taxes on those making between $250,000 to $450,000 a year, even if those who make over $450,000 a year didn’t get as bad a tax hit as they expected. In addition, capital gains and dividends went up from 15 percent to 20 percent. There will also be a 3.8 percent surtax on investments by high-income people, to pay for President Obama’s health care law.

There were concerns about the complexity of the deal. “There were hopes that there would be more simplicity to the tax code,” Zander said. “It has now become even more complex.”

Written by Lisa Swan

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According to a new survey, wealthy people in America say that the economy matters more than the federal government cutting spending.

OnWallStreet.com says that the survey of 1,700 people by Northern Trust revealed that 44 percent of rich Americans say that President Barack Obama’s first priority should be economic growth, with 19 percent saying deficit reduction is most important and 15 percent say political gridlock should be the first priority.

According to the article, “tax increases and spending cuts” are supposed to begin in January 2013 unless the president and Congress can negotiate an end to the fiscal cliff. And 31 percent of the wealthy with at least $5 million to invest are planning to make changes in their lives to deal with possible changes in tax laws.

Suzanne Shier of Northern Trusts said that the “results show that high-net-worth Americans are taking active steps to adapt to a changing tax environment.”

Written by Lisa Swan

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What will happen in the world of financial advisors for 2013? OnWallStreet.com talked with people in the financial services industry about what to expect next year. Here are some of their thoughts:

Joe Masterson of Diversified said that specialist retirement advisors will get a larger share of retirement plans. This will mean that this part of the industry “is about to embark on a new era of growth and development,” OnWallStreet.com says.

Paul LaPiana of MetLife said that there will be some new products being rolled out in 2013, due to low interest rates. In addition, he said that financial advisors will pay attention to tax-efficient methods to help their clients with all the pending tax changes.

Joe Hurley of SavingForCollege.com said that there will be additional fee-based 529 plan share classes, as well as increased interest in 529 plans. And Jason Hsu of Research Affiliates said that equities in emerging markets could be a good place to invest in as opposed to U.S. equities.

Written by Lisa Swan

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So much for those transparency promises that Republicans made when they took over the U.S. House of Representatives in 2010, in which they said that any bill they proposed would  be posted online 72 hours in advance of any vote. Investment News notes that with the legislation the Republicans proposed to solve the fiscal cliff issue, that promise was not kept. That’s because the two bills were only posted 24 hours before a vote.

The article says that “as we reach the end of the fiscal-cliff hanger, it’s becoming clear that the transparency promise is being violated.” Investment News says that “both parties are adept at keeping the public in the dark about what’s going on in the capital.”

As it turns out, House Republicans rejected Speaker of the House John Boehner’s so-called “Plan B,” so the point may be moot. But the issue is still one that matters as far as keeping promises.

In addition, as the publication notes, it’s not only Republicans who are keeping citizens in the dark. Investment News notes that President Barack Obama’s own fiscal cliff plan is hard to find details on, with most details coming from “leaks from administration aides that are then published in the media.“

Written by Lisa Swan

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Choosing a Broker-Dealer – What to Do

Posted by adaniels in Blog on December 26, 2012 - (0 Comments)

There are over 1,000 independent broker-dealers out there, notes Ned Van Riper of OnWallStreet.com. So how do financial advisors decide which one to go with?

Van Riper notes that many advisors will choose a broker-dealer based on things like going with the first recruiter who calls, or checking an industry publication to see which one ranks highest on some metric like which one has the most advisors.

He says that unfortunately, some advisors go with who offers the biggest financial reason, even though this could tie them up financially with the broker-dealer even though it doesn’t ultimately work for them. Van Riper writes that “reality hits advisors after 12 months and they realize they affiliated with a firm whose culture, strategic direction or business mix does not align with their own.”

Instead, advisors should look for the broker-dealer that best fits their own vision. The author says that it is important that advisors do their homework, much like their clients do their own homework on hiring advisors, to find the best broker-dealer for themselves and their own clients.

Written by Lisa Swan

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The movie Lincoln is a big hit at the box office, and it is also a favorite with the critics. But as Danielle and Andy Mayoras noted in an OnWallStreet.com column, Abraham Lincoln was also noteworthy for something related to financial planning. He died without a will. 

 So OnWallStreet.com took a look back in history to see what happened to Lincoln’s estate after his passing. After his father was assassinated in 1865, Robert Lincoln sent a telegram to Justice David Davis of the U.S. Supreme Court about his father, asking him to take over the 16th president’s financial affairs.

Davis became administrator of the estate and said that it was worth $85,000 (several million in today’s dollars.) Ultimately, the estate would be divided between Robert and Thomas Lincoln, the Lincolns’ other living son, as well as Mary Lincoln. In addition, Congress gave Mary Lincoln a lump sum closely equivalent to $25,000, Lincoln’s yearly salary as president. 

 The estate was divided up in 1867, with it ultimately being worth $110,296.80, divided among the three heirs. In addition, Mary could have gotten extra money as a cash allowance because of her being the widow, but she turned that down. For his part, Davis, a close friend of the family, did his legal work for free, even though he could have earned $6,600 for it. 

 It is shocking that Lincoln did not have a will, but it’s even more shocking that between 55% and 67% of all adult Americans do not have a will either. While Lincoln’s situation worked out, most real-world cases today without a will would involve hiring lawyers, and paying big legal fees. As the article notes, “Estates with no wills can be extra complicated and sometimes messier.  Not every family has a Supreme Court Justice willing to step in and help.” An important key to financial planning is having a will.

Written by Lisa Swan

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In order to be on track for 2013, you should tell your financial advisor what life changes you have had in 2012. In addition, there are some questions you really should ask your financial advisor at the end of the year. Here is what The Daily Finance thinks you should talk about:

  • Do you need to make portfolio changes? Perhaps it’s time to think about new asset allocation distribution.
  • What about tax-deferred accounts? Maybe you should add money to thinks like IRA s and 529 plans. Perhaps it’s time to change your regular IRA to a Roth IRA. Also ask your advisor about your 401(k), if you have one.
  • Do you need to do any new tax strategies before the end of the year? Keep in mind that taxes could be higher in 2013.
  • How did your portfolio do this year? You need to know if you made money or lost money, and how your portfolio did as compared to other people and benchmarks. You also need to see if you are on track to make your financial long-term aspirations.
  • How much are you paying in fees for your portfolio? You want to make sure you are not paying too much to have your portfolio. Ask your advisor for a breakdown of the fees.
  • What can you do to have a great 2013? You want next year to be financially fruitful for you. Learn from your mistakes, get advice from your financial advisor, and move on.

Written by Lisa Swan

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According to a new survey, financial advisors could be missing out on younger clients if they don’t keep up with technology.  Financial-Planning.com reports that a study by Cisco Internet Business Solutions Group says that younger investors want to see their financial advisors use the latest in technology.

The study reported that 20% of what they call “Wealthy Under-55s” were planning on switching financial advisors over the next year. In addition, the lack of technology use by some financial advisors could be a deciding factor.

Robert Waitman, who directs Cisco IBSG Financial Services Practice, says that “some advisors don’t favor using the new technology.” He said that “they may feel that no changes need to be made in the way they run their practices.” Waitman said that “many investors want video in t, he mix.”

Some investors would like webinars or video conferencing, the survey says. But Waitman told tFinancial-Planning.com that financial advisors should make sure their technology is up to snuff before diving in.  He said that financial advisors who want to use video “should choose high-quality equipment, to look and feel professional.”

Written by Lisa Swan

 

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There are tax changes expected in Washington, D.C. in the near future, and many investors are concerned about it, says a new survey. Yet most of them are not planning to talk to their financial advisors about it, which could be a missed opportunity.

Financial Advisor Magazine writes on a report by Nationwide Financial. According to the survey, 63 percent of high-net-worth investors are concerned about what is going on in Washington over taxes, yet most of them are not thinking about talking to their financial advisors about it. Nor do the investors think that they can do anything about the shenanigans in Washington.

In addition, according to this survey, which talked to 751 investors who had $250,000 or more a year of annual income, 56 percent think that their tax rates will be raised.

Eric Henderson of Nationwide said that “there is a huge opportunity for advisors to proactively engage clients in a discussion about how tax code changes may impact their portfolio.” He suggested that advisors who are proactive on this issue can build trust with their clients and foster long-term relationships. 

Written by Lisa Swan

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A new survey reveals that millionaire men and women have very different opinions when it comes to getting financial advice. Financial Advisor Magazine writes about Fidelity Investments 2012 Millionaire Outlook Study, which shows how each gender deals with financial advisors.

According to the study, women take less risks, and are more focused on “holistic planning,” the article says. On the other hand, men are more focused on the return on investment. Men are almost twice as likely as women to be concerned about investment returns.

In addition, women are more likely to rely on financial advisors than men, according to the survey. They are also tied to specific advisors more than men. The study, which spoke with 1,520 people, including millionaire investors, showed that 45 percent of women would move firm to follow their financial advisor if the person went elsewhere, while only 23 per cent of men would do so.

Alexandra Taussig of National Financial, a Fidelity company said that “based on these findings, it is important for financial advisors to recognize that women may be looking for different investment strategies or have a different set of financial concerns that deserve consideration.”

Written by Lisa Swan

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