Archive for February, 2015

Are the 1% really just like the rest of us?

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Saturday, February 28th, 2015 EN No Comments

The Five Keys to the Future of Asset Management

The Five Keys to the Future of Asset Management by Peter Hans, President and Co-Founder, Harvest

In order to sustain, one must evolve. In order to grow, one must evolve faster.

I started my Wall Street career in 2000 trading short duration bonds, primarily interest rate derivatives. Products like these are what “Wall St.” has historically deemed as innovation. The synthetic creation of products such as CDOs, and CDOs of CDOs, and CDOs of CDOs of CDOs, is a form of innovation; however, lasting innovation serves to improve the value proposition for the end consumer. Most Wall Street investment product innovation simply serves to increase fee revenue further perpetuating mistrust.

Despite the differences between the asset management industry and the investment banks which create and sell “innovative products,” they are broadly viewed as synonymous. Plus, their major pain points are the same: high customer acquisition costs, and the subsequent difficulties in achieving economies of scale. Managing money for a fee, and selling financial products to a diverse client base, are inherently scalable businesses; however, acquiring and maintaining clients is exceedingly expensive and currently reliant on intermediaries.

As we know, banks sought to achieve operating leverage through the cross-selling of new “innovations,” as opposed to targeting a more efficient work flow.   One might assume that the asset management industry would learn from the mistakes of the banks, but instead of treating the disease and high costs, managers instead focus on the unsustainable Band-Aid of supporting margin via high, and opaque fees. Excessive fees, in the absence of branded differentiation, create an unsustainable business, especially for an industry with the inherent volatility of active portfolio management.

The asset management industry is in the midst of a dangerous combination of mistrust, a lack of transparency, a lack of brand differentiation, and a corresponding questionable value proposition. These characteristics have helped to spur real innovation in the form of competing companies and product offerings. From the introduction of ETFs and on-line brokerage, to recent start-ups aimed at displacement, such as Wealthfront, Motif, and Robinhood, the asset management industry faces significant threat. This threat also comes at the worst possible time.

There is an estimated $60T wealth transfer already underway, and global high-net worth and mass affluent wealth is projected to top $100T in the next five years. The next generation of investors will hold significant wealth, are highly informed, and place emphasis on attributes that are currently glaring weaknesses for most financial advisors and active portfolio managers.

There are a handful of advisors and managers who are evolving by focusing on communication, networks, social impact, transparency, and the establishment of a brand offering expertise and differentiation. Those who are evolving will be best positioned to flourish, those who don’t keep pace will atrophy, and those who refuse to evolve will disappear.

Call me an optimist, but we should have confidence that the broader asset management industry is merely slow, not stupid. Thus, the question managers must be asking themselves is, what are the key trends to capitalize on, and what will the industry look like in the next 10 years?

Asset Management – Key Trends:

  1. A bifurcation of global and regional asset managers
  2. A growing focus on brand establishment and differentiation
  3. A mass adoption of technology for improved efficiency, communication, data, and client engagement
  4. A shifting focus from expensive intermediaries to scalable lead generation, client acquisition, customer service, and retention
  5. A more simple and transparent fee structure leading to easier communication of differentiation, consumer trust, and an environment of manager meritocracy
  • Bifurcation – Any asset gatherer will tell you that raising money is hard. You can find the stats anywhere, but roughly speaking 95% of AUM is managed by 5% of funds. Much of this discrepancy is due to misaligned incentives and high corresponding customer acquisition costs. But regardless of the reason, it’s the reality, a reality that only perpetuates the problem. As a result we are seeing the large become increasingly global with diverse product and service offerings. Large mutual fund complexes and large managers of Hedge Funds and other alternatives are beginning to look the same, and in the near future there will be little differentiation. Simultaneously, the barriers to entry for a small manager are zero, but the barriers to scale remain high. As a result we will continue to see small and emerging managers compete on a more regional level with a highly specialized and differentiated product offering. These entities will also need to focus on scalable asset gathering from regional advisors, or directly from HNWIs in the form of a master fund or separately managed accounts.
  • Brand differentiation – Regardless of size, the need for brand awareness and differentiation will be paramount. The managers and advisors who best succeed in the future will be the ones to effectively educate their target client base on who they are, what they stand for, and what differentiates them from competition. The best manager marketing will serve to educate potential clients thereby solidifying the manager’s subject matter expertise and differentiation while working to establish client engagement and trust. In the near future, managers will differentiate between IR, PR, and marketing, and the most successful managers will have considerable resources devoted to all three efforts.
  • Technology – Asset management has severely lagged other industries when it comes to adoption of new technologies; however, with an increased focus on cyber security, compliance, and cost/efficiency solutions, technology adoption will become mission critical to growth in the asset management industry. There are opportunities abound in data mining and visualization, customer acquisition solutions, client engagement and retention solutions, as well as a number of applications for enhanced internal efficiency and communication. It will soon become the norm for an asset manager to employ a CTO, a Digital Marketing Officer, and a Social Media Coordinator.
  • Economies of Scale – Excessive management fees can be directly attributed to unsustainably high customer acquisition costs. Through adoption of technology and scalable digital marketing, managers will be able to more efficiently grow AUM. Additional adoption of new communication technologies focusing on security, compliance, and client workflow will lead to enhanced client engagement, trust, retention, and network growth. Smaller, more regionally focused investment managers, increasingly targeting a growing but fragmented HNWI client base, will also require a more scalable and sustainable means of client outreach and communication. The most scalable customer acquisition models will allow individual and smaller institutional investors to seamlessly discover the financial expertise, products, and services that are right for them. As an efficient marketplace(s) of financial product buyers and sellers is established, data will be accessed in order to further inform the financial firm allowing them to best target clients with the highest likelihood of converting. Additionally, unlike today’s fears of data being used against the consumer, data in this case will be transparently offered, and disclosed for the mutual benefit of both sides of the transaction. As a result, cold calling and LinkedIn Corp (NYSE:LNKD) spam messages will meet a very welcomed death.
  • The most innovative financial companies have shared a single characteristic that is at odds with much of the opaque culture of Wall St., transparency. Firms such as Charles Schwab Corp (NYSE:SCHW), Vanguard, and iShares, all attacked consumer pain points by offering a high quality, and far more transparent product, for a fraction of the cost. Now it’s very possible that higher levels of service, or more differentiated offerings from more expensive alternatives are worth the price discrepancy; however, in the absence of information, a consumer can only assume that it isn’t. We are currently seeing similar attempts at displacement in the form of Wealthfront, Robinhood, and Motif Investing. My prediction; however, is that traditional active management will survive by evolving into a culture built on transparency, communication, and a differentiated offering; and all with a more straightforward and clear fee structure based on the level of service a customer seeks. Just as ETFs eventually became a compliment to the active management industry, and a powerful tool of the investment advisor, Robo-Advisors will become a key product offering for financial advisors, and the cost of executing equity trades will continue to approach zero for all.

As these predicted trends become more of a reality an environment of transparent expertise will be established. This will allow financial professionals to enter the market, compete, and grow based on the value of the services that they provide. This will ultimately lead to a better value proposition for the manager, as well as the client. Ultimately, this will lead to something that “Wall St.” hasn’t seen in a long time, true, lasting, innovation.

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Saturday, February 28th, 2015 EN No Comments

Obama’s retirement investment protections explained – WLS

President Obama says he wants greater protections for retirement investing. He unveiled broad strokes of a proposal Monday that would hold financial advisers handling individual to a higher standard than they currently are. The change means financial advisers would be held to a so-called fiduciary standard.

Translation: They would formally have to put the best interests of their clients ahead of their own interests by recommending the best product — even if that means taking a smaller fee for their services. The President acknowledged that many financial advisers already do that, but it wants to extend the standard industry wide.

Cliff Morgan is co-founder of Strategic Wealth, a wealth management firm. He explained some of the president’s proposals.

1. Eliminate the special tax break for NUA
The proposal – Net unrealized appreciation, or NUA, one of the biggest tax breaks in the entire tax code for some retirement account owners, would be eliminated if this proposal were to become law. To be eligible to use the provision, which allows you to pay tax on some of your retirement savings at long-term capital gains rates, you must have appreciated stock of your employer (or former employer) inside your employer (or former employer)-sponsored retirement plan and follow certain rules. Any plan participant 50 or older by the end of this year (2015) would still be eligible for the special NUA tax break, provided they meet all the rules.
Cliff’s Comment – The tax break for NUA has been around for decades and now, it suddenly finds itself under attack. Although those 50 and over would be exempt, younger savers who invested in the stock of their company within their retirement plan would miss out on the tax break.

2. Limit Roth conversions to pretax dollars
The proposal – After-tax money held in your traditional IRA or employer-sponsored retirement plan would no longer be eligible for conversion to a Roth account.
Cliff’s Comment – For years, many taxpayers that have been restricted from making contributions directly to Roth IRAs (because their income exceeded their applicable threshold) have instead, made contributions – often nondeductible (after-tax) – to traditional IRAs. Then, shortly thereafter, they have been converting those contributions to Roth IRAs. This two-step process, would be all but eliminated by this provision.

3. ‘Harmonize’ the RMD rules for Roth IRAs with the RMD rules for other retirement accounts
The proposal – To further “simplify” the RMD rules, the administration seeks to impose required minimum distributions for Roth IRAs in the same way they are imposed for other retirement accounts. In other words, this proposal would require you to take distributions from your Roth IRA once you turn 70 in the same way you would for your traditional IRA and other retirement accounts. If, however, you are already 70 at the end of this year (2015), you would be exempt from the changes that would be created by this proposal.
Cliff’s Comment – This is one of the most egregious proposals in the entire budget. Countless individuals made Roth IRA conversions over the last 17 years, and many of them did so, in part, due to the fact that Roth IRAs have no required minimum distributions. To change the rules now, after people have already made these decisions, would be terribly unfair and would constitute a tremendous breach of the public’s trust. At the very least, the administration should grandfather any existing Roth IRA money into the “old” rules should this provision ever become law.

4. Eliminate RMDs if your total savings in tax-favored retirement accounts is $100,000 or less
The Proposal – If you have $100,000 or less across all your tax-favored retirement accounts, such as IRAs and 401(k)s, then you would be completely exempt from required minimum distributions. Defined benefit pensions paid in some form of a life annuity would be excluded from this calculation. Required minimum distributions would phase in if your total cumulative balance across all retirement accounts is between $100,000 and $110,000. Those amounts would be indexed for inflation.
Cliff’s Comment – There’s really no reason why someone with a $15,000, $20,000 or even $100,000 IRA should be forced to withdraw specified amounts from their retirement account each year. It simply creates complexity without any real benefit. Sure, some will argue that $100,000 amount should be higher, but in the end, a line had to be drawn somewhere. There will always be those on the other side.

5. Create a 28% maximum tax benefit for contributions to retirement accounts
The proposal – The maximum tax benefit (deduction or exclusion) you could receive for making a contribution to a retirement plan, like an IRA or 401(k), would be limited to 28%. Thus, if you are in the 28% ordinary income tax bracket or lower, you would be unaffected by this provision. However, if you are in a higher tax bracket, such as the 33%, 35%, or top 39.6% ordinary income tax bracket, you wouldn’t receive a full tax deduction (exclusion) for amounts contributed or deferred into a retirement plan.
Cliff’s Comment – This one is sure to be another politically divisive aspect of the overall budget proposal. If this provision were to become law, it would create a terrible compliance burden for those in the highest tax brackets with respect to their retirement accounts. According to the Greenbook, if a tax benefit for a contribution to a retirement plan was limited by this proposal, it would create basis within a person’s retirement account.

6. Establish a ‘cap’ on retirement savings prohibiting additional contributions
The proposal – This proposal would prevent you from making any new contributions to any tax-favored retirement accounts once you exceeded an established “cap.” The cap would be calculated by determining the lump-sum payment it would take to produce a joint and 100% survivor annuity of $210,000 a year, beginning when you turn 62. Currently, this would cap retirement savings at approximately $3.4 million. The cap, however, would be a soft cap, as your total tax-favored retirement savings could exceed that amount, but only by way of earnings. Adjustments to account for cost-of-living increases would also apply.


Saturday, February 28th, 2015 EN No Comments

Of Rigged Markets and Profitable Emotions


“Does the retail investor really stand a chance to make money in the long run?” was a question posed recently by an industry friend. Before drawing any conclusions, let’s decide who would be on the other side of the retail crowd. Much has been reported about high frequency trading (HFT) firms, at least some of which was based on a public debate triggered by Michael Lewis’s latest book, “Flash Boys,” suggesting that the entire U.S. stock market is “rigged,” leaving so-defined “black box traders” in a far better position to capture market returns than us “regular Joes.” I cannot intelligently comment on Lewis’s point, as it is a complicated matter, which, quite openly, I do not know enough about. My own findings are somewhat peculiar, but lead me in a different direction altogether. 

A recent IPO filing by one of those HFTs highlights the issue: Virtu Financial, Inc. a New York-based, self-proclaimed “leading technology-enabled market maker…” was in the run-up to a public offering in March of last year, but scratched those plans after the public debate over Lewis’s claims did not shine a good light on HFTs’ operating practices. Nevertheless, the firm is back, and a review of the business model (or performance, for that matter) is astonishing: in 2014, Virtu, a rather small shop (compared to large traditional Wall Street firms), with not even 150 employees, has not lost money on any single day of trading, leaving owners with a $190 million net profit on $723 million in revenues. In fact, when expanding the time horizon, of the last 1,485 trading days, Virtu only lost money on one single day. 

There is an opposite side to my discussion, not linked to quantitative market returns, but rather to qualitative judgment and emotions applied when making investments. For example, pessimism can be linked to better financial decision-making. Those who tend to be defensively pessimistic will more likely invest using precautionary measures that help optimize returns. On the other hand, the right dose of prospection (daydreaming) and mental contrasting will position investors more optimally in identifying obstacles. Quite obviously, investors do stand a chance to “outsmart” the “dark matter” of financial computing power, but only if emotional intelligence can be accepted as a basis to support a better investment outcome; this is commonly where the issue lies: we tend to assign more value to the methodical and complicated rather than to our common sense. 

Yet another twist can be found in our discussion. A commonly voiced opinion is that no one can beat equity markets in the long run – not even the most skilled investor. This claim is often paired with a “sales pitch” for profiting from using index funds (and their inherently lower cost structure) as part of portfolio construction. Whereas this argument has a clear academic basis, the “active crowd” is certainly not asleep at the wheel. In support of this idea, a new study examining performance data of more than 200 pension funds over a 20-year period brings to light exactly the opposite: alpha apparently is not zero (or less), as claimed by most “indexers,” but instead active management was able to generate about 12 bps of outperformance on an annual basis (net of fees). However, the remaining question is whether or not the outcome was worth the effort and risk of picking the “right” managers.

In conclusion: It may be a noble idea to unearth the secrets of Wall Street, as Lewis has attempted to do, but the topic is largely irrelevant to the private investor. This in mind, the answer to my friend cannot be that if someone can do it better, let’s not do it at all. Private investing still has merit, especially with the objective of maintaining long-term purchasing power. Asset allocators are generally better off when held to a disciplined process, preferably on the basis of a financial plan, as I suggested in “A Contract with Myself.” It is essential to combine the qualitative andquantitative: a balance between emotional intelligence, common sense, investment acumen, and financial planning will be key to success. It is not important to beat markets, but rather to accomplish personal goals under consideration of the right risk/reward when choosing an advisor or investment. 



Matthias Paul Kuhlmey is a Partner and Head of Global Investment Solutions (GIS) at HighTower Advisors. He serves as wealth manager to High Net Worth and Ultra-High Net Worth Individuals, Family Offices, and Institutions.


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Friday, February 27th, 2015 EN No Comments

Planning for Divorce When Drafting a Trust


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Trusts  Estates

Feb 27, 2015

Marriage can be wonderful, but it can also be hard.

Confronting Our Clients’ Greatest Parenting Fear

Like many of you, I was at the Heckerling Institute on Estate Planning in Orlando, Fla. last month.

Two statements were made relating to divorce that inspire me to comment.  The first was that a trust should be drafted to remove a spouse automatically in all capacities upon divorce.  The second suggested that the spouse should be removed not just upon divorce, but upon the filing of a divorce action.

In recent years, I’ve spoken a bit on the topic of planning for divorce and have had the opportunity to reflect on some of the realities of marriage and divorce and my own view of best practices.  I’ve personally seen and heard stories about situations in which a machete approach of treating a spouse as immediately deceased upon the filing of a divorce action has backfired and ultimately frustrated the settlor’s true wishes.

The reality is that marriage can be wonderful, but it can be hard.  Some couples go through tough times in their relationship, from which they may not recover.

Approximately 50 percent of couples in America divorce, but the rates are lower for a couple when the wife has completed college.  Only about 20 percent of women who complete college end up divorcing.  Using education as a proxy for wealth, this can mean that rates for divorce for our affluent couples probably are much lower than national averages in most parts of the country.

Moreover, not all divorces are acrimonious.  People divorce for many reasons.  Divorced couples sometimes remain close and continue to raise their children together.  Sometimes they want to provide for each other above and beyond what’s required by the divorce order.  Sometimes they’re divorced for some years and then remarry each other.

Even when there’s acrimony, leaving the trust assets on the table during negotiations can enable the parties to make beneficial deals that can protect family business interests or other assets from division.  If a spouse is immediately deemed predeceased and cut out of an instrument upon the filing of a divorce action, this limits flexibility.

Along the same lines, not all divorce filings lead to divorce.  A number of filed divorce petitions are withdrawn each year.  So if the instrument removes a spouse upon the filing of the action, there needs to be a method for restoring the spouse if the action is withdrawn and the couple decides to remain married.

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Friday, February 27th, 2015 EN No Comments

Investors Tell Hedge Funds They Want Lower Fees – Survey


By Svea Herbst-Bayliss

BOSTON, Feb 26 (Reuters) – Institutional investors are sending a strong message to hedge funds after last year’s largely lackluster returns: charge us less and perform better.

Nearly one quarter of 134 investors polled by Preqin Ltd said fees would be a key issue in 2015, the research group wrote in its first-half outlook, released on Thursday.

And 30 percent of investors said fees will factor into their manager selections, up from 21 percent who said they took costs into account when the group was last polled in 2013.

The data could put fresh pressure on managers to trim fees after the industry posted its worst results since 2011 last year and after the California Public Employees’ Retirement System, the biggest U.S. pension fund, decided in 2014 to exit hedge funds altogether.

Ever since the $300 billion fund Calpers called hedge funds too costly and complicated, industry analysts and managers have been monitoring investor sentiment closely for signs of other possible defections. Preqin researchers found, however, that the bulk of the investors they polled late in 2014 are sticking with hedge fund investments.

Still, 68 percent of the respondents said that fees, made up of a management fee plus a performance fee, should be reduced this year. In 2013, only 45 percent of investors demanded cuts.

“This highlights the growing concerns investors have surrounding fees, particularly in the low-return environment of 2014,” Preqin wrote. In the past, many investors felt that managers were able to dictate fees because returns were good and demand was strong.

Investors were polled at the tail end of 2014, when the average hedge fund returned only 3 percent, marking the industry’s worst returns since 2011. Disappointment over returns was evident in the survey.

Preqin said that 35 percent of all respondents, more than double the number from the previous survey, felt that hedge funds failed to meet investors’ expectations.

Nevertheless, the large majority of investors, 84 percent, said they planned to maintain or increase their allocations to hedge funds this year. Roughly half said they would put in as much as $50 million in new capital, while 8 percent said they would put in $500 million or more. (Reporting by Svea Herbst-Bayliss; Editing by Peter Galloway)

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Friday, February 27th, 2015 EN No Comments

Envestnet Jumps on the Robo Bandwagon


Chicago-based Envestnet has acquired Upside, a year-old tech company that has developed an automated, online financial planning and investment platform to be white-labeled by financial planners who want to compete with the likes of Wealthfront, Betterment or Futureadvisor. Envestnet, the advisor support and technology firm, will use the acquisition to provide its clients with a robo-advisor solution of their own.

“Adding Upside to our platform will allow advisors to compete more aggressively to engage current clients online and reach a new class of investors,” said Stuart DePina, group president of Envestnet | Tamarac, in a statement. “While many see robo offerings as serving the mass affluent, advisors know a growing percentage of their high-net-worth clients are demanding to access their financial portfolios and interact with their advisor online.”

Terms of the deal were not disclosed. Envestnet will combine Upside’s online advice platform with its investment solutions, portfolio analytics, account servicing and reporting capabilities.

Ritholtz Wealth Management—run by Josh Brown and Barry Ritholtz—announced they were working with Upside, last October. Called Liftoff, the RWM platform takes investors through a handful of risk-tolerance questions, then asks if clients are looking to create a retirement plan, a financial goal plan or are looking just to invest. The securities underlying the plans are a combination of ETFs, with, according to the site, a “regimented rebalancing strategy” built in.

Envestnet is not the only industry player trying to help advisors compete with the robo offerings. CLS Investments and Riskalyze teamed up recently to launch an automated asset management platform to help financial advisors scale their services for lower-end clients. Advisors can plug the new platform, called AutoPilot, right into their websites. The tool will then allow online clients to access the Riskalyze software to determine risk tolerance, sync outside assets, open a new account, and e-sign all necessary documents.

Once the deal closes, Upside will have access to Envestnet’s technology services and its managed portfolios.

Kimberly and Juney Ham, co-founder and president of Upside, will join Envestnet as senior vice presidents.

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Thursday, February 26th, 2015 EN No Comments

Covenant Expands Wealth Management Firm to Oklahoma City

SAN ANTONIO, Feb. 26, 2015 /PRNewswire/ — Covenant Multifamily Offices, LLC, a Texas limited liability company, today announced it has opened its first Oklahoma City location. The announcement comes as the wealth management firm officially closed on the acquisition of Covenant Financial Services, LLC’s wealth management practice on February 10.

Following the acquisition, Covenant expands its growing wealth management company to four locations, with current offices in Dallas, San Antonio, Austin and now Oklahoma City.

“We are excited to expand into the Oklahoma City marketplace,” said John Eadie, Covenant Founder and Managing Director. “The team in Oklahoma City is fantastic and brings additional depth and technical capabilities to Covenant. The acquisition allows Covenant to continue its vision of becoming an enduring wealth management firm.”

Prior to the acquisition, Covenant Financial Services, LLC in Oklahoma City had no working relationship with Covenant Multifamily Offices, LLC – which will obtain exclusive rights to the Covenant name and brand.

As part of the partnership, Scott Duncan, Founder of Covenant Financial Services, will join Covenant as a Senior Wealth Advisor.

“From our first conversations a shared passion to meet our clients’ financial management objectives based on customized financial planning was evident,” said Duncan. “Joining Covenant as the Oklahoma City office, my team becomes part of a deep pool of talent with a broad perspective offering enhanced service opportunities. I’m excited to continue our 35 years of service to our clients as part of Covenant.”

Joining Duncan at the Oklahoma City office will be Wealth Advisor Raquel Lopez, Wealth Advisor Oliver Norman along with Senior Client Service Associates Donna Herndon and Executive Assistant Clair Neeley.

Covenant and its team of veteran wealth advisors passionately invest in each individual client through a goals-based planning approach. The process is rooted in building wealth that leads to a fuller, more meaningful life. Covenant advisors provide insightful, tailored guidance that is unique in the wealth management industry.

Covenant has experienced significant growth in the previous 12 months as the firm in November opened its third office located at 100 Congress Ave. in Austin, Texas. For more information on Covenant and its services visit

About Covenant Multifamily Offices, LLC

Covenant’s promise is in its name. The wealth management firm exists to provide personally tailored financial guidance rooted in the key tenants of lifestyle, legacy and philanthropy. Covenant serves clients at its headquarters in San Antonio along with offices in Dallas, Austin and Oklahoma City. Covenant Founder and Managing Director John Eadie was named one of the Top-15 financial advisors in Texas for 2015 by Barron’s magazine. More information on Covenant can be found by visiting

Covenant Multifamily Offices, LLC

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SOURCE Covenant Multifamily Offices, LLC


Thursday, February 26th, 2015 EN No Comments

Grantor trusts can be an effective way to optimize lifetime exemptions, says …

By reducing taxable estate assets, families can protect and pass on more
to future generations

ATLANTA, Feb. 26, 2015 /PRNewswire/ – Transferring assets to a grantor trust
can be a powerful way to maximize an individual’s lifetime gift
exemption, according to Atlantic Trust, the U.S. private wealth management division of CIBC (NYSE: CM) (TSX:

These types of trusts, long relied on by estate planners, have been
receiving increased attention lately thanks in part to the income and
estate tax benefits they offer, but also because of how they can help
grantors use gift exemptions more efficiently.

“As the prospect of estate tax repeal grows less likely, individuals and
families want to optimize the exemptions that they already have,”
explains Linda S. Beerman, chief fiduciary officer for Atlantic Trust.
Since grantor trusts offer both income- and estate-tax benefits, they
can be a powerful tool for removing assets from a taxable estate.

Generally in these types of trusts, the person creating the trust (the
grantor) irrevocably transfers certain assets to a trustee to hold and
oversee so that the transfer is a completed gift for gift tax purposes.
The trust, however, is designed with certain specific rights and powers
that make the grantor – not the trust or any of its beneficiaries-
responsible for paying income tax on any trust income and gains.
Regardless of whether or not those powers are actually exercised—and
often they are not—putting them into the instrument makes it a grantor

While any tax paid by the grantor may reduce the value of the overall
estate, assets inside the trust can still appreciate without being
depleted by income taxes. “That prospect can translate into significant
sums,” says Judith A. Saxe, managing director and senior wealth
strategist for Atlantic Trust.

This strategy can be effective because it may help individuals maximize
their lifetime exemptions—the total value of assets that may be given
away before triggering a gift tax. Currently, the lifetime exemption
amount for individuals is $5.43 million ($10.86 million for married
couples) for 2015. Generally, once the exemption limit has been
reached, a gift tax of 40% applies.

Although grantor trusts can be powerful estate planning tools, they also
can pose an additional risk for grantors. If the trust assets greatly
appreciate, grantors must be prepared to pay the tax liability. For
example, if the trust owns a large position in low-basis stock that is
about to explode in value—because the company is being sold—the tax
liability could be higher than expected. Drafting a grantor trust to
allow for the ability to “turn off” grantor trust status if needed
provides additional flexibility with this type of planning.

Atlantic Trust offers a number of resources concerning estate planning
strategies that involve grantor trusts, as well as other types of
trusts. To learn more, visit the
Online Resource Center at

The tax information contained herein is general and for informational
purposes only. Atlantic Trust does not provide legal or tax advice, and
the information contained herein should only be used in
consultation with your legal, accounting and tax advisers.

About Atlantic Trust

Atlantic Trust is one of the nation’s leading private wealth management
firms, offering integrated wealth management for high net worth
individuals, families, foundations and endowments. The firm considers
clients’ financial, trust, estate planning and philanthropic needs in
developing customized asset allocation and investment management
strategies. Experienced professionals deliver a broad range of
solutions, including proprietary investment offerings and a robust open
architecture platform of traditional and alternative managers. Atlantic
Trust operates in 12 full-service locations throughout the U.S. with
$25.9 billion in assets under management (as of October 31, 2014). For
more information, visit

About CIBC

CIBC is a leading Canadian-based global financial institution. Through
our Retail and Business Banking, Wealth Management and Wholesale
Banking businesses, CIBC provides a full range of financial products to
individual, small business, commercial, corporate and institutional
clients in Canada and around the world. CIBC owns a 41 percent equity
interest in American Century Investments®, a major U.S. asset
management company, serving financial intermediaries, institutions and
individuals, and acquired Atlantic Trust, a premier U.S. private wealth
management firm, in January 2014. You can find other news releases and
information about CIBC in our Media Centre on our corporate website at

SOURCE Atlantic Trust Private Wealth Management


Thursday, February 26th, 2015 EN No Comments

Raymond James Welcomes Key New Team to Its Vancouver Cathedral Branch

VANCOUVER, Feb. 25, 2015 /CNW/ – Terry Hetherington, Executive Vice President and Head of the Private Client Group of Raymond James Ltd., and Jock Ross, Senior Vice President, Private Client Group, and Branch Manager of the Raymond James Vancouver Cathedral Branch are pleased to welcome Terry Wright and his Wright Wealth Management team to the Raymond James Cathedral branch in Vancouver.

“We are thrilled to welcome Terry Wright and his team as our newest partners at Raymond James,” said Terry Hetherington. “They embody the very best of our values – a keen client first focus, and a strong dedication to delivering the very best wealth management solutions to the individual investors and families that put their faith in Terry and his team.”

“This is an exciting opportunity to add another outstanding portfolio manager to the strong team in our Vancouver flagship branch. Terry is a first rate individual and we are pleased to welcome him to the team,” said Branch Manager Jock Ross.

The team comes to Raymond James from National Bank Financial where they earned a long-standing reputation among the nation’s top-tier Financial Advisors. Terry Wright has been in the financial services industry for more than a decade, and has been recognized as a top ranked Financial Advisor and Portfolio Manager. As the leader of Wright Wealth Management Group, Terry manages over $100 million in assets on behalf of his clients.

“Raymond James offers the best combination of capacity and culture,” said Wright. “The firm has all the resources, support solutions and intellectual capacities of a large firm, but equally as important, it maintains a main street culture.”

Raymond James is a leading North American independent full service investment dealer, offering an extensive range of professional investment services and products including: private client services, portfolio management, financial estate planning services, insurance, equity research, investment banking and institutional sales trading. Through its network of 6,300 Financial Advisors and Portfolio Managers across Canada and the United States, Raymond James serves more than 2.6 million individual investors and families, and oversees total client assets of approximately US$ 483 billion.

SOURCE Raymond James Ltd.


Wednesday, February 25th, 2015 EN No Comments