TrainWorks publishes a quarterly Newsletter that examines developments and trends that affect wealthy taxpayers: investment products, court decisions, revenue rulings, charitable giving concepts and retirement planning. The Newsletter is designed as an objective summary of financial planning issues facing busy wealth management firms—banks, trust companies, and investment management boutiques—and their affluent clients. Many investment firms also purchase the Newsletter to send to their referral sources—attorneys and accountants—and to their high net worth clients as a marketing tool. Firms needing more in-depth information may generally access the primary sources directly, either without charge or for a nominal fee.
A case in Hawaii against a chaperone of a high school trip could lead parents who are asked to assume that responsibility to reconsider. The case involved an 18-year-old high school cheerleader from New Jersey who died after apparently falling from a balcony at the Hyatt Regency in Maui. She had been seen drinking the day before. An arbitrator determined that the chaperone—Susanne Sadler—was at least partially responsible for the girl's death and ordered the Sadlers to pay the deceased student's family $690,000.
--The Tennessean, 6/20/08
Don’t be so certain that your affluent clients are satisfied with your service because a significant number are not. That’s the conclusion of a recent study that was released this summer. Fidelity Investments conducted the study, in which more than 400 investment firms participated. The study found that 20% of the respondents, all millionaires, were not happy with their financial advisers, which may come as a surprise because many of the unhappy respondents said their advisers have never asked them for feedback. The study also found that nearly half (48%) of an adviser’s new clients typically come from the referrals of existing ones. Perhaps not surprising: of the millionaire respondents who were enthusiastic about the relationship they had with their adviser (the study deems them as “promoters”), 65% viewed their adviser as a personal friend—suggesting that managing an investment portfolio is only part of delivering a positive total client experience. To achieve it, Fidelity has several recommendations. Among the most important: develop a “holistic financial plan” and know personal details about each client’s life—their interests, goals and life events—both large and small.
--“Creating Advisor Advocates to Help Boost Referrals,” Fidelity Investments, Summer 2016
In a case that received national attention from practitioners in the estate-planning field, the Massachusetts Supreme Court has reversed the state’s Court of Appeals decision that allowed a divorce spouse to attach part of the assets in a $24.9 million discretionary trust. The case developed when Curt Pfannenstiehl filed for divorce from Diane Pfannenstiehl, his wife of 12 years, in September 2010. The couple had two children—an 11-year-old son and an eight-year-old daughter who had Down syndrome. During the divorce proceedings, Diane attempted to force a distribution from an irrevocable inter vivos trust Curt’s father created that benefited all of his living “issue”—not just Curt—or a total of 11 beneficiaries. The trust, which included a spendthrift provision, gave the trustees the power to make distributions for the descendants’ “comfortable support, health, maintenance, welfare and education.” The trust named both Curt’s brother and the family’s attorney, arguably not adverse parties, as trustees. In the divorce, Diane contended that, based on both a recent pattern of distributions and in light of the named trustees, a court should determine that Curt’s proportionate share in the trust assets were marital assets. The trial court agreed, concluding that Curt’s share of the trust was approximately 1/11th of all its total value, or about $2.3 million. Based on that determination, the trial court ordered him to pay Diane close to $1.2 million. In a divided opinion, the Court of Appeals affirmed. But late this Summer, the state’s Supreme Court overturned that ruling. In reaching that outcome, the Court said Curt’s interest was “nothing more than [an] expectanc[y]” (citing Adams v. Adams, 459 Mass. 361 (2011). According to the Supreme Court, because Curt’s interest was only an expectancy, he had no right to demand the trustees make a distribution, and because he didn’t have that right, neither did a former spouse.
--Pfannenstiehl v. Pfannenstiehl, SJC-12031, Mass. S.Ct. 8/4/16 (Slip Op.)
Observation: Neither legal practitioners nor financial advisers with a goal of asset protect should take complete solace in this decision. That’s because the Supreme Court also said that, “[a]though Curt’s expectancy of future acquisition of income…is not part of the martial estate, on remand, the judge…may consider that expectancy as part of the ‘opportunity each [spouse] for future acquisition of capital assets and income’” (quoting Mass. G.L.c. 208, Sec. 34, as amended by St. 2011, c.124). In addition, the Court ruled, trusts are not automatically excluded from the marital estate simply because the assets are held in trust. Instead, the Court wrote, whether any particular trust should be considered as a marital asset “turns ‘on the attributes’ of the specific trust at issue” (quoting Lauricella v. Lauricella, 409 Mass. 211 (1991) (emphasis added).
Don't buy mutual funds. That is the advice of David Swensen, the investment manager of Yale's endowment fund which has averaged 16.1% and the author of a new book, Unconventional Success. His advice is supported by extensive research: in the 14 years between 1984 and 1998, the average fund underperformed the S&P 500 Index by 5.1% per year. Perhaps more sobering is a study of the 203 mutual funds that had assets of $100 million or more during the same period. Of those, only eight outperformed the Index. The result: the chance of picking one of the outperforming funds is approximately 4%. Or, more stunningly, as the authors of Made to Stick observed: in blackjack, if you ask the dealer for another card when two face cards are showing, your chances of winning are twice that—about 8%.
--Fast Company, September 2008
For the best price on a hotel reservation, consider booking directly through the hotel’s loyalty program—not through a third-party site like Priceline or Orbitz. That’s because, in an effort to reduce costs, hotels are beginning to offer discounts to members of their loyalty programs who book directly, thereby saving the hotel from paying commissions to the third-party site. Most hotel chains have signed contracts that prohibit them from offering rates to the public online that are lower than the rates offered through their third-party suppliers. Rates that are not available to the general public, however—those that are only available to members through the hotel’s loyalty program—are exempt from that restriction, as are a few other, special rates, such as those offered to AAA members.
--Wall Street Journal, 7/8/16
To be happier, increase your money market account—not your stock portfolio. That’s the recommendation of researcher Joe Gladstone from the University of Cambridge. Based on his research, Gladstone found that happiness increased as an investor’s bank account did even though the same balance invested in a stock portfolio did not have the same effect.
--Wall Street Journal, 9/11/16
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