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Financial Planning > Trusts and Estates

Helping Hands

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When motorcycle gangs in Michigan are lining up to give blood and four little Virginia girls can raise $10,000 for the Red Cross by holding a couple of car washes, you begin to realize just how much everyone wants to find some way, any way, to help the victims and families of victims of the September 11 terrorist attacks.

Planner Rosanne Grande was driving to work through a small village on Long Island, home to many of New York City’s firefighters and policemen, when she passed a church where a memorial service for a firefighter had just ended. The steps and sidewalks outside the church were jammed with men in blue uniforms as they poured out of the church–big men holding tightly to the tiny hands of their children. “It was heartbreaking,” says Grande, managing director of R.W. Rog? and Company in Bohemia, New York.

Grande is now putting her emotions into action, using her professional skills to help families maintain their financial footing even as the whole world seems to have shifted beneath their feet. Through efforts organized by the CFP Board, NAPFA, the FPA, and Worth magazine, among others, Grande and other planners will be providing free financial planning assistance to families directly affected by the terrorist attacks. “If we can help anyone even in the smallest way,” says Grande, “I’ll feel like I did something.”

Along with other firms on the Worth list of the “top 250 advisors in the nation,” Grande’s firm will be participating in the Worth Task Force, an effort that will collaborate with the Uniformed Fire Officers Assoc-iation to provide free financial planning services to the families of firefighters killed on September 11. Information about firms and planners will be distributed to the firefighters’ unions so that it is available to families when they are emotionally ready to think about financial matters. “More than likely, we will try to help the widows or widowers gather the required documentation, and help them sort through the paperwork that survivors need to complete to apply for life insurance benefits and Social Security survivor benefits. And we’ll be there for them,” says Grande.

More than 50 planners have volunteered to help out through the CFP Board’s pro bono effort ( Families of victims can call or e-mail the CFP Board with questions, and receive within one business day a list of planners with expertise in their areas of concern. “They can then e-mail or call the planners to get answers to their questions, or set up an appointment,” says CFP Board spokesman Doug Nogami.

The New York State Society of CPAs and NAPFA are setting up referral lines for families affected by the terrorist attacks. “We’re very anxious to help, but many of these people are still in shock and not quite ready to focus on financial matters,” says NAPFA Chairman Steve Kanaly. “So we’re taking a little more time to make sure that we’ve got the right people in the right place at the right time.” Planners wishing to volunteer can contact Doug Nogami at the CFP Board at 303-839-0667; contact the New York Society of CPAs at 212-719-8356; or contact Ellen Turfe at NAPFA at 800-366-2732.

FPA President Guy Cumbie has encouraged members to offer as much free financial planning assistance to victims’ families as they can. “If the goal of our organization is to help people achieve their goals and dreams, we must also be willing to help them overcome their fears and concerns at a time of national crisis,” he wrote in a mid-September missive.–Karen Hansen Weese

Terror’s Paper Trail

As part of the war against terrorism, the SEC asks advisors to check their records

T he Sec is urging advisors and other securities-related entities to rummage through their records to find possible relationships or transactions they may have had with the individuals and groups named in President Bush’s executive order on terrorism.

The SEC is also asking securities-related firms to alert any foreign subsidiaries and affiliates of the request. Information can be e-mailed to the SEC at [email protected].

John Baker, a securities lawyer with Stradley, Ronon, Stevens & Young in Washington, doubts terrorists would have used an advisor. But while the request is voluntary, Baker counsels advisors to check their records nonetheless because if they ignore the SEC request now, and then discover later that they did have such a relationship, “there could be repercussions in the court of public opinion, or in relationships with regulators.”

But even if a relationship surfaced, the suspected terrorist could freeze access to his records under the Right to Financial Privacy Act (RFPA), Baker says. The RFPA says customers must receive notice prior to the release of financial information so they can challenge the release. However, there are several important exceptions, three of which are pertinent.

First is “voluntary disclosure by a financial institution,” or section 3403(c). This section states that a financial institution may notify a government authority of the existence of such information, but the released information can only contain the name of the individual, corporation, or account and the nature of the activity.

Second is section 3414(a), “Disclosure pursuant to request by a government authority conducting foreign intelligence activities.” This allows you to show customer records to a government authority authorized to conduct foreign intelligence activities. So an advisor could turn over the information to the FBI, for instance, without complying with the notice provision of the RFPA. However, the advisor should get a certificate of compliance with the RFPA from the government authority.

And section 3414(b), “disclosure required due to imminent danger,” allows a federal government authority to obtain financial records if a delay in obtaining them would cause physical injury to any person, serious property damage, or flight to avoid prosecution.–Melanie Waddell

Acting Locally

Although the FPA cancelled its annual convention due to the events of September 11, financial planners from the New York metropolitan area gathered recently in Mahwah, New Jersey, to attend the FPA Members Forum 2001.

Keynote speaker Jonathan Clements of The Wall Street Journal spoke on investor psychology, noting that a sense of excitement and a need to feel involved in a larger community drives the majority of investors. This dynamic, Clements says, will keep the market strong.

When asked to give his prediction for the near future of the stock market, Clements joked that in the past he has said it will either go up or down, though he believes the market is somewhat undervalued at the moment. “We’re still at very high multiples of earnings, very low dividend yields, and very low multiples of book value,” he says.

Attendee Paula Kennedy, a senior manager at Deloitte & Touche in New York, attended a session moderated by Bob Veres that addressed how advisors were dealing with clients in the post-September 11 atmosphere.

“What came out of the Veres session is that planners realize that they are not always trained to handle intense emotions in clients,” said Kennedy. “It seemed most planners wished they’d had more training in how to handle emotions.”–Josh LeBaron

Online Advs: The Experience Could Be Better

The SEC’s Form ADV Web site is up and running at But while the site boasts a clean design, it has a way to go before it can be termed truly user-friendly.

The site lets anyone search for your electronic ADV form. But once the firm’s name pops up, the process bogs down. The site displays an advisor’s full ADV form, which for those with slow dial-up Net connections can yield a snail’s-pace download. Displaying the ADV for Leuthold Weeden Capital Management, the Minneapolis-based advisory firm, took two and a half minutes on my Apple G3 PowerBook with a DSL hookup.

The Adviserinfo database is not complete yet. Currently, only investment advisor firms are listed; the SEC says it will list individual investment advisor firm reps “in the future.” Nor does the site contain the names of advisors who haven’t filed electronically.

Adviserinfo’s searchability also needs improvement. The site features a list of predetermined searches, but some categories are not that clear. And it would be nice if users could also search the entire database for firms of a certain size, those with clean disciplinary records, or ones licensed only in particular states. For those features, we’ll either have to wait for a new release, or until a commercial database vendor figures out how to make a buck off slicing and dicing the ADV filings a better way.–William Glasgall

Doctors, Lawyers . . .

In a major shift, a ruling allows attorneys in New York to set up shop with other professionals

Going back to a time when lawyers on American soil were still referred to in the English tradition as barristers, the legal profession has zealously guarded the notion that its participants must remain absolutely independent from any contractual or financial relationships with non-lawyers.

If an attorney is to be relied upon as a trusted advisor, clients must be absolutely certain that there are no motives driving the attorney’s advice aside from a desire to further the client’s interests.

“This is at the very heart of the legal profession,” says Jonathan Mintz, an attorney for the Sarasota, Florida-based Academy of Multidisciplinary Practice. “A client has to know that there are no ulterior motives for an attorney making a particular recommendation. We have to remain independent.”

No longer, however. Beginning this month, attorneys in New York state will be permitted to enter into contractual relationships with non-lawyers. The ruling from the New York State Bar Association doesn’t just involve investment advisors, as attorneys can now set up potentially lucrative relationships with private investigators or medical experts. But the impact on the investment industry is clear and perhaps most profound.

There had been a number of partnerships forged in the last several years between legal and investment advisory firms. “Firms want to have one-stop shopping for their clients,” says Mintz. “They want to offer legal and financial services from the same place.” An example of this was the October 1999 announcement by the Boston law firm Bingham Dana that it was starting a 50-50 joint venture with the diversified financial services company Legg Mason, called Bingham Legg Advisors.

While the new firm was able to offer one-stop financial and legal services to clients, the idea of tramping over the old independents rankled many attorneys and caused something of a row in the profession. “No one knew what to do,” says attorney Frederick Davies of the Syracuse, New York, Frederick Davies Law Firm. “It would be very lucrative to set up a partnership with investment advisors and refer clients back and forth, but attorneys were afraid of the ethical consequences. At worst, you could be disbarred for participating in one.”

The New York ethics ruling may change the equation. Davies says that he is already in negotiations with a CPA and a local financial planner to form a firm offering a variety of legal and investment services. “This is my baby,” he says proudly. “This really opens a lot of doors for attorneys and advisors.”

Davies describes a scenario where a young investment advisor might try to marry himself to the book of legal business established by an attorney through years in the legal profession.

Mintz says New York is not alone in taking such action. While there is a national code of ethics for attorneys, decisions on such matters are enacted by state bar associations. He believes other states will certainly follow; California has already taken steps in the same direction.

It is worth noting, however, that the new ethical standards in New York come with a few corollaries, rules that will govern such relationships between attorneys and those outside the legal profession. For instance, the attorney must own a controlling interest in the new endeavor, presumably so that he cannot be forced to make a decision not in the client’s best interest. Also, a rather lengthy disclaimer must be issued to clients of an attorney in such relationships alerting the client to the exact nature of what the attorney is doing. “It’s going to take some time to work itself out,” says Davies. “Things won’t be the same, though. That’s for sure.”–Mike Jaccarino

You Can Trust Goldman Sachs

Goldman Sachs Group beefed up its financial offerings to high-net-worth clients in October by forming The Goldman Sachs Trust Company, a national trust company with regional offices throughout the nation.

“We have always been in the business of managing money for high-net-worth families, and we grow and evolve with our clients,” said David Henle, the managing director of Goldman’s Private Wealth Management Group, in the release announcing the move. “Now we will be able to include the fiduciary capabilities that our clients have been increasingly seeking for themselves and the next generations of their families.”

Goldman Sachs has offered estate planning services and trust advisory services to clients through its 50-year-old Private Wealth Management Group, which manages money for high-net-worth individuals and currently has $262 billion in assets.

Company spokeswoman Andrea Raphael pointed out that the trustee has the ability to select the money manager for the trust’s assets. Goldman Sachs manages assets for trusts around the world; the new company is expected to funnel even more assets to its money management business.

Raphael says there will be 15 Trust Company offices opening in cities across the nation, although she declined to comment on how many people would be working for the company. The Trust Company will be headquartered in New York.–Mike Jaccarino

Micro Management

Options for managed accounts grow as more companies and managers get together

As pressure grows on everyone in the financial world to offer clients better, more personalized service, managed accounts are becoming more widely available.

Take, for example, those offered by GE Financial Assurance through its recent acquisition of Centurion Capital Group. Centurion, a West Coast-based private asset management company, brings to the table a range of money managers; asset allocation strategies; and a dedicated trust company providing recordkeeping and client services.

GEFA feels that its addition of Centurion contributes to its focus on wealth and income management and the services that it provides to independent fee-based advisors. Account minimums are low, at $50,000, but the “sweet spot,” according to Tim Benedict, a spokesman for GEFA, is between $250,000-$500,000. Accounts are offered only through independent, fee-only advisors.

Not to be left behind, SEI Investments and Transamerica Investment Management (TIM) announced that TIM will be a sub-advisor for SEI’s Manager of Managers and Managed Accounts programs.

Those managed accounts are hybrids, says SEI VP Jerry Lzynski. They include “individually managed accounts and mutual funds, depending on investment style and the overall size of the account,” says Lzynski. “What SEI will do is provide a structured portfolio of multiple managers, or, if an advisor just wants one manager, we’ll be able to do that as well. The minimum [account size] is $250,000 per manager.”

The program, says Lzynski, “is not a serve-yourself supermarket of separate managers. We pick the best managers, and then are responsible for monitoring those managers and replacing the manager, if necessary, without having to go back to the end investor for permission. [It's a] major difference, to reduce business risk from the investment advisor’s perspective. There are multiple levels of SEI oversight on the program.”

And then there’s EAInvest, a new company founded this past summer. “Our mission,” says VP Matthew McClure, “is to serve the financial advisor exclusively and to be basically a full-service broker/dealer for them.”

Clearing through Pershing and offering a free asset allocation tool for advisors, EAInvest has about 60 managers for its managed accounts “with a wide variety of styles,” according to McClure.

Advisors will be happy to hear that this company doesn’t “have a retail presence and we don’t want one,” says McClure. “We are founded by advisors, and are dedicated to serving advisors as distinct from some of the other larger players who are now opening other offices to compete with advisors.”

Besides providing Web tools for advisors, the firm has also struck an agreement with Advent. This agreement enables EAInvest to be the exclusive reseller for Advent’s Axys software for the advisor market segment of less than $50 million under management. EAInvest offers Axys to advisors at a cost “on a sliding scale, depending on the assets that they transfer, down to free–if you give us sufficient assets in the first six months,” says McClure. EAInvest already has commitments for some $250 million in assets to be transferred into the separate accounts program.–Marlene Y. Satter


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