Do you have clients whose estates face a liquidity crisis because they’re loaded with stock in a family company or other illiquid assets? A Graegin loan may be just the technique you need to prevent unwanted liquidation of estate assets to pay estate taxes and other expenses. If you add life insurance, then the Graegin loan’s positive impact on estate liquidity can be levered up significantly.

An ILIT should never pay the estate’s expenses directly. Do that and you risk pulling the ILIT’s assets back into the estate, totally eliminating its primary purpose. Also, although the Graegin loan is a permissible estate planning device, the IRS would be happy to challenge the loan as being not bona fide or necessary in the administration of the estate. Both the ILIT and the terms of the loan must be drafted carefully to avoid undue IRS scrutiny.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of estate liquidity solutions in Advisor’s Journal, see Practical Succession Planning for the Family-Owned Business (CC 08-22) and Avoid the FLP Trap When Paying the Estate Tax (CC 11-170).

Asset-protection planning using Domestic Asset Protection Trusts (DAPTs) just got a whole lot riskier after the recent Bankruptcy Court decision Battley v. Mortensen. The Alaska court held that assets in an Alaska Asset Protection Trust were fair game for creditors, despite the fact that the trust’s settlor was solvent at the time he formed and settled the trust. [Battley v. Mortensen, Adv. D.Alaska, No. A09-90036-DMD (May 26, 2011)].

The result in Mortensen is clear: Domestic Asset Protection Trusts don’t protect assets from creditors for the first ten years after the trust is settled. It might be time to look elsewhere for asset protection solutions.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of DAPTs in Advisor’s Journal, see Domestic Asset Protection Trusts: New Chart Ranks the States (CC 10-30) and Domestic Asset Protection Trusts: Equal to Their Offshore Brethren? (CC 11-132).

By: George Mentz

The insurance industry had about 2.3 million wage and salary jobs in 2008. Insurance carriers accounted for 61 percent of jobs, while insurance agencies, brokerages, and providers of other insurance-related services accounted for 39 percent of jobs.

The majority of establishments in the insurance industry were small; however, a few large establishments accounted for many of the jobs in this industry. Insurance carriers tend to be large establishments, often employing 250 or more workers, whereas agencies and brokerages tend to be much smaller, frequently employing fewer than 20 workers.

Many insurance carriers’ home and regional offices are situated near large urban centers. Insurance workers who deal directly with the public are located throughout the country. Almost all of those working in sales work out of local company offices or independent agencies. Many others in the industry work for independent firms in small cities and towns throughout the country.

Work environment

Insurance employees working in sales jobs often visit prospective and existing customers’ homes and places of business to market new products and provide services. Others working in the industry may need to frequently leave the office to inspect damaged property, and at times can be away from home for days, traveling to the scene of a disaster—such as a tornado, flood, or hurricane—to work with affected policyholders and various government officials.

A small, but increasing, number of insurance employees spend most of their time on the telephone working in call centers, answering questions and providing information to prospective clients or current policyholders. These jobs may include selling insurance, taking claims information, or answering medical questions.

About 42 percent of insurance workers are in office and administrative support jobs such as those found in every industry. Many office and administrative support positions in the insurance industry, however, require skills and knowledge unique to the industry. About 29 percent of insurance workers are in management or business and financial operations occupations. About 17 percent of wage and salary employees in the industry are sales and related workers, selling policies to individuals and businesses. About 11 percent are in professional and related occupations, including many computer and mathematical science occupations.

Sales and related occupations

Insurance sales agents, also referred to as producers, may work as exclusive agents, or captive agents, selling for one company, or as independent agents selling for several companies. Through regular contact with clients, agents are able to update coverage, assist with claims, ensure customer satisfaction, and obtain referrals. Insurance sales agents may sell many types of insurance, including life, annuities, property-casualty, health, and disability insurance. Many insurance sales agents are involved in “cross-selling” or “total account development,” which means that, besides offering insurance, they have become licensed to sell mutual funds, annuities, and other securities. These agents usually find their own customers and ensure that the policies sold meet the specific needs of their policyholders.

Professional and related occupations

The insurance industry employs relatively few people in professional and related occupations, but they are essential to company operations. For example, insurance companies’ lawyers defend clients who are sued, especially when large claims may be involved. These lawyers also review regulations and policy contracts. Nurses and other medical professionals advise clients on wellness issues and on medical procedures covered by the company’s managed-care plan. Computer systems analysts, computer software engineers and computer programmers, and computer support specialists are needed to analyze, design, develop, and program the systems that support the day-to-day operations of the insurance company.

Actuaries represent a relatively small proportion of employment in the insurance industry, but they are vital to the industry’s profitability. Actuaries study the probability of an insured loss and determine premium rates. They must set the rates so that there is a high probability that premiums paid by customers will cover claims, but not so high that their company loses.

Underwriting is another important management and business and financial occupation in insurance. Underwriters evaluate insurance applications to determine the risk involved in issuing a policy. They decide whether to accept or reject an application, and they determine the appropriate premium for each policy.

Claims adjusters, appraisers, examiners, and investigators decide whether claims are covered by the customer’s policy, estimate and confirm payment, and, when necessary, investigate the circumstances surrounding a claim. Claims adjusters work for property and liability insurance carriers or for independent adjusting firms. They inspect property damage, estimate how much it will cost to repair, and determine the extent of the insurance company’s liability; in some cases, they may help the claimant receive assistance quickly in order to prevent further damage and begin repairs. Adjusters plan and schedule the work required to process claims, which may include interviewing the claimant and witnesses and consulting police and hospital records. In some property-casualty companies, claims adjusters are called claims examiners, but in other companies, a claims examiner’s primary job is to review claims to ensure that proper guidelines have been followed. Only occasionally—especially when disasters suddenly increase the volume of claims—do these examiners aid adjusters with complicated claims.

Compliance Growing

Because of the huge cross over of securities related products into the insurance industry, there will now be more related and licensed jobs available in the risk world.  For instance, supervisors and compliance officers may be needed in insurance companies who sell variable annuities, mutual funds and related packages that include stocks, bonds, ETFs or mutual funds inside of the product. In the end, all financial services companies want to be a “one stop shop”, and with that mission comes more jobs with varying descriptions.

George Mentz, JD, MBA, CWM   -  is an international lawyer, editor, author and contributor in the areas of management consulting, personal finance, securities law, and wealth management.  Prof. Mentz continues to consult  with the US Government and United Nations on issues related to careers and education. Dr. Mentz is the first person in the US to obtain quad credentialing as a lawyer, Double Accredited MBA, Juris Doctorate Degree, financial consultant certification, and qualified financial planner.  Mentz and his educational & professional development firms have worked with thousands of executives and industry workers  in over 150 countries. www.FinancialAnalyst.org Mentz as a professor has personally taught over 200 business, ethics, wealth management,  and law courses at various accredited institutions, and he is the founder of the Mentz Consumer Protection, Class Action,  and Securities Law Firm www.securitieslawyers.us Mentz has served on the advisory boards of the: The African Economists Association, The Royal Society of Fellows, The Arab Academy of Banking & Finance, The China Wealth Council, The World E-Commerce Forum, The GFF Global Finance Forum in Switzerland, and the Indian Academy of Financial Management.    Mentz has been a pioneer in promoting accredited program courses, exams and standards as a government recognized path to professional development. . www.georgementz.com Formally with a International Wall Street Firm, Mentz has passed NASD FINRA Exams and held licenses as an  Investment Advisor.  Mentz also consults on major securities class action litigation and consumer fraud cases and has provided insights as an expert in Arbitration. . Mentz is a award winning professor and author and is the  winner of a meritorious gold medal  for charitable service.   Mentz has been seen on TV, Radio, and International Press along with being a keynote speaker for national and international seminars or conferences.

By: George Mentz

Historically, employment in financial activities [1] has been affected little by economic downturns and usually has grown during an entire recession or started to grow shortly after a recession began. In stark contrast, employment in financial activities grew more slowly in 2006 and eventually peaked in December 2006,[2] 1 year before the official start of the December 2007–June 2009 recession.

Even after the recession ended, employment in financial activities continued to decline.  Leading into the 2007-09 recession, most employment losses in financial activities were concentrated in industries directly involved in buying and selling homes.

However, after the stock market declined sharply in September 2008, all industries within the financial sector began to cut jobs at unprecedented rates. These employment losses were uncharacteristic compared with those sustained in previous downturns.

Prerecession housing crash

Over the past decade, employment changes in financial activities were tied closely to those in construction.  Between 2000 and 2006, roughly 40 percent of the job growth in financial activities occurred in industries directly related to the selling and buying of homes. During this period, construction employment grew by 976,000, sales of new and existing homes increased by 14 percent and 26 percent, respectively, home prices in the top 20 major metropolitan areas in the United States doubled, 7 and mortgage rates reached historical lows. [3]

Combined, employment in real estate credit, mortgage and nonmortgage brokers, and real estate agents and brokers reached a prerecession employment high in April 2006, corresponding with an employment peak in the construction industry, and then declined by 184,000 through December 2007.

Real estate credit and mortgage and nonmortgage brokers respectively lost 32 percent and 34 percent of their workforce during this period. Job losses continued through the end of the recession, although at a slower pace. Between April 2006 and December 2010, housing-related financial industries lost 348,000 jobs and employment fell to its lowest level since January 1998.

Depository institutions, such as commercial banks and savings institutions, started to announce job cuts, and many underwent internal restructuring and discontinued nontraditional loan lending. Employment in depository credit intermediation peaked in September 2007, leading the recession by 3 months. In October 2008, the financial markets experienced large losses, including a 17-percent decline in value according to the S&P 500 index. [4]

Commercial banks substantially decreased new loans and leases in bank credit. Job losses in depository credit intermediation accelerated, and employment fell at a record pace until reaching a trough in April 2010. In 2009, loans and leases by commercial banks fell by 10.3 percent. [5]

Without credit, most firms were in unsustainable budgetary situations and cut payrolls.  Employment losses throughout the economy were tied to the inability of firms to attain credit to continue their day-to-day business activities.

Financial crisis and job losses

With ongoing job losses occurring in financial activities industries related to the housing market crash, a financial crisis that began after the start of the recession pushed losses into other industries within the sector. Employment in the sector of securities, commodity contracts, and investments had been largely unaffected during the first 9 months of the recession, but after the deterioration of the financial markets, job cuts quickly followed: between September 2008 and June 2009, 55,000 jobs were lost.

Employment in insurance carriers and related activities also was unaffected during the first 9 months of the recession. However, year-over-year real personal consumption expenditures in insurance began to decline in April 2008 and accelerated as the recession grew more severe. [6]

With large layoffs occurring in most segments of the economy, households continued to cut back on personal consumption expenditures; insurance expenditures decreased at an annualized rate of 4.7 percent during the fourth quarter of 2008.

New individual life insurance premiums, the main revenue stream for life insurance companies, dropped 14 percent that quarter. [7] The decline in personal consumption expenditures, followed by contracting credit markets, coincided with large layoffs in insurance carriers.

Over the last 3 years, the financial industry worldwide has struggled to come back.  Many banks and other institutions are dealing with sustained losses, foreclosures, losses in clients due to unemployment, and new cumbersome regulations.

Overall, there is continued consolidation in banking along with mergers and acquisitions.  Growth of financial businesses and  institutions worldwide in Asia, Middle East,  Africa, India and Latin America are all continuing to expand. The demographics in India, China and Latin America also support a growing demand for banking and professional services. In the end, the GFC Global Financial Crisis will be over through a combined global expansion of demand, customers, and jobs.

George Mentz, JD, MBA, CWM   -  is an international lawyer, editor, author and contributor in the areas of management consulting, personal finance, securities law, and wealth management.  Prof. Mentz continues to consult  with the US Government and United Nations on issues related to careers and education. Dr. Mentz is the first person in the US to obtain quad credentialing as a lawyer, Double Accredited MBA, Juris Doctorate Degree, financial consultant certification, and qualified financial planner.  Mentz and his educational & professional development firms have worked with thousands of executives and industry workers  in over 150 countries. www.FinancialAnalyst.org Mentz as a professor has personally taught over 200 business, ethics, wealth management,  and law courses at various accredited institutions, and he is the founder of the Mentz Consumer Protection, Class Action,  and Securities Law Firm www.securitieslawyers.us Mentz has served on the advisory boards of the: The African Economists Association, The Royal Society of Fellows, The Arab Academy of Banking & Finance, The China Wealth Council, The World E-Commerce Forum, The GFF Global Finance Forum in Switzerland, and the Indian Academy of Financial Management.    Mentz has been a pioneer in promoting accredited program courses, exams and standards as a government recognized path to professional development. . www.georgementz.com Formally with a International Wall Street Firm, Mentz has passed NASD FINRA Exams and held licenses as an  Investment Advisor.  Mentz also consults on major securities class action litigation and consumer fraud cases and has provided insights as an expert in Arbitration. . Mentz is a award winning professor and author and is the  winner of a meritorious gold medal  for charitable service.   Mentz has been seen on TV, Radio, and International Press along with being a keynote speaker for national and international seminars or conferences.

---

[1] See North American Industry Classification System: United States, 1997 (U.S. Census Bureau, 1997), and  North American Industry Classification System, 2002 (U.S. Census Bureau, 2002)) industry sectors 52, or “finance and insurance,” and 53, or “real estate and rental and leasing.”

[2] CES data, see “Current Employment Statistics – CES (National)” (U.S. Bureau of Labor Statistics, no

date), www.bls.gov/ces.  Last Accessed August 14, 2011.

[3] See  Bureau of Labor Statistics. Monthly Labor Review. April 2011.

[4] See “S&P 500” New York, Standard & Poor’s. http://www.standardandpoors.com/indices/sp500/en/us/?indexId=spusa-500-usduf–p-us-l–. visited Apr. 12, 2011).

[5] See “Assets and Liabilities of Commercial Banks in the United States (Weekly) –  H.8”. Board of Governors of the Federal Reserve System. Apr. 1, 2011. http://federalreserve.gov/releases/h8/current/default.htm. Last Accessed Apr. 12, 2011.

[6] See “Table 2.4.6U. Real Personal Consumption Expenditures by Type of Product, Chained Dollars,” entry 264. Bureau of Economic Analysis. Mar. 28, 2011. http://www.bea.gov/national/nipaweb/nipa_underlying/TableView.asp?SelectedTable=18&FirstYear=2009&LastYear=2010&Freq=Qtr&ViewSeries=Yes. Last Accessed Apr. 12, 2011.

[7] See “LIMRA Reports Sharp Quarterly Drop in Individual Life Insurance Sales”. Windsor,  CT,  LIMRA International, Feb. 24, 2008.  http://www.limra.com/newscenter/newsarchive/archivedetails.aspx?prid=83. Last Accessed Apr. 12, 2011.

By: George Mentz

Recently, researchers at the Bureau of Labor Statistics linked unemployment duration for persons jobless in one month with their labor force status in the following month. In this manner, estimates of unemployment duration were created for the unemployed who became employed in the subsequent month, as well as for the unemployed who quit looking for work and left the labor force.

By the end of 2010, the median number of weeks jobseekers had been unemployed in the month prior to finding work was a little more than 10 weeks.

In contrast, prior to the start of the recent recession in 2007, the median was 5 weeks. Unemployment duration also increased among those who eventually quit looking and left the labor force. Unemployed individuals were jobless for about 20 weeks in 2010 before giving up their job search and leaving the labor force. Whereas in 2007, those who were not successful in their job search had been unemployed for about 8.5 weeks before leaving the labor force.

The recent recession has had a profound effect on the length of successful job search. From 1994 through 2008, roughly half of all unemployed jobseekers found jobs within 5 weeks.

In 2007, for example, 49 percent of those who were unemployed in the prior month and employed in the subsequent month had been jobless for less than 5 weeks. During the same year, less than 3 percent of the unemployed who found work had been jobless for more than 52 weeks. In stark contrast, 11 percent of transitions from unemployment to employment exceeded a year in 2010, and only 34 percent lasted less than 5 weeks.

The information on unemployment duration also provides evidence that the likelihood of becoming employed decreases the longer one is unemployed. For example, the chance that a person who had been unemployed for less than 5 weeks would become employed in a subsequent month was about 30 percent in 2010. For those unemployed 27 weeks or more, that chance in a subsequent month was only 10 percent.

In summary, the length of time it took for the jobless to be successful in their job search increased sharply during the recent recession and in its aftermath. The median number of weeks unemployed doubled—from 5 to 10 weeks—and a far greater share of successful jobseekers spent in excess of a year in their search for employment. At the same time, the median duration for unemployed persons who were unsuccessful in their job search and left the labor force also rose dramatically. Moreover, once unemployed, the likelihood that one would be successful in one’s job search decreased as the time unemployed increases.

This article presents discussion and analysis relating to estimates of the length of time someone is unemployed before finding a job or before giving up searching for work. These measures were derived from the Current Population Survey (CPS) labor force status flow data, which capture the extent to which the unemployed find jobs, leave the labor force, or stay unemployed from one month to the next.

George Mentz, JD, MBA, CWM   -  is an international lawyer, editor, author and contributor in the areas of management consulting, personal finance, securities law, and wealth management.  Prof. Mentz continues to consult  with the US Government and United Nations on issues related to careers and education. Dr. Mentz is the first person in the US to obtain quad credentialing as a lawyer, Double Accredited MBA, Juris Doctorate Degree, financial consultant certification, and qualified financial planner.  Mentz and his educational & professional development firms have worked with thousands of executives and industry workers  in over 150 countries. www.FinancialAnalyst.org Mentz as a professor has personally taught over 200 business, ethics, wealth management,  and law courses at various accredited institutions, and he is the founder of the Mentz Consumer Protection, Class Action,  and Securities Law Firm www.securitieslawyers.us Mentz has served on the advisory boards of the: The African Economists Association, The Royal Society of Fellows, The Arab Academy of Banking & Finance, The China Wealth Council, The World E-Commerce Forum, The GFF Global Finance Forum in Switzerland, and the Indian Academy of Financial Management.    Mentz has been a pioneer in promoting accredited program courses, exams and standards as a government recognized path to professional development. . www.georgementz.com Formally with a International Wall Street Firm, Mentz has passed NASD FINRA Exams and held licenses as an  Investment Advisor.  Mentz also consults on major securities class action litigation and consumer fraud cases and has provided insights as an expert in Arbitration. . Mentz is a award winning professor and author and is the  winner of a meritorious gold medal  for charitable service.   Mentz has been seen on TV, Radio, and International Press along with being a keynote speaker for national and international seminars or conferences.

Advisors, get ready to kiss the SEC goodbye. FINRA is waiting in the wings, ready to take over direct oversight of Registered Investment Advisers (RIAs). FINRA CEO Richard Ketchum has been hinting for a couple of years now that his organization stands ready to take on the role of RIA SRO. It looks like the time for thinly veiled hints is over. Now Ketchum is coming right out and asking Congress for the job.

Ketchum testified on September 13 before the House Financial Services Capital Markets Subcommittee’s hearing on draft legislation that would appoint one or more self-regulatory organizations (SROs) to oversee RIAs.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of the debate over whether to appoint an RIA SRO, see FINRA: Taking the “Self” Out of Self-Regulatory Organization (CC 11-151), FINRA Sets Regulatory Sights on Structured Products (CC 11-130), and FINRA Positions Itself to Oversee Advisers (CC 10-99).

Revelations that a rogue trader at UBS drained over $2 billion from the bank through unauthorized trading sent the bank’s stock spiraling last week and may have pushed the bank into an unprofitable third quarter.

The suspect, Kweku Adoboli, who worked in ETFs, is being held by police in London on charges of fraud by abuse of position and false accounting. In addition to the investigation being conducted by the Crown Prosecution Service, which prosecutes criminal cases investigated by the police in England and Wales, the case is also being investigated by the U.K.’s Financial Services Authority (similar to the SEC/FINRA in the U.S.) and the Serious Fraud Office (an independent Government department that investigates and prosecutes serious or complex fraud and corruption).

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of scandals and scams in Advisor’s Journal, see Three Advisors Sentenced to Prison for Faith-Based Scam (CC 10-126) and STOLI Scheme Lands Insurance Agent in Jail (CC 11-92).