CWM   Chartered Wealth Manager ™  – America’s  First Graduate Wealth Management Certification and Charter.   

CWM ®  Chartered Certified Wealth Manager ® – An AAFM ® Owned and Issued Certification awarded from the USA United States of America.  Why Global Standards are Important.

The CWM  ® Chartered Certified Wealth Manager  ®  professional certification  awarded from the AAFM ®  American Academy of Financial Management  ® is the first graduate wealth management Charter & Board certification in the world – as featured in the FINRA, NASD,  Investopedia, Forbes,  China Daily, Financial Times, Black Enterprise, Wall Street Journal,  and Money Manager[1][2] that was created and founded by the AAFM American Academy of Financial Management [3][4]. The internationally trademarked CWM ® Chartered Certified Wealth Manager AAFM ®  Certification [5] and credential is only available for wealth managers with an accredited masters degree, law degree, CPA, PhD or specialized executive training from an ABA accredited law school [6] or other approved program in Asia, Europe, India, Latin America or Africa. In 2004, Robert Frank of the Wall Street Journal published an expose of the top Wealth Management educational programs and certifications including the AAFM, Wharton School of Business and New York University.

The CWM Certified ( Chartered Wealth Manager ) [7] designation and post-graduate qualification is exclusively issued and conferred by the USA Board of Standards American Academy of Financial Management  ® over the last decade (AAFM) [8][9] The CWM wealth management certification & designation is similar to financial planning certification but is a graduate certification and professional development program in high net worth consulting which has always required a government recognized education and degree.[10] The CWM  Chartered Certified Wealth Manager ® Law School Curriculum and syllabus has been accepted for use with ABA Accredited Law School Programs.[11] Wealth Management is a profession and career that many bankers and investment professionals are entering.[12] Like any accredited law school graduate courses, the AAFM CWM certification courses[13] will count toward a post graduate degree such as a LLM or JSM, will count for continuing education for CPA and Law Licensing, and may count towards the CPA exam eligibility.

The CWM Chartered Wealth Manager Board Certification [14] from AAFM USA requires knowledge in 12 key areas:[15] and is referenced in the Global Designation Directory and on the FINRA US Government Regulatory Website [16][17]  The primary required skill sets of a CWM would include: 1. Estate Planning and Trusts 2. Asset Management 3. Portfolio Management 4. International Taxation 5. Retirement Law 6. Economics 7. Investments 8. Money and Banking 9. High Net Worth Consulting 10. Relationship Management, Compliance, and Ethics 11. Business Entities & Organizations 12. Risk Management and Insurance

Educational institutes and training organizations must petition to the AAFM www.AAFM.us to become an accredited provider of the CWM Chartered Wealth Manager program.

Governmental Citations &  Book References

1. ^ ” Wall Street Journal – Is Your Wealth Manager Certifiable? features AAFM CWM Wealth Management Certification “
2. ^ “CWM Featured in The Money Manager
3. ^ AAFM Investopedia Dictionary Article
4. ^ “Investopedia CWM Article”
5. ^ “AAFM US Government Trademark Reference”
6. ^ “Post Graduate CWM Law School Certification Program”
7. ^ “RIA Compliance Solution book”
8. ^ AAFM CWM in Investopedia Dictionary
9. ^ “US Government Trademark Reference for CWM “
10. ^ “The ElderLaw Portfolio Series, Volume 1‎ – Page 25-16Harry S. Margolis”
11. ^ ABA Accredited TJSL LLM Graduate Program in Finance and Taxation offering CWM from AAFM
12. ^ “AAFM CWM in the Book Career opportunities in banking, finance, and insurance By Thomas P. Fitch Pg. 251″
13. ^ “AAFM Law School Certification”
14. ^ “Demystifying Wall Street”
15. ^ “AAFM US Board and Certifying Requirements”
16. ^ “Directory of Global Professional Accounting and Business Certifications By Lal Balkaran”
17. ^ “FINRA Governmental Regulatory Website Formerly NASD”

AAFM American Academy of Financial Management  ® and CWM ® External links

• AAFM US Board of Standards
• Global Professional Certifying Board
• USA Accredited Law School Program Online for the AAFM CWM
• China www.AAFMChina.org
• Arabia www.AAFMGCC.com
• India www.AAFMIndia.com
• Latin America www.AAFMLA.com
• Singapore www.AAFMAsia.com

Over 800 Accredited Graduate Programs which qualifies you to apply for CWM Certification ™ .  You must have 3 years of wealth management experience on top of having the graduate degree or courses.

1. Masters in Finance, Wealth Management, Tax or Economics from an ACBSP Accredited Double Business School.
2. Masters in Finance, Wealth Management, Tax/Accounting or Economics from an AACSB Accredited Double Business School.
3. Masters with focus on Finance, Wealth Management, Tax or Economics from an ABA Accredited Law School.
4. Masters in Finance, Wealth Management, Tax or Economics from an EFMD EQUIS Accredited Double Business School.
5. Masters Degree in Finance from CUFE Beijing Business School
6. MBA or MSC from Shanghai Graduate Program in Finance
7. Masters in Wealth Management from the Swiss Banking School
8. JSM or LLM from the Diamond Law School Wealth Management Program

5 Million Dollar Strategies – Exclusions and Planning by George Mentz JD MBA CWM

With less than 3 weeks before the Estate and Gift Tax rates change, Americans are speedily transferring assets so as to benefit from the existing tax fairness rules.

There are 2 key objectives in wealth management. There are rules and then there is strategy. The purpose must be effectively intertwined with the laws on the books, and then mixed with the products and services available. And, it all must be documented effectively.

This all makes you think about the options available under the “so called” 5 million dollar exclusion. Here are examples:

1. Gift money to a trust and use a trust department while creating trust documents that have various provisions such as “spend thrift” or education, welfare, and living sustainability clauses.
2. Gift cash to multiple 529 plans to benefit several if not dozens of heirs for educational purposes.
3. Move stock or member interests in small to medium companies to heirs.
4. Create a dynasty trust with a wide array of beneficiaries who are descendants of children or relatives.
5. Buy homes or apartments for loved ones. Have the homes in trust where they are sustained & can’t be encumbered or legally attacked.
6. Set up UGMA or UTMA accounts for grandchildren, nieces, nephews and so forth.
7. Move income producing assets into your children’s name so as to capture a better tax rate.
8. Donate appreciated assets or stock to your children and have them move to a tax free state such as Texas and capture the low capital gains rate before year end.
9. Sell a business for stock, and immediately gift the stock to heirs or loved ones.
10. Borrow the money against your assets such as stock or real estate, and gift it to loved ones.
11. Release loans to family members as a gift.
12. Fund a major insurance trust immediately with a single premium policy.
13. If you demand that family behave and receive a lot of money later, create trust where beneficiaries only receive a portion of the money until they turn 35 or 45 years old.

*It is generally best to consult with a Chartered Wealth Manager and then use a licensed attorney who specializes in your county or state with trusts and wills. Moreover, it is advisable to consider using a lawyer or trust department to manage your estate, trusts and wills. Trust departments offer a lot of services to evaluate and can manage the assets of a trust while also paying bills, insurance, managing successions, and even running a business.

The TJSL Thomas Jefferson School of Law has an LLM program in international tax and finance.  To enroll or tell your staff about the program, view here: www.llmprogram.org

About the Author: Dr. George Mentz is a world recognized consultant and award winning professor who has authored several revolutionary books. Prof. Mentz, an international lawyer, has been a keynote speaker globally in Asia, Arabia, USA, Mexico, Switzerland, and in the West Indies. Mentz can be contacted for speaking engagements at www.gmentz.com or www.managementconsultant.us or www.selfhelpbook.org  Mentz is a licensed attorney and CWM Chartered Wealth Manager who resides in Colorado Springs Colorado USA
*No tax, insurance, investment or legal advice provided herein. Please consult with a licensed professional in your jurisdiction before making any important financial or legal decision.

As a wealth management consultant and professor for over a decade, it is that time again to file our taxes. With tax filings, we must document our income, expenses, deductions, exemptions, retirement contributions and so forth. Some of us must file our taxes for partnerships or corporations.

Wealth management comprises various subjects including: Economics, Banking, Investments, Risk Management, Investment/Asset Management, Estate Succession, Taxation, and Trust Planning and Retirement Planning.

Many of us simply receive W-2 and employment income and traditional company benefits primarily, but others who are self-employed or contractors are doing their best to utilize the system to declare income, pay for insurance, take mortgage deduction and so forth.

The good news is that that the tax code has become more amicable to the self employed over the last decade. Self employed individuals are able to write off or deduct more of their health care expenses while also setting aside more money pre-tax into their self directed retirement accounts.

Here are some thoughts related to Wealth Management 2012

Investments: While we are not sure what will happen with taxes going forward, several of today’s tax rates on income such as dividends and long-term capital gains are reasonable. If they go up, many people may sell out of dividend stocks or other related holdings. Dividend stocks have been particularly popular for retirees and those who don’t want CDs with the rates so low.

Thus, dividend stocks have been the alternative for income producing investments because the tax rates are at 15%. Overall, if income taxes go up on dividend stocks at this time, the hardest hit may be seniors and those who live on a fixed income.

Retirement and Education: In light of the present situation, we hope you are able to maximize your contributions to your retirement before April 15th each year. Also, setting aside money in a 529 plan is a good way to fund a child or grandchild’s education for the future. The annual gifting rules and estate and gift tax rules allow you to gift cash to others during life or at death. Therefore, now may be a good time to consider large gifts due to the generous estate & gift tax exemption for 2012.

Estates and Succession: As for estate taxes, those rates right now are the most generous ever. However, the large exemption may be reduced again to the Clinton era rates if nothing is done by Congress before 2013.

The other major estate management issues are succession documents. Do you have a valid will? Do you have health care directives? Have you considered limited powers of attorney for your financial affairs or health care affairs? Have you arranged for the guardianship of your children if something happens to you? All of these issues can be dynamic and very important?

Insurance: Other topics are risk management related. Do you have proper life, health, and home insurance? Have you considered an umbrella policy or disability policy? Again, protecting yourself and your family in this way is imperative. However, you must remember that insurance contracts have beneficiaries and that each policy can have primary beneficiaries or secondary beneficiaries. Further, these assets are not controlled by your will and the beneficiary receives regardless of what your will says. Providing the policy numbers and information to your loved ones may also be a good exercise.

Banking and Investment Accounts: Additionally, if you have bank or brokerage accounts, you should consider listing your spouse or loved one as person who receives the account upon death. TOD “Transfer on Death” and POD “Payable on Death” accounts are typical choices for your accounts and this allows a loved one to have access to cash immediately if something happens to you. Sometimes, rolling over or consolidating accounts is a great exercise so as to help create a better view of the totality of your investments.

Taxation: The IRS has a tax tips section which is interesting and resourceful. Moreover, there are many great tax software programs out there to chose from that you can use privately on your computer. Thus, with good information coming from the Treasury Department and quality software, all of us have a fair opportunity to get our tax paperwork done on time.

Economics: Keep in mind that there has been a number of economic cycles in the last 20 years in the USA and Internationally. That means that we should all keep an eye on our risk tolerance and our investing time horizon. When you are getting closer to retirement, you should be moving out of riskier investments and into more stable investments or stocks with less volatility if possible. Other related problems such as an election year and global debt crisis issues domestically and abroad are also now part of the macro-economic effects.

In the end, most people are concerned with financial security. During our earning years, all of us want to work in a labor of love, earn what we can, protect our children and retirement, and worry about taxes later. In the end, the key is doing what you want to do, and have the experts handle your legal, tax and wealth management for you.

*No investment, legal or tax advice is intended to be given herein. Please see a licensed professional before making any important decision.

Presidential Politics and Income Tax Theory – The Super Rich & Tax Havens in the USA ? – By G. Mentz, JD, MBA

No matter how you slice and dice it, it is difficult to swallow when you see Warren Buffet’s taxes or Mitt Romney’s taxes. You may think, how did they get their income tax rates down to 15%? The challenge for many of us is not the tax rates, but the totality of taxes we pay or the type of income we receive or earn. As I have taught on the subject of tax and wealth management and also been a Wall Street Firm Wealth Management Advisor, the analysis of progressive tax rates can be deceiving and tricky.

If you buy and sell something for a long term capital gain, you can receive a low rate of 15%. If you receive dividends, you may be able to capture a low rate of 15%. If you can find bonds that pay tax free, you may also receive a low rates on passive income. If you use a tax deferred vehicle, you can also defer taxes till withdrawal, Examples are 401K, IRA, annuities and such.

Don’t forget that you can avoid state income tax if you reside in one of the 7 wonderful states such as: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. 41 states impose income taxes. New Hampshire and Tennessee apply it only to income from interest and dividends.

Some states actually limit the taxes on certain types of retirement income. Various states exclude Social Security benefits from state income taxes. 27 states & The District of Columbia who have income taxes provide a full exclusion for Social Security benefits — Alabama, Arizona, Arkansas, California, Delaware, Georgia, Hawaii, Idaho, Illinois, Indiana, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Virginia and Wisconsin.

States are also prohibited from taxing benefits of U.S. military retirees if they exempt the pensions of state and local government retirees. Various other retirement exemptions apply to the value of property or the type of income. For example, all citizens of some states may have a exemption of the first 50 thousand dollars of property value.

Numerous states allow special tax benefits to military retirees. Some states, with conditions, which do not tax retired military pay are: Alabama, Alaska, Florida, Hawaii, Illinois, Kansas, Louisiana, Massachusetts, Michigan, Nevada, New Hampshire, New Jersey, New York, , Ohio, Pennsylvania, South Dakota, Tennessee, Texas, Washington, Wisconsin and Wyoming. Mississippi, Missouri, Kentucky, Oregon, and North Carolina have conditions that apply.
Many states still have an estate tax on top of the federal estate tax: States that impose an estate tax are: Connecticut, Delaware, District of Columbia, Hawaii, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New York, Ohio, Oregon, Rhode Island, Vermont, and Washington.

The question of the day is how do the super-rich avoid the taxes that most of us pay? While the super wealthy may pay some of the “working class” W-2 style taxes, they avoid it on most of their income.

An example would be, how can Warren Buffet or Mitt Romney avoid self employment taxes? Well, the law allows business owners to pay self employment taxes on income, but most of the other income may be treated as pass-through, long term gains or non considered self-employment taxable such as interest, dividends, or sale of assets.

In the end, the middle class and upper middle class is getting hit with the bulk of the “nickel and dime” taxes in this country. Think about the taxes on: State income, state automobile taxes, school district taxes, gasoline taxes, utilities, electricity, water, phone, flight and transport fees, cellular, internet cable, luxury, alcohol, tobacco, and a myriad of other taxes and fees. The TOTALITY of these TAXES may put the average middle income taxpaying family in a 50% tax bracket if they earn a combined 60-100 thousand dollar per year.

Remember, the W-2 employee is the least likely to have the ability to deduct business related expenses as per our tax codes. In the end, high paid wage-earners who are employees such as: doctors, lawyers, government employees, pilots, and CPAs probably pay the highest tax rates on earned income.

In contrast, Mr. Buffet who has invested billions for his clients and himself owes no taxes on typical investments until he sells them. Viola, no taxes paid on long term holdings until you capture income from the sale. With that being said, if Buffet owns a company, that company or its employees will pay taxes on all money that comes in and goes out. In theory, corporate welfare is a myth in that even if a company pays -0- taxes at the corporate rate, the 500,000 employees all paid taxes and hopefully kept their jobs.

Tax breaks are for everyone, and I remember reading one of Russell Simmons’ recent success books. He claimed that he felt like he could have paid more taxes after the sale of a company. The capital gains rate allowed him to pay a low rate of 15-20% tax on the sale of the large company. He claims to have had an ah-ha moment and paid all of his employees who helped build the company an extra bonus as a result of the tax relief. In my humble opinion, this is the original intent of the lower tax rates “to begin with” where everybody involved can benefit.

You can theorize that lower long-term rates and lower dividend rates allow communities to benefit from more local income and for retirees to survive on their pensions or investments. Overall, when taxes are too high, investment is reduced because the reward is mitigated. This is probably why people like Buffett were long term holders is that the punishment for a sale was too large.

So, Mitt Romney may just have good quality tax advisors, and there is NO need for any taxpayer to pay more than the law requires as per the US Supreme Court cases. We all remember VP candidate John Edwards. He saved $600,000 in taxes by forming an S corporation. Edwards earned $26.9 million as a lawyer in 1995, and he minimized Medicare taxes by creating his own S corporation. Edwards paid himself a salary of $360,000 each year for four years and then he had the S corporation pay him the rest of the income in dividends. Salary was subject to Medicare taxation at a rate of 2.9%; however, dividends escape Medicare taxation. There is no wage base for Medicare, all wages or salaries are subject to the full tax. Social Security does have a wage base, which means wages above the limit are exempt from the Social Security tax.

In contrast, President Obama may have a different and much higher tax rate. Most of his income comes from his book sales and from his government employment. Book royalties and high government wages are generally taxed at a much higher rate.

If you remember, most NBA and NFL stars will attempt to maintain residence in a low income tax state like Texas or Florida; however, the state income tax authorities may show up to tax any players who visit their “higher tax” state to play a game. You must figure that some players may earn 1 million dollars per game and 8% of that income is nothing to balk at.

Historically, there has been so much wealth created in the last 30 years, it has been amazing. To watch Google and now Facebook go public is truly fantastic. I remember back in the 80s where people would complain that all of the property or wealth was controlled with no more to be had. However, when new property and wealth is created from thin air, it proves that creativity always trumps materialistic scarcity theory. And yes, most of the new wealth from Facebook will take residence in a lower tax jurisdiction before selling their stock. Let’s face it, 6-9 percent state tax on a large sale of stock with a low basis is a lot of money.

In closing, I recall in the late 70s somebody showed me a list the Forbes 400 wealthiest people in the USA. I distinctly recall that the bulk of the list of names inherited the money or started with wealth. In the recent 20 years, we now see that the bulk of the wealthiest are self-made. With that being said, the one thing that changed during this time was the reduction in long-term capital gains rates.

Are taxes good or bad? Everyone knows that those who benefit from society must chip in and everyone must have some skin in the game. However, the other extreme is that “100% taxation is pure economic slavery”. Thus, everyone is against slavery on any level. The major question that looms is : what is fair? And that, I will leave that to the government & politicians who are the servants of the customers, “We The People”.

**Financial, Legal or Tax Advise is not intended to be offered in any way. The Academic Exception is Claimed in this Article. If you need tax advice, legal counsel or financial advice, please see a licensed professional in your jurisdiction.
George Mentz, JD, MBA – All Rights Reserved 2012

Author: George Mentz

Today we explore additional factors which will likely contribute the job growth of personal financial advisors.

Economy

First, the question arises concerning the current financial environment with regards to financial planning. In other words, what negative effect has the financial crisis had on the financial planning market? Some commentators believe the impact is great. [1] The marketplace for private investors has changed significantly since 2008. Many investors are becoming more personally responsible for retirement savings and are seeking advice from professionals.

On the other hand, increased regulation regarding personal financial advisory services has grown over the last 5 years.[2] If this pattern continues personal financial advisors may decide to no longer participate in a market where the cost of compliance is too high. This will also prevent new advisors from entering the field.

Market Entry and Lifestyle

Nevertheless, the generally low barriers of entry into the industry make the position attractive for those seeking employment directly from school or through career transition for a variety of reasons including unemployment.

One report notes that about 30% of personal financial advisors are self-employed, most often operating small firms in urban areas.[3] Moreover, the flexibility in terms of lifestyle that the personal financial advisor enjoys is preferable to some over traditional office employment. Because most personal financial advisors are not traditional employees, work and lifestyle flexibility may attract a new generation of workers.

One global organization, The AAFM American Academy of Financial Management ® says about 20% of their  members are independent or registered investment advisors who provide ‘fee based management” services as compared to commissions on the purchase or sale of stocks, securities, or insurance products.   These wealth managers simply earn a percent of the total assets under management.   The trend for high net worth clients over the last 10 years has been to work with wealth management professionals who can assist with investment management services for the super rich.  The AAFM ® Certification Board of Standards works with an accredited law school in the USA which offers the first graduate law program in wealth management that can lead to a masters degree while similar professional development programs are offered by NYU and Wharton [4]

“Although successful [personal financial advisors] can live quite comfortably, their compensation has typically been below the level of top jobs on Wall Street. As financial industry compensation models reset themselves, however, the relative returns enjoyed by [these advisors] may look more attractive.” [5]

The San Diego Business Journal reported in 2009 that wealth management salaries held steady in the midst of the crisis, ranging from $150,000 to $ 400,000.[6] What’s more, “bidding wars among firms for top advisors are not uncommon” and packages will include “bonuses equaling two or three times the payouts from just a few years ago”. [7]

A great start to finding a career in banking and finance would be searching online with  www.AAFM.eFinancialCareers.com This career portal shows available jobs around the world in finance, banking, investments, hedge funds, risk management, insurance, compliance and more.  [8] Further, an  excellent opportunity to take courses in tax, finance, estates, asset management, wealth management and compliance is to apply to the online graduate program at: http://llmprogram.tjsl.edu

Median annual wages, excluding bonuses, of wage and salary financial analysts were $73,150 in May 2008, which is more than double the national median wage. The middle 50 percent earned between $54,930 and $99,100. The lowest 10 percent earned less than $43,440, and the highest 10 percent earned more than $141,070. Annual performance bonuses are quite common and can be a significant part of their total earnings. [9]

In light of the recent scandals with Bernie Madoff etc., clients and customers should be aware of who their advisor or planner uses as a custodian for  their funds.  Generally speaking, independent advisors should have  a 3^rd party administrator and custodian who protects and holds the assets, provides online account access, and sends the clients statements along with having SIPC insurance protection. Further, your  advisor should be registered with the state or federal government where you can review or check their records. [10]

We invite your opinions and comments by posting them below, or by calling the Panel of Experts including:

George Mentz, JD, MBA -  is an international lawyer, editor, author and contributor in the areas of 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 in over 150 countries. Dr. Mentz has taught over 200 business and law courses at various accredited institutions, and he is the founder of the Mentz Consumer Protection, Class Action,  and Securities Law Firm http://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 GFF Global Finance Forum in Switzerland, and the Indian Academy of Financial Management.    Mentz is the winner of several faculty awards and a meritorious award for charitable service.   Mentz has been a pioneer in promoting  accredited program courses, exams and standards as a government recognized  path to professional certification.

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[1] Lindsey Gerdes. “Personal Financial Advisor Among The 10 Most Promising Jobs For Recent Grads?” Bloomberg Business. Posted: April 13, 2009. http://www.businessweek.com/managing/blogs/first_jobs/archives/2009/04/personal_financ.html. Last Accessed 2/24/2010.

[2] E.G., Provisions of the “The Dodd-Frank Wall Street Reform and Consumer Protection Act”.

[3] Financial Analysts and Personal Financial Advisors. Occupational Outlook Handbook, 2010-11 Edition.”  http://www.bls.gov/oco/ocos301.htm

[4] TJSL Graduate Law School Program with AAFM Accredited Certification Program http://llmprogram.tjsl.edu

[5] Ibid.

[6] See Advisorfyi.com-Summit Business Media/The National Underwriter Company. “Wealth Management Employment in the Coming Decade.” Posted October 11th, 2010. http://www.advisorfyi.com/2010/10/wealth-management-employment-in-the-coming-decade/. Last Accessed 5/25/2011.

[7] Helen Kearney. Reuters. “Private banks battling for advisers to super-rich”. 9/17/2010. http://www.reuters.com/article/2010/09/17/idUKN1713016720100917?pageNumber=2. Last Accessed 5/25/2011.

[8] eFinancialCareers.com www.AAFM.eFinancialCareers.com

[9] United States Government  Department of Labor, Bureau of Labor and Statistics, Financial Analysts and Personal Financial Advisors. Occupational Outlook Handbook, 2010-11 Edition.”  http://www.bls.gov/oco/ocos301.htm

[10] SEC Investment Advisor Registration http://www.sec.gov/divisions/investment/iaregulation/regia.htm

Author: George Mentz

“Education, health, and retirement costs are increasing. Lifespans are lengthening. The pension and Social Security safety nets are fraying.” [1]

The role of the personal financial planner or financial advisor “has exploded as baby boomers reach retirement age and seek advice on making their nest-eggs last.” [2] In addition, “younger folks are seeking guidance on managing savings and retirement accounts in lieu of a company pension plan.” [3] However, new products and services in the financial world such as ETFs, may eliminate the need for traditional financial planning investment advice but increase the need for other guidance on other complex wealth management issues. [4] Since ETFs are freely exchange traded while representing a stock holding various securities, ETFs should facilitate diversity while also limiting fees and sell restrictions. [5]

More and more individuals are moving toward planning their own personal financial future.   [6] This is the first time in American history that traditional workers been required to personally assume this much responsibility for their retirement investing. [7]

Moreover, in a 2008 report it was indicated that wealth management firms will sharply increase hiring from 2010 to 2020 because of the impending retirement. [8] In addition, over the coming decade, wealth management firms will have substantially more client opportunities because the pool of high-net-worth individuals (HNWI) globally.[9]

According to another study only 50% of HNWI High Net Worth Individual assets are currently managed by professionals.  An unprecedented amount of retiring boomers who had not previously used a wealth manager now require one to transition their asset portfolios to income ones, plan succession, and balance potential medical care needs. Wealth management firms therefore have a pool of approximately five million (and expanding) new client opportunities. [10]

Overall, qualified wealth management professionals should have the relevant licenses from FINRA or the Insurance Authority, but  also should have completed accredited program exams and education. This is why when you hire a professional; they should have a credential that requires accredited program education and exams.   Examples of such credentials that require accredited program exams or state exams include: MBA, CPA, JD, MSc, LLM, Attorney License, or CWM Chartered Wealth Manager Certification. [11] [12] [13]

A great start to finding a career in banking and finance would be searching online with  www.AAFM.eFinancialCareers.com This career portal shows available jobs around the world in finance, banking, investments, hedge funds, risk management, insurance, compliance and more.  [14]

A excellent opportunity to take courses in tax, finance, estates, asset management, wealth management and compliance is to apply to the online graduate program at: http://llmprogram.tjsl.edu

The study reports that the new generation of HNWIs is predominantly 70% self-generated wealth; through entrepreneurship or executive compensation. These HNWIs consider it normal business practice to seek outside expertise and are more likely to consult with financial advisors. [15]

We invite your opinions and comments by posting them below, or by calling the Panel of Experts including:

George Mentz, JD, MBA –  an international lawyer, editor, author and contributor in the areas of 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 in over 150 countries. Dr. Mentz has taught over 200 business and law courses at various accredited institutions, and he is the founder of the Mentz Consumer Protection, Class Action,  and Securities Law Firm http://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 GFF Global Finance Forum in Switzerland, and the Indian Academy of Financial Management.    Mentz is the winner of several faculty awards and a meritorious award for charitable service.   Mentz has been a pioneer in promoting  accredited program courses, exams and standards as a government recognized  path to professional certification.

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[1] Dan Olsen. “Personal Financial Planning: Making the Transition”. The Finance Professionals Post. New York Society of Security Analysts.” 2/24/2011. http://post.nyssa.org/nyssa-news/2011/02/personal-finance-planning-making-the-transition.html. Last Accessed 5/25/2011.

[2] CNN Money. “Most Job Growth-Personal Financial Advisor”. 2009. http://money.cnn.com/galleries/2009/moneymag/0910/gallery.bestjobs_jobgrowth.moneymag/3.html. Last Accessed 5/24/2011.

[3] Ibid.

[4] D. Armstrong.  Why ETF Investors Need to Do their Homework http://money.usnews.com/money/blogs/the-smarter-mutual-fund-investor/2011/02/11/why-etf-investors-need-to-do-their-homework

[5] SEC Article on ETF Exchange Traded Funds http://www.sec.gov/answers/etf.htm

[6] CNN Money. “Most Job Growth-Personal Financial Advisor”.

[7] Ibid.

[8] See Advisorfyi.com-Summit Business Media/The National Underwriter Company. “Wealth Management Employment in the Coming Decade.” Posted October 11th, 2010. http://www.advisorfyi.com/2010/10/wealth-management-employment-in-the-coming-decade/. Last Accessed 5/25/2011. Citing Cap Gemini.

[9] Ibid.

[10] Ibid.

[11] United States Government  Department of Labor, Bureau of Labor and Statistics, Financial Analysts and Personal Financial Advisors. Occupational Outlook Handbook, 2010-11 Edition.”  http://www.bls.gov/oco/ocos301.htm

[12] FINRA Financial Industry Regulatory Authority –  Understanding Professional Designations – http://apps.finra.org/DataDirectory/1/prodesignations.aspx

[13] Wealth Management Certifications Wall Street Journal – http://online.wsj.com/article/SB109883075169856486.html

[14] eFinancialCareers.com www.AAFM.eFinancialCareers.com

[15] Ibid., citing Oliver Wyman.

Why is this Topic Important to Wealth Managers? Today concludes chapter one of our series on “Wealth Management in Today’s Economic Environment”. The series has been designed to address the specific question many wealth managers are currently asking: “what are the best investment, retirement and financial planning tools given the current global financial position?” We have so far explored alternatives from “safe” to “risky” from “traditional” to “emerging” for the purpose of discovering and discussing the most relevant wealth management tools and techniques available today. We have so far enjoyed presenting this discussion and think you will find the information quite valuable. Please note that this series is presented in continuation starting with last week’s entries. That being said each blogticle resumes discussion from the previous day.

The economy has presented a number of issues for individual investors. Retirement savings were exhausted to a great extent in many cases caused by the financial crisis. Others lost large sums of investment capital. This series has explored a number of options available to clients and wealth managers with regards to investing in today’s economy. Today we present one option that many wealth managers are most likely aware of and can take advantage of starting immediately.  As one commentator has noted, “[o]ver the past two years, investors have been taken for a wild ride. Annuities offer a way off the roller coaster.” [1]

We discussed last month the use of annuities as a substitute/addition to traditional government retirement plans. In sum, the financial condition of Social Security is far from great. Projected long-run program costs for Social Security are generally not sustainable under currently scheduled financing. Thus, we explained, the expected shortfall of federal funds available for retirement has presented a compelling reason to provide clients with fixed income retirement products.

Moreover, as we have previously mentioned earlier in the series, the baby boom generation continues to age and the American economy continues to undergo structural change. Two factors will continue to push investors to become more responsible for their personal planning. First, defined benefit plans are becoming obsolete as the retirement plan of choice for employers. Secondly, defined contribution plans likely won’t provide enough for baby boomers to retire comfortably. One study showed the average amount for retirement available in 401(k)s was only around $64,000.[2]

What are some general considerations that should addressed by wealth managers with regards to annuities providing for retirement income to clients?

• Tax characteristics: as almost all wealth managers are aware the investment income from an annuity grows tax free. The return of capital also will not cause a taxable gain.
• Income stream: perhaps the most salient selling point of annuities is that they provide the annuitant with a guaranteed stream of income for life. The key here is to find a company that clients trust will provide safety and security so that they may rely on the company’s ability to continue to make payments.
• Timing: wealth managers and clients should almost always consider retirement age and projections when using annuity products for retirement income purposes.
• Fixed v. Variable: the client should consider the risk and reward functions available in different products. Many companies offer very advanced products these days and most advisors should be able to find something that fits well with overall planning goals.

Finally, indexed products may provide for the best of both worlds. We discussed earlier in the series the potential benefit of following stock indexes with regards to planning in today’s economy. Indexed annuities provide even further benefit to those planning for retirement as the gains in the market can be leveraged into regular payments.

We will continue this series throughout the summer. Please check back for more analysis and information regarding financial planning in today’s economy.

Next week’s blogticles will discuss tax and market issues relating to wealth management.

We invite your questions and comments by posting them below, or by calling the Panel of Experts.

Series Author: Benjamin Terner

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[1] Ben Steverman. Annuities Offer Steady Income, Big Drawbacks. March 15, 2010. http://www.businessweek.com/investor/content/mar2010/pi20100312_316911.htm. Last Accessed 6/8/2011.

[2] AdivosrFX Advisor’s Journal. “Are Annuities Right for Your Clients?” http://advisorfx.com/articles/default.aspx?documentID=816&filename=fc060110-d.htm&action=24. Last Accessed 6/8/2011. Citing, Fidelity Investments Survey Feb. 2010.

Why is this Topic Important to Wealth Managers? Today we continue our series on “Wealth Management in Today’s Economic Environment”. The series is designed to address the specific question many wealth managers are currently asking: “what are the best investment, retirement and financial planning tools given the current global financial position?” We explore alternatives from “safe” to “risky” from “traditional” to “emerging” to discover and discuss the most relevant wealth management tools and techniques available today. We look forward to presenting this discussion and think you will find the information quite valuable. Please note that this series is presented in continuation. That being said each blogticle resumes discussion from the previous day.

As was discussed yesterday, one option investors may currently consider seeking is U.S. government debt. However, ten-year note yields bottomed out at 3.05 percent last week.[1] Clients are being advised that they “should think twice” about treasures, that’s because consumer inflation continues to outpace those yield figures.” [2] Treasury yields are stupidly low,” says Robert Auwaerter, head of the fixed-income group at Vanguard Group. [3]

Are there any other U.S. government options that provide reasonable rates of return? Given the national debt issues and current low Fed rate will inflation play a part? Presented below is one option that may help clients hedge against inflation.

Treasury Inflation-Protection Securities

Treasury Inflation-Protected Securities, or TIPS, provide protection against inflation. The principal of a TIPS increases with inflation and decreases with deflation, as measured by the Consumer Price Index. When a TIPS matures, clients are paid the adjusted principal or original principal, whichever is greater. This provision protects clients against deflation.

TIPS pay interest twice a year, at a fixed rate. The rate is applied to the adjusted principal; so, like the principal, interest payments rise with inflation and fall with deflation.

TIPS are marketable securities whose principal is adjusted by changes in the Consumer Price Index. With inflation (a rise in the index), the principal increases. With a deflation (a drop in the index), the principal decreases.

The relationship between TIPS and the Consumer Price Index affects both the sum clients are paid when the TIPS matures and the amount of interest that a TIPS pays every six months. As stated above, TIPS pay interest at a fixed rate. Because the rate is applied to the adjusted principal, however, interest payments can vary in amount from one period to the next. Thus otherwise stated, if inflation occurs, the interest payment increases. In the event of deflation, the interest payment decreases.

But according to the returns on TIPS they may not offer investors growth relative to the security they desire. For example the TIPS due February 2041 are currently yielding only 1.774%. [4] Moreover, interest on tips is generally subject to federal tax unlike some other government issued debt.

For more in-depth discussion on treasuries, see AdvisorFX: U.S. Treasury and Government Agency Securities.

Our series continues next week with a discussion of municipal bonds, cash accounts, commodities, international investment and more.

We invite your questions and comments by posting them below, or by calling the Panel of Experts.

Series Author: Benjamin Terner

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[1] Reuters. “Treasuries-Gov debt prices fall on profit taking”. May 27, 2011.  http://www.reuters.com/article/2011/05/27/markets-bonds-idUSN274758020110527. Last Accessed 5/30/2011.

[2] Chris Farrell. Safe Investing in a Troubled Economy. Bloomberg Businessweek. September 25, 2008.

[3] Id.

[4] Wall Street Journal. Friday, May 27, 2011. Market Data Center- Treasury Inflation-Protected Securities. http://online.wsj.com/mdc/public/page/2_3020-tips.html.

Why is this Topic Important to Wealth Managers? Today we continue our series on “Wealth Management in Today’s Economic Environment”. The series is designed to address the specific question many wealth managers are currently asking: “what are the best investment, retirement and financial planning tools given the current global financial position?” We explore alternatives from “safe” to “risky” from “traditional” to “emerging” to discover and discuss the most relevant wealth management tools and techniques available today. We look forward to presenting this discussion and think you will find the information quite valuable. Please note that this series is presented in continuation. That being said each blogticle resumes discussion from the previous day.

Warren Buffett’s mentor, “legendary investor” Benjamin Graham, once “wrote that when challenged ‘to distill the secret of sound investment into three words, we venture the motto, Margin of Safety.’ Those are wise words for all seasons, but especially at a time like this.” [1]

Are government backed investments one way in which clients can find some safety?

Generally United States “securities are debt instruments issued by the U.S. Treasury to raise money needed to operate the federal government and to pay off maturing obligations.” [2] The “paper” is backed by the “full faith and credit of the United States government guarantees that interest and principal payments will be paid on time, and thus, these securities are considered very safe investments.” [3] But has the financial position in Washington changed the traditional view of these obligations?

Treasury bills, or T-bills, “are short-term government securities with maturities ranging from a few days to 52 weeks.” [4] The Bills are generally sold at a discount from the par value or face amount of the bill.  An example, an investor may pay $990 for a $1,000 bill.  When the bill matures, the investor is paid the full $1,000.  The discount or difference between the purchase price and the redemption price is interest.

Treasury notes, or T-notes, are “issued in terms of 2, 3, 5, 7, and 10 years, and pay interest every six months until they mature.”  [5] Further, the notes may be sold at a discount (for less than face value), at a premium (for more than face value) or for face value.  When the note matures, the investor is paid full face value, in addition to the interest payments received.

A few of the key features of T-notes include:

• The yield on a note is determined at auction.
• Notes are sold in increments of $100. The minimum purchase is $100.
• Notes are issued in electronic form.
• An Investor can hold a note until it matures or sell it before it matures. [6]

Treasury bonds are issued for terms of 30 years and pay interest every six months until maturity. When a Treasury bond matures, the investor is paid its face value.

“The price and yield of a Treasury bond are determined at auction.” [7] Like a T-note, a T-bond, may be issued at a discount, premium or face value.  T-bonds “exist in either of two formats: as paper certificates (these are older bonds) or as electronic entries in accounts.”   Today, Treasury bonds are issued exclusively in electronic form.

Total current outstanding debt issued by the Treasury in bills, notes, bonds and other evidence of indebtedness is approximately 13.8 Trillion dollars, as of the end of November 2010. [8]

Tomorrow we continue our series with additional U.S. government investments.

We invite your questions and comments by posting them below, or by calling the Panel of Experts.

Series Author: Benjamin Terner

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[1] Chris Farrell. Safe Investing in a Troubled Economy. Bloomberg Businessweek. September 25, 2008.

[2] AdvisorFX.  AUS Main Libraries ,  Section 22.2  Investment Vehicles, B—U.S. Treasury and Government Agency Securities. http://www.advisorfx.com/articles/f22-2_1_13_3760.aspx?action=13.  Last Accessed 11/29/2010.

[3] AdvisorFX. U.S. Treasury and Government Agency Securities.

[4] Untied States Department of the Treasury.  Treasury Direct-Treasury Bills.  http://www.treasurydirect.gov/indiv/products/prod_tbills_glance.htm.  Last Accessed 11/29/2010.

[5] Untied States Department of the Treasury.  Treasury Direct-Treasury Notes.  http://www.treasurydirect.gov/indiv/research/indepth/tnotes/res_tnote.htm.  Last Accessed 11/29/2010.

[6] Untied States Department of the Treasury.  Treasury Direct-Treasury Notes.

[7] Untied States Department of the Treasury.  Treasury Direct-Treasury Bonds.  http://www.treasurydirect.gov/indiv/products/prod_tbonds_glance.htm.  Last Accessed 11/29/2010.

[8] Damian Paletta.  The Wall Street Journal. Debt-Panel Chairmen Work to Gain Support.  November 29, 2010.  http://online.wsj.com/article/SB10001424052748703785704575643111128016590.html.  Last accessed 11/29/2010.; see also Untied States Department of the Treasury.  Treasury Direct.    http://www.treasurydirect.gov/NP/BPDLogin?application=np.  Last Accessed 11/29/2010.

Why is this Topic Important to Wealth Managers? Today we continue our series on “Wealth Management in Today’s Economic Environment”. The series is designed to address the specific question many wealth managers are currently asking: “what are the best investment, retirement and financial planning tools given the current global financial position?” We explore alternatives from “safe” to “risky” from “traditional” to “emerging” to discover and discuss the most relevant wealth management tools and techniques available today. We look forward to presenting this discussion and think you will find the information quite valuable. Please note that this series is presented in continuation. That being said each blogticle resumes discussion from the previous day.

Corporate Debt

The dream of the asset manager is to generate high returns (like those available through equity positions) while at the same time providing guaranteed payments through avenues such as debt obligations. Nevertheless, as was discussed in the beginning of this series, the risk/reward model can help determine what investments may work best in today’s economy. Any wealth manager who believes however that bonds have no risk has their head in the sand. All investment actions, including inaction, involves risk in its purest form. For that is essentially the theme of what we learned in Econ 101—“Opportunity Cost”. Even corporate debt can be defaulted upon, and has been recently noted tax-free bonds too face danger of default. Thus risk of default should be considered as one factor among many when determining asset allocation.

It is important to thoroughly understand the financial statements of corporations which are issuing debt. It has been seen that the rating agencies such as Moody’s and S&P have failed investors in the past. Personal responsibility is one key to financial success. Therefore wise wealth managers will complete a diligent analysis of the financial position of a corporation before recommending that position to a client. As one commentator notes, “[a] strong balance sheet can be even more a source of strength and competitiveness in a recession than during a boom.” [1]

One important consideration in this area is the debt to equity ratio. Generally in the corporate world, the “expected debt to equity ratio varies depending on whether markets are bullish or bearish, whether the economic sector to which a company belongs is more sunrise or sunset, or indeed on whether a company is in an early development phase or at maturity.” [2]

Generally, interest that accrues after the date of purchase of a corporate bond is included as ordinary income in the year in which it is received or made available. [3]

For additional information on the taxation of bonds see TaxFacts: Bonds.

For additional information on financial statement evaluation see Advisorfyi.com: Understanding Financial Statements with Warren Buffett.

Tomorrow we continue our series with U.S. government investment.

We invite your questions and comments by posting them below, or by calling the Panel of Experts.

Series Author: Benjamin Terner

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[1] Les Nemethy. Debt Versus Equity in Today’s Financial Climate.http://ezinearticles.com/?Debt-Versus-Equity-in-Todays-Financial-Climate&id=2381584. Last Accessed 5/31/11.

[2] Id.

[3] Treas. Reg. §1.61-7.