Ten Rules for Asset Protection Planning

Ten Rules for Asset Protection Planning

By Jay Adkisson

Start early, keep it simple, and don’t try to hide stuff from your creditors.

There’s a gambling saying that goes something like, “If you want to be a winner, you have to walk away from the table a winner.” One time-honored method of reaching this result is to systematically take your chips off the table as you win them, so that your potential for losses stays small.

Asset protection planning is all about taking chips off the table in good times, so that you still can walk away from the table a winner no matter what happens in bad times. Those who worry the most about asset protection are those who are the most likely to get sued; think obstetricians and, more recently, real estate investors here.  But average folks often get caught up in difficult situations, and thus if you have something to protect then the topic of asset protection should at least cross your mind. ...

Technically, asset protection planning is the debtor’s side of creditor-debtor law. While creditors are concerned about the strategies and techniques of collection, debtors are interested in the strategies and techniques for protecting their most valuable assets from potential creditors.

But in this calculation, it is not just about protecting assets but also about making sure that one does not end up in jail for contempt or bankruptcy fraud for engaging in the process.

Keeping in mind the law school adage that “General rules are generally inapplicable”, the following 10 rules should always be kept in mind when you try to take your chips off the table.

1. Start Planning Before A Claim Arises

Many things you can do will effectively provide asset protection before a claim or liability arises, but few things will afterwards. That’s because what you do after a claim rises could be undone by “fraudulent transfer” law.

Moreover, the point at which a claim arises is earlier than a layman might think—it is, for example, usually much earlier than when a demand letter or a process server shows up at the door.

2. Late Planning Usually Backfires

Asset protection planning after a claim arises is apt to make matters worse; think of it as getting a flu shot while you have the flu, and the shot itself making you even more woozy.

 It is a common misconception that the only thing a judge can do is to unwind a fraudulent transfer, leaving a debtor who unsuccessfully tried late planning no worse off than if he had done nothing.

To the contrary, both the debtor and whoever assisted in the fraudulent transfer can become liable for the creditor’s attorney fees, and the debtor can lose the hope of getting a discharge in bankruptcy.

3. Asset Protection Planning Is Not A Substitute For Insurance

Asset protection planning should not be a substitute for liability and professional insurance, but rather should supplement insurance.

It is a myth that asset protection plans invariably scare away plaintiffs, and an asset protection plan doesn’t pay legal fees to defend against a lawsuit.

Insurance also supplements asset protection planning, since it can help a debtor survive a claim a fraudulent transfer claim. If you get sued, let the insurance company pay to defend it and pay to settle it — that’s what you’re paying the premiums for. 

4. Personal Assets Are For Trusts; Business Assets Are For Business Entities

To continue reading, please go to the original article here:

https://www.forbes.com/sites/jayadkisson/2011/07/13/ten-rules-for-asset-protection-planning/?sh=5b0cf8d33889

Post RV Tips & Suggestions

Post RV Tips & Suggestions

From OOMF  By Just Da Truth  (Repost From Our Archives)

While there are numerous ways to prepare for the RV I feel this will assist you in preparation for that most awesome day. When you see RV in big letters on your favorite currency forum, , or when you hear me scream hallelujah from wherever you are in the world…that is when you will know that glorious day has arrived. But will you be ready?

Prepare: I realize many of you have done your research on how to invest, donate, and spend your money (Lord knows we have had plenty of time to do that, LOL) but time should also be allocated to how you are going to receive your investment.

Preparation is not a huge task and I believe it is essential.

Many of us have our dinar stuffed in the sock drawer, safe deposit box at the bank, or maybe even locked in the pages of your Bible but when that day arrives for you to exchange your currency there are a few things you should consider. Here are some simple steps and advice…

Give thanks: First and foremost hit your knees!

Keep Quiet: On the day you discover your investment has RV’d your first reaction is to scream with excitement and to tell the world. Think of your safety and your family’s safety first. Handle your affairs as quiet as possible.

Even though this event trumps all events you could ever post on Facebook and Twitter…it is better not to tell anyone about this particular event.

Identification: If you decide to use a bank or your currency trader at time of exchange both are going to ask for 1 to 3 different forms of identification.

Make sure your id’s are current. You will likely use your driver’s license, passport, credit cards, student ID, work ID, and/or a utility bill.

Banking: If you are dealing with small banks, go straight to the VP or upper management. If your bank has a foreign currency exchange department immediately ask for the VP or President of the department.

With larger national  banks, go to their Private Banking or equivalent division for customers with great wealth. I think you get the point I am trying to make…

If the new exchange rate is considerably higher and you have several dinars to exchange you will be dealing with a high amount of cash in exchange. This step will only move the process along and further protect your asset.

They may have more options when it comes to banking, and have a better grasp of the disclosure and security procedures in the bank.

It would also be beneficial, if you know your banker, to have his/her name and phone number ready in case there is a technical challenge wiring the funds.

If not, have the banks phone number and address readily available…go ahead and log into your contacts in the cell phone.

Also, research your own bank options, banking fees, bank account features, return rates, FDIC insurance, NCUA insurance, etc.

If you are utilizing the services of a currency trader make sure you have all the needed account numbers that the exchange office will require in order to wire funds to your bank of choice. So you will need your bank name, bank account, routing number, and wire transfer numbers. Also add the phone number and address into your cell phone for quick access.

Contingency Plan: Lets say you plan to go to your local bank to cash in your dinar. You find out there is something you are not too familiar with or maybe…they do not offer a currency exchange service.

If they are going to ship your Dinar out-of-state (out of your sight) for 3 or 4 days, the cash in spread is too high, etc etc. What do you do?

Do some calling around before you leave to see what services your institution offers. Ask about the rates and if there will be a delay for the money to be deposited into your account.

Take a preventive measure today by writing down a list of banks near your home, next major city, or an adjacent state that you can contact if a problem with your initial bank arises.

Depositing your Cash: Regardless of the method you use to exchange your dinar into dollars you will likely deposit a large sum of cash into a bank account. If you are in the United States banks are required to report to the IRS any single deposit exceeding $9,999.99. This is to identify potential criminals dealing in fraud, theft, or even terrorism.

Furthermore, funds deposited in the amount of $10,000 or more can be “frozen”by the bank or by the bank on behalf of the IRS if the deposit appears“suspicious”. These frozen funds can by tied up to 10 days or until you can provide valid proof where these funds originated.

There are suggestions on how to avoid your bank account from being frozen but none will guarantee you will not wait to have access to your funds. Banks can hold wired funds, checks and cashier checks until funds are honored by the issuing  institution. Much like a second party check each bank has a “clearing”period based on different transaction types.

Prior to making the deposit (especially if it is a large deposit) talk with the manager and explain the situation as an investment payout. You may need validation of some kind such as a written statement. This may avoid the IRS from being directly involved and shorten the time frame you will have access to your entire deposited funds.

Please discuss this with your banker, attorney, and/or CPA for further clarification and understanding.

“Walking” out with your money: If you were cashing a check for a few thousand dollars it is likely the banker would place your bills in a zipper bag and let you walk out the door.

However, if you ask to walk out with lets say a few hundred thousand dollars be prepared to wait.

Banks refrain from having large bulks of cash on hand for security purposes and most transactions are electronic.

However if you desire to have “cash” be prepared to make a request anywhere from 24 to 72 hours prior to your withdrawal in order for the bank to make arrangements.

Trusts, LLC, and Other Legal Entities: There are many ways to suggest how to set up your financial portfolio. Some have suggested to set up a trust(s), some have suggested establishing a LLC. Some just plan on cashing in as a single person.

However you decide to set up your arrangement make sure all of the legal documents are close by so that you can refer to them, if need be.

If you desire to open a bank account under a Trust, LLC, etc. these documents will be required. See bank accounts above.

Be careful of online offers and Dinar forums offering trust advice or assistance. Do you research…you don’t know who these people are..Don’t send anyone funds prior to a thorough investigation. Call the Better Business Bureau for advice.

Wills: I realize this sounds morbid but it is essential. I hate to say it but here is a scenario…you cash in and deposit $1 million in your bank account. On the way out of the bank you do your best impression of the Snoopy dance.

Not watching where you are going you come face to face with a large RV…not revaluation but a recreational vehicle! Your RV came twice that day…first to make you wealthy and the second time to meet your maker. So what happens to your $1 million?

This is why it is essential to draw up a will. Even a simple notarized will is better than nothing. Easy wills are found at places like Office Depot…some are free online as well.

Tax: The ugliest three letters ever made up. But it is something we all will deal with. Don’t try to avoid it as you will find yourself regretting you ever did. Its better to place a certain percentage aside allocated just for taxes and never touch it!

These percentages have been quoted all across the spectrum but whatever you decide to allocate..remind yourself not to spend it till you decide to send that check to Uncle Sam.

My advice would be to look up the phone numbers of local CPA’s, CPA/Tax Attorney’s and have their numbers available to make appointments with them post RV.

Get their advice and reconcile their thoughts. Once you pick someone you are comfortable with he/she can walk you through the needed forms and steps.

Of course, choosing a CPA or a Tax Attorney is not that simple…so keep your ears open for a well-qualified person to handle your taxes.

I understand some are saying their are methods to avoid paying taxes on currency exchange. Listen! Be Smart! Get the advice of a tax professional and don’t end up owing money or perhaps be under investigation.

Don’t be fooled…the IRS follows every transaction at banks so just be cautious and pay your taxes.

Post RV Investments: The only advice I can give you here is to… get advice.

Seek the services of a financial consultant, go to the library, Google everything that comes to mind. I will admit that just about any financial advisor that exists would likely roll of out of his chair in laughter if he heard about this investment pre-RV but I would also place a handsome bet that he or she would want your business when you are in search of advice post-RV.

Do your due diligence before you spend money. Don’t be afraid to get second opinions and ask around.

This kind of blessing will likely never happen like this again so be wise.

Also..Be wary of fellow dinar investors asking you to partner with them in an investment. Just because they are a fellow investor doesn’t mean they have your best interest at heart. Be Smart!

Donations/Tithe: I think it is imperative we should all give back, pass it forward, and donate. But do your homework and give your money to honest charities. It’s shameful to think that people make up fraudulent organizations and never spend donations instead they line their greedy pockets. Give to organizations that are close to your heart.

Tithe to your church. The tax man is going to take a chunk of your wealth you might as well offset the tax man by giving those funds to something meaningful and worthwhile.

Document Everything; This can’t be emphasized enough. If you are fortunate to gain a large sum of wealth remind yourself to treat your accounts appropriately and be careful not to let others mishandle your money.

You may have more money than you ever had before but that doesn’t mean you will always have it. Keep records, bank statements, receipts, contracts, agreements, etc.

If you hire a financial advisor be actively involved with your account and have understanding of what your advisor is doing with your money. Also, be aware of all of the fees advisors charge for their services.

After all how many times have you heard of celebrities discovering they are broke because they trusted someone else with their money?

Debt: When the RV occurs you will have been blessed with a sudden amount of wealth. No matter how small or large the sum of your return find it in yourself to reduce your personal debt.

Pay off the mortgage, pay off the credit cards, pay off the installment loans, pay off the student loans, pay it all off. Stop being a slave to debt and avoid at all costs reentering into a lifestyle of owing a creditor.

Pay yourself: There is nothing wrong with spending money on yourself. Take a vacation, buy a car, pay off some bills, go to the mall. Withdraw some “fun”money but take the rest and let the interest and dividends accrue.

Remember to buy smart: Many of us have lived modestly most of our lives and with a sudden amount of cash in the bank your buying potential could be endless. But remember to be smart when making purchases.

Sure you can afford a 10,000 sf house but remember the taxes, utilities, and cost to maintain the home. Sure you can afford a Ferrari, Lamborghini, and a Porsche but remember the maintenance cost associated with these high end cars. Enjoy your wealth…learn to keep it.

Loose Lips, Sinks Ships: Its sad but true…the minute you have money in your bank account will be happy. But if friends and family that are non-dinar investors hear of your recent influx of wealth they are going to want a piece of your pie.

I am sure you are going to want to help your friends and family but do it under your own will and not because of their solicitation. Be quiet and serve your fortune to those with gratitude and need.

Safety: Lets just be honest. There are some cruel people in this world and they will do anything they can to harm you or your family in order to obtain a portion of your wealth.

This refers back to being quiet. Fly under the radar. Live as normal as you can. Enjoy your life but be aware of your surroundings and the people you invite into your life.

Enjoy your life: Money does not buy happiness. Some of the richest people in history were the most miserable. Let the happiness in your life result from living your life right, spending your wealth of time with your family, and being debt free.

Now that you are rich avoid falling into the temptation the desire to become wealthier.

Don’t let money be a driving force in your life. It is perfectly fine to invest and protect your wealth just don’t allow it to consume your life.

These are just a few tips and suggestions. This is my soul my opinion and I am not a financial consultant, CPA, lawyer, and in no capacity have the power to give financial or legal advice however I am a concerned investor that wants all of us to be informed.

The Biggest Truth In Personal Finance

The Biggest Truth In Personal Finance

By J.D. Roth Get Rich Slowly

I believe strongly that you need a clear personal mission statement in order to find success with money (and life). I also believe that the most important number on your path to financial freedom is your personal profit, the difference between your income and your spending. (Most people refer to this number as saving rate. I prefer the term “personal profit” because it's, well, sexier.)

That last point is important.

Too many people want magic bullets. They want quick and easy ways to get out of debt and build wealth. They believe (or hope) that there's some sort of secret they can uncover, that somehow they've missed. Well, there aren't any secrets. Money mastery is a combination of psychology and math. And the math part is so simple a third-grader could understand it. Wealth is the accumulation of what you earn minus what you spend.

There are only two sides to this wealth equation — earning and spending — but a disproportionate amount of financial advice focuses on the one factor, on spending, and that's too bad. Sure, frugality is an important part of personal finance. And if you're in a tight spot and/or have a high income and still struggle, then cutting expenses is an excellent choice. But the reality is, you won't get rich — slowly or otherwise — by pinching pennies alone.

The Biggest Lie in Personal Finance

Recently at his excellent blog, Of Dollars and Data, Nick Maggiulli wrote about the biggest lie in personal finance. What is that lie? He writes:

While there are lots of people who are in financial trouble because of their own actions, there are also lots of people with good financial habits who just don’t have sufficient income to improve their finances.

That’s why the biggest lie in personal finance is that you can be rich if you just cut your spending. And the financial media feeds this lie by telling you to stop spending $5 a day on coffee so that you can become a millionaire.

With charts and graphs and data, Maggiuli demonstrates that the problem facing people with low incomes isn't their spending — it's their earning. If you're living at the poverty line — currently $26,200 per year for an American family of four — you're not going to escape through thrift. Thrift is an emergency measure, a stopgap. It's a bandage on a major wound.

Here's the bottom line:

If you're poor and hope to be not poor, your attention should be focused on increasing income, not on cutting costs. Your expenses are likely already very low.

If you have an average household income — currently $63,179 according to the U.S. Census Bureau — your path to building wealth will probably include both frugality and income enhancement.

If you have a high income but still struggle to make ends meet, your attention should absolutely turn to cutting costs. You need to rein in your lifestyle. But you won't accomplish this with frugality; you'll do this by optimizing the big stuff.

To continue reading, please go to the original article here:

https://www.getrichslowly.org/the-biggest-truth-in-personal-finance/#more-238978

Financial Goals: Your Prioritization Guide

Financial Goals: Your Prioritization Guide

Beth Braverman

 You already know the most basic principle of personal finance--spend less money than you make. Once you’ve got that covered, however, figuring out how to achieve all your financial goals at once can feel overwhelming.

 Should you direct any extra cash toward paying off your student loans or saving for retirement? Building an emergency fund or chipping away at credit card debt?

 As you grow your family and advance in your career, there may be even more competing goals, such as buying a house, saving for your kids’ college education or taking a dream vacation.

 In general, this is how you might think of prioritization for your financial goals, from the most to the least important.

 (Of course, the more complicated your finances, the more you’ll benefit from working with a financial planner who can help you navigate your specific situation.)

 1. Protect Yourself Against the Unexpected

 Before working on almost any other long-term financial goals, you’ll probably want to have at least three to six months’ worth of expenses in a liquid account that you can access in case of emergencies.

 “An emergency fund gives you the ability to stay on track no matter what your other goals are,” says Rich Ramassini, a Certified Financial Planner and senior vice president at PNC Investments. This is true even if you have credit card debt. “Let’s say you want to aggressively pay down your credit cards, but your car breaks down and you need a $2,000 repair. If you don’t have an emergency fund, guess where that money is coming from?”

 Bonus: Rising interest rates mean that you save money in an online savings account and it should earn at least a small return.

 Helping to protect against the unexpected also means making sure that you have adequate insurance coverage. That often includes health insurance, auto and home (or renters) insurance, life insurance and disability insurance.

 Although insurance premiums can put a dent in your cash flow, they tend to be relatively cheap compared to the expenses you’d face in a worst-case scenario without such coverage.

2. Start Saving for Retirement

To continue reading, please go to the original article here:

https://meetfabric.com/blog/prioritization-financial-goals-short-term-long-term

Where Do I Store My Wealth?

Where Do I Store My Wealth?

From Crisis To Confiscation— By Jeff Thomas     International Man

International diversification of wealth (no matter how large or small) can save your economic freedom.

Although most of our readers thoroughly understand this concept, one of the most oft-heard concerns is that, by offshoring assets, one may not be able to get to them as easily as they now can. Here’s the response to that, and some practical advice on what you can do to protect yourself.

Let’s say you presently regard yourself as being economically diversified. You own stocks and bonds, you have some cash, you have a retirement fund and you have a bit of gold stuffed away at home. On the surface, it would seem that you’re covered. Trouble is, you have all your wealth in one jurisdiction, and should that jurisdiction find itself in an economic crisis, all that “diversification” will be seriously at risk.

Of course, it’s human nature for us to want to keep our wealth close at hand. It feels more secure than having it miles away from us. We tend to follow this concept even though we’re well aware that to have our wealth really close (i.e., on our person) we would be asking to have someone with a gun take it away.

Although we understand this, we somehow manage to convince ourselves that our own government, should they decide that they wish to get their hands on our wealth, is less of a threat to us than some thief. If we’re being really truthful with ourselves, governments pose a greater threat than the average thief, as they can steal legally.

Confiscations and Bubbles

In recent years, the governments of the US (in 2010), Canada (in 2013) and the EU (in 2014) have passed bail-in legislation, allowing the confiscation of deposits in bank accounts.

When confiscation does occur, I believe it will happen without warning, as it did in Cyprus. One day, you wake up and your money is gone. What can you do? Nothing. It’s legal.

But you may still be all right, since you’re diversified. How about your retirement fund? Well, both the US and EU have announced that, should the investments of your fund be deemed to be at risk, the government will ensure that you will not lose your money, by requiring that your fund be heavily invested in government Treasury bonds, which are guaranteed.

 However, should there be an economic crisis, that guarantee will quickly go south.

Again, when this happens, it will happen suddenly, without warning.

Well, how about those stocks and bonds? You broker assures you that he has wisely invested your money in a variety of stocks and bonds and he declares that your investment is therefore diversified.

Trouble is, the bond and stock markets are presently in the greatest bubbles the world has ever seen. Even a minor crisis can put a pin to those bubbles without warning.

To continue reading, please go to the original article here: 

http://www.internationalman.com/articles/where-do-i-store-my-wealth

Brain Meets Money

Brain Meets Money

Richard Quinn    HumbleDollar

HOW OFTEN DO you think about money? Hey, you just did. Seriously, we think about money every day and sometimes every hour. Some studies say we ponder financial matters even more often than the old standby: sex.

We’ve been thinking about the stuff for a long time. Money goes back about 3,000 years. Paper currency can be traced to China in 700 BC. They didn’t fool around: Their currency stated that all counterfeiters would be decapitated. I’m guessing counterfeiting was rare.

Today, it costs two cents to manufacture a penny and almost eight cents to make a nickel. Result? Each year, we taxpayers lose about $85.4 million on the production of pennies and $33.5 million on nickels.

Gee, at that rate, those of us on Social Security could receive a $2-a-year raise if they made cheaper money. Who needs pennies anyway? Money is no more than a piece of metal or paper—basically worthless, except you can get stuff for it because the people who sell you stuff can get other stuff with the money you give them.

Does money make us happy? Benjamin Franklin didn’t think so. “Money never made a man happy yet, nor will it. The more a man has, the more he wants. Instead of filling a vacuum, it makes one.”

The evidence suggests Ben was right, but try telling that to addicted lottery players. I recall a TV show depicting the impact of winning the lottery on people. Instead of making the winners happy, it often messes up their lives, mostly because they’re ill-prepared to handle the money and because they thought spending would make them happy.

One winner stands out in my memory. He bought several pieces of used heavy construction equipment just to have. He didn’t know the tax withholding on his winnings wouldn’t cover all of the tax he owed. He eventually lost all of his prize possessions and a great deal more to the IRS.

Another family lived in a trailer and, instead of moving, expanded it, bought each child their own ATV and gave each an allowance of $1,000 a month. The kids were ostracized at school and had to leave.

“The conviction of the rich that the poor are happier is no more foolish than the conviction of the poor that the rich are,” offered Mark Twain. Indeed, if you Google the subject of happiness and money, you will find assessments from every point of view. But none concludes that money buys permanent happiness, only fleeting pleasure perhaps.

On the other hand, money can relieve stress—or create it. If you don’t have enough to pay the bills, more money will help. But if you have plenty of money, the fear of losing some may be stressful.

 To continue reading, please go to the original article here:

https://humbledollar.com/2020/02/brain-meets-money/

IRS Rule Change Should Have You Rethinking How You Leave Assets to Heirs

IRS Rule Change Should Have You Rethinking How You Leave Assets to Heirs

Brian J. O'Connor Sun, July 30, 2023

Managing your taxes can be one of the most complex aspects of estate planning and a new IRS rule change continues that trend. The rule, published at the end of March, changes how the step-up in basis applies to assets held in an irrevocable trust. If you need help interpreting the IRS rule change or setting up your estate, consider speaking with a financial advisor.

What Is a Step-Up in Basis?

When someone inherits an asset with unrealized capital gains, the basis of the asset resets or "steps up," to the current fair market value, wiping out any tax liability for the previously unrealized capital gains.

For example, if you purchased stock for $100,000 more than a year ago and sold it now for $250,000, you would pay capital gains tax on the $150,000 profit above the original basis of $100,000. If you inherit that stock, however, your new basis steps up to $250,000 and you'll pay tax only if you sell the stock for more than that amount.

To protect their assets, many people place them in an irrevocable trust, which means they lose all ownership rights to the assets. Instead, the trust becomes the owner of the assets for the benefit of the trust's beneficiaries.

How IRS Rule Change Impacts Irrevocable Trusts

Previously, the IRS granted the step-up in basis for assets in an irrevocable trust but the new ruling – Rev. Rul. 2023-2 – changes that.

Unless the assets are included in the taxable estate of the original owner (or "grantor"), the basis doesn't reset. To get the step-up in basis, the assets in the irrevocable trust now must be included in the taxable estate at the time of the grantor's death.

That's the bad news.

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/want-leave-assets-heirs-irs-105000681.html

Why the IRS Is Making a Big Tax Collecting Change — and How It Affects You

Why the IRS Is Making a Big Tax Collecting Change — and How It Affects You

David Nadelle  Fri, July 28, 2023

In what its calls a “major policy change,” the Internal Revenue Service (IRS) announced July 24 that it would be discontinuing its practice of unannounced visits to taxpayers. The agency cited a need to increase safety standards for the public and its employees — and to stop scam artists from posing as IRS agents to threaten taxpayers.  The change is part of a larger operational policy reconstruction brought upon by the passing of the last year’s Inflation Reduction Act as well as the delivery of the new IRS Strategic Operating Plan in April.

“We are taking a fresh look at how the IRS operates to better serve taxpayers and the nation, and making this change is a common-sense step,” IRS commissioner Danny Werfel said. “Changing this long-standing procedure will increase confidence in our tax administration work and improve overall safety for taxpayers and IRS employees.”

For decades, IRS employees have sometimes visited taxpayers in person, unannounced and unarmed, to resolve account balances and to collect unpaid taxes and unfiled returns.

However, since the Inflation Reduction Act provided for an increase in funding to help improve IRS services and technology, a number of Republican lawmakers assumed this money would be used to increase the number of employees and, in turn, escalate audits. This would ostensibly lead to unwanted and unnecessary home visits.

As CBS News reported, false and exaggerated information about IRS operating policies has resulted in its employees feeling less safe. Some agency antagonists went as far as to jump on social media and warn people of the IRS’s intention to arm its agents on taxpayer visits. This view has been vehemently denied by the IRS and its union, the National Treasury Employees Union (NTEU).

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/why-irs-making-big-tax-181541342.html

The Seven Deadly Sins Of The Wealth Management Industry

The Seven Deadly Sins Of The Wealth Management Industry

John Jennings  Contributor 

In his investment book “Where are the Customers’ Yachts?” Fred Schwed opens with the story that gives the book its title:

Once in the dear dead days beyond recall, an out-of-town visitor was being shown the wonders of the New York Financial District. When the party arrived at the battery, one of his guides indicated some handsome ships riding at anchor.

He said, ‘look, those are the bankers’ and brokers’ yachts.’

‘Where are the customers’ yachts?’ asked the naïve visitor.

Although the wealth management industry has evolved since Schwed’s book was published 81 years ago, the underlying issue remains: it is first and foremost a money-making machine for those who work in the industry. This doesn’t mean the wealth management sector is made up of bad people (I’m one of them!) but rather that their incentives aren’t usually aligned with acting in clients’ best interests. Like Upton Sinclair says, “It is difficult to get a man to understand something when his salary depends upon his not understanding it.”

According to Roman Catholic theology, the seven deadly sins are the primary feelings or behaviors that inspire further sin. The misaligned incentives of the wealth management industry roughly correspond to those deadly sins, and knowing them is essential to being a wise consumer of financial services. Once you understand what drives the wealth management industry, you can better choose which advisors to work with, evaluate their advice with clear eyes, and push back as necessary.

The Seven Deadly Sins Of The Wealth Management Industry Are:

1.    Advisors are incentivized to provide the least amount of service possible (sloth). An investment professional I know who works in the trust department of a large bank told me that a common refrain at their bank is “don’t wake the dead.” In other words, don’t call clients unless they call you first.

There’s a fundamental tradeoff in any business between customization and scalability. And it’s particularly acute in the financial services industry. Wealth management firms are incentivized to scale rather than customize because the more clients they can serve with limited people and resources, the higher the profits. By ignoring clients and being reactive rather than proactive, advisors can handle huge client loads, collect more fees and increase firm profitability.

2.    Advisors spend most of their time looking for their next client (lust). Years ago, I interviewed an advisor from a global investment brokerage who was looking to change jobs. When I asked why he was interested in our much smaller boutique firm, he told me he went into the financial services business to help people but doesn’t get to do that much. “About 80% of my time is spent on business development, and only 20% on actually advising and helping my clients,” he said.

Unfortunately, this is common in wealth management firms because they’re structured so that advisors “eat what they kill.” To make more money, they must constantly obtain new clients. As a result, most advisors spend most of their time wooing new clients instead of caring for those they already have.

To continue reading, please go to the original article here:

https://www.forbes.com/sites/johnjennings/2021/05/26/the-seven-deadly-sins-of-the-wealth-management-industry/?sh=1877636a6a14

7 Little Changes That’ll Make Your Money Last for Generations

7 Little Changes That’ll Make Your Money Last for Generations

Ken Eyler CEO, Aquilance  Thu, July 27, 2023

I’m an Advisor to Wealthy Families: 7 Little Changes That’ll Make Your Money Last for Generations

You may have heard of the third-generation curse, which causes 90% of wealthy families to lose their money by the third generation. But some individuals manage to deplete their wealth even sooner, especially if they came into a lot of money quickly. For instance, athletes, entertainers, executives and entrepreneurs who achieve runaway success after years of financial hardship may suddenly find themselves with seven-figure bank accounts and no idea how to carefully spend and manage their money.

The same thing can happen to people who inherit a lot of money. In fact, money mismanagement is one of the primary factors in the third-generation curse if sound financial values and solid money management strategies weren’t passed on through the generations.

Many of these families did not start off wealthy, and had already developed sub-optimal money habits by the time they became wealthy. Often, it’s hard to change those habits that have been formed over a lifetime. But when you have money, you, unfortunately, become a target. Your behavior needs to change if you want to preserve your wealth.

GoBankingRates spoke to Ken Eyler, CEO of Aquilance, a financial administration company focused on bill pay, bookkeeping, and complex entity and investment reporting for wealthy families. He shared with us seven tips to preserve generational wealth, whether you are a new heir, a social media influencer who hit it big, or an entrepreneur who’s struggled for years before finding that business idea that set you up for life.

Tighten Your Security Profile

As an advisor to high-net-worth and ultra-high-net-worth families, I often encounter those who make easily avoidable mistakes with their fortunes. Many of these families did not start off wealthy, and had already developed sub-optimal money habits by the time they became wealthy.

I see security as one of the biggest vulnerabilities for families. One of the common pitfalls are folks who were accustomed to posting about their travels on social media, especially if they first made it big in the public eye.

But when they are traveling on private jets and leaving their multimillion-dollar homes, they open themselves up to threats when they reveal their whereabouts. My recommendation is to post after the fact instead of in the moment. Also, take seriously the importance of anonymity when checking into hotels or visiting tourist attractions.

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/m-advisor-wealthy-families-7-203337535.html

I Downsized for Retirement and Regret It: Be Aware of These 6 Pitfalls

I Downsized for Retirement and Regret It: Be Aware of These 6 Pitfalls

Andrew Lisa  Updated Thu, July 27, 2023

Generations of Americans have leveraged their homes to fulfill their retirement dreams by downsizing.

Buy a house fit for a family when you have one and build equity over the years. When the nest empties and retirement nears, sell it to buy something smaller, cheaper and more manageable, and use the difference to finance your glorious golden years.  Downsizing can come with hidden financial and emotional costs, however. It can also diminish both your nest egg and your peace of mind. Here are some examples of downsizing regrets and how to avoid them.

In the Post-Pandemic Era, Even Small Houses Come With Big Price Tags

In the 2010s, annual home appreciation reached a high of 8.9% in 2013 but typically hovered around 5% to 6% per year. Then, COVID ushered in the era of unaffordability.

According to Freddie Mac, prices rose by 11.3% in 2020, 17.8% in 2021 and 6.7% in 2022.

It’s good to sell when prices are high, but retirees looking to downsize will then have to buy in an under-inventoried housing market with a median sale price of $416,100, according to the St. Louis Fed. According to Money.com, prices rose fastest and highest in the Sun Belt, where retirees have flocked for generations.

Borrowing Is Burdensome

Some retirees might earn enough from the sale to buy their smaller home outright, but because of today’s sky-high prices, many will have to take out mortgages to avoid being house rich and cash poor. With rates near 7%, home loans haven’t been this expensive since 2002.

High Prices Could Mean High Taxes

Profits of up to $250,000 for individuals and $500,000 for joint filers are exempt from capital gains taxes. Those are fairly easy thresholds to meet in a normal housing market, but today’s downsizers are selling near the market’s peak, and if they breach those limits, they could owe as much as 20% on the profit.

Real Estate Transactions Aren’t Cheap

To continue reading, please go to the original article here:

https://www.yahoo.com/finance/news/downsized-retirement-regret-aware-6-110017144.html