IS LESS MORE?
J.P. Morgan Asset Management wants to limit choices in defined contribution plans. The group introduced Core Menu Innovation in November. It will provide each of its 401(k) plan sponsors with three custom diversified portfolio choices aimed at different levels of risk tolerance. Each general portfolio type would have a stock, bond or cash core, with other investments balanced to ensure diversification. "It makes sense," says Kevin Chisholm, a senior analyst at Cerulli Associates. Participants think investment menus are "confusing."
Engage the 1%
Independent advisors can draw clear distinctions between themselves and the firms being targeted by Occupy Wall Street protesters, according to HNW, a New York marketing firm. This is especially true when dealing with members of the wealthiest 1% of American households. About 51% of high-income respondents recently told HNW in a survey that they do not feel that they are part of the group cited in the Occupy protests nationwide. The WealthPulse: Occupy Wall Street study polled 100 Americans with at least $350,000 in annual income and $1 million in investable assets. But high-net-worth people are also angry at Wall Street. In fact, 61% of respondents think executives responsible for the financial crisis should be prosecuted. Also, 57% said Wall Street firms should make more of an effort to listen and respond thoughtfully to Occupy protesters' concerns.
Will consumers change their retirement saving and investing habits when confronted with computer-generated images of their future older selves? The American Marketing Association's Journal of Marketing Research published a study last month detailing the results of such an experiment. The team showed age-progressed photos to a portion of the study's subjects and then asked them to participate in investment scenarios. Working-age participants who saw photos of themselves at around age 65 were willing to allocate 33% more of their paychecks to their retirement accounts than those who did not see their future selves.
To Cut Out Middleman, Advisors Recommend Intra-Family Loans
In this low interest rate environment, some planners are advising their clients to cut the middleman out entirely with intra-family loans. That way, "the bank's profit stays in the family," says Jonathan Bergman, an advisor in Scarsdale, N.Y.
In most cases, such loans are made to a child from a parent. A parent confident of a son or daughter's ability to repay can make a higher return through an intra-family loan than they often can through stocks or bonds. And, the younger generation is able to borrow at a lower interest rate than those offered by financial institutions.
First-time borrowing, financing business startups and the purchase of investment properties are all "ideal ways" to use this strategy now, according to Cameron Thornton, an advisor in Burbank, Calif., who specializes in inter-generational wealth transfers. He cautioned that the loans must be written using interest rates established by the federal government for short-term, mid-term and long-term periods to ensure the loan rates are not considered "under-interest" by the IRS. — A.M.
Let Accounting Firms Handle Routine Advisor Exams
A Georgetown University professor has proposed a different idea in the ongoing debate over how investment advisors should be regulated effectively: Outsource the heavy lifting to accounting firms.
In a 36-page report now circulating through the industry, James J. Angel, a professor at the McDonough School of Business at Georgetown, says routine examinations should be outsourced to seasoned accounting professionals. TD Ameritrade Institutional commissioned the report, titled, "On the Regulation of Investment Advisory Services: Where Do We Go From Here?"
The SEC and FINRA habitually hire recent college or law school graduates as examiners, yet these examiners often lack industry experience, according to Angel's report. Audits then become perfunctory "check the box" events that are unlikely to uncover wrongdoing, according to Angel. It is better to end the practice of hiring examiners with little industry experience and instead upgrade the skills of existing ones, he says. — D.M.
ON THE MOVE
The CFP Board of Standards has elected four new directors to its board: John Connell, a principal in the Denver-based accounting firm Causey Demgen & Moore; Michael R. Greene, CFP, senior vice president of the financial planning business at Ameriprise Financial Services; Eva Kampits, director at the New England Association of Schools and Colleges and G. Joseph Votava Jr., CFP, CEO of Seneca Financial Advisors.
Chicago-based HighTower has hired Ann T. Rieder as a managing director responsible for the firm's Midwest territory. Rieder has more than 15 years of branch management experience, and had managed the Morgan Stanley Smith Barney office in Oakbrook Terrace, Ill., previously. She led a top private client and corporate services branch with $2 billion in assets under management. Rieder serves on HighTower's diversity council.
Zurich Global Life in North America has named Gary Hirschkron as head of product development. In the newly created position, Hirschkron will seek to drive growth of each of Zurich Global Life's distribution divisions: Independent Financial Advisors, Private Banking, Farmer's New World Life and Corporate Life & Pensions. Previously, Hirschkron was senior vice president of life product design and manufacturing for AXA Equitable Insurance. There, he created AXA's first Indexed Universal Life Series, released in 2010.