Posts made in October, 2009

What’s In A Name?

Posted by on October 26, 2009 in Family Wealth, Musings | 0 comments

I recently heard on the radio a segment about the names of animal groups. A journey of giraffes. A leap of leopards. A charm of hummingbirds. I wondered how people came up with these names and who got to name them. How cool would that be to get to name a group of animals?!?!

So why is it that the names of trusts tend to be chosen by the attorney – without any input from the client  – and based on the applicable tax acronym or technique?

Why is it that the purposes, hopes, and dreams, which likely led to the trust’s creation, are mentioned nowhere in the legal document – even though the “Four Corners Rule” limits the interpretation of trust provisions to the information included in the trust document and to the exclusion of external factors? What a missed opportunity (to say the least).

I am grateful to John A. Warnick, an estate attorney, for his pioneering effort to help other estate attorneys move beyond boiler-plate legal documents and their inherent limitations – and to create a Purposeful TrustTM.

One small but significant part of a Purposeful TrustTM is the use of a meaningful name. John A. estimates the average beneficiary of a dynasty trust will receive close to 300 quarterly trust statements during his or her adult life. Each of these statements will reference the trust by name, which creates 300 opportunities to remind the beneficiary of the (non-financial) purpose of the trust.

Simple? Yes. Powerful? Yes!

Below are two examples of purposefully named trusts – and the explanation, which would be included at the beginning of the trust document. The first is an example provided at the Master’s Level Intensive and copyrighted by John A. The second is one that I wrote, during the Intensive, for a trust for which my husband and I have provided.

Read these and consider the power of a name…

Smith + Jones Legacy Trust

We have chosen the surnames of both my wife and myself and the word “Legacy” to frame the name of this trust. Each surname should remind the beneficiaries of the powerful heritage they have received from both sides of our family. The “+” between the two surnames emphasizes the synergy we feel our family generates because these two family lines came together with our marriage. The word “Legacy” with a capital “L” signifies something deeper than the legal definition of legacy. A legacy in the eyes of the law is money or property bequeathed to another. To us Legacy not only signifies the wealth transmission side of this trust instrument but it also represents the values that have come to us from previous generations. We hope the name of this trust will cause the beneficiaries to not only appreciate the value passing on to them but that they will always regard the values which were in large part responsible for our family’s financial success as a “Legacy” which they should build on for those who follow them.

Sweet Babes Trust

We have chosen Sweet Babes to frame the name of this trust. It symbolizes that our “pets” were always considered our kids and an integral part of our family. Like many other families, our kids were a part of our greatest pride and joy, and sharing their lives was one of the greatest blessings granted us by God. Accordingly, we wish to provide for all their wants and needs for the rest of their precious lives.

What message would you want to live on through a trust you create?

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Consider This

Posted by on October 20, 2009 in Musings, Readings | 0 comments

As difficult as it is to believe, the busiest shopping day of the year is just over one month away, and Christmas is barely two months off. So, even though my closet is still filled with Capri’s and sleeveless blouses, my thoughts have begun to turn toward the Christmas season.

Apparently, I’m not the only one, because just today the National Retail Federation released the results of their 2009 Holiday Consumer Intentions and Actions Survey.

Consider this … According to the 2009 ARF Survey, the average American plans to spend $682.74 on holiday-related shopping this year. If the recent past is any indication, the majority will put these purchases on credit cards, and almost half will take up to six months to pay them off.

Consider this … Instead of the glitz and glam of shopping and gifting, what if this year was more about connecting in new ways with those we love?

Consider this …

If you could not simply buy a present, how else could you show you care?

How might you show love and thoughtfulness without giving a typical gift?

What new tradition might you start – instead of a gift exchange?

In what way might you volunteer together – to give back and support your community?

How might you honor those you love through a gift to those less fortunate – locally and / or globally? [One of my favorites is Heifer International.]

Consider this … How might this year be the year you begin to make more of a difference – for yourself, your loved ones, and your community?

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Why Being Satisfactory is Not Enough – An Invitation to Be Distinctive

Posted by on October 12, 2009 in Family Wealth, Financial Planning | 0 comments

According to a Prince & Associates survey, there is a disconnect between the value financial advisors believe they provide clients and the value high net-worth clients believe they receive. That is, while advisors tend to believe they offer high-value service, clients are not so sure. And, even those who are “satisfied” are not likely to remain loyal.

Survey respondents who rated themselves as “satisfied” indicated they are not likely to recommend the advisor to their friends, may reduce their positions with the advisor, and may leave the advisor. Nearly one-third of those “moderately satisfied” or “satisfied” were “very” or “extremely” likely to leave their primary financial advisor within the next year.

“Highly committed” clients are 12 times more likely than “lower committed” clients to transfer new assets to an advisor’s care and 5 times more likely to recommend their advisor to family or friends (J.D. Power & Associates).

On average, moderately satisfied clients added $17,000 in managed assets per year; satisfied clients added $23,000. Loyal clients added an average of $376,000 in additional managed assets (Russ Alan Prince).

In the highly competitive field of financial services, being satisfactory is just not enough.

So what are high net-worth clients looking for? According to Prince & Associates, they are looking for a “true wealth manager” who can provide comprehensive financial services and products, including tax and estate planning services.

Another survey by Prince & Associates also highlights the importance of estate planning. Almost 80% of “middle-class millionaires” tagged providing for heirs as a primary concern, while 94% of respondents with $3 million – 10 million in financial assets ranked heirs as a top priority. Surprisingly, the estate plans for the majority of these same respondents are out of date.

In addition to skill and knowledge, the advisor – client relationship is key. It’s simply impossible to provide high quality personalized service to a client you do not know and stay in contact with.

So now I ask you – what sets you apart from your competitors? What services or manner of service do you offer that distinguishes you from the crowd? What makes you remarkable or exceptional?

I’d really like to know, because I am assembling a team of financial and legal professionals with whom to collaborate – to provide exceptional service and thus garner the loyalty of highly satisfied high net-worth clients, who will gladly tell others about the tremendous value they receive as a result of this unique collaboration.

Just what does that mean and look like? Contact me, and we’ll discuss options and opportunities – including a live demonstration of a client retreat, a family meeting, and more!

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Neuroeconomics

Posted by on October 3, 2009 in Financial Planning, Readings | 0 comments

I recently began reading Your Money & Your Brain: How the New Science of Neuroeconomics Can Help Make You Rich by Jason Zweig. For warm-ups, he gives examples of how knowing better doesn’t mean we’ll do better and runs down some basic lessons we’ve learned as the field of neuroeconomics has progressed.

My favorite “case study” was that of Harry M. Markowitz, the “father” of Modern Portfolio Theory and winner of a Nobel Prize in economics (1990), who was unable to apply the mathematical breakthrough he’d helped discover to his own investment portfolio. Instead, in the 1950’s, he chose to invest 50% of his retirement savings in stocks and the other 50% in bonds. Markowitz said, “I should have computed the historical co-variances of the asset classes and drawn an efficient frontier. Instead, I visualized my grief if the stock market went way up and I wasn’t in it – or if it went way down and I was completely in it. My intention was to minimize my future regret.”

Markowitz’s sentiment was echoed by another Nobel Prize winner, Daniel Kahneman (the first psychologist to win a Nobel Prize in economics), who said, “Financial decision-making is not necessarily about money. It’s also about intangible motives like avoiding regret or achieving pride.”

So what does the research show? So far, here is some of what we’ve learned through the study of neuroeconomics:

  • Monetary gains and losses create a biological change, which can profoundly affect the body and the brain.
  • The neural activity of someone making money on their investments is indistinguishable from that of someone high on cocaine or morphine.
  • After a stimulus, such as an uptick in the price of a stock, is repeated twice, the brain “automatically, unconsciously, and uncontrollably” expects a third recurrence.
  • Once someone presumes that investment returns are predictable, their brain will respond in alarm when that presumed pattern is broken.
  • Financial losses and mortal danger are processed in the same areas of the brain.
  • “Anticipating a gain, and actually receiving it, are expressed in entirely different ways in the brain, helping to explain why ‘money does not buy happiness’.”
  • “Expecting both good and bad events is often more intense than experiencing them.”
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