Guggenheim Acquires Private Family Office
Guggenheim Wealth Manage-ment-an investment management firm whose heritage traces back to the Guggenheim family of the late 1800s-has acquired one of the nation's oldest family offices.
Guggenheim, based in Chicago, announced that it has completed its acquisition of Private Family Office (PFO), which serves the family and business affairs of about 70 wealthy families throughout the world.
PFO was founded in the early 1900s to serve a wealthy East Coast family-"one of the wealthiest pioneering families in the United States," according to Guggenheim-and has since evolved into a multifamily office. PFO continues to serve the founding family, whose identity remains anonymous.
The merger may be a sign that a degree of consolidation is coming to the multifamily office business just as it is hitting the independent advisor market. Competition in the multifamily office space is growing and firms are increasingly attempting to achieve economies of scale while offering a broader array of services.
A recent survey by Family Wealth Alliance LLC indicates merger activity is expected to heat up in the industry, with 36.4% of respondents with $5 billion or more in assets saying their organizations are either likely or somewhat likely to acquire a smaller firm in the next 12 months. Also, about a third of smaller firms, with under $500 million in assets under advisement, stated that a merger was likely or somewhat likely.
The survey studied 68 multifamily offices and found their cumulative assets under advisement grew by 15.3% last year, to $226.5 billion. "Being able to benefit from a broader base and a deeper expertise is what everyone is after right now," says Leif Soderberg, senior managing director of Guggenheim Partners, which owns Guggenheim Wealth Management.
The acquisition of PFO by Guggenheim is a mutually beneficial merger, Soderberg says. PFO will provide Guggenheim, which has more than 100 individuals and family clients, with family office services that include estate planning and financial planning. PFO, which has outsourced its investment management services, will benefit from Guggenheim's investment management expertise, Soderberg says.
"We're entering a new era in which PFO's longstanding clients will benefit from the unique expertise and exclusive services Guggenheim Partners provides," says Rob Fedoris, CEO of PFO. "PFO and Guggenheim practice the same principles and philosophy in business and share a long history of success."
PFO will be integrated into Guggenheim's platform, but its staff of 35 professionals and support personal will remain intact, he says. PFO will also keep its name and Philadelphia headquarters. "They bring over strong relationships and a great history with the clients they have served," Soderberg says.
Guggenheim supervises more than $110 billion assets for clients, he says. Guggenheim Partners and its holdings were formed six years ago from units of the Guggenheim family office, he added. Besides its Chicago headquarters, it has offices in New York, Los Angeles, Miami, Boston, Philadelphia, St. Louis, Houston, London, Hong Kong and Geneva.
Earlier last month, Guggenheim Wealth Management completed an acquisition of the financial and life management business founded and run by Barry Klarberg, who represents more than 600 professional athletes, entertainers and high-net-worth families.
CFP Board Approves Changes
The CFP Board of Standards has renamed its key governing bodies and named members to the board of governors.
Under the changes adopted at its October 24 meeting, the board of governors will be renamed the board of directors. The board of examiners, which develops the CFP Board's examinations, will be called the council on examinations. The board of professional review, which enforces the organization's ethical standards, will become the disciplinary and ethics commission.
The changes go into effect January 1 and are designed to clarify roles and relationships at the CFP Board.
The board also selected David Strege as 2007 chair-elect beginning in 2007, when current chair-elect Karen P. Schaeffer becomes chair of the board of directors. Strege, of Syverson Strege and Co. in West Des Moines, Iowa, has 20 years' experience as a CFP practitioner and has served on the board of governors since 2004.
Appointed to four-year terms on the board are Theodore R. Daniels, founder, president and CEO of the Society for Financial Education and Professional Development; Alan Goldfarb, director of financial strategies at Weaver and Tidwell Financial Advisors Ltd. in Dallas; and Nancy Johnson Jones, chief compliance officer and senior managing advisor with BKD LLP in Springfield, Mo.
Interest In High-Yield Municipals Surges
High-yield municipal bond funds pulled in more than $7.4 billion from January through mid-October, roughly half of all inflows into municipal bond funds during the period, according to AMG Data Services. The popularity is a fairly recent phenomenon. Of the $358.6 billion invested in all municipal bond funds, high-yield funds account for $54.5 billion, or 15% of the total.
Just three years ago, lower-rated or unrated municipal bonds were an offshoot of the municipal market with little investor demand. But since 2003 a strong economy, lower interest rates and solid demand for higher tax-exempt yields has pushed bond prices up and reduced yield spreads between high-grade and high-yield municipals from a peak of 335 basis points to around 100 basis points, according to John Miller, who manages the Nuveen High Yield Municipal Bond Fund.
Miller says high-yield municipals are less sensitive to the economy than their corporate counterparts, and that the boom in housing prices and solid wage growth has strengthened municipal finances. "High-yield municipals are likely to be more resilient than high-yield corporate bonds as the economy slows because they are less cyclical," he says. "People always need water and sewer facilities or hospitals."
Still, he says, problems could arise if an unexpected default of an issuer held in a lot of portfolios spooks investors. There's also the issue of narrow credit spreads, which reduces the reward of taking on more risk. Overall, he believes this is an "okay time" to be investing in the asset class.
Advisor-Owned Trust Company Hits $4 Billion
National Advisors Trust, an independent trust owned by 125 financial advisory firms, has reached $4 billion in trust and custodial assets.
That represents a 33% increase from a year earlier for the Overland Park, Kan.-based company, which was founded five years ago with a mission to meet the specific needs of independent advisors and their clients.
The company was founded by 82 financial advisory firms and has since taken on 43 additional advisors as shareholders.
"As the only independent, advisor-owned trust company with national presence, we are helping our stakeholders brand their own businesses based on their unique needs and plans for future growth," says National Advisors Trust CEO Michael Baker. "Marketing research shows the vast majority of high-net-worth individuals and families expect us to use trust services, and they expect their advisors to provide those services to them."
By being advisor-owned, the trust company feels it can be more responsive to the needs of advisors and their clients, he says.
"Because most advisors do not have access to advisor-friendly trust services, we believe those who do have a competitive advantage overt those who don't," Baker says.
Some Retirement Plan Limits To Increase
Inflation has lifted many of the Internal Revenue Code caps relating to retirement plans for 2007. But some popular limits won't budge from '06 levels.
Important changes for the new year include the jump to $15,500 in the 401(k) contribution maximum. Proprietors with an owner-only 401(k) can stash $45,000, up $1,000. But the additional catch-up contribution allowed to these and other qualified-plan participants beginning at age 50 remains $5,000.
In defined-benefit plans, an increase to $180,000 in the annual benefit payable by a pension not only lets business owners receive more in the future, it affords a larger current contribution "because you are funding a higher benefit," says consulting actuary Jim Van Iwaarden, head of Van Iwaarden Associates in Minneapolis.
The big news in individual retirement accounts is that for the first time, the amount you can make and still fully contribute to a Roth IRA is going up. For 2007, it's $156,000 for joint filers and $99,000 for singles, according to Kaye Thomas, author and owner of fairmark.com, a free on-line tax guide. The IRA contribution limit remains $4,000 ($5,000 for those over 50) as it is currently set by a schedule that doesn't take inflation into account, Thomas says.
Also of note: The Social Security wage base rises to $97,500 in 2007.
Become A 'Retirement Coach'
If advisors wish to be successful, they need to address their clients' emotional and psychological issues tied to retirement in addition to investment performance, according to a new study.
The research by Mainstay Investments, 2006 Across Generations, found that clients no longer want a relationship with financial advisors grounded in just transactions and software.
What they want is a "retirement coach."
"Forging deeper advisor-client relationships, ones that go beyond the numbers, is of particular importance to the baby boomer segment approaching retirement," state the authors of the study.
Based on interviews with more than 1,500 individuals with at least $250,000 in investable assets, the study concluded that highly successful financial advisors have five main attributes.
Clients cited the following attributes as most important:
Provide Meaningful Advice: Clients want advisors to weigh in with expertise and guidance that addresses the unique particulars of their circumstances. Provide knowledgeable advice and refrain from taking a one-size-fits-all approach (88%).
Be Trustworthy: In today's current environment, investors demand that their advisors be trustworthy. Convey a feeling of trust from the onset and work to build that trust throughout the relationship (85%).
Address Personal Needs: The demands of caring for aging parents, paying for college, and saving for retirement simultaneously are complicating investors' financial lives like never before. Take steps to learn about the specific needs of the client and create a customized plan to address each concern individually (85%).
Achieve Above Average Returns: Investors expect their advisors to achieve above average returns for them. Advisors must work to manage expectations and avoid encouraging unrealistic goals that may leave clients disillusioned if not achieved (81%).
Have Strong Communication Skills: No one likes to be ignored. Maintain consistent and ongoing communication with your clients; be responsive to their concerns and demonstrate a thoughtful and genuine interest in their well-being (80%).
Clients clearly expressed a desire for more than just investment planning, according to the study. More than 50% of affluent investors are looking for more help with planning initiatives, particularly planning for retirement and generating income in retirement, according to the survey. Baby boomers are most interested in retirement and retirement income planning, with 73% of respondents in this category citing this as a need.
"Clearly, advisors who combine superior service and personal relationships with investment performance will win over affluent consumers of all ages," the authors state.
TCA To Debut Platform For Advisors
Trust Company of America, a firm that provides custody, trading, and back-office services to fee-based and fee-only financial advisors through their proprietary technology platform, has announced the release of TCRepresentative, a new service program targeting advisors who sell through representatives.
According to TCA, the fastest-growing segment of their business is servicing advisors who sell through networks of representatives.
TCRepresentative is a comprehensive set of tools designed to offer advisors maximum flexibility in managing and servicing their representatives. Its primary strengths are in modeled trading strategies and administration, which allows advisors to provide an efficient, scalable business model capable of supporting rapid growth.
At the firm level, TCRepresentative offers tools such as detailed rep analytic reports, individual rep activity reports, fee reports and e-mail notification of client deposits. For the representative, the platform offers real-time position information, the ability to graphically display the portfolio by multiple parameters, time-weighted returns, historical account information, indexed client statements and performance reports on CDs, copies of account correspondence and e-mail notification of client deposits.
"Our TCRepresentative program is a must have for any investment advisor who sells through some type of representative, such as registered reps, wholesalers, solicitors, other advisors and even banks," said Terry Reitan, president and CEO of Trust Company of America. Originally, TCA tried to meet the needs of these advisors by offering customization to individual firms; they are now leveraging the knowledge from those engagements to provide additional benefits to all of their customers who sell through reps.
TCRepresentative is designed primarily for those firms wanting to centralize the trading, administration and oversight of client portfolios at the firm level. For those seeking to allow representatives the ability to administer the accounts, an advanced version of TCRepresentative is available.
Further information about TCA and its offerings for advisors can be found at www.trustamerica.com/investment-advisor.