Cuts May Affect Long-Term Care
Impending cuts in Medicaid benefits could be keeping planners busy in the coming years-particularly those who work with middle- and lower-income clients.
One of the key provisions of the federal budget reduction package now under final review in Congress could leave many middle- and lower-income retirees without long-term-care Medicaid benefits, says an advisor who has been following the legislation. "It will make it harder, if not virtually impossible, for some seniors to access Medicaid for long-term care," says J.J. Burns, president of J.J. Burns & Co., a financial planning firm in Melville, N.Y.
The provisions that concern Burns and other critics of the cuts include the extension of the lookback period on long-term care benefits to five from three years. Another key change, Burns says, would redefine which assets are exempt, resulting in principal residences and annuities becoming nonexempt. The bill would set a $500,000 limit on home equity to be eligible for Medicaid benefits. Currently, home equity is considered an exempt asset when assessing Medicaid eligibility.
While proponents of the legislation have said the changes are needed to prevent affluent seniors from rearranging their assets to take advantage of Medicaid nursing home benefits, Burns argues that the nonaffluent will also be impacted.
He says that with the jump in real estate values in recent years, many retirees will find that the value of their homes has made them ineligible for Medicaid long-term care benefits. When the value of homes and annuities are taken together, Burns says, "it's affecting the middle class."
The AARP has had similar concerns about the Medicaid benefit reductions and has urged members of Congress to reconsider the proposal. In a recent letter to Congress, the AARP says the legislation puts the long-term care of millions of lower-income and older Americans at risk.
On the extension of the lookback period, the AARP says it will punish seniors who may have gifted money to grandchildren or other relatives by applying those donations against their aid eligibility. The organization also warned that the new provisions could mean beneficiaries have to forfeit their homes to get long-term care services.
Burns says the look-back extension means that Medicaid recipients will need to have documentation on all their asset transfers for the previous five years leading up to their long-term care eligibility.
This, he says, could cause problems for people who need long-term care services most-such as Alzheimer's disease sufferers who have lapses in their documentation. Other potential scenarios could be surviving spouses who have no records of their deceased's spouse's asset transfers or grandparents who have been putting money away for their grandchildren's educations. The legislation, if passed, will underscore the value of long-term-care insurance, Burns adds.

iNation Teams With Two Firms
iNation, the creators of NationBuilder, the Web-based CRM/e-mail portal for financial professionals, recently announced two strategic alliances designed to enhance the NationBuilder platform.
Through a partnership with Albridge Solutions, a Web-based provider of portfolio accounting and performance reporting, NationBuilder subscribers will be able to access NationBuilder's CRM data and Albridge's portfolio data through a single secure Web portal. Initially, clients will be able to view information from both platforms without having to switch back and forth between the programs.
According to iNation President Gary Bennett, further integration is planned.
Through the deal with Laser App, NationBuilder subscribers will be able to log on, choose a client and select a form from the Laser App library. The application will then "pull" client data directly from the NationBuilder system and use it to populate the selected form. Once completed, the form can be printed, saved, e-mailed or faxed.
Currently, the Laser App library is comprised of over 8,000 distinct forms. The library contains forms for major broker dealers, custodians, mutual funds, annuity products and insurance products.

FPA Won't Drop Suit
An interpretation by the SEC of how brokers are expected to toe the line between fee-based brokerage and advisory services renewed the debate over the commission's broker-dealer exemption rule.
After reading the interpretation, the Financial Planning Association says it plans on pressing on with its lawsuit against the rule, which was adopted by the SEC last year after more than five years of debate.
"The only thing that is enlightening (about the interpretation) is that it confirms our need to have filed a lawsuit challenging a flawed rule and now a flawed interpretation," says Duane Thompson, the FPA's group director of advocacy.
The FPA is arguing that the interpretation-contained in a December 16 letter from the SEC's Division of Investment Management to the Securities Industry Association-essentially allows brokers to perform the core functions of a financial planner without being regulated as advisors.
"As long as they don't put the big stamp at the top of the document that says 'Financial Planning,'" they can get away with it," Thompson says.
The letter was written as a follow-up to the SEC's approval last year of a rule that exempts brokers from the Investment Advisers Act of 1940 as long as they, among other things, provide financial advice that is "solely incidental" to brokerage services.
The SIA, which has been a proponent of the exemption, last year asked for and won an extension to January 31 of some provisions in the rule so it could weigh how some of its provisions would impact broker-dealers-including where the SEC drew the line between brokerage services and financial planning.
The SEC letter addressed several questions posed by the SIA, including instances where broker-dealers are dually registered as investment advisors.
In response, the SEC wrote, "Holding itself out as providing advisory services does not by itself require a broker-dealer to register under the Advisers Act."
The letter goes on to state that, in such a case, a broker-dealer would be subject to the Advisers Act if it holds itself out as a financial planner "and also provides investment advice as part of a financial plan or in connection with providing financial planning services."
When asked by the SIA what exactly constitutes a financial plan, the SEC indicated that it sees a financial plan as a broad spectrum of services that include insurance, savings, tax and estate planning.
"This is distinct from a financial tool that is used to provide guidance to a customer with respect to a particular transaction or an allocation of customer funds and securities based upon the long-term needs of a client, but that is not applied in the context of the more comprehensive plan described above," the SEC wrote. "When used in this more limited way, a financial tool would be viewed as part of a broker-dealer's brokerage relationship with its customer."

Bullish On Large Caps
Investment managers ended 2005 with a bullish eye toward large-cap growth stocks, according to a recent survey.
Eighty percent of investment managers surveyed said they are bullish on the prospects for U.S. large-cap growth stocks over the next year, according to the survey by Russell Investment Group.
It's the most enthusiasm managers have shown toward large-cap growth since Russell started its quarterly Investment Manager Outlook surveys two years ago.
Among the reasons cited by managers for their bullish outlook is the expectation that the Federal Reserve will stop raising short-term interest rates early this year. Sixty-seven percent of the managers believe the Fed will end its interest-raising campaign when the federal funds rate hits either 4.5% or 4.75%.
"U.S. investment managers are bullish on large-cap growth based on what they know, what they believe and what they expect," said Randy Lert, Russell Investment Group's chief portfolio strategist. "Managers know that the economy has been resilient through some challenging times (and) they believe that the long-awaited swing from value to growth stocks has begun."
Lert added that anxiety has abated over how the transition from Alan Greenspan to Ben Bernanke as Fed chairman will impact economic growth.
"While concerns over the Fed have tended to dampen stocks in recent months, managers now appear ready for the reverse to take place-in the market overall and for large-cap growth in particular," he says.

Sports Advisors Set Conference
The fledgling Sports Financial Advisors Association is holding its inaugural national conference in Woodlands, Texas, this month.
The conference, originally scheduled for October 2005 in Houston, was rescheduled because of hurricanes Katrina and Rita.
The event will be held at the Marriott Woodlands Waterway Hotel & Convention Center February 17-18.
The organization, with a membership of 35, was founded in January 2005.
"It's really going to be an event for rolling up our sleeves and sort of defining more completely the mission of the organization," says association president Femi Shote, managing director of Asset Harvest financial planning in McLean, Va.

A Bubble-Or Not?
Wealthy investors apparently aren't buying into the idea of a real estate bubble, according to a new survey.
Of 1,485 adults interviewed-all with at least $150,000 in annual income and $500,000 in investable assets-about 65% said they expect to see double-digit increases in the value of their primary homes over the next five years, according to the survey by PNC Financial Services Group Inc.
Nearly one third, 31%, said they expect a valuation increase of 20% or more.
Only 7% of respondents, meanwhile, said they expect a decline in the value of their primary homes over the next five years.
"Our findings indicate that many among the wealthy will not believe there is a real estate slowdown until they see it reflected in their property values, especially in regions of the country where prices have skyrocketed during the past five years," says Nicholas Buss, senior vice president and PNC's real estate economist.
After a run of robust returns that has seen real estate rise to a prominent place in investor portfolios-as well as a rise in house "flipping" by speculators-there have been indications of a slowdown.
Existing home sales, for example, dropped for the second month in a row last November.
"As an investment, real estate has been an increasingly dominant asset class over the past five years," Buss says. "The party may be over for those who have been flipping houses and using real estate to get rich quick. But, in general, established wealthy Americans have not been speculative buyers and they remain solidly confident in the long-term value of their real estate holdings."

CPAs Edge Out CFPs
CPAs topped the list of most trusted financial advisors-edging out Certified Financial Planners-in a recent survey of individual investors.
Financial television show hosts finished last on the trustworthy meter, according to the survey by AFA Financial Group.
Finishing third in terms of the most favorable responses were attorneys, followed by investment advisors, financial journalists, stockbrokers, life insurance agents, real estate brokers, hedge fund managers, radio talk show hosts and finally television talk show hosts.
The survey was conducted by Amplitude Research and was based on surveys of 1,007 investors.
CPAs had a high median score of 3.85 in the survey, which asked investors to rank each profession on a scale of 1 to 5, with 1 representing "Not trustworthy at all" and 5 representing "Extremely trustworthy."
Although CFPs were second with a median score of 3.78, they did garner the most top recommendations, with 22.8% of respondents saying they were extremely trustworthy compared to 18.3% for CPAs.
CPAs, however, got top marks for service. Among respondents who have used a CPA, 25% said they were extremely satisfied with the service they received. CFPs, by comparison, got a 17.8% satisfaction rating.
In a separate ranking of professions not all related to financial services, CFPs finished seventh out of 12. Topping the list of most ethical and trusted occupations were pharmacists, followed by physicians, teachers, Supreme Court judges, military officers, CPAs and planners. Planners placed above law enforcement officers, attorneys, corporate executives, car salesmen and politicians.