IRS Grants Extension to Value Farmland
The IRS has published a Letter Ruling concerning an extension of time to value farmland. The Letter Ruling involves a case where after the timely filing of Form 706, it became apparent that Executor failed to elect to specially value the farmland under section 2032A. Subsequently, a successor executor filled a supplemental Form 706 and requested an extension of time to make the section 2032A election. The IRS granted an estate an extension to make an election under section 2032A to specially value farmland.
_See_ Tax Analysts, "Extension Granted to Elect to Specially Value Farmland," 2012 TNT 146-44 (July 30, 2012).
Posted by Mariya V. Link, Associate Editor, _Wealth Strategies Journal_.
How to Avoid IRA Scams
Government regulators are stepping up scrutiny of do-it-yourself individual retirement accounts.
Sixteen states recently reported investigations of possible fraud through self-directed IRAs in 2011. Securities regulators have issued 38 enforcement orders involving the products in those states, says Matt Kitzi, Missouri’s securities commissioner and chairman of the enforcement committee for the North American Securities Administrators Association.
The problem is so recent that the group didn’t ask about self-directed IRA issues in previous annual surveys of enforcement actions taken by state-level securities regulators, Mr. Kitzi says. This year’s survey is still being completed; 30% of the responding states so far said they were dealing with more self-directed IRA issues in 2011 than in 2010, while the rest said they were dealing with the same number.
Self-directed IRAs allow investors to pursue a variety of alternative investments, including land and hedge funds, which typically aren’t publicly traded and are often held long term, making them susceptible to fraud.
In one high-profile case in which an investment promoter has been accused of using self-directed IRAs allegedly to take investors’ money, the Securities and Exchange Commission has reached a partial settlement with the defendant.
The SEC in April filed civil charges against Ephren Taylor II, his former company and an employee for allegedly running a Ponzi scheme that targeted investors in church congregations.
The SEC’s claim says Mr. Taylor raised about $11 million by persuading people to roll over retirement assets to self-directed IRAs to be invested in promissory notes funding small businesses or interests in so-called sweepstakes machines, which are computers loaded with games resembling those in casinos.
Instead, the claim says, the money was used to pay other investors and finance Mr. Taylor’s personal and company expenses.
On July 18, the SEC filed a motion in U.S. District Court in Atlanta to enter a partial judgment in which Mr. Taylor consents to be barred as a company officer or director but doesn’t admit or deny guilt. The proposed agreement doesn’t include settlement of financial penalties.
“By settling with the SEC, Mr. Taylor has taken a large step toward a global resolution of the allegations against him,” Christopher Bruno, Mr. Taylor’s lawyer, wrote in an email.
Mr. Taylor also has been sued by investors in two civil claims alleging fraud. A claim filed in Georgia in October named Equity Trust, a self-directed IRA custodian in Elyria, Ohio, as a defendant, along with Bishop Eddie L. Long, senior pastor of New Birth Missionary Baptist Church in suburban Atlanta, from which Mr. Taylor recruited investors.
Mr. Long and the church, also a defendant, said in a January court filing that they had no “confidential or fiduciary relationship” with the churchgoers who invested with Mr. Taylor after hearing him speak at the church, and that they aren’t liable for investors’ losses. A spokesman for Mr. Long didn’t respond to a request for further comment.
In May, a DeKalb County, Ga., State Court judge denied Equity Trust’s motion to dismiss the case on the grounds that it should have been brought in Ohio. An Equity Trust spokesman says the company doesn’t comment on pending litigation.
Separately, Equity Trust and another self-directed IRA administrator, Entrust Group of Oakland, Calif., were sued in U.S. District Court in Los Angeles in April by three investors who alleged the companies knew the investors’ money had been stolen in fraudulent investment schemes, including Mr. Taylor’s, yet sent them reports showing their nest eggs to be intact.
Entrust Chief Executive Hugh Bromma declined to comment on the lawsuit specifically, because the company hasn’t been served formally by the plaintiffs with their complaint. “We have never known that investors’ money has been stolen in fraudulent investment schemes,” he says. “And if we knew at any time that the investment was fraudulent, we would immediately take action.”
The claim was refiled Friday in San Francisco with additional plaintiffs and defendants, including elderly investors. It alleges that the investment accounts failed to maintain enough cash for investors to take even the minimum withdrawals required by the federal government.
Elias Zachos of Austin, Texas, a 76-year-old IBM retiree, moved his $159,000 IRA to Equity Trust in 2009 to invest with a Texas promoter, according to the complaint. A few months later, he learned that his money was gone after reading a news report about another investor trying to kill the promoter for stealing her money, the complaint says. He continues to get bills from Equity Trust for fees and has been unable to get the account closed or its valuation changed to zero, he said in an interview.
Self-directed IRAs continue to attract investors looking for alternatives to stock mutual funds and bonds. The accounts hold about 2% of the $4.6 trillion held in IRAs overall, according to the Retirement Industry Trust Association, which, with the state securities regulators’ group, offered a seminar July 18 on how to avoid fraud in the accounts.
Among the warning signs of fraud, according to experts, is being told you have to act fast, or that the investment is “guaranteed or safe without any real substantial basis for those claims,” says Tom Anderson, vice chairman of Pensco and the industry group’s president.
Another red flag, Mr. Kitzi says: being told the IRA custodian provides an additional level of analysis or oversight.
If an investor suspects foul play, he should contact the custodian and securities regulators “before being overly aggressive with the asset sponsor who, being concerned, may pack up their tent and move to Mexico,” Mr. Anderson says.
- By Kelly Greene
Source: online.wsj.com
Posted by Steven Maimes, The Trust Advisor
Permalink: http://thetrustadvisor.com/headlines/ira-scams
Inheritance: to Tell or Not to Tell
The New York Times published an article by Paul Sullivan titled "What to Tell the Children About Their Inheritance and When." In the article Mr. Sullivan discusses implications of an inheritance. While it may be a blessing to receive any inheritance, some young adults who are not aware of this future benefit are ill equipped to deal with such a windfall. The article discusses issues involved in receiving an unexpected inheritance, from interpersonal issues to tax implications.
_See_ Paul Sullivan, "What to Tell the Children About Their Inheritance and When," NYTimes.com (July 20, 2012).
Posted by Mariya V. Link, Associate Editor, _Wealth Strategies Journal_.
With Personal Loans, Borrowers Hear ‘Gift’ And Lenders Get Resentful
Personal loans between friends are often seen as gifts by borrowers but loans by lenders, according to new research.
Friends will never pay you back. It’s not because they are forgetful or cheap, it’s because they told themselves the $200 you kindly lent them in June was actually a gift.
New research shows why personal loans to friends don’t work: Financial scroungers tend to revise history and see the money as a gift, especially the more delinquent they are to pay it back, according to a new study published in the _Journal of Economic Psychology_.
“We thought that when loans were not paid off that borrowers would feel terrible and avoid lenders,” said paper co-author George Loewenstein, an economics and psychology professor at Carnegie Mellon University, in a call with The Huffington Post. “We found that lenders believed that, too.”
Both are wrong.
“Delinquent borrowers were actually blithely unaware of how lenders felt,” Loewenstein said. And more than unaware, they actually did some mental gymnastics to re-interpret the terms of the loan.
This kind of recasting of past events has a purpose for those who shake down their friends for extra cash: They use it to let themselves off the hook or to save face when they can’t come up with money to pay back the loan, especially when it’s long past the supposed due date, Loewenstein said.
This is just one of the differences in perception between borrowers and lenders that the study found. Those on the receiving end of a loan were also less likely to report the payment date had passed and less likely to report the loan as unpaid. Meanwhile, those doling out the money reported losing trust and closeness with delinquent friends.
While much of these findings can be filed under common sense, this is the first academic research to study the differences between the two groups with personal loans. Loewenstein said that one reason personal loans are not well studied is they tend to happen spontaneously.
The study was based on a survey of 971 people who had borrowed or loaned money to or from friends. The median loan size was $250. Personal loans, unlike a loan from a bank, alternative lenders or even an online peer-to-peer network typically don’t have a formal written contract, interest is rarely paid and there is no collateral.
One of the hallmarks of the casual personal loan is it lacks any kind of contract, other than a verbal one. And that is where much of the misunderstanding starts. On the upside, a successful loan between friends strengthens a friendship by demonstrating trust and investment for both people. On the downside, an unpaid loan erodes that foundation of a healthy relationship; in worst case scenarios, it spells the end of the friendship.
“It seems like the real problems with personal loans is that neither party feels comfortable asking for a written contract,” Loewenstein said. “It is almost like a prenup, where asking for it undermines trust in longevity of relationship.”
According to the study — which found that the highest number of repayments reported were between one and six months since the loan was made — the solution is easy: Get it in writing. A simple IOU could be all the difference to preserving a friendship.
“It’s uncomfortable and feels like it could be bad,” Loewenstein advised. “But it’s much more likely to be good for a relationship because both parties will literally be on same page.”
- By Catherine New
Source: Huffingtonpost
Posted by Steven Maimes, The Trust Advisor
Permalink: http://thetrustadvisor.com/news/personal-loans
Wealth Management Industry Not Sufficiently in Tune with the Needs of Young Investors, According to Aite Group Research
More than 1,000 US investors surveyed reveal convenience and online tools are key reasons for Gen-Xers and Gen-Yers to shift assets between financial institutions
Scivantage, an independent financial technology provider with proven expertise in online brokerage, tax and portfolio reporting and wealth management applications, and Aite Group, a leading independent research and advisory firm focused on business, technology and regulatory issues and their impact on the financial services industry, announced the results of a report titled, “The Race for Next-Generation Assets: Can Banks Maintain Their Lead?”
The study examines the investing preferences of younger generations and the impact they may have on long-term growth opportunities for wealth management firms. In particular, the research focuses on the importance of banks to the younger investor population and discusses how firms can maintain their advantage in the race to capture next-generation assets.
With more than $40 trillion expected to transition to younger generations in the U.S. over the next several decades, wealth management firms will need to focus on this new wave of investors and reevaluate their current service, support and technology models. Financial institutions that can understand and address the unique investment needs of this emerging segment will be best positioned to capture their future wealth, according to the research.
“Gen-Xers and Gen-Yers have been far less loyal to their investment providers over the last few years compared to Boomer and Silent Generation investors, indicating that young consumers have yet to find their ideal investment providers,” said Sophie Schmitt, Aite Group Senior Analyst, Wealth Management. “Banks seeking to maximize their ability to retain and grow share of wallet with young investors should work on growing their online investing capabilities and providing more convenient services.”
Additional key insights include:
– 40% of young investors still consider a bank to be their primary investment provider. By contrast, only 20% of young investors consider an online brokerage firm to be their primary investment provider despite their strong adoption of online trading
– 44% of Gen-X and Gen-Y investors surveyed shifted assets to another investment firm or switched investment providers due to availability of online tools
– 42% of Gen-X and Gen-Y respondents said their bank would need to offer more convenient services and/or more robust online brokerage/trading capabilities in order for them to move more assets to their bank
– About 30% of young investors trade more than 25 times per year and slightly less than 70% trade online more than five times per year
– The No. 1 reason clients shift investments to another firm is fees, such as those tied to accounts, financial advisory and asset management
“Online investing capabilities are now second nature to Gen-X and Gen-Y investors and will be a requirement for banks that want to attract future high-net-worth or current affluent members of this segment,” said Chris Psaltos, Vice President, Product Management, Scivantage. “As younger, tech-savvy investors look for greater control of the investment decision-making process, wealth management firms, particularly banks, must ensure that their online investment platforms are keeping pace with the latest consumer technology innovations.”
This report is based on Aite Group’s December 2011 survey of more than 1,000 U.S. investors who hold a minimum of US$25,000 in investable assets and have access to online trading capabilities. The sample is representative of approximately half of the U.S. population.
About Scivantage
Scivantage is an independent financial technology provider with proven expertise in online brokerage, tax and portfolio reporting, and wealth management applications that automate and integrate key business practices for broker-dealers, mutual funds, custodians and prime brokers. For more information, please visit www.scivantage.com.
About Aite Group
Aite Group is an independent research and advisory firm focused on business, technology, and regulatory issues and their impact on the financial services industry. For more information, please visit http://www.aitegroup.com.
Source: Scivantage
Posted by Steven Maimes, The Trust Advisor
Permalink: http://thetrustadvisor.com/news/gen-x-y-investors
Benefits of Social Media to the Wealth Management Industry
Cast your mind back 15 years to a time when many of us thought that e-mail was a passing fad and would quickly go the way of the fax machine as a means of communication.
Here we are in 2012 and e-mail is now an integral part of our lives and in many cases has replaced the telephone and face-to-face contact. It is now considered second-nature and I firmly believe that in another 3 years social media will also be viewed by the majority as another standard way of communicating. It is therefore imperative that the private banking and wealth management industry embrace social media as a matter of urgency – those firms that don’t risk being left behind. Imagine trying to run any sort of business nowadays without having access to e-mail – that is how social media will be viewed by 2015.
There is a huge amount of research available extolling the benefits of social media, but here are some interesting statistics that are relevant to our industry:
- There are 1.1m Google searches every month for ‘financial advisor’
- 47% of UHNW individuals have a Facebook profile
- 19% of millionaires are on Linkedin
- 71% of financial professionals have a Facebook profile, 65% are on Linkedin, 19% are on Twitter
- The average age of a Linkedin user is 41. Ninety-five percent are university educated, with an average household income of £65,000
- Of investors with at least £250k to invest, 75% of them have used Linkedin for investment research
These figures are only set to increase as the industry begins to understand how effective social media can be, not only in terms of client satisfaction but also upon the impact on your bottom line – an IFA in the New York area recently attributed a 20% increase in assets under management to his social media activity.
There are an almost unlimited number of benefits to incorporating social media into your overall marketing/business development strategy. Social media can help you to:
- Raise brand awareness, as well as preserve the key values associated with your individual firm, by engaging with clients, prospects and fellow professionals online. TIP – use, for example, Twitter, blogs, and YouTube to keep client informed of firm, market and product news
-Expand your professional networks by connecting with centres of influence and key decision-makers. TIP – utilize your Linkedin profile and its advanced tools to raise awareness of your client proposition
- Acquire new clients and deepen relationships with existing clients. TIP – use Facebook and Twitter to connect with luxury brands who cater to the demographic of your clients and prospects
- Monitor what the wider community is saying about your brand, products and services. TIP – it is imperative that you use dedicated software designed to monitor what your clients and employees are saying about your brand online; you must also use this software to retain all social media activity for 7 years, in accordance with FSA guidelines on record-keeping.
- Ultimately, to grow your business, gain client trust, and add significant value for key stakeholders
Almost every other industry is ahead of wealth management in incorporating social media into their business. The two most common perceived barriers to entry, compliance and brand damage, should not be a hindrance as both can be controlled and managed with a comprehensive and well-thought out business strategy.
- By Amy Loddington
Source: myintroducer.com
Posted by Steven Maimes, The Trust Advisor
Permalink: http://thetrustadvisor.com/news/benefits-social