Wednesday, January 31, 2007

"The Media Needs Your Expertise: What Your Clients Value, The Media Will Value" by Beth Chapman

The following article was written by PR expert Beth Chapman of Ink & Air.

There are two assumptions that seem to fuel the attitudes investment advisors have toward the media: 1. There is nothing I can say that would be of interest to the media. 2. The media should find me because my value proposition is so great. I hope you are not surprised when I say that both statements are completely false. Instead, financial advisors should put the following two statements on their desk where they are visible every day:

1. Every issue I discuss with my clients is a story idea for the media.

2. The media will not pay attention to me unless I give them a reason.

The media is always hungry for good story ideas. Recently, an advisor who had been trying to get the attention of the personal finance reporter for his metropolitan newspaper, finally got a vestige of interest with the fifth story idea submission. He realized that several very large local companies had announced layoffs that would impact his community. He developed a story idea as follows:

“When layoffs loom, it is essential that you understand your retirement plan options.”

This is topical, timely, and gave the reporter several significant bullet points to use as the central part of his story.

There is additional information you need, however, when you have begun to generate the interest of the media and are starting to handle incoming calls. Expectations are funny things, and particularly with the media, so managing your expectations about what is likely to happen when the media calls is important.

Got questions for Beth Chapman? Post them as a "Comment" below.

Visit the SusanCFA blog again next week for more do’s and don’ts of working the media and suggestions for overcoming likely pitfalls.


Sunday, January 28, 2007

Are your clients saving too much for retirement?

"A Contrarian View: Save Less And Still Retire With Enough," a recent New York Times article by Damon Darlin, says some economists believe that the financial services industry is encouraging over-saving by individuals.

A Boston University professor, Laurence J. Kotlikoff, is among those economists. "Mr. Kotlikoff’s calculations showed that Fidelity’s online calculators typically set the target of assets needed to cover spending in retirement 36.4 percent too high. Vanguard’s was 53.1 percent too high. A calculator offered by TIAA-CREF, one of the largest managers of retirement savings, was 78 higher than his calculation."

Another financial planner blog: Russell Bailyn's Financial Planning Blog

Want to see another blog by a financial planner? Check out Russell Bailyn's Financial Planning Blog.

Bailyn says, "I’ve been working on a book (due out this summer with Wiley) which will discuss personal finance and recognize the contributions of financial bloggers to cyberspace." Among the bloggers he comments about in his post "Blog Appreciation Day" are the folks behind Money Blog Network.

I'm curious about who reads these blogs.

By the way, I must credit Ed McCarthy's Wealth Manager article on "Beyond the Telephone: Wealth managers are discovering new ways to work with their clients and each other" with pointing me to Bailyn's blog.

Wednesday, January 24, 2007

Outlook for emerging market bonds

“Emerging Market Bonds: Are You Being Paid for Risk?” was the subject of a Boston Security Analysts Society panel moderated by William L. Nemerever, partner and co-manager, global fixed income group, Grantham, Mayo, van Otterloo & Co. on January 23.

Their bottom line: Emerging market (EM) bonds are fairly valued and their near-term outlook is excellent. Years ago EM bonds used to be considered risky, even speculative. That has changed. Now they’re just another part of the global bond universe, said David W. Rolley, co-head of global fixed income, Loomis Sayles & Co.

During the past couple years, EM spreads have tightened and even become tighter than corporate bonds with similar ratings, said John Peta, portfolio manager, emerging market strategies, Standish Mellon Asset Management. Why? He cited factors including:

· Improved credit ratings

· Broader investor base due to strategic inflows and local investors

· Less vulnerability due to abandonment of fixed exchange rates

Rolley played up the role of 28 years of 10% GDP growth in reducing the volatility of the EMBI Global index. But low volatility can’t persist forever. “Volatility is too low. EM governments will provide it themselves by misbehaving,” he said.

Citigroup’s Don Hanna, managing director, head of emerging market economic and market analysis, identified three trends keeping EM bond spreads tight:

· Globalization

· Financial innovation

· Better government policies

Risks loom in each of these sectors over the longer term.

The downside to the greater stability of EM bonds is they don’t offer as much portfolio diversification as in their more volatile days. Perhaps the last stronghold of diversification lies in local currency EM bonds, suggested Rolley.

P.S. When I subsequently discussed this presentation with some BSAS members over lunch, they were concerned that it didn't spend much time on the risks from the carry trade or the fact that investors are not being well-compensated to take on risk. What do you think?

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Tuesday, January 23, 2007

"The underrated power of the press release"

During the month of February, this blog will take a closer look at the power of public relations with guest blogger and PR expert Beth Chapman.

If you're with a small firm that has shunned PR until now, please read "The underrated power of the press release" by Paul McCord. His article explains how press releases can sometimes level the playing field between large and small companies.

Got questions about how press releases work for financial services firms? Visit this blog again in February, when Beth Chapman will answer your questions.

I've been tagged

Maureen Taylor of The Photo Detective blog tagged me yesterday.

So now I'm supposed to tell you five things you might not know about me.
  1. I have a Ph.D. in Japanese history from Harvard, which took me to Tokyo for three years.
  2. I was very into my family genealogy for about five years. I trace my roots mostly into eastern Europe. I mention this for Maureen, who's a widely-known speaker and author on genealogy.
  3. I took my CFA exams in the 1980s.
  4. I took my first poetry class in the spring of 2006. Now writing poetry is a regular part of my life.
  5. I enjoy watching and feeding squirrels.
I'm tagging Steven Miyao of kasina BLOG, one of the rare blogs discussing the investment management business, and Jeff Sinatra of Actium's Managed 401(k)/403(b) blog.

Tuesday, January 16, 2007

Are advisors doing all they can for their clients' philanthropy?

Are financial advisors missing the boat on philanthropy?

That's the assertion of "When Cups Runneth Over: For those who have an abundance, the private foundation has come into its own" by Ellen Uzelac in Wealth Manager (January 2007). Free registration may be required to read the article.

Here's how Uzelac puts it: "Most wealth advisors find themselves poorly positioned when it comes to one of their high-net-worth clients’ most worthwhile impulses—the impulse to give money away. With $500 billion in assets sitting in private foundations today, the disconnect seems almost absurd. Yet few wealth managers treat philanthropy as a core competency, and many are uncomfortable even bringing the subject up."

The article offers suggestions for advisors who'd like to delve deeper into philanthropy. The Bank of America philanthropy study Uzelac refers to is available online.

Advisors in greater Boston can register for "What Do Clients Want? How Can You Help? The Professional Advisor’s Role in Philanthropic Planning," the topic of a Boston Security Analysts Society (BSAS) lunch meeting on February 13. The speaker, Stephen P. Johnson, vice president of The Philanthropic Initiative, Inc., got good reviews when he spoke at the BSAS Wealth Management Conference in October 2006.

In the interests of full disclosure, I have an interest in promoting this BSAS lunch because I'm the co-chair of the committee that scheduled it. Also, I read Wealth Manager because I occasionally write for it.

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Wednesday, January 10, 2007

New hedge fund regulations proposed in December 2006

After the SEC's court defeat on hedge fund registration, sources told me that wouldn't end the Commission's efforts to regulate hedge funds.

They were right. The SEC proposed new regulations late in December 2006. They focus on tightening the requirements for status as a qualified investor and protecting the interests of hedge fund investors against fraud, according to a presentation to the Boston Security Analysts Society by George J. Mazin, partner in the law firm of Dechert LLP.

The SEC would tighten the definition of an accredited investor, known in technical terms as an "Accredited Natural Person." The biggest difference between old and new definitions is the requirement for the investor to hold $2.5 million in investments. But there are other, more minor tweaks.

The new definition will impact hedge fund sales and marketing, said Mazin. Likely implications include:

  • Organization of fewer 3(c)1 funds
  • Conversion or dissolution of existing funds
  • End to some existing investors' ability to invest more in hedge funds
  • Possible creation of a market for registered fund of funds products
  • Disadvantaging of smaller institutions

The SEC's other new regulatory thrust was expressed in anti-fraud Rule 206(4)-8 to make it illegal for hedge funds to engage in business practices that are fraudulent, deceptive or manipulative toward current or prospective investors.

The comment period for the proposed regulation ends March 9. Mazin anticipates the regulations will be issued and take effect in late March or early April, assuming no major issues surface during the comment period.

The new regulations aren't the only regulatory issues for hedge funds to worry about. Mazin also discussed side letters and side pocketing.

To stay current on hedge fund regulation, Mazin recommended Hedgewire Daily News, Hedgeweek, and Alternative Investment News. I noticed at the bottom of his bio, that he frequently lectures or publishes on hedge funds and other securities topics.

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Sunday, January 07, 2007

Critics corner: "Will This Bull Ever Retire?"

"Will This Bull Ever Retire?" That's the catchy title of the lead article on the front page of the New York Times' "Mutual Fund Report" (Jan. 7, 2007). Paul Lim's article grabbed my attention with just four words. I relish that economical use of words.

If I had my druthers, I'd shorten his lead sentence, which goes like this: "If 2006 proved anything, it’s that aging bull markets don’t have to die simply because they’re old, or that they must quietly fade away." I'd lose the phrase "
or that they must quietly fade away." That point could be made later in the article. As a reader, I can absorb a short sentence more quickly. And I don't think that second point is so critical to the story.

Some other praiseworthy aspects of this piece as a writing sample:
  1. In moderation, it's useful to use questions as the titles of your articles. Questions can grab a reader's attention.
  2. Occasional use of short sentences gives the reader a chance to breathe. They're a nice break from the long sentences that clear financial writing often demands.
    • "He's not kidding."
    • "He is in the minority."
    • "And they were rewarded handsomely for their risk taking."
  3. Quotes precede their attribution, except when immediately following a quote by a different person. As in the quotes below.

“Right now, there’s still too much money chasing too few financial assets,” said Stuart A. Schweitzer, global markets strategist at J. P. Morgan Asset and Wealth Management.

James W. Paulsen, chief investment strategist at Wells Capital Management in Minneapolis, agreed. “This is the only time in postwar history where a recovery has taken place without any rise in long-term borrowing costs,” he said.


Wednesday, January 03, 2007

Interesting fact about John Maynard Keynes

"John Maynard Keynes is recognized as one of the foremost economists of the last century, but he lost personal fortunes several times over due to misguided expectations."

That's an interesting piece of evidence for the fact that pundits' predictions are often wrong. I found it in "The Sky Is Falling," a nice Wealth Manager (Nov. 2006) article by Timothy Schlindwein. Schlindwein concludes that "The advisor's responsibility is to watch, evaluate, and temper any assessment of doomsday with an open mind and a proper dose of skepticism."


Tuesday, January 02, 2007

Notes from a Private Wealth Management conference

Here are some random notes from the Boston Security Analysts Society's Wealth Management Conference in October 2006. I focused on some tidbits that might interest you. They're only a tiny fraction of the interesting information presented at the conference.

How to justify investing in commodity futures
Interested in getting your clients to invest in commodities futures?

"Facts and Fantasies About Commodity Futures" by Gary Gorton and Geert Rouwenhorst,
NBER Working Paper No. 10595 is the classic on this topic, according to Kevin Rich, director, currencies and commodities complex risk group, Deutsche Bank and CEO, DB Commodity Services.

Here's a quote from the NBER Digest discussing the paper.
"In Facts and Fantasies About Commodity Futures (NBER Working Paper No. 10595), co-authors Gary Gorton and Geert Rouwenhorst show that over a 45-year period a diversified investment in collateralized commodity futures has earned historical returns that are comparable to stocks. That reward, rather than foreseeable trends in commodity prices, is the key to the returns that a futures investor can expect. Individual commodities can be very volatile, but much of this volatility can be avoided by investing in a diversified index of commodities."

I'd give you a link to the actual working paper, but the NBER website appears to be out of order as I write.

Hedge funds and the private client
These are good reasons for private clients to invest in hedge funds, according to David Shukis, managing director, hedge fund research, Cambridge Associates:
  • Capital preservation
  • Low volatility*
  • Diversification of return sources in overall portfolio
  • Hedge versus risk inherent in large single holdings
* Lowering volatility is the best reason to invest in hedge funds, said Shukis.

Bad reasons for private clients to invest in hedge funds:
  • Return enhancement vs. equities
  • Everyone else is doing it

Life insurance as an asset class

Life insurance makes sense as an asset class for clients with a median net worth of $50 million to $80 million, according to David Freely, president, Financial Architects Partners. Below that level of assets, clients use insurance to finance specific needs.

"Uncle Sam's subsidy is a huge advantage," said Freely. That makes it possible to use insurance to get a better return with less risk than on bonds.

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"The Big Research Issues for 2007" by Integrity Research

Equity research faces an uncertain future. Learn more about the specific issues by reading "The Big Research Issues for 2007" by Integrity Research.

Among other interesting trends, they anticipate a consolidation of research providers.