Week in Review
March 19, 2007
Legg Mason Launches Corporate Branding Ads
Having completed the integration of the money management group from Citigroup, Legg Mason is now trying to showcase the resulting merger with a $4 million corporate print ad campaign, The Wall Street Journal reports.
Following the merger, Legg Mason now runs seven money management firms, and the company realizes that consumers not only don't understand the upshot of the merger, but even those who sell its funds don't know that the firm includes Batterymarch, Brandywine Global, Clearbridge Advisors, Legg Mason Capital Management, Permal, Royce & Associates and Western Asset Management. Hence, the campaign.
Running in newspapers and trade publications, one ad shows a gold pocketwatch, with the tagline, "Independently impressive. Together, extraordinary." Another features a violin with the tagline, "Built to win."
"We really want to highlight that we have a very unique structure, this affiliate structure," said Donald Froude, head of U.S. distribution for Legg Mason. The firm's affiliates "are all well-known names that have been around for decades in the investment business, and we've got them all under one umbrella," he said.
Other "outdoor" ads will appear on digital screens in elevators in cities where Legg Mason financial advisers and brokerages are located. Going forward, Legg Mason is considering online advertising.
Kentucky Case Could Eliminate 529 Tax Breaks
The tax-free provisions of 529 college savings plans and other state programs could be significantly curtailed if the Supreme Court decides to review a Kentucky court ruling that found it unconstitutional for Kentucky to tax municipal bonds issued in other states, while not taxing those issued in-state.
Speaking at a federal outlook session during the National Association of State Treasurers' annual legislative conference, Richard Sigal, a partner at Hawkins, Delafield & Wood, said college savings plans, which exempt students' tuition fees from state taxes, and even city and state programs that hire in-state contractors, could be affected by a high court review of the ruling in Kentucky v. Davis.
Sigal later said the case could impact a broad range of state programs that offer tax or other preferences for in-state versus out-of-state entities or individuals.
Many states try to lure residents to their in-state college savings programs by offering them a deduction on personal income tax returns for contributions to these plans.
If the Supreme Court decides to review Kentucky v. Davis and sides with the state appeals court ruling that it is unconstitutional to tax out-of-state but not in-state issued bonds, the same reasoning could be applied to 529 plans and could wipe out the state tax advantages that many states offer, Sigal said.
Kentucky asked the Supreme Court last November to review the appeals court ruling, which the state's high court declined to review and let stand. George W. Davis and Catherine V. Davis, who sued the state over the issue, owned a lot of bonds issued by other states and were protesting having to pay taxes on those bonds, but not the bonds issued in-state.
The municipal market has been waiting for weeks to see whether the Supreme Court will take up the case. At least 38 states refrain from taxing bonds issued in state, Sigal said. But other states have different policies. Utah has a reciprocal program under which it exempts taxes on bonds issued by states that exempt taxes on bonds issued by Utah and its authorities. Indiana exempts taxes on all municipal bonds regardless of where they are issued.
Meanwhile, Ken Roberts, another partner at Hawkins who spoke at the same session, said the University of Kentucky is trying to see if it can create a model that can be used to study how eliminating state taxes on muni bonds would affect various states.
Americans' Net Worth Grew in Fourth Quarter
Although the real estate market and retail sales are in a slump, the net worth of the average American household grew in the fourth quarter of 2006, largely due to the strength of the financial markets, Business Week reports. Net worth grew 2.5% from the previous quarter and 7.4% from the year before, according to data from the Federal Reserve.
China Bans Funds From Directing Brokerage Trades
With the stock markets doing so well in China and competition heating up, it didn't take long for fund companies there to realize they might pump up the volume by promising trading commissions to those brokers that sell large volumes of their funds.
Now Chinese regulators are banning the practice, known as directed brokerage here in the United States, Industry Updates reports.
The rules prohibit a fund manager from promising a set amount of trades to brokers that meet sales targets and cap stock trading commissions from a fund manager to a single broker at no more than 30%.