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Governance

Estate Tax Expiration Reveals Opportunities

February 8, 2010 - NEW YORK - Financial experts think 2010 could provide many interesting opportunities in the realm of wealth transference, particularly with the temporary, one-year expiration of the federal estate tax and reduction of the gift tax.Thanks to the expiration of the estate tax on Jan. 1, beneficiaries of people who die this year don't have to pay federal taxes on inherited estates. Unless Congress takes action this year, the tax will be reinstated in 2011 to 2001 levels of a $1 million exemption and 55% tax rate above that. President Barack Obama has proposed reinstating the tax at 2009 levels of 45% on anything above $3.5 million, possibly retroactively.

Extreme Makeover: 401(k) Edition

February 8, 2010 - Investors are about to test drive 401(k) plans with a 21st Century whole new look and feel.The Department of Labor is promising streamlined rules for 401(k) advice that plan sponsors may actually use (see "Week in Review," page 4). The government is looking into the possibility of offering annuities or other lifetime income options in defined contribution plans.

403(b) Group Seeks Common Language

February 8, 2010 - An industry group developing best practices for 403(b) retirement plans is coming closer to streamlining these plans to make them even more similar to 401(k) plans, but first they will have to get everyone to agree to speak the same language.Leaders say the SPARK Institute's work on 403(b) best practices is coming along smoothly, thanks to the cooperative efforts of approximately 50 participating institutions. The latest update, version 1.04, fixes many of these communication issues by requiring a standardized reporting format, which it hopes most institutions will adopt by this July.

SEC Tightens Money Fund Rules

January 29, 2010 - The Securities and Exchange Commission last Wednesday adopted several amendments to Rule 2a-7 governing money market funds that aim to reduce risks by increasing credit quality, improving liquidity, shortening maturity limits and requiring the disclosure of a fund’s “shadow” net asset value.The Commission fell short of requiring a floating NAV, but said it may still consider such a move in the future, as well as eliminating the disclosure delay on holdings and the use of credit ratings agencies.

New Financial Regulations to Create Unprecedented 'Sea Change' at SEC

January 25, 2010 - BOSTON -- Mutual fund companies must stay on top of their compliance programs, particularly because Congress is likely to pass new financial regulations, executives warn. "Regulation writing is about resolving tensions and balancing purposes,' said Michael Novey, associate tax legislative counsel at the Office of Tax Policy at the Department of Treasury. "Our task is to implement legislative purpose, recognizing that Congress' acts ought to be workable. There is a tremendous amount of misunderstanding about many of the proposed regulations."

BNY Mellon Aims to Curb Costs, Expand Wealth Unit

January 25, 2010 - As it waits for the fee income that will come once interest rates rise, Bank of New York Mellon will continue to try and control costs and focus on expanding its asset management and asset servicing businesses overseas, the firm said during an earnings call last Wednesday. Robert Kelly, BNY Mellon's chief executive, said the firm will cut expenses by $100 million, or 4.3%, this year. "There are a lot of opportunities to drive efficiencies in our businesses," he said. "Executives will re-engineer operations to make us more efficient."

Climate Change Group Calls on Mutual Funds to Circle the Wagons

January 11, 2010 - Despite an overwhelming consensus among the scientific community that human activity is causing climate change, most of the world's largest investment managers do not factor climate-related trends into their short- and long-term investment decision making, a new study finds. According to a report by Ceres, a coalition of investors, environmental organizations and public interest groups, this short-sightedness is creating trillions of dollars worth of hidden risks in mutual fund and other investment portfolios, such as high energy costs, pollution, water shortages and insurance costs resulting from natural disasters. Sectors like utilities, energy, industrials, manufacturing and the automobile industry have significant exposure to climate risks, the report said.

2010 Outlook Looks Hopeful, Barring Any Surprises

January 11, 2010 - NEW YORK - U.S. and international regulators are widely credited with having saved the global economy from plummeting into a second Great Depression, and the fragile, recovering economy can expect to see continued support for much of 2010, experts say. This support could help stocks rebound anywhere from 2% to 12% this year, depending upon whom you ask, but markets can always defy expectations.

IFRS Puts Focus On Fair Value

January 4, 2010 - As regulators work to converge U.S. Generally Accepted Accounting Principles (GAAP) with International Financial Reporting Standards (IFRS), several key differences remain, most notably the different measurement attributes of financial liabilities, the timing and approaches to projects and the difference between fair value and amortized costs. Under GAAP, investment companies like mutual funds, private equity holders and venture capital organizations are exempted from certain consolidation requirements and are allowed to account for separate fund holdings at fair value. No such exemptions currently exist under IFRS, though fair value concerns are being featured prominently in convergence discussions, and the U.S. has been adapting its rules on fair value to increase its international appeal.

New Rules Shift Power in Proxy Fight

January 4, 2010 - The Securities and Exchange Commission has approved new rules to significantly enhance the level of information companies are required to provide shareholders in proxy statements, but many leaders worry that these changes will do little more than add to the expenses that shareholders pay. The Commission has been struggling with the complicated issue of proxy access for most of the past decade and had held numerous roundtables and rule proposals that went nowhere, before finally seizing the opportunity of the recent financial crisis to push through several big changes just before the end of the year.

Evercore Wealth Plans to Expand; Wants $5B in Assets in 5 Years

December 7, 2009 - Armed with a slew of wealth management veterans who chose to jump ship from U.S. Trust after it was acquired by Bank of America, Evercore Wealth Management has nearly doubled its assets under management to $1.4 billion in the past six months, but if that wasn't already impressive, the New York company's top executive expects to nearly quadruple that and reach $5 billion in the next five years. "We are off to a good start in a turbulent environment," said Jeffrey S. Maurer, Evercore's chairman and chief executive officer. "But I would say we'd be disappointed if we weren't at $5 billion by our fifth anniversary. Right now, it is a question of how to get there. We are going to consider organic and inorganic means."

Firms Look For Compensation Alternatives

November 30, 2009 - The financial services industry has been pulling in solid profits lately, but experts say firms should be mindful about how they dole out year-end bonuses and to keep the focus on rewarding long-term performance. Taxpayers were nearly ready to bring out "le guillotine" in March after the American International Group awarded the top executives in its financial products unit $165 million in bonuses just months after the firm received $173 billion in government bailouts.

Reports of the Death of Risk Tolerance Are Greatly Exaggerated

October 26, 2009 - Since the stock market decline a year ago, there has been much talk of permanent decrease in investors' risk tolerance. Many investors' losses were staggering, goes the refrain, so their tolerance for risk will, for the foreseeable future if not a generation, be substantially lower. Our hard data show otherwise. Average global monthly risk tolerance scores of advisers' clients in the U.S., Australia/New Zealand and Canada from January 2007 to December 2008 show a pattern of decline of only about three points (on a 0 - 100 scale) in each of these countries from earlier scores that ranged from a total of about 52 to about 57 points-less than a third of the standard deviation.

Firms Seek to Control IT Costs During Recovery

October 19, 2009 - Many financial service companies were only able to survive last year's recession by slashing staff and utilizing automated technology solutions to support customers, advisers, salespeople and their remaining workers. As the economy begins to recover and business picks up again, some experts say firms can use this same technology to maximize profitability, increasing workloads without adding more staff -- including in the IT departments.

Guidance Backlog Slows Preparation for Cost-Basis Reporting

October 12, 2009 - BOSTON - As tax experts at mutual fund companies hurry to prepare their fund accounting systems before newly mandated changes to federal cost-basis reporting rules take effect, they are finding they could use a little help and guidance from the government. Instead, they are hearing nothing. This backlog of regulatory guidance is frustrating these tax experts and nearly every other area in the financial industry that is trying to plan ahead in advance of significant regulatory reforms.