Praveen Saanker

Estate Planning - Top 7 Estate Planning Mistakes by Mark P. Cussen,CFP®, CMFC courtesy - Investopedia - Fantastic Estate Planning Pitch

For many people, estate planning falls under the same category as going to the dentist: deal with it as seldom as possible or only when absolutely necessary. In addition, those with low incomes and low net worth often feel that estate planning is unnecessary, and is a process reserved for the rich. However, what most people don't know is that proper estate planning goes beyond allocating money or other assets. There are a number of common estate planning errors that can be avoided by arming yourself with adequate knowledge about estate planning. In this article, we'll examine seven of the most common estate planning errors.

No Estate Plan
Many individuals do not realize that estate planning includes the preparation of documents such as living wills, which include provisions for touchy situations like when one should be taken off life support, as well as traditional wills, which makes provisions for the disposition of property and the guardianship of minor children. Preparing these documents helps to ensure that a person's wishes are clearly documented. Regardless of the size of the estate, preparing a will can help to prevent quarreling and bitterness among beneficiaries, who may otherwise feel that they are the rightful benefactors of a decedent's assets.

Ignoring the Sunset Provision
As of 2008, estates benefit from an exemption from federal estate taxes, for amounts up to $2 million. This amount will increase to $3.5 million in 2009, be repealed in 2010, and is scheduled to be increased to $1 million in 2011. While it may be optimistic to hope that a more favorable provision will be passed for 2011 and after, it may not wise to bank on such changes. Therefore, those with more than $1 million dollars in assets should stay abreast of any future changes so that they can be prepared to alter their estate plans accordingly, if necessary.

Being Unaware of the Gift Tax Impact on Joint Ownership
One method that many individuals use to avoid probate is to title assets in joint names with a friend, relative or other individual. However, unless an exception applies - as is the case when the joint owner is the owner's spouse - this can generate a taxable gift in the current year if 50% of the value of the asset is worth more than the annual gift tax exclusion amount.

For example, if Bill Jones puts his friend Fred's name on the title of a $50,000 car that Bill owns, Bill will be liable for gift tax on $13,000 of the car's value. The annual gift tax exclusion is $12,000 for 2007 and 2008. This means that one can give cash or assets of that amount or less to another person each year without paying gift tax. But because the car is valued at $50,000, half of the value of the car ($25,000) will legally become Fred's property; therefore,  Therefore $13,000 will be taxable.

Failure to Use Unified Credit
Failure to use unified credit is a costly error committed by an astonishing percentage of affluent households. When the first spouse passes away, generally all of his or her assets pass to the surviving spouse. However, if the deceased spouse had assets valued over the unified credit limit ($5 million as of 2008), then the exclusion for those assets will be lost if they are transferred directly to the spouse, who will then only have his or her exclusion to count against assets distributed to heirs when he or she dies. As such, a credit shelter trust should be established that shields the assets of the first spouse to die and allows his or her unified credit limit to be used as well.

Failure to Gift Assets Before Death
One of the easiest ways to reduce one's taxable estate is to gift assets to friends or relatives each year within the gift tax exclusion limit. This is a convenient way not only to reduce the taxes your estate may have to pay after you're gone, but also to see whether your beneficiaries are capable of using your assets wisely. If they squander the gifts you give them during your lifetime, then you may want to consider leaving your assets to them in an incentive trust that rewards them for fiscally responsible behavior.

Failing to Ensure Retirement Plans Have the Correct Beneficiary Designations
The beneficiaries of retirement accounts will sometimes change, particularly if the primary beneficiary predeceases the account owner. However, the account owner must usually complete a new beneficiary designation form, indicating the new beneficiary. Otherwise, the beneficiary might be determined under the default terms of the account agreement. Consider also that the payout options under most retirement plans often depend on whether the beneficiary is a spouse of the owner. Further, these options may be irrevocable after the beneficiary's initial payout election. There can be nasty tax repercussions for those who are not careful in this matter, and beneficiaries should be educated on how their elections could impact the taxes on their inherited amounts.

Make Sure You're Covered
Regardless of your income bracket, having adequate life insurance coverage is vital in most cases. Low-income households can benefit from term insurance coverage to replace income lost as a result of the death of the primary breadwinner, while affluent families may need the proceeds from insurance to provide liquidity upon the death of the insured. However, it may be important that those in the latter category transfer ownership of the policies to an irrevocable trust in order to avoid estate taxation on the death benefit.

Conclusion
These are just some of the errors that individuals often make with their estates. The good news is that many of these can be easily and quickly rectified, providing the corrective steps are taken before death. Consult with professionals who can help to ensure that your estate planning is on track. These individuals may include your financial or estate planner and your tax attorney.

by Mark P. Cussen

Mark P. Cussen has over 13 years of experience in the financial industry, which includes working with investments, insurance, mortgages, taxes and financial planning. He has two years of experience in writing and editing insurance and securities test training manuals, as well as other financial topics. He has also worked in in retail, discount and bank brokerage systems and been involved in a venture capital enterprise in the oil and gas sector. Mark has a Bachelor of Science in English from the

of

Kansas

and completed his CFP®; coursework at the Bloch School of Business at the University of Missouri-Kansas City in August of 2001.

University

Unexpected Bumps That Can Derail Retirement by Ken Hawkins – on Investopedia… This serves as an excellent retirement planning pitch to clients

All the most careful plans and preparation for retirement can fall apart due to an unexpected death, illness, a stock market crash or a pension plan that goes bankrupt. In addition, it is not unusual for people to live more than 30 years in retirement, due to increased rates of early retirement and rising life expectancy, which in itself presents a major risk that retirees will outlive their assets. The longer the time spent in retirement, the harder it becomes to be certain about a retiree's financial outcome. In planning for retirement, or living it, you must understand the risks that lie ahead and how they could impact your financial security.

Types of Post-Retirement Risks
The Society of Actuaries (SOA) in the

identified 15 post-retirement risks that can affect retirees and their financial security. Those preparing for retirement or already in retirement should consider these risks when making plans for the future:

Personal and family risks - Changes in your life or the life of a loved one that could impact your retirement income stream

Healthcare and housing risks - These include the risk that failing health will require moving to a facility with professional caregivers

Financial risks - These risks revolve around inflation, investments and stock market activities

Public policy risks - These risks involve government decisions that could affect retirees

Personal and Family Risks
Employment Risk
Many retirees plan to supplement their income by working either part-time or full-time during retirement. In fact, some organizations prefer to hire older workers because of their stability and life experience, but success in the job market may also depend on technical skills that retirees cannot easily gain or maintain. Employment prospects among retirees will vary greatly because of demands for different skills and may change with health, family or economic conditions.

Choosing the point at which you want to retire is integral to retirement planning. Later retirement is an alternative to increased saving, but there is no certainty that appropriate employment will be available. Working part-time is an alternative to full-time employment, and part-time jobs may be easier to obtain.

Longevity Risk
Running out of money before you die is one of the primary concerns of most retirees. This is an even larger concern today as life expectancies have risen. The life expectancy at retirement is just an average age, with about half of retirees living longer and a few living past age 100. Thus, planning to live to a specified age is risky, and planning to live only to your life expectancy will be inadequate for about half of retirees. The longer you live, the more exposure you will have to other risks that are listed below.

Those who are managing their own retirement funds over a lifetime have to perform a difficult balancing act. Being cautious and spending too little might needlessly restrict your lifestyle, and spending too much increases the danger of running out of money.

A pension or annuity can mitigate some of the risk because it provides an income stream for life. However, there are some disadvantages, including loss of control of assets, loss of ability to leave money to heirs and cost. Although people may not want to annuitize all their assets, annuities should be considered as an important part of retirement planning.

Death of a Spouse
The grief over a spouse's death or terminal illness contributes to high rates of depression and suicide among the elderly.  A spouse's death can lead to a reduction in pension benefits or bring additional financial burden. Also, the surviving spouse may not be able or willing to manage the finances if they were usually handled by the deceased spouse.

Financial vehicles are available to protect the income and needs of survivors after the death of a partner or spouse, such as life insurance, survivors' pensions and long-term care insurance. Estate planning is also an important aspect of providing for survivors.

Change in Marital Status
Divorce or the separation of a cohabiting couple can create major financial problems for both parties. It can affect benefit entitlement under public and private retirement plans as well as individuals' disposable income.

Splitting the marital assets will almost certainly lead to an overall loss in standard of living, especially if it was necessary to pool income and resources to maintain the standard of living to which both parties had become accustomed. Some experts believe that an individual may need about 60-75% of a cohabiting couple's income to maintain his or her standard of living. This is because some expenses, like rent and utilities remain the same, regardless of the number of people living in a household.

Although divorce rates among older couples are far lower than for younger couples, it is not uncommon for a retirement-age couple to get a divorce. Prenuptial agreements may be used to define each party's right to property prior to marriage. 

Unforeseen Needs of Family Members
Many retirees find themselves helping other family members, including parents, children, grandchildren and siblings.  A change in the health, employment or marital status of any of the family members could require greater personal or financial support from the retiree for that individual. Examples of financial assistance include paying healthcare costs for an elderly parent, paying higher-education fees for children, or providing short-term financial assistance to adult children in the event of unemployment, divorce or other financial adversities.
Retirement planning should recognize the possibility of providing financial support for family members in the future, even if this does not seem likely at or before retirement.

Healthcare and Housing Risks
Unexpected Healthcare Needs and Costs
Unexpected healthcare needs and costs are a major concern for many retirees. Prescription drugs are a major issue, especially for the chronically ill. Older people usually have greater healthcare needs and may need frequent treatment for a number of different health-related issues. Medicare is the primary source of coverage for healthcare services for many retirees. Private medical insurance is also available, but it can be costly.

The Society of Actuaries (SOA) says that healthcare costs can be mitigated to some extent by committing to a healthy lifestyle that includes eating right, exercising on a regular basis and using preventive care. In addition, long-term care insurance can pay for the cost of caring for disabled seniors.

Change in Housing Needs
Retirees may need to change from living on their own to other forms of housing, such as assisted living, which combines care with housing, and independent living, which combines some assistance with housing. Housing that includes care can be quite costly, and the most appropriate form of housing for an individual in a given situation may not be available in the chosen geographic area or may have a long wait for entrance.

The likelihood of requiring day-to-day assistance or care rises substantially with age, but changes in individual cases are often hard to predict, because they vary with one's physical and mental capabilities, which themselves change with age. Changes can occur suddenly, due to an illness or accident, or gradually, perhaps as a result of a chronic disease.

Lack of Available Facilities or Caregivers
Facilities or caregivers are sometimes not available for acute or long-term care, even for individuals who can pay for it. Couples may be unable to live together when one of them needs a higher level of care. For people who have lived together for decades, this can result not only in increased costs, but in emotional stress as well.

In general, little advice is available from the state or the financial-services industry on planning for long-term care costs. This may lead consumers to make uninformed decisions or to defer them and hope for the best.

Financial Risks
Inflation Risk

Inflation should be an ongoing concern for anyone living on a fixed income. Even low rates of inflation can seriously erode the well-being of retirees who live for many years. A period of unexpectedly high inflation can be devastating for those living on a fixed income.

According to the SOA, retirees and would-be retirees should consider investing in equities, a home and other assets, such as Treasury inflation-protected securities (TIPS) and annuity products with a cost-of-living adjustment feature. These types of products help offset inflation. In addition, would-be retirees can choose to continue working - even if it is only on a part-time basis.

Interest Rate Risk
Lower interest rates reduce retirement income by lowering growth rates for the retirement savings accounts and assets. As a result, individuals may need to save more in order to accumulate adequate retirement funds. Annuities yield less income when long-term interest rates at the time of purchase are low. Low real interest rates will also cause purchasing power erode more quickly.

Lower interest rates can reduce retirement income, and can be particularly risky when people are depending on drawdown from savings to finance their retirement. On the other hand, a problem also exists if interest rates rise as the market value of bonds drops. Increases in interest rates can also negatively impact the stock market and the housing market, thereby affecting the retiree's disposable income. As such, high real interest rates, over and above rates of inflation, make retirement more affordable.

Stock Market Risk
Stock market losses can seriously reduce retirement savings. Common stocks have substantially outperformed other investments over time, and thus are usually recommended for retirees as part of a balanced asset allocation strategy. However, the rate of return that you earn from your stock portfolio can be significantly lower than the long-term trends. Stock market losses can seriously reduce one's retirement savings if the market value of your portfolio falls.

The sequence of good and poor stock market returns can also impact your retirement savings amount, regardless of long-term rates of return. For instance, a retiree who experiences poor market returns in the first couple of years in retirement will have a different outcome than a retiree who experiences good market returns in the first couple of years of retirement, even though the long-term rates of return might be similar. Early losses can mean less income during retirement. Later losses can have a less-negative impact, as the individual may have a much shorter period over which the assets need to last.

Business Risks
Loss of pension funds can occur if the employer that sponsors the pension plan goes bankrupt or the insurer that is providing annuities becomes insolvent.
Defined-contribution plan accounts are not guaranteed, and plan participants bear losses directly. However, unlike pension plans, the balances in these accounts usually do not depend on the financial security of the employer, except for the employer's ability to make future contributions and in cases where plan balances include employer stocks. Depending on an individual's allocation, the risk of such losses is based on the market performance of the investments or on possible failure of the employer's business if the account is concentrated in employer stock. Ultimately, most investments will always be subject to business risk.

Public Policy Risk
Government policies affect many aspects of our lives, including the financial position of retirees. These policies often change over time along with government policy. Policy risks include possible increases in taxes or reductions in entitlement benefits from Medicare or Social Security.

Retirement planning should not be based on the assumption that government policy will remain unchanged forever. It is also important to know your rights and to be aware of your entitlements to state and local authority benefits.

Conclusions
Even the best-laid retirement plans can fail as a result of unexpected events. Although some risks can be minimized through careful planning, many potential risks are completely out of our control. However, understanding what the potential post-retirement risks are and considering them in the retirement planning stage can help to ensure they are mitigated and properly managed.

by Ken Hawkins, Ken Hawkins is a financial writer and vice president of Second Opinion Investor Services www.secondopinions.ca, an investment consulting firm that provides unbiased and independent investment advice. His experience spans the investment world of the private client investor as well as the world of the institutional investor representing pension funds, asset management companies, mutual funds and investment counselors.

United States

Reverse Mortgae - Common Pitfalls by Glenn Curtis

Reverse mortgages are a way for elderly people to draw an income (either in installments or a lump sum) against the equity that they've built up in their homes. For many older people in need of funds to live on, it is nothing short of a blessing, but there are some pitfalls to the process that everyone should consider. Find out what you need to know before taking the plunge.

High Costs

Although an individual is technically tapping the equity on his or her own house, the bank charges a fee to initiate the transaction. In fact, according to Reverse Mortgage.Org, as part of a reverse mortgage, homeowners may be required to pay an origination fee of $2,000 or 2% of the loan amount, whichever is higher. Some homeowners choose to fold this fee into the loan and pay it back over time with interest.

In addition, there are other fees that homeowners may be responsible for, such as an appraisal fee, which can range in the hundreds of dollars, a recording and credit report fee, which tends to be about $200, and a pest inspection and a flood certification fee, which are about $150 (for both). Finally, homeowners may also be asked to get mortgage insurance, and may be charged a flat monthly account "service fee", which can range from $30 to $35 a month. In short, the costs associated with a reverse mortgage can initially nibble away at the income you'll receive.

Homeowners in need of liquidity who are considering selling their homes within the next several years would probably be better off applying for a more traditional line of credit, a home-equity loan or a personal loan, given the large upfront costs associated with the process.

Your Kids Might Not Inherit the Family Home

Parents may like to pass the family home onto the next generation. However, when a reverse mortgage is taken out, even though the lending institution does not take title to the home, the mortgagee has an obligation to pay back the loan over time with interest. In many cases, that repayment is made by selling the home and then turning over the proceeds (or a portion of them) to the bank.

As a possible workaround to avoid selling the family home, some families will take out an insurance policy on the homeowner and then make an adult child or the lending institution the beneficiary. Using this strategy, the bank may repaid without having to sell the property upon the homeowner's death. Consider consulting with an insurance agent to determine the best way to ensure that proceeds from such a policy are sufficient enough to satisfy the outstanding loan.

Impact on Future Financing

When an individual initiates a reverse mortgage, he or she is creating a huge liability because the loan must be repaid with interest. However, many individuals do not realize that establishing a reverse mortgage may jeopardize their ability to obtain financing at a later date.

On the surface, this may not seem like a concern for elderly homeowners given that they are unlikely to buy another home or make a sizable purchase, but it can have an adverse impact on applications for car and personal loans. It may also impact a homeowner's ability to acquire credit cards.

Reverse Mortgages May Impact Medicaid Benefits

Lending institutions are quick to say that obtaining a reverse mortgage will not affect one's Medicaid payments, but according to RateEmpire.com a site dedicated to lending sources, education and information, "if you receive Medicaid, any reverse mortgage proceeds that you take delivery of must be utilized right away." More specifically, the site says that any retained funds "will count as an asset and may affect your Medicaid eligibility." In other words, this means that if you were to receive $10,000 in a lump sum, you would have to spend that money shortly after receiving it. If you fail to do this, any money left over may count as an asset for Medicated eligibility purposes.

Rate Empire also states that if the total liquid resources are more than $2,000 for an individual or $3,000 for a couple, this could make the person ineligible for Medicaid.

Individuals currently receiving or anticipate receiving Medicaid should consult an accountant and a financial advisor in order to make certain that they are aware of all of the potential ramifications of taking out a reverse mortgage.

Potentially Unfavorable Terms

While the lending institution may neither go after your heirs for money, nor are they entitled to take more than the appraised value of your home, there are several items usually located in the fine print of these contracts that can be disturbing.

For example, some reverse mortgages have clauses that state that the loan must be repaid if the home is unoccupied for a certain period of time. This means that the homeowner could (hypothetically) be in the hospital receiving treatment for a medical condition, and be released to find that their home is in foreclosure.

Furthermore, because homeowners remain responsible for all taxes, insurance and upkeep on the home, failure to pay taxes or maintain adequate insurance could cause the loan to be called.

Keep in mind that the property is also subject to an appraisal. So, while you might have put a large amount of money into your home over the years, there is the chance that it's worth less than you paid. This means that the proceeds that you receive as part of the reverse mortgage process may be less than what you might have anticipated.

Bottom Line

Reverse mortgages are a great way for people to tap the equity in their homes, either in installments or in a lump sum. However, be aware of the potential downsides to entering into such an agreement.

by Glenn Curtis,
Glenn Curtis started his career as an equity analyst at Cantone Research, a New Jersey-based regional brokerage firm. He has since worked as an equity analyst and a financial writer at a number of print/web publications and brokerage firms including Registered Representative Magazine, Advanced Trading Magazine, Worldlyinvestor.com, RealMoney.com, TheStreet.com and Prudential Securities. Curtis has also held Series 6,7,24 and 63 securities licenses.

Reverse Mortgage Demystified

A type of mortgage in which homeowners can borrow money against the value of his or her home. No repayment of the mortgage (principal or interest) is required until the borrower dies or the home is sold. After accounting for the initial mortgage amount, the rate at which interest accrues, the length of the loan and rate of home price appreciation, the transaction is structured so that the loan amount will not exceed the value of the home over the life of the loan.

Often, the lender will require that there can be no other liens against the home. Any existing liens must be paid off with the proceeds of the reverse mortgage.

A reverse mortgage provides income that people can tap into for their retirement. The advantage of a reverse mortgage is that the borrower's credit is not relevant, and is often unchecked, because the borrower does not need to make any payments. Because the home serves as collateral, it must be sold in order to repay the mortgage when the borrower dies (in some cases, the heirs have the option of repaying the mortgage without selling the home).  These types of mortgages have large origination costs relative to other types of mortgages. These costs become part of the initial loan balance and accrue interest. Senior citizen borrowers with good credit should carefully analyze the options of a more traditional mortgage, such as a home equity loan, against a reverse mortgage.

Global Private Banking and Wealth Management: The New Realities by David Maude (Author)

We all know that Wealth management is one of the areas in which banks and other personal financial services players are investing heavily. But the market is changing fast. Going forward, players therefore need to adapt their strategies to the new realities: what worked in the past will not, for the most part, be appropriate in the future.

This book contains best-practice examples and perspectives on the opportunities ahead, it includes

Wealth management challenges: new and old

The changing client profile

New products, pricing and channels

Competitor and business-model landscapes

External challenges and opportunities

Future perspective

Wealth market analyses for 25 countries

For anyone involved in wealth management, this can be a good read.

DAVID MAUDE is an independent consultant. A former consultant at McKinsey & Company, he serves financial institutions around the world, advising on their key strategic, organisational and operational issues. He has also worked in strategy for Barclays, and spent six years as a senior economist at the Bank of England and HM Treasury. He co-authored the pioneering Euromoney book, Private Banking: Maximising Performance in a Competitive Market, published in 1996. He may be contacted at david_maude@lycos.co.uk.

Vault Career Guide to Private Wealth Management by John Ransom

If you want to land a job or career in the private wealth management industry but don't know where to start? This book takes you inside the industry to make sure you can land the job you want. It covers the basics of equity and fixed income products to market and regulatory trends, and dissects career paths and job responsibilities at the both large and small firms. A good read for any one who aspires to be a private/investment banker

Wealth Management: Private Banking, Investment Decisions, and Structured Financial Products by Dimitris N. Chorafas - A good read

Financial expert Dimitris Chorafas explains the real risks and returns of structured financial products in private banking.

This book has two themes: Private Banking and investment decisions regarding Structural Financial Products. Dr. Dimitris Chorafas examines in a rigorous way whether structured financial products are advisable investments for retail and institutional investors and, if yes, which risks they entail. As our society becomes increasingly affluent, and state-supported pension schemes find it difficult to survive, a growing number of high net-worth individuals, and families, have become retail investors looking for ways and means to optimize wealth management, and Private Banking deals with these sorts of clients. Private banking also deals with clients that are institutional investors, such as pension funds, mutual funds, and insurance companies, as well as not-for-profits, foundations and companies explicitly set up for wealth management. Both institutional and retail investors are being offered by the banks they work with structured products. Typically, these are securities that provide them with a redemption amount, with may be either with full or partial capital protection, and some type of return. The book examines structured financial products, their polyvalent nature, and the results which could be expected from them.

Return on structural instruments, which are essentially derivatives, is paid in function of a specific investment strategy on selected underlying asset(s). This essentially means on the performance of the underlyings, obtained by asset managers, which may be banks or hedge funds, through purchase or sale of embedded options. But there are risks. Both risk and return from structured products are related to three main issues: the volatility of future value of an underlying, the uncertainty of future events, and the exposure of the product. Every type of investment is subject to market forces, and the more leveraged a portfolio is, the greater will probably be both the assumed risk and the expected reward. The fact that structured financial products appeal, or at least are being marketed, to both retail investors and institutional investors makes the dual approach deliberately chosen in this book most advisable. This book addresses all these issues in a practical manner with numerous case studies and real-world examples drawn from the authors intensive research.

All you wanted to know about NRI Taxation..Article from Money control..The authors, Gaurav Taneja and Sonu Soni Iyer, are senior tax professionals with Ernst & Young

The recent spurt in economic growth in India has seen a number of Non Resident Indians (NRI) returning to India. NRIs do enjoy special benefits while computing their India Income Tax. It is helpful to know these beneficial provisions so as to reduce tax incidence by proper tax planning.

In this article, we have tried to cover those points which are applicable to NRIs and which must be taken care of while planning for India taxes and filing India tax returns.

Who qualifies as a NRI for India Income Tax purposes?

To be eligible for the ‘NRI’ status, a person should be a non-resident under the Income Tax Act and should either be a citizen of India or a person of Indian origin. A person is of Indian origin if he or his parents or grand parents were born in Undivided India.

A person who has been in India for 60 days or more during a financial year and 365 days or more during the preceding four financial years qualifies as a ‘Resident’ of India. Considering the fact that NRIs may end up staying in India for longer periods while visiting relatives or to take care of India property and investments, the 60 days period is relaxed to 182 days. NRIs based outside India can continue to enjoy non-resident status in India if their presence in India is more than 60 days but less than 182 days, even if their stay in India during the past four financial years is 365 days or more.

Income earned and received outside India is not taxable in India

NRIs are taxable on income accrued or received in India. Income earned and received outside India such as overseas business income, overseas bank interest incomes, etc. is not taxable in India.

Once income is earned and received outside India, it is not taxable in India if at a later date, the money is sent to India. However any income earned, subsequently, on the amounts brought into India will be subject to tax in India.

If a NRI comes back to India and loses his NRI status, he will not be subject to tax in India on his world-wide income if either of the following two conditions are satisfied:

1. He has been in India for not more than 729 days during the preceding seven financial years; or
2. He has qualified as a non-resident for nine out of 10 preceding financial years.

A NRI coming back to India after a long stay outside India may be exempt from tax on his worldwide income for the first two years of his stay in India, if any of the above conditions are satisfied. Similarly, if in any particular financial year, his stay in India exceeds 182 days and he loses his NRI status for that year, his income outside India will still not be taxable if any of the above two conditions are satisfied and his tax status will be that of a ‘Not Ordinarily Resident’.

Tax Treaty Benefits

NRIs can explore beneficial provisions available under various ‘Double Taxation A ance Agreements’ (Tax Treaty) that India has entered into with various countries. These tax treaties often provide lower tax rates and exemptions in addition to those available under the domestic tax provisions.

To give an example, if a NRI is a tax resident of the US as well as of India, the tax treaty between India and US may become applicable to him. The NRI may be taxable in India on interest income at domestic tax rates. However, the tax treaty limits the maximum rate of tax applicable on interest income in India for US tax residents to 15%.

Investments in Indian companies/Government Securities in foreign exchange are taxable at lower rates

Shares of any Indian company, debentures of any Indian public company, deposits with any public company or any security of the Central government, which are purchased with foreign currency, are given special tax treatment. The interest income from these investments is taxable at a flat rate of 20% and long-term capital gains on sale of these investments are taxable at a flat rate of 10%. The sale of these investments is exempt from tax if the sale proceeds are reinvested in similar investments within six months. If the sale proceeds of these assets are partially re-invested, then the exemption is proportionate to the amount re-invested.

NRIs are not required to file any tax returns in India if the income comprises of investment incomes discussed in the previous paragraph and taxes have been withheld at source from such incomes. If the tax rate as per the Tax Treaty is lower than the tax rate as per the income tax provisions or for any other reason, the NRI does not wish to be governed by special provisions applicable to NRIs under the domestic tax law, he can opt out by giving a written declaration along with his return of income.

Elimination of Foreign Exchange Fluctuation in computing capital gains

There is a special method of elimination of foreign exchange fluctuation in computing capital gains on the shares/debenture of an Indian company, acquired in foreign currency by non-residents. The purchase price and sale price are converted back into foreign currency as per the rate of exchange prevailing on the date of purchase/sale. Capital gains are determined in foreign currency and converted into Indian Rupees at the rate of exchange on the date of sale. However, in such cases, the benefit of indexation on account of inflation is not available.

Interest earned by NRIs on Non Resident External (NRE) bank account is exempt from tax

However, interest in Non Resident Ordinary (NRO) bank account is taxable. A NRI returning to India and having NRE/NRO bank accounts is required to report his return to his bankers, who shall then convert these accounts to resident bank accounts. The interest income earned on resident bank accounts is taxable.

Wealth Tax is not applicable on assets held outside India by NRIs

A NRI is not subject to wealth tax in respect of assets held outside India. A NRI returning to India and/or losing his NRI status will not be subject to wealth tax on assets held outside India if either of the following two conditions are satisfied:

1. He has been in India for not more than 729 days during the preceding 7 financial years; or
2. He has qualified as a non-resident for 9 out of 10 preceding financial years.

Permanent Account Number (PAN)

Tax Returns are not accepted without PAN. Therefore, if a tax return is to be submitted, NRIs must obtain a PAN.

Advance Rulings

While computing his income tax liability, if any position on the tax law is not clear, NRIs can approach the Authority for Advance Rulings (AAR) to decide on that tax matter. The rulings of the AAR are binding both on the tax authorities and the applicant NRI.

Whilst NRIs do enjoy some privileges under the Indian Income Tax Act, the Government may do well to create more attractive and tax saving schemes for NRIs and thereby attract foreign exchange inflow into the country.

The authors, Gaurav Taneja and Sonu Soni Iyer, are senior tax professionals with Ernst & Young

Guidelines on Acquisition of Property by NRIs, by way of purchase, Gift, Inheritance and Documents required for the same

Guidelines for property acquisition by an NRI are laid down by FEMA Regulations, notified vide RBI Notification No. FEMA 21/2000-RB. NRIs and PIOs can acquire immovable property in India in the following ways: 

1) By way of Purchase

An NRI/PIO can acquire a residential or commercial property by purchasing it under the general permission granted by the RBI. Payment for purchasing the property should be made only out of funds remitted to India through normal banking channels or funds held in NRE/ FCNR/NRO accounts maintained in India. No payment can be made outside India.

A declaration is required to be submitted to Reserve Bank of India (Central Office) about the real estate acquisition of property by an NRI in form IPI 7 within a period of 90 days from the acquisition/final payment of purchase consideration, along with a certified copy of the document as evidence of the transaction and Bank certificate stating the amount paid.

2) By way of Gift

An NRI/PIO can acquire immovable property (only residential/commercial property) by way of gift from a resident of India, an NRI or a PIO. Agricultural land/plantation property/farmhouse in India cannot be acquired by way of gift.

       A foreign national of non-Indian origin resident outside India cannot acquire any immovable property in India by way of gift.

3) By way of Inheritance

NRIs/PIOs/ foreign nationals of non-Indian origin are eligible to hold immovable property acquired by way of inheritance from a resident Indian / NRI or PIO. However, they would need specific approval from the RBI to hold any immovable property in India if acquired from a person resident outside India.

It is mandatory that the person from whom the property is inherited should have acquired the same in accordance with the foreign exchange regulations applicable at the time of acquisition.

       Citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan are required to seek specific approval of the Reserve Bank of India before being able to inherit any immovable property in India.

Documents Required for Acquisition of Property

1. Title Deed
2. Tax Receipt
3. Bills
4. Encumbrance Certificate
5. Document showing measurement of Land
6. Registration Papers

Key facts on acquisition of property by NRI by Purchase/Gift/Inheritance

1. There is no lock-in period now for any acquisition of immovable property.
2. All the sale proceeds of residential/commercial property received by way of gift by NRI should be credited to NRO accounts only.
3. Sale proceeds of property inherited from a resident Indian not exceeding USD 1 million can be remitted abroad in one calendar year.
4. Sale proceeds of property inherited from an NRI cannot be repatriated.
5. Sale proceeds of residential/commercial property received by way of gift by NRI/PIO can only be credited to NRO account.
6. NRIs can seek an agreement with their relatives in the form of Power of Attorney in their resident country. This way, in their absence their relatives can represent them during the proceedings.

Repatriation Guidelines..A common doubt with most of my clients..Particularly Realty Investors

Repatriation is the transfer of funds from India to accounts held overseas. Repatriation pertaining to Real Estate in India is in accordance with the provision of the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2000 as defined in Sections 6 and 47 of FEMA, 1999 and Notification No. FEMA 21/2000-RB dated May 3, 2000.

Funds on which Repatriation is allowed in India:
If you are a Non-Resident Indian (NRI) or a Person of Indian Origin (PIO), you can avail of repatriation facility on:

·       Sale proceeds of immovable property acquired in India out of your repatriable funds, without any lock-in period. Sale proceeds of immovable property bought from foreign currency.

·       Assets acquired by way of Inheritance/legacy/bequest, without any lock-in period.

·       Deposit with a bank or a firm or a company from funds brought from abroad.

·       Provident fund balance or superannuation benefits.

·       Amount of claim or maturity proceeds of insurance policy.

·       Sale proceeds of shares, securities.

·       Refund of application/earnest money/purchase consideration made by house-building agencies/seller on account of non-allotment of flats/plots/cancellation of booking/deals for purchase of residential/commercial properties along with interest and net of taxes, if original payment is made out of NRE/FCNR (B) account/inward remittances.

However, all persons, whether resident in India or outside India, who are citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, or Bhutan, require prior permission of Reserve Bank for transferring any immovable property in India.

Conditions for Repatriation of Sale Proceeds from property:

1.    Property against which remittance is sought should be acquired as per the applicable laws and in accordance with the provisions of foreign exchange law in force.

2.    Documentary evidence in support of the acquisition of the funds/assets proposed to be remitted should be produced. It is required by banks for the same.

3.    Undertaking and Certification relating to tax compliance are mandatory.

4.    Proceeds should not exceed the amount paid for acquiring the property.

5.    Subject to fulfillment of few conditions, proceeds should be credited to NRE account.

6.    Repatriation of sale proceeds of residential properties is restricted to two such properties.

7.    Repatriation of sale proceeds of immovable property acquired out of Rupee fund (inward remittance) is available only if the property is held for a minimum period of 10 years. If such a property acquired out of Rupee fund is sold within 10 years, remittance can be made, only if the sale proceeds have been held by the NRI/PIO for the balance period in an NRO Account (Savings/Term Deposits) or in any other eligible security provided such investment is traced to the sale proceeds of the immovable property.

8.    Repatriation should be done via 'authorised person'. Authorised person means an authorized dealer/offshore banking unit or any other person for the time being authorised to deal in foreign exchange or foreign securities, by the RBI.

9.    Citizens of Pakistan, Bangladesh, Sri Lanka, China, Afghanistan, Iran, Nepal and Bhutan shall require prior approval from RBI to apply for repatriation.

NRI banking norms:
Repatriation of sales proceeds of an immovable property is allowed by banks, subject to fulfillment of the following points:

1.    Sale proceeds of property purchased with native currency by an NRI do not qualify for repatriation.

2.    Sale proceeds of property purchased with foreign currency qualifies for repatriation amount not exceeding $ I million, subject to two conditions:

o   Remittance for the concerned property was done outside India, in accordance with regulation of FEMA, 1999.

o   Property in question is registered with RBI within 3 months of purchase.

3.    Real Estate acquired as gift by NRI qualifies for repatriation and can be repatriated to only NRO account held by him.

4.    Inherited property can also be repatriated on producing proof of inheritance, undertaking by the remitter and a certificate from a Chartered Accountant. This is subject to RBI approval.

5.    Property purchased on loan also falls under repatriable investment if the loan has either been repaid per norms or an undertaking by a Chartered Accountant is enclosed.

Channels of Repatriation
NRI Accounts:

·       NRE (Non Resident External Account) account (Savings/Current/ Fixed Deposits): Is freely repatriable (principal and interest) and does not require prior permission from RBI. Many banks like HDFC, PNB, SBI, ICICI et al offer NRE facilities.

·       FCNR (Foreign Currency Non Resident Account) (Deposits): FCNR Deposits are fully repatriable (principal and interest). And the entire deposit is exempt from tax. All major banks HDFC, ICICI, SBI offer this facility.

·       NRO account Non- Resident Ordinary Account(Savings): NRO deposits are not repatriable (principal) except on current NRI income like rent, dividend, pension, etc. and remittances indicated under "Repatriation of NRO Funds" only after payment of taxes due in India. Interest is freely repatriable. The NRI may remit up to USD one million per calendar year.

·       RFC account (Resident Foreign account): This account is available for returning Indians only, that is Indian who have permanently returned to India after holding NRI status. Funds can be repatriated on a need basis.

Repatriation Procedure:
To apply for repatriation, an NRI should make an application in the prescribed format to an authorized dealer only, that is, a bank/dealer authorised to deal in foreign exchange by the RBI. The authorized dealer on satisfying itself with the particulars/documents submitted by the concerned NRI may allow the repatriation of the same.

The documents required while seeking Repatriation:

1.    Application for permission in prescribed format in Form IPI 8 to repatriate the original investment made in immovable property held  in India.

2.    Certified copy of the purchase agreement.

3.    Certified copy of the sale agreement.

4.    Original bank documents proving that the purchase has been made from abroad or from an NRE account held by the seller.

5.    Proof of the Capital gain tax, if any, deducted at source and paid to the Government by the purchaser of the property

Got an I-T notice? No need to panic Gagan Pahwa and Vinay Mangla from Ernst & Young explain ways to tackle an enquiry notice from the income tax department

THE income tax authorities for various reasons may issue a tax enquiry notice. Sometimes you may also receive a notice despite filing your returns.
   

Issue of notice where a tax return has not been filed: Salaried employees are required to have their returns filed by July 31, each year for the income earned by them during the previous financial year. To illustrate: For the financial year April 1, 2006 up to March 31, 2007, the tax return was due by July 31, 2007. In case no return of income has been filed but the tax officer feels that a return should have been filed, he or she may issue a notice under Section 142(1) of the Income Tax Act requiring such person to file a return of income within the specified time.

Tax notice where a tax return has been filed: It is possible to get a notice from the tax officer, even if you have duly filed your tax return, in the following situations:

A tax enquiry notice is most commonly issued for audit of income and expense details disclosed in the return of income, commonly referred to as “ax scrutiny proceedings”. under tax scrutiny proceedings, a notice is issued under Section 143(2) of the act if the tax officer believes that less income has been disclosed or excessive claims have been made of losses, exemptions, deductions, allowance or relief in the return. The tax payer is normally requested to answer certain questions, file documents as evidence and provide additional information. However, such a notice has to be issued within a certain period; it cannot be issued to the tax payer after the expiry of twelve months from the end of the month in which the return of income was filed.

There is also a provision under the act, which empowers a tax officer to initiate audit proceedings by issuing a notice under section 148 for the past six assessment years for which scrutiny proceedings may or may not have been conducted, subject to satisfaction of certain conditions. These proceedings are commonly referred to as “reassessment proceedings” and are initiated where the tax officer has reasons to believe income which should have been taxed has escaped audit i.e. no taxes have been paid on such income by the tax payer. For instance: As on November 1, 2007, reassessment proceedings can be initiated for assessment year 2001-02 (financial year April 1, 2000 to March 31, 2001), and onwards.
In cases, where a taxpayer has filed his return, and a tax officer requires certain additional information, a notice may be issued under section 142(1) of the Act. A tax notice may also be issued where a return is found to be defective. In such a case, the tax payer is issued a notice under section 139(9) of the act requiring the taxpayer to rectify the defect within 15 days from the date of notice or such extended period which the authorities may permit. To illustrate: if you have missed filling in all the details in the required columns in your tax return, the return would be treated as defective and you would have to rectify the error.
 

Even a third party can be served a notice to collect information about you. For example, the tax officer can issue notice to a bank asking for the account details of a person who has an account with the said bank.
   

How to respond to a tax notice? In relatively simple issues, you may attempt to handle the situation on your own but in complex cases, please go to your tax advisor. Here are some action points:
   

Verify the validity of notice as regards whether the same has been issued within the time limit prescribed for issue of such notice and whether appropriate procedures have been followed while issuing the notice. Typically, the act provides for a limitation period for issuance of all kinds of notices.
   

Go through your past returns, assessments orders, financial statements before responding to the tax officer. Be aware of the deadline for responding to a notice or attending a tax hearing, as any non-compliance may be viewed as non-cooperation and may adversely influence the outcome of the enquiry proceedings.
 

Unless the notice or summon requires personal appearance of a person, the details/ information may be furnished via post or through an authorised representative (your tax advisor). So next time you receive a tax enquiry notice don’t panic. Just follow the above procedures.

Home is where many tax saving options still dwell ..Interesting Read, by Bakul Chugan

Buy a home, go for joint ownership if you are two salaried persons, buy a second property, or even sell the existing one...if you plan well, there are various options to save tax on hard-earned money

THE Indian economy has been witnessing a boom in the recent past. However, rising property prices and growing interest burden on home loans are worrying buyers. The Budget has not offered any relief, but you can still make ample use of the existing provisions to save substantially on property investments. Here’s how….
   
BUYING A HOUSE   

Owning a house is not just a dream but
   a necessity, and there are several tax
   benefits as well. However, when buying a house, you would do well to consider the following.
   (a) It’s always advisable to go in for a housing loan. Interest paid on home loans can be deducted from your taxable income up to a maximum of Rs 1.5 lakh. This can be a double bonanza in the case of joint ownership. If the joint owners equally bear the interest burden, each gets a deduction up to Rs 1.5 lakh.
   However, the total deduction cannot exceed the actual interest paid by the joint owners. So, if the total yearly interest liability is, say Rs 4 lakh, and the property is equally owned by three people, then each gets a deduction of Rs 1,33,333.
   (b) Principal repayment up to Rs 1 lakh is allowed as a deduction from your taxable income under Section 80C, provided the loan is borrowed from a recognised financial institution.

OWNING TWO OR MORE HOUSES

These days it’s not uncommon to see people owning more than one property. While interest paid on loan taken for a single property is eligible for deduction up to Rs 1.5 lakh only, no such ceiling is prescribed for a new loan taken to purchase a second property. Thus, if your rental income from the second property is Rs 4 lakh and the interest expense on loan taken for the second property is Rs 2.5 lakh, then your income from house property shall be calculated as below:
By claiming deduction for the entire interest expense of Rs 2.5 lakh, you can substantially reduce your tax liability.
Had there been no deduction of interest expense, you would have had to pay tax on Rs 2.8 lakh instead of Rs 30,000.
However, if your second house is lying vacant, generating no rental income, you can still claim deduction for the interest paid. There will nevertheless be a notional rental income and the interest will be deducted from this income.

SELLING PROPERTY   

To minimise tax outflow while selling a property, take into account the following.
   (a) A property or house held for under three years is termed as a short-term capital asset and does not attract any tax incentive. However, if you sell the property only after three years, it is a long-term capital asset, which is eligible for some tax relief.
   (b)Selling property attracts capital gains tax. However, if you invest the proceeds from selling the property into buying or constructing another house, the taxman exempts you from paying taxes. But keep in mind the following:

• If you intend to purchase a new house, do so either one year before or within two years of selling your existing property.

• If you are constructing a new house, then ensure that it is done within three years of the sale of the earlier property. You can start construction even before the transfer of the existing property. However, ensure that it is completed within the stipulated time.

• If you have already sold your property, and could not acquire a new house before the due date for filing tax returns, you can deposit the money in the ‘capital gains deposit account scheme’ with any nationalised bank.
   (c) Even those who do not want to buy a new house can avail of some tax benefits. All you need to do is invest the proceeds from the sale of the property in capital gains bonds issued by NHAI or REC within six months of the deal. The maximum investment permitted in such bonds is Rs 50 lakh, and these bonds can be redeemed only after three years from the date of investment.

Referrals for the Asking - Interesting Read!

Client acquisition is one of the most important tasks you face as an advisor. How you find and attract new prospects clearly will have an enormous impact on your firm's overall growth and profitability.

Unfortunately, new research from CEG Worldwide reveals that the majority of advisors are ignoring one of the most effective, efficient and obvious sources for new referrals: their existing clients. By contrast, an elite group of successful advisors are tapping their client base to build their businesses-and maintain their competitive advantage in the process.

With that in mind, here's a look at the importance of client referrals, along with a proven process for systematically generating new business from existing clients.

Overlooked Avenue

Think for a moment about your best clients-the ones who are profitable for your business, whom you enjoy interacting with and whom are satisfied with you. How great would it be if your practice consisted of nothing but these types of people? Going into work each day would be a pleasure.

One of the best ways to find more of these investors is to go to the top clients you already have. Many of their friends and associates are probably similar and could therefore make ideal new clients.

Because client referrals can be such a strong resource for business growth and development, you might think that advisors are actively pursuing this method of new client acquisition. However, recent evidence proves that advisors are overlooking this important avenue.

Consider CEG Worldwide's most recent study comparing wealth managers and investment generalists. Nearly all of the 2,094 advisors surveyed-93.4%-use an investment generalist business model with a transactional-based approach to client management. By contrast, a select percentage of advisors (6.6%) use a wealth management business model centered on consultative client management. These wealth managers are significantly more successful, earning an average annual net income of $881,000 versus $279,000 for the investment generalists.

When we examined the client acquisition habits of both groups, we saw that a mere 1.8% of the investment generalists regularly ask their clients for referrals. But almost 66% of wealth managers ask for referrals on a regular basis. Given that wealth managers don't hesitate to ask clients for referrals, it's no surprise that they receive more of them. In 2006, the typical wealth manager received 3.1 referrals from each of his or her top 20 clients. The typical investment generalist's success rate: just 1.2 referrals from each top client.

Getting It Done

The numbers prove some undeniable facts: The most successful advisors in the business-wealth managers-are consistent and systematic in their client referral efforts, and therefore garner more referrals. That approach is one reason why they outearn their investment generalist peers by $602,000 a year on average.

To emulate these top advisors and generate a steady stream of client-based referrals, we recommend the following process:

Step 1: Set the stage to ask. Start by showing clients that it's in their own best interest to give you referrals. Explain to them that the less time you need to spend on marketing and prospecting, the more time you can devote to helping them achieve their goals and providing great service. Setting the stage helps clients understand "what's in it for them" by helping you. If you are delivering a great experience, your clients will want to share that experience with their friends and business associates.

Step 2: Ask for the referral. Simply state who you are looking for-your ideal type of client-and ask if the client knows anyone who fits the profile who they believe would benefit from your services. If they don't, ask them to think it over and call you or tell them you'll check in with them during your next regular meeting.

Step 3: Ask again. If you've been given a name, simply say, "Great! Who else comes to mind?" It's reasonable to expect an ideal client to come up with a few good prospects.

Step 4: Gather contact information. Once you have a list of names, ask for background and contact information of the prospects.

Step 5: Consider asking for a personal introduction. Asking the client to give the prospect a heads-up call is a good option if the client has some knowledge of the prospect's financial situation, if it's clear that the prospect is affluent or if there's a high likelihood of having immediate success with the prospect.

Step 6: Commit to follow up. If the client isn't sure whether the person would be a good fit for your services, tell the client that you will follow up on their recommendations by yourself.

Step 7: Wrap up the meeting. Many advisors think that a referral source is using up valuable social or political capital when they refer someone. But remember that even though you are grateful, your clients also benefit by making referrals. So remind clients that referrals allow you to focus on serving them and getting them to their goals faster instead of spending time on marketing. Also, let them know they can now have the personal satisfaction of having helped someone find a trusted advisor who will assist them in solving their financial challenges.

Step 8: Thank the client. Send the client a handwritten note expressing your thanks. (An email is quicker, but less effective in showing your gratitude.) Send the note out on the same day that you receive the referral, and let the client know that you'll keep him or her posted on the outcome of the meeting with the referred prospect.

Step 9: Call each prospect. Here you're looking to arrange an initial meeting. If the prospect says no, it's usually because he or she already has an advisor. If so, ask if the prospect would like a second opinion on his or her portfolio, given the current market volatility. If the prospect says maybe, assure him or her that there is no cost to get together for a consultation. If the answer is yes, schedule the meeting and explain that you'll send out a letter detailing the information that the prospect should bring to the meeting.

Step 10: Send an invitation to the prospect. The letter should include a list of the important documents the prospect should bring (bank and investment account statement, tax returns, insurance policies and similar information).

Step 11: Follow up with the client. Your referral source will want to know how things worked out, so it's important to keep him or her informed of the outcome of the meeting (while maintaining appropriate client confidentiality, of course). Lack of such feedback diminishes the value of the client's efforts and can create resentment.

Step 12: Thank your client-again. Keep your client referral source motivated to refer again by acknowledging how much you appreciate his or her assistance in helping you focus on client goals by reducing the need to prospect. A gift basket or a gift certificate to a client's favorite restaurant can make an ideal thank-you gift.

As you can see, many of the steps in this process are fairly straightforward and easy to implement. The fact is, generating referrals from clients needn't be an especially challenging or uncomfortable task. Most advisors who don't get referrals from clients simply make the mistake of not asking in the first place-usually because they feel they are imposing on their clients. But as noted above, your clients will enjoy great benefits by referring.

Another big mistake to avoid in this process is seeking clients that aren't a great fit for your firm and your skills. Instead of going after every referral you get, stay focused on those prospects you enjoy and to whom you can bring significant value.

The upshot: There's simply no good reason not to pursue new business by leveraging your existing client base. In fact, if you want to provide an exceptional client experience and grow your firm rapidly, you must turn to your clients for help on a regular and consistent basis. By following the steps outlined above, you'll fully tap into one of the biggest sources of your future business-and build a hugely successful practice in the process.

Wealth Advisor

As a Wealth Advisor I understand that I have many roles. I have found that educating potential clients on the differences among financial service providers is one very important aspect of my profession.  Many people cannot explain the differences between a stockbroker, account executive, insurance agent, financial planner and a Wealth Advisor.

Some of my current clients had bad investment experiences prior to working with me. It is no wonder, since most people in the financial services industry work for a large company and want to sell you a product or equity. They are paid by their employer, usually based on their sales. To top it off, they also may have very little time for you after the initial sale since they may have several hundred clients.  Do any of these statements sound familiar?

As a Wealth Advisor, I construct a customized Wealth Plan based on your goals, risk tolerance and time frame with the inputs coming from documents supplied by you.   Iam sure you agree that The Wealth Plan is as important as the investments themselves.

I have seen many other people’s plans and what I produce is not a generic plan that takes an hour to construct, but rather an individualized, comprehensive and usable plan.

The goal of the plan is to give you a better understanding of your financial life, address your goals and point out financial opportunities as well as consider risks.  Many times, the investment strategies suggested are tax-advantaged and allow you to keep more money in your pocket.

I and my fellow advisors limit our client base to allow us to give you the time that is required on an ongoing basis.

I believe the core advisory values we stand for are

Be open, honest and forthright in all matters.

Provide unbiased high-quality service to each client.

Be ethical in the performance of my duties.

Respect the concerns and views of all clients.

Do what is best for each client.

Only accept clients where we can add significant value vs. their present situation.

If you would like to have a more personal relationship with a Wealth Advisor, please give me a call to schedule an introductory meeting.

Retirement Planning: Convincing Clients to Think Long Term Bet on Longevity - By Harold Evensky ..Very interesting read for any advisor

Many years ago I had an occasion to meet with a 72-year-old retired client to discuss his cash flow needs. The bulk of his portfolio was in jumbo ($100,000) one-year CDs, which he rolled over annually. Rates had been dropping and his annual income had tumbled. He wanted to know what to do. I'd only just started my wonderful professional spiel about the benefits of a balanced portfolio when he interrupted me.

"Harold, no way I'm going to gamble money in the market! Don't even bother to tell me about it."

Okay, I thought, I guess we discuss bonds—so I started on my equally wonderful laddered bond portfolio discussion. That didn't last very long, either.

"Harold, forget it, bonds are way too long!"

Frustrated, I blurted, "Then fine, instead of buying and rolling one-year CDs, buy and roll five-year CDs!" He looked at me and said, in all seriousness, "Five years? You must be kidding. 'Long term' to me is a green banana."

Admittedly, if I hadn't been so frustrated I probably would have been gentler but I was very frustrated, so I said, "Go ahead, make my day, die. What keeps me awake at night and should keep you awake is that you won't die."

Experienced planners have all faced the problem of trying to get their clients to recognize the risk of living too long and running out of money. Until recently, I used the story above to frame the discussion; however, since editing my recent book, Retirement Redesigned, I now use an even better one. Matt Greenwald, one of the book's contributors, taught me about Pascal's Wager, which he first encountered in Peter Bernstein's Against the Gods: The Remarkable Story of Risk.

PASCAL'S WAGER

Blaise Pascal, a 16th-century French mathematician, wrote that it's a better bet to live as if God exists than as if there is no God, because the consequences of not believing are more severe than the consequences of believing. If you're wrong, you lose nothing; if you're right you win everything. I share this wager with my clients: "Suppose you knew with absolute certainty that there was only a 30% chance that God existed. How would you live your life?"

You could take the chance that there is no God and live a wild and wanton life, completely ignoring all moral constraints. If you're right and there is no God, you'll have indulged all your desires and face no consequences. But if you discover after death that God does exist, you could be in big trouble—fire and brimstone for eternity.

Now suppose you behave as if God does exist and live a moral, ethical life. If there turns out to be no God, there may be no heavenly reward when you die; however, you'll still have lived a pretty pleasant life. And if God does exist, you'll have won the eternal lottery—a wonderful afterlife.

The point of Pascal's Wager is that the consequences of a choice may be far more important than the likelihood of its outcome. What does this have to do with retirement planning? Everything. When my CD client equated his investment horizon to the life of a green banana, his sole concern was market volatility. If he had had a 100% guarantee that he'd only need income for a few more years, market volatility would indeed have been the only risk he faced. However, with today's expanding life expectancies, the reality is that a client might live to age ninety or beyond. The consequences of not having properly prepared his or her finances could be depending on children or even applying for welfare.

"Long term to me is a green banana," may be a humorous response, but investing accordingly is dangerous. For all of us, retirement planning is a Pascal's Wager—a philosophy that offers an effective way to help clients understand why they need to think long term, for the rest of their lives.

Harold Evensky, CFP, is chairman of Evensky & Katz. He has served as chair of the TIAA-CREF Institute advisory board, and the CFP Board and International Council.

Networking Know-How..6 Tips for Making the Most of Social Engagements - By Lori Tripoli

While socializing there are endless opportunities for financial advisors to build their business while having a good time.Sure, you could just sit back, eat a couple of burgers, and enjoy the occasion. Or you could try to make the most out of networking opportunities—in a subtle way, of course—while enjoying an event at your club.

“If you are a financial advisor, you have to be networking all the time,” observes Bert Salazar, Irvine, Calif.-based executive vice president for the

Orange

County

branch of AXA Advisors.

Networking at a pool party, a polo match, a wedding, or the like does require some special skills. “Don’t go to these events with the mindset that you’re going to sell, sell, sell,” says business etiquette expert Mary Crane, former assistant chef at the White House during the Clinton years and founder of Mary Crane & Associates, based in Denver. Instead, go with the intent of building a relationship, she suggests.

“It does take some finesse to use any kind of social event as a networking event,” adds Anne Baber, Kansas City, Kan.-based co-author of Make Your Contacts Count: Networking Know-How for Business and Career Success. AdvisorMax talked to financial advisors, business etiquette coaches, and other experts for their take on making the most of any summer social occasion.

Wear Something Snazzy

“I always try to wear something that’s a conversation starter, especially at a summertime event,” says Paula Harris, co-founder of WH Cornerstone Investments in Duxbury, Mass. “Wear something like a Hawaiian shirt, or an interesting piece of jewelry, fun sunglasses—something that gets people to talk to you,” suggests Harris, who is also the founder of the South Shore of Boston chapter of the Downtown Women’s Club, which brings women together to create networks. So don't be afraid to wear something unique.

Initiate Conversations...Even If You’re Shy

“Go with the attitude that ‘these are friends that I haven’t met yet,’” Salazar suggests. A smile can break the ice.

Before arriving at an event, come up with some chatty openers. “Prepare some insightful questions before you ever get there, so you’re not stumped,” says Joanne Black, San Francisco-based author of No More Cold Calling™: The Breakthrough System That Will Leave Your Competition in the Dust.

Ask someone whether they’re planning to take a vacation this summer. “The trick is for people to always have five high-yield questions” that get other people to talk about themselves, their personal interests, and what they do, Crane says. It can be as simple as asking someone what their connection is to the host of the event.

“Begin with questions about what the other person does, where they’re from, what they enjoy doing,” suggests Jeanne Hurlbert, owner and manager of Baton Rouge, La.-based Optinet Resources, LLC, which helps entrepreneurs build social networks. “Beginning in that way not only makes the conversation more natural, but also ensures that you don’t look ‘predatory’ in trying to find new clients,” she explains.

“People enjoy talking about themselves,” Hurlbert continues. “If you remain interested in what they say, you’ll not only flatter them, but you’ll also probably find some ‘common ground’ on which to build,” she says. Last summer, Hurlbert was vacationing on Cayman Brac in the

Caribbean

when she started chatting with another guest at her resort. “After some time, I discovered that the woman to whom I was talking was a consultant in a related field; we exchanged information and discussed collaboration,” Hurlbert reports. “But the first topics weren’t business—we talked about the resort, iPods, music, and other topics,” she recalls.

Focus on the Conversation—Not the Food

Continue to make small talk once you’ve been seated. If you’re at a big circular table of 8 or 10, ask the person across from you a question, Salazar suggests. “You’ll be talking across the table, but everyone is listening,” Salazar says. That table is now yours.

So you can command it well, focus on the conversation and not on the food. “Take the shrimp skewer out of your mouth because you are not there to eat!” says Diane Gottsman, owner of The Protocol School of Texas in

San Antonio

. “At any event where there is potential to meet a new client, don’t spend most of your time at the buffet table, grazing,” she suggests. Avoid being famished at these functions by eating a small meal beforehand, Gottsman says.


Learn to Tell a Story

Remember—now is not the time for a pushy salesman routine. Be scintillating. “My purpose in being there is not to ask people for their business, but to build relationships, to learn about people,” says Black. When someone then turns to you and asks what you do, don’t just say, “oh, I’m a financial advisor.” That could leave them flat. Instead, tell a brief story about your work, Black suggests. Get them interested in you. Engage in conversation.

Of course, you don’t want to be snagged by someone who’s looking for free stock market tips. “A social event is not the time to go into a corner and have a detailed conversation about business,” Black says. If someone does want that level of information, set up a time for a separate conversation, she suggests.


Don’t Be a Spoil Sport

A social occasion is your time to shine. Don’t call all the line balls in tennis in your favor. “What really makes golf work, or a clambake, or whatever the social occasion, is something I call the all-or-nothing rule,” Baber says. “If you do something well, people will assume you do everything well. If you do something poorly, people will assume you do everything poorly,” she explains.

If you are playing golf, don’t get mad at the golf ball and throw your clubs down or put your ball a little closer out of the rough when you pick it up, Baber counsels. “People are consciously looking for two things if they want to pursue a relationship with you: your character and your competence,” she says. Think about the message your actions convey.


Keep Practicing

Even if you bomb one event, don’t give up! Learn your weak points and be better prepared when another opportunity presents itself. “Networking is a learned skill even if you’ve never done any networking in your life,” Salazar says. Practice makes perfect.

Can We Talk? By John J Bowen Jr - Must Read, especially in the current market conditions..

The volatility in the financial markets this year has been dizzying, with the indices repeatedly soaring and diving by hundreds of points. These huge swings have certainly created a great deal of anxiety for many advisors and clients. Yet they also present an excellent way for you to improve your business.

It's simple: Call your clients. Reaching out to clients and communicating with them during periods of intense market volatility is an absolutely essential-and effective-way to differentiate yourself from other advisors and win the loyalty of your clients. As you'll see, it can have a huge impact on your bottom line.

Staying Client-Centric

If all the recent volatility has become nerve-wracking to you, imagine how your clients feel. If they don't receive the benefit of your knowledge, experience and perspective, it could become even harder for them to hold on during periods of intense volatility. For this reason, it has never been more important for you to be in close communication with your clients. They are depending on your guidance and leadership to see them through the turbulence.

Volatility in the market also presents you with an opportunity to expand your business dramatically-if you can help your clients meet the challenges. The difference between advisors who excel during difficult times and those who suffer a decline in their businesses lies in how well they lead and communicate with their clients. Client-centric advisors will bring in new assets simply by doing the right thing by their clients. In fact, client-centric advisors may well remember these times as some of the best in their careers.

Client-centric advisors focus on developing their client relationships and do not let investments take priority over relationships (which is not to say that they are unconcerned with investments; in fact, client-centric advisors often have substantial skills in the investment process). They meet regularly with clients and respond to their inquiries immediately.

According to our research, client-centric advisors are a relatively rare breed, making up only 13.8% of all advisors. The remaining 86.2% are investment-centric. Investment-centric advisors tend to be more technically oriented; they focus on developing investment strategies, structuring portfolios, analyzing risk and ensuring that they have the best investment program for clients.

Historically, the differences between the two groups have translated into different outcomes for advisors. It's often helpful to review past events to identify trends you can leverage today. One study done during the spring of 2001-when the market was in the depths of the tech-stock meltdown-examined how each type of advisor fared over the previous six months in four areas: new clients, average assets from each of those new clients, number of existing clients providing additional assets and the average amount of additional assets.

Client-centric advisors experienced substantially better outcomes in every area. In all, client-centric advisors garnered nearly $2.3 million in additional assets during late 2000 and early 2001. In sharp contrast, their investment-centric peers brought in just $76,700 in additional assets. The reward for advisors who focused their attention on their clients during a rough period in the market? Almost 30 times more new assets.

The message is clear: When advisors are there for clients in meaningful ways, the clients take notice. The result is more business from those clients and a huge competitive edge.

This conclusion is reinforced when we examine the difference between true wealth managers using a consultative process and investment generalists who take the traditional transactional approach with clients. Wealth managers contact each of their top 20 clients an average of 15.4 times a year, according to the latest CEG Worldwide research. Meanwhile, investment generalists contact their best clients just 5.6 times a year on average. That's one big reason why the typical wealth manager earns $881,000 a year-while the average investment generalist earns only $279,000 annually.

Make the Call

Clearly the best response to difficult times is to increase client contact. The next step is to think through exactly how to make those reassuring calls.

First, plan to call the top 20% of your clients and then move on down the list. For your largest clients, or those who will need the most reassurance, a face-to-face visit may make sense. Also, don't speak only with your most active clients. Those with long-term, buy-and-hold strategies in place will be just as worried as more active clients, and they need to hear from you as well.

Second, create some talking points. Get a good read on what's happening by touching base with your institutional partners or economists, analysts or money managers. Then reinforce the validity of a long-term perspective and demonstrate the historical recovery of the markets after periods of unrest. While you cannot anticipate the direction of the markets in the short run, you can provide your clients with a valuable historical perspective. It's helpful for them to know that the usual market movement following past events has been an initial drop followed by a fairly rapid recovery.

For example, the average length of up markets since 1947 has been 45 months, compared with just 11 months for down markets. And the average up market saw a total return in the S&P 500 of 138%, versus an average loss of just 22% in the down months. This type of information should help reinforce your clients' confidence in the current U.S financial system and capital markets.

In many cases, your clients will simply want reassurance that things will be all right. Remind them that they are in it for the long haul, and even if their accounts have lost value, they are doing fine and are well on the way to meeting their long-term goals. Advise them to continue the disciplined investment strategy they have in place and only consider altering it if they've experienced changes in their personal financial situations. Most clients won't ask a lot of questions, and most of these phone calls will be relatively short. The key point here is to reassure your clients emotionally.

By the end of the call or visit, make sure to move off the topic of the recent market environment. Ask your clients if their families are in good health, how their kids are doing in school, whether they have followed up on getting their wills in order and so on. Clients want you to care about more than their bottom lines. They want to feel that they are building a strong interpersonal relationship with you, especially when the markets aren't behaving well.

For example, in CEG's recent research, advisors contact "loyal" clients an average of 24.1 times a year-on non-investment matters. In contrast, advisors contact "moderately satisfied" clients about non-investment matters an average of just 0.6 times. By being reassuring and expressing a genuine interest in your clients' lives, you'll win their loyalty-and more of their business.

Finally, make these contacts a priority and set aside the necessary time. If it comes down to blocking out a few hours a day to get these calls in, then that's what you need to do. Also make sure that you and your staff are prepared to answer calls in real time in case there is a calamitous market drop or news event.

The upshot: Nothing is more important than the relationships you maintain with your clients. So when you call your clients during a volatile period-not if you call them, but when-the key idea to get across is not your concern about how their accounts are doing, but about how they, as people, are doing. By checking in and touching on these important issues, you will put yourself in a position to gather more assets, reassure clients and become the trusted advisor they need.

John J. Bowen Jr. is founder and CEO of CEG Worldwide, a global training, research and consulting firm dedicated to helping advisors and the institutions that serve them become more successful.

Open Up! By Dan Veto ..Guys, Interesting Read..

Why is it that sometimes, when we go to see a professional about a particular issue, we don't always volunteer the information until well into the encounter, and sometimes not until the very end. Until that point, there is usually a mix of pleasant chit-chat and discussion of routine matters.

In financial services, it happens all the time. A new prospect, for instance, seems to be listening contentedly as you describe your standard approach to client service. Then, toward the end of the appointment, the prospect interrupts you and raises the issue that is really on his or her mind.

When this dynamic occurs, there are usually two powerful emotional forces at work. One has to do with clients as they ask themselves, "Do I really want to raise this topic now? Am I willing to face this issue?"

The other emotional force comes from you. Ultimately, the prospect is grappling internally with whether or not to trust you. Since time is arguably our most precious commodity, it is in the interest of prospects and advisors to help the prospect come to a positive conclusion sooner rather than later.

Your Bedside Manner

One of the first steps on the path to achieving trust is establishing professional respect. This is earned from various, sometimes not-so-obvious, sources. Of course, you need to be able to communicate your technical expertise. To be fully effective, however, you also must be skilled at demonstrating your professional relationship skills.

In the medical profession, we speak highly of doctors who have good bedside manner. In the financial industry, some professionals frequently spend plenty of time describing their ability to handle the technical aspects of complex portfolio or risk-mitigation strategies but miss the opportunity to develop an enduring professional relationship.

As a generational cohort, boomers in particular are suspicious of a product- or technical-led sales approach and instead place a high value on your ability to understand and appreciate them and their "uniqueness." If you don't demonstrate an ability to respect their specific situation, goals and preferences, you may find yourself achieving less success than you may have had with clients of previous generations.

Your Relationship Style

How do you demonstrate to your new prospects the financial services equivalent of good bedside manner? One way is to recognize that clients have differences and preferences in how they would like you to conduct your professional interactions.

During my tenure with Age Wave, a consultancy that specializes in the business, social and cultural implications of aging, we conducted the Ameriprise New Retirement Mindscape Study, which revealed five principal advisory relationship styles. If you can understand these styles and master the ability to adapt your interactions accordingly, you will go far toward distinguishing your relationship capabilities with your clients and prospects. The five principal advisory relationship styles are:

Guide. Clients looking for a guide want you to help them explore their options. They expect you to share recommendations based on experiences you have had helping other clients successfully navigate similar financial issues. Be prepared to revisit their plan and options as their situation evolves.

Motivator. Clients seeking a motivator want you to lay out a very specific plan for them and assure them that they can successfully execute it. The plan you build for these clients should include many short-term milestones. These clients need and will respond well to encouragement. Be sure to celebrate successes along the way.

Teacher. Clients who want a teacher want you to educate them. These individuals value their independence and don't want to be told what to do. Rather, you can give them enough information to empower them to reach their own decisions. Don't rush these clients. They will likely need to spend some time digesting the information you share with them.

Partner. Clients looking for a partner may feel that they already know a good deal about effective financial strategies. Most of these clients expect you to bring new ideas and approaches, while others are simply seeking validation. In addition, these individuals want to be sure that your mutual outcomes are highly aligned. If you suggest to a partner the need to buy long-term-care insurance, for example, you had better own it yourself or have sold it to your mother.

Friend. These clients want you to be honest with them, but in a gentle, empathetic way. They may need to review the basics and want to be encouraged, but not feel pushed into a rigid program. They appreciate your taking an active interest in them beyond strict professional boundaries.

Style Mismatch

The potential consequences of using the incorrect approach with a particular client or prospect are staggering. If you act like a teacher toward someone who is looking for a motivator, he or she may think you're wasting time on overly detailed information about too many approaches to consider. By leaving the ball in the client's court, he or she may feel like you aren't doing your job-after all, the client came to you for an answer, not a lecture.

Although a flexible communication style may seem like an obvious prerequisite to building and sustaining strong client relationships, most financial professionals I've worked with admit having a single default style. Usually, this is their own professional style preference. They assume that everyone is "just like them" and use this default style with all their clients and prospects.

I am frequently asked what the clues are to determining someone's preferred style of professional interaction. Advisors wonder if the client's preferred style needs to be part of a clandestine agenda. I suggest taking the opposite approach. I coach financial professionals to discuss this topic directly with their clients. Tell them that not only are you a master of the analytic rigors of being a financial professional, but you are keenly aware of the need to work with people in a way that makes them comfortable with the process. Briefly share with them the five styles and ask them which style they find most appealing. Usually a short conversation will ensue and, in most cases, they will share details about their preferences, often revealing important hot buttons. Also, you will have successfully communicated your ability to set the right tone and work with them in the manner they prefer. Try it at your next prospect meeting-you may be surprised by what you learn!

Dan Veto is an advisor to demographic consultancy AgeWave and president of Retirement Spark!, a venture focused on delivering insights to institutions, financial professionals and their clients.

Study Shows Life Planning Wins Business - By Colleen O'Connor-Grant ..Interesting Read..

I found this interesting..Thought I'll share this with all of you..

The "life planning" approach to servicing clients has been bandied about for a decade or so, but many practitioners remain unsure about the method. A new study shows this paradigm to financial planning helps planners win—and keep—business.

Certified financial planners who took a life planning approach to business had clients who were 2.3 times more likely to stay with their current planner and over 3.2 times more likely to recommend their financial planner to others.

The study "Research: Communication Issues in Life Planning," was sponsored by the Financial Planning Association and authored by Carol Anderson, president of Money Quotient, and Deanna L. Sharpe, associate professor in the Personal Financial Planning Department at the University of Missouri-Columbia.

In all, the study concluded that a higher level of client trust and commitment existed for planners who strove for "qualitative" communication. This lent strong support, said the study's authors, "for including a holistic, client-centered, values-based approach to communicating with clients."

And taking a life-planning approach to client relationships may make the job a bit easier.

Clients with planners who utilized this model were 2.7 times more likely to share personal goals and needs and were much more likely to be completely open to disclosing financial information. These clients were also nearly five times more likely to fully cooperate with their planners by following through on recommendations.

The study consisted of 554 certified financial planners and their client base. Thirty seven percent of the planners were aged 46-55 and 33% had been working for 15 or more years as a financial planner. An overwhelming majority, 81%, worked at an RIA firm and 49% were, themselves, an RIA.

The findings don't appear to be swayed by how the client was paying the planner.

A mix of fee structures was found in the group of planners who participated. Nearly 54% based their fees on a percentage of assets under management and 44.6% based compensation on a fee and a commission. About 33% charged an hourly fee and 30.9% charged a per project fee. Just about 25% charged a retainer fee.

"The results also indicated that the inclusion of life planning subject matter in financial planning conversations is highly valued," the authors concluded.

Emotional Rescue - By J. Gibson Watson III July 1, 2008

Most advisors start a new client relationship with a frank discussion of investment goals and risk tolerances in order to create a long-term asset-allocation plan. But despite all of the big-picture planning, advisors are continually faced with clients who panic when markets get rough and decide to seek out safe havens or look to shift their portfolios away from poorly performing asset classes and toward "hot" asset classes.

Indeed, the most common failure of the average investor is to let emotion, rather than an objective process, guide the decision-making process. Often the advisor's toughest task is to take on the role of behavioral coach and to save clients from their natural emotions of fear and greed. If left to their own devices, individual investors invariably buy into the markets at the top and sell at the bottom. A study compiled using Investment Company Institute data in 2007 showed that asset flows into equity mutual funds peaked in 2001, right before the worst equity market in decades in 2002. Chasing performance rarely works and the other side of the coin has been apparent during the last year or so. Recently, many investors have let fear stall their investment decisions, as credit markets have tightened and news stories of recession and inflation are perpetually being circulated.

The annual Dalbar study of investor behavior shows that due to these and other behavioral-finance issues, the actual returns earned by investors in the markets have been significantly lower than the returns of the markets. The attempt to time the market as a result of either fear or greed is a costly game for the average investor. It is increasingly the role of the advisor to help investors avoid obsessing over short-term performance and to provide the discipline needed to overcome the urge to chase returns.

If advisors are successful in imposing the discipline necessary for their clients to focus on long-term asset allocation and goals, periods of volatility can then be used to their benefit, rather than their detriment. Periods of economic uncertainty and market volatility offer the chance to rebalance portfolios, reassess risk tolerances (in light of long-term goals, not current market fluctuations) or to expand the set of managers available for their allocation. Volatility will often force one or more asset classes out of balance relative to the target allocation. This presents the opportunity to add assets to the beaten down asset class either through rebalancing or through the addition of assets to the portfolio. But, many investors have emotional issues with this process, as they may perceive rebalancing as taking money away from the "winners" and giving it to the "losers," rather than viewing it as selling the expensive asset class and buying the cheap one. If done correctly, this type of rebalancing can be done in a tax-efficient manner as well.

While reacting emotionally to losses is ill-advised, market volatility can correctly force investors to review their true long-term tolerance for risk. A precipitous drop of 10% to 15% over a short time period can often make clear in investors' minds exactly how much risk they can endure. Advisors can best serve their clients by ensuring that what's taking place is a true shift in the client's risk tolerance and not just a reaction to recent turmoil. Otherwise, it's likely that investors will once again become more "risk-tolerant" in the midst of the next bull market.

Manager Action and Implementation

Despite the natural temptation to seek out safe havens during periods of high market volatility, advisors need to help their clients remain focused on their long-term objectives, while taking advantage of market dislocations in order to make progress toward those long-term goals. The financial sector (as represented by companies within the S&P 500) shed approximately 21% of its value in 2007 and has fallen an additional 5.5% in 2008. As mentioned previously, one of the biggest sources of investors' underperformance is their own emotional paralysis. Inaction can be costly in terms of its impact on long-term returns. Advisors can help investors to overcome their resistance by focusing on the long-term, imposing a systematic rebalancing program and rebalancing intelligently through the selection of managers. Managers of a high caliber not only reinforce a commitment to long-term investing, but also help to achieve rebalancing while simultaneously adding expertise in a troubled sector. In years to come, as the financial sector rebounds from its current malaise, this strategy could prove rewarding.


J. Gibson Watson III, CIMA, is president and chief executive officer of Denver-based Prima Capital, a provider of independent research, due diligence and advice on the U.S. separate account managers.

High-Net-Worth Personality Types -Lucky Nines By John J. Bowen Jr.

Designing your business to serve affluent clients is one of the surest ways to be successful. But as you are probably well aware, that's much easier said than done. To effectively cultivate this market, you must first understand the unique needs of the various types of affluent investors you're likely to encounter. Armed with knowledge of these various affluent personalities, you can target your efforts to attract the right wealthy investors for your financial planning business—that is, the ones to whom you can bring exceptional value and charge a premium price for doing so.

NINE LIVES

Despite sharing many traits, wealthy individuals are not all the same. Research tells us that there are nine distinct high-net-worth personalities, each with its own unique characteristics. To provide great service, you need to know the specific characteristics of the particular person sitting across the table from you—because a one-size-fits-all attitude won't cut it with the affluent.

Here's an overview of the nine high-net-worth personalities.

The family steward. The most common affluent personality type, family stewards' chief financial and investment concern is taking good care of their loved ones. Their goals, therefore, usually include issues like paying for children's tuition or passing on wealth to heirs. Family stewards want advisors who are prudent and careful: They need to feel that you will protect them and their goal of taking care of their families. This group is open to estate and financial planning and asset allocation services, because they readily see how smart planning can help enhance their families' position.

The phobic. Phobics don't like investing, don't understand it and don't want to learn. Instead, they prefer to delegate investment duties to an advisor they trust. You must demonstrate that you are a reliable expert to win the business of phobics. Although phobics can be emotional about their money, their lack of sophistication means that of all of the personalities, they are the least sensitive to investment performance.

The independent. This type of affluent individual wants the freedom that financial security ensures—freedom to do what they want and to pursue their interests. They want to work with advisors who can help them attain—and maintain—financial freedom. Therefore, they are especially receptive to asset allocation planning and retirement distribution planning.

The anonymous. These are extremely private investors who don't want to disclose their financial information to anyone including financial advisors. That makes the anonymous a tough group to serve, initially. The good news: Once an advisor earns their trust, they tend to be extremely loyal. To get there, you need to instill absolute confidence that you will protect their privacy and keep all their matters confidential.

The mogul. Moguls seek power, influence and control in all aspects of their lives. They tend to view investing as yet another arena in which to show their importance. Working effectively with moguls can be tricky: You need to acknowledge their power, yet also be powerful yourself and maintain control over the relationship and the process. Moguls typically are most open to asset allocation services, which allow them to have control over the overall course of their investments without having to deal with the day-to-day activities.

The VIP. VIPs value prestige. They usually want their investments to help them buy possessions and respect. They are less control driven than moguls—they'll look to you as the investment expert and often are not sophisticated about investing. VIPs prefer to work with firms that are prestigious and well known among their peers. You should emphasize your status and reputation if you want to attract VIPs.

The accumulator. These individuals save more than they spend, live below their means and don't show outward signs of affluence. Their goal is capital appreciation. The more money they have, the more comfortable they feel. Not surprisingly, they are driven mainly by performance, and they expect their advisors to focus on making their money grow.

The gambler. To gamblers, investing is all about the excitement and drama—and performance results. They are most likely to believe that they can consistently beat the market and are willing to take big risks in their attempts to do so. Gamblers love to talk about investing; they want to work with advisors who feel the same way and share an emotional connection to investing.

The innovator. Innovators like new investment products, strategies, services and analytical methods. Often, innovators come from technical backgrounds like mathematics or engineering. They want their advisors to use the most advanced resources available to make decisions. To get their business, you need to show how technically savvy and up to speed you are in your approach to investing.

DIFFERENT STROKES

The differences in these various personalities are especially evident when we look at two main areas of investors' lives: financial concerns and preferred level of contact with their advisors. Issues that are of great importance to some personalities are barely on the radar screens of others, as illustrated by a CEG study of 1,417 affluent individuals who were surveyed in 2006. For example:

Taking care of heirs. Family stewards, as expected, are overwhelmingly concerned about ensuring that heirs are well provided for. In sharp contrast, just one out of seven accumulators (14%) shares this concern.

Paying for education. Family stewards, as would be expected, are generally concerned about paying for their children's or grandchildren's education, with 75.8% of them pinpointing this as a priority. But relatively few gamblers (22.5%); moguls (22.4%); innovators (18.6%); independents (16.4%); and accumulators (14%) said this was a major concern.

Being sued. This is a chief concern for accumulators (89.5%); VIPs (87.2%); and moguls (83.2%). In contrast, it's of fairly minor concern to the phobic and the independent personalities.

Philanthropy. This issue means little to high-net-worth personalities overall (27.8%). But it is quite important to two subsets: the moguls (76.6%) and the VIPs (75.5%), both of whom see charitable giving as a valuable way to show their status and importance.

Frequency and type of contact with advisors. Each high-net-worth personality type prefers a particular frequency and type of contact with advisors. That means you must tailor your contact methods to meet a particular personality's preferences.

According to the CEG study, the frequency ranges from a low of 12 contacts per year for anonymous types, up to 48 for gamblers. The other personalities cluster near the average, which is 28 contacts per year. In this case, contact means any personalized communication between the advisor and the client. Examples include phone calls, emails, letters or face-to-face meetings any encounter in which the advisor personalizes his or her message to suit the client. This contact excludes any type of mass communication even if it's customized such as brokerage statements or form letters.

COLOR BY NUMBER

As you can see, the affluent cannot be painted with a single broad brush. Moreover, it's important to recognize that you are probably not ideally suited to deal with each and every personality type that exists. Instead, it's best to focus your efforts on building a business that caters to one or two affluent personality types that you can serve well. You will feel more comfortable—and therefore, so will your clients.

The message is clear: Don't take a simplistic attitude toward getting to know the affluent marketplace. By understanding the nuances of this enormous group of investors, you'll put yourself in the best possible position to capture exactly the right kind of business that will ensure your success for decades to come.

John J. Bowen Jr. is founder and CEO of CEG Worldwide, a global training, research and consulting firm dedicated to helping financial advisors and the institutions that serve them become more successful.

It's all about your risk appetite

For a lot of investors, investing can be a pretty simple activity. It involves keeping oneself updated through numerous magazines, newspapers and news channels about the latest, most touted investment opportunities. The next step is obvious - invest in these opportunities to the hilt in the hope of making some easy money. And if everything goes right, investors would have made a neat packet all because they were quick to seize upon these great investment opportunities.

We are sure the 'investment process' we have outlined will strike a chord with many an investor. We are not saying this is how all investors are investing, but it is a disturbingly familiar sight. As more and more newspapers, news channels, magazines, personal finance initiatives get launched, media hype around these so-called investment opportunities builds up even more rapidly, which in turn feeds investor interest. This escalates to a point where investors believe that since everyone is investing in the 'hot' investment opportunity, prudence demands that they adopt the same course of action, because not doing so will entail a great opportunity loss.

We could write an entire note on how this whole rigmarole is a prefect recipe for disaster and that investors should take the media hype with a bagful of salt. Over here we wish to highlight something critical that is overlooked by all three parties - the service provider that launches the investment opportunity, media that cannot seem to hype enough about it and the investor who is led to believe that it's the best thing to happen to him in a long time. And that small detail that is overlooked is the risk of investing in the 'hot opportunity'.

But how does the investor go about assessing his risk appetite? If an investor can afford to lose significant amount of money on his principal before it can generate a return, then his risk appetite is high. Put bluntly, risk is the amount of money that the investor can afford to lose, in the interim, in his quest for a certain return on his investment. If an investor can afford to lose only a moderate amount of money, then his risk appetite is on the lower side.

Our grouse with the media hype over a particular investment opportunity and investor enthusiasm for the same, is that rarely, if ever, is the risk of investing in the opportunity highlighted. It's always about how rewarding the opportunity can prove to be and never about how much the investor can stand to lose (i.e. risk) if the opportunity does not quite blossom like it's meant to. In other words, the investor gets half-baked, incomplete information. As a matter of fact, in the absence of information related to risk, information isn't just incomplete, it's downright misleading.

In our view, any discussion on an investment avenue is incomplete unless it underlines the risk along with the (probable) return on it. To that end, investors must pay as much attention to the risk of investing in an asset as the return on it. While it is difficult to quantify your appetite for risk, there are ways through which you can get a fairly good idea about how much risk you can take on in your quest for a return. We have highlighted some of the key points to keep in mind while evaluating your own risk appetite:

1) Risk can be loosely defined as the money you can afford to lose in the interim period until you achieve the return you have in mind. If you can afford to see significant erosion in your investments (say upto 50% of investments) in order to achieve the target return then that makes you a high risk investor. If you are the type, who can tolerate a dip in your investments only upto a certain level (say upto 10%), then you are low risk investor. While the fall in the investment value (10% and 50%) is only indicative, we are sure you get the drift.

2) Your choice of investments must flow from your risk. If you can take a 50% drop in your investments then high risk investments like technology stocks/funds or aggressively managed funds like mid cap funds could suit your appetite. If you cannot tolerate too much volatility, then you must opt for lower risk investments like balanced funds (which invest about 65% of assets in equities) for instance. The idea is to make your risk appetite and not the investment opportunity, as the reference point. Most investment disasters are fashioned when investors use the investment as a reference point and then try to mould their risk appetite accordingly.

  3) The risk associated with an investment has a lot to do with the investment timing. One reason why a lot of investors burn their fingers (and portfolios) with the hot investment opportunities is not because the opportunity was a dud or because the media reported it all wrong; it's mainly because by the time they invested in the opportunity, it had already run its course and had peaked. In other words, it was a bubble waiting to burst. And since all good things must come to an end, the investment opportunity soon embarks on its (sharp) decline hurting investors who came in towards the end, the most. These investors either lose a lot of money or make so little of it that it's not worth the effort (and hype).

So the next time you hear/read of the next big opportunity in the media, ask yourself a simple question - is it possible that since this hot opportunity is yesterday's news it has already run up more than it should and if I enter in it today I may either lose money or make very little money? A lot of investors, who if they had asked themselves this question, would not have been hurt in the hot investment opportunities of yore like technology/media stocks, mid caps, real estate and gold to cite a few.

4) Another strange aspect of risk is that it decreases with time. Certain market-linked investments like equities appear very risky prima facie. While this risk is clear and present, it's important to recognise that this risk is amplified over the short-term (less than 3 years). Over the long-term, the risk of investing in equities reduces. As a prominent fund manager observed equities are the riskiest asset over the short-term and the safest asset over the long-term. That is why where equities are concerned it pays to have a really long-term investment horizon.

5) Contrary to popular expert opinion, risk appetite for equities is not '100 minus the investor's age'. So if an investor is 30 years old, it does not necessarily imply that he must have 70% of assets in equities (according to the 'formula' it does). Apart from the fact that this is skewed asset allocation, the investor may just not have the risk appetite for a 70% equity allocation. He could be one of those investors who cannot tolerate more than a 10% drop in his investments (refer Point 1), in which case a 70% equity investment is a clear invitation to disaster. On the same lines a 60-Yr old investor may have considerable appetite for equities (at Personalfn we have investors in this category) and may want to invest more than the 40% that the formula permits him.

6) The above point does not mean that there is absolutely no link between risk appetite and age. While it may not be true in every case, investor appetite for risk does decline with an increase in age. This is because a) as investors age, they really can't tolerate sharp dips in their investments; it upsets them and makes them nervous. And b) at an advanced age, investors are usually most concerned about planning for retirement. Since equities can be volatile over the short-term it is advisable to shift a majority of assets from equity to debt, as the investor approaches retirement age.

The Principles of Passionate Financial Planning by Thomas T. Brown

Thomas T. Brown is the founder of Business Jungle Enterprises, a consulting firm serving financial planning professionals. He is the former owner of a successful financial planning firm in

California

and the author of Zebras Don't Wear Pinstripes-27 Indispensable Laws of Survival and Prosperity in the Business Jungle. He welcomes your comments about this article at success@business-jungle.com.

Perseverance is the ability to continually move toward the achievement of a goal or objective-it's one of the most important attributes of successful people. If perseverance is one of the most important attributes of success, then you may ask, "What's the most important attribute of perseverance?"

Passion. Passion is the driver of perseverance. Passion is the state of mind that creates the incredible will to persevere. Think of it this way: perseverance is like a rocket ship that can propel you to the top of the financial planning profession, and passion is the rocket fuel. Your missile will never leave the launch pad and reach the stars without the proper fuel.

Finding and maintaining passion is one of the fundamental building blocks of success. It also may be your biggest challenge as a busy financial planning professional. Here are four principles you can use to find and maintain your passion for financial planning.

Passion Principle #1: Discover Your Noble Purpose

If passion is the source of perseverance, then what is the source of passion? Scott Kays, CFP®, of Kays Financial Advisory Corporation in

Atlanta

,

Georgia

, says that the source of passion is found in the answer to this question: "What is the purpose I am here to achieve?"

To uncover the answer to that question, Kays advises planners to envision themselves at the end of their career and ask, "What was the one thing I was supposed to achieve during my career and how well did I achieve it?" The answer can become the purpose that you focus on today and work to achieve for the rest of your career.

That "one thing" you should achieve during your career as a planner can never be defined by anyone other than you. That one thing that you should aspire to achieve is called your Noble Purpose.

Louis Barajas, CFP®, is the founder of Louis Barajas & Associates, serving the Latino community in southern

California

. Barajas has discovered his Noble Purpose. "I want to be the catalyst that brings financial enlightenment to this Latino community. I believe that if I teach people about planning their finances, I will empower them to create the resources that will allow them to achieve their fullest potential."

When Barajas becomes discouraged or frustrated trying to build his practice in this highly nontraditional market, he remembers his Noble Purpose and it inspires him to persevere. Here's a 15-minute, five-step exercise you can take to help you discover your own Noble Purpose. All you need for this discovery exercise is a yellow pad, a pen or pencil, and some privacy for deep reflection.

Step 1. Make a list of some of the mundane tasks you perform each day-answering e-mails, making phone calls, writing a plan, reviewing an investment statement, and so on. Allow yourself two minutes to make this list.

Step 2. Remember that by virtue of completing these tasks you can solve your clients' most challenging financial planning issues. Think about how your clients feel when you have presented them with a financial plan that will allow them to achieve their financial dreams. Make a list of what you think those feeling are-gratitude, relief, excitement, whatever. Spend two minutes on this list.

Step 3. Now make a list of your own feelings after you present that financial plan and experience how it makes your clients feel. Do you feel proud, satisfied, professional, or something else? Take another two minutes to make a list of your feelings.

Step 4. Keeping in mind the emotional responses you listed in steps 2 and 3, write down the essence that underlies everything you do in your practice. This is your Noble Purpose. You should be able to state it in three or four sentences. For Louis Barajas, it was to be a catalyst that brings financial enlightenment. What is your Noble Purpose? Take two minutes to write it down.

Step 5. The final step is to share this Noble Purpose with everyone who is important in your professional life: your co-workers, spouse, clients, mentor, referral sources, and so on.

When you've completed this exercise, you will have defined your Noble Purpose. It will be expressed in a short statement that declares who you are and what you stand for. Post it where you can refer to it easily and it will serve as a motivational fuse. When you feel your passion dwindling and your perseverance waning, reflect on your Noble Purpose. It will light the fuse the re-ignites the fuel of your passion and propels your rocket ship forward.

Passion Principle #2: Directing Your Passion

When a rocket ship burns its fuel, it creates a tremendous amount of energy called thrust. Without a navigation system, undirected thrust can just as easily drive a rocket into the ground as it could send the rocket to the stars. Financial planners who have discovered their Noble Purpose also have vast amounts of energy, only it's not called thrust-it's called motivation and inspiration. To reach your fullest potential as a financial planner, you must learn to direct your thrust.

Scott Kays says that undirected passion cannot create progress, and eventually becomes a destructive force as your lack of progress causes you to become frustrated, then angry, and finally de-motivated. He says that passion must be directed by establishing clear, specific goals. These goals give you something on which you can apply your passionate energy and measure your progress.

Barajas says that he once heard someone say, "The devil doesn't make you bad, he makes you busy." For him, this quote has profound meaning. He says that when you're too busy you get distracted. When you get too distracted you forget to focus on who you are, what you love, and what you're good at doing. When you lose that vital focus your navigation system has failed and you also lose your passion.

There's a difference between working on your business and working in your business. When you work in your business, the devil wins: you lose sight of the big picture, lose focus, and become distracted. When you work on your business, you win because you've planned and set goals to direct your thrust.

You know about the importance of goal setting. Yet few people who tout the significance of goal setting appreciate the bottom-line, fundamental reason why. Now you know: goal setting is important because it's the navigation system that directs your thrust and paints the target toward which you aim your rocket.

To program your navigation system, plan every aspect of your financial planning practice. Set written goals that have specific deadlines and devise a system that enforces accountability and creates a sense of urgency. Post your goals and deadlines next to your Noble Purpose.

Passion Principle #3: Surround Yourself with 'Protons'

Everyone you come in contact with in your financial planning practice-clients, co-workers, colleagues, and others-either enlarge your passion or diminish it. They're like sub-atomic particles: protons have positive energy, electrons have negative, and neutrons are neutral.

Scott Kays advises other financial planners to surround themselves with protons-people who exude positive energy and enlarge your passion. Other planners who have proton personalities, who are further along in their careers, or have more prosperous practices are often good people to have within your sphere.

Kays urges you to take active steps to avoid electrons who radiate negative energy and diminish your passion. He insists that his warning applies to co-workers, the firm you work for, and even clients. If you're the boss, you should fire employees with electron personalities because they will affect your entire team. If you work in a firm that diminishes your passion, find another firm. And don't hesitate to fire a client who's an electron-you can't allow a single individual client to cloud your attitude toward all the rest of your clients and the way you work on your business.

Passion Principle #4: Soft Re-Entry

Ray Ferrara is a financial planning veteran of nearly 35 years, and the president of Provise in

Clearwater

. He says that financial planners who run on passion's high-octane fuel generate enough thrust to travel near light speed-a pace that's hard to consistently maintain. To sustain that pace it's necessary to recognize when you're getting physically and mentally drained. And that's when it's time to slow down, even stop for a while. Sometimes you need to come to a complete stop for the short term in order to resume your pace over the long term.

Many times you're not the best judge of when you're reaching your limit. If you've surrounded yourself with proton personalities, they can alert you. Encourage and show your appreciation to a co-worker, friend, or spouse who speaks up and tells you that you're showing some wear around the edges. Then act on their warnings by doing whatever you do that helps you relax, decompress, and slow down.

Learning the principles of passionate financial planning is just as important as learning the principles of asset allocation, estate planning, and risk management. The challenge is that you won't find many continuing education classes that cover the passion principles; there aren't any formulas, financial models, or calculations you can use to discover the principles.

Louis Barajas says that the only people who truly have greatness in their lives are the people who can tap into the source of their passion. Follow the four passion principles and you will have greatness in your life.