Ensuring financial security for yourself and your family comes at a price. We’re not talking about dollars, but what might be commodities just as precious: your time and concentration.
When was the last time that you undertook a review of all aspects of your financial life? Like many people, you’ve probably reviewed your portfolio and perhaps made some adjustments in light of recent economic and market conditions. But what about an integrated, strategic overview of where you stand today, and where you want to be tomorrow?

As the saying goes, there’s no time like the present.
Continue to review your portfolio now, and regularly. If you have reviewed your asset allocation strategy recently, your job isn’t over. It’s necessary to keep the allocation in balance and modify it as economic conditions and your personal circumstances dictate.

Have your objectives changed? Are there new liquidity needs or tax issues that should be addressed? These factors and others will play a part in deciding what modifications to your current investments are desirable in the coming years.

Are you nearing the end of your working years? Retirement calls for some new investment thinking. Usually, the focus is on risk reduction, income enhancement and the protection of your purchasing power. Ideally, you want to start your planning well before the retirement date on the calendar, because it’s impossible to predict with accuracy the best time to make buy-and-sell decisions.

Make certain that your insurance coverage is adequate
A key element of financial planning is risk management: protecting your assets and income in the event of the unexpected. To have insurance in place that will keep your family financially secure should you not be available to provide for them.
First step: Review your current coverage. Is your life insurance still sufficient? Have you explored the wide variety of policies available—whole life, variable, universal and term? What about disability insurance?
Other kinds of coverage may not spring automatically to mind, but bear examination. First, should you purchase a long-term care insurance policy? There is a wide variety of policies and options to consider. And because age determines the premium amount, you may want to explore coverage now.
Insurance may play an important role in your estate planning. If you own a family business or other illiquid asset, a life insurance policy in your name, or in an irrevocable life insurance trust, can be used to pay the taxes and avoid a forced sale of the property.

Put a plan in place for retirement
Consider just a few of the tasks necessary to determine how much you’ll need for your retirement. For instance, you’ll need to project your annual income and expenses during retirement. Adjust your numbers for inflation between now and your retirement, and after retirement. Find out how much your Social Security benefits will be (and when you’ll want to begin receiving them) as well as your retirement plan benefits (pension or lump sum payment).
If you are entitled to receive a lump sum distribution, will you take it in hand or roll it over into an IRA? If you choose the latter route, you can continue to shelter your retirement assets from tax, but you’ll need to take the right steps. In either case, you’ll want to consider what kind of investments will best suit your needs.
All these decisions need to be made well in advance of retirement in order to keep all of your options and opportunities available.

Formulate and monitor your estate planning
An initial estate plan is not a final one. Even if you have done some estate planning already, revisiting your planning regularly is essential.
Is your will up to date? Changes to your family constellation (new children or grandchildren, marriage or divorce) may prompt some rethinking. Changes in your financial life may make new provisions a must (sale of a business, an inheritance). External factors (the ups and downs of the market, new tax laws) also may, in effect, rewrite your will and estate plan.

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Is it time for a comprehensive review of your financial plan? We would be glad to assist you in developing a strategy to meet your unique needs and circumstances. Call on us.

© 2014 M.A. Co. All rights reserved.
Any developments occurring after January 1, 2014, are not reflected in this article.

As a young man, Robin Trupp competed in equestrian events. He did well enough to be considered for the U.S. Olympic equestrian team. Robin’s horse-riding days ended when he entered law school.

But his interest in horses remained and was renewed when his son Austin began to ride in equestrian shows. In the 1990s Trupp began to represent clients in the equine industry, establishing a solo practice in that field. He joined a law firm in 2004 and continued to practice equine industry law, as well as doing other legal work.
Trupp attended equestrian shows with his son, which usually ran Fridays through Sundays. He was known as the attorney father of Austin Trupp, so people would approach him with their legal problems at the shows. He claimed to have acquired 40 clients in this manner over the years.

In the 2005 tax year, Trupp agreed to pay certain equestrian-related expenses to people who allowed his son to ride their horses at shows. He now proposes to deduct $71,836 as “business promotion” expenses in that year.
Not a winning argument, the Tax Court has ruled. The equestrian activities were not engaged in for profit, at least not enough to support the deduction. Factors that the Court considered included:
• the manner in which the activity was carried out;
• expertise of the taxpayer in the field;
• time and effort invested in the activity;
• expectation that assets used in the activity might appreciate in value;
• success of the taxpayer in carrying out similar or dissimilar activities in the past;
• history of income or losses in the activity;
• amount of occasional profits;
• financial status of the taxpayer; and
• elements of personal pleasure or recreation.

Although Trupp claimed 40 new clients in the equine field, he only documented income from four such, and the most important of these was unrelated to his attendance at horse shows. He did not advertise his presence at the shows but waited for potential clients to approach him. Given Trupp’s background as a distinguished equestrian, he must have taken great pleasure in attending the events in which his son participated. Although Trupp may have gained some business through attendance, it was not sufficient to support the tax deduction.

© 2014 M.A. Co. All rights reserved.
Any developments occurring after January 1, 2014, are not reflected in this article.

Many people following the Bernie Madoff saga and other Ponzi schemes wonder how highly intelligent and even sophisticated investors found themselves caught in his net. The Financial Industry Regulatory Authority (FINRA), the regulator of securities firms doing business in the U.S., has been searching for answers. It’s especially important now, because fraud will be on the rise as scam artists look for any hook that they can find to exploit investors, who may be especially vulnerable as they look for ways to recover from their recent losses.

The psychology behind the pitch
The old saying goes: “If it sounds too good to be true, it probably is.” Solid advice, but probably too simplistic today, FINRA suggests. The problem is deciding when “good” becomes “too good.” There’s no bright line. Investment scammers make their living by making sure that the deals they tout appear both to be good and true.
FINRA’s Consumer Fraud Research Group has examined hundreds of undercover audio tapes of those they call the “masters of persuasion” at work. The tapes reveal that pitches are tailored to match the psychological profiles of their targets. Groping for an Achilles heel, they ask seemingly benign questions—about health, family, political views, hobbies or prior employers. “Once they know which buttons to push, they’ll bombard you with a flurry of influence tactics, which can leave even the savviest person in a haze,” warns FINRA.

The five tactics that ensnare investors
The tactics that scam artists use may seem familiar to their targets because legitimate marketers use them, too. That familiarity may lend credibility to the pitch and throw an investor off guard. An important part of resisting persuasion tactics, FINRA suggests, is to know them before encountering them.

• The phantom riches tactic dangles the prospect of wealth, luring an investor with something similar to Madoff’s double-digit returns or R. Allen Stanford’s high-interest rate CDs.
• The source credibility tactic cloaks the scam artist in legitimacy with claims that he or she is with a reputable firm or has special credentials or experience. “Believe me, as a senior vice president of XYZ Firm, I would never sell an investment that doesn’t produce.”
• The social consensus tactic leads investors to believe that other savvy investors are already on board. It often goes something like this: “This is how Jones got his start. I know it’s a lot of money, but I’m in—and so is my mom and half her church—and it’s worth every dime.”
• The reciprocity tactic works by having the scam artist offer to do a small favor for an investor in exchange for a big favor. One common example is a promise to give the investor a reduction in a commission that would be charged.
• The scarcity tactic traps an investor by creating a false sense of urgency, encouraging the investor to act immediately. Often, there’s a claim of limited supply, such as: “There are only two units left, so I’d sign today if I were you.”

High on the list of targets
By comparing victims of fraud against nonvictims, FINRA research has identified several factors that make it more likely that an investor will succumb to the attentions of a scam artist.
Key among them is reliance on friends, family and coworkers for advice. For example, in a study of groups of investors, 70% of victims of fraud chose investments based primarily on advice from a relative or friend. Yet the percentage was only one-third for the national sample of investors examined. Others factors included: owning high-risk investments; being open to new investment information; and failing to check the background of the individual making the investment offer.

The seven red flags of fraud
FINRA offers the following warning signs that should put anyone on notice that an investment offer may not be what it seems.
1. Guarantees: An investor should suspect anyone who guarantees that an investment will perform in a certain way. Nothing is absolute in the world of investing.
2. Unregistered products and unlicensed “professionals”: Many investment scams involve unlicensed individuals selling unregistered securities. Madoff wasn’t even a registered investment adviser until 2006. His SEC filings show some technical violations, which might have been enough to scare away some investors, if they had done their research.
3. Overly consistent returns: Any investment touted as consistently going up month after month—or that provides remarkably steady returns regardless of market conditions—should be regarded with suspicion.
4. Complex strategies: Anyone who credits a highly complex investing technique for unusual success probably should be avoided. Legitimate professionals should be able to explain clearly what they are doing.
5. Missing documentation: If someone tries to sell a security without all the paperwork (a prospectus for a stock or mutual fund; an offering circular in the case of a bond), he or she may be selling unregistered securities.
6. Account discrepancies: Unauthorized trades, missing funds or other problems with account statements could be the result of a genuine error, or might indicate churning or fraud.
7. An overeager salesperson: No reputable investment professional should push anyone to make an immediate decision about an investment, or tell the person that he or she has to “act now.”

The best protection
Finally, the chance of being a victim of a Madoff or Stanford type of scheme may rest on the questions that an investor asks and the answers that he or she receives. Is the individual licensed to sell the investment? Which regulator issued the license? Has that license ever been revoked or suspended? Is the investment registered? If so, with which regulator? Find out about support organizations, too. According to some reports, Madoff, who was managing billions of dollars, used a three-person accounting firm, one of whom was a secretary and another a retired partner. This should have raised some eyebrows.
Persistence is the hallmark of a successful schemer. Investors who are persistent themselves—doing the necessary research and insisting upon all the answers to their questions—should be successful, too, outwitting any schemer’s plans to part them from their money.

© 2014 M.A. Co. All rights reserved.
Any developments occurring after January 1, 2014, are not reflected in this article.

Has recent market volatility got you worried about your current investment strategies? Before changing directions on your own, it’s a good time to look at getting professional assistance with your investments. Professionals are experienced in analyzing the significance of economic and market events and their portfolio management implications.

But whom can you trust?
Trust is an intangible quantity in a relationship. It’s not something that you can measure or quantify scientifically. But when it comes to choosing someone to serve as an investment advisor, if you cannot be 100% certain at the outset that the person whom you choose deserves your trust, certainly you want to do all that you can to stack the odds in your favor.
Just as with choosing a doctor, lawyer or other professional, finding the right advisor is a matter of due diligence— conducting a detailed analysis and appraisal of the candidates that you are considering to entrust with your assets.
Here are some suggestions that may help you along as you do your research:

• Take advantage of the experience of others. Ask your family, close friends and other advisors (your attorney or accountant, for example) for a referral to someone with whom they have established a successful relationship.

• Use a screening process. Contact several candidates, visit their Web sites and contact them to obtain written information about themselves and the organization with whom they are affiliated.

• Make introductory appointments. Face-to-face meetings with each advisor can tell you a great deal, but first verify that you will not be charged for the visit. The meeting is likely to give you an idea as to whether he or she is someone with whom you will be comfortable.

• Find out about the advisor’s knowledge, experience and specialties. For instance, if you have a significant amount to invest, be certain that the advisor has an extensive background in wealth management for affluent investors.

• Make sure that the advisor has comprehensive resources. He or she should have a wide array of investments choices available; access to research, up-to-date analytic tools and relationships with other professionals when you have need of guidance outside of the expertise of the advisor.

• Determine what additional financial services the advisor offers. Look for an advisor who can help you integrate your investment strategy with your retirement and estate planning goals or has someone on staff who can.

• Understand how the advisor is compensated. Your advisor may be compensated in several ways: He or she may charge a flat fee, charge a percentage fee based upon the assets that he or she is managing, or receive commissions.

• Check references. If you don’t know anyone who has used the services of the advisor that you are considering, ask for the names of some of the advisor’s clients who would be willing to talk to you about their experiences with the advisor.

Interview us
We would be pleased to be on the list of candidates that you are considering as your investment advisor. You’ll find that a meeting with us (without cost or obligation, of course), will reveal that we can provide you with reliable, trustworthy advice about your investments.
What’s more, we can tailor our services to what you are looking for. For instance, you may choose to have us provide the guidance, but leave you to make the ultimate decision making. Or, if you are someone who expects that an investment manager should be making the important decisions, you may leave them to us.
We are ready to answer your questions. Contact us now to set up an appointment at your earliest convenience.

© 2014 M.A. Co. All rights reserved.
Any developments occurring after January 1, 2014, are not reflected in this article.