BlackRock Elite Advisor Intelligence - Coroflot

BlackRock Elite Advisor?

Intelligence PRACTICE MANAGEMENT AT THE HIGHEST LEVEL

M AY 2 0 1 2 | Issue 4

In This Issue

Seeking Income in Different Places

M A R K F I L L A , M or g an stanley smith b arney

We spoke with Mark Filla, CIMA?, Financial Advisor with Morgan Stanley Smith Barney in Mequon, WI, to learn about his team's approach to finding income in a low yield environment. Mr. Filla joined Morgan Stanley Smith Barney in 2001 and co-leads The Filla Latzke Group in delivering comprehensive wealth management solutions.

The Income Story Has Changed

Our practice focuses on retirement solutions for individuals and families, so we talk to nearly every client about income needs. Prior to retirement, a client's work is the provider of income. Once the client crosses that retirement threshold, however, assets and pension (including Social Security) become the providers of income. Before the financial crisis and low interest rate environment, we had a fairly vanilla process of laddering CDs on one side and building diversified stock portfolios on the other. Although we were certainly biased toward value stocks for retirees who were more risk averse, there was no real focus on income.

"Keep it as simple as

possible. Communicate a plan or model that clients can repeat to themselves and repeat to other people."

Once the financial crisis hit and interest rates came down to where they are today, this model no longer worked. We had the choice of either preserving our "safe money" with interest rates that were simply not doing anything or looking at a diversified stock portfolio that was subject to enormous swings of volatility. We needed to define a middle ground ? to explore more dividend ideas or other types of income so we could strike a balance between income and growth.

Broaden Your Horizons

Today, the hunt for income has never been so challenging. Yields on traditional bonds are at record lows, while market volatility is high. In the search for income, we've had to broaden our horizons. In the past, other than investment-grade corporates, we rarely ventured outside of FDIC or full faith and credit government backing. However, we have recently started to look at dividend-paying stocks that may offer a reliable and rising income stream as a source of real income. In addition, we are looking at foreign bonds, emerging market sovereign debt and other asset classes for enhanced yield opportunities.

If we can get the first several hundred basis points of return in cash flow each year, this makes the difference over the long term. Then, our January client review meeting starts out on a positive note: we already have this level of income coming into the portfolio right off the bat. The income doesn't only need to come from safe haven investments. Don't be afraid to move some money into riskier options.

Find a Model That Works

Find out what you are good at and commit to it. Have a practice that runs narrow and deep as opposed to shallow and wide. You will be much happier and more successful ? and your clients will be much happier, too.

Mark Filla is a Financial Advisor with the Global Wealth Division of Morgan Stanley Smith Barney in Mequon, Wisconsin. The information contained in this article is not a solicitation to purchase or sell investments. Any information presented is general in nature and not intended to provide individually tailored investment advice.The strategies and/ or investments referenced may not be suitable for all investors as the appropriateness of a particular investment or strategy will depend on an investor's individual circumstances and objectives. Investing involves risks and there is always potential of losing money when you invest. Diversification does not guarantee a profit or protect against a loss.

Sourcing Income........................................................ 1

Fee-Based Business................................................ 2

Referrals...................................................................... 3

Estate Planning......................................................... 4

We know financial advisors value and respect the experience of other advisors. This series leverages recent in-depth interviews with some of the nation's top advisors who wanted to share. The results are insights, advice and concrete tools you can use to help elevate your business.

To subscribe to upcoming issues, please contact your BlackRock Internal Advisor Consultant at 877-ASK-1BLK (877-275-1255) or visit intelligence.

Three-bucket approach to asset segmentation

In 2010, The Filla Latzke Group introduced a new approach to portfolio construction to look beyond the daily noise of the market and focus on the long-term health of the assets. It's called our three-bucket approach.

Bucket #1: Short-Term (assets needed within five years) We think of this bucket as near-term money where we take little or no risk and accept low interest rates and yields to protect principal for the short term.

Bucket #2: Intermediate-Term (assets needed within five to 10 years) In this middle bucket, we focus on income ? either through dividend stocks or global bonds. Here we look to supplement the income we're no longer getting from the safe side of the portfolio and dampen the volatility of the growth side of the portfolio.

Bucket #3: Long-Term (assets needed in 10 years or longer) This third bucket holds the money that won't be needed for several years. Here we focus on a diversified portfolio of equities with a focus on growth.

FOR FINANCIAL PROFESSIONAL USE ONLY. Not to be shown or distributed to clients.

BlackRock Elite Advisor? Intelligence

How to Have a More Effective Fee Conversation

DAVID W. ADAMS, rAYMOND JAMES

We spoke with David W. Adams, CPA, CFP? and Vice President at Southwestern Investment Services, a top-producing Raymond James branch in Franklin, TN, to learn about his thoughts on fee-based relationships. With more than 12 years of financial services industry experience, Mr. Adams has been named to the Raymond James 2012 Chairman's Council1, which marks his sixth consecutive year as a qualifier for one of the firm's top recognitions. Joining Raymond James in 2004, Mr. Adams provides clients with investment strategies designed to build wealth through comprehensive financial planning.

"I believe if you are patient

and build your practice the right way early on, you'll never look back. And as you grow your practice, the fee-based model motivates you to meet with your clients more often, expand the relationship and ultimately provide opportunities for more referrals.

"

The Demand for Advice

My practice is almost exclusively fee-based, and my goal is to spend as much time as I can facing my clients. I am a huge proponent of the fee-based business model because it just makes so much sense, and I see it as a competitive necessity driven by the demand for quality financial advice.

However, I do have some clients who come to us and the fee-based model might not be the right fit. Maybe it's the size of their investable assets or the type of client they are, and in these cases, a brokerage or a transactional model might work better. With my business model, I have a junior advisor work with these clients - we don't necessarily want to turn them away, because maybe they're really coachable or we think they'll be great clients over the long term. I believe in nurturing relationships with clients who have high future potential.

Relationships That Work

I have broad parameters that help guide the decisionmaking process on how we get paid. The starting point is the size of the account. But then we factor in future potential, other household relationships and whether or not the prospective client is a center of influence. For clients with $100,000 to $200,000 in investable assets, I discuss the pros and the cons of a fee-based versus commissionable relationship and let them decide - based on the breakpoints and fees that make the most sense.

This approach has been successful because the clients don't feel like they're being sold anything. You're really just saying: we have open architecture and we want what's best for you. There's not really a one-size-fits-all kind of investment philosophy. What we care about as the advisory team is the quality of the manager, their philosophy and track record.

For any client with more than $200,000 in investable assets, I always discuss the fee-based model, but I let them know that I can do both. I explain why I believe a fee-based relationship will be best for both of us:

} Places the advisor on the same side of the table as the client; it's really about aligning objectives with a vested interest in long-term planning

}Makes account performance the sole motivation because that's how an advisor's income increases

}Supports our focus on long-term performance and risk management

} Allows the advisor to be nimble and make needed investment changes with increased objectivity

} Provides ongoing investment advice that translates into more time with clients

Be Confident in Your Value Proposition

When I first meet with a prospective client, I always provide a detailed look at our team and philosophy on managing money. I provide some key points on our value proposition:

} The way you make money in the long term is by not losing as much in the down years

} Our team has access to total open architecture - from active to passive managers - so we represent the client, not a specific fund manager or type of product

} We are not sales people, we are consultants

} We look to treat our clients like family; we have a professional team built to provide clients with "white glove service"

} We have a client service model that is the basis for determining the level of service for each client ? based on needs, level of assets, age and life stage

Kicking the Tires

From time to time, you'll come across some tire kickers - people who are just looking for a good deal. And what I try to do is explain my value proposition the right way:

}Clients will realize it's not about how cheap you are, but how good you are and what you do for them

}Fees are only an issue in the absence of value; clients have to see and know that your value proposition is not your fee

}Clients are unlikely to question the fees they pay if you are clear about how you can help them achieve their long-term financial objectives

Do your research around the fees that competitors are charging and find the median. Then, if a prospective client is looking for the cheapest relationship, you can recommend a self-directed account at a discount broker. Some people simply want the best deal and that's just it. You have to be willing to let these people go.

1 M embership is based mainly on assets under management, education, credentials and fiscal year production. Re-qualification is required annually. FOR FINANCIAL PROFESSIONAL USE ONLY. Not to be shown or distributed to clients.

Building Business Through Partnerships with CPAs

J O N A T H A N K U T T I N , A meriprise

We spoke with Jonathan Kuttin, Private Wealth Advisor with Ameriprise in Melville, NY, to learn more about his approach to building business through CPA alliances. With more than 18 years of financial services industry experience, Mr. Kuttin has been ranked among the top 1000 financial advisors in 2009 and 2011 and among the top 100 independent advisors from 2010 through 2012 by Barron's. With a specialization in pre- and post-retirement planning, the Kuttin-Metis Wealth Management team delivers comprehensive asset management and financial planning to mass affluent clients. In 2009, Mr. Kuttin created a coaching program that teaches financial advisors how to successfully build mutually beneficial relationships with CPAs. Additional information can be found at .

Deepen the Advice Package

About 10 years ago, I developed my first relationship with a local accounting firm, and the opportunities for partnership have grown exponentially from there. By building mutually beneficial relationships with local CPAs and tax professionals, I provide more value-added service to my clients. When I am sitting at the same table with the client's CPA and estate planning attorney ? so that we are aligned in supporting all aspects of the long-term planning process ? that's when I can best serve my clients.

From a client acquisition perspective, I focus my energy on deepening relationships with CPA firms and I have built my practice from there. With 30 professional alliances, we leverage a consistent business model and replicate the same client experience. When I look at the advice industry, I see the world of the traditional CPA changing more and more. Small business owners are the bread and butter of smaller CPA practitioners, and with many small businesses shutting their doors or struggling, tax professionals are being forced to reinvent.

Host an educational event for CPAs

Find the Right CPA Partner

Host an educational event with guest speakers and invite local CPAs to attend. For example, offer a

}Do your research; look to identify CPAs who are business-minded and entrepreneurial

glimpse into Social Security benefits and strategies for collection, presented by a reputable fund partner. Provide continuing education credits for the CPAs in attendance. Start the evening by introducing your

}Get to know each other through a series of three to four business meetings

practice and your client value proposition. Reinforce your belief in the value of partnership with CPAs as a way to provide better advice to clients.

}Learn about each other's business, structure, systems and processes to

Master the art of referrals I have found the greatest success in consulting with CPAs and helping them identify referable moments.

ultimately see if an alliance could be

For example, a CPA can take a simple tax meeting

a win for your clients

and create an opportunity for a financial advisor to

meet with the client and give a second opinion or

audit of the client's financial house. And this

Two Options That Work

partnership certainly works both ways. It is sometimes difficult for a client to leave a CPA, but

Semi-exclusive relationship: In this scenario, I conduct thorough due diligence with a CPA firm. If we conclude

much easier for a client to leave a financial advisor based on the recommendation of their CPA.

that my financial planning expertise can provide their

For most clients, the CPA is seen as the trusted

tax clients with a better advice package, we make our

and knowledgeable advisor. If the average CPA

best effort to learn about each other ? from a business calls 10 of his top clients and recommends a second

and client profile perspective. This partnership then

opinion from a financial advisor, nine out of 10

opens up multiple pipelines of opportunity.

clients will take the meeting ? simply based on the

Formal relationship: In this scenario, a select CPA firm is licensed and partners with us in a revenuesharing relationship. Basically, we create a financial planning arm within the tax practice and the CPA becomes the fiduciary of the relationship ?

recommendation. And the client is much better off when the partners can sit together and proactively plan ? look ahead to the next year and talk about what to do in the current year to positively impact the tax situation for the next year.

managing the relationship from 1,000 feet above.

"The greatest success The CPA is compensated for the time and energy

spent on financial planning, and the client benefits

comes from creating more from two sets of eyes and the integration of financial

and tax planning at no additional expense.

Strategic Alliances: How It's Done

Be proactive } To the client: Is it OK for us to call and meet

your tax professional to talk about how financial planning and tax planning are integrated together?

} To the tax professional: We have a mutual client. This client would like us to connect so that my financial planning advice is integrated with your tax planning. By asking for this meeting, you demonstrate a cooperative spirit on behalf of the client and set yourself apart from the competition.

of a consultative relationship with clients. Integrating financial planning into a tax practice is a natural and comfortable extension of the CPA relationship.

"

BlackRock is not affiliated with Kuttin Consulting Group and is in no way endorsing services offered by the Group. BlackRock cannot be held responsible for any direct or incidental loss resulting from services provided by Kuttin Consulting Group. FOR FINANCIAL PROFESSIONAL USE ONLY. Not to be shown or distributed to clients.

A Look Inside: Dynasty Trusts

NICK COSENTINO, COMMONWEALTH

We sat down with Nick Cosentino, CFP?, CEO and President of Financial Foundations, in Framingham, MA, to learn more about dynasty trusts. Mr. Cosentino is a 25-year veteran of the financial services industry and offers asset management, securities and advisory services through Commonwealth Financial Network, Member FINRA/SIPC, and a registered investment adviser.1 He speaks with us about his experience with estate planning and dynasty trusts, and why the time is right to talk with clients about this unique gifting opportunity.

Did you know...

$ 5 Million is the new gift tax exemption ? the largest lifetime gifting limit in history

$ 1 Million is what Congress could push limits back to in 2013

In talking with advisors across the country, we hear about a resurgence of interest in dynasty trusts, also known as perpetual or generation-skipping trusts. Serving as an estate planning tool, dynasty trusts provide income and support to children and future generations of a family.

You talk about clients being more receptive to hearing about dynasty trusts over the past few years. What is the right client profile? For starters, you need to identify those clients who have a large enough net worth -- generally $20 million to $50 million -- to make the conversation relevant. I have found a dynasty trust fits best for a client who has great pride in what he or she has built. My clients are mostly entrepreneurs who have created companies on their own, have amassed a large amount of wealth and are the first in their families to do so. Given all of this, my clients want to transfer that wealth to their families without having it erode due to estate taxes. This is a core value my clients feel deeply about: they want their money to benefit generations to come, but to do so in a way that will ensure the money won't be abused.

With the gift tax provision now at $10 million for a married couple and talk in Congress about limiting the tax-free dynasty trust to 90 years, this creates a unique window of opportunity to approach wealthier clients about making a larger gift. Knowing that Congress has dynasty trusts under attack makes the conversation more relevant and the timing more important.

What are the fears and what gets a client excited when hearing about dynasty trusts for the first time? The first fear in every client's mind is the prospect of losing control. Everyone wants to retain as much control as they can. When they realize a dynasty trust can be designed so they have a great deal of control over the future use of the money, they become more comfortable. They really like having control over how the transfer of wealth is distributed. Many advisors start the conversation around the tax benefits. I have found more success with talking about a dynasty trust as a way to control wealth to help future generations, a way to do so on your terms and, by the way, you also save a lot in taxes. Control on your terms is at the core.

If an advisor has a few clients for whom a dynasty trust could make sense, what are your recommendations for getting the conversations started? If an advisor has clients with wealth they are going to transfer, it's important to get these clients comfortable with the idea. As with anything new, sometimes it helps to know what other people are doing. For example, we have had great success with hosting informal dinners or events for five or six families who are contemplating a dynasty trust. We invite our attorney to the event and have informal conversations and open dialogue. This way, clients do not feel singled out, and they generally like knowing this idea can apply to people who look like them, providing them an added level of confidence.

1 Fixed insurance products and services, and tax services offered by Financial Foundations are separate and unrelated to Commonwealth Financial Network.

Who is BlackRock

In a world that is shifting and changing faster than ever before, investors who want answers that unlock opportunity and uncover risk entrust their assets to BlackRock. As an independent, global investment manager, BlackRock has no greater responsibility than to its clients.

It's why many of the world's largest pension funds and insurance companies trust BlackRock to understand their unique objectives and why financial advisors and individual end investors partner with BlackRock to help them build the more dynamic, diverse portfolios these times require.

BlackRock has built its offering around its clients' greatest needs: providing breadth of capabilities ? and depth of knowledge ? across active and passive strategies. This is combined with a singular focus on delivering strong, consistent performance and an ability to look across asset classes, geographies and investment strategies to find the right solutions.

With deep roots in every region across the globe, some 100 investment teams in 27 countries share their best thinking to gain the insights that can change outcomes. And, with a passion to understand risk in all its forms, BlackRock's 1,000+ risk professionals dig deep to find the numbers behind the numbers and bring clarity to the most daunting financial challenges. That shapes and strengthens the investment decisions that BlackRock ? and its clients ? are making to deliver better, more consistent returns through time.

The information obtained from this research is derived from third-party sources deemed reliable, and is provided to you for educational purposes only. BlackRock cannot guarantee the completeness or accuracy of the information provided.

?2012 BlackRock, Inc. All Rights Reserved. BLACKROCK, BLACKROCK SOLUTIONS and iSHARES are registered trademarks and BLACKROCK ELITE ADVISOR is a registered service mark of BlackRock, Inc. or its subsidiaries in the United States and elsewhere. All other trademarks are those of their respective owners.

Prepared by BlackRock Investments, LLC, member FINRA.

FOR MORE INFORMATION:

FOR FINANCIAL PROFESSIONAL USE ONLY. Not to be shown or distributed to clients.

Lit. No.EAINTEL-RPT-0512

OE6030-0112 / 12-0257

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download