Investment advice is more than telling your clients "no" to those supposed big-ticket money pits like buying a boat or installing a pool at their homes. It's about understanding money and how to use it as a tool, writes Barry Ritholtz. "Money, for all its glory and the trouble the blind pursuit of it has caused, is misunderstood by many. No, money is not the root of all evil. The problem is people and how they behave around it," he writes. Instead, he offers this advice to advisors who are quick to quip, "never buy a boat" to their clients. Instead, tell them, “Don’t buy things you cannot afford, won’t actually use and that could cause you more pain than pleasure.”
Crain’s Detroit Business reports that the estate of deceased former-Pistons owner Bill Davidson is suing Deloitte Tax LLP to recover $500 million in taxes, fees and penalties in the wake of the IRS assessing an additional $457 million tax bill (negotiated down from an initial $2.7 billion) on the billionaire’s estate. Davidson’s estate claimed in the suit that “In its zeal to secure Mr. Davidson’s business, Deloitte Tax failed to disclose the numerous material risks associated with the plan that it advocated.” The plan itself involved self-canceling installment notes, a vehicle that has come under scrutiny from the IRS in the past, but has generally passed muster. The problem here stemmed from Deloitte heavily undervaluing shares of stock in the estate; thereby, the sale price under the notes, artificially depressing the tax bill.
The average 401(k) balance is up 50 percent in the last five years, which has led to an increased percentage of equities in those accounts, making them more susceptible to risk. A recent Fidelity report found Baby Boomers are most at risk, with 10 percent of 50 to 59 year-old investors keeping their entire retirement account in stocks. Twenty-seven percent of that age group has more than 70 percent of the 401(k) accounts in equities. According to Yahoo Finance, the recent bull market is one reason, as investors have taken advantage of increased stock value and not rebalanced accordingly, but many Baby Boomers are taking risks with their retirement simply because they are behind in their retirement savings.
We highlighted The Special Needs Trust Fairness Act a while back and are happy to report that it recently passed the Senate unanimously. Now the bill, which seeks to allow people with disabilities to create their own first-party special needs trusts without having to rely on others, must pass the House. Unfortunately, Special Needs Answers reports that a companion bill is currently tied up in the Energy and Commerce Committee (because Congress can find a way to mess up even something that's supported unanimously), and advocates say it’s unlikely to move onto a full House vote without additional support.