30th Anniversary Celebration
Who’s Managing Your Money?
Moderated by Carolyn Kling, Kling Partners
Presented by:
Paul Spitzer, Advanced Practice Advisors
Carolyn Taylor, Weatherly Asset Management
Herb Morgan, Efficient Market Advisors
Carlee Harmonson, Union Bank
“Who’s managing your money?”
The Del Mar Foundation presents a two-hour panel discussion with local diverse
financial professionals who welcome an open audience dialogue.
At this session, the goal of the panel is to provide an understanding of related costs
associated with investing and how they affect you as an investor. The panelists will
define the differences between banks, trust departments, brokerage firms, investment
firms, money managers, mutual funds, exchange traded funds, and other fund
structures.
The panelist will present the differences between the role of a Fiduciary and the
‘suitability standard’ to which many companies adhere. You will learn how Trusts play an
important role in asset ownership and the correlation of taxes, management,
administration fees and investment performance.
Designed to give local residents an opportunity to “ask the experts,” the Del Mar
Foundation Legacy Planning Series continues their 30th Anniversary Educational Series.
Paul C. Spitzer, Founding Member
Carolyn P. Taylor, President
Comprehensive Wealth Management
• Comprehensive wealth managers have the highest level of
expertise and fiduciary standards in the industry
• More than a just money manager or a financial planner
• Combines portfolio management and financial/estate
planning to manage a client’s financial life as efficiently as
possible
• Paying a wealth manager to advise on all aspects of your
financial life should save and make money over time
• Serious money demands serious legal, tax and financial
knowledge and creativity
Services should be timely, applicable and al la carte catered to your needs.
Holistic Wealth ManagersNeed to be Dynamic and Individualized
Tax Planning
Estate Planning
Financial Planning
Asset Management
• Types of taxation:
• Income vs. capital
gains tax
• Possible offsets
• Deductions,
capital loss carryforward, business
income, etc.
• Deferral of incomemaximizing
contributions to
retirement, defined
benefit, ESOP and
other taxadvantaged
vehicles
• Charitable giving
• Overall gift strategy
– fits with Trust
documents, taxes
and wishes
• The “alphabet
soup” – LLC, FLP,
QPRT, CRT
• Concentrated stock
positions
• Volatility and risk
minimization
strategies
• Income strategies –
tax preferred, tax
deferred, tax-free,
and taxable – or
blend
• Hierarchy/use of
funds
• Where to draw
from first
considering tax
and estate
implications
• Asset structures
and types of
holdings
appropriate for
each
• Asset location vs.
asset allocation
• Risk mitigation for
each type of
structure
• Types of
investments within
• Inflationprotection,
income oriented
Significant Events – Steps to Take
Significant events include: divorce, death, remarriage, job loss and health issues.
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Discuss legal ramifications
Review financial strategies
Decide how best to minimize taxes
Re-evaluate family dynamics, including roles and responsibilities
Divide assets (if applicable) – discuss location and fairness
Define the many “what if’s”
Create a roadmap to optimizing a long-term plan given the
change in circumstance
Multigenerational Wealth
How to help families transition wealth more smoothly from the older to a younger
generation:
Family Meeting
• Introduce the younger generation to the team of advisors
• Keep topics and specifics general
Annual Meetings
• Review relevant legal, tax and investment topics as well as
asset allocation
Quarterly Meetings
• Appoint roles for family and non-family members to gain
experience and responsibility
Additional
Communication
• Meet individually as well to address specific situations and
concerns and interplay of how the larger picture fits within
Asset Location and Investments
The goal is to minimize volatility while maximizing after-tax and inflationadjusted returns.
Asset Allocation
•Asset allocation is the number one driver of risk and return.
•Assets include: equities, real estate, alternatives, raw materials, fixed
income and international
Asset Location
•Asset location – by type of account and type of structure or purpose
•Retirement vs. Taxable Accounts
•LLC, FLP, CRT, Trust (Irrevocable or Living)
Minimizing
Volatility &
Addressing Risk
•Diversification is key
•Adding each of the following, as appropriate: covered calls, dividend stocks,
non-dollar, low beta, preferred stock
Highlight of Fiscal Cliff Negotiations
Links to Learn
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www.weatherlyassetmgt.com
www.newyorktimes.com
www.wallstreetjournal.com
www.bloomberg.com
Finance.yahoo.com
www.brightscope.com
Herb W. Morgan,
President and Chief Investment Officer
Costs Matter
• For decades institutional investors have had a massive cost
advantage over retail investors…Not any longer.
Traditional Mutual Funds
Mutual
**MFund Exp Ratio
Mutual Fund Trading Costs*(Not reported in expense ratio)
Cap Gains Liability
“UNWRAPPED” EXPENSE RATIO
1.50%
.78%
2.50%
4.78%
Exchange Traded Funds (ETFs)
ETF Expense Ratio
ETF Internal Trading Costs (Not reported in exp. Ratio)
Capital Gains Liability**
“UNWRAPPED” EXPENSE RATIO
.20%
.01%
.0%
.21%
Source: “Expense Shifting: An empirical study of cost shifting in the mutual fund industry.” Nicolag Sigelkko, Wharton University 1999
**Most ETFS but not all ETFs do not distribute capital gains due to their unique “in kind” creation and redemption structure
Cost Matters
$12,000,000
$10,000,000
0.21% Total Expenses
$8,000,000
4.78% Total Expenses
$10,158,314
$6,000,000
$4,000,000
$4,425,000
$2,000,000
$0
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
Year 11
Year 12
Year 13
Year 14
Year 15
Year 16
Year 17
Year 18
Year 19
Year 20
Asset Allocation Decisions Matter Most
• Cisco was, is and likely always will be a great company.
1999
Today
Facto
Revenue
$12.15B
$180.0 B
15X
Net Income $ 2.10 B
$ 40.0 B
20 X
Market Value $300 B
$110.0 B
- 2/3
So what is “Asset Allocation”?
Institutional Style Asset Allocation
Courage
Opportunistic
0% to 10%
Tactical
Art & Skill
15% to 30%
Strategic
Monkey Math
60% – 80%
Carlee Harmonson,
Senior Vice President, Regional Director,
Trust & Estate Services The Private Bank
Trust and Estate Services
Trustees administer personalized, tax-sensitive and court-supervised instruments according to
sound fiduciary principles.
Administration
• Living trusts
• Testamentary trusts
• Charitable trusts
• Special needs trusts
• IRA rollover trusts
• Probates
• Conservatorships
• Guardianships
Philanthropic Services
Grant administration and investment management of:
•Foundations
•Endowments
•Pooled income funds
Estate Settlement
• Asset preservation
• Complex administrative and accounting services
• Preparation and filing of tax returns
Comprehensive
Management of
Specialty Assets
• Real estate
• Mineral, oil, and gas interests
• Closely held business interests
• Promissory notes
Wills, trusts, foundations and wealth planning strategies have legal, tax, accounting and other implications. Clients should consult a competent legal or tax
adviser.
Role of a Trustee
A trustee ensures your wealth is managed and distributed in accordance with the wishes outlined
in your trust. The trustee should maintain a neutral position and balance the interests of current
and future beneficiaries. The trustee must avoid conflicts of interest and self-dealing. The trustee
must keep beneficiaries informed of trust activity.
As a fiduciary, the trustee is responsible for:
• Investing assets appropriately and providing accounting and bookkeeping
• Maintaining a complete inventory of all trust assets
• Recording all income and principal distributions and receipts
• Maintaining documents and records
• Filing annual income tax returns
• Communicating with and making distributions to beneficiaries throughout the life of the trust
and upon termination, if applicable.
Investing
assets appropriately
for
generational
beneficiaries
Accounting and
bookkeeping
Tax payment and
Recordkeeping
Communication and
distribution to
beneficiaries
Estate Settlement Services
Executing your wishes as directed in your estate plan is complex and may require
extensive probate administration, asset management, sub-trust funding, and
disbursements to your beneficiaries.
Your trustee needs to bring objectivity to settling your estate as planned:
Marshalling,
investing, and
safeguarding assets
Handling complex
administrative and
accounting
requirements
Preparing and filing
tax returns
Distributing assets
when, how, and to
whom you specify
Specialty Assets
Many trusts contain specialty assets:
Real Estate
Management
• Management
services for
commercial,
industrial,
residential and
agricultural
property holdings
Mineral, Oil and Gas
Interest
• Unique industry
expertise and
knowledgeable
asset managers
Closely Held
Business Interest
• Industry specialists
who can manage
the complexities of
private business
interests
Loan Management
• Expertise in loans
held in fiduciary
accounts
Duties of a Trustee
STARTING THE TRUST
ADMINISTRATION
BOOKKEEPING
RESPONSIBILITIES
INVESTMENT
MANGEMENT
COORDINATION
RESPONSIBILTIES TO
BENEFICIARIES
TAX PAYMENT AND
RECORDKEEPING
MAINTAINS NEUTRAL
POSITION
DISTRIBUTION UPON
TERMINATION
Reviews Trust
Agreement
Manages
recordkeeping for all
assets
Records all income
and principal
distributions and
receipts
Draws up investment
strategy according to
objectives of trust
agreement
Makes distributions to
beneficiary as directed
by agreement
Files annual income
tax return and
provides information
for beneficiary tax
return
Seeks legal counsel
when and if needed
Arranges partial or
final distribution
according to trust
agreement
Marshalls the assets
Completes an
inventory of all trust
assets – keeps track of
all cost basis and
acquisitions for tax
purposes
Takes care of all
transaction activity
Manages investments
according to market
circumstances, safety
of principal, and
income needs
Supplies detailed
statements on a
regular basis outlining
principal, income, and
investment activity
Compiles a record of
adjusted cost basis
and taxable income
Reports actions to an
independent auditor
Divides the assets of
the trust property
between beneficiaries
Meets with beneficiary
and/or grantor to
determine investment
objectives an d
income/principal
needs
Arranges for appraisal
of trust assets and
determines property
insurance needs
Collects all income,
e.g., dividends,
interest payments.
Ensures they are
reinvested or
distributed as
established in
agreement
Regularly reviews
performance and
objectives
Takes care of financial
obligations for medical
needs, if beneficiary is
ill
Manages investments
to allow minimal tax
exposure
Follows terms of trust
agreement and avoids
conflict of interest
Supplies accounting
information and tax
data
DMF Board Director and Founder of Kling Partners, Carolyn Kling will moderate the panel. Ms. Kling provides family office
investment services to family enterprises, family offices and private foundations. Applying valuation tools that integrate business
succession and family generational planning and modeling for family members, Ms. Kling evaluates investment portfolios to
assess risk adjusted performance on an after tax basis, investment policy, structure, asset allocation, management fees and
other risk parameters. Ms. Kling collaborates with client advisors, trust and estate planning attorneys, tax strategists and CPAs to
ensure a seamless integrated investment plan to meet investment objectives through generations. Ms. Kling has earned the
professional designation of AIFA, Accredited Investment Fiduciary Analyst.
Paul Spitzer, Founder, Advanced Practice Advisors, LLC Mr. Spitzer has been in the financial business for over 25 years. He
specializes in Investment Policy Statement construction by aligning the proper asset allocation strategies to each of his clients’
needs. The majority of Spitzer’s career encompassed two decades at AG Edwards, (later Wachovia) where he initiated and
concluded two high-profile IPOs valued at $100M each. He is a Member of the Committee for the Fiduciary Standard in
Washington DC and is active in various San Diego charities and professional financial associations. Spitzer earned his BA at
Idaho State University.
Carolyn P. Taylor, President, Weatherly Asset Management
Ms. Taylor, majority owner of the partnership, is personally and professionally committed to providing comprehensive highquality investment management services. With over 30 years of portfolio management experience, Ms. Taylor offers a wealth of
investment expertise to WAM’s clients. Formerly an investment banker at Dean Witter Reynolds, Inc., NY, a portfolio manager at
Neuberger & Berman NY, and Payden & Rygel, LA, Ms. Taylor has managed over $1B in assets during her storied career.
Additionally, Ms. Taylor is a member of the Chartered Financial Analysts Society of San Diego, the San Diego Foundation’s
Investment Committee, the Jewish Community Foundation and the National Association of Professional Women. Ms. Taylor is a
Founding Member of the National Advisors Trust Company with assets of $7.7 B. Ms. Taylor received her BS and BA from
Stanford University.
Herb W. Morgan, CEO & Chief Investment Officer, Efficient Market Advisors, LLC
Prior to becoming CEO of Efficient Market Advisors, located in Del Mar, Mr. Morgan held the post of Sr. VP of Advisory at
Linsco/Private Ledger Financial Services, Inc., Sr. VP with Dreyfus and Sr. VP with ING Funds. Mr. Morgan is involved with
philanthropy in education where he served as the Chair of the Investment Committee on the Foundation Chapter of Theta Chi
Fraternity, Inc. Mr. Morgan graduated from UC Santa Cruz with a BA in Economics (Honors). Currently Herb is the President of
the Board of Trustees of the San Diego City Employees Retirement System (SDCERS) a $5.5 billion dollar public pension plan. He
serves on the SDCERS Investment, Audit, Disability and Business & Governance Committees. Herb has been seen on CNN,
CNBS & Fox News. Herb writes an investment column for Forbes.
Carlee Harmonson, Sr VP, Reg Dir, Trust & Estate Services The Private Bank, Union Bank
Carlee leads a team of specialists in wealth planning, investments, risk management and fiduciary services. Carlee has been
with Union Bank since 2002 and is a veteran of the trust business with over twenty-five years’ experience in both Personal Trust
and employee Benefit Plants. Carlee is a graduate of UC Davis with a BA in Sociology and holds the professional designation
“Certified Retirement Services Professional.”