|
 August 15, 2006
Edition |
|
|
|
|
STOCKBROKER
OVERTIME CASE - U.S. District Judge John Houston ruled
that
stockbrokers from A.G. Edwards can continue their case calling for
overtime compensation. The firm was trying to get the case
dismissed because its reps were exempt from overtime pay. A. G. Edwards
was also hit with a $900,000 fine for charging excessive fees to
customers. The action stemmed from nearly 150 consumer complaints
concerning a branch office manager in Georgia.
STATE
PENSION PLANS
AGAIN – Maybe this issue is finally getting the
interest
it deserves. The New
York Times
reports that many state and municipal pension plans are seriously under
funded and shortfalls across the country could be between $375 billion
and $800 billion.
FEWER
BRANCH MANAGERS
- Registered Rep
magazine
reports that the number of branch office managers in brokerage houses
is on the decline. Reasons: Many registered reps are "going
independent," plus an increase in merger activity.
PROFIT-MAKING
PATENTS
- The New York Times
reports
that "an intellectual property arms race is escalating on Wall
Street." Apparently a number of financial services firms are
"building up stockpiles of patents on processes like software-based
pricing, trading and risk analysis systems and products like credit
cards, exchange-traded funds and exotic derivatives." So far,
no
firm has attempted to enforce its patented intellectual property, but
that could change if firms' profits decline and they look to boost
revenue by licensing the products or technologies they have patented.
DISABLED
HEDGE FUNDS
- Talk about dumb...Citigroup has been fined $1.12 million by the NASD
and disciplinary action is being taken against a number of Citigroup
brokers for obtaining "mutual fund sales charge waivers by falsely
claiming their customers were disabled." That's dishonest,
and
here's the really dumb part...some of the waivers were submitted for
hedge funds, claiming they were "disabled individuals." One
broker worked with a lot of sick people: he sought disability waivers
for over 80% of his clients.
FED
STEADY AT 5.25%
BUT WARNS OF FUTURE RAISES – After two years and
17
consecutive increases, the Federal Reserve voted to hold the line on
interest rates at 5.25%. However, if inflation picks up again, expect
Ben Bernanke to reinstate the incremental raises of the past.
NASD
FINES ING
– ING will pay $7 million to the NASD for collecting payments
in
exchange for giving preferential treatment to certain mutual funds.
FEWER
ARBITRATORS
– In order to speed up the arbitration process, the NYSE is
asking that that one arbitrator, rather than three, handle cases where
compensatory and punitive damages are less than $200,000.
GRASSO
SAGA -
Former NYSE chairman Dick Grasso's trial on whether his $193 million
compensation package was excessive for a non-profit institution has
been delayed until October 16. The judge has ruled that the
case
will be heard without a jury (a bench trial), a decision that Mr.
Grasso is appealing. Adding to the controversy is news that
Mr.
Grasso's 2003 pay package was calculated using, in part, longer-lived
female life expectancy statistics, which allegedly boosted the size of
his pay package.
|
|
|
|
METLIFE
LOOKING? - MetLife is
accumulating cash and is said to be looking for another major
acquisition to follow up on its $11.8 billion Travelers Life purchase.
IRS
ADMISSION - In testimony before
a Senate committee, IRS Commissioner Mark Everson admitted that
"superrich taxpayers are using accounting tricks to avoid paying their
full share of taxes, and they're getting away with it." The
lost
taxes amount to some $40 billion to $70 billion each year and,
according to the IRS Commissioner, "we have real difficulties finding
out what's going on." Now that's reassuring!
CONSUMER
REPORTS ON NURSING HOMES - Consumer Reports
has a new and
comprehensive report on the quality of care at nursing homes. Among the
findings: *Not-for-profit nursing homes are more likely to provide good
care than for-profits, based on our analysis of inspection surveys,
staffing, and quality indicators. *The same analysis shows that
independently run homes are more likely to provide good care than
chains. *Through its influence in politics, the industry has whittled
down the protections of the 1987 nursing home reform law. In
addition to general findings, the report includes a state-by-state Quality
Monitor list of nursing homes more likely to provide better
quality
care and facilities that should be avoided.
GIVE
HIGHER RATES
AND WEB BANKING DEPOSITS SOAR – Emigrant Savings
Bank is a
family-owned institution with 36 branch offices and has never attracted
much business outside of New York City. That changed dramatically when
the bank started offering "some of the highest interest rates in the
country" via the Internet. Web customers now number about 260,000 and
made about $7 billion in deposits since the bank started offering the
accounts in January 2005. In just a year and a half,
EmigrantDirect has taken in more deposits than its brick-and-mortar
counterpart had accumulated in 155 years. The key was higher rates.
Capital One, HSBC, Countrywide Financial, Washington Mutual, and
Citibank are among the big names now offering high-yield savings
accounts for Internet clients, moves that have quickly bolstered their
deposits--sometimes at the cost of more established players.
ALLIANZ
LAY OFFS – Allianz,
the nation's largest seller of indexed annuities with about one-third
of the market, will lay off about 200 employees – about 7% of
its
3,000 U.S. workforce. EIA sales have been slowed due to rising interest
rates and uncertainty over whether they will continue to be regulated
as insurance products or if the feds start to regulate them as
securities.
S&P
EARNINGS UP
- Reuters Estimates reports that second-quarter earnings forecasts for
S&P companies will show a 12.5% gain over the year-ago period.
The
market isn't reflecting this strong growth due to concerns about the
economy, interest rates and the conflict in the Middle East.
IBM
GETS FAVORBABLE RULING ON PENSION CHANGE
– It was bad news for 140,000 older employees of IBM when a
federal appeals court ruled the company did not commit age
discrimination by changing its pension coverage. In 1999, IBM adopted a
"cash-balance" pension plan, which awards employees with a lump sum
after departing a company. Older employees, however, claimed
that
they were denied the returns they would have received through their
previous defined benefit plan, in which they earned more retirement
benefits during their last years of service. In addition, the
new
Pension Protection Act provides greater legal protection to cash
balance/hybrid plan arrangements.
HURRICANE
SEASON - The Tropical
Meteorology Project forecasts fewer storms than originally predicted,
but says the 2006 season will be more active than normal.
HCA
LEVERAGED BUYOUT
– The HCA buyout will apparently go on without a bid from
rival
Blackstone. Blackstone has decided the venture would be too
costly. A group led by Bain Capital and Kohlberg Kravis
Roberts
has offered to pay $33 billion for HCA in what would be the largest
leveraged buyout in history.
SEC
WANTS DELAY OF SOX AUDIT –
Fearing that compliance with the Sarbanes-Oxley Act might impose big
burdens on small businesses, the SEC is asking that the July 15, 2007
deadline for meeting the new audit requirements be delayed by six
months. The companies could also wait until the end of 2008
to
have outside auditors test and certify their controls.
|
 |
|
Need a
Free Speaker?
Use
Technology and Bill O'Quin, CLU,
ChFC,
RFC!
Bill is the
co-creator of the Virtual Sales Assistant and offers a
variety of free seminars for company, agency and association groups.
All speaking engagements are free and conducted via the Internet, so
no travel
costs are necessary. You provide an Internet connection, a speaker
phone and projection system. Bill will do the rest.
Currently
Bill's most popular
presentation
is:
The
Priority Planning Review.... A
Simpler Way to Approach Prospects.
A simple,
non-threating approach is
the key to effective and
unobtrusive prospecting. Bill will not only tell you how to do this,
but
will also give you the tools necessary to actually conduct a
stress-free approach.
For availability, contact
Bill at boquin@ix.netcom.com.
(Last minute requests for a stand-in speaker can usually be
accommodated.) |
|
|
 |
BIG
"I" WEIGHS IN ON CONTINGENT COMPENSATION
- Following the latest settlement by a national insurer, the
Independent Insurance Agents & Brokers of America (the Big "I")
denounces the continued assault on a legal compensation practice used
in businesses all across America. "Like virtually all other businesses
distributing products through a sales force, the insurance industry has
developed effective compensation practices to reward sales excellence.
This includes the ability of insurers to choose how to pay for strong
sales performance, just as is done in virtually all sales environments.
Incentive compensation is one form of compensation used for this
purpose, and companies doing business in a competitive, free-market
economy should be able to continue to choose to use it as well as any
other legal form of compensation. We applaud the lead taken by Liberty
Mutual, which is standing up for free market principles and the right
to provide incentive compensation for its distribution force. We do not
believe that illegal activities, which should be pursued and
prosecuted, should be confused with sound free-market sales practices,
including the use of incentive compensation."
PENSION
PROTECTION
ACT OF 2006 - This legislation passed the Senate on August
3 and
is awaiting the President's signature. While primarily
concerned
with pension reform, including defined benefit plan funding, education,
hybrid plans and a variety of pension and employee benefit rules, the
Act also makes permanent a variety of EGTRRA provisions that were due
to expire after 2010 and tightens up a number of charitable giving
rules. CCH has a good overall summary of this legislation
available here.
If you're particularly interested in the pension provisions of the Act,
Deloitte & Touche provides a fairly in-depth analysis in its "Securing
Retirement: An Overview of the Pension Protection Act of 2006."
NYL AND
MDRT
- For the 52nd consecutive year, New York Life leads the MDRT with
2,331 agents achieving MDRT membership.
"TRIFECTA
BILL"
– Following passage of the Pension Protection Act of 2006,
the
Senate failed to pass the so-called trifecta bill that would have
reduced estate tax exposure, increased the federal minimum wage and
extended a variety of popular expired tax breaks, such as the deduction
for state sales taxes. While the future of estate tax and
minimum
wage legislation is uncertain, Kiplinger
predicts that Congress will reinstate the expired tax breaks
retroactively before adjourning for the year.
TASK
FORCE FOR THE
FUTURE - Leaders from 18 life insurance industry
organizations,
including the ACLI, GAMA, LIMRA, MDRT and NAIFA, are participating in
the Task Force for the Future, an initiative designed to help the
industry better help Americans meet their financial security
needs. Objectives of the group include improving financial
literacy, increasing awareness of the importance of insurance,
investing more heavily in recruiting new people to the industry and
resisting and removing regulatory barriers.
NASD
AMENDS VA –
Although the NASD has amended a controversial proposal that would boost
standards involving the sale of deferred variable annuities, many in
the industry are still unhappy with the proposal that would require
sellers of deferred variable annuities to meet special suitability
requirements. Industry leaders feel that the current NASD suitability
rules already cover variable annuities.
REGISTERED
REPS'
GROSS STAGNANT – According to an annual study by
the
Securities Industry Association, median gross production for retail
registered representatives was up about 1% from 2004, to $317,000 in
2005, according to a survey of retail broker compensation trends.
Average gross revenue for retail brokers fell about 1% to $414,000 last
year. Following an industry focus on better clients with higher account
sizes, the average number of accounts per rep fell 21% to 414 from 526,
while the average value of a customer account grew 14% to $183,706.
FPA
SCORECARD
– The FPA has produced a Practice Management Scorecard that
allows planners to compare their practices with those of similar
planners using benchmarks for revenues, assets, clients, revenue by
product, financial adviser information and practice performance.
Advisers in New York and northern New Jersey, San Francisco, Chicago,
Boston, Dallas/Ft. Worth, Denver and Memphis will be allowed to
participate in a pilot of the Scorecard and receive a free benchmarking
report by visiting FPA
Practice Management Scorecard.
PENSION
REFORM
SHOULD BOOST FUNDS - Vanguard predicts the new pension
legislation may bring 5.5 million additional people into 401(k) plans
through automatic enrollment in the next five years. Mutual funds stand
to win big as $2 trillion in new money is expected to be channeled into
retirement funds.
529
COLLEGE SAVINGS
PLANS – Once the bill is signed into law, the
Pension
Protection Act of 2006 will clear up a great deal of confusion in the
educational planning area by exempting contributions for 529 college
savings plans permanently. Prior to this, the plans had a 2010 sunset
on contributions.
INSURANCE
NOT ON
AFFLUENT RADAR – When asked what service wealthy
consumers
want from their primary financial firm, most answer "investment
advice." A study by the Spectrem
Group of affluent and wealthy consumers who have at least
$500,000
in investable assets ranked "brokerage services" number two with
"insurance services such as life insurance and property casualty
insurance" next to last, followed only by "charitable giving
advice." The study also revealed that most were reluctant do "one stop
shopping," while 34% were already using just one financial services
firm.
BORROW
AGAINST
RENEWALS – Oak
Street Funding, one of a few finance companies that allow
producers
to secure loans using anticipated streams of insurance policy
commission revenue, just raised about $250 million for that purpose.
Converting your renewal income to cash can be helpful in succession
planning, mergers, acquisitions and/or for working capital.
WHAT IS
OLD IS NEW
AGAIN - New York Life has introduced its Custom Whole Life
Insurance, which allows customers to decide how long they want to pay
premiums by choosing a policy paid-up date at the time of purchase.
Once the policy is paid-up, consumers have the option to draw an income
stream from the cash value in the policy. This innovative
product
allows individuals to retain the benefits of life insurance and the
ability to accumulate cash value on a tax-deferred basis, while being a
potential source of supplemental retirement income if the client no
longer has a need for the full death benefit.
HOW
LONG CAN HUMANS
LIVE – Apparently, a lot longer than we do
now. The
science of anti-aging is likely to achieve major breakthroughs in
coming decades that will sharply increase life expectancy, a leading
British academic predicts. By as early as 2036, the average lifespan in
the developed world may be decades longer than it is now. If
you
want to see a scary guy and read some scary prognostication about
ultra-long lifespans, check out Aubrey de Grey and his Website at www.sens.org/index.html.
DON'T
BURDEN THE
FAMILY - A Mutual of Omaha survey reveals that about 41%
of LTC
insurance purchasers say their main motivation for buying coverage is
to avoid being a burden on their family. Additionally, 65% of the
survey participants had talked about LTC coverage with family members,
and 53% said family members were involved in their decisions to
buy.
|
|
|
