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Global and U.S. stock markets have been hitting record highs, despite the “disturbing” headlines writes Russ Koesterich at BlackRock. He sees three key reasons for this disconnect. “First, there’s no clear link between these events and near-term economic or earnings growth. Yes, an escalation of violence in Ukraine could lead to increased sanctions against Russia and potentially slower growth in Europe, but thus far none of the parties involved in the crisis seem inclined to up the ante.
“Second, over the past five-years investors have been conditioned to “buy the dips.” Anyone who bought equities during the U.S. debt ceiling debacle or the showdown over European sovereign debt has been well rewarded. Finally, while these issues are obviously significant from a geopolitical perspective, some have little systemic significance for the global economy. The events in the Ukraine and Thailand are national in nature, and together these countries account for less than 3% of the MSCI Emerging Market Index.”
Kristin Barry, Vanguard Financial Advisor Services, highlights the top three reasons that families fail to have the wealth transfer conversation.
1. “Fear of a negative effect on the work ethic of their heirs. If my heirs know what level of wealth they stand to inherit, will they continue working as hard as they do today?”
2. “Second is that we were never really taught to discuss wealth. It hasn’t been a topic that we bring to the dinner table dialogue. So it’s just that upbringing of never being taught to discuss this topic.”
3. “And the third is a fear that the heirs aren’t mature enough to handle this conversation.”
It’s difficult to have talks about wealth transfer and inheritance with family members but it is also necessary. A study by the Institute for Preparing Heirs, cited by Vanguard, found that 70% of wealthy families lose a chunk of their assets during the process because of a lack of communication and trust in the family.
Nouriel Roubini spoke at an event hosted by Aberdeen Asset Management in New York and said there are six things that worry him now. Ben Rooney at CNNMoney sums up Roubini’s top concerns.
1. A Chinese bumpy landing — Roubini doesn’t think China will have a hard landing but he does think growth will “surprise to the downside.”
2. The Fed acts too quickly — Investors largely expect the Federal Reserve to hike rates sometime in 2015, but if inflation ticks up and depending on how the new members of the FOMC vote, rates could tick up sooner.
3. The Fed is too slow to act — If the Fed waits too long it could create a stock market bubble.
4. New risks for emerging markets (paraphrased from Rooney) — “Many of the factors that had supported these economies in the past are now working against them.”
5. The Ukraine crisis continues — Roubini thinks investors are too lax about the threat of another “cold war.”
6. The rise of China — Roubini thinks there is a risk of geopolitical conflicts in Asia as China continues to rise. “The risk of an outright conflict is one you cannot discount,” Roubini said.
The Importance Of Revenue Sharing Relationships With CPAs And Attorneys (The Wall Street Journal)
High-net worth clients typically rely on a range of experts, including financial planners, accountants and attorneys. In a new WSJ column, Paul Saganey, president and founder of Integrated Financial Partners, writes that if these various experts don’t work together, it can actually be a disservice to the client. “I’ve found that the best results are achieved by building a team-focused dynamic with these professionals,” writes Saganey.
“We do this by engaging CPAs and attorneys in a revenue-sharing relationship, where all revenue derived from the financial-planning process is shared with the CPA or attorney and disclosed to the clients in advance. Not only does this lead to more efficient and effective service for the client, but it also unlocks a potent new source of referrals for advisers and provides an opportunity to significantly grow their practice.”
House Majority Leader Eric Cantor suffered a surprising loss to Dave Brat, a Tea Party-backed professor on Tuesday. This shakeup of the House could lead to stricter oversight of financial advisors. “Changes in Republican leadership could elevate Rep. Jeb Hensarling, chairman of the Financial Services Committee, to a higher post and result in his chairmanship being filled by Rep. Randy Neugebauer of Texas or Rep. Ed Royce of California, who are viewed as receptive to stricter SEC advisor regulation, according to advisor industry sources,” writes Ted Knutson at FA Mag. But two other potential candidates have an anti-regulation stance similar to Hensarling and they might not be as open to stricter regulations for advisors, sources told Knutson.
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