challenges in changing regulatory and economic environment financial planning: presented by herbert...

Challenges in Changing Regulatory and Economic Environment

Financial Planning:

Presented by

Herbert K. Daroff, J.D., CFP®

Baystate Financial Services, LLC

Boston, MAHDaroff@baystatefinancial.com

2004 World Services Group Financial Services Meeting, Miami

May 7, 2004MetLife

Achieving the Dynamic Needs of High Net Worth Individuals

TIME Magazine

Sept. 29, 2003

Bad News = Big Headlines

Bad News Travels Fast

‘...the NASD is taking a “novel” approach and they’re sending the message that firms should “dedicate serious resources” to resolving problems after they were detected.’

She Was Found Guilty … The Brand Was Found Guilty

“By going to such lengths to serve a client, Mr. Bacanovic underscored how thin the line can be between exemplary client service and unethical or even illegal behavior.”

“The brand will never be the same the way it was.”

Troubled AnnuitiesMore than 800 insurers these days are considered vulnerable, or financially weak, by at least one of the major rating agencies.

Company Number of Vulnerable Ratings

Bankers Life & Casualty 5Conseco Annuity Assurance 5Allmerican Financial 4Old West Annuity & Life 3Old Standard Life Ins. 3Security National Life 3

Financial Planning

… is the dynamic process of helping people

• identify where they are financially today;

• identify where they want to be in the future; and

• then, achieve their financial goals, needs and objections.

Six Step Process

1. Mutually Defined Scope of the Engagement• planner’s expectations• client’s expectations

2. Data Gathering• goals, needs, and priorities• factual information

3. Analyze Data and Evaluate Alternatives

4. Present Recommendations

5. Implement Agreed upon Solutions

6. Periodically Monitor and Revise as Necessary

Changing Regulatory and Economic Environment

Changing Lawsand Regulations

EconomicConditions

• Split-Dollar

• NASD/SEC Compliance

• Retirement Funding Limits

• Estate Taxes

• 15% Dividends

• Insurance & Annuity Products

• Individual Securities Mutual Funds Managers of Managers

Life Insurance Products

Low Interest Rates (beginning to rise):

UL -- mostly short term debt -- increased performance

WL -- mostly longer term debt -- decreased dividends

VUL -- FLEXIBILITY

ClientLife &HealthIns. Co.

FinancialPlanners

Property &CasualtyIns. Co.

CPA

Banks

Evolution of Financial Services

WireHouses

Mutual Funds

Investments

Trusts Cash Management

Attorney

Evolution of Financial ServicesFirst Stage of Consolidation

FinancialPlanners

CPA

Banks

Trust Cash Management

Attorney

Client

Ins. Co Multiple LinesLife &HealthIns. Co.

Property &CasualtyIns. Co.

WireHouses

Mutual Funds

Ins. Co B/D

NES

Walnut St.S

ec.

MetLife

Nathan &

Lewis

Investments

Evolution of Financial ServicesSecond Stage of Consolidation

Attorney

Client

CPA

and

FinancialPlanners

and

Banks

Licensed to sell Product

Insurance

and

Investments

Licensed Insurance

Agents

Products

RegisteredReps.

Note: Attorneys in Boston have been investingtrust fund assets for many years

Evolution of Financial Services

Products Advice

Commissions Fees

Who is our Competition?

Other Advisors

Good Advice Bad Advice

Analysis Paralysis

The Internet

Do-it-yourself

Procrastination

Indecision