Best Practices in Buy-Sell Agreement Planning (November 2018)
One of the most important skills an advisor can offer to clients who own a business is the ability to understand and explain business planning needs. In the area of buy-sell agreements, the depth of technical knowledge, tax expertise, and practical experience necessary to do this thoroughly is much greater than it might appear. The results of a 4-year study of over 1,500 buy-sell agreements reveal a wide range of best practices and practical recommendations. Financial advisors who are aware of the client’s circumstances and goals can identify questions for discussion with the client’s attorney, suggest updating where necessary, and help ensure that there is adequate funding of needs upon death and disability.
Author: April Caudill, JD*, CLU, ChFC, AEP, is a business and advanced solutions director with Principal Financial Group®, Des Moines, IA 50392. She is part of the business and advanced solutions team that assists advisors with tax and legal concepts related to advanced planning and business owner needs.
A Financial Advisor’s Guide to Avoiding Required Minimum Distribution Land Mines (April 2018)
In 2016, approximately 2.5 million taxpayers turned 70 years old. In 2017, these baby boomers turned 70½. People with money in tax-deferred retirement accounts (other than Roth accounts) are required to begin taking distributions from these accounts at age 70½ and pay income taxes on those distributions. The yearly minimum distribution amounts are calculated using account values and ratios set forth in IRS tables of longevity. Exceptions and adjustments apply to surviving spouses, and different rates apply to nonspouses who inherit IRAs. This article provides guidance on these distributions.
Author: Alisha M. Harper, JD, LLM, was a senior attorney for the IRS Office of Chief Counsel for 8 years prior to becoming a full-time associate professor at Bellarmine University in 2012. Her areas of focus are tax practice and procedure, individual income taxation, flowthrough taxation rules, and online pedagogy. Alisha is a member of the Kentucky and Louisville bar associations.
Author: Jonathan P. Smith, CRPC, APMA, is a financial advisor at Encore Wealth Management Group, a private wealth advisory practice of Ameriprise Financial. Jonathan, along with two other advisors in the practice, focuses on comprehensive financial planning for individuals, businesses, and institutions, including advanced investment solutions.
Author: Patricia Miller Selvy, PhD, CPA, CGMA, has owned her own small business and worked in both industry and public accounting in addition to teaching at the University of Louisville and Bellarmine University. She has served on the Family Scholar House Board, the Audit and Finance Committees, and on the Kentucky State Parks Commission. Her areas of focus have been in teaching graduate courses in financial and managerial accounting, corporate governance, and state and local taxation, and undergraduate courses in financial and managerial accounting, individual and corporate taxation, as well as in the areas of auditing and theory. Her research focus has been in the areas of teaching pedagogy, state and local taxation, Social Security, and capital budgeting, among others. She is a Kentucky CPA and holds memberships in the AICPA and the Kentucky Society of CPAs.
Redemption Fees: Reward for Punishment (March 2018)
Mutual funds impose redemption fees with the intent of maximizing the wealth of fund shareholders through discouraging them from engaging in frequent trading activity. This paper empirically analyzes whether and how redemption fees achieve this goal. The research finds that funds with redemption fees outperform their counterparts by 1.0 percent to 1.4 percent a year. Moreover, performance increases by 0.5 to 2.4 percentage points a year following the initiation of a redemption fee such that the performance differential is attributable to the fee. The authors find that the fee improves performance through changing portfolio characteristics. Most notably, cash holdings decrease after fee initiation.
Author: William Waller, PhD, has had his research published in peer-reviewed journals, such as The Review of Financial Studies and The Journal of Financial and Quantitative Analysis. He received his doctoral training in finance at UNC—Chapel Hill.
Author: David Nanigian, PhD, CFP, is associate professor of finance and personal financial planning program director in the Mihaylo College of Business at California State University, Fullerton. His research focuses on mutual funds and is frequently cited in global media outlets such as The Wall Street Journal, The New York Times, and the Associated Press. Nanigian earned CFP® certification, and he holds a PhD from Texas Tech University.
Author: Michael Finke, PhD, CFP, is dean and chief academic officer at The American College of Financial Services. Finke’s research focuses on financial planning regulation, investments, and individual investor behavior. He has published over 50 peer-reviewed articles and is widely quoted in leading publications such as The Wall Street Journal, The New York Times, and Time. He earned CFP® certification, and received doctorates in consumer economics from The Ohio State University and finance from the University of Missouri.