Practical analysis for investment professionals
16 January 2012

Private Wealth Roundup: The Eurozone Crisis

While the eurozone crisis dominated the news in recent weeks, there were plenty of other articles on topics of interest to wealth advisers and their clients. Here, in no particular order, are my top picks:

  • If there is one topic that is sure to raise hackles, it is taxing the wealthy. And sure enough, a Wall Street Journal op-ed titled “The Conservative Case for a Wealth Tax” generated about 500 comments at last count.  In the article, Stanford University professor Ronald McKinnon called for “a moderate flat tax — say 3%” on those whose wealth exceeds $3 million.  But, as Robert Frank pointed out in a subsequent post, “The Problem with a Wealth Tax”, on the Wealth Report blog, the concept has “a fatal flaw” — namely, valuation. “Determining a rich person’s precise net worth is difficult even for the wealthy themselves, let alone the government,” he wrote. “And that’s due to the particular nature of the wealth of the wealthy.”
  • Many wealthy families have significant art collections or want to start building one, and so one of the services private banks offer their clients is access to their art advisory team. In recent years, some have even argued that art should be considered an alternative asset class. But is art an investment? According to Reuters blogger Felix Salmon, it most definitely is not. “Art doesn’t have returns, it just sits there, being expensively insured. It pays no dividends, and it can’t be marked to market, since the only way to find out the market price for an artwork is to sell it,” Salmon wrote, in response to an FT article that began: “The art market defied economic gloom to return 11 per cent to investors in 2011, outpacing stock market returns for a second consecutive year.”
  • Deciding whether to embrace social media is a tough call for most wealth managers. Those who do must ensure they are in compliance with regulatory requirements. This SEC alert is a go-to resource for investment advisers who use social media.
  • The start of a new year is often a good time to take stock of one’s estate planning. In “The Flexible Irrevocable Trust,” on LifeHealthPro.com, the authors discuss the use of an irrevocable life insurance trust (ILIT) as a vehicle for wealth transfer. If structured properly, they contend an ILIT can offer more flexibility to the grantor than other types of irrevocable trusts.
  • “When it comes to managing money in 2012, investors should not attempt to predict the future but rather to reduce the year to some plausible scenarios and work out the rough probabilities of each,” according to John Authers, a columnist at the Financial Times.  This year, he said, is going to be another year of “sideways crab-like markets.”

For more news and trends, visit the Private Wealth Management Community of Practice.

About the Author(s)
Lauren Foster

Lauren Foster is a content director on the professional learning team at CFA Institute and host of the Take 15 Podcast. She is the former managing editor of Enterprising Investor and co-lead of CFA Institute’s Women in Investment Management initiative. Lauren spent nearly a decade on staff at the Financial Times as a reporter and editor based in the New York bureau, followed by freelance writing for Barron’s and the FT. Lauren holds a BA in political science from the University of Cape Town, and an MS in journalism from Columbia University.

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