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Wealth Management for Alaskans

Wealth Management is Big Business in Alaska. Local investment and banking firms say their business has increased during the last few years as the population ages. Census figures indicate the number of Alaskans 65 and over increased 54 percent since 2000. With volatility in the stock market and the possibility of changes in tax policy, younger Alaskans realize they need guidance preparing for retirement and protecting their hard earned assets.

More than 1,700 investment representatives are registered with the State, says Kevin Anselm, enforcement and securities chief for the Alaska Division of Banking and Securities. Roughly 78,000 stock brokers are registered to trade securities.

Trust services in Alaska are available through regulated financial institutions, and include Alaska Trust Co. and Alaska USA Trust Co. which are chartered under Alaska law, says Anselm’s colleague, Katrina Mitchell, chief bank examiner for Alaska. Of the six banks headquartered here, Northrim and First National Bank Alaska have trust departments.

“Trust business is super specialized and super regulated. It is best to seek a referral from your attorney or financial institution,” Mitchell says.

There are so many choices in financial advisers, brokers and trust companies the average Alaskan may feel it is as challenging as scaling Mount McKinley. Maybe that is why a number of firms display scenes of mountains in their marketing material.

Numerous firms market themselves specifically as “wealth managers.” However, “wealth management” is more a term of art than a legal category, Anselm says. An advisory firm may or may not be regulated, depending upon the services offered. Investment advisers, for example, are regulated under state and federal laws, depending upon the amount of money in question. But there is no specific regulation of wealth management, which covers a wide range of services.

Anselm recommends doing business with someone you know and trust, who has a track record and is certified or licensed. “Don’t give money to someone you recently met at church or the PTA,” she advises. “Look on the state’s website for actions against brokers and advisers. The Financial Industry Regulatory Authority is another database for checking credentials and compliance.”

Certifications and licenses are one measure of an advisor. There are Chartered Financial Consultants, Certified Financial Planners and Certified Financial Analysts who have studied with professional associations and passed examinations judging each individual’s knowledge of finance and regulations. Stock brokers must be registered with FINRA and licensed to sell stocks and bonds. Such certifications do not mean the person has earned a degree in finance or economics.

Choices range from national firms like Wells Fargo Private Bank to homegrown businesses such as Alaska Permanent Capital Management. There are specialty firms such as Alaska Trust Co. and then there are others calling themselves generalists. Each type of business offers a style that differs with services, licenses and fees. Some operate on a percentage basis fee; others charge commission for each separate service or transaction.

Alaska Permanent Capital Management was founded by Dave Rose, the first director of the Alaska Permanent Fund, and is now led by his son, Evan. The company manages and advises on $3 billion in assets for government agencies, including the Permanent Fund, nonprofit organizations, foundations, utilities and corporations as well as individuals. APCU charges a fee based upon a percentage of assets managed. They do not sell insurance or other products, but do make referrals to other companies for those products.

Laura Gerber Bruce, CFP, ChFC, vice president of client relations, differentiates the firm’s style as “high level strategizing to minimize taxes and maximize investment.”

“We like to say it only matters what you keep. Management is not just about growing one’s wealth, it is protecting it as well, “ Gerber Bruce says.

Because the term wealth management can be so intimidating to people, she prides herself on demystifying the process for her clients.

APCM’s corporate standard is that every person who talks with clients is a CFA, CFP or has a minimum of 20 years of experience in investing. Most, like Gerber Bruce, who previously had a career in banking, may have degrees in finance.

Protect and Preserve

Protecting and preserving assets is a common thread among wealth managers. Doug Blattmachr, president and part owner of Alaska Trust Co., specializes in establishing trusts for clients who wish to protect assets and assure how their wealth is transferred. One of several Alaskans who worked to pass the Alaska Trust Act of 1997, Blattmachr is steeped in the intricacies of trust law. He began as a bank teller and has worked in every phase of the trust industry.

Alaska Trust Co. does provide planning, but does not sell products on a commission basis. ATC’s fee is a percentage of assets managed. Other services recommended, such as insurance or long term care, would have to be purchased from other companies and attorneys, for which the firm makes referrals. For example, an attorney would draw up the trust document and Alaska Trust Company would serve as the trustee.

In implementing a client’s financial plan, Blattmachr uses the Unified Management Account method, which frequently rebalances investments using mutual funds, stocks, or any other securities. “We seek advice from the best investment minds available and mix those styles,” Blattmachr says. His staff does the actual purchase based upon the analysis of the many managers consulted. They may override any adviser customizing investments to reflect the trust grantor’s values and preferences.

Full Package

In contrast, 160-year-old Wells Fargo Private Bank offers the full package of services and products from within its many divisions. TerriLee Bartlett, wealth adviser in the Wealth, Brokerage and Retirement Division, says services include business services, lending and investing, trust establishment and overall financial planning. Wells Fargo offers some proprietary products and may charge commissions.

The company offers a team approach that will include professionals like JoEllen Weatherholt, CFP, a senior investment strategist, who came to Wells Fargo with the National Bank of Alaska merger, where she worked in lending and investing; and Jim Plymire, a trust and fiduciary specialist with a Certified Trust and Financial Advisor designation. Their skills and experience might take a client from initial investing at mid life to oversight of the individual’s care in a nursing home or other special needs care.

“Our clients are individuals and businesses, rather than government or institutions, and typically in the $5 million bracket,” Weatherholt says.

On the other end of the spectrum is independent adviser, Jim Thiele, who changed careers 30 years ago when he went from being a scientist to following his passion for investing. He trained to be a CFP at the College for Financial Planning and the Institute of Certified Financial Planners. He is affiliated with Financial Network Investment Corp., through which he is a registered representative and an advisory associate. FNIC is his support group for researching stocks and trends, Thiele says.“Most of my clients are friends,” he says, who characterizes his approach as not so much about managing material possessions. “I try to look at the broader definition of wealth—the client’s aspirations and dreams in the context of financial realities. Some of my clients live off the grid in what might be called the Alaska lifestyle.”

Thiele personally selects the products or stocks he recommends to his clients, and either takes commissions or charges fees based upon client preference.

All the firms emphasize personal attention to each client’s circumstances, assets and values. Each has its own method of discussing options with clients to determine what advice to give.

Gerber Bruce says her process begins with assessing the current tax situation, health, health care needs, insurance and obligations, as well as tolerance for risk, so that any investment choices are more about the client’s best interests rather than the suitability of a stock.

Blattmachr doesn’t like standardized questionnaires. He prefers to have a conversation with his clients to draw out their wishes and individual needs for the future.

With the resources of a diversified, coast-to-coat financial services company, Bartlett employs sophisticated tools to assess client needs and desires before making any recommendations. One example is the tactile approach to helping clients articulate their tolerance for risk, their short and long-term goals and circumstances. Clients select statements about giving to charity, supporting parents and children, or pursuing a dream from a deck of “discovery cards” used to rank their desires and priorities.

“When couples do this independently, it highlights areas of agreement or differences and focuses the discussion on those aspects,” Bartlett says.

“Everyone who wants to retire eventually and be able to care for themselves and their family needs wealth management,” Gerber Bruce says.

Colleagues and competitors in the game all agree. Choosing the right adviser depends upon the size of one’s pocketbook, one’s dreams for the future, and how comfortable the individual is with the reputation of the firm, their fee structure and the expertise of the adviser.

 

SIDEBAR

Crowdfunding Fraud: Federal JOBS Act preempts state review

What’s in a name? When it comes to legislation, names may not tell the whole story. The Jumpstart Our Business Startups (JOBS) Act, is billed as a jobs creation law based upon “crowdfunding.” That’s the Internet-based method of raising capital for new start-up businesses. But the law’s title obscures an unintended consequence of the jumpstart legislation.

Not Such a Good Law

Buried in the law is a provision preempting states from reviewing crowdfunding offerings before they are sold to investors, North American Securities Administrators Association (NASAA) president, Jack E Herstein says. This leaves little scrutiny of the offerings until after any fraudulent sale.

“The JOBS bill President Obama signed recently is based on faulty premises and will seriously hurt all investors by either eliminating or reducing transparency and investor protections. It will make securities law enforcement much more difficult,” said Herstein, who is also an assistant director of the Nebraska Department of Banking & Finance, Bureau of Securities. “Investors need to prepare themselves to be bombarded with all manner of offerings and sales pitches. Congress has just released every huckster, scam artist and small business owner and salesman onto the Internet,” he added

Pending Investor Crisis

State securities regulators have been the first line of defense for an investor considering giving money to a broker or investment adviser. Extensive employment, disciplinary and registration information about a stockbroker or investment adviser is available through most state securities regulators. One could ask for records and any complaints about a stockbroker from the Central Registration Depository (CRD). This computerized database contains licensing and registration information on more than 650,000 stockbrokers.

In 2004, the Bush administration preempted numerous state consumer financial protection laws to promote what they termed, “financial innovation.” That resulted in many of the ill-considered practices in mortgage lending that led to the mortgage debacle,” according to NASAA.

By removing state screening functions in the Jumpstart Startups act, Congress puts consumers at another disadvantage, says Kevin Anselm, Enforcement and Securities Chief for the Alaska Division of Banking and Securities.

“We view this as a pending crisis for investors,” Anselm says.

Vet, Vet, Vet and Vet Again

When considering a prospect made over the Internet, an investor should search the names of all persons and companies connected to the investment being offered. The Internet offers anonymity, and scam artists take advantage of this. Do a search for the name of the person offering the investment and the companies involved in the investment. If there are few results, or their name doesn’t appear anywhere outside of the one investment program they’re offering, that’s a red flag that they may be using multiple aliases, or hiding behind a fake identity.

The Alaska Division of Banking and Securities advises Alaskans to check out any firm or broker offering to invest their money on the state database: http://commerce.alaska.gov/bsc/home.htm

In addition to state databases there are a number of sources for checking credentials and complaints: www.nasaa.org/3736/savingsandinvesting/

www.advisorinfo.sec.gov

Joette Storm is a writer living in Anchorage.

This article first appeared in the June 2012 print edition of Alaska Business Monthly magazine.

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