First Look: December 2008

December's Top Stories

Centered

For advisors, and their clients, the conflict between head (rational judgment) and heart (emotional reaction) is always present, but it’s probably never been more apparent than in the current environment. On the one hand advisors are watching client account balances diminish (not to mention firm revenues as the level of assets under management drops) and know their clients expect them to make sense of it all and do the right thing, whatever that is. At the same time, they also know that one of their most important jobs is to help their clients cope with the crisis and keep those clients from doing something imprudent as a result of panic. And advisors certainly can’t give in to the panic themselves. Our annual look at how advisors try to match their clients’ principles with their portfolios has been transformed this year into how clients’ distressed portfolios have challenged not just their own principles, but those that advisors hold dear as well.

Addition by Subtraction

For many wealthy families philanthropy is an important part of their identity, an obligation that comes along with privilege. This can be particularly so for those whose good works span several generations. As Olivia Mellan notes in this insightful article philanthropy is more a matter of nurture than nature and as with many good habits, it’s best introduced at an early age.

Yearning to Be Free

As they watch their clients’ assets and their own incomes diminish many financial professionals within firms whose reputations have been sullied must defend the honor of their employers—and their own integrity, by association. As Mark Tibergien notes in this month’s “Formulas for Success” column, for these individuals there are several options, besides staying where they are: form or join an RIA, form or join a broker/dealer, or create a hybrid firm with boots planted in both the broker/dealer and RIA worlds.

Taking the Good with the Bad

It’s unfortunate but true that when the markets and economy are at their worst, advisors tend to see a rush of new business. The current financial crisis is certainly proving this point, as advisors are fielding a bunch of new referrals and new money from existing clients is streaming in. But along with this good news also comes some bad—advisors’ assets under management (AUM) have fallen in tandem with the markets.

Also at InvestmentAdvisor.com

Schwab Institutional Reorganized; Charles Goldman Out

Charles Schwab Corp. said November 17 that it had created a new business unit called Institutional Services that will combine its RIA, TPA, and corporate benefits plan sponsor units under the leadership of executive VP Jim McCool. McCool, who had headed Schwab’s Corporate and Retirements Services unit, replaces Charles Goldman, who as executive VP had headed Schwab Institutional since May 2007 but has now left the company. McCool joined Schwab in 1995 when it acquired The Hampton Company, the retirement plan services company founded by now Schwab CEO Walt Bettinger; McCool was one of that firm’s first employees.

Putnam to Merge Six Equity Funds and Lay Off 47

Bob Reynolds, the former Fidelity executive, has taken additional steps to make his mark upon Putnam Investments, announcing November 17 that the firm will lay off a total of 47 people, including 12 portfolio managers, from its 2,500-person workforce and will eschew Putnam’s traditional team-based approach of managing money in its equity mutual funds in favor of a “decision-making process that vests full authority and responsibility with individual fund managers.” The steps announced by Reynolds, who became CEO of Putnam in July 2008, include merging six equity funds into larger “lower-priced” funds, according to the company.

Reserve Fund Makes Partial Distribution

The Reserve said it is distributing $4.5 billion to shareholders of its U.S. Government Fund money market fund, or about 40% of the $10.5 billion that has been in the fund since September 15. On September 16, the Reserve Primary Fund broke the buck, along with two other Reserve money market funds—Reserve Yield Plus Fund, and Reserve International Liquidity Fund.