Emotional Quotient and the Charitable Organization

It’s funny how concepts I learned at Claremont McKenna still pop up as we meet with various organizations and families.  A concept often pops into my head is Emotional Quotient (EQ).  EQ is similar to intelligence quotient (IQ) in that it measures one’s ability.  In this case, EQ measures emotional strength which is what helps us interact with the world (and people) around us.

One of the foundational studies is a Stanford study which measured children’s ability to delay gratification.  Each child could have one marshmallow immediately.  But, if the child could wait for 15 minutes before scarfing it down, the child would receive an extra marshmallow.  I would say those able to defer gratification in order to receive twice the benefit had higher EQ than those unable to wait.  This longitudinal study revealed those children delaying gratification went on to have “better” lives.

The interesting thing is that we can measure organizations EQ also.  For instance:  do they want the rewards now even if it means giving up long term, higher, benefits.  Put another way:  they take a short term gain for long term loss.   I have seen this in charities too.  As an example, the gift of a life insurance policy is a great gift if held to maturity (think two marshmallows).  But, some charities cannot wait for the marshmallow and surrender the policy in order to get at the cash values now; they pick up several thousands of dollars today, but give up the hundreds of thousands of dollars promised to them. . . Low EQ.

Of course FUTR recognizes that charities have current needs which must be met and so they often need the cash.  However, by combining different giving techniques, charities have the ability to increase BOTH current gifts and deferred gifts. . . sometimes with the same gift.  An example of this would be the idea I posted about on the on June 5th  on the FUTR Philanthropic Facebook Page.

Now is a great time to meet with FUTR to discuss your organizations EQ and how FUTR increases EQ of the organizations it works with. . . Along with the amount of money coming in!

– Don Kuhn

FUTR Philanthropic’s CG+A Frees Up Cash and Limits Liability

Two weeks ago an influential charity asked us to evaluate their existing charitable gift annuity portfolio in light of our FUTR CG+A program. Here is what I found:

Out of the 79 gift annuities the charity has, 26 are “exhausted”. This really means they are underfunded and could cause the charity to lose money on the deal or reduce the value of the anticipated gifts. The extent of the under-funding was approximately $302k.

I also found that out of the 79 annuities, 32 annuities could be “re-insured” in order to free up almost $524k – basically fully funding the shortfall on the 26 annuities which are underwater AND providing a $220k “war chest” for the remaining annuity portfolio to shore up funding shortfalls in the future.

Doing this will also relieve the charity of almost half of its existing annual payment liability.

* If your charity or organization has a charitable gift annuity portfolio which has not been reviewed, or you are concerned about the growing liability, please contact Don Kuhn at (888) 458-3887 Ext 3.

Turning Annual Givers into Major Donors

What if you had a way to turn your “Annual Fund” Givers into “Major” or “Planned” Gift Donors while retaining their regular annual gifts?

 by Neil Campbell

At a recent presentation to the Association of Fundraising Professionals San Diego Chapter and the San Diego Planned Giving Partnership, Tim Logan of RuffaloCODY presented “Developing a Multichannel Planned Giving Marketing Plan.” The slide you see below was one of particular interest to those of us at FUTR because it represents our investment concerns of intrinsic value, margin of safety and special situations.

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FUTR Family Management and its team have a long history in working with charities throughout the country. In 2012, Don Kuhn joined FUTR full-time after several years of consulting to spearhead our work with charities and the introduction of our virtual fee-based life and annuity insurance programs for families and their charities.

From the beginning of our working relationship in 2007, Don identified and championed the untapped market represented in the Southeast Quadrant (bottom right yellow highlight) of Tim Logan’s presentation. These donors are men, women and families of average wealth and life-style means. One characterization of this group is a desire to do more for their charities; they do not recognize the true extent of their “average wealth.” 

Don developed The Twelve as the means for Charities to access this unrecognized market. The Twelve are unique fundraising strategies not covered by PG Calc, Number Cruncher, or other programs you may be familiar with. FUTR has further developed this payment method menu to enable these loyal, charitable volunteers and donors to become significant benefactors while they can enjoy the stewardship of their gift. The payment methods are characterized by low impact on current Life-Style Cash Flow and significant benefit to their charity.

Over the coming months, Don will be writing The Twelve Blog which will contain valued information for accessing the Southeast Quadrant Donors. In the event you have a spam filter embedded in your e-mail system, I would encourage you to unblock Don’s e-mail address: don@futrfamily.com

Thanks in advance for your consideration,

Neil Campbell

Founder, FUTR Family Management

Click to see: FUTR Philanthropic Overview

“I Already Have a Broker” #2

Man with landscape puzzle pieces

by Don Kuhn

Recent studies show the “average” affluent investor relies on 3.6 advisors. Research goes further and explains that this is generally due to the fact that each of those advisors offers a specialty input to the investor’s overall wealth management. Still, it is probable that one of the advisors is a generalist attempting to coordinate the investor’s zone defense. Some of you have heard me describe FUTR Family Management as the “family office for the rest of us.” This means FUTR can act as that coordinator for your team. However, we have also established a unique risk management specialty practice. . .

This article will focus on our “family office” capabilities.

According to Investopedia :

“Family offices are private wealth management advisory firms that serve ultra-high net worth investors. Family offices are different from traditional wealth management shops in that they offer a total outsourced solution to managing the financial and investment side of an affluent individual or family. For example, many family offices offer budgeting, insurance, charitable giving, family-owned businesses, wealth transfer and tax services.”

The reason I describe FUTR as the “family office for the rest of us” is that many of the services provided by traditional family offices are offered to our clients, without the “ultra-rich” requirement. The FUTR platform allows an entrepreneurial management style where families are free to hire and fire various specialists, or advisors, at will.

Here is a sampling of some of those services benefitting our Families:

1. Reporting: FUTR has invested heavily in reporting software which enables us to report on all your assets, even if we are not the operating company, investment manager or banker. These reports are available to individuals of your choosing.

How this helps: Consistent reporting takes away the guessing game of family members and/or beneficiaries. Sometimes lack of information leads to misunderstandings and causes friction within the family; reporting helps keep information flowing and can serve as a conversation starter and lead to better understanding.

2. FUTR Family College: Every year, and even on a customized basis, FUTR brings families together to learn responsible family wealth governance. Our motto is “Wealth is more than money.”

How this helps: Topics are not all about money and focus on vision, unity, team-building, preservation, and growth. For instance, we had an expert in communication present a questionnaire to be used anonymously in order to find disconnects among family members; the results serve as a way to discuss difficult topics without putting anyone on the spot.

3. Coordinating Wealth Transfer and Lifestyle Cash Flows: FUTR helps clients maintain their lifestyle today, while enabling each successive generation to pursue their dreams in the future.

How this helps: Wealth transfer plans are often put on hold because of fear. This inaction may be due to fear of outlining ones assets. Another fear may be that the kids are not ready to maintain the business. Still another concern may be loss of control. But by coordinating the wealth transfer and lifestyle desires, FUTR is able to offer a proactive solution which benefits everyone instead of dealing with the situation on a reactive basis.

4. Philanthropic Advising: Helping families and institutions define their legacies by investing in their Community.

How this helps: FUTR is an active philanthropist in its own right and has developed giving strategies which maximize impact and minimize (or eliminate) lifestyle cutbacks. We also have the resources to research charities.

5. Risk Management: Fee-based solution creating a fixed income alternative investment featuring wealth replacement for taxes and family philanthropies.

How this helps: We are able to offer insurance products on a fee basis instead of commission basis. We view life insurance as an alternative investment as well as a risk management tool. Finally, insurance can be used to increase philanthropic impact for a reduced amount of cost.

6. Investment Management: Tailored solutions offered on a fully-transparent investment platform.

How this helps: We offer fee only investment advice where all fees are disclosed in advance — no surprises here.

7. Fiduciary Standard: We operate under the fiduciary standard instead of the suitability standard.

How this helps: A fiduciary must operate in the best interests of the client — just like family should. The suitability standard applied to all brokers only requires that decisions meet a minimum standard (i.e., Doesn’t have to be the best, just “good enough”).

“I Already Have a Broker”

Image: the word "Advice" in the dictionary to describe Registered Investment Advisor (RIA)

“We’re not a broker.”

by Don Kuhn

As you can imagine, in nearly a half century of experience with the broker community, we at FUTR hear, “I already have a broker,” quite a bit. After all, most successful people focus on what they do best; and then rely on outside experts to meet their other needs. This is especially true when it comes to managing considerable assets and complex succession plans. By the way, “broker” is really a synonym for more than just a stockbroker and often includes bankers or trust officers.

For more than 15 years, I supported top brokers in the planning process as my insurance company’s senior estate planning executive. I have been in broker’s offices – and banks — from California to New York, and Florida to Washington State, facilitating the planning process for over 100 high net worth clients. It was not uncommon for the broker’s operations to have limited solutions available to the broker. Generally, the solutions were suitable for the client. That does not mean they provided an optimal outcome for the client.

An interesting thing happened in the financial services industry over the last several years: top brokers began leaving their broker-dealer firms (i.e. Smith Barney, Merrill Lynch, B of A, Wells Fargo, LPL, etc.) to become Independent Registered Investment Advisors (RIA). Top brokers left because they no longer relied on the brand name or support systems of the firm. . . and they began relying on their own reputation and expertise. As a result, we have seen a talent drain at most of the big firms.

You may be asking yourself, “Why are the best brokers leaving?” Or more importantly, “What benefits can Registered Investment Advisors (RIA) offer that that ‘my broker’ does not?”

There is no single answer to these questions, but understanding the difference between a Registered Investment Advisor and a broker may help understand this trend. (alphabetically)

Compensation
Brokers receive commissions whenever they sell you something (i.e. get you to invest money somewhere). RIAs are compensated for the services they provide (i.e. advice, consulting, reporting, monitoring, and management).

Disclosure
Brokers’ compensation is not fully disclosed. RIAs fully disclose their compensation prior to entering into relationship with a client (found in ADV Part II).

Hybrids
Broker-Dealer firms have created (and run) RIAs in an attempt to keep their best salesmen. Brokers then have the opportunity to offer advice for a fee while still retaining the right to sell certain investments for a commission. In fact, most broker-dealer RIAs use proprietary investment managers in order to keep all revenue in-house. Most RIAs have specific reasons for being independent of a broker-dealer firm.

Incentives
Brokers often receive higher commissions for certain products their firm is “pushing.” RIAs do not receive additional compensation for recommending investments.

“Products”
A broker typically sells products to a client. A registered investment advisor does not sell products – rather, the RIA will provide their client with the most appropriate financial advice.

Regulation
Brokers are regulated by FINRA which is a self-regulatory body. RIAs are regulated by the SEC (Securities and Exchange Commission). Quote from Investopedia:
“To summarize, the SEC is responsible for ensuring fairness for the individual investor and FINRA is responsible for overseeing virtually all U.S. stockbrokers and brokerage firms. In the grand scheme of things, FINRA is overseen by the SEC.”

Standards
Brokers operate under what is called the suitability standard. RIAs must operate with a fiduciary standard. Maybe an analogy with the hiring process would help here: suitability in hiring would be hiring someone who met your minimum standards whereas fiduciary standard would be hiring the BEST person even though several candidates met your minimum standard.

Exploring New Ways to Fundraise: Follow-up to FUTR’s 2013 Philanthropic Symposium

Image: FUTR Family 2013 Philanthropic Symposium, Terranea Resort

FUTR Family recognizes the challenges that nonprofit organizations face when trying to raise money. FUTR’s 1st Annual Philanthropic Symposium, held on October 11, 2013 at Terranea Resort, introduced attendees to two of “The Twelve” methods that FUTR recommends nonprofits employ to encourage major gifts from their donors.

The Symposium brought together representatives from a number of nonprofit organizations in the Southern California area. The day provided a valuable educational and networking opportunity.

Don Kuhn, FUTR’s Director of Insurance Services, delivered two sessions:

The first presentation focused on charitable gift annuities and the FUTR CG+A Program (Charitable Gift plus Annuity):

  • • Any charity can offer a virtual CGA program (without the usual hassle of being licensed by each state; this program is of particular interest to smaller charities)
  • • Charities can receive an up front payment averaging approximately 26% of the donors investment
  • • Transaction guaranteed by A or better rated financial institutions

The second presentation covered the Life Giving Team:

  • • If a charity has 1,000 donors in their database, they had almost $51 million in embedded life insurance benefits
  • • If 10% in the database responded to the call for life insurance donations, the charity would be looking at $5 million of future gifts
  • • Donors can purchase new policies, up to $250k, and tie those to specific needs of the charity (i.e., pet bequests, scholarship funds, etc.)
  • • Donors can work together in teams in order to accomplish the gift of insurance (one is insured/another gifts the premiums or groups of insureds can pool their policies to accomplish even bigger projects or using 2nd to die life insurance to reduce premiums or enable an unhealthy donor to be part of a policy)

Image: FUTR Family 2013 Philanthropic Symposium, Terranea Resort

Jace Overgauuw, from Passage Consulting, is an experienced management consultant specializing in developing organizational teams to deliver increasing value to the customers they serve. Jace’s mission at the Philanthropic Symposium? To help nonprofits build teams internally to communicate externally – this included outlining a step-by-step plan to solicit existing and potential donors.

Jace’s session covered:

  • • How to create a donor-contact team
  • • Setting out the team’s objectives
  • • How to select team members
  • • Determining what information the team will need and who will provide that information
  • • Setting up team processes regarding reporting, roles and communication
  • • Choosing a team sponsor and determining the sponsor’s function
  • • Empowering the team
  • • Setting up team results measurements and team member rewards

Don’s sessions enlightened attendees as to options nonprofits can use to solicit donations from existing and potential donors. Jace’s interactive sessions encouraged participation and lively discussion by all parties – this allowed an exchange of ideas and experiences.

Attendees came away from the Symposium eager to try the team-based fundraising and new approaches donors can use to support their favorite charities and non-profits.

 

Brenda Siquieros, from Easter Seals, attended the Symposium, and said:

“I told others if they need to brush up on their planned giving skills and to receive more up-to-date info, the FUTR Symposium was great for that. It was a good networking experience as well. The ideas and conversations floating around with other development professionals is always beneficial to me and I know would be to others as well.”

 

FUTR Family College Day Earns A+

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Graduates of FUTR’s Annual College Day agree that it was a rousing success! The day-long program held at Terranea Resort on October 12, 2013, was well-attended and the curriculum offered family wealth education from A-Z. In addition to a series of information-packed presentations, the program included several interactive components that allowed teams and families to communicate and work together for a successful outcome.

The day opened with an introduction by CEO, Neil Campbell, who recounted the story of his uncle Ben’s lumber business (started by Neil’s great uncle and Ben’s father, John Foster) and its demise only a few years after Ben’s death. Unlike his father John, Ben had not continued the legacy — the family’s human capital was not developed and the corporate family did not sell assets to succeeding generations. Such a failure is avoidable and is one of the biggest reasons Neil started FUTR – he doesn’t want other families to fall victim to the same scenario.

Sustainable wealth depends on many factors including: understanding the importance of the family legacy, recognition of the human and intellectual capital available within the family, the need for effective communication among members to make sure all members are “heard” and afforded consideration, implementation of family governance and processes and financial accountability investment education. These issues, and more, were covered at FUTR College.

Image: FUTR Family 2013 Philanthropic Symposium, Terranea Resort

Jace Overgauuw of Passage Consulting was the day’s MC and facilitator. The goal was to make the day beneficial, educational and fun — mission accomplished! Jace started the day by introducing the “Nest Egg” concept and distributing actual raw eggs that each group had to “protect” for the entire day.

The morning session included presentations and a panel discussion by Adam Campbell, FUTR’s Senior Financial Analyst, who talked about FUTR’s approach to investing and the how their team of managers are chosen; John Prichard, of Knightsbridge, gave detailed information about how he invests on behalf of FUTR using company research to find situational “anomalies” and out-of-favor companies with the potential to bounce back and finally, attorney Charles Field stressed the importance of finding an advisor with the traits of “honesty, truth and fidelity.”

Interspersed were breakout sessions where impromptu teams addressed issues of family communication, leadership and investment education, among others. Another interactive event had the team building a structure for their nest egg that would protect it when was dropped from a 6′ height.

FUTR’s Don Kuhn, Director of Insurance Services, delivered a session that showcased the options of using Life Insurance as a both an investment and philanthropic vehicle. Don’s presentation highlighted the view of life insurance as “a Swiss Army Knife,” an asset the can address issues of both personal capital (income and tax benefits) and social capital (donating to a worthy cause).

The lunchtime presenter, attorney Charles Lusby, is an expert in estate planning. He talked about the importance of adequate estate document preparation and family succession planning and recounted the types of horror stories that can occur when estate matters are not satisfactorily addressed.

In the afternoon, Relative Solutions’ Fran Lotery and Ilene Weingarten presented a simulated case study to illustrate the four tenets of Family Wealth Sustainability:

  • • Family Legacy and Connection
  • • Governance Structures and Processes
  • • Human Capital and Leadership Development
  • • Financial Accountability and Management

Their session was interactive as well – allowing attendees to discuss each tenet as it related to the simulated case study and ultimately, to their own family situation.

FFCDSunset

The day ended with cocktails on the balcony, a glorious sunset and dinner in the Santa Rosa Room. The evening’s entertainment was Jake Overgauuw dropping each “protected nest egg” from his perch on a chair. The good news? Teams earned an A+ here, too — each of the nest eggs survived the egg drop.

Proof that communication, preparation, care and knowledge can assure “future” security.

Santa Clause

Well, Christmas is on the horizon, especially after Thanksgiving and the FUTR Family College Day in the Terranea sun.

It is early Christmas present to learn that Mr. Charles H. Field Esq. who is currently of counsel at the Jacko Law Group and previously the Managing Director, General Counsel and Chief Compliance Officer of Allianz Global Investors, has agreed to speak to the 3rd FUTR Family College.

Normally, the issues of custody and compliance are dull issues. However, Charlie claims that he has many entertaining stories about mutual and hedge fund clients who did not read the prospectus materials and were too trusting of their investment advisers who were under the suitability standard versus the fiduciary standard of care. Quite often, client portfolios earn more by adhering to the Fiduciary Standard . . . performance which cannot be reported as part of a portfolio’s total return.

If you have not done so, review the invitation in an earlier blog and call for the College Registration.

Looking forward to seeing you at the FUTR Family College Day!

You’re Invited! FUTR Family College Day, October 12, 2013

FUTR Family Management believes that Wealth is More Than MoneyAs a family-focused wealth management firm, FUTR recognizes the importance of sustaining successful family relationships while acquiring, growing, preserving and managing assets…and at the same time ensuring a durable family legacy.

We invite you to join us at Terranea Resort for a one-day event combining presentations and interactive sessions about:

  • How to design and implement a family communication plan
  • The multi-generational family: how to sustain family wealth
  • Today’s investment picture and how it affects you as an investor
  • Insurance as an alternative investment and philanthropic tool
  • The Dos and Don’ts of Estate Planning
  • FUTR’s approach to wealth management as it relates to families

FUTR’s highest value is placed on the well-being of the family; FUTR Family College Day will provide tools and takeaways that you and family members can use to communicate with one another about a topic that is often a minefield of misunderstanding…one’s financial future…in a supportive, rewarding atmosphere.

Sign Up Early! The first 20 registrants are invited to participate in a fictional Case Study to provide a baseline for the family’s Current and Expected State for Operations in creating the family’s sustainable wealth.

There is a nominal charge of $250. per person to attend. The event will run from 8:15 a.m. (registration) to 5:30 p.m and will include a continental breakfast, lunch and an evening hors d’oeuvres and beverages offering.

Space is limited; please contact Paul Menard (paul@futrfamily.com) or call 760-930-0661 x1 or toll free: 888-458-3887 today to register.

Presenters will include:

Neil Campbell, CEO, FUTR

Paul Lusby, Attorney

Fran Lotery, Ph.D.

Ilene Weingarten, MA

John Pritchard, CFA

Adam Campbell, CFA

Jace Overgauuw, Management Consultant

Don Kuhn, Director of Insurance, FUTR

 

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Welcome to FUTR Family Management, LLC,

a family-focused asset management firm providing solutions for wealth, succession and philanthropic legacies. Family wealth is about more than money, and our job is to facilitate communication among the generations, helping them to clarify and realize their family mission, vision and core values.

FUTR helps clients maintain their lifestyle today, while enabling each successive generation to pursue their dreams for generations to come. Comprehensive wealth management solutions are offered on a fully transparent investment platform, focused on generational succession, and span the family life cycle, from planning to accumulation to growth to distribution. FUTR offers:

FUTR offers highly individualized advisory relationships which emphasize communication and education, are inclusive of the entire family and its trusted advisors, and are grounded in shared values and reflective of each client’s individual needs.

We invite you to contact us to set-up a meeting to discuss how we can help you and your family continue your success through future generations.