June: He's the nationally recognized expert on entrepreneurship
and a counsel and a financial planner for some of the country's
most successful entrepreneurs. He has written several books
and he is also a person who has made many speeches and was
twice recipient of the Illinois State Bar Association's prestigious
Lincoln award. Thanks so much for being here, Marc.
My pleasure, June. Nice being with you.
June: Well, where are the rich putting their money? Can you
tell us in a few sentences or is it going to take longer?
Well, I can give you the short version or the long version.
I suppose the rich are putting their money where they've always
put their money. They don't get scared away like the rest
June: So that would be in what?
Well, they are making money as entrepreneurs. They are making
money in the stock market. Believe it or not, they are making
money in special situation equity deals that many of the rest
of us can't get into. But they're making money because they
have the right attitude. They have a long-term view, they
don't get scared easily, and they have the strength to wait
June: But don't they also have the money to wait it
out, whereas the average person may not have?
The strength is both financial and psychological.
Charlie Pellett: I'm very curious about
how your business is doing in all of this. There are many
high-net worth individuals who have seen dramatic declines
in their portfolios, and presumably it's not affecting their
lifestyle - or is it? And are you seeing any significant decline
in either inquiries or new business?
We're actually seeing an increase in new business and inquiries.
Our clients are sticking with the program. They have diversified,
counterbalanced portfolios. They understand that historically,
when there have been recessions, you wait it out, and a year
down the S&P tends to be 19 to 20 % higher than it was
when the recession began. They have the confidence and comfort
that by getting involved in quality situations and waiting
it out, that they'll be in good shape and there are deep pockets
June: Tell us in these times of adversity, what is
the best place for the rich to put their money and for the
average investor to put their money?
Okay, well I think the philosophy probably should be about
the same because you only make money if you have a long-term
view. If you're expecting to get in and out, you know, it's
the luck of the draw, it's a crap shoot. We're not in that
business, and we discourage people from taking those kinds
of risks. So what you're really doing on the stock side is
getting involved in conservative, dividends - paying growth
stocks and you are diversifying among industries and sectors
and you are placing your bets not on stocks, but on companies.
That's what we tell clients: you're not buying a stock, you're
buying a company. But at the same time you have to have a
significant fixed-income component within your portfolio to
serve as a buffer against stock market volatility and to insure
that there's a 'A gimme'. Historically dividends have represented
perhaps a third or more of total returns within most stock
portfolios - dividends and interest on bonds that go a long
way toward evening out the rough spots.
Charlie: Marc, a question specifically about
dividends: we have seen a number of big well-known companies,
- one immediate example is Ford that just slashed its dividend
in half from 30 cents a share down to 15 cents a share. Conversely
though, this week we had a couple of companies raising their
dividends. One of the ones that also comes to mind is General
Electric, raising its dividends by 13 percent. Any thoughts
about the merits of buying a stock specifically for the dividend?
I think it's one factor. We look at consistency of dividends
over the long term as an important predictor of what stock
price is likely to do. Prospectively, even if dividends go
up a little bit every quarter and a company is able to maintain
the dividend, you know it can't play with smoke and mirrors
very long. This is really then out of earnings, and if we
can see that happening quarter after quarter, a funny thing
happens. If we assume the stock market is efficient, eventually
price will reflect that dividend yield. And over time you
will see price appreciation. But in the meantime, strategically,
if you manage a portfolio for total return, the dividend becomes
an important component of what you're after.
June: Do you have an easier time because your dealing with
wealthy clients who don't have to worry as much as the average
Joe, or Jane, about income and mortgages, and car payments
and all the things that make life interesting?
I suppose it's a function of how recent their wealth is. If
they've been at this long enough, then they understand that
the business cycle was not repealed after all. This will come
around, it will go around. If, on the other hand, their money
is relatively recent, they need to be educated, they understand
that we are doing the right things for the right reasons.
Over time that will be vindicated.
Charlie: Marc, a question which I suppose may involve a diplomatic
answer. Have you ever had any clients that have come to you,
very rich people who perhaps maybe have such an attitude,
that you wouldn't like to have as a client or doesn't that
happen at all with your type of clients?
Oh, sure it does. And I think it's important in any financial
advisory relationship that the chemistry be there. And you
know, we fit our clients, just as our clients fit us. We want
to make sure that not only can we substantively add value.
We want to make sure that the relationship is going to be
a healthy and constructive one.
June: We hope our relationship with you is going to be a
healthy and constructive one over the next 45 minutes and
to do that we need our listeners to call in. The number is
1-800-971-1130. If you'd like to ask any question of Marc,
who has quite a lot of experience in the area, 1-800-971-1130.
All your questions will be answered and we will be here to
do that as time goes on and we are going to do that right
after we listen to what is happening on the roadways. It is
coming upon 8:15, and that means it is time to check traffic
Charlie: Welcome back to the Bloomberg Money Show. Glad you
are with us. Friday night. New York, New York. 800-971-1130.
We welcome your calls tonight as we talk about the rich. Where
are they putting their money? And our guest for the hour,
Marc Lane, an attorney, financial planner, and chairman of
Marc J. Lane & Company. And we welcome your calls on the
Bloomberg Money Show at 800-971-1130. Charlie Pellett and
June Grasso. Marc Lane are you all set to take some calls
from our listeners?
Charlie: All right, let us go to the phones. Andy from Manhattan.
Andy, Good Evening and welcome. You are on the Bloomberg Money
Caller/Question: How are you doing tonight?
Charlie: Okay, how are you?
Caller/Question: I was just wondering what
you consider the definition of rich to be?
Charlie: Rich in spirit, or rich in a million dollars in
the bank, what's the answer?
I guess the answer depends upon the purpose for which the
question is being asked. Within our firm, for example, - and
this is not necessarily an indicator of much else, - we suggest
that clients have a million dollars in investable assets before
they can really take full advantage of our comprehensive legal
and financial planning services. Not that we turn away people
with lesser dollars, but at some point there are threshholds
below which you're not really fully equipped to take advantage
of the most sophisticated planning strategies. For our limited
purpose, that's our test.
June: Andy, what do you consider rich?
Caller/Question: I don't know, that's why
I'm asking. You say a million dollars in investable assets.
Is that liquid, or would that have to be liquidated to be
put into your firm?
It need not be liquidated. The approach should not be to liquidate.
There are a lot of firms that would, for the ease of their
administrative efficiency, encourage liquidation. At that
point, of course, you're going to have taxes, transaction
costs, and all the rest. You have to be very cautious about
jumping to a firm that encourages liquidation for the sake
of its own operational approach.
Charlie: So I bring my assets to Marc Lane and then what
approximately would be the annual fee, if there is one, either
on a percentage basis or a transaction basis? What sorts of
fees am I looking at for you to manage my money?
Well, you're kind to ask and I appreciate the plug. Our firm
is a law firm, and so far as I know, we are the only law firm
in the country that has a comprehensive financial services
capability, including an NASD broker-dealer. So our approach
tends to be a holistic one where we assist clients with their
tax planning, their estate planning, tuition planning for
their kids and grandchildren, retirement planning, compensation
planning. As well as investment and insurance planning. Each
of those services has a different compensation approach, so
it's really a mix and match. It depends on what the clients
June: Thanks so much for your call, Andy. Let's go
to Lisa from Jersey City. You're on the Bloomberg Money Show
Lisa. Good evening.
Caller/Question: Hi, Marc. How are you?
I'm good, Lisa. How are you?
Caller/Question: Oh, I'm fine, thank you.
I'll ask just a quick one. I wanted to check with you on investing
in Asia Pacific. I generally hear that this is an emerging
market. It also has got some strong economies. Now I'm pretty
young and resilient, so I got some time on my side. So I thought
I'd be a little more aggressive, and with my company's 401K
program, I asked to put the bulk of my savings into an Asia
Pacific index fund. But this thing over the past three years
has consistently lost money, and it doesn't really make much
sense to me. I was wondering if you could comment about it.
I'll try. When I hear you putting the bulk of your money in
any one thing, I get a little squeamish. Foreign markets will
not necessarily outperform the US market. However, there's
likely to be a rotation where different markets will have
their day in the sun at different times. So there is an advantage
in having some exposure to foreign markets. However, as for
the bulk of it, no, I wouldn't. I don't know if I would necessarily
recommend to anybody that they have an undue concentration
in a specific geographic locale. I would also be sensitive
as to what kind of companies you're looking at within that
market. Are these developed countries, are these seasoned
companies, are they developing countries, third world countries?
So there is a whole mix of company sizes and maturities, as
well as economies, you need to be concerned about. Just making
a kind of an assumption as to a geographic range doesn't tell
us nearly enough. What you want to have is a diversified portfolio
that takes advantage of all different kinds of opportunities
and has the effect of counterbalancing risks. That's what
this is about.
Caller/Question: Then can I ask what companies
it does hold, the companies and the countries they are investing
Yes, I think when you talk about a 401K plan, what you're
really talking about is selecting some accounts which are
quasi-mutual funds, essentially. And even for people who are
looking to invest outside the U.S., not within qualified plans,
generally individual investors are wise to look at mutual
funds or the equivalent, because they will have the intelligence
on the ground within those locales. The accounting methods
are going to be different. The regulations are going to be
different. The tax laws are going to be different. So having
somebody locally that really has the ability to look at a
company, and understand the context in which it's making money,
is going to serve you well. Therefore, I would look at a very
high-quality mutual fund as to, however, a very small percentage
of your portfolio.
Caller/Question: Ok, I really appreciate
Charlie: We appreciate the call. Thank you very
much. 800-971-1130. Tonight we welcome your calls on the Bloomberg
Money Show. How are we defining rich these days? It's a question
Andy was raising. Has the definition changed? How do you think
the rich differ in their investing strategies? Let me ask
you, if you were to have lunch with a superrich person, I'm
talking investors, corporate types, money managers and not
a celebrity, is there a single question you might ask about
how they accumulated their wealth? The Bloomberg Money Show.
It's 8:25. Traffic and weather on the fives. Let's get the
very latest now from Kelly Garrett.
June: Welcome back to the Bloomberg Money Show. I'm June
Grasso. We're here with Charlie Pellett. Thanks for being
here with us on a Friday night. Marc Lane is our guest. He's
a financial planner and an attorney. The number to call is
800-971-1130 with any of your questions for him. The question
that we have is, how the wealthy invest and whether those
not quite so wealthy can do the same. Marc, what do you say
to mutual funds? Do you think they are a good idea or do you
prefer that your client invest in individual stock?
I think that mutual funds have their place. I think they do
best for niche types of investments. We talked, for example,
about foreign investing. I think they are a very attractive
vehicle for foreign investing. They are also a very logical
way to diversify a portfolio, where the dollars are fairly
modest. For larger accounts, however, I'm not a fan. I'm not
a fan because the tax inefficiency associated with the mutual
fund has investors pick up tax liabilities when they did not
necessarily enjoy the economic run-up of the fund. And when
mutual funds go through their quarterly window-dressing, they
need to buy and sell securities, which may have tax consequences
to the investors. And, of course, funds report their performance
on a pretax basis. The tax attributes and tax costs flow through
to the investor. Further, the operating expense ratio and
costs associated with mutual funds, even no-load funds, are
largely avoidable through individually managed securities.
And accounts that are fairly decently sized have the ability
to do that. And, really, to target specific asset classes
and sectors and industries, whereas mutual funds may have
gaps and overlaps within industries, leaving you either underexposed
to a given opportunity or overexposed to a given risk.
June: All right, so that is the answer for the rich.
But the not-so-rich who don't have the time?
Yes, the not-so-rich, and I'm not so sure exactly where not-so-rich
comes in. But I would say that, for example, if somebody had
under $100,000 to invest, mutual funds. I would select probably
a high-quality mutual fund family. That would be a decent
way to involve themselves in the market.
June: We are going to involve ourselves in more of
your calls at 1-800-971-1130, 1-800-971-1130. Any questions
you have through 9:00 o'clock for Marc J. Lane, who is a financial
advisor, as well as an attorney, that is going to be coming
up, right after we hear about weather and traffic on the fives.
Charlie: Welcome back to the Bloomberg Money Show. I hope
you enjoyed a profitable trading week. Yes, we were down on
the week. Welcome back. Charlie Pellett and June Grasso. 800-971-1130.
I'm giving you the number because I've got questions. Tell
us about your investment strategies as we head into the new
year. How would you invest like the rich? And how are we defining
rich? Our guest for the hour is Marc Lane, an attorney and
financial planner. Also the chairman of Marc J. Lane and Company,
and he is spending the hour with us. Marc, I'm glad that you
are with us, and are you ready to take some more calls from
My pleasure, Charlie.
Charlie: All right, let us continue now, and let us go to
Grant. Grant from Newark, New Jersey. Good evening and welcome.
You are on the Bloomberg Money Show.
Question: Good evening, gentlemen. Marc, I'm going to put
you in the hot seat. I love telecoms and we've had a rough
week in the telecoms. What would you tell me to do going forward?
Well, I'm going to be a one note sounder here. My attitude
always is one of diversification. It would not be my favorite
category. Although we are very much involved in private equity
telecom deals, and I think those can be very attractive, but
as far as the market is concerned, I'm afraid it's a little
pricey for me still.
Charlie: After all, the way we've seen these telecom stocks
get beaten down so far, they are still pricey?
Charlie: Grant, what's your opinion?
Caller/Question: Well, I was just curious.
One of the most heavily traded was GX over the week. Does
he think it's going to make it? Is it something that we look
at or we don't look at?
Charlie: All right, GX. Of course, were talking
here about Global Crossing Limited.
I'm not going to give you an opinion on a specific stock.
But I will tell you that PE is lofty in too many categories,
that being one of them. I will reciprocate in this respect.
I will give you a couple of categories, that I think that
will be a little more attractive. It seems to me that if you
look at oil stocks today, I think that this price war between
OPEC and the Russians is overstated. And I think that current
fear that oil is going to drop to ten bucks a barrel appears
farfetched, and I think your going to see a fairly decent
recovery there. If you can tolerate the politics of it, and
you don't have an ethical problem, it's hard to argue with
the economics of tobacco. That is certainly a defensive issue.
And drugs, notwithstanding this week's volatility, because
some of the most prominent drug companies are seeing products
coming off patents, and the theory that generics are going
to take their place. I think one should have a long- term
outlook. And I think that long-term outlook is bright. Again
my attitude, is always one of diversification. So it doesn't
matter if I'm right or wrong. What matters is that I have
a decent asset allocation.
June: All right, Grant, thanks so much for that call. Now,
let's go to Steve from Upper Saddle River. Hi, Steve, you're
on the Bloomberg Money Show. What's your question?
Caller/Question: I'm asking a question regarding
back-load mutual funds. Assuming you are a high net-worth
individual in a high-tax state such as New Jersey, my question
is this. I would still maintain that if an investor is long-term,
which you say you encourage your clients to be long-term -
long-term can be 5 to 10 years - I would maintain it that
wouldn't someone be better off being involved in an index
fund, as an example, a total stock market index fund and perhaps
a portion of their portfolio in a total bond index fund? Assuming
that high net-worth individuals are there for 5 to 10 years,
after you subtract the cost of your advisor fees, as well
as taxes, as well as the transaction costs, wouldn't you in
the long term almost be better off, if not be better off,
in an index fund, both a stock market and bond index as opposed
to actively managed?
Yes, your argument is one that is often made and I don't have
any problems with it philosophically, and I think for many
people that might be the right answer. However, to the extent
you can outperform the indices, to the extent you have special
needs in terms of tax efficiency, or where you want to be
able to gain a competitive tax advantage vis-a-vis, other
investors have the same security, we want to take advantage
of certain kind of opportunities that may not necessarily
be generally well known, where your advisor has expertise
in specific fields that may permit reasonably an outperformance.
For many, I think that there are variations on the theme that
can counter the generalized approach. But I would say, for
many investors, I think an index approach makes a lot of sense.
June: Steve, have you invested in both forms?
Caller/Question: Yes, I have. I've invested
both in a bond index fund as well as total stock market. And
I will say I have also done my own type act, acting naturally,
with respect to stock, and of course, the last year and half
or two years, the volatility has been such that I have seen,
that between tactical gains and tactical losses, it's kind
of hard to actually, I feel like I'm spinning my wheels and
treading water, this year, you know?
June: And your children are even crying about it.
Charlie: All right, Steve, thank you very much for the call.
Let us continue now. The guest, by the way, is Marc Lane,
an attorney and financial planner. Let's continue with your
calls now Matt, from Manhattan. Matt, good evening. Welcome,
Matt. You are on the Bloomberg Money Show.
Caller/Question: Hi, Marc. I was wondering
if you think that family limited partnerships are still in
favor as an estate planning tool for a wealthy individual?
Yes, they continue to be very popular. The IRS continues to
attack them with generally unsuccessful results, so long as
they're properly structured. For listeners who may not necessarily
be familiar with the strategy, what we're talking about here
is taking a business and/or a portfolio and dumping it into
a partnership, where interests in that partnership can then
be transferred or sold to children or grandchildren. And for
gift tax purposes those gifts are valued at a discount because
the children or grandchildren don't have liquidity and they
don't have governance rights. So it's a device for shifting
wealth and appreciation to the next generation. It's also
a device for saving estate tax. And done well, and in proper
circumstances, I think it continues to be a viable strategy
among many within the estate planning area.
Charlie: Matt, thank you very much for the call. Coming up
more of your calls on the Bloomberg Money Show 800-971-1130.
Would love to hear tonight about your definition of rich,
some of the strategies you would like to employ. Questions
about how the rich invest. We've got some of the answers from
Marc Lane, an attorney and financial planner. Also, too, what
about my question? If you could have lunch with a superrich
person, an investor, a corporate type, a money manager and
I specify, not a celebrity, is there a single question you
might ask about how they accumulated their wealth?
June: You're listening to the Bloomberg Money Show on this
Friday evening. Glad you could join us. I'm June Grasso along
with Charlie Pellett and our guest, Marc J. Lane. We're going
to go right back to the telephones. Albert from New Haven,
you're on the Bloomberg Money Show. Albert, good evening.
Hi, Albert. Do you have a question? I know you're there, Albert.
I can see the light, but we can't hear the question. Albert,
are you there? Ok, we found you. Thank goodness. I thought
you were lost in New Haven. Ok, what's your question, Albert?
Caller/Question: How much importance would
Marc put on long-term health care insurance to protect your
Well, that's a question that does depend on one's wealth.
I think long-term care insurance is critically important for
people who cannot otherwise sustain the statistically increasing
likelihood that one may need assisted care either at home
or within a facility. I'm the founding president of the Illinois
Chapter of the National Academy of Elder Law Attorneys. This
is something that is near and dear to my heart. So, unless
you are in the multi-million dollar category, I would say
it's a very wise investment once you get above age, let's
Caller/Question: All right. Thank you.
Charlie: Thank you for the call, sir. Let us move along now,
and let us continue to see the light. Sandra from Burlington.
Sandra, good evening and welcome. You're on the Bloomberg
Caller/Question: Good evening, and by the
way it's snowing up here in the valley.
Charlie: You know it's funny, cause June and I were talking
about that, and I said I promised I would ask you about the
snow conditions up there in Vermont. Good skiing?
Caller/Question: I would assume so, cause
they said this morning they were using the snow guns up on
the mountains. They're about 1200 feet above us. They would
certainly be getting some snow, if were getting snow here
and it's freezing.
June: You're our link to Vermont, Sandra. You're the caller
who doesn't use credit cards, if I recall.
Caller/Question: That's right.
Charlie: Let's get to your question now, please, Sandra.
Caller/ Question: I kind of have two questions.
He hit a little bit on it on the trust, earlier. How much
legal planning do rich people have, and number 2, how do they
live? Do they live below their means a lot? Cause it looks
like from my experience preparing taxes, there are a lot of
people that are very rich and they don't act it at all.
Well, maybe that's how they got rich, Sandra.
Caller/Question: I think so.
There is a school of thought among the very wealthy that you
never touch principal, and you live off the income.
Caller/Question: Like the 'Millionaire Next
I think there are a lot of secret millionaires. And you know,
by the way, 'millionaire' isn't what it use to mean. A very
high percentage of folks are, in fact, millionaires. And if
you consider the value locked in your home, you may be one
out there listening.
Caller/ Question: What do you consider really
rich people? How many millions do they have to have to be
rich to be in your clientele?
Sandra, you qualify.
Caller/ Question: What do you mean? I'm
not a millionaire.
You have to have the will to improve your financial situation
and then you qualify. It's not a mathematical test.
Caller/ Question: Well, if I multiplied
it by ten in less than eight years, I guess I qualify, huh?
No, you qualify anyway. I'm very entrepreneurial by nature.
Our firm imposes no minimums whatsoever.
Caller/ Question: Really! Cause I had one
broker who moved to a different firm and he said I'm sorry
I can't handle your account if its less than half a million
Well, that's a business decision for that broker.
Caller/ Question: So I wondered how often
that happens. What do they consider rich enough to bother
June: Well, I think it depends on whom you are approaching
with that question. Marc, am I right? There are some people
who do have rock bottom lines. That they won't go any lower
and other people are more open.
Oh, sure. Typically, you'll find that trust companies, for
example, of necessity have to establish certain dollar minimums,
because their investment approach involves essentially quasi-mutual
funds where, based upon your demographics, they're going to
comingle your assets with those of other people similarly
situated, and until you have that critical mass, they are
unable to do that effectively for you. Our approach, however,
is individual portfolio management so we don't have such requirements.
Caller/ Question: So, with your people,
do some of your clients, just say come in, and just dump it
in your lap and put it into mutual funds.
Well, we may use mutual funds or we may use individual securities.
I have a visceral disinclination to use mutual funds except
in the smallest of cases for the reasons that I've articulated.
But many times that is the most practical approach. Our firm
works on both a discretionary and nondiscretionary basis.
That is, clients can entrust to our judgment how the money
is invested, or we can tell them how we would do it and seek
their approval - yay or nay - as to each trade.
Caller/Question: Can I ask one question?
June: Very quickly, cause we are running out of time.
Caller/Question: Would you approve of an
investment strategy that counts on laziness not to sell?
No, I think you have to have a buy discipline and a sell discipline
to do it right.
June: All right. Thank you, Sandra. And I want to
thank Marc J. Lane. Thank you so much for being with us. We
appreciate your being here, and we welcome you to come back
My pleasure, June. Thanks for the invite. I appreciate it.
Charlie: Thanks again, Marc. Appreciate it.