Category: Press

IHT Wealth Management President Steve Dudash discusses volatility and where potential opportunities are in the U.S. markets

By Steven Dudash

June 29, 2015

 

For most Americans, Cuba is an isolated third-world island country with a backward economy and a regrettable political and human rights record. After 56 years of the Castro regime, this reputation has been well-earned, but there was a time when Cuba represented something quite different. During pre-revolutionary days, it was a hotbed for American tourism, a place where well-heeled East Coasters came to enjoy plentiful sunshine, opulent beaches and a nightlife scene that bustled year round. In many ways, parts of Cuba were Las Vegas before Las Vegas, right down to the unmistakable presence of nefarious underworld characters, brought to life most vividly by Godfather II, critical parts of which were set in Havana.

 

With the United States and Cuba having taken small steps to normalize relations in recent months, one of the questions that have been raised is whether the island can once again become a prominent destination for American tourists and, more broadly, a haven for outside business investment.

 

To be sure, a number of hurdles stand in the way before this can become a reality – not the least of which is that an American travel and trade embargo remains in place. Only Congress can change that, and despite the initial signs of a détente, opposition to Cuba’s leaders on Capitol Hill remains fierce, meaning the embargo being lifted is still anything but guaranteed.

 

Equally important is that Cuba’s crumbling infrastructure is in no position to support Western-style tourist activity. The country generally lacks many of the amenities needed to attract an influx of regular visitors, including a wide selection of luxury hotels, golf courses and high-quality restaurants.

 

Clearly, new investment will come slowly, and economic progress – if it comes – will be measured in years, not months, but just as Las Vegas emerged from the shadow of the mob to become a hub of tourism and legitimate business, so, too, can Cuba, even in the face of considerable structural and political obstacles.

 

Here are some industries that could benefit should Congress lift the current embargo and allow U.S. companies the freedom to pursue opportunities on the island:

 

**Hotels and Lodging: Any potential resurgence in Cuba starts here. Absent significant upgrades to current hotel and other lodging options, very few American travelers will consider Cuba a realistic vacation or business destination. Obviously, this would be an ambitious undertaking, but as the U.S. economy has improved in recent years, the fortunes of the world’s largest hotel chains have also surged, with Marriott (MAR) and Hilton (HLT) both up around 20 percent over the last year. By acting decisively, these companies could gain a valuable first-mover advantage over potential rivals and for years to come establish a dominant position in this potentially lucrative market.

 

**Shipping and Cruises: The U.S. recently granted permission to four small companies to operate limited ferry services to Cuba. And while American travel is still tightly controlled and Havana must first approve these companies’ licenses, this move may encourage bigger players such as Royal Caribbean (NYSE: RCL) to pursue Cuban routes. Cruise liners would likely be among the first businesses to benefit from the country potentially embracing more open economic policies, since the industry would be less affected by its lack of hotel infrastructure. Situated only 250 miles from Miami, Cuba would also attract attention from cargo ship operators, who would likely want to participate in trade activity were the embargo lifted.

 

**Housing and Real Estate: First, it’s important to note that almost without exception nonresidents are barred from owning real estate in Cuba. But as the two sides slowly pursue more normalized relations, there has been speculation that such restrictions could ease as part of a more formal future agreement to re-start American trade and travel. If so, it could somewhat ease the upcoming financial burden facing many Baby Boomers, many of whom are hurdling toward retirement woefully unprepared. Should Cuba open up, top retirement-community builders in the U.S. like Lennar Corp. (LEN) and Hovnanian Enterprises Inc. (HOV) could seize this opportunity to construct low-cost developments geared to older Americans looking for a more affordable housing alternatives.

 

**Gaming: Casino operators have hit a wall in Macau, where gaming revenues have fallen 12 straight months amid a softening Asian economy and corruption crackdown in China. Shares of Wynn Resorts (WYNN) are down more than 30 percent since the beginning of the year, while Las Vegas Sands Corp. (LVS) and MGM Resorts International (MGM) have shed over 10 percent over the same period. Obviously, these negative trends could reverse in time and revenues may come roaring back. Still, the always ambitious casino industry is unlikely to pass on the opportunity to enter a new, potentially profitable market – especially one so close to the East Coast now that Atlantic City, N.J., is a shell of its former self.

 

**Telecommunications: According to estimates, less than 20 percent of Cuba’s 11 million citizens have cell service. Even fewer have access to the Internet. U.S. policy makers pursuing closer ties with Cuba have prioritized further mobile phone penetration and getting more people connected to the outside world, having recently placed telecommunications equipment and services on a list of embargo exemptions. Naturally, this is an opening for one of the two American telecom giants, Verizon (NYSE: VZ) or AT&T (NYSE: T), to build more cell towers and establish a greater level of connectivity – which could ultimately lay the groundwork for better broadband access. Facebook (NASDAQ: FB) would also probably consider making investments in Cuba. Never shy about spending money on high-growth potential projects, the company has said expanding Internet access in the Third World is one of its key strategic goals moving forward.

 

Much of the above, of course, is pure speculation. There are no guarantees U.S. lawmakers will lift the longstanding embargo or, for that matter, that Havana will open itself up to outside business investment if they did. And even if those two things happened, it would take years for many of the these projects to come to fruition. Time will tell. In the meantime, it doesn’t hurt for investors to keep an eye on Cuba for the future.

 

Steven Dudash is President of IHT Wealth Management, a Chicago-based firm with approximately $650 million is assets under management.

http://www.forbes.com/sites/greatspeculations/2015/06/29/betting-on-cubas-economic-future-as-havana-becomes-las-vegas-again/

By Elizabeth Dilts
May 27, 2015
Full Reuters Article

Steven Dudash, like most brokers, spends a lot of time making it easier for his clients to retire. This summer, though, his plan is to make it easier for older brokers to retire.

After starting IHT Wealth Management in Chicago in June with six brokers, Dudash says he will buy four businesses from retiring brokers in coming months. The acquisitions will boost the assets his firm looks after to more than $800 million.

The 38-year-old Dudash, and brokers around his age, have a lot of businesses to choose from. Of the 300,000 brokers now working in the United States, nearly 35 percent are over 55. Between those Baby Boomers, and others looking to retire in coming years, some 40 percent of brokers will try to sell their businesses before 2022, according to research firm Cerulli Associates.

“(Buying) retiring advisors will be a huge part of the business moving forward,” said Dudash, who now has 19 brokers at IHT and said he gets three calls a week from older advisers seeking to discuss selling their businesses.

Buyers close to Dudash’s age have been in business long enough to be able to afford to buy a competitor, and they are young enough to wring substantial income in years to come from the businesses they are buying.

For brokers born during the Baby Boom — from the mid 1940’s through the early 1960’s — finding someone like Dudash to buy their business is an increasingly urgent matter. Just 26 percent of brokers are in the younger half of Generation X.

With so many older brokers looking to sell to so few younger ones, wealth management will likely end up being a much more concentrated industry in the future, with a smaller number of mega-brokers handling large numbers of assets, industry experts said.

It also means that retiring brokers are likely to get less money for their businesses the longer they wait.

For the brokers buying from their older counterparts, it’s a good time to get new customers: New clients have become tougher to win in recent years, as more investors push to cut expenses by managing their own money, or by getting automated advice from platforms like Wealthfront or Betterment.

FINANCIERS

It’s also a good time for niche banks and private equity firms that finance these deals for buyers. Live Oak, a bank based in Wilmington, North Carolina, with about $680 million of assets as of the end of March, launched an adviser lending division in 2012.

A typical loan to fund the purchase of a senior adviser’s business is about $800,000, said Jason Carroll, who heads the division. As of April 30, Live Oak had made a total of $175 million in loans. By the end of May, Carroll expects its volume will top $200 million.

Over the last year, brokers have been able to sell their businesses for two to 2.5 times annual revenue, if they have desirable qualities such as younger clients and accounts that generate steady revenue, Carroll said. An adviser who manages about $75 million of assets and generates $750,000 of annual revenue could sell his or her book of business for at least $1.5 million. [ID: nL2N0QI2MC]

Private equity firm Lightyear Capital, which built Cetera Financial Group from a series of acquisitions made starting in 2008, sold the combined business in 2014 for $1.15 billion. Lightyear did not disclose how much it paid for Cetera’s constituent businesses. It remains active in as an investor in wealth management firms – it bought a majority stake in the Minneapolis-based independent firm Wealth Enhancement Group last month.

Banks, historically among the biggest buyers of wealth management firms, are also showing interest in the deals. In 2014, banks bought 47 registered investment advisors and trust companies, twice as many as in 2013, according to the mergers & acquisitions consulting firm, Silver Lane Advisors. In one of the biggest, Canadian Imperial Bank of Commerce bought Atlantic Trust Private Wealth Management in Chicago for $210 million.

Prices for brokers’ businesses are likely to fall in the future as clients get older and begin withdrawing money from their accounts. Most advisers have not prepared to sell their business. Roughly a third of U.S. brokers have a succession plan, and only 17 percent have created a binding agreement, according to a study by SEI Advisor Network.

Many will try to sell only after they realize their business is depreciating, potentially flooding the market, said Mark Hurley, CEO of Fiduciary Network, which has bought minority stakes in 17 wealth management firms.

However, not every broker nearing retirement age can commit to selling his or her business, Hurley said. Many have trouble letting go.

“A lot of owners can’t get through the grieving process,” said Hurley.

Teaming Up to Better Serve Wealthy Clients
By Miriam Rozen
May 12, 2015

http://www.financial-planning.com/30days-30ways/teaming-up-to-better-serve-wealthy-clients-2692860-1.html

When sorting out the roles of experts acting as a team in carrying out estate planning for clients, the advisor who brings the concepts prevails. That’s the strategy that Scott Rawlins tells his advisors to deploy when they assemble a team of lawyers and accountants to serve high-net-worth clients.
Rawlins, the managing director of national marketing for HD Vest Financial Services, which has $38 billion in assets under management through independent brokers, recommends that advisors follow three steps in order: establish client goals, plan for these, and then bring in other professionals. “That way, I am the one bringing in the different scenarios,” Rawlins says.

REHEARSE ‘OFFSTAGE’

Once a team of professionals is assembled to plan the estate, take care to protect everyone’s reputations with the client. “We don’t want to embarrass anyone,” says Edward “Ned” Lubell, a UBS financial advisor, whose team in Palm Beach, Fla., has more than $1 billion in assets under management. He typically has conversations “to float ideas” with the other professionals “offstage” before presenting those to clients.

Steve Dudash agrees. “First and foremost, be respectful of the other pros in the room,” he writes in an email. “Don’t make someone else look bad. It will only come back to hurt you. These people are normally very good in their specific industry and just as easily as you can run circles around them in investing or planning, they excel in other areas. Work as a team.”

But Dudash, who is the president of Chicago-based IHT Wealth Management, which has over $200 million under management, adds: “This doesn’t mean that you shouldn’t question opinions or plans. In fact, with attorneys, make it a point to find something to challenge them on, politely. It helps show that you are their equal and not just a guy looking to flip stocks or sell a big insurance policy.”

He adds a warning: “You had better know the topics that are going to be discussed. Nobody in that room wants to deal with a rookie. If the attorney is going to be discussing some complicated trust options, you had better know a fair amount about them.”

BUILD EACH RELATIONSHIP

Kyle Brownlee, a financial advisor who is CEO of HD Vest affiliated Wymer Brownlee in Enid, Okla., which has $510 million in assets under management, recommends limiting the number of attorneys you rely upon. “Many advisors — especially those who are new to working on estate planning concerns for clients — are tempted to develop relationships with multiple estate planning attorneys, in order to build a range of potential referral relationships,” he says.

But that might be a mistake, he adds, because “an advisor’s ability to work in harmony with an estate planning attorney gets stronger the more closely they work with a particular attorney or two.”

Addressing the Top Four Wirehouse Advisor Concerns About Transitioning to Independence

One of the defining trends within the financial services space over the last couple years has been the increasing frequency with which wirehouse advisors have transitioned to the independent channel. And as the financial crisis fades further into the rearview mirror, it is very likely that this crossover will only pick up in pace in the coming years.

For many clients, the deepest, most damaging scars of the financial crisis will never go away entirely. Nearly every investor had their confidence rattled and portfolios gutted, but thanks to a historic run up in equities over the last few years, most have recovered, both psychologically and financially.

Meanwhile, wirehouse advisors are operating in an industry that is getting older and more consolidated every day, even as many of the retention bonuses handed out by large wirehouse firms to their advisors in the panicked days following the financial crisis are starting to expire.

This has wirehouse advisors from across the landscape reevaluating their options. But even as the independent channel looks as attractive ever, especially now that the wirehouse brands no longer command the same levels of credibility and respect they once did. Nevertheless, from the outside looking in towards the independent space, many wirehouse advisors are still wary, many of them clinging to long-held – but largely untrue – perceptions about the space.

Having just recently made the transition to independence, I had the opportunity to do a deep dive on my greatest concerns about the transition away from the wirehouse space. I spoke to multiple successful advisors on both the independent side as well as those within the wirehouses to weigh my options and get a sense of perspective on my decision.

In the process, I realized that, for most successful wirehouse advisors, most transition anxieties boil down to the following four questions of concern, for each of which there is – contrary to popular opinion in the wirehouse space – a very good answer:

  • What if my clients don’t follow me? Without question this is the greatest fear among advisors changing firms. Clients are the lifeblood of the business, and given that most people are resistant to change, especially when it comes to their finances, it’s only natural for advisors to worry about client retention. They shouldn’t.

While hard numbers are elusive, most industry observers believe 60-90% of clients stay with their advisors through transitions. And for those advisors who have built close relationships and a deep reservoir of trust with their clients, it’s safe to say that the retention rate is at the high end of that spectrum.

Wirehouse advisors making the transition to independence just need to be up front with their clients and communicate clearly and as early on in the process as possible about why they are making the switch. The typical reasons – such as how the added freedom and flexibility that the space provides is ultimately in the end client’s best interests, and how being independent will allow the advisor to spend more time and resources on making the client experience infinitely more rich and fulfilling – resonate well. Wirehouse advisors would be surprised about how they will more than likely keep the overwhelming majority of their client relationships if they communicate early, often and honestly.

  • What if I can’t handle the burdens of running my own business in addition to supporting my clients? While the notion of starting and running a small business appeals to some advisors, many others are turned off by the idea having to provide their own administrative, back office and compliance support. It’s one of the top reasons they remain within the wirehouse world, where they are provided such services in a professional, white-shoe environment so they are free to do what they do best – work with clients.

What wirehouse advisors don’t know, however, is that many independent firms have successfully recreated this experience, leveraging broker-dealers and third party providers to provide best in breed support services, with the added freedom and flexibility that allows advisors to serve clients more effectively and run better businesses. Whether it’s someone looking to set up their own one-man shop or a network of advisors coming together to replicate the feel of wirehouse firm, the independent channel today in fact offers a range of business models to accommodate almost every approach.

  • What if the technology and investment solutions I have to work with as an independent advisor are inferior to the wirehouse space? In the past, there’s no question that wirehouse firms offered superior technology tools and resources, along with a broader selection of investment solutions to better help clients meet their ever changing needs. Today, though, that’s no longer the case. Blame the free market.

Whereas wirehouse advisors are offered an in-house solution, and they have to live with it, for better or for worse, independent advisors mostly determine what works best for their businesses. If they find something that works better, they often have the liberty to change providers or seek relationships with new product companies, thanks to the fact that the larger independent broker-dealer platforms now have the pricing and selection power that comes with increased scale. As a result, where there was once a big gap, wirehouse and independent platforms have become virtually indistinguishable with respect to the quality of technology and product platforms. In fact, in some cases, the financial planning and customer service software is far better on the independent side.

  • What if my business growth opportunities will be more limited without the backing of a large, recognized Wall Street brand? This is the fourth most common conern that wirehouse advisors raise about potentially going independent. Frankly, it’s also the last thing wirehouse advisors should be worried about. Many Wall Street brands are beginning to grapple with much higher costs stemming from a recent spate of large regulatory fines and increased pressure among shareholders. And with pay grids coming down and account fees going up, it’s clear that advisors and their clients are being asked to foot the bill for such costs. In other words, the rising legacy costs that wirehouse firms have will be paid for by their advisors and the advisors’ end clients – Which hardly translates into greater business growth opportunities.

Also consider that most wirehouse firms are needlessly wasteful and hopelessly inefficient, plagued by layers of management and costly training programs that yield few, if any productive advisors. Ultimately, is all of this worth a 50% premium to have a recognized brand on your business card? Only a cursory examination of all your options will tell you that it is not. As stated above, advisors provide value and create growth opportunities, not brands.

As a [xx]-year veteran of the wirehouse world who recently transitioned to the independent space, I can tell you that there has never been a better time to make the same switch. Not only are clients ready but the shifting industry dynamics are virtually begging for it.

And while there is no doubt that all transitions are stressful and fraught with potential risks, at the end of the day wirehouse advisors should take comfort in the fact that finding an easy landing place, one which combines all the best aspects of both of the independent and wirehouse worlds, is easier than they might think.

Steven Dudash is President of IHT Wealth Management (www.ihtwealthmanagement.com), a Chicago-based firm of experienced wealth management professionals with approximately $[592] million in assets under management

Securities offered through LPL Financial, member FINRA/SIPC

“IHT Wealth Management is honored to be featured in Crain’s Chicago Business magazine. Our president Steve Dudash lauds the independent model we offer advisors and speaks to why it drawing so many of from the large wire houses.”

If you come from a typical family, finances were rarely discussed in detail even as you matured into adulthood, which was fine as long as your parents were fully capable of running their own lives.  But, as your parents age, and with today’s life expectancies that could span another 20 to 30 years at age 60, there is a strong likelihood that they might lose their cognitive function over time. Not only will your parents fight it, they will try to deny that it is happening.

It won’t be until you see the past due notices in their stack of mail, or maybe even a default notice on their front door that you realize they aren’t able to keep up with the pace of their finances anymore. Worse, you might learn that they have fallen prey to a scam or are being taken advantage of by a stockbroker. Waiting until the problems compound will make life difficult for everyone. Preparing now to prevent these types of problems is a lot easier than trying to unravel them when they occur.

Now is the time to approach your parents and work through all of the issues they will face. While, you may encounter some initial resistance, once they understand that you are doing it out of love and to avoid unpleasant problems down the road, they will come eventually come around, even if it’s gradual.

Ten Preparation Steps you can take Right Now

  1. Get your own financial house in order. Your own financial security is paramount. Unless you build your own financial capacity, you may not be able to help your parents in the way you want. Develop and implement your own financial plan that includes contingencies such as assisting your aging parents.
  2. Take your parents temperature. You know your parents, so you know how they might react to a conversation about their financial future. You could frame it in way in which you are asking for their advice for your own situation, and then talk about the “what ifs.” If you find that they haven’t prepared, then you need to start a new conversation.
  3. Discuss financial and estate planning goals. Talk with them about their vision of the future, including their life style desires and priorities. Find out what they would like to have happen with their estate when they die. Ultimately you should know how they have structured their retirement plan in order to pay for their life style. If they haven’t done so recently, they should have their retirement plan reviewed by an independent financial advisor.
  4. Make a checklist. Once you determine what your parents have or don’t have in place, you can work with them to ensure that they have the proper documentation and that everything is up to date. At the very least, it is important for you to know how to locate all documents. The checklist should include the following:
    • Current will
    • Living trust (have yourself named as trustee)
    • Durable powers of attorney
    • Medical directives
    • Insurance policies
    • Health records
    • Tax returns
    • Credit card and loan documents
    • Bank and investment statements
    • Social Security information
    • Location of safe deposit boxes and their keys
    • Contact information for all professional advisors
  5. Get them to go hi-tech. If you parents are like many seniors they are hi-tech hold-outs. Show them how using a program such as Quicken can simplify their financial lives by consolidating all of their accounts into a single view and managing bill pay and money transfers online. Show them the ease in which they can have all of their bills automatically paid each month.
  6. Explore long-term care insurance. If your parents are going to rely upon their assets to generate their required income, it would be important to have them consider long-term care insurance. With the cost of long-term care now exceeding $70,000 a year for a nursing home, it could quickly deplete their assets should they have to pay for it out of their own pocket.
  7. Enlist some help. If you have siblings, you shouldn’t go it alone. Involving your siblings will ease your burden and provide emotional support in dealing with your parents. You will also want to enlist the help of a profession advisor if your parents have one – a doctor, an attorney a financial advisor – that they trust. They can be instrumental in moving the conversation forward.
  8. Scout ahead for senior assistance programs. You should fully investigate all of the services and resources available to seniors in your area including government and community assistance programs. Go to www.eldercare.gov for a list of services in your area.
  9. Arrange for a complete financial plan to be prepared. The best course, if they haven’t yet done so, is to find a reputable, independent financial advisor to prepare a complete financial plan to include their retirement income strategy, estate planning and an investment strategy. Many independent financial advisors will prepare a plan for a flat fee. It may be a worthwhile investment on your part especially if you can be included in the process.
  10. Finally, it is important to respect your parent’s financial sovereignty and dignity. They spent most of their lives managing their finances and raising a family and they deserve to feel as though they have control. Most of these steps can be taken gradually, and over time they will feel more comfortable accepting your help.

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Article by: Ann Marsh

“Six Chicago planners have left Merrill Lynch to join LPL Financial and form an independent shop to lure other wirehouse breakaways.

The move reflects a desire to avoid the costs of coming settlements for Merrill’s parent company, Bank of America — and targets other breakaways with similar concerns, say the advisors.”

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