Looking in on IMCA's Advanced Wealth Management conference: Sold-out event shows how IMCA is growing, broadening membership

The Investment Management Consultants Association kicked off its 6th annual Advanced Wealth Management Conference yesterday in downtown San Francisco at the fabulous Palace Hotel to a sold out crowd of over 500 wealth advisors — about 40% from California.

IMCA, long known as the go-to association for wirehouse advisors, offering the highly regarded CIMA investment planning designation, has successfully broadened its appeal to a wider set of wealth management content. Attendance at the Advanced Wealth conference doubled over the past two years and the San Francisco event sold out before the early bird deadline, a rarity on the conference circuit these days.

During the conference’s first day, attendees heard, first, from Peter Ricchiuti, assistant dean of Tulane University’s A.B. Freeman School of Business, who told them an economic recovery is on the way. Then advisors heard that despite the upcoming political gridlock there will be one area of compromise in Washington, D.C., : the need for higher taxes because of the government’s precarious financial situation. Andrew Friedman, of The Washington Update LLC, offered strategies advisors could use to manage their clients assets in a time when the government is seeking a bigger share of them.

With nearly 8,000 members, IMCA is one of the few industry associations that is actually growing. “We’ve grown at over 4% per year during a very difficult time in the markets,” noted Sean Walters, CEO and executive director. “Our goal is to be the community for the advanced investment and wealth management advisor and as part of that our conferences offer world class education and best in class speakers.”

More than 20% of IMCA’s members are affiliated with independent RIA firms; an additional 10% work for banks. The conference attendees reflected these percentages.

For custodians, the IMCA conference provides a target-rich environment of high-net-worth wirehouse advisors (the average IMCA member AUM is $270 million), who are accustomed to fee-based business through managed account programs. Many can make the switch to independence relatively painlessly.

Timothy Welsh: The IMCA conference provides
a target-rich environment of high-net-worth wirehouse
advisors.

All of the major RIA custodians, including Schwab, Fidelity, TD Ameritrade, Pershing, LPL, and Raymond James were out in force with their top gun business developers looking to influence dissatisfied wirehouse advisors to go independent and embrace the RIA model in the crowded exhibit space.

A more informal approach

While just about every other industry association or company sponsor of industry events takes advantage of the conference beginning to produce a formal opening speech and presentation, highlighting their organizational messages, strategy and future direction, the brass at IMCA took a back seat to the elected-member leaders. Speaker attire was open collar and blazer, rather than the suited up variety, which provided a nice breath of fresh air and a quick lead into the content.

The only “plug” from the podium was on the Certified Private Wealth Advisor (CPWA) designation. IMCA members looking to expand their expertise go through a rigorous six-month study period followed by a week-long formal training program at the University of Chicago’s Booth School of Business to learn about advanced estate and tax planning, executive compensation issues, planning needs for the business owner as well as asset protection strategies to round out and complement their investment management expertise. In only its third year, the CPWA program has attracted over 350 IMCA members, with the next set of classes fully filled.

What matters to the economy? Corporate profits.

Ricchiuti provided an energetic, entertaining, funny and optimistic view of the economy in his speech titled, “Market Signals – What the Financial Markets Are Telling Us Now.”

Ricchiuti provided a number of points, data, statistics and trends to show that predictions for a double dip recession and a slow growth environment are completely off base.

“The media doesn’t understand that the stock market is a leading indicator and that unemployment is a lagging indicator,” noted Ricchiuti.

As for other problem areas in the economy, the keys are to put the numbers in perspective. “When you look at debt as a percent of GDP, while staggering nominal numbers, they are still far below the WW II era and all the markets need to take off is to get the debt % to move in the right direction. This can be accomplished by higher taxes, some budget cuts, changes to entitlement programs and higher revenue from a rebounding economy.”

“Additionally, when you look at interest payments as a % of GDP, they are at their lowest levels in history, due to the low interest rate environment.”

Ricchiuti emphasized the role that earnings play in driving the markets as well saying that what really only matters are corporate profits.

Strip club metaphor

Since WW II, corporate profits are up 110 fold and at the same time stock prices are up 81 fold. Ricchiuti noted that the two travel in companion and all else should be ignored, with the quip, “The rest of it is “noise,” like the buffet at a strip club.”

Further bolstering his claim of a continued bull market is the yield curve as a prophet for the future. “The yield curve has been right since the earth cooled.” Citing statistics of the yield curve over time, Ricchiuti showed multiple instances in history of an inverted yield curve. When it is positively sloped, there has always been an expansion.

“In 2003, before we had14 straight quarters of growth in the markets, the yield curve slope was +340 basis points (10-year treasury note minus 3-month Treasury bill). Currently the slope is +265 basis points. There will be no double dip recession. This has been a “V” shaped recovery, and stocks are underpriced.”

Ricchiuti concluded with some “financial myth” busting, providing solid evidence that in periods of high unemployment, a weak US dollar, times of over leverage and a Democrat in the White House, the markets have outperformed. “The US economy is not an economic “clunker,” he said.

“The U.S. is the largest and most productive economy (4.6% of the world’s population produces 25% of the world’s output), is larger than Japan, China and Germany combined, and that China’s growth is coming at the expense of Japan, South Korea and Mexico, not the US.”

Grim prospects for political progress: Andrew Friedman

Friedman’s predictions for the political environment post-election were grim. “With the GOP success, we will quickly return to a period of gridlock in Washington, with very little movement on the key issues facing this country. Particularly those who think the GOP has a mandate to change existing reforms such as health care and Dodd-Frank, that won’t happen as they won’t make it through the senate, nor past Obama’s veto.”

The one area where we will see compromise, however, is in the budget deficit and taxes. “We have no choice. The cruel math shows that with 88% of the budget locked in for entitlements, interest payments and defense spending, that only leaves 12% of domestic funding that can be cut. And even if we cut 1/3 of domestic spending, that is only $140 billion out of a $3.5 trillion total budget, making it only a tiny dent in our current $1.4 trillion deficit. Which means only one thing: There will be tax increases.”

Friedman provided some actionable advice for managing finances in a higher tax environment, including selling long-term capital gains assets now to take advantage of the 15% current rate, deferring charitable contributions to later years to get the write off in higher tax bracket years, and lastly considering converting qualified assets to Roth IRAs to pay the tax now, which will be lower than in later years. Additionally, he recommended buying Muni bonds, investing in tax-managed mutual funds, and taking advantage of tax deferral and exemption strategies such as life insurance and annuities.

Friedman also had comments on the status of the estate tax, predicting that it will be back, most likely more onerous than before, due to budget deficit issues. He also predicted that solving the budget problem will mean dealing with entitlements. In turn, that likely means raising taxes by removing the income tax cap on social security, incorporating means testing and ultimately raising the retirement age.

The Rest of the Program

Monday’s afternoon sessions focus on advanced wealth management topics including alternative investing with noted speaker Scott Welch of Fortigent, and executive compensation techniques and trends with RIA industry veteran Tim Kochis of Aspiriant.

A lively cocktail reception with exhibitors will conclude the first day, followed by a decidedly behavioral finance focused day two. The conference concludes at noon on Tuesday, with an optional post-conference workshop led by marketing guru Peter Montoya on “Branding Yourself for the High Net Worth Market.”