Tips on Identifying Cyber Threats

We recently received the following two emails from a client email address:

From: Client Name [mailto:cclient@aol.com]
Sent: Friday, April 14, 2012 9:32 AM
To: Lisa Reynolds
Subject: Update

Lisa,

I will like you to email me the cash available balance in my account for today.

Thanks,

From: Client Name [mailto:cclient@aol.com]
Sent: Friday, April 14, 2012 9:45 AM
To: Lisa Reynolds
Subject: Re: Update

I would need you to kindly help me send out an urgent wire transfer today.
Please Advise on wiring instructions.

Best Regards,
________________________________________________________________________________________________

The grammar mistakes and behavior exhibited in the email prompted Lisa to call the client to verify the instructions. The client confirmed Lisa’s suspicions – a fraudster had hacked the client’s email!

In recent months, incidents of wire fraud, identity theft, and so-called “phishing” scams have been on the rise. The FBI has recently been investigating an international fraud ring that compromises individual email addresses in an attempt to impersonate someone and ultimately access financial accounts. As in the example above, the fraudster uses a client’s legitimate email account and poses as the rightful account owner. The ring has been successful at getting large sums of money wired to bank accounts that they control. Account owners are often unaware they are being targeted, putting the responsibility on financial advisors and banking institutions to identify suspicious activity.

How does it work?
The scam starts with an email, sent to a large number of individuals, requesting that they login to view an offer or utilize a service. The scam may be set up to look like the email is coming from an internet service provider, like AOL or Gmail, so the unsuspecting consumers think they are logging into their own account. This practice is known as phishing. Once fraudsters obtain access to the email account, they review sent and deleted emails for financial information, account numbers, and the names of the email holder’s financial institutions. Finally, the fraudster uses this information to communicate with the advisor or financial institution to request unauthorized transactions, typically wire transfers.

Protecting our clients
Truepoint takes several steps to reduce the risk of fraudulent transactions, including:

• Be on the lookout for signs of fraud – Employees are trained to spot email compromise fraud: wire transfer requests, international wires, spelling and grammar mistakes, sympathy ploys, or requests to communicate only via email.

• Separate sensitive information – We communicate an ID and password separately or utilize a password already known to the client. Without both an ID and password, execution of fraud is more difficult.

• Maintain strong systems – Truepoint maintains a restrictive and effective firewall. We require passwords for all access and mandate frequent  password changes.

Clients can also protect themselves
Because email compromise fraud, and many other scams, target individual clients, there are steps everyone can take to reduce the risk of their personal information falling into the wrong hands:

• Safeguard account information – Never send account information or personally identifiable information over any insecure channel (email, chat).

• Be suspicious of unsolicited information requests – Any email requesting personal information should be suspect. Most businesses have no need to get your information that way. And never respond to an information request by clicking a link in an email. Type the web site’s URL into the browser yourself instead.

• Protect your information on social networks – Be careful how much information you post on social networking sites. You should never post your social security number (including even the just the last four digits), and you should consider keeping confidential your birth date, home address and home phone number.

Advisors may be the first and best line of defense in protecting clients, as our personal relationship with the client can help us detect fraud.  If the details and behavior exhibited in an email request don’t seem to be right, then it may be fraudulent. Through industry publications and the Fidelity Institutional Fraud Response Team, Truepoint keeps up to date on the latest scams and fraud methods.

If you are not currently a client but would like to learn more about Truepoint’s services, please contact Lisa Reynolds. If you are a client and would like to learn more about Truepoint’s security policy, please contact your lead advisor.

Listen to Janel discuss the Viewpoint.

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Truepoint Inc. is an independent wealth management and multi-family office firm based in Cincinnati. Our specialists provide integrated broad-based services to high net worth individuals and families across the country.

We take great care to thoroughly research the information provided in our Viewpoints to ensure accuracy. However, these columns provide general commentary and are not intended to provide specific tax, legal, accounting, financial or professional advice. Readers are advised to seek qualified professional advice on these issues for their specific circumstances. Truepoint Inc. shall not have any liability for any damages alleged to be caused, directly or indirectly, by the information contained in our Viewpoints. Additionally, none of the material included on our website constitutes a tax opinion and is not intended to be used, and cannot be used, for the purposes of avoiding any tax penalties imposed by the IRS.

Confidence and security come through knowledge and planning. 

Women are increasingly becoming the financial decision makers in many households. Women control 14.3 trillion dollars or 51.3% of the country’s wealth and this number is expected to grow.  As a result of death, disability or divorce, 95% of women will be their family’s primary decision maker at some point in their lives.

Because women face unique financial challenges, retirement planning must be a top priority.  Women historically earn less than their male counterparts over their careers due to leaving the workforce to raise a family or from lower salaries than male peers.  Compounding the earnings gap, statistics suggest that women live longer than men, on average about 10 years. With lower earnings and higher life expectancies, it is important for women to have a retirement plan.

In the January 2012 Viewpoint, Michael Chasnoff identified female investors as one of Truepoint’s areas of targeted new growth.  Given these changing demographics, Truepoint has formed the Women’s Wealth Counsel, a team of advisors that focus on addressing the unique aspects of managing wealth for women.

A study from the Family Wealth Advisors Council found that women with a net worth of over $1 million are dissatisfied with the financial service industry because they feel they are not being heard or respected by their current advisor.

While impossible to generalize the needs of women given the various sub-segments, many studies have found that when seeking financial advice, women prioritize trust and respect. Additionally, a human touch and competence are key criteria for women when they select an advisor.

We believe that Truepoint is uniquely positioned to meet the needs of women investors. As a fiduciary, we place the client first. Our team of credentialed specialists listens closely to our clients and translates their goals and desires into effective financial strategies. Placing their trust in Truepoint allows clients to focus on other aspects of their lives. Truepoint’s experienced advisors help female clients achieve financial confidence throughout the transitions and challenges in their lives in areas such as:

• Reviewing spending plans
• Changing jobs or careers
• Preparing for retirement
• Caring for aging parents
• Shifting to an empty nest
• Managing financial affairs after a divorce
• Coping with the illness or death of a spouse
• Providing educational funds for children or grandchildren

Currently representing 16% of our client base, single female households are a growing segment of Truepoint’s business. The composition of these households varies from widows to divorcees to professionals.

According to a recent study by Insured Retirement Institute ¹, nearly one-half of women state they are not as knowledgeable about investing, compared to 40% of men who gave the same response. Truepoint is committed to educating its female clients on a variety of topics such as financial well-being, health and wellness and personal growth.

In 2011, we hosted over 150 guests to learn about women and philanthropy. This year the focus of our female-only event will be navigating the various transitions of life and making the most of the opportunities. We hope you will be able to join us in May! Client invitations have been mailed for the Truepoint Ladies Luncheon on May 8, 2012. If you are not currently a client but would like to learn more about Truepoint’s upcoming female-only events, please contact me. If you are a client and would like to make your reservation for the upcoming luncheon, please contact your lead advisor or click here.

1 Insured Retirement Institute. “Women, Retirement and Advisors: Concerned About Meeting Retirement Expectations, Female Boomers Seek Expert Advice.” September 2011. https://www.myirionline.org/eweb/uploads/Womens%20report%20Sep2011%20FINAL.pdf

You can listen to Liz discuss the Viewpoint.

Return to all Truepoint Viewpoints

Truepoint Inc. is an independent wealth management and multi-family office firm based in Cincinnati. Our specialists provide integrated broad-based services to high net worth individuals and families across the country.

We take great care to thoroughly research the information provided in our Viewpoints to ensure accuracy. However, these columns provide general commentary and are not intended to provide specific tax, legal, accounting, financial or professional advice. Readers are advised to seek qualified professional advice on these issues for their specific circumstances. Truepoint Inc. shall not have any liability for any damages alleged to be caused, directly or indirectly, by the information contained in our Viewpoints. Additionally, none of the material included on our website constitutes a tax opinion and is not intended to be used, and cannot be used, for the purposes of avoiding any tax penalties imposed by the IRS.

Scott Barbee

The Alternative Minimum Tax (AMT)

Throughout my years as an advisor, I have been asked by clients many times to decipher the AMT system by explaining it in simple terms. While “AMT” and “simple” mix like oil and water, I hope the explanations and the observations below make the topic a little less mysterious.

What is the AMT?
The AMT was first introduced in 1969 to prevent taxpayers with very high incomes from using special tax benefits to pay little to no federal income tax. It is essentially a separate federal income tax system with its own tax rates and set of rules governing the recognition and timing of income and expenses. If you’re subject to the AMT, you must calculate your taxes twice – once under the regular tax system and again under the AMT system. If your income tax liability under the AMT is greater than your liability under the regular tax system, the difference is reported as an additional tax on your federal income tax return.

Am I subject to the AMT?
Part of the problem with the AMT is that, without doing some calculations, there’s no easy way to determine whether or not you’re subject to the tax. Key AMT “triggers” include the number of personal exemptions you claim, your miscellaneous itemized deductions and your state and local tax deductions. Thus, for example, large families living in high-tax states often have to contend with the AMT. IRS Form 1040 instructions include a worksheet that may help you determine whether you’re subject to the AMT, but you might need to complete IRS Form 6251 to know for sure.

Common AMT adjustments
It’s no easy task to calculate the AMT, in part because of the number and seemingly disparate nature of the adjustments that need to be made. Here are some of the more common AMT adjustments:

• Standard deduction and personal exemptions: The federal standard deduction, generally available under the regular tax system if you don’t itemize deductions, is not allowed for purposes of calculating the AMT. Nor can you take a deduction for personal exemptions.

 • Itemized deductions: Under the AMT calculation, no deduction is allowed for state and local taxes paid. Your deduction for medical expenses may also be reduced, and you can only deduct mortgage interest to the extent loan proceeds are used to purchase, construct, or improve a principal residence.

• Exercise of incentive stock options (ISOs): Under the regular tax system, tax is generally deferred until you sell the acquired stock. But for AMT purposes, when you exercise an ISO, income is generally recognized to the extent that the fair market value of the acquired shares exceeds the grant price.

AMT exemption amounts and uncertainty
While the AMT takes away personal exemptions and a number of deductions, it provides specific AMT exemptions. The amount of AMT exemption that you’re entitled to depends on your filing status. For taxpayers who are married filing jointly, the exemption is $74,450 for 2011, but drops to only $45,000 for 2012.

The exemption is not adjusted for inflation – it only changes through legislation. Over the past ten years Congress has “patched” the AMT exemption eight times, temporarily delaying dramatic increases in the number of individuals affected by the tax. The latest two-year patch, included as part of 2010 tax legislation, was effective through December 31, 2011. As the exemption remains “unpatched” for 2012, an election year, you should expect more eleventh-hour legislation dealing with this issue. If Congress fails to act, the number of taxpayers subject to AMT could rise from 4 million in 2011 to over 30 million in 2012!

It also is important to note that the exemption amount begins to phase out once taxable income exceeds a certain threshold ($150,000 for married individuals filing jointly). The phaseout thresholds are not indexed for inflation.

AMT rates
Under the AMT, the first $175,000 of taxable income is taxed at a rate of 26%. Taxable income above this amount is taxed at a flat rate of 28%. The lower long-term capital gain rates (typically 15%) exist under the AMT calculation as well. However, long- term capital gain and qualifying dividends are part of your taxable income under the AMT system. That means large capital gains and qualifying dividends can push you into the phaseout range for the AMT exemption, indirectly increasing your AMT.

Summing up
Owing AMT isn’t the end of the world, but it can be a very unpleasant surprise. It also turns a number of traditional tax planning strategies (e.g., accelerating deductions) on their heads, so it’s a good idea to factor AMT into your tax planning. If you think you might be subject to the AMT, consider discussing your situation with your advisor or tax professional.

If you are not currently a client but would like to learn more about Truepoint’s services, please contact Lisa Reynolds. If you are a client and would like more assistance with this process, please contact your lead advisor.

You can listen to Scott discuss the Viewpoint.

Return to all Truepoint Viewpoints

Truepoint Inc. is an independent wealth management and multi-family office firm based in Cincinnati. Our specialists provide integrated broad-based services to high net worth individuals and families across the country.

We take great care to thoroughly research the information provided in our Viewpoints to ensure accuracy. However, these columns provide general commentary and are not intended to provide specific tax, legal, accounting, financial or professional advice. Readers are advised to seek qualified professional advice on these issues for their specific circumstances. Truepoint Inc. shall not have any liability for any damages alleged to be caused, directly or indirectly, by the information contained in our Viewpoints. Additionally, none of the material included on our website constitutes a tax opinion and is not intended to be used, and cannot be used, for the purposes of avoiding any tax penalties imposed by the IRS.

Today’s financial world is filled with uncertainty – volatile markets, economic flux and political unrest. These variables impact the balances of our accounts daily, which can make anyone feel helpless in regards to financial security.

But most medical costs aside, the cost of basic living expenses (shelter, clothing, food) and entertainment is determined by you. The key to a sustainable retirement is to limit spending in the face of everything else that you cannot control.

Start planning retirement expenses early
Planning for retirement expenses can be a bit of a guessing game, because you don’t really know how much you will spend until you are actually retired. Careful budgeting before you retire can help you get closer to an estimate. To start:

• Itemize your current expenses and think about which expenses will increase (travel) or decrease (lunches out) in retirement
• Think about which expenses might go away (monthly parking at work) or appear (full health insurance)

Often, people believe their expenses will decrease as soon as they retire – which is far from reality. In many cases, this new sense of “freedom” leads to increased travel, home remodels and even relocation. As such, retirees frequently find that they spend more money in the first few years of retirement than when they were still working. Anticipating for these changes and saving more for the first few years will provide an extra cushion so that you aren’t completely dependent on your investment portfolio.

Where to start?
Spending can often get out of control when it comes to your home. For some, relocation is a retirement goal, which is perfectly attainable. But it is important to know what costs are associated with relocation. Start by researching the following items to factor into your future budget:

• Get an estimate on your new real estate taxes
• Find out the premium on your new homeowner’s insurance
• Look at an average utility bill for that region of the country

If you plan to stay put, think first before investing significant money into a home remodel:

• How long will you be there?
• Is it worth investing the money now?
• If you are traveling and your children aren’t nearby, do you still need to live in a large home?
• Even if the memories of a family home are important to you, is it worth the heavy costs of maintenance and the potential strain on your resources?

Gifting to your family
Spending in retirement can add up quickly when it comes to your children and other family members. Gifting can provide estate tax benefits and, more importantly, benefit a person you love who might be in need. These are fine reasons to share your hard-earned wealth, but this pattern can quickly get out of control and create a detrimental strain on your cash flow. When gifting, make sure that you are actually helping and not enabling that person to become dependent on your financial support long-term.

Consider “self-imposed” inflation
A hidden factor that can also increase your spending in retirement is inflation. In general, prices go up over time. However, it is important to decipher between economic inflation and self-imposed inflation. A properly balanced portfolio can help protect you against economic inflation. However, if you are spending more each year through your own choices, you are the only one that can eliminate the rising expense.

For example, you may feel that it costs more to travel now than it did ten years ago. Economically, this might be true. Or, is it possible that the increase is because of the “upgrade” you have been making to your vacations? The cost of eating out might be going up, but is the increase because you have now become a regular at an upscale steakhouse instead of the local restaurant up the street? If these examples sound familiar, economic inflation might not be fully to blame.

Prioritize, then enjoy
As your advisor, we are here to help you with the planning process. You’ve worked hard for a long time and deserve to enjoy those rewards in retirement. But it is important to understand the difference between wants and needs. Prioritize what is (or what will be) important to you, and understand how that will factor in to your spending. The market and economy might be uncertain, but the key to your financial security is in your hands – you just have to control it.

If you are not currently a client but would like to learn more about Truepoint’s services, please contact Lisa Reynolds. If you are a client and would like more assistance with this process, please contact your lead advisor.

You can also listen to Heather discuss the Viewpoint.

Return to all Truepoint Viewpoints

Truepoint Inc. is an independent wealth management and multi-family office firm based in Cincinnati. Our specialists provide integrated broad-based services to high net worth individuals and families across the country.

We take great care to thoroughly research the information provided in our Viewpoints to ensure accuracy. However, these columns provide general commentary and are not intended to provide specific tax, legal, accounting, financial or professional advice. Readers are advised to seek qualified professional advice on these issues for their specific circumstances. Truepoint Inc. shall not have any liability for any damages alleged to be caused, directly or indirectly, by the information contained in our Viewpoints. Additionally, none of the material included on our website constitutes a tax opinion and is not intended to be used, and cannot be used, for the purposes of avoiding any tax penalties imposed by the IRS.

You can also view the conference agenda to see more details of the sessions Scott attended.