Industry News, Articles and Events Blog

The Case to Convert to Fee-based Checking from Thought Leaders at IZALE on FMStv

9/25/2018

New choices in the marketplace, means banks and credit unions may struggle to maintain market share for their checking accounts. One solution is to update outdated free checking accounts to a fee-based model. This fee income strategy simultaneously increases revenue and delivers these value-added services to customers. Find out more from this short Thought Leader Video from the Financial Managers Society then click here where you can join one of our upcoming Fee-based Income webinars and learn more about this strategy for change from your friends at IZALE.

For more information about FMS, click here.

0 Comments

Positioned for Choppier Waters from Guggenheim Partners

5/18/2018

0 Comments

After several quarters of low volatility, tight spreads, and abundant liquidity, financial conditions are shifting.

Here are the key takeaways from our latest report:

The complacent environment, characterized by low volatility and a scarcity of bonds to buy, is changing.
The shift from quantitative easing to quantitative tightening took its toll in the first quarter of 2018 as rate, credit, and equity volatility all spiked.
We expect more of the same going forward and are preparing portfolios accordingly.
As we approach the turn in the credit cycle, our portfolio managers have been shortening portfolio duration, opportunistically moving up in credit, and maintaining a reasonable liquidity buffer for picking up undervalued credits in periods of market weakness.

Steve Brown and Matt Bush share insights from
the Second Quarter Fixed-Income Outlook

www.guggenheimpartners.com

Important Notices and Disclosures

Investing involves risk, including the possible loss of principal. This material is distributed or presented for informational or educational purposes only and should not be considered a recommendation of any particular security, strategy or investment product, or as investing advice of any kind. This material is not provided in a fiduciary capacity, may not be relied upon for or in connection with the making of investment decisions, and does not constitute a solicitation of an offer to buy or sell securities. The content contained herein is not intended to be and should not be construed as legal or tax advice and/or a legal opinion. Always consult a financial, tax and/or legal professional regarding your specific situation.

This material contains opinions of the author or speaker, but not necessarily those of Guggenheim Partners or its subsidiaries. The opinions contained herein are subject to change without notice. Forward looking statements, estimates, and certain information contained herein are based upon proprietary and non-proprietary research and other sources. Information contained herein has been obtained from sources believed to be reliable, but are not assured as to accuracy. No part of this material may be reproduced or referred to in any form, without express written permission of Guggenheim Partners, LLC. There is neither representation nor warranty as to the current accuracy of, nor liability for, decisions based on such information. Past performance is not indicative of future results.

© 2018 Guggenheim Partners, LLC. All rights reserved. Guggenheim, Guggenheim Partners and Innovative Solutions. Enduring Values. are registered trademarks of Guggenheim Capital, LLC.

IZALE Financial Group is hereby authorized to use the copyrighted report “Fixed-Income Outlook: Second Quarter 2018,” by Guggenheim Partners, solely for the purpose of posting on its company blog, found here.

0 Comments

Announcing: The Value of BOLI - Bank or Business Owned Life Insurance on FMStv

3/16/2018

0 Comments

We are proud so share this amazing opportunity to learn from Scott Richardson, CEO/Founder of IZALE Financial Group, plus his remarkable team Chris Richardson, Jonathan Barnes, and Phil Aderton as to why they are the go-to BOLI experts and why BOLI is a viable solution today for financial institutions to attract, reward and retain their key talent – their most valuable asset.

0 Comments

❗Tax Reform Bill Undermines NQDC (Nonqualified Deferred Compensation)

11/4/2017

0 Comments

Action Call and Urgent Message from Scott Richardson, President and CEO of IZALE Financial Group:

To Clients, other businesses and their stakeholders, and our industry colleagues: this is a must read summary of the House tax bill that was released on November 2, 2017.

While the contents of any bill are far from certain, if this bill becomes law, employers’ ability to retain and reward key talent will be profoundly impacted. Call your Congressman and Senators and express that concern! Please use our Social Media share buttons to educate your peers on this rapidly evolving issue.

Saturday, November 4, 2017 ~ Special Edition

This report provides K&L Gates' initial executive summary of Section 3801 of the Tax Cuts and Jobs Act, which would virtually eliminate the NQDC market and have broad impacts on a number of common compensation arrangements across our economy.

Section 3801 Increases Taxes on Savings and Fundamentally Alters Compensation Plans in America

Section 3801 of the Tax Cuts and Jobs Act created a new section, Internal Revenue Code §409B, which:

Eliminates ability to defer compensation for all U.S.-taxpayer employees and other service providers (directors and consultants) at all levels of for-profit businesses—start-ups, private companies, public companies, etc.
- Applies to all levels of service providers, not just high-paid executives
Requires income to be recognized when compensation is no longer subject to a “substantial risk of forfeiture” (SRF), with a narrow definition of SRF:
- SRF can be based only on requirement to provide substantial future services
- Specially excludes SRF based on performance conditions (as otherwise permitted under IRC §83 and §409A)
- Specifically excludes SRF based on compliance with a non-compete (as otherwise permitted under IRC §83)
Broadly defines “nonqualified deferred compensation” (NQDC) to include any amounts that could be paid later than March 15 of the year after the year the SRF lapses, with explicit exceptions for qualified retirement plans, certain welfare benefit plans (e.g., vacation and disability), and transfers of property (excluding options) subject to IRC §83, and specifically includes as NQDC:
- stock options and stock appreciation rights
- restricted stock units and other forms of phantom equity
Applies to all compensation earned for services beginning January 1, 2018 (immediate)—requires end of all pre-2018 deferrals by end of 2025

§409B Would Adversely Impact U.S. Businesses, Employees, and Shareholders

The following lists some of the potential adverse consequences of §409B:

U.S. businesses will be less competitive globally because of the limited flexibility to compensate employees as compared to the majority of industrialized nations.
Millions of U.S. employees—not just top-paid, public-company executives—may experience (1) lower pay due to reduced equity and performance-based incentive opportunities, (2) reduced retirement benefits, and (3) higher taxes due to lost deferral opportunities.
U.S. businesses will find it significantly more difficult to align employee pay and long-term shareholder interests, which will harm shareholders, businesses, and employees.
- Employees’ ability to share in the long-term success of their employers will be severely limited.
- Employees will be incentivized to focus on short-term performance at the expense of long-term performance.
- Compensation techniques for discouraging excessive risk-taking will be significantly limited.

§409B Would Effectively Eliminate Many Common Compensation Practices

The following widespread and long-standing forms of compensation would effectively be eliminated or dramatically curtailed by §409B:

Stock options (potentially including tax-qualified IRC §422 “incentive stock options”)
Employee stock purchase plans (ESPPs) (potentially including tax-qualified IRC §423 ESPPs)
Multi-year performance bonus plans that provide employees with share in the growth and financial success of the employer
Compensation holdback policies designed to reduce excessive risk-taking practices
Stock-based awards designed to provide income protection at death, disability, or retirement and align to shareholder interests through retirement
Severance arrangements intended to give income security to terminated employees for periods longer than 3 months
Retirement plans which provide retirement security at companies when 401(k) plans are not available or contribution limits are constrained
Other forms of retirement programs intended to make up for IRC limitations or provide long-term retention and incentives

Many of these practices are especially common among small and private businesses, where the potential for growth and innovation is high but cash-flow and liquidity are constrained. These practices are also broad-based and allow employees outside of executive management to share in the upside of a growing company and save for retirement.

Additional Details on Adverse Impacts and Unintended Consequences

Stock Options and Phantom Equity. §409B would effectively eliminate the use of stock options, stock appreciation rights, and phantom equity (including RSUs) for all U.S. businesses. Stock options, in particular, are a foundational form of incentive compensation for businesses at all levels, in part because they are simple in concept, well understood, effectively align interests of employees with shareholders, and provide rewards only for actual value creation for shareholders. Forcing employees into §83 restricted stock awards as the only form of permitted equity compensation will be impractical for many start-ups/private companies/small businesses because it requires liquidity to pay taxes before the shares are liquid and when the companies need to preserve cash for growth. This will also be a global competitive disadvantage for U.S. business, as most industrialized economies in the E.U., Asia, and elsewhere recognize stock options as an appropriate form of incentive compensation.
Statutory Options (ISOs and ESPPs). §409B would eliminate tax-favored forms of equity compensation—incentive stock options (per IRC §422) and employee stock purchase plans (per IRC §423)—intended to encourage broad-based employee ownership in businesses. These are broadly used programs both among public and private companies.
Performance-Based Compensation. §409B would severely restrict both public and private companies in designing and implementing long-term, performance-based compensation plans (cash- and equity-based). It is commonplace in such plans to provide an opportunity for an employee to continue to vest in an award, subject to the ultimate performance outcomes, in case of certain terminations of employment, such as death, disability, or termination by the company without cause. §409B would apparently trigger tax at termination of employment (although it is unclear as to how the amount would be determined when performance has not been completed), which will severely hamstring design flexibility or eliminate the programs altogether. Such programs are broadly used both in private companies (typically as long-term cash awards) and public companies, where institutional shareholders strongly urge companies to adopt these types of programs as in the best interest of long-term shareholders. The programs are used with all levels of key employees, sales people, etc.—not just executives.
401(k) Restoration Plans. IRC limits on 401(k) plans can adversely impact retirement savings for employees earning as little as $120,000 (the “highly compensated employee” threshold). Smaller companies with blue collar workforces often establish NQDC 401(k) “make-up” plans to permit retirement savings by these impacted employees. §409B will eliminate the ability to use these plans and leave these relatively low-paid “highly compensated employees” with inadequate retirement savings.
Other Retirement Plans. Many community banks and privately held businesses use supplemental retirement plans in lieu of equity compensation as a retention and incentive tool for top managers. These plans often provide make-up retirement benefits not available under qualified defined benefit or defined contribution retirement plans because of limits such as the $120,000 highly compensated employee definition or the $270,000 compensation limit. §409B would likely eliminate these plans or force the use of lengthy time-vesting schedules that hurt employees and diminish the retentive value (because employees tend to deeply discount the compensation value of amounts vesting longer than five years). Impacted employees at these companies are not wealthy executives at public companies. For community banks, these programs support bank regulatory principles by aligning employees with the interests of creditors and depositors in the bank.
Deferral Programs Supporting Risk-Management Practices. §409B is directly at odds with the regulatory direction of U.S. and E.U. banking regulators more generally, which have guidelines and rules that push financial institutions to have annual incentive compensation awards deferred for three-to-five-year periods in order to ensure that initial annual performance is sustainable and that risk management policies are observed by risk-takers. The concept of risk-takers goes well beyond executives and top-paid management and can include broad groups of employees in similar incentive plans. These principles have also been more broadly adopted outside of the financial services industry in response to institutional shareholder demands and to ensure that compensation programs properly support risk-management best practices. §409B as proposed would likely require a major re-design of these deferral programs and would likely significantly water down the effectiveness of the programs by forcing tax payments on amounts that would otherwise be subject to forfeiture/clawback for conduct contrary to risk-taking policies or in the event of subsequent financial restatements.
Salary Continuation/Severance. As proposed, §409B would apply to routine salary continuation/severance arrangements paying severance over periods as little as three months, forcing companies into lump sum severance payments. This would apply to employees at all levels, not just executives. Salary continuation serves several very reasonable business purposes, including providing companies with a tool to enforce post-employment covenants and to more easily administer post-employment health benefit arrangements by providing a ready source for deducting the employee portion of premiums.
Other Unintended Consequences. In the rollout of §409A, one key lesson was that the broad definition of NQDC in §409A (which is less broad than as proposed in §409B) can potentially and unanticipatedly impact a wide range of compensation arrangements impacting all employees, including various types of broad-based employee fringe benefit programs (like various types of service reward programs). Forcing early taxation on these types of programs will dampen innovative compensation design and create additional competitive disadvantages for U.S. businesses as compared to global competitors.

Click to Read AALU's Talking Points on NQDC

This special edition WR Marketplace is created exclusively for R. Scott Richardson, IZALE Financial Group by experts at K&L Gates and the AALU staff.

The AALU WR Newswire and WR Marketplace are published by the AALU as part of theEssential Wisdom Series, the trusted source of actionable technical and marketplace knowledge for AALU members—the nation’s most advanced life insurance professionals.

About K&L Gates
K&L Gates is a fully integrated global law firm with lawyers located across five continents. Our broad global platform allows us to guide clients through the legal challenges inherent in the ever-changing international landscape. The deep latticework of relationships across our offices and practices enables our clients to respond to diverse legal issues and risks through the services of one law firm with a single communication. Read more here.

DISCLAIMER
This information is intended solely for information and education and is not intended for use as legal or tax advice. Reference herein to any specific tax or other planning strategy, process, product or service does not constitute promotion, endorsement or recommendation by AALU. Persons should consult with their own legal or tax advisors for specific legal or tax advice.

0 Comments

IZALE is on TV! FMStv that is!

8/7/2017

0 Comments

We are proud to be a Platinum Sponsor
of The FMS Forum.
FMS is one of the premier organizations that support quality education for the financial community. Being industry informed is one of the best ways to value your clients, help them improve their earnings, and protect their assets.

0 Comments

<<Previous

Blog

The Case to Convert to Fee-based Checking from Thought Leaders at IZALE on FMStv

Positioned for Choppier Waters from Guggenheim Partners

After several quarters of low volatility, tight spreads, and abundant liquidity, financial conditions are shifting.

Announcing: The Value of BOLI - Bank or Business Owned Life Insurance on FMStv

❗Tax Reform Bill Undermines NQDC (Nonqualified Deferred Compensation)

Saturday, November 4, 2017 ~ Special Edition

IZALE is on TV! FMStv that is!

We are proud to be a Platinum Sponsor
of The FMS Forum.
FMS is one of the premier organizations that support quality education for the financial community. Being industry informed is one of the best ways to value your clients, help them improve their earnings, and protect their assets.

IZALE Financial Group

Archives

Categories

Client Log-In

Contact

Blog

The Case to Convert to Fee-based Checking from Thought Leaders at IZALE on FMStv

Positioned for Choppier Waters from Guggenheim Partners

After several quarters of low volatility, tight spreads, and abundant liquidity, financial conditions are shifting.

Announcing: The Value of BOLI - Bank or Business Owned Life Insurance on FMStv

❗Tax Reform Bill Undermines NQDC (Nonqualified Deferred Compensation)

Saturday, November 4, 2017 ~ Special Edition

IZALE is on TV! FMStv that is!

We are proud to be a Platinum Sponsor of The FMS Forum. FMS is one of the premier organizations that support quality education for the financial community. Being industry informed is one of the best ways to value your clients, help them improve their earnings, and protect their assets.

IZALE Financial Group

Archives

Categories

Client Log-In

Contact

We are proud to be a Platinum Sponsor
of The FMS Forum.
FMS is one of the premier organizations that support quality education for the financial community. Being industry informed is one of the best ways to value your clients, help them improve their earnings, and protect their assets.