Have an account or thinking about an account with Merrill Lynch?  If you’re not bringing at least $250k to the table, you might want to think twice.  Starting in 2012 Bank of America’s Merrill Lynch division is no longer paying its advisers for new accounts under $250k.  Previously, the cut off was $100,000 dollars.

This means that none of Merrill’s 15,000 financial advisers will pursue new clients with accounts less than $250k because they won’t get paid for their effort.  Merrill will be happy to accept your “small” account but you have to question the attention you’ll receive as the thundering herd focuses on richer clients. This latest move by Bank of America herds <$250k accounts into house accounts, removing any incentive for “advisers” to support you.

Accounts with less then $250k comprise 4% of the $2.2 trillion in client assets managed by Merrill.  Owners of that $88 billion might be wise to consider gravitating away from such a big firm. These investors will be best served by smaller, more client-focused advisory firms.  (shameless plug alert:  NorthStar Capital Advisors is a small, independent company where we enjoy a personal relationship with each of our clients).

As with most service-based industries, size matters…the larger the firm and the smaller your invested assets, the less you matter.

It has been an honor to work on behalf of our clients and their families to meet their investment needs.  Thank you for allowing us to serve you.  We wish you a happy holiday season and a prosperous 2012.
— NorthStar Capital Advisors

Click for larger view

Investment scams committed against those over 50 is a rampant and growing problem. Many times victims are tempted to take risky actions to overcome the losses suffered during the financial crisis.

Some of the common investment frauds committed against older Americans:

• Ponzi schemes – money from new investors is funneled to previous investors
• Self-directed IRAs – used to hold bogus investments in real estate, gold and oil wells
• Promissory notes – unregistered securities get less regulatory oversight than stocks and bonds

Types of investment involving investors ages 50 or older that are seeing a  surge of enforcement actions:

• Variable annuities
• Free-lunch seminars
• Misuse of professional credentials

Spread the word about these investment scams to protect yourself and others.

Click image for larger view

The state-tax savings for families investing 529 college savings plans depends very much on where you live.  The chart to the left shows the state-tax savings for a couple filing a joint 2011 return with $100,000 in taxable income and contributions of $2,500 each to two children’s in-state 529 savings plans.  For example, North Carolina’s benefit is in the mid-range at $388, but note that 16 states don’t offer any tax benefits!

[source: Wall Street Journal and Morningstar]

An oil terminal fire in Misurata, Libya, in May.

Potential investors often wonder is better to go with a big-name company. Shouldn’t bigger investment firms give better advice? After all, they are big, powerful, and knowledgeable – the best of the best, right? But what is the outcome of their work?

Baltimore-based investment giant Legg Mason managed $300 million for a Libyan investment fund (New York Times article). From January 2009 through September 2010, Legg Mason charged their big client $27 million in fees. But Legg Mason did a lousy job losing 40% during this time period! This is yet another example of Wall Street making tons of money regardless of how they perform.  People were paid millions of dollars in fees and delivered sub-par returns.

How did the little guys do for comparison? At NorthStar Capital Advisors, our relatively conservative portfolio of 50% stocks and 50% bonds gained 16% from January 2009 through September 2010.

Instead of being swayed by the slick marketing and unrealistic expectations often created by large well-known firms, most investors would be better off with a balanced portfolio of stocks and bonds with reasonable rates of returns.

NorthStar Capital Advisors is not a big, famous firm.  We offer simple advice and don’t require huge fees.  We help individual investors invest relatively small amounts (no $300M accounts here!).  We believe we’re doing better work for our clients than those bigger firms.

Bigger is not necessarily better when it comes to investing.  In fact, it’s often just the opposite.

Did you know that insider trading laws do NOT apply to members of Congress? It is completely legal for them to buy and sell stocks based on non-public information learned through their congressional activities.

Members of congress have daily access to non-public information. For example, say you serve on the health care committee which decides that Medicare is not going to pay for a certain type of drug. That’s market moving information. You can trade on this before it’s public knowledge and do so legally.

During the health care debate of 2009, members of congress were trading health care stocks and making money this way. During the financial crisis of 2008, members of congress got private notifications of the potentially apocalyptic outcomes. In the melt down, it was revealed that Spencer Bachus of Alabama, the Head of the Financial Services Committee in the House of Representatives today, shorted stocks after a meeting and profited handsomely from it. Here’s how Andrew Brietbart described it:

While Congressman Bachus was publicly trying to keep the economy from cratering, he was privately betting that it would, buying option funds that would go up in value if the market went down. He would make a variety of trades and profited at a time when most Americans were losing their shirts.

60 Minutes profiled insider trading in Congress. Watch it and you’ll be shocked and outraged.

Sen. Scott Brown, R-Mass., introduced the Stop Trading on Congressional Knowledge (STOCK) Act of 2011, which would prohibit members or employees of Congress, as well as executive branch employees, from using non-public information obtained through their public service for investing or any attempt at personal financial gain. But don’t expect this to go anywhere. Why would the rule makers take away such a profitable option from themselves?

During the housing boom, Carl Richards, a financial adviser, made the same mistakes he warns people to avoid.  A bad combination of leverage and wishful thinking led to the Richards Family losing their home.  According to Carl, “I should have known better.”  The New York Times story written by Carl is a must-read.