Challenges in Changing Regulatory and Economic Environment Financial Planning: Presented by Herbert K. Daroff, J.D., CFP ® Baystate Financial Services, LLC Boston, MA 2004 World Services Group Financial Services Meeting, Miami May 7, 2004 MetLife Achieving the Dynamic Needs of High Net Worth Individuals

TIME Magazine Sept. 29, 2003

Bad News = Big Headlines

Bad News Travels Fast ‘...the NASD is taking a “novel” approach and they’re sending the message that firms should “dedicate serious resources” to resolving problems after they were detected.’

She Was Found Guilty … The Brand Was Found Guilty “ By going to such lengths to serve a client, Mr. Bacanovic underscored how thin the line can be between exemplary client service and unethical or even illegal behavior.” “The brand will never be the same the way it was.”

Troubled Annuities More than 800 insurers these days are considered vulnerable, or financially weak, by at least one of the major rating agencies. CompanyNumber of Vulnerable Ratings Bankers Life & Casualty5 Conseco Annuity Assurance5 Allmerican Financial4 Old West Annuity & Life3 Old Standard Life Ins.3 Security National Life3

Financial Planning … is the dynamic process of helping people identify where they are financially today; identify where they want to be in the future; and then, achieve their financial goals, needs and objections.

Six Step Process 1. Mutually Defined Scope of the Engagement planner’s expectations client’s expectations 2. Data Gathering goals, needs, and priorities factual information 3. Analyze Data and Evaluate Alternatives 4. Present Recommendations 5. Implement Agreed upon Solutions 6. Periodically Monitor and Revise as Necessary

Changing Regulatory and Economic Environment Changing Laws and Regulations Economic Conditions Split-Dollar NASD/SEC Compliance Retirement Funding Limits Estate Taxes 15% Dividends Insurance & Annuity Products Individual Securities Mutual Funds Managers of Managers

Life Insurance Products Low Interest Rates (beginning to rise): UL -- mostly short term debt -- increased performance WL -- mostly longer term debt -- decreased dividends VUL -- FLEXIBILITY

Client Life & Health Ins. Co. Financial Planners Property & Casualty Ins. Co. CPA Banks Evolution of Financial Services Wire Houses Mutual Funds Investments Trusts Cash Management Attorney

Evolution of Financial Services First Stage of Consolidation Financial Planners CPA Banks Trust Cash Management Attorney Client Ins. Co Multiple Lines Life & Health Ins. Co. Property & Casualty Ins. Co. Wire Houses Mutual Funds Ins. Co B/D NES Walnut St.Sec. MetLife Nathan & Lewis Investments

Evolution of Financial Services Second Stage of Consolidation Attorney Client CPA and Financial Planners and Banks Licensed to sell Product Insurance and Investments Licensed Insurance Agents Products Registered Reps. Note:Attorneys in Boston have been investing trust fund assets for many years

Evolution of Financial Services ProductsAdvice CommissionsFees

Who is our Competition? Other Advisors Good Advice Bad Advice Analysis Paralysis The Internet Do-it-yourself Procrastination Indecision