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Bramwell’s Lunch Beat: The Divide Between Financial Advisors and Millennials

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May 12th 2015
Staff Writer and Editor AccountingWEB
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SEC receives at least one audit independence query daily
John Kester and Emily Chasan of the Wall Street Journal’s CFO Journal wrote that auditor independence continues to be a hot-button issue for the US Securities and Exchange Commission’s (SEC) enforcement unit. The SEC gets about 400 auditor-independence questions a year, or about one a day, according to the agency’s chief accountant, James Schnurr. Last year, the SEC settled two cases against auditors over alleged violations. Ernst & Young LLP paid more than $4 million to settle allegations that it lobbied on behalf of audit clients. KPMG LLP paid $8.2 million to settle allegations that it provided prohibited extra services to audit clients. In their settlements, the firms neither admitted or denied the allegations.

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Financial advisors don’t care about millennials, and the feeling is mutual
The investment industry has an age discrimination problem, and millennials and Generation X are bearing the brunt of it, wrote Ben Steverman of Bloomberg. Only 30 percent of financial advisors are actively looking for clients under age 40, according to a survey of 500 advisors by the research firm Corporate Insight. Advisors prefer older clients for a simple reason: Most advisors get paid based on a percentage of the assets they manage. And typical households in their late 60s and early 70s are far richer than their children and grandchildren, with net worths that are five times that of a median 35- to 44-year-old household. These older baby boomers own 22 times more in assets than those under age 35, Federal Reserve data show. Still, the investment industry can’t ignore younger clients forever. For one thing, retiring boomers are starting to spend down their nest eggs, making them less profitable for advisors year after year, says Corporate Insight’s Sean McDermott.

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Chris Christie calls for fewer US income tax rates
New Jersey Gov. Chris Christie, a Republican considering a run for president, will propose a simpler US income tax system and lowering the top rate to 28 percent as part of his plan for spurring the national economy, wrote Terrence Dopp of Bloomberg. Christie also is calling for ending some tax deductions but leaving those for charitable giving and first home mortgage and interest payments, according to excerpts of a speech he plans to give on Tuesday in early-voting New Hampshire. He said there should be three individual income tax rates instead of six, with the lowest less than 10 percent. In addition to what he’s called a “fairer and flatter” income tax structure, he’ll propose cutting the top corporate tax rate to 25 percent from 35 percent and giving workers under 21 and over 62 a payroll tax holiday, according to the excerpts.

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House Dems: Repeal medical device tax by Memorial Day
More than a dozen Democrats are pressuring House leadership to advance a bill that repeals Obamacare’s medical device tax before Memorial Day, wrote Sarah Ferris of The Hill.  Rep. Scott Peters (D-CA) led 17 House Democrats in a letter to Speaker John Boehner (R-OH) and Minority Leader Nancy Pelosi (D-CA) urging “timely passage” of the bill. Peters and the 17 other Democrats warned that the 2.3 percent tax on medical devices is prompting companies to slash their budgets on research and development, which they say “puts the discovery of new breakthrough medical technologies at risk.” Lawmakers from both parties – including prominent Democrats such as Sen. Elizabeth Warren (D-MA) and Sen. Al Franken (D-MN) – have repeatedly called on Congress to repeal the provision.

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Second Swiss bank reaches deal under US tax program
Vadian Bank AG has become the second of what are expected to be dozens of Switzerland-based private banks to reach a deal with the US Department of Justice under a voluntary disclosure program for assisting Americans in evading taxes, wrote Karen Freifeld of Reuters. The program, launched in 2013, allows Swiss banks to avoid prosecution by disclosing cross-border activities that helped US account holders conceal assets and income. Vadian, a small bank that has one office in St. Gallen, Switzerland, accepted accounts that were forced out of other Swiss banks in 2008 after it became public that UBS AG was the target of a criminal investigation over facilitating tax evasion. Under a nonprosecution agreement, Vadian will pay a $4.25 million penalty, demonstrate that it put in controls to stop misconduct in undeclared US accounts, and cooperate in related legal proceedings. BSI became the first Swiss bank to settle under the program in March.

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Raise alcohol tax to boost economic output, says OECD
A tax increase that would raise alcohol prices by 10 percent is among the most effective means of countering excessive consumption, which reduces economic output in most developed countries and contributes to early death and disability, the Organization for Economic Cooperation and Development (OECD) said on Tuesday, wrote Paul Hannon of the Wall Street Journal. The OECD noted in a report that while alcohol consumption has been declining in most countries over the past two decades, it is heavily concentrated, with the majority accounted for by the heaviest-drinking 20 percent of the population. “Hazardous” and “binge” drinking is on the rise among young people, and especially young women. “This report provides clear evidence that even expensive alcohol abuse prevention policies are cost-effective in the long run and underlines the need for urgent action by governments,” said Secretary-General Angel Gurría, launching the report in Paris.

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