1. Panel:
Irwin Nachimson, Partner, Nigro Karlin Segal & Feldstein, LLP
Robert C. Brandt, Partner, Feinberg, Mindel, Brandt & Klein, LLP
Ronald J. Silverman, Managing Director, Bel Air Investment Advisors LLC
Rachael S. Wexler, Partner, Glaser Weil Fink Jacobs Howard Avchen & Shapiro LLP
Moderator: Alexander B. Kasdan, Managing Director, DelMorgan & Co.
Event Organized by
2. Irwin Nachimson is a partner of Nigro Karlin Segal & Feldstein, LLP and has been with the firm
for approximately 20 years. Irwin has worked on family law, fraud, investigative and litigation
support assignments. His assignments have included calculating cash flow available for support,
dividing community and separate assets, tracing assets and valuing companies. Irwin has also worked
on various assignments with asset based lenders in troubled debt scenarios and been involved with
numerous assignments in Chapter 11 cases. Irwin s assignments have included monitoring
companies, analyzing cash flow forecasts, tracing sources and uses of funds and investigating
fraudulent transactions. Irwin has worked in a variety of industries including the Petroleum, Real
Estate, Non-Profit, Computer, Entertainment, Distribution, Manufacturing, Agriculture, and Food
industries.
Irwin has worked on projects for financial institutions including Bank of America, Wells Fargo,
Comerica, Union Bank of California, Bank of the West and Silicon Valley Bank.
Irwin also specializes in merchandising and profit participation audits on behalf of actors, directors
and producers in the entertainment industry as well as other high net worth individuals. As part of
these audits he as visited and done extensive work at various major studios.
Irwin is a graduate of The University of California Los Angeles (UCLA) and earned his MBA from
The University of Southern California (USC). Irwin is a Certified Public Accountant and a member of
the American Institute of Certified Public Accountants, The California Society of Certified Public
Accountants and The Association of Insolvency and Restructuring Advisors. Irwin is certified in
Financial Forensics by the American Institute of Certified Public Accountants (AICPA). Prior to his
work at Nigro Karlin Segal & Feldstein, LLP, Irwin worked with Arthur Andersen.
Irwin is married to his wife of 16 years, Sharona, and has four children. Irwin is a board member of
National Conference of Synagogue Youth. He is also on the Board and a member of the audit
committee of the Union of Orthodox Jewish Congregations of America.
1
10960 Wilshire Blvd.
Suite 500
Los Angeles CA 90024
(310) 229-5161
www.nksf.com
inachimson@nksf.com
3. Robert C. Brandt, Partner, Feinberg, Mindel, Brandt & Klein, LLP, is the head of the firms Family Law
Department. Mr. Brandt is a Certified Family Law Specialist by the State Bar of California Board of Legal
Specialization.
Mr. Brandt graduated from Southwestern University School of Law, J.D., 1976, University of California at Los
Angeles, M.A., 1972, and San Diego State University, B.A., 1971 Graduating with Distinction in Speech Arts.
Mr. Brandt was named one of Southern California’s Top 10 Lawyers in 2012 and 2013, one of Southern
California's Top 100 lawyers in 2009 – 2013, and was named as a Super Lawyer by Los Angeles Magazine, 2005
- 2013. Mr. Brandt was also selected by his peers for inclusion in The Best Lawyers® 2010 – 2012, and has an
AV rating with Martindale-Hubbell.
• Fellow of the American Academy of Matrimonial Lawyers, where he serves as Treasurer of the Southern
California Chapter.
• Fellow of the International Academy of Matrimonial Lawyers.
• Member of the Association of Certified Family Law Specialists.
• Member of the Los Angeles County Bar Association.
• Member of the Los Angeles County Bar Association Family Law Section Executive Committee for more than
eight years.
• The Immediate Past Chair of the Los Angeles County Bar Association Family Law Section, and former Chair,
Chair Elect, Vice Chair, Treasurer and Secretary.
• Member of the Los Angeles County Bar Family Law Section Executive Committee “Court Liaison/Family
Court Services Committee.”
• Member of the Beverly Hills Bar Association Family Law Section Executive Committee (2009-present).
• Previously served as the Chairperson of the Continuing Legal Education Subcommittee.
• Frequently participates in Continuing Legal Education seminars as a lecturer, moderator and panel member.
• Co-authored Chapter 3A, entitled, "Family Law/Domestic Relations Issues Affecting a High Net Worth Athlete
or Coach," in the Thompson West four-volume treatise, "Law of Professional Amateur Sports" (c) 2009.
• Co-authored the article, "Under Influence in Probate and Family Law Matters," with partner Howard Klein. The
article was published in the September 2008 issue of Los Angeles Lawyer, and Brandt and Klein were featured on
the cover of the magazine.
2
12424 Wilshire Blvd.
Ninth Floor
Los Angeles, CA 90025
(310) 447-8675,ext. 227
www.fmbklaw.com
rbrandt@fmbklaw.com
4. Rachael S. Wexler is a Partner at Glaser Weil Fink Jacobs Howard
Avchen & Shapiro LLP. Ms. Wexler is a transactional attorney whose
practice focuses on digital entertainment, social media, mergers and
acquisitions, joint ventures and capital markets. Ms. Wexler has represented
digital studios in acquisitions, joint ventures, licensing and website
development, as well as small, mid-market and large public and private
companies, investors and underwriters in the technology and tech-solutions,
including the renewable energy, industries in connection with securities
offerings, business combination transactions and strategic growth initiatives.
In 2010, Ms. Wexler was named a “Ground Breaker” by Brownfield
Renewable for her legal work and business innovation in the arena of
renewable energy financing. In 2009, Ms. Wexler was recognized as one of
Los Angeles Business Journal’s “Who’s Who in L.A. Law.” Ms. Wexler
recently spoke at Digital LA's NewFronts Panel. This panel discussed how
content studios are monetizing the content of shows via advertising,
sponsorship, show integration and more.
She graduated with honors from the University of Chicago where she
received a bachelor's and a master's in the philosophy of science. Ms.
Wexler received her juris doctorate degree from Columbia University
School of Law, where she was a Harlan Fiske Stone Scholar.
3
10250 Constellation Blvd.
Suite 1900
Los Angeles, CA 90067
(310) 556-7805
www.glaserweil.com
rwexler@glaserweil.com
5. Ronald J. Silverman is a Managing Director at Bel Air Investment
Advisors. Prior to joining Bel Air in 2003, Ron was a Senior
Managing Director and a member of the Management Committee of
Gerard Klauer Mattison & Co., Inc., an investment bank headquartered
in New York. Before GKM, Ron was a partner of the Beverly Hills-
based law firm Weissmann, Wolff, Bergman, Coleman, & Silverman
for 15 years; earlier he was a partner of the Los Angeles law firm
Manatt, Phelps, Rothenberg & Tunney. Ron started his legal career as a
trial attorney with the United States Department of Justice, Antitrust
Division.
Ron is on the Board of Directors of the City of Hope. He previously
served on the Board of Directors of Cedars-Sinai Medical Center. Ron
has also been active in Jewish Federation activities, leading the Los
Angeles chapter on its first mission to Cuba in 1999 and co-chairing a
UJF Major Gifts Mission to Washington, D.C. Ron is also on the Board
of Trustees of Children Institute Inc.
Ron serves on the Board of Advisors of the George Washington
University Law School, where he received his J.D. degree. He received
his B.A. degree from Pennsylvania State University.
4
1999 Avenue of the Stars
Suite 2800
Los Angeles, CA 90067
(877) 229-1500
www.BelAir-LLC.com
rsilverman@BelAir-LLC.com
6. Alexander B. Kasdan is a Managing Director at DelMorgan & Co. He has more than
twenty years of investment banking, real estate, corporate law and corporate strategy
experience. Mr. Kasdan has executed over 100 domestic and cross-border transactions
totaling more than $10 billion in overall volume in a variety of industries. Prior to joining
DelMorgan, Mr. Kasdan founded and ran Convergence Capital Partners, LLC, a boutique
investment banking advisory firm and was an investment banker at Barrington Associates in
Los Angeles, where he headed the restructuring group, Peter J. Solomon Company, Credit
Suisse First Boston and Merrill Lynch.
Mr. Kasdan practiced law with O’Melveny & Myers LLP (formerly O’Sullivan Graev &
Karabell LLP) and Paul, Hastings, Janofsky & Walker LLP (formerly Battle Fowler LLP),
where he specialized in mergers and acquisitions, private equity and corporate finance
transactions. In addition, Mr. Kasdan served as Corporate Counsel in charge of business
development at SchlumbergerLtd., a global oilfield and information services company.
Mr. Kasdan graduated magna cum laude from Middlebury College with a B.A. degree in
Economics and Italian and was elected to Phi Beta Kappa during his junior year. In addition,
he holds a J.D. degree from Columbia University Law School and has studied at the
University of Florence in Italy. Mr. Kasdan is admitted to the Bar in the State of New York.
Mr. Kasdan is a Senior Advisor to Governance and Transactions LLC, an advisory firm
established in 2003 by Mr. James L. Gunderson, former Secretary and General Counsel of
Schlumberger Limited, to assist boards, management and owners with corporate governance,
compliance, structuring and strategic transactions.
Mr. Kasdan is a frequent speaker and published author on the subjects of mergers and
acquisitions, corporate finance and restructuring.
5
100 Wilshire Blvd.
Suite 750
Santa Monica, CA 90401
(310) 980-1718
www.delmorganco.com
ak@delmorganco.com
7. Anna Spektor is the Founder and President of Expert Presence,
a marketing, business development and brand communications
consultancy.
Expert Presence is frequently engaged by law, accounting and other
professional services firms to design and implement comprehensive
strategies focused on cultivating new and solidifying existing
referral relationship and building brand awareness.
Founded upon creativity, accountability and delivering results,
Expert Presence is well equipped to provide solid, cost-effective
and accountable counsel for clients across the United States.
6
1250 Constellation Blvd.
Suite 2320
Los Angeles, CA 90067
(310) 995-6579
www.expertpresence.com
anna@expertpresence.com
9. Question 1: How does a family law court allocate between SP and CP the
business income (or increase in value) of a SP business that is owned and
managed by one spouse during the marriage?
8
Business Remains the Spouse’s SP: Although the business remains the spouse’s SP, family law
courts apply two formulas to allocate the business income earned during the marriage.
1. Pereira Approach: Courts apply the Pereira formula if the growth in value of the SP business
is attributed to a community effort (i.e., the efforts of the managing spouse results in increased
profits and sales).
• Formula: Community Income = Value of Business (-) Fair return on the SP investment.
The SP spouse receives as much as if he/she had taken SP and put it in a bank account instead of
investing in a SP business.
o Does Not Subtract Family Expenses: Periera does not subtract family expenses paid by
business earnings because it calculates the value of the SP, and the remainder, which is already
reduced by money withdrawn to pay family expenses, is CP.
• Benefits Community: Pereira benefits the non-SP spouse because it gives the SP spouse
only a fair return on his/her investment.
10. Question 1 (cont.)
9
2. Van Camp Approach: Courts apply the Van Camp formula if the increase in the value of the
SP business is attributed to general market conditions or something other than the community
effort (i.e., increase in oil prices is directly responsible for growth in a family-owned gas
station).
• Formula: Community Income = Reasonable value of services performed by the SP spouse
(-) Amount of family expenses paid from the business earnings.
o Subtracts Family Expenses: Family expenses are property taken into account insofar as they
were paid from the business income.
• Benefits SP Spouse: Van Camp benefits the SP spouse because it apportions only a
standard salary to the community, and the remainder belongs to the SP spouse.
Example: Assume that the original value of a spouse’s SP business is $10,000. Assume that the
value of the SP owner spouse’s efforts is $20,000 annually, the annual family expenses are
$15,000 per year. Assume that a fair of return is 7 %.
• Periera: Take the original value of the SP business ($10,000), and multiply it by the fair
rate of return (7%), which equals $700 SP income annually. If the business earned $40,000 per
year, subtract $700, so the annual CP income would be $39,300.
• Van Camp: Subtract the owner spouse’s efforts ($20,000) from the annual family expenses
($20,000), which equals $15,000 per year. The remainder ($5,000) is CP. If the business earned
$40,000 per year, $5,000 of that is deemed CP and the remaining $35,000 is deemed SP.
11. Question 2: What is the safest mechanism to ensure that a SP business
remains the spouse’s SP business upon divorce?
10
Premarital Agreement: Spouses may protect their separate property businesses by executing a
premarital agreement. Parties may use premarital agreements to avoid California CP
presumptions, and may validly provide that earnings/profits from a spouse’s SP business will
remain that spouse’s SP.
• Courts Favor Premarital Agreements: Family law courts favor premarital agreements, as
long as they do not violate public policy.
• Requirements of Premarital Agreements: In order to be enforceable, a premarital
agreement must be voluntarily executed and cannot be unconscionable. Family Code § 1615.
o “Voluntary” Defined: The party against whom enforcement is sought: (1) was represented by
counsel at the time of execution or waived the right to counsel; (2) had at least 7 days between
the time that party was presented with the agreement (and advised to seek independent legal
counsel) and the time the agreement was signed; and (3) if unrepresented by legal counsel, was
fully informed of the terms and basic effect of the agreement.
o “Unconscionable” Defined: The agreement was unconscionable and (1) the party was not
provided a fair, reasonable, and full disclosure of the property or financial obligations of the
other party; (2) the party did not waive the right of disclosure; and (3) the party did not have an
adequate knowledge of the property or financial obligations of the other party.
• ATROS: The ATROS still apply even if a premarital agreement designates a business as a
spouse’s SP.
12. Question 3: Can the spouse who owns a SP business sell the SP business
during a dissolution proceeding without the other spouse’s knowledge or
consent?
11
ATROS (Automatic Temporary Restraining Orders): ATROS significantly restrict a spouse’s ability to sell or
in any way reorganize a SP business during a dissolution proceeding, even if the business is entirely the
spouse’s SP.
• Family Code § 2040(a)(2): Both parties are restrained from “transferring, encumbering, hypothecating,
concealing, or in any way disposing of any property, real or personal, whether community, quasi-community,
or separate, without the written consent of the other party or an order of the court, except in the usual course
of business or for the necessities of life, and requiring each party to notify the other party of any proposed
extraordinary expenditures at least five business days before incurring those expenditures and to account to
the court for all extraordinary expenditures made after service of the summons on that party.”
o Usual Course of Business: The Family Code offers no guideline in determining whether a property
disposition was made in the “usual course of business” or for “necessities of life.”
o Extraordinary Expenditures: Each party is required to notify the other of any proposed “extraordinary
expenditures” at least five business days before incurring those expenditures and to account to the court for all
extraordinary expenditures made after service of summons.
• Operation of Business During Divorce: If one spouse is the primary operator of a business and the other
spouse is not actively involved, the operating spouse retains responsibility for running the business during the
divorce. The court, however, may issue restraining orders against third parties (i.e., a business partner) in order
to protect the community interest in the property. See Family Code § 2045(a).
13. Question 4: If only one spouse manages and runs a CP business, then what
duty does the managing spouse owe to the other spouse during the
dissolution proceeding?
12
Fiduciary Duty: Family Code § 721 defines the fiduciary duty as follows: “a husband and wife
are subject to the general rules governing fiduciary relationships which control the actions of
persons occupying confidential relationships with each other. This confidential relationship
imposes a duty of the highest good faith and fair dealing on each spouse, and neither shall take
any unfair advantage of the other. This confidential relationship is a fiduciary relationship.
• Nature of Fiduciary Duty: During a divorce, the managing spouse owes the highest duty of
“good faith and fair dealing” on the out-spouse, which includes providing the out-spouse with
access to books, disclosing true and full information upon request, and providing an accounting.
As long as the fiduciary duty exists, each spouse has the affirmative obligation to “immediately,
fully, and accurately update and augment” their required disclosures. Family Code § 2100(c).
• Termination of Fiduciary Duty: The fiduciary duty continues until the date of distribution
of the community asset (even after the dissolution). Therefore, if the business is part CP, then,
pursuant to the Family Code, the managing spouse must manage the business in a way that does
not prevent the other spouse from receiving the benefit of the business.
• Relationship between Fiduciary Duty and Managing Business: Even if the business is only
partially community property, the managing spouse still owes the other spouse the fiduciary duty
to protect the other spouse's interest in the business and to constantly apprise the other spouse
about material/significant transactions in the business.
14. Question 5: How does a court value a family business and how is it divided?
13
Valuing Businesses: As illustrated In re Marriage of Foster, courts are free to accept any
legitimate, evidence-based valuation. In re Marriage of Foster (1974) 42 Cal. App. 3d 577.
• Common Valuation Methods:
o Sale;
o Auction between parties (In re Marriage of Cream);
o Buy-Sell Agreement (In re Marriage of Nichols);
o Comps (often used for franchises);
o Book and adjusted book value;
o Going concern, return on investment.
• Elements of Business Value: In determining the value of a family business, courts will
focus primarily on the real property (whether fee or leasehold interest), the work in process,
assets (including accounts receivable), and goodwill.
• Goodwill: To the extent a business has acquired recognized goodwill, the goodwill is
generally an asset to be included in the valuation of the family business. In re Marriage of
McTiernan & Dubrow (2005) 133 Cal. App. 4th 1090.
https://1.next.westlaw.com/Link/Document/FullText?
findType=Y&serNum=2007583254&pubNum=7047&originationContext=document&transiti
onType=DocumentItem&contextData=(sc.Search)
15. Question 5 (Cont.)
14
• Date of Valuation: Family Code § 2552(a) provides that the “court shall value the assets
and liabilities as near as practicable to the time of trial.” However, for good cause and upon 30
days notice, the court may value a business at a date after separation and before trial “to
accomplish an equal division of the community estate of the parties in an equitable manner.”
Family Code § 2552(b).
o Separation Date: When the value of a business is largely attributed to a spouse’s skill and
management (as opposed to underlying capital), the court will likely use the separation date as
the valuation date.
o Minimizing Costs in Valuing Businesses: Determining the date to value a business is difficult,
as it is a still picture of a moving object; so it will likely be cost-efficient for the parties to
stipulate in advance to a valuation date.
Division of the Business:
• If Only One Spouse is Capable of Running Business: The court usually awards it to the
managing spouse, as opposed to selling it to a third party or ordering a division in-kind.
• If Both Parties are Capable Managers: The court will usually require that one spouse buy
the other out (as opposed to selling it to a third party).
16. Question 6: Are there any other preventative measures a business owner
expecting a divorce can take to protect his business?
15
Buy-Sell Agreement: A buy-sell agreement can effectively limit a spouse's ability to acquire ownership,
deprive a divorcing spouse of voting rights, or give other business partners the right to buy at a specific price.
• What Should a Buy-Sell Agreement Include?
o A mechanism to determine the price, terms, and conditions for the sale
o Source of funds for the purchase of any ownership interests (i.e., life insurance, cash on hand)
o Require all owners to have an acceptable premarital agreement in place to require that the soon-to-be
spouse waves ownership interests in the business in the event of divorce.
• Formula in the Buy-Sell Agreement: The buy-out formula for purchasing a business interest is
probative of the value for purposes of dividing the community interest in the business, but not necessarily
conclusive. In re Marriage of Nichols (1994) 27 Cal. App. 4th 661.
• In re Marriage of Nichols: The court used a stock purchase agreement to value H and W’s community
interest in H’s business. The court emphasized that it “possesses broad discretion to determine the value of
community assets as long as its determination is within the range of the evidence presented.” In re Marriage
of Nichols (1994) 27 Cal. App. 4th 661, 670. The court also adopted the following considerations in
determining whether to use a formula set forth in a buy-sell agreement: “(1) the proximity of the date of the
agreement to the date of separation to ensure that the agreement was not entered into in contemplation of
marital dissolution; (2) the existence of an independent motive for entering into the buy-sell agreement; and
(3) whether the value resulting from the agreement’s purchase price formula is similar to the value produced
by other approaches.” Id. at 672.
18. Income Issues and Property Issues
There are two categories through which we need to look
at a small business in a Divorce Setting
17
• How much income is currently being generated by the
small business for the purpose of calculating support and
value.
• What is its value?
19. Income Issues and Property Issues
Income being generated by the company is typically
assigned to the in-spouse for the purposes of
calculating support.
18
• How do we determine the true income of a company
and what documents are needed?
20. Income Issues and Property Issues
• Basic Documents Needed To Determine True
Income:
– Company Tax Returns
– Company Trial Balances and General Ledgers
– Company Contracts
– Bank Statements
– Account Receivables and Payable Ledgers
19
IncomeAvailable for Support
21. Income Issues and Property Issues
• Typically we look at Income for the most recent
12 Month Period
– How do We Determine a True Income Number?
1. Add Backs:
Prerequisites – Example:
Auto expenses
Meals and Entertainment
Travel
Charitable Contributions
Divorce Legal Fees
Pensions
Medical and Life Insurance
20
22. Income Issues and Property Issues
How do We Determine a True Income Number?
(continued)
2. Taxable vs. Non Taxable
3. Depreciation – Non Recurring Expenses
4. Reductions From Income – Non Recurring Income
(i.e., Expiring Contracts)
21
23. Income
• Income vs. Cash Flow
• Income Generated – Includes Accrued
Receivables vs. Cash Approach (Does Not
Include Accrued Sales)
• Also Applies to Payables
• How much is other spouse retaining within the
Company and not reporting as a distribution
22
24. Income
• Fraud
• Un-Reported Income
• Bogus Employees (Girlfriend)
• Fictitious Vendors
• Hidden Bank Accounts
23
25. Income and Valuation
• Valuation Methods
I. Income Approach
– Takes into account
• Risk
• Appropriate Multiple & Reasonable Compensation
• Historical Earnings
II. Market Approach – Other Comparable
Companies
III. Asset Approach – Assets Only
24
27. Asset Approach
• How do you buy them out?
Award Other Assets (House)
Notes Payable
Share of the Profits
26
28. Valuation - Issues Involved
• Value of Small Business
• Dates of Valuation
Date Closest to Trial
Service Business – Date of Separation
Other Stipulated Date
27
31. • The requirement that any “transmutation” of property
interests be made in writing by an express declaration that is
accepted by the spouse whose interest is adversely affected.
• The imposition of fiduciary duties in transactions between
spouses: “a duty of the highest good faith and fair dealing on
each spouse and neither shall take advantage of the other.”
3
Special Requirements of Family Law
46. Assembling the Working Group
• Investment Banker
Pre-engagement diligence – solid financials, reputation, etc.
Desirability of client – our reputation and time are on the line
Selling on the uptick
Identify all appropriate add-backs and adjustments to EBITDA
Recast historical financials
Projections and pro-forma adjustments
Knowledge of marketplace and process
Due diligence issues
Management issues
Investment banking fees – exclusivity, retainer, success fees
47. Assembling the Working Group
• Transaction Counsel
Familiarity with M&A issues
Knowledge of various deal structures
Confidentiality of the sale process
Non-compete agreements
Stock sale v. asset sale
Employment and/or consulting agreements
Board and minority shareholder/passive investor issues
Legal fees
48. Valuation of the Business
Reason for Valuation
Fair Market Value
Fair Value
Other
Methodology
Minority and Marketability Discounts
Personal transactional tax implications
Due diligence issues
49. Issues to Consider
Familiarity with M&A issues
Knowledge of various deal structures
Confidentiality of the sale process
Non-compete agreements
Stock sale vs. asset sale
Employment and/or consulting agreements
Board and minority shareholder/passive investor issues
Legal fees
50. Illustrative Sale Process – Steps and Timeline
Company
Preparation
Marketing the
Company
Receive
Proposals
Due Diligence
and LOI
Negotiations and
Closing
5-7 weeks 6-12 weeks 3-4 weeks 4-6 weeks 4-8 weeks
• Information
gathering
• Prepare
Company
Summary
• Prepare
Information
Memorandum
(IM)
• Finalize list of
targets
• Contact
targets
• Execute CAs
• Distribute IMs
• Organize
Virtual Data
Room
• Address any
other issues
• Receive written
indications of
interest
• Select short
list
• Management
Presentations
• Initial due
diligence
• Solicit final bids
(LOIs)
• Distribute draft
agreements
• Receive final
offers
• Evaluate LOIs
• Negotiate with final
bidders
• Coordinate working
group (counsel,
accountants, other
advisors)
• Final due diligence
• Closing
Total Time =
22–37 Weeks
51. The main responsibility of business owners
and management is to continue running
the business – need to meet all
projections and forecasts
52. Bel Air Investment Advisors
1999 Avenue of the Stars, Suite 2800 Los Angeles, CA 90067 Phone: (877) 229-1500 Fax: (310) 229-1505
WWW.BELAIR-LLC.COM
Prepared By:
Ronald J. Silverman
David Sadkin
February 12, 2013
53. Changed Circumstances:
How to Manage a Portfolio for Income and Growth
1Bel Air Investment Advisors
• It is a challenge to take responsibility for finances. This is even more difficult given
fresh memories of the financial crisis.
• While there remain risks, the worst case scenario is unlikely to materialize.
• Resolution of tax side of the fiscal cliff (though spending cuts could be drag on
economy.
• Europe no longer in crisis (though long term problems remain).
• China hard landing averted (though growth likely slower than in past).
• Interest rates remain at all-time low.
• 10-Year Treasury remains below 2%.
• Municipal bond yields anemic – less than inflation.
• Rising rates would decrease bond values
• Economy growing – but slowly.
• We believe stocks will outperform bonds over the next three to five years.
54. Things to Consider
2Bel Air Investment Advisors
• Investment Objectives: Cash Flow, Time Horizon, Risk Tolerance
• Strategies:
− Fixed Income to generate income and wealth preservation.
• Municipal Bonds – tax exempt, low volatility, modest yields
• Taxable Bonds – corporate, mortgages, global, and high yields bonds can be
used to increase income
− Equities to generate dividends and grow the portfolio over time.
• Domestic equities – growth, value, dividends
• International equities – developed countries including Europe and Japan
• Emerging Market equities – more volatility but more opportunity for long-term
economic growth
− Alternative Investments to complement traditional strategies.
• Income oriented investments including MLPs, mezzanine debt, real estate,
and structured credit
• Growth oriented investments including long/short strategies and private equity
• Energy, natural resources, and commodities
• More aggressive strategies including venture capital
• Diversification can reduce volatility and smooth out returns over time
55. Examples
3Bel Air Investment Advisors
Equities
30%
Alternatives
22%
Fixed5Income
48%
Municipal)Fixed)
Income
100%
Municipal Bond
Portfolio
Moderate Allocation Portfolio
Assumptions:
Starting Value of $10 million
Annual After-Tax Distributions of $500,000
56. Example Projections
4Bel Air Investment Advisors
$"
$2,0 0 0 ,0 0 0
$4,0 0 0 ,0 0 0
$6,0 0 0 ,0 0 0
$8,0 0 0 ,0 0 0
$10 ,0 0 0 ,0 0 0
$12,0 0 0 ,0 0 0
Y ear.0 Y ear.5 Y ear.10 Y ear.15 Y ear.20 Y ear.25
Moderate Municpal.
Estimated Annual After-Tax Net of
Fee Return: +4.83%
Estimated Value of Portfolio After 25
Years: $9.2mm
Estimated Annual After-Tax Net of
Fee Return: +2.78%
Estimated Value of Portfolio After 25
Years: $2.1mm
