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Sentinel, Looking Back And Looking Forward

A lot has changed since I published the first issue of this newsletter, but a surprising amount has not. Both are reflected in the first paragraph of that May 1993 edition, from an article titled “For The Best Gifts, Keep On Giving.”

“Much has been made about last year’s abortive effort in Congress to reduce the $600,000 gift/estate tax allowance (the “unified credit” amount) to $200,000,” I wrote. “Just this week, another somber-sounding tome crossed my desk warning of attempts to revive the proposal later in 1993 and urging readers to make their big gifts now. (Like many somber-sounding tomes, this one came from an insurance company which suggests that the big gift would best be made in the form of an insurance policy.)”

Today that unified credit amount is $11.58 million, a nearly 20-fold increase in the tax-free wealth transfer amount. The threatened reduction to $200,000 never happened, but efforts to roll back the tax-exempt allowance continue to this day. Also as in 1993, life insurance companies still tend to present their product as the perfect vehicle to implement nearly any financial strategy. Those claims still warrant close examination.

I launched the newsletter less than six months after I left Arthur Andersen, then the world’s largest accounting firm, to open my own financial planning practice in Westchester County, New York. Naturally, I referred to my new enterprise as the world’s smallest accounting firm, at least for a little while.

At first I worked alone in a small office my wife found for me in a converted movie theater in the village of Hastings on Hudson. The name of that building, Moviehouse Mews, appeared on the front page of the newsletter for the next eight years. I named my new publication Sentinel, after a mountain that stands next to the University of Montana campus in Missoula, from whose journalism school I had graduated in 1978.

I was not a fan of most financial firm newsletters. Even the best seemed canned and antiseptic, designed to showcase the smarts of their authors without risking offense to anyone who might ever become a client or a referral source. Someone like an insurance agent, for example.

The cachet of running the world’s smallest accounting firm wears off pretty quickly, as you can imagine. My goal for my new business was to build an enterprise that could eventually prosper even beyond my own working career. To do that, I needed to attract clients and staff to serve those clients. Why should any of them choose me when they could go to a larger, better-known firm? I reasoned that my best hope was to communicate my views and my personality, as well as my knowledge, as widely and as openly as possible.

Inevitably, this meant taking positions that upset some people. Long-term care insurance was being heavily marketed in the 1990s; I was convinced that the product’s economics made no sense. Too many people were apt to claim benefits for too long a period due to increasing life expectancies, and companies were pricing the product aggressively to meet competition and make sales. Insurance makes financial sense when it covers a catastrophic event that seldom happens, such as a house fire or a premature death. Becoming old and infirm is not such an event. My colleagues and I wrote many times in Sentinel that the product could not work, and usually we received (and printed) irate rebuttals from those in the industry. But the product proved to be a financial debacle for many companies that offered it and consumers who bought it, as we expected.

Another frequent topic was same-sex marriage. Just before launching Sentinel, I completed the first draft of “First Comes Love, Then Comes Money,” which was the only book at the time that focused on financial planning for unmarried couples. Doubleday published it in 1994, followed by an updated paperback edition a year later under the title “Financial Self-Defense for Unmarried Couples.”

There were no legally recognized same-sex marriages anywhere in the world at the time. The Hawaii Supreme Court had ruled in favor of same-sex marriage in 1993 on state constitutional grounds, but a constitutional amendment negated the decision. Vermont responded to a similar ruling at the end of 1999 by implementing “civil unions,” with many of the attributes of marriage, the following year. Other states and locales followed suit.

But before that happened, with the 1996 elections approaching, Congress passed the Defense of Marriage Act. It declared that the federal government would not recognize any same-sex marriage and that no state was obligated to recognize such a union performed in another state, either. Seventeen states by that point had passed laws or constitutional amendments rejecting same-sex marriages, no matter where they might be solemnized. I was working with gay clients to protect the financial interests of their families as best we could at the time, and I did not feel the situation called for mincing words.

“Nasty things sometimes crawl out of legislative bodies in an election year,” was the lead of a page 1 story in the August 1996 issue. On page 2, I recounted the legal history of interracial marriage leading up the 1967 Supreme Court decision in Loving v. Virginia, which declared marriage to be a fundamental right. I predicted the court would eventually reach the same conclusion regarding same-sex marriage.

“Sure, Justice Antonin Scalia will dissent, as will Justice Clarence Thomas … But the majority of the Court, like the majority of the country, can be counted on to be fair-minded in the long run as the current of history carries us past the noisy gaggle of haters on the shore,” was my take on the situation.

It took some time, but in 2015 the Supreme Court reached exactly the conclusion I expected in Obergefell v. Hodges. Justices Scalia and Thomas did dissent in that 5-4 decision, as did Justice Samuel Alito and Chief Justice John Roberts. But in the five years since, same-sex marriage has all but ceased to be a controversial political or judicial issue in this country. I am pleased that Sentinel was around to see that process through.

Other issues have not reached nearly so satisfying a conclusion. Consider this comment, which was written in 1996 but which could just as easily have been said last month: “Despite earlier hopes that the state was moderating its stand, New York officials continue to take an aggressive position toward former Empire Staters who claim to be nonresidents for income tax purposes.”

In 2005 we made Social Security’s history, structure and precarious future the focus of an entire issue. President George W. Bush, newly inaugurated for his second term, was pushing for a substantial overhaul that would have allowed the millennials who were then just joining the workforce to put money into private accounts, rather than merely funding retirement benefits for aging boomers. Social Security’s trustees at the time were predicting its old age and disability insurance fund would run out of assets in 2042. Restructuring – which would likely have required increases to the retirement age or reductions in benefits, or both – could have been phased in over nearly three decades, allowing protection for workers who were close to retirement age.

Nothing happened. While Bush no longer faced future elections, members of Congress did – and still do. So while “protecting” Social Security is an evergreen issue on the campaign trail, proposals to actually do it are unserious, unspecific or rely on politically unrealistic tax increases. The most recent trustees’ report put the exhaustion of the old age and disability fund at 2035, seven years earlier than when we ran that special issue. That’s just 15 years from now.

Besides reporting and commenting on current events, Sentinel has been the vehicle through which we introduced many of the staffers who joined the firm, often straight out of college. Sometimes we reported on their weddings or the arrival of children, too, until the staff got too big and the happy events too numerous to keep up with it all. But those reports (and the mug shots that accompanied them) helped many clients and friends get to know us, and to appreciate how our workplace family has grown. We were delighted to have several of those clients travel long distances to join us in 2018 for the firm’s 25th anniversary party in Fort Lauderdale, Florida.

There have been so many events that we shared in these pages: routine things like elections (2000 was memorable, as were 2008 and 2016) and tax-law changes, as well as life-changers like 9/11 and the financial crash of 2008. We sometimes got letters critical of what we wrote, but we received fan mail, too, and acquired many loyal readers. A financial firm newsletter that gets fan mail (and the occasional howler, to borrow a Harry Potter term) is just what I was aiming for, back in 1993.

Everything changes with time. Over the years my colleagues have taken over a lot of the writing load, sharing insights from their experiences just as I tried to do. We launched a blog, “Current Commentary,” on our website in 2009; as of this writing it has been published every business day ever since. We started posting Sentinel articles online in the months between quarterly print issues, and we issue a monthly email bulletin featuring a few of our articles and blog posts.

These avenues are more efficient at reaching our audience today, which is why the March 2020 issue of Sentinel will be the last that we print and mail to readers. It has been a privilege and pleasure to enter your home or office via your mailbox all these years. If you are not already receiving our material electronically we hope you will take advantage by subscribing at our website (palisadeshudson.com/get-sentinel), or by following us on Facebook, Twitter or LinkedIn.

There is more material on which to report and comment, and more of us to share our experiences with you, than ever. So goodbye to printed Sentinel. If you are just joining us online, please pull up a screen and make yourself at home. Our lights are always on for you.