Exotic Foods

By SARAH E. NEEDLEMAN

Twitter has turned out to be a useful tool for some small businesses coping with customer-service or public-relations crises.

The social-media service — where users send short “tweets” to followers who have signed up to receive the messages — came in handy for Innovative Beverage Group Holdings Inc., whose drankbeverage.com site crashed last month after a surge in traffic following a segment on Fox News for the company’s so-called relaxation beverage, which contains “calming” ingredients like valerian root and melatonin. News Corp.

owns Fox News as well as The Wall Street Journal.

Innovative Beverage notified consumers on its Twitter feed that it was working to resolve the problem. The company also did a search on Twitter for mentions of the site crash, so it could respond with tweets describing its repair efforts.

Peter Bianchi, Innovative’s chief executive, says the site’s meltdown was devastating, since a small business rarely receives national TV coverage. But he says the 12-hour site crash didn’t appear to have any lasting damage and online sales of the beverage peaked the following day to their highest level to date.

“Twitter gave us an up-to-the-minute ability to take what would normally be a crisis situation and make it just another event,” says Mr. Bianchi. “You can’t do that with a 1-800-number.”

As of Monday, drankbeverage.com had more than 1,000 Twitter followers.

Twitter also helped wine critic Gary Vaynerchuk respond quickly after his company’s Web site, Corkd.com, was hacked so that visitors were greeted with pornography.

While technicians plugged away at the problem, which took about eight hours to resolve, Mr. Vaynerchuk says he shot a video of himself apologizing to customers of the wine-review site. He then posted it on a video-hosting site and linked to the footage from Twitter, where he has nearly 900,000 followers.

Mr. Vaynerchuk, who owns New-York based Cork’d LLC, also tweeted apologies to about 65 people who tweeted about the incident. “Every person that mentioned Cork’d on Twitter got a message from me and a link to the video,” he says.

Mr. Vaynerchuk says his Web site saw no drop in traffic during the days that followed. He also received about 75 emails from customers complimenting him on how he handled the matter.

To be sure, Twitter can also be the root of a problem for entrepreneurs. Virginia Lawrence, a director at Ballantines PR, a boutique agency in Los Angeles, monitors Twitter daily on behalf of several small businesses for tweets that could harm their reputations.

Recently, she says she found several criticizing a client that were from a former employee the firm had fired. The dismissed worker “was saying negative things about how the company was run, as if they were doing illegal things,” she says. Ms. Lawrence notified the client, who then approached the terminated employee about the matter, and soon after the scurrilous tweets stopped.

Twitter can also be an effective way to get a message across to consumers in an emergency. When an ice storm struck the Bartlesville, Okla., area last winter, United Linen & Uniform Services notified customers about the status of their orders through Twitter in addition to its Web site. Scott Townsend, marketing director for the laundry service, says many consumers today will find information about a business on Twitter before anywhere else because it’s where they hang out online. “You fish where the fish are,” he says.

Mr. Townsend adds that while email was also an option, entering customers’ addresses would have been tedious and time-consuming.

Entrepreneurs should bear in mind that Twitter is unlikely to be of help in dealing with a problem if it isn’t used regularly otherwise, says Shel Israel, author of “Twitterville: How Businesses Can Thrive in the New Global Neighborhoods.”

“If you just go to Twitter when you have a crisis, you will have no followers and no credibility,” he says. “The key to using Twitter effectively is to build trust with people who are relevant to your business.”

Steve Fusek, owner of Fusek’s True Value LLC, a hardware store in Indianapolis, now has an employee dedicated to updating the shop’s Twitter profile during business hours. Mr. Fusek says consumers expect to see frequent tweets and swift responses to customer-service inquiries they post.

“You can’t just sign up and leave it. You have to have someone on it,” he says. “If you’re not legitimate, you’ll be found out quickly.”

Write to Sarah E. Needleman at sarah.needleman@wsj.com

Printed in The Wall Street Journal, page B5

Gas prices are inching toward record highs, but experts say how you drive and where you buy your groceries can cut the costs of filling up.

Prices at the pump currently average $3.89 for a gallon of regular unleaded, 30 cents more than a month ago, according to AAA. Drivers in 18 states plus the District of Columbia pay even more—and in 10 of those, prices already top $4 a gallon.

Consumers shouldn’t expect relief in coming months, either, says Tom Kloza, chief oil analyst for the Oil Price Information Service. Cost per gallon typically peaks in May after refineries complete the switch to summer gasoline blends, which are more volatile than winter blends and so, more expensive.

As a result, drivers could see prices rise another five to 25 cents, he says.

Here’s how to avoid that premium, and knock a dollar or two more off your per-gallon price:

De-clutter. Savings: Up to eight cents per gallon.

There’s good reason to clean out the junk in the trunk, says Jim Kliesch, research director for the Union of Concerned Scientists’ clean-vehicles program. Every 100 pounds of added weight in a car reduces its fuel economy by up to 2%. Hauling a cargo carrier, bikes, kayaks or other gear atop the car for a road trip is worse, decreasing fuel economy by 5%.

Weigh payment method. Savings: Up to 19 cents per gallon.

As gas prices rise, many credit cards’ reward caps on gas purchases kick in, limiting their value, says Odysseas Papadimitriou, chief executive of CardHub.com. In some cases, it could make more sense to pay cash. Stations may offer discounts of up to 10 cents per gallon for drivers who eschew plastic.

Drive responsibly. Savings: Up to $1.28 per gallon.

Based on Department of Energy estimates, each five miles per hour a person drives over 60 mph adds 30 cents per gallon to the gas bill. Aggressive stops and starts waste another 33% at highway speeds and about 5% at slower, local speed limits.

Check the tires. Savings: Up to 12 cents per gallon.

Under- or over-inflated tires change the way the car handles, adding drag and speeding wear. That, in turn, reduces fuel efficiency by about 3%.

Use grocery discounts. Savings: Up to $2.20 per gallon.

Many big supermarket chains now tie in-store spending to discounts at the pump. Programs typically have a cap on the number of gallons one can get at the discounted rate, although households may still be able to fill two cars on the cheap.

Create a fuel-efficient route. Savings: Up to 30 cents per gallon.

You can cut down on mileage just by running a few errands on the same trip, and seeking nearby stations with the cheapest prices, says Avery Ash, manager of regulatory affairs for AAA.

—Kelli B. Grant

SmartMoney.com

Stolen Refunds

As many taxpayers gather their financial documents to do their tax returns, a number of unlucky filers are finding that someone else has already filed in their name—and walked away with their refunds.

For the 12th year in a row, identity theft topped the list of consumer complaints received by the Federal Trade Commission in 2011, with nearly 280,000 complaints, according to a report released last week. And a bigger chunk of those cases is tax related, with 24% of identity-theft complaints being tied to tax or wage-related fraud, up from about 15% in 2010, according to the FTC.

For some victims, the fraud isn’t discovered until they hit the send button on their electronic tax returns—and get a rejection note from the Internal Revenue Service.

Other times, it takes a little longer to know something is wrong, such as not receiving a refund check. You might also receive a letter from the IRS saying the income reported doesn’t match their records—a sign someone else could be using your Social Security number.

Taxpayers should report suspected fraud to the IRS Identity Protection Specialized Unit at 1-800-908-4490. They should hold on to any letters sent to them from the IRS and fill out the IRS Identity Theft Affidavit, a form for reporting fraud or suspected fraud. Victims will also need documentation to help prove their identity, including W-2 forms, previous tax returns and a photo ID.

Once suspected fraud is reported to the IRS, taxpayers should also check their credit reports and alert the credit-reporting companies about any accounts or charges fraudulently made in their names. The FTC also recommends filing a report with your local police department and placing a fraud alert on credit reports.

Experts say it may take at least six months before taxpayers can get their stolen refunds back. There is a slim silver lining: The IRS pays modest interest on refunds that are issued late.

—Jonnelle Marte

The Tax Blog

SmartMoney.com

Pricier Picture

TV prices usually spike in late spring and early summer when the new models come out. But analysts say troubles at one of the world’s biggest TV makers could make those price hikes even bigger this year.

Sharp recently forecast a $16 billion loss for its fiscal year ending March 31—the biggest in the company’s 99-year history—and is planning to cut production at its largest TV-panel factory. As a result, the company may have little room to compete on price amid falling TV sales.

And the TV picture may be getting even bleaker for buyers: Samsung and Sony said last month that they would increase margins on the new 2012 models to keep online retailers from undercutting bricks-and-mortar pricing.

Aside from paying more for new models, the shifting TV market likely means that consumers will see a pause in the overall trend of declining prices, says Andrew Eisner, the director of editorial content for Retrevo.com.

Spring and summer TV shoppers still have some options for deals on 2011-model closeouts, says Paul Gagnon, director of North America TV Research at NPD DisplaySearch. Those sets aren’t subject to inventory cutbacks or the new pricing.

—K.B.G.

Real-Time Advice Blog

SmartMoney.com

The Aggregator, edited by Cristina Lourosa-Ricardo, features news and commentary from The Wall Street Journal and other publications. Email: cristina.lourosa@wsj.com

By VERONICA DAGHER

The wealth of many boomers is tied up in businesses they own. And that can be a problem when it comes time to retire.

Too many owners aren’t prepared for the day when they’ll need to cash out. Some haven’t done their homework to figure out what the business is really worth. Others undermine their company’s value with their inability to let go.

Advance planning for the sale of a business is more important than ever, given today’s economic uncertainty and how portfolios have suffered over the past decade. Even when families transfer ownership to the next generation without a sale, the tax consequences can be huge without proper planning.

Here’s the first step to take before you sell your business. Plus, a risk with managed-fund ETFs investors may be missing. And, a prediction for interest rates. Dow Jones Wealth Adviser’s Veronica Dagher reports. Photo:GETTY

Below, financial advisers and exit-planning specialists weigh in on some of the most common mistakes business owners make when they’re ready to retire, and how those mistakes can be avoided:

The Mistake: Creating a Business That’s Too Dependent on the Owner

One of Paul Pagnato’s boomer clients spent decades building his company. When he decided to retire, he was not only chief executive, he was handling all key decisions in marketing, sales and client service, despite having hired executives to handle those functions.

Gary Hovland

“He was the business,” says Mr. Pagnato, a Washington, D.C.-based adviser who works exclusively with entrepreneurs. But Mr. Pagnato says having a business too dependent on the owner or a handful of major customers can dramatically hinder the company’s sale price, as buyers are likely to perceive more risk. Indeed, Mr. Pagnato’s client ended up selling his business for less than he originally planned and was required to stay on longer to insure a smooth transition.

The Fix: Mr. Pagnato says it’s important to delegate responsibility well before the sale to help insure a smoother transition and diversify the company’s customer base.

The Mistake: Ignoring the Tax Benefits of Planning Ahead

Adam von Poblitz had a client whose 10-year-old business was valued at $20 million two years ago. The owner had always planned to transfer an interest to her son, says the New York City-based estate-planning attorney. But the client procrastinated. Today, the client is ready to transfer a 50% interest in the company to her son, but the company is now valued at $40 million. As a result, she will pay gift tax on a much larger taxable gift.

The Fix: Had the client transferred the half interest two years ago, she would have paid gift tax on only $10 million rather than on $20 million, thus avoiding the tax on the post-gift appreciation attributable to her son’s half interest.

Mr. von Poblitz says that if an owner anticipates transferring ownership in the next five years, it may make sense doing it sooner at a lower valuation.

The Mistake: Incorrectly Valuing the Business

Richard Jackim worked with a client who was the founder of a small but successful consulting firm. The client calculated he’d need to sell his business for $6.25 million to maintain his lifestyle in retirement, says the Chicago-based exit-planning adviser, and figured his business would be worth that much. He was wildly optimistic, however. All too often, owners base retirement plans on faulty valuations, causing drastic overhauls in retirement plans, not to mention blows to self-esteem, says Mr. Jackim.

The Fix: Well in advance of retiring, business owners should get a realistic appraisal of their business, to see if it will fetch what they’ll need to retire. If it won’t, the owner needs to adjust his or her retirement plans, or come up with a financial strategy to boost their income.

Mr. Jackim says a mergers-and-acquisition adviser can help determine what a business actually might sell for.

Also essential: understanding if there is a market for the company, how liquid the market is for lending and equity, what buyers are paying for similar companies and how they are structuring the deals.

The Mistake: Rushing to Accept a Rich Number

Sellers often jump at what appears to be the highest bidder, ignoring other bids, says Fentress Seagroves, an Atlanta-based transaction-services principal. But that high bid may be misleading. The seller doesn’t take into account the due diligence that the buyer is undertaking, and how that could change the final number. The seller also ignores other crucial elements of the bid, such as how employees will be treated, or how the buyer will finance the deal. In the end, the seller may have ignored what would have been truly the best deal.

The Fix: Don’t fixate on what is superficially the richest offer, Mr. Seagroves says. Big numbers sometimes are used as a distraction. Stay engaged. Try to anticipate how the due diligence the buyer is undertaking could change his or her offer at the close. Consider all aspects of the transaction, not just the nominal price.

The Mistake: Hiring Your Brother-in-Law to Do the Deal

Thomas Bonney had a client whose legal counsel’s expertise was in general legal matters for small businesses. The lawyer also happened to be the husband of the company’s controller, says the Philadelphia-based exit-planning adviser. The lawyer’s lack of expertise with merger-and-acquisition transactions and lack of understanding about the time-sensitive nature of the deal resulted in the family’s missing the opportunity to sell the business in a strong deal market.

The Fix: Too many family businesses keep everything in the family—including legal services. That can be fine, day to day, but foolhardy when looking to sell. Mr. Bonney advises clients who are considering selling their business to interview three to five separate firms early in the process. He says they should ask the lawyers how they would structure the deal, how they can help with negotiations and ultimately, make a quick close. This process will not only allow the owner to see how an attorney works with them, but they will also have an opportunity to get some good ideas on both legal and personal issues—such as what should a compensation package look like for a family member who wants to continue to work in the business.

The Mistake: Underestimating the Emotional Impact of Selling a Business

John Leonetti, a certified business-exit consultant based in Canton, Mass., has seen all manner of crises erupt when a business owner prepares to sell, causing disastrous moves that wound up hurting the sale and the seller’s personal life. He’s seen some owners fire their key people months before a scheduled sale, refuse to return phone calls that are time-sensitive and critical to the transaction, and act unreasonably during the negotiations. He’s seen others engage in lavish spending sprees or file for divorce after a sale.

Because owners’ sense of self and purpose is often wrapped up in their business, letting go is often more difficult then they realize and sometimes causes them to act irrationally, he says.

The Fix: Mr. Leonetti says owners can make their exit easier by mapping out their post-exit lifestyle before the sale. He advises clients to get a calendar and fill in how they are going to spend each day for the six to 12 months after the deal goes through. He’s also seen clients do consulting work or start a scaled-down version of their former business, allowing them to stay in the business they love and adjust to a new schedule.

Ms. Dagher is a reporter for Dow Jones Newswires in New York.

She can be reached at veronica.dagher@dowjones.com.

A version of this article appeared April 30, 2012, on page R3 in some U.S. editions of The Wall Street Journal, with the headline: Preparing to Leave.

By LAURA KUSISTO And JENNIFER SMITH

New York law firm Dewey & LeBoeuf LLP, which is heavily in debt, is planning to put the executive floor of its Manhattan headquarters up for sublease, a move that could bring in a couple of million dollars a year, according to a person familiar with the matter.

The firm plans to sublease the 43rd floor, which measures about 43,000 square feet, this person said. The space is the firm’s top floor in the building, and is fitted out with executive offices. Some spots offer a view of Central Park.

In a statement, a spokesman for the firm said Wednesday that “plans to sublease the 43rd floor were made in January of this year as part of the firm’s efforts to reduce costs.”

Dewey, which has been suffering under a heavy debt load and an exodus of partners, is considering a merger that could involve a prearranged bankruptcy filing, which would allow it to resolve debts and other obligations before being bought.

Dewey & LeBoeuf occupies more than 10 floors at 1301 Sixth Avenue. The building housed the headquarters of Dewey Ballantine LLP, an old-line New York firm that merged with LeBoeuf, Lamb, Greene & MacRae LLP in 2007 to create one of the largest law firms in New York.

Dewey leases about 470,000 square feet, or the largest block of space, in the Paramount Group’s 1.8 million-square-foot building, according to CoStar Group Inc., a commercial real-estate database.

The law firm’s lease runs until 2020, according to the person familiar with the matter. Dewey’s asking annual rent is in the $50 a square foot range, according to that person. In other words, a tenant leasing the entire block of space would pay about $2 million a year.

It isn’t unusual for law firms, companies and other types of businesses to sublease small amounts of space as they grow or shrink, according to real-estate brokers.

Law firms often look for new space during recessions when their leases expire and they can get better deals, said John Maher, a broker at CBRE Group Inc. Usually, law firm space is quite easy to sublease because the offices are well laid out, Mr. Maher said.

But Dewey could face challenges renting its space in a leasing market that is currently saturated by other major companies, including Société Générale SA

and UBS AG,

which are planning to put large blocks of space up for sublease, according to people familiar with the matter.

Dewey, which has drawn some $75 million on a $100 million revolving credit line, is days away from a deadline to renegotiate the terms of the loan with a syndicate of banks. It also owes at least $125 million to insurance companies that purchased a private bond the firm floated in 2010, according to people familiar with the matter.

Write to Laura Kusisto at laura.kusisto@wsj.com and Jennifer Smith at jennifer.smith@dowjones.com

A version of this article appeared April 26, 2012, on page B2 in some U.S. editions of The Wall Street Journal, with the headline: Dewey & LeBoeuf Will Try to Sublet New York Office Space.

By EMILY MALTBY

Business owners could face a new credit squeeze as early as next month, in what amounts to a gap period between the expiration of two popular stimulus provisions and the ramp-up of President Barack Obama’s plan to boost loans for small companies.

To be sure, the stimulus provisions – which lured hundreds of banks back to the small-business lending arena – could survive past late November or December, when funding is expected to be depleted. On Thursday, the House voted to continue the measures until September 2011. The Senate has yet to consider the legislation.

Getty Images

The stimulus provisions, which allowed the Small Business Administration to drop fees and boost its maximum guarantee on loans to 90%, bolstered lending levels and attracted more than 1,260 lenders that hadn’t made SBA loans since October 2008.

In anticipation of their expiration, Mr. Obama outlined a new plan last week allowing community banks to tap TARP funds for small-business lending. The initiative also would increase ceilings on SBA loans. But the problem, those in the lending industry say, is that there isn’t enough overlap between when the stimulus measures end and when Mr. Obama’s plan – scheduled to roll out by the end of the year – kicks in.

“We’re entering into an era of uncertainty,” says Bob Coleman, founder of Coleman Publishing, a firm in La Canada, Calif. that tracks and reports government-guaranteed lending activity. Previous government programs, including last summer’s emergency-loan ARC program, have taken time to ramp up, as banks must evaluate the rules and – if they decide to participate – prepare their internal systems to support it. Even if Mr. Obama’s plan successfully launches by year’s end, there could be a dip in SBA lending for weeks or months until risk-averse banks engage, Mr. Coleman says.

The SBA and senior administration officials say the programs are part of a collective effort to reinvigorate small-business lending. “While we’ve been able to accomplish a lot with the Recovery Act and engineer a turn around in SBA lending, it will involve really a multi-pronged effort, not just one program replacing another,” says SBA spokesman Jonathan Swain.

Banks, however, say they’d have more incentive to try the new plan if the stimulus measures – in particular, the 90% guarantee – could be extended and act as a safeguard while they adapt to the new rules and regulations. Once the stimulus funding is exhausted, the fees would return and guarantees on loans would drop back to a maximum of 75% for loans more than $150,000.

The stimulus provisions “helped us from a liquidity standpoint,” says Keith Ward, president and chief executive of United Central Bank in Garland, Texas, one of the top 20 lenders in the country by SBA loan volume. “I think it’s too early to stop this program.”

Bob Polito, director of government-guaranteed lending at Webster Bank in Waterbury, Conn., a smaller SBA lender, agrees. “Although bank volume was down in SBA lending, can you imagine how much worse it could have been without the stimulus?”

Whether the stimulus provisions are extended could come down to the price tag. According to the SBA, extending the stimulus measures until September 2010 – about half the time the House bill proposes – would cost $479 million.

“We know it’s an expensive program, but having that extra percentage guarantee is huge,” says Cece Mitchell, senior vice president at Zions Bank in Salt Lake City, one of the top 10 lenders in the country by SBA volume. “Banks are risk-averse and more comfortable if, say, there’s one change in three months, and maybe another change in three months and another change in three months, rather than all at once.”

At United Central, Mr. Ward has high hopes that the stimulus program will receive additional funding. “It’s too early to think that everything is resolved,” he says. “It should go on for at least one more year and let the economy recover a bit more.”

Write to Emily Maltby at emily.maltby@wsj.com

Just two days into this week, it was looking rough for Wall Street. Critics, investors and regulators and even the president called out the industry. Rules were coming. Investors were mad as hell. Taxpayers were fed up.

All of this would be something if Wall Street cared or suffered. It doesn’t—and it didn’t. And why would it? Big financial interests are beating back every broadside with a vigor not seen since the financial-bubble days.

The attacks began Monday when the Senate began debating the so-called Buffett Rule, which requires any taxpayer with more than $1 million in income to pay at least a 30% tax rate. The proposal would affect 210,000 taxpayers, many of them Wall Street financiers who pay much of their taxes at the 15% capital-gains rate.

On Tuesday, President Barack Obama targeted “oil speculators”—a code word for traders—for rising prices at the pump. Mr. Obama asked Congress to approve a $52 million proposal to shore up regulation of the oil-trading market.

Then, at Citigroup Inc.’s

shareholder meeting in Dallas, investors rejected the bank’s compensation plan, including a massive pay raise for Chief Executive Vikram Pandit to $14.9 million from $1 annually.

Amid all of this, the Commodity Futures Trading Commission was considering rules that would rope in more derivatives traders under the CFTC’s watch.

For anyone interested in tax policy for the wealthy, Wall Street’s role in shaping oil prices, shareholder democracy, corporate governance and safeguards in a market uprooted by the financial crisis, it was shaping up to be a watershed week.

You can guess what happened next. The Buffett Rule didn’t get the necessary votes. Defenders of free markets attacked Mr. Obama’s plan, and it is unlikely to pass the Republican-controlled House. Citigroup reminded everyone that the say-on-pay proposal was nonbinding. And the CFTC backed off its plan to regulate more traders.

The timing was a coincidence, but the outcomes aren’t some divine confluence. The financial industry has been pushing hard to soften Washington lawmakers into easing the wave of rules and oversight wrought by the financial crisis.

Of 222 deadlines for rule making set by the Dodd-Frank law, only 67 were met as of April 2, according to law firm Davis Polk & Wardwell LLP.

There’s something larger at work, too. Wall Street has waited out the public backlash from the bailouts and economic collapse. It’s an election year, and poll after poll shows that most Americans have moved on from a perceived lack of fairness on Wall Street to other concerns.

More Americans now are concerned about unemployment, the high cost of living and the federal budget deficit, according to Gallup’s March 11 survey.

Antibank sentiment peaked last summer, according to Gallup, just before Occupy Wall Street was swept off the front pages and their camps were swept out of the parks.

Perhaps the biggest factor of them all is the market rally. The Dow Jones Industrial Average is up 12.7% in the last six months, 17.5% in the last two years and 97% from the crisis-era low in March 2009.

The recovery of wealth, leaving the market roughly where it was at the end of 2007, isn’t insignificant. Seventy-four percent of Americans who have yet to retire expect to tap funds they have in 401(k)s and other savings plans, while 40% will primarily use money invested in stocks and mutual funds. Even among those already retired, 30% draw most of their income from market sources, according to Gallup.

It’s only natural that people are feeling richer and less afraid. Reform Wall Street? Why spoil the party?

Tally all of it up and you have a populace softened by a market rally, distracted by home economics and lawmakers worn down by a record $474.1 million spent last year on lobbying by the insurance, real-estate, banking and securities industries.

Meanwhile, some of the protagonists are gone. Sen. Chris Dodd and Rep. Barney Frank have left the building. They both decided against running for new terms.

With resistance softening, it’s no wonder regulators are backing down and the president plays politics more than practicalities with his oil and tax policy.

And those shareholders at Citigroup? For them, it’s less about pay than performance. Citigroup fell short in the most recent round of stress tests, effectively delaying a dividend increase for which stockholders are starving.

Citigroup will probably ignore the no vote on its pay. Management likely will resubmit the bank’s finances to the Federal Reserve this summer in a bid to get an OK for that dividend. You can bet any pushback about pay will be swept away with the promise of payments.

In the end, Wall Street’s successful road this week has been paved by a lot of cash: money made in the market and money spent on influence. There’s nothing wrong with that, of course, until something goes wrong.

Swagger, after all, is a privilege granted by those too satisfied to be bothered.

Write to David Weidner at david.weidner@dowjones.com

How to Ask for Referrals

Referrals are a crucial way most advisers build their business. But advisers often make mistakes in trying to score introductions, some specialists in the field say.

Too often, advisers ask for referrals in a self-focused way, telling clients they “want to build their business,” says Bill Cates, the Laurel, Md.-based president of Referral Coach International. Some clients may be willing to help, but some won’t, especially if they aren’t completely satisfied with their adviser.

Instead, an adviser should start by asking a client how he or she thinks their relationship is going, what’s working and what could be improved, Mr. Cates says. If the client isn’t satisfied, it is important for the adviser to know and to address those issues. If clients are satisfied, that provides an opening for a possible referral.

Advisers are more likely to win referrals if they focus on marketing a “specialized blend” of services or skills, such as working with high-level executives on their stock options, says Stephen Wershing, a referral marketing consultant in Rochester, N.Y.

Similarly, Mr. Cates says asking a client about someone “who they know could benefit” from the adviser’s services is often too broad a request. Instead, advisers should ask clients to identify contacts in specific categories, such as anyone who just retired, received a large inheritance or recently changed jobs.

Follow-up is also crucial. Advisers should immediately call once they have a prospect’s phone number and should mark a specific date on the calendar to follow up, says Susan Hirshman, a New York-based practice-management consultant. And, she says, advisers should be sure to call the client to say thank you for the introduction.

Making Room for Younger Investors

Big brokerage firms often seek higher profits by getting their advisers to focus on wealthier clients and to shed those with investible assets of less than around $250,000.

But “while that’s a good short-term strategy, longer term they’re going to have to start thinking about how to appeal to the next generation of wealth,” says Katharine Wolf, an associate director at financial-services research firm Cerulli Associates. If firms neglect younger middle-class clients now, they risk losing out on the next generation of rich investors, she and other consultants say.

A couple of the largest securities firms are using separate programs to serve less-affluent investors. At Bank of America Corp.’s

Merrill Lynch, the Merrill Edge division is designed for customers with $50,000 to $250,000 in investible assets. Merrill Edge provides access to investment guidance in person at banking centers or through a call center, as well as an online self-directed investing platform.

Familiarizing Generation X and Y clients with Merrill’s brand through Merrill Edge gives the firm a good chance of holding on to those clients as they grow wealthier, says Alois Pirker, a research director at research and consulting firm Aite Group.

Wells Fargo

& Co., which runs Wells Fargo Advisors, also has an online trading platform, called WellsTrade, and its Client Solutions Team works with less-affluent clients over the phone.

The other largest national full-service firms, Morgan Stanley Smith Barney and UBS Wealth Management Americas, “need to take this topic very seriously and have a strategy ready in how to connect with a younger generation,” Mr. Pirker says.

A spokeswoman for Morgan Stanley Smith Barney—a joint venture of Morgan Stanley

and Citigroup Inc.

—says the firm’s financial advisers “are highly entrepreneurial, and many have business models and team structures that target younger, more mass-affluent clients.”

UBS Wealth Management Americas, a unit of UBS AG,

declined to comment.

You’re Afraid? Me Too.

Financial advisers should combat the fear that has been lingering over the markets by telling clients that advisers themselves aren’t immune to it, suggests Meir Statman, a finance professor and author who specializes in behavioral finance.

That may sound unconventional to advisers used to putting on a brave face during bad times. But by admitting their own fears, advisers actually open the door to discussion of what they can offer clients—steps that may help the clients resist acting compulsively out of fear, says Prof. Statman, who teaches at Santa Clara University.

“It kind of disarms the client who [had believed that] the adviser is saying, ‘I am smarter,’ ” says Prof. Statman. An adviser can then say, “I know that some things that seem intuitive are not; let me help you with that,” he says.

Fighting fear often involves educating investors, long before a downturn, on what to expect—and keeping expectations reasonable. For instance, some investors have concluded that diversification no longer works because international and U.S. stocks plummeted together in 2008, Prof. Statman says.

Investors need to get a more nuanced message, he says: U.S. and international stocks may move in tandem, but typically not by the same magnitude. Since you don’t know which will do best, you spread your money between them and get returns that aren’t as good as the best but not as bad as the worst.

Written by Dow Jones Newswires writers Veronica Dagher veronica.dagher@dowjones.com, Caitlin Nishcaitlin.nish@dowjones.com and Daisy Maxeydaisy.maxey@dowjones.com.

A version of this article appeared May 7, 2012, on page R10 in some U.S. editions of The Wall Street Journal, with the headline: News for Brokers, Wealth Managers And Their Clients.

Tax planning is seldom simple, but lately it has been next to impossible. At year’s end, a host of temporary provisions expire, and lawmakers have put forth radically different proposals for what to do next. Throw in an election year, and predictions become all the more difficult.

For the confused, here is what is clear (not much) and unclear (a great deal) about tax rates in 2013, plus expert guesses about what will actually happen.

Rates on “ordinary” income, such as wages and interest. The current regime expires at year-end. The top rate of 35% will rise to 39.6%, and millions of poor and middle-income taxpayers removed from the tax rolls by the “Bush tax cuts” of 2001-3 will again owe income taxes.

A limit on itemized deductions adding up to 1.2 percentage points to the tax rate will return as well.

Next year also brings a new 0.9% Medicare tax on wages for most joint filers with adjusted gross income above $250,000 ($200,000 for single filers). The tax will apply to the income above the threshold, not below.

President Obama’s budget, proposed Monday, seeks to retain current tax rates for people in lower brackets and let them expire for most joint filers with adjusted gross incomes of more than $250,000 ($200,000 single). It also would cap the value of itemized deductions for people in higher brackets.

Mr. Obama’s budget also calls for replacing the alternative minimum tax, which imposes extra tax on people with big deductions, with a different levy. Known as the “Buffett rule,” because billionaire Warren Buffett has famously noted that his tax rate is lower than that of his secretary, the proposal would subject people making more than $l million to an average tax rate of no less than 30%.

The president’s budget offered no projections on how much the new tax would collect or details on how it would work.

Lawmakers in the House and Senate each have their own version of a tax based on the Buffett rule, called the “Pay a Fair Share Act,” with the same 30% and $1 million thresholds.

According to Roberton Williams of the nonpartisan Tax Policy Center, Congress’s version would raise $20 billion in 2015 from 116,000 taxpayers—assuming no one changed behavior, which many would. By contrast, the AMT has been raising some $40 billion a year from 4 million taxpayers.

Rates on investment income. The current investment-tax regime also expires at the end of this year. The top 15% rate on long-term capital gains (those held over a year) will rise to 20%, and the current zero rate for those in the bottom two tax brackets will rise to 10%.

Qualified dividends will again be taxed as ordinary income, with a top rate of 39.6%.

In 2013 a new 3.8% tax on investment income debuts for most joint filers with adjusted gross income above $250,000 ($200,000, single).

It covers capital gains, dividends, rents and royalties, among other things. It doesn’t apply to gains from home sales unless the gains exceed the cap of $250,000 (for single filers) or $500,000 (joint filers).

Mr. Obama favors letting the top 15% rate on capital gains rise to 20%. New this year is a proposal to tax dividends like ordinary income for those with adjusted gross income above $250,000 ($200,000 for single filers).

In addition, both he and the lawmakers sponsoring the Buffett-rule proposal would like to see investment income taxed at an average rate of 30% for people earning more than $1 million.

Estate and gift taxes. The current regime expires at year-end. The $5 million-per-individual estate-tax exemption will drop to $1 million, and the top estate-tax rate will rise from 35% to 55% for most and 60% for some. The gift-tax exemption will fall to $1 million and the rate will rise to 55%.

Mr. Obama wants to return these taxes to 2009 levels. That would mean an estate-tax exemption of $3.5 million and a gift-tax exemption of $1 million. The top rate for both would be 45%.

The bottom line. It is an election year and much depends on what happens Nov. 6. Most tax experts believe Congress won’t address tax rates before the election—although legislation is notoriously unpredictable. All the proposals mentioned above, plus others, are in play.

After Nov. 6, the current Congress might pass another temporary extension, as happened in late 2010, says Clint Stretch, a principal at Deloitte Tax in Washington: “A straight extension of the current system will be the path of least resistance, especially if it comes with a promise of tax reform in 2013.”

On the other hand, says Michael Graetz, a former top Treasury official now teaching at Columbia University’s Law School, the election results could mean that “for ‘millionaires and billionaires’ with more than $250,000 of income, there may be a substantial tax increase.”

—Email: taxreport@wsj.com

A version of this article appeared February 18, 2012, on page B9 in some U.S. editions of The Wall Street Journal, with the headline: More Uncertainty for 2013.