With the end-of-the-year holidays approaching, many generous grandparents are looking for ways to pass on some financial gifts to their grandchildren. But letting clients give savings bonds as presents only guarantees the family will be stuck with an investment that offers a low rate of return and a high degree of hassle.

Here are several reasons why helping those well-intentioned clients use 529 college savings plans instead will make the grandparents and their grandchildren happier now, as well as in the future.

Low Risk, Less Reward

The EE and I bonds issued by Uncle Sam are not completely without merit, as the principal and interest are backed by the full faith and credit of the United States Treasury.

But like most other safer paper, yields on savings bonds are currently near all-time lows. Right now EE bonds pay just 1.7 percent interest. The I bonds have a fixed rate of 0.3 percent that is added to an inflation-adjusted rate of 3.06 percent, for a total current yield of 3.36 percent.

Compare those figures to the inflation rate in college costs over the last 40 years or so—which, according to the College Board, have increased at a yearly rate of about 7.2 percent, versus 4.4 percent annual general inflation over the same period.

True, the equity and bond fund options within the 529 accounts also have a downside risk that the savings bonds don’t. But at least the variable college savings plan investment choices give families a fighting chance of meeting or beating the rise in the cost of going to college—as opposed to savings bonds, which only guarantee that they won’t keep pace.

Besides, even conservative savers can find a safer haven within 529s, as several plans now offer federally-insured certificates of deposit on the investment option roster.

Full Story >

Bob McCann, chief executive of UBS’ Wealth Management Americas, set out some ambitious targets today for the brokerage’s unit—including turning around client asset flows and boosting capital. He also reiterated his profitability target of 15 to 20 percent for the division, and set a goal of CHF1 billion for annualized pre-tax profit.

Signaling some other substantial challenges ahead, McCann said there had been a lack of “disciplined leadership” in the wealth management unit – as well as a lack of “pragmatic planning” or “culture of execution.”

“Make no mistake about it, there is significant work to be done to improve this business,” McCann told the UBS Investor Day 2009 event hosted in Zurich. “But we have good people and we are going to add to the number of good people [at the firm.]”

UBS Wealth Management Americas had 7,286 financial advisors at the end of the third quarter, down from 7,939 at the end of June, according to a spokeswoman for UBS.

McCann also spoke of the division’s cost/income ratio, which he would like to bring down from its current 99 percent ratio to between 80 and 85 percent within six to 12 months. This would require the wealth management group to stem the outflow of client assets and begin gathering net new assets again.

Full Story >

Asian stocks have soared this year. Now the average Asian fund sells for a price-earnings multiple of 13, compared to a figure of 10 for European funds, according to Morningstar. Are the highflyers due to crash? Perhaps. But the booming markets of China and other Asian emerging countries have not yet reached bubble territory, said Robert Horrocks, chief investment officer of Matthews Funds.

“If you invest now, you may not benefit from much more multiple expansion, but the stocks should rise along with earnings,” Horrocks said today in an interview at Registered Rep.’s Manhattan offices.

Horrocks said that Asian stocks will be boosted by strong growth throughout the region. While Asian exporters have been hurt by the global recession, domestic economies have continued to expand as millions of consumers enter the middle class for the first time. Horrocks described the phenomenon as “mass consumption.”

To ride the expansion, Horrocks is emphasizing financial and technology companies that are serving the new generation of consumers. A favorite holding is Baidu, the Chinese Google. The company is growing rapidly as search traffic climbs.

Full Story >