As school starts up again, we at Snow Creek want you and your child to be as prepared as possible. Here are a few things you might consider as we begin a new school year. Read more…
As school starts up again, we at Snow Creek want you and your child to be as prepared as possible. Here are a few things you might consider as we begin a new school year. Read more…
At this point we are thankful for the financial gains that have come in this current bull market. Starting in March of 2009 we have had over 3,400 calendar days of gains, the second-longest growth run on record since WW2. In most accounts, we have held firm to the growth story keeping our foot on the gas and “overweighting” stocks in the investment portfolios.
This year I set a goal for myself to learn more about new technologies that are being offered to financial planning and wealth management businesses like ours. I have always thought if I could take knowledge and turn it into value then it would be good for all concerned. Our goal is to offer comprehensive strategies and give advice on how to use financial planning to set a course for the investment process.
I wanted to learn if and how these new technologies could help our clients. New trends like big data, artificial intelligence, behavioral finance, digital wallets, e-documents, and smart portfolios are mixing in with the reliable old rules like diversification, tax-efficiency, and ethical behavior.
Valuable Courses, Conferences and Continuing Education
Each of us at Snow Creek has attended online courses, conferences, and conventions where Business School Professors, Money Managers, Economists, Mathematicians, and Research Scientists gave us their opinion on many trends, strategies, and techniques. Luckily for our pocketbooks, Nashville is now a popular convention destination, and we could sit and listen for hours while educators and sponsors from the International Association of Advisors in Philanthropy and the Investments and Wealth Institute came here to deliver almost five days of presentations.
We went for two days to an advisor summit in New Orleans to learn about intelligent systems for wealth management and personal financial wellness. We chatted with many software vendors for wealth advisors and subsequently looked at many “demos” of the newest and smartest iterations of their software. I went to NYC to attend a JPMorgan conference for advisors and listened for two days to world-class money managers who bring big data economic analytics to bear on investment decisions for enormous pools of money.
Professionally I have to complete continuing education requirements every two years to maintain my Certified Financial Planning Designation. Being a Certified Financial Planner, CFP® is about extensive training and experience along with professional integrity. This year our learning honed in on our obligation to always act in the best interest of our clients as a fiduciary.
Better Tools, Better Planning
In my opinion, it’s a good idea to constantly work on your professional skills, learn continuously, finding mentors and resources that guide you to carefully use knowledge and experience to make decisions. Our investment values are clear, and our work begins collaboratively with each individual, family, estate or trust in a one-on-one Financial Planning process.
Once we establish your objectives we must gather your data, organize it, analyze it and use the results to establish a course to achieve long-term financial goals. To facilitate that we can now offer you convenient financial data aggregation tools that consolidate and simplify your various accounts.
From there we can analyze the data and then deliver detailed reports that are easy to read on most smartphones, tablets or computers. These reports will clearly show you what you want to know about your money.
No Substitute for Face-to-Face
But, unless we regularly sit down and talk eye-to-eye about all this data, the information may not be of much use or of much comfort to you. Everyone’s lives are forever changing — maybe it is a job or career change, your family or your marital situation, big purchases like houses or an investment opportunity arise, planning for retirement, and the big ones — health care and estate planning. We can all make smarter decisions by modeling hypothetical outcomes of financial choices and the long-term outcomes may very well be closer to what you want.
The economy is forever changing as are the harvests of investments. It’s important that we get your unique situation right, and without your ongoing input that’s a pretty difficult task. I suggest everyone re-commit to attending regular meetings with us to talk about your accounts, tell us your concerns and adapt to the new data aggregation tools. Then we can use our new understandings and experience to set your financial goals and invest accordingly.
Call us and make an appointment to review, let us hear about what’s on your mind. It’s your money and it’s important to communicate regularly. We prefer to review in person, but if that’s not convenient we can show you how to use the internet to share information and have a proper conversation.
I’ve been thinking a lot lately about philanthropy and its role in our financial planning practice. As more of our clients begin to contemplate retirement and estate tax planning, the questions that always arise are, do we have enough money to retire? How do we pass what’s left to our heirs? And sometimes, what are our philanthropic goals?
Often what is missed are the numerous planning opportunities available to benefit charity, create a current income flow, and reduce potential inheritance tax while we are alive.
Generational Wealth Transfer
Some of the more common generational wealth transfer techniques are to create a trust during your lifetime. These trusts are usually funded with appreciated assets being transferred to the trust. The trust sells the property and, in these instances, avoids any income tax. The grantor receives a current charitable income tax deduction and an income stream for life or for joint lives. Upon death, the remaining assets go to the charities you have designated. There are numerous types of trusts to facilitate this kind of planning.
Charitable Giving Reflects Your Values
For clients with heirs, the dilemma is to determine what is fair so the children and grandchildren are adequately taken care of and what should be left to charity. While some people prefer to leave their entire estate to their heirs, others believe leaving enormous sums of money to children and grandchildren can be a disservice.
Communicating Your Values
One item we would stress is to have as many of the family involved in the discussions as possible. It is critical for future generations to understand your philanthropic views so they can continue to respect your wishes. Formal family meetings, for example, may be scheduled so all the generations can have an understanding of what’s at stake, as well as getting to know the key family advisors: attorney, accountant and wealth manager. This gives the opportunity for parents to encourage giving without imposing their ideas on their children.
Immediate Tax Planning
For more immediate income tax planning, consider bunching deductions in one year and taking the standard deduction in the alternate year. This is especially beneficial in light of the significant increase to the standard deduction passed into law in the new tax bill effective 2018. This can partially be achieved by making donations to donor-advised funds. A donor-advised fund can be established by most custodians as well as community foundations. The amount contributed to the fund is allowed as a charitable deduction in the year contributed. The funds can be distributed in the current or future years to the respective charities at your direction, thus satisfying your tax planning and philanthropic goals.
Please call us to schedule an appointment to discuss any of your charitable questions.
As a frequent watcher of House Hunters International, I ponder what retirement would be like in a foreign exotic/low-cost destination. As is usually the case there are many items to consider before taking such a bold step. Here are some items to consider.
Satisfying Uncle Sam
As a U.S. citizen or permanent resident, you are required to continue to file a U.S. tax return. Certain income may be excluded if you are a “Bona Fide Resident” or meet the “physical presence test” of a foreign country. BUT you are still required to file a tax return and report foreign bank accounts.
Medicare typically does not cover medical care you receive outside of the U.S. You will need to determine what is available in your new country of residence. In addition, a Medevac policy may be advisable. Not only is this an additional cost to consider, but don’t give up on paying for monthly Medicare Part B, because paying the premium to keep Part B when abroad will ensure that Medicare will cover your care whenever you travel to the U.S. Additionally you will not face premium penalties or gaps in coverage. If you fail to pay for Part B while abroad, when you move back to the U.S. you may go months without health coverage. This is because you may have to wait until the General Enrollment Period (GEP), which runs January 1st through March 31st each year, with coverage starting July 1st.
Securing Social Security Benefits
Benefits can be transferred to retiree’s bank account thanks to advances in technology. This is available in most countries, but there are some exceptions. Make sure your new country of residence is not a restricted jurisdiction.
Before buying real estate make sure you work with honest, knowledgeable professional as there are sometimes restrictions on what foreigners can buy and what if any financing is available.
Keep Your Investments Here
The U.S. financial and banking system is regarded as the safest and most reliable in the world. We would strongly advise keeping your assets invested in the U.S.A., avoiding major currency fluctuations and arranging for funds to be electronically transferred to your new domicile. This will ensure your funds are not subject to exchange rate fluctuations and political upheaval.
I wanted to bring your attention to the most recent activity in your investment accounts. We are generating trades in the fixed-income portion to move money from a strategy that is not doing as well as we expect.
As you know, the economy has been sluggish for years and the Federal Reserve had a policy of low-interest rates to encourage growth. The economy is now growing at a faster rate than before and the Fed has decided to raise interest rates to moderate growth. Whenever things change there is a period of friction and dislocation as market participants try to adjust to the new paradigm. We are finding that our active U.S. fixed managers are doing better and they see more opportunity ahead as we go through the new interest rate cycle.
The Move to U.S. Fixed Income
For several years we used Global fixed income as a key component of our strategy but the performance of that strategy has lagged for the last six to 18 months. Conversely, the performance of our U.S. fixed income has performed up to and above our expectations, therefore we are closing out the Global fixed income and repositioning that money to the performing funds.
Fixed income is an important piece of the investment portfolio because it can preserve principal, generate income and provide stability. We want to encourage our investors to stay invested in stocks for the long term because you can make more money in stocks while you have the relative safety of the fixed income.
We encourage you to review your accounts through the Snow Creek Web portal https://snowcreekwealth.portal.tamaracinc.com and call us with any questions or concerns.
Once again, thank you for your trust and confidence.
The emotions of investors are subject to change and at times those sentiment changes can be contrary to market signals. For example, investors may be optimistic about the market or a stock and may continue to buy, thinking that prices will continue to push higher. But, often stock prices pull back leaving the overly optimistic investor with a loss.
Or, an investor may be overly pessimistic and think stocks are perpetually going down and keep her money under the mattress waiting for the perfect investment opportunity. Often, though, when pessimism is at its most extreme stocks lift off their lows and the pessimistic investor misses out.
When market strategists put both sentiment extremes into statistical perspective, we can see that there is a positive correlation between extreme pessimism and potential future gains. There is also a positive correlation between excessive optimism and future declines. Sentiment is not a perfect indicator, it is just one of many variables to consider when you are choosing your portfolio.
In today’s market environment, renewed volatility, Trump tirades, inflation, a focus on the Fed interest rate hikes, and trade war talk have shifted the focus away from the ongoing global economic expansion and the favorable earnings outlook. Pessimism is at an extreme and the appetite for risk seems low. However, extreme pessimism is not supported by deteriorating fundamentals (job losses, consumer spending down, or a decline in corporate earnings).
The outlook will be clearer as the corporate reporting season is about to begin, and earnings expectations are optimistic. It would not be surprising to get an upward move in the markets when the attention shifts back to earnings and global growth.
Stock market volatility had been missing for all of 2017, and since it returned in February and March it has been rough on the nerves. It takes time to make money in the market and one must try and not get too concerned with market volatility or a move of more than 1% a day. Over time these daily moves are inconsequential to our long-term goals. In my opinion, the current volatility is more consistent with a market correction in a bull market, and while the fundamentals stay intact it supports our overweight allocation to equities.
We monitor each portfolio daily, and our goal is to statistically minimize the downside risk by staying globally diversified and to be tax efficient by harvesting tax losses. We build fences around long-term cash withdrawal needs, and we plant seeds into growth as opportunity presents. Financial planning is the base of our practice, and the real way to make money in stocks is not to get scared out of them when sentiment is at an extreme.
Do you have a financial plan that reflects your sentiment or your goals? Give us a call to schedule an appointment and we’ll keep you on the road.
How’s your relationship (with your advisor)?
In many households, spouses divide and conquer responsibilities in an effort to be efficient and fair to each other. For example, one spouse may cook dinner and the other may clean up afterward. However, there’s one task you should be united on: choosing your financial planner.
Sometimes it’s easier to assign this responsibility to one spouse because they have a natural interest or aptitude for personal finance. However, at Snow Creek Wealth Management, we would argue how important it is for both spouses to have a solid relationship with their advisor.
So, how do you choose a financial advisor?
Find a planner who wants to get to know you. Does the future worry you? What are your shared and individual goals? What’s your history with investments, taxes and financial planning? Are you apprehensive about making decisions because of past mistakes? Look for someone you feel a genuine connection to and you are comfortable speaking openly with.
Find a planner who can adjust to your communication style. Are you a visual learner? Do you like having regular in-person meetings or is the occasional phone call sufficient? Do you feel comfortable asking “dumb questions?” Well, you should. As a professional, it’s easy to forget everyone doesn’t understand terms like “standard deviation,” but an advisor should understand how to break down these concepts and ensure everyone is on the same page.
Agree on Risk
Find a planner who understands your definition of risk, which means something different for everyone. Experiences, salary, and general outlook can affect your perception of risk. While it’s the advisor’s role to make informed recommendations on the allocation of your portfolio, it’s also their responsibility to understand what helps you sleep at night.
Find a planner you’d want to stay with should something happen to your spouse. Studies show over 70% of women leave their financial planner within a year of their spouse passing. This is an amazing number and generally comes from the spouse not feeling welcomed into the conversation by the advisor. It may seem easier to build a relationship with a new financial advisor rather than fix a broken one. The loss of a spouse is a stressful event, to say the least. During difficult times, your financial advisor can be a trusted part of your support system, not an additional stressor.
At the end of the day, it’s your life and your money. We want to encourage each of you to get involved in the management of your money at some level. Having a longstanding relationship with your financial advisor can help you reach your goals better in the long run and help smooth out times of trouble.
As you have probably noticed, the stock market has been on a wild ride since Friday, with the Dow dropping 1,175 points on Monday. While this can certainly be anxiety-inducing, you should always remember investments are for the long term.
Up until Friday, we had been enjoying record highs in the stock market, so it was only a matter of time before we saw a correction. Nothing goes up forever. We all love to see the market when it’s booming, but we don’t experience the same feelings when it’s down.
Stay the Course
Corrections can’t be avoided and it is likely the lows in the market will be tested again. However, we certainly recommend you stay the course and do not make rash decisions. While we can’t avoid the losses incurred, by working with us as advisors and having a personalized financial plan, portfolios can be structured to minimize the volatility.
Our responsibility as wealth managers is to react accordingly should an event take place to help protect our clients’ investments. As always, we are monitoring the market closely and have tools at hand should we need to take action quickly. If you have any questions in the meantime, please do not hesitate to give us a call.
Prior to the newly enacted tax bill 529, savings plans offered tax-free earnings growth and tax-free withdrawals when the funds were used to pay for college. Under the new law families will be able to withdraw up to $10,000 per year tax-free for “public, private or religious elementary or secondary school” expenses.
The biggest advantage to saving money in a 529 plan is that you won’t have to pay tax on the investment gains if the funds are used for appropriate educational expenses. To get the maximum tax-free benefit the question becomes How to fund the 529 Plan? Gifts to a 529 plan are restricted to $14,000 per year per donor. So, for example, two grandparents could each contribute $14,000 to the plan for a total of $28,000.
It Gets Even Better
In any year during which your 529 contributions for a particular beneficiary exceed $14,000, you may make an election on Form 709 to prorate the contributions over five years (20% per year) for gift-tax purposes. This permits frontloading of up to $70,000 per beneficiary (or $140,000 for a married couple) into a 529 plan without generating a taxable gift, assuming no other gifts to that beneficiary are made during the five calendar-year period. Frontloading gives the 529 plan the opportunity to get the maximum tax-free growth for educational needs.
There is a maximum that can be contributed into a 529 account for each child. The amount differs from state to state, ranging from approximately $300,000 to $500,000. In order to find the maximum allowed amount in any state, get a current copy of that state’s disclosure booklet. Remember, you do NOT have to fund the plan for the state you live in. You can fund in any state, but this may have implications for those who have state income tax.
If you are interested in forming a 529 savings plan, please call us to schedule an appointment.