Wealth Management Blog

Posts published in February 2015

What the Academy Awards Has to Do With Your Financial Planning

By JJ Burns

February 22, 2015

Joan Rivers, Robin Williams, Philip Seymour Hoffman and Mike Nichols. They’re all industry legends. We’ve been entertained by them for many years and miss their unique talents, wit and spirit.

They were incredibly talented, creative—and most would assume financially successful. However while bringing home or being nominated for that elusive Oscar—some may not have won an award for their financial planning.

The old adage about death and taxes rings true—and no matter what your profession or income, life can be complicated. Whether you’ve had a long-enduring relationship, kids, several spouses, just as many houses and businesses (and did we say grandkids), without a solid estate plan in place, all your hard work can be for naught without some financial forecasting.

Time is On Your Side

The earlier you plan and the earlier you save, the better you are able to face financial downturns. Joan Rivers and Mike Nichols had time on their sides to build their incomes over long careers, as well as solid financial plans in place. They created strategically designed business and estate plans (not to mention having adult children) which made the transfer of assets at their deaths that much easier. Philip Seymour Hoffman and Robin Williams had different family situations that may have made their estates a bit more complicated.

Of course, no one wants to think about what happens “when I die.” However, planning for the expected—as well as the unexpected—will help give you a greater peace of mind.

Ways to Take Action Now

So what can you do now to help secure your financial future? Here are five suggestions to shape your strategy.

  1. Leave a legacy that reflects your values and priorities. This is usually created in the form of a trust, and is an opportunity to tell your story. There are a number of ways to have your wishes heard and directed through financial planning. Also, homes and businesses owned within a trust may be protected from certain liabilities and can be afforded tax advantages.
  2. Consider the differing needs and situations of your loved ones. Every family is different. You may wish to pass on your business to your children, set up educational funds or care for a special needs relative.
  3. Streamline your estate management. Estate taxes, plus federal and state taxes can eat up your assets quickly if you don’t plan ahead. In 2015, personal estate tax exemptions are $5.43 million per individual. With professional financial planning, you can avoid the hassle of probate and the time it would take for your heirs to resolve your estate.
  4. Maximize your charitable giving. Many people wish to leave a legacy for their families as well as to community organizations. From donor-advised funds to charitable planning, you can maximize the impact of your donations.
  5. Make plans for the unexpected. An important part of financial planning is to specify your end-of-life preferences. While some people may find this a bit morbid, it’s good to know that you can have control over your estate, your medical treatments, who can help make decisions and other vital issues before you need them. A living will combined with an advanced health care directive can take care of most of these basics.

Enjoy the Academy Awards—and give yourself an award for whatever you do best. Everyone’s situation changes throughout the years—marriage, divorce, death, birth, new job—and that’s just the first level of what to consider. Now is the time for a quick financial planning checkup to learn more about how to make your plans for the future a reality and create the legacy you wish to leave.

Ever Wonder What “Really” Happens in the Markets?

By JJ Burns

February 10, 2015

The first 5 weeks of the New Year have been pretty volatile for most markets; clearly, last year’s news has brought volatility back.  Many strategists have been “pounding the table” on stocks and declaring that the Large Cap US Equity Market will continue to lead the way in 2015.  Although possible, we believe that broad diversification is still the key to long-term success.  This philosophy means we will continue to have exposure to small cap, mid cap and international securities, even though they trailed US Large Cap equities last year.  We just received an interesting piece from Louis Navellier of Navellier & Associates.  A long-time market analyst and portfolio manager, he notes:

The biggest news last week was crude oil rallying 19% from its lows in just four days, which sparked a big rally in some beaten-down energy stocks and other stocks that have been beaten down by a strong U.S. dollar. By Friday, most major market indexes had made up for all of January's declines. But here is the real conundrum the stock market now faces…of the 20 stocks that account for approximately 30% of the S&P 500's total value, too many — like Caterpillar, Chevron, Coca-Cola, DuPont, ExxonMobil, IBM, McDonalds, Microsoft, General Electric, Goldman Sachs, JPMorgan & Co, Pfizer, Procter & Gamble, and even Google have all missed analyst estimates and/or issued cautious guidance below analyst estimates… essentially what is happening is that a strong U.S. dollar is squelching sales of large multinational companies and squeezing their underlying earnings. A massive flight to more domestic stocks with real sales and earnings growth is now underway, so I expect the stock market will get increasingly narrow in the upcoming weeks.

Since the brief U.S. market correction last fall, investors have had to adjust to new information and possibly reposition portfolios with respect to:

  1. The increasing strength of the U.S. dollar
  2. A precipitous decline in crude-oil prices and gasoline, followed by a brief but sharp rally in 2015
  3. Changes in European Central Bank policy that are expected to lead to expansionary moves similar to those taken by the U.S. Federal Reserve Open Market Committee following the financial crisis.
  4. A repricing of some commodities that react to changes in inflation expectations and the dollar such as gold.

Navellier also noted that the previous time a ‘leadership change’ occurred in the U.S. markets was a mega-cap retreat in the early 2000s following the Tech Bubble.  He goes on to say:

The S&P 500 has gotten too top-heavy once again…the bottom line is that we are now unquestionably in an increasingly narrow stock picking market, and the "sweet spot" in the stock market is moving down the capitalization ladder to the mid-capitalization area.

Time will tell if this analysis is correct.  However, we agree with the thesis, and think this is a good time for rethinking exposure to international stocks as well, which might expect a boost in revenues and favorable exchange rates against the U.S. dollar.   The best news, however, is that many of our clients are in portfolios that are diversified across the U.S. market-cap spectrum (including mid- and small-cap stocks), and have international exposure as well.  We appreciate that 2014 was a trying year for many investors, but we’re pleased that we already have many of the security exposures that might prevail going forward.  For more on the markets over the last two years and how some investors fared, please see our 2014 year-end review.