Categories for Blog
June 24, 2016 1:35 pm
Published by dylan
In an expectedly close but surprising vote, the U.K. has completed a referendum to endorse a withdrawal from the European Union (EU). Today’s market reactions are the usual result from market uncertainty around economic issues—sell-offs in “risk assets" such as stocks and currencies and a flight to quality in “safe-haven” currencies and bonds (e.g. the U.S. dollar and Treasuries). Early analysis of the results indicates, however, that the LONG-term results may not be as severe as feared.
HERE’S WHAT HAPPENED
U.K. and Commonwealth voters, by a slim margin, voted to leave the EU. Prime Minister David Cameron immediately resigned, and a new government will be installed in the fall.
WHAT HAPPENED IN TODAY’S MARKETS?
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Stocks and other assets such as currencies, have sold off around the globe. The U.K. and other EU countries have been hard hit, while the U.S. decline has been muted. Leading up to this, the global markets were rebounding over the last couple weeks.
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The U.S. dollar and Japanese yen have strengthened; the Euro has declined a bit, and the sterling has substantially declined against the dollar.
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There has been a flight to quality in bonds, particularly U.S. Treasury Bonds.
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Gold has been priced up, while oil has declined.
WHY WERE MARKETS VOLATILE?
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Many believed that Britain would remain in the EU and short-term traders made heavy bets in currencies and other “risk assets.” In fact, markets rallied into the vote as the DJIA was up over 250 points yesterday. Interest rates were moving higher.
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The markets were surprised once the votes were tallied and markets reversed their trend, giving back most of these gains. The behavior was violent as Britain leaving the EU is a significant event.
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The U.S. markets declined as the thought process that European companies are trading partners of the U.S. This could be negative for some businesses.
WHAT ARE THE LONGER-TERM EFFECTS?
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Britain represents 4%-5% of global GDP. Net results may not be that significant.
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The U.K. will need to implement policies to provide liquidity and ease interest rates.
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The sterling will fall, U.K. inflation will increase due to increased import prices, and U.K. GDP will likely decline in the near-term. A recession is possible in Britain.
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The U.S. will be relatively insulated. The Fed will likely delay interest-rate hikes.
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Global growth may be affected to some degree. This event is not a ‘Lehman moment’ that accelerated the global Financial Crisis. As one pundit noted, “…markets adapt. Policymakers adjust. Businesses will change course while they continue to seek profits. Prices will reset. Opportunities will emerge.”
WHAT SHOULD BE DONE IN MY PORTFOLIO?
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Our principles of portfolio construction are based on each of our client's unique personal goals. Their plan is well thought out and balanced by diversified asset allocation.
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Changing your portfolio based on a reaction to market events rarely leads to productive long-term results.
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All of our plans are built upon the certainty that we will go through negative events and market fluctuations.
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All of our portfolios contain an anchor of high quality bonds and bond funds, which help to limit declines in significant market events, and did so during the Brexit vote today. Our bonds are doing exactly what we want in uncertain times.
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We expect short-term stock volatility and will be partially offset by bond and commodities gains. Today’s market moves are short-term reactions, and most currency and bond markets have moved in orderly fashion (i.e. no extreme drops). And, as our pundit notes, “The long-term political, economic and financial repercussions of the ‘Leave’ vote are incalculable at this point.”
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While the Brexit vote has been surprising and unsettling, most of the effects will be felt in the U.K. and Europe. We don’t see any required portfolio moves at this point; most of the trading is just that—trading. Long-term investors should stay focused, and we’ll update you as events progress.
As always, if you have any questions or wish to speak to us directly please feel free to call us.
June 22, 2016 10:21 am
Published by dylan
Securities markets around the world have been reacting to the politically charged environment in the U.K. over the fierce debate about whether it should leave the European Union. A so-called “Brexit” referendum vote will be held on Thursday this week. British citizens 18 years of age and older, citizens abroad who have been registered to vote in Britain within the last 15 years, and residents of Britain who are citizens of Ireland or the Commonwealth (53 countries) are eligible to vote.
A vote in favor of leaving the EU would likely trigger further volatility in stock, bond and currency markets around the world. U.S. stocks already proved they were sensitive to the situation in the U.K. when they gapped down at the opening two Fridays ago after a poll conducted by The Independent suggested that 55% of Britons were in favor of a Brexit. The result surprised many investors, and the murder of Minister of Parliament member Jo Cox last week by a man shouting “Britain first!” stunned people around the world.
Candlelight vigil in London for Jo Cox
During the mourning of Minister Cox, tensions eased and additional polls were conducted, many of which suggested that The Independent poll was inaccurate. One betting shop put the odds of the U.K. leaving the EU at just 27%, or about 1 in 4. If accurate, it appears that the conservative groups that support leaving the EU will not have enough votes.
Nonetheless, we find it interesting that the U.K. is dealing with many of the same political issues that are being hotly debated in the U.S. presidential election. Jobs, immigration, and reclaimed sovereignty are the main issues for Britons who favor leaving the EU. These issues are very similar to the “Make America Great Again” slogan of the Trump campaign.
The global boom over the past two decades has eliminated many manufacturing jobs in both the U.K. and U.S. Meanwhile, immigration into both countries has caused concerns for conservative groups ranging from perceived increased competition for domestic jobs to increased healthcare costs and a threat of terrorism. The long-term effects have resulted in rising wealth inequality and chronic under- and unemployment among the middle and lower classes in both nations.
On the flipside, many voters in the U.K. appear to be supportive of remaining in the EU, as do most independent economists and large corporations. If history is an accurate guide, the referendum vote this Thursday could be similar to the last referendum held in 1975, when Britain considered leaving the European Economic Community. Back then tensions were running high as well, but more than 67% voted to remain. That’s an indication of how difficult it is to change the status quo.
Regardless of Britons’ EXPECTED intentions to remain, it’s important to be aware of market risks that could develop this week if the vote goes the other way. U.S. investors are clearly in favor of the U.K. remaining; that’s why U.S. stocks surged on Monday after many news outlets suggested that the votes to remain would significantly outnumber votes to leave. That said, market risk would likely surge if U.K. voters decide to leave the EU. The reason is there are many more unknowns associated with Britain leaving the EU than there are for remaining. Also, risks to GDP in the U.K. and the EU after a vote to leave have been estimated to be as low as a 3.2% decline within the next few years before moderating in the next decade.
In fact, the governor of the Bank of England said the prospect of a Brexit is “the biggest domestic risk to financial stability because, in part, of the issues around uncertainty.”
It has been estimated that negotiations about how the U.K. would divorce from the EU will take up to 2 years. Ironically, some of the most disliked EU economic policies may end up remaining in force in the renegotiated trade and economic treaties with former EU partners.
Some influential business people still believe that leaving the EU is a better option than remaining. Edward Atkin, one of Britain’s most successful manufacturers, was quoted by The New York Times as saying, “Customs duties are completely irrelevant compared to fluctuations of the currency.” Interestingly, most economists believe that a Brexit could be devastating for the pound. They also believe that it would take 10-15 years to recover from leaving the EU.
Regardless of how the referendum turns out, we believe that investors who are diversified in long-term strategies will experience some volatility in their portfolios in the short term. If voters decide to remain in the EU, we wouldn’t be surprised to see stocks around the world enjoy a relief rally. Deutsche Bank provided this handy chart to help illustrate how currencies, interest rates and stocks could respond after the vote.
We are also interested in how this week’s referendum affects the Clinton and Trump campaigns and other conservative movements in Europe. This may be the subject of a follow-up post.
June 16, 2016 8:38 am
Published by dylan
Whether you're beginning to plan for your financial future—or have found yourself smack dab into making significant decisions that you didn’t anticipate—at some point you’ll need to consult with a financial advisor. However, it can be difficult to always know who the best person is to trust your finances to.
Choosing a financial advisor goes beyond working with someone who has the backing of a large brokerage firm or an impressive list of credentials behind their name. When you look around, there are a lot of alphabet-soup designations out there. Anyone can call themselves a financial advisor, but that doesn’t necessarily mean that they are highly qualified to advise you.
What to Look for in an Advisor
Professional credentials do not tell you everything you need to know about an advisor. You should also look at an advisor’s experience, investment style, and type of clientele. Use the following questions to help you in evaluating an advisor.
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What are your qualifications? Advisors must be registered with the Securities and Exchange Commission (SEC) or Financial Industry Regulatory Authority (FINRA) in order to provide investment advice. It’s important to understand the two standards of care that advisors are held to by each. The fiduciary standard requires that an adviser put the clients’ interest first and is enforced by the SEC, while the suitability standard is enforced by FINRA and requires that a broker make recommendations that are suitable based on a client’s personal situation. You should also do your due diligence to find out if a potential advisor has ever been investigated or found guilty of an infraction.
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How does your firm operate? No great advisor goes at it alone so discover all you can about the team behind the principal advisor. The mix of the team speaks volumes about the firm. Ask what licenses, certifications and/or credentials members of the team have. For example, many top advisory firms will have a Certified Financial Planner (CFP) and a Chartered Financial Analyst (CFA) on their team. Go deep and investigate other members on their team as stated in the above. Ask what role they play and how this will benefit you.
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What services do you provide? Some advisors only offer investment planning, while others take a whole life approach. As an example, Certified Financial Planners (CFP) have a process that looks at your overall goals and creates a written plan that addresses the wealth gaps to get you where you want to go.
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What does a financial plan look like? Of course every plan is different and should be tailored to the individual investor. However, ask to look at a sample portfolio or investment plan. Find out how the advisor approaches the planning process and communicates with clients. Ask if or why you need a plan, you may not depending on your needs. Also be sure to ask for client references—and then check them.
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What is your investment approach and how do you choose investments? It’s important that advisors have a process of how investments are chosen and deployed in an asset allocation. Your advisor should be able to explain how and why a particular investment is chosen. Discover their buy, sell and rebalance disciplines. It’s easy to buy investments, it’s the discipline of when and why to sell that are keys to better performance.
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What is your communication style? Some clients are very financially savvy while others appreciate a bit of hand-holding and education. Will your advisor and his or her team take the time to thoroughly explain the markets, the investing rationale—and any other questions that you may have? At times of market stress, how does the advisor communicate?
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How are you compensated? Some advisors are strictly fee-based, while others earn their living by commission or from selling an investment product. Ask if there are any conflicts of interest which would motivate the advisor to do something that’s not in your best interest. Be sure all fees are disclosed and if you’re unsure about something—ask!
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What makes the investment team unique? We ask these questions when we buy a car, hire a contractor, or work with a personal trainer. An investment advisor should be no different. Ask them how they define a successful relationship. If your advisor can’t explain in clear language why they are different and how you will benefit from becoming a client, move on.
Know When It’s Time to Change Advisors
You may have been with an advisor for many years and have not been particularly satisfied. But sometimes it seems easier to stay with them because change can be just as difficult. Stop and take a minute to see if any of these points apply:
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Lack of communication: A good advisor is always available for clients—by phone, email or appointments. If your advisor isn’t keeping you in the loop, it’s time to look for someone else.
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Pushing products instead of giving advice. One size does not fit all. Your financial plan should be tailored to your specific goals. Avoid advisors who recommend cookie-cutter products or plans.
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Not being proactive—or reactive. A year or two of lackluster performance isn’t cause for alarm. Those are things that an advisor cannot completely control. However, if your performance returns continue to be out of line with your risk tolerance or goals, be sure to discuss re-vamping your investment strategy. And, if you come away feeling that your advisor isn’t listening, consider making a change.
At JJ Burns & Company, we believe a good advisor is truly your partner in your long-term financial success. Talk to us about how we can help you reach your goals.
June 1, 2016 2:38 pm
Published by dylan
[Update: For those who couldn't attend, you can watch the webinar video here.]
Will the Fed raise interest rates in June? How will the U.S. presidential election affect the market and your portfolio?
After a challenging start to 2016, the markets have improved. Issues surrounding a potential interest rate hike, U.S. elections, Brexit, and China continue to influence economic and corporate earnings growth. Find out how these challenges will impact investment portfolios in 2016.
Join JJ Burns & Company on Wednesday, June 8th at 1:00 pm EST for a complimentary webinar to discuss the 2016 Mid-Year Economic & Market Outlook. During this live presentation, CEO JJ Burns, Managing Director Anthony LaGiglia, and Chief Investment Officer Steven Mula will review our outlook for the next 6 months.
Bonus: All registrants will receive a link to the on-demand version of the webinar following its completion.
In this 30-minute webinar we'll talk about:
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The recent market correction and our economic outlook for the rest of 2016
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Issues affecting the stock market such as potential interest rate hike, U.S. elections, Brexit, and China
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How we construct investment portfolios to take advantage of volatile markets
Plus we’ll also answer questions from attendees.
Don't miss this informative event! Reserve your spot today.
May 13, 2016 7:43 am
Published by dylan
David Bowie and Prince both had much in common—an international career as talented musicians, performers and actors; and sadly, untimely deaths this year (January and April, respectively). But possibly the most significant thing they didn’t share were wills. While Bowie had an estate plan and a will, Prince reportedly died without one.
We understand that discussing financial matters for some people is difficult—and that contemplating what will happen when you’re gone can be even more unpleasant. However, without proper planning, you stand to lose a significant amount of the value of your estate to state and federal taxes, not to mention legal fees. It’s estimated that Prince’s $300 million estate will pay $120 million—or more—in taxes.
Consider this: without a directive after your death, a judge could award your spendthrift step brother (whom you never liked) an equal share of your hard-earned assets as those awarded your children. Or, your alma mater may not be able to help fund the scholarship that was so important to you.
A comprehensive wealth management plan will give you the power to live the life—and pass on the life—that you want.
Officially Intestate
The legal term for dying without a will is “intestate.” Depending on the situation, it can be a lengthy, difficult process to sort out if you are managing it for a family member or friend—or if they are managing it for you.
To save effort, it’s key to understand what assets are not passed through in a will. These are assets where beneficiary(ies) are assigned or where there is co-ownership, and can include:
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Life insurance policy proceeds;
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Retirement plan funds in IRAs, a 401(k) or other retirement plans;
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Assets held in a living trust;
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Joint tenancy or community property funds with right of survivorship, such as real estate or bank accounts;
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Funds or property held in a transfer-on-death account.
States Rule Over the Feds
The federal government has a specific tax percentage they levy on the amount of an estate. But what every state requires for probate and levies for taxes is different.
Generally, spouses, registered domestic partners and blood relatives will inherit under a certain state’s intestate laws; unmarried partners, friends and charities are not eligible to receive an intestate distribution. If there is a surviving spouse, he or she usually receives the largest portion of the estate. And if no relatives can be found, without a will, the state becomes the heir and takes any remaining assets.
In the case of Prince, who was divorced and had no living children, his one full-blooded sibling and five half-blooded siblings will all share in his estate.
Special Considerations
If you have minor children or loved ones with special needs, it’s especially important to have a will and other estate planning instruments in place to care for them. You don’t want to leave important guardianship decisions up to a judge who knows nothing about you, your family nor your wishes.
The Bottom Line
A will for anyone at the minimum is essential. A comprehensive estate and financial plan is even better. Changes in life invariably happen so make sure your plan is up to date. If you don’t have one, talk to us today.
April 28, 2016 8:26 am
Published by dylan
Life After Professional Sports
It’s not unusual to hear about professional athletes losing all the money they made playing their sport only a few years after they retire. Sometimes they spend all their money on expensive homes, cars, jewelry, and clothes.
Other retired pros lose it all as an entrepreneur. Many athletes start businesses after they leave their sport. Others invest in someone else’s business or charity.
They are often flush with cash, surrounded by friends, family and managers, and full of good intentions. Starting a business is part of the American Dream. They seem to have everything in place to make that dream a reality. They are “retired” but young enough to still have another profession, helping others and helping them.
They have a desire to create a successful business and make some money.
Many things can go well along the way—but even more can go wrong. There’s a reason so many businesses fail in their first few years: Lack of planning.
Why Athletes?
Professional athletes have worked hard physically to get to the top of their game. Once they become successful in their sport, they earn large sums of money. This does not automatically prepare them to become successful business owners.
Just as they need a written plan to open their business, they need a written plan to manage their (sudden) wealth.
Marques Ogden played for four NFL teams. At the height of his career he was worth $4 million. He became a real estate developer in 2008. He took courses offered by the NFL to help players after their sports career. He declared bankruptcy in 2013.
Antoine Walker played in the NBA. He made more than $108 million during his professional basketball career. Not only did he spend his new wealth on cars, jewelry and homes, he started a real estate firm. Just two years after retirement, he filed for bankruptcy in 2010.
Starting Off Right
The NFL has programs in place to help their athletes. Not only do they offer classes like those Ogden took for retiring players, they also offer a rookie symposium. This four-day session is designed to teach players how to handle many aspects of their new life. Experts and retired players share advice and give tips.
Hall of famer Aeneas Williams told one group, “Begin with the end in mind.” They are urged to think about setting a plan for their career. There will be many steps along the way where they can lose their footing. The same will happen when they leave the league.
These NFL players have been given help along the way. When they began their sports career and when they retired and started a business. They got advice, so what went wrong? Getting the right assistance can make all the difference.
Planning Is Imperative
Ogden did not plan long term for this business. A comprehensive wealth advisory firm can help business owners create written financial plans. Part of this process is to anticipate possible issues and to solve for the potential gaps in entrepreneurial endeavors.
Ogden didn’t blow his money on cars and houses. He started out with a background in finance. He launched his construction company in 2008. In 2012 he took on a huge project and lost $2 million in 90 days. He tried to save the business with his own savings. It was all over by 2013.
Opening a business is a lot more complicated than making sure you don’t blow your money while you build a career. It goes well beyond living within your means and not spending your paycheck on what might be considered frivolous trappings of fame.
Beginning a business is high risk and care needs to be taken in an overall wealth management plan. It’s important to recognize possible setbacks. It’s also vital to acknowledge when enough is enough and to protect and preserve levels of overall wealth for the longevity of a life-long plan.
Putting a Team Together
Create a written wealth management plan with a financial services team who can give you perspective on achieving your goals and preserving your wealth.
Sure taking risks is part of any overall plan, but keeping the long-term goal of overall preservation is key. Some business owners can go back to a previous profession, but a professional athlete is not going back to the NFL. For these entrepreneurs going backward is not an option.
Just as Williams hopes the rookies will keep their goal in mind of ending on a high note, business owners also need to think about the finish line. The team you put together can help determine your success as an entrepreneur. You’ve worked hard for that nest egg, now put it to work to help you build a future.
April 21, 2016 1:07 pm
Published by dylan
For most people, navigating all the complexities of Social Security can be confusing. Do you wait until you’re at full retirement age (FRA) to take your distributions? Or do you decide to postpone until age 70 to maximize your benefits?
On the other hand, do you file and suspend to allow you or your spouse to collect a larger benefit at a later time? It’s not a decision to be taken lightly. And it needs to be made as soon as April 29, 2016, when the Bipartisan Budget Act of 2015 will close this so-called Social Security loophole.
Married couples with at least one working spouse who has contributed to Social Security through payroll taxes—or those who were married for at least a decade and now divorced—generally choose to exercise the file and suspend option. The maximum amount the spouse will receive is 50% of the working spouse’s primary benefit amount—the monthly income he or she is eligible to receive at FRA.
Here’s How it Works
With file and suspend, the older spouse claims benefits at the current FRA of 66 and then immediately suspends his or her benefits. Then the younger spouse, who must be above age 62, can claim spousal benefits to defer his or her own benefits until FRA.
But wait…there’s more:
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When the older spouse is 70, he or she can claim Social Security benefits that will have grown to the maximum amount, and the younger spouse can collect the larger of his or her own benefit or spousal benefit.
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The advantage is that the spouse who suspends earns 8% each year as an additional Social Security benefit credit.
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The downside is that if you file for a spousal benefit before your FRA, the Social Security Administration (SSA) can reduce your benefit by up to 30 percent, depending on how early you file a claim.
File and Suspend Example: Jim and Jane Banks
Let’s take a hypothetical situation of spouses Jane and Jim Banks. Jane worked before taking time off to raise their three kids and then re-entered the workforce on a part-time basis afterward. So Jane will receive at age 66 approximately $800 a month in Social Security benefits.
Jim, who has been working longer and has had a record of higher earnings, projects to receive $2,000 a month in Social Security benefits if he suspends and waits until age 70. According to SSA calculations, half of his benefit would be $1,000 a month in spousal distributions.
So if Jane claims a spousal benefit, she will receive $1,000 per month in income, based on Jim’s Social Security contributions. Had she filed based upon her own earning records she would have received only $800 per month.
Is File and Suspend Right for You?
It’s a complex decision and one that—like most financial planning strategies—is dependent upon your own situation and goals. Are both spouses still working, or have other sources of income? Or will they need to depend on receiving Social Security benefits earlier than their FRA?
The new law will only affect you if you file and suspend on or after April 30, 2016. If you’ve chosen to voluntarily suspend before that date, the new law will not affect you. Additionally, if you suspend before April 30, if your spouse or children become entitled to benefits, they will not be impacted by the new rules and will continue to receive their Social Security benefits.
Some people recommend acting right away, while others think it’s wise to take a wait-and-see approach.
At JJ Burns & Company, part of our planning process is to help you understand how to best maximize your Social Security options depending on your situation. Contact us today to see if the file and suspend strategy is right for you.
March 23, 2016 8:50 am
Published by dylan
For several years, the beloved PBS British drama series, Downton Abbey, followed the lives of the Crawley family and its servants in their classic Georgian country house. The series began with the 1912 sinking of the Titanic, which leaves Downton Abbey's future in jeopardy since the presumptive heirs of Robert Crawley, Earl of Grantham, perished in the accident. In the ensuing decade-plus since the initial tragedy, the Crawleys—as well as their household servants—experienced some key financial milestones.
Here’s what we can learn about finances from Downton Abbey:
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Economies ebb and flow. The main source of income on the Downton Abbey estate was agriculture. Over a 13-year period, the estate saw declining revenues, while experiencing increasing employee costs. As a result, they downsized the business and their staff.
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The take-away: Don’t put your head in the sand. Stay on top of changing economies, work with your financial team and take action. If that means re-adjusting your asset allocations or moving from a very large home where you really only live in a few rooms to something more realistic, then explore your options.
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Diversify, diversify, diversify. After a decade, the Crawleys moved from the grain business into pig farming and then into real estate development because that’s where the opportunities were. The same philosophy still holds true in 2016. Don’t be afraid to diversify your investments.
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The take away: While you may have had success in the past investing in one way, there are always other options—equally successful—that you may not be aware of. Talk to your financial team about other strategies to see if they are appropriate for your situation.
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Succession planning is key. At Downtown Abbey, the long-term, day-to-day management of the estate took its toll on Lord Grantham in the form of serious health issues. His daughter, Lady Mary and son-in-law Tom Branson, decided to take over the estate to give Lord Grantham a break.
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The take away: No matter what your personal situation is, you need to have succession and estate plans in place. If you run a business, who will step in when you retire, become incapacitated or die? Who in your family will inherit what? How will your assets be distributed? No one likes to think about these things, but they are necessary. A will, trust and various estate planning documents can help ensure that the hard work you’ve done to create a solid financial foundation remains secure.
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Do your due diligence. Not all financial advisors are created equal. On Downton Abbey, Mrs. Patmore, the cook, asks Mr. Carson, the butler, for financial advice. He doesn’t have any experience in the area, but to save face he relays some advice about real estate development that he overheard Lord Grantham give. Mrs. Patmore decides to ignore Mr. Carson’s advice and go along with her original plan to open a bed and breakfast.
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The take away: Always make sure any advisor you use is qualified to give you financial advice. Carefully consider his or her recommendations, years of experience and understand the rationale behind the strategies. Never be afraid to ask questions or to walk away. No matter what your financial acumen, your advisor should be able to communicate to you in a straightforward, informative manner.
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Manage unrealistic expectations. In Downton Abbey, the butler Carson marries Mrs. Hughes, the head housekeeper. They both work long hours, yet he still expects her to have dinner on the table every night at six. Who can keep up with those expectations?
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The take away: This is on par with doing due diligence. By understanding the investment process, you can learn how to balance your portfolio between risk and reward. The benefit of setting expectations upfront is that you can make sure that you are on track to achieving your financial goals.
“Adapt and survive.” That seems to have been the motto of the characters in Downton Abbey. Through wars, deaths, illnesses, behind-the-scenes scheming, and financial ups and downs, everyone adjusted to their situations. Some were successful; others were not.
When it comes to your own portfolio, being informed, flexible and realistic seem to be the keys to surviving any economic situation. Take these lessons from Downton Abbey and then talk to your wealth management team about how you can apply them to your portfolio.
January 14, 2016 10:12 am
Published by dylan
What lies ahead for the global economy in 2016?
As we enter the new year, the outlook for the global economy remains uncertain with a rise in interest rates and decelerating growth in China. How will key economic trends in 2016 affect your portfolio and business?
Join JJ Burns & Company on Thursday, January 21st at 1:00 pm EST for a free webinar to discuss the Q4 2015 Economic & Market Outlook. During this live presentation, CEO JJ Burns, Managing Director Anthony LaGiglia, and Chief Investment Officer Steven Mula will review our outlook for the coming year.
Bonus: All registrants will receive a link to the on-demand version of the webinar following its completion.
In this 30-minute webinar we'll talk about:
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The 2015 markets and continuing U.S. recovery
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Key economic trends to watch for in 2016
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How investor behavior impacts long-term investment results
Plus we’ll also answer questions from attendees.
Don't miss this informative event! Reserve your spot today.
[Update: For those who couldn't attend, you can watch the webinar video here.]
December 28, 2015 7:02 am
Published by dylan
You’d like to make a major gift, and want to maximize the donation to help both you and the charitable organization. Maybe you own a piece of artwork or an item that would complement a collection. There are ways to make a donation that still allow you to enjoy the piece yourself.
Maybe you want to build or maintain a lasting legacy centered around your family values. You can involve your children and create a generational plan that will outlive you. When considering donations, there may be some options you might not have considered for your planned giving. Your assets can help more than charitable organizations and your taxes— they may also help your heirs now or later.
Donor-Advised Fund
One of the fastest-growing vehicles for donating to philanthropies is the donor-advised fund or DAF. This is an alternative to a foundation. Typically, you make contributions with appreciated property, like stock shares and receive an immediate tax benefit. You avoid capital gains tax and get a charitable deduction for the value. Over time, you recommend grants from the DAF account.
You can make contributions to the account as often as you like. The gifts to the donor-advised fund can be invested and they grow tax-free while they are in the DAF.
DAFs can be set up and personalized to reflect your interests and values. You can choose the name of your DAF to reflect your intention, such as “The Jones Family Fund for The Learning Disabled.” You can also choose a name that keeps you anonymous.
Want to make it a multigenerational family affair? Your children or family members can be involved as long as they are at least 18. Children or successors of your DAF may learn the importance of getting involved in a charity as well as the virtues of gratitude and humility.
Charity Lead Annuity Trust – “CLAT”
A charitable lead annuity trust or CLAT can give your charity regular donations and provide assets to your heirs. By shifting investment assets into a CLAT, a Trustee whom you choose, can make a series of annuity payments over a number of years to one or more charities. At the end of a fixed time period the remaining assets are distributed to your heirs. The amount you deposit into a CLAT could provide you a significant tax deduction in the current tax year.
An example could be a 20-year CLAT set up from a large stock distribution or business buy-out. You want the annuity payments to benefit a cancer clinic over the next twenty years, after which your heirs receive the remaining assets. The benefits you receive are a significant present value tax deduction on the day the CLAT is funded, minimizing the size of your current estate and facilitating the passage of assets to the next generation.
In times of lower interest rates, CLATs are more popular because the present-value tax benefits tend to be greater. Keep in mind there is flexibility and a fair amount of customization to fit your needs in charitable trust planning.
Tangible Property
An ever-popular donation is tangible property. But don’t think there’s only one way to donate, and that the donation ends when you deliver it to the organization.
By working with your financial team and the charity, you can make a mutually-beneficial arrangement. One example could be a piece of artwork, say a painting or sculpture. By working together, you could make the donation but still get to display the piece on certain dates each year at your home.
This “fractional interest” in the property may accommodate your schedule. The time frame can be established in increments. Let’s say you contribute a 75 percent fractional interest in your fully-restored classic luxury car to a motor museum. You could retain custody of the vehicle three months of the year, while they display it for nine months.
Evaluate the Charities
It’s a good idea to do some research when choosing a charity for your donation. Making a site visit to the location can give you a better understanding of their mission. Remember you can direct or restrict your donation to any part of the charity you feel it is important to help. You should also speak with employees, administrators, and other donors. Don’t be afraid to ask questions or get involved.
You can also get an outside view of the charity through a growing number of online organizations. They track a variety of non-profit information, including their IRS filings, revenue and expense data, boards of directors, balance sheets, and annual reports.
Some of the most popular charitable information services are GuideStar.org, the BBB Wise Giving Alliance (Give.org), and CharityNavigator.org. Some of these online guides supply access to data, while others rank charities according to standards listed by each group.
Discuss Your Options
Don’t get frustrated thinking there are limited options for planned giving. There are many ways to make a lasting major gift to the charities of your choice. These donations can help those organizations while also helping you and your heirs.
As with any estate planning techniques mentioned above, it is vital to consult with your wealth management team inclusive of a qualified estate/trust attorney and an accountant.
Contact us to see how you can reach your charitable goals while also receiving tax benefits and creating a lasting legacy.
December 24, 2015 9:22 am
Published by dylan
Famous miser Ebenezer Scrooge was introduced to readers in Dickens’ 1834 classic tale of redemption that takes place on Christmas Eve. Scrooge has lived a life focused on growing his financial wealth with little regard for life outside his counting house. In one remarkable evening, on a Christmas Eve seven years after the death of his partner Jacob Marley, he is visited by Marley’s Ghost and three other Spirits. Their visits offer Scrooge an opportunity to objectively look at himself and others from an abstract point of view, and revisit his past actions and beliefs. The now-famous result is well known, but we might ask, how does this apply to investors?
Seven years ago this very day, in the throes of the Financial Crisis, here’s where the markets sat compared to where they are today:
The global economy in 2008 was mired in slumping markets, broken banking systems, panic selling in every market segment and plagued with a lack of financial controls. More pain and dislocation in the job and securities markets were waiting for investors in 2009 and beyond. It was a very difficult period to navigate, from both an emotional and analytical perspective.
Now let’s fast forward to 2015. Many investors are disappointed by market returns this year. There are no global tailwinds at play (other than low oil prices), and different regions and countries are executing different monetary and fiscal policies. We are truly in a state of global flux. But we also think that as U.S. investors take stock of the year, there is certainly more to be thankful for in 2015 than during the Crisis. We don’t mean to imply that everything related to the U.S. markets and economy has been rosy during the recovery, but the U.S. is certainly in a better place than many other areas of the world. We can also confidently predict that we don’t know what will happen next year or the year after, but at this writing, we expect continued modest recovery in global growth and in modest returns for stocks and bonds.
We can also use Dickens’ three ‘spirits’ to help set our behavior and our expectations going forward:
PAST
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DON’T focus on GREED (at any price) and FEAR (panic selling) due to lack of planning
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DO focus on long-term results that are right for you, NOT the short term noise
PRESENT
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DON’T tinker and chase returns based on “feelings” and avoid short term opportunism
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DO be aware and rebalance to your correct allocation as your plan calls for
FUTURE
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DON’T ignore the lessons of the past and what the real data says
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DO focus on what can be controlled – allocations, investments and EMOTIONS
Scrooge’s transformation occurred on many levels; most of us have a lot to be thankful for, too, and we hope that Dickens’ message of charity and forbearance resonates at this time of year.
We offer best wishes for a peaceful and grateful holiday, and a Happy New Year!
October 27, 2015 6:26 am
Published by dylan
You’ve worked hard to build your business to where it is today. Whether you are selling your business to move on to other things, or it’s simply time, it’s important to think ahead. As with most things in life, a good plan is very important to have in place.
Strategically look at the sale of your business. Even if you’re not ready to sell just yet, you should be building it with the intention of selling or the possibility of creating a strategic merger. Whether you sell or merge, you want your organization to look appealing to any potential growth opportunity. Many owners don’t prepare in advance for their business to be sold so they miss the opportunity to leverage the sale for themselves, their family, and their employees.
As part of your planning process, consider these five common mistakes many business owners make – so you can avoid them.
Mistake #1. Not planning with the end in mind. It can be hard to think beyond the day-to-day running of your business. Making the decision to sell may happen one day, or over time, but having your plan ready will be important either way. Think about what you can do to fetch the highest value for your business and “who” would likely be a purchaser. Ask yourself these questions:
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What is the value of your brand in the market place?
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What is the tenure of the people on your executive team
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How vested is your team to stay on after you’ve sold?
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What are the most important intangibles of your business that are difficult to replace making it appealing for the purchaser?
Remember, your business is, well, business. As hard is it may seem, you need to keep that in mind. It may feel like your child, but there comes a time when you let the child grow up and move on. Selling your business can give you a means to fulfill other goals you may have on your “bucket list”, whether it’s seed money to start something new, the opportunity to concentrate on something else, or living the life you only dreamed of.
Mistake #2. Not using the right advisors or accessing the right guidance. Selling your business is an important step in your life. Make sure you get good advice as you make your plan.
Get unbiased advice from your financial, accounting and legal advisers. A solid team often yields significant results. Clients often tell us that they did their due diligence when they started their business, but did not do the same in choosing the wealth planning team to plan and manage the life they want to live.
Try to avoid “emotional” biased advice. Because you’ve been strategic, you have the opportunity to weigh opinions and options and can time the sale, prepare your documents, and consider alternatives.
Your team of advisers can help you prepare a strategic, thoughtful financial plan for your business so it thrives after the sale, just as it has thrived under your leadership. Continued performance may be part of the installment sale plan.
Mistake #3. Not knowing what happens after the sale. You’ve made it! The sale has gone through. There will be that first day you do not go to the office. What will you do?
You may have reached this point in your life through a variety of paths. You may have more than one business or want to start a new venture. Maybe your health has changed. It might be time to retire. No matter the reason for changing ownership, after you sell, your life will be different. Be prepared for this change.
How you fulfill your dreams may take many different forms. If you plan to volunteer, check out some of the organizations that interest you to see how you can help. Many people travel. Research the destinations you’d like to visit. Maybe you’d like to work part time for a business or cause that is dear to you. Evaluate those opportunities as well.
Practice what an average day will look like in your new life. Create an agenda and live by it. Make sure you write it down! Our clients have found the gaps in their lives and filled it with many more things they were never able to complete when they had the responsibility of running their business. Don’t let the new time on your hands come as a surprise to you or your family.
Mistake #4. Not thinking about financial implications. Time will be exhausted. Will your finances too?
Just as you have an asset allocation for your investment portfolio, you will also want one for your wealth. All your capital should not be placed in the business. Create “diversifiers” for your money. For instance, you can consider placing assets in real estate and your portfolio.
If you plan to retire when you sell your business you will no longer pay for expenses through the business. Expenses that were once part of your business are now your own personal expenses. You will have to think twice before going to the office supply store, buying the extra service package for your cell phone, or getting those box seats to a show/game. These and other expenses will need to be provided for by your portfolio or other sources of income.
Whether you still own another business or have retired, your taxes will also be impacted. Talk with your financial and tax advisers to discuss the possible tax implications of the sale. This is important when setting up your plan ahead of time.
Another change could be to your income. Hopefully business was good and the sale left you sitting pretty for this next chapter. But you may have less income now. Either way, think about making the most of your sale so it lasts as long as possible to give you the lifestyle you want.
Mistake #5. Not considering alternative approaches to selling your business. Just because you want to sell your business doesn’t mean you have to sell it to some stranger. You could make it part of your legacy planning. When creating your succession plan, you could include the business as part of an inheritance. This way, if you were to die before you retire or sell it yourself, you could still keep it in your family or with key owners.
You can also consider an alternative that keeps you working in the business but lets the ownership get divided. In this case, you could implement an employee stock ownership plan (ESOP). ESOPs provide employees with an ownership interest in the company, giving workers stock ownership, often at no up-front cost to the employees.
Evaluate options and start your plan
You may hope to stay in your business for years or you may be looking at potential buyers or a merger soon. Either way, creating a plan ahead of time can help you make your business attractive when the time comes. By seeking professional guidance and doing some research, you can make these positive changes in your business – and your life – less stressful and more beneficial to all involved.
