In January 2017, Five Star Professional paired with the San Diego Magazine to publish profiles of Five Star Professionals in San Diego. Weatherly’s senior team, including Carolyn Taylor, Candise Holmlund, Brent Armstrong, Ashley Copp, and Kelli Ruby all received this inclusion. To read more about the team and Weatherly’s comprehensive wealth management services, view the profile here http://winnerreprints.fivestarprofessional.com/five-star-award-winner-weatherly-asset-management/0635567001485447280.

The Five Star Wealth Manager award, administered by Crescendo Business Services, LLC (dba Five Star Professional), is based on 10 objective criteria. Eligibility criteria – required: 1. Credentialed as a registered investment adviser or a registered investment adviser representative; 2. Actively employed as a credentialed professional in the financial services industry for a minimum of 5 years; 3. Favorable regulatory and complaint history review (As defined by Five Star Professional, the wealth manager has not: A. Been subject to a regulatory action that resulted in a license being suspended or revoked, or payment of a fine; B. Had more than a total of three customer complaints filed against them [settled or pending] with any regulatory authority or Five Star Professional’s consumer complaint process. Unfavorable feedback may have been discovered through a check of complaints registered with a regulatory authority or complaints registered through Five Star Professional’s consumer complaint process; feedback may not be representative of any one client’s experience; C. Individually contributed to a financial settlement of a customer complaint filed with a regulatory authority; D. Filed for personal bankruptcy; E. Been convicted of a felony); 4. Fulfilled their firm review based on internal standards; 5. Accepting new clients. Evaluation criteria – considered: 6. One-year client retention rate; 7. Five-year client retention rate; 8. Non-institutional discretionary and/or non-discretionary client assets administered; 9. Number of client households served; 10. Education and professional designations.

The Five Star Wealth Manager award program recognizes and promotes wealth managers. Five Star Wealth Manager candidates were identified by one of three sources; firm nomination, peer nomination or pre-qualification based on industry standing. Five Star Professional notified advisors of their candidacy for the award via an email solicitation. Weatherly provided data in the form of an online survey submission. Neither Weatherly nor its employees were required to be a member of an organization to be eligible to receive the award. No payment was required of Weatherly to be considered for the award or to be named a Five Star Wealth Manager. Once awarded, wealth managers may opt to purchase additional profile ad space or related award promotional products. Weatherly paid Five Star Professional for a half page advertisement placement in the San Diego Magazine and an electronic URL for marketing use.

Wealth managers do not pay a fee to be considered or placed on the final list of Five Star Wealth Managers. The award does not evaluate quality of services provided to clients. Once awarded, wealth managers may purchase additional profile ad space or promotional products. The Five Star award is not indicative of the wealth manager’s future performance. Wealth managers may or may not use discretion in their practice and therefore may not manage their client’s assets. The inclusion of a wealth manager on the Five Star Wealth Manager list should not be construed as an endorsement of the wealth manager by Five Star Professional or the San Diego Magazine. Working with a Five Star Wealth Manager or any wealth manager is no guarantee as to future investment success, nor is there any guarantee that the selected wealth managers will be awarded this accomplishment by Five Star Professional in the future. Five Star Professional is not an advisory firm, and the contents of the advertisement should not be construed as financial advice. For more information on the Five Star award and the research/selection methodology, go to www.fivestarprofessional.com. Five Star considered 1,354 San Diego wealth managers for the award; 349 (26 percent of candidates) were named 2017 Five Star Wealth Managers.

Five Star Professional conducts a regulatory review of each nominated wealth manager using the Investment Advisor Public Disclosure (IAPD) website. Five Star Professional also uses multiple supporting processes to help ensure that a favorable regulatory and complaint history exists. Data submitted through these processes was applied per the above criteria: 1) each wealth manager who passes the Five Star Professional regulatory review must attest that they meet the definition of a favorable regulatory history, based on the criteria listed above; 2) Five Star Professional promotes via local advertising the opportunity for consumers to confidentially submit complaints regarding a wealth manager; and 3) Five Star Professional contacted approximately 1 in 12 households identified as having a high propensity to use the services of wealth managers in order to provide consumers the opportunity to submit complaints regarding a wealth manager.

Receipt of this award is not representative of any one client’s experience and is not indicative of Weatherly’s future performance. Weatherly is not aware of any facts that would call into question the validity of the award or the appropriateness of advertising the award.

About Weatherly Asset Management, L.P.

Weatherly Asset Management, L.P. is a Registered Investment Advisor, located in Del Mar, California, dedicated to providing high quality, holistic and innovative wealth management services to high net worth individuals, small businesses and institutional clients since inception of the Firm in 1994.

Our comprehensive approach to all aspects of a client’s financial life, the extensive experience of our principals, and the accessibility of experts, set us apart from other firms.

Our primary business focus is money management, with each account individually managed to maximize wealth preservation and growth over time. We also provide advice related to retirement planning, tax planning, philanthropic planning, financial planning and college planning, as well as estate planning and wealth transfer guidance. Our goal is to provide clients with as much information as necessary to effectively manage portfolios and help achieve their financial goals.

Weatherly Asset Management, L.P. is the investment advisory division of Weatherly Asset Management, Inc. As an independent partnership, the Firm is wholly owned and operated by the partnership.

For information on our wealth management team, and for a full list of services we provide, please visit: http://www.weatherlyassetmgt.com/team/

For information on our ADV filings and Compliance, please visit: http://www.adviserinfo.sec.gov/IAPD/IAPDFirmSummary.aspx?ORG_PK=106935
http://www.weatherlyassetmgt.com/adv/

If you would like to learn more, please contact:

Carolyn P. Taylor
858-259-4507
Carolyn@weatherlyassetmgt.com

Weatherly’s Candise Holmlund was included in the debut edition of the San Diego 500, an annual book listing 500 influential business leaders published by the San Diego Business Journal. Candise’s profile features her established career in the wealth management industry, her educational background, and well-rounded involvement within the San Diego Community. You can learn more about the San Diego 500 here and read Candise’s full bio here.

The 2016 San Diego 500 is comprised of 11 main categories: 1) Business Services, 2) Civic, 3) Education, 4) Finance, 5) Health & Science, 6) Leading Industries, 7) Lifestyle, 8) Real Estate, 9) Technology, 10) Wealth & Investments, and 11) Icons. The San Diego Business Journal’s process for inclusion in the list involved asking for feedback from numerous industry experts. Evaluation criteria included merit, business savvy, and civic engagement.

Candise was one of 12 professionals included in the Wealth & Investments investment banking subcategory. The San Diego 500 included 30 professionals total in the Wealth & Investments category (12 investment banking/private equity; 6 venture capital; and 12 wealth management). Weatherly did not apply for consideration or inclusion in the list. Once selected for the list, Candise provided biography-related information for inclusion in the publication.

There was no fee to participate in the list, and Weatherly was not required to advertise in, or subscribe to, the San Diego Business Journal. When or if reprints of the list become available, Weatherly will pay the Journal for electronic reprints.

No organizational memberships were required of the Firm or individuals. Inclusion in this list is not representative of any one client’s experience and is not indicative of Weatherly’s future performance. Weatherly is not aware of any facts that would call into question the validity of the ranking or the appropriateness of advertising inclusion in this list.

About Weatherly Asset Management, L.P.

Weatherly Asset Management, L.P. is a Registered Investment Advisor, located in Del Mar, California, dedicated to providing high quality, holistic and innovative wealth management services to high net worth individuals, small businesses and institutional clients since inception of the Firm in 1994.

Our comprehensive approach to all aspects of a client’s financial life, the extensive experience of our principals, and the accessibility of experts, set us apart from other firms.

Our primary business focus is money management, with each account individually managed to maximize wealth preservation and growth over time. We also provide advice related to retirement planning, tax planning, philanthropic planning, financial planning and college planning, as well as estate planning and wealth transfer guidance. Our goal is to provide clients with as much information as necessary to effectively manage portfolios and help achieve their financial goals.

Weatherly Asset Management, L.P. is the investment advisory division of Weatherly Asset Management, Inc. As an independent partnership, the Firm is wholly owned and operated by the partnership.

For information on our wealth management team, and for a full list of services we provide, please visit: http://www.weatherlyassetmgt.com/team/

For information on our ADV filings and Compliance, please visit: http://www.adviserinfo.sec.gov/IAPD/IAPDFirmSummary.aspx?ORG_PK=106935
http://www.weatherlyassetmgt.com/adv/

If you would like to learn more, please contact:

Carolyn P. Taylor
858-259-4507
Carolyn@weatherlyassetmgt.com

With the holidays and year end quickly approaching, ’tis the season of detailed tax planning and gift giving! While tax planning and gift giving don’t always get a seat at the same strategy table, we encourage clients to consider their charitable endeavors as a critical piece of the overall tax and financial planning process. A yearend conversation with your CPA and Weatherly provides an excellent opportunity to maximize efficiency while accomplishing charitable goals. In addition, many clients utilize charitable planning as the beginning steps of the family conversation with their heirs, specifically to communicate family values and begin the legacy planning process. Giving funds to those less fortunate or causes you are passionate about, while capturing a tax benefit offers a winning combination for our clients.

We have outlined two efficient approaches below:

Donor Advised Fund

A Donor Advised Fund (DAF) is a philanthropic account that allows a donor to make charitable contributions, receive an immediate tax write-off and subsequently grant funds out to charities over time.  DAFs are available for clients at most community foundations and large brokerage firms. Weatherly can facilitate opening a DAF at either type of institution and will assist in selecting securities for donation.

What can be donated?

The donor can of course contribute cash, however, one of the main benefits of a donor advised fund is your ability to contribute appreciated securities, both publicly traded and some privately held securities.

• The donor receives a deduction equal to the fair market value (FMV) of the securities on the day the shares are contributed to the DAF and does not have to pay tax on the unrealized capital gain.
• The contribution is considered an irrevocable gift and cannot be reclaimed by the donor, this allows the donor to claim the FMV as a deduction on their tax return in the current tax year.
• The securities are immediately converted to cash by the custodian and held in the account awaiting the donor’s instructions.
• The DAF provides an opportunity to decrease a low basis concentrated position while accomplishing charitable donation goals.

Example here: https://www.fidelitycharitable.org/giving-strategies/tax-estate-planning/appreciated-securities.shtml

Investing the funds in a DAF

• Once the donation is made to the DAF, the donation can grow tax- free. Custodians typically offer model portfolios invested in exchange traded funds or mutual funds at reasonable management fees. The end charities benefit from more dollars available to the donor to grant out.
• Once over a certain dollar amount many custodians allow the funds to be managed by an Advisor with broader investment choices  – individual stocks and bonds, mutual funds, exchange traded funds, alternatives etc. Fees and threshold vary per custodian.

Estate and Legacy planning

• The DAF offers a convenient way to leave funds to charity in your estate. Instead of naming specific charitable organizations in your estate plan you can simply name the DAF – during your lifetime if you want to change the dispersion of funds to the charities listed or change the selected organizations receiving funds you can make this edit simply via the DAF at no cost versus paying an attorney to amend your estate documents.
• The donor can also select a successor on the DAF so the account can continue under direction of the selected individual after the donor has communicated their charitable values and vision for the funds.
• In our experience, clients find this vehicle an excellent way to start the family conversation surrounding values, charitable goals, wealth transfer, and legacy planning. A discussion with heirs and other family members to collectively select causes and organizations that represent family values is a meaningful exercise for teamwork and family unity. This may make the transition to a broader conversation regarding estate planning smoother if and when it is appropriate for your family. See a link to Weatherly’s family conversation assessment card here.

Example #1: Concentrated Position – Donating Stock versus Cash

A couple in their early 60’s both worked for a technology company, ABC inc., for 20 years. While working they received compensation via incentive stock options that they exercised over time. They now have a concentrated position of the company stock equal to 30% of their overall net worth and would like to diversify out of the position over time to decrease risk as they near retirement. The shares have a very low cost basis, and therefore large capital gain tax if they were to liquidate shares. They are both still working and adding to their portfolio via 401(k) and Trust contributions annually. They are charitably inclined and donate on average $25,000 annually to organizations supporting foster youth programs. They have been completing these donations with cash from annual income.

Mike and Susan’s advisor recommends they open a DAF and utilize the ABC Inc. stock to complete their annual gifting. They will transfer shares from their Trust account to the DAF and receive a deduction on their tax return equal to the Fair Market Value of the stock. The shares will be immediately converted to cash and Mike and Susan can grant out the funds to the charities they regularly support.

They did not pay any capital gains tax and can now add the $25,000 cash they would have used for the charitable donation to their Trust account for investment in other sectors, ensuring diversification over time.

Example #2: Small Business Sale – Frontloading a DAF

A couple, Bob and Jenny, started a successful company in their 30’s. They have worked hard over the last 25 years to build a profitable business. They have now decided they’d like to move on to other endeavors and spend more time with their family. They have successfully negotiated a sale of their business, however they will incur a large tax bill this year due to the payout. They have consistently donated $20,000 annually to various charities. They would like to continue working after the business is sold to stay engaged and earn income but at a lower time commitment. They have consulting opportunities but are unsure of their income levels and if their earnings will allow the same level of donations going forward.

Bob and Jenny’s advisor recommend they open a DAF and frontload the account. They will contribute $100,000 of appreciated securities to the DAF and receive a deduction on their tax return to help offset their very large tax bill this year. They are able to grant the funds out to charities over the next 5 years at their regular $20,000 amount without any impact to the income that they earn after the business sale. They can also replace the donated funds with the business sale proceeds and reinvest the monies.

They did not pay any capital gains tax on the appreciated stock transferred to the DAF, they have guaranteed their regular donations for the next five years, and they maximized the tax benefit by capturing the deduction in this tax year.

Key Tax Planning Details

Taxpayers can deduct charitable donations up to a percentage of their adjusted gross income in a given tax year. The percentage varies depending on the type of asset donated:

*www.irs.gov

Charitable Carryover

In the event that a taxpayer completes a charitable donation in excess of the AGI thresholds, the excess charitable donation can be carried over for up to 5 years. This excess amount cannot exceed 50% of the taxpayer’s adjusted gross income (AGI) for each tax year claiming the carryover.

Phase Outs

Itemized deductions on Schedule A of the 1040 are subject to phase outs depending on compensation levels, detailed in Section 68 of the Internal Revenue Code. The tax benefit of deductions can be reduced if the tax payer is over certain thresholds.

The Section 68 phase-out is equal to the lesser of 80% of total itemized deductions or 3% of the taxpayer’s AGI in excess of the thresholds below. The phase-out applies to taxpayers whose 2016 adjusted gross income (AGI) exceed the following thresholds:

• Married filing a joint return: $311,300
• Filing as single: $259,400
• Filing as head of household: $285,350
• Married filing a separate return: $155,650

http://www.donorstrust.org/tax-estate-planning/itemized-deduction-phase-out/

Required Minimum Distribution (RMD) Direct Rollover to Charity

Another high impact strategy for clients over age 70 ½ who are taking their required minimum distributions from their IRA’s is a qualified charitable distribution.  The donor is able to shift a portion of their RMD, up to $100,000 per year, directly to charities of their choosing. The funds sent to charitable organizations are then not included in the individuals adjusted gross income, therefore reducing taxable income while still satisfying the required minimum distribution mandated by the government. The key is that the funds must go directly from the IRA account to a tax exempt organization. This strategy would be most helpful for a client with large RMD requirements, who does not need the funds for living expenses, and regularly donates to charity.

Note in previous years, Congress typically did not announce whether or not individuals could donate RMDs tax free until December. The Protecting Americans from Tax Hikes Act of 2015, permanently allows individuals to contribute RMDs at any time prior to December 31^st.

Charitable donations are a powerful tool, both from a personal philanthropic perspective and as a piece of your long term financial plan. Weatherly’s goal is to help our clients achieve financial goals while delivering high quality service and advice. We would welcome a discussion with you regarding the information presented above to specifically investigate if these strategies are appropriate for your individual financial situation.

https://www.irs.gov/charities-non-profits/charitable-organizations/charitable-contribution-deductions

https://www.irs.gov/pub/irs-pdf/p526.pdf?_ga=1.187647912.1882756303.1477606334

** The information provided should not be interpreted as a recommendation, no aspects of your individual financial situation were considered. Always consult a financial professional before implementing any strategies derived from the information above.

As technology has advanced and improvements in diet, medicine and education have grown, one trend that is very apparent is that people are living longer. While this fact can almost certainly be viewed as a positive, increasing longevity may also create financial, lifestyle and family relationship strains as retirees must find the means and methods to satisfy an extended life expectancy.

To help combat these potential issues, we have addressed the 5 common pillars of dealing with the challenges of managing longevity.

Managing End of Career:

For many people, retirement is seen as the light at the end of the tunnel and something that they have been working towards for decades. However for some, when the time comes to hang up the working boots, they have trouble filling both the emotional connection and the time commitment that a 40 plus hour work week brings. While no one truly knows how they will respond to the lifestyle that retirement brings until that time comes, managing the end of your career can produce benefits in many ways by exploring options such as:

• Consulting or part-time work
  • Allows you to contribute to a Self-Employed 401(k) and continue to save tax-deferred money
• Part-time teaching or taking part-time courses
• Volunteer opportunities
• Student mentoring
• Participation on local boards and committees

By reaching out to those in your network who are participating in these activities or approaching local universities and groups for existing opportunities, you can explore potential opportunities for yourself post-retirement should the desire or need arise.

Financial Assets and Efficiency:

As people enter retirement, they begin to withdraw their assets rather than add to them. When there is a steady, defined income flow from employment, it can be much easier to mentally compartmentalize what is being spent and often times the habit becomes to spend what you net. While this mindset can suffice if there is a fixed income, it can create a habit of living without a budget, making it difficult for retirees to develop an understanding of what they actually need for living expenses. This can result in assets can be inappropriately drawn down and potentially prematurely exhausted. To better manage your financial assets and cash flow, the steps below can be helpful:

1. Establish a budget for a proper understanding of the expense level needed to support your desired lifestyle.
2. Explore what sources are available to fund those expenses. Visit Weatherly’s Research tab above to view Mint.com, which can be an effective tool to consolidate all of your accounts and track budgets.
3. Understand how you can leverage different types of accounts in combination with other income sources to produce a more tax efficient cash flow.
4. Strategically withdraw needed funds to help make your money last longer.
   1. Pair higher income years with tax-free withdrawals, lower income years with tax-deferred withdrawals or a combination of the two to help create a more consistent and predictable level of taxable income. Click here for the 2016 tax brackets.

As retirement needs and income become more apparent, decisions relating to when to claim Social Security benefits, management of Required Minimum Distributions (RMDs) and potential use of debt can be managed in a tax efficient manner.

Quality of Life:

A successful retirement is not solely determined by finances but also greatly by the quality of the lifestyle. While it may seem that quality of life is largely dictated by what is financially practical, developing a proper expectation of your desired retirement lifestyle can be just as impactful. Common goals often include:

• Family time
• Travel
• Charitable giving
• Intra-family gifting
• Minimization of the noise and complexities of life

Weatherly can assist with developing a financial evaluation to help determine whether the quality of life that you strive for is consistent with the quality of life that is financially sustainable given your life expectancy, typically into the mid 90s.. Not only will this exercise bring you through the critical thought process of developing a retirement bucket-list, it can also help to the relieve the stresses that accompany uncertainty or unrealistic expectations.

Health and Healthcare Cost Management:

It’s not hard to see the positives of increasing longevity, with more time with loved ones, to live your dreams and goals and to enjoy the simplicities of life. However, the ability to pursue these things and live your desired quality of life is driven largely by how retirees manage both their health and the related expenses.

While the expected total lifetime cost of retirement healthcare expenses can vary greatly from study to study, commonly ranging from $260,000 to $464,000, the conclusion is the same; healthcare costs represent one of the largest expenses in retirement. The large potential outlay and uncertainty of the size of that outlay is only compounded by the fact that U.S. healthcare costs have been rising at a much faster rate than the annual inflation rate and by as much as 50% according to retirement healthcare planning firm HealthView Services. The big question is how to manage these costs using the most cost effective, tax efficient methods. Common solutions include one of or a combination of:

• Continuing to work longer
• Delaying the period which assets are withdrawn
• Health Savings Account (HSA)
  • Click here to find out if you are eligible to for an HSA and which expenses are considered qualified medical expenses that HSAs can cover
• Insurance policies with a Long Term Care Benefit option or Accelerate Death Benefit (ADB) rider

Regardless of which option or options you pursue, it is important to account for these potential expenses and conduct annual checkups to help maintain your health. It is also important to relay your family’s longevity history to your advisors and professionals so that they can be aware of this information and factor corresponding needs and considerations into your financial picture.

Family Conversations:

The end of life stage is something that no one wants to think about as it’s difficult to contemplate your own mortality just as it is for your children and loved ones to do so. However, having the appropriate family conversations and taking certain necessary actions will not only help manage the end stage of life but also help to alleviate some of the stresses that your loved ones may experience after your passing.

For many families, finances is one of the few topics that is considered off limits. However, as you, and your children and loved ones age, the importance of financial discussions becomes greater. A recent study conducted by wealth transfer firm The Williams Group found that nearly 70% of families lost control or experienced strain in their relationships after a wealth transfer event; the most common source being a lack of communication. Without having to specifically mentioning the details of your finances, you can help reduce this lack of communication by:

• Relaying a broad overview of the types and locations of your assets
• Outlining where assets are held
• Communicating any potential charitable intentions
• Establishing a list of who to contact and where personal information is kept
• Introducing potential inheritors to your financial and legal professionals

These family conversations can be very helpful in the handling the procedure of wealth transfer, but communication is not the only necessity. As detailed in Weatherly’s previous blog post on estate planning, regardless of asset size and complexity, there are additional legal procedures and documentation that should be part of any estate plan.

Managing longevity is by no means done overnight, but by considering these 5 pillars, you can help to ease both your own experience and the experience of your loved ones. We encourage all to reach out to Weatherly and their other trusted professionals to see how they can potentially further manage their longevity.

Links for further reading:

http://www.jackolg.com/considerationsforservingagingclients.pdf

** The information provided should not be interpreted as a recommendation, no aspects of your individual financial situation were considered. Always consult a financial professional before implementing any strategies derived from the information above.

EMI Network Research partnered with Forbes Magazine to produce the California Financial Leaders segment of Forbes Magazine’s September 2016 print special issue. To promote Weatherly Asset Management’s national exposure, as well as community and industry outreach efforts, the Firm chose to participate in the promotion. View the profile here.

The California Financial Leaders segment was based on a marketing opportunity openly offered to California RIAs by EMI Network on behalf of Forbes Magazine. Firms had the opportunity to occupy one of six slots based on conducting an interview with EMI, submitting Firm information, and payment. No organizational memberships were required of the Firm or individuals; eligibility was based on a first-come, first-served basis when reserving spots for the segment.

This paid-for advertisement included an interview portion in which Weatherly supplied a series of answers to questions created by EMI Network. Weatherly was responsible for providing Firm branding information, photographic images, contact information, and appropriate disclosures. Weatherly paid for the marketing package (inclusion in the advertisement segment, paper reprints, copies of the Forbes magazine for distribution, as well as an electronic PDF of the profile, available for use on the Firm’s website). Materials are approved for distribution and electronic use within the parameters of EMI Network’s contract agreement.

The marketing package also included an appearance on Forbes Custom website for one year from date of publication.

Inclusion in this promotional piece is not representative of any one client’s experience and is not indicative of Weatherly’s future performance. Weatherly is not aware of any facts that would call into question the validity of the promotional segment or the appropriateness of advertising inclusion in this promotion.

About Weatherly Asset Management, L.P.

Weatherly Asset Management, L.P. is a Registered Investment Advisor, located in Del Mar, California, dedicated to providing high quality, holistic and innovative wealth management services to high net worth individuals, small businesses and institutional clients since inception of the Firm in 1994.

Our comprehensive approach to all aspects of a client’s financial life, the extensive experience of our principals, and the accessibility of experts, set us apart from other firms.

Our primary business focus is money management, with each account individually managed to maximize wealth preservation and growth over time. We also provide advice related to retirement planning, tax planning, philanthropic planning, financial planning and college planning, as well as estate planning and wealth transfer guidance. Our goal is to provide clients with as much information as necessary to effectively manage portfolios and help achieve their financial goals.

Weatherly Asset Management, L.P. is the investment advisory division of Weatherly Asset Management, Inc. As an independent partnership, the Firm is wholly owned and operated by the partnership.

For information on our wealth management team, and for a full list of services we provide, please visit: http://www.weatherlyassetmgt.com/team/

For information on our ADV filings and Compliance, please visit: http://www.adviserinfo.sec.gov/IAPD/IAPDFirmSummary.aspx?ORG_PK=106935
http://www.weatherlyassetmgt.com/adv/

If you would like to learn more, please contact:

Carolyn P. Taylor
858-259-4507
Carolyn@weatherlyassetmgt.com

Strategies for Retirement – What retirement plans and trending industry topics you need to be aware of to achieve your personal retirement goals. An adviser at Weatherly can assist with selecting an optimal retirement plan, providing strategic investment strategies, and addressing retirement concerns or topics.

Defined Benefit to Defined Contribution Plans

Saving for retirement has not always been a cause of anxiety for employees. In the past, individuals would begin working for a company in early adulthood, continue working with that same company for decades, and retire with a sponsored defined benefit (DB) pension plan that provides the employee with sufficient retirement assets through pension payments. The major risk employers face is that the returns generated from investing employer monthly contributions to the general fund will not satisfy the pension premiums owed to retirees in the future due to lower interest rates, uneasy markets, and increase in life expectancy. If returns are not sufficient, the business will have to pay out of pocket to negate the accumulated liabilities. This extra cost has led most employers to switch to offering company sponsored defined contribution (DC) plans, in which the employee is responsible for all payouts during retirement, rather than the employer. This elimination of risk to the employer and freedom of investing for the employee are reasons these plans are popular for both parties, although employees are now on the hook to save for retirement through their own investment strategy and prowess and hope to receive a company match to their contributions.

Choosing the Right Plan – Plan options will depend on compensation:

• W-2 Employees
  • Company Sponsored Retirement Plan – 401(k), 403(b), Roth 401(k), or Employee Stock Ownership Plan
    • Contribution Limits –Employees can contribute up to $18,000 of deferred income for 2016 and if the employer offers a contribution match, the employer can contribute up to 25 percent of annual compensation. Total contributions between the employee and employer may not exceed $53,000. If the individual is at least 50 years old, the employee may utilize a catch up provision of $6,000 for a total allowable value of $59,000.
    • Benefits – Deduction on employee tax return and deferred taxes on capital gains, dividends, and interest income.
    • Administration – N/A
    • Action Items – Auto-enroll in company sponsored plans and contribute to at least the employer matching maximum percentage.
• Self-Employed/Business Consultants
  • Self-Employed 401(k) – available for individuals with no other employees, excluding a spouse
    • Contribution Limits –Total contributions between the employee and employer may not exceed $53,000. If the individual is at least 50 years old, the employee may utilize a catch up provision of $6,000 for a total allowable value of $59,000.
    • Benefits – Can contribute as both the employee and employer with generous contribution limits without being subject to complex ERISA rules and regulations. Large universe of investment options to choose from such as stocks, bonds, mutual funds, and exchange-traded funds.
    • Administration – Annual Form 5500 filing if assets grow to greater than $250,000.
    • Action Items – Establish plan before calendar year-end for employee deferral and tax filing deadline for employer deferral.
  • Simplified Employee Pension Plan (SEP IRA) – any business can establish this type of plan
    • Contribution Limits – Total contributions by the employer may not exceed $53,000. If the individual is at least 50 years old, the employee may utilize a catch up provision of $6,000 for a total allowable value of $59,000. The business must contribute the same percentage of income to employee accounts that the business owner contributes to his or her own account.
    • Benefits – Easy to establish and no annual fees. Large universe of investment options to choose from such as stocks, bonds, mutual funds, and exchange-traded funds.
    • Administration – No required annual Form 5500 filing and must establish SEP IRA for every employee.
    • Action Items – Must establish and fund by business tax filing deadline.
• Small Business Owners–
  • Saving Incentive Match Plan for Employees (SIMPLE IRA) – available for companies with less than 100 employees
    • Contribution Limits – Employees may contribute 100% of income up to $12,500. If the individual is at least 50 years old, the employee may utilize a catch up provision of $3,000 for a total allowable value of $15,500. The employer is required to match up to 3% of employee contributions.
    • Benefits – Easy maintenance and no required identical percentage match to employees. Large universe of investment options to choose from such as stocks, bonds, mutual funds, and exchange-traded funds.
    • Administration – No required annual Form 5500 filing. If the employer is not matching 3% of contributions, then the employee must be notified before the 60 day election period for the calendar year.
    • Action Items – The plan must be established between January 1^st and October 1^st.
  • Safe-Harbor 401(k)
    • Contribution Limits – Employers can contribute up to 25 percent of annual compensation and employees can contribute up to $18,000 of deferred income. Total contributions between the employee and employer may not exceed $53,000. If the individual is at least 50 years old, the employee may utilize the catch up provision of $6,000 for a total allowable value of $59,000.
    • Benefits – High-earning employees can maximize contributions to retirement plans without the complex Internal Revenue Service non-discrimination test.
    • Administration – Employers are required to give employees annual notice of rights and obligations regarding the plan.
    • Action Items – Establish the plan with a third party administrator and financial advisor. The plan must be established within 3 months of the end of the plan year.

Topics for Retirement Investing

1. Investment Strategies – Most retirement plans will feature mutual funds or exchange-traded funds available for investors to select for investment in retirement portfolios. The availability of these of these funds can be a blessing or a curse as they provide novice investors with greater diversification and professional, active management, but can also charge high fees without guaranteed returns. Selecting a fund with a low expense ratio, a target date close to projected retirement date, or an investment style appropriate for risk tolerance are imperative for successful retirement planning and peace of mind. In order to maintain the appropriate amount of risk to generate ample returns, investors should seek their retirement plan’s investment adviser or personal wealth manager for advice.
2. Robo Advisers –Although robo-advisers are relatively new to the investing landscape, they are taking the industry by storm, and some retirement plans will opt to use a robo-adviser rather than a human adviser. These computer programs offer investors professional advice and management, at a discounted rate. The online platforms utilize a complex algorithm to recommend asset allocation and securities for investors based on a variety of factors, including client information and current market trends. The recent Department of Labor final ruling, which requires all financial agents advising retirement plans to follow the fiduciary standard, rather than the suitability standard, may have an effect on the legality of robo-advisers advising for retirement plans, although executives in the industry believe these platforms will be unaffected by ruling. Regardless, robo-advisers offering advice to IRA’s and ERISA plans discussed previously in this post will be under the same scrutiny that human financial advisors currently are and may potentially need to alter the programs algorithm or charge higher fees.

How to Utilize an Advisor

A financial advisor that maintains a fiduciary responsibility at your disposal is crucial for retirement planning and execution. The many retirement plans and topics discussed in this article should be common knowledge for advisors, as they collaborate with clients to maximize client tax efficiency and achieve client goals. Individuals, regardless of employment backgrounds, will rely on a financial advisor to provide education on ever-changing plan rules and contribution limits, update financial evaluations to reflect growing retirement savings, and pinpoint optimal times to begin withdrawals from retirement accounts or access social security benefits. Some advisors, such as Weatherly, will offer their services as financial advisors for company sponsored 401(k) plans to assist in meeting strict ERISA compliance rules and answering participant investment related inquires.

Other Considerations in Retirement

1. Minimum Required Distributions – Minimum required distributions (MRD’s) are IRS imposed withdrawals from a tax-deferred account after the participant turns 70 ½ years old. Investors that efficiently save for retirement may encounter a minimum required distribution that bumps income up so high in retirement years, that his or her tax bill may be higher in retirement than the bill was in income earning years. Well-informed investors will strategically contribute to and draw strategically from a multitude of accounts with different registrations, including Roth IRA, Trust accounts, or Individual Accounts to help balance tax implications.
2. Medicare Premiums – Higher income earning beneficiaries of Medicare will face higher premiums for Medicare Part B and prescription drug coverage. Married couples with a modified adjusted gross income (MAGI) of greater than $170,000 and single individuals with a MAGI of greater than $85,000 will be subject to the higher premiums. Retirees that draw income from a pension, self-directed retirement plan, or an advisor-managed retirement plan will need to keep track of tax-deferred withdrawals to ensure that MAGI is kept below the threshold for higher premium payments for cost savings.
3. Social Security Benefits – Many Americans are familiar with Social Security, the monthly deduction from paychecks, but how to utilize Social Security benefits strategically is not as straightforward. A recent study by the Government Accountability Office detailed that delaying claims could possibly allow for tens of thousands of dollars more in benefits to retirees, depending on how long the individual and spouse live. Individuals taking Social Security benefits should also note that up to 85 percent of these benefits are taxable, depending on the individuals overall earned income level. For more information on the taxation of Social Security benefits, please utilize this article from the Congressional Budget Office.

Please contact Weatherly to discuss your retirement options and how to best maximize savings, income, and tax-deferrals.

More resources:

http://www.ivdgl.org/social-security/self-employed.htm

www.ssa.gov/pubs/EN-05-10536.pdf

https://www.irs.gov/retirement-plans/plan-sponsor/401k-plan-overview

https://www.fidelity.com/viewpoints/retirement-plan-small-business

** The information provided should not be interpreted as a recommendation, no aspects of your individual financial situation were considered. Always consult a financial professional before implementing any strategies derived from the information above.

Estate planning isn’t glamorous but it is necessary for everyone to think about – not just the wealthy. From protecting your loved ones in the face of unexpected illness or death to efficiently and effectively implementing a multi-generational wealth transfer plan; designing, executing, and monitoring an overall strategy with a financial professional is an important goal for everyone.

So, that being said, let’s look at an overview from those just starting out through those with substantial assets and everything in between. First, what are the most basic, necessary estate planning documents that everyone needs?

Estate Planning Necessities

Everyone, including young adults heading off to college and those just starting out, need at least a few simple documents. The most basic of these is a will. A will does a variety of things but in short is a legal document that ensures your assets are passed down as you wish without having to go through probate. You will need to make sure you have beneficiary designations on your bank or brokerage accounts and that the assets remaining without those designations that are directed by your will do not exceed $150,000. In your will, you need to name an executor who will oversee the distribution of your assets, and if you have minor children name a guardian. A will is sufficient for those with “simple” financial situations and no complicated wishes about how their assets are passed. For those with moderate assets and more complex wishes about how these assets are distributed, a trust may be beneficial. For those with relatively simple situations, but who own a home, a third option is available. A TOD Grant Deed is used when you own a property but have relatively few other assets. The TOD designation on the deed allows the property to transfer on the death of the owner without going through probate. Certain restrictions and requirements apply which have to be carefully followed in order to make sure the TOD is valid. To read more about TOD Grant Deed and other common trusts click here.

With a will in place the next step is durable powers of attorney for both medical and financial situations. A “power of attorney” is a legal document that gives the person you choose the power to act in your place. The word “durable” means that this document stays in effect if you become incapacitated. By instituting a durable power of attorney for both finances and healthcare, you will have a designated person in place to take care of financial and medical issues that need to be attended to if you are unable to do so yourself. You will need a HIPAA waiver in addition to the healthcare power of attorney in order to allow the designated person to view otherwise confidential medical records.

Links for further reading:

http://www.wsj.com/articles/SB10001424127887323981304579079473312130490
https://www.nerdwallet.com/blog/finance/2-estate-planning-documents-millennials-need/

Many professionals exist that will do a “college package” at a reduced rate for their clients. Please contact Weatherly if you would like a referral to one of these professionals.

Moderate Wealth and Planning

What about those that have accumulated some assets or moderate wealth? Remember estate planning is about really two things; control and tax savings. Control over the disposition of your assets; how, when, and to whom at the forefront of most concerns.  If you have children or special circumstances in your family, more than likely you would benefit from the use of a trust to outline your wishes.   Tax savings, specifically estate tax savings, comes into play for those above the lifetime gift tax exemption, currently set at $5,450,000 per person for 2016. This amount can however be changed by the legislature at any time. As an illustration, Hillary Clinton has proposed a reduction to $1,000,000 or potentially less per person.

Additionally, if you do not have a plan for your assets, the state and federal governments do. It’s called probate. Not only is probate time consuming and expensive, it is publicly available information.

Some issues to further address specific to those currently under the lifetime gift tax exemption in their total net worth are the use of portability, the risk of potential future changes to the exemption amount, strategies related to income tax planning or utilizing a step-up in basis at death particularly for low cost basis or high capital gain items, strategies for passing on real property or business succession, and maintaining some flexibility of options for the future. Additional considerations are asset protection usually related to creditors, high risk professions, and spendthrift beneficiaries.  This is the first in a series and future articles will address several of these topics in greater detail.

Links for further reading:

Portability example: http://whitecoatinvestor.com/is-the-federal-estate-tax-now-irrelevant-except-for-the-super-wealthy/
Basis Planning: http://www.sosinarnold.com/pdf/Basis-Estate-Planning.pdf

High Net Worth Planning

For those with estates over the lifetime gift tax exemption amount, currently $5,450,000 per person or $10,900,000 for a couple, planning becomes even more critical. In addition to the above strategies more specialized options come into play and the analysis focusing on the client’s lifetime need for funds, the state of residence (death tax issues), Generation Skipping Tax (GST), the differential between estate tax vs. income tax rates, and the desire to maintain flexibility dictate which strategies to utilize. Strategies involve the use of specific trusts or entities such as Family Limited Partnerships (FLP), Irrevocable Life Insurance Trusts (ILIT), and Charitable Remainder or Charitable Lead Trusts (CRT, CLT) for those charitably inclined.  Qualified Personal Residence Trusts (QPRT) can be utilized for primary or vacation homes.  Given current interest rates are still low; Grantor Retained Annuity Trusts (GRAT), Family Loans, or loans to a trust, if structured properly can be advantageous. Irrevocable Trusts can be used to gift assets during your lifetime and can allow continued control, protection from spendthrifts or divorce of beneficiaries, as well as some tax advantages.  In each of these options trust administrative burdens should be considered.

Moreover circumstances that would call for additional provisions in planning would be: dynamics related to blended families, a second marriage later in life where each has prior assets (QTIP), addiction or spendthrift concerns of beneficiaries. Each of these areas can be complex and require professionals that are well versed in the issues and options available. Weatherly has expertise in each of these and works with a network of estate planning professionals in executing these strategies for our clients.

Links for further reading:

State death tax: http://www.wsj.com/articles/the-new-rules-of-estate-planning-1414167302
Overview of Trust Types: https://www.weatherlyassetmgt.com/types-of-trusts/ 

** The information provided should not be interpreted as a recommendation, no aspects of your individual financial situation were considered. Always consult a financial professional before implementing any strategies derived from the information above.

Weatherly Asset Management, L.P. is proud to announce that Carolyn Taylor, Candise Holmlund, Brent Armstrong and Ashley Copp were named as Top Wealth Managers You Need to Know by Five Star Wealth Manager. This advertisement opportunity was published in the June 13, 2016 southern California region of the Wall Street Journal circulation, and highlighted each advisor’s certifications as well as Weatherly’s comprehensive wealth management services.

The Five Star Wealth Manager award, administered by Crescendo Business Services, LLC (dba Five Star Professional), is based on 10 objective criteria. Eligibility criteria – required: 1. Credentialed as a registered investment adviser or a registered investment adviser representative; 2. Active as a credentialed professional in the financial services industry for a minimum of 5 years; 3) Favorable regulatory complaint history reviewed (as defined by Five Star Professional, the wealth manager has not: A. been subject to a regulatory action that resulted in a license being suspended or revoked, or a payment of a fine; B. Had more than a total of three customer complaints filed against them [settled or pending] with any regulatory authority or Five Star Professional’s consumer complaint process. Unfavorable feedback may have been discovered through a check of complaints registered with a regulatory authority; D. Filed for personal bankruptcy; E. Been convicted of a felony; 4. Fulfilled their firm reviewed based on internal standards; 5. Accepting new clients. Evaluation criteria – considered: 6. One-year client retention rate; 7. Five-year client retention rate; 8. Non-institutional discretionary and/or non-discretionary client assets administered; 9. Number of client households served; 10. Education and professional designations.

The Five Star Wealth Manager award program recognizes and promotes wealth managers. Five Star Wealth Manager candidates were identified by one of three sources; firm nomination, peer nomination or pre-qualification based on industry standing. Five Star Professional notified advisors of their candidacy for the award via an email solicitation. Weatherly provided data in the form of an online survey submission. Neither Weatherly nor its employees were required to be a member of an organization to be eligible to receive the award. No payment was required of Weatherly to be considered for the award or to be named a Five Star Wealth Manager. Once awarded, wealth managers may opt to purchase additional profile ad space or related award promotional products. Weatherly paid Five Star Professional for ad space in the Wall Street Journal, as well as paper reprints.

Wealth managers do not pay a fee to be considered or placed on the final list of Five Star Wealth Managers. The award does not evaluate quality of services provided to clients. Once awarded, wealth managers may purchase additional profile ad space or promotional products. The Five Star award is not indicative of the wealth manager’s future performance. Wealth managers may or may not use discretion in their practice and therefore may not manage their client’s assets. The inclusion of a wealth manager on the Five Star Wealth Manager list should not be construed as an endorsement of the wealth manager by Five Star Professional or the Wall Street Journal. Working with a Five Star Wealth Manager or any wealth manager is no guarantee as to future investment success, nor is there any guarantee that the selected wealth managers will be awarded this accomplishment by Five Star Professional in the future. Five Star Professional is not an advisory firm, and the contents of the advertisement should not be construed as financial advice. For more information on the Five Star award and the research/selection methodology, go to www.fivestarprofessional.com. Five Star considered 1,337 San Diego wealth managers for the award; 349 (27 percent of candidates) were named 2016 Five Star Wealth Managers.

Five Star Professional conducts a regulatory review of each nominated wealth manager using the Investment Advisor Public Disclosure (IAPD) website. Five Star Professional also uses multiple supporting processes to help ensure that a favorable regulatory and complaint history exists. Data submitted through these processes was applied per the above criteria: 1) each wealth manager who passes the Five Star Professional regulatory review must attest that they meet the definition of a favorable regulatory history, based on the criteria listed above; 2) Five Star Professional promotes via local advertising the opportunity for consumers to confidentially submit complaints regarding a wealth manager; and 3) Five Star Professional contacted approximately 1 in 12 households identified as having a high propensity to use the services of wealth managers in order to provide consumers the opportunity to submit complaints regarding a wealth manager.

Receipt of this award is not representative of any one client’s experience and is not indicative of Weatherly’s future performance. Weatherly is not aware of any facts that would call into question the validity of the award or the appropriateness of advertising the award.

About Weatherly Asset Management, L.P.

Weatherly Asset Management, L.P. is a Registered Investment Advisor, located in Del Mar, California, dedicated to providing high quality, holistic and innovative wealth management services to high net worth individuals, small businesses and institutional clients since inception of the Firm in 1994.

Our comprehensive approach to all aspects of a client’s financial life, the extensive experience of our principals, and the accessibility of experts, set us apart from other firms.

Our primary business focus is money management, with each account individually managed to maximize wealth preservation and growth over time. We also provide advice related to retirement planning, tax planning, philanthropic planning, financial planning and college planning, as well as estate planning and wealth transfer guidance. Our goal is to provide clients with as much information as necessary to effectively manage portfolios and help achieve their financial goals.

Weatherly Asset Management, L.P. is the investment advisory division of Weatherly Asset Management, Inc. As an independent partnership, the Firm is wholly owned and operated by the partnership.

For information on our wealth management team, and for a full list of services we provide, please visit: http://www.weatherlyassetmgt.com/team/

For information on our ADV filings and Compliance, please visit: http://www.adviserinfo.sec.gov/IAPD/IAPDFirmSummary.aspx?ORG_PK=106935
http://www.weatherlyassetmgt.com/adv/

If you would like to learn more, please contact:

Carolyn P. Taylor
858-259-4507
Carolyn@weatherlyassetmgt.com

New Department of Labor (DOL) regulations regarding fiduciary standards and the financial industry make it increasingly important to understand the different types of services and fees within the umbrella of the financial industry. Each sector of the financial industry operates, collects fees, and most of all interacts with clientele differently.

We have addressed some frequently asked questions and common concerns of clients about the investment community. With this blog, we want to aid in eliminating the confusion of the global who, what, where, when and whys when differentiating financial professionals.

Wealth Managers and Investment Advisors

Wealth managers or Registered Investment Advisors (RIAs) provide the greatest range of advice within the industry. From money management to creating financial plans, the comprehensive nature of this type of advisor offers unique and specialized services to each and every client. Each advisor offers a different range of services at their Firm and may charge fees accordingly.

RIAs typically work with high net worth clients to offer high quality, high touch services in every aspect of the client’s financial picture. The most common services offered are retirement planning, tax planning, philanthropic planning, financial planning, college planning, estate planning and wealth transfer guidance.

RIAs are required to register with the Securities Exchange Commission (SEC) or their state securities regulator, depending on the size of the Firm. Typically, fees are charged based upon a percentage of assets under management and can be located in a firms ADV I or plain English brochure.

Broker Dealer and Stockbroker

A broker is typically a person or company in the business of buying and selling securities on behalf of their clientele. They fall into two categories: full-service and discount, which indicate how fees will be charged and the level of service one will receive. Largely based on research and trading, the scope of a broker service is limited in comparison to an RIA.

Full service brokerage firms provide investment recommendations based on extensive research done on the client’s behalf. In addition, costs may be higher than discount brokerage firms due to extra commissions and expense ratios attached to the products that they sell. Discount brokerage firms are only responsible for completing a transaction on the client’s behalf. They offer online resources for clients to complete their own research but do not provide recommendations. Commissions can vary widely among brokerage firms and are typically based on the type of security traded (stocks, bonds, or funds). Mutual funds and exchanges-traded funds also have underlying fees called expense ratios which can vary widely. Information on expense ratios can be found on sites like morningstar.com.

Financial Planners

Financial planners offer a robust amount of advice ranging from cash flow management to tax and estate planning. Planners typically work with clients to assess their current financial situation and plan for future goals. If a financial planner is not registered with the SEC or state, and hasn’t passed licensing exams, they are legally restricted from giving advice on what securities to invest in and when. Therefore, a financial planner of this nature can only give advice regarding asset allocations and investment strategies.

The term financial planner is broadly used in the industry, so it is important to differentiate professionals by their credentials and titles. Financial planners who are registered through the SEC as Certified Financial Planners™ are held to a fiduciary standards, similar to Registered Investment Advisors. By combining the CFP certification, as well as industry exams Series 7 and Series 63 or 65, financial planners are then legally able to advise on investments.

Robo-Advisors

Robo-advising could be considered the “millennials” of the financial world. This up and coming method of asset allocation, portfolio construction, and financial planning capitalizes on the low cost and online accessibility of services. The financial planning that once was distributed via human interaction has now been automated to use algorithms to recommend portfolios and asset allocations according to the clients risk tolerance, financial goals, and long term plan.

The multitude of options robo-advising offers comes with pros and cons. Most robo-advisors have eliminated the required minimum portfolio size, which combined with advanced technology, welcomes a younger generation of investors who perhaps can’t afford to onboard with a professional advisor.  While streamlined, online access to financial databases and information may be attractive, it comes with downfalls that are important to consider. The imminent cybersecurity threat is present when populating personal financial information on the web. Simultaneously, as the experience is automated, investors lose touch with human interaction, dialogue, and perspective. Fiduciary requirements are not typically met by Robo Advisors.

To review the scope of service, fee’s, and credentials offered by these different types of professionals, please review the services chart, click here.  

How Weatherly Fits Into the Picture

Weatherly Asset Management, L.P. is a SEC Registered Investment Advisor. Our primary business focus is wealth management, with each account individually managed to maximize wealth preservation and growth over time. We also provide comprehensive advice related to retirement planning, tax planning, philanthropic planning, financial planning and college planning, as well as estate planning and wealth transfer guidance. Weatherly implements a tax and fee-only efficient structure. Please reference our Areas of Expertise on the bottom of Weatherly’s homepage.

To view more about Weatherly, and our listed competitors, check out the Top 10 Best Advisors in San Diego published by Advisory HQ, listed on our Weatherly in the News page.

To research our Firm via the SEC.gov website, please click http://www.adviserinfo.sec.gov/IAPD/IAPDFirmSummary.aspx?ORG_PK=106935.

Useful Tools to Help Gauge Your Financial Professional:

The Securities Exchange Commissions offers a vast database to explore different Firms, services and financial professionals. Please reference https://www.sec.gov/.

The Financial Industry Regulatory Authority (FINRA) can be used to narrow your focus and designate which type of financial professional is right for you. Please reference http://www.finra.org/.

To research brokers specifically please reference http://brokercheck.finra.org/. Here you can obtain background information including registration and licensing.

** The information provided should not be interpreted as a recommendation, no aspects of your individual financial situation were considered. Always consult a financial professional before implementing any strategies derived from the information above.

The US Department of Labor (DOL) issued its final rule regarding the conflict of interest and fiduciary rules for personal retirement accounts on April 6^th 2016. This has been a heavily debated topic in the investment community in recent years with the ultimate goal of improving the standard of advice within the financial industry. The DOL’s ruling addresses the personal retirement account space, updating an outdated framework regarding conflicts of interest and extending the fiduciary standard of care to financial professionals throughout the industry who were previously held to the suitability standard.

How does this apply to Weatherly and our clients?

Weatherly is a comprehensive wealth management firm registered with the Securities and Exchange Commission and defined as a registered investment advisor (RIA). We have been held to the Fiduciary standard of care since the inception of the firm in 1994 and strive to deliver the highest quality of investment advice to our clients while upholding the fiduciary standard. Although the new guidelines do not directly impact Weatherly and how we work with clients, the new ruling does have a significant impact on the industry overall increasing quality and accountability.

Fiduciary Standard vs. the Suitability Standard

The fiduciary standard of care, established under the Investment Advisors Act of 1940, applies to advisors/wealth managers registered with the Securities and Exchange Commission or state regulators. The standard holds advisors to a duty of loyalty and care, which requires financial professionals to act in the best interest of clients at all times. Advisors must obtain complete and accurate information before delivering investment advice. In addition, advisors must avoid conflicts of interest and disclose potential conflicts to clients prior to providing investment advice. Lastly, a fiduciary must also apply a best execution standard when completing transactions on behalf of a client, which requires both low cost and efficient execution.

The suitability standard is much different in scope, this standard applies to financial professionals registered with the Financial Industry Regulatory Authority (FINRA) – including broker dealers, insurance professionals, investment salesperson etc. The suitability obligation dictates that the professional must only reasonably believe that a recommendation is suitable for the client and is in their best interest. The professional is not responsible for monitoring an investment after the initial purchase, having complete and accurate information regarding the clients overall financial situation, or operating with a duty of loyalty to the client. Investments can be suitable for a client but inferior in quality to other investment offerings of similar nature.

Additional information here:

http://www.investopedia.com/articles/professionaleducation/11/suitability-fiduciary-standards.asp
http://financialplanningcoalition.com/issues/fiduciary-standard-of-care/
http://money.usnews.com/money/blogs/the-smarter-mutual-fund-investor/2015/03/19/is-your-financial-advisor-a-fiduciary

DOL Fiduciary Standard Rule

• Financial professionals providing advice to retirement plans or IRA account holders under the Employee Retirement Income Security Act (ERISA) will now be held to the fiduciary standard. Actions that require the fiduciary standard of care going forward include:
  • Recommendation of investment allocation to a plan sponsor
  • Advice regarding a specific investment option to a plan participant
  • Any recommendation of IRA product options – including a rollover from a qualified plan to an IRA
  • Referrals to an advisor or advisory service
• Planners, wealth managers, advisors and professionals delivering advice must adhere to the fiduciary standard and disclose any conflict or potential conflict of interest to plan participants. Failure can expose professionals and employers to lawsuits and ERISA penalties.
• Phased in over time – the rule is applicable to ERISA retirement plans and IRAs beginning in April 2017.

Additional information here:

https://blogs.cfainstitute.org/marketintegrity/2016/04/07/dol-fiduciary-rule-though-complex-it-moves-investment-advice-model-in-right-direction/
https://www.dol.gov/ebsa/newsroom/fsconflictsofinterest.html
http://www.employeebenefitadviser.com/news/dol-fiduciary-ruling-may-have-more-significant-impact-than-advisers-initially-thought-study-finds

We will continue to monitor developments from the DOL and possible changes to the industry landscape.

** The information provided should not be interpreted as a recommendation, no aspects of your individual financial situation were considered. Always consult a financial professional before implementing any strategies derived from the information above.