When it comes to life, few gifts are more valuable than financial advice. As young professionals and their families navigate the complexities of today’s world, financial planning is essential in helping them reach various milestones in life. Whether they are just beginning their career, starting a family, or beginning to plan for retirement, a financial advisor can be an invaluable asset.  

“Industry studies estimate that financial advice can add between 1.5% and 4% per year to account growth over extended periods.” Source: Fidelity    

For young professionals and new families just getting started, having an advisor who takes a holistic approach to your situation can add tremendous value and have a long-term impact. A good financial advisor will help create a plan that considers income, expenses, and long-term goals, to optimize cash flow. In addition, they will help identify areas where money can be saved or invested for long-term objectives, like retirement or college savings plans for children. An experienced financial planner can also guide clients through the nuances of tax mitigation strategies and estate planning considerations.  

In this blog post, we will discuss these topics in more detail alongside the benefits of working with an experienced wealth management advisor on the journey to financial success.  

Cash Flow Optimization: 

For young professionals and families, financial planning can be one of the most intimidating aspects of life. One of the critical steps in achieving your financial goals is to understand how to optimize cash flow between discretionary and non-discretionary spending, 401K contributions, and 529 college savings plans. This can help provide clarity around how to achieve financial goals in the short term and long term.  

Non-Discretionary vs. Discretionary Spending  

When it comes to allocating a paycheck, there are several factors to consider. First, it is vital to set aside money for essential expenses such as rent or mortgage payments, insurance premiums, utilities, food, gas/transportation, and other necessary living costs. Additionally, it is prudent to establish an emergency fund with at least three to six months’ worth of expenses. These items should take precedence over any other form of spending or saving.  

Retirement Contributions 

After assessing the difference between non-discretionary and discretionary spending it is essential to think strategically about how the remaining funds should be allocated between retirement savings (401k) and college savings (529), as applicable. Through dialogue with a WAM advisor, we can offer tailored advice on what you should prioritize based on your individual goals.  

Contributing to a 401K is often a great idea because of its tax advantages and investment options available through employer plans. Often, 401K plans come in two forms: a Traditional or a Roth option. Traditional 401K contributions are made before taxes, which offers a tax deduction today, and grow tax-free until funds are withdrawn in retirement. Conversely, the Roth option consists of after-tax contributions, with no tax deduction today, but no taxes are owed upon withdrawal during retirement.  

Source: JP Morgan Guide to Retirement (page 45)

Additionally, by working with one of our advisors, we can assist in recommending an appropriate asset allocation strategy for your retirement funds, based on your risk tolerance and investment goals. Another benefit of participating in a company’s 401K plan is that many employers will match contributions up to a certain amount – this provides an excellent incentive to save more and get the maximum benefits from the plan. 

College Savings Plans   

Regarding college savings plans, 529s are the most popular vehicles due to their tax advantaged nature. Contributions to these plans are made with after-tax dollars, but the earnings grow tax-free and can be withdrawn tax-free when used for qualified higher education expenses. Additionally, many states offer tax deductions or credits for contributions to a 529 plan, making it an even more attractive option for millennials looking to optimize their cash flow. The WAM team can help facilitate the establishment of 529 accounts to ease the burden of increasing educational costs.  

Tax Mitigation Strategies: 

Young professionals face unique financial challenges, and it is important to understand the best strategies for managing their money. One of the most important financial strategies for millennials is tax mitigation. Tax mitigation strategies include utilizing a Roth IRA, taking full advantage of their mortgage, and utilizing other applicable tax credits/deductions.  

Roth IRA  

In addition to the benefits above, if you have a Roth IRA for more than five years, there are no taxes or penalties when withdrawing earnings for a first-time home purchase, up to $10,000.  

Tax Loss Harvesting 

Tax loss harvesting is an effective way for investors to reduce their taxable income by selling investments at a loss in order to offset any realized gains from appreciating investments. In a year characterized by stock market losses, you may find that there are few opportunities to offset gains in your investment accounts. If that is the case, you can still utilize the lax loss carry-forward which will allow you to offset capital gains in future years. Alternatively, the IRS allows an individual to use $3,000 of capital losses per year to offset ordinary income. This technique can assist in tax mitigation throughout your lifetime if used properly.     

Mortgage Deductions 

Mortgage interest payments are deductible from your taxable income when filing taxes which can significantly reduce liability owed. This deduction applies to both primary residences (purchased or refinanced) as well as second homes such as vacation properties or rental properties that may generate rental income or be used for recreational use. If your home was purchased after December 15th, 2017 you are allowed to deduct interest on the first $750,000 of the mortgage. Additionally, if you have a HELOC you may deduct up to a max of $100,000 in interest.  

Child Tax Credit 

The Child Tax Credit is available for parents who have dependent children under the age of 17 living with them full time in the United States. The Child Tax Credit can be claimed up to $2,000 per qualifying dependent with half being refundable if certain criteria are met such as adjusted gross income (AGI). Additionally, if AGI exceeds certain thresholds, then this credit may be reduced or phased out completely.  

Charitable Contributions 

In a recent study conducted by Fidelity Charitable, they found that approximately 74% of millennials consider themselves philanthropists. With the future of philanthropy in the hands of the next generation, please refer to WAM’s Guide to Giving to learn about the most tax-efficient ways to maximize charitable contributions to influence the world in a positive way.  

 Estate Planning: 

Millennials are the largest generation in the United States, and it is important for them to start planning for their future. An estate plan is one of the best ways to ensure their wishes are followed and their assets are handled appropriately in the event of their death or incapacity. A comprehensive estate plan should include a trust, will, power of attorney, and health care power of attorney.  

Trust 

A trust is an important document to have in an estate plan. It can be used to protect assets, provide for minor children, and manage assets in the event of incapacity or death. Assets that are listed within the trust will avoid probate court, saving your family members valuable time and expenses. There are several types of trusts all with varying implications.  

Will 

A will is another important part of an estate plan. It allows a person to designate beneficiaries, provide instructions for how and when beneficiaries receive assets, and can name guardians for minor children.  

Power of Attorney/Health Care Power of Attorney 

A power of attorney and health care power of attorney are also important documents to have in an estate plan. A power of attorney allows a person to appoint someone to manage their finances and legal affairs in the event of their incapacity. While a health care power of attorney is a document that allows an individual to designate someone to carry out their health care directives in the event of incapacity.  

These four essential documents are important because they allow you to specify what you want to happen to your property and assets after you pass away. These documents can also help to protect your loved ones and ensure that your wishes are carried out according to your specifications. Without these documents, your property and assets may be distributed according to state law, which may not be in line with your wishes. Additionally, estate planning documents can help minimize taxes and other expenses and can provide guidance to your loved ones during a difficult time.  

Why Work with a Weatherly Advisor: 

Younger investors are looking for ways to manage their cash flow, make sound investment decisions, and protect their wealth. Working with our experienced professionals at Weatherly can help achieve these goals efficiently.  

Advisors can help young professionals optimize their budget, save and invest, and provide tailored advice on tax mitigation strategies, such as understanding deductions and knowing which tax credits apply in different scenarios. Financial advisors can also help young families create realistic estate plans that prioritize their goals while minimizing the potential impact of taxes or other liabilities.  

Learn more about our services and how our customized approach may benefit you or your family: 

https://www.weatherlyassetmgt.com/our-services/ 

It’s that time of the year again when we celebrate Thanksgiving and start preparing for year end! For many of our clients it is an opportunity to give thanks and give back to their communities in the form of charitable donations. The charitable landscape has grown significantly during the last couple of decades and progressed even further in recent years in the midst of a global pandemic, Russia/Ukraine war, and global inflation. In 2021 alone, charitable giving by Americans totaled $484.85 billion, up approximately 4% from the prior year. Donations are most impactful when there is a specific need, and we have seen our fair share of new challenges in recent years.

While the most common way to give is in the form of cash or check, it isn’t always the most tax efficient method to give to charity. In this blog post, we outline tax efficient strategies to help maximize charitable giving in hopes to have a positive influence on the world.

Donor Advised Fund (DAF)

A Donor Advised Fund (DAF) allows donors to contribute appreciated assets to a charitable account and capture a current year tax deduction*. The funds can then be invested tax free until they are granted out over time to qualified 501c3 public charities.

The ins and outs of the DAF is best summarized by the three Gs- Give, Grow and Grant.

Give→

For a current year tax deduction*, donors can make an irrevocable contribution of cash, publicly held and some privately held assets prior to December 31. While the DAF does allow for cash donations, contributing a long term, appreciated asset may allow the donor to deduct the Fair Market Value (FMV) of the asset and effectively eliminate the associated capital gain tax implications had the donor sold the asset and donated cash. Donating appreciated securities typically results in a larger deduction and more money for the end charity, as the following example illustrates:

Chart Sourced from Fidelity Charitable

Tax Benefits:

Donors who itemize their deductions can have their turkey and “gravy”, too, as they may be eligible for a tax deduction* in the year an appreciated asset contribution is made to a DAF, with some Adjusted Gross Income (AGI) limitations:

Chart Sourced from Fidelity Charitable

Although the AGI figures above may limit your current year deduction, any unused amount that exceeds the limits can be carried forward and deducted within the next 5 years. For this reason, charitable giving and year end tax planning should have a seat at the same table to ensure charitable intent and tax benefits are aligned.

Grow →

Once the assets are transferred into the DAF, most large custodians allow the funds to be invested for potential tax-free growth.

Grant →

Since tax deductions are captured on the front end, when assets were initially contributed to the account, it allows the donors to take their time in granting out to 501c3 public charities. This may come in subsequent years or whenever the donor is ready.

DAF Strategies to consider –

• Contribute long term, highly appreciated securities and/or to limit concentration risk in a portfolio: The Weatherly team can assist in opening a DAF and subsequent asset selection to fund the account.
• Consider a Bunching strategy in high income tax years: If income is higher in a particular tax year, multiple year’s worth of contributions can be “bunched” into the high-income tax year for a larger deduction. Donors can then take their time granting out the funds in future years.

Qualified Charitable Distribution (QCD)

A Qualified Charitable Distribution (QCD) allows an individual age 70.5 or older to donate up to $100K per year from IRAs directly to one or more charities. These distributions are not included in taxable income and can be beneficial for those taking Required Minimum Distributions (RMD) at age 72 and/or claiming the standard deduction.

QCD client example:

A now retired married couple, Mr. And Mrs. Awesome, worked hard and saved some money in the Awesome Family Trust, but much of their savings were through salary deferrals to their employer’s 401k plans. Since retiring, they have rolled their 401ks into IRA accounts. For the current tax year, Mrs. Awesome, age 75, has an IRA RMD of $50k. Mr. Awesome is not RMD age, 72, yet. The Awesome’s paid off their home mortgage and therefore, anticipate they will take the standard deduction for this tax year. They have minimal expenses and can live off their Social Security Income and pension income, totaling around $250k a year.

As they adjust to retirement, a big goal is to continue their annual charitable donations of $50k. The Awesome’s advisor recommends they complete a QCD direct from Mrs. Awesome’s IRA to the various charities they are passionate about. Since they do not need the RMD income, Mrs. Awesome selects 5 different charities to give $10k in QCDs to, and therefore, satisfying her RMD requirement for the year. They can meet their philanthropic goals without itemizing their deductions and get to exclude $50k from their taxable income.

The next tax year, Mrs. Awesome’s IRA RMD is approximately $60k. After a few dialogues, the Awesome’s decide that they would like to be consist with their $50k annual gifting goal. Their advisor helps them complete the same 5 QCDs of $10k each. The remaining $10k RMD is sent to the Awesome’s Family Trust and is included in their taxable income for the year.

QCD Strategies to consider:

• Using QCDs to satisfy a portion or entire RMD for the year can limit taxable income and keep you in a lower overall tax bracket.
• The chart below highlights a typical client profile for a QCD strategy versus giving appreciated securities to a DAF:

Appreciated Stock Donation to DAF vs QCD Strategy

Chart Sourced from Fidelity Charitable

Charitable Trusts and Estate Planning

For Ultra High Net Worth and philanthropic individuals, more complex strategies can be considered as part of an estate and legacy plan. Depending on the donor’s philanthropic and estate planning goals, Charitable Lead Trusts (CLTs) and Charitable Remainder Trusts (CRTs) can create income streams for an individual or a charity for a certain period with the remaining balance going to a charity or other heirs. These types of trusts pair philanthropy with other financial goals and can even help reduce estate taxes. The Weatherly team is here to coordinate with your estate attorney to ensure these trusts are set up correctly and with your tax professional to determine initial funding and tax deductions.

Another item that combines charitable giving with estate and legacy planning would be to list a DAF as a beneficiary in your trust or retirement account. This allows for ultimate flexibility as a DAF successor can be updated at any time without involving an estate attorney. Donors can list either individual(s) or public charity(ies) as successors on the account. If an individual is listed as successor, then the successor takes over the DAF at the original accountholder’s passing and can donate to charities as they wish. This could be used to start the family conversation surrounding wealth and/or help carry out the family legacy. If a charity is listed as a successor, the DAF balance will go directly to the charity of your choosing. This can help reduce estate taxes and fulfill charitable goals while maintaining assets during a donor’s lifetime. Consult with your attorney, tax professional and Weatherly before implementing this strategy.

Strategies to consider:

• Incorporating family members in charitable giving and planning.
• Charitable giving at passing can reduce estate tax liability

How Can WAM help?

Your Weatherly team is here to assist in your charitable endeavors while considering your overall tax situations. We can determine the best strategy to facilitate your giving, research charitable organizations and coordinate with your attorney and tax professional as appropriate. We also request tax returns to review prior year giving and to identify strategies going forward. As always, please don’t hesitate to reach out with any questions or to schedule a yearend planning call. In the meantime, we would like to give THANKS to all our clients for our partnership over the years.

*In order to receive a tax deduction for charitable giving, one must itemize deductions on with Schedule A.

Additional Resources:

Top San Diego Charities 
Top National Charities
2022 Fidelity Giving Report
2022 Key Financial Data Sheet

As we emerge from the pandemic, there’s a lot on everyone’s mind- unrelenting health concerns, an upcoming election, escalations on the war in Ukraine, and the highest inflation the US has seen in 40 years. So, it comes as no surprise to us here at Weatherly that our most common client dialog these days begins with “When is the next recession?” And despite Weatherly’s in office crystal ball, we are balancing a historic level of uncertainty and volatility. Therefore, we wanted to take a look at current economic conditions through the lens of past recessions. By putting historical volatility in context, we hope to add perspective on current market uncertainty.

What is a Recession?

A recession is a slowdown or contraction of the economy over a business cycle and is often defined as two consecutive quarters of negative gross domestic product, or GDP. However, in the US we have the National Bureau of Economic Research (NBER), who ultimately makes recession related determinations. NBER has expanded the definition of recession beyond GDP to capture a range of indicators such as real personal income, employment, personal consumption spending, wholesale-retail sales, and industrial production.

Since the Great Depression of the early 1930s, there have been 14 US recessions. An important observation is that historical recessions are relatively small blips in economic history and are relatively short lived. Over the last 100 years- the average recession has lasted 14 months, while the average expansion was 47 months (JP Morgan’s Guide to the Markets). Similarly, their net economic impact is comparatively small. The average expansion increased GDP by almost 25%, whereas the average recession reduced economic output by 2.5%. All to say, recessions are painful but subsequent recovery can be powerful. For investors with a long-term outlook, recessions can be viewed as an opportunity to deploy capital into assets at a discount.

The Great Depression (1929-1933)

In the 1920s, America bounced back from the disruptions and destruction of World War I. The US economy thrived and Americans dove headfirst into their favorite, newfound wealth generating system – the New York Stock Exchange. During the Roaring Twenties, investors watched the ticker tape and leveraged their bets with historically high levels of margin to trade. Eventually, spending escalated and fueled an unprecedented increase in security pricing which caused assets to be dramatically overvalued. On October 29th, 1929, the bubble burst when the stock market crashed on Black Tuesday- beginning a period of economic contagion now considered to be the biggest recession in US History.

Chart Sourced From:  https://www.capitalgroup.com/advisor/insights/articles/guide-to-recessions.html 

It’s not easy, even for people who have lived through the economic downturn caused by the COVID-19 pandemic, to grasp the depths of deprivation to which the economy sank during the Great Depression. GDP fell 26.7% and in 1933, unemployment reached a striking 25.6%. The Great Depression triggered a series of economic regulation and reform that revolutionized US financial markets. After Black Tuesday and the collapse of more than 1/5th of American banks by 1933, strict trading and bank regulations were put in place. These updated financial protections were enforced by the newly formed Securities and Exchange Commission (SEC) and the Federal Deposit Insurance Corporation (FDIC). FDR’s New Deal also expanded the role of the government and introduced an array of services, regulations, and subsidiaries to address the high rates of unemployment and poverty.

The Roosevelt Recession (May 1937 – June 1938)

The Roosevelt Recession pales in comparison to the Great Depression, despite being one of the worst recessions of the 20th century. Sometimes referred to as “the recession within the Depression”, it came before the Great Depression’s recovery was complete. Real GDP fell 11% and industrial production fell 32%, which was widely attributed to a tightening of fiscal and monetary policy related to the New Deal. (Refer to Weatherly’s A Presidential Look at U.S. Taxes for more information) It isn’t until after this recession, in 1939, that the United States economy is thought to have fully recovered from the Great Depression.

Chart Sourced From (Page 18):  https://am.jpmorgan.com/us/en/asset-management/adv/insights/market-insights/guide-to-the-markets/ 

The Union Recession (February – October 1945)

As the US entered the sixth and final year of World War II, a decline in government spending led to a drop in GDP. The Union Recession was the result of subsequent demobilization and a general shift from wartime to peacetime. This recession got its name from the large increase in union related work stoppages at the time, which directly translated to a decrease in production and subsequent economic output. Contrary to the prognostication of economists at the time, this recession was much slower and shallower than predicted – perhaps due to the conditioned expectations of previous recessions.

The Post-War Recession (November 1948 – October 1949)

Similarly, the Post-War Recession was relatively short- lasting eight months from peak to trough. This recession proved to economists that the US had successfully adapted to the post-World War conditions. In late 1949, another robust expansionary period began that lasted 45 months with 6.9% annual GDP growth.

The Post-Korean War Recession (July 1953 – May 1954)

The Post-Korean War Recession ultimately occurred due to the high level of war related expenditures in the US and subsequent inflationary pressures. During this time, the inflation rate in the US soared from its pre-war 2% to a staggering 10%. To curb inflation, the Fed tightened money supply and the cost of borrowing. Relatively speaking, this was a brief recession- lasting only 10 months from peak to trough.

The Eisenhower Recession (August 1957 – April 1958)

In early 1957, a large influenza outbreak in Asia began to spread to Europe and then the United States by late summer. “The Asian Flu” reduced labor supply and slowed production at the same time the Federal Reserve was tightening interest rates to fight inflation. This stagnated the housing sector and auto sales plummeted. A moderate recession with a wide reach, growth restarted only 8 months later after the Eisenhower administration implemented various stimulus measures. The Federal reserve also pivoted to lower rates to 1.75%.

The “Rolling Adjustment” Recession (April 1960 – February 1961)

A “rolling adjustment” recession occurs when a slowdown in one economic sector has a pervasive effect on the entire economy. This recession occurred in line with the globalization of the automotive industry and subsequent decrease in domestic auto sales/production. During this 10-month recession, GDP declined 2.4% and unemployment reached nearly 7%. The light at the end of the tunnel was a long expansionary period that lasted nine years from 1961 to 1969. Throughout this time, cumulative GDP almost doubled, with a growth of more than 90%. This was the longest period of economic expansion during the 20th century.

The Nixon Recession (December 1969 – November 1970)

The Nixon Recession followed the lengthy period of expansion. This recession was also relatively short, lasting only 11 months from peak to trough and fairly mild. A more consequential event happened shortly after in 1971 when Nixon eliminated the gold standard. This paved way for floating currencies and the ability of central banks to exhibit more control over their economies through monetary policy. This also contributed to exacerbating the following recession and inflation due to the dollar losing value relative to other currencies.

The Oil Shock Recession (November 1973 – March 1975)

Growth resumed after the brief Nixon Recession for three healthy years. Annual GDP increased by 5.1% and annual employment increased by 3.4% during this time. This expansionary period came to an end abruptly with the 1973 oil crisis. Inflation remained stubbornly high and would soon rise to double digits despite stagnating growth, a phenomenon that came to be known as stagflation. A quadrupling of oil prices by OPEC, coupled with the 1973 stock market crash led to a stagflation recession.

The Energy Crisis I Recession (January – July 1980) and Energy Crisis II Recession (July 1981 – November 1982)

Following the Oil Shock Recession, an expansion occurred for the remainder of the decade. Inflation remained high during this period, peaking around 15% in 1980, and energy prices continued to be a particular sore point. Oil prices reached an all-time high that would not be surpassed until more than 25 years later, in 2008. This expansion was followed by a “double dip” recession. One short recession in 1980, triggered in part by the Federal Reserve’s decision to combat rising prices by raising interest rates, followed by the worst economic downturn in the US since the Great Depression from 1981 to 1982. Unemployment reached nearly 11% and GDP fell by 1.8%.

The Gulf War Recession (July 1990 – March 1991)

After the lengthy peacetime expansion of the 1980s, the Gulf War recession was mild and brief. It lasted just eight months and was a combined result of the Gulf War’s effect on oil prices and the savings and loan crisis. In August of 1990, Iraq invaded its oil-producing neighbor, Kuwait. The ensuing Gulf War created a shortage in oil production and therefore an increase in price per barrel. This, coupled with the state of residential mortgage markets caused the market to go into a recession. By the end of the 1980s, after years of historically low interest rate debt accumulation on residential mortgages, small local banks suffered as the Fed had begun steadily raising interest rates in response to growing inflation.

The Dot Com Recession (March – November 2001)

The 1990’s were the longest period of economic growth in American history up until the Dot Com Bubble. A frenzy of exuberance around the first wave of internet companies coupled with low interest rates came to a head as tech IPOs and stock prices became grossly overvalued. As the name insinuates, this recession began when the stock prices of internet companies crashed as the Fed began raising interest rates in 1999 and 2000. The tech-heavy NASDAQ ended up losing nearly 77% of its value and took over 15 years to recover its losses.

It’s important to distinguish- a stock market crash does not necessarily result in a recession. But on September 11th, 2001, the devastating attack on the World Trade Center solidified a pessimistic outlook that teetered the US economy into a recession

All things considered, the Dot Com Recession lasted 8 months with unemployment reaching 5.5% and GDP falling by 0.95%.

The Great Recession of 2008 (December 2007 – June 2009)

The Great Recession was the longest economic downturn since World War II and was the deepest prior to the COVID-19 Recession. Real GDP fell 8.5% in the fourth quarter of 2008, and unemployment peaked at 10% in October 2009. The Great Recession was triggered by the subprime mortgage crisis and the collapse of the US housing bubble. In the years leading up to the recession, financial institutions created complex securities that bundled bad mortgages and sold them as high-quality investments known as CDOs (Collateralized Debt Obligations). In 2007, major subprime lenders began filing for bankruptcy as borrowers were unable to repay their mortgages, which burst the housing market bubble. Over the next year–and–a–half, stock markets tanked, and major financial firms started going bankrupt, triggering a worldwide financial crisis and a recession.

The effects of the Great Recession of 2007-2009 continued to be felt for years. The Fed cut interest rates to zero in an effort to encourage borrowing. Congress passed two stimulus packages, and later passed the Dodd-Frank Act to tighten financial market regulation and prevent a similar catastrophe in the future.

The COVID-19 Recession (February – April 2020)

The Coronavirus recession was the shortest in US history, lasting just two months, but had the steepest GDP decline since the 1945 recession. More than 24 million people lost their jobs in the US the first three weeks of April 2020. The economic impact of the virus and the ensuing stay at home orders is to still be determined but was quickly propped up by government intervention. The Fed rapidly slashed interest rates to zero, Congress passed stimulus packages that put cash directly into American’s pockets, and PPE loans were extended to small businesses to stay afloat. Amongst the medical, social, and economic crisis- sentiment improved and the recovery from the Covid-19 pandemic was remarkably fast. Real GDP grew 5.6% throughout 2021 and the unemployment rate reached 50-year lows.

Looking Forward

Recessions are a natural and necessary part of every business cycle to remove excess, reprice assets, and tame risky behavior. While recessions have been relatively short and infrequent in comparison to expansions, they must be expected and can be mitigated through proper asset allocation, diversification of asset classes, and emergency funds- to name a few. It is vital to maintain perspective and have a long-term view. Financial plans are an excellent way to test your ability to withstand a large recession and give confidence that your assets are sufficient to meet your goals before, during, and after recessions.

Chart Sourced From: https://www.fisherinvestments.com/en-us/insights/market-cycles/volatility/in-perspective

Further Reading

• Capital Group: Guide to Recessions
• US Economic Recession Timeline
• Net Suite’s History of Economic Recession
• Great Depression
• NYTimes Coronavirus
• Nixon Shock

Charts Sourced From:
• Chart 1: https://www.capitalgroup.com/advisor/insights/articles/guide-to-recessions.html 
• Chart 2: https://am.jpmorgan.com/us/en/asset-management/adv/insights/market-insights/guide-to-the-markets/
• Chart 3: https://www.fisherinvestments.com/en-us/insights/market-cycles/volatility/in-perspective

** 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.

Whether you’re new to investing or have decades of experience in financial markets, having an asset allocation aligned with your goals and risk tolerance remains one of the most important decisions investors can make.  Having an appropriate asset allocation aims to balance the risk and reward, through diversification across asset classes and types. There is no one size fits all when it comes to determining an asset allocation for every investor, however it will ultimately have a larger impact on portfolio returns than security selection. In this blog post we will explore what factors to consider, importance of diversification, how an investor’s asset allocation may change over time, and various ways the Weatherly team can help you achieve your goals.

An investor’s allocation will determine how their portfolio will be appropriated across different asset classes commonly classified as equities, fixed income, and cash. Additional assets classes of importance can include alternatives such as real estate, commodities, or collectibles. Each of these different asset classes carry a different set of risk and return characteristics highlighting the necessity of setting an allocation that aligned with the investor’s overall goals.

There are several factors to consider when determining an appropriate asset allocation, including:

Time Horizon

An investor should review each of their goals to determine the amount of time until the funds will ultimately be needed. With short time horizons, within a few years, a sudden market decline may significantly decrease the original investment preventing the individual to reach their goal or recoup losses. Therefore, it’s often recommended to allocate more funds into historically safer assets such as money markets, high yield savings accounts, CDs, and other short-term high-quality fixed income securities. While the returns on these assets are low, the investor’s principle is more protected.

Conversely, longer time horizons such as saving for retirement may be decades away and can afford the investor to have a more aggressive allocation with a larger exposure to riskier assets such as stocks, equity funds, or alternatives. While stocks have more implied risk than cash or high-quality fixed income, they historically have provided greater returns over the long run, helping investors ultimately reach their financial goals.

Risk Tolerance

This refers to the degree of risk an investor is willing to endure in times of market volatility. An investor with an aggressive allocation may be willing to lose a greater share of their original investment to achieve potentially higher rates of return while a conservative investor may prioritize capital preservation and guaranteed returns.

https://www.brightstart.com/risk-tolerance-questionnaire/

While it’s important to consider both your time horizon and risk tolerance when determining an appropriate asset allocation, they might not always align. For instance, your ability to emotionally endure losses could exceed your ability to withstand them given your financial situation. Alternatively, some investors are very risk averse even if they have a significant level of assets.

The balance between risk and reward should be top of mind for investors and diversification remains a key driver.  The chart below breaks down historical performance and volatility of different asset classes over time. The balanced portfolio represented by the white box highlights how diversification can help reduce risk in the portfolio and enhance returns.

Chart sourced from: JP Morgan Guide to the Markets – August 2022, Page 61

The slide below represents the importance of an investor understanding both their personal goals and the time horizon associated. Short time periods may experience greater volatility but over the long term returns typically return to the mean.

Chart sourced from: JP Morgan Guide to the Markets – August 2022, Page 62

Total Asset Allocation

Asset Allocation is the main driver of returns and should not only be reviewed on the account level but also as it relates to net worth. This can include alternative investments such as real estate, business interests, commodities, collectibles or other assets that are held outside a traditional investment account. Any concentration in these other asset types should be considered when determining the asset allocations at the account level. For example, if a client has a large position in a startup business, they may have a more conservative approach in their investment accounts to help balance total risk they are subject to. Total asset allocation can even impact individual positions in a portfolio. For example, an investor who has a large chunk of their net worth tied to real estate, may rethink investing in a residential Real Estate Investment Trust (REIT) to limit concentration to the real estate industry. Similarly, concentration in a employer stock due to stock options may impact overall investment strategy and portfolio risk. Reviewing total allocation can sometimes improve concentration concerns found in a specific account.

Asset Allocation Per Account

Although asset allocation can be viewed on an aggregate basis, it should also be reviewed on an account basis. Retirement accounts often have a tax deferral component, and benefit from long-term accumulation. Therefore, retirement accounts may favor a higher equity allocation until Required Minimum Distributions (RMDs) begin at age 72 or the client becomes reliant on income from this type of account. If possible, cash flows are taken from non-retirement accounts first, so a more conservative allocation is generally used for these accounts. Tailoring asset allocation this way can help maximize tax efficient returns over time. Additionally, there are planning opportunities that may span across multiple generations and thus require a different allocation than the individuals establishing the accounts. This can especially be seen in a Roth IRA given tax treatment and no mandatory withdrawals while the account owner is alive. A more aggressive asset allocation to this account can capture a longer period of tax-free growth and enhance a future inheritance for beneficiary or loved one.

When to Review Asset Allocation

It should also be noted that asset allocation may evolve over time as new goals develop and life happens. For example, a large liquidity event may cause investors to increase or decrease their asset allocation as their priorities may have changed. Also, investors generally shift to a more conservative allocation to reduce near term risk if they anticipate upcoming cash flow needs from a portfolio. Some examples of this could include a home purchase, looming child education expenses, large medical costs or beginning retirement. This same type of progression can be seen in target date funds which utilizes passive investing to automatically adjust asset allocation to be more conservative as a certain goal approaches.

Periods of volatility can also cause investors to review their asset allocation. During a down market, investors tend to reevaluate the amount of risk they were originally taking. If they are comfortable with the volatility, then it may be an opportune time to rebalance the portfolio by bringing the equity allocation back up to help reinflate the portfolio faster. This is often forgotten during periods of exuberance in the stock market, but it may be appropriate to rebalance the portfolio to fixed income to limit overall concentration to equities. During these periods of volatility, an active management investment style tends to benefit clients. Being able to quickly reevaluate risk profiles, allow for gains to be taken or a portfolio to be repositioned.   Financial Planning can be helpful in determining the amount of risk needed to take to fulfil various goals.

How Can WAM Help

Whether you’re a new or an existing Weatherly client, we pride ourselves on open dialogue to ensure we understand each client’s needs and goals both for the short and long term to determine an appropriate asset allocation.  You’ll often find a question we always ask on the front end is if there are any upcoming liquidity needs. This allows us to properly align the portfolio while also exploring areas of opportunities to reduce risk. We review current and target asset allocations several times a year to ensure the appropriate amount of risk is being taken to achieve goals and meet cash flow needs. If periods of volatility cause concern, then we revisit the target asset allocation with the client and implement adjustments, if necessary.  We lean on our financial planning capabilities that help clients bring together their financial picture into a holistic and consolidated view to prioritize goals based on importance and timing.  We encourage you to reach out to your trusted advisor with any questions about how life changes can impact your allocation, risk mitigation, or any other questions.

** 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.

For those approaching retirement, it can be an exciting time as they look forward to the next chapter in their life, whether it’s spending more time with family and/or focusing on the causes closest to them.  We often see individuals ease into retirement by continuing on a part-time basis with their employer or through consulting work within their related field.  This transition may bring a level of uncertainty as they shift focus to a different set of priorities such as income and spending, asset preservation, and estate planning to name a few. Many of these priorities will carry through to those already in retirement along with additional planning opportunities that will be discussed later. In this blog post, we will explore a variety of topics to help individuals prepare for retirement and build confidence as they enter and live out their golden years. 

SAVE: 

As you close in on retirement, it is an essential time to take inventory of your financial picture and prioritize based on importance. A quick win is to ensure that you are saving as much as possible. Individuals are often in their prime earning years as they approach retirement and should focus on maxing out employer retirement plans or contributing enough to take advantage of a full employer match, if available. The 2021 maximum contribution an employee can put into an employer retirement plan is $19,500 for those under 50 and $26,000 for 50 and over. Additional savings can be allocated to taxable or Trust accounts that do not have carry contribution limits. If self-employed, there are additional opportunities to fund a Profit-Sharing or Defined Benefit plan that can go beyond the traditional limits above. For additional contribution limits please see Weatherly’s Key Data Chart.  

SPENDING/BUDGET: 

After ensuring you are saving as much as possible, we recommend tracking how much you are spending on a monthly basis on both discretionary and non-discretionary items. Non-discretionary items can include bills such as utilities, mortgage payments, insurance etc. while discretionary items fall into areas such as going out to eat, vacations, and hobby related expenses. We suggest reviewing the past three months of your bank transactions to get a sense of your average monthly expenses. Alternatively, there are various budgeting websites that can track your expenses such as Mint.com that can be a helpful resource and found here. 

ACCOUNTS: 

Now that you have an idea of how much you are saving and spending, it is time to review where each of your accounts is held and the balances thereof. It is quite common for people to change jobs throughout their careers and leave their accounts within a prior employer’s plan. It is important to make sure you are able to access these accounts and Weatherly can help you consolidate them, if appropriate. While going through this process can be time consuming it is important to also look at the allocation of each of these accounts to ensure your entire portfolio is aligned with your risk tolerance and time horizon.  

ESTATE REVIEW: 

As you work through locating and accessing each of your accounts, it is a great opportunity to review the titling and beneficiaries of the accounts to verify they reflect your current estate planning objectives. While estate planning can vary widely between families depending on their unique situation and desires, we recommend all individuals have the following four documents in place.  

• First, is a Will and Testament which is a key instrument used to outline how an estate is to be settled in a manner desired by the deceased. They typically include an executor of the estate, named beneficiaries, instructions for how and when the beneficiaries will receive assets, and guardians for any minor children.  
• Secondly, a Revocable Trust that each of the assets are registered under excluding those with beneficiary designations. Assets in the trust will pass outside of probate, saving time, court fees, and potentially reducing estate taxes. You can also specify the terms of the trust precisely, controlling when and to whom distributions may be made.  
• Third, a Power of Attorney document that provides legal authorization to a designated person to make decisions on your behalf regarding property, finances, investments, or medical care. Power of Attorney is most frequently used in the event an individual has a temporary or permanent illness or disability, or when they are unable to be present to sign necessary documents.  
• Lastly, a Health Care Directive or commonly referred to as an Advance Directive which is a legal document that lets your loved ones and health care team know what kind of care you want, or who you want to make decisions when you are unable to do so.  

FINANCIAL PLAN: 

Before we move into our next section covering additional planning opportunities for those within retirement, let us first explore the importance of running a financial plan. When Weatherly works with clients to develop a plan, we take a holistic approach to ensure every aspect of the client’s financial profile is accounted for. While not limited to, we will generally request the following information: 

• Overview of investable and real assets 
• Annual expenses – both discretionary and non-discretionary 
• Annual income sources and target retirement dates 
• Liabilities  
• One-time liquidation events such as business or real estate sales 
• Family and business priorities and values 
• Goals such as paying for education, real estate, retirement, or philanthropy 

Once these items have been compiled, we will run a year-over-year cash flow-based projection using conservative assumptions that highlight the outcome of the base case scenario. The base case scenario will illustrate if the client is on track for a successful financial plan or if adjustments will need to be made. We will include a few different alternative scenarios to explore items that are in the client’s control such as different spending levels or retirement dates along with areas outside of the client’s control such as bear market events or longer life expectancy to name a few. These plans serve as a benchmark for future updates as we can look back and compare how your plan has evolved over the years. If you would like to learn more about how Weatherly works with clients in developing financial plans, we have included an earlier blog post here.  

For those that are already in their retirement years, there are several different strategies and planning opportunities that are useful to ensure your assets not only cover your day to day living expenses but also the increased costs in the form of medical expenses. Individuals may no longer be covered by their employer’s insurance plan and will therefore need to purchase private insurance until they are eligible for Medicare coverage. Planning for this large and unpredictable expense is an important aspect of retirement planning. To learn more about how to prepare for healthcare costs in retirement, please follow the link here.  

With a continued focus on spending and asset preservation it is important to align retirement income sources with goals and expenses. Spending will continue to have the largest impact on a successful retirement and will therefore be important to have a comprehensive withdrawal strategy. Not only are withdrawal amounts important, but the buckets that these funds come from are equally important to successfully funding goals for a long and prosperous retirement.  

The main sources of retirement income outside of an investment portfolio typically come in the form of social security, pension, or rental income. However, these funds may not adequately cover living expenses in retirement and withdrawals from an investment portfolio must be made. Let’s explore the different account types and which buckets we recommend pulling from first to fund retirement living expenses.  

Taxable Accounts: Draw from 1st 

• Include Trust, Individual and Joint Accounts.  
• Withdrawals may be subject to capital gains  
• Holding period of 1 year or greater = favorable Long Term capital gains rates (currently 0%-20% depending on income level) 

Pre-Tax/Tax-Deferred: Draw from 2nd 

• Include 401(k), IRA, 403(b), Pension (DB/PSP) 
• Withdrawals are taxed at ordinary income rates (currently 10%-39% depending on income level) 
• 59 ½ – no penalty for withdrawal  
• RMDs required by 72 

Post-Tax/Tax-Advantaged: Draw from last 

• Include Roth IRA, Roth 401(k) 
• Tax Free withdrawals for owners and their heirs 

Due to the preferential capital gains rates associated with taxable accounts, this would be the preferred bucket to draw upon first allowing for funds within the tax deferred bucket to continue to grow. Roth accounts are the most advantageous from a tax standpoint, which is why it is recommended to allow these accounts to grow for as long as possible with the added benefit to their heirs also being able to withdraw funds tax-free.  

There is no one size fits all strategy, which is why regularly revisiting your financial plan to make sure you are on track to meet your goals is so important. Clients with a higher retirement income may not need to rely as much on their portfolio for living expenses allowing for a different asset allocation than those with lower income levels focusing on asset preservation and income in the form of dividends and interest.  

Planning opportunities  

Social Security Analysis  

• As part of a comprehensive retirement plan, it is important to consider your retirement income when deciding on when to take social security. Timing of when to begin social security can have a significant impact on retirement income, as seen in the chart below.  
• By running a social security breakeven analysis, we can help determine the most appropriate time to begin payments. 

Chart Sourced from: https://www.ssa.gov/pubs/EN-05-10147.pdf  

• Please use the following link to different social security calculators offered by the social security administration website.  

Roth Conversions – GAP Years 

During the years between beginning retirement and taking your Required Minimum Distribution (RMD) at 72, many individuals experience a steep drop in income. These gap years provide for an ideal time to review claiming Social Security benefits and potential Roth conversion strategies. If you would like to learn more about the benefits of Roth conversions, we have included a link to a previous blog highlighting this strategy here.  

Chart Sourced from: https://www.abovethecanopy.us/how-to-take-advantage-of-your-retirement-gap-years/ 

QCDs – Giving Strategies  

After turning 72 the IRS requires individuals to take Required Minimum Distributions (RMDs) from their tax deferred accounts such as an IRA. If the RMDs are not needed for living expenses and individuals are charitably inclined a Qualified Charitable Distribution (QCD) is a strategy to reduce taxable income while achieving their philanthropic goals during retirement. Individuals can take advantage of this strategy beginning at age 70 ½. For more information on charitable giving, please reference our previous blog on the topic.  

As we have covered, retirement planning is a very dynamic phase of life that requires proper preparation and ongoing focus across various aspects. Weatherly is here to help provide clarity and guide you into a successful retirement allowing you to focus on what matters most. We welcome you to reach out to your trusted advisor for any questions you may have on this topic or your managed accounts. 

** 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 of the start of the 4^th Quarter 2021, Weatherly officially entered its 27^th year of serving clients. The team at Weatherly feels beyond fortunate to be able to work with clients in the way that we do. This exciting milestone, paired with the unprecedented global climate of the past 20 months, has us reflecting on the services we provide and when our team feels we are doing our best work.

When describing our approach to client service, our team favors the “dinner plate” analogy. While our core pillars of investments and planning take the largest share of the plate, there are a number of strategies that serve as side dishes to complement our two main competencies and take the overall client experience to the next level. Our team leverages the information gained through ongoing dialogue with each client and their trusted professionals and couples it with expertise of our team to maximize positive impact.

We are often asked from both current and prospective clients – how do I fit into Weatherly’s core client base?  Although we provide customized service to clients of all backgrounds, over the years our client base has organically morphed into 3 niche client groups: Entrepreneurs and Small Business Owners, The Working Wealthy, and Women. In this month’s blog post, we begin a 3-part series through which we will individually explore our niche client groups. We will introduce hypothetical case studies per client group that highlight the way in which we weave different solutions together to create the highest level of customized service for each individual we serve.

We begin the series with the “Entrepreneurs and Small Business Owners” niche client group. Whether it be a self-employed individual, entrepreneur with several employees or family business owner, members of this niche client group are typically high net worth or ultra-high net worth individuals who are high income earners and have a majority of their assets tied up in their businesses. There are many variables in this subgroup that can contribute to the complexity of their financial life. In the below case study, we explore the fictional situation of “Business Owner Ben and Self-Employed Sarah” and how Weatherly was able to help create a financial roadmap that addressed their unique situation.

When we first met Business Owner Ben and Self-Employed Sarah, their excitement and enthusiasm about their family’s business was infectious.  They were entrepreneurs with a unique approach to working together on different aspects of the business, which nicely complemented their previous educations and backgrounds in engineering and accounting, respectively.  

Ben and Sarah’s passion for problem-solving, testing and innovating products and services was a great match for how our Weatherly team collaborates – starting with the clients’ team of 2-3 advisors offering them our core pillars of financial planning and investments, paired with our team of experienced subject matter experts.  Our first priority as a potential advisor to Ben and Sarah was to understand their current financial situation, long-term outlook and goals and where there might be risks and opportunities in their plan.  

After our initial discovery call, we understood their current focus on their business’s future growth and desire to incorporate family ownership and community philanthropy.  We initiated several dialogs with Ben and Sarah and incorporated their adult kids into relevant conversations.  We also were introduced to their estate planning attorney and CPA so we could problem-solve collectively as their advisory team.  

It was extremely apparent they were juggling a lot of responsibilities and had a passion for growing their business, creating a legacy for their family and giving back to the community, so we discussed a number of methods to help make their goals a reality.  We kept the big list in the background and prioritized a short list during our scheduled meetings to make the most of Ben and Sarah’s time based on what was most important.  The big list included:  

• • Estate Planning – The estate planning discussion started with a basic business and personal document review, ensuring consistent and up to date with current law and evolved into a discussion of how to leverage your trusted advisors. When Ben and Sarah were ready, we incorporated their adult kids, who were named as their estate trustees, into the conversation.  
  • Life Stages of a Business– Ben and Sarah were deep into what we call the “teenage” stage of a business – with a heavy emphasis on growth.  As small business owners ourselves, we offered advice on types of business structures to consider, how to establish retirement plans and what type of insurance they may need.   
  • Retirement Planning – The opportunity in the retirement space can often be overlooked by business owners.  We were able to optimize their retirement 401k plan and establish a small business plan that offered benefits to all employees and profit sharing and cash balance for the highly compensated.  For Ben and Sarah personally, we were able to solve for their retirement income equation and determine when they could start to step away from the business and transition to the next generation.  
  • Private Equity – Over our years working together, we saw the business grow into the “adult” phase where the dialog pivoted to succession planning and family dynamics.  We introduced Ben and Sarah to an Investment Banker to help ready the company for next steps and stages in their life cycle.  As their adult kids were folded into the business appropriately, we worked with next gen on their own financial and succession plans, with topics that were relevant to them.  
  • Philanthropy – Ben and Sarah had a strong desire to give back to their community, similar to our team at WAM.  They were donating cash year over year to local charities, which certainly created impact but could have been done in a tax-efficient manner as well.  We helped to create a Donor Advised Fundto help offset the sale of real estate and incorporate their adult kids in the investment and granting committees. 

Fast forward 5 years later, Ben and Sarah have enjoyed the success of many of the investment and planning strategies utilized by our team of advisors, while allowing them peace of mind, time and flexibility to focus on what really mattered to them – their business, family and community.  As their business pivots to incorporate new products and people, and their investment assets have surpassed their expectations, they are now faced with the proposed estate and tax changes and are working with our team to create additional gifting to next gen and philanthropy.  The Weatherly team continues to work with their children, friends and family they have referred over the years.   

What brought Ben and Sarah to Weatherly was an interest in our core pillars of investments and planning, or what we like to call our main entrée.  What elevated the relationship and brought additional value was our focus on the big picture, understanding their goals and needs, and focusing each dialog on their list of priorities.  Our side dish offerings have evolved over the years as their business and family continues to grow.   

We feel so fortunate to work with clients like Ben and Sarah each day and are witnesses to the ripple effect on their business, family and community. 

As we have just seen with “Business Owner Ben & Self-Employed Sarah” Weatherly works hand in hand with entrepreneurs and small business owners at every step of the way to create a strategy that maximizes a positive impact on their life, livelihoods and legacy.

If any part of Ben and Sarah’s situation sparked your interest, our advisors would be happy to schedule a planning call to discuss these strategies and more. Be sure to keep an eye out in the coming months for the next two installments of our niche client group blog series to learn more about how we implement our core competencies of investments and planning to benefit the groups of the working wealthy and women!

***

Case Study Disclosure

This hypothetical case study is provided for illustrative purposes only and does not represent an actual client or an actual client’s experience, but rather is meant to provide an example of the Firm’s process and methodology. An individual’s experience may vary based on his or her individual circumstances. There can be no assurance that the Firm will be able to achieve similar results in comparable situations. No portion of this article is to be interpreted as a testimonial or endorsement of the Firm’s investment advisory services and it is not known whether the hypothetical client referenced approves of the Firm or its services.

The information provided should not be interpreted as a recommendation, as no aspects of your individual financial situation were considered. Always consult a financial professional before implementing any strategies derived from the information above. Working with a highly-rated adviser does not ensure that a client or prospective client will experience a higher level of performance or results. Past performance is not necessarily indicative of future results. http://www.weatherlyassetmgt.com/adv/

As we welcome the beginning of fall with the start of September, here at Weatherly we are already sipping on pumpkin-flavored drinks and preparing for year-end planning conversations with our clients. To assist your team of advisors in giving the best advice as well as employing the most opportune investment strategies, we often request a few documents from you. In this month’s blog, we’d like to highlight important documents and how they help your advisors in tailoring advice specifically to you.  

2020 Tax Return and Asset Allocation Review 

• Having your tax return on file is helpful for many planning strategies but is especially important when factoring in any unrealized gains and losses for the year.  As we look to de-risk portfolios, reduce concentration risk and rebalance taxable accounts, we like to account for capital gains and how this may impact your marginal tax bracket.  Remember – capital gains are an indication your account has seen good growth and often are necessary to ensure we have room to incorporate new investment themes into your portfolios. 

• We also welcome any other tax related items you think our team might find helpful for year-end planning – this could include a summary of your income year-to-date so we can offer advice on tax mitigation strategies like retirement and charitable contributions.

Charitable Opportunities 

• There are many ways to give to charity with two-fold benefits – donating to organizations you are passionate about and reducing your tax liability. Your team of advisors can discuss what options are available to you each year given your unique circumstances.   
• If any qualified chartable distributions (QCDs) still need to be made from your IRA or if you’d like to donate directly from your Donor Advised Fund (DAF), please let your advisor know which charity or charities you would like to donate to. 

 Contributions to Retirement Accounts  

• Many retirement plans like employer-sponsored 401ks and self-employed 401ks have a year-end deadline for making contributions.  You can view this year’s contribution limits on our Key Data Chart – our advisors are here to help you review your options and funding methods. 

Updated Estate Documents 

• Given the potential changes to tax and estate laws, this year provided many people the opportunity to update their estate documents, including trusts, wills, etc. We wrote about 5 estate planning strategies to consider earlier this year.  
• If we do not have an updated copy of your estate documents, please post them to our secure portal for our records. If you are not sure whether we have your estate documents on file, please let us know and we will be happy to check our records for you. 

 Information to Update or Add Beneficiaries 

• It is essential to have beneficiaries on all your accounts to avoid assets going through the cumbersome probate process if you were to pass, as highlighted in this article. Our team does periodic audits of our accounts to ensure there are beneficiary designations, and your designations should be reviewed annually or when you face big life changes. 

• If you need to update your beneficiaries or add any beneficiaries, please email your advisor. If we need any birthdays or social security numbers, we ask you to please upload a document containing that information to our portal. 

 Year End Gifting 

• As your assets grow and accumulate, you may want to consider gifting to kids or grandkids.  The annual gift limit for 2021 is $15k per person, per beneficiary; as a couple you can gift $30k per beneficiary.   
• There are many ways to provide additional gifting above the annual exclusion – the blog post we highlighted above touches on these alternatives.  You may want to talk to your advisor about strategies that pique your interest and how we engage in the family conversation.

Documents Supporting Upcoming Transfer of Asset (TOA) Opportunities 

• We provide our best advice when we have your full financial picture available. If you have any large asset transfers in your immediate horizon, such as a home sale, an inheritance, or wish to transfer a significant amount of money into or out of your portfolio, please provide that information to your advisor and post any related information to our portal.  This information also helps us to provide guidance on how to invest future assets and implement tax planning strategies like those outlined above.  

CIRAL – Client Information Release Authorization Form 

• Our team is working towards acquiring all our clients’ personal and professional contacts in preparation for an unexpected event. We request our clients to fill out and return our Client Information Release Authorization Letter (CIRAL). This form, which can be downloaded here, outlines the contacts whom we can reach out to in the event it is necessary. If you have already submitted your CIRAL but wish to change your contacts, we welcome an updated version at any time.  Similar to your beneficiaries, this should be reviewed annually.  

Cyber security is always top of mind here at Weatherly. When supplying our team with forms and documents, please utilize our secure portal. You can also use our portal to view your accounts and statements at any time, anywhere. 

If you do not currently have a portal and would like to get set up with one, please email us and we will be happy to do so. If you need assistance downloading documents from our portal or posting documents, please see our handy portal help PDF that will walk you through the steps. We are also available to answer any questions as they arise via phone or email. 

The holidays can be stressful and year-end planning can seem overwhelming, but your Weatherly team is here to help make your financial picture something you do not need to worry about. Cheers to a pleasant autumn and a festive fourth quarter of 2021! 

** 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.

Cyberattacks continue to evolve in terms of sophistication, pervasiveness, and impact. Back in 2018, our team blog scratched the surface of big data, analytics, implications for information sharing, and data compromise. Each cyber-attack, targeted or unleashed, has created not only serious disruption and headaches but true opportunities for professionals and individuals to have their information security at front of mind in all daily activities. Changes since the 1988 Morris Worm include increases in cyberwarfare, government espionage, corporate espionage, ransomware attacks and hacktivism. Stolen email addresses and credentials impacted millions, including Adobe, Yahoo, and Sony. Early large scale financial and credit card data breaches included Equifax, Target, and Mastercard. With COVID-19, we saw a shift to remote work, as well as more online commerce, only increasing the information security breach vectors of both businesses and individuals. 

In 2021, we’ve seen cybercrimes’ basis shift to supply chains. Data security executives note that the fall out of the late 2020 early 2021 Solar Winds highly sophisticated data exfiltration event may take months or years to be fully realized (Gately, 2021). This breach of national security exposed vulnerabilities in global software supply chains, affecting government as well as private systems.  

Got gas? 

In early May 2021, the ransomware attack on the US Colonial Pipeline showed us how a single password although complex, naked of the protection of multifactor authentication, could result in the compromise of a critical infrastructure network managed by a private company. Fuel shortages at airports and filling stations coupled with panic buying brought rapid national attention; often with raised eyebrows on other critical infrastructure vulnerabilities (water, electric grids).  Russian operatives such as Darkside intend to capitalize monetarily on security vulnerabilities, oftentimes staying less detected via cryptocurrency payments.  

National Security, trust me. 

In Mid-May 2021, as the Colonial Pipeline attack unfolded, US President Biden prioritized Cybersecurity efforts at the federal level (White House, 2021). His Executive Order on Improving the Nation’s Cybersecurity addresses policy, removing barriers to sharing threat information, modernizing federal government cybersecurity, enhancing software supply chain security, the establishment of a cyber safety review board, standardizing the federal government’s playbook for cyber vulnerabilities and incident response; threat detection improvements on federal networks, improvements in the federal government’s investigative and remediation capabilities,  and national security systems.   The “zero trust architecture**” (NIST’s set of standards) serves as a fundamental pillar of the security strategy outlined in the executive order. 

Where’s the Beef? 

Another ransomware attack targeted at JBS Foods in June 2021, with the potential of prolonged food supply chain disruption across 100 countries. Similar to the Colonial Pipeline, cybercriminals are preying not only on government operations and wallets, but on the nation’s individuals’ psyche… our level of trust in economic players to protect information, resources, and infrastructure, and ultimately our safety. 

3rd Party 4th of July Party  

Over July 4th weekend, the US saw how a point of compromise for businesses (and individuals!) is often times the trust between a vendor (software provider) and a client (you and me).  The Kaseya ransomware attack was yet another zero-day attack (an instance where a newly discovered software vulnerability is exposed, but an exploit occurs prior to the developer’s release of a patch). Because this attack targeted MSP (Managed Service Providers), this is the stuff that small business nightmares are made of.  As small, mid, and large businesses often contract their managed services (I.e IT, network management, etc) to third parties, it makes complete sense that hackers would target this large vector.  

Geopolitical efforts to collaborate on defensive and proactive strategies to combat the growing threat landscape are constantly adapting. This whitepaper from 2020 details certain global efforts and entities working towards holistic threat defenses. While certain nations adopt data privacy regulations, the border-less-ness of internet content traffic and information sharing can make collaborative approaches especially challenging. 

Understandably, when the world sees a DDOS event (distributed denial of service) that pulls down websites like Fedex, UPS, Delta, etc.., we first think there is a bad actor involved.  In the recent Akamai Edge service outage, however, the company stated it was related to an intentional update that caused the disruption, which was resolved by rollback within an hour. 

Impacts on Businesses, Families 

Economic impacts of supply chain cyberattack have immediate and long-term impacts on companies’ and individuals’ bottom lines.  In general, we see a shift towards security-focused investments by businesses. The investment in security can come with a high up front price tag, forcing small businesses and individuals to make calculated risks in choosing not to update their systems and devices. While businesses sometimes choose to purchase data-breach or cyber insurance, it oftentimes affords the business just enough to cover the cost of forensics and remediation after an actual event.   

Families as well as business are having the cyber conversation more than ever. The hack on San Diego Unified’s systems in 2018 uncovered how lower funded municipal services’ systems are especially at risk. With the shift to remote learning during the pandemic, our vulnerabilities as families widens, as information sharing in public academics now includes children ages 5+ in our county. Gamers, students, Moms, and Dads alike have to think like businesses; similarly, businesses need to think like families. With information sharing comes great responsibility. 

Navigating the Cyber Sea 

Per current events, it is an unfortunate truth that cybercrime is an ongoing threat that continues to evolve and impact our lives. As much as we want to prevent it entirely, cyber security isn’t an absolute. You aren’t either insecure or totally secure. There is a gradient, and it pays to ensure that you are striving to be on the “most secure” end of the spectrum. Below are 7 tips to help smoothly sail the cyber sea. 

1. Second check before you click & slow down before you share. Although it may sound a bit extreme- trust NO ONE (online). Phishing emails often look as though they have been sent from a legitimate organization or someone who knows the end target (you), to entice clicks on malicious links or attachments. If you are ever unsure, pick up the phone to verify the validity of the email in question. 
2. Do not duplicate passwords across accounts. When you use the same password for multiple accounts you open yourself up to a cyber-attack known as credential stuffing. All a hacker needs is your information from one poorly defended site and suddenly, they can access any other account where you use the same login information (“Are Your Passwords,” 2020). Length is the primary strengthener when creating a robust password. We suggest a minimum of 10 characters and have found that using a sentence is a great way to create a long password that you will not forget!  
3. Keep your software updated. Running outdated software is an open invitation for cyber criminals to exploit known flaws and gain access to your system. Software companies regularly push out new updates to patch identified errors, making them (and you) less likely to become a target of cybercrime. The best way to ensure your software is current is to enable automatic updates on your system(s). 
4. Back up your data. Perform frequent backups of your system and important files and verify your backups regularly. If a ransomware infection were to occur, you can restore your system to its previous state (sans ransomware) using your recent backup(s). Store your backups on a separate network or device such as the cloud or an external hard drive. Ensure that these backups are secured with the utmost protection such as MFA (#5). 
   • Encrypted/Protected External Hard drive: These allow for fast data transfers and large storage capacities. Look for ones that are encrypted and require a padlock password. 
   • Cloud: iCloud, Google Drive, and Dropbox, are some of the most well-known cloud-based services. Many of these come with limited free storage space and a paid option for additional storage if needed. 
     • When choosing a cloud-based storage, ask; Do they have privacy and security settings I can adjust? Do they use encryption to protect my data? 
5. Enable Multifactor Authentication (MFA) whenever available. MFA adds an additional layer of protection to the sign-in process and is widely available for many of your most sensitive logins. When accessing your data, you will be required provide additional identity verification(s), such as scanning a fingerprint, answering personalized questions, or entering a code received by phone. Use of anything beyond a password significantly increases the work for attackers to access your data, lowering the risk of you getting hacked in the authentication process!
   • Click here to learn more about setting up MFA on your Fidelity.com login 
   • Click here to learn more about setting up MFA on your Schwab.com login 
6. Insist on Information Security (Infosec). It is essential to ensure that when working with anyone who has your personal information (SSN, date of birth, acct #s, etc), that they will not misuse or disclose it to outside parties. Be certain that these professionals can and will safeguard your personal identifiable information (PII) to best of their ability. Take the initiative and inquire what secure method(s) they use for the bi-directional exchange of information. Some common examples include encrypted emails, secure portals (Weatherly’s preferred method), or password protected documents. 
7. Upgrade your upgrade process. Your devices (laptops, tablets, cell phones) contain more information than you may think! Whether it be financial or personal, before disposing of your old electronic devices, it is important to delete your information from the hard drive so that it does not end up in the wrong hands. Before letting go of your old devices: 

• • Back up your information (#4) 
  • Sign Out of Accounts, Disconnect Devices, and Erase Your Hard Drive 
    • After you have saved your personal information (cloud, external hard drive, etc), sign out of all your online accounts. It is also best to un-pair your computer from Bluetooth devices (mouse, keyboard, wireless display, etc.) 
    • Erase your computer’s hard drive and reset it to factory settings.  
  • Safely Dispose of your device 
    • Most devices contain hazardous materials that do not belong in a landfill. Instead consider keeping it green, and recycling or donating your old electronics. Check out the Environmental Protection Agency’s Electronics Donation and Recycling page to learn about recycling or donating your computer. 

When it comes to cybercrime the most harmful thought you can have is, “it won’t happen to me”.  Cybercriminals don’t discriminate, so in a way, fighting cybercrime is everybody’s responsibility.  At Weatherly we consider it our obligation to not only uphold our own best practices, but to be a resource for those joining the fight against cybercrime. Please do not hesitate to reach out to our team with any questions. 

Sources: 

Gately, E.  (2021, July).  Kaseya VSA Ransomware Attack, SolarWinds Hack share many similarities.  Channel Futures.  Security.  Retrieved from https://www.channelfutures.com/security/kaseya-vsa-ransomware-attack-solarwinds-hack-share-many-similarities 

Ruhl, C. et al.  (2020, February).  Cyberspace and Geopolitics: Assessing Global Cybersecurity Norm Processes at a Crossroads.  Carnegie Endowment for International Peace.  Retrieved from https://carnegieendowment.org/files/Cyberspace_and_Geopolitics.pdf 

POTUSA- Biden, Joseph (2021, May).  Executive Order on Improving the Nation’s Cybersecurity.  Presidential Actions.   Briefing Room. Retrieved from https://www.whitehouse.gov/briefing-room/presidential-actions/2021/05/12/executive-order-on-improving-the-nations-cybersecurity/ 

Are Your Passwords Putting You at Risk for a Cyber Attack? (2020). Retrieved from https://www.atsg.net/blog/passwords-risk-cyber-attack/  

https://www.marketwatch.com/story/buying-a-house-heres-how-to-ensure-your-confidential-financial-details-remain-secure-2019-05-29 

Vocab/Acronyms 

CIS- Center for internet security  

ATP  – Advanced persistent threat 

DdOS – Distributed denial of service attack 

IOC –Indicators of Compromise 

RAT – remote access trojan 

MFA – Multi Factor Authentication 

PII (Personal identifiable information) – defined as any representation of information that permits the identity of an individual to whom the information applies to be reasonably inferred by either direct or indirect means 

**Zero Trust Architecture 

a security model, a set of system design principles, and a coordinated cybersecurity and system management strategy based on an acknowledgement that threats exist both inside and outside traditional network boundaries.  The Zero Trust security model eliminates implicit trust in any one element, node, or service and instead requires continuous verification of the operational picture via real-time information from multiple sources to determine access and other system responses.  In essence, a Zero Trust Architecture allows users full access but only to the bare minimum they need to perform their jobs.  If a device is compromised, zero trust can ensure that the damage is contained.  The Zero Trust Architecture security model assumes that a breach is inevitable or has likely already occurred, so it constantly limits access to only what is needed and looks for anomalous or malicious activity.  Zero Trust Architecture embeds comprehensive security monitoring; granular risk-based access controls; and system security automation in a coordinated manner throughout all aspects of the infrastructure in order to focus on protecting data in real-time within a dynamic threat environment.  This data-centric security model allows the concept of least-privileged access to be applied for every access decision, where the answers to the questions of who, what, when, where, and how are critical for appropriately allowing or denying access to resources based on the combination of sever 

From airline tickets and car prices to gasoline and commodities, consumers and investors have experienced pockets of inflation as the U.S. economy continues to recover from the COVID-19 pandemic. We saw the May Consumer Price Index (CPI) numbers reflecting the largest month-over-month gain since 2008, and subsequently the Federal Reserve began talking about potential changes to monetary policy and their expectations for increasing inflation. As we turn to the Federal Reserve for guidance, let’s look at the role the Fed plays and the key points made during the most recent Federal Open Market Committee (FOMC) meeting, specifically a deep dive into inflation and what that means for investors.

The Federal Reserve:

The Federal Reserve (Fed) is the central banking system of the United States and is used to promote a strong economy.  The Fed uses monetary policy to support their primary goals:

• Maximum Employment
• Price Stability

The Fed hopes to maintain consistent price stability as they set their long-term annual inflation rate target to 2%.  A modest inflation rate is generally viewed as healthy for the economy as it can coincide with wage growth and maintain consumer demand; alternatively, deflating prices (deflation) or hyperinflation can stress the economy.  While moderate increases in price is the ultimate inflation goal, the Fed’s most common levers to pull include:

• Open Market Operations –
  • Buy/sell securities in the open market to help control liquidity.
• Setting the Discount Rate –
  • Short-term interest rates the Fed uses to charge commercial banks. This has a spillover effect on all interest rates.
• Adjusting reserve requirements-
  • Amount of cash banks need to hold

Recent FedSpeak and New Challenges:

As evidenced by the recent Fed meeting, uncertainty is still present despite Federal Reserve Chairman Jerome Powell communicating that the recent bounce in inflation is transitory – or not permanent.  The Fed is experiencing new challenges with the recent record-breaking Government spending, higher tax proposals, and pent-up consumer demand due to the pandemic.  Even with soaring unemployment last year, we saw the household savings rate increase during global shutdowns.  We now find Americans excited to spend and make up for the lost opportunities last year – particularly in travel, dining and experiences.  The higher demand and lost production time with factory shutdowns has also caused supply chain constraints in several industries such as autos, lumber, and chips/semiconductors leading to higher prices.  This was captured in the latest inflation report, with Fed officials signaling higher expectations for inflation, as well as an earlier time frame for interest rate hikes.  The FOMC hinted at two hikes in late 2023 on the recent dot plot projection versus the previous projection of no rate hikes in 2023, in fact, 7 members expected a rate rise in 2022. If higher inflation numbers continue to roll in, the Federal Reserve may be forced to lift rates earlier than they anticipated to achieve its mandate of maintaining price stability and moving towards full employment.

Inflation and How It’s Measured:

Simply put, inflation is the rise in price of goods over a period of time.  Or viewed differently, a decrease in purchasing power of a currency for the same good.  An example, is a loaf of bread costing 22 cents in 1960, today costs $2.12 or more.  This price increase is inflation. However, we indulge in more than just bread, so economists look to inflation indexes for a broader representation.  The Fed views price stability as moderate inflation

The Consumer Price Index (CPI) is the most recognized way of measuring inflation in the US and is reported monthly by the Bureau of Labor Statistics (BLS).  The index is calculated by analyzing the price of a basket of goods and services.  This basket includes eight categories: food/beverages, housing, clothing, transportation, medical care, recreation, education/communication and other goods and services.  The aggregate change in price of the basket is known as the inflation rate and can be used for Cost-of-Living Adjustments (COLA) in Social Security or applicable pensions.

A Quick Look Back in History:

The BLS has a record of CPI dating all the way back to 1913.  When going back this far, the average annual inflation rate is slightly over 3.10%*.  This is in part due to greater volatility in prices. Within the last few decades, inflation has become much more stable as the Federal Reserve has had better oversight and control of monetary policy.  Additionally, globalization, new technology and supply chain success has aided in keeping the price of goods low.   In fact, inflation over the last decade is much lower than the historical average as it has been around 1.76%**.

Inflation Today and Where It’s Headed:

Inflation talks have taken over news headlines, Fed meetings and conversations with neighbors.  And this should come as no surprise.  When comparing to the prior year, the February inflation rate was up 1.7% and then April and May inflation rates rose to 4.2% and 5.0%, respectively.  This dramatic jump can be attributed to the surge in demand for inputs and consumer goods as the U.S economy began to recover and grow at a larger than expected rate with gross domestic product (GDP) forecasts coming in at 7% versus 6.5% previously.  Categories such as autos, airfares, and gas are seeing the biggest price increases as a temporary reopening demand surge.

Chart Sourced From: https://www.bls.gov/charts/consumer-price-index/consumer-price-index-by-category-line-chart.htm

Impact on Portfolios:

Whether inflation is here to stay or just a minor blip on the radar, it serves as a great time to review your asset allocation with your advisor.  We believe a well-diversified portfolio tailored to your risk appetite is still appropriate to participate in market growth while limiting some downside risk.  As discussed in our previous blog , it is also important to discuss concentrated positions with your advisor to evaluate risk in specific holdings or asset classes. Let’s take a look at how different asset classes may be affected by inflation:

Chart Sourced From: https://am.jpmorgan.com/us/en/asset-management/adv/insights/market-insights/guide-to-the-markets/

• Cash – is most vulnerable to inflation. While we still encourage holding an emergency fund and some cash for opportunities, the excessive cash held in a checking/saving account will lose purchasing power due to high inflation and little to no interest being earned.  Cash enhanced short-term funds can be considered as a potential alternative as they yield higher returns while preserving liquidity.

Chart Sourced From: https://am.jpmorgan.com/us/en/asset-management/adv/insights/market-insights/guide-to-the-markets/

• Fixed Income – High Inflation can have a negative impact on real returns. Because of this the Fed will typically lift interest rates to combat higher inflation.  When interest rates increase, bond prices typically fall.  The idea is that bond investors may offload their current bond holdings on the secondary market and then purchase new bonds with a higher yield.  Longer term and low-quality debt are most susceptible in this scenario.  However, these interest rate changes do not impact the return of principal you receive at bond maturity.  Treasury Inflation-Protected Securities (TIPS) provide protection against inflation by growing with CPI until maturity.  Interest rates may be lower than other debt instruments given the attractive feature of increasing principal with inflation.

Chart Sourced From: https://am.jpmorgan.com/us/en/asset-management/adv/insights/market-insights/guide-to-the-markets/

• Equities – Stocks tend to be the best performing asset class with rising inflation. Since businesses are raising their prices, the benefits often flow through and benefit investors. Companies that require little capital, such as technology companies and communication services tend to do well in inflationary environments. Also, companies with a competitive advantage with high barriers of entry and strong consumer loyalty tend to well in this environment.  However, high inflation and interest rate changes often increase volatility in the stock market.  Equities undergo additional pressure as higher yields cause investors to reevaluate the risk/return relationship and may seek to invest in debt that pays some more in interest.

• Real Assets – Real estate and other tangible assets like commodities tend to do well in inflationary times. Historically, as inflation rises so does property values.  This allows landlords to charge more for rent or homeowners to cash in more when they sell their property.  Also, those who carry a fixed rate mortgage benefit from inflation since their monthly payment and outstanding debt does not grow.

Chart Sourced From: https://am.jpmorgan.com/us/en/asset-management/adv/insights/market-insights/guide-to-the-markets/

How WAM Can Help:

With inflation concerns and potential interest rate hikes on the horizon, we believe now is a great time to review your asset allocation with your advisors.  Please reach out to our team and schedule a call to ensure your portfolio is positioned in accordance with your risk profile and the changing environment.

** 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.

We all know the phrase “don’t put all your eggs in one basket” and there is one concept in the world of investing that universally applies to all individuals… diversification.  Often, the very asset that has helped generate wealth over times poses the biggest risk to your financial future.  We will be exploring highly concentrated positions and what this means to you as an investor.

Concentration occurs when an investor owns shares of a stock or other security type that represents a large portion of their overall portfolio or net worth.  A position is typically considered to be concentrated when it represents 10% or more of the portfolio.  Investors may understand the risk these positions represent but may choose not to take action for a variety for reasons including:

• Tax Ramifications – Often times, it’s as simple as not wanting to pay the capital gains tax associated with selling a portion of a highly appreciated security if held in taxable account. Alternatively, stock options awarded from employers can lead to significant tax liabilities due to supplemental income when exercised, highlighting the need for proper exercise strategies.

• Emotional Bias – Others may experience an emotional or behavioral connection to the company. This could stem from shares received from an employer and a sense of betrayal by selling these shares.  Another emotional connection could arise from individuals who inherited concentrated positions from a loved one who felt strongly on the prospects of the company.

• Behavioral Bias – Lastly, investors may fall victim to a behavioral bias of a stock that has outperformed over time and believe past performance will continue into the future.

Chart Sourced From: https://content.rwbaird.com/RWB/Content/PDF/Insights/Whitepapers/Hidden-Cost-Holding-Concentrated-Position.pdf 

Portfolios with large concentration in individual holdings can introduce risk that could otherwise be mitigated through proper diversification.  Without proper planning, an investor’s overall portfolio performance can be driven by the heavily weighted security.  There are copious factors that could put downward pressure on stock prices, such as a deterioration of company fundamentals, shift in public outlook or perception of the company/industry, regulation or change in key leadership to name a few.  While not as common, black swan events can occur such as the well-known Enron scandal that evaporated wealth from shareholders and employees seemingly overnight.  Additionally, changes in a company’s corporate structure may lead to unintended ramifications for shareholders. For example, Medtronic’s decision to change the location of their headquarters forced employees and shareholders to fully realize (pay tax on) their deferred capital gains without actually transacting the security.  You can read more about it here.

With a better understanding of some factors that lead to security concentration and associated risks, let’s circle back to the tax conversation.  As of this posting, the Biden administration has proposed legislation to nearly double the top capital gain rate from the current 20% to 39.6%, excluding the additional 3.8% Medicare surtax.  While this would only apply to those individuals with incomes of more than $1 million, current capital gains rates are historically low with most investors falling in the 0%-15% bracket.  For context, top capital gain rates were roughly 40% in the late 1970s and have only decreased over the years.  Whether the new legislation will be passed by Congress in its current form or if amendments to the rate and/or income limits is still unknown at this time.  As a result of COVID-19, roughly $5.3 trillion of fiscal stimulus has been paid out to support the economy with trillions more on the table under the proposed American Families Plan and American Jobs Plan.  This level of spending will need to be supported and as such we anticipate taxes to increase into the future.  As the saying goes, “there’s no time like the present”, and certainly applies when looking to de-risk the portfolio and chip away at concentrated positions.

Graph Sourced From: https://www.taxpolicycenter.org/briefing-book/how-are-capital-gains-taxed 

Aside from the capital gains we spoke to, another key aspect of tax legislation proposed by the Biden administration is the potential to limit the “step-up” in cost basis to the first $1 million of a deceased person’s assets and $2 million for married couples.  This could lead to significant tax implications for the heirs looking to diversify concentrated positions as the original cost basis of the deceased will carry over to their beneficiaries.

How WAM Can Help

Through continuous collaboration with our clients, we help identify areas of concentration across your managed accounts in conjunction with your entire investment portfolio, including assets held away, as appropriate.  With tax mitigation at the forefront, we can help create a plan of action to strategize the timing of de-risking the portfolio in low tax years or reducing concentration within tax deferred accounts, allowing the funds to be re-deployed into our new thematic ideas.  We will continue to work alongside your trusted professionals to explore additional strategies such as tax loss harvesting and potential gifting scenarios for each client’s unique situation.

 
** 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.