Ordering supper, listening to music, arranging transportation, banking and socializing can now all be handled electronically, efficiently, and oftentimes without any human interaction. While this frees up time to be with those we love, explore new places, and dedicate to our communities, increases in data sharing and accessibility present both risks and opportunities for consideration.

A recent Wall Street Journal* article highlights just how much information we share with high-tech companies when doing something as simple as planning pizza delivery and at home movie night with a friend. Ordering online, paying through the Alexa app, and using Google Maps for directions to the friend’s house resulted in two women sharing over 50 pieces of data with tech companies including Apple, Amazon, Google, and Facebook.

Ongoing news about Facebook and Cambridge Analytics illustrates some of the risks associated with data collection. The EU’sGeneral Data Protection Regulation  (GDPR) will go into effect May 25, 2018; this law on data protection and privacy for all individuals within the European Union will be enforced internationally, as it addresses the export of personal data outside the EU. Businesses are being held accountable for adhering to their privacy policies. At Weatherly, we have a strict privacy policy and comprehensive data security program addressing our perpetual commitment to securing our network infrastructure and client privacy.

How many devices do you and your family use on a daily basis? There are currently 20.8 billion devices compromising the Internet of Things (IoT) and Cisco predicts by 2020 this will increase to 50 billion. Two of the most valuable components within the digital domain are privacy and quality of service. Technology used well can help streamline our lives, but take care to guard your personal information with best practices.

Given the remarkable amount of data that is being generated by our digital footprint, Weatherly looks to capture that trend by investing in companies leveraging the information we knowingly, or unknowingly make public. Have you ever searched for a product on Google or Amazon and decided not to buy it? The next day, have you logged into your web browser and viewed an advertisement for the exact product, but now for a slight discount? Your search queries, purchase habits, and geolocation are all being analyzed to provide you with relevant advertisements. Companies like Amazon, Google and Facebook have been generating millions in revenue allowing advertisers to leverage the data they have on your behavior. These providers also remind you of recurring purchases (dog food, diapers) or search pattern.

Intelligent interaction with machines, the web and the cloud is another space that is evolving, often called Web 4.0. With cameras for facial recognition and digital breadcrumbs to accurately predict your behavior, our interactions with technology will become more and more intuitive, helpful and in some ways creepy. Imagine you wake up and your bed tells you, “Coffee is ready in 3 minutes, traffic is already looking bad, so leave 7 minutes earlier than you normally do to make it to work on time. You have enough milk for one bowl of cereal, so I’ve ordered milk to be delivered by this evening. Don’t forget to exercise, you told me last week to remind you even if you tell me not to because you’ve gained 4 pounds since last month.” These types of interactions will only become more commonplace as you get ready for your day and before you get into your self-driving car and listen to music recommended to you by Spotify based on your previous listening.

Another way to capture this data splurge from an investment standpoint is by protecting it. Cyber security from hacking is paramount to our data being contained. Companies providing solutions for consumers, corporations or government are ripe for growth as bad actors around the world work to undermine security practices. Beware of fraud via phone, phishing, and email links.

Finally, blockchain technology is being adapted to a variety of industries to improve efficiency and increase transparency. Most simply, blockchain removes the human middle-man and allows processes to occur faster with fewer errors. The goal is also to eliminate the opportunity for fraud. Some applications are found here:

At Weatherly, our modus operandi is to guide our clients’ financial lives to meet goals, and a large part of achieving those goals is through the investment process. By identifying and capturing trends, we hope to generate value for our clients by investing in the companies best adapting to the new world.

*The article referenced requires a paid subscription to WSJ. Please contact us for further details.

** 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.

Congratulations! You’ve completed your undergraduate or graduate courses and are now moving on to the next phase in your life. Working and living on your own is exciting, with fresh opportunities and challenges, including taking responsibility for bills or loans and beginning the savings process for major purchases (car, home, or trips) and retirement. While this may seem overwhelming at first, having a Dialogue for Impact now to solidify your present financial standing will exponentially benefit you in the long run. We’ve developed a check-list for young professionals to reference when beginning their careers to Prioritize for Progress by strengthening their current situation, and simultaneously planning for their futures.

Savings & Expenses

The first question each graduate should ask is what cushion do I have in the case of a job loss, devastating injury, or unexpected life event. An emergency fund is critical to ensuring that, in a worst-case scenario, you aren’t stressed for cash. The balance of this account should typically reflect 3 months to 6 months of living expenses or the time it would take to find new employment.

An important piece of establishing a savings routine is understanding what current expenses total and what your overall financial picture looks like. A neat tool to use is Mint – a website that tracks all transactions for debit & credit cards and aggregates daily balances. Graphs and charts detail how much is spent in each category so users can determine if they are overbudget for restaurant spending or if they have the financial stability for upcoming vacations, philanthropy, or concert tickets. Checking Mint on a regular basis will also alert you to any discrepancies in your inventory of digital assets that may be related to fraudulent activity and increases the protection of your personal identifiable information (PII). An online password manager like Keeper is also useful for safeguarding online log-ins.

Once the emergency account has been appropriately funded with monthly income and expenses in mind, another great way to save is through the deferral of your paycheck into an employer-sponsored retirement plan, the most common being a 401(k). More details below:

401k

The 401(k) is a retirement plan that you contribute to with income from your paycheck on a pre-tax basis. Some employers offer matching contributions, usually up to 3% or 4% of what you defer. It would behoove employees to take advantage of this extra compensation that is essentially free money by contributing at least the matching rate.

A key component of 401ks and other retirement pans is the tax-deferred nature and inherent compounding interest. Compound interest is the idea that because capital gains and dividends are not taxed on an annual basis, they are able to be re-invested at a higher rate than if the gain or income was taxed. This is very beneficial for young investors with a long time-horizon to retirement. The chart below and the Khan Academy video explain compounding interest in greater detail. Another retirement account available to investors is the Roth IRA, explained more in the next section:

Chart: https://investor.vanguard.com/retirement/savings/when-to-start

Roth IRA

The Roth IRA is a tax-exempt retirement account, meaning that because the dollars you contributed have already been taxed, and will not be taxed again. Once you reach a certain age specified by the IRS, currently 59 ½, all funds in the account can be withdrawn without penalty. If an investor will be in a higher tax bracket later in life, then contributing to this account each year is very advantageous due to compounding interest and tax savings. The IRS specifies that qualified withdrawals for a first-time home purchase and certain medical/educational expenses and are not penalized if distributed from the account before 59 ½.

As of this writing the maximum contribution to the account is the lessor of earned income or $5,500. Investors should only make contributions to retirement accounts after accounting for all other bills as poor credit can negatively affect future purchases, which is addressed below:

Building Credit & Paying Off Debt

Anyone that has applied for a rental, car lease, or credit card knows that adequate credit is a critical piece of securing a satisfactory transaction. Poor credit can either cause the disqualification of a rental application, as most landlords will not rent to individuals with poor credit, or force home buyers to take on loans with excessively high interest rates. Effective steps to build credit are:

1. Paying 100% of your bills on time, including utilities.
2. Keeping lines of credit open, but with manageable balances (usually less than 30% of max credit)
3. Always making the minimum payment on credit card bills on time to minimize interest charges.
4. Monitoring your credit report for any irregularities.
5. Organize student loans by interest rate and payoff the highest interest rates first. Refinancing student loans may also be an option

For those with minimal credit history, signing up for a credit card is a good start to build a credit profile. While access to credit may create budgeting risks, maintaining a consistent strategy for purchases and balance reduction is key to building your profile effectively. Your first credit card will most likely be with your current banking relationship, but subsequent cards may offer perks such as airline points, cash rewards, or retail partnerships.Nerd Wallet’s 2018 list of top credit cards is a great place to begin the search for a card outside of your normal bank to take advantage of category-specific cards like no annual fee, airline miles, and relationship rewards.

You can access your credit report free of charge annually at any of these sites:

• Experian
• Equifax
• TransUnion

Estate Planning

Young professionals may think that estate planning is reserved for high-net worth individuals or older generations, but every adult with meaningful assets should maintain some sort of documentation to describe how belongings will be distributed upon death.Trusted advisers can be leveraged to ensure the appropriate documents are drafted and then updated to reflect life changes. Declaring the recipients of your assets in a will or trust and electing beneficiaries for retirement accounts is a great start.

• A will is a broad document that directs the disbursement of your assets to friends, family, or charities at your death There are some brief requirements to validate the will at time of its writing: the individual must not be under duress, be of sound mind, and had two witnesses present.
• Naming beneficiaries to retirement accounts is another key estate planning tip to ensure assets are directed to the appropriate person or entity. Primary and contingent beneficiaries can often be named on accounts to provide some layering.

Young adulthood is not a cake-walk by any means, but by ensuring critical financial matters are addressed now, you allow yourself greater financial flexibility in future decisions. The Ripple Effect of establishing a solid financial base now will allow you to shift your attention to more enjoyable aspects later in life.

** 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 strive to make an impact in a number of ways at Weatherly. Your financial plan is an important component and roadmap to success developed with a team of professionals. Taking into consideration your current financial situation, goals and aspirations, and using well thought out and reasonable assumptions, we seek to create an accurate evaluation of your financial plan to help you to see the big picture, while we prioritize a short list for forward progression.

It is important to have a financial plan, but sticking to it during times of volatility can be critical. Having a plan built with accurate information and conservative assumptions takes into consideration periods of volatility, and makes our clients long-term goals a priority.

Each financial plan is customized with numerous factors, and by implementing the following steps, we are able to create an extremely in-depth analysis that addresses your specific goals and needs.

1. Ask.Share. Repeat.

Weatherly’s responsibility is to consider all relevant information to our client’s respective plans and seek out any additional information that could impact that plan. By asking the important questions, sharing information with your team of professionals, and repeating this process to keep the flow of information relevant, we create a foundation for planning.

2. Dialogue for Impact

We collaborate with each client on a personal level to drill down into your financial situation to become a part of your plan. Having an initial Dialogue for Impact, we seek to identify the main considerations to include in your financial plan including, but not limited to:

• Financial statement preparation and analysis
  • Cash flow analysis and budgeting
    • mint.com is a great resource for consolidating financial accounts and creating and tracking your budget.
    • For a more simplified budgeting tool, use this chart to help understand and categorize your budget
  • Insurance planning and risk management
    • Fidelity offers a free life insurance calculator to estimate your life insurance needs.
  • Employee benefits planning
  • Investment planning
  • Income tax planning
  • Retirement planning
  • Estate planning
    • Use this worksheet for your digital estate planning where you can securely store your usernames and passwords, and location of assets.

Your goals are important to you, and we want to help you reach them. Common goals to think about and make a focus in your financial plan include:

• Emergency fund
• Pay off credit cards
• Retirement spending
• College funding
• Wedding funding
• New house purchase
• Car purchase
• Home remodel or repair
• Charitable giving
• Leave behind inheritance

By having a deep understanding of your current financial situation, a Ripple Effect naturally occurs throughout, where each aspect of your plan affects the next. As a cohesive, fluid process, your financial plan becomes the driver towards reaching your short and long-term financial and personal goals.

3. Prioritize for Progress

Once we understand your current financial picture and your most important financial and personal goals, we are able to Prioritize for Progress by reviewing and analyzing the data that has been provided to us. We review current investments and asset allocation, cash flow needs, assets and liabilities, education funding, insurance needs, tax strategies, retirement needs, estate planning, and any other relevant information you have provided.

4. Developing flexible recommendations and/or alternatives

When creating a financial plan, we want to give you options and allow for flexibility for your goals and life expectations to change and evolve. We typically create a base case as well as 2-3 alternative scenarios to show how small changes in your plan can have a large impact on the success.

• Base case: We take your current situation and project if maintaining this course of action will result in a successful plan. If assets are sufficient, what is your safety margin?
• Alternative Scenarios
  • Whether the base case scenario succeeds or illustrates a need for adjustments, we typically show how various changes in the plan can affect the outcome. Some of these scenarios are things you can control while others are simply out of your control:
    • Longer life expectancy
    • Utilize primary residence for additional equity
    • Increased/decreased living expenses
    • Additional gifting

By making these assumptions and making your financial goals a priority, we begin to build a clear picture of what your plan will look like. By adding in alternative scenarios, we go beyond your base case, and plan for potential risks that may arise during the course of your life in order to protect your primary goals and to be prepared for the unexpected.

5. Implementing recommendations and working with your team of professionals

By working with your team of professionals, including attorneys and CPA’s we can help to implement the recommendations we have made. We have discussed the importance of working with your team of trusted advisors in our previous blog post focused on estate planning and how to leverage these professionals.

Please take a moment to print and fill out Weatherly’s Client Information Release Authorization Letter – CIRAL so that we have the contact information of your team of trusted professionals on file to help coordinate the important aspects of your life.

The process that we implement when developing financial plans for our clients is central to what our client’s ultimately take from those plans. By using accurate, yet conservative assumptions and illustrating the impact that various changes can have on the success of those plans, clients should understand how their long-term goals are influenced by different factors. Our ultimate goal during the financial planning process is for our clients to feel assured that market volatility, a below-average market year, or unexpected expenses are buffered into the long-term success of their plan.

By working with our team to develop and revise your financial plan, we hope that you better understand the big picture, feel as if you have a roadmap to stay on track to help create a Ripple Effect that extends beyond your individual 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.

As Weatherly embarks on our 24th year of business, we wanted to thank our clients and colleagues who have contributed to our mutual success as a Firm and partner in the community. Since our founding, we have maintained a client base that is invigorating to work with and our team continues to create The Ripple Effect with every client we serve – our ultimate goal is to create and implement a strategy that is impactful for our clients, so they can impact their families, businesses and communities.

We welcome you to a planning model in which you can drop your stone of inquiry, and together we can explore The Ripple Effect. The real impact of our work comes from navigating the interconnected nature of life and livelihood.

Together with our clients and colleagues, we explore outliers of opportunity, solving problems and maximizing potential in unexpected ways. Conversations become a series of concentric circles – each influencing the next, impacting areas that had not appeared connected to wealth or planning.

Over the years, our client base has organically fit into three niche groups and we’ve tailored our education and services to provide dialog and expert advice that progress our clients forward. We learned through experience that the depth and relevance our of advice is directly connected to how much we learn about our clients.

The Small Business Owner

As a small business ourselves, we understand the intricacies involved in creating, maintaining and eventually implementing a successful plan and the agility associated with the planning process. We touched upon the life stages of a business in a previous blog post. We find clients in this niche have a focus on tax mitigation – you’ve created a stream of income that has grown significantly, so what type of retirement plan is right for you? Let us explore your estate plan and how it relates to your business. Do you have enough insurance coverage for you and your business? Is key man life insurance right for you? Many business owners want to transfer ownership to their successor or heirs or work part time in retirement. Have you had your business valued recently – if not, do you know how often you should?

The Working Wealthy

Many of our clients are in their peak earning years, and much like the small business owner, minimizing taxes are on their minds. We tailor our investment strategies for each client individually, creating custom portfolios that are tax and fee efficient and implementing strategies for concentrated stock positions. Individuals who have worked many years at large corporations often have stock option plans, deferred compensation plans and 401(k) allocations to consider. You’ve worked hard for your money, and we want to ensure your money is working hard for you. We work to answer the age old question “when can I retire” with confidence by creating a plan to manage longevity that is adaptable to life’s nuances. Estate planning is paramount for individuals and families in the high net worth area – we explore what estate planning tools are right for you given your assets and goals for you and your beneficiaries.

The Women in Wealth

As a Firm with a strong female presence, we have naturally fostered relationships with women in the community, including entrepreneurs, executives and women in transition through retirement, death or divorce. Estate planning is paramount for individuals and families in the high net worth area – we explore what estate planning tools are right for you given your assets and goals for your beneficiaries. We provide a “good health check-up” annually for our clients to ensure your estate plan is up to date and beneficiaries are in line to plan for life’s big events. We also encourage clients to incorporate charitable giving into their planning conversations.

The Middle Generation

We often work with clients who are in the “sandwich generation,” and are caring for aging parents and planning for the futures of their children. We enjoy working with clients at all stages and offer progress that is both robust and contiguous at all levels, incorporating the family conversation. Elder abuse is on the rise and we monitor unusual activity to help our clients spot unusual behavior that may demonstrate diminished mental capacity.

The millennial generation also has a separate set of considerations as they’re planning for their families. We encourage clients to discuss gifting strategies with us – what financial assistance can you provide to your children while allowing them to maintain independence. If you have grandchildren, does a 529 plan make sense?

How Weatherly Can Create Impact

We find ease and vitality in aligning with growth-minded people who are highly engaged in life. We foster a culture in which you actually understand your plan, and over time, you’ll find yourself navigating daily life with a peaceful sense of awareness. We want to take an inventory of the services that will derive value and Prioritize for Progress to allow you to apply your bandwidth to areas that can be most impactful given where you’re at in life.

As we share our story, we’re looking to widen our circle of people who enjoy pushing past the status quo and are forward-thinking. We welcome the opportunity to connect with you and others whose vision aligns with our capabilities to work synergistically together. Please feel free to contact us about any of the topics that pertain to you or someone you know so we can continue to put our Ripple Effect into motion.

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

The exchange of services and goods has existed in economies since the creation of civilization, although the method of payment has transitioned over time from a barter system to mediums of exchanges such as coins and banknotes. More recently, electronic exchanges have revolutionized the way consumers, producers, and service providers transact. Credit cards and other loaning mechanisms have given individuals and small organizations the ability to take on more credit, allowing for jumps in consumer spending and economic activity. New types of exchanges and currencies have rapidly innovated and transformed established financial industries and practices, although they each feature their own concerns over privacy, security, and valuations that users should consider.

Institution Disruptors

• Payments – PayPal (PYPL) has revolutionized the e-payment space with its online transaction platform by offering secure transactions between individuals and businesses, notably for international payments and currency conversions. Its consumer application Venmo, has fit in perfectly in today’s sharing economy by fusing social media with peer-to-peer transactions so friends can share their payment history. PayPal also recently confirmed that major retailers will begin accepting Venmo.
• Lending – LendingClub (LC), SoFi, and UpStart are online lending applications that allow individuals to access private markets for mortgages, student loans, and personal loans that would historically only have been available through large creditors. Traditional creditors without efficient digital platforms are facing an existential threat from new lenders that ease the financial process for customers comfortable with online applications.
• Raising Capital – GoFundMe and KickStarter give individuals the ability to raise large amounts from many small donations for social entrepreneurship, business ventures, or charitable causes. These crowdfunding platforms appear ripe to delve into the space previously ruled by venture capitalist and private equity firms and allow smaller investors to make impactful contributions.

“Moneyless Money”

What is it? – Digital currencies, such as Bitcoin and Ethereum, utilize block-chain technologies to track and validate each piece that is owned, spent, or sold in decentralized exchanges.

• Blockchain – digital ledger of transactions
• Decentralized exchange – transactions occur on a peer-to-peer basis and do not flow through a central location where the value of the money is defined and controlled

What are the effects on markets? – Digital currencies have exploded in value as investor exuberance has reached all-time highs. The popularity of the currency could lead to the diminished use of standard money (i.e. banknotes and coins) and therefore present difficulties for central banks to influence financial markets through the use of monetary policy. Opinions of the currency concerning valuations differ across many industry leaders, even Jamie Dimon of JPMorgan weighed in by recently referring to Bitcoin as a fraud..

What is the legal status? – Bitcoin has been legal in the United States since 2013 and is classified as a commodity by the CFTC. Critics however have noted that Bitcoin is solely used for the purchase of illegal goods or criminal activities. Supporters will respond that because the address of each transaction is tracked, authorities will be able monitor these transactions and thwart the perpetrators more efficiently.

Can’t get enough? Follow a few links below for further reading!

• Cryptocurrency 101
• The Truth About Blockchain
• Blockchain: A Better Way to Track Pork Chops, Bonds, Bad Peanut Butter?

Digital Marketplace Concerns

The opportunities and benefits of technical innovations in payment systems, lending platforms, and raising capital come accompanied by certain risks related to data privacy and human error. Protecting personal information will need to remain paramount during the evolving use and implementation of such tools. Consumers and businesses will need to prioritize their focus on data security, cyber hygiene, and education.

While the overall market for digital currencies estimated worth has been valued at $160 billion (CoinMarketCap), these currencies present a unique set of concerns and risk. The SEC has succinct bulletins outlining risks related to bitcoin and initial coin offerings. Some risks investors interested in the space may want to consider are: being targets for fraudulent or high-risk investment schemes, lack of insurance and recovery options, exchange rate volatility, and a volatile regulatory environment, like recent news in China and Japan (Ripple).

As new financial practices and mediums of exchange flood our economies and marketplaces, investors can be sure of one thing – innovations in financial technologies will continue to revolutionize institutions and processes critical to our daily lives. Weatherly’s team has taken note of these rapid changes and will continue to strenuously monitor new industries mentioned in this article, specifically mobile payment systems through blockchain technologies, to capitalize on new opportunities at the company level.

** 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 the ebbs and flows of everyday life run their course, it is often easy to stress and fixate solely on our financial ambitions. During these times, it is important to remember that money is not the only answer, but it can help make a difference. Not just in the obvious sense of benefitting you and your family, but in a broader sense as well. If you think of your money as a tool to help achieve equanimity, you’ll find that its possibilities are endless. Just as ripples spread when a small pebble is dropped into water, your financial plans and goals can positively influence other aspects of your life and help create your own ripple effect. Weatherly challenges you not only to think about your financial goals, but your life ambitions as well. We encourage you to complete the survey below so we can best utilize our services to help you do well, live well, and give well.

1. What are your core values?
2. Do you feel like you are able to make an impact?
3. What kind of legacy would you like to leave behind?
4. How can you leverage your financial situation to achieve your life goals?

After you have considered and answered the above questions, we encourage you to discuss your responses with us so we can help put your ripple effect into motion.

Putting the Ripple Effect into Motion

There are a few ways you can create your ripple effect with your financial success. Consider the following:

• Beneficiaries: It is important to have your life savings and assets passed on to those aligned with your will and wishes. Maybe you want to pass on your wealth to the next generation or follow in Warren Buffet’s tracks by donating 100% of your wealth to charity, or maybe it is a combination of the two. Regardless of what boat you are in, we recommend reviewing your beneficiaries, trust document, and overall estate plan on an annual basis or when certain life events- such as birth or death in the family, divorce, or remarriage- occur. It is also good practice to review your beneficiaries and your intended ripple effect side by side. If your beneficiaries need to be updated or changed as a result of your review, we are happy to discuss and help implement these changes for you. We also encourage you to discuss your wishes in a general sense, not necessarily including specific dollar amounts, with your elected beneficiaries as a way to start the family conversation about wealth, instill family values, and emphasize the importance of planning for the future.
• Socially Responsible Investing (SRI): Socially Responsible Investing (SRI) allows you to invest in causes, corporate practices, and communities you support and avoid those you do not. This investment strategy enables you to create positive social change, while potentially receiving a financial return on such investments. To effectively implement a socially responsible investment strategy, we recommend the following steps:
  • Step 1: Determine what causes, corporate practices, and/ or communities are important to you. Some common SRI areas include, but are not limited to: environmental stewardship, customer protection, human rights, animal rights, and alternative energy.
  • Step 2: Make a list of products, companies, or causes you want to avoid. A few examples may include: alcohol, tobacco, fast food, gambling, and weapons.
  • Step 3: Discuss your SRI goals with Weatherly. We value and encourage your efforts to create positive social change as reflected in some of our current holdings, including one of our top holdings, Guggenheim Global Water ETF (CGW). We can also work to add or remove positions in those stocks, mutual funds, and/or ETFs to accomplish your SRI goals and needs.
• Charitable and Education Initiatives: Maybe you always wanted to see the world, but did not have the opportunity to do so until now. We encourage you to incorporate your charitable endeavors while traveling. A few ways to accomplish this include missionary trips, teaching abroad, or donating school supplies or clothes to local schools while on your trip. You can also impact your own community by volunteering your time or donating your assets from afar. One way you can donate your assets is through a Donor Advised Fund (DAF). The DAF allows you to donate cash, publicly traded and privately traded appreciated stock, real estate, and other acceptable assets. Once donated, you receive an immediate tax write off for donations to qualified public charities. To help facilitate your charitable giving, Weatherly can assist you in setting up and managing your DAF. For more information regarding DAF, please refer to our charitable giving blog at the following link: http://www.weatherlyassetmgt.com/blog/39tis-the-season-of-charitable-giving-and-tax-planning. We encourage you to involve the next generation in your charitable initiatives to emphasize the importance of giving back to the community, thus continuing the ripple effect.

Please do not hesitate to reach out to Weatherly with any questions or suggestions on how to start your Ripple Effect.

** 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.

Business owners live two often intertwined lives, their own and their business’s. We view the process of creating, growing, establishing and ultimately exiting a business similar to the different stages of a human’s life. Just as a person’s interests, motives and actions differ as they progress from infancy to the later stages of life, the considerations that businesses face vary from start-up to maturity. As in life, business owners need to nourish and develop their craft while utilizing internal and external experts, leveraging technology, focusing on innovation and leading their team into the future. The chart below summarizes some of our thoughts on the considerations faced as a business progresses through the stages of the life cycles.

Click here to enlarge and interact with the Stages of Business chart.

Most business owners are focused on the day-to-day growth of their business. Often an owner may find it difficult to judge where their business falls in the life cycle and fail to create the bandwidth to prioritize next steps. Through thoughtful discussion and by leveraging Weatherly’s connections and experience, potential value can be added as your business enters the growth stage, becomes an established business or approaches the mature stage. A team of experts including retirement specialists, business attorneys, CPAs and wealth advisors can help to lead, design and implement the appropriate next steps. Considerations of retirement plans, key man insurance and developing a next-gen roadmap are all integral parts of our discussion on how to best convert your hard work into a saleable asset and plan for a more secure outcome.

As one of our favorite niche clients, Weatherly works with small business owners at all stages of the life cycle. Creativity and formation begins the development process but the opportunity to protect business structure, reduce taxes and develop a plan for the highly compensated also becomes central as a company matures. If you or a friend owns a business and wants to review our capabilities, Weatherly would be happy to schedule a consultation and we welcome the opportunity to lend a helping hand as your business progresses through its own life cycle.

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

The process of creating your estate plan can be a dynamic and challenging task involving detailed discussions with your estate planning attorney, financial advisor, and CPA. Every family is unique, with different assets, goals, and complexities that must be reflected in your planning instruments. We have described the documents that should be a part of your estate plan in our previous blog post and the driving forces behind these documents of tax and control.

Our clients often have to push themselves to consider a variety of outcomes and “what if” scenarios, starting with the now – what would occur if something happened to myself and/or my spouse tomorrow? Although emotionally challenging to think about, the process is necessary. Estate plans are living documents that can be adjusted as you, your family, and your assets grow and change over time.

Frame the Discussion

Your estate plan should include provisions for your assets both during your lifetime and after your passing. Strategic planning to address the tax, legal and financial aspects of your estate while living should ensure all pieces of the overall estate are working together most efficiently to minimize tax and risk, while maximizing growth and return. However, equally as important are the mechanisms put into place to ensure proper distribution of assets at your passing or incapacitation, considering your goals, values, and objectives.

The motivations vary significantly per family. The principles and ideals that are important to you should be a running thread throughout the estate plan, including:

• Ongoing family business – operations or ownership
• Charitable intent – specific organization/cause or core value of giving back to your community
• Financial security – of your spouse and family
• Support of education – kids and/or grandkids

The strategy and the individuals designated to carry out your legacy are fundamental ingredients to the success of your estate plan after your passing. We have created a checklist and timeline to illustrate the complex process of settling an estate and the imperative role of your executor or successor trustee.  This checklist also illustrates the complexity and detail involved for your loved ones after your passing.  Weatherly serves as a quarterback for our clients to collaborate with your estate planning attorney and CPA to delegate necessary tasks, and provide personalized support.  Our goal is for your team to work as a well-oiled machine and guide you through the estate administration process with comfort and clarity.

Leverage Professionals

Your most vital tool is the team of advisors assembled to guide you and your heirs throughout this dynamic process. The selected professionals will provide competent, efficient, and creative strategies to develop the most appropriate solutions for you and your family. Weatherly provides personalized support and financial guidance to the executor/successor trustee and heirs every step of the estate administration process.  Communication amongst your team is crucial to the creation and implementation of your plan, we believe collective expertise through collaboration provides the best result for you and your family.

** 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 growth and inflation expectations have risen over the past several months, stocks and bonds have had very different reactions. Let’s look at some principles of bond investing to shed some light!

Bond Mechanics

Bonds can be offered by many different types of agencies, including federal governments, municipalities, and corporations. These securities have five inherent components:

• Maturity – how much time is left until the bond expires and the principal is returned to the lender. The longer the maturity of a bond, the more sensitive the bond market price is to changes in prevailing interest rates.
• Duration – the maturity of an investment based on weighted cash flows. If the majority of a bond’s cash flows are attributable to the final principal payment, then the duration will be closer to the bond’s maturity.
• Coupon/interest rate – the stated amount that the lender will be compensated on a regular basis for providing the loan to the borrower. The amount is typically paid on an semi-annual basis and is based on a percentage of the par value of the bond. For example, a bond with a coupon rate of 5%, paid on a semiannual basis, and $1,000 par value will receive coupon payments twice a year of $25.
• Yield – the annual return, in percentage terms, the investor will expect to receive by investing in the bond if held to maturity. Yield is inversely related to price; the higher the yield, the lower the price, and vice-versa. Yields can be stated as return within a certain time period such as yield to maturity or yield to call. If a bond’s price is greater than its par value, the bond is stated to be priced at premium and the yield to maturity will be lower than that of the par priced bond. The opposite of a premium is a discount, and occurs when the market price is lower than par price.
• Credit rating – is an assessment of the likelihood that the borrower will repay the borrowed principal and meet scheduled interest payments. The lower the credit rating, the less likely that the borrower will meet these payments. There are two tiers to credit ratings, investment grade and speculative (junk) grade.Weatherly limits its fixed income investing to bonds with investment grade ratings.

Fixed income valuations are derived from the characteristics listed above, but are responsive to universal market risks. Investors are compensated for taking on additional risk through a higher coupon payment or higher yields/lower prices. The following risks are common in bond investing:

• Interest Rate Risk – As interest rates rise, newer issues of bonds will have higher yields that compensate lenders at a higher amount. Now that these “new” bonds with a higher compensation rate and lower priced bonds are available in the market, bond buyers will have less of an appetite for the previously issued bonds with a similar risk profile, but lower interest/coupon rate. Therefore, these “old” bonds will experience a decline in market value and rise in yield until there is an equilibrium in the marketplace.
• Credit/Default Risk – The greater the likelihood that an interest payment or repayment will not be met by the borrower. As with most other risks, the investor will be compensated with a higher coupon rate or higher yield for taking on the higher risk.
• Maturity Risk – In a vacuum, a bond with longer maturity has a greater risk than a bond with a shorter maturity purely because the lender is required to wait a longer period of time to receive the principal repayment amount. This is featured on the upward sloping yield curve, as investors are compensated with a higher yield on their investments, the longer the maturity of the bond.
• Inflation Risk – Traditional bonds will repay principal at the maturity date and pay the stated coupon at the regularly scheduled date. The inherent risk to lenders is that these payments are not indexed for inflation and will therefore not rise in value with the inflation of a given currency, negating the real return of the investment.

If rates do rise, how will that affect fixed income investing for Weatherly clients?

Investments with longer maturities such as 30 year or even 50 year investments experience a more dramatic drop in price compared to similar shorter maturity investments as rates rise. Speculative grade investments with lower credit quality also respond with a larger depreciation in market value in a rising rate environment in juxtaposition to investment grade bonds. Weatherly strategically invests in high-quality (investment grade) and short to medium term (generally <7 years to maturity) investments with values that are marginally less affected by interest rate changes risk to avoid a steep drop in portfolio returns. Duration is generally much lower than average maturity in Weatherly portfolios.

How will the new administration’s policies affect bond values and availability?

The new administration has advocated for widespread tax reform, most notably the decrease of marginal tax rates for individuals and increased infrastructure spending. Municipal bond income is untaxed for individual bondholders and boost after tax yields for high-net worth individuals. Marginal tax rates would be required to drop significantly to equalize the current after-tax yields of municipal bonds with comparable U.S Treasuries and corporate bonds. The current administration has also proposed infrastructure spending in many districts that would boost municipal bond issuances and a potential offering of a Build America Bond replica. Build America Bonds, created under the America Recovery and Reinvestment Act in 2007, are taxable municipal bonds that carry federal subsidies for the bond issuer, who can then pass on the subsidy to bond buyers. Build America Bonds are often attractive for individuals with minimal difference between their pre-tax and after-tax yields, but a desire for high quality credit ratings, low duration, and high yields. Government spending could also be advantageous for TIPS and convertible debt holdings, as the stimulus could drive inflation in the economy, benefiting holders of investments that keep pace with inflation.

As the domestic fixed income investing environment dynamically changes, Weatherly continues to be a stalwart investor for our clients to find securities that boost yields, while maintaining risk/return profiles.

** 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.

January often stirs a jump start on New Year resolutions as people wipe the slate clean from the year before.  Ranging from nutrition and exercise to reading and traveling, goals for the New Year can enhance our overall well-being.  We want to help our clients, colleagues and friends with goals and resolutions relating to our area of expertise.  Here are some ideas to get you on the track for an organized and well-balanced 2017:

Clean up Clutter- I’m sure by now many of you are familiar with The KonMari Method popularized by Marie Condo’s book The Life-Changing Magic of Tidying Up.  The premise is simple – if an item in your home doesn’t bring you joy, get rid of it!  This is a great time of year to donate gently used books, clothing and household goods to local charities.  The KonMari Method also states that a decluttered space helps with clarity and focus; so you may also be inclined to take on the often daunting task of organizing your office, which lead us to our next idea.

Purge and Catalog- This site is a great tool outlining how long you should keep certain documents, like bank statements and tax returns.  You can divide your documents into a “purge” and “catalog” stack, and either scan or file the items to be cataloged in a manner that works for you.  Please be sure to shred any documents that are in your purge pile or those that you’ve scanned and archived.  You can take documents to Staples to be shred for a low fee or check what local services may be offered to you – for example, in San Diego, SDCCU hosts an annual “Super Shred” event.

Streamline and Automate- Now that you’ve gone through your physical documents to purge and catalog, sign up for electronic statements for your various accounts.  You won’t have to worry about the paper pile-up and you can either download or keep your statements on the service provider’s site.  Weatherly also offers a client portal where you can view your current and historical quarterly statements; we can sign you up if you haven’t already.  Our portal is also home to our client vault where you can post documents, like your estate plans and tax returns, and we will download and save them to our secure server indefinitely.  We also recommend aggregator sites like Mint to track your monthly spending and budgeting.  You can link multiple accounts for easy viewing of what you’re spending each week, month or year.

Create a Roadmap for Yourself- Tracking your monthly budget may lead you to question how much you should be putting away for retirement, or if you’re spending or gifting too much or too little.  We work with our clients on detailed financial plans to answer these questions and more.  We touched on this topic briefly in a previous blog on Managing Longevity and financial planning is one of the keys to managing your assets in a manner during your working years that would allow for comfortable and seamless retirement later in life.  We analyze income and spending, assets and liabilities and the various buckets you’re putting funds into each year to come up with a plan for the future.  Just like going to your doctor for your annual physical, we want to review your plan at least annually for accuracy and a good financial health “check-up.”

Create a Roadmap for your Heirs- Reviewing your estate and legal documents are just as important as reviewing your financial plans.  Each year brings updates to our tax codes and even changes to laws pertaining to estates, which could translate into a change for your current estate plan.  There are a multitude of reasons to re-evaluate your plans, in addition to changes in tax codes, like changes to your family or wealth.  A basic will may not suffice if your financial plan shows that you’ll amass substantial assets throughout your lifetime.  You can review our blog on Estate Planning to see if an update is appropriate for you – or you can give us a call to discuss (and possibly share your estate documents electronically via our portal if you have completed your electronic cataloging!)

Upgrade- As much at it sometimes pains us, it may be time to upgrade some of your technology.  If you’ve been writing your passwords down on sticky notes, you could benefit from an app like Keeper that manages your passwords in one secure place.  Make sure you also use complex passwords and change them with some frequency to prevent hacking.  Log out of any secure website after use and don’t send sensitive information via email.  If you need a refresher on our cyber security tips, you can check out the post we wrote here.  If you want to re-evaluate or change the RIA you’re working with, you can use sites like Investment Advisor Public Disclosure to view regulatory information and ADV filings for advisors.  Also make sure you’re reviewing the type of advisor and fees, if your advisor adheres to fiduciary standards  and performance, as these all make an impact in the long-term success of your financial plan.

We wish you all health and wealth in 2017 and success with all of your goals and resolutions!  Please don’t hesitate to contact us if we can be of assistance.

** 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.