SYM News

Your Portfolio and Presidential Elections

Presidential elections in the United States are storied events which often culminate with a fresh face in office and a large new voice in American policy.

 

Though just four and five percent of all Americans voted for Donald Trump and Hillary Clinton during the primaries,[1] many voters now shudder at the prospect of one candidate or the other occupying the White House. Super Tuesday showcased a national display of petulance with a spontaneous surge in Google searches for “how can I move to Canada.”2 Some voters say they begrudgingly favor one nominee over another in hopes of dodging a “greater evil;” others find comfort in a third party candidate (while acknowledging that any third party faces great odds amid a long history of Republican and Democratic victories). There is even a large cadre of Americans claiming they will abstain from voting altogether. Meanwhile, though not part of the vocal majority, a segment of Americans appear to be perfectly comfortable with the drama playing out on the political stage and are pleased with their chosen candidate.

 

Until November 8, our clients living in the United States will continue to be bombarded with appeals and attacks meant to influence votes, but alarming political commercials and emotionally-charged news articles can spill over and create investment temptations as well. At SYM, we’ll happily stay out of the political debate while offering a few points to consider when it comes to election-year finances.

 

Viewing the election through an investment lens, our best advice is un-glamorous but sound: stick with the strategy even (and especially) through uncertain times. It’s encouraging that historically, investment values have held solid during times of presidential unpopularity. This also holds true during high-stakes elections where military, business, and social concerns are at the forefront, and when members of either party win. Remember that financial and political analysts have been torturing data for as long as data has been available, and show no sign of easing up. But if the overflow of speculation/information still gets to you, reflect on the following truths:

 

  • With or without gridlock, no party gets its way unfettered.
  • Changes in Washington are typically incremental, not revolutionary.
  • Interestingly, if you happened to support a primary candidate who was calling for a revolution, know that investments have grown substantially during years in which elections did not result in a desired revolution.
  • For better or worse, campaign rhetoric doesn’t always align with what happens during the winner’s presidency.
  • Consumers and businesses have a greater impact on the economy than has the government.
  • While economic conditions often affect the incumbent party’s reelection odds, the parties themselves rarely cause meaningful differences in investment outcomes.

Bear in mind that SYM’s equity portfolios invest in companies, not in the United States political climate. As with any time, we fully expect stock prices to move up and down throughout the year. However, SYM’s broad diversification among many sectors and countries is designed to lower the impact of any hypothetical regulation on individually debated groups of businesses - such as minimum wage paying restaurants, fossil fuel miners or multinational importers. In the S&P 500 (a company for which one candidate called for a temporary product boycott and promised pressure to end the company’s overseas manufacturing), constitutes under one half of one percent of SYM’s investment portfolio.

 

SYM’s quarterly presentation will address these issues for our clients in more detail. With that said, for the next few months a relaxation phone app or quality time spent away from all media sources may benefit your investment outlook as much as the strategy principles we usually discuss.

 

[1] New York Times, August 1, 2016. Accessed at http://www.nytimes.com/interactive/2016/08/01/us/elections/nine-percent-of-america-selected-trump-and-clinton.html?_r=0
2 US News & World Report, March 2, 2016. Accessed at http://www.usnews.com/news/blogs/data-mine/articles/2016-03-02/google-searches-surge-for-moving-to-canada-after-trumps-super-tuesday-success

 

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Two Documents Every 18-Year-Old Should Sign

Financial and health care power of attorney documents are fundamental components of any estate plan.  Executing these documents is essential to allow others to act on our behalf when we are unable to act for ourselves.

 

When we think about who will act on behalf of our adult children when health or other emergencies arise in their lives, we tend to automatically assume that as parents we can always step in for our kids when they can’t fend for themselves. Right? Wrong!

 

On a child’s 18th birthday, he or she becomes an adult in the eyes of the law. This is true even if you are still paying for his or her college tuition, housing, cell phone and car insurance, and it’s even true if you still carry the adult child on your health insurance plan and claim him or her as a dependent on your income tax return. 

 

More importantly, without proper documentation parents don’t have the authority to manage their adult children’s finances or make health care decisions on their behalf. A child developing the maturity to make their own choices is part of the normal process of turning children into fruitful adults. However, if a young adult is in an accident or becomes temporarily disabled, without a pre-existing power of attorney a parent will need to obtain court approval simply to act on their child’s behalf.

 

As much as we hope we’ve prepared them to take care of themselves in any situation, we are likely still our children’s fallback for emergencies. It could be a parent’s worst nightmare to find out the hard way that the law has cut some valuable and deep ties when your child needs you the most. And as the average age of marriage for young people creeps up into the late 20’s, it’s likely there could be a ten-year or more window of risk where there is no spouse to assume the role of agent and advocate and you as the parent will be in the best position to act during times of crisis.

 

Fortunately, a simple solution exists. When your children turn 18 years of age, ask them to sign both a Durable Power of Attorney and a Health Care Directive, documents which will allow you to make decisions regarding emergency health care or step in and manage your adult children’s financial affairs should they be unable to do so themselves. Be sure the documents are valid not only in the state where you reside, but also in your children’s states of residence.

 

The Health Care Directive consists of three parts: a health care power of attorney, which authorizes an agent to make medical decisions on someone’s behalf; a HIPPA release that will provide the agent full access to medical records; and a living will, which expresses a person’s preference regarding end-of-life care.

 

While the health care directive gives authority over medical decisions, a Durable Power of Attorney appoints an agent to act on an adult child’s behalf in a wider range of financial and legal matters. Not only limited to parents, any trusted family member, friend or adviser may take on the role of agent.

 

A power of attorney may become effective from the moment it is signed or it may be activated by a specific event—for instance, if he or she becomes incompetent. The problem with this approach, known as “springing power,” is that someone must decide when an individual has reached that state. For that reason we recommend a durable power of attorney that takes effect immediately.

 

Certainly these situations are not fun to ponder. But an ounce of prevention is worth a pound of cure when it comes to the health and wellbeing of our adult children.

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Who is your financial advisor really working for? Part 3 of 3

People like to ask financial advisors for “the next hot pick” in the stock market. Though a true professional won’t venture a serious guess to that inquiry, you can be sure he or she can offer something more valuable than a stock tip. Parts 1 and 2 addressed the first four of five questions people really should ask when coming face-to face with a wealth advisor or anyone selling investment products. The answer to the fifth and final question will quickly reveal what kind of investment provider you are dealing with, and whose interests might take priority in any future relationship. Not a SYM client? Put your current advisor to the test.

The fifth and final question is one of critical importance:  Will you accept the responsibility to put my best interests first? 
In the investment industry (and others), the responsibility to put clients’ interests before your own is considered a fiduciary duty. As unbelievable as it sounds, most advisors were never required to adhere to this principal. In fact, it’s still extremely difficult for prospective clients to know what they can expect of a relationship with their financial professional should conflicts of interest occur. This issue was pressing enough that in March 2016, the Department of Labor (DOL) ruled that all advisors must become a fiduciary, though their definition still allows for conflicts of interest to exist if disclosed.

 

In contrast, financial advisors who identify as Registered Investment Advisors (RIAs) have always pledged a code of conduct more stringent than the DOL’s new requirements. Their compensation is fee-only or fee-based, meaning their pay is linked to serving clients uncommonly well, not hawking an investment product.

 

When considering a new advisory relationship (remembering that all advisors will consider themselves to be fiduciaries after January 2018, the final implementation date for DOL requirements), start by asking the advisor what having a fiduciary responsibility to clients means to him. Ask what his fiduciary duty looks like in action, and if his method of compensation might introduce conflicts of interest to the relationship. If you aren’t comfortable with the response, we recommend you keep looking.

 

The sad reality is, much of the financial industry is a thinly veiled sales institution. Because we are humans, we can become emotionally impaired by those things which have happened to us most recently. Market or personal disorder can make fertile ground for salespeople with “products” that make us believe we are well-protected. Consider fixed annuities, cash features like CDs and high yield deposit accounts, and “no risk no loss” promotions. Are these inherently bad products? Not necessarily.  But are they the best places to invest your money? NOT NECESSARILY. The problem occurs when a financial salesperson (making his mortgage payment by way of sales commissions) convinces both of you that they are!

 

A true professional will deliver guidance and results to steady you through thick and thin. He or she will help you sidestep the errors in judgement that might trigger a desire to buy and/or sell at the wrong time. A financial salesperson, sometimes unwittingly, will offer only the tools and resources at his disposable, however appropriate or inappropriate they may be. As they say, “When all you have is a hammer, everything looks like a nail!”

 

The next time you meet a financial advisor, forget about products. Don’t ask for a “magic bean” to help you avoid taxes, access market upside without downside, or protect you from what happened yesterday. Instead, ask the five thoughtful questions above. While a salesperson will have slick responses (or worse, try to sell you the magic bean!), a professional advisor will provide real food for thought.

 

If you wish to share this email or any others from SYM, we welcome you to forward, to print and post, or to direct your friends and colleagues to www.SYM.com.

 

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Who is your financial advisor really working for? Part 2 of 3

People like to ask financial advisors for “the next hot pick” in the stock market. Though a true professional won’t venture a serious guess to that inquiry, you can be sure he or she can offer something more valuable than a stock tip. Part 1 addressed the first two of five questions people really should ask when coming face-to face with a wealth advisor or anyone selling investment products. SYM clients and friends will recognize how quickly these next two questions reveal whose interests are likely to take priority in any future relationship. Not a SYM client? Put your current advisor to the test.

 

QUESTION 3:  Am I saving enough to enjoy the retirement lifestyle I desire?
Part of a professional advisor’s job is to become knowledgeable about your values, goals and dreams, for they are the reasons you invest in the first place. An advisor who is committed to your well-being will construct a detailed model of your financial holdings and cash flows to see if you are on the path to realizing your objectives. After exploring your desired lifestyle, he or she will tell you very frankly if there is a shortfall and coach you to spend less, earn more or for longer, or adopt a more aggressive investment posture to increase the likelihood you will realize your retirement dreams.

 

QUESTION 4:  Am I still working because I need to, or am I now working because I want to? 
On the flip side of the retirement coin is understanding, “For what reason am I still working, anyway?” Far too many people put their life passions and dreams on hold for far too long because they think they still need to work to provide for their future. Stop and ask yourself, when you have no idea where the finish line is, how do you know when to stop running? 

 

Sadly, due to a variety of situations, many people are never able to enjoy the fruits of their efforts as they had hoped. Can you retire earlier and still live the lifestyle you wish to have? A hands-on financial advisor not only helps you to balance your savings and spending, but keeps careful watch to celebrate the time when you’ve met key savings goals.


Next: What it looks like when a professional advisor puts your best interests first.
If you wish to share this email or any others from SYM, we welcome you to forward, to print and post, or to direct your friends and colleagues to www.sym.com/sym-news.

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Who is your financial advisor really working for? Part 1 of 3

People like to ask financial advisors for “the next hot pick” in the stock market. Though a true professional won’t venture a serious guess to that inquiry, you can be sure he or she can offer something more valuable than a stock tip. Below are five questions people really should ask when coming face-to face with a wealth advisor, or anyone selling investment products. SYM clients and friends will recognize how quickly these five questions reveal whose interests are likely to take priority in any future relationship. Not a SYM client? Put your current advisor to the test.

 

QUESTION 1:  How are you compensated?

 

There is a night and day difference between the service you can expect from a financial salesperson versus a professional financial advisor. To illustrate: Imagine you learned the lawn service employee who cuts your grass could earn a huge bonus – but only on the 25th lawn he mowed in a single day. How likely would he be to take the time and care necessary for your lawn to look great, whether you’re lawn #1 or lawn #25? We would argue not likely at all. This employee has an inherent conflict of interest between his financial incentives and the quality of work he can do for his pay, and no matter how much he would like to leave your yard picture-perfect, he’s dis-incented by his employer to do it. The same holds true with your financial advisor. Unless an advisor can assure you that he and/or his company’s pay is not linked to the sale of certain financial products, do not even consider following his recommendations without an independent review. 

 

QUESTION 2:  When should I start my Social Security benefits?

 

Oddly, the Social Security question is more often answered by a person’s social group, neighbors, or CPA than by a subject expert. To make matters worse, financial salespeople posing as advisors have little to gain on this front so they may not be very invested in providing guidance. However, a true financial advisor is as committed to adding value to your life as he or she is to working with you on your investment portfolio. From such an advisor you would learn that taking Social Security benefits at the earliest opportunity is one of the most common mistakes made by retirees and pre-retirees. Based upon years of analysis and recommendations for our clients, in some cases SYM advisors find we can add an additional 5% to 10% to the total expected value using in-depth claiming strategies.

 

Next: How a professional advisor guides you to a happy retirement.

 

If you wish to share this email or any others from SYM, we welcome you to forward, to print and post, or to direct your friends and colleagues to www.SYM.com.

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