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Over the next twenty years, there will be a wealth transfer
that exceeds $30 trillion as the Baby Boomer generation passes the remainder of
their wealth to the Millennials and subsequent generations. |
The Great Wealth TransferOver the next twenty years, there will be a wealth transfer
that exceeds $30 trillion as the Baby Boomer generation passes the remainder of
their wealth to the Millennials and subsequent generations. The Baby Boomers (born 1946-1964) are
considered the wealthiest generation, currently controlling 70% of all the
disposable income in the United States. Its imperative families develop a plan to
transfer assets since the transfer of wealth is inevitable. For most families, the transferring wealth
was acquired during this lifetime and not inherited from the previous
generation.
When starting to plan for wealth transfer pre-retirees
should prepare for their retirement first, healthcare costs second, and the
remaining transferring assets last.
Although some individuals choose not to involve their family members
that will become the beneficiaries of their assets, including qualified tax and
legal professionals are important. But
don’t write off including your heirs in all aspects of wealth transfer planning
if you’d like more than just one generation to benefit.
Preparing your heirs to take over your estate eventually
passing their remaining assets on to their beneficiaries is equally
important. Heirs that are unprepared in
managing money, investments or seeking financial guidance from qualified
professionals seldom have enough inheritance left over for their heirs. Some families choose to ‘train’ heirs by
teaching how to wisely invest so they can give some away through
philanthropy. Without financial
education, frequent investment decision making and a purpose to preserve the
inherited wealth, many estate transfers rarely survive. The complexities of wealth preservation are
not taught in school or other institutions and can only demonstrate through
modeling, professional guidance, and the generation’s intention to pass their
wealth forward.
If the generation set to inherit from the Baby Boomers does
a good job preserving what they inherit, it’s possible it could easily provide
financial benefits to others for the next thirty to forty years. And that’s worth planning.
As financial advisors, we spend a lot of time preparing for
building wealth, but not passing it on to subsequent generations. If you would like guidance on The Great
Wealth Transfer and my working with your beneficiaries, I welcome a meeting
with all of you. Click here for printable version
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 | Tariffs and Trade Wars: The Impact into Q3 After months of verbal threats between the EU, China and the
US, tariffs, and counter-tariffs started in July 2018, leaving American
consumers and investors wondering how much of an impact it will have on
them. Already three months into the
trade war, consumers are not swaying from buying imports despite the increasing
costs. In July, the US Trade Deficit
increased to $50.1 billion, a 9.6 percent increase from the previous month (according to the U.S. Census) while imports increased .9% to a record $261.2 billion, proving that Americans’
demand for imports remains strong.
August’s data is expected to be out the first week of October and
indications are it will be higher than the July’s. It’s notable that the EU and
China exported the most goods into the US of any of the trade partners during
this time.
What will the impact be as the tariffs continue? Increased costs of goods (including food,
clothing and other necessities) may cause households to have the less
discretionary cash to spend on other items considered non-essential, such as
electronics, entertainment, automobiles or even events. If costs continue to rise, Americans may
eventually choose to not spend on goods produced in the United States either.
The counter-tariffs imposed to hurt foreign buyers will
impact American companies, farmers and workers, and eventually overall company
profits as countries impose their tariffs on US goods. Many retirement savings accounts invest in
US-based companies which may see decreased earnings and share values as tariffs
apply to their products. Eventually this
could reflect in the account values of American investors. Retaliation has started from other countries
by the US being left out of new trade agreements as the current administration
considers pulling out of the World Trade Organization.
Despite the tariffs and trade war, it is positive that the American economy has remained strong throughout the latest quarter.
Because we are in the early stages of the trade war
economists are unable to predict how prices and portfolios will fare in the
future. The trade war landscape is
changing day-by-day which is why now may be a good time to review your portfolio
if you have concerns.
Click here for printable version
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The trade war landscape is changing day-by-day which is why
now may be a good time to review your portfolio if you have concerns. |
Whatever type of investor you are, no single investor knows
everything about the stock market. Even
from time to time, knowledgeable investors ask for advice. | Calling All Investor TypesSome investors are the do it yourself type and manage their
accounts with minimal assistance from a financial advisor. Other people are eager to have an advisor
manage their investments for them.
Whatever type of investor you are, no single investor knows everything
about the stock market. Even from time
to time, knowledgeable investors ask for advice.
Working with a financial advisor can benefit both types of
investors. An advisor is a resource for
what you may not know about your investments, other types of investments or
additional information you may need to make an informed decision. Working with an advisor doesn’t mean you have
to hand over control of your finances.
Always be upfront about you expect from working with an advisor. Open communication is essential for both
parties to understand what the preferred way for you to receive investment advice.
The best way to avoid problems is to understand what type of
investor you are through your investor profile.
Your Investor Profile or
style is determined by:
Objective Traits- Personal or social traits such as
gender, age, income, family, even tax situation
Subjective Attitudes- Part of the emotions and beliefs
you have
Balancing Risk vs. Reward- Are you able to tolerate more
significant risk to have a greater reward or prefer less risk and are content
with a reasonable return?
Area of Focus- The types of investments (ex. stocks,
bonds) and sectors of investments (ex. Technology) in your portfolio.
Investment Strategies- Help to shape your investor
profile by the types of investing you prefer (ex. ethical, growth, index)
Valuation Methods- Help to develop your investor profile
through valuation methods (ex. Fundamental analysis, technical analysis,
quantitative analysis).
I can help you with specific accounts, or help with your
entire portfolio. It’s really up to you,
and you always have choices.
Click here for printable version
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 | Happy Retirement, LIBORThere’s a number that is going away soon that has an impact
on your life; it’s called LIBOR. LIBOR
(London Interbank Offered Rate) is used to determine the interest rates banks charge each other for overnight,
one-month, three-month, six-month, and one-year loans. LIBOR is a substantial number because it
decides, in part, the interest rate you will pay for loans, credit cards, and
even your mortgage or refinance. Banks
add their markup (another percentage) to LIBOR to calculate what to charge
consumers. LIBOR has been the benchmark
for banks throughout the world since 1969 but will be phased out worldwide by
the end of 2021.
LIBOR seemed to work well until the financial crisis when
inaccurate bank reporting to LIBOR made way for rate manipulation. Unlike a stock price which calculates on the
buying and selling of the public, LIBOR compiles information from a bank’s
observation or reporting of their daily rate, which is voluntary. By making up false information during the
financial crisis, some banks profited illegally. For this reason, regulators worldwide are
phasing out LIBOR.
In the United States, LIBOR is being replaced by SOFR
(Secured Overnight Financing Rate), which is already approved for rate
calculation. SOFR has compiled
information back to 2014 and began publishing earlier this summer. SOFR uses the Federal Reserve’s fed funds
rate and the yield on the ten-year Treasury note and others, using real data on
the previous day’s trading on our currency.
Currently, traders in the United States have already started
to see the LIBOR-SOFR rate as we transition toward LIBOR’s retirement. Click here for printable version
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LIBOR has been the benchmark for banks throughout the world
since 1969 but will be phased out worldwide by the end of 2021. | | SAI October 2018 Newsletter Approval 2253542.1Click here for printable version
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