Randy Carver

Have a Safe Flight

September 19, 2016 // by Randy Carver

When we book an airline ticket we want to get from where we are to our destination as quickly and easily as possible with the least amount of cost and hassle. We understand that some airlines include things like checked bags whereas some do not and that there are different routes we can take based on our schedule, budget and destination. Ultimately we expect all airlines to get us to the destination safely and that they meet basic mandated guidelines. For example the airline is expected to inspect and maintain the aircraft based on FAA guidelines.

The pilot will check the plane for mechanical issues, before departing but we understand he did not build the plane and that things may come up that are unforeseen. There may be weather issues that cause delays or a change in routing. We understand that delays that are related to the weather, or due to a mechanical issue, are beyond the control of the pilot or airline. What we expect is that they safely get us to our destination as efficiently as possible given the challenges and events that come up.

The same things are true with your financial planning. You are hiring your advisor and his or her firm to get you from where you are to a financial destination as quickly and easily as possible with the least amount of cost and hassle. The route you take will be based your needs, schedule and ultimate destination (goals). It is very important to understand that the advisor did not build the investments being used to get you to where you are going, just as the pilot did not build the plane. While the advisor has done their due diligence (pre-flight inspection) unforeseen events may occur. For example a fund manager may leave or an investment strategy may change. There may be a natural disaster or terrorist event that impacts markets in general and therefore portfolios. This is not the fault of the advisor (pilot). Their job is to identify the problem, notify you and then act accordingly to get you to your ultimate destination as safely and close to schedule as possible. We plan for what is expected and also for contingencies when emergencies occur as part of our proactive process. When something does arise our role is to deal with it and get you to your destination as safely as possible. This is also where an experienced flight crew or financial advisory team can make a difference.

When selecting the airline, or even private charter, there are dozens of choices; just as there are with financial firms and advisors. Some discount airlines provide bare-bones service but often have other fees such as for carry-on bags, selecting a seat or checked bags that are included with a full service airline. Understanding what the fees are and what you can expect from the airline is key. The same is true of your financial advisor. Understating what the cost to work with them is, and what you can expect in return is important. Moreover, if you book a first class ticket or private charter you will receive perks that you will not get with a discount airline.

We generally utilize a flat fee based approach for clients based on assets managed. We believe this provides the most transparency about what you are paying and also the most flexibility to make adjustments when unforeseen issues arise. This approach allows you to make changes or get cash without penalty or transaction expense.

We will design a custom route based upon your specific goals, needs, risk tolerance and overall vision. We have developed and refined a process to work with you in developing, implementing and monitoring a plan this is based on your vision. We then utilize a proactive approach to managing income, taxes and other factors that are important to you. Please feel free to contact us, without cost or obligation, to discuss any questions you may have. Safe travels!

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Randy Carver and not necessarily those of RJFS or Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Investing involves risk and investors can incur a profit or loss regardless of strategy selected. You should discuss any tax or legal matters with the appropriate professional. In a fee-based account clients pay a quarterly fee, based on the level of assets in the account, for the services of a financial advisor as part of an advisory relationship. In deciding to pay a fee rather than commissions, clients should understand that the fee may be higher than a commission alternative during periods of lower trading. Advisory fees are in addition to the internal expenses charged by mutual funds and other investment company securities. To the extent that clients intend to hold these securities, the internal expenses should be included when evaluating the costs of a fee-based account. Clients should periodically re-evaluate whether the use of an asset-based fee continues to be appropriate in servicing their needs. A list of additional considerations, as well as the fee schedule, is available in the firm’s Form ADV Part II as well as the client agreement.

Anyone can fly when the plane is on autopilot

September 8, 2016 // by Randy Carver

When the autopilot is engaged anyone can sit in the cockpit and the plane will continue on course – this doesn’t make the person a pilot. Nor do they need to be. When there is an issue with the aircraft, the weather changes or we need to land then we need someone with the skills and experience to deal with the situation. Would you rather be on a plane with a pilot or without?

When markets continue to move up in a relatively stable fashion most investments l move up and anyone can feel like they are doing a good job with their wealth management. It is when the markets become volatile, there is an issue with a specific investment or the economy changes that a skilled and experienced financial professional can add value. As your needs, and the world’s changes, one of the keys to your success is being proactively prepared, rather than having to react when it may be too late. This is just one of the ways a skilled and trained professional can help you reach your financial goals safely and on time. Our role is to help you achieve your personal vision – not to pick investments. We believe in a holistic approach to planning which incorporates anticipated needs and goals and helps prepare for the unexpected. We want to makes sure that your tax, legal, investment and estate planning all align so that we can develop the best solution for your personal situation. The investments are simply tools for achieving you vision much like an airplane is a tool for getting from point A to point B.

Just because the markets are on autopilot doesn’t mean you should be your own financial advisor or base your expectations on the last couple of years performance. An experienced and qualified advisor can help you achieve your vision over the long term. As Warren Buffet famously put it “it’s only when the tide goes out that we see who is swimming naked”. The time to engage with a professional is when you are serious about your future – not when there is a crisis. As with a pilot experience matters – do you want someone who has been flying for fifty hours or someone who has 10,000 hours experience. Our team has more than 135 years of combined experience and is here to serve you. Please contact us to discuss your personal needs and vision and we will partner with you to develop and monitor a plan that makes sense for you.

Bad News & Violent Crime

August 11, 2016 // by Randy Carver

It seems that everyone time we turn on the news we hear or read about more violent crime. The country just seems to be coming apart. This is one of the major issues that both presidential candidates are focusing on. The reality is that violent crime continues to dramatically drop in the United States – not increase! Our perception is being impacted by the news media focusing more on crime, and in a more dramatic way. This often creates the perception that we are living in a war zone. The reality is that According to the FBI ¹violent crime has decreased dramatically over the last twenty years!

There were 23,326 murders in the United States in 1994 and 14,196 in 2013. Not only did the number of murders drop by more than 40% – at the same time the US population grew from 260,327,021 in 1994 to 316,128,839 so not only did the number of murders drop the rate dropped from 9 per 1,000 people to 4.5 per 1,000.² Moreover, we do not hear about all of the good things that law enforcement is doing.

Similarly on June 28^th immediately after the so called Brexit vote, the headline was “World markets lost $3 trillion in the two days of trading following the United Kingdom’s Brexit vote.”2. What we did not hear was that the markets increased by more than $3 trillion in the weeks following. In fact In the two weeks following the Brexit vote the major market indices moved up more than 7% and set several record highs over the next few weeks.

It’s critical to understand that the media will focus on the negative and short term. With increased competition for viewers and readers the main stream media uses fear, drama and negativity to get people to tune in. A trusted advisor can help you navigate the sea of information and remain focused on your long term plan. The role of the trusted advisor is not so much to select investments but to help you develop, enact, monitor and update a plan based on your needs, goals and vision. The advisor can sort through what information is relevant to you and what is just noise. Beyond helping you develop a sound plan based on your needs a trusted advisor can help you avoid making poor decisions based on fear and emotion rather than facts.

Do we face challenges in society and with regard to investing? Absolutely. Are things as terrible as the media would have us believe – certainly not. There are tremendous potential opportunities to help build wealth and maintain our standard of living today. A trusted advisor can help you to take advantage of these while avoiding the various pitfalls that we face. Feel free to contact us without cost or obligation to discuss your personal needs and vision. Randy Carver (440) 974-0808 or randy.carver@raymondjames.com

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Randy Carver and not necessarily those of RJFS or Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Investing involves risk and investors can incur a profit or loss regardless of strategy selected.

1. https://ucr.fbi.gov/crime-in-the-u.s/2013/crime-in-the-u.s.-2013/tables/1tabledatadecoverviewpdf/table_1_crime_in_the_united_states_by_volume_and_rate_per_100000_inhabitants_1994-2013.xls

2. http://www.aol.com/article/2016/06/28/world-markets-lose-3-trillion-after-the-brexit-vote/21420545/

It’s Different This Time- Brexit and more

July 14, 2016 // by Randy Carver

With the so called Brexit vote we are once again being told that the future is uncertain and we should worry because ‘this time it’s different’. Whether real or imagined the stock markets will often react based on perceptions. It is then that we hear the refrain “it’s different this time” – it really never is. Events change but markets react for the same reasons. Warren Buffet famously said that the four most dangerous words for investors are: this time it’s different. Viewing an event as different can cause us to liquidate investments, fail to make important decisions or simply stop investing.

The media fights to fill a never ending news cycle and politicians need a crisis to justify their existence and re-election. We are inundated with bad news, some based on fact and some simply hype. The current market dip as a result of the Brexit is typical of the reaction to an unforeseen event. Moreover, we often hear about the negative impact of events but not the subsequent recover. For example CNN had the headline (one June 28^th) ‘Brexit Crash wiped out a record $3 trillion. Now what?”. The now what was that in just a week or so after much of the money was back because markets rebounded.

So what can we expect in the coming months? While nobody knows exactly- frankly what markets, and portfolios do in the short term should not matter. We believe that the Brexit, and uncertainty with Europe, may ultimately help the United States as investment moves out of Europe to the U.S. Our labor cost is roughly half of that in Europe, our energy cost is less than half and there are big tax advantages for non-US companies. In the near term, however, we will continue to see volatility and as we have more media there is more media attention.

Markets have prevailed when shaken by crisis in the past and rewarded investors who have the courage and insight to stay invested and when able to add to positions. Although past performance does not guarantee future results, the Dow was at approximately 117 when Pearl Harbor was attacked, fell 20% to 93 by early May 1942 and then rallied to 145 by July 1943. In August 1962, at the time of the Cuban Missile Crisis, the Dow was at 615. It fell to 550 in October and then rose to 650 in December and 767 by December 1963. At the beginning of the 1982 the DOW was at 700 and by 1992 the DOW was at 3100 (source stock charts.com).

Looking more recently consider that in 2013 we had a series of negative events ranging from a government shutdown to war in the middle east. Despite many dips including a 7.5% drop in May the markets climbed by almost 30%. This is typical of what we have experienced over the last 50 years. Long term investors should remember that it’s normal to see pullbacks of 10% or more during bull markets. In fact, we’ve seen the S&P 500 correct by at least 14.7% five times since 2000, only to eventually make its way higher. The short-term interruptions in the markets can present attractive buying opportunities for investors who have a well-diversified plan in place.

Today our economy is still the envy of the world. We have historically low interest rates, low energy cost and little inflation. American companies are more efficient than ever before, are earning record profits and have record amounts of cash. America is the world leader in production and utilization of technology.

These reasons suggest sticking to your long-term financial plan now more than ever. You’re investing for a lifetime – not for a week, a month or even the duration of the fight against terrorism. Unfortunately, what is seen as a positive indicator one day is discounted the next, which can be very confusing. Those constantly conflicting stories may be of interest to day-traders, but not to me and, hopefully, not to you. Instead of listening to the hype, we focus on you and your needs. That’s the information we need to make well-thought-out long-term investment decisions based on your personal vision, needs and goals.

While the internet, newspapers’ business headlines and TV financial talk shows can be entertaining, they often cause us to divert our concentration from our real objectives which may include maintaining our lifestyle, protecting against unnecessary taxation and passing on wealth to our heirs. We need to understand that with increased media there is increased competition for viewers and readers. Media is big business and companies seek to generate profits by attracting viewers. They do this with sensational headlines that often seek to scare us as much as entertain; but which may not truly inform.

Our advice is to generally ignore the media when it comes to news about individual companies’ performance or how events have negative influence on the markets. Hopefully you will not let the headlines upset you as you begin to understand that they are meant to gain viewers, not to advise investors. The Brexit is just another event that we believe is like Y2K, the lowering of the US Credit Rating or Pearl Harbor. The Brexit is new but not different in terms of market behavior.

As always we are here for you. Please contact us with questions, concerns or whenever we can otherwise be of service.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Randy Carver and not necessarily those of RJFS or Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Investing involves risk and investors can incur a profit or loss regardless of strategy selected. Inclusion of indexes is for illustrative purposes only; investors cannot invest in an index directly. The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stock of companies maintained and reviewed by the editors of the Wall Street Journal. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market.

ELECTIONS, MARKETS & YOU – Is this Alice in Wonderland?

June 14, 2016 // by Randy Carver

Every four years the pundits and talking heads like to discuss the impact of elections on markets. While we always need to keep in mind that past performance doesn’t guarantee future results this is perhaps truer with this election cycle than ever before.

This year’s election seems like Alice in Wonderland as we have two very non-traditional candidates in Bernie Sanders and Donald Trump who strangely share some similar ideas despite being polar political opposites as a self-proclaimed socialist and ultra-capitalist. Both candidates, especially Donald Trump, make comments that would in the past have eliminated them from the election but this year seem to increase their popularity.

“But I don’t want to go among mad people,” Alice remarked.
“Oh, you can’t help that,” said the Cat: “we’re all mad here. I’m mad. You’re mad.”
“How do you know I’m mad?” said Alice.
“You must be,” said the Cat, “or you wouldn’t have come here.”
― Lewis Carroll, Alice in Wonderland

As Mark Twin is attributed for saying “History doesn’t repeat itself but it often rhymes”. So before looking at where we are today here is some historical perspective.

Wars, bear markets and recessions tend to start in the first two years of a president’s term, says The Stock Trader’s Almanac; bull markets mark the latter half. Since 1833, the Dow Jones industrial average has gained an average of 10.4% in the year before a presidential election, and nearly 6%, on average, in the election year. By contrast, the first and second years of a president’s term see average gains of 2.5% and 4.2%, respectively. A notable recent exception to decent election-year returns: 2008, when the Dow sank nearly 34%. (Returns are based on price only and exclude dividends.) In the 22 president elections since 1928, 14 were preceded by gains in the three months prior. In 12 of those 14 instances, the incumbent (or the incumbent party) won the White House. In seven of eight elections preceded by three months of stock market losses, incumbents were sent packing. Exceptions to this correlation occurred in 1956, 1968 and 1980.

Having said all of that not only is this Presidential race is unique but the entire election cycle is not consistent with past experience. The Dow Jones Industrial Average was up 27% in the first year of President Obama’s second term, and 7.5% in year two. Last year (2015), which was supposed to be the strongest of the cycle, saw the Dow industrials drop 2% helping to prove why past performance doesn’t guarantee future results.

In terms of which party may be better for the markets conventional wisdom might suggest that Republicans, who are supposedly more business-friendly than the Democrats, would be more beneficial. In fact, looking back to 1900, Democrats have been slightly better for stocks, with the Dow up an average of nearly 9% annually when the Democrats are in control, compared with nearly 6% per year during Republican administrations.

One popular theory suggests that the incumbent party leverages economic policies to give the market a slight nudge just before election time, then allows the market to appropriately correct itself once elections are over. Another theory proposes that investor confidence tends to rise based on the lofty promises of candidates vying for office, then tapers off as some of those promises fall by the wayside.

Regardless of which theory, if any, you choose to believe, it’s important to remember that traditional fundamentals, and public perception, always impact markets. Isolated factors such as political elections never explain the whole story. More importantly, in our opinion, predicting what the broader markets will do is not only difficult but not relevant for people who have a strong comprehensive plan. Proper proactive planning should take into account both anticipated volatility and unforeseen events so that they will not affect your ability to maintain and enhance your lifestyle. We have developed and refined a proprietary process for doing this called Personal Vision Planning ™ . This is what we utilize with our clients to help simplify their lives while protecting and enhancing their lifestyles.

So where do we go from here? Ultimately who wins the Whitehouse may matter less than the overall political landscape of the House and Senate once the dust settles. Broad markets can handle bad news and also good news but become very volatile when there is uncertainty. Until we have more clarity on the political landscape, and policy direction of whomever prevails, we anticipate continued broad market volatility. Regardless of the outcome we believe there will be strong growth for the domestic equity markets over the next three to five years. As interest rates rise long term fixed income investments will under-perform. Many may miss the opportunity for growth as they focus on negative social issues such as higher inflation and unemployment. As always we recommend a broadly diversified asset allocation that includes cash and short term fixed investment for any near term needs to so that market and portfolio fluctuations do not impact you or your lifestyle. If nothing else the election will be good political theatre!

“Have I gone mad?
“I’m afraid so, but let me tell you something, the best people usually are.”
― Lewis Carroll, Alice in Wonderland

Please note that will be hosting Andy Friedman for two exclusive events on September 7^th (7 pm) and 8^th (8:30 am) at LaMalfa Center in Mentor OH. According to CNBC, Andy Friedman is “one of the nation’s most sought-after speakers on all things political.” If you would like to attend there is neither a cost nor any obligation; however due to limited space reservations are required. Please contact our office (440) 974-0808 or click here to reserve space.

The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Randy Carver and not necessarily those of Raymond James. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Past performance may not be indicative of future results. The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stock of companies maintained and reviewed by the editors of the Wall Street Journal. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor’s results will vary.

Suitability Standard versus Best Interest – What They Mean For You

April 18, 2016 // by Randy Carver

Our firm follows a fiduciary standard of putting our clients’ interests first. We believe this is simply the right thing to do and ultimately is good business. In the financial services industry there are two regulatory standards – a fiduciary standard and a suitability standard. The majority of the public does not understand the two different rules under which various types of financial advisers operate. Failing to be aware of this difference can have negative financial impacts.

Most broker dealers, insurance salespersons and other financial company representative operate under the “Suitability Standard” which is:
o Know your client and their financial situation.
o Recommend products that are suitable for their situation.

Registered Investment Advisors (RIA) or an ERISA appointed Fiduciary must operate under the “Fiduciary Standard,” which is:
o Put the client’s best interest first.
o Act with prudence; that is, with the skill, diligence and good judgment of a professional.
o Do not mislead clients; provide full and fair disclosure of all important facts.
o Avoid conflicts of interest.
o Fully disclose and fairly manage, in the client’s favor, unavoidable conflicts.

Fred Reish, a very well-known ERISA attorney, summed up the differences this way: “With regard to the standard of care under current securities laws, a broker-dealer needs only to determine that an investment is suitable for the client. However, the fiduciary standard of care requires that the adviser take into account a number of considerations, such as whether the fees are reasonable, whether the investments are adequately diversified, whether there are conflicts of interest, whether the investments are consistent with the provisions of the trust or other governing document, and so on.”

On Wednesday April 6, 2016 the Department of Labor (DOL) released new rules pertaining to IRA’s which in many cases requires advisors and firms to be fiduciaries. We believe this is a good thing. The bill also attempts to increase the transparency of expenses which we also believe is a good thing.
At the end of the day the key is for your portfolio to meet your needs, objectives and risk tolerance while you are aware of all fee’s and expense associated with the relationship. The least expensive option may not be the best; however, you need to know what you are paying to determine if the relationship makes sense. Many investments with high commissions or expenses such as some annuities or limited partnerships do not make the information readily available. Our team is always here to help you evaluate any investment opportunity and to answer any questions that you may have.

A Tale of Two Islands

April 1, 2016 // by Randy Carver

Once there were two islands – each had ten couples living on them. For years each day the couples would wake and spend the morning fishing and the afternoon taking care of maintaining their huts and surviving. Each couple would catch one fish that would feed them for the day. One day two of the people on each of the islands discovered a way that they could catch enough fish for everyone.

On the first island the people decided that those who could best fish would catch enough fish for everyone and the others would then use the time to improve their village, begin farming and improve everyone’s lives. Everyone was better off.

On the second island the people decided that they would let just the two go fishing and the rest would not do anything but take some of the fish – a tax from those who were working. Over time the two people fishing asked why they should do all of the work to support everyone else and began to catch less fish. Everyone’s lifestyles and attitudes got worse.

As technology improves efficiency both companies and individuals can earn more and produce more. This is a good thing as it allows others to take on different productive endeavors to improve our society both financially and culturally. If, however, you over tax those who are the engines of our economy they will not produce as much and everyone will be worse off. At the same time it is important for everyone in society to contribute, rather than simply taking from those who are productive, so that everyone may be better off. Simply taxing the most productive and while other’s do little or nothing will not benefit society and actually hurts the most vulnerable.

We are truly living in an amazing time of innovation and we have a choice of whether we will use this to improve everyone’s lives or not. It is critical that everyone contributes, and that we do not over tax those who are generating growth. In my opinion two of the biggest risks we face as a country are a sense of entitlement and a lack of work ethic. There are those who are critical of the success of others and feel entitled to benefit from society while not contributing. We can all improve and prosper like the people on the first island or we can fall prey to our own success like those on the second. I believe there will always be people who want to do better for society and will continue to innovate- the question is whether we will benefit as a society or not.

As we hear more about new income tax proposals and criticism that the ‘wealthy’ are not paying their fair share the following should be noted. According to the IRS the top 1 percent of taxpayers pay more in federal income taxes than the bottom 90 percent combined. In fact while tax rates have gone down the amount paid by the top 1% has gone up over time.

Not only does this group pay more taxes they also produce more jobs and capital than the rest of the population combined. As we get deeper into the election season and one of the issues is the concentration of wealth and ideas for ‘redistributing’ we should consider whether this really benefits us all or not.

It should be noted that wealth has become more concentrated by the wealthy. According to The Economist (November 2014) real incomes for the top 1% of families grew 3.4% a year from 1986-2012 while those for the bottom 90% grew 0.7%. The chart below indicates the results of this trend for the wealthiest 1/10 of 1% of Americans.

As the government attempts to redistribute wealth we believe that it is critical that everyone pursue a productive endeavor like those on the first island so that we all may be better off. If we simply tax those who are productive and give it to those who do not want to work, we will be like those on the second island and everyone will be worse off – especially the most vulnerable. We have the opportunity to grow and prosper as a country in which everyone benefits – the question is will we seize it.

Randy Carver named one of top financial advisors in United States by Barron’s Magazine

March 8, 2016 // by Randy Carver

March 5, 2016 Barron’s Magazine named Randy Carver as one of the top advisors in the Nation and one of Ohio’s best financial advisors. Randy has been recognized by Barron’s each year since 2008. The rankings are based on data provided by the nation’s most productive advisors. Factors included in the rankings: assets under management, revenue produced for the firm, regulatory record, quality of practice and philanthropic work. Investment performance isn’t an explicit component because not all advisors have audited results and because performance figures often are influenced more by clients’ risk tolerance than by an advisor’s investment-picking abilities. According to Reuters (February 11, 2015) there are roughly 285,000 financial advisors in the United States. Barron’s listed the top 1,200 or just 4/10ths of 1% of all advisors. “It’s an honor and privilege to be included in such an elite group. This recognition reflects the professionalism and commitment to our clients of our entire team”- Randy Carver

An Amazing Week with Alan Greenspan, Sir John Sawers, Cokie Roberts and more

February 12, 2016 // by Randy Carver

Our team strongly believes in continuing education and meeting directly with world and thought leaders so that we can provide you with timely, unbiased and relevant information. The week of February 1^st, 2016 was a truly amazing week as I had the opportunity to meet with Alan Greenspan (former FED chairman), Sir John Sawers (former head of MI6), Cokie Roberts and more than a dozen other influential leaders to hear their thoughts. We had more than a dozen meetings over five days in two cities. What is very interesting is that there are some common themes and insights which I outline below. As always please feel free to contact me, or your advisor, with questions, comments or if we can otherwise be of service.

There is a consensus that both the United States and world as a whole are facing some new challenges and threats which we discuss in more detail below including an existential threat from Russia and a more direct threat of cyber-attacks. With that being said, all of the leaders that I spoke with were very optimistic about the outlook for the United States and its place in the world – and more specifically our equity markets over the next three to five years. They believe we will remain the dominant super power and our currency will continue to be the reserve currency at least for the relative near term. As is generally the case in life there are some great opportunities for the country, and individuals, who have the courage to take advantage of them but also some significant challenges and risks ahead. There was general acknowledgement that it is virtually impossible to predict what will happen over very short periods of time (one to six months) and that ultimately if someone plans properly it really doesn’t matter.

Low oil prices are helping some poorer countries like India and will benefit the United States over the next few years. While there are some who have said that low oil prices could lead to a recession we believe the opposite is true- that this will lead to more inflation . In the near term the lower oil prices are helping put more dollars in the hands of individuals and the only ones really suffering are large oil companies. The impact on our economy of people having more cash is not likely to be seen in the statistics for another six to twelve months.

Nobody has a crystal ball and we believe that with proper planning short term market and interest rate changes should not matter. Having said that there is some consensus about the longer term outlook. We agree that over the next five to ten years interest rates will go up, inflation will go up, unemployment will go up and that the broader domestic markets will move up strongly. There will be increased volatility that will cause some to miss the potential for growth due to fear. Interestingly Mr. Greenspan expressed a different perspective.

“We are at this moment faced with a number of serious long term economic problems, all in a sense having to do with the underinvesting in our economic future. My most worrisome concern is our broken political system”, Alan Greenspan

One of largest global change factors in the world is China. China is struggling now as they transition from a command and control economy to more of a market economy. They also face challenges as they move from a net exporter to a domestic economy. China has a choice to essentially compete with the west or to partner. They are moving in the direction of a partnership but this presents challenges for several reasons including the planning perspective of our respective countries. In the United States things are planned for the next quarter, year or often at most the next election cycle. The Chinese think in terms of decade’s even centuries and plan as such.

While it was expressed that the biggest existential threat right now for the world is Russia – it was not felt that they are a direct threat to the United States.

The largest disrupter today is technology. Technology will help create efficiencies and reduce expenses but will also eliminate jobs both in the near term and more so in the future. One upside to increased technology is that ‘big data’ should expose any fraud, deception or discrepancies in markets or accounts creating more transparency and efficiency. With an increasingly connected world cyber security at a personal, corporate and National level is critical. There is consensus that cyber-attacks are the single biggest threat to the nation at this time which we are seeing currently addressed in Washington.

It is believed that while we hear a lot about government and tax reform but little will be done by Congress or the Senate before the Presidential election this fall. There is a need to address the Federal Debt which will continue to grow until there is entitlement reform as entitlements (Social Security, Medicare, Welfare, Medicaid, etc.) account for almost 60% of the federal budget. As interest rates rise so too will the interest on the debt which will need to be paid. The leaders that we spoke to feel that this will be resolved but it will be a long and painful process which will result in cuts to entitlements and most likely means testing. This is unlikely to affect anyone who is 55 – 60 year old today but will be directed towards the next generation and will take effect long after today’s politicians are out of office. This is why personal planning, rather than reliance on government programs will be critical.

In the US we have many baby boomers whose wealth planning is shifting from focusing on growth to generating income as they retire. The challenge is that they are living longer and will need their funds to last. This emphasizes the need for proper planning based on each person’s situation – not the previous generations or some rule of thumb. Our Personal Vision Planning® process address’ each person’s needs, resources and goals with a plan based on their situation – not a model or rule of thumb.

What should you do now?

As the pace of change accelerates and factors affecting become increasingly complex it’s important that your planning is monitored and updated on a regular basis. We do not advocate market timing or short term trading for investments but do believe it is critical to actively monitor and rebalance. In our opinion the idea of simply buying and holding a generic portfolio does not make sense as this must be a dynamic process based on both your evolving needs and changes to markets, interest rates and regulation. We believe that inflation and the ability to maintain and enhance our standard of living is a major risk for many people which may be negated by properly allocating your portfolio. Finally, it is critical to make decisions based on your situation and looking forward – not based on past performance or experience. Planning based on the past is like driving down the road looking in the rear view mirror – it’s fine unless the road turns. For example we have not seen interest rates rise for more than 20 years – planning based on bond performance over the last decade will not, in our opinion, produce similar results going forward.

The only things we can say with certainly are that change will continue and we cannot predict the future. Your overall planning is a process that is continually evolving – not a static onetime event. We appreciate the opportunity to partner with a select group to bring you timely and relevant information while being a partner to you and your family for generations to come. Please contact our team with any questions or whenever we may be of service to you or your friends. There are exciting times ahead and we look forward to helping you benefit from them.