capwealth

How to Structure Your Assets for Long-Term Protection and Privacy

Tue, 21 Apr 2026 11:15:10 GMT

Author: Michael Vaught, CFP ^®

When people think about building wealth, the focus is often on investment selection: what to buy, when to buy it, and how markets are performing. But over time, we’ve found that how assets are structured can be just as important as the investments themselves.

Thoughtful structuring helps protect what you’ve built and that your plan continues to work as intended through different life stages and market environments. While every situation is unique, there are a few foundational principles we often revisit with clients.

Start with Proper Account Titling

One of the most overlooked but important details is how accounts are titled. Ownership drives more than just who “owns” an asset on paper. It can influence factors such as tax treatment and how assets transfer in the future.

Account titling should also be revisited periodically, as life changes occur. Whether it be through marriage, business ownership, or estate planning changes, making sure your account structure aligns with your broader goals can simplify things down the road.

Avoid Concentration Through Diversification

Many investors understand the concept of diversification, but it’s easy for portfolios to become unintentionally concentrated over time. We often see this with employer stock, legacy positions, or strong-performing sectors.

A well-diversified portfolio helps manage risk and smooth out long-term outcomes. It’s about creating resilience in different market environments, not chasing short-term returns.

Beneficiary Designations and Trust Structures

Beneficiary designations are one of the simplest ways to ensure assets transfer efficiently, but they’re often outdated.

Because these designations typically override instructions in a will, keeping them current is critical. Regular reviews help ensure they reflect your current intentions and remain consistent with your broader estate plan. For example, your beneficiaries on your 401(k) supersedes your will, so even if you revisit estate planning documents, if your beneficiaries aren’t aligned you may not have your wishes fulfilled.

For some families, trusts can play a meaningful role in structuring assets. When used appropriately, they can provide additional privacy and control while helping to manage how and when assets are distributed. Trusts aren’t necessary in every situation, but in the right context, they can be a valuable complement to an overall investment and estate strategy.

In some cases, individuals may use a trust to maintain a level of privacy and control over how assets are managed and distributed. For instance, instead of assets passing directly through an estate, a trust can help streamline the process while keeping certain details out of the public record.

Coordinate Across Your Advisory Team

Asset structuring doesn’t happen in a vacuum, and decisions around ownership, taxes, insurance, and estate planning need to be all-encompassing.

That’s why coordination between your financial advisor, tax professional, attorney, and insurance specialist is so important. When these pieces are aligned, the result is a more cohesive and effective long-term plan.

By focusing on thoughtful account titling, diversification, beneficiary planning, appropriate use of trusts, and collaboration across your advisory team, you can create a framework that supports long-term growth while also prioritizing protection, privacy, and control.

CapWealth’s Tim Pagliara Ranks #1 in Tennessee, Cracks Top 250 Nationwide on Forbes 2026 Lists

Thu, 09 Apr 2026 20:31:48 GMT

Business Wire, April 9, 2026

CapWealth announces that Tim Pagliara, founder and chief investment officer, was ranked #1 in Tennessee on the 2026 Forbes Best-In-State Wealth Advisors list and #243 nationally on the Forbes America’s Top Wealth Advisors list. “This recognition reflects the consistency of our team and the way we approach serving clients. We take that responsibility seriously, and we’re focused every day on delivering thoughtful guidance and a high level of service. It’s rewarding to see that approach recognized,” says Pagliara.

Tim Pagliara | Fox Business Making Money - Investing Success

Wed, 08 Apr 2026 21:00:05 GMT

Tim Pagliara, Chief Investment Officer at CapWealth, joined Fox Business Making Money with Charles Payne to discuss that the keys to investing success are asset allocation and security selection that depend on asset valuation and special situations. "Lumen, for example, is one of those companies that people have ignored. They are the railroad tracks that are going to connect all these data centers," he explains.

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What a Risk Review Reveals About Your Portfolio and Long-Term Goals

Tue, 07 Apr 2026 11:00:11 GMT

Author: Jennifer Horton, CFP®, CTFA®

When markets become volatile, it is easy to focus on short-term movements and daily swings instead of the bigger picture. But periods of uncertainty can also be valuable, offering a chance to take a closer look at how much risk your portfolio is carrying and whether it still aligns with your long term goals.

A risk review is a structured conversation about the assumptions behind your financial plan, the types of risk embedded in your investments, and whether your current strategy still reflects who you are, where you are in life, and where you need to go.

Understanding Risk Tolerance

According to the SEC, risk tolerance is defined as an investor’s ability and willingness to lose some or all of an investment in exchange for greater potential returns. That definition captures two distinct dimensions: what you can afford to lose financially, and what you can handle emotionally.

Several factors shape risk tolerance, including your time horizon, income, overall liquidity, and the total amount you have invested. In general, risk tolerance tends to decline with age. When retirement is decades away, a portfolio has time to recover from a significant loss. When retirement is approaching, that same loss carries very different consequences and requires much more careful management.

This is one reason why risk reviews matter at every stage of life, not just near retirement. Younger investors often believe they are comfortable with volatility until they experience it firsthand. Understanding the difference between willingness and ability to take on risk is an important step toward building a portfolio you can actually hold through difficult periods without abandoning your plan.

The Different Types of Risk in Your Portfolio

Risk is not a single thing. There are several distinct types of risk that can affect your investments, and understanding them helps clarify what a risk review is actually examining.

Systematic risk, sometimes called market risk, affects the overall market and cannot be eliminated through diversification. It stems from broad forces such as interest rates, inflation, geopolitical events, and global economic cycles. Every investor who participates in the markets carries some level of systematic risk, regardless of how well-diversified their portfolio is. Unsystematic risk is specific to an individual company or security. Unlike market risk, unsystematic risk can be meaningfully reduced by building a diversified portfolio across different companies, sectors, and geographies. Concentrating too heavily in any single position increases exposure to this type of risk, even when broader markets are performing well.

Other forms of risk are also worth understanding. Credit risk arises when a borrower may be unable to meet its debt obligations, which is particularly relevant for investors holding bonds or other fixed-income securities. Liquidity risk reflects how easily an investment can be sold without significantly affecting its price. Additional factors, such as interest rate sensitivity, political and regulatory changes, and investor behavior, can shape outcomes over time.

What Risk Means for Your Long-Term Goals

A risk review is not just about cataloguing what you own. It is about making sure the assumptions that drive your financial plan still hold up under scrutiny.

The rate of return projected in a financial plan plays a critical role in determining whether you are on track for retirement or whether you remain on course once you are in it. If your plan assumes a rate of return that your portfolio is not actually positioned to deliver, you may be operating from projections that do not reflect your real financial picture. For example, assuming a 10 percent rate of return in retirement may not be realistic if your portfolio has been structured more conservatively or is not positioned to achieve that level of growth. A plan built on overly optimistic assumptions can create a false sense of security.

Aligning risk and expected return is one of the most important calibrations in long-term financial planning. Getting it right means your projections are grounded in what your portfolio can realistically achieve, given how it is actually built and managed.

How Advisors Measure and Monitor Risk

Beyond understanding risk conceptually, financial advisors use specific tools to measure it concretely. Standard deviation is one common measure, showing how much an investment’s returns fluctuate over time and offering a view of historical volatility. Beta measures how sensitive a portfolio or individual security is to broader market movements. Value at Risk (VaR) estimates the potential maximum loss over a defined time period under normal market conditions.

These tools are not designed to eliminate uncertainty. No tool can do that. But they give advisors and clients a clearer, more grounded view of what a portfolio is actually exposed to, which makes it possible to have more informed conversations about whether that exposure is appropriate .

Working With an Advisor

Markets will always carry some degree of uncertainty. A risk review provides clarity about how that uncertainty interacts with your specific situation, goals, and timeline.

A review is not about becoming more conservative or more aggressive. It is about making sure your portfolio reflects where you actually are and where you need to go. Working with a financial advisor during periods of market volatility can help you step back from short-term noise and focus on the decisions that matter most for your long-term financial future.

2026 Guide: 9 Last-Minute Tax Moves You Still Have Time to Make

Wed, 01 Apr 2026 14:18:55 GMT

U.S. News & World Report, April 1, 2026

Dean Shahan, executive vice president and financial advisor at CapWealth, discusses strategies to decrease tax bills before the April 15 deadline, such as funding health savings accounts and contributing to IRAs with Maryalene LaPonsie in U.S. News & World Report. When considering what kinds of accounts to open, Shahan adds, “Some people think they can only do one or the other,” when choosing between an IRA and a workplace plan.

CapWealth Group LLC Announces Investment Opinion: Releases Research Report on Lumen Technologies

Mon, 30 Mar 2026 14:23:22 GMT

Business Wire, March 30, 2026

CapWealth announces it has released a research report on Lumen Technologies to demonstrate why the firm believes it’s positioned for future growth as an enabler of digital infrastructure for the artificial intelligence economy.

How to Build a Family Governance Plan That Preserves Wealth

Tue, 17 Mar 2026 11:30:01 GMT

Author: Blake Harrison, CPA/PFS

Many families who build significant wealth begin with a clear leader, often a founder, matriarch, or patriarch who makes key financial decisions and sets the direction for the family. In the early years, the process of making financial decisions is relatively simple because responsibility sits with one person or a small group.

Over time, however, wealth and decision-making expand across generations. By the third generation, there may be a much larger group of people with different priorities and levels of financial experience.

The informal decision-making that worked in the early years can start to create confusion. Without a clear structure in place, family members may not fully understand how decisions are made, what assets exist, or what role they play in the process. Even with the best intentions, a lack of clarity can lead to frustration and put strain on family relationships.

This is where building a family governance plan becomes essential.

Communication builds trust

One of the most important parts of a family governance plan is clear information sharing.

When family members have a clear understanding of the family’s financial structure, they are far more likely to work together productively. Transparency builds trust and helps people feel confident participating in decisions. When information is unclear or unevenly shared, family members may feel disconnected from the process or uncertain about the broader financial picture.

Clear communication does not mean everyone needs to be involved in every decision. It does mean, however, that family members should understand how the family’s wealth is structured and the goals that guide it.

Participation helps governance last

Another challenge families face is how governance structures are created.

If one individual designs the system and passes it down to the rest of the family, it may work in the short term. However, structures that feel imposed often struggle to last after that person steps away. Families that succeed across generations often build their framework together. When people participate in shaping the family’s values and goals, they are far more likely to support those systems over time.

The role of outside advisors

Family dynamics can make governance conversations difficult. Between differences in age, personality, and financial experience, open discussions about money can be challenging. This is where an outside advisor can help.

A neutral third party can guide conversations, encourage participation, and ensure discussions are focused on shared goals rather than family dynamics.

Advisors often begin by speaking with family members individually to understand their perspectives and glean insights to guide broader family meetings. From there, families can define how decisions are made, who participates, and how information is shared. A clear process for meetings, communication, and responsibilities turns these dialogues into a workable governance framework.

The role of outside advisors

Family values statement: Outlines the core beliefs that guide the family's approach to wealth and decision-making. These values often reflect the principles that helped create the family’s success in the first place.
Mission statement: Explains the purpose behind the family’s wealth. It answers an important question: what should this wealth accomplish?
Family council or board: A smaller group of family members responsible for organizing information, research, and helping prepare decisions for the broader family.
Statement of responsibility: Clarifies expectations for participation and what it means to be part of the family’s shared financial structure.
Advisors and experts: Trusted professionals who provide expertise across investments, taxes, legal planning, and reporting.
Governing documents: Legal structures such as trusts, foundation charters and estate planning documents that guide how assets are managed.
Family meetings: Regular gatherings where families review updates, discuss decisions, and educate younger generations are one of the most effective governance tools. They also help strengthen connections across generations, which can be just as important as the financial discussions themselves.

Families spend decades building wealth, but far less time thinking about how decisions will be made once that wealth is shared across generations. Building a family governance plan helps families move to a process that works for a larger group.

When families establish shared values, open communication, and clear decision-making procedures, they create the foundation for long-term cohesion. That cohesion is often what allows wealth and opportunity to endure for generations.

Navigating Long-Term Care Planning for Affluent Families

Tue, 03 Mar 2026 13:00:04 GMT

Author: Hillary Stalker, CFP®

Affluent families devote significant time and care to planning for investment growth, tax efficiency, estate strategy, and the thoughtful transfer of wealth across generations. Yet one important area is often postponed or quietly assumed to be addressed by wealth alone: long-term care planning.

While financial resources provide options, they do not automatically resolve the complex personal, emotional, and logistical realities that can accompany extended care needs. If the goal is to protect generational wealth and preserve family harmony, the conversation must also include autonomy, dignity, and the long-term impact care decisions may have on a family’s broader plan.

Looking Beyond the Cost of Care

Many people associate long-term care planning primarily with insurance. While insurance can be an appropriate and effective tool, the decision involves more than simply purchasing a policy. The more meaningful question is how the possibility of extended care fits within the family’s overall financial structure.

Even substantial portfolios can be affected by prolonged withdrawals, especially if they occur during market downturns or require the liquidation of tax-sensitive assets. Without thoughtful planning, care expenses may disrupt investment strategy, reduce assets intended for heirs, or create unnecessary tax consequences.

Affluent families often choose to self-insure, relying on their balance sheet rather than transferring risk to an insurance company. This can be a sound decision when supported by careful analysis, but the key here is intention. Cash flow, liquidity, portfolio durability, and estate objectives should all be reviewed together so that funding care does not unintentionally undermine other goals. Long-term care planning involves understanding how those services will be funded and how that funding affects the broader financial picture.

Preserving Autonomy and Family Alignment

Extended care decisions are rarely made under ideal circumstances, as health events often arise unexpectedly and require families to make important choices quickly. When preferences have not been clearly discussed in advance, that uncertainty can add an additional layer of stress during an already challenging and emotional time.

These families frequently have strong opinions about where and how they would like to receive care. Some prefer to remain at home with private support, while others may want access to specific facilities or specialized services. These preferences should be documented and communicated while the individual is fully capable of expressing them.

Bringing the family together for thoughtful conversation can create clarity around expectations, responsibilities, and decision-making roles.

Reviewing estate documents, healthcare directives, and powers of attorney in that setting helps ensure that those entrusted with authority understand both their responsibilities and the family’s wishes. When communication is proactive and aligned, it reduces confusion and helps prevent misunderstandings or conflict when important decisions must be made.

Long-term care planning, at its core, supports family continuity. When roles are defined and expectations are understood, wealth can serve its intended purpose rather than becoming a source of tension.

Coordinating the Professional Team

For affluent families, long-term care planning should be integrated across the advisory team. CPAs, estate planning attorneys, and wealth managers each bring a different perspective, and coordination helps confirm that no part of the plan operates in isolation.

Funding care may involve distributions from trusts, adjustments to gifting strategies, or changes to tax planning, all of which require liquidity needs to be evaluated alongside long-term return assumptions. Estate documents may also need to be updated to reflect current healthcare preferences or clarify trustee responsibilities. When these elements are reviewed together within the broader financial framework, families can identify potential gaps before they become urgent challenges and ensure that care planning supports, rather than interrupts, their long-term legacy goals.

Seen in this light, long-term care planning is not a separate exercise, but a natural extension of the overall wealth management process. By addressing it early and thoughtfully, families can protect their independence and dignity while preserving the structure and legacy they have worked so intentionally to build.

Healthcare in retirement could cost you $172K. We asked 11 pros the best ways to save

Mon, 23 Feb 2026 21:27:53 GMT

MarketWatch, February 23, 2026

Hillary Stalker, CFP, executive vice president at CapWealth, tells Lara Becker at MarketWatch that with nearly 20% of Americans overlooking retirement healthcare costs, savers should maximize HSAs and build flexible taxable savings. “One of the most unknown but key factors to saving through an HSA is that those funds can be used tax-free for Medicare premiums,” says Stalker.

Bloomberg Daybreak Asia: Japan's Takaichi Formally Reappointed

Wed, 18 Feb 2026 20:01:59 GMT

Tim Pagliara, chief investment officer at CapWealth, joins the Bloomberg Daybreak Asia podcast to discuss how AI is pressuring software companies with costs and returns. “I think some of these software companies that have very, very expensive packages, they're going to be under some pricing pressure. They're going to have to bundle and innovate around it. So as of right now, it really looks to me like it will be impactful primarily on pricing. I don't think people are going out of business, but I think they're going to have to innovate around it, and that's going to lead to a lot of job disruption,” says Pagliara.

LISTEN TO THE PODCAST

Costly Retirement Planning Mistakes Affluent Families Should Avoid

Tue, 17 Feb 2026 13:00:39 GMT

Author: Michael Vaught, CFP®

As wealth grows, there is more flexibility and opportunity for retirement planning. At the same time, it also introduces complexity that requires careful coordination. Multiple account types, shifting family priorities, tax considerations, and long-term legacy goals are all intertwined. When even one element is overlooked, small inefficiencies can quickly compound, which is why it’s important to understand where common pitfalls can occur.

Assumptions That Don’t Age Well

During the planning process, assuming spending will remain steady, or even decline, in retirement can lead to long-term hurdles. For many affluent families, lifestyle expenses tend to expand instead. Travel becomes more immersive and frequent. Additional properties may be acquired. Philanthropic commitments deepen. Financial support for children and grandchildren often becomes more intentional.

Plans anchored solely to current spending patterns can fail to capture how priorities evolve over decades. A thoughtful strategy anticipates that lifestyle growth may accompany wealth growth, and it builds in the flexibility to accommodate both.

Complexity Beneath the Surface

Affluent households rarely hold their wealth in one place. Taxable portfolios, retirement accounts, trusts, and business interests often coexist, each governed by distinct tax rules. The challenge lies not simply in managing investments, but in determining how assets are accessed over time.

Withdrawals taken without coordination can unintentionally trigger higher taxes, increase Medicare premiums, or diminish the long-term benefits of tax-advantaged accounts. While these decisions may appear incremental, their cumulative impact can materially reduce after-tax wealth.

Timing decisions deserve similar scrutiny. Social Security is frequently claimed early because the income does not feel necessary. Yet delaying benefits increases guaranteed lifetime income and can provide meaningful protection against longevity risk, particularly for married couples. In this context, the decision is less about short-term cash flow and more about strengthening the overall retirement structure.

Decisions That Deserve Coordination

Philanthropy is often central to an affluent family’s identity, but it is not always fully integrated into the broader financial plan. When charitable giving is handled independently, opportunities for efficiency may be missed.

Strategies such as Qualified Charitable Distributions, donor-advised funds, and gifts of appreciated securities can enhance both impact and tax efficiency when used intentionally. Aligning charitable goals with income and estate planning ensures that generosity supports the broader strategy rather than existing alongside it.

Coordination across advisors is equally important. Affluent families commonly work with CPAs, estate attorneys, financial advisors, and insurance specialists, each offering valuable expertise. Without alignment, however, well-intentioned advice can overlap or conflict. A collaborative approach helps ensure each decision reinforces the family’s long-term objectives.

Estate plans, in particular, require ongoing attention. Changes in tax law, asset values, and family dynamics can quickly render existing structures outdated. Regular reviews help prevent unintended tax exposure, administrative delays, or confusion for future generations.

Retirement planning at this level goes beyond reacting to markets or chasing returns; it requires deliberate decision-making that reflects how you want to live and transition wealth over time. When spending assumptions, tax strategy, income timing, and estate planning are aligned, the result is not only financial efficiency, but clarity and confidence about the years ahead.

How Charitable Giving Can Strengthen Your Legacy and Lower Taxes

Tue, 03 Feb 2026 12:43:19 GMT

Author: Michael Vaught, CFP®

Charitable giving is often driven by the desire to make a meaningful difference, and when approached thoughtfully, it can also play a powerful role in shaping your long-term financial and personal legacy. Beyond the immediate satisfaction of supporting causes you care about, strategic philanthropy can help reduce taxes, engage future generations, and ensure your values endure well beyond your lifetime.Life changes often happen quickly, and financial plans can fall out of sync just as fast. A plan that once fit your goals and responsibilities may no longer reflect where you are today. Reviewing your financial plan during key moments helps ensure your strategy continues to support your needs, priorities, and long-term goals.

Changes in Family or Relationships

Marriage, divorce, or the birth or adoption of a child can reshape both day-to-day finances and long-term planning. Combining households may require coordinating income, savings, and debt, while divorce often involves separating assets and rebuilding individual financial independence. Welcoming a child introduces new expenses and makes planning for education, insurance, and estate considerations more important.

In each case, reviewing beneficiaries, updating estate documents, and confirming insurance coverage are essential steps to keep your plan aligned with your family’s current needs.

Career Shifts and Income Changes

Changes in employment can directly affect cash flow, benefits, and long-term savings. Starting a new role, receiving a promotion, changing careers, or facing a layoff may alter retirement contributions, insurance coverage, or tax planning strategies.

Giving With Purpose

For many individuals and families, charitable giving reflects what matters most. Supporting local communities, educational institutions, medical research, faith-based organizations, or cultural initiatives allows you to leave a lasting imprint that extends far beyond financial wealth. When gifts are planned intentionally, whether during your lifetime or as part of an estate strategy, they can create an enduring impact that aligns closely with your personal vision.

Philanthropy can also serve as a meaningful way to involve family members in conversations about values and stewardship. Families who give together often find that charitable decision-making becomes a shared experience, reinforcing priorities and encouraging future generations to take an active role in carrying those values forward. By establishing a family fund or integrating charitable goals into comprehensive planning, generosity can become a continuous family tradition rather than a single moment.

Aligning Impact With Tax Efficiency

From a financial perspective, charitable giving can be a highly effective tax planning tool when structured intentionally. Qualified charitable contributions may reduce taxable income for individuals who itemize deductions, and the type of asset used can significantly influence the overall tax outcome. For example, donating appreciated securities allows individuals to avoid capital gains taxes that would otherwise be triggered by a sale, while still receiving a deduction based on the asset’s full fair market value. This strategy can be especially advantageous for long-held investments that have experienced substantial growth.

Donor-advised funds offer an additional layer of flexibility and control. By contributing assets to a donor-advised fund, individuals can receive an immediate tax deduction while maintaining the ability to recommend grants to charitable organizations over time. This structure can be especially useful during higher-income years or following liquidity events, allowing donors to align tax planning with a longer-term philanthropic strategy rather than making reactive giving decisions.

For individuals in retirement, charitable giving can also intersect meaningfully with required minimum distributions. Once RMDs begin, qualified charitable distributions allow IRA owners to direct funds straight to eligible charities. Because these distributions are excluded from adjusted gross income, they can help reduce overall taxable income while still satisfying annual distribution requirements. This can be an effective strategy for retirees who do not rely on RMDs for income and want to give in a tax-efficient way.

Starting in 2026 under the One Big Beautiful Bill Act, there is a new deduction for non-itemizers, up to $1,000 single ($2,000 joint filers) for cash donations to public charities, excluding DAF accounts and supporting organizations. Taxpayers who do itemize can only deduct the portion of their charitable donations that is above 0.5% floor of their AGI.

Creating a Lasting Legacy

Charitable planning often extends beyond lifetime giving and plays an important role in estate strategy as well. Including charitable bequests in a will, trust, or beneficiary designation can reduce the size of a taxable estate, potentially lowering estate taxes while ensuring assets are directed toward causes that reflect personal values. In some cases, charitable gifts may also help create more efficient outcomes for heirs by balancing philanthropic goals with wealth transfer objectives.

When approached with intention, charitable giving becomes more than generosity alone. It serves as a bridge between financial planning, tax strategy, and legacy planning, allowing individuals to support meaningful causes while managing income and estate tax exposure. Working closely with a financial advisor can help to integrate your charitable strategies into a broader plan, so each gift supports both personal goals and long-term financial efficiency.

Tim Pagliara | Fox Business - AI Spending is Shifting

Mon, 02 Feb 2026 12:42:26 GMT

On Fox Business, Tim Pagliara, Chief Investment Officer at CapWealth, discussed how a rise in AI spending is shifting investor focus toward free cash flow and capital discipline.

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I Earn $130,000 but Am Terrified of Layoffs. Should I Stop Funding My 401(k) to Pay off My Mortgage?

Sat, 31 Jan 2026 20:55:43 GMT

Money, January 31, 2026

Hillary Stalker, executive vice president at CapWealth, provides insight to Pete Grieve at Money about the importance of prioritizing saving for the long-term over paying off mortgages. "With such a long runway until retirement, I think that there are other areas to focus on to give him peace of mind. It would be an opportunity cost to him to pay off the mortgage and give up saving for retirement," Stalker says.

When Life Changes: Key Events That Should Prompt a Financial Plan Review

Tue, 20 Jan 2026 13:52:16 GMT

Author: Jennifer Horton, CFP®, CTFA®

Life changes often happen quickly, and financial plans can fall out of sync just as fast. A plan that once fit your goals and responsibilities may no longer reflect where you are today. Reviewing your financial plan during key moments helps ensure your strategy continues to support your needs, priorities, and long-term goals.

Changes in Family or Relationships

In each case, reviewing beneficiaries, updating estate documents, and confirming insurance coverage are essential steps to keep your plan aligned with your family’s current needs.

Career Shifts and Income Changes

Revisiting your financial plan during these transitions helps ensure savings goals remain realistic and that benefits are being used effectively. It also provides an opportunity to adjust spending and build resilience during periods of uncertainty.

Housing Decisions and Relocation

Buying a home or relocating to a new area often brings new financial obligations. Mortgage payments, moving costs, property taxes, and changes in cost of living can all affect cash flow. If a move is tied to a job change, additional considerations such as relocation benefits or state tax differences may also apply.

A financial plan review helps clarify how these changes fit into your broader financial picture and whether adjustments are needed to maintain balance and flexibility.

Windfalls and Unexpected Events

Receiving an inheritance, bonus, or other financial windfall can be meaningful, but it also requires thoughtful planning. Decisions around saving, investing, charitable giving, or paying down debt should be made in the context of your long-term goals rather than in isolation.

Similarly, serious illness, disability, or the loss of a family member can quickly change financial priorities. These moments often require reassessing income, medical expenses, insurance coverage, and estate planning to ensure stability during difficult times.Once we close out the year, our attention shifts quickly to what comes next. We study economic and market signals, evaluate evolving industry trends, and continue investing in the tools and expertise needed to serve clients at the highest level.

Preparing for Retirement

As retirement approaches, the focus shifts from accumulation to income and preservation. Reviewing your financial plan helps confirm that withdrawal strategies, investment allocations, and Social Security decisions align with your expected lifestyle and comfort with risk.

Regular reviews during this phase can help reduce uncertainty and support a smoother transition into retirement.

Why Financial Plan Reviews Matter

Life does not follow a fixed timeline, and financial planning should remain flexible. Major life events can shift priorities, responsibilities, and risk tolerance, making periodic reviews essential. Staying proactive allows you to adjust before small issues become larger challenges.

Working with a financial advisor during these moments can provide clarity and guidance, helping ensure your financial plan continues to support the life you are building, both now and in the years ahead.

Tim Pagliara | Market Outlook: Trump-Powell tensions put spotlight on rates, stocks and AI growth

Thu, 15 Jan 2026 13:59:18 GMT

CIO Tim Pagliara joins BNN Bloomberg to discuss how recent political pressure on the Federal Reserve and other factors are impacting U.S. equities and economic growth.

WATCH VIDEO

CapWealth Promotes Drew O’Connor to Director of Research

Tue, 06 Jan 2026 13:59:05 GMT

BusinessWire, January 6, 2026

CapWealth announces that Drew O’Connor has been promoted to Director of Research to grow the investment team and promote research and idea development. “His promotion reflects the leadership, discipline, and thoughtful approach he brings to our team each day. As Director of Research, Drew will play a central role in shaping our investment thinking and supporting strong outcomes for our clients,” says Tim Pagliara, founder and CIO of CapWealth.

$2bn RIA names new top gatekeeper

Tue, 06 Jan 2026 13:59:02 GMT

Citywire, January 6, 2026

Reporter William Johnson at Citywire highlights Drew O’Connor’s promotion to Director of Research at CapWealth. “Drew has been instrumental in strengthening our investment process and elevating the sophistication of our research platform. His promotion reflects the leadership, discipline and thoughtful approach he brings to our team each day,” CapWealth founder and CIO Tim Pagliara says.

CapWealth, Gresham Smith, LP Building Solutions announce updates

Tue, 06 Jan 2026 13:58:59 GMT

Nashville Post, January 6, 2026

Cynthia Yeldell Anderson at Nashville Post shares that Drew O’Connor has been promoted to Director of Research at CapWealth.

Reflecting on Year-End at a Wealth Management Firm

Tue, 16 Dec 2025 14:13:35 GMT

Author: Hilly Stalker, CFP®

Insights, Achievements, and Planning for the Future

Year-End Reflections: Navigating Success and Strategy

Year-end has a way of arriving quietly and then demanding our full attention. For wealth management firms, it’s a natural inflection point: a time to evaluate the decisions made, the outcomes produced, and the ways in which our clients’ lives and priorities have changed.

At CapWealth, we don’t see December as a finish line. It’s more like a checkpoint. It’s the moment to pause, take stock of what worked, learn from what didn’t, and make sure we’re walking into the new year with a clear plan.

Building Trust & Relationships with Client Reviews

The cornerstone of year-end is the client review. These meetings are essential because they allow us to step back from day-to-day market noise and revisit what the portfolio is designed to do.

Performance matters, of course. However, the real value of year-end reviews lies in context: understanding what changed for a client this year, what risks are newly relevant, and what opportunities we should be positioning them for. We revisit long-term objectives, test assumptions against today’s environment, and evaluate the investment strategy so it remains aligned with the client’s needs. Tax conversations, charitable giving strategies, and year-end execution are all part of the broader responsibility we have to help clients build wealth efficiently and intentionally.

Portfolio Management & Tax Strategies

Markets rarely finish the year where they began, and even small shifts in allocation can meaningfully alter risk exposure over time.

That’s why we review each portfolio’s construction, rebalancing where necessary, and confirm that today’s positioning still aligns with the client’s objectives and risk tolerance. We rebalance to preserve discipline and reinforce the strategy that underpins long-term outcomes.

We also evaluate tax-sensitive opportunities within the portfolio. Tax-loss harvesting, capital gains analysis, and forward-looking positioning are part of holistic investment management.

Celebrating Success and the People Behind It

As analytical as our work is, year-end also highlights the human side of what we do. Strong outcomes are never the product of a single decision; they come from consistency, preparation, collaboration, and a team that understands what clients are counting on.

Our advisors, investment professionals, and support teams are committed, especially during a season that requires both precision and responsiveness. Taking the time to recognize that effort is part of who we are.

Setting Goals for the New Year

Once we close out the year, our attention shifts quickly to what comes next. We study economic and market signals, evaluate evolving industry trends, and continue investing in the tools and expertise needed to serve clients at the highest level.

But the goal isn’t to chase what’s new. It’s to stay sharp, stay disciplined, and stay aligned with what has always mattered most: delivering high-quality advice and investment management rooted in long-term thinking.

Year-end at CapWealth is both reflective and highly active. It’s a season for meaningful client conversations, careful portfolio oversight, and precise planning decisions that carry real weight into the year ahead. We’re grateful for the trust our clients place in us, and we remain committed to helping them navigate their financial lives with confidence.

Six Advanced Strategies For Ducking Capital Gain Taxes

Sat, 06 Dec 2025 13:03:10 GMT

Six Advanced Strategies For Ducking Capital Gain Taxes

William Baldwin, reporter for Forbes, speaks with Blake Harrison, executive vice president of wealth management at CapWealth, about advanced strategies high-net-worth investors can use to minimize capital gains taxes on appreciated assets. “It does pass muster with the Internal Revenue Service. But the fees add up: The stockbroker pitching the plan will get one for creating the pool, another for managing it, potentially a third for the arbitrage play on the side,” says Harrison.

You're A Financial Advisor, Not A Psychotherapist

Wed, 03 Dec 2025 12:57:54 GMT

You're A Financial Advisor, Not A Psychotherapist

Hillary Stalker, executive vice president at CapWealth, explains the importance of setting boundaries with clients who are under psychological distress with Ben Mattlin at Financial Advisor Magazine. “It is the advisor’s job to know the client well enough to know when to ask more questions and when the line between advisor and psychologist has been reached,” Stalker says.

Your Financial Year in Review: What to Update Before the Clock Strikes Midnight

Tue, 02 Dec 2025 13:05:08 GMT

Author: Hillary Stalker, CFP®

As the final weeks of 2025 tick by, it’s a good time to take stock of your financial picture and look ahead to what’s changing in the new year. Even small adjustments, from contribution limits to tax bracket shifts, can influence your buying power, taxable income, and long-term savings. Understanding these changes now gives you time to prepare and start 2026 on the strongest financial footing possible.

A 2.8% Social Security Increase

Social Security recipients will see a 2.8% Cost of Living Adjustment (COLA) in 2026.

While not as dramatic as increases during high-inflation years, this bump still offers meaningful support as costs for everyday essentials, such as groceries, utilities, and healthcare, continue to rise. For retirees, it’s a reminder to revisit your budget and confirm your spending plan reflects the updated monthly benefit.

Several IRS adjustments also take effect in January, each designed to reflect inflation but still important to understand as you map out your year:

Higher Standard Deduction - A larger standard deduction means more of your income is protected from taxation. This could lead to a lower tax burden for many households.
Wider Income Tax Brackets - Inflation-adjusted tax brackets slightly widen the income range for each tier. As more of your income falls into lower tax brackets, this may result in a modest increase in take-home pay throughout 2026.

Review your tax withholdings to make any adjustments to help you avoid surprises when it’s time to file your return.

Updates to HSA Contribution Limits

Health Savings Accounts remain a valuable tool for those enrolled in high-deductible health plans, offering triple tax benefits.

For 2026:

Self-only coverage: up to $4,400
Family coverage: up to $8,750
Catch-up contribution (55+): remains $1,000

Because these accounts can also serve as supplemental retirement savings for those who can afford to leave the funds untouched, maximizing contributions when possible can meaningfully strengthen long-term financial security.

IRA and Roth IRA Contribution Increases

Both Traditional and Roth IRA limits are rising in 2026:

Under age 50: up to $7,500
Age 50+: up to $8,600 (includes a $1,100 catch-up)

These changes provide savers with more room to build tax-advantaged retirement balances, especially helpful for those aiming to close savings gaps or accelerate progress toward their long-term goals.

Workplace retirement plans are also increasing their contribution thresholds. Those under age 50 can contribute up to $24,500, with catch-up contributions of $8,000. Even a small bump, just 1% or 2%, can make a substantial difference over time thanks to compounding.

Key Year-End Action Steps

While some of these updates happen automatically through employer-sponsored plans, others require your attention to ensure you’re taking full advantage of the new limits and rules.

Consider reviewing:

Your retirement plan contributions to capture the new limits
Tax withholding elections based on bracket and deduction changes
HSA contributions to ensure you’re maximizing tax-free savings
Your investment allocation to confirm it still aligns with your goals and time horizon
Year-end is also an ideal moment to reset your financial priorities, define new savings milestones, and prepare for upcoming expenses in 2026.

A trusted advisor can help you sort through the details, determine what matters most for your situation, and make adjustments that keep your money working as efficiently as possible.

A few thoughtful steps today can lead to meaningful financial improvements tomorrow. As we approach a new year, staying informed and proactive is the best way to position yourself for success.

Is Giftflation Blowing Up Your Holiday Budget? Here’s How to Fight It.

Wed, 12 Nov 2025 12:55:14 GMT

Is Giftflation Blowing Up Your Holiday Budget? Here’s How to Fight It.

NerdWallet reporter Lauren Schwahn speaks with Hillary Stalker, executive vice president and financial advisor at CapWealth, about the impact of the rising cost of gift giving. “When everyday costs rise, that leaves less room for discretionary spending when it comes to gift giving,” says Stalker.

How to Give Strategically Before Year-End (And Maximize Tax Savings)

Tue, 04 Nov 2025 12:55:21 GMT

Author: Jennifer Horton, CFP ^® , CTFA ^®

As the year draws to a close, many investors and families take time to review their finances, and charitable giving is often a meaningful part of that reflection. Year-end giving not only supports the causes and communities you care about most but can also create valuable tax benefits when done strategically. By planning your philanthropy before December 31, you can make a greater impact while optimizing your financial position.

Define Your Philanthropic Goals

Before making any year-end gifts, start by identifying what matters most to you. Are you passionate about supporting local nonprofits, advancing education, or driving change at the national or global level? Clarifying your priorities ensures that your contributions align with your personal values and create the kind of impact you want to see.

Consider creating a short list of organizations or causes you wish to support this year and think through whether your giving will be a one-time contribution or part of a longer-term commitment.

Understand the Tax Implications

Charitable giving can also play an important role in year-end tax planning. Donations made to qualified 501(c)(3) organizations are generally tax-deductible if completed by December 31.

If you itemize deductions, consult with a tax professional to ensure you’re taking full advantage of the available benefits. Your advisor may also recommend strategies, such as bunching, which involves grouping multiple years of donations into one tax year, to maximize deductions and exceed the standard deduction threshold.

Optimize What You Give

While cash donations are common, they’re not the only way to give. Donating appreciated assets such as stocks, mutual funds, or real estate can provide additional tax benefits. These types of gifts may allow you to avoid capital gains taxes on the appreciation while still receiving a charitable deduction for the fair market value.

For those seeking flexibility, a donor-advised fund (DAF) can be a powerful tool. You can make a contribution to your DAF before year-end, capturing the deduction now, all while distributing grants to charities over time.

Coordinate with Your CPA and Financial Advisor

If your goal is to maximize tax savings, it’s essential to understand the limitations that apply to charitable deductions. Working closely with your CPA and financial advisor can help ensure your giving strategy aligns with your broader financial plan and avoids potential pitfalls.

Your team can also help you evaluate which assets to give, how much to contribute, and whether your donations could support additional estate or income tax planning opportunities.

Explore Recurring and Matching Gift Opportunities

Many employers and private foundations offer matching gift programs that can double or even triple the value of your donation. It’s worth checking whether your company participates. You may also want to consider setting up recurring donations. This approach provides consistent support to the organizations you care about, helping them plan more effectively throughout the year while integrating generosity into your long-term financial habits.

Ensure Timely Execution and Proper Documentation

Timing is everything when it comes to year-end giving. To ensure your contributions qualify for this year’s tax benefits, complete all transactions before December 31. This includes confirming transfers of securities or other non-cash assets, which may take additional processing time. Keep detailed records of your donations, such as receipts, acknowledgments, and transaction confirmations, for your tax records. Proper documentation ensures compliance and makes tax filing smoother in the spring.

Communicate Your Intentions

If you’re making a significant or targeted gift, consider contacting the organization directly to discuss your goals. Many charities allow donors to direct funds toward specific programs or initiatives. Clear communication ensures your contribution is used as intended and strengthens your relationship with the organization.

Moving Forward with Purpose

Year-end giving is an opportunity to make a lasting difference while also reinforcing your financial plan. By clarifying your goals, understanding the tax rules, and collaborating with your advisory team, you can ensure that your generosity creates both meaningful impact and measurable financial benefit.

Thoughtful planning today can make your giving more purposeful and help you start the new year knowing your money is working for the causes and communities you value most.

Tim Pagliara: This is the backbone of the AI revolution

Tue, 28 Oct 2025 20:53:37 GMT

CapWealth CIO Tim Pagliara discusses the impact of technology earnings on free cash flow in Big Tech on 'The Claman Countdown.'

WATCH VIDEO

Your Year-End Financial Checklist: 7 Smart Moves to Close Out the Year

Tue, 21 Oct 2025 12:17:02 GMT

Author: Hillary Stalker, CFP ^®

As the year winds down, it’s the perfect time to take a step back and review your financial picture. A thoughtful year-end checkup can help you confirm what’s working, identify areas for improvement, and ensure you’re entering the new year with confidence. By taking a closer look now, you give yourself the opportunity to make meaningful adjustments while there’s still time to make an impact.

Revisit 401(k) and Retirement Plan Contributions

Before the calendar flips, take another look at how much you’ve contributed to your workplace retirement plan or IRA. Are you maximizing what’s allowed, or at least contributing enough to capture your full employer match? Even small increases in your contributions before year-end can give your long-term savings a significant boost and may also help reduce your taxable income.

Review Beneficiary Designations

Beneficiary information is often overlooked, but it plays a crucial role in protecting your loved ones. A quick review of the names listed on your retirement accounts, life insurance policies, and other financial assets can help ensure that everything accurately reflects your current situation. Life changes, such as marriage, divorce, births, or deaths, may necessitate updates. Making those changes now can prevent confusion or unintended consequences later.

Consider Charitable Contributions

If charitable giving is part of your financial plan, the end of the year is an ideal time to make contributions. Whether you donate cash, appreciated securities, or use a donor-advised fund, giving before December 31 not only supports causes close to your heart but may also reduce your taxable income. This way, your generosity can benefit both your community and your financial plan.

Revisit Your Plan After Major Life Changes

Big life events often bring big financial changes. If this year included milestones such as a wedding, welcoming a child, or changing careers, it’s wise to connect with your financial planner before year-end. Discussing these transitions can help you adjust your strategy so it continues to reflect your long-term priorities and provides peace of mind as you move forward.

Review Income Tax Withholding

Taxes are another area where a little preparation goes a long way. Reviewing your withholding now can help you avoid surprises during tax season. Withholding too little may result in an unexpected bill, while withholding too much ties up money that could be used or invested throughout the year. A quick adjustment today can ensure better balance tomorrow.

Check Your Investments

It’s tempting to “set it and forget it” with your investments, but staying informed is essential. Many people are unaware of how their accounts are performing because they rarely review their statements. Take this time to review your portfolio, confirm that your risk level still aligns with your comfort zone, and make sure your money is working toward your goals. Staying engaged helps you stay on track.

Revisit Your Budget

Finally, refocus on your day-to-day finances. Reviewing your budget now allows you to see whether your spending and saving habits are supporting your goals or if adjustments are needed. Small changes, such as cutting back on nonessentials or redirecting funds toward savings or debt repayment, can have a significant impact over time. A refreshed budget provides a strong foundation for the year ahead.

The Bottom Line

Completing a year-end financial review may feel like one more task on a busy to-do list, but the payoff is well worth the effort. By revisiting contributions, updating beneficiary information, checking your investments, and fine-tuning your budget, you’ll step into the new year with greater clarity and control. Small, intentional steps now can set you up for lasting financial success.

How a CD Ladder Can Help You Maximize Short-Term Yield

Sat, 11 Oct 2025 12:16:32 GMT

A CD Ladder Is the Right Step for These Young Workers. Here’s Why.

Hillary Stalker, executive vice president at CapWealth, speaks with Mallika Mitra at Barron’s about the benefits of CD laddering. “By laddering at different maturities, they have the opportunity of capturing that yield at a three-month mark, a six-month mark, a nine-month mark, up to a year, and that gives them different opportunities for their funds to mature. If they’ve decided to not purchase that home yet, then we can have another conversation about what to do with that cash and the interest paid moving forward,” says Stalker.

Selling Your Business? Here’s What Needs to Happen Before You Do

Tue, 07 Oct 2025 12:19:05 GMT

Author: Jennifer Horton, CFP ^® , CTFA ^®

Selling a business is one of the most significant financial and personal decisions a business owner will ever make. Whether you’ve spent decades building your company or just a handful of years growing it to scale, the choice to sell isn’t just about finding the right buyer; it’s about preparing yourself and your business for a successful transition.

Too often, we see business owners underestimate the amount of groundwork required before putting their company on the market. Alternatively, they may undergo a liquidity event and approach us too late in the process to plan financially. Taking the right steps ahead of time can help maximize the value of your business, streamline the process, and give you confidence as you move into the next chapter.

Assess Your Reasons for Selling

Before anything else, it’s important to be clear about why you’re selling. Buyers and advisors alike will want to understand your motivations. Common reasons include retirement, health concerns, pursuing new opportunities, or simply needing liquidity for personal or financial reasons.

Understanding your “why” will not only help you identify the best buyer but also guide you toward a sale strategy that aligns with your goals. If for health reasons or liquidity needs, you may be on a different timeline than planning for retirement, without that time constraint. Whether your goal is to maximize price, secure your legacy, or create a smooth path for employees and customers, your “why” will be the north star to guide the decision-making process.

Assemble the Right Team

Selling a business is not a solo effort. It requires input from professionals who understand the nuances of mergers and acquisitions, tax strategy, and financial planning. At a minimum, you’ll want:

A CPA to affirm your financials are accurate and to help you understand tax implications.
An attorney to manage contracts, compliance, and negotiations.
A financial advisor to help you align the sale with your personal wealth and retirement goals.

The key is to have experienced professionals working in concert. A collaborative advisory team can save you time, reduce stress, and increase the likelihood of a successful outcome.

Organize Your Records

Clean, accurate financials are the backbone of any business sale. Buyers will scrutinize every detail during due diligence, from revenue streams to outstanding debts. Make sure your records are up to date, consistent, and transparent.

This may mean revisiting prior years’ statements, confirming tax filings are complete, and tightening up accounting practices. The more clarity you can provide upfront, the smoother the due diligence process will be.

Just as with your financial records, buyers will examine your legal and compliance history closely. That means looking at contracts, permits, licenses, and employee agreements to see if they are current and enforceable.

Addressing any legal issues before the sale process begins will reduce risks, build buyer confidence, and prevent last-minute delays. Think of it as preemptive due diligence that demonstrates professionalism and foresight.

Understand Your Valuation

Every business owner has an idea of what their company is worth, but the market may have a different opinion. A professional valuation provides an objective assessment of your business’s worth and sets a realistic foundation for negotiations.

Factors that impact valuation include cash flow, growth potential, market conditions, customer base, and even the strength of your management team. Knowing this number ahead of time can prevent surprises, set realistic expectations, and put you in a stronger position when offers start coming in.

Develop a Transition Plan

A buyer isn’t just acquiring your financials; they’re acquiring a living business with employees, clients, and processes. Having a thoughtful transition plan can make your company more attractive and valuable.

This plan might include retaining key employees, outlining client handoff procedures, or even committing to stay involved for a defined period. Demonstrating continuity gives buyers confidence that the business will remain stable and successful post-sale.

Selling your business is more than a financial transaction. It’s the culmination of years of hard work, sacrifice, and success. Preparing in advance by clarifying your goals, assembling the right team, and tightening up financial, legal, and operational details will help you sell from a position of strength.

Whether you’re ready to sell now or just beginning to plan, taking these steps early can pay dividends when the time comes to hand over the keys to your next successor.

CapWealth Named to Forbes 2025 List of Top RIA Firms

Thu, 02 Oct 2025 15:53:56 GMT

CapWealth has been recognized on the Forbes 2025 list of America’s Top RIA Firms.

The fourth annual list highlights firms with proven track records of safeguarding and growing client wealth. CapWealth’s inclusion on this list reflects the firm’s dedication to providing investment strategies tailored to the unique needs of the individuals and families we serve.

This recognition further underscores our mission to deliver trusted advice, sound financial planning, and disciplined investment management. The Forbes ranking developed by SHOOK Research is based on qualitative and quantitative data using an algorithm to weigh factors such as revenue, AUM, compliance records and industry experience.

This acknowledgment affirms CapWealth’s commitment to helping clients protect, grow, and pass down their wealth for generations.

https://www.forbes.com/lists/top-ria-firms/

Third-party rankings and recognition from rating services or publications are no guarantee of future investment success. Working with a highly rated advisor does not ensure that a client or prospective client will experience a higher level of performance or results. These ratings should not be construed as an endorsement of the advisor or by any client nor are they representative of any one client’s evaluation. Generally, ratings, rankings and recognition are based on information prepared and submitted by the advisor. Unless otherwise noted, no fee was paid for consideration of any ranking or award.

CapWealth is not affiliated with Forbes. Rankings within Forbes Top RIAs, Best-In-State Wealth Advisors, Best in State Women Advisors and Top 250 Wealth Advisors lists are based on data and criteria gathered and developed by Shook Research, which does not receive compensation from the advisors or their firms in exchange for placement on a ranking. A more thorough disclosure of the criteria used in making these rankings is available by clicking on this link .

CapWealth is not affiliated with Forbes. Rankings within Forbes Best-In-State Wealth Advisors, Best in State Women Advisors and Top 250 Wealth Advisors lists are based on data and criteria gathered and developed by Shook Research, which does not receive compensation from the advisors or their firms in exchange for placement on a ranking. A more thorough disclosure of the criteria used in making these rankings is available by clicking on this link .

Forbes 2025 America’s Top RIA Firms

Wed, 01 Oct 2025 12:05:01 GMT

Forbes 2025 America’s Top RIA Firms

CapWealth is named as one of the Forbes Top RIA Firms 2025. The Forbes ranking developed by SHOOK Research is based on qualitative and quantitative data using an algorithm to weigh factors such as revenue, AUM, compliance records, and industry experience.

Understanding RMDs: What Retirees Need to Know

Tue, 23 Sep 2025 14:26:05 GMT

Author: Hillary Stalker, CFP ^®

When it comes to retirement planning, saving diligently is only half the story. After years of benefitting from tax-free growth, eventually, the IRS requires you to begin withdrawing money from tax-deferred accounts, whether you need the income or not. These withdrawals are known as Required Minimum Distributions, or RMDs. Understanding the rules around RMDs can help you avoid costly mistakes, all while keeping your plan on track and reducing stress during retirement.

When RMDs Begin

For tax-deferred retirement accounts, including Traditional IRAs, Simplified Employee Pension IRAs (SEP IRAs), Savings Incentive Match Plan for Employees (SIMPLE IRAs), and employer plans like 401(k)s, you must begin taking RMDs by April 1 of the year after you turn 73, if you reach that age in 2023 or later.

Roth IRAs don’t have lifetime RMDs for the original owner, so the funds can remain untouched for as long as you choose. Roth 401(k)s and once had similar RMD requirements, but beginning in 2024, those rules no longer apply to account owners.

After your first RMD year, all future distributions must be taken by December 31. If you delay your first withdrawal until April 1 of the following year, you’ll end up taking two RMDs in the same calendar year, the delayed first RMD plus that year’s regular one. This can significantly increase your taxable income and potentially push you into a higher tax bracket, so planning the timing carefully is essential.

How RMDs Are Calculated

Your RMD is based on your account balance as of December 31 of the previous year and a life expectancy factor from IRS tables. The Uniform Lifetime Table is used for most people, but if your spouse is more than ten years younger and is your sole beneficiary, you can use the Joint Life Table instead, which reduces the required amount. Understanding which table applies to you can help ensure you withdraw only what’s necessary.

Avoiding Penalties

Missing an RMD or withdrawing less than required can be an expensive mistake. The IRS can impose a penalty of 25% of the amount you failed to withdraw, though this penalty can be reduced to 10% if the error is corrected within two years. Staying organized and setting reminders can help you avoid this costly oversight and keep your plan on track.

Special Situations to Consider

There are also a few special circumstances to be aware of. If you are still working at age 73 or older, and you do not own 5% or more of that company, you may be able to delay RMDs from your current employer’s plan until you retire, provided your plan allows it. This exception does not apply to IRAs.

In addition, if you have multiple accounts, the rules can differ. If you hold several IRAs, you can take the total amount of your required distribution from any one or a combination of those accounts. However, if you have multiple 401(k) accounts, you must take separate RMDs from each plan.

The Bottom Line

Understanding RMD rules can save you from unnecessary stress and penalties. By knowing when RMDs start, how they are calculated, and what exceptions may apply, you can create a plan that aligns with your goals and keeps your retirement on track. Taking time now to understand the process will allow you to spend less energy worrying about deadlines and more time enjoying the retirement you’ve worked so hard to build.

CapWealth’s Tim Pagliara Highlights Market Opportunities Beyond the “Magnificent 7”

Mon, 22 Sep 2025 14:19:14 GMT

Tim Pagliara, Chief Investment Officer at CapWealth, shared his market outlook on Fox Business, urging investors to evaluate companies individually rather than focusing solely on the broader indexes. While mega-cap names like the “Magnificent 7” trade at high multiples, he pointed to opportunities in overlooked sectors with stronger value potential. With $2+ billion in assets under management, CapWealth’s strategy emphasizes identifying growth at reasonable valuations, and Pagliara underscored his team’s confidence in the breadth of the market moving forward

Want to Retire At 70? See if You Can Answer These Six Questions

Tue, 09 Sep 2025 16:35:00 GMT

Kiplinger, August 31, 2025

Jennifer Pagliara Horton, executive vice president at CapWeath, discusses what individuals need to consider before retiring with Donna Fuscaldo at Kiplinger. “Are you going to live to 100? Are you healthy? It does make a difference. Are you set up for success in retirement in your current environment? What is your living situation for the next 10, 20 and 30 years? If someone wants to keep doing something they love and they are mentally and physically capable of doing it and it brings them joy, why not?” says Horton.

Trusts, Wills and What Most People Miss in Their Estate Plan

Tue, 09 Sep 2025 13:17:28 GMT

Author: Jennifer Horton, CFP ^® , CTFA ^®

When people think of estate planning, they often focus on drafting a will or creating a trust. While those are important pieces, a comprehensive plan goes well beyond that. Estate planning is about protecting your family, easing burdens during difficult times, and making sure your wishes are carried out. Unfortunately, there are a number of details that often get overlooked, and those gaps can create problems for loved ones.

Keeping Beneficiary Designations Up to Date

Your will does not control who inherits certain accounts. Retirement plans, life insurance, and other financial accounts often pass directly to the beneficiaries listed on the paperwork. If those designations are out of date, your assets may go to the wrong person.

It is also important to name contingent beneficiaries. These serve as backups if your primary beneficiary is no longer living. Without them, those assets could end up going through probate unnecessarily.

Making Sure a Trust is Funded

Setting up a trust is only the first step. You also need to move the right assets into it. This process, known as funding the trust, is often forgotten once the paperwork is signed.

If the trust is not funded, it may not offer the protection or benefits you expected. In many cases, your estate could still end up in probate, defeating one of the key purposes of creating the trust in the first place.

Planning for Incapacity

Estate planning is a constantly evolving process and should not focus solely on what happens after death. It also needs to account for what happens if you become unable to make decisions on your own.

Without powers of attorney or healthcare directives in place, your family may need to petition the court to act on your behalf. Putting these documents in place now ensures that someone you trust can handle financial and medical decisions if the unexpected happens.

Covering Digital Assets and Online Accounts

Your estate today may include more than just physical property. Online accounts and digital assets can be an important part of the picture. Social media accounts, email logins, cryptocurrency wallets, and services like PayPal can be nearly impossible for loved ones to access without advance planning. Taking time to record your digital assets and how they should be handled can save your family frustration and confusion later on.

Addressing Property in Other States

If you own a second home or property in another state, your executor may need to open probate there as well. This can be costly and time-consuming. Placing out-of-state property into a trust is one way to simplify the process and spare your loved ones from added complications.

Remembering Heirlooms and Sentimental Items

Families often assume conflict will arise over money, but in many cases, the biggest disagreements are over sentimental items. Jewelry, china, or collectibles may not have significant financial value, but they carry deep emotional meaning.

Including these items in your estate plan and spelling out who should receive them helps reduce tension and ensures your wishes are clear.

The Bottom Line

Estate planning encompasses more than just wills and trusts. By reviewing these often-missed areas, you can strengthen your plan and give your loved ones peace of mind, all while ensuring no important detail is left to chance.

Estate Planning Myths That Could Hurt Your Family

Tue, 26 Aug 2025 09:01:00 GMT

Author: Jennifer Horton, CFP ^® , CTFA ^®

Estate planning is one of those topics many people put off, often because of misconceptions about what it really is and who needs it. The truth is, an estate plan goes far beyond distributing wealth after death. It’s about protecting your loved ones, honoring your wishes, and creating clarity during difficult times. Unfortunately, common myths can cause families to miss critical steps, leaving them exposed to unnecessary risks.

Myth #1: “Estate Planning Is Just for the Wealthy”

Estate planning isn’t reserved for those with significant wealth. Without a plan, the state decides how your assets are distributed, which may not align with your intentions and can leave your family in a complicated situation. Estate planning is less about how much you have and more about ensuring the people and causes you care about are protected.

Myth #2: “A Will Is All You Need”

A will is an important piece of the puzzle, but it doesn’t cover everything. A will directs how property is distributed after death, but it cannot appoint someone to handle medical or financial decisions if you’re incapacitated. Without powers of attorney or healthcare directives, your family may have to turn to the courts for authority.

Relying solely on a will means your estate will be subject to probate, a public, time-consuming, and potentially costly process that delays your family’s access to assets. A will may also fall short for minors: while you can name a guardian, it doesn’t control how inherited assets are managed, meaning children could gain full access at age 18, whether or not they’re ready. For more complex assets, blended families, or tax concerns, a comprehensive plan that includes trusts and other tools provides far stronger protection.

Myth #3: “Once Written, Your Estate Plan Is Set Forever”

Life changes, and so should your estate plan. Milestones, such as marriage, divorce, the birth of a child, relocation, or changes in finances, can all affect how your plan should be structured. Outdated documents can create confusion, lead to disputes, or even make your plan unenforceable. Regularly reviewing your estate plan ensures it reflects your life today and your wishes for tomorrow.

Myth #4: “Estate Planning Is Only About Who Gets What”

A thoughtful estate plan does much more than divide assets. It also safeguards against incapacity by ensuring someone you trust can act on your behalf if you cannot. For parents, it provides clarity on guardianship and how children’s inheritances are managed, protecting them from receiving assets before they are ready. Estate plans also include healthcare directives and end-of-life instructions, easing the burden on loved ones by removing uncertainty in difficult moments. Ultimately, estate planning is about protecting your family in both financial and personal matters.

Myth #5: “My Family Knows My Wishes, So I Don’t Need to Put Them in Writing”

Relying on conversations or assumptions is risky. Even close families may disagree on what you “would have wanted,” which can lead to conflict, strained relationships, or even legal disputes. Documenting your wishes in a legally binding way eliminates guesswork and provides your family with a clear roadmap to follow.

Myth #6: “I Can Do It Myself with Online Forms”

Online templates may seem convenient, but they rarely account for unique family dynamics, complex financial situations, or state-specific laws. A one-size-fits-all form may be incomplete, invalid, or vulnerable to challenges in court. Professional guidance ensures your estate plan is comprehensive, enforceable, and tailored to your goals.

Myth #7: “Estate Planning Is Just About Avoiding Taxes”

While minimizing taxes can be part of the process, estate planning offers much more. It can protect your privacy by avoiding probate, simplify the transfer of assets, and ensure loved ones are cared for both financially and personally. Viewing estate planning only through the lens of taxes overlooks its greater role in protecting your family’s future.

Myth #8: “If I’m Young and Healthy, I Don’t Need an Estate Plan”

Estate planning isn’t just for later in life. Accidents and illnesses can happen unexpectedly, and without basic documents like a healthcare directive or financial power of attorney, your family may be left scrambling. By planning early, you give yourself peace of mind and your loved ones the clarity they’ll need when it counts.

The Bottom Line

Estate planning isn’t about wealth level or age; it’s about preparation, clarity, and care for the people who matter most. By dispelling these myths and putting a proper plan in place, you can protect your loved ones from unnecessary stress and ensure your wishes are honored.

At CapWealth, we believe thoughtful estate planning is an essential part of your overall financial strategy. If you have questions about your plan or are ready to get started, we’re here to help guide you through the process.

Back-to-School, Back to Budget: Resetting Your Family’s Finances

Tue, 12 Aug 2025 13:27:56 GMT

Author: Hillary Stalker, CFP®

As summer winds down and a new school year is on the horizon, shopping for back-to-school essentials is high on the priority list. But your budget deserves just as much attention. The school year often brings expenses you didn’t face during the summer, from after-school activities and school lunches to field trips and extracurricular fees. By planning ahead and making room for these costs in your budget, you’ll set yourself and your family up for success all school year long.

Revisit Your “School Year” Budget

Back-to-school expenses rarely stop at notebooks and pencils. A realistic school-year budget should also account for things like school lunches, extracurriculars like sports and clubs, tutoring, field trips/school events, transportation, technology, and more. Planning for these costs ahead of time means you won’t be caught off guard down the road, and setting aside money into a dedicated “school-year fund” can make those bigger expenses much easier to handle when the time comes.

Re-evaluate Everyday Spending

As the school year kicks off and schedules become more hectic, this is a good time to take another look at your family’s spending habits. With evenings filled with practices, games and rehearsals, the added costs of carpooling, new gear, and on-the-go dinners can quickly add up. Reviewing your everyday spending is a smart way to see where you can cut back or simplify costs where necessary to make room for these expenses. Even small adjustments like automating bills or reducing impulse purchases can free up cash for other important needs.

Plan Ahead for Seasonal Surprises

Some school-related costs don’t make it into the original budget but can still sneak up throughout the year. Holiday gifts for teachers, spirit wear during homecoming, or bigger events like prom and graduation in the spring can all add up. These expenses might not apply every year, but setting aside some seasonal-specific savings at the start of the school year can help ensure you’re prepared if (and when) they come around.

Stay Committed to Your Financial Future

While it is crucial to take into account the extra spending that comes with the school year, it is also necessary to keep your long-term financial goals in mind. You should continue to contribute towards your savings goals, emergency fund, retirement and even college/day care funds if they’re a possibility in the future. This process is also a great opportunity to involve your children in the conversation by teaching them good savings habits and helping them understand the value of their extracurricular activities and the costs associated with them, so as to set them up for their own financial success in the future.

So, as we say goodbye to summer and hello to another school year, now is the time to consider your budget. A quick review now can help you anticipate upcoming costs and head into the year financially prepared. By making adjustments early, you’ll avoid surprises and stay in control of your spending for a successful school year.

Dean Shahan Joins CapWealth as EVP and Advisor

Fri, 01 Aug 2025 19:45:43 GMT

PlanAdviser, August 1, 202 5

Yasin Mohamud at PlanAdviser reports that Dean Shahan has joined CapWealth Advisors as executive vice president and financial advisor. “We’re excited to welcome Dean to our team,” said Tim Pagliara, founder and CIO of CapWealth. He adds, “His fresh perspective and forward-thinking approach will strengthen our capabilities and elevate our client service.”

Financial Planning Throughout The Decades

Tue, 29 Jul 2025 13:00:15 GMT

Author: Hillary Stalker, CFP ^®

Sophisticated Simplicty®

Most people don’t start thinking about a financial plan until life becomes more complicated. Maybe you’ve built up savings, bought a home, or just realized you don’t want to handle it all on your own. Often, that’s the point where people try to figure out how to turn what they’ve worked hard for into a plan that supports their goals.

The truth is, financial planning matters at every stage of life. It’s especially important as you get older and your wealth grows, but starting early makes everything easier down the line. You might not need a detailed plan right after college, but every decade offers opportunities to set yourself up for success.

Build a Foundation

In your 20s, it’s all about building good habits. Create a budget so you know where your money is going. Start an emergency fund with a few months of living expenses in a savings account you can access easily. Even if you can only contribute a little, begin investing, whether it’s through a Roth IRA or your employer’s 401(k). Pay off high-interest debt as quickly as possible, and work on building strong credit by paying bills on time and keeping balances low. Don’t forget the basics like health and renters insurance, and consider disability coverage too.

Grow and Protect

When you hit your 30s, the focus shifts to growth and protection. Increase your retirement contributions, aim to max out your 401(k) or IRA if you can. If you have dependents, life and disability insurance become essential. For those with kids or planning for them, a 529 college savings plan can help you prepare for education costs. It’s also a good time to create a will, even if your assets are modest. Look at your debt and consider refinancing where it makes sense. And don’t overlook investing in yourself, advanced training or education can increase your earning potential.

Optimize and Plan Ahead

By your 40s, you’re likely in your peak earning years, and this is when optimizing your plan really matters. Max out your retirement contributions, review your investment mix, and make sure your portfolio is aligned with your long-term goals. Revisit college savings plans, think about long-term care needs, and make sure your insurance coverage, home, life, disability, and even umbrella liability, is where it should be. Updating your estate plan, including powers of attorney and beneficiary designations, is important now, too.

Prepare for Retirement

Your 50s are all about the final push before retirement. Take advantage of catch-up contributions, estimate what you’ll need, and start planning in detail. Downsizing your home or paying off remaining debts could make sense at this stage. Review your investments and consider a more conservative allocation if needed. And start building a strategy for retirement that factors in taxes and healthcare costs.

Preserve and Enjoy Sophisticated Simplicity®

Once you reach your 60s and beyond, the focus shifts to protecting what you’ve built and enjoying the life you planned for. Create a withdrawal strategy that’s sustainable for the long term. Think carefully about when to claim Social Security, plan for required minimum distributions, and review your Medicare options. Simplifying your finances, like consolidating accounts and automating income, can make things easier. And finally, make sure your estate plan reflects your wishes and legacy goals.

The earlier you start, the smoother every stage feels. A financial plan isn’t something you set and forget; it’s a living roadmap that adapts as life changes. Your destination stays the same, but there are many ways to get there. Our approach is rooted in Sophisticated Simplicity®. Planning ahead at CapWealth means giving yourself more options, more confidence, and more peace of mind along the way.

Advisor moves: Raymond James, CapWealth, AmeriFlex Group welcome new recruits

Fri, 25 Jul 2025 13:42:21 GMT

InvestmentNews, July 25, 2025

Steve Randall at InvestmentNews shares CapWealth’s hiring announcement of Dean Shahan as executive vice president and financial advisor.

CapWealth Welcomes Dean Shahan as Executive Vice President and Financial Advisor

Thu, 24 Jul 2025 14:00:28 GMT

BusinessWire, July 24, 2025

CapWealth announces the addition of Dean Shahan to their team as executive vice president and financial advisor. With expertise spanning risk management, investment strategy, tax planning, and retirement, estate, and education planning, the addition of Shahan reinforces CapWealth’s commitment to delivering meaningful client outcomes through trusted relationships and sound financial guidance. “What drew me to CapWealth was the firm’s strong culture of client care and its commitment to comprehensive planning. CapWealth goes beyond traditional wealth management, taking a deeper approach that aligns with how I believe clients should be served,” says Shahan.

Fisk, Triple Tigers Records, CapWealth announce updates

Thu, 24 Jul 2025 13:55:43 GMT

Nashville Post, July 24, 2025

Nashville Post reports the hiring of Blake Harrison at CapWealth as part of their “People on the Move” section. Harrison will be taking on the role of executive vice president of wealth management.

CapWealth Welcomes Dean Shahan as Executive Vice President and Financial Advisor

Thu, 24 Jul 2025 13:18:28 GMT

BusinessWire, July 24, 2025

CapWealth announces the hiring of Dean Shahan as executive vice president and financial advisor. “CapWealth goes beyond traditional wealth management, taking a deeper approach that aligns with how I believe clients should be served. I am excited to have a shared vision for how we work with clients: thoughtfully, thoroughly, and with a long-term view of their financial lives,” says Shahan.

A Guide To Tax Bill's Expanded 529s, New Child Accounts

Mon, 21 Jul 2025 14:37:53 GMT

Financial Advisor Magazine, July 11, 2025

Jennifer Pagliara Horton, executive vice president at CapWeath, shares insight with Ben Mattlin at Financial Advisor Magazine about the Big Beautiful Bill’s expanded 529 education-saving plans and its implications on homeschooling. “Online education materials, books and instructional materials could and would be considered part of the homeschooling costs,” explains Pagliara.

Tim Pagliara Talks AI Sector, Data Centers & Long-Term Investment Ideas

Mon, 21 Jul 2025 14:11:15 GMT

Tim Pagliara of CapWealth outlines why AI-driven infrastructure and data connectivity offer one of today’s most overlooked investment opportunities.

How to Keep a Cool Head in a Hot Market

Tue, 15 Jul 2025 12:45:00 GMT

Author: Jennifer Horton, CFP ^® , CTFA ^®

Stock market volatility is uncomfortable for just about everyone. When values start moving and headlines shift, it’s easy to feel like you need to react. But often, the best move is no move at all. Staying steady during turbulent times comes down to preparation, perspective, and trust in the work you’ve already done.

Maintaining confidence during periods of movement begins with a well-crafted financial plan. When your plan is built thoughtfully, rooted in realistic goals and calibrated to your personal risk tolerance, it’s designed to help you navigate the inevitable twists and turns of the market. Following that plan, especially when things feel uncertain, is one of the most effective ways to keep from making emotional decisions that can throw your long-term progress off course. It’s perfectly natural to feel uneasy when the market fluctuates, but making decisions driven by fear rarely leads to better results. If you’re feeling uncertain, consider reaching out to your advisor. Sometimes, a thoughtful conversation is all it takes to regain clarity and stay on track.

Another important piece of staying calm is ensuring the basics are covered. Having an emergency fund, cash that’s easy to access when something unexpected happens, can prevent you from tapping into your investments during a downturn. For retirees, that cash cushion matters even more. Without earning a regular income, it can be harder to weather a market dip without selling assets. Knowing you’ve got enough set aside to cover your needs can provide peace of mind and give your portfolio time to recover.

Your comfort with risk also plays a big role in how you experience market volatility. If you find yourself constantly checking your accounts and losing sleep over daily changes, it might be worth reassessing your tolerance for risk. An advisor can help make sure your investment approach reflects not just your goals, but also your comfort level. A few portfolio adjustments can lower your exposure to big swings, giving you more stability without walking away from growth entirely.

Even with a strong plan and a well-balanced portfolio, it’s still easy to feel rattled, especially when the news is focused on what’s going wrong. Taking a break from market headlines can be helpful. Many investors find that limiting exposure to financial media reduces anxiety and keeps them from making reactive choices. If you’re working with a financial advisor, you don’t have to stay glued to the news. You have someone tracking the big picture for you.

What can sometimes get lost in the panic is that market pullbacks aren’t just something to survive, but they can also be an opportunity. If you’re in a position to invest new money, a dip can be an opportune time to do so. Buying while prices are lower has long been a strategy for long-term growth. No one can predict the market perfectly, but keeping cash on the sidelines for the right moment, or adding to your investments consistently, can help position your portfolio for the future.

At the end of the day, staying steady in a turbulent market comes down to having a clear plan, staying committed, and remembering you’re not in it alone. The market will always have its ups and downs, but what matters most is how you respond. With the right guidance and a steady focus on your long-term goals, you can navigate the volatility and keep moving forward with confidence.

Blake Harrison on What the New Tax Law Means for You

Fri, 11 Jul 2025 19:47:58 GMT

Bankrate, July 11, 2025

Blake Harrison, executive vice president of wealth management at CapWealth, speaks to Mallika Mitra at Bankrate about the changes households will face with the new tax law. “While every tax situation is unique, and application of the tax code is complex, there are numerous provisions that should lower the tax bill of millions of Americans,” Harrison says.

Planning for Children with Special Needs

Tue, 01 Jul 2025 13:00:30 GMT

Author: Hillary Stalker, CFP ^®

Planning to bring a child into this world can be one of the most exciting times in a parent’s life. But alongside the joy often comes anxiety, particularly when thinking about the financial planning that is required for childcare, basic needs, and healthcare. And when a child is born with special needs, those feelings amplify, knowing that much more specific and complex needs-based planning is required.

Every parent and child deserves a life filled with health and happiness. Understanding and addressing the unique challenges that come with raising a child with special needs requires a holistic approach to ensure a bright and successful future. What once felt like a straightforward financial checklist now becomes a deeply personal, evolving plan, one that must account for specialized medical care, educational support, and long-term security.

The “mental load” of caring for a child with special needs is real and often constant. While it may feel stressful, starting the planning process early can make a meaningful difference. One of the most effective tools for navigating this is a life care plan.

A life care plan is a comprehensive document that outlines the long-term care and support a child may require. It typically includes medical treatments, therapy schedules, educational goals, social development, and, critically, financial planning.

Financial planning is arguably the most important aspect to plan for. While well-intentioned, following traditional planning tactics can often have a negative impact on a child’s well-being and benefits, which many loved ones don’t realize. For example, leaving assets directly to a child, such as a retirement account or real estate, can jeopardize their eligibility for benefits. There are a few elements to consider when creating a financial strategy for a child with special needs:

Special Needs Trusts: These trusts ensure that the child’s assets are managed effectively without jeopardizing eligibility for government benefits.
Government Benefits: Programs such as Supplemental Security Income (SSI) and Medicaid provide financial assistance and healthcare support for individuals with disabilities.
Insurance: Adequate health, life, and disability insurance policies are crucial for covering unexpected expenses and ensuring long-term care.
Savings Plans: Establishing savings plans, such as 529 ABLE accounts, can provide tax-advantaged savings for disability-related expenses.

Special needs planning for children is an ongoing and dynamic process. Parents who start early and create a comprehensive plan can ensure that their child with special needs has a secure, happy, and fulfilling future. It’s a lifelong commitment that evolves with your child’s growth and the changing landscape of laws, benefits, and care options. The earlier you start, the more flexibility and support your family will have along the way.

At CapWealth, we work closely with families to develop holistic financial strategies that reflect not just their circumstances but their values and hopes for the future. Our role is to help families make confident, informed decisions during what can often be a deeply emotional and overwhelming time. But ultimately, careful planning can provide the child with the support and opportunities they need to thrive and lead a meaningful life.

Worried about a recession? We asked 10 financial pros how you can prepare

Fri, 27 Jun 2025 14:19:21 GMT

MarketWatch, June 27, 2025

Hillary Stalker, executive vice president at CapWealth, shares financial tips for those worried about an incoming recession with MarketWatch’s Shelby Fishman. “Understanding what you are spending your money on will help in the event you need to scale back,” says Stalker.

Deals & Moves: CapWealth Adds Tax Expert

Tue, 24 Jun 2025 20:14:40 GMT

WealthManagement.com, June 18, 2025

Reporter Alex Ortolani covers the news of CapWealth hiring Blake Harrison, a tax specialist, as Executive Vice President of Wealth Management. “We pride ourselves on deep relationships and strategic investment guidance, and Blake allows us to deliver on that promise on a new level,” says Tim Pagliara, founder and CIO of CapWealth.

$1.8bn CapWealth adds ex-CPA exec as EVP of wealth

Tue, 24 Jun 2025 20:14:36 GMT

Citywire, June 18, 2025

Citywire reporter Lauren Holladay covers the news of CapWealth hiring Blake Harrison, CPA, PFS, as their Executive Vice President of Wealth Management. “I’ve always been impressed with CapWealth and their relationship focus with their clients, and I’m really excited to be able to join in that, to be able to focus on relationships, focus on clients’ needs, and do a great job coming up with solutions for these clients,” says Harrison.

Blake Harrison Hired at CapWealth

Tue, 24 Jun 2025 20:14:33 GMT

Nashville Business Journal, June 18, 2025

Nashville Business Journal highlights Blake Harrison, CPA, PFS, joining CapWealth as Executive Vice President of Wealth Management.

CapWealth Embraces Multifamily Office Model With Addition of Blake Harrison

Tue, 24 Jun 2025 20:14:25 GMT

BusinessWire, June 18, 2025

CapWealth announces Blake Harrison, CPA, PFS, as Executive Vice President of Wealth Management. The addition of Harrison helps to expand the depth of service CapWealth offers to its clients, and signals the firm’s evolution to a fully integrated multifamily office. “We pride ourselves on deep relationships and strategic investment guidance, and Blake allows us to deliver on that promise on a new level,” said Tim Pagliara, founder and CIO of CapWealth.

CapWealth Embraces Multifamily Office Model With Addition of Blake Harrison

Wed, 18 Jun 2025 15:38:22 GMT

Harrison’s deep tax planning expertise positions $1.8B RIA for continued growth to serve clients with complex needs

FRANKLIN, Tenn. CapWealth, a leading $1.8 billion RIA, brings on Blake Harrison, CPA/PFS, as Executive Vice President of Wealth Management. The addition of Harrison, a nationally recognized tax leader with nearly 20 years of experience, significantly expands the depth of service CapWealth offers to its clients, and signals the firm’s evolution to a fully integrated multifamily office.

Harrison joins CapWealth from LBMC, where he served as a partner and leader of the firm’s tax division, delivering tailored tax and estate strategies to high-net-worth and ultra-high-net-worth families. His expertise spans tax compliance and planning, charitable structuring, trust and estate design, and multi-generational wealth transfer.

“We pride ourselves on deep relationships and strategic investment guidance, and Blake allows us to deliver on that promise on a new level,” said Tim Pagliara, Founder and CIO of CapWealth. “His expertise allows us to layer in a level of tax and estate planning capability to serve even the most complex client scenarios.”

Harrison’s addition enhances the firm’s ability to deliver proactive, multi-dimensional planning, eliminating the fragmentation many families face across tax, investment and planning services. His consultative approach aligns seamlessly with CapWealth’s mission to provide clarity, continuity, and confidence to the families it serves. Harrison’s expertise enables CapWealth to work in lockstep with outside CPAs and estate attorneys, helping clients navigate every layer of their financial lives with a unified approach.

“Blake brings both technical depth and a genuine commitment to client care, the exact combination we look for in our leadership team. He shares our values, and he’s going to make an immediate impact on our clients and our culture,” explained CapWealth CEO Phoebe Venable.

“Over the years, I’ve found that the most rewarding work comes from building relationships,” said Harrison. “Joining CapWealth allows me to go deeper with clients, to think strategically about their lives and legacies, and to be part of a team that shares that same client-first mindset. I’m excited to build an expanded offering that reflects both the complexity and opportunity in our clients’ lives.”

A Virginia Tech graduate and Brentwood, Tenn. resident, Harrison has advised clients across the country, from entrepreneurs navigating major liquidity events to families with advanced estate and philanthropic planning needs. In 2018, he was recognized with the AICPA’s Standing Ovation Award for excellence in tax planning.

About CapWealth

CapWealth is an independent, SEC-registered investment advisor and multifamily office in Franklin, Tenn., with $1.8 billion in assets under management. Committed to helping individuals and families build and preserve their wealth, CapWealth provides personalized, fiduciary advice and portfolio management rooted in transparency.

Are You Retirement Ready? 5 Key Signs You’re on Track

Fri, 13 Jun 2025 16:47:49 GMT

Author: CapWealth

Retirement is one of life’s most meaningful transitions. It brings exciting opportunities, and understandably, a few uncertainties. Whether it’s just around the corner or still a decade away, feeling prepared for retirement means more than reaching a goal dollar amount in your retirement and savings accounts. It’s about supporting your lifestyle, staying healthy, and finding personal fulfillment in this next phase of life. Here are five key signs you’re on the right path.

1. You Know What You Need to Live On

While having it’s not the only thing pre-retirees need to consider, one of the most important questions to answer as you approach retirement is: how much do I need to live the life I envision? Since you’ll no longer receive a regular paycheck, creating a realistic, detailed financial plan is essential. This includes assessing your monthly living expenses and planning for inflation. Turning your savings and investments into income is a shift for many, so it’s critical to project how long your savings will need to last. A trusted financial advisor can help run the numbers and stress test different scenarios to give you clarity and confidence.

2. You Have Little to No Debt

Minimizing debt before retirement can significantly improve your cash flow. Equally important is having a well-defined strategy to pay off any remaining debt. Monthly payments on mortgages, car loans, or credit cards can quickly eat into your income. This may limit your ability to enjoy the freedom you’ve worked so hard to earn. If you still carry debt, it’s wise to evaluate your options and prioritize paying it down as part of your pre-retirement strategy.

3. You’ve Accounted for Health Care Costs

Healthcare is often a major retirement expense, particularly for those retiring before Medicare eligibility at age 65. It’s essential to plan for this coverage gap and recognize that Medicare itself is not without cost. Premiums, deductibles, and costs for services not covered by Medicare can add up quickly. Proactively evaluating your insurance options and factoring those costs into your retirement plan can help you avoid unexpected financial stress down the line.

4. You Feel Emotionally Ready

Financial readiness is only one side of the coin. Being emotionally prepared for retirement is just as important. Do you want to retire? Some individuals are eager to leave the workforce. Others feel uneasy or even forced into it. That’s why it’s helpful to begin thinking early about what retirement will look like for you. Be honest about your readiness to embrace this new chapter.

5. You’ve Thought About Your Non-Financial Goals

What will you do with your time once the structure of your workday is gone? Retirement can feel like a significant identity shift. This is especially true if much of your life has revolved around your career. The most successful and happiest retirees are those who stay engaged with life. This can mean traveling, exploring hobbies, volunteering, or spending time with loved ones. Whatever your dream may be, make it part of your plan.

As you plan for your retirement years, make sure you take a step back and look beyond your investment portfolio and look at the big picture you’ve worked years to earn. If you’re interested in discussing your retirement readiness needs with a financial advisor, don’t hesitate to reach out.

The Millennial Cheat Sheet To Building Wealth

Tue, 03 Jun 2025 13:48:23 GMT

Author: CapWealth

Financial planning is essential for millennials to navigate the complexities of modern economic challenges and build a secure financial future. With rising living costs, student loan debt, and a competitive job market, it is crucial to adopt effective strategies to manage personal finances.

Millennials face a financial reality dominated by competing priorities and seismic trends outside of their direct control.

They have to contend with rising living costs, realities of student loan debt, and a job market that are all very different from those faced by their parents and grandparents. Millennials need to figure out how to prepare their children for their own education costs, look after their aging parents, and find time to address their own priorities.

What’s more, millennials have lived through multiple financial crises that have shaken up their entire world. No one could have realistically prepared in advance for the 2008 recession, the 2020 pandemic, 2022’s inflation, or 2025’s tariff wars, just to name a few.

This is all to say that if you are a millennial and you’re apprehensive about your finances… you’re in good company. But there are steps you can take today that will help you align your money with your priorities.

Understanding your goals

The first step is to ask what you actually want your money to do.

You don’t have to know the big-picture answers right away. They will come in time. If you’re overwhelmed, start small. Maybe you want to stop stressing every time a surprise bill pops up. Maybe you’re dreaming about a house, or freedom from student loans, or just a vacation.

Write it down. Be specific. Good financial plans start with goals that mean something to you, not what the internet says you should care about.

Short-term financial goals can include building an emergency fund to cover three to six months of expenses, paying off high-interest credit card debt, and saving for travel, a wedding, or a new laptop. Long-term goals might be buying a home, investing for retirement, or planning for kids, healthcare, or even early retirement.

From here, you need to build a basic picture of what’s coming in and going out. Budgeting apps like Mint or You Need A Budget (YNAB) can help. They can categorize your expenses and help you see trends in your personal spending and saving. Set up automatic transfers into savings so you don’t have to think about it. And review things monthly. Your budget should grow with you, not box you in.

A simple framework to start saving is to follow the 50/30/20 rule:

50% for needs (rent, bills, groceries)
30% for wants (dining out, Netflix, that concert ticket)
20% for savings and debt

First steps of investing

The start of your investing journey doesn’t need to be complicated. You just need to start.

We recommend you start with the easy wins. If your job offers a 401(k), especially one with matching, take it. That’s free money. Outside of work, a Roth IRA is a great way to save in a way that grows tax-free.

Common options include:

Stocks: Buying shares in companies. Higher risk but potential for high returns.
Bonds: Lending money to companies or governments. Lower risk but moderate returns.
Mutual Funds: Pools of stocks, bonds, and other securities. Diversified and professionally managed.
Real Estate: Investing in property. Provides rental income and potential appreciation.
Index Funds: Funds that track market indexes. Low cost and diversified.

Start small. Invest regularly. And don’t panic when the market dips, even if it is the start of yet another financial crisis. You need to think in terms of decades. The people who stayed in the market in 2008 are, by and large, doing quite well in 2025! It’s far easier said than done, but don’t lose your cool.

Tackle debt without shame

Debt is real. So is the pressure to ignore it. But small moves now can save you thousands later.

With student loans , look into income-driven repayment plans or refinancing if your rate is high. If you work in public service, see if you qualify for forgiveness programs.

With credit cards , focus on the highest interest debt first. Balance transfers can buy time if you’re disciplined. Automate your minimums so you never miss a payment.

You don’t have to be debt-free tomorrow. You just need a plan that moves you forward.

No time like the present

It’s easy to think of retirement as “later you” problems. But “later you” will love that you started early.

Compound interest works wonders . Saving even a little now can mean way more than playing catch-up later in life. Time is your best asset.

Set up:

A 401(k) if your employer offers it, and contribute enough to get the match
A Roth IRA if you qualify
Automatic monthly contributions so you don’t have to remember

Check in once a year. Adjust as needed. Be consistent!

Your financial plan will change, because your life will change. There is no such thing as a perfect plan you can set and forget. Instead, think about direction and momentum. Pick one thing and start. The rest will follow.

That said, we understand that this is a complicated and at times emotional aspect of anyone’s life, regardless of their age. If you have questions or want to discuss any of these subjects in greater depth, our door is always open .

Benefits of Working with a Fiduciary Advisor

Wed, 21 May 2025 13:55:46 GMT

Author: CapWealth

When it comes to managing your money, trust is everything. You want to know that the person guiding your financial decisions makes recommendations for one reason: they’re right for you. That’s where the term fiduciary becomes important.

A fiduciary financial advisor is legally and ethically required to act in your best interest. Fiduciary duty is an advisor's obligation to put their clients' financial goals ahead of their own interests or compensation. Not every advisor operates under this standard, so understanding the difference can help you make more confident and informed decisions about your financial future.

Advisors Who Put Your Interests First

One of the most important benefits of working with a fiduciary advisor is knowing their loyalty lies with you. Fiduciaries are required by law to provide guidance that serves your best interests. They must avoid conflicts of interest and cannot recommend a product or strategy unless it is the best option for your unique needs.

Some advisors who follow the “suitability standard” are only required to recommend something suitable, even if it’s not the most cost-effective or aligned with your long-term goals. In a fiduciary relationship, the focus is always on what’s right for you, the client.

Guided by the Prudent Person Rule

The fiduciary standard is rooted in the Prudent Person Rule, a legal principle that expects advisors to act with diligence and sound judgment in making investment decisions. This rule applies across many financial roles, including trustees, pension managers, and legal guardians. It reinforces the expectation that recommendations are based on thoughtful analysis, not speculation or guesswork.

Transparent Advice and Clear Fee Structures

Fee transparency is central for fiduciaries, who typically offer straightforward pricing, such as flat fees or a percentage of assets under management. Clients understand exactly how their advisor is compensated.

In contrast, non-fiduciary advisors make money from commissions or incentives tied to specific products. This can create confusion or lead to recommendations prioritizing sales over client needs. Fiduciary advisors eliminate that uncertainty by offering a compensation structure that supports objective advice.

A Holistic Approach to Your Financial Life

Fiduciary advisors take the time to understand your entire financial picture. That includes retirement planning, estate strategy, tax considerations, charitable giving, and more. They recognize that your financial life is interconnected, and they work to ensure each part supports your overall goals.

They can also help you build and manage a team of professionals, including CPAs, attorneys, and insurance specialists, so that your plan works together seamlessly.

Advice Built on Objectivity and Trust

Fiduciaries have two critical standards: the duty of care and the duty of loyalty. This means they must gather all relevant information before offering guidance, consider all available options, and make recommendations with your best interests in mind.

There are no product quotas or hidden agendas. The advice you receive is grounded in research, tailored to your goals, and delivered with integrity. That kind of objectivity is a key reason why so many investors work with fiduciary advisors.

How to Know if Your Advisor Is a Fiduciary

If you’re unsure whether your current advisor is a fiduciary, here are a few simple ways to find out:

Check the FINRA BrokerCheck database: Visit brokercheck.finra.org to review your advisor’s registration and disclosures.
Look for SEC registration: Registered Investment Advisors (RIAs) are held to fiduciary standards by law, and you can find this on the SEC’s website .
Read your client agreement or Form ADV: These documents should outline how your advisor is compensated and whether fiduciary obligations apply.

If in doubt, ask directly: Are you legally required to act in my best interest at all times? A fiduciary advisor will be transparent.

Experience the Fiduciary Difference

At CapWealth, we are proud to operate under the fiduciary standard. We believe every client deserves thoughtful, transparent, and trusted advice. You can find our disclosures right here on our website . Scroll to the bottom to find links to our Form ADV. If you have any questions, we’re always happy to answer them!

If you're ready to experience the benefits of working with a fiduciary advisor, we’re here to help. Let's build a financial plan that puts your goals first and enables you to move forward with confidence.

U.S. stock rally set to pause after six-day run

Tue, 20 May 2025 16:10:41 GMT

BNN Bloomberg, May 20, 2025

Phoebe Venable, president and CEO at Capwealth, joins a segment of BNN Bloomberg to discuss the recent rally in the stock market and how it is going to pause after a six-day run. “From our point of view, any time we go outside of the United States, we’re going to put a significant risk premium on the currency exposure that we have. Even with the softening of the dollar, we’re still not able to get there under our models and valuations in the way that we look at it,” explains Venable.

Sell in May and Go Away? Smarter Portfolio Management

Mon, 12 May 2025 20:34:01 GMT

Author: CapWealth

Every year, as spring turns to summer, the old investing adage “Sell in May and go away” begins to make the rounds again. It’s a saying rooted in the idea that the stock market tends to underperform during the summer months, prompting some investors to step aside and re-enter the market in the fall. While catchy and often repeated, this idea deserves a closer look, especially in today’s environment where market volatility remains elevated and short-term noise can distract from long-term goals.

Historically, there is some truth to the idea that stocks underperform during this period. Since 1926, the S&P 500 has posted stronger average returns from November through April than from May through October. But while those colder months may appear to outperform, the summer stretch isn’t exactly a slump. In fact, since 1990, the S&P 500 still posted an average return of 3% during the so-called weaker half of the year. That’s hardly a signal to step aside. Missing out on even one segment of market growth can be costly, not only in terms of short-term gains but in long-term compounding power. Effective portfolio management considers these long-term compounding effects when building investment strategies designed to weather full market cycles.

Trying to time the market—whether based on seasonal trends or emotional reactions to headlines—has long been one of the biggest pitfalls for individual investors. Even professionals find it difficult to consistently predict short-term movements. Markets move fast, often in reaction to news or economic data that no one saw coming. Reacting in the moment or leaning on outdated seasonal strategies can lead to whiplash and missed opportunities. That’s why long-term investors are typically better served by staying invested through the ups and downs, rather than jumping in and out in response to historical patterns or gut feelings.

In uncertain times, simple ideas offer a sense of control, so it’s understandable why rules-of-thumb like “Sell in May” persist. But oversimplified strategies are not a substitute for fundamental or technical analysis. The market is influenced by countless factors: earnings reports, interest rates, geopolitical events, and investor sentiment, to name just a few. Relying on a single seasonal rule ignores the nuance and complexity that drive real performance. A sound portfolio management strategy is grounded in analysis, diversification, and a consistent approach tailored to an investor’s goals.

We believe that a well-diversified portfolio built with resilience and flexibility offers a more reliable path forward than any calendar-based strategy. With an in-house investment team focused on hands-on portfolio management, we’re able to actively adjust strategies to endure market highs and lows. That flexibility helps our clients stay invested and confident, even when headlines may suggest otherwise. Our approach is designed to help investors participate in growth while mitigating risk, regardless of the time of year.

Ultimately, the question isn’t whether to sell in May, but whether your portfolio is built to endure and grow through all seasons. Investing is a long game, and history has shown that staying in the market, through headlines, through seasons, through noise, has been one of the most effective ways to build wealth. If you’re unsure about how your portfolio is positioned or feel tempted to make a move based on a headline or old saying, let’s talk. We’re here to guide you with thoughtful portfolio management that focuses on what really matters: long-term progress, not short-term predictions.

Juggling Motherhood and a Career in Financial Advice

Wed, 07 May 2025 17:07:36 GMT

Barron’s Advisor, May 7, 2025

Hillary Stalker, financial advisor at CapWealth, speaks with Steve Garmhausen of Barron’s Advisor about the balance between being a financial advisor and mother. “One key is just recognizing that it’s never going to be a 50/50 split. I care deeply about my clients and doing a good job in my role here at CapWealth, but I also don’t want to miss anything from my kids. There’s a give and take,” explains Stalker.

What is a multi-generational financial plan?

Tue, 06 May 2025 13:09:51 GMT

Author: CapWealth

What is a multi-generational financial plan?

When most people think of financial planning, they think of preparing for their own retirement or perhaps setting up a college fund for their kids. But what happens when you want to build something that lasts, not just for your children, but for your grandchildren and potentially their children, too? That’s where multi-generational financial planning comes in.

Unlike traditional financial planning, which often focuses on one individual or couple’s goals and life, a multi-generational financial plan takes a longer-term view to protect and grow wealth. It ensures that future generations are financially secure and guided by the values that built the family’s initial success.

At its core, a multi-generational financial plan is a blueprint for how a family can preserve and grow wealth in a way that benefits both current and future generations. We’ve all heard of the adage “shirtsleeves to shirtsleeves in three generations,” where critical missteps can lead to wealth you’ve built to be squandered without prudent planning.

This type of planning is complex and involves investment management, estate planning, tax strategy, risk management, and philanthropic goals to create a clear financial roadmap for the family so your family doesn’t fall into that classic trope. Thinking through how assets can be protected against market volatility, how they can be distributed effectively and fairly, and how to prepare heirs to be responsible stewards of their inheritance is the first step toward multigenerational wealth management.

Planning for generations is not just about maximizing returns—it’s about protecting what’s already been built. That’s where diversification comes in. A well-diversified portfolio can help preserve assets across different market conditions and provide a cushion against unexpected events. The aim is to support sustainable growth over time, rather than chase short-term gains.

Estate planning is a crucial step in making sure that the family’s legacy is carried out accordingly. Trusts, wills, and powers of attorney help ensure that wealth is transferred according to the family’s wishes. More importantly, they help avoid costly legal disputes and reduce the risk of assets being lost to taxes or poor planning.

As of last year, roughly 32% of Americans have an estate plan in place. This gap in long-term planning can have long-term negative impacts for future generations. Having these documents in place preserves wealth and also provides a clear direction and legacy plan that reflects your values and vision for the future.

Taxes can be one of the biggest threats to multi-generational wealth. But with proactive planning, many of these liabilities can be managed or even avoided. Gifting strategies, the strategic use of tax-advantaged accounts, and charitable contributions are all tools that can help reduce the tax burden while supporting causes that matter to your family. Thoughtful tax planning ensures that more of your wealth stays within the family and continues to work for future generations.

Many families who build wealth over time want to do more than pass on money; they also want to pass on meaning. That’s where philanthropy can play a powerful role. Whether it’s establishing a family foundation or supporting causes year after year, philanthropic giving can unite a family around shared values, reinforce a sense of purpose, and leave an impact that goes far beyond the balance sheet.

No two families are alike. Some are navigating the complexities of a family business, while others are balancing the needs of children in very different life stages. Some are focused on education, others on charitable giving. But at the heart of it all, most families share the same vision: to preserve their wealth, values, and opportunities for future generations.

That’s why working with an experienced financial advisor, ideally a Certified Financial Planner (CFP®), who understands the nuances of multi-generational planning is important. It’s not just about running numbers. It’s about listening, guiding, and helping families make intentional decisions that reflect their legacy and aspirations.

At CapWealth we are no stranger to this type of planning. We’ve worked with clients through three and even a fourth generation; we know the complexities that come with this level of planning and look forward to continuing to carry out these legacies for more generations to come.

Focus on U.S. Markets

Mon, 05 May 2025 20:35:05 GMT

BNN Bloomberg, April 30, 2025

Tim Pagliara, chief investment officer at CapWealth, joins BNN Bloomberg to share his thoughts on recent market volatility and what investors should expect moving forward. "The environment we're in, whether it be tariffs, inflation, or general economic health, suggests that investors will reevaluate what they're willing to invest in these companies," says Pagliara.

The Pros and Cons of Four Alternatives to ‘529’ Plans for College

Thu, 01 May 2025 16:00:14 GMT

The Wall Street Journal, May 1, 2025

The Wall Street Journal’s Cheryl Winokur Munk talks about 529 plan alternatives and their pros/cons with Hillary Stalker, executive vice president at CapWealth. While discussing certain tax-efficient strategies, Stalker explains that, “You can scale back the taxable interest and the taxable dividends associated with the funds in that account.”

RMD Strategies For A Bear Market

Thu, 01 May 2025 15:52:32 GMT

Financial Advisor Magazine, May 1, 2025

Jennifer Pagliara Horton, executive vice president at CapWealth, shares the importance of monitoring required minimum distributions (RMDs) during periods of market volatility with Ben Mattlin at Financial Advisor Magazine, advising that clients do not wait until the last minute to take them.

Where to Turn During Market Volatility

Fri, 25 Apr 2025 16:17:58 GMT

Yahoo! Finance, April 25, 2025

Phoebe Venable, chief executive officer at CapWealth, joins Yahoo! Finance Market Domination Overtime to explain where investors should be looking as market volatility continues. “The market doesn’t exactly repeat itself, but it does rhyme with history,” explains Venable.

Tim Pagliara of CapWealth Named Best-In-State Wealth Advisor for Tennessee by Forbes

Thu, 10 Apr 2025 18:47:28 GMT

Tim Pagliara, Founder, Chairman, and Chief Investment Officer of CapWealth, has been recognized on the Forbes 2025 Best-In-State Wealth Advisors list for the eighth consecutive year in a row, earning a spot in the top three advisors within the state of Tennessee each time. This year, and in previous years, Tim was selected as the #1 Wealth Advisor in Tennessee. Tim was also named on the broader Forbes 2025 list of America’s Top Wealth Advisors this year. Tim ranked first out of 105 successful Tennessean advisors listed.

The Forbes 2025 Top Wealth Advisors list is a compilation of the top 250 advisors nationwide compiled by SHOOK Research, which uses quantitative and qualitative data, including interviews, to rank candidates nominated by their firms. Specific criteria include evaluating advisors on assets under management, average net worth of client relationships, typical size of household accounts, and other factors. Forbes’ rankings continue to be a gold standard industry-wide, honoring the country’s most prestigious advisors and their firms.

This recognition highlights Tim’s leadership of CapWealth, as well as the firm’s commitment to fiduciary duties and to providing investment strategies tailored to the needs of their high-net-worth and ultra-high-net-worth clients.

https://www.forbes.com/profile/tim-pagliara/?list=top-wealth-advisors

Portfolio Management Strategies in a Volatile Market

Wed, 09 Apr 2025 17:14:41 GMT

Author: CapWealth

Escalating tariffs and uncertainty surrounding trade policy roil the markets. But from our vantage point at CapWealth, this kind of volatility, while uncomfortable, is exactly how markets are supposed to behave when uncertainty is high.

“It’s like the first inning of a game that we don’t know how long it will run,” said our CEO Phoebe Venable to The Wall Street Journal (paywall). Markets move on both data and emotion. And when investors aren’t sure what’s coming next, that uncertainty gets priced in through short-term swings.

The market reflects our collective outlook on the future. And right now, that outlook is clouded. Policy changes, global conflicts, and economic shifts have all made it harder to predict where things are headed. Even companies that aren’t directly impacted by tariffs or regulation may delay hiring or scale back growth plans simply because the environment feels uncertain.

At the same time, we’re coming off a stretch of elevated valuations. Enthusiasm and speculation drove stock prices higher than fundamentals might justify. Now, investors are looking for solid ground in a sea of mixed signals.

This type of pullback doesn’t mean something is wrong with the market. It’s part of how the market finds balance.

Portfolio Management Strategies for Volatile Times

That said, volatility can feel awful, even when the market functions the way it should. No one wants to see rapid shifts in the assets that are supposed to fuel your long-term goals and financial needs.

Take a deep breath. What you feel right now is a natural reaction, too. Give your emotions an outlet, but don’t let them derail your financial plan. At CapWealth, we focus on helping clients stay anchored through uncertainty with investment strategies that are built to weather change.

1. Stay Focused on Your Timeline

Market headlines change daily, but your financial goals don’t. Retirement, education funding, and legacy planning all demand a long-term horizon in mind, even when the short term feels chaotic. Think back to the last major downturn. What investment choices did you make? Did you deviate from your plan, or stick to it? No one is perfect, but you can carry the lessons from the last period of volatility to make better choices in the present.

2. Diversify with Purpose

Diversification remains one of the most effective ways to manage risk. By spreading your investments across different asset classes, sectors, and geographic regions, you reduce the impact any one area can have on your overall portfolio. In times of market stress, diversification provides balance.

3. Avoid Timing the Market

No one, not even professional investors, can consistently predict the exact right moment to buy or sell. Attempting to time the market often results in missing the best days of performance. Staying invested, even through rough patches, has historically delivered stronger results over time.

4. Look for Opportunity

Market downturns can create opportunity. High-quality companies may become undervalued during a selloff. If you have a solid long-term investment strategy, moments of fear in the market can become moments of strength for your portfolio.

Investing during volatility requires patience and perspective. It’s easy to react emotionally when markets fall, but short-term movements should not dictate long-term decisions.

At CapWealth, we work with you to build a portfolio designed for real-life goals. That includes planning for times like this. When uncertainty and frightening market news fills your news feeds, it’s hard to think clearly. With a thoughtful, well-researched investment strategy, you don’t need to fear volatility. You can prepare for it.

If recent market swings have you questioning your investment strategy, we’re here to talk. Whether it’s revisiting your goals or exploring new portfolio management strategies, CapWealth is committed to helping you invest with confidence—no matter the headlines.

Finding opportunity amid market sell-off

Wed, 09 Apr 2025 16:02:41 GMT

BNN Bloomberg, April 9, 2025

Phoebe Venable, chief executive officer at CapWealth, joins BNN Bloomberg to discuss how to find opportunities in the market during a sell-off. “Even though there is a lot of uncertainty in the market and things could go lower, this week we have been buyers. We are very value based in our approach to investing and allocating capital. We have seen a lot of companies where we have high conviction, their valuations have come down because their prices have come down, and we have felt like this week has presented some opportunities for some good entry points,” explains Venable.

Tim Pagliara on Trade Tariffs and Market Impacts

Tue, 08 Apr 2025 17:23:06 GMT

Trade, Tariffs, and the US Economy

Interviewer:

Tim Pagliara is Chief Investment Officer with CapWealth. He joins us now. Thank you so much for joining us today. Is there a sense that investors believe that this might be the worst, and potentially a deal could happen?

Tim Pagliara:

Well, I think this is a big reset of the US economy. It's a big reset for our trade negotiations and our partners. You know, the previous caller had mentioned that the tariffs are not negotiable. Well, I would say reciprocity is not negotiable, and we are going to level the playing field on some of these relationships that have just gotten out of balance. And, you know, I was in a meeting with Treasury Secretary Bessent with a small group of people on Monday, and this administration has a very clear message and a very clear strategy on how they're going to deal with this in the context of the big picture. You know, we have a $7 trillion spending problem, we have $5 trillion with the revenue, and $1 trillion of that $5 trillion in revenue goes to interest on our debt, so we have to bring that down. And what you're seeing, I think, in the markets today, take Apple, for example, one of the most widely traded US companies. The 52-week range in Apple is $260 to a low of $165. It's somewhere around $190 this morning. But even at $190, Apple is trading at 32 times earnings. So if the valuations of American companies had not been distorted by this excessive government spending and permissive federal surplus, we wouldn't have these valuation shifts that we're seeing in the market that appear to be very violent because things go down a lot quicker than they go up.

Interviewer:

I just want to jump in here, because you mentioned you're on a call with the US Treasury Secretary Scott Bessent. Did he during that call mention to you, obviously we've seen the US dollar come under pressure, is that part of the strategy? Because he's mentioned that in the past, and also long-term interest rates were something that he was focused on.

Currency and Inflation

Tim Pagliara:

Since Treasury Secretary Bessent was confirmed, the 10-year Treasury has dropped 100 basis points, and the dollar is reflecting a better valuation relative to other world currencies. You know, because Europe has had to step up their game. Germany is now spending more on defense. And so as you see Europe and the rest of the world respond to this, yes, the dollar will moderate, but it will be at a more favorable level for everyone. I also see this talk about inflation with tariffs. Look at the inputs and inflation. Two-thirds of inflation is wage demands and benefit costs in the United States. The other third is commodity prices. All of those metrics now are moderated, so the inputs for inflation, minus whatever impact that the tariffs have, is actually trending in the right direction.

Interviewer:

But they moderating in part because the odds of a sort of shallow recession are going up?

Jobs and Trade Imbalances

Tim Pagliara:

Well, yes, and yet the US economy, they just reported, created 228,000

jobs, and we were expecting 148,000 jobs. That was the March figure. So you've got

stable US employment for now. You've got somewhat of a moderating economic activity that was going to happen as you dealt with this $2 trillion annual deficit. And again, Treasury Secretary, they have a plan. They want to bring that deficit down, but they have to do it gradually. You can't just pull the patient off the table and expect to get them back on the field. Now it's going to take a little bit of time and they recognize that. You know, we've talked about trade imbalances my entire career. I remember we used to hang on that number in ‘85 and ‘86. Nothing's ever happened, so something has to happen. And, you know, the Trump administration, I call it the three C’s.

Interviewer:

We're running out of time here, Tim, but we really appreciate your time today. Tim Pagliara, Chief Investment Officer with CapWealth, thank you very much for your insights today.

Tim Pagliara:

Thank you for having me.

A Key Reason for the Selloff: Uncertainty

Thu, 03 Apr 2025 14:56:34 GMT

The Wall Street Journal, April 3, 2025

Phoebe Venable, chief executive officer at CapWealth, provides insight on the looming questions on the impact of recent Trump tariffs with Karen Langley at The Wall Street Journal. "This is like the first inning of a game that we don't know how long it will run,” explains Venable.

Tim Pagliara of CapWealth Recognized Among Top Financial Advisors in Tennessee by Barron’s

Thu, 27 Mar 2025 13:08:12 GMT

Tim Pagliara, Founder, Chairman, and Chief Investment Officer of CapWealth, has been recognized in the 2025 Barron’s Top Advisor Rankings by State, moving up from #7 to #6 in Tennessee. Notably, CapWealth is the only Registered Investment Advisor (RIA) among the top 10 firms in the state, underscoring our independent and client-focused approach to wealth management.

The Barron’s Top Advisor Rankings evaluate advisors based on assets under management, revenue generated by the firm, regulatory record, and the quality of the advisors' practices, including their commitment to best practices and client service. The rankings serve as a benchmark for the industry, recognizing firms that demonstrate consistent success in helping clients achieve their financial goals.

This recognition reflects Tim’s leadership, CapWealth’s commitment to fiduciary responsibility, and the firm’s dedication to providing customized investment strategies tailored to clients' needs.

For more information on Barron’s “America’s Top 1,200 Financial Advisors”, click here .

CapWealth is not affiliated with Barron's. Ranking within the Top 1200 Advisors list is based on a specific methodology where certain data is collected. Barron's does not receive compensation from the advisors or their firms in exchange for placement on a ranking. Details surrounding the methodology can be accessed by clicking on this link .

Executive financial advisor weighs in on stock market worries after Trump administration's tariffs

Tue, 11 Mar 2025 15:05:11 GMT

Fox 17 News, March 11, 2025

Jennifer Pagliara Horton, executive vice president at CapWealth, joins a segment of Fox 17 News to discuss how tariffs are impacting the market and what it means for investors. “I know there is a lot of sentiment around being afraid but there is a lot of support around if you try to time the market and get in and out, you’d be way worse off than if you would have ridden it out,” explains Pagliara Horton.

Nasdaq Pops 1.5%. Markets Rebound After Trump Backs Down on Auto Tariffs.

Wed, 05 Mar 2025 15:19:10 GMT

Barron's Advisor, March 5, 2025

Phoebe Venable, president and CEO at CapWealth, connects with Connor Smith at Barron's Advisor to discuss the recent impact of tariffs on the stock market. “In the near term, everybody's just going to have to expect, and not be surprised, by the volatility that we're seeing. Because just like you and I don't know exactly how this is going to play out, the market certainly doesn't know how it's going to play out either,” says Venable.

Better Than a Piggy Bank: 3 Ways to Invest for Your Kid's Future

Mon, 24 Feb 2025 15:24:04 GMT

Money, February 24, 2025

Hillary Stalker, executive vice president and financial advisor at CapWealth, connects with Money reporter Jordan Chussler about ways to invest for your children's future. “Saving money for your children in any way, shape or form is never a bad thing. If the goal is saving for a car or a home, these accounts offer more investment options,” says Stalker.

Got one leaving the nest for college? Here's a financial checklist

Wed, 22 May 2024 15:37:09 GMT

Author: Hillary Stalker, CFP ^®

As your child prepares to leave the nest and head off to college, it’s an ideal time to help them build some critical financial skills. For most young people, going to college represents their first taste of true independence and money management responsibilities. Involving them in financial conversations and creating a structured plan can pay dividends down the road. So here’s a practical financial checklist to help ensure your soon-to-be freshman is well-prepared.

Budget as a family

Teaching your child to manage their finances starts with a solid budget. Sit down as a family to discuss income sources, expected expenses, and how to balance the two. Make sure they understand the fundamentals of budgeting and living within one’s means. Help your child categorize expenses into "needs" (essential for their basic living and education) and "wants" (lifestyle choices that can be adjusted or eliminated if necessary). Discuss the importance of an emergency fund and encourage setting aside a small portion of their income or allowance for unexpected expenses.

Emphasize the importance of tracking spending and sticking to the budget, and consider tools or apps that can help your child keep their finances on track. Learning to monitor and adjust spending in line with this budget can help avoid future debt troubles.

Encourage part-time work

Even if you can financially support your child through college, encouraging them to find part-time work can be beneficial. Working part-time helps students gain practical experience, build resumes, and form new friendships outside the classroom. It also instills a sense of responsibility and helps them appreciate the value of money.

Encourage your child to seek employment in areas that complement their studies or career aspirations. Campus jobs, for instance, can be particularly accommodating with flexible hours and proximity to classes. Regardless of the job, the experience will teach them about the world of work and provide a sense of achievement and independence.

Discuss credit wisely

It’s essential to have a conversation about credit. Discuss the dangers of impulsive credit decisions, such as opening a store credit card for a one-time discount. Explain how credit scores work and the long-term impacts of good versus poor credit management. It’s vital to teach them that misuse of credit can lead to a debt spiral that is difficult to escape and can damage their credit score severely.

Share personal anecdotes about credit – both good and bad. Your own experiences can provide real-life examples of the consequences of credit decisions. This can make the discussion more relatable and impactful.

Use this conversation to lay the groundwork for responsible credit use. Encourage them to start with a simple, low-limit credit card to build their credit history if they feel ready to manage it. Stress the importance of paying off the balance in full each month to avoid interest charges and build a positive credit record.

Open a student checking account

To promote financial independence and decision-making, have your student open their own checking account, but structure it to avoid issues. Many banks offer student accounts you can co-own and monitor, preventing banking fees and errors through overdraft protection transfers from your funds. These accounts typically have features tailored to students, such as minimal fees and overdraft protection, offering a balance between independence and safety. Mobile apps with purchase alerts can keep you both informed.

Create a cyber-safe environment

With the increasing number of financial scams targeting students, it’s crucial to ensure your child’s financial accounts are secure. Begin by setting up multi-factor authentication (MFA), which requires more than one method of verification to access accounts, dramatically reducing the risk of unauthorized access. Enable transaction monitoring and set up alerts for any financial activities. These alerts can be sent to both your and your child's phone or email, providing immediate notification of any suspicious transactions.

Educate your child on the importance of strong, unique passwords for each account and the dangers of sharing these passwords. They should also be aware of the common tactics used by scammers, such as phishing emails or fake websites. Encouraging them to regularly review their financial statements and credit reports can further enhance their awareness and ability to spot inconsistencies that might indicate fraud.

Have annual discussions

Make it a habit to discuss financial aid, student loans, and scholarships every year. Circumstances can change annually, and keeping your child involved in these discussions will increase their awareness and responsibility toward their college finances. This ongoing conversation can also motivate them to seek out scholarships and understand the nuances of financial aid. If loans are inevitable, model different payoff scenarios so your child understands the true cost of borrowed funds plus interest over repayment periods.

Lay the groundwork

At CapWealth, we are committed to promoting financial literacy across all ages because we understand its critical role in securing your family’s financial future. Starting these conversations and implementing safeguards benefits both students and parents alike. Your child gains invaluable money management skills and financial ownership while you maintain appropriate oversight. The entire family develops healthy financial habits and transparency that pave the way for future success.

By following this checklist, you’ll help your child develop financial independence and security as they embark on their college journey. Remember, preparing them for the financial reality of college life is just as important as their academic readiness.

Hillary Stalker, CFP, is an executive vice president and financial adviser at CapWealth. For more information, visit capwealthgroup.com .

How to teach your kids to budget this summer and more

Despite strong economy, investors should protect portfolios against inflation

Mon, 06 May 2024 16:36:31 GMT

Author: CapWealth

Recent economic data has shown remarkable resilience to higher interest rates placed upon us by the Federal Reserve. Traditional economic theory would say the Fed rate is restrictive, but strong jobs reports and higher inflation says otherwise. These factors have crushed market expectations of interest rates dropping this spring. Some within the Fed have even hinted at further rate hikes being possible.

If the economy is doing so well, why do we feel so bad?

Paradoxically, the strong economy that should be making us all feel better is a major factor driving our pain with expenses in everyday life. Excess cash caused by remnants of pandemic-era programs have been sloshing through the system and leading to sticky inflation. Categories that hit our daily wallets the hardest have generally remained elevated.

Data indicates that pockets of inflation in various categories continue to pop up at random times. We coined this “inflation whack-a-mole” after the adorned arcade game. Much like the pesky moles who rear their head randomly in the game, we’re experiencing the same symptoms in the economy. Housing, labor cost, oil prices, and food supply have all seen price spikes, but not all at once.

Housing is driven by a supply shortage and fluctuating mortgage rates. In a January 2024 report, the American Enterprise Institute Housing Center wrote, “…year-over-year home price appreciation has begun to accelerate, largely due to buyers being well-qualified and highly motivated by a historically tight supply.”

As mortgage rates drop further, the tight supply will only drive prices higher as more potential buyers enter the market. This may lead to start-stop inflationary reads in the housing sector. The first major inflation data of the year, published on Jan. 11, confirmed our sentiment, with housing contributing to more than half of the overall CPI increase. The subsequent reports show trends of inflation embedding itself again.

Inflation is half of the affordability story

Inflation data plays an important role in setting the Fed’s policy rate and is often mischaracterized as a “catch-all” phrase. Calculations like PCE and CPI sound like characters from a certain sci-fi franchise but are in fact the best guides for estimating price changes across the United States. They are not perfect. CPI data tends to read higher than PCE because it includes a larger weight on sectors like housing and is more sensitive to the rising cost of homes and rent. The Fed uses PCE as its primary source and its inflation 2% target is expressed in terms of this metric. Other agencies use CPI to adjust social security payments, for example.

Higher interest rates are not figured into either CPI or PCE inflation reading, which skews how we feel about making purchase decisions. Buying items right now can feel more expensive than inflation readings imply. A $330,000 home in 2019 is now selling for $500,000 due to inflation but the CPI/PCE calculations ignore the true cost to finance a more expensive house due to higher interest rates. A 30-year fixed mortgage payment in 2019 would have been about $1,500 whereas in 2024 it's closer to $3,370. This represents an increase of 124% in payment burden over five years! That profound double-whammy isn’t entirely reflected when the media cheers that inflation is subsiding.

What can you do?

Ultimately, we must all manage our wallets a bit tighter. Pay attention to pricing and use discounts where possible. Investors must also ensure their portfolios are protected against inflation and potential economic downturns caused by Fed missteps. CapWealth is available to assist in your financial planning, and we welcome the opportunity for dialogue.

Grant E. Stark, CFA, is director of research at CapWealth Group. Stark has experience in finance, investing, operations, due diligence and management assessment, as well as transaction sourcing and execution across both private and public sectors. He co-manages CapWealth’s investment strategies and develops the firm’s investment policies.

“Gray Divorce” on the rise

Personal finance: Understand the nuances of investing in gold

Sun, 07 Apr 2024 20:17:04 GMT

Author: CapWealth

Gold has been a symbol of wealth and stability for centuries, and it continues to be a go-to investment for those seeking stability in uncertain economic times. But investors need to understand the nuances involved in owning gold – such as knowing the real benefits, how physical gold compares to gold stocks, and the truth about its effectiveness against inflation. It's also important for anyone considering gold to think about the timing of their investment and how it complements their broader financial portfolio.

Here's a little historical context

In 1934, President Franklin D. Roosevelt signed the Gold Reserve Act into law. This legislation centralized all monetary gold ownership with the U.S. Treasury and ended the practice of redeeming U.S. dollars for gold in domestic transactions. Its goal was to stabilize the economy during the Great Depression by giving the government more control over the monetary supply. Critics, however, argued it limited personal and institutional gold ownership – fundamentally altering the U.S. monetary system in the process.

This prohibition on private gold ownership was lifted when President Ford signed a bill repealing the relevant sections of the Gold Reserve Act. This legislation, which took effect on December 31, 1974, allowed U.S. citizens to own gold bullion without any restrictions. (Before this repeal, Americans could own gold coins, but restrictions were in place for gold bullion.)

Why investors turn to gold in uncertain times

Gold is often seen as a reliable investment when the economy or the stock market is not doing well. This perception of gold as a safe haven is rooted in its historical stability, which investors find attractive when the future looks unpredictable. Recent global events, like ongoing elections, continuing conflicts in regions like Ukraine and Israel/Palestine, and economic upheavals, have created a sense of uncertainty that's driving some investors to take a closer look at gold.

But deciding when to invest in gold and when to sell can be tricky. While gold can be a safe choice when other investments are falling, it usually grows less than stocks and bonds over the long term. The challenge for investors is figuring out when to move their money out of gold and into these other investments. This decision is difficult because it's hard to predict how long the uncertainty will last or when the stock market will start to recover. Investors need to weigh the comparative safety of gold against the potential for higher returns from other investments.

Physical gold vs. gold stocks

Many people don’t realize there’s a significant difference between owning physical gold and investing in gold stocks. Physical gold means having actual gold items, such as bars and coins. While these represent a tangible investment that some investors find attractive, they also come with the need for secure storage and finding a trustworthy seller. On the other hand, gold stocks represent investments in companies that mine or trade gold. They don't involve owning gold in its physical form.

The main advantage of gold stocks is their liquidity. They are much easier to buy and sell than physical gold, making them a more convenient option for investors looking to quickly move in and out of their positions. Also, there's no need for storage or insurance as gold stocks can be held in a standard brokerage account, which simplifies the investment process.

Investors need to understand these differences before making a decision. Each option has its pros and cons, so it's crucial to carefully evaluate your investment goals and risk tolerance when choosing between physical gold and gold stocks.

Can gold protect against inflation?

Many investors believe that buying gold can protect their wealth against inflation, a notion largely rooted in the 1970s when gold prices shot up during a period of high inflation. But gold's effectiveness as an inflation hedge isn't as straightforward as it seems since it requires investors to accurately predict when to sell. While it's true gold returned 35% from 1973 to 1979, those who missed the peak lost an average of 10% from 1980 to 1984.

In comparison, other investment vehicles such as stocks, bonds, and real estate have historically offered more consistent protection against inflation. These assets can provide returns that outpace inflation over time, whereas gold’s performance can be more volatile and dependent on market timing. While gold may have its place in a diversified investment portfolio, relying solely on it for inflation protection might not be the best approach.

More: Personal finance: Along with the closets, let's spring clean our finances

Incorporating gold into your investing strategy requires a nuanced understanding and careful approach. While its historical appeal during economic downturns and uncertainty is clear, investors should weigh gold against other investment options, especially as protection against inflation. Other assets like stocks, bonds, and real estate might offer better returns over time.

The decision to invest in gold, either directly or through gold stocks, should be made with a clear understanding of one’s investment goals and risk tolerance. Gold can play a valuable role in diversifying a portfolio, but its effectiveness hinges on thoughtful timing and integration with your overall investment strategy.

Jennifer Pagliara, CFP, CTFA, is an executive vice president and financial adviser at CapWealth.

‘Perfect’ Wedding Can Cripple Your Financial Future

Personal finance: Along with the closets, let's spring clean our finances

Sun, 24 Mar 2024 19:06:47 GMT

March is here, and with it, the season of spring cleaning. While we often focus on decluttering our homes – clearing out closets, sorting through pantries, and reorganizing living spaces – it's equally important to focus on our financial well-being. Now is the perfect time to sort out your finances and ensure that your money matters are as organized and efficient as the rest of your household. Below, we outline a few key steps to help tidy up your financial situation, from maximizing contributions to retirement accounts to planning for summer expenses. So let's start preparing our financial house for a brighter year ahead.

Adjust your contributions

First, it's important to reassess your contributions to retirement accounts such as your IRA, 401(k), and any HSA or FSA accounts you may have. In 2024, the IRS has updated the maximum contribution limits for these accounts. Taking stock of these changes and increasing your contributions accordingly can help you maximize your savings and the associated tax advantages.

Making these adjustments early in the year can greatly benefit your long-term financial health, ensuring you're on the right track toward a secure retirement. Take a moment to check the new limits and adjust your contributions as needed.

Roll over old retirement plans

Life changes, and so do jobs. If you've embarked on a new career path this year, don't leave your old 401(k) or retirement plans gathering dust. Rolling over these accounts into your new employer's plan or an IRA can consolidate your savings and give you better control over your investment choices.

Revisit your financial goals

Check in on your financial goals for the year. It’s common for priorities to shift or for unexpected challenges to lead you off your planned course. Instead of viewing this as a setback, see it as an opportunity to recalibrate your financial strategies.

Identify the areas where you’ve drifted from your goals, and determine what adjustments are needed to either realign with your original intentions or set new, more realistic targets. This proactive approach not only aids in getting you back on track but also enhances the likelihood of achieving or even surpassing your goals for the year.

Allocate your tax refund wisely

For many, the arrival of a tax refund feels like bonus money. But a strategic approach towards using this refund can significantly enhance your financial security. So before you splurge, prioritize strengthening your emergency fund to cover three to six months of living expenses if you haven't already.

This financial buffer helps you navigate life's uncertainties, from a sudden job loss to unexpected medical bills, without derailing your long-term financial plans. Consider your tax refund as an opportunity to solidify your financial foundation, providing you with peace of mind and stability in case of unforeseen circumstances.

Max out last year’s IRA contributions

If you haven't taken full advantage of your Individual Retirement Account (IRA) contributions for 2023 and your financial situation permits, now’s the time to act. The IRS allows contributions for a given tax year up until the tax filing deadline of the following year. This means you still have a window of opportunity to contribute to your IRA for 2023 before this year’s tax deadline.

Doing so can reduce your taxable income for 2023, providing immediate tax relief. Also, maximizing your IRA contributions enhances your retirement savings, capitalizing on the compounding growth potential over time. This strategic move not only helps in tax savings but also strengthens your financial security in retirement.

Budget for summer expenses

As you start dreaming of summer vacations, be sure to incorporate these plans into your budget. Assess the amount you intend to spend on things like travel, outings, and other activities, and start earmarking part of your income or savings. This proactive approach can help you enjoy your time off without the stress of overspending and derailing your financial goals.

Spring cleaning your financial house doesn’t have to be a daunting task. By taking these steps, you can ensure your finances are tidy, organized, and well-prepared for the rest of the year. Here’s to a fresh start and a prosperous 2024!

Hillary Stalker, CFP, is an executive vice president and financial adviser at CapWealth. For more information, visit capwealthgroup.com .

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Trillion dollar market cap marks amazing company benchmark

Sun, 25 Feb 2024 19:38:06 GMT

Market capitalization, often referred to as market cap, is a measure of a company's total value as perceived by the stock market. It is calculated by multiplying the current stock price by the number of outstanding shares. This metric is crucial for investors as it provides a snapshot of a company's size, financial health, and market worth.

Who gets in elite trillion-dollar club?

The trillion-dollar market cap is a rare and prestigious milestone that only a handful of companies have achieved. The top contenders in this exclusive club are predominantly technology giants, with Apple, Microsoft, Alphabet (Google), Amazon, and Nvidia leading the pack. Their innovative products, global reach, and dominant market positions have propelled them into this elite category, showcasing the immense power and influence of the tech industry in the modern economy.

Apple, the iconic tech company known for its iPhones, iPads, and Macs, made history in 2018 by becoming the first publicly traded company in the U.S. to reach a $1 trillion market cap. This achievement was a testament to Apple's innovation, brand loyalty, and market dominance. Despite criticism and comparisons to historical companies or partially publicly traded entities like Saudi Aramco, Apple's liquidity and transparency in trading set it apart. The company continued to lead the way, reaching $2 trillion in 2020 and briefly touching $3 trillion in 2022 and again in 2023, solidifying its position as a financial juggernaut.

The concept of a trillion is difficult to grasp due to its sheer magnitude. An analogy from a 1986 New York Times article helps put it into perspective: a million seconds is almost 12 days, a billion seconds is about 31.7 years, and a trillion seconds is about 31,709.8 years. This staggering comparison highlights the enormity of a trillion, a number that has become more common in discussions about company valuations and national debt but remains a monumental figure.

Why pursue trillion-dollar valuation?

While Apple has been a consistent frontrunner, other companies like Microsoft have also reached and briefly surpassed Apple's market cap, as seen in early January 2024. This competitive landscape underscores the dynamic nature of the market and the ongoing race to achieve and maintain trillion-dollar valuations. The pursuit of this milestone reflects not only the financial success of these companies but also their ability to innovate, adapt, and shape the future of technology and business.

What’s next?

The first company to hit a billion-dollar valuation was the United States Steel Corp. in 1901. Other big milestones were GM reaching $10 billion in 1955, GE hitting $100 billion in 1995, and Microsoft achieving $500 billion in 1999. The time between these milestones is getting shorter and shorter. It took 117 years to go from one billion to one trillion, but how long will it take to get to a one quadrillion market cap?

The trillion-dollar market cap is a testament to a company's success, innovation, and influence in the global market. It is a milestone that few have reached, making it a significant achievement that underscores the immense scale and impact of these corporate giants. As we continue to witness the growth and evolution of the tech industry, the power of a trillion remains a remarkable benchmark that highlights the extraordinary potential of modern businesses. The rarity of this achievement serves as a reminder of the vastness of the economic landscape and the remarkable feats that companies can accomplish.

Jennifer Pagliara, CFP, CTFA, is an executive vice president and financial adviser at CapWealth. For more information, visit capwealthgroup.com .

Personal finance: Keep your guard up, learn the sneaky ways scammers work

Sun, 11 Feb 2024 19:11:13 GMT

With the rise of artificial intelligence, scammers have more creative ways than ever to lure people into fraudulently giving them money. With data pointing to rising numbers in scams of all shapes and sizes, Americans are losing billions of dollars in alarming rates year over year.

Most people are familiar with robo-calls, emails and text messages by now, however with AI now entering the picture there are specific scams to look out for in 2024.

Well, they seem legit

The most popular is an impersonator or imposter scam. These are typically individuals pretending to be from an organization like the IRS, Social Security, or a health insurance company. With the help of technology, it may even come across your phone screen as the particular organization they are pretending to be a part of.

They will begin by building trust and letting you know of a routine problem but swiftly begin to create urgency to let you know if you do not do what they say, you will lose whatever benefit this organization can provide. The most important thing to note in these situations is that the IRS will not call you. They most commonly reach taxpayers by mail through USPS, not UPS or FedEx.

In these scenarios, we encourage individuals to ask for a return phone number or to just hang up. Usually, if it is a scam, they will not provide a return phone number and will hang up first.

You won!

The second scam that is rising in numbers is the lottery scam. These typically are presented as phone calls notifying an individual that they have won something like a Publishers Clearing House prize, even though they never signed up. The call begins with the announcement that they won and when they second guess the news, the scammer lets them know they signed up so long ago they likely do not remember.

To receive their winnings however, they must pay an amount to cover taxes or processing fees, and then they ask you not tell anyone so that you can surprise your friends and loved ones. This can be tricky, as it happens mostly to older people.

The most important thing to do in order to prevent this from happening is to remain vigilant, pay attention to the red flags like creating urgency and asking to keep the news a secret.

"Grandpa, I'm in trouble"

Also growing in popularity with the rise of AI is the “Grandparent Scam.” A bad actor will use artificial intelligence technology to mimic the voice of a loved one. Usually, it is a person calling a grandparent and making them worry over a grandchild, giving them a terrible scenario that they would need money to get out of.

One tip that we have provided our clients is to have a verbal family “password”. In this scenario, you would ask the scam artist to provide you the password, and when they inevitably do not know it, you would know that this person is not your loved one and hang up.

Hackers love social media

Social media continues to be a breeding ground for hackers. From social media websites to dating sites, there are a variety of ways individuals have reported being scammed. The most dollars lost were due to fake shopping websites, investment related scams through the social media channel and romance scams.

It is wise to always make sure you check the website you have visited outside of the social media app. This is one way to determine if a website is legitimate and if there are any reports of it being a scam through a quick Google search. Social media can be great for a lot of things, but investments are not one of them. We would urge anyone to avoid any monetary investment transaction through a social media platform and to ask your financial adviser if you are unsure.

While there are plenty of good people out there in the world, it is always smart to stay attuned to the ways in which people are being victimized by scams. There are common “red flags” in which we would always urge our clients to second guess something.

You win a contest you did not enter
You are told there is a problem with your account (taxes, social security)
You are directed to act immediately and pressured to do so
You are not to tell anyone
You are given oddly specific information for payment

The next most important thing to note is that if this has happened to you, or you fall victim to a scam, there are things you can do to still protect yourself.

Know you are not alone; this is happening at alarming rates to people around the world
Contact your bank or credit card company should you have offered financial information
Notify the police
Notify your family members and/or friends
Alert the credit bureaus

This has become an unfortunate reality during a time where technology is at the tips of our fingers each and every day. The best way to avoid them happening to you or a loved one is to stay vigilant, educate your family and friends on scams and ways to prevent it, and to always practice safe technological activity.

At CapWealth, we don’t take the trust our clients have instilled in us lightly. We are always working to keep our clients educated on topics that could affect the nest eggs they have accumulated and the well-being of their families for generations to come.

Hillary Stalker, CFP, is an executive vice president and financial adviser at CapWealth. For more information, visit capwealthgroup.com .

Parenthood beckons millennials, but cost is prohibitive

Personal finance: Here's a helpful checklist for prosperous new year

Sun, 31 Dec 2023 19:17:27 GMT

It's hard to believe another year has passed, and we're already setting our sights on 2024. And with the arrival of a new year come those old, familiar resolutions. While fitness or organization may be at the top of your list, this is also a great time to reevaluate your household finances.

Experience has taught us that using a checklist is a straightforward way to maintain financial discipline. This approach ensures you examine all facets of your finances, from setting achievable savings goals to creating realistic budgets. Below, we've compiled a list to help you manage your finances effectively throughout the year.

January: Set your goals

Every New Year's resolution begins with a goal, and your financial resolutions are no different. Start by drafting a budget to clearly understand your financial landscape. Take a close look at your cash flow and distinguish between essential expenses, such as groceries, gas, and utilities, and those that can be reduced, like frequent dining out or unused subscriptions.

If you haven’t done so already, now is the time to set or adjust your IRA and 401(k) contributions. Whether you’re just beginning to save for retirement or aiming to increase your savings, a well-planned budget is your first step. Once you have a thorough understanding of your expenses, decide on a specific amount or percentage of your income to invest each month. Remember, even the smallest increases in your monthly savings can make a big difference over time.

February: Simplify

Just as organizing your home may be on your 2024 to-do list, it’s a good idea to do the same with your financial accounts. Remember to look through all statements as they come in for tax season. Do you have an old 401(k) lying around? Consolidating accounts can be a good way to streamline your finances and ensure you have access to all your account information.

March: Organize for tax time

If you got off track in February, that's OK. But now is the time to make sure your finances and records are organized for tax time. Keep in mind that the tax filing deadline for 2024 is April 15. Need more time to file? Consider filing an extension to extend your filing date back to Oct. 15. It is important to note that it is not an extension of time to pay, just to file. While it's advisable to file your tax returns or extensions well before April 15, make sure you do so no later than this date to avoid any penalties.

If you're expecting a tax refund, consider saving that money rather than spending it. If your emergency funds fall short of the recommended 3-6 months of living expenses, add it to that account. If your emergency account is in good shape, consider investing your refund in an account that earns interest.

Also, don't forget about your IRA and HSA contributions. You have until April 15, 2024 to contribute to your IRA and HSA for 2023.

April: Review debt

Dealing with debt can be a significant burden. If you’re expecting a tax refund, consider using it to pay down high-interest debts, such as credit card balances. This approach not only reduces your financial liabilities but can also alleviate stress and potentially improve your credit score.

This is also a great time to review your credit score if you haven't already. Many credit card companies offer this service for free, but you can also obtain a free report annually from each of the major credit bureaus. It's important to stay on top of your credit to ensure there are no errors on your report. It also helps you identify opportunities to improve your financial standing.

May: Focus on education

As the school year winds down and thoughts turn to summer, it’s the perfect time to consider educational savings for your children or grandchildren. 529 plans are now more versatile than ever, offering tax-free growth for various educational expenses, from traditional schooling to vocational training. A 529 plan is a great way to grow money tax-free while investing in the education of future generations.

June: Do mid-year check in

June marks the halfway point of the year, making it a great time to gauge how closely you’ve followed your financial goals. Have you stayed the course? Or have you fallen off track? Take this opportunity to revisit the budget and goals you wrote down at the beginning of the year and adjust accordingly if your priorities have changed.

July: Set up for financial freedom

The month we celebrate our nation’s independence is a great time to set yourself up for your own financial independence. Check in on your investment portfolio and asset allocation. If you're working with a financial adviser, ask questions to ensure that your holdings are well-diversified and there's no unnecessary overlap.

Summer can be lots of fun, but it can also be expensive. Make sure to practice mindful spending so that your summer fun doesn't derail your larger financial goals.

August: Update insurance

With the arrival of August and the back-to-school season, our lives often shift back into more structured routines. That makes it an ideal time to bring the same level of organization to your financial matters, particularly insurance. Take the opportunity to review and update your various insurance policies. Make sure your life, disability, home, and auto insurance are current and meet your family's evolving needs. If you haven’t taken advantage of any discount programs, like good student driver discounts, now's the time.

September: Consider charities

As the year begins to wind down this September, it's a good time to reflect on your charitable contributions. Consider how much you've donated to charitable causes so far and what more you'd like to do before the year ends. This way, as the season of giving approaches, you can allocate your resources effectively to ensure you can fulfill your charitable goals for the year.

October: Update online security

There’s nothing spookier than cybersecurity fraud. As you begin to think about the end of the year, it’s wise to reevaluate online accounts and passwords. Ensure that you use strong, unique passwords for each account that use a combination of uppercase and lowercase letters mixed with numbers and special characters. Regularly updating your passwords can significantly enhance your online security.

November: Think about family

November brings the holiday season and family gatherings both near and far. This focus on family makes it an ideal time to address important financial matters. Consider reviewing and updating your estate documents, such as wills and trusts. It's also a perfect opportunity to have age-appropriate financial conversations with your children and organize all your important financial documents in one accessible place. These steps help ensure your family's financial affairs are in order, providing peace of mind during the festive season.

December: Review and look ahead

As the year comes to a close, it's an ideal time for those who aren't yet retired to reflect on their retirement savings. Review what you've contributed to your tax-deferred retirement accounts this past year and what you can increase this to in 2025. Even if you can't do it immediately, aim to save 15% of your salary (including employer contributions) in your retirement accounts.

If you turned 73 in 2024, now is the time to make sure you've taken your Required Minimum Distribution from a traditional, rollover, SEP, or SIMPLE IRA. Also, check the provisions of any inherited IRAs, regardless of age. Forgetting to do so can be a costly mistake.

With your financial professional, consider tax loss harvesting in your portfolio to offset income taxes. This investing strategy attempts to lower your taxes for the current taxable year by choosing to sell an investment at a loss.

Stay financially attuned all year

Remember that consistent attention to your finances is key to achieving your goals. From setting clear objectives in January to making smart decisions about retirement in December, each step you take is a building block towards financial stability and freedom. Use this checklist as a guide throughout the year to stay on track, and remember that small, consistent efforts can lead to significant long-term benefits. Here’s to a financially healthy and prosperous 2024!

Hillary Stalker, CFP, is an executive vice president and financial adviser at CapWealth. For more information, visit capwealthgroup.com .

Pagliara: Markets a little too bearish for comfort

Thinking about end-of-year giving? Consider Donor Advised Funds

Sun, 17 Dec 2023 19:40:42 GMT

The holiday season often inspires a spirit of generosity. It’s a time when many choose to give back, and this is reflected in the fact that charities receive about a quarter of their yearly donations in December. If you’re considering charitable contributions this season, Donor Advised Funds (DAFs) offer a smart and efficient way to do so.

Learn history of DAFs

First introduced in the 1930s, DAFs have become an increasingly popular way to give, especially since the 1990s. (They were formally recognized in the IRS Code in the Pension Protection Act of 2006.)

As of 2022, there are nearly two million DAFs in the U.S., accounting for about 10% of all U.S. charitable giving. They’re a flexible and tax-efficient way to support the causes you care about, making them an excellent choice for year-end charitable contributions.

Understand Donor Advised Funds

A Donor Advised Fund is essentially a charitable investment account. When you contribute to a DAF, you receive an immediate charitable deduction. The funds then grow tax-free and can be granted at a later point to any eligible IRS-qualified public charity. This structure allows for an initial donation to potentially increase in value, amplifying your philanthropic impact over time.

You can contribute cash, securities, and certain other assets to a DAF. The value of your donation is based on its fair market value on the day of the contribution. This is particularly appealing for donors with low-basis stock, as it allows them to avoid paying capital gains taxes on their donation. However, it’s important to note that once a contribution is made to a DAF, it is irrevocable.

See advantages, disadvantages, trends

While DAFs come with the limitation of only being able to grant to IRS-qualified public charities, their advantages are significant. They are less expensive to maintain than a private foundation and offer ease of transfer to heirs. Anyone can manage and maintain a DAF, making it a versatile option for legacy planning. Additionally, the initial contribution required to start a DAF can be relatively small, making it accessible to a wider range of donors.

Despite a downturn in total charitable assets – likely influenced by last year’s decline in the stock market – DAFs continue to rise in popularity. In 2022 alone, grants from DAFs increased by 9% to $52.16 billion.

‘Tis the season

As we celebrate this season of giving, Donor Advised Funds present a unique and effective way for individuals to maximize their charitable impact. Most of the larger custodians, like Charles Schwab and Fidelity, provide DAF options, making the process more accessible than ever. But if you'd like some help determining whether a DAF makes sense for your unique financial situation, reach out to a financial adviser today.

Jennifer Pagliara, CFP, CTFA, is an executive vice president and financial adviser at CapWealth. For more information, visit capwealthgroup.com .

Strategizing College Savings: What You Need to Know

Tue, 28 Nov 2023 19:29:10 GMT

As we navigate through the end of 2023, many of us are reevaluating our financial strategies – particularly when it comes to saving for education. As both a financial advisor and a parent, I'm often asked about the best ways to save for college. Here are some common questions I hear, along with my recommendations.

What are the best ways to pay for college?

Broadly speaking, there are three ways to pay for college: (1) current income, (2) future income (i.e. student loans), and (3) past income (savings).

While the best approach for you depends on your unique situation, a balanced approach I often recommend follows the "1/3 Rule." In this approach, you aim to save 1/3 of college costs beforehand, pay another 1/3 from income during the college years, and cover the remaining 1/3 through scholarships, student income, or student loans if necessary.

When is the ideal time to start saving?

While it’s easy to be distracted by the looming specter of college costs, I strongly encourage parents to prioritize their retirement savings first –setting aside 10-15% of their income. Once that’s in place, saving for college is the next step.

If the budget doesn’t quite allow for college savings yet, that’s OK – your savings is not the only way to pay for college. For example, the Tennessee Promise Scholarship offers two years of tuition coverage at Tennessee community or technical colleges.

Where should I save for college?

529 plans, which are available in most states, are excellent vehicles for education savings. They offer tax-free growth and withdrawals for education expenses. As such, they should be the first place to consider saving for college. And while Tennessee's TNStars is an excellent choice, remember that you’re not limited to your state’s plan. (While federal tax benefits are the same for all 529 plans – tax-free growth and withdrawals for qualified education expenses – state tax benefits can vary. Some states offer tax deductions or credits for contributions to their own 529 plans.)

Each state sets a maximum contribution limit for its 529 plans, typically ranging from $300,000 to $500,000. This cap is the total amount you can contribute over the life of the plan. As for withdrawals, there's an annual limit of $10,000 for K-12 education expenses, and no annual withdrawal limits when it comes to college expenses.

How much should I contribute to a 529 plan?

For those looking to save about 1/3 of college costs for a child, a good target is $170 a month or roughly $2,000 per year. If you're able to save more, consider a regular brokerage account (outside of the 529 account) for the excess. It's important to balance your 529 contributions – over-funding can lead to penalties for non-educational withdrawals (if your child does not attend college, for instance, or receives a large scholarship).

If you have a lump sum available now to fund the 529, the right amount to add likely depends on whether you plan to use for K-12 and what college the child might attend.

Any additional tips for college savings?

For families with an adjusted gross income under $218,000 (married filing joint in 2023, $138,000 single), I recommend first maxing out any Roth IRA contributions ($6,500 per person) before contributing to a 529 plan. And consider Roth contributions in 401(k)s or 403(b)s if your tax bracket is below 32% ($364,000 joint, $182,000 single). IRAs and 401(k)s can be used for college expenses, but don’t have to – which means you can save any funds left over for retirement.

The college savings landscape is constantly shifting. For further questions, reach out to your financial advisor. And if you don’t have one, at CapWealth, we’d love to help. We take pride in our Sophisticated Simplicity® and Provable Integrity®, where our desire is to make complicated things simple and also to communicate to our clients with clarity and transparency.

Costco is selling gold. Is it worth buying?

Sun, 19 Nov 2023 19:34:35 GMT

Costco, the bulk-shopping powerhouse renowned for its competitive pricing on household staples and groceries, has recently broadened its horizons in a surprising way. A recent earnings call revealed that the retail giant has started offering gold bars for sale on their website.

While the sale of precious metals may seem like a departure from Costco’s traditional inventory, the move has proven to be a shrewd one as the 1-ounce bars continually sell out within hours of being listed online. And while these gold bars are not priced at the steep discounts that shoppers have come to expect from Costco’s products, they are being sold at the prevailing market price. So investors seeking a refuge from inflation are seeing an opportunity. As of this writing, multiple media outlets are reporting that the 1-ounce bars retail for around $2,000 each, with a limit of two per customer.

In uncertain economic climates characterized by market volatility and fears of recession, it's not uncommon to see a surge in the demand for precious metals. Gold has long been considered a "safe investment" and a method to diversify one's investment portfolio. The tangible nature of gold also appeals to those seeking a semblance of security, especially when high-interest rates and a shaky banking industry are causing widespread concern.

But the real question investors should ask is whether buying gold from Costco – or anywhere – is truly "worth it." While the allure of gold is undeniable, the diversification it offers is minimal – especially in quantities as small as the 2-ounce limit imposed by Costco. What's more, the perceived security of any precious metal can be misleading. Gold's price is subject to significant fluctuations and historically has not proven to be the inflationary hedge investors expect. When inflation rates exceed the returns on gold, the investment might lead to missed opportunities for safeguarding and growing one’s principal.

The historical data speaks for itself. As of December 2022, gold’s 10-year return stood at a modest 0.92%, whereas the U.S. stock market boasted a 10-year return of 12.44%. With inflation still high and interest rates continuing to rise, one could argue that an investment in a short-term Treasury bill would be a better way to hedge against inflation while yielding little to no risk – in contrast to precious metals with a risk profile similar to the very volatility investors often aim to avoid.

Costco is no stranger to solid business ideas, and this offering has certainly gotten the company plenty of press. But prudent investors should think twice before adding gold bars to their shopping carts alongside bulk toilet paper and pantry items. It’s important to consult a financial adviser to determine if gold aligns with your broader financial strategy.

For those without a financial adviser, our team at CapWealth is equipped to guide you. As experts in several asset classes, including precious metals, we can assess whether gold is a suitable component of your financial blueprint. Keep in mind that investment decisions should always consider the full range of your financial goals as well as the current market landscape.

Hillary Stalker, CFP, is an executive vice president and financial adviser at CapWealth. For more information, visit capwealthgroup.com .

How to save money when you're a millennial

Personal finance: Still have money in your FSA? Here are some ways to use it

Sun, 05 Nov 2023 20:41:45 GMT

In today’s workplace, it’s common for employers to offer individuals either a Flexible Spending Account (FSA) or a Health Savings Account (HSA). But given the similarity in the acronyms, what’s also common is for people to confuse the two.

Both FSAs and HSAs serve as tools to save for medical expenses and reduce taxable income. While they have some similarities, like being able to contribute pre-tax dollars and allowing for the payment of medical expenses, there’s one key difference that often trips people up – the timeline during which they must spend down their FSA.

Unlike HSAs, which allow you to roll over unused funds year after year, FSAs typically require you to spend down the account balance by year-end. Although some employers offer a grace period, to keep them straight, it's best to remember that FSAs must be spent by the end of the year. Not doing so means forfeiting those funds.

More: Personal finance: Ask these questions before giving financial gifts

Yet as the year draws to a close, many people are unsure what to do with their remaining FSA dollars. So here are a few easy and practical ways to spend down your Flexible Spending Account by year-end:

Over-the-counter products: These are allowable as an expense. Things like Tylenol, ibuprofen, and allergy medications can all be purchased using your FSA. Many stores like Walgreens now tag "OTC" items so you know which items fall into that category, but Amazon and Walmart have gone one step further. Their websites have an "FSA & HSA Shop" where you can stock up on household essentials without using after-tax dollars to do so.

Scheduled medical appointments: If there’s an eye doctor or dentist appointment you’ve been putting off, now is the time. Those are generally covered as an FSA expense. Even better news – if your prescription has changed, those new glasses or contacts are also covered as vision care expenses.

Hearing aids: For anyone depending on hearing aids, FSA dollars are a great way to keep costs down on maintenance, batteries, or new devices.

Feminine hygiene products: While the notorious “pink tax” (the sales tax charged by some states on feminine products) hasn’t gone anywhere, these items can be purchased through an FSA to help preserve your hard-earned dollars.

Medical equipment and batteries: Devices such as blood pressure monitors, thermometers, or even wheelchairs can be covered. If you don't need the equipment replaced, you can stock up on the batteries that keep the equipment running.

Besides the mentioned tips, many people are unaware that some fitness programs or physical therapy sessions might also be FSA-eligible if prescribed by a physician for a specific ailment or condition.

These straightforward tips can help ensure you’re not losing money in a Flexible Spending Account. You should also look into your employers' specific rules to see if they offer a grace period. If you ever need clarification on the rules or need guidance on your specific FSA, consider consulting a professional who is well-versed in health savings accounts.

At CapWealth, we're dedicated to providing our clients with the knowledge and tools they need to make sound financial decisions. If you need an adviser to guide you through your company benefits, don't hesitate to reach out. We're here to help you navigate these sometimes confusing topics.

Hillary Stalker, CFP, is an executive vice president and financial adviser at CapWealth. For more information, visit capwealthgroup.com .

Peloton has 'no business model' -CIO

In election season, stock market only cares about certainty

Tue, 26 Sep 2023 20:21:01 GMT

With summer officially coming to an end and school back in session, it’s hard to believe that we are about to enter the final quarter of 2023. With the year quickly passing us by, it has many focusing on what’s next. With a presidential election ahead of us, many of our clients have already begun asking for our thoughts regarding the stock market during this next election cycle.

Who you vote for and what party you support is your business. After all, it is what has kept this country a free and prospering place for hundreds of years. Most people are under the impression that the stock market will react poorly or positively to the running of a specific candidate. What history tells us is that the stock market doesn’t care so much about who is running. What it does care about is certainty.

It is not unusual in a race that feels tight or uncertain for the stock market performance to be flat or down. This is due to the ambiguity of what party and what policies will be put into place. It could lead to policy gridlock and a divided government, which ultimately causes confusion for investors when evaluating certain sectors or companies.

On the flip side, if the polls are showing a landslide outcome favoring one party over another, the market usually reacts positively because it can begin to predict which policies will become a focus in the near future, leaving investors with a cautious amount of optimism in companies that would benefit from those decisions.

It’s important to remain knowledgeable about what sectors are likely to be affected by upcoming policy change, but it is not anything to panic over. As always, investing is a big-picture scenario, and we must keep in mind that one full business cycle is usually longer than a four-year presidential term.

A diversified portfolio is the best way to ensure peace of mind during any year, but if you are an investor who is easily influenced by the noise of election years, it’s especially important to talk to your financial adviser about your concerns.

At CapWealth we are always working to ease our clients’ minds no matter what the news cycle brings, and we would be happy to do the same for you should you feel a sense of unrest in your investments as we head into the heat of the election.

Hillary Stalker, CFP, is an executive vice president and financial adviser at CapWealth. For more information, visit capwealthgroup.com

Reuters: Wall Street Ends up Sharply for Second Straight Day

Tim Pagliara on IPOs: 'Good news' for markets, 'bad news' longer term

Thu, 14 Sep 2023 14:47:26 GMT

CapWealth Chief Investment Officer Tim Pagliara discusses the impact of the August PPI, retail sales reports on the markets, the anticipated Federal Reserve meeting, as well as his outlook on oil and IPOs.

WATCH VIDEO

Personal finance: Ask these questions after receiving inheritance

Sun, 10 Sep 2023 18:52:29 GMT

Inheriting money often comes with a mix of emotions – ranging from anxiety and grief to anticipation and gratitude. And sometimes, the suddenness of such an event can make it a challenge to think clearly. As a beneficiary, how should you navigate these waters? Asking a few key questions can help ensure that you make the right choices in line with your values and life situation.

Ask these questions for an inheritance of any size

Is this going to change my lifestyle?

When one inherits money, it's tempting to make quick, significant life changes. It could be a new car or a bigger house. It could even be retirement. But before diving in, reflect on the permanence of these decisions. Is this inheritance sizable enough to support a lifelong lifestyle change? Also, working isn't just about income. It provides purpose, structure, and social interactions. If you're considering early retirement, weigh the non-financial aspects of work as well.

Am I looking at this to make me happy?

While sudden wealth can certainly bring comfort and luxuries, it's important to understand that real happiness is seldom tied to material gains. Relationships, experiences, and personal growth are the foundations of a fulfilled life. Money is simply a tool. Consider this inheritance as a way to support and enhance these aspects rather than replace them.

How can I honor the individual I inherited from?

An inheritance is not just a financial asset — it’s a legacy. Remember the person who left it to you. Would they have wanted you to use it for a specific purpose? Were there causes they were passionate about? By aligning some of your choices with their values, you not only honor their memory but also create a bridge between generations.

In 20 years, will I look back and be glad about what I did?

Time often provides clarity. Try to visualize the distant future. Will your imminent choices resonate positively two decades from now? Long-term thinking helps in prioritizing what genuinely matters.

Ask these questions for larger inheritances

Do I understand the tax implications?

Often, large inheritances come with a myriad of tax considerations. Here's a brief breakdown:

Estate taxes: Depending on the size of the estate and where the decedent lived, the estate may face federal or state estate taxes. These taxes are based on the estate's net value and can significantly reduce the overall inheritance.

Income taxes on inherited IRAs: If you inherit an Individual Retirement Account (IRA), you might have to take Required Minimum Distributions (RMDs), which can be taxable. The tax treatment varies based on the type of IRA (traditional vs. Roth) and your relationship to the deceased.

Capital gains tax: If you sell inherited property or stocks, there might be capital gains tax implications based on the difference between the inherited value and the selling price. A misstep or oversight can lead to sizeable tax liabilities. It’s important to align with a tax professional who can guide you through these intricacies. They can help ensure you remain compliant while optimizing your inheritance.

Am I OK to take it slow?

The excitement and the sense of responsibility that comes from inheriting significant wealth can feel like a wave carrying you toward immediate action. Major financial decisions, however, especially those impacting your long-term financial trajectory, merit deliberate thought.

Remember that while the inheritance might be sudden, the decisions you make around it don't have to be. By taking a step back, you allow yourself the space to process, understand the full spectrum of options available, and consult with experts. This measured approach can be the difference between building a legacy and suffering financial missteps.

Do I have a team of advisers to help me?

While it can be tempting to trust your instincts, there are many complexities surrounding large inheritances. That’s why leaning on an experienced team can be invaluable.

Attorney: Legalities around wills, trusts, and estates can be intricate. An attorney can help ensure all legal procedures are followed, rights are exercised, and potential pitfalls are avoided.

Accountant: With the multitude of potential tax implications, a seasoned accountant can help navigate the tax code and minimize your tax burden.

Financial adviser: Beyond immediate implications, there’s the broader picture of wealth management. How should you invest? What’s your risk tolerance? How can this inheritance align with your long-term financial goals? A financial adviser can analyze this information and provide strategies tailored to your unique situation.

Working with a team of experts isn’t just about managing the inheritance – it’s ensuring the continued health of the legacy you’ve inherited.

Explore your options

Inheritances present a wide range of opportunities, some of which include:

Giving it away: There’s a unique joy in philanthropy. Supporting causes or charities can create ripple effects in communities.

Gifting to others: Whether it’s setting up a college fund for a child or helping a friend in need, gifting can be a way to spread the wealth.

Using it for education: Knowledge is its own form of wealth. Consider courses or degrees that can enrich your life or that of a family member.

Paying off mortgage or debt: Financial freedom is liberating. Using the inheritance to eliminate debts can help you breathe easier.

Planning a family vacation: Travel not only provides a way to recharge your batteries, it’s also a way to create lasting memories.

Receiving an inheritance is as much a responsibility as it is a privilege. Money is a tool – often a very powerful tool – and can have a lasting impact on those around you. I wish you the best on your personal journey.

Hunter Yarbrough, CPA, CFP, is a vice president and financial adviser with CapWealth. He is passionate about taking a holistic view of personal finance, including investments, taxes, retirement, education, estate planning, and insurance.

Firm Recognition

Tim Pagliara on Fox Business Mornings With Maria

Tue, 18 Jul 2023 14:51:21 GMT

Tim shares CapWealth’s view on why inflation will stay stubbornly high for longer than people think with Maria Bartiromo on Fox Business Mornings With Maria.

WATCH VIDEO

Stock market got you nervous? Understand the basics of the indexes and your portfolio

Sun, 04 Jun 2023 19:56:20 GMT

In a world where the news has become a place of political debate and sometimes sad stories, it has also become a place where investors often get trapped regarding the stock market. There is no question that the last couple of years have been turbulent and full of unknowns, but sometimes the basics of investing and the general stock market get caught in the latest crypto headline leaving everyday investors paralyzed.

If you are someone who often gets panicked by watching the latest news cycle, there is no shame in that, it’s easy to do in this day and age. We are here today with a few basic reminders to help ease worry during times of ups and downs.

The most talked about indexes are the Dow Jones, Nasdaq and the S&P 500. It is important to remember the Dow is only composed of 30 companies. While its performance can speak to publicly owned, large-cap U.S. companies, it is used as a way to measure the health of the stock market even though it is limited to tracking the price of those 30 stocks. It typically holds less technology stock, placing too much weight in other sectors like financial and industrial sectors. This gives the Dow much less exposure and more concentration.

The S&P 500 index consists of 500 of the leading U.S. companies’ stocks, giving it a much broader index in comparison to the Dow. This being said, the S&P 500 and Nasdaq are more concentrated around technology stocks. The S&P 500 is often used as a benchmark for the U.S. stock market, and many financial investment companies will use this as a benchmark for their portfolio performance.

While these indexes help investors gauge the performance of the broad stock market, they may not directly correlate to what is inside of your portfolio. There are many factors that play into the performance of an investment portfolio, but some of the most important include what companies are owned by an investor and how much of their portfolio is made up of one specific company stock. If one stock is doing really well but you only own a small piece of it, it will have a much smaller effect on the overall performance of the portfolio. Conversely, if you own a portfolio consisting of a large quantity of one company stock, it can negatively impact your performance quickly if the stock suffers losses.

The latter part of the equation is usually where the news gets us tied up in knots over the stock market and it is why, during times like these, it is important to have an adviser to speak to not only to understand what you own and why, but to help you weather the storms.

A good adviser strives to ensure that all clients have full transparency regarding their investments, so that they can sleep more easily at night. If this is something that has been causing you distress, consult an adviser to help you navigate the news cycle so that you can sleep easier, too.

Hillary Stalker, CFP, is an executive vice president and financial adviser at CapWealth. For more information, visit capwealthgroup.com .

Fox Business CapWealth’s Thoughts on Artificial Intelligence

Fri, 26 May 2023 14:55:33 GMT

CapWealth responds to Nvidia’s rapid rise to a trillion-dollar valuation on a recent Fox Business Segment. In the clip, Tim Pagliara reminds viewers that understanding the difference between a trade and an investment can help investors avoid companies that have reached unsustainable levels.

WATCH VIDEO

Phoebe Venable Talks Estate Planning in StyleBlueprint

Here's a primer to help us understand Medicare

Sun, 09 Apr 2023 19:43:49 GMT

As more and more baby boomers shift their focus to retirement, Medicare has become an increasingly hot topic. In fact, it’s one of the things I get asked about most often. So in this article, I'll spell out some of the basics and highlight a few things that tend to catch soon-to-be retirees off-guard.

What is it?

Medicare is a federal health insurance program for anyone over the age of 65, certain younger people with disabilities, and people with end-stage renal disease. There are three main parts to Medicare: Part A, Part B, and Part D.

Part A is what's commonly known as "hospital insurance." This covers hospital stays, care in a skilled nursing home, hospice care, and some health insurance. Part B is your "medical insurance" and covers some doctor's visits, outpatient care, and other preventative services. Part D is the prescription drug coverage that helps with the costs associated with your medications.

History of Medicare

The program dates back to July 30, 1965, when President Lyndon B. Johnson signed a bill into law that led to the creation of Medicare and Medicaid. The program was originally created to provide basic medical coverage to Americans who did not have health insurance.

In 1972, the coverage was expanded to cover people over the age of 65, younger citizens with certain disabilities, and those with end-stage renal disease. Part D for prescription drugs did not go into effect until 2006, as part of a 2003 modernization to the program, marking the most significant change that Medicare had seen to that point.

It's not free

It’s important to note that Medicare is not free. I can’t count the number of times I’ve had to break this news to people who incorrectly assume it’s an entirely free program. While it should make health care much more affordable than before enrolling, that is not always the case. So it’s crucial to understand the costs associated with the program.

Let's break it down

Original Medicare, which is comprised of Part A and Part B, pays for most, but not all, of the cost of covered health services and supplies. Part D for prescription drugs is separate. You pay for services as you go and usually pay a deductible at the beginning of the year, along with about 20% of the approved services called co-insurance. Many people also get a Medigap policy, which costs extra to make up the gaps from what original Medicare won’t pay.

Alternatively, Medicare Advantage bundles Part A and Part B and often includes Part D as well, into one plan from a private provider. This is a Medicare-approved plan and often includes vision, dental, and hearing services that original Medicare does not provide. Usually, these plans are for one year, and changes can occur at the end of the contract. You’ll be notified of these changes and may have to switch Advantage plans if a change interferes with something vital for your needs. Each plan can charge different amounts and has different rules on how you receive your care, which has led to a lot of confusion among people who use Advantage.

Issues with Medicare

There are currently several key problems with Medicare, with the enrollment process being right at the top. Switching over can be a confusing and complex process. Many people who don’t have help can make honest mistakes that result in higher out-of-pocket costs and late enrollment fees. Another glaring issue is the lack of comprehensive dental, vision, and hearing coverage. As we all know, these three areas can deteriorate as we age – and the failure of original Medicare to cover them is a huge oversight, in my opinion.

Given that the average life span in our country continues to increase, I foresee more problems arising unless these issues are addressed. In the meantime, for anyone 65 or older who needs to enroll in Medicare, it’s a good idea to discuss your options with a qualified financial adviser. These professionals can help determine the types and amount of coverage that’s right for you.

Jennifer Pagliara, CFP, CTFA, is an executive vice president and financial adviser at CapWealth. For more information, visit capwealthgroup.com .

Cheddar News: Stocks Close Higher

Personal finance: Help kids solidify a great saving habit

Sun, 12 Mar 2023 19:50:06 GMT

As a mom of two and product of the generation raised in a time where it was taboo to discuss finances, it’s always been a goal of mine to teach age appropriate, fiscal responsibility to my kids. One could argue it’s a hazard to the profession that I chose, but either way, we’ve done our best to instill the habit of saving early in our children’s lives.

What started with a traditional piggy bank and a lesson in budgeting when they received that Target gift card that was burning a hole in their pockets, has now turned into an experiment with the ever popular “Greenlight” kids debit card. I should mention that this is not a paid advertisement but an honest review with real life results.

When Greenlight first hit the market a few years ago, our oldest was 5 at the time. He has always been conscious of “his money” and curious what that could buy him on adventures of any kind where they sold kid-related goods. He would ask to enter the chip into the reader at the store, and always asked if he could pay for things himself. My husband and I decided that we would give this kid’s debit card a try and gifted it to him that Christmas with his very own wallet. With zero exaggeration, it was his favorite gift that year.

The card came with an app that a parent or guardian could control, and it also gave the ability to link your bank account to it. While it came with many features, we used it strictly to help him to deposit any money he received so he could watch it grow. He has a “spend” account and a “save” account. Any time he received money, we would deposit it to our checking account and transfer it to his. There was one catch; whatever money he received for a birthday, holiday, or just because Grandpa threw him 5 bucks, had to be split 50% between spend and save.

Any parent can imagine the first phrase was “that’s not fair” when it came time to deposit his first birthday loot since opening his account. But we fast forward two and a half years later, and he recently asked if we could put half of the quarter he found on the ground in his accounts.

What’s most interesting is that it has also caused him to stop and think when he does want something at the store. The deal is, if it is in his “spend” account, he can spend it on whatever (within reason) he would like. But this exercise has caused him to recognize the value of something above a typical impulse to buy just because he wants something.

The Greenlight card has become such a useful tool in our home that this Christmas our daughter, now also 5, received her own card and wallet for Christmas. While I am sure the battle over who will buy the sparkly shoes won’t ever go away, her older brother has helped us find a tool that aids in the parenting debates that come in a world full of consumerism that we hope continues to pay dividends in the future.

I would encourage you to ask your financial adviser what you need to be doing today for the future generations of your family. At CapWealth we believe next generation education should start early with age-appropriate lessons. Successfully preparing the next generation to receive your family’s wealth is about more than prudent investing or the right estate planning documents. It is about making sure money helps, not hinders, our children become responsible adults with fulfilling and productive lives. If your financial adviser isn’t talking to you about stewardship lessons for your children and grandchildren, give me a call.

Hillary Stalker is an executive vice president and financial adviser at CapWealth. For more information, visit capwealthgroup.com .

PAGLIARA: How secure is Social Security’s future?

Top 10 habits of really effective people

Sun, 26 Feb 2023 18:32:12 GMT

There will always be those who benefit by luck or "being in the right place at the right time." But there is often a common thread behind effective individuals – they cultivate certain habits that they follow consistently.

The good news is these habits can be mimicked by anyone.

In my experience over the years working with various families as a wealth advisor, here are 10 common habits I’ve observed:

1. They embrace delayed gratification.

This is a hard one for many people – the practice of denying an immediate reward based on the expectation of an even better reward later. But it's a practice effective people implement regularly. For example, many wealthy individuals make a habit of forgoing temporary pleasures with an eye on long-term success. Whether that means living in a more modest home or saving money on things like cars or clothing, they recognize tomorrow's success as more important than today's momentary gratification.

2. They don’t follow the herd.

Most people have a tendency to “jump on the bandwagon” of popular opinion. It’s part of our innate desire to be part of the crowd and blend in with society. But following the herd is a surefire way to limit yourself. Effective people aren’t afraid to make their own decisions and stand by them – often creating their own herds in the process.

3. They keep learning.

Effective people understand the value of education, which is why they focus so heavily on self-improvement. This can take many forms – keeping up with the news, soliciting feedback from others, etc. – but they primarily build their knowledge base by reading. And while they'll sometimes read for entertainment, much of their reading time is focused on personal development – with biographies and history books comprising the bulk of their reading lists.

4. They’re early risers.

We've all heard the expression "the early bird gets the worm" because it's based on a simple truth: the more time you can devote to your pursuit of success, the more success you'll achieve. The habit of getting up early shows up again and again among effective people – mainly as a way to combat daily distractions and focus on what’s really important. Getting up early and focusing on what you want to accomplish in a given day (as opposed to dealing with constant interruptions and disruptions) helps move you closer to your goal and gives you more confidence.

5. They take care of themselves.

Whether it takes the form of daily exercise, a mindful diet, or ensuring that they get enough sleep every night, a focus on personal care ranks high on the list of habits effective people share. Over three-quarters of self-made millionaires exercise for at least 30 minutes a day and sleep at least seven hours a night.

6. They budget their time.

"Do not squander time," Benjamin Franklin wrote, "for that is the stuff life is made of." Effective people recognize that time is irreplaceable – and spending it on trivial pursuits comes with a cost. They flex their decision-making muscles to prioritize the tasks that matter and minimize time spent on unimportant things. From building consistent daily routines to prioritizing projects, they would rather focus on getting the right things done than simply getting more things done.

7. They set goals.

It’s very difficult to arrive at a destination when you don’t have a map. That’s why effective people set clear, specific goals and commit to achieving them. The process generally includes four common steps: They visualize the future they want to achieve, they write these goals down, they set clear deadlines and measurements, and they hold themselves accountable.

8. They take action.

Without action, the best plans in the world will amount to nothing. Effective people act quickly – in many cases, before they feel they're ready. They recognize how crippling indecision can be, and they take steps to counteract it. Where other people may vacillate and come up with reasons not to take that first step, effective people take the risk – and the action.

9. They stay connected.

Effective people understand the importance of collaboration. That’s why they seek out other positive, goal-oriented individuals to exchange ideas and inspiration. Whether through simple networking or playing a role as a mentor or mentee, effective people surround themselves with other effective people.

10. They give.

Whether through donations of time, money, or ideas, effective people make a habit of sharing what they have. They recognize that giving back is not only the right thing to do but also an act that empowers all involved.

In my opinion, the habit of giving is perhaps even “the secret” to effective, successful, and wealthy individuals. By recognizing success and wealth as an opportunity to share with others, truly effective people see the beauty of - and the part they have to play in - the big picture.

Habits make a difference.

We've all heard the saying that it's not what you do occasionally that makes an impact – it's what you do consistently. Effective people have mastered the art of putting their habits to work for them because they recognize that consistency is often the difference between success and failure. Of the habits listed above, most require little more than a bit of discipline and practice. (That, and the decision to begin.)

But the good news is that it’s never too late to get started.

From the fiscal to the physical, giving is strong move

Sun, 15 Jan 2023 19:25:58 GMT

Whether it’s a contribution of time or capital, there are few things as gratifying as an act of charitable giving.

It’s a message that’s clearly catching on: In 2021 alone, Americans gave away $484.85 billion – that's a 4% increase over 2020. What’s more, the largest source of that charitable giving (67%) came from individuals.

Why give?

There are countless reasons to give, and the benefits range from the emotional to the physical to the fiscal.

Happiness. A 2008 study by Harvard Business School found that giving money to someone else lifted the giver's happiness more than spending that money on themselves. This, despite the givers' expectation that spending on themselves would make them happier.

Health. There’s been a wide range of research linking generosity to better health, even in people with chronic illnesses. Researchers suggest one reason giving may improve physical health is that it helps decrease stress.

Social connection. Several studies have suggested that when you give to others, your generosity will likely be rewarded down the line whether by the person you gave to or by someone else. These exchanges promote a sense of trust and cooperation that strengthens our ties to others.

Finances. But in addition to these emotional and physical reasons for giving, there are also several sound financial benefits – most notably the reduction of your tax burden in both the short and the long term.

Choose a way to give

As of 2023, the lifetime gift tax exemption – the amount you can leave in your estate without triggering estate tax – is $12.92 million. That’s up from $12.06 million in 2022. (Married couples can shield up to $25.84 million.) Although this exemption has traditionally increased each year with inflation, it is set to be cut in half at the start of 2026. And while most people will fall well under these thresholds, those meeting them must keep these upcoming changes in mind when developing their investment and giving strategy for the next few years.

Also, for 2023, the gift tax annual exclusion amount has jumped to $17,000, up from $16,000 in 2022. That means you can give away up to $17,000 to as many individuals as you’d like with no federal gift tax consequences. For parents with married children, this limit is multiplied by four to $68,000 ($17,000 from each parent to each child).

Another way to lower one’s taxable estate is to designate charities as beneficiaries.

A donor advised fund allows you to place assets in a fund that’s not counted toward your total estate value. This lets your investments grow tax-free since they're set aside for charity, while you can advise how to invest and where to donate funds. (If you should pass away before donating, your heirs can manage and distribute the money.)

A charitable remainder trust is a trust that lets you donate to charity while providing you and your heirs with tax savings. These are typically funded with highly appreciated long-term assets like real estate or stocks. This creates an income stream for the beneficiaries, with the remainder of the trust's assets donated to one or more charities.

Cash or stock? While cash is often the easiest, gifting assets (like stocks or real estate) has additional benefits. Not only does the donor receive a charitable deduction, but the donor also does not realize any capital gains on the gift. Also, while tax deductions for charitable contributions made in cash are generally limited to 60% of gross income, non-cash contributions often have lower limits that depend on the type of asset donated.

The bottom line

No matter how you opt to make a gift of your money, the benefits will be felt by every party involved. But it’s important to keep track of these contributions to maximize your deductions and ensure you’re not adding to your tax burden. If you'd like help mapping out a strategy for your charitable giving, speak to an experienced financial planner or tax professional. They can help you navigate the many options available and arrive at a solution that meets all your goals for your money.

The information presented is the opinion of CapWealth Advisors, LLC and does not reflect the view of any other person or entity. The information provided is believed to be from reliable sources, but no liability is accepted for any inaccuracies. This is for information purposes and should not be construed as an investment recommendation. Past performance is no guarantee of future performance. CapWealth Advisors, LLC is an investment adviser registered with the U.S. Securities and Exchange Commission.

Phoebe Venable Talks Estate Planning in StyleBlueprint

Tim Pagliara Appears on FBN’s ‘The Claman Countdown’ to Discuss the Stock Market

Fri, 18 Nov 2022 14:59:23 GMT

Source: https://grabien.com/file.php?id=1730399

How a $1.3bn RIA beat the SEC in a 12b-1 fee trial

Wed, 16 Nov 2022 17:32:15 GMT

Spotty witnesses and the decision to marshall a massive legal entourage may have backfired on the regulator.

Last month, $1.3bn RIA CapWealth Advisors squared up in federal court against an intimidating opponent: the Securities and Exchange Commission (SEC). The regulator had accused the firm of fraud stemming from its collection of 12b-1 fees on sales of certain mutual fund share classes, while CapWealth execs countered that they had reduced their advisory fees to cover any 12b-1 fees charged to their clients.

The battle’s outcome was a surprising one.

To understand the context of the dispute and the stakes at hand, one must go back to February 2018, when the SEC launched its Share Class Selection Disclosure Initiative allowing RIAs to avoid financial penalties if they self-reported past 12b-1 fee-related Advisers Act violations and returned any excessive fees charged to their clients. Many RIAs who had collected 12b-1 fees in the past did just that, but some did not. The SEC worked to root out such offenders and continued its crusade against firms it deemed to be out of compliance even after the disclosure program officially ended in April 2020.

Most firms that found themselves the subject of an SEC complaint elected to settle with the regulator, figuring it would be cheaper, quieter and easier than going to trial. But a small contingent elected to fight back on principle, decrying the 12b-1 crackdown as a misguided ‘regulation by enforcement’ campaign.

One of these rebels was Ambassador Advisors, a biblically focused RIA that the SEC argued did not adequately disclose the conflicts of interest related to its collection of 12b-1 fees. Ambassador argued that it never actually violated any regulations and pushed for a jury trial, which finally unfolded over eight days in March. Few were surprised when the jury found in favor of the SEC , determining that Ambassador’s failure to disclose its collection of 12b-1 fees breached its fiduciary duty to clients. The judge ordered Ambassador and its three top executives to pay more than $2m in combined civil penalties, disgorgement and interest.

Similarly, CapWealth chief executive Tim Pagliara raised eyebrows in December 2020 when he initially proclaimed his plan to take the SEC to trial. The SEC had sought financial penalties against CapWealth, Pagliara and advisor Tim Murphy, as well as repayment of ill-gotten gains plus prejudgment interest.

‘Principle is important, my integrity is not negotiable, and I will not settle with them. I will take this all the way to a jury trial, and it will be adjudicated by a jury of my peers, and that’s the only way I’m going to accept it,’ he told Citywire at the time, adding: ‘We do not negotiate with regulatory thugs that harass our clients.’

Watchers took Pagliara’s assertions with a grain of salt. Juries famously hate perceived financial wrongdoing, even if they don’t totally understand the minutiae of a case. And the SEC is a formidable plaintiff, with virtually bottomless pockets and a wealth of lawyers and paralegals it can call on for support.

But in late October, Pagliara was vindicated when ten jurors in US District Court for the Middle District of Tennessee found in CapWealth’s favor, determining that the firm’s collection of 12b-1 fees from advisory clients in the mid-2010s constituted neither fraud nor a violation of its fiduciary duty.

While the SEC declined Citywire’s multiple requests for comment on the trial, Pagliara (pictured) was willing to discuss the details of the case. In an interview, he explained how his firm managed to come out on top.

Witness trouble

According to Pagliara — who was represented at trial by Gino Bulso and Eric Smith of Bulso PLC — the SEC’s expert witness testimonies were conducted sloppily. The minute entries for each day of the trial are not public record, but Pagliara told Citywire that the SEC’s staff started off on the wrong foot with Chief District Judge Waverly Crenshaw, Jr.

‘When they put their first witness up on the stand, the judge had to dress them down because they were not following the rules of his court,’ he said. ‘They were introducing their witnesses and their credentials incorrectly.’

Pagliara said things reached a boiling point when the SEC called its in-house expert witness – an economist with the SEC’s office of litigation economics – to the stand.

‘He came back into court the next day and he said, “I’ve done some research on this overnight and I want to change a few of my answers.” My attorney was setting up and all of a sudden the judge said, “Ladies and gentlemen of the jury, I’m going to ask you to leave.” Well, the judge took over and it was tense. He almost held [the expert witness] in contempt of court.’

If Judge Crenshaw expressed frustration with the SEC’s attorneys or witnesses, the jury almost certainly picked up on that tension, even if they had been ordered out of the room during the worst of it.

Additionally, Pagliara said the SEC called two former CapWealth clients as witnesses, hoping to show the jury who was impacted by the ‘excess’ 12b-1 fees. He said that this strategy backfired for the SEC and ultimately worked in CapWealth’s advantage. ‘One of them hadn’t been a client since 2015, this 80-year-old woman,’ he said. ‘They asked her:

“During your discussions with Mr. Pagliara … do you remember talking about 12b-1 fees?”

“No.”

“Do you remember talking about anything related to your advisory account?”

“No.”

“What do you remember?”

“I remember at one point there was not much cash left on the account.”

So, my attorney gets up and asks: “Did it surprise you that they brought you all the way from Lilburn, Ga., to testify about $76 in 12b-1 fees?”

“Yes.”

“Do you even know why you’re here?”

“No. No one ever explained it to me.”’

Were clients harmed?

Whether or not investors were harmed financially is largely irrelevant in CapWealth’s case and other 12b-1 cases.

Judge Crenshaw’s written instructions for the jury ahead of deliberations spelled this out: ‘The SEC does not need to prove, or offer any evidence, that any defendant intended to harm or actually harmed any client. … When you consider whether the defendants committed any of the violations alleged by the SEC, you should not consider or speculate about whether their conduct caused economic harm.’

Instead, the judge instructed the jury to determine whether the SEC proved its accusation that CapWealth violated the anti-fraud provision of the Advisers Act. To do so, the SEC needed to prove that CapWealth breached one of the fiduciary duties that it owed to its clients – either the duty of best interest or the duty to disclose conflicts of interest.

CapWealth’s position throughout the course of the dispute held that there was no conflict of interest because the firm discounted other fees, including its advisory fee, to offset the 12b-1 fees that it collected. Additionally, Pagliara testified that it was more tax efficient for certain clients to pay 12b-1 fees compared to higher advisory fees because 12b-1 fees are tax deductible while advisory fees are not. By leaving such clients in share classes that charged 12b-1 fees, the firm was indeed acting in its clients’ best interests, he said.

A memorandum opinion written by Judge Crenshaw in April said that if the jury finds Pagliara’s testimony to be true, ‘then Defendants had no conflict of interest. They would have received the same compensation regardless of the strategy they pursued—whether through 12b-1 fees or an enhanced advisory fee—and they simply chose the strategy most beneficial for each client.’ If there is no conflict of interest, the firm could not have breached its duty to disclose such a conflict.

As for the SEC’s accusation that CapWealth failed to establish adequate compliance policies, it could be argued that CapWealth’s reduction of advisory fees addressed the conflict of interest created by its collection of 12b-1 fees.

Evidently, ‘the jury believed in our credibility and how we priced our services,’ Pagliara told Citywire days after the jury found in his firm’s favor.

Location, location, location

Putting aside for a moment the legal arguments at play, a few intangibles likely worked in CapWealth’s favor throughout the trial.

Veteran securities attorney Bill Singer pointed out that the United States District Court for the Middle District of Tennessee is a ‘relatively favorable venue’ for CapWealth, which is based in Franklin, Tenn.

‘A jury in Tennessee is likely not populated with folks who have contacts to the same extent to Wall Street as in other larger jurisdictions, and, more to the point, one is likely to encounter more distrust of “big government” and the SEC,’ Singer explained.

Making matters worse was the heavy artillery the SEC brought to the battle. Pagliara noted the SEC’s staff comprised eight attorneys and paralegals, plus its expert witnesses, including at least one full-time SEC employee – a troupe that could be seen as a waste of government resources, especially by more conservative jurors.

‘That’s a lot of government staffing going up against little old CapWealth,’ Singer said. ‘For reasons that often escape me, the SEC never quite appreciates the optics of having that many “feds” enter a courtroom.’

The price of victory

Singer sees the SEC’s defeat as an embarrassment and a detrimental precedent-setter for the regulator.

‘More defendants will now be emboldened to reject settlement offers and force the government to prove its case,’ he said.

Many such defendants will lose. But the SEC’s court-related expenses will likely skyrocket, which, for better or worse, may force it to be more selective in filing complaints against registered firms. Pagliara said CapWealth spent roughly $1.5m defending itself, while the SEC spent ‘over $4m’ in an effort to collect what he said ‘would’ve ultimately come down to about $16,000 in “excessive” 12b-1 fees.’ The SEC did not have to pay CapWealth’s legal fees.

‘I’m a taxpayer, too,’ Pagliara said. ‘There was no proportionality whatsoever. This was wrong.’

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RIA CapWealth Wins Legal Battle With SEC Over 12b-1 Disclosures

Wed, 16 Nov 2022 17:19:08 GMT

CapWealth went up against an SEC staff of eight attorneys, jury experts and two paralegals, and won a rare victory related to share class disclosure conflicts.'This is David and Goliath,' the firm's founder said.

A Franklin, Tenn.–based registered investment advisor prevailed in a jury trial brought by the Securities and Exchange Commission accusing the firm of not disclosing conflicts of interest stemming from 12b-1 fees.

CapWealth Advisors was found not guilty after a trial that began in federal court in Tennessee’s Middle District last week. The SEC first filed its complaint against the RIA in late 2020, arguing the firm failed to inform clients their investments were placed in certain mutual fund share classes when more affordable options were available.

CapWealth founder Tim Pagliara told WealthManagement.com in February 2021 that he intended to fight the accusations in a jury trial, if necessary.

In an interview following the verdict, Pagliara said he’d been appreciative of the judge, federal court staff and his own attorney, saying he’d faced off against an SEC staff of eight attorneys, jury experts and two paralegals, compared with his single attorney and paralegal. He called the SEC’s actions “a regulatory abuse of a small business.”

“This is David and Goliath,” he said. “That’s all it was.”

On Tuesday, the jury voted in favor of CapWealth on all counts, responding “no” to charges that Pagliara and CapWealth “engaged in conduct that operated as a fraud or deceit,” and that the firm “did not adopt and implement written policies and procedures reasonably designed to prevent” violations of the Investment Advisers Act, according to a verdict form dated Nov. 1.

Many firms over the past several years opted into the SEC’s Division of Enforcement’s Share Class Selection Disclosure Initiative , which launched in February 2018 to encourage firms to self-report mutual fund share class violations in order to avoid being charged and possibly paying higher penalties. That initiative returned nearly $140 million to clients. After the self-reporting period ended, the SEC began charging firms for nondisclosure, with most deciding to settle with the regulator.

The CapWealth trial marked one of the few occasions where such charges reached a jury trial. In March, a jury decided in favor of the SEC in its case against Ambassador Advisors, finding that the Pennsylvania-based firm breached its fiduciary duty by failing to disclose share class conflicts. While the jury decided in the SEC’s favor, the judge later “rescinded” the jury’s verdict.

The SEC argued that a portion of CapWealth’s raised 12b-1 fees had gone to the firm’s managing director, as well as other brokers; while Pagliara didn’t directly receive such fees, some of his share of generated fees went to the parent company, a trend that allegedly continued after CapWealth began offering share classes with different fee structures.

Pagliara previously told WealthManagement.com the allegations were “absurd,” arguing the SEC misunderstood the services CapWealth provided for clients, and argued that the SEC had spoken to more than a dozen of his clients, none of whom had raised concerns. He also called the commission’s self-disclosure initiative intimidating to advisors and an exploitative example of the regulator’s power.

The SEC declined to comment “beyond public filings,” including whether it planned to appeal the verdict, according to a spokesperson. Pagliara believed he would prevail should the SEC pursue an appeal, calling the verdict a “pretty-clear cut” victory.

However, he questioned whether “the average firm” would have even pursued a jury trial, saying his own personal wealth made that decision easier. He also hoped to work with elected officials to raise awareness of what he called “an abuse of power and colossal waste of taxpayer money.”

“It’s bittersweet, because you think your government’s looking out for your best interest, and you find there are these regulators who don’t care about the truth,” he said. “They care about winning."

The SEC Sued a Wealth Manager Over 12b-1 Fees. He Fought Back—and Won.

Wed, 16 Nov 2022 17:14:07 GMT

Three years and $1.5 million.

That’s how much time and money advisor Tim Pagliara has spent fighting allegations brought by the Securities and Exchange Commission that he and the firm he founded failed to disclose conflicts of interest related to 12b-1 fees. After a lengthy legal battle that culminated in a trial in federal court, a jury last week found that the SEC failed to prove its allegations against Pagliara , CapWealth Advisors, and the firm’s managing director of wealth management, Timothy Murphy.

“It was bittersweet,” Pagliara tells Barron’s Advisor. “I felt vindicated. But I also feel there was something dreadfully wrong about their process.”

An SEC spokesman declined to comment beyond public filings.

The loss represented a setback for the SEC, which in recent years has been scrutinizing advisors’ disclosures to clients around 12b-1 fees and mutual fund share class selection . A 12b-1 fee is a recurring fee paid out of mutual fund assets to cover marketing and can reduce a client’s return. The SEC has collected tens of millions of dollars in fines and penalties from wealth managers.

The SEC began investigating CapWealth’s practices and use of 12b-1 fees in 2019, according to Pagliara. In 2020, the regulator filed a civil lawsuit in a federal court in Tennessee against the firm, Pagliara, and Murphy. The SEC alleged that over a three-year period they failed to adequately disclose conflicts of interest arising from their selection of mutual fund share classes that charged 12b-1 fees to clients when lower-cost share classes of the same funds were available. The SEC said 12b-1 fees were paid to an affiliated broker-dealer under common ownership with CapWealth, which in turn paid some of the fees directly to Murphy as compensation, and indirectly to Pagliara, through his majority stake in CapWealth’s holding company.

The SEC said clients allegedly paid more than $430,000 in unnecessary fees.

CapWealth Advisors, Pagliara and Murphy denied the allegations and chose to litigate the case. They argued that they had disclosed the fees, acted in the best interests of their clients, and discounted their standard advisory fee to offset the costs of 12b-1 fees.

“I had no choice but to fight for my integrity,” Pagliara says. “They wanted me to admit that I had defrauded my clients.”

Pagliara had established a broker-dealer in 2009, the same year he launched CapWealth, but disbanded it in 2018 because of changes in the mutual fund industry and what was available through RIA custodians, he says. Pagliara adds that his average annual fee for advisory clients is 0.75 percent of assets under management.

He says he’s pleased to put the legal battle behind him but notes he won’t be able to recoup his legal fees.

CapWealth, which is based in Franklin, Tenn., had approximately $1.4 billion in assets, according to its form ADV filed with the SEC. Pagliara has worked as an advisor for 36 years and has been ranked among Barron’s Top 1,200 Advisors . He says he lost no clients during the legal tussle with the SEC, but it slowed his growth rate as the charges were a disclosable event on his regulatory record, and the trial took time away from his business.

“I’ve climbed Kilimanjaro 12 times,” he says. “I learned a lot about perseverance. But I never thought that the highest mountain I would ever climb was a battle with my regulator that lasted three years.”

Need to save money? Try these 10 simple intentional actions

Sun, 06 Nov 2022 19:42:13 GMT

No one ever said saving money was fun or easy. And given how thin a margin there often is these days between what people earn and what they spend, it can seem like it’s harder now than ever. So, since we can all use a little extra inspiration once in a while to help us save, here are 10 simple tactics that can help get your savings plan on the right track.

Automate transfers

This approach puts your savings more or less on autopilot. By setting up automatic transfers from your checking account to a dedicated savings account either weekly or monthly, your savings will accumulate without you ever having to lift a finger. (Except for setting it up in the first place.)

This approach works particularly well when you're saving for specific targets like a vacation, emergency fund, or down payment on a home. Just set aside an amount you can afford to regularly deduct from your checking account, and watch the savings add up.

Plan ahead, and eat in more often

Doing a bit of homework before you shop for groceries can actually save a surprising amount of money. Make a shopping list of items you actually need and avoid impulse purchases. Also, the savings from coupons and loyalty programs can really add up.

Another easy place to cut back is on the amount you spend eating out, since restaurant meals are invariably more expensive than cooking at home. If it’s too hard to stop altogether, at least try to minimize the number of times you visit a restaurant or order delivery. (And remember that skipping drinks at a restaurant can significantly reduce your tab.)

Watch your online shopping

We know this is easier said than done, but one way to do it is to make the process a little bit harder. Don’t opt for saved billing info or auto-fill forms. Instead, manually enter all necessary information for each order. (It doesn’t sound like much. But depending on how much you order, it can turn into a real time drag, which can disincentivize impulse purchases.)

Also, consider using a private (or “incognito”) browser window when shopping. By deleting your history when you close the tab, this can keep companies from tracking your viewing habits and arbitrarily raising prices. (A phenomenon anyone who has shopped for airline tickets on two consecutive days has likely experienced.)

Put off your purchases

It’s also helpful to give yourself a little space between the time you find an item you like and the time you actually make the purchase.

Resist the pressure to “buy now,” and instead put the item in your cart and walk away for a while. The length of time is up to you, but a week is a solid target to give yourself time to think it over. (And it might also prompt a retailer to offer coupons for the items in your “abandoned cart.”)

Save on car costs

Shopping around for car insurance is one way to save on auto-related costs. You can also reduce the amount you spend on maintenance by simply driving less or avoiding situations that put added strain on your car – like sudden braking or rapid acceleration.

And while there’s nothing you can do to control gas prices, driving less will also cut down on how much of your hard-earned money you’re putting in the petroleum companies’ pockets. (Several grocery retailers – like Kroger – also offer gas points for using their rewards program.)

Try bundling

Depending on your carrier, you can save significant money by bundling your cable and internet service. Some providers may even include cell phone coverage. If you want to trim even more, take a long, hard look at how much of your current package you’re actually using, and consider cutting cable altogether.

Another place to look is your streaming services. They’ll often offer an attractive rate to lure you in, then raise those rates regardless of whether you’re even watching their content.

Cancel unnecessary subscriptions

Odds are, you’re still paying for subscriptions you no longer use or need (and have likely forgotten about). To check, give your credit card statement a thorough review and identify any recurring expenses you can do without.

And to avoid falling into the same trap again, avoid signing up for supposedly “free trials” that require you to enter your credit card information. That free period will end before you know it, and suddenly you’re on the hook for something you might not otherwise have chosen.

Pay off your high-interest debt

Nothing drains a budget like debt. Particularly high-interest debt. By making every effort to pay off your high-interest debt as quickly as possible, you'll essentially save yourself months or years of additional interest paid. Then you’re not only relieved of that extra burden, you have additional money on hand to funnel into savings.

Create a 50/30/20 budget

Once you’ve paid down your high-interest debt, a 50/30/20 budget can be an invaluable tool for establishing your savings priorities.

This approach means devoting 50% of your after-tax income to necessities, 30% to wants, and 20% to savings or other financial goals. While it’s not a hard and fast rule, it’s a handy guideline that can help you build a savings plan that works for you.

Review your budget regularly

Once your budget is created, set regular rhythms to review it. This could look like reviewing your transactions every week, and then reviewing budget totals monthly. When reviewing, are you on track? If there’s money left over, how would you like to spend (or save, give, invest) it? If the budget’s coming up short, what one or two budget items could change?

You can’t arrive unless you start

Wishing for more savings won’t make it happen. But implementing a few simple tips and tricks can start you down the right road. Remember, when it comes to saving, it’s not about how much money you make. It’s about how intentional you are about where that money goes. Sometimes it requires uncomfortable choices. But having that money available for future use – whether it be an emergency or a planned-for event – will make any short-term discomfort more than worthwhile.

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SEC 12b-1 Disclosure Litigation: Background and Outcome

Tue, 01 Nov 2022 13:43:22 GMT

Author: CapWealth

CapWealth Advisors, LLC is an SEC registered investment adviser headquartered in Franklin, Tennessee.

Background

In December 2020, the U.S. Securities and Exchange Commission filed a civil enforcement complaint against CapWealth Advisors, LLC in the U.S. District Court for the Middle District of Tennessee. The complaint alleged violations of the Investment Advisers Act of 1940 related to disclosures concerning 12b-1 mutual fund fees. The action arose from the SEC’s Share Class Selection Disclosure Initiative, an industry wide enforcement effort focused on mutual fund share class disclosures.

Procedural History

CapWealth did not settle the matter and contested the SEC’s allegations. The case proceeded through discovery and was tried before a federal jury in the Middle District of Tennessee.

Outcome

After trial, a jury returned a verdict in favor of CapWealth Advisors, LLC on all claims brought by the SEC. The jury found that the SEC did not meet its burden to prove fraud or violations of fiduciary duty related to 12b-1 fee disclosures. No penalties, disgorgement, or sanctions were imposed on CapWealth Advisors, LLC as a result of this matter.

Frequently Asked Questions: SEC 12b-1 Disclosure Litigation

Your money: Understanding stock splits

Sun, 23 Oct 2022 15:17:28 GMT

Stock split: two words that are virtually guaranteed to prick up the ears of most investors. And so far, 2022 has been a banner year for splits – with Tesla, Amazon, Google, and Shopify each issuing additional shares.

But just what does that mean? And is a stock split always a good thing for investors? Let’s take a look.

First, what is a stock split?

A stock split is a corporate action that adjusts the number of outstanding shares in a company to either increase or decrease the price per share.

There are two broad categories of stock splits: forward and reverse.

In a forward stock split, the company increases the number of shares to reduce the per-share price of their stock. A company's board of directors can choose to split their stock by any ratio; 2-for-1, 3-for-1, 5-for-1, etc. Although the number of outstanding shares increases, there is no change to the company's total market capitalization since each share's price also splits. Each share is worth less since it now represents a smaller portion of ownership in the company. In other words, the size of the total pie remains the same – it's simply been sliced into more pieces.

A reverse split is just the opposite – in a reverse stock split, the goal is to increase the per-share price of the stock by combining multiple shares into a single more valuable share. For instance, if a stock is trading at $1 per share and the company institutes a 1-for-10 reverse stock split, investors would receive a single share with a value 10 times higher – in this case, $10 – for every 10 shares they owned. This approach is often used by companies to cash out shareholders who hold fewer than a specified number of shares.

Forward splits are by far the most common, in part because the new, lower price per share makes it easier for average investors to obtain the stock. With a forward stock split, the board of directors is essentially hoping that increased interest and access to the stock will lead to more trading – and, as a result, an uptick in the price.

In the short term, this new interest can build momentum since average investors can now invest in a company that was previously too expensive. But in the long run, the share price will typically come back down to reflect actual performance. There's no guarantee that a stock split will make a company's shares go up in value.

A few recent examples of forward stock splits include:

Tesla: During the company's annual meeting on Aug. 4, Tesla's shareholders approved a 3-for-1 stock split. That split occurred after the market closed on Aug. 24. (Shares of Tesla closed at $891.29 on the 24th and opened at roughly $302 on Aug. 25.) Tesla went through a 5-for-1 stock split in August 2020, making this the second Tesla stock split in just two years.

Amazon: In March, Amazon announced its first stock split since 1999. The 20-for-1 stock split (accompanied by a $10 billion stock buyback) went into effect on June 6. Shares were worth $2,785 at the time of the announcement – a gain of more than 4,500% since the 1999 split. The June 6 split led to a share of Amazon selling for less than $1,000 for the first time since 2017.

Alphabet: Alphabet (the parent company of Google) went through a 20-for-1 stock split after the market closed on July 15. That represented the tech giant’s second stock split after its 2-for-1 split in 2014 and reduced its trading price from about $2,200 to approximately $110 per share. (But the share price has suffered since then, hitting a 52-week low of $96.87 for its class A shares on Sept. 27.)

Shopify: Shopify completed a 10-for-1 stock split after the June 27 trading session. While e-commerce giants like Amazon and Shopify certainly benefited from online consumer spending during the pandemic, there is concern over the impact today’s high inflation may have on online retailers.

So are stock splits a good thing?

Stock splits don’t add or subtract value. A forward split increases the number of outstanding shares, but the company’s overall value does not change. Generally speaking, forward stock splits are done when the stock price of a stock has risen to the point that it’s unrealistic for new investors. So a split is often interpreted as a positive sign – indicating either current or potential growth in the wake of new investors. (That said, stock splits are not universally loved. A perfect example is Berkshire Hathaway CEO, Warren Buffett. Even though A shares of the company now trade for over $400,000 each, he has refused to split those shares.)

The bottom line: While investors often react enthusiastically to stock splits in the short term, it's important to remember that investing is about assessing a business's overall performance. A stock split should not be the primary reason for buying a company's stock. Remember that the split does not affect the company's market capitalization. While there are any number of reasons a company may split their stock, none of them change the business fundamentals. So don’t try to time the market, don’t invest in anything you don’t understand, and don’t be afraid to ask for help from a qualified wealth adviser.

Jennifer Pagliara, CFP, CTFA, is an executive vice president and financial adviser at CapWealth. For more information, visit capwealthgroup.com.

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Tue, 27 Sep 2022 18:07:23 GMT

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Make Sense of Saving/Investing with These Five Questions

Sun, 11 Sep 2022 18:28:59 GMT

Saving and investing are both important components of a solid financial foundation. They also have unique characteristics that dictate when each one makes the most sense.

The level of risk vs. return is the most significant difference between the two. Savings will generally result in a lower return (via earned interest), but it will do so with virtually no risk. Investing, on the other hand, can yield significantly higher returns, but it also comes with a greater risk of loss.

Since the S&P 500 index started tracking in 1957, the average annual returns on stocks have averaged roughly 10%. Compare that with high-yield savings accounts, which typically earn less than 2%. Although stocks are far more volatile in terms of price fluctuations (you may have noticed that this year), this opportunity for higher returns makes them a valuable weapon in your financial arsenal. But it's important to know when to use them.

Here are five questions to ask to help find the appropriate amount of risk and return for you.
Question 1: Do you have any consumer debt?

If so, you’re certainly not alone. But not all types of debt have the same impact on your finances. A mortgage, for instance, is helping you build equity. But high-interest credit card debt will continually hold you back. By paying it off first, you can save hundreds if not thousands of dollars in interest that you can then put toward your other financial priorities.

Question 2: Do you have an adequate emergency fund?

Before deciding whether to save or invest your money, consider how much cash you have to fall back on in an emergency. What qualifies as "enough" will vary based on several factors, like your income and job security. The right amount will depend on the individual and their level of risk tolerance. But these are some popular guidelines:

While you’re working, make sure you have 6-12 months of living expenses set aside.
Once you retire, have the equivalent of 1-3 years of the income you plan to earn from investments.

Question 3: How best to save?

Since they're not subject to market fluctuations (and are typically FDIC-insured), high-yield savings accounts are a good option for both your emergency fund and your short-term savings. They're also helpful as you're trying to save up for certain financial milestones. Saving in this way is a good choice for many short-term needs – those with a 1-3 year timeframe, like a home or vehicle purchase.

Choosing a straightforward online savings account like those offered by CapitalOne and American Express will allow you to earn some interest with no risk attached. They also typically allow quick access to your cash, no fees, and easy mobile access.

Question 4: Do you want more cash on hand?

In addition to savings accounts, when you want more cash (or cash equivalents) on hand, another option to consider is U.S. Treasury securities. This would include treasury bills, treasury notes, and Series I savings bonds.

Treasury bills (a time frame of one year or less) and Treasury notes (2-10 years) have all yielded in the 3% range in recent months, as interest rates have risen.

Series I savings bonds have become popular in in 2022 because of the higher yield (9.62% through October 2022) due to higher rates of inflation. There are some restrictions, however, such as a one-year lock up period, and are generally limited to $10,000 per person per year.

Question 5: When to invest?

If you’re looking to invest beyond the 1-3 year timeframe – and you've paid off your high-interest debt and secured your emergency fund – consider investing in stocks, whether in the form of individual stocks or funds. Even given occasional contractions, the market has historically risen over the long run.

For less risk, consider higher dividend yield stocks. For more risk (and hopefully higher returns), consider "growth" stocks – those that tend to increase in capital value more than providing income. If you want to invest but balk at the prospect of choosing and purchasing stocks, consider a mutual fund or ETF (exchange traded fund). In these funds, since a pool of investors contribute toward a stock purchase, you assume indirect ownership and professional money managers make the investment decisions for you.

The important thing is to get started.

When dealing with the market, there are no perfect rules, and there are no guarantees. Yes, investing can present some confusing options. But there are still easy ways to get started. If you’d like to learn more about ways you can ensure your money is working as hard – and smart – as possible, reach out to one of our professional advisers today.

Hunter Yarbrough, CPA, CFP, is an executive vice president and financial adviser with CapWealth. He is passionate about taking a holistic view of personal finance, including investments, taxes, retirement, education, estate planning, and insurance. For more information about Hunter and CapWealth, visit capwealthgroup.com.

FoTim Pagliara Named No. 1 Wealth Advisor in Tennessee by Forbes

Tim discusses the latest on the markets with hosts Bryan Curtis and Stephen Engle on Bloomberg Radio.

Tue, 06 Sep 2022 17:44:17 GMT

See the link below.

https://www.bloomberg.com/news/audio/2022-09-04/tim-pagliara-on-the-markets-radio

What Comes First? Student-Loan Payoff or Investment

Sun, 28 Aug 2022 18:34:10 GMT

College is often thought of as some of the best years of your life. And for good reason. From the academic experience to the recreational activities and, of course, the long-term career benefits, a four-year degree is undoubtedly very valuable.

Unfortunately, that once-in-a-lifetime experience often comes with a hefty price tag. In 2022, the average cost of a four-year college degree is $122,000. To pay for this, 70% of Americans take out student loans. Today, one in eight Americans have student-loan debt, with a staggering total of $1.74 trillion nationwide.

On the individual level, the average student loan-holder carries a balance of $38,792 with an interest rate of around 5.8%. Taking on a loan of that size in your late teens or early 20s is a daunting prospect, and many will not realize the weight of their debt until they graduate and have to begin making payments.

On average, it takes most people about 20 to 30 years to pay off their student loans. When you consider statistics like these, it can begin to feel like the financial investment isn’t worth it.

Investing: Start small with investing

Here’s the good news. If you take a focused approach to paying off debt, it doesn’t need to control your life or impede your financial future.

It’s important to begin early and attack the debt aggressively before interest starts to build up, even if it is something small. The monthly strain that debt puts on your budget greatly inhibits your ability to build long-term wealth through savings and investments.

Many young adults think that investing early should be a priority before paying off their student loans. The rationale behind this is that (hopefully) the investment returns will be higher than the interest rate on the loans.

But let me suggest an alternative.

What if student loan holders aggressively paid off student loans, pausing all other financial goals?

It's not uncommon for those following this method to eliminate their student loan debt in just 18 to 24 months—a significantly better plan than making minimum payments and carrying the loan around for 20 to 30 years.

But I thought I could earn more by investing in the long run?

While you probably CAN earn more on your money by investing (in the long run at least), the difference isn’t that much. If you could earn 3% higher by investing (8.8% compared to 5.8%) with an average student loan balance of $38,000, the actual amount earned over 10 years is only about $19,000. That’s before tax without a guaranteed return.

What are the benefits of paying off early?

You can be done with it. You can be done with the debt and done with being tied to a required payment.
You can move on. You can move forward to building wealth and having the freedom to save, spend, invest, and give as you desire.
You can focus. You can have the single objective of providing for your family, being generous to others, and building wealth.

About 73% of Americans rank their finances as their number one cause of stress. The faster you pay off your debt, the sooner that burden is lifted from your shoulders, and you can focus on more exciting goals.

If this feels like a daunting task, remember, you can always start small. And if needed, you can reach out to an adviser to help assess your situation and help you get started on the path to financial freedom.

Mason Everett, a student of accounting and finance at the University of Mississippi, is a Tennessee native and served as CapWealth’s 2022 summer intern.

Wall Street sinks as Powell's speech spooks investors

Sat, 27 Aug 2022 17:56:47 GMT

Wall Street slumped on Friday to close well down, as investors keen for a more modest interest rate path were disappointed by Federal Reserve Chief Jerome Powell, who said the central bank would keep hiking rates to tame inflation. This report produced by Chris Dignam.

Source:

https://www.reuters.com/video/watch/wall-street-sinks-as-powells-speech-spoo-idOV096626082022RP1

https://www.youtube.com/watch?v=RTpPj-ylkhE&ab_channel=Reuters

Peloton has 'no business model' -CIO

Sat, 27 Aug 2022 17:54:50 GMT

Tim Pagliara, chief investment officer at CapWealth, said Peloton Interactive was "not the kind of company that you want to be invested in" right now "in market conditions like this," adding that the fitness equipment maker was "bleeding cash."

Source:

https://www.reuters.com/video/watch/peloton-has-no-business-model-cio-idOV094426082022RP1

Millennials spur trend of SRI — socially responsible investing

'Powell essentially canceled Christmas' -CIO

Sat, 27 Aug 2022 17:53:21 GMT

Tim Pagliara, chief investment officer at CapWealth, said U.S. Federal Reserve Chair Jerome Powell's remarks on Friday "make it much more likely that we are going to see a mild recession," adding he believed "inflation is going to be lingering in the 4-6% range for at least the next three years.

Source:

https://www.reuters.com/video/watch/powell-essentially-canceled-christmas-ci-idOV094326082022RP1

Stocks: Dow Futures Slip, Walmart Beats Forecasts

Tue, 16 Aug 2022 16:56:35 GMT

Stock futures slipped Tuesday even as earnings from Walmart WMT +0.29% and Home Depot HD –0.09% topped Wall Street forecasts.

Earnings from Home Depot (ticker: HD) beat estimates but the stock declined as customer transactions declined 3% in the second quarter. Walmart (WMT) was rising 3.4% after earnings and revenue at the giant retailer topped forecasts.

Contracts linked to the Dow Jones Industrial Average DJIA +0.45% on Tuesday fell 66 points, or 0.2%, to 33,807, S&P 500 SPX +0.40% futures were down 0.2% and Nasdaq COMP +0.62% futures declined 0.2%. Crude oil prices slumped.

Stocks closed higher on Monday despite a surprise rate cut from China following data that showed a weakening of retail sales and factory output in the world’s second-largest economy, while the New York Federal Reserve’s Empire State Manufacturing Survey missed expectations by a wide margin. In addition, U.S. home builder sentiment declined for the eight straight month.

Stocks have risen for four straight weeks as signs of cooling inflation at both the consumer and wholesales levels have led investors to bet on a less aggressive Federal Reserve. The central bank has increased interest rates four times this year — the last two by three-quarters of a percentage point — in its effort to slow the economy.

The Federal Open Market Committee will publish the minutes from its policy meeting in July on Wednesday. At that session, the Fed boosted rates by 0.75 a percentage point for the second straight month. The minutes will be read closely for signals on the Fed’s next move.

Tim Pagliara, chief investment officer at CapWealth, a wealth management firm in Franklin, Tennessee, said a few softer inflation readings “doesn’t mean the Fed will slow or even pause the pace of rate hikes, which is what the market is expecting.”

Pagliara said the recent market “melt-up” was “more akin to a bear market rally and we remind investors that the dot-com bubble saw four bear market rallies of 20% or more, with each one testing new lows.”

These stocks are moving in premarket trading Tuesday:

Zoom Video (ZM) fell 3.2% after analysts at Citi cut their rating on the stock to Sell from Neutral.
Aerojet Rocketdyne (AJRD) rose 4.6% after Elliott Investment Management reported a 3.7% stake in the defense company.
Ginkgo Bioworks (DNA), a developer in the emerging field of synthetic biology, rose 16.3% after second-quarter revenue beat analysts’ estimates.
ZipRecruiter (ZIP) declined 6.1% after cutting its revenue guidance for the year.

Keep a Cool Head During These Stock Market Ups and Downs

North American Morning Briefing: Retailers in Focus with Walmart, Home Depot Earnings

Tue, 16 Aug 2022 16:43:46 GMT

Tim Pagliara, chief investment officer at CapWealth, said a few softer inflation readings "doesn't mean the Fed will slow or even pause the pace of rate hikes, which is what the market is expecting."

Pagliara said the recent market "melt-up" was "more akin to a bear market rally and we remind investors that the dot-com bubble saw four bear market rallies of 20% or more, with each one testing new lows."

Source:

https://www.morningstar.com/news/dow-jones/202208161577/north-american-morning-briefing-retailers-in-focus-with-walmart-home-depot-earnings

CapWealth Hosts 2019 State of the Union Luncheon

Investing Wisdom: Start Young, Start Small if Need Be, and Stay the Course

Sun, 14 Aug 2022 16:32:46 GMT

It’s never too early to begin investing, no matter the amount.

The truth is many of us have the tendency to procrastinate when it comes to saving for retirement (and other long-term goals). Some may see it as a low priority compared to other financial goals, like saving up for a down payment on a home. Others may have a misconception that the amount invested matters more than the timing.

Starting early allows investors to take full advantage of compound interest—one of the most powerful wealth-building tools available. Whether you’re maxing out your contributions or only setting aside a small percentage, the best time to begin investing is now.

What is compound interest?

Compound interest can be defined as interest that is calculated on both the initial principal and the accumulated interest of previous periods.

Compared to simple interest, which is calculated only on the principal, compound interest makes the balance of an investment—or a loan—grow at a significantly faster rate.

Because of this, when you start saving can matter far more than how much you save.

While investing 15% of your income is a good rule of thumb, it’s important to understand that investing something is better than nothing. Many young people fear that investing isn’t worth it if they can only afford to put 5 percent of their income into their Roth IRA or 401(k).

However, the numbers show that someone who invests smaller amounts early on comes out ahead in the long run, compared to someone who waits until they can start investing the full 15%.

Take this example.

Consider Dave, a 35-year-old professional who waits to begin investing until he can afford to contribute a larger percentage of his salary. Though he was investing almost $700 per month, with an average return of 10%, his balance was about $1.5 million by age 65, with a total of $252,000 in contributions.

Alternatively, consider Sally, a college student who works part-time and begins putting just $200 a month into a Roth IRA at age 18. At the same 10% rate of return, Sally’s investment will be worth about $2.5 million by the time she turns 65, with a total of $112,800 in contributions.

She saved half as much as Dave and ended up with $1 million more because she started early.

As you can see, compound interest favors those who start early, which is why it pays to start now, regardless of how much you can invest at the beginning.

How should I begin investing?

By starting early and staying consistent, your investment can turn into a nice nest egg by the time you retire.

There are several great options available for young investors, including employer-sponsored 401(k)s, Roth IRAs, and 529 plans for education savings, just to name a few.

Contributing to your employer-sponsored 401(k) can be the best option, especially if they offer a match. It’s hard to beat the benefits of the employer matching contribution—that’s free money!

Roth IRAs are also an excellent option for investors, as they grow tax-free, unlike traditional IRAs. Your contributions come from your after-tax income and thus are not taxable when you retire and begin taking distributions.

Individuals can add as much as $6,000 per year to Roth IRAs ($7,000 for those over 50). Please note, there are income limits for Roth IRAs, making it even more important to start young before your income potentially exceeds certain limits ($129,000 for single and $204,000 for married filing jointly in 2022).

In addition to retirement accounts, 529 plans are a smart choice to look into if you have children and are hoping to save for their education. This is another scenario where compound interest is crucial. Saving something when your child is in diapers can make a big difference.

If the concept of maxing out two investment accounts is overwhelming at this point, don’t panic. As a young investor, it isn’t about doing everything at once, it’s simply about getting started and starting small.

If you’re ready to begin taking steps toward a more secure financial future, reach out to an adviser to help you determine the best starting point for you.

Mason Everett, a student of accounting and finance at the University of Mississippi, is a Tennessee native and served as CapWealth’s 2022 summer intern.

Cuban Market Could Be Boon to U.S. Businesses

Amazon Joins Deal Revival Spurred by Lower Valuation: Tech Watch

Wed, 10 Aug 2022 16:26:00 GMT

“So this is a good time for them to get off the merry-go-around,” said Tim Pagliara, chief investment officer at CapWealth, a wealth management firm in Franklin, Tennessee.

(Source: https://www.bloomberg.com/news/articles/2022-08-10/amazon-joins-deal-revival-kindled-by-lower-valuation-tech-watch )

This Bloomberg article was also posted on Yahoo News. See link below.

https://news.yahoo.com/amazon-joins-deal-revival-spurred-133907683.html

Is Tax-Loss Harvesting for You? Ask These Four Questions

Reuters: Wall Street Ends up Sharply for Second Straight Day

Fri, 29 Jul 2022 17:18:22 GMT

U.S. stocks rose sharply for a second day Thursday as investors bet the Federal Reserve may not raise interest rates as much as expected following data that showed the U.S. economy contracted again last quarter

See the Link: https://t.co/JCgYCcDpqM https://t.co/fCZoDllfbO" / Twitter

WATCH INTERVIEW

Market Downside Risk & Stock Picks: WMB, LUMN, INTC

Fri, 29 Jul 2022 17:10:45 GMT

"Investors should focus on one investment at a time, not indexes or ETFs. The broader stock market has downside risk. I am looking at companies well positioned for a recession. Inflation will last 3 to 5 years to adjust once supply chain issues subside," says Tim Pagliara. Then, Pagliara provides his stock picks: Williams Companies (WMB), Lumen Technologies (LUMN), and Intel (INTC).

WATCH INTERVIEW

CapWealth’s Tim Pagliara named 2022 Forbes Best-In-State

Gentleman of Distinction

Tue, 28 Jun 2022 14:04:42 GMT

Pagliara Named Williamson Gentleman of Distinction

Each Summer, Your Williamson curates a group of men who embody what defines a southern gentleman. This year's Gentlemen of Distinction features eleven such gentlemen, who exemplify integrity, leadership, character and unwavering dedication to this community. Each one has profoundly impacted Williamson County in ways big and small. But each, has left their mark. We are honored to share just a piece of their stories. We dedicated this issue to Brant Bousquet, a man of generosity and diligence, and Coach Gentry, the true legend of Williamson County.

READ PAGLIARA'S FEATURE

For 26-year-olds, good health meets insurance anxiety

Stock Close Near Session Lows

Tue, 28 Jun 2022 13:55:17 GMT

U.S. stocks closed Monday's session near session lows after posting their second best showing of the past 12 months last week. The Dow dropped 0.2%, the S&P fell 0.3%, and the Nasdaq had the biggest decline of all the major indexes, ending 0.8% lower. Tim Pagliara, chief investment officer at CapWealth, joins Cheddar News' Closing Bell to discuss.

WATCH INTERVIEW

How to keep your "I Do" day from creating big debt

Sun, 19 Jun 2022 15:21:57 GMT

Planning a wedding has never been easy. But anyone trying to do so over the last two years has faced a host of new challenges. Venue closures, travel restrictions, and wary guests are just a few obstacles they've had to overcome.

Yet as unique as these recent years may have been, there's one wedding constant that hasn't changed one bit:

They don't come cheap.

According to The Knot, the average cost of a wedding in 2021 was $34,000, with most of those costs ($28,000) going to the ceremony and reception. That's already back in line with pre-pandemic spending levels.

And the news doesn't get much better.

According to WeddingWire, 74% of couples go over budget on their wedding – and the average couple underbudgets what they'll spend by as much as 45%.

Are you ready for more? In the Brides and Investopedia 2021 wedding survey, 9 out of 10 respondents said they've put off at least one significant financial priority – like saving for a home, starting a family, or saving for retirement – in order to pay for their wedding.

At a time when wedding planners report that prices for food, rentals, and venues are skyrocketing, it's worth looking at how couples and their families can prepare to handle the expense.

First, who's paying?

These days, more and more couples are paying for their weddings out of their own savings instead of asking for help from family. But as the above numbers show, it's quite an investment.

Most couples start saving toward their wedding once they get engaged. But more often than not, they're also struggling with other financial constraints such as saving for a home or paying off credit card debt.

This helps explain why most engaged couples still go the traditional route and rely on help from family.

No matter who ends up signing the checks, it all boils down to two key factors – where to save and how much.

Where to save

At CapWealth, we're often asked by clients how soon they should start saving for their child's wedding. The obvious answer is as soon as you can, and a UTMA (Uniform Transfer to Minor's Account) is an ideal way to do it.

The UTMA allows minors to receive gifts and avoid tax consequences until they reach legal age in their state, at which point the money or gifts legally become theirs. (In Tennessee, it's when they reach 21.) It offers an easy way for children to save and invest without the accompanying tax burden. For 2022, the IRS provides an exclusion from the gift tax on qualifying gifts of up to $16,000 per person.

We often see parents using UTMAs to help their children save for things outside of education. It could be a car, a down payment on a home, or, for our purposes here, a wedding. A key advantage is the fact that it gives parents plenty of time to save slowly.

If you and your partner are saving for yourself, an individual or joint investment account is usually the best route. But this also depends on your time frame. And remember that there's always a risk when investing money, particularly over the short term, as we've seen in recent months.

If you're on a tight time frame – 2 years or less – you likely won't want to invest the money at all. If the current market conditions are any indication, volatility can work against you when you need money on a relatively short basis. That makes a CD or other short-term cash equivalencies a safer bet.

How much to save

The basic concept is the same as with any other budgeting approach – take your targeted wedding budget and divide it by the number of months you have to save. If you need $28,000 and have two years, then a little over $1,000 a month is what you need to save. ($1,166.67, to be exact.)

If you have longer – let's say 21 years, in the case of parents using a UTMA – you'd only need to save $52 a month to save $28,000 (assuming a 7% annual return over 21 years).

Just remember to keep your targeted budget realistic. If you don't think you can hit your savings number regularly, you have two choices. Either dial back your wedding plans (and budget) to a more reasonable level or delay the wedding to create a more extended timeframe in which to save.

These can be hard choices to make. But they're vitally necessary. There are ongoing costs that go into a wedding – many of which are unforeseen. So it's important to plan ahead and save. Otherwise, you and your family could face some very unpleasant financial repercussions that can linger for years.

Jennifer Pagliara, CFP, CTFA, is an executive vice president and financial adviser at CapWealth. For more information, visit capwealthgroup.com.

‘Elevated Risk This Deal Doesn’t Go Through’: Why Investors Are Beginning to Doubt Musk’s Blockbuster Bid for Twitter

MoneyWatch: Market Recap

Tue, 14 Jun 2022 17:16:26 GMT

Tim Pagliara discusses his views on the market and answers questions around a possible recession.

WATCH INTERVIEW

CapWealth Client Conference Call: March 19

Near-term stock market in a 'treacherous environment'

Mon, 13 Jun 2022 16:11:46 GMT

CapWealth CIO Tim Pagliara and Brandywine Global portfolio manager Bill Zox discuss where the market might go after Friday's ugly inflation number on 'The Claman Countdown.'

WATCH THE INTERVIEW

Amazon Joins Deal Revival Spurred by Lower Valuation: Tech Watch

Near-Term Stock Market in a Treacherous Environment - CapWealth Insights

Fri, 10 Jun 2022 23:02:38 GMT

Join CapWealth's Chief Investment Officer, Tim Pagliara, as he discusses the near-term stock market environment alongside High Yield Bond Trader, Bill Zox, with Liz Claman. Learn about their strategies and predictions regarding inflation, interest rates, and key sectors.

Market Conditions and Key Factors Impacting Stocks

Liz Claman (Speaker 1):

Closing bell six minutes away. We do have the markets off session lows, not by much. Dow, S&P, and Nasdaq are looking at their second down week in a row right now with the S&P down 2.6%, the Nasdaq down 3.3%. It's the Dow Transports that are having their worst week in two years as energy prices are spiking, actually weighing on the sector. Oil up one and a half percent this week with just a few minutes to go.

We have perspectives from both the equity side and the fixed income viewpoint. High Yield Bond Trader and Brandywine Global Portfolio Manager, Bill Zox, and CapWealth Chief Investment Officer, Tim Pagliara.

Inflation Impact on Investment Strategies

Liz Claman:

Tim, let me throw it to you first. Did anything about how you are strategizing for your clients change after you saw this inflation number this morning?

Tim Pagliara (Speaker 2):

No, not a bit. We're focused on companies that have predictable earnings and are embedded in the current economy.

Preferred Sectors and Stocks

Liz Claman:

And what are those? I mean, what areas do you feel are matching exactly what you see?

Tim Pagliara:

Well, Williams, for example, a natural gas pipeline company, has been in business since the 1900s. We're going to need more energy. Part of this problem is supply, and so you have to increase supply before you can bend down the inflation curve. Williams is well positioned, 5% dividend yield, lots of free cash flow. They're very well positioned. I've owned that company for over 20 years.

Liz Claman:

Yeah. I was looking at natural gas over the past, just pretty much year to date. Nat Gas year to date up 146%. So, okay, I get that.

H2: Predictions for Interest Rate Hikes

Liz Claman:

Mr. Zox, let's bring you in here. From the fixed income standpoint, we've got Barclays and Jeffries among the two of a couple now that are coming out saying next week we will see 75 basis point hikes. What's your prediction and where do you catch at least a little bit of air for investing?

Bill Zox (Speaker 3):

Yeah, I mean, I think if the markets discount 75 basis points, the Fed will validate that. Look, yesterday the markets were skeptical that the Fed could get to 3%. Now it looks like we're going to test out three and a quarter to 3.5% on Fed funds. But the real important question is, does the Fed have to get to something like 5% or higher? And I'm not seeing that in the market right now. So we think that high yield bonds for a long-term investor make quite a bit of sense from this starting point at about 8% yield, and that's up from about 4% at the beginning of the year.

Volatility and Market Predictions

Liz Claman:

Well, sure, yield, that's what people truly want. I mean, we're showing the 10-year right now. It's not waiting around for next week. It is already jumping 11 basis points to 3.16%. We already saw that the two-year yield is seeing the highest since November of 2018. It is pretty dramatic at the moment. And folks, we do want to draw your attention to the bug and to the lower third banners here. We do have the S&P now down 108 points. The Dow losing 809 points.

Tim, talk to me about your biggest fear here and what would you completely avoid just to guide our investor viewers.

H2: Stocks to Avoid and Sectors to Watch

Tim Pagliara:

I'd avoid the unpredictable. There's a number of companies, for example, you take DocuSign, they've completely blown up. You had 19 analysts that had a $320 price target. It's down 25% today, $50. Those are the types of things. They don't have predictable business models yet, so you just have to ignore them, not be tempted to get back in because this is going to take a couple of years to sort out. And again, the strong, predictable embedded companies in the economy are the ones that are going to win.

Liz Claman:

Yeah. The CEO was just on, Dan Springer, and he sounds confident. They did see an increase in subscribers, but maybe this is a growing pains type of company. It's still in the first couple of years of its existence.

Long-Term Interest Rate Predictions

Liz Claman:

Bill, give me your final word here on where you see interest rates going. We just had the conversation with Anastasia Amoroso and she called neutral rates two, two and a half percent. I fail to see how that can even be possible. She's smarter than me, trust me when it comes to markets. But where do you see neutral rates in the real world?

Interest Rate Path and Market Outlook

Bill Zox:

Yeah, no, I would agree with you, Liz, that I think we're going higher than that. I think the most important question is does the Fed have to get to 5% or something higher than that? And I'm not seeing signs of that. The fact today that the yield curve is flattening quite a bit is very positive for risk assets over the long term. But in the near term, this is a treacherous environment. There's no question about it that stocks have to go lower to contain inflation, and that's the most important thing right now.

Liz Claman:

Well, I want to thank both of you, Tim and Bill, and our screen says it all. The bears are shredding equities on this Friday. We are closing folks at fresh session lows. When we started this hour, the session low was a loss of 853 points for the Dow. Right now, we're down 871. It is an ugly session. Investors do not want to go into this weekend long after that ugly inflation number.

Consumer Price Index Analysis and Economic Insights from Tim Pagliara

Thu, 12 May 2022 22:50:26 GMT

Interviewer 1 (Speaker 1):

Thanks much. It’s 6:32. Unfortunately, we have some challenging news. April's Consumer Price Index (CPI) showed an 8.3% increase year-over-year, surpassing predictions. Food prices are up 9.5%, airfare up 18%, energy prices over 30%, and fuel oil up a staggering 80%. To help us understand this latest report, we are joined by economic expert Tim Pagliara. Tim, thanks for being here. Everyone wishes for a significant raise to keep up with inflation, but that’s not likely. What can consumers do to balance their finances in these times?

Strategies for Consumers to Manage Inflation

Tim Pagliara (Speaker 2):

Well, the first thing is don’t panic. I remember during the 2009 recession, Andrew Ross Sorkin said nobody would pay $1.95 for a cup of coffee. Yet, I just paid $3.24 for that same coffee yesterday. Wages and productivity have a way of evening out over time. We’ll make it through this; now is not the time to panic.

Interviewer 1:

Your Starbucks story brings up an interesting point. Investing wisely during downturns can be beneficial, as you've experienced.

Tim Pagliara:

Absolutely. Back then, I even made my firm’s largest order for Starbucks while waiting in line. Companies like Costco, Walmart, and Starbucks typically thrive in inflationary environments because they can adjust prices and remain in demand. There are silver linings.

Practical Tips for Everyday Consumers

Interviewer 1:

For those not making large market investments, how can they save on everyday purchases at places like Walmart, especially given the rising costs of essentials like gas?

Tim Pagliara:

Consumers should consider taking their foot off the gas a bit. In housing, for example, we face both inventory and supply problems. There were 800,000 homes available in April 2020, but less than 300,000 in April 2022. Long-term, there's a shortage of over 5,000 single-family homes. Fannie Mae and Freddie Mac need to ramp up financing to help average Americans.

Housing Market Constraints and Consumer Advice

Interviewer 1:

These challenges are ongoing, and solutions are needed. Tim, your advice this morning is appreciated. Enjoy your coffee, and hopefully, we’ll talk again soon.

Tim Pagliara:

Have a great day.

Interviewer 1:

Thank you, you as well. Marissa?

Interviewer 2 (Speaker 3):

Yes, that's useful information. His positivity is encouraging—sometimes you just have to push through tough times.

Interviewer 1:

Absolutely, the journey can be tough, but it's necessary.

Interviewer 2:

It’s indeed challenging. All right.

Dow Books Fourth Straight Day of Losses as Stocks End Mixed -Interview

Wed, 11 May 2022 16:03:36 GMT

“You’re going to continue to see companies like Peloton PTON, -8.70% get punished over earnings misses,” said Tim Pagliara, chairman and chief investment officer at CapWealth Advisors, by phone Tuesday. “I wouldn’t get too excited about anything that’s happening in the broader market because there’s still a lot of danger” in individual stocks that have been “so very, very overvalued.”
See the link below.

https://www.marketwatch.com/story/u-s-stock-futures-climb-after-three-days-of-heavy-selling-11652174336

Hiring a Financial Adviser Is Absolutely Essential

Consider These Tax Strategies for Charitable Contributions

Sun, 08 May 2022 18:06:45 GMT

In 2017, Congress passed the Tax Cuts and Jobs Act, which, among many changes, both lowered tax rates and increased (doubled) the standard deduction. In fact, those who itemized deductions on their taxes decreased from 31% to an estimated 14% ( taxfoundation.org ) because of the higher standard deduction ($12,950 for single filers, $25,900 married in 2022.)

While this change simplifies returns and lowers taxes for many filers, some charitably inclined individuals found they no longer received a deduction for their charitable gifts because they were no longer itemizing and taking the higher standard deduction. The good news for these filers, however, is that there are still ways to make charitable contributions and lower their taxes. One of these ways is the qualified charitable distribution, commonly called “QCDs.”

Are qualified charitable distributions for you?

A qualified charitable distribution is an otherwise taxable distribution from an IRA (not including an ongoing SEP or SIMPLE IRA) that is paid directly from the IRA to a qualified charity. The word “qualified” is important – you can’t simply gift the money to a friend or family member. The charity must be one that is approved by the IRS. Eligible charities include 501(c)(3) organizations and houses of worship. Donor-advised funds aren’t eligible to receive QCDs on a tax-advantaged basis.

QCDs offer several benefits – the first being a perfect place to apply your required minimum distributions.

The IRS requires taxpayers older than 72 (it used to be 70 ½, but changed to 72 in 2019) to take a required minimum distribution from their IRAs each year. This forced distribution adds to the taxable income you must report on your annual return. But by using a QCD to donate that money to charity, you can lower your tax liability. That's because the amount given to charity using a QCD does count toward your IRA’s annual RMD, but it doesn’t count against your annual taxable income.

By using QCDs, individual IRA owners can gift up to $100,000 each year. Couples filing jointly can gift up to $200,000. But remember that this option is only available for IRA owners over the age of 70½. It can’t be used for 401(k)s, 403(b)s, thrift savings plans, or other plans.

Another important point to consider is that the funds must be made payable directly from the IRA to the charity. You can’t take possession of the RMD funds and then write a check. (That said, some IRA trustees will mail you a check directly. But you can simply give that check to the charity, instead of depositing it yourself.)

When does it make sense?

It usually makes the most sense to take a QCD when taking the standard deduction. For those itemizing, it often makes more sense to donate appreciated assets, since that will also help mitigate your taxes on capital gains.

For those younger than 70½ years old, there’s another option called “bunching.”

Bunching is the process of taking as many tax-deductible expenses as possible (such as charitable contributions and property tax) in a single tax year. In the year that you’ve bunched your deductions, you itemize them on your taxes. The following year, you take the standard deduction.

It's a matter of alternating the years you itemize your deductions. For instance, a family might typically give $10,000 to charity in a year. If bunching, they may instead elect to give $20,000 one year, then $0 the next.

How does bunching work?

For example, a married couple may have $30,000 of itemized deductions in a typical year (between charitable contributions, property taxes, etc.). And because their itemized deduction of $30,000 is higher than the standard deduction of $25,900, it makes sense to itemize their deductions.

But if the couple “bunched” two years’ worth of deductions in a single year, they would save about $5,698 in taxes (using a 22% marginal tax rate). This is because their $30,000 in deductions each year ($60,000 total) turned into $85,900 total ($60,000 one year, $25,900 the next).

These two examples - QCDs and bunching - are just two strategies (out of many) to make the most out of charitable contributions. To see what might be the right fit for you, reach out to your financial professional. If you don’t have one, feel free to reach out to our team.

How to make 2016 financial resolutions that stick

Consumer Analysis: Consumer Price Index Report - Interview

Thu, 05 May 2022 15:57:57 GMT

FOX 5 DC
See the link below.

https://www.fox5dc.com/video/1068668

How to move out of your parents' house for good

Tim discusses the latest on the markets with hosts Bryan Curtis and Kathleen Hays on Bloomberg Radio.

Sun, 01 May 2022 15:41:19 GMT

See the link below.

https://www.bloomberg.com/news/audio/2022-05-02/tim-pagliara-on-the-markets-radio

‘Elevated Risk This Deal Doesn’t Go Through’: Why Investors Are Beginning to Doubt Musk’s Blockbuster Bid for Twitter

Fri, 29 Apr 2022 15:33:35 GMT

https://fortune.com/2022/04/29/elevated-risk-musk-twitter-tsla-short-sellers/

Tim Pagliara, chief investment officer, CapWealth, a Franklin, Tenn.-based wealth management firm, reckons "run of the mill merger arbitrage" activity explains at least some of the poor performance we're seeing in TWTR in recent days. If there is a red flag, he says, it's in the $1 billion breakup fee built into the deal, which "is at the low end for a transaction of this size."

"If the breakup fee was $5 billion," he continues, "Twitter's stock price would likely be higher. The breakup fee itself says something about the likelihood of the deal getting done." Pagliara sees the puny divorce levy as a sign "there's not a high level of confidence that a deal will be able to pass the various hurdles ahead, including regulatory approval and Musk's further due diligence of Twitter."

Personal finance: Along with the closets, let's spring clean our finances

Ask These Big Questions when Considering Retirement

Fri, 22 Apr 2022 17:56:04 GMT

Although there's no single path to a secure retirement, there are a few common questions that everyone can ask themselves before making the transition. After all, it's a big step that will likely change your day-to-day life in many ways. So, asking these questions can help you develop a clear picture of what to expect when the day arrives.

When do you want to retire?

Obviously, you're the only person who can answer this. And it all depends on what retirement means to you. Beyond not working, do you have a plan for your time? It's only natural to take some time to decompress – for most people, retirement is a reason to celebrate. But after that initial period of rest and recuperation is over, you'll want to start the next chapter of your life. That's when doubts can sometimes creep in. Will you get bored in the event that you retired too early? Will you regret it if you retire too late? This is where it helps to have a clear understanding of how you plan to spend your post-retirement days. It could be travel, a new hobby, volunteering, more time with family… a vision for how you'll spend your time beyond simply "not working."

Will you have enough to retire?

The answer naturally depends on how much you're withdrawing from your retirement accounts, and over how long a period. For decades, many people have abided by what's known as the "4% Rule" – a principle that suggests a 4% withdrawal rate, adjusted for inflation and rebalanced annually, could provide for a retirees' needs for the duration of an average retirement. (For example, that would mean an initial investment of $1 million could provide an annual retirement income of $40,000 over an average retirement term of 30 years.) This principle was based on research by financial adviser William Bengen, and has served as a benchmark for millions of Americans since first developed in 1994. Bengen has since adjusted his conclusions and now believes investors can safely withdraw as much as 4.5% annually.

While this is a great place to start, everyone’s situation is different. For example, depending on the individual’s age at retirement and therefore the remaining life expectancy, the “safe” rate may be higher or lower than 4.5%.

If you're concerned about having enough money set aside to ensure you won't outlive your retirement savings, it's a good idea to speak to a professional financial adviser. They can help you develop a plan and a process that will best use your savings over the long term.

How can I ensure that I’m smart with my money in retirement?

Once the “when” and “how much” questions are answered, the issue becomes one of “how?” This is a topic that can (and does) fill countless books, blog posts, and column newspaper inches with exhaustive explanations. But there are three primary questions that many near-retirees like to ask:

First, when should you have your mortgage paid off?

To start, what seems to make sense for most people is the peace of mind that comes with retiring without a mortgage. Unless an investor is very comfortable with having a mortgage in retirement, it may make sense to err on the side of peace of mind, and have the mortgage paid off before retirement.

Second, what impact with Medicare and Social Security have?

Medicare and Social Security are federal programs for Americans who are (generally) no longer working. Medicare provides health insurance, while Social Security provides monthly payments depending on the number of years you've paid into the system. While Medicare starts at age 65, you can choose to receive Social Security benefits as early as 62 or as late as 70. It’s important to remember that the longer you wait to receive Social Security, the higher the benefits will be.

Third, which investment accounts do I pull from first? And how are they taxed?

Generally speaking, people use their non-qualified (or non-retirement) accounts first. This allows retirement accounts to continue growing tax-deferred or tax-free. In the same way, once you begin accessing retirement accounts for distributions, the traditional (pretax) accounts are generally used first, allowing tax-free Roth accounts to continue growing. Again, depending on your income and relevant taxes, these rules may differ.

Retirement planning is an important and sometimes complex process, and these points just scratch the surface. But thoughtfully answering these and other questions can help you achieve a retirement filled with exciting possibilities instead of doubt. If you have additional questions you’d like answered, reach out to our professional team of financial experts today.

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CapWealth’s Tim Pagliara named 2022 Forbes Best-In-State

Fri, 22 Apr 2022 15:25:03 GMT

FRANKLIN, TN (April 21, 2022) – Tim Pagliara, founder, chairman, and CIO of CapWealth, was named #1 in Forbes Best-In-State for the third year in a row.

Forbes publishes the top advisors’ rankings annually. The research methodology is based on an algorithm of qualitative criteria gained through telephone, virtual and in-person due diligence interviews, and quantitative data. The algorithm weighs factors like revenue trends, assets under management, compliance records, industry experience, and those that encompass best practices in their approach to working with clients.

“Being named #1 in the state for the third time is an honor we don’t take lightly,” said Pagliara. “CapWealth has a committed team that knows our continued success is derived from always doing what’s best for our clients, and this recognition underscores our belief.”

The Forbes Best-In-State recognition is one of the highest honors for an advisor. Over 34,000 people were nominated, with only a select few named. Pagliara received this award for the first time in 2018, along with Barron’s magazine No. 1 Financial Advisor in Tennessee. Marking the first time a Tennessee financial advisor has been ranked No. 1 in the state by both publications simultaneously. He previously earned the top spot in Barron’s annual state-by-state ranking seven out of the previous ten years.

Pagliara formed CapWealth in early 2000 after nearly 20 years of experience in the financial industry. CapWealth is an RIA firm based in Franklin and provides wealth management services, including investment advice, personal financial planning, and portfolio management. CapWealth specializes in preserving, growing, and distributing assets over clients’ lifetimes. With $1.4 billion in assets under management, the firm is one of the nation’s leading independent wealth managers. For more information, visit www.capwealthgroup.com .

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Don't Fall for These Common Misconceptions About Financial Planning

Sun, 10 Apr 2022 17:19:38 GMT

While many people understand the basic idea and benefits of financial planning, many also have several misconceptions about the process.

That’s understandable – there are a lot of intricacies to properly managing one’s finances, and the process can be daunting. That’s where working with a financial planner can help. But there are a few persistent myths that make some people hesitate to pick up the phone.

Here, we try to address five of the most common financial planning misconceptions.

Myth 1: Financial planning is only for the wealthy

Some people believe financial plans are just for wealthy investors who want to move large piles of money around. But the truth is, anyone who wants to set long-term money goals can benefit from a financial plan.

At its core, financial planning is just a tool to help you build a meaningful future. While the tactics might change, the fundamental strategies work for all ages and all levels of income. Your individual life circumstances matter more than your age or assets. That said, there’s no denying that the earlier you start, the better off you’ll be. Even for someone with few assets, the power of compounding interest can produce powerful results over the long run.

Myth 2: Saving 10% of my income is enough

We’ve all heard some iteration of this old adage. But the math seldom works.

Setting aside that magic 10% only works if someone starts saving at the age of 18 and continues without fail until they’re 65. Even if you happen to be supernaturally disciplined and dedicated to these savings, there’s no guarantee you’ll enjoy decades of consistent, uninterrupted employment.

Unexpected unemployment aside, you could suffer an illness, the loss of a residence, or any number of life changes that could come between you and that 10% number. That is why your actual savings target should be much higher.

Many people significantly underestimate the amount they need to consistently save to properly prepare for retirement – especially if they’re starting later in life. This is where advice from a certified financial planner can prove invaluable.

Myth 3: If I only spend 3-5% of my retirement account each year, I won’t run out of money

There’s a general rule of thumb that suggests withdrawing between 3% and 5% of your retirement savings each year, after adjusting for inflation. This approach is built on the assumption that you can normally expect a 4% return on your investments. Created in 1994 by financial advisor William Bengen, this rule has sustained almost 30 years, but it might not be realistic for you.

But that number isn’t set in stone. It obviously only works if you’ve set enough aside to begin with. And more importantly, it assumes a 30-year retirement. It all comes down to your circumstances and goals for retirement. When clients first retire, they can have expectations to travel and really live life to the fullest that they couldn’t do while in their careers. This might lend itself to having a bit of a higher distribution rate at first and then drastically decreases as they age.

A recent Harris Poll indicates that only 23% of current workers expect their retirement investments to last longer than 20 years. As lifespans continue to increase, this number becomes more problematic. It means investors who run out of money in their 70s and 80s are left relying on Social Security alone at a time when their healthcare costs are likely at their peak.

With the interest rate environment being at zero or almost zero since the financial crisis, there are some experts that the withdrawal rate needs to be drastically lower. Some even saying that 2.4% is the rate that investors should aim for. When your investments are not paying as much in dividends and interest, you are dipping more into your principal each year than in other times.

No matter the size of your investment account balance, the key to ensuring your money lasts is limiting the amount you take out each year. One common strategy involves basing your withdrawal rate on the IRS’s Required Minimum Distribution tables. It may mean taking less income than you’d prefer, but that’s better than running your account down to zero and being forced into potentially painful lifestyle adjustments.

Myth 4: Once I set up my financial plan, it’s on autopilot

There’s no doubt that working with a professional financial planner is the best way to navigate your financial future. It helps you reach your goals while also dealing with the inevitable surprises along the way.

But it’s not a “one and done” process.

In addition to those inevitable surprises, your goals and priorities may very well change over time. That’s why your financial plan should be periodically reviewed and updated to make sure you stay on track toward achieving your financial goals. At CapWealth, we suggest that our clients examine their plan annually as well as after or before any major life events.

Myth 5: A financial plan assumes I’ll retire at 65

There was a time when turning 65 meant getting a gold watch from your employer and cashing your Social Security checks. But things have changed dramatically over the years including the age at which people are choosing to retire.

According to the Employee Benefit Research Institute, just 25% of Americans between the ages of 45 and 54 are planning to retire at 65. The rest are fairly evenly split, with 40% expecting to retire sooner, and 36% expecting to retire later.

The point is that there’s no “one size fits all” template when it comes to retirement, or financial planning. Truth be told, there never was.

Is financial planning for you?

In a word, yes. Financial planning is for anyone who wants to achieve their financial goals – no matter their age or financial status. A properly executed financial plan covers every area of your financial life. And working with a professional financial planner will help steer your decisions in ways that will help you reach your goals.

So don’t be swayed by myths and misconceptions. Take charge of your financial future today.

Jennifer Pagliara, CFP, CTFA, is an executive vice president and financial adviser at CapWealth. For more information, visit capwealthgroup.com .

Have Straight Talk with Children About Your Wealth

Tim Pagliara Discusses Stock Market Reactions and Investment Advice Amidst Market Fluctuations

Thu, 07 Apr 2022 22:57:50 GMT

Interviewer (Speaker 1):

Turning back to the major averages, joining us now is Tim Pagliara, Chief Investment Officer of CapWealth. And Tim, what is your reaction to how markets closed today?

Tim Pagliara (Speaker 2):

Well, I think it was good. It was a little bit of relief. The markets have had to digest a lot of action from the Federal Reserve this quarter and it's affecting everything from mortgage rates to how they value stocks.

US Market Stability Amidst Ukraine Conflict

Interviewer:

So you've said that the ongoing conflict in Ukraine makes the US market a safer bet for investors than the European market. Why is this?

Tim Pagliara:

Well, we're the stable source of everything in the world. We've got the best regulation, we've got the best national security, we're self-sufficient in oil and gas, and our supply chain issues are minimal compared to the rest of the world. So the US is going to continue to be the safe haven place to invest and save going forward.

Advice for Investors in European Markets

Interviewer:

Now, does that mean that you believe investors in European markets should sell? Or what are you advising?

Tim Pagliara:

Well, when they allocate capital, they're already allocating to the United States. There's a reason why there's no real estate development projects in Ukraine. They're here in the United States. There's money from South America, from Europe, from Asia. 15% of all the commercial real estate last year was purchased by the Chinese. So that is a trend that even started and was very strong before the Ukrainian crisis.

Impact of Fed Policies on the Mortgage Market and Economy

Interviewer:

Now you said you expect the Fed to continue with the planned policies it has outlined. What impact do you think this will have on markets and what should investors know?

Tim Pagliara:

Well, let's talk about the mortgage market and that gives you the best insight as to what is happening. In 2020, the average mortgage was 2.75%. At the end of 2021, it was 3.25%. It just crossed over 4.7%. So the Federal Reserve was the largest purchaser of mortgages. So they slowed up purchases, they've stopped purchases, and then this week they announced that they were going to start selling mortgages. So all of a sudden, the largest customer is out of the market and they're raising rates at the same time. So you're going to see the mortgage market and the housing market slow dramatically. That impact will ripple through the rest of the economy as well. And it will start to bring inflation down as supply chains open up and they reverse. It's the reverse of the pandemic. They're pulling back everything that they put into the economy. We have 40% more money has been printed since February of 2020 that existed prior to that.

Investing Amidst Inflation Concerns

Interviewer:

Now you've also said that investors with cash on the sidelines should consider investing in the market to guard against inflation. Can you tell me more about that?

Tim Pagliara:

Absolutely. My good friend Ron Barron spoke this morning about this. If you look at the last 50 years, inflation has run about 4%. And historically, the best way to protect yourself against inflation is well capitalized, big companies that have products and services that Americans need where they have pricing power. And that pricing power allows them to continue to increase their earnings and profits and that shows up in good long-term results for investors.

Expectations for First Quarter Results and Company Health

Interviewer:

Now, what are your thoughts on what we might see when first quarter results start to come out in the next few weeks?

Tim Pagliara:

I think that there's a lag. So I expect first quarter results to be good. There will be some inflation pressures that will have an impact on earnings because like you were talking about earlier, Rent the Runway, they've got higher costs, they haven't been able to pass those along yet. That has an impact on earnings and profits. But by and large, American companies are still very healthy, the economy is still supercharged, and I think we're going to go through the rest of this year in better shape than what people anticipate.

Key Sectors to Watch: Housing and Real Estate

Interviewer:

All right. My last question for you, Tim, is what sectors are you keeping an eye on?

Tim Pagliara:

Housing's the main one.

Interviewer:

Yeah.

Tim Pagliara:

20% of the United States economy is housing. We have to keep that moving. The Senate and the House can do a lot by getting Fannie Mae and Freddie Mac recapitalized and released from conservatorship so that they have the capital to make up the slack from the Federal Reserve not buying and actually selling the mortgage-backed bonds that they accumulated since February of 2020.

Future of the Housing Market Amidst Rising Mortgage Rates

Interviewer:

So what do you think happens when the housing market reaches that point where mortgage rates are so high that buyers are scared off from buying and sellers are no longer getting people walking through their house?

Tim Pagliara:

Well, housing prices will start to moderate. The supply will get better. And builders, let's face it, they've been getting fat in the last year, year and a half, while there's been more demand than there has been supply. So they may not have five people bidding on a house, waiting for them. It may go down to one. And so a lot of the speculation that's been in the market, in the housing sector will start to subside as the supply comes up. And it will naturally go up because of the affordability problem with rates going up as much as they have, as quickly as they have.

Interviewer:

All right. Tim, Chief Investment Officer at CapWealth. Tim, it's been a pleasure having you on. I appreciate your expertise and sharing it with us.

Cheddar News: Stocks Close Higher

Thu, 07 Apr 2022 15:18:43 GMT

Cheddar

https://grabien.com/getmedia.php?id=1501233&key=739db82a9d1c03ed8740e9fc94d473a9&userid=16245

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Economic Fundamentals ‘are Very, Very Good’ Despite Inflation, Strategist Says

Wed, 30 Mar 2022 15:10:55 GMT

Interview

Yahoo Finance. See link below

https://finance.yahoo.com/video/economic-fundamentals-very-very-good-202928353.html

Hey millennials, for the best of life’s experiences, mix strategy with spontaneity

Take These Simple Steps to Saving for Retirement

Sun, 27 Mar 2022 21:22:53 GMT

While most people recognize the importance of saving for retirement, many Americans feel woefully unprepared. According to PwC’s Retirement in America report, 25% of Americans have no retirement savings at all. And among those 60 years old or older, 13% have nothing set aside for retirement. While there may be several factors at play here, one great place to start is making sure we understand some basic principles, which help us see how simple (and less intimidating) retirement savings can be.

In this article we’ll discuss four things: when to start saving, where to save, what to invest in, and how much to save.

When should you start saving for retirement?

When you run the numbers, the power of compounding interest and the “time value of money” will certainly show the value of saving early. But everyone’s different, and perhaps the best approach is to view this in terms of priorities. Obviously, both your age and income will dictate your priorities, but a general rule of thumb is to “pay yourself first” by eliminating costly debt and ensuring you have an emergency fund in place before focusing on future savings.

First, it often makes more sense to focus on eliminating consumer debt (credit cards, not necessarily your mortgage) before saving for retirement. Not only does this lower your monthly expenses, but more importantly, this allows you to step into a new phase of your financial life, which is a phase marked by freedom – freedom to invest, save, and give as you are able and so desire.

Second, building an emergency fund of about three to six months of living expenses allows you to be prepared for unexpected expenses ahead, while minimizing the risk of taking on consumer debt in the future.

Where should you save?

There are a variety of retirement accounts to choose from, with the most common being an employer-sponsored 401(k). As of 2021, 68% of private industry workers had access to retirement benefits through their employer, according to the U.S Bureau of Labor Statistics. But for those not covered by an employer’s plan or would like to save in addition to their retirement plan, there are plenty of other ways to save.

Here are just a handful of some of the more common options:

401(k). This is the standard employer-sponsored retirement account. Many companies match the amount you contribute up to a certain limit. Depending on the type of 401(k) you have, you’ll either pay taxes on the money before it enters your account (Roth), or when you withdraw the funds in retirement (called “traditional” or “pre-tax”). In 2022 an employee can contribute up to $20,500 to a 401(k), or $27,000 if over age 50.

Traditional IRA. You won’t pay taxes on Individual Retirement Account (IRA) contributions until you withdraw the funds (typically after age 59½ to avoid a penalty). In 2022 you can contribute up to $6,000 to an IRA, or $7,000 if over age 50.

Roth IRA. Unlike a traditional IRA, the contributions you make to a Roth IRA are taxed before they enter your account. As a result, no taxes are deducted when it’s time to begin withdrawing your funds. It often makes sense to pay taxes now when one’s projected tax bracket in retirement may be higher.

SEP IRA or Solo 401(k). Simplified Employee Pension IRAs and Solo 401(k)s were created to allow small-business owners and self-employed individuals without access to an employer’s 401(k) a similar way to save for retirement.

What should you invest in?

Broadly speaking, stocks (also called “equities”) and bonds (often referred to as “fixed income”) are the two most common investment options for retirement savings. As with the style of plan you choose, it’s always wise to consult an expert to find the right mix of investments for you.

Stocks. Buying stock allows you to become a shareholder in a corporation. As a result, you make or lose money as the corporation’s value increases or decreases, and many companies pay shareholders a portion of earnings in the form of dividends.

Bonds. Buying bonds is essentially lending your money to corporations and governments. During the life of the loan, you're repaid with interest payments, and when the bond matures, you’re repaid the initial loan amount.

Mutual funds. Mutual funds take money from a group of people and invests in a collection of stocks, bonds, or other securities. Investing in mutual funds is often a way to easily diversify your investments.

Exchange-traded funds (ETFs). Like mutual funds, ETFs can be made up of a basket of securities. But unlike mutual funds, ETF prices fluctuate throughout the day, and are traded on an exchange like a stock.

How much should you invest?

As with most questions ... it depends. But a great place to start is to target saving about 10-15% of your income for retirement. Depending on your desired spending range, you may need or want more or less than that figure.

As we have mentioned, every individual’s situation is different. Financial advisers may use a range of calculations to help investors determine how much they need to save, so it may be wise to consult with an expert to ensure you’re leveraging your money in the best way possible.

With a little bit of homework and some sound advice from a professional financial adviser, our hope is for you to see that saving for retirement saving doesn’t have to be too complicated or intimidating, and for you to be well on your way to achieving your goal of retirement.

How Fed Rate Hike Will Impact Spending, Investments - Interview

Wed, 16 Mar 2022 19:52:53 GMT

See the link and video below.

https://www.bloomberg.com/news/videos/2022-03-15/how-fed-rate-hike-will-impact-spending-investments-video

Economic Impact of War in Ukraine Interview

Now More than Ever, Stay Calm and Double Check Your Financial Plan

Sun, 13 Mar 2022 21:20:15 GMT

Few things can roil the financial system like global politics.

Russia’s invasion of the sovereign nation of Ukraine shook markets around the world. And with good reason – it represents the most significant military movement in Eastern Europe since 1939. Investors are still trying to digest the impact of the invasion, and the long-term implications are anyone’s guess.

Energy prices were among the first to respond. Since Russia is a leading exporter of oil and natural gas, fears of a supply disruption sent prices soaring. The beginning of March saw crude hit $115 a barrel in the global markets and $112 a barrel here in the United States – the highest price since 2008. Grain prices jumped to their highest point since 2008. And the major indexes accelerated their ongoing drop with the Nasdaq coming close to a 20% dip that would have moved it into “bear” territory.

That said, U.S. markets are making up much of the ground lost since the initial scare. And a few offsetting factors should help alleviate some of the early shock; releasing oil from the Strategic Petroleum Reserve could help curb fuel prices, and rate hikes by the Fed may help mediate record inflation. But there is no quick fix on the horizon and both issues will continue to impact consumers and businesses for some time.

It's no time for panic

At times like these, it’s only natural for investors to feel stressed. Day-to-day movements in the market are always worrisome, and more so in times of uncertainty. But it’s important to remember that more often than not, these daily fluctuations won’t derail your long-term goals. Ask yourself: Where do you plan to be in 20 years? Do you truly see today’s changes in the market affecting that?

See importance of a financial plan

While it’s easy to push financial planning aside, moments of uncertainty like these are why we suggest that our clients have a financial plan. The goal of a financial plan is to help map out how best to achieve your goals and provide comfort and stability. If your plan is laid out, you’ve done the hard part, and now you just need to let it execute.

Financial planning helps you recognize the big picture. It can also help you become more strategic in your saving. And those benefits only scratch the surface.

Balance priorities. The right financial plan helps you understand the differences in your goals – whether it’s saving for a child’s college education or setting aside money for retirement. These and other long-term goals can easily turn into mere “hopes” without a sound plan in place.

Keep you on track. We all know how life likes to disrupt our carefully laid plans. It’s easy to get off track when bumps appear in the road. But having a plan helps you navigate these disruptions without compromising your goals.

Put your mind at ease. The future is stressful enough without worrying about money, yet financial fears haunt virtually everyone in one way or another. Having a comprehensive written plan breeds confidence. You can take one major stressor off your plate when you have your eyes on the larger goal and have a clear direction mapped out to get there. In fact, a recent Charles Schwab survey found that 65% of people with a written financial plan said they felt financially stable, while only 40% of those without a plan felt the same degree of comfort.

Sustain you through volatility. And that brings us full circle. Reading the headlines is enough to make anyone question their strategy. But the intent of a thoroughly thought-out financial plan is to help you ride the highs and lows without feeling seasick.

It's time to check your plan

Hopefully, the turmoil in Europe will be short-lived. But the invasion of Ukraine isn’t the only thing that has people concerned about the markets; inflation, rate hikes, and a seemingly never-ending pandemic also play a role.

If you already have a plan and still find yourself overly anxious about market movements, it might be time to talk to your financial advisor. A financial plan is a wonderful roadmap, but it’s not carved in stone – sometimes updates and revisions are necessary. That’s why at CapWealth, we suggest an annual check-in for our clients.

Working with an experienced financial advisor can create a financial plan that gives you confidence in your long-term strategy and takes much of the worry out of market volatility.

Jennifer Pagliara, CFP, CTFA, is an executive vice president and financial adviser at CapWealth. For more information, visit capwealthgroup.com.

Keeping your cool — and taking action — during market corrections

Tim discusses the latest on the markets with Juliette Saly and Bryan Curtis on Bloomberg Daybreak Asia

Thu, 10 Mar 2022 19:57:41 GMT

See the link below.

https://www.bloomberg.com/news/audio/2022-03-10/tim-pagliara-on-the-markets-radio

Economic Fundamentals Remain Strong Despite Inflation Concerns

Sun, 06 Mar 2022 23:25:09 GMT

Tim Pagliara, a noted analyst, emphasizes the importance of valuation, dividends, and liquidity for investors, while also highlighting specific stocks with great value.

Interviewer 1 (Speaker 1):

Tim, I want to start with you because yesterday we did see the S&P 500 actually touch levels last seen in May of 2021. What's an investor to do right now? Where does an investor run?

Tim Pagliara (Speaker 2):

Well, I think they focus on valuation dividends and then having cash for their investment needs and liquidity. Those are the main things right now. And we're finding some great value still out in the market. A lot of these stocks that have dropped 75%, they're still in a territory we're not sure what their earnings prospects are going forward, so we're staying with some really basic companies.

Top Value Picks for Current Market Conditions

Interviewer 2 (Speaker 3):

Can you walk us through some of the names there? Name some names. Where are you seeing value right now?

Tim Pagliara:

Well, D.R Horton is one of our favorite picks. They'll make a little over $12 a share—

Interviewer 1:

This is the homebuilder.

Tim Pagliara:

Homebuilder. Largest homebuilder in the United States. 65% of their homes are between $250,000 and $500,000. The average, which is a great entry point for first-time home buyers, and we're short 5 million homes in the country. There's also a move on to recapitalize Fannie Mae and Freddie Mac so that they can extend more credit and make it easier for home buyers to get into that first-time home. They've been in conservatorship for 13 years, making it very difficult for average people to get financing. They do $6 billion of the $12 trillion mortgage market.

H2: Small-Cap Stocks and the Risk of Stagflation

Interviewer 1:

Hey, Gina Martin Adams, come on in here, Chief Equity Analyst at Bloomberg Intelligence. You have a new note out today focusing on small-caps, the Russell 2000, but you have kind of a scary word, I think, to a lot of people in the headline there, the S word, stagflation. Take us into it.

Gina Martin Adams (Speaker 4):

Well, our view still is that small-caps are incredibly cheap relative to large-cap stocks and should weather the storm this year very well as a result of that, especially if they can get a little bit of a revenue uplift in comparison to their large-cap brethren who are more exposed to weaknesses geopolitically and in Europe. That said, there is growing consensus that is a bit more concerned about stagflation. So we introduced a stagflationary scenario into our models. I give it a less than 5% probability of occurring, but if we do have stagflation emerge, we would anticipate that inflation stays extremely high. Oil prices stay extremely high over a period of years, not just months or even weeks as it were so far this year. Nonetheless, if oil prices stay high, commodity prices at large stay high, and growth takes a material downdraft, then we introduce that stagflationary scenario, which does imply significantly greater weakness for small-caps as well as broader global equity markets.

Federal Reserve's Role in Combating Stagflation

Interviewer 2:

And when it comes to stagflation, which is a very scary word, people think of the 70s, the 80s, long lines at gas stations.

Interviewer 1:

You remember that, Katie, right?

Interviewer 2:

I remember that very well. But what can the Fed do here? What's in its toolkit? And if the Fed isn't able to do anything, how do equity markets behave in that scenario?

Gina Martin Adams:

So the Fed does have tools at their disposal. Let's just consider the fact that the Fed is still extremely easy, balance sheet's still expanding, just getting set to finally stop expanding, and they're just embarking on interest rate tightening. Our base case scenario implies that the Fed does tighten at least four times, more likely five times over the course of the next year, and ultimately does allow some balance sheet runoff. That in and of itself should constrain demand a little bit at least, which results in a slightly slower demand growth, which does contain inflation to a certain degree. So part of the reason why the stagflationary risk or the fears around stagflation are rising is because the Fed is behind the curve. The fact that they do embark upon a tightening cycle to catch up to economic reality and at least put a lid on what has been extraordinary demand growth and extraordinary growth, they can battle that demand side. They also can battle the general price dynamics in the commodity markets. Recall prior to the crisis erupting in Ukraine and Russia, we did see commodity prices surging. And part of the reason for that surge, you would have to argue, was liquidity conditions. Liquidity conditions supporting not just stocks, which are usually the first thing that everyone thinks about when they think about the Fed balance sheet, but all forms of risk assets to the degree that the Fed normalizes that balance sheet, takes a little bit of liquidity out of the system, we could see prices come under some degree of control as well. So, I take issue with this idea that the Fed can't do anything. I think they still can do a lot of things. The market is concerned about growth, but perhaps a little overly concerned about growth just considering how steady demand growth has been.

Interviewer 1:

Well, we certainly imagine the Fed doing things today as they kick off their two-day policy meeting. We are going to hear from Fed chair Jay Powell tomorrow. I expect a lot of questions, not just about rising commodity costs, but also, of course, Russia's invasion of Ukraine and to what extent that could affect supply chains and inflation.

IBM as a Strategic Investment in Today’s Market

Tim, come back in here, and speaking of the 1970s, I want to talk about a company that was pretty old in the 1970s: IBM. It's another one of your picks. So more than 100 years old. This company has gone through many different iterations and transformations, right now, increasingly focused on the cloud. Why are you optimistic about IBM as a pick?

Tim Pagliara:

Well, I think the inflation that we're talking about is going to focus companies on reducing costs. Cloud expense is well over $100 million for a lot of publicly traded companies. And IBM's hybrid model focuses on containing costs, and I think it will gather momentum. And the next leg in this cloud computing is going to be some price competition and ways for companies to reduce those costs. So we like it. It's got a 5%-plus dividend yield, it's a below-market multiple, and we think they're going to make this transition very well.

The 7 Best SPDR ETFs to Buy and Hold Interview

Wed, 02 Mar 2022 19:56:41 GMT

"A short-term spike in oil prices to $120 per barrel is possible because sanctions against Russia would curtail its ability to export oil and that would likely reduce global supply," says Tim Pagliara, chief investment officer of Tennessee-based wealth management firm CapWealth. "Oil prices are likely to see the largest reaction to the Russia/Ukraine uncertainty – more so than stocks and bonds."

(Source: https://www.kiplinger.com/investing/etfs/604295/best-spdr-etfs-to-buy-and-hold )

This article also appeared on Nasdaq.com:

https://www.nasdaq.com/articles/the-7-best-spdr-etfs-to-buy-and-hold

Keep a Cool Head During These Stock Market Ups and Downs

Sun, 27 Feb 2022 21:09:48 GMT

January 2022 was a rough month for investors. Despite a late, brief rally, the S&P 500 and Nasdaq Composite posted their worst months since the start of the pandemic with drops of nearly 10% and 9%, respectively.

Those losses can make it easy to overlook just how well the market had performed in the previous two years. Despite being the first year of the pandemic, 2020 saw the S&P gain 16%. And 2021 was even better, in part thanks to optimism over the new COVID-19 vaccines.

In fact, although many parts of the economy certainly suffered, the stock market was up an astonishing 47% over that two-year period.

But optimism has a shelf life. By late 2021, concerns over supply chain problems and runaway inflation left many investors feeling pessimistic. Add to that growing worries over higher interest rates and simmering geopolitical concerns (such as escalating tensions over Russia and Ukraine) and volatility took hold of the markets.

That uncertainty may continue over the next several weeks – a reality that has many investors feeling fearful if not downright frantic.

These emotions are completely understandable. After all, in most cases those hard-earned dollars represent either a nest egg or an active source of income. But it’s important to remain calm in the face of downturns. Not only are downturns a natural feature of the market and are called “corrections,” after all, they can also provide attractive investing opportunities for those who keep their heads.

What you can do

If you’re among those wondering if you should take some sort of drastic action in the face of these drawdowns, it can help to step back and ask yourself a few key questions. First, examine what’s behind your anxiety. Is it based in rational fear, or just a general sense that the “sky is falling?” It’s easy to get caught up in our own echo chambers of information and feedback, and 24/7 financial news is a key culprit. While it can obviously provide valuable information, it can create angst for viewers. So consider whether you need to take a breather from a news cycle before making any important decisions.

Remember, although it’s common for people to panic when they see a falling stock market, it’s both difficult and risky to try to “time” the market. Remaining invested reduces your risk of missing out on significant gains. According to a study by J.P. Morgan Asset Management of the S&P 500’s largest moves between Dec. 31, 1993 and Dec. 31, 2013, staying invested for the full 20 year span would have netted a 483% return for investors of the broad-based index. If an investor missed the 10 biggest upward moves over that period, the return was cut to just 191%. (And the return plummeted to a mere 20% if an investor missed the 30 best days over that 20-year period.)

As we mentioned earlier, market downturns can also provide an opportunity to buy equities at a lower price. But there’s no one-size-fits all strategy here. That’s why it’s always a good idea to have a financial advisor take a look at the totality of your plan.

Take the long view

Emotion can be the biggest enemy to a strong portfolio. So take the time to step away from the present and revisit your financial plan from 30,000 feet. You should also take the opportunity to re-evaluate your risk tolerance. How has the current downturn made you feel? Should you adjust the level of risk in your investments? If you decide the answer to that question is “yes,” we suggest first riding out the current volatility. But don’t be afraid to make a sound, reasoned shift at some point. (Again, it can help to talk to an experienced financial adviser.)

That said, before you make any investing decisions, make sure you have a sufficient emergency fund in place to help address any unexpected expenses that may come your way. Often times, simply having that cash “buffer” can provide the peace of mind you need to smoothly ride out market uncertainties while keeping your eye on the long term prize.

Amazon Joins Deal Revival Spurred by Lower Valuation: Tech Watch

Investors Scramble for Inflation Protection After Russia Attack Interview

Thu, 24 Feb 2022 19:47:00 GMT

“Our advice to investors is to stay invested,” Tim Pagliara, chief investment officer at CapWealth Advisors, said in a email. “There is no need to make any drastic changes to one’s investment portfolio. Oil prices are likely to see the largest reaction to the Russia/Ukraine uncertainty -- more so than stocks and bonds.”

(Source: https://www.bloomberg.com/news/articles/2022-02-24/investors-scramble-for-inflation-protection-after-russia-attack )

“A short-term spike in oil prices to $120 per barrel is possible because sanctions against Russia would curtail its ability to export oil and that would likely reduce global supply,” said Tim Pagliara, the chief investment officer of Franklin, Tenn.-based wealth management firm CapWealth. “Oil prices are likely to see the largest reaction to the Russia-Ukraine uncertainty, more so than stocks and bonds.”

(Source: https://www.forbes.com/advisor/investing/ipsos-consumer-confidence-feburary-2022/ )

Insights

CapWealth’s Phoebe Venable Named #8 Forbes Best-In-State Women Advisors

Thu, 17 Feb 2022 16:37:39 GMT

We are excited to announce that Phoebe Venable, President and CEO of CapWealth, has been named #8 on the 2022 Forbes Best-In-State Women Advisors ! Congratulations to Phoebe!

Don't Fall for These Common Misconceptions About Financial Planning

Stock Market's Ups and Downs Aren't Necessarily Bad

Sun, 13 Feb 2022 21:03:43 GMT

With a rocky start to 2022, the stock market movement can cause anxiety for even the coolest, calmest investor. And if the volatility itself isn’t enough to unnerve the investor, then the 24-hour news cycle’s incessant coverage will certainly suffice. But is all this anxiety warranted?

So what is volatility, anyway?

The formal definition of volatility is a statistical measure of the dispersion of returns for a given security or market index. So when the media discusses market volatility, they are essentially talking about how much stock prices are moving up and down. High volatility means prices are moving up and down quite a bit, and when it is low, there is steadier fluctuation.

As you probably guessed, the VIX peaked over the last five years in March 2020 at 66.04 during the beginning of the pandemic in the United States, when fear of the unknown was at its highest.

So why is volatility a good thing? With some volatility, there is a wider range of possible outcomes. If volatility stays consistent, there is less possibility for reward. While the upside increases so does the downside. And as with any investment, the riskier it is, the greater the possibility of return.

What is a correction?

A 10% drop in the market is considered a correction. The S&P 500 Index did cross that threshold in January but has rebounded since. What most investors don’t realize is that a 10% correction is normal about every 18 months to 2 years. We haven’t had this type of market movement since March 2020 and the beginning of the pandemic.

Watch emotions while investing

The trendline of the S&P 500 Index is not a perfectly smooth one. There are dips, some larger than others, that traverse the line. There is no way to predict when a decline is going to happen. Because technology has created a 24/7 constant stream of news, the hype of what is happening in the market is often played up. Yes, we did have a big drop, and it can be easy to get wrapped up in the emotion of what is happening.

The worst thing that an investor can do is let those feelings get the best of them. Always remember the basic rule of investing: buy low, sell high. Year to date (as of Feb. 7) the S&P 500 Index has a negative return of 5.92%. But if you based all your decisions on a snippet of time in the market, we would most likely make the wrong decisions. The S&P 500 Index has been averaging 10% per year since the 1950s, so remember fluctuation is just a blip on the radar and that volatility is not the enemy.

Jennifer Pagliara, CFP, CTFA, is an executive vice president and financial adviser at CapWealth and a proud member of the millennial generation. Her column speaks to her peers and anyone else that wants to get ahead financially. For more information about Pagliara, visit capwealthgroup.com.

Tech Guidance Has Been More Disappointing than Earnings: Strategist - Interview

Thu, 03 Feb 2022 19:42:17 GMT

Yahoo Finance website. See link below.

https://finance.yahoo.com/video/tech-guidance-more-disappointing-earnings-212751763.html

And on the Yahoo Finance Twitter page with 1.3 million followers (they tagged Pag!):

https://twitter.com/YahooFinance/status/1489349414011428867?s=20&t=S2qvyRubLkDTWDTvlGdUnA

Tim Pagliara, discusses top news on the markets with Kathleen Hays and Bryan Curtis on Bloomberg Daybreak Asia.

Tue, 01 Feb 2022 19:38:37 GMT

Bloomberg Radio . See link and audio below.

https://www.bloomberg.com/news/audio/2022-02-02/tim-pagliara-on-the-markets-radio

Ask These Questions Before Jumping on The Homeownership Train

Sun, 30 Jan 2022 21:00:48 GMT

Buying a home is often the largest single purchase in a person’s life, so it is safe to say it is a big deal. Along with this, the last few years have seen some remarkable changes in the housing market. Home sales have exploded despite a pandemic that forced the nation into a recession. From September 2020 to September 2021, homeowner equity increased by 31%, a whopping $3.2 trillion (CoreLogic.com). Because of this, many homeowners (and potential homeowners) are asking two questions right now:

Why have home prices appreciated so much recently?
When is the right time for me to buy a home?

To answer our first question, let’s discuss what has happened to the housing market over the last couple of years. A few factors are: low mortgage rates, working from home, and demand from millennials.

Low mortgage rates

In March 2020, the Federal Reserve lowered the federal funds rate to encourage investing and stimulate economic growth in response to the pandemic. This, in turn, indirectly lowered mortgage rates, which are closely tied to the federal funds rate. In fact, 30-year mortgage rates reached a record low of 2.65% in January 2021 (Freddie Mac).

With lower rates, many of those on the fence about buying leaped into the market whether they were first-time buyers or investing in a second home. Since both of those groups were taking a home off the market without putting one up for sale, the result was more pressure applied to the market. This increase in demand led to higher prices.

Working from home

As we all know, the pandemic resulted in most Americans spending much more time at home. Remote work became the norm.

Even after the initial mandates began to lift, many workers chose not to return to an office setting. A National Bureau of Economic Research paper published in June 2021 estimated that 37% of jobs, many of which not remote prior to the pandemic, can be performed entirely remotely.

Add to that the impact of widespread remote learning for students, and you had many families in 2021 searching for more space - often in the form of a new home.

Millennials buying in large numbers

Millennials represent the largest generation in American history, surpassing Boomers in 2019, totaling 72 million (Pew Research.) Now reaching their prime homebuying years, millennials accounted for just over half of all home purchase loan applications in 2020, with that number steadily growing. The cohort represented 67% of first-time home mortgage applications and 37% of repeat purchase applications from January-August 2021. With the largest percentage of millennials just reaching the age of 30, those numbers will likely continue to grow.

That brings us to our second question: when is the right time to buy a home?

For anyone wondering if the time is right for their own home purchase, there are a few questions that can help you make the right decision.

Are you ready to stay put for a while?

One good indication that you’re ready to become a homeowner is that you’re prepared to put down roots — at least for a while. While there are always exceptions to the rule, conventional wisdom generally dictates that you should plan on remaining in the house for at least three to five years for a home purchase to make financial sense. If you sell sooner than that, you may run a higher risk of selling for less than you paid for it.

Can you afford it?

Gauging the affordability of a home is about far more than just managing the down payment and monthly mortgage. There are also closing costs, homeowners insurance, property taxes and home maintenance — not to mention mortgage insurance if you happen to put down less than 20%. And even if your budget can easily absorb these costs, there are still important factors to consider.

A mortgage is the single largest debt most consumers will accrue in their lifetime. Which is one of the reasons it’s wise to pay off as much other debt as possible before buying a home. By eliminating other expensive debt – from credit cards, student loans, or other sources – you’re clearing the path toward a more comfortable and responsible home purchase.

An emergency fund of three to six months of expenses is also a priority before purchasing a home. Not only does owning a home go hand-in-hand with unexpected costs – a burst pipe, a faulty HVAC system, the list is literally endless – but life has a way of throwing other financial curveballs when we can least afford it. What if you lose your job? Or add members to your household?

Are you ready for the responsibility?

It’s easy to get caught up with the romantic aspects of homeownership – like designing your dream kitchen or picking out beautiful flooring. But remember that as the owner of a property, you’re the one responsible for its upkeep. Unlike renting, if there’s a problem, you can’t simply call the landlord or superintendent. Being a homeowner means handling issues as they arise. (That doesn’t mean you have to be a skilled handyman, but it might be a good idea to have one on speed-dial.) If you’ve never owned a home before, you can take time to learn the basics about the more common household maintenance tasks.

The bottom line

There’s no one-size-fits-all standard that dictates the right time to buy a home. While there will always be an element of risk with home values, taking the time to fully understand your financial situation and your overall mental preparedness will help you make the best decision for the long term.

4 Strategies For Getting Out Of Debt

Fed May Hike Interest Rates in March

Fri, 28 Jan 2022 19:37:48 GMT

In this discussion, finance expert Tim Pagliara explains the implications of the Federal Reserve's anticipated interest rate hikes on individual finances, particularly focusing on mortgage rates and the housing market.

Steve Chenevey (Speaker 1):

Talk a lot about a rate hike, the Federal Reserve signaling it will raise interest rates come March. So, for more on what that means for your wallet, let's bring in personal finance expert, Tim Pagliara from CapWealth. Good to see you, Tim. Good morning.

Tim Pagliara (Speaker 2):

Good morning, Steve.

Individual Impact of Upcoming Rate Hikes

Steve Chenevey:

A lot of people don't understand what's at stake here, so let's try to keep it simple and we'll focus with the individual. How might this impact us at the individual level?

Tim Pagliara:

Well, if you look at mortgage rates, most experts believe that they will end the year at approximately 4%. That compares to a three-and-a-quarter percent rate at the end of 2021 and 2.65% at the end of 2020. So, that'll add $130 a month to the average mortgage payment of a $400,000 mortgage with a 20% down payment on a home. So, it's not a showstopper and it's not insignificant. Whether we get those rate increases or not that the Fed is talking about is going to depend on a number of factors.

Impact on Mortgage Refinancing and Home Value

Steve Chenevey:

A lot of people were doing a refi during the pandemic. Is that something that you could still do now or are most homeowners out of time if that's what they wanted to do?

Tim Pagliara:

It's certainly less attractive than it was prior to the end of 2021 and it'll be less attractive this year, I believe so.

Outlook for the Housing Market in 2022

Steve Chenevey:

The other question when it comes to housing then, because a lot of people obviously keep their value in their homes and this might impact that, but homes are also hard to find. So, what do you see happening there when it comes to the housing market overall in the next year?

Tim Pagliara:

I think you'll see a moderation in the increase in housing prices, probably five to 10%. We enter 2022 with a shortage of between five and a half and six and a half million homes, so the demand and supply are going to still be out of balance for quite a while.

Steve Chenevey:

And as far as if folks are trying to get any help with some of those loans or some of that credit when it comes to housing, is that available?

Tim Pagliara:

Not like it should be. People through cannot get financing that should qualify for financing. Right now, it is for people that have high credit scores. A lot can be done to help that situation. Two of the largest employers in your viewing audience, Fannie Mae and Freddie Mac, they've been in conservatorship longer than Britney Spears. They're two of the most profitable companies in the world, and the government ending their conservatorship and properly recapitalizing them, could do a lot to help homeowners get the financing they need.

Steve Chenevey:

Love the pop culture reference. A lot of folks wondering how long this is going to last. Obviously, if you have multiple rate hikes this year, like you mentioned, if you go from three and a quarter up to 4%, it's a significant jump. What's it take to even things out? What will we be watching for in the rest of 2022 to try the curve inflation and get back perhaps to a better place?

Predicting Duration and Impact of Rate Hikes

Tim Pagliara:

I think the factor that people are not paying enough attention to right now is end of speculation in the financial markets. NASDAQ has dropped 25% since its high in July. Half of that decline has occurred this year. So, people don't spend rich when they're not rich, and that factor is something that the Federal Reserve will look at as they evaluate all these data points, and it'll be a factor of whether or not we get those four rate increases this year.

Steve Chenevey:

It's a lot to look at, a lot to pay attention to. That's why we have experts like you, Tim. I do appreciate your time this morning. Tim Pagliara is with CapWealth, trying to break down the upcoming Fed rate hikes, which we expect the first one to happen soon. Jeanette?

Personal finance: Help kids solidify a great saving habit

Rethink how To Manage Money with A Reverse Budget

Sun, 16 Jan 2022 20:58:03 GMT

There are a few words that always seem to make people uneasy.

“Diet” is one. “Budget” is another.

The reasons are actually similar. Both can be hard to stick with, and they each leave you feeling guilty when you fall short.

Although budgeting is an invaluable aspect of personal finance and shouldn’t be ignored, many people chafe at the rigidity of a traditional “budget.” For some, it’s too time-consuming and restrictive to track every expense and manage every penny. (Not coincidentally, those are often the same people who end up with too much month left at the end of the money.)

But there’s an alternative to this traditional, spreadsheet-heavy approach, and it’s an ideal method for those trying to get a better handle on their money – the reverse budget.

A reverse budget is exactly what the name implies. Unlike a traditional budget that prioritizes paying bills and day-to-day expenses, then relegates any savings or investments to whatever money is left over, a reverse budget puts savings front and center.

The idea is to pay yourself first and then use what’s left for your normal expenses.

Sound simple? It is. But it requires a little introspection.

Set savings goal

The first step is to identify what you’re saving money for. By identifying a specific goal for the money you’re saving, you lessen the chances that you’ll find some other way to spend it. (If you’re just “saving for the sake of saving,” you’re far more likely to dip into those funds and derail the whole process.) It could be setting money aside for retirement, saving up for a down payment on a house, or building an emergency fund to cover expenses in the case of the unexpected. You need a clear goal for the money in question. You also need a firm yet realistic timeline. Because just like any other goal, if you give yourself unlimited time to achieve it, odds are you never will.

The key next step is to automate the process. By having the money dedicated to your savings goal automatically deducted from your payroll or bank account transfers, you lessen the chances that you’ll spend that money elsewhere. Saving for your goals becomes an automatic process instead of an afterthought.

So how much should you save? While most experts agree that 20% of your gross monthly income is a good place to start, everyone’s situation is different. You should start with a clear-eyed assessment of how much money is coming in and going out each month. Work backward from your savings goal to determine how much you need to set aside each pay period, then set up an automatic transfer to funnel that money directly to your goal.

Identify expenses

Once you’ve "paid yourself first" by setting that money aside, you can prioritize essential expenses like housing, food, and utilities. Determine how much you need to cover these basic necessities, then automate as many bills and expenses as possible. This process may take some adjustment, but the overarching goal is to make the process as turnkey as possible. Spending just a little up-front time automating your allocations into separate accounts – one for savings (which remains untouched), and one for expenses (which also covers unexpected costs), ensures that you’re making steady progress toward your goals while still budgeting effectively.

In essence, reverse budgeting is about taking a long-term approach to your finances. Instead of looking at monthly expenses, it flips the script and focuses on the things that truly matter to your future – your individual, targeted savings goals.

All too often, in a traditional budget, these things get overlooked in favor of categorizing household expenses. But with a reverse budget you can rest easy knowing you’re consistently moving forward toward your larger financial goals.

Dow ends lower with losses led by JPMorgan as the blue-chip index, S&P 500 book second week of losses - Interview

Fri, 14 Jan 2022 19:33:06 GMT

“The discussion on inflation is getting real,” said Tim Pagliara, chief investment officer of CapWealth, in a phone interview Friday. “It’s really a time to say ‘time out,’ and the Fed, Congress and the executive branch of government have to work to solve this problem.”

(Source: https://www.marketwatch.com/story/u-s-stock-futures-pause-as-earnings-season-kicks-off-after-tech-stock-dive-11642161603 )

Illegal Insider Trading Undermines Market

Stock Market Inflation - Tim Pagliara Interview

Fri, 07 Jan 2022 19:30:47 GMT

"The data suggests that the economy is stronger and that the Fed is going to have to continue on the path of tightening through reducing asset purchases and that we're headed towards higher interest rates," said Tim Pagliara, chief investment officer, CapWealth, based in Franklin, TN.

"It's time for (the Fed) to do what you would do after a period of easing and very accommodative monetary policy."

(Source: https://www.reuters.com/markets/europe/futures-edge-higher-ahead-nonfarm-payrolls-report-2022-01-07/ )

“The Federal Reserve is walking a tight rope by trying to halt inflation and it is common to see market valuations contract as the market weighs what the future looks like, especially in growth companies whose earnings are all in future dollars,” wrote Tim Pagliara, chief investment officer at CapWealth.
(Source: https://www.barrons.com/articles/stock-market-today-51641810432 )

"The Federal Reserve is walking a tightrope by trying to halt inflation and it is common to see market valuations contract as the market weighs what the future looks like, especially in growth companies whose earnings are all in future dollars," said Tim Pagliara, chief investment officer at Franklin, Tennessee-based CapWealth. "But it isn't on autopilot; if the unemployment rate continues to fall and inflation continues to rise, then the Fed is likely to act. If Omicron has a larger impact on the economy, the Fed will once again act accordingly."

(Source: https://www.thestreet.com/markets/stock-market-today-inflation-pounds-tech-omicron-tests-growth )

“The data suggests that the economy is stronger and that the Fed is going to have to continue on the path of tightening through reducing asset purchases and that we’re headed towards higher interest rates,” Tim Pagliara, chief investment officer of CapWealth, told Reuters. “It’s time for (the Fed) to do what you would do after a period of easing and very accommodative monetary policy.”

(Source: https://www.etftrends.com/core-strategies-channel/value-etfs-gain-after-december-jobs-data/ )

Is Tax-Loss Harvesting for You? Ask These Four Questions

Sun, 02 Jan 2022 20:40:46 GMT

No one enters the investment world intending to lose money. But by the same token, well-diversified portfolios often contain under-performing investments. The good news is, there's a way to use those “losers” to save on taxes by employing a practice known as tax-loss harvesting.

What is tax-loss harvesting?

Tax-loss harvesting involves selling an investment for a loss to offset gains from investments sold at a profit. This can reduce your tax bill, since you’re only paying on your net profit, which is the amount you’ve gained minus the amount you lost.

Granted, the process of intentionally selling for a loss can seem a bit counterintuitive. But most investors don't use it as a way to eliminate their exposure permanently. Instead, they use the sale to reduce their tax bill, then reinvest the returns in a similar industry or sector to keep their asset allocation and risk profile unchanged. (After a 30-day waiting period, they can also reinvest in the same stock. But more on that in a moment.)

Tax-loss harvesting can be a valuable strategy for those invested in taxable brokerage accounts, either as a means of reducing or eliminating capital gains or reducing ordinary income. Even if there are no gains to offset, the IRS allows single filers and married couples filing jointly to deduct up to $3,000 in capital losses from ordinary income each year. Any losses beyond $3,000 can be carried over and deducted in subsequent tax years.

It’s important to remember that tax-loss harvesting generally isn’t appropriate for tax-deferred accounts like 401(k)s or IRAs, since the original investment and earnings are already growing tax deferred (in traditional IRAs) or tax-free (in Roth IRAs).

Are the savings worth it?

The amount of money you can save through tax-loss harvesting depends both on your tax bracket and the nature of the gains you’re trying to offset. For example, when you sell a stock or other investment, the IRS taxes whatever profits you earn. But different rates apply depending on the length of time you’ve owned the investment. For any investments you’ve held for a year or less, short-term capital gains tax rates apply. These are same rates that apply to regular income, like salary and wages. These rates, ranging from 10% to 37%, are higher than the rates on investments you’ve held for more than a year; long-term capital gains tax rates run from 0% to 20% (effectively 23.6% when a Medicare surtax is applicable).

While many investors look for tax-loss harvesting candidates in their portfolio near the end of the year, harvesting opportunities exist year-round. After all, investments can fluctuate dramatically, and a tax-loss harvesting opportunity that looks attractive in June may well be gone by the end of the year.

What are the rules?

Remember that 30-day waiting period we mentioned? That's due to the "wash sale" rule. This rule states that an investor can't sell a stock to realize a loss and minimize their tax burden, then rebuy that same stock within 30 days. The rule actually goes further and states that an investor also can't buy a new security that is "substantially identical." For instance, if you sold shares of Pfizer to claim a loss, you can't turn around and buy new Pfizer shares within 30 days. You could, however, buy shares of Merck, or invest in an industry-specific ETF or mutual fund. Or, at the end of 30 days, you could buy back the original shares with no tax penalty.

If you’re hoping to rebound a stock, the wash sale rule can make it difficult to harvest those tax losses. But the IRS hopes these measures will help prevent abuse of the tax-loss harvesting strategy.

Are you a good candidate?

Generally speaking, tax-loss harvesting is most advantageous for those who buy and sell investments on a regular basis. Infrequent or casual investors may not even have enough capital gains for it to be a factor. That said, it's a great strategy for individuals who know how to use it properly – offsetting capital gains tax obligations while minimizing losses.

It is wise to explore all options for reducing your taxes. To make sure you're making the most of all opportunities, consult with a tax professional or financial adviser who can review your financial goals and guide you toward the most appropriate and beneficial tax strategy.

A season to give, receive — and talk inheritance

Before 2021 Ends, Check These Items Off Your Financial To-Do List

Sat, 18 Dec 2021 20:33:02 GMT

At this time of year, it’s only natural for our thoughts to turn toward what we can do better in the future. And that extends to our finances as well. (It’s no coincidence that “save more and spend less” ranks high on most people’s list of resolutions year after year.)

So as the end of the year rolls around, here are a few tips that can help you close the year out right.

Sell losers to offset gains

Despite recent inflationary concerns, the U.S. economy has enjoyed a bull market for over a decade and that can mean substantial capital gains for taxable (non-retirement) accounts. Any “losers” in your portfolio – whether mutual funds, ETFs, or individual securities – could be sold to offset those gains. (The tax nerds among us like to call this process “tax-loss harvesting.”)

Increase retirement savings

A good rule of thumb has always been to save 10-15% of your income in retirement accounts. Examine your 2021 contributions to make sure you’re on the right track. Contributions to 401(k)s and 403(b)s must be made before year-end to receive a deduction for 2021, but contributions made to IRAs can be made up until your tax filing deadline.

Make your charitable contributions

Many nonprofits receive substantial donations during the last month of the year. To receive a tax deduction for 2021, gifts must be made within the calendar year. For investors who may be holding highly-appreciated securities in a taxable account, these securities can be donated to a charitable organization. It's a process that relieves you of the taxes on those capital gains. Many organizations accept gifts of stock directly, or you can consider gifting your stock through a donor advised fund. When gifting through a donor advised fund, you receive a tax deduction for the year the securities are deposited, and the gift to a charity of your choice can be made at a later date.

Consider a Roth conversion

Do you have a retirement account, such as a 401(k), 403(b), IRA, etc.? If so, make sure you know what tax bracket you’ll end up in this year. If your income is lower this year than previous and/or future years, it may make sense to pay taxes now, rather than at a higher rate in retirement. This is particularly timely advice given many of the tax changes in President Biden’s new American Families Plan.

Remember that contributions to IRAs are different than Roth conversions. While contributions are cash additions to IRAs, a Roth conversion means that a traditional, pre-tax IRA is being “converted” to a Roth (after-tax) account, and, as a result, will not be taxed upon distribution in retirement.

Take a look at next year’s budget

Despite everyone’s best intentions, (and despite us all having calendars on our phones), the end of the year has a way of catching people by surprise. But a little planning can go a long way toward minimizing holiday stress. While it’s not always possible to predict the future, look ahead to what you think the new year will hold.

What will be different in next year’s budget, and how can you adjust? Consider income changes and expenses – from basic needs like groceries and housing to long-term goals like retirement and college savings. Even something as simple as setting a monthly savings goal for Christmas presents can help enormously at the end of the year. Online budgeting tools can help keep the process simple and organized, all at no (or very little) cost.

As 2022 approaches, it’s only natural to look ahead. But while planning for the future, don’t forget to take a moment and reflect on your progress to date. After all, those earlier successes have paved the way for the bright future you’re building.

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Make Solid Gift-Giving, Food and Travel Plans This Holiday Season

Sun, 05 Dec 2021 20:29:59 GMT

You’ve heard the saying that bad things come in threes? Well, get ready for the triple whammy that will be the 2021 holiday season.

You’d be hard pressed to find a time when the global supply chain was such a topic of widespread conversation. Whether it’s on social media or network news, discussions about shortages are everywhere. And they’re only intensifying. Add to that the inescapable impacts of rising inflation and the worsening labor shortage, and you have a triple threat that stands to demonstrably impact the holiday season.

The good news is, with a little planning, it’s possible to lessen the impact these factors can have on your household finances. But it requires a thorough and clear-eyed examination of three key factors.

More are traveling

While the numbers are still a little lower than they were before the pandemic, both international and domestic flight searches are up dramatically over 2020 levels – up to 212% higher in some cases, according to online travel agency Kayak.

While on the surface that would appear to be a sign of a return to normalcy, in reality it’s likely a portent of higher prices, last minute delays, and possible cancellations. One key factor is the rising price of oil, which recently closed at a seven-year high of $80 a barrel. That makes it hard for airlines to compensate without passing those higher prices on to consumers. Many travelers have already noticed stark increases over flight prices from just a few months ago.

And even if you’re able to afford a ticket, there’s still the chance that a scheduled flight won’t take place as planned. In a dramatic shift for an industry that struggled with a labor surplus as little as a year ago due to pandemic-related travel restrictions, the airline industry is struggling with a severe labor shortage. In October alone, Southwest canceled roughly 2,000 flights, at an operational cost of $75 million. August saw Spirit Airlines cancel 2,800 flights, citing a lack of qualified workers. And this was all before the holiday surge.

That said, the airlines are hoping to mitigate the damage somewhat. In a recent staff memo, American Airlines said it expects to gain 4,000 new employees this quarter, while also recalling nearly 1,800 flight attendants from long-term leave. Similarly, Southwest is targeting 5,000 new hires by year-end.

Food prices up

We’ve all experienced the occasional bare shelf at the grocery store lately, which is the result of everything from truck driver shortages to supply chain issues. And the goods that remain are steadily gaining in price. In October, the consumer price index for food rose nearly 1% from August to September 2021 and 5.4% from September 2020. That’s a problem in a year when people are planning larger holiday gatherings to compensate for last year’s smaller celebrations.

The cost of a whole turkey (between 8 and 16 pounds) has nearly doubled since 2019, according to a 2021 Wells Fargo report, citing both increased demand and reduced production. This drastic increase serves as a microcosm of what shoppers can expect to find at the supermarket as they lay out their holiday food plan. And it merits some planning – and shopping – ahead. If you’re one of those who puts off getting all your holiday ingredients until a day or two before the meal, you may want to rethink your strategy. Logistical problems getting product to stores will mean many items will run out sooner than expected.

Shop soon

If you haven’t already ordered your Christmas gifts this year, you’re essentially playing catch-up. A survey conducted in early October by Morning Consult found about 50% of U.S. shoppers got an early start to their 2021 holiday shopping. Even so, many of them are still having trouble finding goods. The survey showed that 51% of early shoppers reported that stores were out of at least one item they were looking for and 54% said a product they wanted was out of stock online. And 49% are having to wait on back-ordered or delayed delivery of an early purchase.

And mirroring the issue with supermarkets, scarcity is only part of the problem. U.S. consumer prices jumped 6.2% in October compared with a year ago, as food, gas, and housing costs surged under the highest inflation rate in 30 years.

That spike in prices has been fueled in large part by robust consumer demand – demand that’s been increasingly hard to meet due to pandemic-related shutdowns of overseas factories. In a desperate bid to keep workers, America’s employers have also been raising wages and then passing those labor costs on in the form of higher prices.

And it’s not limited to the big chains. According to a new survey from Business.org, 82% of small businesses raised their prices as a direct result of rising rate of inflation.

Don’t let holiday hiccups force you into bad decisions.

For all three factors listed above, proper planning and effective budgeting are key.

If flying this holiday season, use your airline’s app to keep track of your flight status. Not only can it let you know everything from a gate change to a delay or cancellation, it can also help with rescheduling if necessary. Also, try to schedule morning flights if possible. Delays compound throughout the day, so you have a better chance of being accommodated on a same-day flight if you were originally scheduled to leave early. And while it’s not always possible, it’s always a good idea to have a plan B. For example, if your destination is drivable, have a car at the ready.

When it comes to both food and gift planning, the number one piece of advice for consumers would be to make a budget and stick with it. While it might be tempting to lean more heavily on credit cards and debt to compensate for this year’s higher prices, it’s never a good idea to spend more than you can readily afford.

Set a strict spending limit for yourself that allows you cover regular expenses while staying within your means. Also, research prices to get a better idea of where you need to allocate your dollars. And finally, don’t be afraid to cut down on your gift-giving list. After all, everyone’s dealing with the same economic realities this year. Something as simple as some baked goodies or a homemade gift can be enough to remind people you care.

In tightening economic times, sticking close to a budget becomes even more important. The holidays are notorious for nudging otherwise responsible spenders into impulse purchases. But keeping your eyes on the long-term prize and avoiding adding to your debt this holiday season may be the best gift you can give yourself.

CapWealth Founder Featured in December Lifestyles Pubs

We Can Make Teaching Our Kids About Money Part of Everyday Life

Sun, 21 Nov 2021 20:23:22 GMT

When it comes to teaching kids fiscal responsibility, as of this writing, only 21 states require high school students to take a personal finance course. That's up from just 17 states two years ago. And as parents, next to discussing the birds and the bees, money ranks as one of the most intimidating conversation topics a parent can face. A recent survey revealed that although 85% of parents agree it's important to have financial discussions with their kids about saving and spending money, 41% of those same respondents admit a reluctance to discuss money matters.

As a parent of three young children myself, I can relate to this. But it really doesn’t have to be that intimidating. If you don’t know how to get started (or if you’re just worried about saying the wrong thing), here are a few ways to get started.

Start early. Start small. And keep it simple.

Start early

You’d be surprised to learn how early kids start picking up concepts about money – and how quickly those ideas can solidify. According to researchers at the University of Wisconsin, Madison, children can grasp economic ideas such as value and exchange as early as age 3 – albeit at a very basic level. This is also when kids are developing the cognitive skills to learn concepts such as delayed gratification, which is a cornerstone of financial education. And it doesn't take long for that early understanding to take root. According to a study by the University of Cambridge, by the age of 7, children are already forming money habits. (And habits, as we all know, are hard things to break.)

Start small

Having an open, up-front discussion of money will help kids learn that it’s not a taboo subject, or one to be feared, but rather a natural, ongoing part of everyday life. That doesn’t necessarily mean family sit-downs with everyone gathered around the table as most families are strapped enough for time as it is. But weaving these discussions into regular family activities can be an easy and memorable way to get your message across.

Watch for opportunities to inject money discussions into your daily interactions with your kids. For example, you could explain why you chose a particular brand at the supermarket based on price. Or you can use the commercials on television to discuss basic financial concepts. Finding ways to weave the discussion naturally into regular interactions is the key. Your kids may not understand everything you’re telling them, but they’ll come to understand the importance of the subject.

Even at elementary-school age, let kids manage a small amount of money, whether allowance or from birthday gifts. Let them spend (or give, or save, or invest), and also let them feel the consequence if they run out of money. For example, what if they spend too much on new shoes, and don’t have enough to go to the movies with friends? What a great way to learn while the stakes are relatively small, but grow into adulthood already having that experience.

Keep it simple

Help your kids understand the four “buckets” into which money falls: spending, saving, investing, and donating. Each has a unique role in their financial future. And while they may not fully grasp the differences at first, it’s important to expose them to the concepts.

Spending, they’ll no doubt understand fairly quickly. That candy bar (or Playstation) costs money. Explaining the difference between saving and investing, however, can sometimes trip parents up. One approach is to define them in terms of longevity; saving is intended to provide short-term security, while investing is meant as money for the future, whether for college or retirement. The last bucket, donating, is another monetary concept that comes fairly naturally to kids particularly in an age of cause marketing and social justice. Helping children learn the value that can come from responsibly and thoughtfully giving money to a worthwhile cause, person, or organization can be one of the most valuable financial lessons they’ll learn.

Depending on their age, an effective strategy to explain the four buckets can be to use simple cans or jars with each one dedicated to a category. This encourages them to decide how much they wish to devote where and gives them a tangible example of what might otherwise seem like an abstract idea.

It’s OK to not be sure

Relax. It’s only natural to have reservations about initiating a money conversation with your kids. But even small efforts to teach your kids about money will go a long way toward setting them up for a lifetime of financial security.

So have fun with it and show yourself (and your kids) lots of grace along the way. Start early, start small, and keep it simple.

Hunter Yarbrough is an executive vice president and financial adviser with CapWealth. For more information about Hunter and CapWealth, visit capwealthgroup.com.

Do Your Homework Before Considering a Roth IRA Conversion

Sun, 31 Oct 2021 20:12:41 GMT

There’s been a great deal of media focus on retirement accounts lately — specifically, Roth IRAs. There are several reasons for this, one being the news of PayPal co-founder Peter Thiel having a Roth IRA worth over $5 billion. But the primary reason for the renewed interest is President Biden’s proposed American Families Plan. This plan seeks to implement a wide range of tax updates, with particular attention paid to retirement accounts. Such changes include:

Prohibiting all Roth conversions for those in the top income tax bracket. (But only after a 10-year window; a move actually encourages high-income taxpayers to convert to Roth accounts and pay the associated taxes while they can).
Prohibiting Roth IRA conversions of after-tax funds in retirement accounts altogether, beginning in 2022 (therefore ending the “backdoor” Roth)
Forcing required minimum distributions (RMDs) for IRAs with a combined balance of over $10 million, regardless of age — a move designed specifically to force dollars out of large retirement accounts.

For a better understanding of what all that means, let’s take a closer look at Roth conversions.

What is a Roth conversion?

Simply put, a Roth conversion is the process of moving money from a traditional retirement account into a Roth account, and paying tax in the process. Investors generally make the decision to convert if their current tax rate is lower than their expected tax rate in retirement (and therefore more money is saved because less taxes are paid).

The primary attraction of a Roth IRA is that it allows for potentially tax-free withdrawals since the contributions are made with after-tax money. Taxes are paid today, not later. That’s unlike a traditional IRA, where you make before-tax contributions that provide a tax deduction today, but require those taxes to be paid later on withdrawals. This obviously has implications if an investor expects to be in a higher income tax rate in the future.

Another key factor is, unlike a traditional IRA which requires RMDs, a Roth IRA doesn’t require distributions during the life of the original owner. That means the money grows tax-free for as long as they want. Contributing to a Roth IRA won’t lower an investor's taxable income, but they also won’t have to pay taxes on withdrawals from earnings provided they're over 59½ and have had the account open for five years or more.

The advantages

If you’re likely to be in a higher tax bracket in retirement than you’re in now, the tax-free withdrawals of a Roth IRA are attractive. And if taking a required minimum distribution from a traditional IRA could push you into a higher tax bracket, it may make good sense to shift funds to a Roth – especially considering that this higher bracket could subject a larger portion of your Social Security income to taxes or increase Medicare premiums.

A Roth IRA can also provide tax advantages for your heirs. With the enactment of the “Setting Every Community Up for Retirement Enhancement” (SECURE) Act in 2019, stretch IRAs for beneficiaries were all but eliminated. These beneficiaries are now required to draw down an inherited IRA within 10 years rather than over a lifetime. These distributions from an inherited IRA would be considered taxable income, but the distributions from an inherited Roth IRA would generally be tax-free.

A few other considerations

All of that being said, we need to keep a few things in mind. Since you’re paying income tax on any amounts transferred out of a traditional IRA, you need to ensure that you have the money on hand to pay those taxes. If you expect to be in a lower tax bracket in the future – whether due to retirement, a spouse leaving a job, or any of a host of reasons – it may make more sense to wait on undertaking a Roth conversion until then.

In addition, penalties may be owed on distributions within five years of the conversions. It’s also important to remember that Roth IRA conversions can’t be reversed meaning the assets can’t be converted back into a traditional IRA. So do your homework and plan wisely.

Don’t take a chance, talk to an expert

There are many potential long-term advantages to a Roth conversion. With potential tax changes, there’s no time like the present to examine your portfolio and determine what makes the most sense for you. Remember, there are several factors to consider and tax planning is a complex and nuanced process. So be sure to consult a tax professional before making any decisions with the power to impact your financial future.

Hunter Yarbrough is an executive vice president and financial adviser with CapWealth. For more information about Hunter and CapWealth, visit capwealthgroup.com.

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Student Loan Holders See Targeted Relief, Payments to Resume in February

Sun, 17 Oct 2021 20:08:45 GMT

The final extension of the federal student loan payment pause officially ends Jan. 31, 2022. That means many borrowers have not made a student loan payment in almost two years. Because of COVID-19, eligible loans have suspended payments, 0% interest rate, and no collection on defaults. So, with this upcoming cliff, let’s examine where student loan debt stands now, what the federal government is doing for borrowers and how to plan for college costs.

Where student debt stands now

As of the end of March 2021, the total student loan debt for federal and private loans stands at $1.6 trillion. According to NerdWallet, 62% of the 2019 class graduated with student debt and an average loan of $28,950. More than 43 million Americans have student loan debt. To put that into perspective, that is one in eight Americans. With that, 92% of loans are federally funded. The default rate on the loans stands at 9.7%. To again provide some context, according to the St. Louis Federal Reserve, the delinquency rate on single-family residential mortgages for the second quarter of 2021 was 2.49%.

What is the federal government doing?

While student loan forgiveness has not happened yet, the Biden administration has given targeted relief. The Department of Education states that relief has come to four areas currently.

The first is for those who were defrauded by their school or if their school closed before they received their degree. This is called borrower defense, and $1.5 billion has been provided in relief.

Second, $7.1 billion in loans were discharged for 364,000 people who qualify as disabled.

The third area focused on current and former active-duty service members. Interest was waived retroactively for 47,000 members.

And finally, the Department of Education recently expanded the federal student loan forgiveness program that would allow thousands more public sector workers, including members of the military, to seek a reprieve on their educational debts.

The new policies would affect an estimated 550,000 borrowers and give them an extra two years of progress toward forgiveness.

How much does college cost?

On its website, the University of Tennessee-Knoxville has an undergraduate budget estimate breakdown for the 2021-2022 school year. Remember, this is an estimate for in-state students, so every situation might be different. The breakdown looks like:

Tuition and fees: $13,244

Room and board: $12,150

Books: $1,598

Transportation: $1,664

Personal: $4,002

The grand total is $32,678. There is some debate on how quickly the cost of education is inflating. However, 5% is a good average to use. If we inflate $32,678 forward by 5% for 18 years, it will cost $78,644 per year for the 2039- 2040 school year.

How and how much do you save?

Now that you have the numbers you might be panicking. I’m here to help. If you’re considering more higher education for you or a dependent, think ahead. There are several ways you can save for education:

529s are by far the most popular. The earnings grow entirely tax-free if the money is used for qualified education expenses. Always consult the IRS or your financial advisor for what qualifies.

Coverdell ESAs have mostly been phased out by 529s. They essentially work the same way as 529s; however, there are income limitations and contribution limits.

Uniform Transfer to Minors Accounts (UTMAs) are not traditionally used for education savings. This type of account can be used for anything as long as it’s for the benefit of a minor. Some clients like the flexibility. However, the money does not grow tax-free like a 529.

Roth IRAs are probably the least utilized vehicle in savings for education. However, it is growing in popularity. There are income and contribution limitations. But the money grows completely tax-free, and there is no 10% penalty, which usually applies for early distributions, as long as it’s used for qualified education expenses.

So how much do you need per year? Using the example above, you need to save about $6,400 per year or $533 per month. While this number might seem staggering (because it is), we can only plan based on current information.

Just remember that I have only skimmed the surface on the different rules and implications for each way to save for education. There is not a right or wrong way to go about saving. At CapWealth, we work with our clients to figure out the best way for them to save and how it fits into their financial plan and life. The most important thing is you start saving as soon as possible. You only have 18 years!

Personal Finance: Be Sure to Understand Cryptocurrency Before Investing

Sun, 03 Oct 2021 20:05:52 GMT

With the introduction of Bitcoin in 2009, much of the world has become fascinated by cryptocurrency. Within its first decade, Bitcoin reached the mainstream, becoming a household name. And more recently, on Sept. 8, El Salvador launched Bitcoin as a national currency. Because of its popularity alone, many investors and financial advisors cannot escape the question: Should we invest in cryptocurrency?

To get to the bottom of this, let’s first start at the top.

What is cryptocurrency?

Cryptocurrency is a digital currency created as a medium for payments that bypasses the traditional banking structure. According to its creator (who has used the presumable pseudonym ‘Satoshi Nakamoto’), Bitcoin was created to be a “peer-to-peer version of electronic (payments) . . . without going through a financial institution.” ( bitcoin.org .)

Bitcoin “mining” is the process of finding new bitcoins by using sophisticated hardware to solve difficult math problems. Miners are rewarded for their work with new bitcoins. Most holders of Bitcoin, however, simply buy Bitcoin as an investment, speculating the price will increase.

There are thousands of digital currencies, with Bitcoin being the most widely used, taking nearly half of the market share (coinmarketcap.com/charts.)

How much has it grown?

In 2011, one Bitcoin was worth roughly one U.S. dollar. By April 2021, Bitcoin reached its highest price (so far) of over $64,000.

When running the numbers, Bitcoin averaged a return of over 200% per year over the last decade. Compare this to the annualized return of the S&P 500 stock market index - which had a stellar decade – of about 16% per year ( finance.yahoo.com , Morningstar.com .)

Is it for you?

While these returns are certainly incredible, we encourage you to keep several things in mind if you are going to invest in Bitcoin.

Valuation. Traded entirely on sentiment, cryptocurrency lacks economic fundamentals to support any valuation. Stocks, on the other hand, have underlying value based on company profits, giving a logical basis to invest. While some may state that buying cryptocurrency is a way to invest in blockchain (the technology behind crypto), owning Bitcoin doesn’t give ownership in the underlying blockchain technology.

Performance. While cryptocurrency may continue its upward trajectory for some time, it is important to remember that past performance does not indicate future results.

Risk. Cryptocurrency is a highly volatile investment. Prices may dramatically fluctuate, even within seconds, and therefore the risk is very high. Investors need to feel comfortable with the risk of loss.

History. What if tulip bulbs each cost more than the average annual salary? “Tulipmania” really happened in Western Europe in the 1630s when Dutch investors began buying tulips and dramatically drove up the price only to see prices collapse. Or how about the dot-com bubble of the late '90s? The Nasdaq index quadruped in five years and subsequently fell by 78% within two years.

Whether or not you decide to invest in Bitcoin, our objective as a financial advisor is to help carefully guide your decision-making regarding a speculative investment. Always feel free to reach out to a financial advisor to discuss further or for general investment and planning advice.

Hunter Yarbrough is an executive vice president and financial adviser with CapWealth. For more information about Hunter and CapWealth, visit capwealthgroup.com.

Drew O’Connor, CFA, CIPM, is a Portfolio Manager at CapWealth Group, responsible for client portfolio analysis, investment research, and performance reporting. Drew is an Investment Adviser Representative (IAR) with a background in client portfolio management, investment company research, due diligence, financial and performance reporting, investment consulting, and financial data/software. For more information about CapWealth, please visit capwealthgroup.com.

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Proposed Tax Changes (And Planning Strategies) Under The Biden Administration Part 4: Credits & Deductions

Thu, 23 Sep 2021 17:09:31 GMT

Proposed Tax Changes (And Planning Strategies) Under The Biden Administration Part 4: Credits & Deductions

In this series, we discussed Ordinary Income, Capital Gains, and Estate & Gifts. Today, for our fourth and final article, we’ll discuss two remaining items: (1) the Child Tax Credit, and (2) flat retirement credits.

While there are other proposed deductions and credits (like reinstating the first time homebuyer credit or capping deductions at 28%), that we will address if or when there is more likelihood of them passing. For now we will focus on these two.

Child tax credit.
This credit got passed with the American Rescue Plan in March, 2021, along with the third round of stimulus checks. This currently only impacts the 2021 tax year and would need further legislation in order to continue beyond that.

How did it change?
This was previously a credit of $2,000 per child and expanded to $3,000 per child ($3,600 for children under 6). Not only is it fully refundable for 2021, but it is also partially paid in advance (from July to December 2021) in monthly payments with a maximum of $250-$300 per child.

Phaseouts?
The new expanded credit begin at $150,000 for married-filing-joint ($75,000 Individual); phaseouts for the original $2,000 credit per child still remain at $400,000 married-filing-joint ($200,000 Individual).

Flat retirement credits.
(Unlike the Child Tax Credit, this has not yet been passed).

What is it?

Our current tax law allows individuals to deduct contributions to retirement accounts (like 401(k)s and IRAs) from income. Biden’s proposal, however, would replace the deduction with a flat credit (likely 26%, which is revenue-neutral to the federal government).

How is a 26% flat credit different from a deduction?

The value of a deduction rises as income increases. For example, an individual with a marginal tax bracket of 37% may receive a $37 tax benefit for every $100 contributed to a retirement account. And an individual in the 10% marginal tax bracket would receive a $10 benefit. Flat credits, on the other hand, would provide the same benefit to individuals regardless of tax bracket (likely $26 regardless of tax bracket). This works out better for those in lower brackets but worse for those in higher brackets. The rationale behind the proposal would be to encourage those in lower brackets to save more for retirement.

What does this mean for anyone saving for retirement?

Under current law, it has generally made sense for higher earners to save in Traditional (pre-tax) retirement accounts and those in lower brackets to save in Roth (after tax) accounts. This proposal, however, would make the opposite true. Roth accounts would become more attractive for higher earners (because the credit would be lower than their marginal tax rate), while Traditional accounts would be more attractive to everyone else because the credit would be higher than their marginal tax rate.

While some things have already changed (like the Child Tax Credit), other proposals may not materialize. Either way, we want to keep you informed to make decisions as things progress. Thank you for your reading!

Tennessean:

What Changed with The Child Tax Credit?

Child Tax Credit Q&A

On March 11 ^th , 2021, the American Rescue plan was signed into law by President Biden. A $1.9 Trillion package. Along with the third round of stimulus payments, the major change was the expansion of the Child Tax credit.

What was the Child Tax Credit to begin with?

This was originally a $2,000 credit for each child under age 17 ($1,400 of which was refundable).

How has it changed?

With the American Rescue Plan, this was expanded to a fully-refundable credit of $3,000 per child ($3,600 per child under the age of 6).

How much is paid in advance?

Half of the credit will be paid in advance monthly from July to December. The other half will be credited after filing a 2021 tax return.

Who is eligible?

Income phaseouts for the expanded portion of the credit for individuals over $75,000 ($150,000 married). Phaseouts for the original $2,000 credit per child remain at $200,000 individual ($400,000 married).

Will it continue past 2021?

Unless future legislation is passed, the expanded credit will only be for 2021 and revert to previous amounts in 2022.

For additional questions, you can turn to the Child Tax Credit Update Portal at irs.gov . You can also ask your financial advisor or reach out to our team for help.

CapWealth’s Pagliara Named One of America’s Top Wealth Advisors

Tue, 07 Sep 2021 17:29:15 GMT

FRANKLIN, TN (Sept. 7, 2021) - Tim Pagliara, founder and chief investment officer of CapWealth, has been named one of America’s Top 250 Wealth Advisors by Forbes.

The Forbes ranking, developed by Shook Research, is based on an algorithm of qualitative and quantitative criteria, including in-person interviews, industry experience, compliance records, revenue produced, and assets under management.

“It’s an honor to be named by Forbes as one of the country’s top wealth advisors,”Pagliara said. “I’m privileged to work alongside a talented team that is committed to providing our clients with the highest level of service and this award is proof of our continued hard work.”

Over 33,000 nominations were received, with only 250 advisors named to the list. Pagliara was the only advisor in Tennessee on this prestigious list. Pagliara has been recognized several times as Forbes Best-In-State advisor as well as Barron’s magazine No. 1 Financial Advisor in Tennessee.

With assets under management of approximately $1.3 billion, CapWealth provides comprehensive financial planning and active portfolio management services to clients and is located at 4031 Aspen Grove Drive, Suite 600, Franklin, TN . For information about the firm or to speak with Tim Pagliara, call (615) 778-0740 or visit www.capwealthgroup.com .

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Five Questions Everyone Should Ask a Prospective Financial Adviser

Thu, 02 Sep 2021 20:00:56 GMT

Are you looking to work with a financial adviser for the first time? Are you unsure of what questions to ask? Searching for an adviser can be overwhelming, and it can feel like a lot of pressure to find the right fit for your long-term goals. To help you narrow your search, here are the top questions I get asked by prospective clients.

Are you a fiduciary?

“Fiduciary” is the buzzword of the decade. A fiduciary is a person or organization that acts on behalf of another person(s), putting their clients' interests ahead of their own, with a duty to preserve good faith and trust. There are lots of different fiduciaries in the world and not just in the financial field. A board member, a parent, and an executor of an estate are all fiduciaries. You need to ask your financial adviser if they are a fiduciary. If they are not that means that they are held to a suitability standard. They only have to offer investments or products suitable for clients, which may not necessarily be in their best interests. It's a subtle difference, but it's a very important one.

How do you get paid?

This is one of the most important questions to ask and often sways a client's direction. Fee-only advisers charge an annual, hourly, or flat fee. The most common fee structure is to charge a percentage of assets under management quarterly. In this case, the adviser's fee is deducted from your account quarterly based on the portfolio value. However, they can charge an hourly or flat rate or in addition to the percentage of AUM. I have also seen advisers charge an additional flat rate fee for financial planning, depending on the situation's complexity. Commission-based advisers are paid on investments they sell. Every time an investment is bought or sold, the adviser makes a commission on that trade. I have seen every combination of those mentioned above, and firms continue to create new fee structures. Whatever the case, you need to understand what you are paying for the services provided.

Where do you custody?

Registered financial advisers are not allowed to come into physical contact with your assets, except to debit the fees they charge for their services. Instead, custodians have physical possession of your assets. Charles Schwab, Fidelity, and TD Ameritrade are three of the largest custodians. The custodian provides four primary services:

Process transactions when securities are bought and sold
Collect dividend and interest payments
Make distributions
Produce monthly statements that document holdings, cost basis, and current market value

When you select a financial adviser make sure you know what custodian will have physical possession of your assets. This information should be fully disclosed in the advisor's service agreement.

What services do you provide?

The short answer is financial advisers help people manage their money. Some financial advisers are more skilled in financial planning, while others may focus on investment strategies, tax planning, or insurance solutions. As you can see, financial advisers have many different specialties. You need to find an adviser who will suit your needs.

What's your experience?

Are specific credentials vital to you as a client? There is almost an endless number of certifications and qualifications that an adviser can obtain. Some financial credentials to check for include CFP, CFA, and CPA. These designations are worthy of your attention as they follow rigorous qualification criteria regulated and monitored by various state and local agencies.

As you have probably figured out by now there are many facets to the financial services world. But finding a local professional financial adviser doesn't have to be hard. Do some research on what type of financial adviser is best suited for you, check their qualifications, and then meet with two or three firms before making a decision. The kind of financial adviser best suited to your needs will differ depending on your current financial situation and your goals. Here at CapWealth we help prospective clients determine if we are a good fit and we are glad to answer all your questions.

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Your Money: Child Tax Credit Expanded only For 2021

Sat, 21 Aug 2021 19:57:00 GMT

Tax changes and proposals affect our financial planning. Here's a primer on child tax credit and flat retirement credits.

Over the last few months, we've discussed ordinary income, capital gains, and estate and gifts. In this final article, we’ll discuss two remaining items: the child tax credit, and flat retirement credits.

While there are other proposed deductions and credits (like reinstating the first-time homebuyer credit or capping deductions at 28%), that we will address if or when there is more likelihood of them passing. For now we will focus on these two.

Child tax credit.

This credit got passed with the American Rescue Plan in March 2021, along with the third round of stimulus checks. This currently only impacts the 2021 tax year and would need further legislation in order to continue beyond that.

How did it change? This was previously a credit of $2,000 per child and expanded to $3,000 per child ($3,600 for children under 6). Not only is it fully refundable for 2021, but it is also partially paid in advance (from July to December 2021) in monthly payments with a maximum of $250-$300 per child.

Phaseouts? The new expanded credit begin at $150,000 for married-filing-joint ($75,000 individual); phaseouts for the original $2,000 credit per child still remain at $400,000 married-filing-joint ($200,000 individual).

Flat retirement credits.

(Unlike the child tax credit, this has not yet been passed).

What is it? Our current tax law allows individuals to deduct contributions to retirement accounts (like 401(k)s and IRAs) from income. Biden’s proposal, however, would replace the deduction with a flat credit (likely 26%, which is revenue-neutral to the federal government).

How is a 26% flat credit different from a deduction? The value of a deduction rises as income increases. For example, an individual with a marginal tax bracket of 37% may receive a $37 tax benefit for every $100 contributed to a retirement account. And an individual in the 10% marginal tax bracket would receive a $10 benefit. Flat credits, on the other hand, would provide the same benefit to individuals regardless of tax bracket (likely $26 regardless of tax bracket). This works out better for those in lower brackets but worse for those in higher brackets. The rationale behind the proposal would be to encourage those in lower brackets to save more for retirement.

What does this mean for anyone saving for retirement? Under current law, it has generally made sense for higher earners to save in traditional (pre-tax) retirement accounts and those in lower brackets to save in Roth (after tax) accounts. This proposal, however, would make the opposite true. Roth accounts would become more attractive for higher earners (because the credit would be lower than their marginal tax rate), while traditional accounts would be more attractive to everyone else because the credit would be higher than their marginal tax rate.

While some things have already changed (like the child tax credit), other proposals may not materialize. Either way, we want to keep you informed to make decisions as things progress.

What changed with the child tax credit?

On March 11, 2021, the American Rescue plan was signed into law by President Biden. A $1.9 trillion package. Along with the third round of stimulus payments, the major change was the expansion of the child tax credit.

What was the child tax credit to begin with?

This was originally a $2,000 credit for each child under age 17 ($1,400 of which was refundable).

How has it changed?

With the American Rescue Plan, this was expanded to a fully-refundable credit of $3,000 per child ($3,600 per child under the age of 6).

How much is paid in advance?

Half of the credit will be paid in advance monthly from July to December. The other half will be credited after filing a 2021 tax return.

Who is eligible?

Will it continue past 2021?

Unless future legislation is passed, the expanded credit will only be for 2021 and revert to previous amounts in 2022.

For additional questions, you can turn to the Child Tax Credit Update Portal at irs.gov. You can also ask your financial advisor or reach out to our team for help.

Hunter Yarbrough is an executive vice president and financial adviser with CapWealth. For more information about Hunter and CapWealth, visit capwealthgroup.com.

CapWealth’s Tim Pagliara named 2021 Forbes Best In State

Tue, 27 Jul 2021 17:24:59 GMT

Tim Pagliara, founder, chairman, and CIO of the middle Tennessee-based firm, CapWealth, was named 2021 Forbes Best In State for the third time.

Forbes publishes the top advisors’ rankings annually. The research methodology is based on several criteria, including in-person interviews, industry experience, compliance, revenue produced, and assets managed.

“It’s a privilege being recognized for our hard work here at CapWealth,” Pagliara said. “We pride ourselves in listening to our clients and understanding their needs. The Forbes announcement is continued recognition that we are providing excellent client care.”

The Forbes Best In State recognition is one of the highest honors for an advisor. Over 32,000 people were nominated, with only a select few named. Pagliara received this award for the first time in 2018, along with Barron’s magazine No. 1 Financial Advisor in Tennessee. Marking the first time a Tennessee financial advisor has ever been ranked No. 1 in the state by both publications simultaneously. He previously earned the top spot in Barron’s annual state-by-state ranking six out of the previous seven years.

Pagliara formed CapWealth in early 2000 after nearly 20 years of experience in the financial industry. In 2014, the firm trademarked the term Provable Integrity®, which describes CapWealth’s transparent approach to wealth management and sets the standards for the firm’s compliance with Global Investment Performance Standards (GIPS®).

CapWealth is based in Franklin, TN, and provides wealth management services, including investment advice, personal financial planning, and portfolio management to individuals, families, foundations, and endowments. CapWealth specializes in preserving, growing, and distributing assets over our clients’ lifetimes. With $1 billion in assets under advisement, the firm is one of the nation’s leading independent wealth managers. For more information, visit https://www.capwealthgroup.com .

Be knowledgeable about your financial adviser

While Investment FOMO Is Natural, It Can Lead to Intolerable Risk

Sat, 12 Jun 2021 19:50:37 GMT

At some point in time, we have all experienced the sinking, borderline painful feeling of missing what would have been an enjoyable experience or positive situation. Commonly referred to as FOMO, the fear of missing out often causes some level of emotional distress as we imagine what positive outcome or difference may have come from whatever it is we did not take part. In some instances, our response to this feeling of FOMO may even lead us to alter our behavior moving forward, which can be particularly precarious when applied to investing. In this three-part series, I’ll aim to link this experience and its ensuing potential behavioral alterations to possible investment pitfalls, specifically those present when investing in crypto-currencies/crypto-assets.

Part I will focus on the FOMO moving forward, and the potential emotional and behavioral impacts it may have on one’s investment philosophy and practices. To start, gaining further understanding of this emotion is imperative to combating it. Investment FOMO lurks in the shadows of every investor’s thought process, discipline, and strategy. The fear of missing an opportunity to achieve goals can quickly push an individual to take unnecessary risks. I link an investor’s personal method to the bumpers deployed when bowling. With the guardrails set, the ball can deviate down the course of the lane with a dramatically increased chance of it knocking down some or all the pins. It may seem a slightly on-the-nose simile, but the same is true in the realm of investing. Discipline and philosophy guard the investor from poor decisions that may negatively impact returns. Deviating outside of one’s own plan increases exposure and risk, often dramatically, and can negatively impact overall performance.

Market euphoria is the breeding ground for investment FOMO. Investors observe a meteoric rise in a particular company or position and want to “ride the wave” in pursuit of quick profits. A perfect example of such behavior involves the recent rise of the company Gamestop. From Jan.12-27 of this year, Gamestop’s stock rose from $19.95/share to $347.51/share, representing an increase of 1,641.90% in 15 days; only to fall nearly 90% from the high just under a month later. This momentum and the ensuing euphoria was almost entirely generated by conversations stemming from an online Reddit forum called WallStreetBets. Once the stock started soaring, news began reaching those unfamiliar with the WallStreetBets forum, causing many investors to purchase the stock late and near or at the peak, ultimately leaving them holding the bag and incurring heavy losses as the stock price plummeted. A similar argument can be made for the recent attention and focus paid to crypto-currencies, particularly the dramatic rise in the value of crypto-assets such as Bitcoin and Ethereum, which will be further explored later in this series.

It is tricky to provide perspective on these situations without completely condemning investors on either side. The point is certainly not to criticize those making such swift choices, but rather to highlight the risks involved when straying from set investment discipline, and to provide potential solutions to check the allure of market euphoria. By maintaining an underlying foundation of stoicism in their approach, investors can prevent succumbing to FOMO and taking intolerable risks. Simply put, stoicism represents an area of philosophical thought pertaining to the pursuit of proper action by decoupling emotionally charged responses from the circumstances one encounters. Marcus Aurelius, Roman emperor and revered Stoic philosopher stated, “The first rule is to keep an untroubled spirit. The second is to look things in the face and know them for what they are.” Applying this basic tenet of Stoic philosophy to investing focuses the lens through which investors view their subjective approach. The more FOMO can be diminished, or even completely removed, the more sound an investment decision becomes. This, in turn, decreases the potential of encountering unnecessary risk.

As we encounter occurrences of such market euphoria, it is important to measure them appropriately and view them for what they are. Though they offer chances for great return, the accompanying risk must not be ignored. FOMO rears its ugly head when these events are irrationally perceived as the last opportunity to ride the wave. There will be opportunity in the future for one to achieve their investment goals; however, maintaining a disciplined approach while adhering to the guardrails of their philosophy is imperative to ensuring those objectives are achieved.

Ryan Burns is a financial advisor for CapWealth. For more information about Burns and CapWealth, visit capwealthgroup.com.

President Biden's Plans for Estate and Gift Tax

Wed, 12 May 2021 14:29:00 GMT

By: Hunter Yarbrough, CPA, CFP®

Executive Vice President and Financial Advisor

In our previous two posts, we discussed the Biden tax proposal for ordinary income and capital gains. Today we will talk about estates and gifts, including two topics of discussion: (1) reducing the estate and gift tax exemption amount and (2) eliminating the step-up in basis.

A brief history lesson to set the stage.

Estate taxation traces its roots back to ancient Egypt, through the Roman Empire and medieval Europe, and into the infancy of the United States. Modern estate tax began with The Revenue Act of 1916, imposing a 1% tax on estates above $50,000 and 10% above $5 million. Moving forward 91 years to 2017, the Tax Cuts & Jobs Act, the exemption base amount (what is not taxed in an estate) doubled from $5 million to $10 million. This amount adjusts each year for inflation and will “sunset”, or expire, in 2026 if further legislation is not passed before then. Amounts above the exemption amount are currently taxed at a flat 40%.

President Biden has proposed two major changes to estate and gift taxation:

1. Reducing the estate and gift tax exemption amount

2. Eliminating the step-up in basis.

1. Reducing the Estate and Gift Tax Exemption Amount to $3.5 million:

What does this mean? With a current exemption amount of $11.7 million, a reduction in this amount will result in more tax for many families at death. For example, an estate of $5 million (currently under the $11.7 million limit) would be taxable for amounts over $3.5 million.

What are some planning ideas? A few strategies to consider are as follows:

Annual Gifting: Current limits allow for gifts up to $15,000 per donee per year, a strategy used to pass wealth while staying within IRS limits. When a donee is married, a donor can gift $15,000 to that spouse, as well.
Gifting Up to the Current Exemption Amount: While gifting above annual limits will necessitate a gift tax return, no tax will be owed as long as amounts are under the lifetime exemption limit. It is possible to use the full exemption limit ($11.7 million) even if it is lowered to $3.5 million. The IRS has confirmed that it will not claw back tax on lifetime gifts if the exemption is subsequently lowered. (IR-2019-189).
Regarding Trusts: While there may be some legislation passed to limit certain types of trusts, there will likely be a renewed interest in trusts allowing transfer of assets with minimal, or zero, tax. Examples of these types of trusts and entities are GRATs (Grantor Retained Annuity Trusts), or SLATs (Spousal Lifetime Access Trusts).

Also in the Works: Along with President Biden’s proposal, Senator Bernie Sanders introduced the For The 99.5% Act on March 25th, which also proposes a reduction of the estate exemption to $3.5 million, while adding two notable details: (1) limiting lifetime gifts to $1 million, therefore separating the currently-unified estate limit and gift limit, and (2) limiting annual gifts to $10,000 per donee, and $20,000 cumulative per donor.

2. Eliminating the Step-Up in Basis:

What does this mean? When capital assets (e.g., stocks and real estate) are inherited, the basis (cost) is generally “stepped-up” (updated), generally to the date of death of the decedent. These assets then pass to any beneficiaries generally with a higher basis, which means less taxes and a simpler estate process.

For Example:

A parent purchases land for $100,000, and the land appreciates to $1 million.

Scenario 1. If the parent sells the property before death and pays capital gains tax on the $900,000 gain.
Scenario 2: If the parent dies before selling, the basis is stepped-up to $1 million (the current market value), and the child inheriting the property sells for $1 million without paying any tax.

As you can see, eliminating the step-up is particularly interesting for individuals and families holding highly appreciated assets to save on tax.

What Are Some Planning Ideas? Two main ideas are:

Gifting of Highly Appreciated Assets: Along with gifting cash, families may consider gifts of stock to beneficiaries during one’s lifetime. Lowering the amount of the taxable estate can be compelling when beneficiaries have lower capital gain tax rates.
Life Insurance: When structured and executed appropriately, certain types of insurance products may provide liquidity needed to pay for any taxes at death. This may come into play if an immediate income tax on death is imposed.

Also in the Works: While not proposed as a “wealth” tax, one unique feature to Biden’s proposal is the possibility of triggering an immediate tax at death, even when assets are not sold. Elizabeth Warren has proposed an annual wealth tax of 2% above $50 million and 6% above $1 billion. California has proposed something similar: 0.4% above $30 million.

Estate and gift taxation can be a significant factor as families plan for the future, and we want to help educate as families make decisions for their future. As always, please reach out to us with any specific needs or questions.

Hunter came to CapWealth in 2018 from LBMC Investment Advisors, LLC, where he was an investment analyst and advisor.

He is a Certified Public Accountant and a CERTIFIED FINANCIAL PLANNER™, and his background includes experience in both accounting and banking, as well as serving as Chief Financial Officer for a private business.

As Executive Vice President and Financial Advisor at CapWealth, Hunter works with clients to help them understand their finances, make wise financial decisions and steward their resources with excellence.

Hunter decided to pursue a career in investments and financial planning while studying at Samford University in Birmingham, Alabama. He was a charter member of Samford’s Bulldog Investment Fund, a student-directed investment fund investing university dollars.

He is now an active member of the Tennessee Society of CPAs, American Institute of CPAs and Financial Planner’s Association of Middle Tennessee. He enjoys traveling, music and spending time with his family. Raised in Hendersonville, he and his wife currently live in Oak Hill with their three children.

You can reach Hunter at hyarbrough@capwealthgroup.com or by calling our office at 615.778.0740 .

What is Rebalancing, and Why is it Important?

Mon, 19 Apr 2021 14:21:00 GMT

Diversification is a key term in the financial space that ensures clients, simply put, do not place all their eggs in one basket. Diversification will ensure higher-risk assets do not represent a large portion of your portfolio. During the 2000s technology bubble, investors lost by sinking money into newly-public, unproven internet companies lacking true business strategies. You may recall companies such as Pets.com and Webvan.com that went under due to failed business models. Just for fun, let's throw Napster in there, as well, which was partially owned at the time by a publicly-traded company. Everyone’s tune quickly faded with that investment.

Even companies like Amazon experienced a monster increase to their share price from the IPO price of $18/share, soaring to $107 in a matter of months, only to drop back down to $7 at one point. Based on this experience, consider this question: Would you rather be concentrated in one position, or allow yourself to sell shares and invest in other meaningful companies focused on different industries? Rebalancing is a critical step in portfolio management that can help alleviate issues involving concentrated positions.

Rebalancing ensures diversification across your portfolio strategy:

Rebalancing is the process of adjusting a portfolio over time to achieve a client’s investment strategy. Rebalancing becomes necessary when changes in a clients’ financial needs lead to a shift in asset allocation, or when a manager is monitoring a strategy and wants to ensure all investments are properly weighted to their goal. This process ensures investments are appropriately weighted after recent price movements, and thus prevents the overcompensation of one investment to portfolio performance by alleviating portfolio risk.

A manager can rebalance a portfolio on a periodic basis, known as Calendar Rebalancing , or by implementing a Percentage-of-Portfolio rebalance method, where investments will be partially bought or sold if they hit a percentage weight outside a tolerance level or corridor.

Rebalancing accounts to their strategy benefits clients by eliminating dispersion across accounts at the portfolio management level. This allows managers to monitor the performance of their plan and ensures account allocations are in line with the stated strategy. If a manager's approach is optimal, any divergence in the portfolio from the strategy allocation is not desirable.

Rebalancing helps eliminate the risk of loss while providing new buying opportunities:

Back to putting all your eggs in one basket: choosing not to rebalance a portfolio will allow potentially higher-risk assets to represent a larger proportion of a portfolio’s performance over time. For example, as a stock like Amazon increases significantly in value relative to the rest of the account, portfolio risk will increase and potentially deviate from the client’s risk tolerance. Rebalancing helps maintain portfolio risk, especially when an investment strategy has remained unchanged.

Rebalancing also provides opportunities for new investments. Not all stocks are perfectly correlated when capital market expectations change and the economy fluctuates. In other words, stocks do not just increase in value right away. Rebalancing provides opportunities to both invest in underweight positions that have not outperformed the market while the manager is still bullish on a stock, and potentially sell securities that may have become overpriced.

The cost of trading today is cheaper than ever before:

Due to recent competition in the capital markets space driving trading costs lower, the cost of rebalancing is now at historic lows. Previously, the costs associated with trading commissions and fees could technically impact an account’s performance. The lowering or eliminating of these costs by brokers, as they attempt to generate more business, in turn diminishes the direct cost impact incurred when reblancing an account.

Finally, while rebalancing does create a cost when realizing gains in a portfolio, which generates a capital gain tax liability, methods such as tax-loss harvesting or advantageoulsy rebalancing an IRA can alleviate these concerns. Realizing gains in an account sooner rather than later will help avoid unintentionally ending up with a concentrated position in the portfolio. At CapWealth, we advise on tough, complex decisions such as these in order to achieve what is best for our clients from diversification, tax, and unique circumstance perspectives.

Burns joins CapWealth as a Financial Advisor

Mon, 12 Apr 2021 16:49:00 GMT

FRANKLIN, TN (April 12, 2021) – Ryan Burns joins CapWealth, a Forbes Best-In-State firm, as a financial advisor.

Burns is a Franklin native and alumnus of Montgomery Bell Academy. He graduated with a Bachelor of Arts in English Literature from the University of Virginia, where he was an All-American recruit for the Division I Men’s Lacrosse team.

“Ryan is a great addition to our team,” CapWealth’s Chairman and Chief Investment Officer Tim Pagliara said. “His experience in both the financial services industry and private wealth management provides a solid foundation for him to be a trusted advisor to CapWealth clients.”

After graduation, Burns was an agent for New York Life Insurance Company, where he worked with clients across five states. He later joined Promus Capital, LLC. as a client service associate serving as a liaison between portfolio managers and clients. Most recently, he was an associate banker and assistant vice president at Citi Private Bank. He supported five Chicago private bank teams, including private equity firms, ultra-high net worth clients, and family offices.

“Ryan will play an integral role in the continued growth of our firm,” Phoebe Venable, CapWealth’s CEO, said. “We’re excited to have a local who shares our values and passion for helping families achieve financial success.”

6 financial mistakes for millennials to avoid

Investing in The Age of Big Data: How To Navigate Expanding Sea of Information

Thu, 01 Apr 2021 19:27:47 GMT

Investors living in the digital age have a seemingly unlimited amount of information available at a moment's notice. With an abundance of information, it would seem investors have it easy when selecting stocks or planning for retirement, whereas our grandparents had to walk uphill both ways, in a blizzard, just to get to the library. It turns out that investing in today’s world is as challenging as it was 50 years ago — just in different ways.

The same thing but different

Back in the day, investors like Warren Buffett would gain an edge by parsing through the information that took an effort to compile — an effort that the general public would rarely undertake. This advantage allowed investors to analyze data and trends that were all “publicly available” but relatively hidden and difficult to access.

For example, someone interested in Sears stock during the 1960s may have needed to send a request letter to the company for an annual report. In a few short weeks, like magic, the requested documents would show up in their mailbox. Good luck if you needed to follow-up, as that might be another month waiting for more information. It wasn’t impossible, but those willing to put in the time and soak up basic information on trends and sales figures had the edge over the average investor.

Today though, that information edge has all but vanished. There are countless high-quality websites and forums devoted to financial metrics, strategies, trends and analysis. It has only amplified during the pandemic. What made a superstar analyst in the 1980s would barely pass as an intern in terms of the ability to capture and regurgitate information on a specific company today.

The big data dilemma

As information has become more abundant and closed the gap with old-school research, investors seek opportunities to gain an edge. The problem isn’t the lack of data, it's too much data. Big data, as it's known, is a term that references the increasing amount of digital material we generate, store and interpret. There are distinct advantages to big data, namely the opportunity to extract otherwise hidden patterns or unseen trends. The darker side to big data, particularly in finance, is that investors are barraged with too much input and not enough time or tools to interpret the data effectively. This can lead to less than ideal outcomes, especially for someone investing for retirement.

What’s the problem?

Big data can skew realities and lead investors astray. Someone may think they are purchasing a less risky stock than they are due to misinterpreted or confusing data. It may also be difficult for an investor to drill down and find actual trends, such as “housing starts,” which refers to an economic indicator reflecting the number of privately owned new homes on which construction has begun.

A search for the term “housing starts” returns over 39.6 million results (in 0.75 seconds), and news articles at the time of writing have headlines indicating the metric has fallen over 10%. That may lead investors to think housing is slowing and may take them down a different investment decision path. The broader data shows that housing starts are higher than at any point since 2008, suggesting that the 10% fall was just a slight cooling off of an otherwise very active market.

Big data is here to stay

With the ever-expanding universe of cloud computing, big data is here to stay. Investors can navigate the frenzied ocean of information by focus, awareness and interest. Speaking with an investment advisor may help structure your throughs and goals and allow you to focus on the questions you should be asking versus letting the data do the guiding.

Awareness is key for individual and institutional investors alike. Ensure you know and trust the data you are sourcing and cross-check with other sources to see how they compare. Lastly, taking an interest in the data helps tease out suspect reporting. Ask tough questions until you feel more comfortable with the data presented. We are investing in an incredible digital age, one that can help or hurt us depending on how we decide to use data, and ultimately the old saying remains true: “Knowledge is power.”

Grant E. Stark, CFA, is director of research at CapWealth Group. He co-manages CapWealth’s investment strategies and develops the firm’s investment policies.

Businesses Must Adapt to Multigenerational Workforce

Proposed Tax Changes (and Planning Strategies) Under the Biden Administration Part 2: Capital Gains

Tue, 23 Mar 2021 23:09:00 GMT

By Hunter Yarbrough, CPA, CFP®

As a follow up to our previous post, Proposed Tax Changes (And Planning Strategies) Under The Biden Administration – Part 1: Ordinary Income , we laid out four main topics of discussion: ordinary income, capital gains, estates, and deductions. Today, we will discuss the second major topic: capital gains.
So, what does Biden propose to change for capital gains? We see this primarily in two areas:

1. For income over $1 million : Capital gains
Long-term capital gains and qualified dividends over $1 million would be taxed at ordinary rates instead of capital gains rates. This effectively increases the from 23.8% to 43.4%, a change, being over an 80% increase.
Note: The “actual” capital gains rate for over $1 million would change from 20% to 39.6%., and then a 3.8% net investment income tax would be added to each, which to any investment income over $200,000 (single) or $250,000 (married).

2. For income over $400,000 : 1031 Exchanges.
The 1031 like-kind exchange would be eliminated for those with income above $400,000. As many readers know, this 1031 exchange is a common strategy used by many real estate investors allowing one to defer taxes when proceeds are invested in like-kind property.

What Can We Do About This?
For those with income above these limits, here are a few options that may help lower taxable income:

Hold securities/property for longer to stay under the $1 million or $400,000 threshold. This is the most obvious and simplest option, and it is important to see this as a balancing act between paying tax and optimizing investment performance. But with higher taxes means there is a higher incentive to hold rather than selling.
Use installment sales to regulate income. This applies mainly to business owners and real estate investors, which could spread out income over multiple years.
Opportunity zones. These are qualified funds that invest in designated underserved communities, and capital gains can be deferred when investing in one of these funds. This is still very much in its infancy (only three years old), so while it is not a tried-and-true method, it has been growing in popularity.

That leads us to our next topic. . . how long can you (or should you) hold an investment and defer a capital gain? And with estates, will there still be a step-up in basis to minimize a beneficiary’s gain? We will discuss in the coming weeks.

Speculative Trading in GameStop Is Instructive for New Investors

Thu, 18 Feb 2021 19:18:28 GMT

Recent trading activity in GameStop and other heavily shorted companies has generated significant conversation around the morality of retail investors' actions to coordinate purchases of companies through online forums. Some see the events as a vindication for the “little trader” who was trampled during the great recession while big hedge funds were able to recover quickly. Others see it as irresponsible gambling that exposes investors to undue risk.

No matter where your opinion falls on the spectrum, this event has left its mark on our financial system by introducing new investors to the roller coaster of investing and trading. Every decade or so, investors are exposed to various “shock events” that shape our financial markets through new regulations or behaviors while teaching an upcoming generation many timeless lessons. With an estimated 60% of recent GameStop purchases being conducted by first-time investors, there is a tremendously positive opportunity for a new generation to learn from what they have experienced.

Same lesson, different day

From a technical standpoint, what unfolded with GameStop is called a “short squeeze” and is not particularly unusual. Notable other short squeezes date back to the famous Piggly Wiggly short squeeze of 1923 and, more recently, Volkswagen’s stock exhibited like behavior in 2008. Every one of the events had a catalyst. In the instance of GameStop, investors have now been exposed to the world of viral social media investing, which prompted the price volatility. Although unique in approach, this new form of social investing has taught GameStop investors timeless lessons that previous generations have learned as well.

The biggest lesson in these events is that when a stock becomes materially detached from its fundamental valuation, it is only a matter of time before the price returns to reasonable levels. A coordinated entry is generally easy to organize, but coordinated exits are all but impossible to orchestrate. This leaves thousands of investors at risk of significant loss as the peak price collapses without notice. Akin to running with the bulls, someone at the very back will get trampled. From an investing perspective, where the aim is to grow wealth over time, this type of investing makes little sense.

Turn lemons into lemonade

There is light at the end of the tunnel, though. These new investors have now been exposed to the trials and tribulations of investing. Stories of big gains and losses pepper the internet, but for all this frenzy and attention on GameStop, new investors can take this opportunity to understand that patience, time and emotion management are the most powerful tool any investor has in their arsenal.

With so many investment combinations — nearly limitless — it is all but impossible to select the next hot ticket with perfect timing. Instead of following a social media crowd chasing the next short squeeze, new GameStop investors should heed the advice being offered to them by experienced investors that investing is not a “get rich quick” strategy. Time is our friend in the investing world, as it smooths out bumps along the way and, when coupled with fundamentally strong stocks and the power of compounding, has shown to be an excellent wealth builder.

Capital market strength

For all that we have recently witnessed in our capital markets, it is encouraging to see that they have largely functioned as designed and remain a cornerstone of the largest and most successful economy in the world. New investors have taught institutions lessons, and vice versa. Regulatory bodies will likely review and intervene where necessary. This is an opportunity to reflect on the impact it may have had on your net worth.

Building investments incrementally instead of chasing quick profits will help guide you to your long-term goals. It takes years for professional athletes to reach peak performance, just like it takes time for individuals to develop discipline and grow wealth, but in the end, wealth is built through continuous small acts that over time can grow into something substantial. This is the CapWealth way, and has served our clients well for decades.

Grant E. Stark, CFA, is director of research at CapWealth Group. He co-manages CapWealth’s investment strategies and develops the firm’s investment policies.

Proposed Tax Changes (and Planning Strategies) Under the Biden Administration

Thu, 14 Jan 2021 17:20:00 GMT

By Hunter Yarbrough, CPA, CFP®

Three years ago, one of the most extensive revisions ever was enacted to the Internal Revenue Code. Today, much of this 1,000+-page piece of legislation (The Tax Cuts And Jobs Act of 2017) is still being sorted through and clarified by the Internal Revenue Service.

But it is a new day – we have a new President. And the Democratic Party has a (razor-thin) majority in both the House and Senate. So, what does this mean? Let us discuss what may happen to taxes (and possible planning strategies) in the next few years.

While there are many, many items to discuss (and more than we can cover in a blog post), we can discuss the main topics within these categories:

Ordinary income,
Capital gains,
Estates, and
Itemized deductions.

Today, we will discuss the first main topic: ordinary income.
President Biden has proposed to increase the ordinary income tax rate for those making $400,000 or more. Biden’s proposal states “anyone” in regard to this threshold and hasn’t yet specified whether this applies to single filers, married filers, or both. So we will assume both until further clarification. We see this in three main ways:

Rates would be (back) at 39.6%. Not only for the top (37%) bracket but also for those currently at the 32% and 35% brackets for income above $400,000.
Social Security payroll taxes would be levied . Payroll (FICA) taxes are 15.3% collected on the first $142,800 of wages – half by the employer, half by the employee. While Medicare (2.9%) applies for all wages past this limit, Social Security (12.4%) currently stops at $142,800 (for 2021). Under Biden’s plan, we would see a “donut hole” where income between $142,800 and $400,000 are not Social-Security-taxed, while all other wages (under $142,800 and above $400,000) would.
The qualified business income (QBI) tax deduction would be eliminated . Owners of certain pass-through entities (e.g. LLCs and S corporations) have previously been allowed a 20% deduction on business income, effectively reducing a 37% tax rate to 29.6%. This kept smaller businesses in line with the lower (21%) corporate tax rate. This change would increase the effective top tax for these pass-through owners by exactly 10%, from 29.6% to 39.6%.

For those with income under $400,000, President Biden has pledged not to raise taxes. However, some of the other areas of the proposal will affect many under this threshold (e.g., estate planning, certain itemized deductions, and credits). We will cover these areas in the weeks ahead.

What are some strategies to consider with these changes?

With taxes likely increasing, it may make sense for many to accelerate income – pay taxes at a lower rate now rather than a higher rate later. The most common example of this is the Roth conversion: taking a Traditional, pre-tax IRA, paying tax on it, and moving it into a Roth IRA. This may make sense to discuss even though it does not make sense for everybody. Other options (for business owners) include using bonus depreciation and installment sales to regulate income.

One major note here: while Congress does not often enact tax changes retroactively, it is within their power to do so (meaning rates could change for 2021, and not just 2022-forward). So with any major changes to income and taxes, it may make sense to wait until there is more clarity on the timing.
In the next few posts, we will discuss each of the other areas (capital gains, estate taxes, and itemized deductions). Our hope is to cover each of these areas so that you will be in a position to make the best decision for your financial future.

How election years can shake up the stock market

Tim Pagliara Fox Business Interview

Sun, 03 Jan 2021 18:14:00 GMT

Hedge funds: Rock stars or one-hit wonders?

Even Better than Roth IRA? HSA Is Best Retirement Tool

Sun, 13 Dec 2020 19:09:44 GMT

While the Roth IRA has long been touted as the best retirement vehicle available, I would argue that something is slightly better. And that would be the health savings account (HSA).

What is a health savings account (HSA)?

Accounts created "so that individuals covered by high-deductible health plans could receive tax-preferred treatment of money saved for medical expenses" (treasury.gov). Signed into law in 2004 as part of the Medicare Prescription Drug, Improvement, and Modernization Act by President George W. Bush.

How does it work?

Similar to pretax 401(k)s and Traditional IRAs, contributions to HSAs are tax-free and grow tax-free, and are typically set up through one's employer. HSA withdrawals, however, also allow tax-free withdrawals on eligible health expenses, unlike Traditional IRAs and pretax 401(k)s.

Why is this better than the Roth IRA?

HSAs are the only accounts that offer the "triple tax advantage" of tax-free contributions, tax-free growth, and tax-free withdrawals for qualified expenses. Roth IRAs allow for tax-free growth and withdrawals, but contributions are taxable.

A local leader in HSAs and healthcare solutions is Pinnacle Bank. Adam Hewitt, employer healthcare solutions product manager, SVP, with Pinnacle Health & Benefits, describes the HSA as "one of the best retirement tools. Period. In most life situations, an HSA can help. It helps save taxes when a budget is tight. And it’s a great retirement tool when the budget has flexibility.”

How much money can it save?

An average family can save around $2,000 a year, or $1,000 for a single. This assumes a 22% tax bracket and includes payroll taxes saved. Families can currently contribute $7,100 a year and single can contribute $3,550.

How is it different from an FSA?

While there are several differences, the primary differences are: FSA funds expire every year ("use it or lose it") while HSA funds do not.

Special tip

Many individuals spend all of their HSA funds every year. If your budget allows, however, consider paying for medical expenses out of pocket. There is no time limit to submit qualified expenses that you pay for out of pocket. As long as you keep your receipts, you can save and invest the money you would have spent until you are either no longer enrolled in an HDHP plan or turn 65 and enroll in Medicare. The account's additional growth from doing this could be used for medical expenses (and long-term care premiums) in retirement. This will only allow for more tax savings in retirement.

How do I qualify for an HSA?

The major qualification is participating in a high-deductible health plan (HDHP), which is roughly half of employment-based coverage today, according to cdc.gov. HDHPs have required minimum deductibles of $1,400 for single or $2,800 for family.

Where can I open one?

Several banks offer HSAs. One option is Pinnacle Bank, which has expanded its HSA platform in the last two years. Ranked No. 14 on FORTUNE Magazine's 100 Best Companies to Work For in 2020, Pinnacle offers HSAs with a low fee structure, debit card, and provides an app with a barcode scanner (to help identify HSA-eligible products), and plenty of investment choices.

While the HSA is only 16 years old, it will very likely it will continue to be more and more prevalent in the future of personal finance. Not only does it save taxes for medical expenses, but it can also be "the best retirement tool. Period."

Hunter Yarbrough, CPA, CFP®, is an executive vice president and financial adviser with CapWealth. He is passionate about taking a holistic view of personal finance, including investments, taxes, retirement, education, estate planning, and insurance. For more information about Hunter and CapWealth, visit capwealthgroup.com.

Personal Finance: Be Sure to Understand Cryptocurrency Before Investing

Irrational Exuberance Fueled Quibi's Downfall

Fri, 13 Nov 2020 19:06:01 GMT

Ad Meter 2020: Quibi Super Bowl ad.

As investors, we naturally gravitate toward stories and ideas that may generate superior returns on our hard-earned money. Particularly during the pandemic, individuals in search of outsized returns have crowded into technology names while fueling a frenzy of billion-dollar initial public offerings in businesses with no earnings.

When psychological factors like “fear of missing out” mix with blind optimism, irrational exuberance is born. The term was made famous by former Federal Reserve Chairman Alan Greenspan during a 1996 speech relating to then-budding internet companies and is as relevant today as it was then. You may know someone who has done well trading in a few technology names, or discussing an initial public offering, but the music does not go on forever.

While some of the technology companies can justify high valuations, individuals looking to invest in new companies should exercise caution and prudence when making purchase decisions. When money begins to circulate at an increasing velocity, largely caused by irrational exuberance, companies will be eager to take advantage of the funding opportunity.

Famous investors are celebrated for their ability to outperform specific benchmarks, identify an idea before the majority catches on or see trends that might not be so obvious. Yet even they fall prey to bad investments, misjudgments on timing. It is difficult to repeat one-off successful investing decisions that were not based on fundamentals.

The story of Quibi provides a cautionary tale of blindly allocating capital to ideas that lack sound footing.

How was Quibi the embodiment of 2020’s technology runup?

We might look back a decade from now (or not) and remember the soon-to-be defunct mobile streaming startup Quibi as “peak 2020.” On paper, Quibi had the ingredients of a successful technology startup.

Founder Jeffrey Katzenberg was former chairman of Walt Disney Studios with deep ties to all production studios. Chief Executive Officer Meg Whitman grew eBay from a company with $4 million in revenue to $8 billion. Investments of more than $1 billion were secured from nearly every one of Hollywood’s media powerhouses including Warner Media and Disney. Off to the races.

Katzenberg’s vision was to offer a unique video streaming platform that ran short-form, 10-minute episodes designed for mobile devices. The initial marketing campaign, loaded with celebrity talent, touted the ability to watch videos in landscape or portrait orientation – perfect for cellphones.

Was Quibi destined for failure?

Despite support from nearly all the Hollywood establishment, only six months after launch, Katzenberg and Whitman announced the platform would shut down. With industry titans at the helm, powerhouse movie studios funding the initial investment and a market trending toward streaming services, how could it fail?

The answer to why Quibi failed might have been cemented even before the first user signed up. In many ways, the idea was rushed to market likely because Katzenberg was enticed by irrationally exuberant investors willing to invest money without a sound fundamental plan or proper testing at smaller scale.

For all its promise, Quibi faced dozens of obstacles. An attempt to reinvent the video streaming wheel made Quibi look like the next Netflix, but when the target audience failed to materialize in a market already approaching oversaturation, it became only the most recent in a long line of technology startups to fall as quickly as they rose. In the end, all that will remain of Hollywood’s latest flop is a group of advertisers and investors on the hook for nearly $2 billion dollars.

What can you do to protect yourself?

Being aware of the risks when investing in a hot sector is most of the battle. Investors should set reasonable and realistic expectations and remember that however good an idea might sound, the price you pay for what you get and ability of management to execute on a plan are just as important.

The Quibi theme is currently running rampant, from other tech startups to electric vehicle companies attempting to capture some Tesla magic for themselves. Proceed with caution. Registered investment advisors stand by to assist if you need help thinking through these ideas.

Grant E. Stark, CFA, is director of research at CapWealth Group. Mr. Stark has experience in finance, investing, operations, due diligence and management assessment, as well as transaction sourcing and execution across both private and public sectors. He co-manages CapWealth’s investment strategies and develops the firm’s investment policies.

CapWealth Cares

How to Get (and Give) the Most out Of Charitable Giving

Fri, 30 Oct 2020 19:00:40 GMT

As the end of the year approaches, many of us are thinking about making year-end charitable contributions. While many people know that charitable contributions may offer tax deductions, there are a few other tax strategies that are lesser known but that can offer large tax savings. One of those strategies is called “bunching.”

What is bunching?

Bunching (sometimes called “clumping”) is the process of taking more than one year’s worth of deductions (often two years’ worth) all in one tax year. For example, if a family usually gives $10,000 to charity in one year, they may give $20,000 to charity in one year, and then $0 to charity in the next.

While bunching has long been a strategy for some, this became more popular with the passing of the Tax Cuts and Jobs Act of 2017 (TCJA). Before the TCJA of 2017, about 69% of filers claimed the standard deduction; but that jumped to about 86% after the TCJA — nearly 30 million more households (TaxFoundation.org). This is because the standard deduction is double what it used to be ($12,400 single, $24,800 married for 2020).

How exactly does bunching work?

For example, one married couple might take $30,000 of itemized deductions in a typical year (e.g. charitable contributions, property tax, etc.). Because the itemized deduction of $30,000 is higher than the standard deduction of $24,800, it would seem to make sense to itemize each year.

But what if the couple “bunched” two years’ worth of deductions ($60,000) in one year, and then took the standard deduction the next year? So instead of totaling $60,000 in deductions over two years, they would total $84,400 ($60,000 itemized plus $24,400 standard). This is $24,400 more in deductions, or $5,368 in taxes based on a 22% marginal tax bracket.

While this can be a significant tax savings for some, one reason people may not want to use this strategy is the cash requirement to gift up front, so it may not be for everybody. There are several other strategies, however, that we can cover in our next article. These would include donating appreciated assets and using donor advised funds. Until then, happy giving!

Financial industry works to regain trust of investors

Should You Refinance Your Mortgage?

Mon, 24 Aug 2020 18:51:51 GMT

On March 15, The Federal Reserve dropped the federal funds rate to 0-0.25%, which then sent average mortgage rates to 50-year lows, with an average 30-year mortgage around 3% (Source: FreddieMac.com).

So what does this mean for someone with a mortgage? When does it make sense to refinance?

There are two rules of thumb that I like to start with:

Can you drop your interest rate by 1%-2%?
Can you pay off your closing costs within a year or two? (Average closing costs range from 2% to 4% of the loan.)

For example, let us take a $200,000 30-year mortgage at 5% with a monthly payment of $1,074 (before taxes and insurance). If refinanced at 3%, we have an $843 monthly payment, or $231/month savings. And with closing costs of $4,000 (2% of the loan), it takes 17 months to break even ($4,000/$231). This is compelling. Not only does it drop the payment, but it only takes 17 months to break even on closing costs.

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As a note, while it may technically make sense on paper to refinance even if a break even is not reached within the first year or two, it can be difficult to predict the long term. For example, your job may change next year and you may decide to sell your house. This is why I usually encourage folks to refinance if they can break even in the short term.

There are many other things you may want to consider when refinancing, such as changing from a variable rate to fixed rate, locking in a shorter term, or changing the amount of the loan.

Every situation is different, so consider reaching out to a mortgage broker or financial adviser to see what makes sense for you.

CapWealth Planning Team Discusses CARES Act Waivers for RMDs

Thu, 30 Apr 2020 18:32:00 GMT

Listen to CapWealth Planning Group members Jennifer Pagliara, CFP®, CTFA, and Hunter Yarbrough, CPA, CFP®, discuss provisions from both the CARES Act and the SECURE Act that affect required minimum distributions (RMDs) and 401(k)/IRA distributions for 2020.

Gold offers investors taste of an old standard

8 Must-Know Rules for COVID-19 RMD Waivers Under the CARES Act

Tue, 28 Apr 2020 18:48:00 GMT

“The Coronavirus Aid, Relief, and Economic Security (CARES) Act, which became public law on March 27, 2020, is in response to the coronavirus disease 2019 (COVID-19) outbreak and its impact on the economy, public health, state and local governments, individuals and businesses. The response, intended to provide aid, relief and economic security, includes a waiver of required minimum distributions (RMD) for 2020 as part of the solution.”

The excerpt above is from this article by Denise Appleby, APA, CISP, CRC, CRPS, CRSP, which provides a comprehensive recap on RMDs and 8 must-know rules for RMD waivers under the CARES Act.

Download the full article here .

Despite Disappointing Q1, Signs Looking up For Economy

CapWealth Client Call | April 23

Thu, 23 Apr 2020 18:57:00 GMT

CapWealth’s leadership team discusses the price of oil and its effect on economic recovery on today’s CapWealth Client Call.

Coffee’s not just a drink, it’s an investment option

Tim Pagliara named No. 1 in Tennessee by both Barron’s and Forbes

Mon, 20 Apr 2020 19:02:00 GMT

In 2018, CapWealth Chairman and Chief Investment Officer Tim Pagliara became the first advisor in Tennessee to be named No. 1 on both Barron’s Top 1,200 Financial Advisors and Forbes Best-In-State Wealth Advisors. And, it happened again in 2020. Click on the graphics below to learn more about each ranking.

Or visit the links below:
Forbes Best-In-State Wealth Advisors list can be viewed her e .
For more information on Barron’s “America’s Top 1,200 Financial Advisors” list, click here .

CapWealth Client Call: April 1

Wed, 01 Apr 2020 19:11:00 GMT

CapWealth’s research team walks through priority points of the $2 trillion U.S. Stimulus Package on today’s CapWealth Client Call.

To download an overview on the stimulus package developed by CapWealth’s research team, click here .

A millennials guide to 401(k) investing

CapWealth Client Conference Call: March 30

Mon, 30 Mar 2020 20:27:00 GMT

Listen to the recording of today’s client conference call with CapWealth’s Chairman and Chief Investment Officer Tim Pagliara.

A start-up guide for investment newbies

White House 2020 $2T Stimulus Package: How It Impacts You

Mon, 30 Mar 2020 20:18:00 GMT

The White House has agreed to the first Fiscal Stimulus Package in over 10 years, effective Friday, March 26. This bill does not have the same mandate as the rescue plan of 2008. Whereas the rescue plan dealt with shaky financial institutions, this is a relief bill to help ordinary Americans weather the health crisis through a wide variety of initiatives.

Download a printable version of this article here.

View a flow chart showing how the funds are being distributed here.

How does this impact you, and what are the eligibility requirements?

Based on your most recent tax forms, the amount of payment received depends on your most recent calendar year Adjusted Gross Income and whether you are married or single.
For Single individuals, you receive a rebate payment of $1,200 if adjusted gross income is below $75,000.
From $75,000, this payment decreases gradually as an individual’s adjusted gross income approaches $99,000. An individual with an income above that amount does not receive a rebate payment.
For married couples, the requirement and payment numbers above double.
Every child under the age of 17 adds an additional $500 to the initial rebate payment amount, not incorporating adjusted gross income.
The rebate is non-taxable, and the IRS will consider eligibility for 2020 tax returns if not eligible in 2019.
The bill and federal government also urged lenders to relieve individuals on student loans and mortgages through forbearance on their payments for up to six months.
The bill increases the unemployment benefit duration from 26 weeks to 39 weeks, with a $600/week payment increase and expands insurance eligibility to individuals impacted by COVID-19.

Married Couple Payment Structure:

Single Individual Payment Structure:

How does the bill impact your retirement accounts?

Required minimum distributions (RMDs), which those over 72 years old must take from traditional IRAs, SEPs and 401(k) accounts, have been waived for 2020. This has no impact to Roth IRAs.
If you’ve already received a distribution from your own IRA or one inherited from a spouse for 2020, you can roll it back into your IRA within 60 days of receipt.
The limit for retirement plan loans not treated as distributions has been temporarily raised from the normal $50,000 to $100,000 for six months, while the current rule that loans may not exceed half of a 401(k) participant’s vested account balance has been waived.
If you had a retirement account loan payment due from the date of the bill to year-end 2020, that payment due date shall be delayed for 12 months.
You are eligible to take a $300 tax deduction on adjusted gross income, from charitable donations for 2020, in additional to the standard tax deduction ($12,400 for individuals and $24,800 for married couples filing jointly).

If you can provide certification/confirmation to your plan administrator that you: 1) have been diagnosed with COVID-19, 2) have a spouse who has been diagnosed with COVID-19, or 3) have experienced adverse financial consequences from quarantine (business closure, laid off, etc.), then the following actions may be taken on 401(k) and IRA retirement accounts:

If under 59 ½, Retirement Account owners are eligible to make a distribution of up to $100k without paying the 10% early withdrawal fee.
The sum withdrawn may be re-contributed to a retirement account within three years, without being subject to the usual annual contribution caps.
If the account is not repaid, the withdrawal will be taxed as ordinary income tax rates over a three-year period.
You can make a Roth conversion with this distribution. Before you typically must take out RMDs before making a Roth conversion.
If you’re 70 1/2 or older this year, you can give up to $100,000 directly from your IRA to charity in what’s known as a charitable IRA rollover, or a charitable qualified distribution. Normally this type of rollover counts towards your RMD.

How will this impact Corporations?

The bill includes but is not limited to:**

$100B in grant assistance to healthcare providers, to help respond to and prepare for the virus cases, including equipment, telehealth, and insurance reimbursements.
$350B in loan assistance provided to small businesses assuming economic loss, in an effort for job retention and debt relief on existing loans.
$500B in loan assistance for corporations in industries that have been hurt by the outbreak. This includes airlines, potentially in exchange for equity stakes taken by the treasury, and relief for companies which are part of the country’s national security.
$150B in state and local stimulus funding, for expenses related to COVID-19 and costs related to significant unemployment levels.
Corporation lending will be administered by the US Treasury through Federal Reserve emergency lending facilities, which new activity will be announced to the public over time.
Firms who accept loans from the program are required to suspend any dividend payments and share repurchase agreements, ban all labor force cuts of 10% or more, and implement compensation caps for executive pay employees.
Airlines receiving loans must maintain service to existing destinations and routes. Air travel excise and fuel taxes will be suspended for all of 2020. In addition to the loan program, $32 billion is earmarked for payroll assistance for airlines and contractors.
In addition to lowering rates to 0, and implementing the first Quantitative Easing major asset purchase program since the 2008 Financial Crisis, the Federal Reserve has provided emergency funding access and waived capital adequacy requirements for Banks, so they can provide loan accessibility to households and businesses impacted by COVID-19.

**We will update this section as more details are released by the Treasury.

While the bill does not specifically single out any industries in which our holdings have direct exposure, we continue to monitor our existing portfolio holdings over time, as more details arise from the corporate stabilization efforts made by the federal government.

Coronavirus Check-In: 6 Things You Can Do Now to Take Care of Your Finances

Mon, 30 Mar 2020 18:38:50 GMT

Tennessee Voices: A conversation with Ginny Welsch

Tennessean Opinion Editor David Plazas spoke with Metro Nashville Council Member Ginny Welsch on the census and the future of the city.

The novel coronavirus outbreak has caused most of us to limit public exposure right now. Here are six things you can do financially while you fight boredom within the confines of your home.

1. Organize your financial documents

Have you been putting off scanning and filing that stack of paper on your desk? Now is the time to organize! Go through and see what needs to be kept and what doesn’t. If you have your own scanner, scan what needs to be kept and then shred anything else. If you don’t have a shredder, place all documents in a box and label to shred at a later date. Free shredding is often available through local city or county recycling services, or you can purchase your own ID theft stamp online to mark out personal information.

2. Paperless or paper

This is the time to evaluate what you want to keep receiving in the mail or what you receive online. As you go through your documents, you may be surprised what bills or other documents you don’t want to receive copies of anymore. Most documents will offer the option to go paperless and direct you to the website to do so.

3. Auto-pay

Again, this is the time to be thinking about what bills you want to be automatically paid or debited out of your bank account. We’re all busy and now is unique time in which we can step back and try to put things on auto so that we have less to keep track of. You may want to keep closer track of some expenses over others that remain the same each month.

4. Emergency fund

I think this is one of the most important things you can evaluate. Everyone should have an emergency fund, but everyone’s amount will vary. Traditionally, a financial planner would say to have between 3 to 6 months of living expenses depending on your situation. We usually use a “soft pillow” test if someone is unsure. What amount in the bank is going to keep your pillow “soft” so that you can sleep without anxiety? For us, we have been recommending retired clients keep one to two years’ worth of living expenses in cash stored in easily accessible savings accounts.

The coronavirus is a pandemic that continues to impact life in Tennessee in a variety of ways. The USA Today Network newsrooms in Tennessee are uniquely positioned to cover this crisis. To support our mission, please consider a subscription . For more information on COVID-19, please visit cdc.gov/coronavirus .

5. Reassess or confirm goals

This is a good time to check in with your financial adviser to confirm your goals and that you are on track to meet them.

6. Long-term focus

Don’t panic. It’s challenging to not let your emotions get the best of you when the market is extremely volatile. But once you know what your goals are, remember to stay focused on them. Most of us have a goal for retirement. Keep that long-term focus and don’t let short-term volatility influence you into making decisions that will derail your future plans.

How to save for the high cost of higher education

Where does the money go in the Senate’s $2T Stimulus Bill?

Sun, 29 Mar 2020 20:34:00 GMT

On March 27, 2020, the Senate passed a roughly $2 trillion Coronavirus aid package with the intent of providing relief to seven groups most affected by the pandemic. As a follow up to CapWealth’s CARES Act summary posted on March 30 , please find an infographic which demonstrates allocation of the funds below. The bill is rightly complex, and as such, we found the graphic helpful in understanding the general allocation of funds. The graphic is not an official release from the government, and should be reviewed in parallel with CapWealth’s comprehensive summary and the CARES Act language.

SevenandForty / CC BY-SA

Call to Action – C19 Victory Solution

Mon, 23 Mar 2020 20:47:00 GMT

Included in this post is information on a proposed solution to the COVID-19 pandemic – called the C19 Victory Solution. We encourage our clients, partners, vendors and friends to reach out to their elected officials to make sure they are aware of this option.

March 20, 2020

The current approach that Congress is using to solve the COVID-19 pandemic is headed in the wrong direction. The plan does not solve the massive unemployment problem that we are going to face in the coming weeks, is harmful to the balance sheet of the Federal Reserve, and will do nothing to allay the fears the American people have for their personal safety. Yes, we want to get back to work , but we must look at this from a different angle.

A Novel Approach is called for to address the C19 problem

Keynesian Economics will not work. Traditionally, the Treasury’s approach (rooted in Keynesian economics) has been to put cash in the hands of Americans. The centerpiece of the current plan is to send Americans a check, cut payroll taxes, and provide assistance to companies in order to smooth the rough spots. This does not address the basic problem of the velocity of money. People will hoard this money like it is toilet paper. Checks will not keep people employed. Payroll tax relief will not work if there is no payroll. There is no assurance the bulk of this assistance will go to the American people.

The C19 Solution is simple enough to implement quickly through existing government infrastructure and provide the emotional and financial security that the American people need to weather this crisis.(1) We must isolate the costs of this crisis to minimize the long-term impact to our financial system.

A Different Solution

Every American business has a unique tax-identification number that matches the tax return they file on an annual basis. That return reconciles income and expenses. Occupancy costs, utilities, and payroll are expenses clearly identified on that form. The solution is to have the Federal Government and the American people become a customer while we have mandated the shutdown of business. This relief uses the existing tax format to provide small business direct assistance to maintain the payroll and occupancy during the crisis. This is in addition to the cash payments already proposed for working class Americans. At the end of 2020, the Treasury will issue a 1099 income statement to those businesses. They will recognize the income from the C19 distributions from 2021-2026 through a special line item on their tax return. That income will be recovered on a prorated basis at a special tax rate of 40%. (2 ) The money must be used for payroll and occupancy costs. This maintains the velocity of the money in the economy unlike handing people a check. It provides the only real solution to the mitigation of the problem. And while the Treasury will only recognize 40% of the C19 assistance, the multiplier effect will generate additional tax revenue that will shadow the assistance provided to small business. (3)

Businesses have plenty of issues to solve during these unprecedented times. New regulations mean things like a countertop sneeze guard , potentially never used before, is suddenly a vital addition to the workplace. It is interesting to note that more businesses are also being forced to confront company-wide issues more than ever before during these times. This is particularly true in the case of handling the payroll. No matter what type of business you own, from small, local businesses to global corporations, there is one common challenge that everyone faces – managing the payroll. Although large numbers of businesses handle their payroll systems internally, stretched companies are now looking to outsource their payroll to specialists like CloudPay with expertise in payroll processing. Consequently, if other processes are slowing down due to a disproportionate amount of time and energy being dedicated to managing the payroll, this can lead to employees losing sight of core competencies. Needless to say, if your business is falling short, it might be time to consider outsourcing your payroll.

C19 Bonds- The victory Bonds of 2020 ( 4)

To finance this massive undertaking, the United States Treasury should issue special purpose bonds identified as C19 Victory Bonds. Backed by the full faith and credit of the Federal Government, these bonds should carry an above market interest rate of 2.5% and be issued over a 50-year term and be callable by the Treasury after 5 years.

Conclusion

No plan is perfect. This idea has been purposefully limited to a conceptual format to catch the eye of the reader. Every contingency can be accounted for by drilling deeper into the C19 Solution to this problem. Because of its simplicity, this proposal can be put in legislative form in 48 hours and implemented by the United States Treasury in less than 30 days. In 30 days, the first relief checks can be sent to struggling businesses. The application can be a downloaded form that references the specific line items of the business asking for assistance. (5)

Footnotes:

(1) The psychological obsession with hoarding will stop when people are comfortable this crisis can be solved. Until then, the underlying fear and greed that has been created through the shutdown will continue to multiply.

(2) The impact to the federal balance sheet is partially offset by the recovery of these payments.

(3) The multiplier impact of having people employed diminishes the impact on unemployment insurance and other reductions in revenue at the federal, state and local level.

(4) There are additional benefits from issuing these bonds at an attractive rate. Relief is given to pension funds and savers who are struggling to get a return on their money. The above market rate will attract investment from all over the world and be easily absorbed. This will diminish the need for Fed open market operations in monetizing the current crisis.

(5) This form could be created in a matter of hours. The existing structure of the Treasury could easily accommodate the process of these forms with assistance from personnel at FEMA and other government agencies.

Beyond the movies: Unveiling the mystery of hedge funds

CapWealth Client Conference Call: March 19

Thu, 19 Mar 2020 21:30:00 GMT

Listen to the recording of today’s client conference call with Tim Pagliara, CapWealth’s Chairman and Chief Investment Officer.

Beyond ‘Shark Tank’: What you should know about venture capital

CapWealth 2020 State of the Union Recording Online

Wed, 12 Feb 2020 21:33:00 GMT

On Wednesday, Jan. 29, CapWealth hosted a State of the Union luncheon at Richland Country Club. The event provided attendees with an outlook on the state of the market and the firm’s focus for the new year. A portion of the event was recorded and can be viewed on our website by clicking on the graphic below.

4 things for investors to know about ETFs

Already off your financial resolutions? Set goals to get back on track.

Mon, 03 Feb 2020 22:28:00 GMT

Is one of your 2020 New Year’s resolutions to get your finances in order? According to a study by YouGov, 49% of Americans are hoping to save more this year, a resolution second only to exercising more.

With the rising cost of housing and increasing college debt, many news stories draw attention to the millennial generation’s spending habits. Resolving to save more is a great start. The bad news? Most people give up on their resolutions by mid-February.

Maybe you need to get out of debt, or your goal is to save more. Maybe you’re unhappy with your current financial advisor. The bottom line is you need to find someone who you trust to help reach your goals. Given the high failure rate for resolutions, setting goals and having someone to hold you accountable is key to succeeding.

If you’ve gotten sidetracked by post-Christmas sales and other needless spending, I’m here to help. Read this list of questions as you look for an advisor and start setting your own financial goals.

What is your goal? Start by knowing what you are looking for. Do you want a program to help you get out of debt? Do you have money you want to invest but don’t know what to do with it? Or are you ready to start saving for your child’s future education?
Make sure the goal is realistic. For example, if you are currently saving 10% of your salary, is it reasonable for you to commit to saving 30% of your salary? Understand how you are spending and what you are willing to compromise.
What credentials does the advisor have? Does it matter to you if he or she has education past the legal requirements to be a financial advisor?
Are you going to get shuffled around? A comment I hear a lot is that clients get passed from one advisor to the next as their original advisor gets promoted or moves cities.
How much contact will you have with the advisor? Having clearly defined expectations on how many times you will meet within the year is important.
How much is it going to cost you? Fees are usually one of the main factors in choosing an advisor or platform. Does your advisor charge an ongoing management, hourly fee or commission? Is there a fee for a financial plan in addition to everything else you are paying? How much does it cost to trade? Don’t be afraid to get a detailed list of what costs are involved.

These are definitely not all the questions that you should ask, but they can help you start narrowing down who you want to work with and what you want to achieve. It never hurts to ask!

Goal-setting is powerful because it forces us to identify an overarching purpose to guide behavior. Goals provide focus and motivation and allow us to measure our results. Objectives involving money are usually not quick fixes and require years of diligence and patience. Having an advisor to keep you on track should help you overcome those “mid-February blues” when it seems impossible to reach your goals.

Jennifer Pagliara, CFP, is an executive vice president and financial adviser at CapWealth and a proud member of the Millennial Generation. Her column speaks to her peers and anyone else that wants to get ahead financially. This article was originally published in The Tennessean on Feb. 3, 2020.

Knowing your financial destination can help you prepare for accidents, setbacks

Tim Pagliara Named No. 1 Wealth Advisor in Tennessee by Forbes

Tue, 28 Jan 2020 22:41:00 GMT

CapWealth founder, chairman and chief investment officer has been named No. 1 in Tennessee on Forbes’ Best-In-State Wealth Advisors list for 2020. This is the second time Tim Pagliara has been named No. 1 in Tennessee on Forbes’ Best-In-State Wealth Advisors list. The first time was in 2018, on the publication’s inaugural list, when Tim was also named No. 1 Financial Advisor in Tennessee by Barron’s at the same time.

The Best-In-State Wealth Advisors list spotlights more than 4,000 top advisors across the country who were nominated by their firms—and then researched, interviewed and assigned a ranking within their respective states and markets.

Each advisor selected by SHOOK Research is chosen based on an algorithm of qualitative and quantitative criteria, including: in-person interviews, industry experience, compliance records, revenue produced, and assets under management.

Learn more about the Best-In-State Wealth Advisors for 2020 here .

Proposed Tax Changes (and Planning Strategies) Under the Biden Administration

Investors Unite Jan. 24 Teleconference Recording Online

Fri, 24 Jan 2020 19:00:00 GMT

On Friday, Jan. 24, Investors Unite Executive Director Tim Pagliara hosted a teleconference with David Thompson, Managing Partner at Cooper & Kirk, to brief Investors Unite members and the media on the latest developments in appeals before the Supreme Court regarding the illegal Net Worth Sweep of Fannie Mae and Freddie Mac profits. On the call, Thompson and one of the attorneys representing plaintiffs in Collins vs. FHFA, provided clarifications on recent actions by the Supreme Court and what they mean for GSE shareholders. The full recording of the teleconference can be found at this link.

Chief Investment Strategist John Lueken Featured in RIA Biz Magazine

As the Decade Ends, Check These Financial Items off Your List

Sun, 22 Dec 2019 19:05:00 GMT

We tend to end the year thinking about goals we met or failed to accomplish during the year and ways we might improve in the new year. As the end of the decade rolls around, have you considered your financial goals?

Each year, saving more and spending less are among the most common resolutions. If you aim to increase your financial stability, here are five things you can do to end the year right.

1. Sell losers to offset gains.

The U.S. economy has now been in a bull market for over a decade, and that often means substantial capital gains for taxable (non-retirement) accounts. Any “losers” in your portfolio (whether mutual funds, ETFs, or individual securities) could be sold, at least for a time, to offset gains. Tax nerds like me call this “tax loss harvesting.”

2. Increase retirement savings.

A good rule of thumb to start with is saving 10-15% of income in retirement accounts. Contributions to 401(k)s and 403(b)s must be made before year-end to receive a deduction for 2019, but contributions made to IRAs can be made up until your tax filing deadline.

3. Make your charitable contributions.
Many nonprofits receive substantial donations during the last month of the year. To receive a tax deduction for 2019, gifts must be made in the calendar year. For those that might have highly appreciated securities in a taxable account, you can “sweeten the deal” by gifting these securities, which means you are no longer subject to taxes on those capital gains. Many organizations accept gifts of stock directly, and you can also consider gifting through a donor advised fund. By gifting to a donor advised fund, individuals receive a tax deduction in the year the securities are deposited into a donor advised fund. They can then make the gift to the charity of their choice at a later date.

4. Consider a Roth conversion.
Do you have a retirement account, such as a 401(k), 403(b), IRA, etc.? If so, make sure you know what tax bracket you are going to end up in this year. If your income is lower this year compared to previous and/or future years, it may make sense to pay taxes now, rather than at a higher rate in retirement.
Contributions to IRAs are different than Roth conversions. While contributions are cash additions to IRAs, a Roth conversion just means a traditional, pre-tax IRA is being “converted” to a Roth (after tax) account and will not be taxed upon distribution in retirement.

5. Take a look at next year’s budget.
What will be different in next year’s budget, and how can you adjust? Consider income changes and expenses – from needs, like groceries to long term goals, like retirement and college savings. For Christmas presents next year, it might make sense to save a little bit each month ahead of time. To help keep things simple and organized, consider using a low-cost (or no-cost) online budgeting tool.

As 2020 approaches, take some time to reflect on all the hard work you’ve put in this year as you continue to plan for the future.

Proposed Tax Changes (And Planning Strategies) Under The Biden Administration Part 4: Credits & Deductions

Socially Responsible Investing Is Here to Stay. This is What You Need to Know

Sun, 15 Dec 2019 19:10:00 GMT

In our increasingly complex world, some investors are taking a stance about where they choose to invest their money. They want to be assured the companies they invest in are going to leave the world a better place.

While this might feel like a necessity born out of modern society, socially responsible investing has actually been around since the 1700s. The Religious Society of Friends, also known as the Quakers, refused to participate in the slave trade or invest in weapons for war. It’s also been prevalent throughout history for investors to avoid “sin industries” such as alcohol, tobacco and gambling. The movement took strides in the 1980s when investors began pulling out of South African industries due to apartheid.

Many people don’t realize there is a plethora of ways to be a socially responsible investor. I don’t just mean the investment vehicle either, like a mutual fund versus an exchange traded fund. Let’s explore some of the different definitions.

ESG
Environmental, social and governance (ESG) investing is a practice that investors use to screen and analyze investments. The environmental component takes into consideration a variety of factors on how a company is impacting the earth. Some of these factors are the size of the company’s carbon footprint, recycling practices, green technologies and products utilized. The social component focuses on the issues that impact its culture and society. How does the company treat their employees, customers and suppliers? Finally, governance focuses on how a company is run, from the board of directors, to executive compensation, to its relationship with the SEC.

SRI
Socially Responsible Investing (SRI) is an investment that is considered socially responsible due to the nature of the business the company conducts. Essentially, SRI takes ESG a step further to screen for specific guidelines. These screens are used to eliminate “sin stocks,” like weapons, tobacco, alcohol and adult entertainment companies. One company that’s a top SRI pick is Microsoft, which has taken steps to become carbon neutral.

Impact Investing
Impact investing differs slightly from SRI in that these investments are intended to have a positive impact and a financial return. Instead of using negative screens, this investment strategy seeks to help make a difference in sectors from sustainable agriculture to microfinance.

Not just a trend

Though SRI and its subsets have long been a trend, I think it’s one that’s changing the nature of investing. As of 2018, the U.S. Forum for Sustainable and Responsible Investment revealed more than $12 trillion in assets are being managed with SRI principles.

If you are interested in investing socially, I challenge you to identify values to screen for and causes to support. Having this in mind will narrow the scope of what you can invest in and ultimately give you the knowledge that your money is working for you while making the world a better place.

Cut back on errors to improve financial health, life

Mon, 07 Oct 2019 19:25:00 GMT

As the school year gets back into full swing and sports teams are starting their next season, it’s natural to focus on the lofty goals we each want to achieve in the coming year. Dreams of acing tests and scoring the game winner are top-of-mind for the kids – everyone wants to make a positive contribution. However, are we focused on the right metrics? In the case of many things, improvement is not about doing more things right, but about doing fewer things wrong.

To illustrate, let’s look at the evolution of Japanese manufacturing in the 1970s. During that time, the Japanese firms emphasized what came to be known as “lean production.” Their goal wasn’t to be the most creative or innovative. They didn’t reinvent the mousetrap. Rather, they relentlessly looked to remove waste of all kinds from the production process. By building the same products with fewer mistakes, the Japanese improved by subtracting. According to an article in the New Yorker, by 1974, service calls for American-made color TVs were five times greater than those for Japanese TVs. By 1979, the Japanese could build three TV sets in the time it took an American firm to build one.

Revolutionary, innovative, disruptive change is great, but it is unreliable. It is just as important to improve by not getting worse – focusing on efficiency and dependability.

To hammer home the point, let’s look at diet and exercise. The common mindset when embarking on a new diet is to only eat healthy food. That can feel overwhelming. Instead, flip the script and focus on eating fewer unhealthy foods. Eliminate the “empty calories” in your diet and the results can be astounding.

For exercise, we often become obsessed with the intensity of our workouts – lift more, run farther, burn more calories. This too can be overwhelming. Instead, focus on missing fewer workouts. Not everything has to be a one-up. Improve your consistency and the results will come.

The same is true for personal finance. Most people are guilty of chasing a higher salary or searching for that once-in-a-lifetime investment that makes them a millionaire. While both pursuits are worthwhile, they are incredibly hard to predict. The far easier path to financial independence is to eliminate the waste.

How do you do that?

Develop a budget to track expenses and ensure that you spend less than you make. Living within your means is financial improvement by subtraction.
Eliminate credit card debt. Using credit cards to fund your lifestyle can be a costly mistake thanks to the high interest payments that accompany them. If you have credit card debt, make it a priority in your budget to pay off.
Avoid investments that don’t (or won’t) meet your financial needs. Diversification is good in investing, but it is crucial to understand how to balance your investments according to your current needs and future goals. You don’t want to waste time in investments that aren’t going to provide the return you need to fund your future financial goals.

Improvement by subtraction is less flashy than improvement by addition. Every athlete wants to play a great game, every writer wants to pen a best-seller, every business wants to land a transformative deal, and every investor wants to find the next Amazon. But the power of controlling the controllable should not be overlooked.

John Lueken is the executive vice president and chief investment strategist at CapWealth. This article was published in The Tennessean on Oct. 7, 2019.

Ask These Big Questions when Considering Retirement

America Is About To Do The Right Thing In Housing Finance Reform. We Have Tried Everything Else.

Tue, 01 Oct 2019 19:32:00 GMT

In a surprise move in September 2008, government-sponsored entities (GSEs) Fannie Mae and Freddie Mac were placed under government control under supervision of the Federal Housing Finance Administrator (FHFA) and through authority granted by the Housing and Economic Recovery Act (HERA). This move was a shock to investors who had been repeatedly reassured by the Treasury Secretary himself that Fannie Mae and Freddie Mac were adequately capitalized.

Over the next few months, the FHFA abruptly wrote off over $187B in obligations. Most of the write-offs were non-cash assets known as Deferred Tax Assets (DTAs) and their disallowance rendered the institutions insolvent. In order to restore solvency and confidence, Treasury loaned the GSEs $189B at 10% interest and received warrants equivalent to the ownership of 79.6% of the outstanding shares of the combined companies.

In the years that followed, the GSEs became the whipping post for the financial crisis. Senators Bob Corker and Mark Warner proposed legislation that would radically change our housing finance system through the elimination of the GSEs — despite the fact that they were created to provide a counter-cyclical force to keep liquidity in the housing markets.

Some history here: In the Great Depression, housing prices dropped 50%, employment hit 25%, and banks were forced by regulators to clean up their balance sheets. Fannie Mae was created in 1938 to buy loans from the banks and create longer terms for repayment, and thus, the 30-year mortgage was born. Banks had fresh capital, and the new system of housing finance created a whole new generation of homeowners. In 1968, faced with mounting concern about the level of debt from the Vietnam war, Fannie Mae was chartered as a privately held, government-sponsored entity and listed on the NYSE (FNMA). Its unusual structure created a private capital buffer that allowed the mortgage debt to be taken off the federal government’s balance sheet.

Freddie Mac was created for similar reasons and increased competition in the mortgage finance industry. Today, the GSEs provide mortgage liquidity in much the same way they did in 1938. Both Fannie and Freddie buy mortgages from banks and re-package them for sale to insurance companies and pension funds that rely on predictable income to offset the liabilities for pension and annuity payments.

By the summer of 2012, the chief financial officer of the GSEs briefed the Treasury and the FHFA that the GSEs were so profitable that they would have to reverse the DTAs that were the basis of the insolvency in the first place. The justification for conservatorship could no longer hold water. But instead of telling the truth and allowing the GSEs to pay back the government and exit conservatorship (as had been done with the Troubled Asset Relief Programs, or TARP), Treasury officials instead concocted a scheme to sweep 100% of their earnings and profits in an amendment to the original senior preferred purchase agreement known as the Third Amendment Sweep. Treasury Secretary Tim Geithner and FHFA director Ed DeMarco justified the move by telling the world that the GSEs continued to languish in a death spiral and would never return to profitability.

The profound and deliberate obfuscation about the actual financial condition of these two pillars of housing finance spawned the most complex pieces of litigation ever filed against the federal government. On Sept. 5, 2019 in Collins v. Mnuchin, the Fifth Circuit in an en banc hearing held that the government violated the Administrative Procedures Act and remanded the case back to the trial court for a remedy. The court called out email communication from Obama administration advisor Jim Parrott as evidence that the government acted in bad faith and contrary to their mission to conserve and protect the assets of entities as conservator.

The court also held that the FHFA was an unconstitutionally structured agency but disagreed on a remedy. Nine judges believed that the objectionable part of the statute could be corrected with a blue pen. Seven believed FHFA’s unconstitutional actions negated the Sweep itself. In an unusual move following the decision, plaintiffs’ lawyers filed an appeal to the U.S. Supreme Court arguing that a blue-pen correction to the statute does nothing to remedy the harm shareholders faced from the 100% sweep of the earnings and profits of the companies.

The court also acknowledged current FHFA Director Mark Calabria’s written statements, i.e., that the government acted improperly and violated the statutory authority of HERA. Perhaps that is why he said, “The status quo was not an option,” as he repeatedly defaulted to his responsibility under the statute that he and the former FDIC General Counsel Michael Krimminger wrote in 2006. During the time Calabria worked with Senator Richard Shelby on the Senate Banking Committee, they were guided by the belief that “well run, adequately capitalized, properly regulated financial institutions, do not fail.”

Despite President Trump’s executive order directing the Treasury to reprivatize the companies and end 11 years of U.S. government control and the emphatic smack down from the Fifth Circuit, there continues to be rogue arguments for the shut-down of the GSEs – more Jim Parrott.

On Sept. 30, Director Calabria momentously announced the end of the Third Amendment Sweep by allowing both Fannie Mae and Freddie Mac to retain $25B and $20B in capital, respectively. For the time being, the retained capital would be added to the government’s liquidation preference. (Liquidation Preference is defined as the money the GSEs still owe the government prior to being released from conservatorship.) At the current level of profitability and a win in the courts, the GSEs could accumulate $40B to $50B in capital in the next 12 months.

All of this sets up drama for investors. What should we look for next?

If the court changes the remedy in finding the Sweep unconstitutional, or that FHFA’s actions violated the Administrative Procedures Act, then multiple damage models show the money the government advanced has been paid back and the Treasury owes the companies $26B.

In summary, three things are critical for the next step in reform and re-privatizing the GSEs.

First, Director Calabria needs to establish the capital buffer and regulations that these entities must comply with in order to protect the taxpayer as publicly traded companies.

Second, the companies will have to sell themselves to the investment community as worthy of their hard-earned investment dollars. The GSEs are among the most profitable companies in the world. This type of investment attracts serious money that is interested in and understands the benefit of a long-term, predictable stream of earnings, profits and dividend income. In a world with $17T of negative interest rates, there is a nice market for companies like Fannie Mae and Freddie Mac.

Finally, the liquidation preference from the senior preferred purchase agreement needs to be written down. Both the courts (through force) and the Treasury and the FHFA (through regulatory conscience) seem to be moving in the same direction. Allowing the GSEs to retain capital is a milestone in ending the conservatorship and honoring the government’s commitment to GSE shareholders, taxpayers and the next generation of homeowners.

Investors need patience in the extreme. This is a long game, and we play it to the end. To paraphrase Winston Churchill: America is about to do the right thing in housing finance reform. We have tried everything else.

Tim Pagliara is the founder, chairman and chief investment officer of CapWealth. Tim is also a Forbes contributor. This article was originally written for and published on Forbes.com. Find the original article here.

Disclosure: Tim Pagliara and his clients own shares of Fannie Mae and Freddie Mac Junior Preferred Shares.

Opinion: We're long overdue for tax reform

Achieving a Better Life Experience through ABLE Accounts

Mon, 16 Sep 2019 19:37:00 GMT

For families with a special-needs member, saving and planning for the future can often be a multi-layered process. But in 2016, these families received good news: a Tennessee state bill had been passed to encourage investing for those who have disabilities.

What are ABLE accounts?
ABLE accounts are part of a state-based program to help residents who have physical and/or mental disabilities save and invest money to help pay for qualified disability expenses. This program is administered state by state. In Tennessee, it is managed by the Tennessee Treasury Department. ABLE provides an opportunity for residents to maintain their independence and quality of life through tax-free earnings.

Why were they created?

The Achieving a Better Life Experience (ABLE) Act became a federal law on Dec. 19, 2014. This act has had a profound impact on people with disabilities and their families.

Prior to this law, most families were limited to creating a Special Needs Trust to help pay for the needs of the person with a disability. Said person risked their eligibility for government programs like Medicaid if he or she earned more than $700 per month or had savings/assets in excess of $2,000. The problem is that Special Needs Trusts can be very expensive to create and maintain. Generally, you must work with an attorney to set up the trust and then find a trustee willing to serve.

What about Tennessee?
The act allowed states to establish and maintain their own ABLE programs. Tennessee was one of the first three states to launch a program of its own. State Treasurer David H. Lillard, Jr. was instrumental in working with the Tennessee General Assembly to establish the ABLE program, and Governor Bill Haslam signed the legislation into law on May 18, 2015.

What are the benefits?
Family members and loved ones generally want to ensure their disabled family member will be able to maintain a certain standard of living without jeopardizing his or her government benefits. ABLE Tennessee allows for savings and investments to grow tax free if used for qualified expenses. These expenses cover education, housing, transportation, employment, training/support, assistive technology, personal support services, health, prevention and wellness, financial management, administrative services, legal fees, expenses for oversight and monitoring, and funeral and burial expenses. If earnings do end up being used for non-qualified expenses, the funds will be treated as income, taxed at the beneficiary’s tax rate and charged a 10% penalty.

In Tennessee, ABLE accounts that have less than $100,000 in assets do not impact eligibility for government assistance. If the assets grow to more than that, the supplemental security income (SSI) will be suspended. It will resume once assets fall back under the threshold. Medicaid is not affected if assets grow over $100,000. The thresholds and consequences do vary state to state.

There is a lifetime contribution limit of $350,000 for ABLE TN accounts. There is also a $15,000 annual contribution limit, which is considered a completed gift to the beneficiary for federal tax purposes.

Planning
If you are someone who has a physical and/or mental disability or a family member caring for a loved one with a disability, I suggest you consult with a legal professional and a financial advisor before opening an ABLE account. Planning with professionals not only helps take the burden off you, but it also ensures you are doing everything by the book.

Jennifer Pagliara, CFP, is an executive vice president and financial adviser at CapWealth and a proud member of the Millennial Generation. Her column speaks to her peers and anyone else that wants to get ahead financially. For more information about Jennifer, visit capwealthgroup.com . This article was published in The Tennessean on Sept. 16, 2019.

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Tales Of Investor Mania

Wed, 11 Sep 2019 19:42:00 GMT

Economic bubbles are created when asset prices appear to be based on implausible or inconsistent views of the future. Asset bubbles, such as those we see today – from cryptocurrencies to marijuana stocks – are nothing new. The first recorded bubble occurred in the early 1600s in the Netherlands, when a tulip bulb traded for upwards of 4,200 guilders (or roughly the equivalent of 14 years average salary of a skilled craftsman). This bubble burst in spectacular fashion in 1637 and was later chronicled by Charles Mackay in his Extraordinary Popular Delusions and the Madness of Crowds .

My neighbor, Scott, tried to get me to buy into the emu business. This was the late 1990s and this ostrich-like bird had become all the craze for providing a healthy alternative to steak. Scott was a hardworking guy from a small town south of Nashville; he’d acquired a hobby farm that he wanted to turn into the world’s emu-breeding capital – despite rumblings out of Texas that the market was softening and that ranchers were getting hurt. At that point, mature birds were insured at $50,000 a pair. Eggs cost $2,000 apiece. But as the Los Angeles Times reported at the height of the bubble, “what looked like a lucrative venture had quickly become a money pit,” costing breeders thousands of dollars a year just to keep the birds alive.

After I turned down the emu opportunity, I remember Scott’s frustration as his first emu chicks died. The University of Tennessee came to the rescue (for a $2,000 consulting fee) and advised that Scott had unwittingly kept the birds “too clean.” The chicks needed dirty pens to create a gut microbiome to properly digest their food, and hence were starving. Eventually, the emu market in Tennessee stalled because of an oversupply.

So what does this have to do with the current monetary environment and the historically low interest rates that have investors pulling their hair out?
The Federal Reserve targets inflation at 2%; while the 10-Year Treasury Rate is slightly over 2%. That means that after you pay taxes on a 10-Year Treasury, you effectively lose money.

Despite this, everyone appears to be fixated on “the boost” provided by the Fed’s .25% rate cut, in a fiscal environment where interest rates are already subterranean – both in the US and internationally. In Japan, for example, a 10-year bond is at 0%. And some European banks are charging customers to deposit their cash. There’s an estimated $10 trillion in negative interest rate debt issued globally. Essentially, investors are paying the government to hold their money .

Let’s put the rate cut in the context of “cheaper” loans: If I decide to expand my business and borrow one million dollars, I would save $2,500 in borrowing costs per annum . Do Chairman Powell and others at the Fed believe that their .25% rate cut is thereby a meaningful stimulant to business growth? I mean, if $2,500 in savings is critical to me to borrow a million dollars, I probably should not do it.

In the absence of Congress and the administration driving fiscal policy that spurs investment and business development, the Fed’s monetary manipulations will always fall short. Investors will be tempted to continue to EMU their portfolios – jumping on meatless burgers, marijuana, art, or whatever the latest craze is for speculative gains. Where are the serious fiscal reforms (for example, a second major overhaul of the tax system) that encourages workforce participation by allowing Americans to keep more of what they make under a simplified tax and budgeting system that they can understand? I would take that over a .25% cut in interest rates any day of the week.

Backdoor Roth IRAs

Maybe Financial Advice Business Isn’t Dead After All

Mon, 02 Sep 2019 20:01:00 GMT

Pacific Life Insurance recently announced it would be halting the digital financial advice service called Swell Investing.

After four years on the market, Swell representatives said they weren’t able to achieve the right scale to sustain operations .

The theme of the automated platform was investing clients in vehicles focused on sustainable businesses, like green technology, clean water and renewables.

But with environmental, social and governance (ESG) funds attracting nearly $9 billion in the first half of the year (compared with $5.5 billion for all of 2018 ), it may be the platform that’s the problem.

One example of such an automated platform is the Charles Schwab Intelligent Portfolio . Introduced in 2015, a minimum of $5,000 is required to begin . Algorithms are used to build and monitor a personalized portfolio.

Since their emergence over a decade ago, robo-advisers have become a popular alternative for investors just entering the market or those looking to simplify the investment process.

According to a recent study from the Pension Research Council at the University of Pennsylvania’s Wharton School, only 5% of Americans utilize a robo-adviser.

A recent Charles Schwab study says these users are predominantly millennials (60%) but found that nearly half of Americans expect to use a robo-adviser by 2025. Still, 70% of those who would or do utilize a robo-adviser want that system to have access to human advice.

For millennials, who came of age during the technological boom, pivoting to online banking and financial services and has been a given. And for those just starting out in the market, a robo-adviser can provide low- or no-fee services and a basic understanding of the market.

One problem with robo-platforms is in the way accounts are set up, largely through a questionnaire about risk aversion. As a columnist in Forbes noted when the aforementioned Schwab product went on the market, “[Robo-platforms] are not providing the wisest retirement advice but merely giving you what you asked for.”

When you work with a registered investment advisor (RIA), he or she is held to a fiduciary duty. This duty means that the advisor must have the clients’ best interests in mind at all times. The argument for avoiding robo-advisers is simple: How can an algorithm have your best interests in mind at all times?

Many headlines touted that robo-advisers were going to replace traditional financial advisors altogether. But data shows that as people become more aware of their own goals, they want real people to help manage their finances. They want someone who can understand their level of risk aversion, educate them on the market and lend an ear to their unique financial challenges and victories. It seems that working with a human is here to stay – at least for a little while longer.

Jennifer Pagliara, CFP , is an executive vice president and financial adviser at CapWealth and a proud member of the Millennial Generation. Her column speaks to her peers and anyone else that wants to get ahead financially. This article was published in The Tennessean on Sept. 6, 2019.

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What Are The Unintended Consequences of Low Interest Rates?

Mon, 26 Aug 2019 20:06:00 GMT

Rising geopolitical tensions and trade wars have led to an increase in market uncertainty and growing concerns about a global growth slowdown. To combat these fears, the U.S. Federal Reserve and central banks around the world (European Central Bank, People’s Bank of China, Bank of Thailand, Reserve Bank of India and the Reserve Bank of New Zealand to name a few) have cut interest rates to spur spending and investment. Put simply, the central banks are telling the market, “We hear your concern, and we have your back.”

But what are the unintended consequences of ultra-low interest rates? Everyone always focuses on the positives – The economy is weak so cut interest rates and stimulate investment; and when the economy improves, companies will make more money and the stock market will go higher. But what are the risks?

The most obvious is the punishment for savers. When interest rates are low, the return on cash, money-market-funds, short-duration Treasury bills and even high-grade bonds is also low. As a result, investors can either accept lower incomes or they can invest in riskier securities to earn the same return they used to.

Additionally, when borrowing costs are low and there is no return on cash, less-deserving projects and companies receive funding. Over time, this can create asset bubbles.

While the U.S. economy seems to be strong in my view – and the U.S. consumer appears particularly strong – when stock volatility increases, it signals a shift in risk appetite. At those moments it is worth taking stock of your investments and their ability to thrive in all market environments.

In a nutshell, there are three types of companies you can invest in:

Conservative Companies: These are businesses that can make interest payments and pay off their debt when it matures out of the cashflow generated by the company.
Speculative Companies: These businesses can make interest payments on their debt but are dependent on the capital markets to constantly roll their debt further out into the future (they are unable to pay down the principal balance).
Highly Speculative Companies: These businesses have no hope of covering their interest expense, never mind their debt. They are entirely dependent on the benevolence of the capital markets to perpetually fund their operations.

If you aren’t sure about the companies you are invested in, now may be a good time to talk to a financial advisor. Just like your personal finances, you always want to be in control of your own destiny. With the 10-year treasury yielding 1.7% (less than the rate of inflation), $15 trillion in negative-yielding debt around the world and several Silicon Valley darlings burning cash for the sake of growth, it might be time to buy companies with strong balance sheets that are paying dividends twice the yield of the 10-year treasury.

John Lueken is the executive vice president and chief investment strategist at CapWealth. This article was published in The Tennessean on Aug. 26, 2019.

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Numbers: Prime Day was Largest Shopping Event for Amazon

Mon, 19 Aug 2019 20:55:00 GMT

On the heels of the most recent Amazon Prime Day, it makes sense to look at this extraordinary company and how far it has come.

Founded in 1994, Amazon has evolved over the past 25 years from a predominately online bookstore to the retailer of choice for consumers in the U.S. and around the world. Amazon has upended the retail industry by democratizing convenience. By providing the consumer exactly what they want in almost the same amount of time it takes to go to the local mall or department store, Amazon has revolutionized the way we shop. At the same time, the company has forced an entire industry to scramble to keep up.

Amazon continues to evolve today, adding original programming, gaming, home automation, cloud services, logistics, brick-and-mortar retail (Whole Foods and Amazon Go stores), a new pharmacy experience (PillPack) and extensive mobile capabilities. By perpetually expanding its addressable market, Amazon has become a larger and larger piece of our daily routines.

While the numbers are still trickling in (and some won’t be disclosed), it is estimated that consumers purchased more than 175 million items on Prime Day, which was held on July 15 and 16 this year. That figure tops last year’s Black Friday and Cyber Monday totals combined! Total sales amounted to an estimated $7.16 billion dollars. Retailers with annual revenue over $1 billion experienced a +72% spike in sales compared to an average week, according to Adobe Analytics.

Prime Day has officially become the Black Friday of the summer, even bringing in Taylor Swift to headline a subscriber-only concert. Competitors from Walmart to Best Buy have now begun offering their own discounts and promotions. But what does the future hold? How much bigger can Amazon get?

Let’s take a look at the company’s current market penetration:

300 million Amazon users
2 million Amazon third-party partners
$232.9 billion in 2018 net sales; +31% growth year-over-year
37.7% market share of U.S. retail ecommerce
5% market share of total U.S. retail sales

Those last two figures are particularly interesting. Amazon currently captures 38% of all US retail ecommerce transactions. That is astounding. However, the company only has 5% market share of total U.S. retail transactions. That is because retail ecommerce only represents 14.3% of total U.S. retail sales ($517 billion out of a total $3.68 trillion in 2018). With ecommerce growing at +15% per year, Amazon has a long runaway for outsized growth moving forward. In addition, the company is just starting to capture a portion of the brick-and-mortar pie.

It is worth taking a moment to recognize the profound impact Amazon has had on consumer preferences and the retail industry at large. And they might just be getting started. In a world fueled by technological change, it is critically important to understand if your investments are disruptors or are being disrupted. While you don’t have to own richly valued technology names, you would be well-served to avoid the companies that they are leaving in their wake.

John Lueken is the executive vice president and chief investment strategist at CapWealth. This column was published in The Tennessean on Sunday, Aug. 4, 2019.

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The Fed’s Pivot

Mon, 08 Jul 2019 22:26:00 GMT

Beginning in December of 2015, the Federal Reserve embarked on a slow, methodical, well-telegraphed interest-rate hiking cycle. Having effectively kept interest rates at zero since 2008, Fed officials began with a small ¼ point (0.25% or 25 basis points) hike in the Federal Funds rate from 0.25% to 0.50%. They proceeded with one quarter-point hike (from 0.50% to 0.75%) in 2016, three quarter-point hikes (from 0.75% to 1.50%) in 2017, and four quarter-point hikes (from 1.5% to 2.5%) in 2018. That era has now ended.

At the June Federal Open Market Committee meeting, officials signaled to the market their willingness, in response to changing economic conditions, to act as appropriate to sustain the expansion. While subtle, the minor pivot in the Federal Reserve’s language signals the end of the hiking cycle and the possible beginning of interest rate cuts going forward.

To take a step back, what is the Federal Funds rate? Put simply, the Federal Funds rate is the interest rate that banks charge each other for overnight loans. In theory, since the loan duration is one-day, it should be the least-risky and, as a result, carry the lowest interest rate. After all, borrowing today to pay back tomorrow is straightforward.

The Federal Funds rate is the benchmark interest rate for the highest quality loans in the market. In a normal interest rate environment, the Federal Funds rate is the lowest interest rate level (the floor) with the yield curve sloping higher as the duration of the loan increases. For example, a bank might charge another bank 2.50% for a one-day loan. The same bank might charge a corporate customer 3.5% for a one-year loan and an individual 5% for a 30-year mortgage. That would represent an upward-sloping yield curve (from 2.50% in the lower left-hand corner to 5% in the upper right-hand corner).

But we aren’t in a normal interest rate environment. We are in an “inverted” yield curve environment. What does that mean? It means that the rate charged on short-duration loans (loans made for one day, one month, three months, etc.) are paying higher yields than loans made for longer durations (five years, seven years, 10 years, etc.).

When this occurs, it is the bond market’s way of telling the Federal Reserve (and other Central Banks around the world) that there are concerns. Right now, those concerns are about the US-China trade war, geopolitics and low inflation. Market leaders think that the Federal Funds rate is too high and that it would be prudent for the Federal Reserve to “cut” rates to stimulate the economy. At the June meeting, the Fed officials said they are listening and willing to react if the situation deteriorates. In general, this is wonderful news for the stock market.

Now that you have the back story, how should you proceed?

First and foremost, I am reminded of the following quote from Charlie Munger of Berkshire Hathaway, Warren Buffett’s long-time business partner and friend: “It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.”

Interest rates are low. Earning ~2.05% on a 10-year Treasury while losing ~1.8% to inflation won’t fund your lifestyle in retirement. Even worse, there is currently $12 trillion of investment grade and government bonds around the world that are offering negative yields. Think about that. If you give me $100 dollars today, I promise to give you back $98 dollars in 5 years. Deal? You must be insane.

Rather than buying low-yield bonds, recognize the Federal Reserve’s pivot as an opportunity to capitalize on a lower potential mortgage rate and refinance or buy your first home. See it as an opportunity to take out a more affordable small business loan and fund your expansion. Acknowledge that, all else being equal, in a lower interest rate environment, stock become more attractive relative to bonds.

While there are many factors that contribute to a well-managed portfolio, thinking logically is by far the most important.

John Lueken is the executive vice president and chief investment strategist at CapWealth. This column was printed in The Tennessean on July 8, 2019.

What is Capital Gains Tax and what does it mean for investors?

Mon, 24 Jun 2019 22:21:00 GMT

We all know we have to pay taxes on income earned. But many people don’t understand exactly how investments are taxed.

When you buy a security, you pay a certain price for a certain number of shares. This is called your cost basis. When you sell a security, you receive a certain price for the number of shares that you want to sell. You will either have a capital gain or loss, depending on if you sold your shares for a more or less than what you paid for them.

If you have a gain or loss, the amount of taxes you pay is based on your income and the length of time you held the security. If you don’t have any gains, net losses of more than $3,000 can be carried forward and used in subsequent years to offset gains. A security held for less than a year is considered a short-term capital gain and is taxed at your ordinary income rate. If held longer than a year, it is considered a long-term capital gain and is taxed accordingly.

If taxable income falls within the categories below, your capital gains rate is 0%.
$39,375 (single/married filing separately)
$78,750 (married filing jointly)
$52,750 (head of household)
If taxable income falls at or over the rates above, your capital gains rate is 15%.
If taxable income is at or over the following categories, your capital gains rate is 20%.
$434,500 (single)
$244,400 (Married filing separately)
$488,850 (married filing jointly)
$461,700 (head of household)

History
The corporate income tax was first instituted in 1909, followed by the federal income tax in 1913, which included a provision for capital gains. The first capital gains tax topped out at 7%.

After World War I, capital gains were taxed at an alternate rate of 12.5% after being held at least two years. Throughout the rest of the 20th century, the gains tax varied based on the amount of time a security was held and an investor’s income.

Until about eight years ago, the “burden of proof” for reporting capital gains was on the taxpayer. As you might imagine, this resulted in a great deal of inaccurate reporting.

In fact, in 2001, there was an estimated $11 billion “tax gap” related to individual taxpayers misreporting income from capital assets (generally owned for investment or personal purposes), according to a report from the U.S. Government Accountability Office (GAO-06-603). The GAO also estimated that 38% of taxpayers who reported the sale of a security that year misreported their capital gains or losses.

In this report, issued in 2006, the GAO therefore suggested that it be required for all brokers or custodians to report to their clients and to the IRS the cost of covered securities that are sold during the tax year. It took a few years, but in 2011, the IRS issued Form 8949 for taxpayers to use in reporting more specific information about each the sale of any stocks, bonds or mutual funds – information most acquire from their broker or custodian.

Capital gains taxation was also addressed by President Obama’s Simpson-Bowles Commission (officially named the National Commission on Fiscal Responsibility and Reform) in 2011 in an effort to identify policies that would create a more sustainable fiscal future. While the commission recommended eliminating the lower tax rate for long-term capital gains in favor of a lower rate on income, the policy changes were never introduced.

Looking to the Future
The most recent development in capital gains tax came in 2018, when Director of the National Economic Council Larry Kudlow and President Trump said they would focus on a second phase of tax reform, potentially lowering the capital gains rate.

But with a current focus on other international and domestic issues, it’s unlikely we’ll see a shift in the way capital gains are taxed anytime soon. Stay on top of it, though, because any changes could affect your investments and financial goals.

Jennifer Pagliara, CFP, is an executive vice president and financial adviser at CapWealth and a proud member of the Millennial Generation. Her column speaks to her peers and anyone else that wants to get ahead financially. This column was published in The Tennessean on June 24, 2019.

Is Uber a Good Investment?

Mon, 10 Jun 2019 22:25:00 GMT

After 10 years as a private company, the innovative ridesharing business Uber Technologies went public on May 10.
With an implied market capitalization of $79 billion, Uber boasted a larger valuation than DowDuPont, US Bancorp, Charter Communications, Morgan Stanley, Gilead Sciences, Caterpillar and Blackrock. That’s more than twice the size of Target.
While the timing of Uber’s initial public offering (IPO) was admittedly poor (it closely followed the IPO of ridesharing rival Lyft and came on the heels of escalating US-China trade war tensions), it was still the most highly anticipated IPO since Facebook in May 2012.
Why? Because Uber has become a household name. It offers an incredible service at a reasonable price and a great story as the disruptor of the entire transportation and logistics market. But, if you’re someone looking to get involved with online stock trading – or even are interested in breaking into the world of the stock market – is it a good investment?

Here’s an interesting fact uncovered in a couple of Bloomberg articles: In late 2015, Uber held a private fundraising round at a valuation of $62.5 billion or $48.77 per share. Company leaders used the additional funds to further invest in the business, grow market share, and expand into new verticals (food delivery, scooters, aviation, etc.). Valuation expanded as a result. But this year, the IPO price of Uber was $45 per share, compared with $48.77 in 2015. How did that happen?

A company’s market capitalization (calculated as total shares outstanding multiplied by share price) can go up, even if the stock price goes down. The trick is that the company issues more shares, which is exactly what Uber has done.

Bloomberg columnist Matt Levine explained this further in his opinion piece the night before the IPO launch, noting that since 2015, Uber issued $8 billion in stock to investors before the IPO. During the IPO, the company issued another $8.5 billion in additional shares. Together, these total $16.5 billion, basically accounting for the difference between $62.5 billion and $79 billion with a relatively flat share price.

From an investment standpoint, this is not the preferred way to grow market capitalization. A company’s market cap usually grows because the share price increases while the share count remains the same or is reduced (share count is reduced when the company buys back its own stock from shareholders). This creates wealth for the investor because his shares are now worth more. This has not been the case with Uber since 2015. In fact, investors in Uber’s 2015 private fundraising round lost money if they sold their shares at the IPO.

Since going public it has only gotten worse. Uber’s stock has been under pressure and continues to trade well below its IPO price of $45 per share. Why is this important?
It’s a reminder to not get caught up in the hype and the hoopla. Despite the fanfare, the exclusivity of being an Uber investor, and the storyline that accompanies a disruptive business, an investment in Uber underperformed a simple investment in the S&P 500 by over 40% since 2015. Since Uber has gone public, the underperformance has only grown.

Uber’s eye-popping $79 billion valuation captured headlines and set records, but a private investment in Uber as early as 2015 has provided a negative return. Like most things, the devil is in the details.

John Lueken is the executive vice president and chief investment strategist at CapWealth. This article was published in The Tennessean on June 10, 2019.

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Changing Times Lead to Evolution for Financial Industry Players

Mon, 20 May 2019 22:32:00 GMT

For most of history, financial advisers and stockbrokers had access to information the average citizen did not. The Internet didn’t exist, so people couldn’t hop online at any point and see thousands of articles about the latest buzzworthy company. Nor were up-to-date financials at the average person’s fingertips. In those times, people relied almost solely on the “insider” knowledge of their financial adviser or stockbroker to make investment decisions.

Technology has certainly caused a big shift in that relationship, as well as in the value that both stockbrokers and financial advisers provide for clients. Other changes in the industry have also caused an evolution of these roles.

The difference between a financial adviser and a stockbroker is sometimes confused, as stockbrokers can serve as advisers to their clients and vice versa. However, the Investment Advisers Act of 1940 determined that a Registered Investment Adviser (RIA), which many financial advisers are, carries a different responsibility than a stockbroker by way of what’s called “fiduciary duty” – putting the client’s best interest first.

Another industry change that further defined and separated these roles occurred after the Tax Reform Act of 1986 when many types of tax-shelter investments, like rental properties, were eliminated and fixed trading commissions were de-regulated. These changes led to the peak of commission-based stockbrokers (think “The Wolf of Wall Street”) and, ultimately, to the progression of the role of adviser as it is today. Advisers offer advice, looking at clients’ wealth holistically instead of acting as a salesperson (like a stockbroker).
In addition to managing investments, financial advisers offer:

Retirement planning : Everyone wants to know, “Do I have enough?” Financial advisers devise a plan on how much to save and what investments to use for clients to be able to retire when they want.
Estate planning : How and to whom do you want to leave your assets when you pass? Financial advisers work with clients, their families and attorneys to ensure financial wishes are carried out in the most efficient way possible, avoiding future hefty legal bills and lengthy probate court timelines.
Tax planning: Clients want to do everything they can to minimize their tax burden. Financial advisers can strategize various account contributions to help reduce taxable income, as well as work with clients’ CPAs to review tax returns and see if there is anything else that should be done.
Other financial goal planning : Many clients have more financial goals than just retirement, like planning for a wedding, purchasing a home or saving for a child’s future education.

The client’s role has also shifted. With so much financial information readily available to them, it’s easy for clients to question every decision their adviser makes. (“Why did you sell X? You should buy Y!”) But, it’s more important than ever to work with a trusted professional who can help sort through the vast amounts of news, advertisements and information (sometimes misinformation) out there and choose investments that help them achieve their specific goals.

The bottom line is the industry has evolved towards relationship-based financial planning, which benefits all parties. Life happens to all of us in the most unexpected ways, and the true value of the relationship is in having someone there to help when that curve ball is thrown that could impact your financial health.

Jennifer Pagliara, CFP, is an executive vice president and financial adviser at CapWealth and a proud member of the Millennial Generation. Her column speaks to her peers and anyone else that wants to get ahead financially. For more information about Jennifer, visit capwealthgroup.com . This article was published in The Tennessean on May 20, 2019.

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America’s Infrastructure Failures, Demands Seen on Local Level

Mon, 06 May 2019 22:39:00 GMT

While Washington remains divided and contentious with very little “across the aisle” initiatives, infrastructure is a potential bright spot. It is rumored that House Speaker Nancy Pelosi and President Donald Trump have discussed working together on an infrastructure package and have held talks as recently as earlier this month.

Now, we all know that talk is cheap and infrastructure plans have routinely taken a backseat to other policy priorities. With the Washington policy establishment migrating toward initiatives to redistribute wealth, infrastructure could finally be in the limelight. Major infrastructure programs have been a favorite of Keynesian policymakers since the 1930s.

Several figures have been tossed around concerning the size of any major infrastructure deal. Trump proposed $200 billion to $1 trillion in his public/private partnership, and Pelosi has touted $1 trillion to $2 trillion in spending. Here’s a look at America’s infrastructure needs:

According to Duke Professor Henry Petroski, traffic congestion delays cost the U.S. economy at least $120 billion a year, while the Department of Transportation estimates that $800 billion is needed to fix America’s roads and bridges.
America’s airport infrastructure is so dilapidated that experts estimate that nearly 40 million airplane trips per year are avoided because of congestion and security delays, costing businesses $35 billion annually.
The American Society of Civil Engineers (ASCE) gave America’s infrastructure a “D+” on its 2017 report card. According to the ASCE’s calculations, failure to improve our roads, ports, inland waterways, levees, etc. could result in almost $4 trillion in losses to gross domestic product by 2025.
The World Economic Forum’s Global Competitiveness Survey currently ranks the U.S. 10th in quality of overall infrastructure.
The EPA estimated that drinking water, wastewater and irrigation systems will require more than $600 billion of spending in the next 10 years.

If you live in, commute to or have recently visited Nashville, you’ve undoubtedly been affected by several infrastructure development projects. The two largest current pain points are the overhaul of Interstate 440 and the Nashville International Airport expansion. While both are inconvenient now, they are mission critical for Nashville’s future development.

The airport’s $1.2 billion overhaul includes adding a new international terminal, gates, security checkpoints, parking, restaurants and lodging to streamline the travel process. Increasing the number of inbound and outbound nonstop flights will dramatically improve the efficiency with which both Nashvillians and guests can travel.

For Interstate 440, traffic was already bad. Anyone who could would avoid the road at peak travel times. Given the growth of the city, things were only bound to get worse. While the $153 million buildout is painful now, it is a necessary investment to drive future productivity, with construction expected to wrap up by August of 2020.

While costs are often staggering, an investment in infrastructure can have real, concrete implications for our economy and productivity.

According to the University of Maryland, the downstream “multiplier effect” from infrastructure spending (think less traffic, less waste, greater efficiency, etc.) could add $3 to the GDP for every $1 invested by 2030.

Right now, there are roughly 14 million American workers employed in infrastructure related sectors. If infrastructure spending increased by 1% of GDP, the industry would add an additional 1.5 million jobs to the economy.

From a business perspective – for concrete companies, trucking companies and heavy machinery manufacturers – it will be worth watching to see if D.C. policymakers can strike a deal to rebuild America.

John Lueken is the executive vice president and chief investment strategist at CapWealth. This article was published in The Tennessean on May 6, 2019.

Knowing your financial destination can help you prepare for accidents, setbacks

Mon, 29 Apr 2019 08:37:00 GMT

How many times have you and your family gotten into a car without knowing where you were going for dinner? This likely happened a lot more before the internet was in the palm of our hands. I know when I was growing up, this was a common problem. We’d pile in the car and drive endlessly until we could all finally agree (after much bickering and sometimes tears) on where to eat. Then, it was off to our destination and nothing else was in our way.

Financial planning is similar to this situation, believe it or not. You can waste time and money fretting over what you should be doing financially if you don’t have clear goals in mind. Once you identify what your financial goals are, you can chart a path toward achieving those goals – you will be headed for the restaurant!

Do you know what your financial goals are? If reading that question leaves you panicked, you aren’t alone.

According to a 2013 Gallup poll, only one-third of Americans utilize a detailed budget. A 2017 study undertaken by Capital One revealed that fewer than half of Americans have established a long-term financial plan. Perhaps most telling, the government shutdown earlier this year highlighted the fact that many Americans (nearly 80 percent, according to a 2017 study) live paycheck to paycheck .

Goals-based financial planning has rapidly become the favored approach of many financial advisers. We start by helping clients set and prioritize goals, and then we help develop a plan to achieve them. We also make sure they stay on track and update the plan as their goals evolve over time. Technology has accelerated the popularity of this planning technique, allowing advisers to create and monitor individualized strategies for clients through innovative software.

If you haven’t identified your own financial goals, here are three steps that should help you get started:

Start by writing down what you think your financial goals are. It could anything from buying a house to paying for a child’s education to retiring at age 60. If you are struggling in this stage, your financial adviser can really help. Most of us talk to clients all day long so we hear every goal that you could possibly imagine and probably some that you haven’t. We can help point you in the right direction.
The next step is prioritizing your goals. Is paying for your child’s college going to trump your planned retirement at age 65? Most of us don’t have all the money in the world, so some sacrifice will be necessary. This step will help you determine what is really important to your family.
The last step is to chart out a plan. You need to figure out how much to save for each goal so that you can achieve it on time. This step is ideally executed with the help of an experienced financial adviser who can help you identify how much you need to save and how to incorporate the plan into your everyday life.

Jennifer Pagliara, a CERTIFIED FINANCIAL PLANNER™, is an executive vice president and financial adviser at CapWealth and a proud member of the Millennial Generation. Her column speaks to her peers and anyone else that wants to get ahead financially. For more information, visit capwealthgroup.com . This article was published in The Tennessean on April 29, 2019.

Top companies enter the market, Lyft-ing awareness of IPOs

Mon, 22 Apr 2019 09:11:00 GMT

Lyft officially became a publicly traded company on March 29, 2019. Close behind, Uber filed paperwork with regulators to go public just a few weeks later on April 11. With these two very popular companies hitting the stock market and others like Slack and Pinterest eyeing a 2019 entry, it seemed like a good time for a crash course on initial public offerings (IPO) and how companies become publicly traded.

An IPO is the first sale of stock issued by a company that has followed the steps laid out by the Securities and Exchange Commission to go public. Before this, the company was owned by private shareholders. After going public, the company will be required to publicly report earnings to shareholders and to the SEC.

While being a publicly traded company offers the opportunity to raise more capital, increase liquidity, offer employees stock options and improve brand awareness, there are drawbacks. It takes a lot of time and expense to turn a company public. The company will also become responsible for reporting to the SEC, and to shareholders, creating a continued expense and increasing liability. And, a privately owned company offers executives more power in controlling how the company is run.

Some of the biggest privately held companies include the candy brand Mars, Publix, Koch Industries and Chick-fil-A, while some of the biggest public companies are JPMorgan Chase, Berkshire Hathaway, Apple and ExxonMobil. The first IPO occurred in 1602, with the formation of the Dutch East India Company, a group of merchant ships given exclusive rights to trade with the East Indies by royal decree.

In their IPO, the merchants raised capital to outfit a fleet of ships. Dividend yields ranged between 12% and 63% from 1602 to 1696, a period which saw the speculation of tulip bulb prices lead to the first market crash.

There are several steps a company must take in order to enter the market through an IPO.

Choosing an investment bank : The company must have a bank or banks to underwrite the costs to sell the first public shares.
Underwriting : The bank, or underwriter, must file several documents, including an S-1 for the SEC, a letter of intent and a registration statement. These documents lay out the company’s initial plan for potential shareholders, as well as certain cost promises to the bank.
Pricing stock: The IPO must be approved by the SEC for the company to set an initial offering date. On the day before the company will go public, the offering price is released. Companies often underprice their initial stock to ensure they can sell as many shares as possible.
Stabilization: The underwriting bank is responsible for ensuring the market stabilizes at a certain price for the security offered, which is often done by purchasing shares at or below the initial offering cost.
Transition: The transition of a stock to market competition begins 25 days after the IPO, as mandated by the SEC. After this time period, the underwriter will provide the company with an estimate of their earnings and valuation.

If you want to get in on an IPO, consult your advisor to see if the company is worth your investment in the long term, or if it’s simply a flash in the pan.

Jennifer Pagliara, a CERTIFIED FINANCIAL PLANNER™, is executive vice president and financial adviser at CapWealth and a proud member of the Millennial Generation. Her column speaks to her peers and anyone else that wants to get ahead financially. For more information about Jennifer, visit capwealthgroup.com . This article published on The Tennessean on April 22, 2019.

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Americans fall short in financial literacy

Mon, 15 Apr 2019 10:03:00 GMT

We teach our children to wear seat belts, to eat vegetables and to wash their hands, but do we spend enough time educating them on the dangers of too much debt or the wonders of compound interest? Do we have real conversations about the long-term financial impact of student loans and high-interest credit card debt?

According to the 2015 Standard & Poor’s Global Financial Literacy Survey, the answer is no. While the U.S. is the world’s largest economy, America is ranked 14th when it comes to the percentage of adults who are considered financially literate (57 percent). To put that into perspective, at 57 percent America is slightly ahead of Botswana — an economy that is 1,127 percent smaller!

Researchers also found that only 37 percent of Americans were able to answer simple questions about inflation, compound interest and diversification. That was down from 42 percent in 2009. While scary in its own right, this also comes at a time when Americans are increasingly charged with taking responsibility for their financial future.

Parents can — and should — help their children get started on the right foot financially by discussing the most important financial decisions a young person will make.

Student debt

College loans are the first time many young people will take on debt. Far too often, the burden of student debt is discussed (or realized) long after the debt has been incurred, and that burden is often carried around for many years after college is over — decades for some.

Student loans are now the second-highest household liability (after home mortgages), and student debt is the most common form of consumer debt to become delinquent, or to be reported to the credit bureau as past due. Since average college debt per student has more than doubled over the past decade, this can have serious ramifications.

Saving early for retirement

With student loan debt taking priority over retirement savings, Americans are falling further behind in saving for retirement — and we are way behind to begin with. According to a 2018 study by Northwestern Mutual, the median retirement savings for Americans between ages 55 and 64 is $120,000. Invested in an inflation-adjusted annuity, that would provide a mere $320 per month in retirement income.

By not starting to save for retirement early, young adults are missing out on the power of compounding interest. We often use the hypothetical example of a young girl who was able to save all her birthday and babysitting money from the age of 14 to 23 ($3,000 per year). Earning 10 percent interest per year on that initial $30,000 investment (never investing another dollar), she would have $1,110,447 by the age of 55. By contrast, a young man who started saving at 24 and invested $3,000 every year until he was 55, earning 10 percent interest every year, would have $663,755.

Credit cards

Compounding interest also works in the favor of banks and lending institutions, and many young people are too easily lured into high-interest credit cards with the promise of greater purchasing power. In today’s impatient, “I need it now” society, young people could benefit from learning about the value of delayed gratification and deferring large purchases to when they can actually afford them before finding themselves overwhelmed by credit card debt.

Unfortunately, parents can’t depend on the schools to start these discussions. According to the Council for Economic Education, only a third of high school students are required to take a course in personal finance and only five states require a semester-long, standalone personal finance course.

Early education around simple financial concepts (credit scores, budgeting, personal balance sheets, compound interest) could dramatically improve the financial decisions of the next generation and help them avoid the common pitfalls of bad credit and high-interest loans.

For more insights, ask your financial adviser or industry professional for their best tips for building a strong financial base for your children and family.

John Lueken is the executive vice president and chief investment strategist at CapWealth. The article was published by The Tennessean on April 15, 2019.

Proposed Tax Changes (and Planning Strategies) Under the Biden Administration Part 2: Capital Gains

Financial Advisors Offer Important Strategies for Tax Season

Mon, 01 Apr 2019 10:06:00 GMT

As we approach April 15th, tax planning is on the minds of most everyone. Gathering all the documents, searching for or meeting with an accountant, and deciding whether or not to file an extension takes up a lot of time and energy. Despite that, with the right accountant like Dave Burton, understanding taxes and filing a tax extension can seem a little less scary. Regardless, taxes need to be taken seriously.

Tax season is a busy time for financial advisors , as well, as there are a myriad of services that advisors provide to help clients prepare to file their taxes.

Whereas a CPA is skilled in income and estate tax approaches, a financial advisor has a broader image of the client’s entire financial puzzle – including insurance, investments, retirement savings, educational savings, employee benefits and retirement planning – and therefore can offer a holistic perspective on his or her tax situation.

For example, the Tax Cuts and Jobs Act of 2017 significantly changed the way Americans approach tax planning. We now have lower marginal tax rates across brackets and an expanded standard deduction – among other changes – which are currently set to expire Dec. 31, 2025. Right now, we’re discussing possible IRA distribution acceleration with our clients in order to take advantage of the favorable tax environment.

Some other examples of tax planning situations to discuss with a financial advisor are:

Estate planning: Many clients are concerned with how they are going to leave their assets after they pass. Some investment vehicles are more advantageous to the beneficiary. Traditional IRAs are often less favorable to inherit than Roth IRAs (which are tax free) or taxable accounts (which receives a step-up in basis, meaning the inherited stocks are more valuable).

Planning for a large purchase: If you anticipate buying a new house, boat or making another large purchase, you should give your financial advisor advance warning. Rather than taking one large lump sum from an IRA in one year (and paying a higher marginal tax rate in that year), one may take several distributions over multiple years at lower rates. Or your advisor might be able to strategize how to take a loss in a taxable account to offset a distribution from an IRA.

Tax bracket flexibility: You might not even realize what you are leaving on the table by not utilizing your entire tax bracket. Based on current needs and situation, an advisor can help create a balance between tax-deferred IRAs, tax-free Roth IRAs and taxable accounts.

The bottom line: Financial advisors serve as an additional resource for clients at tax time, and most are happy to coordinate with a client’s CPA so that everyone is on board with the tax plan. If you’re not sure this is a service your advisor offers, ask! You might be surprised by the answer.

Jennifer Pagliara is an executive vice president and financial advisor at CapWealth and a proud member of the millennial generation. Her column speaks to her peers and anyone else that wants to get ahead financially. For more information about Jennifer, visit capwealthgroup.com . This article was published in The Tennessean on April 1, 2019.

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Beyond ‘Shark Tank’: What you should know about venture capital

Mon, 18 Mar 2019 20:53:34 GMT

Surely you’ve seen an episode of “Shark Tank,” where a nervous-looking group of entrepreneurs stands before a panel of investors and waits for them to tear apart their business. If a panelist chooses to invest in the product, he or she becomes a venture capitalist (VC) in that business, expecting a strong return (25 to 35 percent) on investment. But what the camera doesn’t capture are the lengthy procedures behind striking a deal with a VC.

“Shark Tank,” at its core, is a TV show. It is geared to keep the audience engaged, create excitement and drive viewership. Only a small percentage of entrepreneurs even make it onto the show out of the nearly 45,000 that apply every year. Those who don’t make it onto the show join the thousands of other entrepreneurs seeking traditional venture capital to fund their business dreams.

So, what does that look like off-screen? Whether you’re seeking venture capital for a new business or looking to make a healthy investment, there are some things to keep in mind.

What is venture capital?

Venture capital is financing that investors provide to start-up companies and small businesses thought to have huge growth potential. This investment tends to have more inherent risk because these companies are still in their infancy or need an infusion of capital to take the business to the next level. There is no guarantee that the investment is going to pay off.

Most investors are lucky to simply get their original capital returned, while many never see the money back. VCs are in the game for results like those of legendary start-ups Twitter, Facebook and Spotify, all of which hold billions of dollars’ worth of value. But, the likelihood of a payout greater than $1 billion is less than a quarter of a percent.

Start-up founders typically pitch potential investors with a strategy. If they are successful, the investors might help them at various stages, from seed to growth. Early-stage investors will cut smaller checks to support the company. But once a brand is a bit more established, the owners are likely to ask for more funding from a VC.

The two common types of venture capital are equity and convertible debt. Equity is essentially owning stock in the company, while convertible debt has a repayment date in the future.

History

The first publicly owned venture capital firms began in the U.S. in the early 1900s. Frenchman Georges Doriot, known as the “Father of Venture Capitalism,” founded the American Research & Development Corporation in 1946. The idea was to encourage private sector investment by those other than the extremely wealthy — namely, soldiers returning from World War II. As a public firm, the American Research & Development Corporation ultimately shuttered, but not before providing inspiration for ventures on the West Coast, which depended heavily on the military industry.

The Small Business Investment Act of 1958 was spurred by the race to the moon and provided the impetus for venture capital to grow closer to what it is today, with less paperwork and incentives for managing partners.

A record year for venture capital

In 2018, a record $131 billion of capital investments were made in U.S. companies. Companies known as unicorns, or those worth $1 billion or more, were responsible for 25 percent of that capital last year. And exit values have increased by $37 billion since 2013. It’s a popular funding option without the strict rules of other fundraising methods, and it doesn’t look like it’s going away anytime soon. If you’re an entrepreneur looking for someone to invest in your company, just remember that the investors don’t always get it right. There are plenty of people who were turned down by investment banks and well-off investors time and time again who went on to be more successful than they ever imagined.

Before investing

If you are considering investing as a VC, talk to your financial adviser first. He or she will have access to information you don’t have. Private investments can create diversification for the right client, but also know that you should not take your decision to invest lightly. Unicorns are more difficult to find and invest in than most people think.

John Lueken is the executive vice president and chief investment strategist at CapWealth. This article was published in The Tennessean on March 10, 2019.

5 Tips for Long-Term Care Insurance

Connecting to ‘Future Self’ can Positively Impact Health, Financial Choices in Long Run

Sun, 10 Mar 2019 10:32:00 GMT

There is tremendous value in establishing a connection between your current self and your future self. That’s the implication from a recent study out of the Columbia Business School.

The idea is that the more connected we feel to our future selves, the more we appreciate that some behaviors, even though they have a minimal short-term impact, can be monumental in the long term.

n the study, researchers asked participants to write a letter to themselves, 20 years in the future. They were encouraged to think about who they would like to be, what topics they would deem important, what activities they would like to be doing, and how they broadly envision their life.

The impetus of the study was to encourage healthier habits. If you feel more connected to your future self, you are more inclined to take care of your body today. The skipped workout or the extra donut may not have any immediate impact, but over time, these choices will influence your future self’s quality of life.

What is powerful about this study is that it forces you to consider the long-reaching implications of decisions made today. More importantly, it applies the ramifications of those decisions directly upon your future self. This is an incredible motivational tool. Participants in the study were 1.43 times more likely to exercise and, on average, exercised 1.40 times longer than non-participants. After all, they were improving the quality of their future life!
While the study was health-focused, there are clear self-improvement takeaways for business, investing, personal relationships, and broader skill development.

Futuristic thinking is a powerful tool in developing a financial plan. Currently, several advisors incorporate sophisticated planning tools and software in order to calculate the likelihood that a client will “have enough” in retirement. Assumptions (savings rate, time to retirement, monthly income, etc.) are tweaked until their “likelihood for success” is maximized. This is a valuable exercise, but it often misses the emotional connection necessary to drive meaningful changes in behavior.

A financial plan is just numbers on a screen, but through the power of self-continuity, those numbers are transformed into the activities and quality of life that you will enjoy in retirement. Saving for the future is no longer an obligation, but rather an investment in your future self. It may sound ridiculous, but creating emotional connections is a critical element in changing and improving behavior.

Baseball great Mickey Mantle famously said, “If I knew I was going to live this long, I’d have taken better care of myself.” Having lost several men in his family at a young age, Mickey couldn’t imagine living into his 50s or 60s. His inability to visualize a prosperous future drove poor health and financial decisions throughout his life.

The point is simple: decisions made today can have a long-term impact. The more in tune we are with our future self, the better decisions we might make today in order to ensure a happier and healthier tomorrow.

While abstract, picturing yourself physically walking in your own shoes 20 years from now is a powerful exercise. What can you do today to help ensure that you have a bounce in your step and a bit more wisdom?

Maximize contributions to your retirement plan in order to receive the full employer match.
Take the stairs instead of the elevator every chance you can.
Learn something new on a daily basis. You can do this through signing up for a daily email newsletter, listening to a podcast, or taking a walk in a new spot on your lunch break.

John Lueken is the executive vice president and chief investment strategist at CapWealth. This article was published in The Tennessean on March 10, 2019.

Help your kids learn financial discipline

Pros and Cons of a Cashless Society

Mon, 11 Feb 2019 11:10:00 GMT

Have you recently gone to tip your valet attendant and discovered that you have no cash in your wallet? Possibly worse, you discovered that you only have a $20 bill and must decide – benefactor or Scrooge? Been caught penniless over the holidays as you walk past those iconic red Salvation Army kettles? Forced to write a check for your $7 Girl Scout Cookie order? For me, the answer is yes to all the above and that’s just in the past month! In a New York Times graphic on the share of adults who made or received a noncash payment in 2014, the latest year available for data, the United States came in at 92 percent, with Canada and Britain at 97 percent and Sweden at 99 percent. In Mexico, however, that share was 35 percent, while it was just 22 percent in India.

What are the consequences – both intended and unintended – of a cashless society? Much like we don’t know the long-term consequences of several medicines or our increased obsession with smartphones and electronic devices, the long-term outcome of a cashless society is uncertain.

First, there are obvious consumer benefits:

Zelle, PayPal, Venmo and others make the transfer of cash from one bank account to another seamless. This is mission critical when it comes to paying the babysitter at the end of the night or settling your fantasy football payouts.
Linked credit cards and debit cards make for the time efficient order and payment of practically everything – Amazon, Uber, Netflix or any recurring subscription.
Non-linked credit and debit cards can pay for the remainder. Is anyone else slightly furious when they have to retrieve their wallet to type in a credit or debit card number when placing an order online? It’s laughable if you think about it, but that‘s how economic moats are built. Enabling convenience is a tremendous business plan.
Mobile wallets, like Apple Pay, provide secure, cash-free payments and are rapidly gaining market share in developing countries that lack physical infrastructure or strong banking systems.

In addition, there are obvious societal benefits:

Printing money and coins is expensive. Storing and guarding money is expensive. Both would become relics of the past in a cashless society.
Crime: With an electronic record for every transaction, there is always a trail, making money laundering and other financial crimes more difficult. Digital currency can also shine a light on the black market. How do you pay for drugs and other illegal products and services if there is a permanent digital receipt?
The difficulty of international money exchange would be eliminated, as it all would happen on the back-end.
There’s also time to be saved by eliminating the hassle of physical money. Think of a future where you don’t have to stand in a line to check out at the store!

But there are negative consequences, too:

Electronic payment models would disenfranchise the poor, who are less likely to have access to mobile phones, computers and the Internet.
In an era of unprecedented government access to personal life, going totally digital with finances could allow even more government monitoring.

The biggest concern for most Americans utilizing cashless systems is protecting their privacy and identity through multiple layers of security.

Even as technology improves, cash use in the United States is still prevalent. Right now, there’s $1.7 trillion in U.S. currency in circulation. The Federal Reserve Board estimates the demand for paper currency and will likely continue printing paper money as long as demand exists.

Whether a total pivot away from cash is possible is largely up to the innovators who continue rolling out new ways to avoid pockets filled with change.

Though we aren’t likely to stop paying the babysitter, tipping the valet and buying Girl Scout cookies anytime soon, in the future, we are likely to do so without cash.

John Lueken is the executive vice president and chief investment strategist at CapWealth. This article was published in The Tennessean on Feb. 11, 2019.

Backdoor Roth IRAs

Sat, 02 Feb 2019 10:48:00 GMT

Many of you have probably heard of a Roth IRA. But for those of you who are new to the investment world, I’ll elaborate. A Roth IRA is an individual retirement account that is funded with after-tax contributions. Therefore, the contributions are not tax deductible, but they grow tax deferred; when you make a qualified distribution, there is no tax due. For 2019, you can contribute $6,000 – or $7,000 ($1,000 catch up) for those who are 50 or older.

History
Surprisingly, Roth IRAs are a relatively new investment vehicle. In 1997, Senator William Roth Jr. was concerned about the United States’ low savings rate compared with the rest of the world. The traditional IRA had been around since the 1970s, and Senator Roth believed that a more flexible version of the IRA could help younger investors. At the time, Sen. Roth was the chairman of the Senate Finance Committee and successfully lobbied to have the Roth IRA added to the Taxpayer Relief Act.

In 2000, taxpayers held $77.6 billion in Roth IRA accounts. By 2016, that number had soared to roughly $660 billion. Sadly, Roth died in 2003 and did not get to see the phenomenal growth of his idea over those 16 years.

Backdoor Roth IRAs
One of the caveats that Roth IRAs have is the income limitation, which can be adjusted yearly by the IRS.

If your filing status is single and your income is over $137,000, you cannot contribute to a Roth IRA. If you are married and filing jointly with a combined income of over $203,000, you also cannot contribute to a Roth IRA. Therefore, high-income earners are limited in their ability to participate in this type of retirement savings account.

However, there is a popular way to get around this rule; it’s called a backdoor Roth IRA. This is quite a controversial topic, and some financial advisors will not facilitate this work-around. Essentially, the client has to have a Roth IRA and a traditional IRA open to complete this transaction. He or she will make a non-deductible (after tax) contribution to a traditional IRA and then convert the money to the Roth IRA.

Cautions:

The client must have earned income. You cannot contribute to a traditional or Roth IRA without earning income.
You must be under the age of 70.5. You cannot contribute to a traditional IRA once you reach 70.5 because your required minimum distribution will have to begin.
The traditional IRA that the non-deductible contribution will go to should not have any pre-tax contributions already in the account. If the IRA is empty, then the conversion is much cleaner, and you don’t have to worry about your contributions commingling.
There may still be taxes to pay. There is a pro rata rule that can come into effect. The IRS will treat your IRAs as one big IRA account and you will be taxed on the pro rata, or proportional, percentage of the total pre-tax IRA balances of all your IRA accounts. Therefore, you are forced to pay taxes on part of your pre-tax IRAs when you convert the non-deductible IRA.
But you can avoid those taxes by keeping your IRA empty. The pro rata rule only comes into play if you have non-deductible contributions mixed in with pre-tax contributions.

As you can tell, the backdoor Roth might not be as straightforward as some may assume. Talk to your financial advisor and make sure you aren’t getting into something you don’t fully understand.

Jennifer Pagliara is an executive vice president and financial advisor at CapWealth and a proud member of the Millennial Generation. Her column speaks to her peers and anyone else that wants to get ahead financially. For more information about Jennifer, visit capwealthgroup.com . The article was published by The Tennessean on Feb. 2, 2019.

5 Financial ‘don’ts’ For 2018

What you need to know about dwindling Social Security reserves

Mon, 28 Jan 2019 12:24:00 GMT

The Social Security Administration estimated 63 million Americans received $1 trillion in benefits in 2018. But by 2034, without federal reform, the Social Security Trust Fund projects that pot of money will be empty.

After the 2017 tax bill passed by President Donald Trump, Social Security has once again become a hot topic and will likely factor into next year’s presidential election debates. Here’s what you need to know about the system, instituted by President Franklin D. Roosevelt in 1935.

Who pays and how much?

All of you should know that if you have a job and earn income, you are paying into the Social Security program. What you might not know are the specifics. The government automatically deducts 6.2 percent of each employee’s wages, while those who are self-employed pay 12.4 percent. Taxable salary is capped at $128,400.

Remember, Social Security benefits were only designed to replace 40 percent of a worker’s income in retirement, though the SSA estimates one-third of beneficiaries utilize their benefits as 90 percent of their retirement income.

Will the program run out of money?

It should come as no surprise that the Social Security program is facing many challenges. With Baby Boomers retiring in the recent and upcoming decades, the current workforce isn’t large enough to fill the gap. In the pay-as-you-go program, millennials covering the benefits of current retirees will be less likely to see their own future funds covered as the growth of the workforce slows.

Though the administration’s trustees predict the money to run dry by 2034, that doesn’t mean benefits will stop completely. The money the agency receives will continue, but it won’t be enough to cover program costs. After funds are gone, trustees say the program will provide only 77 percent of benefit payments.

How are lawmakers going to fix the problem?

Fixing the problem is possible, but would require congressional intervention. In 1983, President Ronald Reagan’s Greenspan Commission recommended raising the retirement age from 65 to 67 and a partial tax of benefits. Those changes allowed the agency to take in extra funds to prepare for the impending retirement of the boomers.

Today, lawmakers are considering similar options — raising the tax rate, raising the age of withdrawal again or reducing program benefits — to reform Social Security. Whatever action they decide to take must be dramatic in order to be effective at this point.

What you can do

It’s important now more than ever to create a plan for your retirement that isn’t dependent on Social Security. You can start by taking advantage of any employer-match offered on your retirement savings account and making that your main savings vehicle. It’s surprising how many people don’t take advantage of the full match available through their employers.

If you’re passionate about Social Security reform, lobby your congressman and let them know the issue is a top priority for you.

If you plan to survive off Social Security alone in retirement, you may need to reevaluate your expectations. Remember that this program was created to be a benefit or supplement to retirement, not your sole source of income.

For millennials and Generation Z , I strongly encourage you to stay involved and on top of what is happening because it could drastically affect your future.

Jennifer Pagliara is an executive vice president and financial adviser with CapWealth and a proud member of the millennial generation. Her column speaks to her peers and anyone else who wants to get ahead financially. For more information, visit capwealthgroup.com. This article was publised by The Tennessean on Jan. 28, 2019.

CapWealth Hosts 2019 State of the Union Luncheon

Thu, 24 Jan 2019 12:29:00 GMT

On Jan. 24, 2019, CapWealth hosted a State of the Union luncheon at Richland Country Club, which was attended by nearly 140 of the firm’s clients and employees. At the event, attendees heard perspectives from CapWealth Chairman and Chief Investment.

Officer Tim Pagliara on the state of clients’ investments – what we focus on and how we get our clients to where they need to be. If you would like to view the presentation, click here .

Irrational Exuberance Fueled Quibi's Downfall

Forgotten Bear Markets

Mon, 21 Jan 2019 12:31:00 GMT

On this Christmas Eve, the S&P 500 officially entered bear market territory (20 percent correction) after closing at an all-time high on September 20. The Dow Jones Industrial Average plunged 653 points in the shortened three-and-a-half hour trading session.

If you listened to CNBC, there was no good news anywhere! In fact, it was speculated that Santa Claus was going to be a no-show this year. There was a loss of confidence in everything. The stock market experienced its worst December financial performance in over 100 years and its largest multiple compression in forty years.

Fast-forward three weeks and the market has already rallied approximately 10 percent off those Christmas Eve lows. Sentiment has improved from “the sky is falling” to something more reasonable. While it is impossible to predict the ebbs and flows of investor behavior, being a student of market history can help keep emotional periods in check.

The powerful long-term wealth creation of stocks comes at the ‘cost’ of holding through volatility and downturns. It isn’t fun, and it certainly isn’t easy, but it is critical to achieving your long-term financial goals.

After all, not every market correction is reminiscent of the Great Depression, the Crash of 1987, the bursting of the dot-com bubble or the Great Financial Crisis. In fact, most are relatively short with benign longer-term impacts.

Just going back to the early 1990s, there are two major “pullbacks” that set up some of the best stock market rallies in history.

July 1990 to October 1990 (-19.9%): In the summer of 1990, the Gulf War was just getting underway. Interest rates had been rising since the late 1980s and stocks had posted positive gains every year from 1982 to 1989. Following the 20 percent summer swoon, the S&P 500 would end the year in negative territory, down 3.1 percent. However, they would go on to post gains in every year from 1991 to 1999 in what became one of the most incredible stretches for US stocks in market history:

1991: +30.47%
1992: +7.62%
1993: +10.08%
1994: +1.32%
1995: +37.58%
1996: +22.96%
1997: +33.36%
1998: +28.58%
1999: +21.04%

April 2011 to October 2011 (-19.4%): Contagion fears from the European sovereign debt crisis to Spain, Italy, and France resulted in the first-ever downgrade of the United States credit rating from AAA to AA+ on August 6th. The US had enjoyed a AAA credit rating since 1941. While only eight years ago, investors have quickly forgotten how scary this was at the time. There was talk of a double-digit recession and stock market volatility exploded. For all the noise, the S&P 500 ended the year slightly positive (+2.1 percent) and was off to the races…

2012: +16.00%
2013: +32.39%
2014: +13.69%
2015: +1.38%
2016: +11.96%
2017: +21.83%

2018 was the first negative calendar year for the S&P 500 since 2008. It isn’t fun, but it also isn’t unprecedented, and it certainly isn’t uncommon. Risk assets (stocks) are going to dish out bad periods from time to time. That is just a short-term cost of investing. What’s important is to remember the big picture.

In 2017, Warren Buffett shared his oft-expressed belief that, “over the long-term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression, a dozen or so recessions and financial panics; oil shocks, a flu epidemic, and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.”

The fundamentals of the US economy are strong today and the tailwinds of corporate tax reform, deregulation, and improved globe trade policies (ultimately) will be positive catalysts for years to come.

John Lueken is the executive vice president and chief investment strategist at CapWealth. This article was published in The Tennessean on Jan. 21, 2019

Plan your way to a secure retirement

Investing: Millennials are embracing trend of retiring early; should you?

Mon, 14 Jan 2019 13:28:00 GMT

The following column from Jennifer Pagliara , CapWealth Senior Vice President and Financial Advisor, was posted by The Tennessean on Jan. 14, 2019.

There is a constant barrage of media that tells us millennials are burdened with more debt than ever before and are going to have to retire later than ever. However, there is a new movement that has popped up around the United States of professionals who are on FIRE. No, not literally. They are taking advantage of FIRE, the savings methodology acronym which stands for “Financial Independence, Retire Early.”

The idea of FIRE can be traced back to Vicki Robin, a 72-year-old who turned an inheritance in her 20s into an income that sustained a modest lifestyle in the 1970s. She co-authored the book “Your Money or Your Life” in the 1990s. Now, the principles from the original are making a comeback in a revised second edition released in 2018.

In general, this movement is for people who would like to retire much earlier than the traditional age of 65. The participants want to enjoy their youth and not be beholden to a traditional 8-to-5 job. Their retirement often involves doing creative, enjoyable work at a low salary or volunteering, while living primarily off money generated from investments . But some take a true retirement, swearing they have never worked a job for money in their early retirement.

Though they may be unaware of the trendiness of their financial strategy, I have clients participating in this movement. So I do have some firsthand experience and tips for anyone thinking this might be something for them.

Know your own goals: Everyone has different financial goals they want to achieve. If you don’t know what yours are, it’s time to start thinking about them. You might have to make some compromises if you want to retire early, so prioritizing your goals will be crucial.

Discipline: No one said that it was going to be easy to be retire early. It is going to take a lot of discipline and effort to save as much as you need to live off your investments. Most advocates of this movement are saving between 50 and 90 percent of their take-home pay. That means cutting back on entertainment, dining out and traveling.

Invest: You are not going to be able to retire early with just saving alone. Your money needs to not only to beat inflation , but also have significant enough return to help you achieve your end goal. This is the most important thing to discuss with your adviser.

Additional streams of income: Working one job might not provide enough income to achieve your end savings goal. Having a side hustle is not uncommon for these participants to help offset living expenses.

Retiring early might sound like the dream, but there are many aspects you might not have thought of that your adviser can provide input on.

Inflation: Don’t forget to factor in the rate of inflation, which will steadily eat away at 3 percent of your assets.

Health care: A 21-year-old with no preexisting conditions living in Tennessee currently pays around $2,700 each year for health care, a cost that will only rise with the rate of inflation. The ability to take advantage of a spouse’s health care plan could be a boon.

Account limitations: With most retirement accounts, like an IRA and 401(k), you won’t be able to withdraw until you reach age 59.5 without incurring a 10 percent penalty fee. Therefore, you need to have a firm understanding of where to properly contribute your money so you have access to it without penalty.

Returns: Finally, you need to ensure that you have realistic expectations about the return on your investments . If you anticipate a higher return than is achievable based on your investment allocation, it is going to hinder your time horizon on when you can retire.

Ultimately, you need a strategy that best suits you. A financial adviser can help you develop a plan specific to your situation, and he or she can guide you on how much you need to save and what to invest in to achieve your final goal.

Jennifer Pagliara is a financial adviser with CapWealth and a proud member of the Millennial Generation. Her column speaks to her peers and anyone else that wants to get ahead financially. For more information about Jennifer, visit capwealthgroup.com.

Company Executives

Investing: Are your expectations aligned with reality?

Sun, 16 Dec 2018 13:36:00 GMT

The following column from Jennifer Pagliara , CapWealth Senior Vice President and Financial Advisor, was posted by The Tennessean on Dec. 16, 2018.

In the midst of the holiday season, the most magical time of year can engender unrealistically high expectations in all of us. As if the pressure to get the perfect gift for everyone you know isn’t enough, there are a host of parties and events to attend. And to put a cherry on top, most companies are trying to wrap up the year, potentially adding to your workload.

It’s easy to start the season feeling all warm and fuzzy, only to wind up wondering what happened to the magic once it’s all said and done. One way to keep your wits about you — and actually enjoy the holiday season — is to set realistic expectations for what can be accomplished amidst the year-end, holiday hustle and bustle.

The same can be said for your investment portfolio and saving for retirement. In our business, the best thing we can do for clients is to help them understand the factors that affect their returns and set realistic expectations for future earnings.

This was brought into the light during a meeting I recently had with new clients. They, like me, are millennials and graduated from college during the financial crisis. Because of this, their investment accounts and employer plans have had exponential growth, as they have capitalized on the bull market we’ve been experiencing. They said to me, “If we can keep our accounts growing at an annualized rate of 14 percent, I think we’ll be happy.” Not only was I shocked by this statement, I knew it was my duty to realign their expectations.

So, what should investors expect their returns to be? Well, you can look at the S&P 500, the index made up of the 500 largest American companies, and you’ll see that it has returned approximately 10 percent per year from 1928 to 2016. However, that’s not an appropriate way to benchmark potential future returns — there are so many additional factors that must be considered.

One major factor is inflation — many people don’t account for inflation in their retirement planning. If you accounted for average inflation of 3 percent each year, the real return of the S&P 500 noted above would be more like 7 percent.

A few of the other factors to consider are:

Risk tolerance: There is a principle called the risk-reward trade-off that affects the potential return an investor can get. As the potential return rises, there is generally an increase in risk. Everyone would love to take no risk and have an annualized return of 15 percent, but that’s just not possible. As we all know, money can be a very emotional topic. You need to be on board with the amount of risk you are taking to ensure you are comfortable with the range of possible outcomes.
Time: As the saying goes, if it seems too good to be true, then it probably is. Generally, there are no successful get-rich-quick schemes in the stock market. Time is a huge factor. The more of it that you have, the better. It is easier to withstand the market corrections when you have time to make up for it.
Fees: No one wants to pay more than they have to in fees. Generally, financial advisers charge somewhere around 1 percent. Investors need to account for this in the long term.
After explaining to my clients that the average return (over a long period of time) was actually closer to 7 percent, they started to realize how extraordinary their returns have been over the last 10 years.

I advise everyone out there to ensure that your expectations are in line with what your financial adviser can deliver based on all of these factors. Once you have all the information about your investments, you can begin to accurately prepare for the future. Jennifer Pagliara is a senior vice president and financial adviser with CapWealth and a proud member of the millennial generation. Her column speaks to her peers and anyone else that wants to get ahead financially.

Adults aren’t vanishing, they just look different

CapWealth Founder Featured in December Lifestyles Pubs

Thu, 06 Dec 2018 13:41:00 GMT

CapWealth Founder, Chairman and CEO Tim Pagliara is featured in the December issue of our Nashville area Lifestyles magazines, including Brentwood Lifestyles, Green Hills Lifestyles and Urban Nashville Lifestyles, just to name a few.
The publications’ photographer and editorial coordinator, Rick Murray, sat down with Tim to learn a little more about his passions and his journey from oldest of seven children to owner of one of the top investment advisory firms in Tennessee.

You can read the article about Tim online here: http://www.brentwoodlifestylepubs.com/2018/11/28/tim-pagliara-wealth-builder-adventurer-and-philanthropist/

7 tips for millennials ready to buy a ride — not hail it

How to Avoid Overspending This Holiday Season, Especially You, Millennials

Thu, 22 Nov 2018 18:30:07 GMT

It may be the most wonderful time of the year, but it can also be the most expensive.

December is the most expensive month to travel, and for many, it’s the most costly month of the year.

Holiday vacations and excursions, parties, cards, gifts and even clothing can add up quickly.

According to a recent story from CNBC, 41 percent of millennials plan to spend more this holiday season than last , an average of $861.

That’s compared to the national average holiday spending, which is $819 across a group divided into parents, millennials and those with $100,000+ incomes.

How do millennials spend for the holidays, and how is it different from other generations?

First, we know millennials are more likely to value travel and experiences over material items, and Christmastime is no exception. Keep in mind that while December is the most expensive month for travel, January is the cheapest. Perhaps an excuse to escape the post-holiday blues!

Here’s a surprising statistic: Millennials are more likely than baby boomers to set and stick to a budget , according to TD Ameritrade’s Next Generation Research report.

But when Credible.com, a student loan refinancing website, surveyed a group of 500 millennials with credit card debt, they found nearly half had no budget in place for the holiday season.

By simply creating a spending plan, you’re more likely to follow through and keep your hard-earned money in your saving account through the new year.

Here are some suggestions to avoid overspending around the holidays:

Use cash to become more aware of your spending. If you’ve been saving extra from a side hustle , designate that money towards gifts and holiday outings.
If you must use credit cards , pay attention to cashback bonus opportunities in categories where you might be doing your holiday shopping.
Take advantage of sales , but don’t go overboard. You might find a great deal on a TV for your mother, but don’t get sidetracked by the sale on that expensive pair of shoes.
Instead of paying for a pricey holiday photo shoot and custom Christmas cards, create your own cards through low-priced sites like Snapfish or at Costco’s Photo Center, using photos taken on your smartphone throughout the year.
Instead of hosting a huge holiday party, plan a potluck and have each of your friends bring their favorite dish.
Set a limit for holiday get-togethers with friends, like one lunch and one dinner per week. Or, spend time volunteering together for a local nonprofit instead.
Need a couple new outfits for the holidays? Add it to your holiday budget to avoid mindless shopping for yourself when buying gifts for others.
When it comes to budgeting for the holidays, I also have a few tips and tricks. If you are a diligent budgeter and know what you have spent in past years during the holiday season, go ahead and budget that much ahead of time. Using this method, you’ll be able to either put aside extra money each month throughout the year or cut down other areas of your budget to compensate for this increase in spending at the end of the year.

Another tip is to limit how much you spend per person. Start by making a list of who you need to buy gifts for and what your total budget is. Then either allocate an equal amount to each or set different amounts based on who you are giving to.

If you can plan far enough in advance, you may even consider buying presents for those on your list throughout the year. This helps spread out the spending and alleviates the pressure on the November and December budgets.

The holidays are already a stressful time of the year and planning ahead can save you so much headache.

Jennifer Pagliara is a senior vice president and financial adviser with CapWealth and a proud member of the Millennial generation. Her column speaks to her peers and anyone else that wants to get ahead financially.

More ways to save: Ms. Cheap: 9 popup sales of the season not to miss

Enjoy holidays on the cheap: Ms. Cheap Guide to Holidays 2018: 92 free things to do for a fun-filled, joyful season

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End of QE May Signal Shift Toward Stocks

Keeping your cool — and taking action — during market corrections

Mon, 19 Nov 2018 14:16:00 GMT

The following column from John Lueken , CapWealth Executive Vice President and Chief Investment Strategist, was posted by The Tennessean on Nov. 19, 2018.

Investing is hard, but not from a technical or fundamental standpoint. Most individuals, if interested, can figure out how to build a discounted cash-flow model or learn about the economic projections that drive a global marketplace. No, investing is hard because it is emotional. It is really emotional at times. And, it is really emotional right now.

The collective stock market peaked on Oct. 3 and has been under severe selling pressure. Why? Market pundits will cite an escalating trade war with China, a budget impasse between Italy and the European Union, failed negotiations around Brexit, rising interest rates and the recent, highly contested mid-term election. But the market knew all of that before Oct. 3.

The trade war with China has been escalating for the past several months. Italy and the European Union have been battling since early summer. Brexit has been an ongoing issue for more than two years. The Federal Reserve has been hiking the federal funds rate since December 2015 while being the most “transparent” Fed in history. Mid-terms occur every four years like clockwork. So, why now?

The answer could be anyone’s guess. We can’t control what the market is going to react to and when. Most importantly, we can’t control the temperament (emotional state) of other investors. To remain rational while others are “losing their heads” requires an understanding of your specific goals and objectives.

For new and younger investors — millennial investors, for example — a market correction is a gift. Buying stocks at lower valuations, higher dividend yields and decades of future compounding is the secret to wealth creation. Prospective purchasers of stocks should much prefer sinking prices.

For anyone who is a “net-saver” — those who make more than they spend in a given year — a pullback in stocks isn’t going to impact their current lifestyle since they don’t expect to need those savings until well into the future.

While it is largely counterintuitive to hope for a market pullback, it is a great way to reframe your mindset to be able to act during volatile markets. While everyone would love an orderly market that slowly and steadily marches higher, that will never happen. There are too many factors and emotions to consider. However, the investor that can emotionally detach from the whims of the market and view short-term corrections as an opportunity to buy their favorite investments at lower prices, will be substantially better off — both financially and mentally.

For those closer to retirement, it can be helpful to think about your investments in different buckets. One bucket should fund your current lifestyle for the next couple of years and should primarily be comprised of cash and short-term investments. While still meager, rising short-term interest rates are finally protecting this pool against inflation and offering some yield to reward savers.

The other bucket for those nearing retirement should have a longer-term view and include stocks. A longer time horizon cushions against the near-term emotional fluctuations of the market, and while every investment decision and portfolio should take into consideration the unique circumstances of that investor, stocks have been the greatest creator of financial wealth in human history.

Owning stocks is not for the faint of heart, however, as evidenced by this recent bout of volatility. In order to minimize the emotional toll on your well-being, change your mental approach. At CapWealth, we own pieces of businesses, not stocks. We know as much about our portfolio holdings as possible to avoid being “emotionally scared” out of them when markets correct.

Fifty years ago, the average stock was held for 14 years – today it is disposed of after 11 months. Short-termism creates irrational buying and selling for everything to do with the near-term direction of stocks, but nothing to do with the long-term value of businesses. As Benjamin Graham said, “Mr. Market can be our servant or our master.” Since the goal of all investors is to be our “own” boss in retirement, let’s continue to choose the former.

Controlling your emotions is key to long-term financial success. The best recipe for controlling your emotions is to have a financial plan that you understand. John Lueken is the executive vice president and chief investment strategist at CapWealth.

Investing Wisdom: Start Young, Start Small if Need Be, and Stay the Course

Study: Millennials reaping the benefits of the side hustle

Mon, 12 Nov 2018 14:23:00 GMT

The following column from Jennifer Pagliara , CapWealth Senior Vice President and Financial Advisor, was posted by The Tennessean on Nov. 12, 2018.

Earlier this year, Bankrate released a new study about the side hustle . According to the survey, nearly 4 in 10 Americans have a side job (about 37 percent of the population). Millennials were more likely to have a side hustle than other generations, however, with 38 percent of that generation alone reporting that they make money from a side hustle at least once a month. Overall, though, more than half of all millennials – 51 percent – report having an occasional side hustle. That caught my attention. The study also noted that the average monthly earnings for millennials with side hustles is almost $580, with 15 percent of side-hustling millennials taking in more than $1,000 per month. That’s significant additional income for these early earners (and investors/savers) – and I’d say it also provides a case against the “lazy, entitled millennial” stereotype.

So, what is a side hustle?

The term “hustle” might conjure a scandalous, back-alley pretense, but a side hustle is just an extra job, often done occasionally or on a part-time basis, to earn extra money outside of a regular paycheck.
According to Bankrate’s survey, the most common side hustles are home repair, landscaping, online sales, crafts and childcare. And, while Uber and Lyft get a lot of attention for the rise of the gig economy, more Americans hustle as bartenders than ride-share drivers.
Those wanting to take a big leap chose real estate as an industry to start side hustling due to the huge profitability opportunities. Not only is the money side of things attractive, but there are many different directions those choosing to get involved with real estate could go, including becoming an agent, wholesaling, or getting involved with buy and hold or fix and flip . While real estate can seem like a scary step to make, this is definitely a side hustle that can mean profiting more than anticipated.
The gig economy describes today’s environment where temporary positions have become more common than ever, providing opportunities for freelancing rather than being tied down to one job or company – and saving companies money in terms of benefits, office space and training. A study by Intuit has predicted that by 2020, 40 percent of American workers will be independent contractors.

What’s the benefit?

So, what’s the draw? Why are millennials so eager to participate in this new gig economy? Here’s what I’ve learned from my experience.
Paying off debt . It’s not just student loans millennials are trying to pay off. Because of the extreme availability of credit cards, many have racked up credit card debt and are now trying to climb out of the hole they’ve gotten themselves into.
Extra cash to supplement their lifestyle. It’s expensive to live in today’s world, and while they haven’t yet reached their full earning potential, millennials can use the additional income to fund their social lives, go out to eat more often and take vacations.
Saving for retirement . Millennials – and others in the gig economy – are using the extra income to save for retirement. Their existing budget may not allow for the extra savings needed to boost their retirement funds, so the side hustle allows money to go straight to those savings.
And finally, flexibility. The traditional 8-to-5 job just doesn’t appeal to some people. Therefore, some side-hustlers are turning their temporary trades into a permanent career choice . The freelancer lifestyle also provides flexibility to take on jobs and projects that they want to work on, when they want to work on them – and offers the opportunity to take time off in between. So, whether it’s to support or supplement their current lifestyle or to secure a comfortable future lifestyle, the side hustle is affording millennials the opportunity to get more out of life.
Jennifer Pagliara is a senior vice president and financial adviser with CapWealth and a proud member of the millennial generation. Her column speaks to her peers and anyone else that wants to get ahead financially.

Phoebe Venable Talks Estate Planning in StyleBlueprint

Mon, 29 Oct 2018 14:29:00 GMT

CapWealth President and COO Phoebe Venable recently chatted with StyleBlueprint’s Kate Dore about why families need an estate plan. Phoebe pointed out that not having an estate plan can cause a lot of stress for some families – especially when the estate is complicated – and making mistakes can be costly and can cause a lot of problems for the family you leave behind. She also offered insights on communicating about the plan with heirs and how education is necessary to ensure the next generation will be good stewards of what’s left to them.

Kate compiled Phoebe’s insights into her article, “7 Legitimate Reasons You Need a Legacy Plan.” You can read the article online here: https://styleblueprint.com/nashville/everyday/responsible-inheritance-capwealth/

Phoebe Venable: Tapering signals economic strength

Should You Have a Separate 529 Account for Each Child?

Wed, 17 Oct 2018 15:40:00 GMT

529 Plans are important elements in our clients’ financial plans, especially now that they can be used for can be used for K-12 educational expenses (up to $10,000 annually). It’s common practice for families to open one 529 for each child, but in this Schwab “Ask Carrie” column, the idea of having one 529 for multiple children is discussed. It offers some interesting insight on 529s in general that thought we’d share. Check it out here: https://www.schwab.com/resource-center/insights/content/should-you-have-separate-529-account-each-child

Jennifer Pagliara Named to The Women’s Fund Board

Fri, 05 Oct 2018 15:43:00 GMT

Jennifer Pagliara, CapWealth Senior Vice President and Financial Advisor, was recently added to the Community Foundation of Middle Tennessee’s Women’s Fund Board.

The Women’s Fund Board is composed of community leaders who believe deeply in ensuring that the needs of women and girls in Middle Tennessee are met both today and tomorrow. The Board’s members include a diverse group of women with a common passion for the Middle Tennessee community and the desire to improve the lives of all of its women and children.

You can learn more about The Women’s Fund here: https://www.cfmt.org/community-leadership/community-initiative/the-womens-fund/

Alibaba IPO a Myth in The Making

CapWealth’s Jennifer Pagliara Offers Insights in StyleBlueprint

Mon, 01 Oct 2018 15:46:00 GMT

CapWealth Senior Vice President and Financial Advisor Jennifer Pagliara recently shared her expertise with StyleBlueprint for an article on Millennial Money.

For the article, Jennifer audited a local millennial’s budget and provided her insights on the young woman’s spending and saving habits. She also shared her advice for tools that anyone can use to create a budget and monitor their spending and saving, as well as provided insights on how millennials should be saving, what to do about student debt and how to plan for upcoming expenses, such as buying a home.

Read the article online here: https://styleblueprint.com/nashville/everyday/capwealth-diary-of-a-millennial/

College Is Expensive, but Not Getting Degree Costs More

“Gray Divorce” on the rise

Wed, 05 Sep 2018 15:56:00 GMT

This post was originally published on Charles Schwab’s Advisor Services website and can be accessed here .

People are living longer, and divorces after age 50 are happening at twice the rate they did just a generation ago.* They are seeking the guidance of such law firms as petersmay.com to help them get through this in the best legal way possible. Partners in these gray divorces are reinventing themselves, going their own way, and often breaking with their longtime financial advisors. But an advisor who serves as a trusted partner and knowledgeable resource during these difficult times stands to retain these clients-and potentially grow their business-in the process.

What’s behind the trend in gray divorce?

Older couples are contacting a fort collins divorce attorney to begin divorce proceedings in increasing numbers. Financial advisors can show up as strong advocates by providing comprehensive educational and emotional support on the complexities clients face when going through “gray divorce.” (Photo: Charles Schwab)

The most influential driver behind the trend is straightforward: longer lifespans. Today, the average American lives to age 82**-nearly 20 years after the average retirement age. When lives were shorter, retirement often amounted to 10 or 15 years, with most of that time occupied by personal health concerns or taking care of an ailing spouse.

Now not only is there more time to fill in retirement but, according to Haleh Moddasser, a financial advisor who specializes in gray divorce, the quality of those days is much better. She notes that the amount of time people in retirement spend in nursing homes has shrunk from 10 to 2.4 years, a decrease she attributes to healthier lifestyles and advances in medical treatment.

“What does that mean?” Moddasser asked at a recent Schwab event. “It means that people have an opportunity to reinvent themselves. Second careers. Hobbies that they never thought they would do. Travel. And, yes, new partners with whom to spend the rest of their lives.”

Societal factors also are contributing to the rise in gray divorce. In the past, the social stigma of divorce prevented couples from this kind of reinvention. Baby boomers were the first generation to divorce in large numbers. Compared with previous generations, women of today are increasingly earning their own living, building assets, and establishing financial independence. And those whose financial lives are intertwined with a spouse’s are now supported by laws that help prevent dependency. Going through a divorce with all the legalities that happen can be time-consuming and draining, so a family law jacksonville fl practice, or one closer to their area, will be needed to make sure this new transition goes through smoothly that satisfies both sides.

Financial setbacks

Every divorce can create uncertainty-for both parties. But late-stage divorce comes with its own heightened pressures. Recent research conducted by professors at Bowling Green State University found that gray divorce tends to diminish wealth more than divorces in earlier life stages, since younger couples have more time to recoup related financial losses.***

Moddasser has found that divorce at this stage can be particularly challenging for women, even though they initiate two-thirds of all gray divorces. If women have taken time off from full-time work to help raise children during the marriage, divorces can leave them vulnerable to financial difficulties after separation. While numerous studies show that men ultimately achieve or exceed their marital standard of living after divorce, women often do not. One survey found that the average divorced woman’s income falls by more than a fifth-and remains suppressed for many years.****

Women and the trust void

For a person facing financial uncertainty, turning to their financial advisor for help seems like a wise first step. But that’s true only if the financial advisor is seen as trustworthy. Moddasser says that women tend to be skeptical when it comes to financial services providers. She points to research showing that two-thirds of women report finding the financial industry as a whole to be untrustworthy. She says many feel overlooked or patronized by financial advisors. Some women may also have the perception that their advisor’s loyalties lie with their ex-spouse.

So it’s no surprise, Moddasser says, that 70% of wives cut ties with their financial advisor as soon as they’re divorced or widowed.

Given that women control 51% of the nation’s wealth-a share Moddasser says is forecast to grow to 66% by 2030-this lack of trust is troubling for advisors. But advisors can embrace the opportunity to build trust with female clients by helping them get ahead of the financial and emotional challenges specific to gray divorce.

Understanding the journey

The surest way to meet clients’ needs is by understanding and relating to them. Experience helps: The more clients you’ve worked with, the higher the likelihood that you’ve encountered others in similar circumstances. But no matter how many people you’ve helped in the past, every client is different. And so is every gray divorce. Each client has their own financial, emotional, and psychological struggles, which can be exacerbated by the dissolution of a marriage.

The emotional dimension is often a blind spot for both women and men, says Moddasser. Couples involved in a gray divorce often feel anger, guilt, and fear. When these emotions bubble over, it’s a bad mix, she says. So she advocates empathy. “When you’re dealing with this couple, we’re not trying to have a zero-sum game,” Moddasser says. “It’s about creating a win-win scenario, where each party has the best chance to relaunch a future life.”

Mastering the initial meeting

Win-win scenarios are the result of careful planning, interaction, and understanding. But first, it’s important to step back and see the lay of the land. This is just as true for new clients as it is for longstanding ones. Divorce is a life-changing event, and even your most familiar clients may be facing new feelings and new needs.

Moddasser recommends creating a road map-a series of sequential objectives that give you the information you need to match your client’s situation to the right solutions and resources. She urges advisors to get to the bottom of three questions whenever they’re engaging a client going through a gray divorce:

Who is this person?
What are they feeling?
What do they need?

Avoiding financial pitfalls

Ultimately, your financial expertise is what will allow you to create the greatest positive impact for your divorcing clients. It’s why they turned to you. And during a gray divorce, couples are facing financial challenges they may not even recognize-challenges that can be, at best, time-consuming headaches and, at worst, wealth-eroding crises.

To better advocate for clients, you should help them understand the unique issues they face:

Retirement spending. People considering divorce tend to think they will spend less money on their own, but the opposite often is true: Newfound independence can inspire them to travel, dine out more, or splurge in other ways.
Inflation. Those with scant experience managing their finances may not appreciate how inflation erodes their purchasing power over time.
Alimony. Court-ordered spousal support is not indefinite. At most it will be paid out for half the length of the marriage and is often curtailed at retirement.
Taxes. Alimony will not be tax-deductible after 2018. Tax surprises may loom in Investment Retirement Accounts and low-cost stock positions, which are among the favored investments to swap in divorces.*****
Administration. Plan custodians typically transfer assets pursuant to a qualified domestic relations order (QDRO), but it often remains in cash, not earning interest.
As always, diligence pays. Moddasser has seen extreme cases in which a simple custodial error has led to a “huge gap” between what the divorce attorneys settled on and what actually ended up in the recipient’s account. She stresses that if you can catch such an error on a client’s behalf, “you will have a client for life.”

Empowering through projections

For many, simply seeing how their money can work for them in the market-with the aid of projections for long-term returns and life expectancy-can help deepen a relationship, especially if it leads to better decision-making.

Good advice doesn’t-and shouldn’t-have to wait until after the divorce is finalized. In many cases, advisors can play a pivotal role by doing some of the complex financial projections involved. Moddasser shared the example of one client who fundamentally changed the trajectory of her net worth. Prior to settlement, projections showed her the higher value of agreeing to accept cash instead of the marital home, as well as a non-taxable lump-sum payment in lieu of alimony. This savvy approach to planning services is not uncommon. Moddasser notes that while studies show women may be less likely to invest, they are very methodical and rational when they do. This often makes them more receptive to hearing about long-term financial security as opposed to returns. So talk to clients and introduce projections early in the negotiation process to help them make informed decisions.

The power of a plan

Becoming a compassionate advocate

Gray divorce is a growing trend, and advisors should prepare for how to best serve clients going through a late-life separation. Help clients considering a breakup understand what’s at stake, including the potential impacts on their retirement and family relationships. Use financial projections to help those who have decided to move forward visualize different financial futures. Ultimately, it’s looking at the complex whole that allows advisors to be a stronger advocate for their clients’ best interests-and positions them as a trusted resource and partner for the long term.

To read this article on the Charles Schwab Advisor Services website and learn more about the author, click here .

* Pew Research Center analysis of the 2015 American Community Survey and 1990 Vital Statistics following the methodology in Brown and Lin’s “The Gray Divorce Revolution: Rising Divorce Among Middle-Aged and Older Adults, 1990-2010.
** John Diehl, “MIT AgeLab/8,000 Days of Retirement: A Phase of Life Waiting to Be Invented” IMPACT® presentation, November 2017.
*** I-Fen Lin, Susan L. Brown, and Anna M. Hammersmith, Marital Biography, Social Security, and Poverty, Bowling Green State University, November 2015.
**** Stephen P. Jenkins, Marital Splits and Income Changes Over the Longer Term, Institute for Social and Economic Research, University of Essex, February 2008.
*****Tax Cuts and Jobs Act, Pub. L. No. 115-97, 131 Stat. 2054 (2017).
Based on Haleh Moddasser’s IMPACT® 2017 presentation, “Gray Divorce: Threat or Opportunity.”

How to Identify Your Children's 'Money Style'

Move over millennials; time to get to know Generation Z

Sun, 26 Aug 2018 17:33:00 GMT

The following column from Jennifer Pagliara , CapWealth Senior Vice President and Financial Advisor, was posted by The Tennessean on July 2, 2018.

A 2017 report from 747 Insights and Collaborata, called “Generation Nation,” surveyed more than 4,000 Americans from their late teens to early 70s, gathering opinions on everything from work friendships to brands. Insights gleaned from the study helped identify interesting differences between the generations on a number of topics.

For Gen Z, it was found that they are less patriotic than previous generations and may not be as swayed by pro-America brands. Additionally, while social media is important to them, how they use it differs from millennials – the generation known for popularizing social media. Gen Z tends to favor less-public outlets that provide much more control over who can see their posts, such as Snapchat.

This generation also exhibits the greatest acceptance of diversity and inclusion of all generations, according to the study. That’s likely because Gen Z is the most diverse generation in America, according to the Census Bureau, which reported that 48 percent of the makeup of Gen Z is non-Caucasian. Compare that to the next most-diverse generation, millennials, with a 44 percent non-Caucasian makeup.

Financial habits

Believe it or not, the oldest group of Gen Z is already in the workforce full time or will be in the next couple of years. Many are also beginning to participate in internships and work part time. Getting to know their financial habits and attitudes towards finance in general is going to be a topic of endless discussion in the coming years.

Financial research firm Raddon, a Fiserv company, last year analyzed data collected from 2,500 teens between the ages of 16 and 18 and found that two-thirds of those surveyed already had a financial account and were three times more likely to take a financial education seminar than millennials. Gen Z is already proving to be a group that’s more financially aware and seems to have learned a few things by watching their predecessors.

What have they learned?

Student debt is one of the hottest topics discussed in relation to millennials. Because of this $1.4 trillion topic, Gen Z is much more concerned with debt and the cost of their education. Many intentionally choose colleges that won’t leave them debt-ridden.

Gen Z is also keen to learn more about the intricate relationship between finance and marketing. Correspondingly, in my experience, millennials are therefore more likely to attend financial seminars to expand their knowledge of both financial and marketing concepts so that they can apply money management strategies to their own lives and the workplace.

Because of their own experiences with debt, my millennial clients are much more concerned about education planning for their children than older clients have been over the years. They don’t want their children to be burdened with the debt that many of them are still dealing with, so many start 529 plans as soon as they get their child’s social security number.

Gen Z is also keen on saving to avoid debt. A 2017 study by the Center for Generational Kinetics found that 21 percent of Gen Z respondents have had a savings account since before they were 10 years old, and some have already started saving for retirement, with 35 percent saying they plan to start saving in their 20s.

More to learn about Gen Z

As much as millennials have been studied and classified over the past several years, Gen Z is sure to be similarly probed and cataloged – especially since they are expected to become the largest generation of consumers by 2020. We will certainly be paying close attention to better understand and service the unique financial needs of this new generation.

Investing: Millennials are embracing trend of retiring early; should you?

Williamson, Inc. Names Inaugural Leadership Young Professional Class

Thu, 12 Jul 2018 18:18:12 GMT

Williamson, Inc. the umbrella name for the county chamber of commerce and economic development office, has named its inaugural class for a new leadership initiative.

Leadership Young Professional, or Leadership YP, allows young professionals in Williamson County to participate in a series of leadership development days that focus on quality of life in the county. The class will participate in community service projects around the county after graduation.

The class runs from August to next April. Applications for the second class will open in 2019.

2018 class members:

Ashley Larcinese, Data Blue
Brooke Wanser, Home Page Media Group
Carmen Stanek Franklin Tomorrow
Chase Harper, TMA Group
Chris Burger, Capwealth Advisors
Cody Wilson, AssuredPartners
David Kelly, Southeast Financial
DeAnna Croom, Pinnacle Financial
Griffin Wilcoxon, Williamson, Inc.
Hope Sonam, Snapshot Interactive
Katherine Hellard, Williamson Medical Center
Kel McDowell, Williamson, Inc.
Lindsay Curtis A. Marshall Hospitality
Olivia Bane, Tazikis Café
Sally Mink, A. Marshall Hospitality
Shikhar Shukla, Skanska
Sydney Ball, First Citizens National Bank

4 strategies to make sure your paid vacation doesn’t go unused

Sun, 01 Jul 2018 17:40:00 GMT

The following column from Jennifer Pagliara , CapWealth Senior Vice President and Financial Advisor, was posted by The Tennessean on July 2, 2018.

At some point or another, all of us get worn out, feel exhausted and just need a break from work. As we head into summer, many might be counting down the days until the annual beach vacation or that trip to explore a part of the world they’ve never seen. Time away from the office is vital to remaining motivated and refreshed. So why are there so many unused vacation days?

Generally, benefits are a big part of why someone does or doesn’t take a job. Notoriously, the perks of working at Google are quite extensive. A few of these include an onsite gym, free meals (all three if you want) and the ability to bring in speakers to discuss specific topics of interest. While not all jobs go to such lengths, vacation days are a standard benefit for most jobs. So, to put it in the simplest terms possible: The company you work for is allowing you to go on vacation and still get paid. Why would anyone want to waste that opportunity?

According to Glassdoor , a jobs and recruitment website, only 23 percent of employees who get paid time off took all the time they were entitled to. In 2014, that number was at 25 percent. An even more shocking statistic was that 9 percent of employees who get paid time off took no vacation days. Project Time Off completed a study in 2016 that reported American workers had 658 million unused vacation days — that accounts for about 55 percent of all workers who didn’t use all of their vacation time.

In Sheryl Sandberg’s book, “Lean In,” she notes the astounding number of people who quit their jobs due to burnout and yet, inevitably, those are the people who have unused vacation days. She explained that it doesn’t shock her anymore, though, because the pattern has repeated itself so many times throughout her career.

So what is stopping us from taking vacation? I believe there are four overwhelming reasons:

Vacation shaming: We are all now connected to our jobs pretty much 24/7. It is not uncommon for our co-workers to have our cell phone numbers and for our work emails to be on our phone. Because of that, it can be very easy for a co-worker to text you about something going on at work or for us to constantly check our emails.
Lack of planning: Some people wait until the last minute to plan vacations. The problem with that is they can be too expensive if not planned in advance.
Too expensive: Taking a vacation just might not be an affordable option for some. This might lead them to just continue working instead of taking time off.
Too much work to do: Some employees just simply feel like they have too much work to do and cannot take the time off.

Here are some tips to help combat this:

It’s important that any organization instills a culture that respects people’s time away from the office. Everyone needs rest and a break from the office, and after being able to enjoy their time off, employees can come back recharged and ready to give their best.
It’s never too early to plan a trip. In January, go ahead and schedule the days you want to take off for vacation and get it approved by your boss. This will encourage you to plan the trip in advance.
If you can’t afford to take a trip right now, do a “stay-cation.” Get things done around the house or go explore the city you live in. Simply being away from the office is going to give you some well-deserved rest!
I hate to say this, but work is never going to end. There will always be something else that has to be done. Complete all the time time-sensitive items that you can and then go enjoy a vacation! Your work will be waiting for you when you get back.

Just remember, vacation days (normally) cannot be rolled into the next year or paid back to you for the unused time. They are purely lost and result in $61.4 billion in lost paid time off annually according to Project Time Off. So, the next time you’re thinking of not using your vacation days, think twice.

Jennifer Pagliara is a senior vice president and financial adviser with CapWealth Advisors, LLC, and a proud member of the Millennial generation. Her column speaks to her peers and anyone else that wants to get ahead financially.

Investing: Are your expectations aligned with reality?

Retirement: Do you really need to save twice your salary by 35?

Mon, 25 Jun 2018 17:46:00 GMT

The following column from Jennifer Pagliara , CapWealth Senior Vice President and Financial Advisor, was posted by The Tennessean on June 26, 2018.

My sister-in-law sent me an article a couple of weeks ago from MarketWatch, titled “Money Milestones: This is how your finances should look in your 30s.” In the article, the author said that by the age of 35 you should have twice your current salary saved. So, if you are making $50,000 a year, then you should have $100,000 saved.

The column was recently picked up on social media, with Twitter users hilariously posting what you should actually be saving by your mid-30s. Of course, Buzzfeed quickly published the most hilarious responses. At first, I thought the article’s numbers seemed very arbitrary — why twice your salary by 35? I decided to do my own research to see how I really felt about this suggestion.

I don’t think anyone underestimates the daunting task of planning for retirement and ensuring you have enough saved when the time comes. The No. 1 question that most financial advisers are asked by those heading into retirement is “Do I have enough?” So, I see where the author is coming from. Her point is that it’s important to hit milestones throughout your financial life so you’re not scrambling as you near retirement. But, let’s dig into the numbers to see how much you actually need to save for retirement and if having double your salary saved by the time you’re 35 even makes sense

The first thing to remember is that everyone has different expectations for how they want to live in retirement. You might need $10,000 a month to live comfortably and another person might only need $2,000. The age you want to retire also greatly affects how much you need to save. Therefore, each person’s end goal number is going to be different.

Generally, advisers suggest that in retirement you should not withdraw more than 5 percent of your investments every year. The safe zone is 3 to 5 percent. When you start going over that, you tend to start digging into principal and affecting your ability to outlive your money.

Let’s run through an example. The U.S. Census Bureau shows that the average retirement age in the U.S. is 63. The average life expectancy for a man who is 65 today is 84.3, and it’s 86.6 for a woman. Therefore, let’s be cautious and say you are going to spend 24 years in retirement and need $100,000 annually to live off of. If we use the 3 to 5 percent rule, you simply divide $100,000 by 3 percent to get $3,333,333 to be on the conservative side or by 5 percent to get $2,000,000 to be on the more aggressive side.

So how much do you need by the time you’re 35? If you retire at 63, then you have 28 years left to save. The average salary for ages 35 to 44 in the U.S. is $49,400 per year. You would need $100,000 or double the average salary by the age of 35 to have $2,000,000 saved by 63, assuming a 5 percent return on your investments and saving $25,000 a year.

As arbitrary as the twice-your-salary number seemed at first, it isn’t so random after all. But remember, there are a lot of factors that go into getting you to that end goal number. Your investments might return more than 5 percent, or you might get a pay raise that you weren’t planning on that allows you to save more. Therefore, don’t be deterred if your savings at 35 aren’t quite double your salary. But it will take a plan and dedication to get you where you want to be.

Investing in The Age of Big Data: How To Navigate Expanding Sea of Information

CapWealth Hosts Tech-Talk Luncheon with FirstBank and Belmont University

Sun, 03 Jun 2018 17:52:00 GMT

On May 15, CapWealth partnered with FirstBank and Belmont University to host a Tech-Talk Luncheon featuring Harvard-based entrepreneur and scholar Dr. Harpreet Singh, who spoke about artificial intelligence, blockchain technology and cryptocurrency. Below is a recording of the presentation.

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Will Women Leading NYSE & NASDAQ Boost Financial Diversity?

Mon, 28 May 2018 17:58:26 GMT

You might have already heard the historic news that Stacey Cunningham was named the first female president of the New York Stock Exchange. But in case you haven’t, you might be interested to know that it only took 226 years for a female to be appointed to this position within the organization.

Women in the NYSE

Many credit Muriel Siebert with paving the way for women on Wall Street today. In 1967, she bought her own seat on the NYSE and worked alongside 1,365 men for the next decade.

Cunningham has had her own impressive career within the financial industry. She began as an intern on the exchange in 1994 while still attending college at Lehigh University. After graduating, she become a trader on the floor of the exchange. She took some time off to work in the culinary industry in 2005 but ultimately came back to the NYSE after working for NASDAQ from 2007 to 2012. She was serving as chief operating officer of NYSE Group before being tapped for the new lead position.

Cunningham assumed the role of the 67th president of the NYSE on Friday, May 25, but she doesn’t sit alone at the top of list of the highest-ranking women executives in the finance world. Adena Friedman became NASDAQ CEO in January 2017.

Baltimore-raised, Friedman has spent most of her life and career in the northeast region of the U.S., but she spent some time in Nashville, where she received her MBA from Vanderbilt University’s Owen Graduate School of Management. She started at NASDAQ in 1993 and steadily rose through the company. Like Cunningham, her career veered onto a different path for a couple of years, when she joined the investment firm Carlyle Group as its chief financial officer ahead of its initial public offering, but she returned to NASDAQ in 2014 as president and apparent successor to Robert Greifeld, who had been serving as CEO since 2003. Her accession, therefore, wasn’t a surprise but still a win for women in finance nonetheless.

After accepting their positions, both Cunningham and Friedman spoke about hope for more diversity in the finance world – noting the importance of spreading positive messages to young girls about their careers and showcasing Wall Street as being more inclusive for other women.

NYSE Background

The NYSE was founded on May 17, 1792, on Wall Street in NYC when 24 stockbrokers signed the Buttonwood Agreement. At this point, the exchange was focused on government bonds until the early 1800s and overtook Philadelphia to be the financial hub of the U.S. It was officially named the New York Stock & Exchange Board on March 8, 1817, but it was later simplified to the New York Stock Exchange. It has been located at 11 Wall Street since 1865.

Membership of the NYSE was originally set to 533 “seats” in 1868. The term “seats” was coined because members sat in chairs to trade. Holding this seat allowed the owner to directly trade on the exchange. The most expensive seat ever sold was in 1928 for $625,000, which today would be roughly $6 million. Eventually the seats were raised to 1,366 in 1953.

In 2005, NYSE became a for-profit, publicly traded company, and at that time, seat owners were given compensation and shares of the newly formed corporation. Now, one-year licenses are sold to trade directly on the exchange.

Where is NYSE today?

Today, the NYSE is the largest stock exchange in the world by market cap and estimated to be $21.3 trillion as of June 2017. It is open between 9:30 p.m. and 4 p.m. EST Monday through Friday marked by the distinguished bell ringing. It is closed for all federal holidays, and it is regulated by the Securities and Exchange Commission (SEC).

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Sun, 27 May 2018 18:26:00 GMT

The following column from Jennifer Pagliara , CapWealth Senior Vice President and Financial Advisor, was posted by The Tennessean on May 28, 2018.

Women in the NYSE
Many credit Muriel Siebert with paving the way for women on Wall Street today. In 1967, she bought her own seat on the NYSE and worked alongside 1,365 men for the next decade.

NYSE Background
The NYSE was founded on May 17, 1792, on Wall Street in NYC when 24 stockbrokers signed the Buttonwood Agreement. At this point, the exchange was focused on government bonds until the early 1800s and overtook Philadelphia to be the financial hub of the U.S. It was officially named the New York Stock & Exchange Board on March 8, 1817, but it was later simplified to the New York Stock Exchange. It has been located at 11 Wall Street since 1865.

Where is NYSE today?
Today, the NYSE is the largest stock exchange in the world by market cap and estimated to be $21.3 trillion as of June 2017. It is open between 9:30 p.m. and 4 p.m. EST Monday through Friday marked by the distinguished bell ringing. It is closed for all federal holidays, and it is regulated by the Securities and Exchange Commission (SEC).

Jennifer Pagliara is a senior vice president and financial adviser with CapWealth, LLC, and a proud member of the Millennial generation. Her column speaks to her peers and anyone else that wants to get ahead financially.

Capwealth Founder Named No. 1 Financial Advisor In Tennessee By Forbes, Barron’s

Wed, 16 May 2018 18:37:00 GMT

Tim Pagliara is the first and only financial advisor in Tennessee to simultaneously earn top honors from both leading financial publications.

Tim Pagliara , founder, chairman and CEO of independent registered investment advisory firm CapWealth, was named No. 1 Financial Advisor in Tennessee by Barron’s magazine and also topped the list of Forbes’ recently released Best-In-State Wealth Advisors for 2018 .

Pagliara’s accolades mark the first time a Tennessee financial advisor has concurrently resided atop both publications’ national rankings. He previously earned the top spot in Barron’s annual state-by-state ranking five times (consecutively from 2012 to 2016).

Barron’s Top 1,200 Advisors rankings are based on data provided by more than 4,000 of the nation’s most productive advisors, and factors include assets under management, revenue generated by the firm’s advisors, regulatory history, quality of practice and philanthropic work. Forbes’ Best-In-State Wealth Advisors list spotlights more than 2,000 top-performing advisors across the country who were nominated by their firms and then researched, interviewed and assigned a ranking within their respective states. Forbes partners with SHOOK Research, who determines the rankings based on an algorithm of qualitative and quantitative criteria, including in-person interviews, industry experience, community involvement, client retention data and revenue trends.

“Recognition as the best in the state by both Barron’s and Forbes underscores the focus of CapWealth’s entire team,” Pagliara said. “CapWealth’s knowledge and experience are crucial in executing our unique, trademarked process which allows us to provide the most sophisticated, straightforward and transparent advice to clients—something they won’t always find elsewhere.”

Pagliara started his firm in 2000 after nearly 20 years in the financial industry with the goal of serving clients better in two distinct ways: the exclusive use of market-traded securities and an emphasis on accountability and transparency. CapWealth practices Sophisticated Simplicity® , the art of thoroughly understanding a complicated global markets landscape and boiling it down to high-quality, straightforward investment ideas. To provide clients with a clear understanding of their returns and costs, the firm relies upon Provable Integrity™ , a proprietary tracking and reporting system utilizing state-of-the-art data-aggregation technology and compliance with the rigorous standards of the Global Investment Performance Standards (GIPS).

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Beyond the movies: Unveiling the mystery of hedge funds

Mon, 16 Apr 2018 18:41:00 GMT

The following column from Jennifer Pagliara, CapWealth Senior Vice President and Financial Advisor, was posted by The Tennessean on April 17, 2018.

Most of us have our own opinions of Wall Street and the financial services industry. Movies like “Wolf of Wall Street” and “Wall Street: Money Never Sleeps” definitely did not help the reputation of industry. I believe there is a particular reputation that hedge funds have earned over the years that have led these investments to have an air of exclusivity, greed and mystery. I’m here to lift the veil back a little and help you understand what this type of investment is really all about.

What is a hedge fund?
A hedge fund is simply pooled money from investors that can be invested in a wide variety of investments with the goal of having a positive return. In its most basic definition, it’s not as scary anymore, is it?

Hedge fund vs. mutual fund
You might be thinking “Isn’t that the same thing as a mutual fund?” A mutual fund is a company that also pools money from investors to invest in securities such as stocks and bonds. But the difference is that hedge funds are not regulated as heavily as mutual funds, and they can invest in much riskier investments. There are also a few other characteristics that differentiate hedge funds from mutual funds:

Accredited investor: In general, you have to be an accredited investor to invest in hedge funds. An accredited investor has a minimum level of income or assets to qualify. This is the main contributing factor that has led to the exclusiveness of hedge funds.
Valuation: Mutual funds have a net asset value (NAV) that is computed once per day. NAV is the total value of the securities in the portfolio minus liabilities and divided by the number of shares outstanding. Often, investments in a hedge fund are difficult to value, and therefore, it makes it hard to know what the value of your investment truly is.
Redemption: With a mutual fund, as long as it is open-ended, you can redeem your shares any day or time that you would like. With a hedge fund, there is a lock-up period. You cannot redeem your shares within that period, which is often at least one year long. Then, after that period expires, you have to give a 30-, 60- or 90-day notice that you would like to redeem your shares.
Initial buy-in: With a mutual fund, you can buy in with often as little as $25 or $50. With a hedge fund, the buy-in is often at least $500,000 or $1 million. But it is not uncommon to see initial investment minimums of $5 million or even $10 million.
Fees: In 2016, average expense ratios ranged from 0.5 to 0.75 percent, depending on the type of mutual fund. For a hedge fund, managers are compensated generally on a “2 and 20” schedule. This means you pay 2 percent for the management of the fund, plus the manager keeps 20 percent of the fund’s profits. However, each manager has a unique compensation package, so this can vary.

Why invest in hedge funds?
After all of this, you might be questioning why anyone would want to invest in a hedge fund. The two main appeals are performance and diversification.

Adding a hedge fund does provide another way to diversify a client’s portfolio. And, hedge fund performance does tend to have an allure because of its legendary numbers. We have all heard stories about that one fund that had a 400 percent increase. I hate to burst your bubble, but the average fund just does not have the crazy performance that the rumor mill has spread. In fact, the HFRI Fund Weighted Composite Index has earned an average of 6.1 percent each year since 2003. So, just because an investment has a high minimum investment or requires a certain level of income doesn’t mean that it is guaranteed to have a high return.

Ultimately, hedge funds may or may not be the right investment for you. Be sure you understand what you’re investing in and don’t always believe what you see in the movies.

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4 Strategies For Getting Out Of Debt

Sun, 01 Apr 2018 18:46:00 GMT

The following column from Jennifer Pagliara , CapWealth Senior Vice President and Financial Advisor, was posted by The Tennessean on April 2, 2018.

Likely, you caught the recent headlines broadcasting the news that Americans’ national credit card debt hit $1 trillion for the first time in history. These findings emerged from WalletHub’s recent Credit Card Debt Study.

That’s a shocking statistic, but it doesn’t seem out of line when you look at the Federal Reserve’s latest numbers, which show that the average American household has $137,063 in household debt (including mortgages). Add to that the fact that the median household income in 2017 was only $59,039, according to the U.S. Census Bureau, and it’s clear that Americans are putting themselves into a hole they aren’t likely to climb out of.

Unfortunately, debt is a natural part of life for many millennials and young professionals in what we call the asset accumulation phase of life. They are in the early stages of establishing their careers and likely carry a hefty amount of student debt. They also often rely on credit cards for lifestyle spending at this point in their lives and are adding auto loans and mortgages to their financial obligations.

It’s not uncommon for new millennial and young professional clients to come to us with debt burdens. And, we’re prepared to help them chart a course to reducing their debt and begin focusing on growing – and preserving – their assets. Here are a few of the first steps we walk them through.

Consolidate
One of the first things we look to do is consolidate credit card debt into one lump sum with a lower fixed rate. There are a number of methods out there, from taking out a personal loan at your bank to opening a balance-transfer credit card, and each have pros and cons to consider. The best option for each person depends on the individual situation, so the best practice is to lay out all of the options available to your specific situation and weigh the pros and cons to determine the best choice for you. For example, although for some people there are plenty of loans in missouri that might be the perfect solution, there are alternative options out there too. Above all, doing plenty of research to assess your unique financial situation is crucial. If you are unsure of where to start or need some further information and guidance then you could search here for a personal loan guide.

Set a plan of attack
Next, it’s time to set a plan to attack the debt, starting with the smallest loan. Paying off that first debt will be a psychological win that will serve as motivation to keep going. Determine a set amount to pay toward the smallest loan each month, and be consistent with your payments. And, when you get rid of that first loan, celebrate it!

Budget
“Budget, budget, budget” in finance is as important as “location, location, location” in real estate. It is the key to success. You can be deliberate with your spending by outlining your income versus expenses for the month and identifying spending categories where you can set limitations.

There are a number of budgeting apps and websites that can help you, but you can simply start by tracking your spending for a few months to identify how your money flows in and out of your account.

Before long, you should be able to determine where you may be overindulging and can cut back. And, once you’ve set a budget, stick to it! You will be surprised by how empowered you will feel once you take charge of where your money goes each month.

Persistence pays off
I’m not going to lie to you and say it’ll be easy. It may not feel like much fun to buckle down, set a budget and be diligent in your spending, especially if you’ve become accustomed to a lifestyle of spending at will. But once your debt is down, not only will you feel a sense of relief, but hopefully, you will also have acquired the tools you need to ensure you don’t let it get out of control again.

Jennifer Pagliara is a senior vice president and financial adviser with CapWealth, LLC, and a proud member of the millennial generation. Her column speaks to her peers and anyone else who wants to get ahead financially.

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Jennifer Pagliara Makes Another List Of “best Millennial Financial Advisors”

Wed, 14 Mar 2018 18:49:00 GMT

CapWealth Senior Vice President and Financial Advisor Jennifer Pagliara recently made the list of PeopleMaven’s “Best Millennial Financial Advisors.” PeopleMaven is a search engine designed to help uncover the world’s best people for any project at home or work. Jen was also recognized by Forbes Magazine last year as one of the nation’s top millennial advisors for 2017 . She joined a list of 500 of America’s top next generation wealth advisors in the country and was honored during Forbes’ Under 30 Summit in Boston last October – a conference that drew more than 7,000 people in attendance. Learn more about Jen here.

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Phoebe Venable Provides Insight on Millennial Investors in Financial Advisor IQ

Tue, 20 Feb 2018 18:57:00 GMT

CapWealth President and COO Phoebe Venable recently contributed her insights on millennial investors in an article for Financial Advisor IQ titled “Ignore Millennial Prospects at Your Own Peril.”

The article – which featured the insights of a select few financial industry experts, including Phoebe – highlighted recent research proving that millennials are saving for retirement more so than many think, surpassing both Gen Xers and baby boomers in their rate of savings and demonstrating themselves as worthy prospects for financial advisors.

In the article, Phoebe noted that “Younger prospects also present opportunities to teach sound investment strategies and steer them away from poor financial behavior.” She also spoke to some of the commonly asked questions that CapWealth advisors hear from this generation, from how much to allocate for loan and student debt payments to how much to save for a first home and how to split savings between 401(k) plans and individual retirement accounts.

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Stock Market Volatility: Friend Or Foe?

Thu, 15 Feb 2018 19:02:00 GMT

The following column from Jennifer Pagliara , CapWealth Senior Vice President and Financial Advisor, was posted by The Tennessean on Feb. 16, 2018.

Volatility is back. While many may not have expected such a swing after the long period of stability, investors and advisers alike know that volatility is simply part of the market cycle.

So, what is volatility anyway?

The formal definition of volatility is a statistical measure of the dispersion of returns for a given security or market index. When the media discusses market volatility, they are essentially talking about how much stock prices are moving up and down. High volatility means prices are moving up and down quite a bit, and when it is low, there is steadier fluctuation.

There are even volatility indexes that show the market’s expectation of 30-day volatility. The VIX (the trademarked ticker symbol for the Chicago Board Options Exchange Volatility Index) tracks the S&P 500. It is forward-looking and is often referred to as the “investor fear gauge.” VIX values greater than 30 are generally associated with a large amount of volatility as a result of investor fear. Values below 20 correspond to less stressful, even complacent, times in the market. Until February, the VIX had not closed at more than 16 over the prior six months. At the point of writing this column, the VIX’s highest peak was at 39.60 on Feb. 9.

Volatility can be a good thing. With some volatility, there is a wider range of possible outcomes. If volatility stays consistent, there is less possibility for reward. While the upside increases, so does the downside. And as with any investment, the riskier it is, the greater the possibility of return.

What’s the cause?

The problem with volatility is that there isn’t one particular cause that anyone can pinpoint. For the past couple of weeks, there seems to be several factors at play:

We are in a rising interest rate environment for the first time since the early 1980s. There is more conviction that three rate hikes will happen in 2018. Within that realm, the 10-year Treasury yield has rapidly increased to 2.8 percent from 2.5 percent in January.
There was a shift in investor sentiment. People started to believe that this bull run couldn’t last for forever.
There are also some large macroeconomic events that could have had some effect as well, including the potential government shutdown and concerns over the deficit and increased government spending woven into the bipartisan budget deal coming out of the Senate this week.

Some strategists, on the other hand, have noted more unusual suspects for some of the recent drop-offs, such as “forced selling” by electronic management models.

And still, many strategists point to “market psychology” for the selloff behavior, rather than to fundamental failures. With the economy continuing to move ahead in a positive direction and U.S. businesses reporting repeated earnings growth with the catalyst of major tax breaks still to be fully realized, the stage seems to be set for a sustained and healthy business economy — one to remain invested in.

How to stay the course

We all let our emotions get the best of us at times. We’re human. It’s completely understandable. However, when it comes to investing, making sure you don’t let that happen is going to be key to long-term financial success. We often let fear and greed drive our decisions in making shifts in our investments, rather than sticking to the fundamentals.

You should invest in companies that you believe will be successful and profitable for the long run, and don’t let daily fluctuations in valuation deter you. As Warren Buffet has said, “Games are won by players who focus on the playing field, not by those whose eyes are glued to the scoreboard.”

Volatility is expected and, as earlier noted, can even provide an opportunity to acquire a greater investment in a company you believe in at a lower cost.

Are we headed for another recession?

Thu, 01 Feb 2018 19:11:00 GMT

The following column from Jennifer Pagliara , CapWealth Senior Vice President and Financial Advisor, was posted by The Tennessean on Feb. 2, 2018.

2018 marks the 10th anniversary of the beginning of the Great Recession. At times, it feels like the economy is still healing, but on the whole, we have come a long way since then.

With the stock market at all-time highs, unemployment down to 4.1 percent and U.S. home foreclosures down to some of the lowest levels since 2005, it’s natural to worry about being able to continue on this trajectory. But should we be bracing for another recessionary cycle? Let’s take a deeper look.

What is a recession, after all?

To take some ambiguity away from what a recession really is, let’s define it. A recession is most commonly defined as two consecutive quarters of declines in quarterly real GDP. The National Bureau of Economic Research offers a more detailed definition:

“A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production and wholesale-retail sales. A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough. Between trough and peak, the economy is in an expansion. Expansion is the normal state of the economy; most recessions are brief and they have been rare in recent decades.”

The Great Recession lasted 18 months and was triggered by the bursting of “an enormous speculative housing bubble,” generated by a perfect storm of low interest rates, lenient lending standards, ineffective mortgage regulation and lacking loan securitization, according to a 2011 study released by the Federal Reserve Bank of San Francisco .

While devastating to the economy and to many people and industries, which are still struggling to recover today, a lot was learned from the Great Recession, and many changes have been implemented in both policy and regulation to protect the country from a similar crash.

Where are we today?

While recovery has been slow, it’s been purposeful, driven by caution across the board.

The Federal Reserve has kept interest rates low, easing the burden on those in debt (while counterproductively slowing gains for savers, however). And, central bank regulation is at an entirely different level than it was pre-Great Recession, completely changing how lending institutions operate today. The difference is so great, in fact, that Trump’s administration is seeking to loosen some of the restrictions applied 10 years ago to allow banks back in the game a bit more, if you will. This will likely produce a positive boost to our economy.

Also contributing to the advancement of the economy has been extraordinarily low inflation. Even as growth has picked up, inflation has remained low, meaning that as businesses are doing better, people are making more money and their paychecks are going farther.

What’s to come?

The stock market has always been considered a leading economic indicator, and the health of the economy was certainly reflected in last year’s double-digit positive performance across all major indexes (Dow +25 percent, S&P 500 +21 percent and Nasdaq +28 percent). Circling back to our original question, can this upward momentum continue or should we be on the lookout for a significant stock market correction?

In November, Vanguard Group , one of the largest investment management companies in the world, released research suggesting a 70-percent likelihood of a U.S. stock market correction. However, the prediction was not delivered with alarm, but rather with the intention of preparing investors for an impending downturn and setting right expectations for what the future could look like.

It’s important to note, however, that a stock market correction doesn’t mean we’ve entered a recession. A natural pullback allows the market to consolidate before going toward higher highs. It’s a natural function in the market cycle.

Other factors — such as interest rates and inflation, which are both expected to rise in 2018 — will have more of an impact on a possible recession in the economy. But in usual cautionary fashion, the Federal Reserve is likely to only raise rates slightly, and even inflation is expected to maintain a snail’s pace in upturn.

So, don’t panic.

Warren Buffett has said, “Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.”

I urge you not to panic when a market correction does come. Because it will come, it is inevitable. What’s more important to focus on is the general outlook of your investments. If your perception of the company’s future earnings hasn’t changed, then a correction may only be an opportunity to invest more into those future earnings at a discounted price.

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Millennials Will Change Jobs More; Be Prepared For It

Thu, 18 Jan 2018 19:52:00 GMT

The following column from Jennifer Pagliara , CapWealth Senior Vice President and Financial Advisor, was posted by The Tennessean on Jan. 19, 2018.

It is easy to paint millennials as self-absorbed, flakey job-hoppers who don’t work very hard. However, through this column over the past several years, I have tried to show a different side to this often misunderstood generation.

A big part of being in your 20s and 30s is figuring out what you want to do in life. Not everyone is born knowing their purpose and exactly how to achieve it. So this can result in several job changes before someone understands the path he or she is supposed to be on.

And, millennials haven’t been afraid to take the leap when necessary. LinkedIn actually evaluated its 500 million users and found that within their first decade out of college, members of this generation changed jobs an average of four times verses Generation Xers who only changed jobs two times. And, this trend is an even bigger shift from our grandparents’ and great-grandparents’ time, when they often held only one, maybe two, jobs during their entire lifetime.

Context matters

It’s interesting to consider the context behind such a trend shift. The financial crisis occurred when the majority of millennials were graduating from college, so I have to believe that had a huge impact on our churn.

There has also been less and less loyalty shown to any one specific company or even industry. So while our grandparents were likely motivated to stay put due to loyalty to the company, younger generations are more focused on finding the right fit for utilizing (and growing) their knowledge, skills and abilities. Times have certainly changed, and I don’t think it’s a negative thing.

The Bureau of Labor Statistics reports that the average American will hold 11.7 jobs between the ages of 18 and 48, but context matters here, as well, because a career change isn’t always as black and white as a doctor becoming a chef. There are parallel moves that might look like a change but are really a necessary shift to get to the next level.

With all of these likely job changes on the horizon for millennials, there are a couple of financial considerations to be aware of and prepare for.

Retirement plans

Employer-sponsored retirement plans, such as 401(k)s , aren’t always top of mind for someone considering a transition into a new career or job. It is not uncommon for me to deal with clients who have three or four employer-sponsored retirement plans scattered around that they have never consolidated. However, I always encourage them to either combine them into a traditional IRA or try or to roll them into a new employer-sponsored retirement plan (if the plan allows).

This is important, first of all, because if you don’t handle it right away, you will forget about it and won’t monitor the investments contained within it. Secondly, you’re missing out on potential money earned, as simple compounding helps grow your money faster if you combine them all together.

Emergency fund

Sometimes life doesn’t happen in the way we plan it, and career shifts are not always intentional. It’s important to have an emergency fund in place should you do lose your job or if you need to quit before you have another job lined up.

You will commonly hear that you need six months to one year’s worth of living expenses as an emergency fund. However, I believe that number is somewhat arbitrary. The real question you should be asking is “How much money do I need in savings to let me sleep soundly at night?” If that turns out to be six months’ worth of expenses or if it’s $25,000, then that is fantastic, but I’m less concerned with what everyone else does and what you need to feel comfortable.

Millennials may be professionally “on the move” more so than previous generations, but such diversity of experience can mold candidates who offer an equally diverse skill set, which should be an attractive quality to hiring managers in today’s fluid business environment.

CapWealth kicks off 2018 Quarterly Brown Bag Lunch Series with “2017 in Review”

Thu, 18 Jan 2018 19:47:00 GMT

CapWealth’ Chairman and CEO Tim Pagliara, along with Executive Vice President and Chief Investment Strategist John Lueken, take a look back at 2017 and provide their insights for 2018 in the first Quarterly Brown Bag Lunch seminar of the year.

You listen to the audio of the entire seminar below.

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Capwealth’s John Lueken In Barron’s Magazine

Thu, 11 Jan 2018 20:15:00 GMT

CapWealth Executive Vice President and Chief Investment Strategist John Lueken was quoted in an article in Barron’s Magazine’s first edition of the new year, published on Jan. 1, titled “Corning: Through a Glass, Brightly.”

The article focused on the bright prospects of the glass and optical fiber maker, speaking to the new markets and products the company is embarking on, and included the insights of a few financial industry experts, including John.

While nearly all of the feedback on the company’s prospective value growth for the future was positive, John provided the most bullish opinion, deeming that Corning can earn $2.40 a share in 2019 and deserves more than the current 16 times 2019 estimate. His estimated price per earnings ratio of 17 puts Corning’s share value at $41, a 26% upside.

John provides further insight on Corning, not published in the article, below:

“Corning has been a CapWealth portfolio holding company for the past several years and is indicative of our investment process,” John said. “In our view, it was a misunderstood business that was addressing several strategic priorities, reinvesting to diversify their product offering, and streamlining their balance sheet through proactive capital return programs to shareholders. All the while, the company was operating in a secular growth sector headlined by the need for infrastructure investment to support rapidly increasing broadband use. The investment community is just beginning to realize the value proposition and unique competitive positioning of this well-run, shareholder-focused company.”

If you have a subscription to Barron’s online, you can read the full, original article here:
https://www.barrons.com/articles/corning-shares-could-gain-more-than-25-1514601255

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Tax Reform Bill Expands College Savings Plans To Include K-12

Thu, 11 Jan 2018 19:54:00 GMT

The following column from Phoebe Venable , President and COO of CapWealth, was posted by The Tennessean on Jan. 12, 2018.

Just before the end of the year, President Trump signed the Republican tax reform bill. The Tax Cuts and Jobs Act has occupied the headlines for the past few weeks because of the major changes being made to personal and corporate tax rates and deductions. The plan also includes a smaller change that will expand the benefits of 529 savings plan to include private school expenses.

A 529 plan is an educational savings plan operated by a state, state agency or educational institution, named after the IRS code section that created them. There were two types of 529 plans created: a savings plan and a pre-paid plan. Tennessee’s pre-paid plan is called TNStars College Savings 529 Program. Visit www.tnstars.com for more information. The 529 Savings Plan works a lot like other types of savings plans in that contributions are invested into mutual funds or other investment vehicles. The plan you choose will provide you with investment options, and the value of the account will go up and down based upon the performance of the investments you select.

Before the new tax plan, 529 plans were exclusively used for college related expenses, but the new tax plan includes a provision that allows 529 plans to be used for K-12 education expenses. This includes private school tuition as well as public and religious elementary and secondary school expenses. It does not allow 529 plans to be used for homeschooling expenses. Beginning this year, 529 plans can pay up to $10,000 a year for K-12 expenses.

These accounts are easy to set up and contributions can be automatically deducted from your bank account every month. You can contribute up to $14,000 a year for single filers and $28,000 for couples filing jointly. There is also an option that allows you to fund a 529 Savings Plan with up to $70,000 (single) or $140,000 (married) in one year, but then no contributions can be made for five years. Although your contributions are not tax deductible on your federal income tax return, the earnings are tax-deferred.

Distributions from the 529 plan to pay for the child’s college costs are tax-free. You, as the donor, control the account, which means you call the shots. You decide when distributions are made from the account and for what purpose. Funds may be used for any qualifying educational expense. This includes supplies, books and room and board. Savings can be used for qualified higher education expenses at any accredited traditional college or university, community college, vocational or trade school in the U.S. And you, the owner of the 529 plan, name the beneficiary which can be your child, your niece, your grandchild or even yourself!

If your child (the beneficiary of the 529 plan) does not use all of the funds, you can reclaim the funds, but the earnings portion will be subject to income tax and an additional 10 percent federal tax penalty will be imposed on the earnings as well. An exception can be claimed if you withdraw the funds due to death, disability or if your child receives a scholarship and doesn’t need the funds for college expenses.

Another great feature of these savings plans is that a family with more than one child can simply change the beneficiary. If your oldest child receives a scholarship and does not need the 529 funds, you can change the beneficiary to another child and avoid the penalty or at least defer it until all of your children have completed college. What a nice problem this would be — to have over-saved for college!

Phoebe Venable , chartered financial analyst, is president and COO of CapWealth. Her column on women, families and building wealth appears every other week in The Tennessean.

Young Leaders Council, Williamson Chamber Graduate 29 in Training Program

Mon, 08 Jan 2018 16:01:10 GMT

The Young Leaders Council has graduated 29 participants in its 2017 class in partnership with the Williamson County Chamber of Commerce.

YLC trains young leaders to effectively participate on the boards of local nonprofits.

The graduates of the program, all of whom live or work in Williamson County, received 28 hours of training and will now serve one-year internships on nonprofit boards. It is the fifth year for the partnership with the Williamson chamber.

The graduates are:

Anthony Brais, Civil & Environmental Consultants
Joshua Britton, Acadia Healthcare
Will Brown, Stites & Harbison PLLC
Chris Burger, CapWealth Advisors LLC
DeAnna Croom, Pinnacle Financial Partners
Jennifer Abell Douglas, Sharecare
Addison Folcher, Brown & Brown
Stacey Garcia, Williamson County Convention and Visitors Bureau
Liz Anthony Garza, management consulting firm North Highland
Elizabeth Goodwin, Doster Construction Co.
Chase Harper, TMA Group/VanStar
Kurt Jones, Williamson County Schools
Timothy Kirch, Charles Schwab & Co. Inc.
Kyle Kraemer, PricewaterhouseCoopers
Ashley Larcinese, Data Blue
Ryan McDonald, Bank Director
Jessica Mizell, High Hopes
Hunter Moss, Barge Waggoner Sumner & Cannon
Jennifer Presley, Elliott Davis
Brandon Priddy, 906 Studio Architects
Diana Puglio, Rumbo Cultural Marketing
Virginia Reynolds, Sheridan Public Relations
Cody Schmits, Monroe Carell Jr. Children’s Hospital at Vanderbilt
Shikhar Shukla, Skanska USA Building Inc.
Carmen Stanek, Franklin Tomorrow
Zachary Ward, Libra Business Solutions LLC
Griffin Wilcoxon, Williamson Inc.
Danielle Williams, Crowe Horwath LLP
Brittany Wright, Pinnacle Financial Partners

5 Financial ‘don’ts’ For 2018

Thu, 04 Jan 2018 20:20:00 GMT

The following column from Jennifer Pagliara , CapWealth Senior Vice President and Financial Advisor, was posted by The Tennessean on Jan. 5, 2018.

Happy new year! Are you ready to tackle the usual resolutions to improve the many aspects of your life? I’m sure you’ve got a list of all the things you want to (or need to) do this year to achieve your goals. Let me help you with a few “don’ts” to aid your yearlong journey.

1. Don’t put off saving — not even one more day. You likely have resolutions related to spending less and paying off debt, and maybe you have one related to setting and sticking to a budget. But an absolutely necessary step toward furthering your financial position is to start saving today! (The key word being “today!”) The power of compounding interest is mind-blowingly real — the earlier you start, the more mind-blowing. I can’t stress this enough to my millennial cohorts. If you think you’re too young or don’t have enough money, you’re wrong. Even putting away a small amount each month gains you an advantage for your future. You can actually begin investing in many mutual funds for as little as $50.

2. Don’t miss out on the new available tax credits and savings opportunities in 2018. With the recent tax reform came a number of changes to available credits and savings opportunities that millennials can reap benefits from. One particular note of interest for many of my clients pertains to 529 savings plans. Previously applicable only for college savings, these plans now allow for tax-free withdrawals for K-12 private school education. It would behoove parents (of all ages) to check with their accountants and ensure that they are up to speed on this and other applicable changes resulting from the new tax bill.

3. Don’t let student debt damper your dreams of financial freedom. Student debt is a looming displeasure for many millennials. A recent Nerdwallet report noted that the median student loan debt for a person who has attended some college or graduated from college is more than $49,000. Carrying the burden such a bulk can be overwhelming and may discourage resolutions to “get out of debt” in the new year. Rather than looking at the debt in its entirety, focus on paying off a particular amount each year, and divide that by 12 months. For example, a resolution to pay off $5,000 per year equates to around $415 per month. With just a little diligence in paying this amount (or any other amount you deem doable) each month, you will be sure to hit the annual goal and still take a chunk out of the overall debt.

4. Don’t “just do it.” (Plan for it!) I’ve said it before, and I’ll say it again. You need a financial plan. A plan allows millennials (and others) to set goals for your financial future and monitor progress along the way to ensure you stay on track. Life goes faster than you think, and with huge life events happening for millennials — launching careers, getting married, buying houses, having children — it’s easy to let time get away from you and miss out on the chance to properly prepare for future needs, like your children’s education and your own retirement. Success requires careful thought, discipline and some savvy. If you don’t have it, find a financial adviser that does and keep in touch.

5. Don’t let fear hold you back. Fear can be a roadblock to accomplishing great things. It can hamper the opportunity to try something new, to advance in one’s career or to find that special someone. Fear can also cause people to miss out on advantages others are capitalizing on now. This certainly holds true for those who let fear and worry keep them out of the market last year. It’s no secret that volatility exists within the market; ups and downs are guaranteed. Historically, however, the market has persevered upward, and the longer one is invested in the market, the more time there is to make up market declines and unanticipated sub-par returns. So, if you aren’t invested now, don’t let fear continue to keep you out of the long-term advantage you have at this point of your life.

Jennifer Pagliara is a senior vice president and financial adviser with CapWealth, LLC, and a proud member of the Millennial Generation. Her column speaks to her peers and anyone else that wants to get ahead financially.

Is Uber a Good Investment?

Planning to have a baby in 2018? Count the costs

Mon, 11 Dec 2017 20:04:00 GMT

The following column from Jennifer Pagliara , CapWealth Senior Vice President and Financial Advisor, appeared in The Tennessean on Dec. 8, 2017.

As we enter the holiday season, millennials’ Facebook and Instagram feeds are no doubt going to fill up with engagement announcements – it’s that time of the year. But for those who have already tied the knot, is a baby announcement on the horizon? Is 2018 going to be the year of “the baby” for you?

Current stats

In 2016, 3,941,109 babies were born in the U.S. This equates to 62 births per 1,000 women aged 15 to 44, or a decrease of 1 percent from 2015. That’s a small decrease, of course, but a decrease nonetheless.

It has been noted that millennials are delaying many of the big life milestones – getting married, buying a home, starting a family – so could this possibly have something to do with the decline? And, does this mean that as our generation ages into our late 20s and early 30s, there may be an uptick in births?

Will U.S. fertility rates rebound?

There are people on both sides of the fence on this debate. The optimists believe there will be a surge of babies born due to the “tempo effect.” Essentially, demographers claim that fertility declines are followed by rebounds. The U.S. experienced this with the baby boomer generation. The war caused fertility rates to drop and then there was a huge surge of births after. The great recession could have caused a similar affect.

Naysayers, on the other hand, believe that millennials just don’t want large families anymore. Declines in unintended pregnancies is also a contributory factor of lower fertility rates.

But it’s true that millennials are more conscious of the costs of those aforementioned life events and are choosing temporary alternatives to many of those commitments – Uber over car buying and renting over homeownership – so maybe they’ve gotten wind of the costs associated with raising a family.

Babies: They’re cute, they’re cuddly, they’re costly

While I don’t want to cause any more anxiety about having a baby (especially for first-time parents), I want to arm my fellow cohorts with knowledge to help prepare financially for what occurs once a couple becomes a family of three (or more).

The Department of Agriculture estimated that a child born in 2015 cost a middle-income, married couple $233,610 in food, shelter and other necessities through age 17. This number does not include the medical costs associated with having the baby, however, which can range from $18,239 for a vaginal birth and $27,866 for a cesarean birth without complications for parents with insurance, according to a study by Truven Health Analytics.

Additionally, the $233,610 doesn’t include the costs of college, which continues to rise each year according to the College Board, a not-for-profit organization that publishes the annual “Trends in Higher Education” reports. The organization’s “Trends in College Pricing 2017” noted that the average published tuition and fee price for full-time in-state students at public four-year colleges and universities is $9,970 for the 2017-18 academic year. And, with an average increase of about 3 percent reported by colleges each year, think about how much that will cost 18 years from now!

Now, I admit, I am skipping ahead here, I went from discussing a baby to sending them off to college with a pocket of dreams and cash! I can dial it back and say to you, that if you want to start planning for a baby, you’re going to need to know what the best type of equipment is right for them, from car seats to cribs, you need to know how much you’re spending and what for. Luckily for you, there are sites such as Mommyhood 101 who can give you reviews from all different types of products, tried and tested by parents. So, let’s start there shall we?

Advantage: Time is on your side

The good news is while the initial cost of giving birth is due right off the bat, you have the next 17 years to plan accordingly to both raise your baby and get him or her through college!

Setting a realistic budget will allow you to outline what you need to support your desired family lifestyle and identify where you can start saving for college and other future life costs, such as retirement. Time is on your side, especially when you put this practice into place before you even have children.

Jennifer Pagliara is a financial adviser with CapWealth, LLC , and a proud member of the Millennial Generation. Her column speaks to her peers and anyone else that wants to get ahead financially.

Millennials Change The Landscape Of Charitable Giving

Wed, 29 Nov 2017 20:27:00 GMT

The following column from Jennifer Pagliara , CapWealth Senior Advisor, appeared in The Tennessean on Nov. 27, 2017.

As we kick off the 2017 holiday season, giving back is at the forefront of everyone’s minds. For 2016, individuals, estates, foundations and corporations donated an estimated $390.05 billion to U.S. charities according to “Giving USA 2017: The Annual Report on Philanthropy for the Year 2016.” Specifically, individuals and households saw an increase in giving by 3.9 percent over 2015.

While many might not automatically associate charitable giving with millennials, people might be surprised to learn that the millennial generation is actually changing the landscape for nonprofit organizations and causes around the world. In fact, there have been several articles just this year noting the disruption millennials are causing in charitable giving, as nonprofit organizations scurry to implement new technology and programs to meet the expectations and needs of this generation.

The old way of reaching out to and collecting donations just doesn’t connect to today’s digitally savvy contributors — millennial or otherwise. The days of sending a letter requesting a donation with a return envelope are over. Many people don’t even use a checkbook anymore, much less pay much attention to what shows up in the mailbox.

So, where are people finding causes to contribute to? Social media.

Remember the ALS ice bucket challenge that went viral a couple of years ago? It took on a life of its own and got people to donate to a cause most knew nothing about. Why? Because it allowed people to visually broadcast their charitable response — something millennials especially love to do.

Our generation (and those coming behind us) have been raised in the digital age, where broadcasting our lives is as much a part of our daily routine as eating and sleeping. And, not only do we use social media to transmit our own life happenings, but we expect to be able to follow the broadcasts of our friends and influencers. And seeing what others are doing can certainly inspire people to check out certain charities and get involved in the causes their friends and influencers care about.

Another charitable giving demand social media has inspired for millennials? Transparency.

With the rise of social media came an overall expectation of greater transparency — from companies, brands and organizations — as people expected to be able to dig deeper into a company’s mission, vision and culture by following them on social media and, thus, learning how they are making a difference in the world.

Millennials care about where their money is going, whether purchasing a product from a company or donating to a charity. An article in Fast Company in October of this year, titled “As Millennials Demand More Meaning, Older Brands Are Not Aging Well,” noted that for brands to continue to perform well with millennials and other “consumers of the future,” they need to have (and communicate) a clear mission.

Charitable giving falls in line with this same expectation — it’s important for us to know exactly how our donations will be spent and how big that impact is on the world around us.

It’s also not all about the money for millennials. For us, it’s not just about how much money we give, but it is also about donating our time. It is just as valuable — maybe even more valuable — for us to give of our time than to hand out a monetary donation. We get more fulfillment out of personally being involved in the impact rather than just handing over some cash.

If we can wear a pair of shoes or eyeglasses by a brand known to give back to charity for every purchase, that’s an active way for millennials to support a good cause. Similarly, if we can attach a charitable offering to an everyday activity, such as shopping on Amazon, that’s a no-brainer for us.

The millennial generation is now the largest living generation, surpassing the baby boomers this past year, so it’s important for charitable causes around the world to start engaging us now. Lucky for them, we are eager to help out — it’s just a matter of getting creative with how we can give back.

Jennifer Pagliara is a financial adviser with CapWealth, LLC, and a proud member of the Millennial Generation. Her column speaks to her peers and anyone else that wants to get ahead financially.

Got a holiday budget? Christmas offers good lessons for kids

Thu, 16 Nov 2017 20:46:00 GMT

The following column from Phoebe Venable , President and COO of CapWealth, appeared in The Tennessean on Nov. 17, 2017.

Believe it or not, Christmas is just around the corner! Now is the time to start thinking about how much your family should spend on Christmas gifts and festivities this year (and maybe try not to go overboard like last year). Every family has financial limitations when it comes to gifts, however it is easy to ignore these limitations during the holiday season.
Creating a Christmas spending budget is a proactive step, but how do you determine your budget? What does the average family spend? According to Deloitte’s 2017 holiday survey, Retail in Transition, the average expected spend for the 2017 holiday season is $1,266 per respondent. That’s an expected increase of 4 to 4.5 percent over last year, and that includes more than just gifts, as the bulk of shopper budgets go to non-gift items and experiences, according to Deloitte’s data.

If there are two adults in your family, that is $2,532 spent during the holiday season. But is that the right amount for your family?
One commonly used formula for establishing a Christmas budget is 1 percent of your after-tax income. If your family’s income is $100,000 a year and taxes are $20,000 (this will vary greatly but 20 percent is a good place to start), then your after-tax income is $80,000, and 1 percent of that is $800. That might sound like a lot of money to some and not nearly enough to others. If the average two-adult family is spending $2,532 this year on Christmas, does this mean the average family’s after-tax income is $253,200? Of course not. Clearly not everyone sticks to the 1 percent formula, but being conservative can be beneficial to you in the new year when the credit card bills come rolling in. But if 1 percent doesn’t work for your family, maybe 2 percent does. Find a moderate number that works.
The holidays are a wonderful time to teach children about using a budget. A portion of the family’s holiday budget can be allocated to each child so they can make their own shopping list and decide how they want to spend their holiday budget. Throughout their entire life, they will have to make choices about how to spend a limited amount of money, so this is a great learning opportunity for the kids and a great teaching opportunity for all parents.
By teaching children that everyone has a finite amount of money to spend on the holidays, they start to understand the value of budgeting. While gifts from Santa may magically appear, children need to understand that the other gifts they receive are purchased with hard-earned dollars. Include the children in your decision-making process for the family holiday budget, too, so they can start to see that there is a clear and thoughtful approach to spending.
All families have holiday traditions. At my house, we have a tradition of allocating a portion of our holiday budget for a “house” gift. We all get a vote and the opportunity to campaign for whatever we want the house gift to be. Over the years, this tradition has not only been a lot of fun for all of us, but it has also engaged our son in the decision-making process and helped him understand the budgeting process.
Another great idea is to allocate a portion of the family’s holiday budget to helping those less fortunate. Whether you adopt an angel from one of the Salvation Army’s Angel Trees or donate food to Second Harvest Food Bank, benevolence is about the importance of giving and what it means to both the giver and receiver. Charitable giving has been shown to help raise self-esteem, develop social skills, foster an introduction to the greater world and encourage kids to appreciate their own lifestyle. By giving children their own holiday budget, they will begin learning very valuable lessons that will benefit them throughout their lives and help them grow into money savvy adults.
Phoebe Venable, chartered financial analyst, is president and COO of CapWealth, LLC. Her column on women, families and building wealth appears every other week in The Tennessean.

How to protect yourself when shopping online

Millennials spur trend of SRI — socially responsible investing

Fri, 27 Oct 2017 20:52:00 GMT

Millennials have lived through the longest war in United States history as well as the worst recession since the Great Depression. Coming of age amid such trying times, millennials are motivated differently than other generations. This generation wants to feel like they are a part of something that is making a difference — for the common good, for happiness and for hopefulness — in the world.

So, with a cohort so acutely concerned with how they are impacting the world, how does that influence their advisers and their investment choices?

More: Millennials: Are you expecting your parents to leave you an inheritance?

Parameters

Financial advisers take many factors into consideration when building a portfolio and financial plan for their client. Some of these constraints are: time horizon, liquidity, risk tolerance, legal and regulatory factors, tax concerns and unique circumstances. Under this last guideline, clients can give their financial adviser parameters for what they feel comfortable investing in or what they don’t.

Socially Responsible Investing (SRI) is essentially an investing strategy that considers environmental, social and corporate governance (ESG) criteria to not only create competitive returns, but also to provide positive societal impact. SRI is something that your clients might inquire about, and financial advisers need to choose appropriate investment vehicles that abide by those guidelines.

Evolution

The evolution of SRI has been one of organic growth as the landscape of investing and politics has changed. Traditionally, baby boomers and Generation X did not want their financial advisers to invest in companies that deal with tobacco or alcohol or what is commonly known as "sin stocks." But, with the advancement of technology, SRI has taken the foundation of what sin stocks stood for and expanded it.

The Forum for Sustainable and Responsible Investment is now the leading voice in the advancement of sustainable, responsible and impact investing across all asset classes. Investors not only care what products or services a company provides, but they also care about the environmental and societal impact that they have on the world. Our world today is faced with a new set of problems that wasn’t at the forefront 50 or 60 years ago. Some of these include obesity, poverty and sustainable agriculture. Leading ESG criteria these days include board issues, pollution, human rights, climate change, executive pay and conflict risk.

How to invest

According to the 2016 Report on U.S. Sustainable, Responsible and Impact Investing Trends, “more than one out of every five dollars under professional management in the U.S. — $8.72 trillion or more — was invested according to SRI strategies.” That figure confirms an increase of 33 percent from 2014 to 2016 and accounts for 22 percent of the $40.3 trillion in total assets under professional management in the U.S. tracked by Cerulli Associates.

There are 1,002 funds that incorporate ESG criteria, including mutual funds, exchange-traded funds (ETFs), variable annuities and alternatives. The largest ESG ETF is the iShares MSCI KLD 400 Social. It is comprised mostly of large-cap companies with slightly higher exposure to technology, industrials and real estate and lower exposure to financials and energy compared to the average large-cap ETF. It does tend to track the S&P 500 within a few points.

Common misconceptions

While growing in popularity, there are still some misconceptions about SRI. It is often assumed that these strategies produce lower returns. However, just because a company complies with these standards doesn’t necessarily mean that the returns will be lower or higher than the broader market or its competitors.

Another misconception is that the criteria used to screen SRI investments is only negative. Yes, there is screening to exclude companies involved in activities that are deemed unacceptable or have a negative impact on the world. However, there is also positive screening for how much investment is being done to solve environmental, community or societal problems.

Finally, many presume that SRI is only involved in public equities. But, it is also utilized in fixed income, real estate and private equity. What is important to note is that for millennials, it’s not always just about a return; it’s also about the impact an investment is making on the world.

Jennifer Pagliara is a financial adviser with CapWealth Advisors, LLC, and a proud member of the millennial generation. Her column, which appears every other week in The Tennessean, speaks to her peers and anyone else that wants to get ahead financially.

Opinion: We're long overdue for tax reform

Thu, 12 Oct 2017 20:32:49 GMT

The last time the U.S had any major tax reform was in 1986. That was 31 years ago – in the midst of birthing our millennial generation!

Throughout Donald Trump’s presidential campaign, tax reform was one of his biggest promises of change. And, truthfully, there has never been a better time for the GOP to create these changes with control of the White House and both houses of Congress.

A blast from the past

Let’s go back to the last time there was a major change to the tax code. (Some of us weren’t even born, yet, while others may have just started kindergarten.) At that time, Ronald Reagan was president, and the world looked like a much different place than it does today. The goal back then? To simplify the tax code and more fairly redistribute the tax burden. Sounds familiar, doesn’t it?

Some of the changes successfully made with the 1986 Tax Reform Act were similar to what’s being proposed in today’s reform package, such as consolidating and reducing the number of income tax levels. Another similar focus for both reform packages is on the loopholes that allow certain people to avoid paying taxes.

Three decades later

Since 1986, a number of loopholes, credits and deductions have been added to the tax code, accounting for a 44 percent growth in such additions and resulting in a tax code that went from 30,000 to 70,000 pages. (Are you shaking your head and wondering how that’s possible?)

Throughout our lifetime, lawmakers have added modifications intended to encourage certain behaviors — everything from buying hybrid vehicles to replacing your home’s windows; from adopting children to putting them in daycare. And, now we have a tax code that’s once again quite complicated and confusing — and in need of another major overhaul.

With that understanding in place, let me point out the framework of the changes proposed in the current tax reform package.

Changes for families and individuals

The number of individual tax rates would shrink from seven to three. Those rates would be 12, 25 and 35 percent. However, the income ranges have not yet been determined for those brackets.
The standard deduction increases to $12,000 for single filers and $24,000 for married ones.
The child credit would increase to $1,000 per child under the age of 17.
Most of the itemized deductions will be eliminated, which includes personal exemptions of $4,050.
There are still incentives for homeownership, retirement savings, charitable giving and higher education. Those deductions are staying around.
The alternative minimum tax (AMT) will be eliminated. This tax was designed to keep wealthy taxpayers from using loopholes to avoid paying taxes. It normally becomes effective for filers making between $200,000 and $1 million.
The estate tax would also be eliminated. This tax applied to the transfer of any estate valued over $5.49 million upon the death of the owner. Currently, an estate of this size is taxed at 40%; anything under $5.49 million is not taxed.

Changes for businesses

The corporate tax rate would be reduced from the current rate of 25 percent to 20 percent.
The reform also proposes changes to how multinational companies are taxed on profits made outside of the U.S. Currently, companies with overseas profits are only taxed when they bring those funds back into the U.S. The new tax reform states that those companies would be subject to the tax of the government where the money is made instead of just what’s brought into the U.S.

These changes are pretty drastic. The end goal is to put more money into the taxpayer’s hands and, in turn, into the economy, ultimately increasing GDP and boosting a healthier overall economy. Whether this proposed reform will pass still stands to be seen, but it is certainly time for a simplified tax code.

Jennifer Pagliara is a financial adviser with CapWealth Advisors.

Numbers: Prime Day was Largest Shopping Event for Amazon

Millennials: Are you expecting your parents to leave you an inheritance?

Tue, 03 Oct 2017 19:36:14 GMT

There are an endless number of reasons that people don’t like to talk about money. When you live in the South, it can be especially taboo. Navigating discussions about family wealth with children and young family members can be tricky, but nevertheless, it’s important to make the effort, especially for the young adults in the family.

At this point, millennials stand to inherit $30 trillion dollars in assets from their foregoing generations. That will be the largest wealth transfer of any generation. However, some may be shocked at what they actually receive. According to a new Natixis U.S. Investor Survey, nearly 70 percent of young people expect to get an inheritance, while only 40 percent of parents plan to leave anything for their children.

While you might be cringing at the thought of bringing up this topic with your parents, it’s important that you have an open dialogue with them to understand their wishes and how that might possibly impact you. This could honestly save both you and your parents a lot of frustration, uncertainty and wasted time.

More: Don't make these mistakes when insuring your home

More: A start-up guide for investment newbies

There are likely several reasons why your parents have not previously discussed their wishes with you. First of all, many people don’t want to confront the fact that they will die someday. Also, parents sometimes don’t want children to be aware of what they could inherit because it could hinder their motivation in life and in their careers. And finally, it can just be flat out uncomfortable.

Here are some tips on how to tactfully approach the subject with your parents:

Don’t go into the conversation with any expectations. You might be surprised by what your family has planned. There is a real possibility that your parents plan to spend their life savings during retirement and not leave you (or your siblings) anything.
Acknowledge that this might be an uncomfortable conversation but one you feel is important to have. A good segue into this discussion is to ask if they have a strategy in place to carry out their wishes after they pass away.

Take exact numbers off the table. Encourage the idea that it’s not about the amount they are leaving you; but rather, you want to understand how their wishes could impact your own planning.

Ask for their advice. Explain that you are beginning to take a more active role in planning for your own retirement and want to know if they have a will, power of attorney, insurance policies or any other estate planning documents in place. Ask for their suggestions on what you should be doing at your age.

Start small. If you are dreading a formal sit down, then simply start the conversation naturally when you feel the timing is right. However, if you have siblings, you might want to ask in advance if they would like to be included in the discussion so it can be at a time when they are around.

Don’t think of this as a one-and-done conversation. Financial situations can change as life change happens and as time goes on. Keep an open dialogue to ensure everyone maintains an understanding of what’s to come.

The most important thing to remember is that your inheritance is a contingent asset, meaning you have no control over whether or not you will receive the amount your parents intend to pass down to you. If you plan for your financial future as if you won’t receive it, you are only going to be better off if something does come your way.

Jennifer Pagliara is a financial adviser with CapWealth Advisors.

Articles by Hillary Stalker

Don't make these mistakes when insuring your home

Thu, 14 Sep 2017 19:18:08 GMT

Hurricanes Harvey and Irma have wreaked havoc over the past couple of weeks. Unfortunately, none of us can escape natural disasters; however, you can be proactive and ensure that your home and personal belongings are properly insured before a disaster strikes.

Homeowners insurance is not something anyone wants to pay, especially when you have never had to file a claim. Nevertheless, it is necessary to ensure that the cost to rebuild or fix your home is covered. A standard homeowner's insurance policy will provide the insurer costs related to damage of the interior and exterior of the home, often related to fire, hurricanes, lightning, vandalism or other covered disasters. However, damage not normally covered, which requires separate riders or add-on provisions, is that which results from flooding, earthquakes and poor home maintenance.

Even if you aren’t a homeowner. You can still protect your belongings through a renter's policy. This policy does not provide coverage for the structure or dwelling where you live, but it will protect up to a certain amount of coverage for your personal belongings. According to a Nationwide Insurance survey, an estimated 56 percent of renters between the ages of 23 and 35 do not have renters insurance. I assume that a lot of millennials skip on this because they believe their possessions are not valuable enough to insure. However, there is a big misconception around this fact that I will discuss below.

Below are a few common mistakes and misunderstandings about homeowner’s insurance:

Underinsuring your home

A common mistake insurers make is only buying enough coverage for the remaining balance of their mortgage or the current value of their home. Both would most likely not cover the amount it would cost to rebuild their home. A professional can better estimate of how much it would cost to completely rebuild your home, and certain agents provide this service for free. That is the amount you should aim to cover.

Understanding your coverage

It’s important to know exactly what your home insurance covers and what it doesn’t. If you don’t know how to read your policy, be sure to ask your insurance agent for specifics. For example, flood insurance is not generally part of a standard insurance package. Many here in Nashville experienced the flood of 2010, where most of the areas affected were not considered in flood plains, and thus did not have the appropriate coverage. According to FEMA, more than 20 percent of flood claims come from properties outside the high-risk flood zone. You will need an extra rider for flood and earthquake coverage.

Insurance isn’t just for possessions

Homeowners and renters insurance policies don’t just cover personal property. They also protect the insurer from liability lawsuits. If your dog bites a visitor or someone falls down your stairs and breaks his or her leg, your insurance will provide protection. You are liable for what occurs in your home (if you own it or not) and need to be covered. This is where renters can benefit from a policy regardless of the value of their possessions.

Cost

Do not fall into the trap of buying the cheapest policy available. Also, understand your deductibles. You might believe you only pay one flat deductible if you file a claim, but often for natural disasters, like hurricanes or earthquakes, you end up paying a percentage of your coverage which could be up to 5 percent for flood or 10 percent for an earthquake. If your coverage is $500,000, you could be out of pocket $25,000 or $50,000.

If you’re feeling overwhelmed with picking the right policy, utilize your insurance agent or financial advisor. That is what he or she is there for. It’s best to ask questions now before you are in a situation where it is too late.

Jennifer Pagliara is a financial advisor with CapWealth Advisors.

Wealthy Families

How to prevent the proverb 'shirtsleeves to shirtsleeves in 3 generations'

Fri, 08 Sep 2017 19:23:14 GMT

Longtime readers of this column might recognize the universal cultural proverb “shirtsleeves to shirtsleeves in three generations.” It is thought to exist in all cultures and all written languages, both modern and ancient. All proverbs tell a basic truth and the shirtsleeves proverb informs us that generational wealth has a pattern.

The fortunes that are accumulated by the first generation are dissipated by the next three generations. Like all proverbs, there is a lesson to be learned.

The proverb describes how the first generation starts without wealth and possibly without education. Their greatest opportunity is to be an entrepreneur and work hard, which they do. Along the way, they do not change their values or their lifestyle.

Like all parents, they want a better life for their children so the second generation is well educated and has a choice about career.

They become lawyers, engineers, doctors and enjoy cultural activities. Their parents worked in shirtsleeves but the children go to work in jacket and tie. They saw the sacrifices their parents made to amass the family fortune and they know their parents want them to have a better, easier life so they adjust their lifestyle accordingly. The family fortune plateaus in the second generation. The third generation is raised with all the spoils of wealth. They do not witness the amount of work and sacrifice that it took to create the wealth so the third generation consumes the family fortune and the fourth generation goes to work in shirtsleeves again.

The proverb is certainly not unique to the western world. Clogs to clogs, stalls to stalls, rice paddy to rice paddy, shirtsleeves to shirtsleeves. It is a universal cultural proverb because it describes human nature. The proverb also describes failure. I often think of this proverb when I hear “the rich get richer.”

It is true that it is easier to make money if you start with money. But people with money tend to acquire expensive hobbies and lifestyles which can be a huge drag on their financial resources. It is also true that the first generation was motivated by need and desire for a better life. The third generation is born into a family that is enjoying a wonderful lifestyle so they have less motivation to create wealth. The desire to “spoil” the children is actually a disservice to the younger generations.

James E. Hughes, Jr., my favorite author on generational wealth, in his book "Family Wealth – Keeping it in the Family" suggests there is an antidote for this proverb. He says “to successfully preserve its wealth, a family must form a social compact among its members reflecting its shared values, and each successive generation must reaffirm and readopt that social compact.”

The lesson of the shirtsleeves proverb is all generations need to be connected to the family and the family’s values. If a family is only connected by money and legal structures, it is difficult to prevent the shirtsleeves proverb from becoming reality. Families need to come together on a regular basis and be reminded of who they are, where they come from and in what way they are different and how that difference can benefit them and the future generations of the family.

Be sure to tell your children the stories of your family, the stories of how the family’s wealth was created and what was important to the generation that created the wealth.

Phoebe Venable, chartered financial analyst, is president and COO of CapWealth Advisors, LLC. Her column on women, families and building wealth appears every other Saturday in The Tennessean.

Millennials: Is social media use harming your finances?

Fri, 01 Sep 2017 17:36:18 GMT

How much time do you spend on social media every day? I can feel your dread as you count minutes, which often turn into hours, of your day lost to the online abyss. It is easy to spend five minutes on Facebook while in the checkout line of the grocery store or two minutes on Twitter at a stop light. No judgement from me. I am just as guilty as everyone else.

The tiny computers we have in our hands have led us to escape into other people’s lives, if only for a minute or two, rather than deal with what is in front of us. We can scroll and like people’s pictures rather than process how we feel about events going on in our lives or the mountain of bills piling up. Now I realize that not all of my generation is like that. However, on a whole, I think the habit of escaping to social media is translating into harmful millennial financial behaviors.

Hey millennials, for the best of life’s experiences, mix strategy with spontaneity

Many of you might be scoffing at the idea that the time you spend online has any effect on your finances. However, I am here to discuss how it might be in ways that you didn’t even realize.

We know that money is always one of the top stressors for every generation. However, it is particularly weighing on millennials who potentially don’t have the knowledge or life experience to deal with money issues.

Too much debt is the No. 1 source of financial stress according to Student Loan Hero . When you are young and beginning your career, money is often quite tight. You add a large amount of debt on top of everything, and it can seem impossible to overcome. So what do you do? You ignore it.

I can’t stress enough that you will only make the problem worse by not facing it head on. Get off social media and come up with a plan.

More: A start-up guide for investment newbies

In 2015, Deloitte found that 47 percent of purchases made by millennials were influenced by social media. So not only are we running to Instagram and SnapChat to escape what is happening in our lives, we are also buying things based on what we see on these platforms.

Everyone puts their best self on social media platforms. Even if we think that we are not gullible enough to fall for these advertisements, they are subtly influencing our spending behaviors. It is easy to want to “keep up with the Joneses.” We have all seen a friend or celebrity on social media that has caused us to try and find what he or she was wearing or research what they are selling. Your phone makes it possible to buy whatever you just saw with one click.

Millennials are notorious for spending more money on experiences than other generations, but we also like our conveniences and comforts. Charles Schwab found that we spend more money on coffee, "hot" restaurants and taxis/Ubers than older generations. So the next time you impulsively want to buy something, stop and think if you really need it.

I challenge all of you to be intentional with your saving and to stop escaping what you should be doing today to ensure your future is financially sound. According to a GOBankingRate 2016 survey, 67 percent of millennials between the ages of 25 and 34 have less than $1,000 in their saving accounts and 33 percent have nothing at all.

Break your bad financial habits. Know where you are spending your money and how much you can save each month so that you are not in that 67 percent. Create your financial plan and stay present with it. I know that it’s easier said than done; however, time is your friend when it comes to saving for retirement, so don’t waste it!

Jennifer Pagliara is a financial adviser with CapWealth Advisors.

3 allowance apps to help teach your children financial responsibility

Thu, 24 Aug 2017 19:18:49 GMT

The most common way to begin teaching financial responsibility to our children is by giving a weekly allowance. It’s a direct, effective approach that empowers children to make financial decisions for themselves.

Once a child must make her own decisions on whether to spend or save her own money, chances are she will begin viewing money very differently. If parents just dole out cash to pay for things the child wants, it’s easy for a child to see money as an abstract concept at best or an unlimited resource at worst.

Ownership changes the game. When it’s their own money, children begin to learn the difference between wants and needs. Making choices and prioritizing financial resources is a fact of life, and this is a child’s introduction to it.

Allowance no longer has to involve parents handing cash to their children once a week. Like almost everything else, there is now an app for that! Actually, there are many smartphone apps available to help parents and children manage their allowance. These apps can actually send the allowance, track spending, teach budgeting lessons and even monitor chores.

Do you have a list of chores on your refrigerator that your children can do for extra money? You can incorporate those chores into the app and get rid of the fridge list forever.

Unless your bank offers an app for children that is tied to an actual bank account, most of the allowance apps will create a virtual allowance for your child. Think of it as a “store credit” that your children have with you.

Every week, their allowance is added to this credit and with your permission, they can buy whatever they want. Parents still have to actually complete the purchase transaction but after that’s finished, the parent simply deducts that amount from the child’s virtual account by logging the transaction into the app.

There are a lot of choices for parents that want to use web-based software or a mobile app for managing allowances. Here are just a few that you might want to check out:

Bankaroo

This app is more appropriate for teens than younger children but it was actually developed by an 11-year old and her father. This virtual bank allows a teen to track their savings as well as what mom and dad owe them for chores. It also has tools for learning how to set goals, budget and even do some basic accounting. One nice feature not found on every allowance app is the ability for parents to remove funds so kids had better make sure they make their bed every morning!

iAllowance

While most allowance apps are free, iAllowance costs $3.99. It's another virtual allowance tracker for parents and kids with some nice features that we didn’t find in other apps. iAllowance can send reminders to the children about household chores or other responsibilities around the house. Parents can add extra money or rewards for good deeds or when the kids meet certain goals. When a child wants to spend some of their allowance, the parent simply taps their account to purchase the item and the amount is deducted from their balance.

Piggybot

This apps is designed for kids ages 6 to 8 and not only tracks allowances and spending but also can show youngsters how much more they need to reach their goal and how long it will take to get there based on the child’s spending and savings habits. Using this app, kids can add pictures of the things they want and create a slide to show off the things they’ve already purchased. This can help teach the concept of goals and rewards. The app also has a feature where a child can share some of their money with a sibling.

It is important to remember that the role of allowance in a child’s life is to give them an opportunity to practice managing money—and that is all.

Joline Gofrey, author of "Raising Financially Fit Kids," suggests parents repeat this mantra to themselves regularly: "An allowance is not an entitlement or a salary. It is a tool for teaching children how to manage money."

Allowance apps can be a great way for our children to practice managing money.

Phoebe Venable, chartered financial analyst, is president and COO of CapWealth Advisors, LLC. Her column on women, families and building wealth appears every other Saturday in The Tennessean.

How Fed Rate Hike Will Impact Spending, Investments - Interview

What you need to know about IRAs

Fri, 18 Aug 2017 17:31:51 GMT

We have all seen the bright yellow how-to books that were once the most popular go to guides to learn about whatever topic you had trouble understanding. Football for dummies, Auto repair for dummies and even Parenting for dummies are just three of the 1,950 titles in circulation.

For some of you, finance can seem like a completely different language, and you need a guide to help you start saving for retirement. Individual retirement accounts, most commonly known as IRAs, are types of plans that many employees and employers utilize for that very reason.

Here’s a brief overview of four different types of IRAs to help begin your decision on what type of IRA is right for you.

Traditional IRA is an individual retirement account that allows you to invest pre-tax dollars that grow tax-deferred. There are no income limitations, and you are taxed at ordinary income when you withdraw after 59.5. For 2017, the contribution limit is $5,500 or $6,500 if you are over the age of 50. All or some of these contributions are tax deductible depending on your situation.

Roth IRA is an individual retirement account that allows you to invest after-tax dollars that also grows tax-deferred. When you make withdrawals after the age of 59.5, your distributions are not taxed. There are income limitations that the IRS mandates each year based on your modified adjusted gross income (AGI). If your filing status is:

Married:

Less than $186,000: up to $5,500 or $6,500 if over age 50
Between $186,000 and $196,000: a reduced amount
More than $196,000: $0

Single:

Less than $118,000: up to $5,500 or $6,500 if over age 50
Between $118,000 and $132,999: a reduced amount
Over $132,999: $0

The important thing to remember is that you can only contribute a combined $5,500 or $6,500 per year to a Traditional and Roth IRA -- not to each one. When starting your career, employees earn less income than later in life, we often recommend contributing to a Roth IRA while you are still under the income limitations.

SEP IRA is a simplified employee pension individual retirement account that provides business owners with an easier way to make pre-tax contributions toward their employees’ retirement as well as their own.

These contributions are tax deductible, and there are no income limitations. However, the employee cannot make contributions to their SEP IRA- it is only the employer. The money that your employer contributes for you will grow tax deferred and is taxed at ordinary income when withdrawn after 59.5.

For 2017, the maximum contribution is a $54,000. Unlike qualified plans, like 401(k)s, SEP IRAs are easy to administer. The start-up and maintenance costs are also much lower. Any business owner with one or more employees can start this type of plan.

Simple (Savings Incentive Match Plan for Employees) IRA allows employees and employers in a small business to contribute pre-tax money to a retirement plan. The company must have less than 100 employees to qualify to use this type of plan.

Again, like the SEP IRA, a Simple plan is much cheaper to start, maintain and administer than qualified plans. For employees to contribute, they must have at least $5,000 in compensation in any two previous calendar years.

Employers can make two types of contributions: dollar-for-dollar matching contribution (not to exceed 3 percent of the employee’s compensation) or a 2 percent non-elective contribution to all eligible employees, regardless if they make a contribution or not. For 2017, the maximum contribution limit is $12,500 or $15,500 if over the age of 50.

Because everyone’s situation is unique, we highly recommend consulting your financial advisor before making any decisions on where to start investing.

5 financial skills teens need

Fri, 11 Aug 2017 19:01:03 GMT

From age 13 through 18, teenagers should open their eyes to essential adult financial concepts like keeping track of money, investing, understanding business basics, handling credit, and talking to a banker or adviser.

How to keep track of money:

Once children earn or save a reasonable amount of money, it is probably time to open a checking account for them at your bank. With the widespread availability of online banking, your children can always know the exact amount in their bank account.

Most banks today have real-time processing so your financial fledgling can access real-time balances, and we know it can take mere minutes for money to fly through kids’ hands!

How to invest:

Unfortunately, most school systems don’t allocate much time in their curriculum on sophisticated economic concepts like investing. So the burden of teaching this lies with you as parents. Make sure your teens understand the basic types of investments such as stocks, bonds, mutual funds and real estate.

Teens should understand that every investment comes with a certain amount of risk; the higher the potential earnings on an investment, the higher the risk. To mitigate the risk of losing money due to a dip in one of your child’s investments, teach them the essential concept of diversification. To practice these concepts, play a virtual investing game like smartstocks.com with them.

Understanding business basics:

It’s important for your teens to understand how a business runs. From managing the inflow and the outflow of costs to monthly budgeting and earning a profit, there are a host of factors that affect the success of a business.

Again, I’ll suggest a simulated business model that your teens can play on the computer. Look at simulations like Business Tycoon, WeWaii, or even business-related games on the Big Fish Games website. Always oversee your kids as they play these games and try them for yourself before deciding if they are appropriate for your children. Make running a business fun and entertaining!

How to handle credit:

A huge caveat is needed here: if your child has a difficult time controlling their spending already, consider waiting to introduce them to using a credit card. If you’re confident your child can manage one and they have mastered responsibility over their checking account, sit them down for a serious talk first and foremost.

Point out that credit cards are how most people get into serious financial debt. Illustrate what happens when credit is not repaid in a timely manner — not only are 15 percent interest rates killer, but it could affect their ability to get a loan for a car or a house in the future. Establish strict guidelines about credit card use. For example, credit can only be used when purchasing necessities like gasoline and they can only use it when they have that amount in checking. Further, establish that every time they make a purchase with their card, they pay the balance immediately. This will deter an “I’ll pay it later” attitude that gets kids in trouble every time. Finally, monitor, monitor, monitor their credit use!

How to talk to a banker/adviser:

Bring your kids with you to the bank or your next meeting with your financial adviser. This will help them become familiar with how to talk about finances.

Most children will not need to know how to buy and sell securities for their own portfolios, but they will, most likely, meet with financial professionals throughout the balance of their life.

By allowing older teenagers to tag along and observe your financial meetings, your children will begin to understand the importance of financial responsibility. Allow them to get a holistic view of what adult finances look like and encourage them to ask questions. These advisers and bankers could be part of child’s future financial success, so get your kids comfortable with approaching them now so that they may carry this with them in the future.

These are just a few things that children should be prepared to handle financially as they get older. Empower them to be good stewards of wealth. Be a financial role model in their lives and set them up for great success.

Phoebe Venable, chartered financial analyst, is president and COO of CapWealth Advisors, LLC. Her column on women, families and building wealth appears every other Saturday in The Tennessean.

How 9/11 scared millennials away from investing

A start-up guide for investment newbies

Thu, 03 Aug 2017 17:28:18 GMT

I had a friend tell me the other day that she didn’t even know where to start when it comes to investing. I’ll admit that it can seem like a daunting task. She was afraid that she was going to ask a “stupid” question or be overwhelmed by the amount of information that an adviser would throw at her. If there any readers out there like her, I’m here to help.

If you’re a millennial, or anyone else new to investing, think of the following as a checklist for getting started in investing:

Budget

You should have a good understanding of how you spend your money. There are so many free apps to help you categorize and track your spending that you should have no problem marking this off your list. It may feel strange at first watching every transaction, but it is how you learn to budget and will become second nature once you get the hang of it. Remember to always pay yourself first. This means if you’re saving for something or want to put money towards investments, do that before you create the rest of your budget.

Emergency fund

You need to have money on hand for when life happens. Inevitably, your car will breakdown or your air conditioner will stop working. You need cash to cover those potentially unexpected large expenses.

I recommend keeping this money in a savings account. It will earn interest and you will hopefully be less tempted to spend it if it’s not in your checking account. You will hear that advisers recommend having three to six months’ of living expenses as your emergency fund in case you lose your job.

However, that is just an average. The right amount for you will be what makes you feel comfortable. So ask yourself the question, “What amount of money set aside will let me sleep soundly at night?”

Life events

Many of you are in the middle of big life changes. You might be buying a house, planning a wedding or having a baby. If one of these events is in your near future, I wouldn’t recommend investing the money that you will need for a down payment you will need for these occasions. In general, refrain from investing if you know that you will need the money within a year. A year makes it hard to guess whether the market will be up or down at the time you need those funds or what the tax impact could potentially be.

Investments

Two of most common questions that I hear are “how much do I need to start investing?” and “do you have a minimum?” Many financial advisers do have a minimum that you need in order to start working with them. However, there are always exceptions and many who do not.

If your parents are working with an adviser, he or she will often work with you as well because you’re considered part of their household. Or that firm might have a designated person who works with millennials like myself.

How much you need to start investing is a tricky question. Technically, to invest in many mutual funds, you need as little as $50. I believe the equally important question that is what type of account you should open. Can you invest in a Roth IRA still? Are you maximizing the match for you 401(k)? These are all the questions a financial adviser will have for you.

Ask questions

Remember that everyone’s financial situation is unique. Don’t hesitate to ask questions. You are paying for advice and deserve to know what you’re getting into. If it sounds too good to be true, then it probably is. And finally, always remember that it is never too early to start investing!

Jennifer Pagliara is a financial adviser with CapWealth Advisors.

Consider These Tax Strategies for Charitable Contributions

Robo-advisors: The future of investing or the latest financial craze?

Fri, 21 Jul 2017 16:21:45 GMT

Technology has undoubtedly created, destroyed and changed countless industries in the last 20 years.

The financial services has not been immune to this disruption. In 1980, there were approximately 5,500 people working on the floor of the New York Stock Exchange. Today, that number has dwindled to around 700.

This mass decrease is mostly attributable to electronic trading. Some of the other technological advances have affected the industry I work in in unexpected ways. I don’t believe that 30 years ago many financial advisors would’ve guessed that there would be an option available for people to work with a robot who would give them financial advice. However, today that is very much a possibility and robo-advisors are on the rise. But, the biggest question is, are they right fit for you and your family?

What are they?

Robo-advisors are digital platforms that provide automated, algorithm-driven financial planning services with little to no human supervision. Typically, a client will take an online survey to give data on their current financial situation and future goals. Then, the robo-advisor will compute where the client should invest his or her money. Most advice is based on modern portfolio theory.

In the United States, there are currently over 200 robo-advisors and more are launching every single day. In general, the fees associated with this new way of investment advice range from free to about 0.75 percent. There is normally not a minimum that is needed to start investing, unlike many financial advisors.

They are limited to what types of accounts they can manage. They generally stick to IRAs and taxable accounts. Having only begun in 2008, they’ve had a relatively short existence thus far.

Where is the emotion?

While I realize that I undoubtedly bring some bias to this discussion, let's explore three ways in which working with an advisor is different than with a robo-advisor:

Holistic approach: Many advisors, the firm I work for included, approach managing money holistically. Yes, we actually manage the money inside your account(s). However, we do so much more. Do you need help evaluating or buying insurance? Do you have an estate plan for how your money should be distributed when you pass? How should you invest the money in your 401(k)?

The list is endless. While there are some robo-advisors that are offering add-on services to help with questions outside the scope of managing your money. However, those services do cost money. My firm, for instance, does not charge for these services. We charge one fee that encompasses everything.
Not just a number: Money is emotional. When you decide to use an advisor, you’re entrusting someone with your livelihood, your hard-earned dollar and your financial future. The stock market moves up and down on a daily basis. It can be a stressful experience to watch those movements. Part of my job is to explain to my clients why their account is doing well or why it isn't. Do you want to be just a number in a computer? Can your advisor answer your questions when you’re concerned with the direction of your account?

Fiduciary: As a reminder, a fiduciary duty means that a financial advisor must have a client's best interests in mind at all times. Not all advisors currently operate under this duty; however, the industry as a whole is moving in this direction. There is also quite a debate on whether or not robo-advisors can uphold this duty. Can a robot have your best interests in mind at all times?

Know your advisor

As always, I want my readers to make smart, informed financial decisions. You might be just starting your investing journey, which is often the reason investors go with robo-advisors. Perhaps there’s other good reasons. Whatever the reason, just remember that, as with many things in life, the cheapest option is not always the best option.

Jennifer Pagliara is a financial advisor with CapWealth advisors.

5 questions for a summertime financial checkup

Fri, 14 Jul 2017 18:41:03 GMT

"Summertime and the livin’ is easy." Ella Fitzgerald’s famous lyrics illustrates the slower pace that many Americans assume during the summer months.

For many families, summertime means vacations that have been planned and anxiously anticipated for months. But summertime also marks the halfway point in our calendar year. As we pass the mid-year mark, it’s a good idea to use some of your “down time” to conduct a financial checkup to ensure you’re on track for a financially successful year.

Just ask yourself these five questions:

1. Are you contributing to a retirement plan?

Are you contributing enough? The type of plan you participate in determines how much you can contribute each year. If your employer offers to match a portion of your contributions, are you contributing enough to get all of those free dollars? If you are 50 or over, are you taking advantage of the catch-up provisions of the tax code? Consistently contributing to your retirement plan will pay off greatly later and most of us can achieve this through payroll deduction, making it one of the simplest ways to save for our future.

2. What is your annual budget for charitable giving this year?

For those in high tax brackets, charitable donations can significantly reduce your federal income tax bill while providing you and your family with an opportunity to make a positive impact on the life of your community and the lives of other people. Check how much you donated during the first half of the year and develop a plan for the dollars that you’ll donate before year-end.

3. Have you checked your credit report this year?

If you haven’t, go to www.annualcreditreport.com to request a free copy from each of the three credit reporting companies. Carefully check to make sure that all of the information is correct and up to date on each report. Credit reports can affect your mortgage rate, credit card approvals, insurance applications and even job applications. Suspicious activity or accounts you don’t recognize can be signs of identity theft. Review your credit reports and catch problems early.

4. How is your emergency fund doing after the first six months of this year?

Did you have any unexpected expenses that required dipping into your cash reserve? If so, start working on restoring that balance. Most of us should have three to six months of living expenses in some type of savings account that serves as our emergency fund to protect against an unforeseen financial blow.

5. Has anything about your life changed this year?

A change in your marital status, health, employment or benefits? A new child, grandchild or home? Have you received an inheritance or established a college-savings plan for your children? An event like any of these can necessitate adjustments to your will, insurance coverage, retirement planning, tax status, investments and more. And if you have experienced a signification change in your lifestyle, have you told your financial adviser? Each time you meet with your financial advisor, he or she should enquire about these changes — but don’t wait for them to ask. Schedule the appointment and find out what, if any, adjustments and fine-turnings should be made to your financial life.

These five checkpoints can be quickly reviewed so that you can get back to relaxing and enjoying your summer, while having the added peace of mind that you are on track financially for the remainder of the year!

Phoebe Venable, chartered financial analyst, is president and COO of CapWealth Advisors, LLC. Her column on women, families and building wealth appears every other Saturday in The Tennessean.

Interest rate hike is coming — here’s the good and bad

5 tips for achieving financial independence

Fri, 07 Jul 2017 16:16:28 GMT

Perhaps more than any other generation in American history, millennials have been scrutinized, stereotyped and maligned.

We’re lazy. We’re arrogant. We’re entitled. Worst of all, in a country that loves self-reliance and self-determination, millennials are moochers off their parents and financially dependent upon them.

In some regards, our unflattering reputation is partially true. According to a new U.S. Census Bureau report published in April called "The Changing Economics and Demographics of Young Adulthood: 1975-2016" about a third of millennials do in fact live with their parents.

Studies show millennials abhor financial dependence too

Guess what? Millennials don’t like financial dependence any more than you do.
When asked to define adulthood in the same study, the majority of millennials said that finishing their education and gaining full-time employment were “extremely important.”

On the other hand, marriage and parenthood, milestones that previous generation rated as necessary to achieving adulthood, were considered “not very important” by most millennials. Not surprisingly, this correlates with the rise in student debt and decline in early-career salaries in the past four decades. Unfortunately, only 28.9 percent of young adults are reaching their goal of financial independence by 21 years of age today.

A Bank of America Better Money Habits study published late last year had similar findings. Forty percent of 18 to 26-year-olds said "financial independence" was the top indication of adulthood. Only 14 percent said “moving out” of their parents’ home. Getting married and starting a family? Just 7 percent.

Incredibly, millennials responding to this survey said people should be able to pay for their own cell phone plan at 18.5, pay for their own car at 20.5, and for their own housing at 22. In all three cases, Baby Boomers — the millennials’ parent generation — felt it should take about a year and a half longer to happen!

Why the gap between aspiration and actuality?

Why is there such a disconnect between aspiration and actuality? I think it’s quite simple. It’s a classic case of desperately wanting what you don’t have — combined with some very sound logic that you should be able to stand on your own two feet before bringing into the world the pitter-patter of additional tiny feet.

5 tips for achieving financial independence

Turn living at home into a strategic plan, not a fallback plan. Living with your parents is a great way to save money and pay off debt while you work or look for work. If you’re doing that while your parents have the grace and patience to house you, that’s very smart. If you’re not, that’s mooching.
Define your hard and soft expenses. Hard expenses are those you can’t avoid without badly affecting your life — food, rent or mortgage, utilities, phone, insurance and loan payments. Soft expenses are those which don’t dramatically affect your life. Let’s call them frills: cable, Netflix, expensive coffee drinks, dining out, gifts, unnecessary clothes and gadgets.
Downsize your life. It doesn’t matter how small you think you’re living, you can live smaller. Cut out the soft expenses, then start trimming the hard ones. Research cheaper phone plans. Move into a smaller apartment or house. Plan your meals and prepare them at home.
Wage war on your debt. By waging war, I mean be strategic in your attack and, if you have a lot of debt, prepare for a long campaign. Start with your highest-interest debt. Or, if the psychological benefit is helpful, start with the smallest debt.
Convince yourself that retirement is now. The only way you’ll ever have a retirement that’s free from anxiety and fully of comfort is by starting on it ASAP. The money you have left over after hard necessary expenses should go first to one of three buckets: emergency savings (3 to 6 months of living expenses), debt repayment and funding some sort of investment plan for retirement. You can never get back the time that is absolutely essential to compounding returns.

Jennifer Pagliara is a financial adviser with CapWealth Advisors.

Make Sense of Saving/Investing with These Five Questions

Help your kids, don’t make them helpless

Fri, 30 Jun 2017 18:35:09 GMT

At the end of this past school year, my middle-school-age son didn’t turn in a paper. My son, who is smart, hard-working (normally) and a good student, took a 0, on purpose.

As if grades didn’t matter. As if all the work he’s put into school didn’t matter. I was shocked — so much so that I had a sudden vision of him growing up to become a lazy and entitled brat of privilege. My shock became fury.

Two kinds of opportunities

Our children live our lives until they build their own lives. We work hard to provide the best education possible, a nice home, vacations and all the material things that our children enjoy. But our children need to understand that all these things we give them are opportunities.

That one day, all the opportunities provided by mom and dad — to be nurtured, to gain knowledge, to make good choices, to learn from mistakes, to experience the good life — will be gone.

The opportunities will then be their own to find, to create and capitalize upon. We’ve done all we could do to get them to the plate. Now they’re taking their own swing at the American dream.

When we heard about my son’s paper, he received a lecture on responsibility, respect and not taking anything for granted. Very directly, we told him how he’s enjoying the results of our swing at the American dream. Whether or not he fully understood, I’m not sure. But I am confident that he’ll never deliberately bomb a school assignment again. And hopefully he got the message that opportunities are everywhere around him.

Avoiding rich-kid-itis

Though I may have overreacted when I learned about the paper, my worry is one that many families share. Having worked hard all your life to attain wealth, be it the upper-middle-class or filthy-rich variety (ours is the former, not the latter), how do you ensure your kids aren’t infected with rich-kid-itis?

How do you teach kids, who’ve only known comfort and plenty, to become independent, productive adults with a work ethic?

Raising independent, productive children

First, you must model the behavior you want from your kids. Don’t be blasé about the things you’ve earned. You worked hard to get them and your children need to know that. You value the things you have not because they’re inherently nice, pleasurable, comfortable and expensive, but because of the discipline and labor that was required to attain them. Simpler, less pricey things have value, too, for the same reason.
Value what you’ve earned, but value people more. Always think of others and have respect for them, no matter their origins, their vocation, their social strata or their tax bracket. You demonstrate this to your children very simply: in how you treat people. Another is through charitable giving and philanthropy. You don’t have to be rich to give to a food bank or volunteer some time.
Make them work. Not only should your children have duties at home, but they should have part-time and/or summer jobs when they’re teens. Nothing instills the value of hard work better than a low-glamour, low-wage job.
Finally, your children need to know they’ll be relying solely upon themselves to build a career, find purpose, and get through life’s highs and lows. Sure, you can help them, but don’t make them helpless by giving them too much financial support.
I recommend sharing the parable of the man of faith who was sure that God would save him from a flood. First a car, then a boat, and finally a helicopter came, but he declined help from them all. He perished and when he got to heaven, he asked the Lord why he didn’t save him. God replied: “I tried. I sent a car, a boat and helicopter.” Explain to your child that each of those was an opportunity. Help is great, but you must also learn to help yourself.

Chief Investment Strategist John Lueken Featured in RIA Biz Magazine

Hey millennials, for the best of life’s experiences, mix strategy with spontaneity

Fri, 23 Jun 2017 16:04:32 GMT

How many times would you go see your favorite musical performer or band? Five, ten, twenty times? One of my friends traveled to D.C. this weekend to see Dave Matthews for the 34th time.

While he was there, he also caught the U2 show, a group he’s now seen seven times. When he told me this last week, I was amazed.

Then listening to the radio on my way to work the very next day, the deejays asked their listeners to call in and talk about what band or singer they’d seen the most. A woman called in claiming she had seen Widespread Panic 150 times.

Widespread panic

My jaw literally dropped. That’s an enormous commitment of time and money, and the woman was only 30 years old. The media loves to talk about how much my generation, the millennials, values experiences over physical possessions. But this was revelatory for me. As I drove down the highway, I confess to experiencing some widespread panic myself.

I love concerts just as much as the next person — provided that person isn’t this woman. I have definitely seen some of my favorite bands and performers more than once. There’s just not enough music fanaticism and too much responsible financial adviser in me to see anyone 150 times!

The cost of a concert experience

It’s one thing to see a show in the city in which you live, but something else altogether if you have to travel. Let’s put some numbers around going on an overnight trip to see a concert in another city.

Concert ticket: According to a report by Pollstar, the average cost of a ticket in 2015 was $74.25. Obviously, this is going to vary depending on who you see and if you’re getting the ticket at face value or rebuying through a service like StubHub.
Plane ticket: According to the Bureau of Transportation statistics, last year the average domestic U.S. ticket price was $346.72.
Lodging: The average hotel price in 2016 was around $125.
Food & alcohol: While you’re traveling, you’re going to have to eat out and alcohol at the concert venue isn’t going to be cheap. Let’s be on the conservative side and say you spend a total of $75.
Transportation: Don’t forget the rides to and from the airport, going to eat and getting to and from the concert. Let’s add in another $50, which again is conservative.

The total spend on this two-day-and-one-night experience? $670.97. Multiply that by 150 and you’ve got $100,645.50. Let that sink in a moment.

Deferring today’s pleasure for more tomorrow

Now think in terms of retirement — which is how I instantly thought of it when I heard her on the radio. Let’s say a 30-year-old put that total in an investment account today. How much money would that be when that person is 65?

Assuming an annual 7 percent return on her investment, which is the average annual return of the S&P 500 adjusted for inflation and accounting for dividends since 1950, her account would be worth north of $1 million. Learn how that happens in another of my columns.

A million bucks, my dear fellow millennials, can buy a lot of experiences. The original 100 grand could provide a sizeable down payment on a house. It could launch a business. The possibilities are endless.

Mix strategy into your spontaneity

I don’t mean to moralize. For all I know, the woman on the radio is prudently saving and investing. And like her, I too believe in experiences. After all, what is life but a long (hopefully) and, in the main, satisfying (again, hopefully) sequence of experiences.

But I’m a firm believer that not only whims, but planning and discipline, too, achieve invaluable experiences: freedom from financial worry, the resources to maintain an enjoyable lifestyle and take memorable trips, the ability to send children to college, security in retirement and much, much more.

Make sure you’re employing both strategy and spontaneity in your quest for life experiences.

Jennifer Pagliara is a financial adviser with CapWealth Advisors.

America’s Infrastructure Failures, Demands Seen on Local Level

The markets are more resilient than you think. Here's why

Fri, 16 Jun 2017 18:22:16 GMT

As the stock market marches on, setting new highs, some investors are starting to feel a little stress.

They can’t square the strong markets with the pandemonium that is the news: Terrorist attacks in Europe, North Korea edging closer to nuclear weapons, the Russian attempt to influence U.S. elections and Trump’s latest tweet, among others. Surely the markets are due for a correction, maybe even a crash, right? I should sell while the market is high before it’s too late!

That’s our emotions talking. Our “fight or flight” response. Our cognitive biases. I’m not saying they’re right or wrong, I’m saying beware. Be calm. Be self-aware. Because all those emotions and cognitive biases, they often don’t have a clue.

The markets are more resilient than you think

Two things to bear in mind. First, the financial markets and the global economy are more resilient than we think. Second, the returns of the average investor are astoundingly atrocious.

Exhibit 1: According to a study by InvestTech Research that looked at 11 major geopolitical events of the past century, only two — the Nazi invasion of France in May 1940 and Japan’s bombing of Pearl Harbor in December 1941 — led to market losses over one-week, three-month and one-year periods.

In the case of Pearl Harbor, the one-year decline was less than 1 percent. President Kennedy’s assassination? A year later, stocks were up more than 20 percent. Also worth noting, the bull markets of the last century have on average lasted longer than bear markets. But no matter how long they last, bull markets always end. The one we’re in now will too eventually.

Exhibit 2: People are generally terrible at predicting when the market will swing from bull to bear, bear to bull. According to the market research company Dalbar, the 20-year annualized returns by asset class from 1996 to 2015 is topped by REITs at 10.9 percent, followed by the S&P 500 at 8.2 percent.

At the bottom is oil, at 3.3 percent. The returns of the average investor? 2.1 percent. Incidentally, the rate of inflation during those two decades was 2.2 percent, which means the average investor really didn’t even break even.

Either know and trust thyself — or a good adviser

My point is that every investor should know thyself. Understand your own emotions and cognitive biases so that you recognize how they might steer you wrong. After knowing thyself, then trust thyself. Make sound, emotion-free decisions and have patience.

Trying to time the market by selling when you think it’s high and buying when you think it’s low has been many an investor’s very successful strategy for going broke. If you can’t trust thyself, then I highly recommend you find a good financial adviser and trust him or her.

Phoebe Venable, chartered financial analyst, is president and COO of CapWealth Advisors, LLC. Her column on women, families and building wealth appears every other Saturday in The Tennessean.

How to save money when you're a millennial

Sat, 10 Jun 2017 15:59:58 GMT

Congratulations to all those who have graduated and starting first full-time jobs. Earning a college, vocational or associate’s degree is no small feat. You should feel proud.
Along with pride, you may also feel apprehension, and rightfully so. From experience, I can tell you that the transition from school to “the real world” is not always a smooth one. It can be a shock to be on your own, with no mom or dad to fall back on.

It can also be a shock to learn how far your dollar goes: not far at all.

Let’s break down your new paycheck to see how it’s diminished before it even gets in your hot little hands. I’ll also offer advice on what to do with paycheck before you start spending it.

Before you get paid

If you haven’t had a paycheck up until this point, you’re in for a rude awakening. Whatever your annual salary is, that’s definitely not the figure ending up in your bank account. Here’s where it goes before it goes to you.

Federal Income Tax:

The federal government takes a cut of your paycheck each tax period (unless you defer it) depending on how much money you make. These tax brackets change depending on whether you are married, file head of household, and other deductions and credits.

There could be potential reform in federal taxes under the new Trump administration, so be sure to follow the news on this. Currently, Americans pay an average of 20 percent of their income in federal taxes, including income, Social Security and Medicare taxes. If you make $40-50,000, that average is more like 11 percent

FICA Social Security:

FICA stands for the Federal Insurance Contributions Act, a payroll tax which funds Social Security and Medicare. Social Security, as you have probably heard, is a program that we pay into to receive benefits when we retire and for those with disabilities. By law, 6.2 percent of your gross income goes to Social Security.

FICA Medicare:

This tax is used to subsidize health insurance for people 65 and older and those with disabilities. You pay 1.45 percent of your gross income to Medicare.

State Income Tax:

In this respect, you’re lucky — maybe. Tennessee is one of only nine states that does not take additional tax from your paycheck. Instead, Tennessee has state sales tax of 7 percent. Combined with local sales taxes, Tennessee has one of the highest sales-tax rates in the country. So they get you post-paycheck.

City Tax:

Some cities levy income taxes. Nashville does not. However, Metro does have a 2.25 percent sales tax, making the combined sales tax rate for Nashvillians 9.25 percent.

SDI:

This stands for State Disability Insurance. Some states have a mandatory tax to benefit people who become injured on the job or have to take family or medical leave. Tennessee doesn’t have an SDI tax.

After you get paid

Federal, state and local governments have taken their bites. Now I’m going to advise something crazy. Set aside even more to begin building the foundations for a financially secure lifetime. I’ll also briefly solve — for most situations — a common dilemma for young workers: do you build an emergency fund, invest or pay off loans first?

Emergency Fund:

Life happens. Broken-down cars, rent increases, lost jobs and worse. Squirrelling away some savings in an emergency fund —3 to 6 months’ worth of expenses — can really save your bacon when life throws you a curve ball. For that reason, I say this is your first saving priority.

401(k):

Next, I cannot stress enough the importance of beginning to save for retirement now if it’s at all possible — even if it’s $25 or $50 each pay period. History shows that 6-7 percent annual return is a reasonable expectation on stock investments. Moreover, many employers offer a 401(k) match. Finally, you’re young and the power of compounding interest is on your side, so make the most of time you can never get back.

Paying off student loans:

According to the Department of Education, interest rates on federal loans to undergraduates have ranged from 3.4 percent to 6.8 percent over the last decade. When you pay off a student loan, you’re earning a “return on investment” roughly equal to the interest you no longer have to pay. If you expect to exceed that ROI with your 401(k) or other investments, then do that second and pay off loans last.

Jennifer Pagliara is a financial adviser with CapWealth Advisors.

MoneyWatch: Market Recap

Americans spend more at restaurants than grocery stores. Is it a problem?

Fri, 02 Jun 2017 18:20:00 GMT

Recently I heard our chief investment strategist say that Americans now spend more at restaurants than grocery stores . I was astonished. Could that really be true? A couple quick Google searches confirmed that indeed, last year, retail sales at restaurants and bars exceeded those of grocery stores for the first time.

It’s Norman Rockwell at my house

My next thought was, well, the rest of country might be eating out more, but not so at my house. We’re very committed to having dinner as a family each night. Plus, I have a passion for cooking. In fact, our sacred mealtime ritual, a tradition carried over from my childhood, is quaint to many of our friends. I look forward to the conversation. I look forward to the connection.

I look forward to seeing my husband and my son enjoying the repast I’ve prepared with my own two hands.
Yet, being a finance and numbers freak, I was curious. What was our ratio of eating at home versus eating out?

So I separated out our grocery and restaurant purchases over the past year. You guessed it. I was stupefied to discover that we, too, spent more at restaurants! What happened to my Norman Rockwell dinnertime?

A buffet of dining options

There are several reasons behind this reversal of a longstanding pattern in which the bulk of American food spending occurs at the supermarket.

Demographics have had a large impact on this shift. While baby boomers are eating at home in an effort to save money (perhaps because they under-saved for retirement), they are outnumbered by the millennial generation.

Millennials have many frugal habits but they do have a penchant for eating out. Technology is also impacting the trend with apps like GrubHub, DoorDash and Seamless providing convenient ways to order food from almost any restaurant for delivery.

Takeout has become so popular that restaurants are being reconfigured to handle the growing number of customers that come in only to pick up their order.
Somewhere between a home-cooked meal and eating out is the meal kit, another new dining phenomenon.

Meal kits offer pre-portioned ingredients and instructions for preparation delivered direct to your doorstep.

They require cooking but there is no actual grocery shopping. Blue Apron, HelloFresh and Plated are all examples of an industry which is touting annual sales of $1.5 billion and growing.

Is this trend a problem? It depends

Is this trend a problem for the American consumer? Dining out is certainly more expensive than eating at home, but if you’re adjusting your budget to accommodate, then it shouldn’t be a big deal. But the Federal Reserve’s 2015 report on the economic wellbeing of U.S. households showed that 46 percent of adults say they either could not cover an emergency expense costing $400.

A couple of weeks ago, an Australian real estate mogul was roundly lambasted on social media for suggesting that $19 avocado toast might be why millennials couldn’t afford homes. But the truth is, eating out does add up. One wonders, too, if it’s adding up in other ways — contributing to our escalating obesity epidemic, for instance.

It’s certainly not a problem for investors.

It’s an opportunity. When consumers change their preferences, they shift spending habits, causing some companies to benefit and others to suffer. Winners and losers can be hard to identify, but if you think this trend is here to stay, investing in companies that adapt to the changes in their industry could bring bountiful returns.

Phoebe Venable, chartered financial analyst, is president and COO of CapWealth Advisors, LLC. Her column on women, families and building wealth appears every other Saturday in The Tennessean.

Proposed Tax Changes (And Planning Strategies) Under The Biden Administration Part 4: Credits & Deductions

Adults aren’t vanishing, they just look different

Fri, 26 May 2017 15:56:01 GMT

Ben Sasse, the Republican senator from Nebraska , is an accomplished man. At 45 years of age, he’s already served as president of a college, an assistant secretary in the U.S. Department of Health and Human Services, and has earned three master’s degrees and a doctorate from illustrious institutions such as Harvard and Yale. In addition to being accomplished, he’s principled. Whether you agree with his politics or not, early on in the election last year, Sasse repudiated Trump and never backed down — a rather lonely stance as a Republican.

An accomplished and principled senator

As yet further proof of his achievement and sense of virtue, Sasse has just published a book titled “The Vanishing American Adult: Our Coming-of-Age Crisis—and How to Rebuild a Culture of Self-Reliance.” There’s a lot to like about the book. But there’s also some of it that I take issue with, particularly the disparagement of my generation, the millennials.

I’ll start with what I like. Sasse sings the praises of hard work, travel and reading books, and compellingly explains why. All three teach you about the world and yourself, expanding your mind beyond the immediate, the familiar and the comfortable. Work, in particular, is a favorite subject of Sasse’s, and he shares an incident from his time as president of Midland University that in part inspired him to write his book.

The virtues of hard work, travel and reading

Some students were asked to decorate a 20-foot Christmas tree. They decorated the bottom seven or eight feet, the part that was easy to reach, and then quit without even looking for a ladder.

Writes Sasse: "I simply couldn't reconcile the decision to leave while the work was still incomplete with how my parents had taught me to think about assignments. I couldn't conceptualize growing up without the compulsion — first external compulsion, but over time, the more important internal and self-directed kind of compulsion — to attempt and to finish hard things, even when I didn't want to."
I completely agree that calling it quits like these students did is pitiful. But I think Sasse comes down too hard on millennials. He fails, for instance, to point out that my generation volunteers more than previous generations and that we’re on track to become the most educated generation in U.S. history. That’s awfully adult of us, I’d say.

Maybe adulthood has more than one definition

Sasse reveres “gritty work experiences” such as farm and ranch work, which he did as kid and which he now ships his own kids off to do in the summer for the construction of their character.

While I would agree that learning the value of hard work is laudable, even critical, and that there are too many people of all ages piddling unproductively on their digital devices, Sasse leaves himself open to some ridicule here.

For starters, less than 2 percent of the American population works in agriculture today. Mark Zuckerberg has probably never driven a tractor — nor even dug a hole — but he built Facebook from scratch. He’s not only shaped the course of human history, last year his company had revenue of $28 billion and today he’s worth nearly $60 billion. And, by the way, he and his wife have pledged to give 99 percent of their Facebook fortune to charity. That’s accomplishment. That’s principled. And last year, a GoDaddy survey found that 40 percent of millennial professionals worldwide consider him their biggest role model.
Moreover, the senator could be accused of fretting over upper-middle-class problems. While he’s concerned about his privileged children learning the lessons of good work, his critics might say there are still plenty of Americans simply looking for good-paying work.
As I said, there’s a lot to like about Senator Sasse’s book. But I don’t think the American adult is vanishing, at least not at any greater rate than in eras before. I think there have always been responsible, hard-working people and less responsible, less hard-working people. Perhaps adulthood looks a little different today and, like beauty, is in the eye of the beholder.

Jennifer Pagliara is a financial adviser with CapWealth Advisors.

IRS Changes May Mean Frustrating Tax Season Ahead

How to teach your kids to budget this summer and more

Thu, 18 May 2017 18:16:28 GMT

Summer is drawing nigh, that erstwhile family season of relaxation and slowing down. In today’s world, it’s just the opposite. It’s all about planning and activities — planning what the children will do while not in school, planning how to get your children to and from those activities while you work, planning vacations, planning to ensure family life runs smoothly when the reliable structure and schedule of the school year is pulled out from under you like a rug.

I’ve been working on my family’s summer calendar practically since last summer ended. With just a few days of school left, I felt confident that I’d struck the right balance of family time, sports and travel for my teenage son. Then yesterday, it occurred to me: I, a financial adviser, hadn’t planned anything that would advance his financial savvy!
Here are some easy ways to insert some financial acumen into your child’s summer:

1. Give kids a vacation allowance — and stick to it.

Summer vacations are the perfect time to discuss budgeting, a supremely critical financial skill. Before going on vacation, determine how much discretionary spending your children will have. How much cash will you give them and will they be allowed to dip into their own savings?

Once you’ve determined the amount, sit down and talk about it. If each child gets $50 for the week, explain this is $7.14 per day. Make sure they think about how they’ll keep up with the cash while traveling. If on day one, they blow all their money on amazing live sea monkeys that turn out to not be so amazing, they need to understand you’ll not be buying them any more souvenirs.

Allowing your child to experience the consequences of their actions is invaluable.

2. Take them to the grocery — and talk about that candy bar.

A simple trip to the grocery store provides another financial learning opportunity. No matter the age of your children or grandchildren, they can use your guidance on how to be a good spender. Explain what an impulse purchase is and why candy bars are placed near the cash registers.

A candy bar may seem like nothing to worry about because the cost is small, but this lesson isn’t about the size of the purchase. It’s about not succumbing to temptation and purchasing something without considering the ramifications. Talk about the nutrition and food volume of a candy bar compared to, say, a dozen eggs, which is equivalent in price.

Consumption is part of our culture and marketers bombard us with messages to buy things we don’t need. Point these strategies out to your children so they aren’t so easily and blindly “sold.”

3. Make them work a summer job — and watch them learn.

For many of us, our first job was a summer gig. A summer job will teach a child more about personal finance than any lecture from mom and dad ever will. If your teen is working for minimum wage ($7.25 here in Tennessee) and a movie tickets costs $13, let him or her decide if going to the movies with friends is worth two hours of work or not. Besides learning the value of hard work and the value of a dollar, your child may begin learning what kind of work interests them.

They may discover they love interacting with customers as they bag their groceries. Even the process of applying for a summer job is a great experience for teenagers.
Enjoy your summer and make some memories, but don’t forget to give your children some financial lessons they won’t forget either!

Phoebe Venable, chartered financial analyst, is president and COO of CapWealth Advisors, LLC. Her column on women, families and building wealth appears every other Saturday in The Tennessean.

Near-term stock market in a 'treacherous environment'

7 tips for millennials ready to buy a ride — not hail it

Thu, 11 May 2017 15:44:00 GMT

Having purchased my first car without moral support (or help negotiating) recently from a dealership in Cool Springs, I know how stressful buying a car can be.

Other than a home, a car is one of the biggest purchases you’ll ever make, and likely one you’ll make several times in your life.

It’s an important financial decision and, unfortunately, my experience didn’t go as well as I would have liked. So I now feel compelled to give my fellow millennials who might be in the market for a new car some warnings and some tips. Hopefully you won’t make the same mistakes that I did!

5 things millennials want (and need) in a financial adviser

Just a few years ago, car companies were terrified that the debt-laden millennials would never buy cars, preferring to use ride-hailing services such as Uber and Lyft. As millennials pay off their college loans, get settled into careers and move out of city-center apartments in favor of home ownership, I predict that of most of my cohorts will buy cars.
Here are some tips for when you do, millennials.

Budget: Know your income, your fixed expenses and how much you can afford —this is called a budget, people — before taking one step onto a car lot. Your budget for a car should also include car ownership costs — fuel, insurance, maintenance and registration costs.
Do your research: Also before you go, get online and narrow down the cars you’re interested in that fall within your price range. That way, you’ll have more clarity and confidence as you shop in person. Know the invoice price for the new cars you’re interested in, as well as the manufacturer’s suggested retail price (the wholesale price and dealer’s asking price, respectively, if you’re buying used). The invoice and wholesale prices are a rough indicator of what the dealer paid for the car, so it may be a good place to begin negotiation.
Secure financing beforehand. Check interest rates on loans from local banks and credit unions and compare those with what the dealer offers. Dealers typically receive an additional fee or commission from every loan they generate.
Know the dealer’s profit centers. Selling you a new car for more than the invoice figure isn’t how the dealer makes most of his or her profit. According to the National Automobile Dealers Association, they make most of their money on dealer cash and holdbacks (this is money the manufacturer kicks back to dealers for selling a car), by selling your trade-in (often for a much bigger profit than they just made selling you a new car), on dealership financing and insurance, and on the service they hope to provide you post-sale. Knowledge is power. Have plenty of it going into negotiation.
Don’t fall for a false sense of urgency: Unless you’re negotiating on the last day of a special promotion, more likely than not the price you hear today will be also be good tomorrow. Car salespeople have quotas to fill and commissions to earn, so they’re going to pressure you to buy now. Don’t be rushed into anything you’re not ready for.
Don’t fall in love with the latest and greatest: If your heart is set on the newest model of a very popular car, you’re probably not going to get a great deal. The dealerships know they have the upper hand in this scenario — you want it and there’s a line of people behind you that want it, too — and they’ve got zero incentive to give you a better price.
Be prepared to walk. Everything is negotiable. The worst that can happen is they say no. In that case, resolve to walk out and try another dealership.

"Other than a home, a car is one of the biggest purchases you’ll ever make, and likely one you’ll make several times in your life." Jennifer Pagliara is a financial adviser with CapWealth Advisors.

Plan your way to a secure retirement

Nashville arts: 7 of the best culture events beginning May 4

Fri, 05 May 2017 16:57:58 GMT

These are the top culture events in Nashville, starting May 4.

1. Closing ceremony of the sand mandala at the Frist

The Tibetan monks of Drepung Loseling Monestery return to the Frist Center for the Visual Arts on Sunday to destroy the intricate sand mandala they created in February with millions of grains of colored sand. In conjunction with Free Family Festival Day and to punctuate the closing of the exhibition, “Secrets of Buddhist Art: Tibet, Japan, and Korea,” the monks will chant and sweep up the sand in a ritual closing ceremony.

Guests are then invited to follow the monks in a procession down Broadway from the Frist Center to the Amphitheater in Riverside Park on the Cumberland River, where the monks will perform multiphonic chanting and pour half of the sand into the water to disperse the healing energies of the mandala throughout the world. Eastbound lanes of traffic will be shut down and there will be safety barricades for guests to walk behind. The remaining sand will be given to the Frist Center Sustaining Community Partners to spread blessings throughout the city. Traditionally, the destruction of a sand mandala is performed as a metaphor for the impermanence of life, and depositing the sand into a nearby body of water fulfills a function of healing.

The Frist is at 919 Broadway. Regular Sunday hours are 1 p.m.-5:30 p.m. and the closing ceremony will be from 4:30 p.m.-5:30 p.m.

— Melinda Baker, for The Tennessean

2. Harding Art Show

The Harding Art Show is the longest running school-sponsored fine art show in Middle Tennessee and returns this weekend for its 42nd annual exhibition and fundraiser. Running May 4-6, this three-day celebration of art and community features paintings, sculpture, woodwork, photography, and more from 70 artists. A portion of proceeds benefits Harding Academy, a co-educational day school serving pre-kindergarten through eighth grade. This year, the featured artist is local abstract artist, Ed Nash. On Thursday and Friday evening, there will be receptions for guests ages 21 and up with cocktails and hors d’oeuvres. Tune, Entrekin & White host the reception on Thursday and CapWealth host on Friday. Parking for both evening events is free with a shuttle service running from the Immanuel Baptist Church on Belle Meade Boulevard from 5:15 p.m.-9:30 p.m. During the day on Friday from 1 p.m.-5 p.m., the show is open to all ages, and on Saturday from 10 a.m.- 4 p.m., Infinity Group hosts Family Day at The Harding Art Show with food, treats, and hands-on art activities for guests of all ages. Parking is in the Harding Place parking lot just west of campus during the daytime events. The show is free and open to the public, though a $10 donation is suggested at all events.

— Melinda Baker, for The Tennessean

3. Nashville Ballet presents world premiere of 'Seven Deadly Sins' at TPAC

Nashville Ballet explores two contemporary dance styles in one performance this weekend — a ballet set to brand-new music by acclaimed singer-songwriter collective Ten Out of Tenn and another featuring an iconic Aaron Copland score — at the world premiere of “Seven Deadly Sins” with “Appalachian Spring.”

Choreographed by Nashville Ballet Company dancer Christopher Stuart, “Seven Deadly Sins” features a unique collaboration between Ten Out of Tenn and Nashville Symphony — with all-new, original music inspired by the concept of one of the seven deadly sins.

The performance opens with “Appalachian Spring,” Nashville Ballet Artistic Director & CEO Paul Vasterling’s abstract interpretation of Copland’s iconic masterwork, with a quintessential Americana score performed live by the full Nashville Symphony orchestra.

May 5-7 at TPAC’s Andrew Jackson Hall, 505 Deaderick Street, Nashville. Performances at 7:30 p.m., Friday and Saturday; 2 p.m., Sunday. Tickets start at $28, available at www.nashvilleballet.com or by calling the TPAC Box Office at 615-782-4040.

— Amy Stumpfl, for The Tennessean

4. TWTP’s 11th Annual Women’s Work Festival

Tennessee Women’s Theater Project opens its 11th Annual Women’s Work Festival this weekend, with an exciting mix of performing and visual arts — all created by women.

Opening weekend highlights include the Music City-inspired musical “Another Round,” with music/lyrics by Julie Forester and Kirsti Manna; book by Bill Feehely; a staged reading of Kari Floren’s new play, “Revisiting Wildfire,” featuring Aleta Myles and Tamara Scott, directed by Carolyn German; and the Nashville-made (and soon-to-be cult favorite) horror/comedy film “Black Holler,” written by Heidi Ervin, Rachel Ward Heggen and Jason Berg, and starring TWTP favorite Tamiko Robinson Steele.

May 5-21 at Looby Theater, 2301 Rosa L. Parks Blvd., Nashville. Performances at 7:30 p.m., Thursdays-Saturdays; 2:30 p.m., Sundays. For complete schedule of performers, show dates/times, reservations and information, visit twtp.org or call 615-681-7220.

— Amy Stumpfl, for The Tennessean

5. ALIAS spring concert at Vanderbilt’s Turner Hall

ALIAS Chamber Ensemble will present its spring concert on Tuesday at Vanderbilt’ s beautiful Turner Recital Hall. The concert will explore “a world of musical contrasts” — including works by Georg Philipp Telemann, Mason Bates and Sarah Kirkland Snider — along with Trey Anastasio’s “Divided Sky,” featuring the renowned electric violinist Tracy Silverman as guest artist.

May 9 at Turner Hall, Vanderbilt University’s Blair School of Music, 2400 Blakemore Ave., Nashville. Performance at 7:30 p.m., Tuesday. Tickets $20, available at aliasmusic.org .

— Amy Stumpfl, for The Tennessean

6. Nashville Opera and abrasiveMedia present ' Move Closer' at Houston Station Art Crawl

Nashville Opera and abrasiveMedia team up this weekend for “Move Closer,” a creative blend of music, aerial dance and visual art — all inspired by the sensual art of the tango.

Aerial dance company Suspended Gravity will perform, with music by Nashville Opera . Yuri Figueroa , a native of Mexico, will display his original art. This interactive and immersive movement installation invites audiences to experience art in a new way.

May 6 at abrasiveMedia, 438 Houston St., #257, Nashville (inside Houston Station, second floor). Drop in between 6 p.m.-9 p.m., Saturday. Free. Visit abrasivemedia.org for details.

— Amy Stumpfl, for The Tennessean

7. 46th Annual Spring Tennessee Craft Fair

Returning to Centennial Park this weekend for its 46th annual event is The Spring Tennessee Craft Fair. This juried craft exhibition and sale brings together hundreds of talented craft artists with regional and national reputations and draws 45,000 visitors. Seventy-five percent of the selected artists are native to Tennessee and many will be in attendance to answer questions and discuss their work as you shop for memorable, locally-made gifts for others or (unabashedly) yourself.

Featured artists include Kristi Hyde (Atlanta), Tom Turnbull (Nashville), Vickie Vipperman (Kingston Springs, Tenn.), and Daniel Corban (Orlinda, Tenn.). Don’t forget to visit the "Emerging Makers" tent and see the work of talented up-and-coming craft artists, and bring the little ones to the Publix Kids’ Tent for community and culture-themed hands-on activities and a chance to contribute to the creation of a collaborative mural.

The fair will be open Friday and Saturday from 10 a.m.-6 p.m. and Sunday from 10 a.m.-5 p.m. The event and parking is free, and on Saturday and Sunday, there will be a free shuttle service running in 15-minute loops from the HCA Parking Lots located on Park Plaza to the fair.

— Melinda Baker, for The Tennessean

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'Sell in May and Go Away' Manages to Hang Around

Fri, 05 May 2017 16:22:28 GMT

It’s May! The tell-tale signs are everywhere — the temperatures are up, flowers are in bloom, Steeplechase is next weekend, students are taking final exams and the financial news is once again repeating the adage, “Sell in May and go away.”

Playing the ponies

If you’re not a market watcher, you may not be familiar with the expression. But even if you are, you may not know the origins. It dates back to merry old England when stock brokers would take the summer off to enjoy the horse racing season. With the first race of the season in May and the final race in September, their offices were pretty much empty the entire summer. Not surprisingly, that made for a pretty flat market those months. With the St. Leger Stakes the last of the big races (as it still is), the original saying was “Sell in May and go away. Do not return until St. Leger’s Day.” (Yes, I know. This story does nothing to dispel the idea of fat cat bankers and Wall Street types. But I’ll have you know, I haven’t had a summer off since I was a child!)

Stock market seasonality

While investors today don’t have to worry about stock brokers abandoning their profession for the whole summer, there is evidence of seasonality in the stock market. According to FactSet, since 1928 the S&P 500 Index has gained, on average, about 5 percent from November through April while adding just 2 percent from May through October. When we look at stock market performance by the month of the year, over the last 89 years May’s returns were positive 50 times and negative 39 times. While May is certainly in the bottom half of all months for performance, it has actually produced positive returns more often than not.

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More: Have straight talk with children about your wealth

Trends, noise and hot air

All of this makes great fodder for market commentators, but there’s no way to know if this or any other market trend will hold true this year, next year or in the years to come. The vast majority of people are long-term investors, not traders. The talking heads love to buzz on noisily — after all, they have to fill airtime — about short-term strategies that simply aren’t in the best interest of long-term investors. For an investor to actually follow the “sell in May and go away” adage, they would need to liquidate their entire stock portfolio, racking up transaction costs and possibly capital gains tax, not to mention increasing their risk. What’s changing month to month in the stock market should be, for all intents and purposes, irrelevant to long-term investors.

One-liners don’t build retirement accounts

We can do four things with our money: spend it, save it, invest it or give it away. For the portion of your wealth that is allocated to investing, the stock market has historically been the best place to grow wealth, but there have been many periods of time when investors were disappointed. Investors (as well as market commentators) are constantly searching for the best way to earn more while taking the least amount of risk possible. Selling in May and going away is not the answer, nor is any other one liner. Even “sell high and buy low” is nearly useless. For all its obvious wisdom, what’s your success rate at consistently timing the market?

For long-term investors, investment decisions should be guided by your individual financial goals, risk constraints, investing time horizon, liquidity needs and tax circumstances. While that doesn’t sound snappy or succinct, by retirement you may think them some of the most beautiful words you’ve ever heard.

Phoebe Venable, chartered financial analyst, is president and COO of CapWealth Advisors, LLC. Her column on women, families and building wealth appears every other Saturday in The Tennessean.

5 Things Millennials Want (and Need) in A Financial Adviser

Thu, 27 Apr 2017 17:21:47 GMT

Some of you may remember an advertising slogan from the late 1980s: “Not Your Father’s Oldsmobile.” Some of you won’t remember it, which is understandable. It’s an old commercial for a car brand that’s been defunct for 13 years, after all. That aside, the line became a pop culture catchphrase. I’ll demonstrate: “Not Your Father’s Financial Adviser.” That aptly describes the millennials’ preference when it comes to finding professional financial assistance.

Millennials aren’t looking for their parents' adviser — if they’re looking for one at all.

For starters, many millennials simply don’t have extra assets to invest right now.

They’re significantly indebted with student loans, they’ve faced a tough job market for years, and wages have been stagnant much or even the entirety of their lives.

Although a basic challenge, a dearth of capital isn’t the only hurdle. Besides the state of the millennial wallet, there’s the state of the millennial mind.

Having lived through the dot-com bubble of the late '90s and early '00s, the Financial Crisis of 2008 and the subsequent Great Recession, they’re skeptical of Wall Street.

There’s more. The Internet, smartphones and social media is the air millennials have breathed since birth. Startup founders such as Marc Zuckerberg and Elon Musk are more likely to be a millennial’s hero than traditional industrialists, and consequently millennials are very entrepreneurial. They’d rather invest in talent and creativity — often their own — than in stocks and bonds.

Add to that the millennials’ commitment to causes, be it environmental sustainability, tolerance and diversity, or fair wages, and convincing them to invest in profit-first corporations is an even harder sell.

If they are interested in investing, many would rather do what comes naturally: Get online, do some research and purchase cheap, passive products such as ETFs, skipping the inconveniences of finding and paying an adviser.

What millennials want

Fortunately for my profession, but also fortunately for their own financial futures, there are millennials who recognize the value in an experienced adviser. Still, from my experience with millennial clients, they don’t want just any adviser. Here’s what they’re looking for:

Service. Millennials don’t want to be another warm body in a chair. They want you to care. Besides investment guidance, they want to be counseled on their debt, budgeting, financing the experiences they value and their careers. Now, most advisers don’t have all that expertise in-house. Forward-thinking, service-oriented advisers, however, can recommend people that they trust and know will do excellent work for their client.
Reputation and trustworthiness. Trust me when I say that millennials are going to do their research on financial advisers. Because a few sleaze balls have tarnished the financial profession, millennials want assurance their adviser isn’t going to do the same.
Accessibility. The days of meeting face to face for every meeting are fading away. The adviser needs to have the flexibility to meet at nontraditional times, at a coffee shop, and over the phone and internet-enabled videoconferencing platforms.
Fair fees. They want crystal-clear transparency on how much they’ll pay and why. They don’t want to be nickel-and-dimed for every service provided.
Feeling valued. Just because they don’t walk in the door with half a million dollars doesn’t mean that they aren’t future high-income earners. They know that and you’d better too. Millennials want to feel valued now and appreciated for what they will bring to the table in the future.

Most of these traits would well serve any adviser, regardless of their clientele. Don’t go the way of the Oldsmobile. Make sure you’re worth millennials’ time, trust and money.

Jennifer Pagliara is a financial adviser with CapWealth advisers. Her column appears every other week in The Tennessean.

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Have Straight Talk with Children About Your Wealth

Fri, 21 Apr 2017 17:41:03 GMT

Whether your family has a lot of wealth, some wealth or just a little wealth, there comes a time when you have to talk to your children about it. Most parents dread this conversation as much as they dreaded having the “the birds and the bees” conversation with their children. Being open with your children about money and wealth is similar.

Children are forming ideas about your wealth regardless.

When you had the big talk with your children about where babies come from, were you surprised by how much they already knew? Once again, it’s the same with money. Kids know more than we think they know. They hear things from their friends. They can use Google. They also draw conclusions based upon the family’s lifestyle. Kids are resourceful and smart, but they need their parents to paint a full and appropriate picture for them. Otherwise, their imaginations and their expectations could run wild.

This talk could be difficult and you will need to prep for it. Depending on your financial situation and your plans for your children, there could be as many risks to telling them about the family wealth as there is to not telling them. You’ll have to determine the amount of information to share, and when, depending on your child’s maturity level and ability to understand.

It’s all about setting expectations.

Let’s say your family earns a high income that supports living in beautiful home, driving expensive cars, taking fabulous vacations, enjoying the privileges of a country club, sending your children to private school — but you aren’t saving much money. Or perhaps you intend for your child to be responsible for their own education. Either way, that’s fine — so long as your child knows this. Otherwise, it’s safe to assume your child will expect mom and dad’s abundance to extend to college tuition, living expenses, graduate school, etc.

Let’s say your family is of much more modest means. Your lifestyle isn’t luxurious and you follow a strict budget — yet you are saving some money for your child’s college education and desire that he or she go. Your child needs to know the extent of support that you can provide and needs encouragement that the rest can be managed through low-interest loans and working through college. Otherwise, your child may have inaccurate expectations, perhaps of the too-low variety.

There’s no shame in being honest — in fact, there’s more risk in avoidance.

Can you pay for college? Any college? Graduate school? Any graduate school? A dorm, an off-campus apartment, a car, other living expenses, spending money? Very few families have an unlimited budget for the education of their children, so there is absolutely no shame in telling your children exactly what your financial commitment can be to their education. Moreover, it is the only way for your child to make informed decisions not only about where to go to college but what career path to pursue. The difference between four years at an in-state public school versus five years at a private school followed by graduate school could easily be hundreds of thousands of dollars. That’s a difference that could devastate a family’s ability to maintain a lifestyle or fund retirement.

I’m reminded of a family that lived very modestly whose daughter developed a love for art at an early age. But as she grew up, she knew that an art career wasn’t practical, so she turned to finance instead. She eventually became a very successful investment banker on Wall Street, although it was never her passion. By 55, both her parents had passed away. Two weeks after her father’s funeral, she learned she’d been left $25 million. Her father had never wanted her to know lest it deter her from being a productive person. The next time she visited her father’s grave, she found herself screaming and demanding of the headstone “Why?”

Conversations with your children about money might be uncomfortable, but it is one of the best gifts you can give them regardless of how much they ultimately receive or inherit. This isn’t a “one-and-done” conversation but something that should be discussed repeatedly. If you’d like help on how to have these conversations with your children, talk to your financial adviser.

Phoebe Venable, chartered financial analyst, is president and COO of CapWealth Advisors, LLC. Her column on women, families and building wealth appears every other Saturday in The Tennessean.

Unless Your Money Is Beating Inflation, You’re Losing

Fri, 14 Apr 2017 18:07:37 GMT

Inflation is the rate at which the price of goods and services rises. With inflation, the purchasing power of money declines.

Many millennials have known nothing but recession and recession recovery. They’ve never seen wage growth. They’ve never known big life decisions — such as marriage, buying a house or having kids — that weren’t delayed due to insufficient savings. Those who are older have experienced this, too, of course, but they can at least remember better times of economic optimism.

About the only economic curse millennials haven’t endured is inflation. But even that could change now as inflation appears to be rearing its ugly head.

Diminished purchasing power

Inflation is the rate at which the price of goods and services rises. With inflation, the purchasing power of money declines. Many factors contribute to inflation, but one of the basic causes is the economic principle of supply and demand.

There are currently many trends at work that could potentially spell inflation. Many expect a fiscal stimulus to the economy thanks to Trump’s promises on infrastructure spending and tax cuts. Investors certainly believe an economic jolt is coming, as evidenced by the double-digit lift to the S&P 500 since Election Day. Another commonly watched inflation indicator, wages, are also creeping up. Energy prices, which bottomed out last year, have turned around, yet another inflation indicator.

Real-world examples

At 2 percent annual inflation, a candy bar that costs a buck today will cost $1.02 this time next year. While a two-cent increase in the price of a candy bar sounds trivial, inflation affects the price of potentially everything: groceries, utilities, gas, clothing, eating out, a new car, home repairs, rent, travel costs, you name it. It adds up fast.

Inflation even affects what you don’t buy — it affects what you save. At 2 percent inflation, a savings account earning no interest that’s worth $1,000 today will be worth $903.92 in five years. In 10 years, that’s down to $817.07. While inflation doesn’t make the money disappear, it lessens the amount of stuff that you can buy with that amount of money — which is a whole lot like cash evaporating.

At 3 percent inflation, it gets much worse. According to the Bureau of Labor Statistics, thanks to an average annual inflation rate of 2.97 percent, $100 in 1980 is equivalent to $295.63 in 2017. That doesn’t mean your money is worth more: It’s precisely the opposite. What a Benjamin could buy 37 years ago now costs triple. So, had you put that $100 into that savings account in 1980 at the age of 30 years old, you’d now be 67, what many people consider retirement age. That $100 would still be $100 nominally and officially, but now it buys only a third of what it did before — its real-world value has shrunk by two-thirds!

Inflation vs. interest

Inflation is one of the reasons investors invest. Because unless you grow your money ahead of the inflation rate, its value is falling.

I’ve noted in my column before that millennials haven’t sought the services of financial advisers like the generations before them. That’s to be expected, given that they’ve had less investable assets and grown up with the financial crisis and a tepid recovery. But financing long-term goals such as marriage, home ownership, children and a comfortable retirement require knowledge, planning and discipline. The specter of inflation now makes a difficult task even harder. It may be time to get advice from an experienced, trustworthy adviser.

Jennifer Pagliara is a financial adviser with CapWealth Advisors. Her column appears every other week in The Tennessean.

Housing costs leave millennials hurting

Tue, 04 Apr 2017 21:47:05 GMT

Interest rates are finally rising and it’s more expensive to borrow money now to buy a house. But living in Middle Tennessee — surrounded as we are by cranes, homes under construction and ever-denser traffic thanks to all the newcomers — may skew our ideas on the housing market. You may have heard about the rule that says housing should account for no more than 30 percent of your income. Is that rule of thumb still valid?

Where 30 percent came from

The ratio traces its beginning back to Massachusetts Senator Edward Brooke, who was the first African-American to be popularly elected to the Senate since the Civil War. The Brooke Amendment capped rent in public housing at 25 percent of residents’ income. Congress increased that rent ceiling to 30 percent in 1981 when they were faced with a budget crisis. That number has stayed the same since then, thus the 30 percent rule of thumb.

What millennials pay for housing

Last year the National Endowment on Financial Education partnered with Parents magazine to conduct a survey on the financial struggles of millennial-age parents. They found that 40 percent of millennial parents’ monthly incomes were going toward housing. Astonishingly, one-fifth of those were paying between 50 percent and 59 percent, and 8 percent were paying 60 percent to 74 percent. The vast majority of those in their early 30s and younger are paying rent, not a mortgage. Rental rates have soared since 2005, making it harder for renters to build a down payment for a home.

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Housing market continues to lag

There are reasons to believe that the situation could get worse. Although housing starts and building permits are up this year, thanks to the upward ticking of the economy, housing continues to lag the business cycle and longer-term data suggests that there are not enough homes to satisfy the demand of millennials — driving up prices. As the Global Wealth and Investment Management division of Bank of America Merrill Lynch reported in its March 24 letter from the CIO, many undocumented construction workers left during the recession and may not return due to immigration reform. Given that labor represents 25 percent of a home’s sales price, a labor shortage could further drive up housing costs.

A pricey proposition

We’re all aware of, and perhaps exhausted hearing about, today’s staggering student debt. However, I bring up that $1.3 trillion figure to make a point. If 40 percent or more of your monthly income is earmarked for housing and you’ve also got $300 to $500 in monthly student loan bills, a huge chunk of your budget could be servicing debt alone. That leaves precious little for food, transportation and childcare, let alone saving and investing.

Recalculating the housing math

Here are some tips if you want a home but are at your financial limits:

Get smaller and further away. If too much of your budget is going toward housing, whether you rent or own, consider decreasing your square footage and lengthening your commute. If you’re looking to purchase, you don’t have to buy as much house as you’re approved for. In fact, that could turn out disastrously.
Refinance. Rates are going up, but they may be lower than your current rate. If you’re paying 5 percent or more in interest on your mortgage, have good credit and plan to live in your home five years or longer, it might make sense to refinance. Get a quote and crunch the numbers.
Stick to a budget and a financial plan. Be disciplined, but accept that you will make mistakes. Learn from them and stay the course. If you need help, talk to a financial planner.
See long, not short. As shocking as it may be to hear it, a person can in fact live without Starbucks, eating out, designer clothes, cable television and many other non-essentials. These things might make you happy in the moment, but years of it could add up to financial agony. As a financial adviser, I’ve never met a client who regretted tightening his or her belt earlier in life. I’ve met plenty who sorely regretted not doing it.

Jennifer Pagliara is a financial adviser with CapWealth Advisors. Her column appears every other week in The Tennessean.

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Are diamonds a millennial's best friend?

Fri, 17 Mar 2017 21:43:14 GMT

We’ve all heard how millennials love to break with tradition. But much of their subversion — marrying later, buying homes later, opting for alternate modes of transportation, valuing experiences over material belongings — has as much to do with finance as philosophy. For instance, plenty of millennials do in fact get married eventually, as my own busy schedule attending my friends’ weddings will attest.

According to a RBC Capital Markets research paper published last year, “diamond jewelry appears to be low on the buying lists among so-called millennials.” Some analysts believe the global slowdown in diamond sales will pick up as millennials’ finances do so. Others cite much different reasons for millennials falling out of love with diamonds.

De rigueur for marriage proposals nearly worldwide, could the diamond ring one day become passé?I

A little history on that big rock

There are conflicting sources about how the engagement ring got started. The ancient Egyptians are often credited with inventing the engagement ring, a circular shape to symbolize an eternal cycle, and it’s believed the ancient Greeks too gave a “betrothal ring” in advance of marriage. But what really cemented the diamond ring tradition isn’t all that romantic. It’s recent and it’s pure (though admittedly brilliant) salesmanship.

In 1947, U.S. diamond sales, always an extravagance of the wealthy, had been declining for two decades. So the De Beers diamond company hired the N.W. Ayer advertising agency to create campaign. The phrase “A diamond is forever” was born and by 1951, 80 percent of brides in America had one.

Today, 8 out of 10 married American women still have one on their finger, believing that this super-hard, super-rare, sparkling bauble requiring one to three billion years to form is the perfect emblem of their love. And we’re not the only ones. De Beers advertises globally.

Are the diamond’s fortunes shifting?

Who came up with the rule of thumb that an engagement ring should cost two or three months’ salary? Do you really have to ask? That helpful recommendation also comes from years of De Beers advertising.

In 2016, the average spend on a ring was $6,163, according to the wedding-planning website The Knot . That’s a lot of moola for a cash-strapped millennial. Or a cash-strapped anybody. After all, once you remove the storytelling and the symbolism, a diamond could be viewed chemically: a three-dimensional cubic lattice of carbon atoms.

Already the diamond’s allure has been somewhat spoiled by the news of “blood diamonds” or “conflict diamonds.” These interchangeable terms point to the fact that many diamonds have been mined in Africa since the 1970s to finance bloody civil wars, insurgencies and invasions. That’s a problem of ethics and image.

Now, technology is presenting a problem of exclusivity and rarity. Laboratories are getting better and better at manufacturing so-called “synthetic” or “artificial” diamonds, which are virtually indistinguishable from their natural counterparts. As a result, the price of diamonds could start to decrease.

A Veblen good

Diamonds are not a commodity like oil or gold — or nearly any other economic good, for that matter. They are a Veblen good. This is a good for which demand increases as the price increases because of its exclusive nature and appeal as a status symbol. That’s contrary to the normal economic laws in which demand has an inverse relationship to price. As the price of diamonds decreases, will demand plummet as well? Will that further erode their mystique?

The growing Chinese middle class will probably prop up diamond demand for a while. But after that, will a new tradition take its place?

Jennifer Pagliara is a financial adviser with CapWealth Advisors. Her column appears every other week in The Tennessean.

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Choose a financial adviser who is obligated to give good advice

Fri, 17 Feb 2017 21:41:30 GMT

In case you haven’t heard, Johnny Depp is in deep. Deep financial trouble.

As reported in The New York Times, despite lifetime earnings of nearly $650 million, Depp has not paid his taxes on time, has had to cough up nearly $6 million in interest to Uncle Sam, has made bad loans and bad investments, and is having trouble covering his recent divorce costs. And by the way, he also owns 14 houses around the world and an island in the Bahamas. For now, anyway.

Back taxes and Bahamian islands

Depp blames his money woes on his financial advisers at the Management Group, whom he’s suing. Depp claims they “engaged in years of gross mismanagement, self-dealing and at times, actual fraud” and all the while he trusted them “as a loyal fiduciary and prudent steward of his funds and finances.” The Management Group has countersued, claiming they “did everything to protect Depp from his own irresponsible and profligate spending.” How irresponsible and profligate? Two million dollars a month, or so they say.

Putting another’s interests above your own

That word “fiduciary” is our focus here. A fiduciary is someone to whom property or power has been entrusted for the benefit of another. In 1974, Congress enacted the Employment Retirement Income Security Act (ERISA), which established that employers and their employee benefit plans’ investment managers have a fiduciary responsibility to their participants. The participants’ interests must come before their own.

Pretty straightforward, right? As a matter of course, anyone involved in providing me any kind of investment advice is putting my interests above their own, right?

Uh, no. Not necessarily.

Fiduciary vs. suitability standard

Brokers, also known as broker-dealers, are primarily in the business of buying and selling securities, transactions upon which they make a commission, though they also provide financial advice. They’re legally bound to a lower standard in their client relationships, that of suitability. They must prove a product is suitable for a client, though it might not be the best product for them.

Fee-based advisers and Registered Investment Advisers (RIA), such as my firm, are under the fiduciary standard. They offer advice with their client’s best interests in mind at all times and are paid for that advice — not for conducting transactions.

The new law of the land — maybe

Doesn’t sit well with you? It didn’t sit well with former President Obama either. In 1974, there were no 401(k) plans and IRAs had just been created, both of which are for retirement, and there’s been no law providing a consistent standard of conduct for all the many professionals giving advice on all these accounts. So in 2015, Obama proposed a major overhaul to the financial industry. In 2016, the Department of Labor issued the new Fiduciary Rule. All financial professionals working with retirement plans or providing retirement planning advice will be ethically and legally bound to the fiduciary standard beginning April 10, 2017.

However, President Trump issued an order on Feb. 3 to delay the rule’s implementation. He’s instructed the Department of Labor to carry out an economic and legal analysis of the rule’s potential impact. As of now, the new Fiduciary Rule is in limbo.

But your retirement doesn’t have to be. Make sure you trust whomever is giving you advice. If you don’t easily trust others — a good habit to have when it comes to your money — find an adviser who is under a fiduciary obligation to you and take an active role in understanding the advice you’re getting.

Jennifer Pagliara is a financial adviser with CapWealth Advisors. Her column appears every other week in The Tennessean.

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Annuities don’t add up for millennials and middle-age investors

Fri, 03 Feb 2017 21:39:51 GMT

Many of you are sick of hearing about financial products that you don’t understand. Millennials certainly are. We’re even cynical about financial products we do understand. That’s because the news of our short lifetimes has been Enron, the Financial Crisis of 2007-2008, Bernie Madoff and more. Which is why I’m so perplexed to see annuities marketed to millennials and, even more astonishingly, to have millennials approach me about investing in them.

With rare exceptions, annuities simply aren’t appropriate for younger people. Or really anyone that’s not very near or in retirement. Here’s why.

What’s an annuity?

An annuity is a contract between an individual (the annuitant) and a life insurance company or other financial institution. The annuitant funds the annuity either by a lump sum or periodic payments during his or her working years. The institution grows those funds during the accumulation phase by investing them somehow. Upon reaching the annuitization phase at a later point in time, the institution will pay out a stream of payments to the annuitant. A fixed annuity will provide regular periodic payments at a fixed rate of return. A variable annuity provides payments based on the performance of an annuity investment fund — made up of stocks, bonds or other market instruments. Thus, the returns can vary over time.

All annuity earnings grow tax-deferred and taxes are paid when earnings are either withdrawn or paid out during annuitization. Also, an annuity can ensure that, if the annuitant dies, his or her beneficiary receives no less than the initial investment — this is called a Guaranteed Minimum Death Benefit (GMBD). These are the important basics of annuities, though they can be structured in many, many different ways, including how long payments are guaranteed to continue.

So far, so good, right? And annuities can be quite good for people who need to secure a steady cash flow during their retirement years and/or are in danger of outliving their assets. In fact, defined-benefit pensions and Social Security are two examples of annuities.

Reasons to be wary

For everyone else, some things to consider about annuities:

They’re complicated and confusing. I’m a firm believer that you shouldn’t buy anything that you don’t fully understand.
They’re expensive. I cannot stress enough how expensive these products can be. Variable annuities on average cost between 2 and 3.5 percent; I’ve seen even higher when all the fees were compiled. What fees? Riders must be purchased to add the GMBD, to accelerate payment if the annuitant is diagnosed with a terminal illness or to adjust payments based on inflation. There are also M&E fees, sub-account expense ratios, administrative fees and surrender fees of 10 percent or more if the annuitant takes money out too early. You also need to realize that the person selling you your annuity often gets a commission — that money has to come from somewhere.
There are no guarantees. “Guaranteed” income is what draws so many people to annuities. But there could be nothing further from the truth. Guaranteed lifetime income costs extra, and even then it goes away if the annuitant withdraws more than the schedule permits. Moreover, for that “guarantee,” annuitants will on average pay 4 percent a year. So your guarantee of 5 percent is really only 1 percent. That’s a crummy return.
The risk-reward calculation too often doesn’t add up. For me and my firm, investing has a long-term focus. It should for you as well. If you’re a millennial, or in your 40s, 50s and even 60s, you’ve most likely got years and even decades to ride out market meltdowns. In that case, you really need to think about fully participating in the market’s long-term upside. While that’s not guaranteed either, the market’s growth over time has been demonstrated over history. Locking your investment money into an annuity’s low returns out of fear or an overabundance of caution could irreparably stunt your nest egg. If you’re risk-averse, you’re likely much better off with a portfolio of low-cost stock-and-bond index funds or enlisting the help of a good financial adviser. As Ken Fisher, founder and chairman of Fisher Investments, once said: “Almost always, anything that can be done with an annuity can be done a better way.”

A final thing to consider. Life insurance is bought to deal with the risk of dying prematurely. An annuity, on the other hand, is bought to deal with the risk of outliving one’s assets. In either case, actuarial science tells an institution how to price their policies so that on average they— and not you — earn a profit. When I said the risk-reward calculation doesn’t add up, I meant it!

Jennifer Pagliara is a financial adviser with CapWealth Advisors. Her column appears every other week in The Tennessean.

Opinion: We're long overdue for tax reform

Millennials love booze, and the alcohol industry is listening

Thu, 19 Jan 2017 21:36:45 GMT

Keypoints

Millennials account for 35% of U.S. beer consumption, 32% of spirit consumption and 42% of wine consumption.
According to Nielson’s alcohol surveys, a large percentage of millennials reject mass-market alcohol beverages.
They're helping to fuel the rising popularity of “handcrafted,” “artisanal” and “small batch” alcohol products.

With New Year’s two weeks past, the Bicentennial Mall “mud pit” has been cleaned up (amazing what rain and thousands of revelers can do to a place!) and no doubt all vestiges from your own private celebratory bashes have been cleared away.

At my own recent trip to the recycling center, I marveled at the mountainous heaps of empty booze bottles. Then this weekend at a coffee shop I overheard a conversation at the table beside me. The two millennials were avidly discussing liquor. One of them said, “Even though I don’t make much money, there’s a line item in my monthly budget for good Irish whiskey. Life’s too short to drink bad alcohol,” he proclaimed. The same sentiment is true of many millennials, judging by my own friends and acquaintances.

The U.S. alcoholic beverage market has $211.6 billion in annual sales. Millennials of legal age, though only representing one-fourth of adults over 21, account for 35 percent of U.S. beer consumption and 32 percent of spirit consumption according to Nielson. The Wine Market Council reports that they consume 42 percent of all wine in the U.S. As more and more millennials turn 21, it shouldn’t surprise you that the alcohol industry is scrutinizing with clear eyes and clear heads how millennials choose to become a little bleary-eyed and warm and fuzzy inside. While drinking and driving never mixes, the unique ways that millennials are drinking is certainly driving new trends.

Quality

When it comes to shopping, millennials are value-conscious. They look for good deals and use coupons. But this does not mean they settle when it comes to quality. In fact, just the opposite is true. According to Nielson’s alcohol surveys, a large percentage of millennials reject mass-market alcohol beverages, helping to fuel the rising popularity of “handcrafted,” “artisanal,” “microbrewery,” “small batch” “single barrel” and “single malt” alcohol products. Over 40 percent of millennials equate price with quality, while only 27 percent of baby boomers do. This trend seems to be born out in wine sales. Last year, says the Wine Market Council, 37 percent of high-frequency wine drinkers purchased at least one bottle of wine over $20 per week, nearly doubling 2010’s number.

Variety

It would be a mistake to believe this penchant for quality translates as brand loyalty, however. Says Ben Steinman, president of Beer Marketer’s Insights , “Famously, the millennials are fickle. They’re seeking variety, innovation and flavor.” Wine Spectator magazine concurs, writing that “It's not an exaggeration to say the millennial American consumer has the most varied set of tastes of any wine drinker in history … young wine drinkers clamor for diversity in regions and styles more than ever.” As is the case with much of the millennial generation’s consumption and experience-seeking habits, they’re adventurous and like to try different things.

They don’t drink alone

While a millennial might drink alone, he or she is more apt to tell the whole world about it! Of millennials who drink wine, again according to the Wine Market Council, over 50 percent talk about it on Facebook and more than a third do on YouTube, Twitter and Instagram. No doubt millennials are just as digitally gregarious about their experiences with beer and hard liquor. Millennials listen, too, eager to know what both peers and experts have to say about alcohol products. About 60 percent consider wine reviews “extremely” or “very” important, compared to about 20 percent of baby boomers.

Millennials have changed not only how we talk about things, but how we buy things, too, and that’s true of alcohol. Starbucks now offers wine. I’ve seen bookstores, movie theaters and even car washes that offer wine. And thanks to technology, there are now companies such as Drizly and Minibar that will deliver alcohol directly to you in less than an hour!

For alcohol-related businesses willing to pursue innovation, originality and quality, millennial tastes will reward them with economic opportunity. Cheers!

Jennifer Pagliara is a financial adviser with CapWealth Advisors.

6 financial mistakes for millennials to avoid

Fri, 06 Jan 2017 21:33:15 GMT

Here are six tips on avoiding common mistakes made by those early in their adult lives and careers. I’m speaking directly to you, my fellow millennials, but much of this is good advice for any age.

Millennial Financial Mistake #1: Getting a late start on saving

You’ve probably heard this many times, including in my columns. But like a lot of oft-repeated advice, such as look both ways before you cross the street, the risks and the rewards are clear. The power of compounding interest is mind-blowingly real — the earlier you start, the more mind-blowing. If you’re starting late, don’t panic. Just start now. If you think you’re too young or don’t have enough money, you’re wrong. Many mutual funds allow you to invest as little as $50.

Millennial Financial Mistake #2: Taking on unnecessary debt

Newfound financial freedom can be intoxicating. As with other intoxicating things, it can get you into trouble. You have your first real paycheck and you suddenly want to buy everything. You need to be very careful about what types of debt you incur. Google my Tennessean column on good debt and bad debt.

Millennial Financial Mistake #3: Failing to plan and monitor your progress

Time gets away from you. So can your finances. You need a plan, you need to monitor your progress and maybe need a professional to help. Millennials are going through huge life events: launching careers, getting married, buying houses, having children, etc. Paying for all of this while ensuring you’re setting aside enough and investing properly for long-term needs like kids’ education and retirement doesn’t magically happen. Success requires careful thought, discipline and some savvy. If you don’t have it, find a financial adviser that does and keep in touch.

Millennial Financial Mistake #4: Leaving retirement money on the table

Odds are your employer offers some kind of retirement plan. Odds are, too, they offer a contribution match. One of the biggest mistakes you can make is not contributing enough to get it — one of the few things in life that’s truly free. For example, your employer may match up to 3 percent of your pay, but only if you’re contributing at least 3 percent. If you’re not getting the full match, do it.

Millennial Financial Mistake #5: Utilizing after-tax options while still available

Generally, millennials are in a lower tax bracket early in life than you will be later in life. Therefore, you need to avail yourself of investment tactics that allow you to pay lower taxes now versus higher taxes later — a Roth IRA, for example. You contribute after-tax dollars today (paying your current tax rate) and its growth is tax-free (meaning you don’t pay taxes when you take out the money at retirement). A Roth IRA limits income to under $115,000 if filing individually and $183,000 if filing jointly.

Millennial Financial Mistake #6: Investing too conservatively

Volatility makes most investors uncomfortable. However, the best time to take risks is when you have the most time until retirement. If you’re a millenial in your 20s, you have 40 or more years to invest. That gives you time to make up market declines and unanticipated sub-par returns. I’m not suggesting you dump all your money into risky investments. I’m saying that though there are great years and awful years in the stock market, historically it’s persevered upward. You can’t reap your share of the returns if you’re not in it. Get conservative when you’re nearing retirement.

Again, if you need help avoiding the mistakes as a millenial, talk to a financial adviser.

Jennifer Pagliara is a financial adviser with CapWealth Advisors. Her column appears every other week in The Tennessean.

Even Better than Roth IRA? HSA Is Best Retirement Tool

Investing in a changing world requires constant study

Fri, 23 Dec 2016 21:30:42 GMT

I came across an online Buzzfeed article called “29 Things Millennials Killed This Year.” After rolling my eyes for what promised to be yet another piece of negative coverage regarding my generation, I scrolled on. It was a series of screenshots from various news sources with headlines such as “Blame Millennials for the Vanishing Bar of Soap.” “How Millennials Ended the Running Boom.” “Millennials Are Killing the Golf Industry.” “The Death Throes of Democracy: Murdered by Millennials.” They headlines were hilarious — and to a large extent, the news they conveyed was legitimate. Millennials are changing products, the market, the way we consume, oftentimes in dramatic ways.

Change is constant

But then, as a financial adviser, I remembered: Products, markets and consumption are always changing. Much of the change above isn’t just about millennial whims. It’s technological innovation, which millennials embrace. And though the speed of change has ramped up, change has always been a constant. In 1958, the average lifespan of an S&P 500 company was 61 years. In 1980, it was 25 years. Today, it’s 18 years. At the current churn rate, 75 percent of the S&P will be replaced by 2027! Which is why the person behind your investment portfolio — be that you, your adviser or the manager of the mutual fund you’re in — better be sharp, informed, a tireless learner and a part-time economist, accountant, world affairs expert and more.

Know your adviser

You should know your financial adviser. What kind of person they are, how they think and what their overall record is. We believe the same goes for the executives of the companies you invest in. Our firm certainly does. In fact, we endeavor to know all we can about the C-suite and their companies — both before we purchase their stock for our clients and for the lifetime of our clients’ positions in that stock. We study their financials, looking for hidden or unrealized value; we monitor changes in management and their competitive position; we watch for new product developments or technological advancements. Meanwhile, we’re just as vigilant about the macroeconomic factors beyond a company’s control: currency fluctuations, inflation, fiscal policy, regulation, trade agreements, cyclical correlations and much, much more.

How do we do this? Through Wall Street research, industry sources, conferences, personal meetings with management, personal meetings with customers, competitors and suppliers, SEC filings, news publications and news media, and constant and comprehensive data analysis.

Choose investments wisely

The challenge in investing, just like in everyday life, is aligning unreasonable expectations with reality. Our due diligence process helps us identify sustainable business models, trading at attractive valuations and governed by high-quality, shareholder-focused management teams. At the same time, it helps us avoid the high-flying stocks whose valuations are based on wildly overly optimistic expectations for the future. Searching for strong business models and strong management teams has another benefit. It leads us to companies that can not only weather but thrive in today’s world of technology-driven change and disruptive innovation.

The Greek philosopher Heraclitus, known for his doctrine that change is central to the universe, once said, “You never step twice into the same river.” Every day is a new day in the world of investing. Be sure you or your investment professional is up to the task.

Jennifer Pagliara is a financial adviser with CapWealth Advisors. Her column appears every other week in The Tennessean.

Changing Times Lead to Evolution for Financial Industry Players

Girls need to see women who are succeeding in finance

Fri, 09 Dec 2016 21:29:03 GMT

Did you know that today in the United States, only 21 of the Fortune 500 CEOs are women? That’s right, it’s nearly 2017 and only a paltry 4.2 percent of America’s biggest companies are led by the sex that comprises over half of our country’s population. Even more shockingly, that percentage hasn’t really changed in over 40 years. As a woman, that makes me rather sad and rather angry, all at the same time.

That figure had a similar effect on Maura Cunningham in 2012, only she decided to do something about it.

Shaking up the status quo

Cunningham was recently retired after a highly successful 25-year career in financial services in which she worked in unit investment trusts and mortgage-backed securities on Wall Street and later financial planning for ultra-high-net-worth clients and succession planning for privately held companies in Florida and Nashville. Three years into retirement, she decided to pursue her masters in civic leadership at Lipscomb University. That’s when all her years of being the only woman in the room really began to gnaw at her. Where were all the other women in positions of financial leadership?

“Forty-four years after the adoption of Title IX, women still face barriers to full equality in education and in the workplace,” says Cunningham. “As a result, their pay, their promotions and their quality of life aren’t equal. Even more disconcerting than the relative absence of women in top roles in the financial industry is the fact that 40 percent of all households with children under 18 rely solely or primarily on income from the mother. I decided I had to do something to help break multi-generational financial illiteracy in females. If not me, who?”

Girls rock Wall Street

Rock the Street, Wall Street (RTSWS) has been seismic. With a three-pronged educational approach — financial literacy workshops, mentoring and field trips — and relying on female volunteers who are financial professionals, RTSWS has expanded from Nashville to serve Memphis, Chicago, New York City and Dallas/Ft. Worth. Nearly 600 high school girls have completed the five-week workshop, participated in internships and job-shadowing, and had the opportunity to tour financial services firms, banks, entrepreneurial centers and state treasury departments.

The girls are tested on financial knowledge pre- and post-program and on average their knowledge increases 84.26 percent. The program is working, says Cunningham, because RTSWS volunteers “can walk the walk and talk the talk.” They are eminently qualified to instruct and mentor. She cites a recent Survey of States Report, in which over 80 percent of high school teachers do not feel competent to teach personal finance.

The waves Rock the Street, Walls Street has made are being felt all the way to the White House. This year Cunningham was invited by The White House Council on Women and Girls to participate in the White House Conference on Inclusive STEM (Science, Technology, Engineering and Math) education. As if that isn’t positive reinforcement enough, Cunningham was invited to ring the NASDAQ’s closing bell Dec. 2 on Wall Street.

Role models needed

It’s all about positive reinforcement for girls’ aspirations everywhere. “We lose girls in math as early as age 9,” explains Cunningham. “They’re often not encouraged or properly supported in school, and once they’re turned off, never go back. They don’t see female STEM professionals depicted in popular culture, on television and in the movies. They don’t see their friends, their mothers or their role models going into these fields.” In essence, she says, we’re indoctrinating our girls at a very young age that STEM fields aren’t for them, to the detriment of all of us.

“Rock the Street, Wall Street is determined to bring them back,” says Cunningham. “Clearly, girls can do finance and STEM. They just need to hear a chorus that they can instead of they can’t.”

If you want to learn more about Cunningham’s mission or how to donate or volunteer, visit RockTheStreetWallStreet.com . I’m a volunteer, and I’ve never been more proud to be part of an organization.

Jennifer Pagliara is a financial adviser with CapWealth Advisors. Her column appears every other week in The Tennessean.

Americans fall short in financial literacy

Avoid getting hustled during the holiday bustle

Fri, 25 Nov 2016 21:26:27 GMT

The holiday hustle and bustle has officially begun! There’s a lot to do — and a lot to purchase — before the year is out. But in your haste, don’t throw caution to the wintry wind. With billions in consumer gift-buying crammed into a matter of a few frenzied weeks, the pandemonium is a bonanza for retailers and scam artists alike.

By the way, being a tech-savvy millennial affords me and my cohorts no special protection. According to Norton’s 2016 Cyber Security Insights Report, we’re the most likely to be scammed online of any generation, with 40 percent of us having experienced some sort of cybercrime this past year!

Here are some tips to keep all of us from being hustled during this year’s holiday bustle.

4 tips for buying tech this holiday season

Fake charities

The holidays are a time to count blessings, so naturally many of us make donations to those in need. It’s also a time for fake charities to pop up all over the country. The easiest way to ensure the charity you are giving to is legitimate is to check with the Better Business Bureau . You might also want to ensure that your donation is being put to good use. Inquire with the charity you’re considering how much of their proceeds actually go to those in need. Is it 90 cents of every one of my hard-earned dollars or just 9 cents?

Package theft

With the steady rise of online shopping comes ever-more deliveries to our homes. It doesn’t get any easier for thieves. They’re taking packages right off of our doorsteps. According to the United States Postal Service, there will be 750 million packages delivered this holiday season — that’s 5 million per day. This is a 12 percent increase over the approximate 670 million that were delivered in 2015. According to InsuranceQuotes.com , about 23 million Americans have had packages stolen from their doorsteps at some point. Have your package delivered to your office or pick it up at your local post office, UPS or FedEx store. You can also schedule delivery times for when you know someone will be at home or require a signature upon delivery.

Online scams

As we frantically scramble to find the perfect gifts for our loved ones, we might venture onto some sites that we normally wouldn’t. These fraudulent “phishing” sites oftentimes look absolutely legitimate but actually exist just to collect your personal and payment information as you key it in or by planting malware on your computer. Again, check the Better Business Bureau to ensure that companies you’re doing business with are legit. Also, always use PayPal or a credit card protection service so that you don’t input your credit card directly into the website.

Phishing and malware can also come at you via phony email called spam — again, which looks incredibly authentic. Never open email or attachments from any source you’re not certain about. Be aware that legitimate organizations will never request sensitive information via email and almost no bank will ask for any kind of information unless you’ve initiated the contact yourself. Most of the spam we receive comes to us because a legitimate website we’ve visited has sold our email information to a third party. Chick the privacy policy of all the websites you use to see if they sell mailing lists.

Gift cards

We all give them and we all get them. Which is why gift card fraud is another scam on the rise. Scammers will copy the codes off the back of gift cards before they’re purchased and then wait for them to be activated to drain the funds. If you are buying cards this season, make sure back of the card isn’t scratched off or tampered with in any way before you purchase it. Some retailers allow you to register the card, which I highly suggest so that no one can use it except for the intended recipient.

Make the most of the mayhem. Enjoy the excitement. Spread cheer. Count your blessings. And keep the hustle out of the bustle by watching out for scams and theft!

Jennifer Pagliara is a financial adviser with CapWealth Advisors. Her column appears every other week in The Tennessean. For more information, visit www.capwealthadvisors.com.

4 strategies to make sure your paid vacation doesn’t go unused

Coffee’s not just a drink, it’s an investment option

Fri, 11 Nov 2016 21:24:27 GMT

Coffee is a millennial’s best friend. While generations have relied upon coffee to reach a normal level of functioning on a daily basis, millennials have elevated need to love and love to snobbery. While baby boomers may prefer Folgers or Maxwell House, either will do. Meanwhile, millennials debate the finer points of Ethiopian Yergacheffe and Indonesian Sumatran like connoisseurs of fine wine. The fancier the coffee, the better.

In our defense, we grew up in the Starbucks era when the $5 cup of coffee became a regular part of life. But as our obsession grows, the supply of coffee beans rapidly declines. A report by the Climate Institute advised that half of the world’s coffee could disappear by 2050 because demand mounts while weather conditions in Brazil, Ethiopia, Colombia and Vietnam gets dryer. Millennials are such a large generation that our tastes and preferences are affecting the commodity markets in ways that we probably aren’t aware of.

A basic, interchangeable, valuable good

A commodity is a basic good used in commerce that is interchangeable with other commodities of the same type. The distinction of a commodity is that it is basically uniform across producers. The quality may differ slightly, but if it is traded on an exchange, it must meet specified minimum standards known as a basis grade. Some of the most commonly known commodities are oil, grains and gold.

The history of commodity trading is a long and rich one. The very reason commodities are produced in large quantities by many different producers and are of a uniform quality is that they are staples of human civilization: the foundation of our diets, the raw materials of our production, the energy powering our tools and conveniences. And as you can imagine, the impact of these markets is vast. Energy, metals, livestock and meat, and agricultural products are the four commodity categories that you can trade. The most popular exchanges are the CME Group , Intercontinental Exchange and London Metal Exchange .

One of the secrets to Southwest Airlines’ success

To give you a “real-life” example of how commodity trading works, one of the most notable recent oil hedges was done by Southwest Airlines during the financial crisis. Flyers and investors alike watched the major airlines to see which would stay afloat (aloft?). As it turned out, Southwest was the only large U.S. carrier that remained profitable through the downturn. A big part of that success was their betting correctly on what the price of oil would do. Years before the crisis, they bought a call option which gave them the right to buy fuel at a certain price for a certain number of years. That call option gave them the right to buy fuel at $51 per barrel throughout the downturn instead of the going rate at $140 per barrel. Not to take anything away from Southwest’s great culture and customers service, but what an enormous competitive advantage!

Companies all over the world use extremely complicated strategies involving commodities. But don’t be mistaken, there are ways for the average person to invest in them, too. Exchange Traded Funds (ETFs) have become a popular way for people to invest in commodities. They are usually focused on either a single commodity (like coffee), holding it in physical storage or focused on futures contracts.

Another asset class to consider

The important takeaway is that commodities are yet one more asset class that could diversify your portfolio of investments. Typically, people think of investing in stocks, bonds and real estate. Talk to your financial advisers. It could be that the building blocks of your favorite over-priced skinny, decaf, no-foam latte that pairs so well with your favorite over-priced hybrid, artisan, bite-size dessert could also be the building blocks of an outperforming portfolio!

Jennifer Pagliara is a financial adviser with CapWealth Advisors. Her column appears every other week in The Tennessean. For more information, visit www.capwealthadvisors.com.

How to Avoid Overspending This Holiday Season, Especially You, Millennials

How to save for the high cost of higher education

Fri, 28 Oct 2016 21:22:04 GMT

It is probably no shock to you when I say there is a “baby bust” happening in the United States right now. In 2015, the fertility rate — defined as the number of live births per 1,000 women ages 15 to 44 — dropped to tie the lowest level on record, which was 62.5, in 2013. The baby boomer generation is, of course, defined by the explosion of births after WWII. It makes you wonder if the millennials’ children’s generation will come to be defined by the opposite.

For those millennials who are having children or beginning to consider it, you need to start thinking about their education. Perhaps that feels so far away that you’re rolling your eyes. But 18 years is not that long. Think about it this way: Most people get 40 or more years to save for retirement. While you won’t need as much money for your kids’ college, it does help put it in perspective how much shorter your time frame is.

Let’s start with the basics. There are three major ways that you can save for college: a 529 Plan, a Coverdell Education Savings Account (ESA) or a Roth IRA. All three of these accounts allow you to grow money tax-deferred and, if used for qualified education expenses, distribute the funds free of tax. But each has its own set of parameters and limitations. Therefore, if you are already working with a financial adviser, let them help you determine which is best for your situation.

If you don’t have a financial adviser, here are a few broad tips to help:

Income limitations: You cannot contribute to a Roth IRA if your modified adjusted gross income (MAGI) is over $194,000 (filing jointly). Also, you cannot contribute to a Coverdell ESA if your MAGI is over $220,000.
Contribution limitations: If you are able to contribute to a Roth IRA or a Coverdell, you are limited to annual contributions of $5,500 and $2,000, respectively. There are no technical contribution limits for a 529; however, you should stay under $14,000 to avoid paying gift tax.
Leftover money: If you have money left over in a 529 or Coverdell ESA, you cannot distribute it without paying ordinary income plus a 10 percent penalty. However, you can transfer the money to another eligible family member free of charge.
Investment choices: With a 529, you can invest only in mutual funds or annuities. With a Roth IRA and Coverdell, you can invest in mutual funds, stocks, bonds, etc.

Now that you have at least some idea how you’re going to save for your kids’ college, now let’s talk about how much it’s going to cost you. According to the College Board Study, for the 2015-16 school year, the average “sticker price” was $24,061 for in-state public college expenses and $47,831 for private college expenses. That’s anywhere from $96,244 to $191,324 on average for four years of undergrad! If that isn’t eye-opening enough, the current student debt total in the United States is about $1.3 trillion, and the average class of 2016 graduate owes $37,172!

Over the last 30 years, college tuition has experienced 1,200 percent inflation. It’s risen two times faster than medical expenses, five times faster than food costs and four times faster than the Consumer Price Index. While it seems the higher education system in the United States is ripe for a makeover, we urge you to start planning now for what could be one of the most expensive decisions you and your children will ever have to make.

Jennifer Pagliara is a financial adviser with CapWealth Advisors. Her column appears every other week in The Tennessean. For more information, visit www.capwealthadvisors.com.

Market Downside Risk & Stock Picks: WMB, LUMN, INTC

How election years can shake up the stock market

Fri, 14 Oct 2016 21:21:11 GMT

The presidential election is just under a month away, but that’s ample time for the circus we’ve all been living in to become yet more bizarre. Who can predict what will be said, claimed, tweeted, leaked, accused, promised or lied?

Though the stock market is popularly regarded as a roller coaster, following its ups and downs is almost a relief by comparison. I, for one, am glad to focus on it. But with such polarizing candidates, with a recovery that’s still frustratingly anemic and with the American middle class having lost ground now for many years, you — like many of my clients — are probably wondering how each candidate's presidency would affect you financially. While I can’t predict how precisely a Hillary Clinton or Donald Trump presidency would impact the economy, jobs, health care, taxes or your wallet and livelihood, I can share with you some interesting historical data on elections and the stock market.

What history tells us

According to the Ned Davis Research Group, the Dow Jones Industrial Average (DJIA) has shown an average 7.6 percent gain on election years from 1900 to 2008. During the same period, it has increased an average of 15.1 percent if the incumbent party wins and dropped an average of 4.4 percent if the incumbent party loses. It has increased an average of 3.9 percent if a Democrat wins and an average of 10.3 percent if a Republican wins.

Before Democrats get their hackles up and Republicans start to gloat, inaugural years have tended to be better under Democrat presidents. In fact, according to S&P Capital IQ, from 1945 to 2015, the stock market on average has gained 9.7 percent a year (not solely election years) under Democratic presidents and 6.7 percent under Republican presidents. The worst record was under Nixon, a 5.1 percent drop, and the best under Ford, a 18.6 percent gain. (Both were Republicans, for those who are counting.) For reference, while we had quite a rocky start to the year, the Dow Jones closed out the quarter at a positive 6.33 percent.

In another recent study, Ned Davis Research looked at political control in the Oval Office and Congress (in all years, not solely election years) and its correlation with the S&P 500 from 1901 to March 2016.

Democratic president/Republican Congress: 8.6 percent gain
Republican president/Democratic Congress: 2.4 percent gain
White House/Congress controlled by the same party: 7.1 percent gain
Democratic president/split Congress: 10.4 percent gain
Republican president/split Congress: 4.3 percent loss

The best performance since 1945, according to S&P Capital IQ, was on years with a Republican presidency and a Republican Congress (for some reason, Ned Davis Research didn’t break it down to Republican control in both branches and Democratic control in both branches). Experts are predicting that Congress will stay Republican. Therefore, no matter who is president, if history repeats itself, we are hopefully looking at excellent performance in the future.

Though all of this is interesting, for me it mostly underlines a market fact: The markets don’t like uncertainty, and presidential elections pose plenty of that. Wall Street much prefers the devil it knows over the devil it doesn’t. And after the dust and angst settle after an election and inauguration, the markets will see less political uncertainty and return to rising and falling based upon other indicators. It’s my belief that when this uncertainty does lift, we’ll see a more positive investment landscape than investors now appreciate.

Looking ahead

Can the stock market predict actually who will be the next president? If you’re willing to give it credence, the key to this theory is to look at the three months leading up to the election: Aug. 1 through Oct. 31. If stocks gain over those three months, the incumbent party wins; however, if stocks fall over this period, the other party wins. According to Daniel Clifton at Strategas Research Partners, the S&P 500 has “predicted” the winner 19 out of the past 22 elections. So, looking at some broad market indices, here’s where we are as of the last trading day before this column was submitted:

The S&P 500 was 2,170.84 on Aug. 1 and 2,168.95 on Oct. 7.
The Dow Jones Composite Average was 18,404.51 on Aug. 1 and 18,240.49 on Oct. 7.
The Russell 3000 was 1,282.46 on Aug. 1 and 1,274.60 on Oct. 7.

All three are relatively flat in that period, just a touch down. Just like in the political arena, three weeks is a lot of time in the stock market. Regardless of what happens in either, I think we can all agree that this election has been one for the history books.

Jennifer Pagliara is a financial adviser with CapWealth Advisors. Her column appears every other week in The Tennessean. For more information, visit capwealthadvisors.com.

Stocks: Dow Futures Slip, Walmart Beats Forecasts

Debt: the good, the bad and the ugly

Fri, 30 Sep 2016 21:19:50 GMT

The federal debt is so big that neither Hillary Clinton nor Donald Trump have touched the subject on the campaign trail (I don’t know if they talked about it at Monday night’s debate, because my deadline was Monday afternoon). It’s so hairy, complicated and seemingly insurmountable that political expediency says to ignore it.

I’m not going to ignore it. I’m going to dig into it. Only I’m going to talk about consumer debt, the kind that you and I have personally. Rather than advise you on how to pay off your debt, I’m going to examine the basic kinds of debt. The ability to differentiate among them may help you avoid debt problems in the future.

Once upon a time, experts may have distinguished between “good” debt and “bad” debt. Today, after the 2008 financial crisis and a lackluster recovery, it might be prove more useful to use “better” debt and “worse” debt. All debt is costly, after all. It’s just that some debt is a calculated risk that pays off in the long run, while other debt is just plain dumb.

The good

“Good” debt can be thought of as an investment, a way to improve your earning potential and your wealth. Education, whether it be technical training, college or an advanced professional degree, is perhaps the best example. You take out loans for tuition and other expenses now for the possible return of higher wages later. It’s a good risk, according to research. The more education you have, the higher your salary and the lower your odds of unemployment. Over a lifetime, the returns on investment in education can mean hundreds of thousands and even millions of dollars.

Small business loans and mortgages are two more examples of “good” debt. The first, like education, can result in a lifetime of elevated income, not to mention the advantages and pride of being your own boss and building your own company. As for the second, it can mean a comfortable home for decades and, one day, a profit from selling it.

Nothing is guaranteed, of course. The recent housing bubble saw home prices soar and then plummet, leaving millions of Americans with “underwater” mortgages — owing more than their home was (and is) worth. And businesses, as we all know, shutter their windows every day.

The bad

Other kinds of debts can’t be considered investments because they have no possibility of increasing in value. In fact, these debts are incurred to procure “depreciating assets” — property that only decreases in value. Ever heard someone grumble about how new cars are worth less the second you drive them off the lot? That’s absolutely accurate. And the same goes for clothes, big-screen televisions, fancy new appliances, restaurant meals, vacations, a movie theater ticket — just about every consumable good or service.

The ugly

If you buy any of this with a credit card, that’s even worse. Much worse. You’re borrowing money at astronomically high rates — 18 percent to 20 percent on average — to buy something that within seconds or perhaps years will be worth nothing. Zilch. The value of your purchase immediately goes down, while the credit card interest accrual immediately goes up.

Many of these things are necessary for maintaining a certain quality of life. A car gets you to work. A meal out is a welcome reprieve from cooking (and cleaning up) at home. A washing machine saves a lot of time and energy over manually washing clothes. But you should not go into debt to buy these things. Perhaps debt is necessary for a short period (if your fridge goes out, for instance), but never for an extended period. You pay for these items in cash — from your emergency fund, or on a credit card, if there’s no other option — but you pay them off as quickly as possible to avoid snowballing interest.

According to a recent report by NerdWallet.com , the average U.S. household with debt (most are) carries more than $15,000 in credit card debt and more than $27,000 in auto loan debt, and pays $6,658 in debt interest per year. According to the U.S. Census Bureau, the median U.S. household income is about $52,000.

Like our national debt, and as too many American households unfortunately know all too well, those numbers aren’t sustainable over time.

Jennifer Pagliara is a financial adviser with CapWealth Advisors. Her column appears every other week in The Tennessean. For more information, visit www.capwealthadvisors.com.

Got a holiday budget? Christmas offers good lessons for kids

How millennials can lower risk of online scams

Thu, 15 Sep 2016 21:18:44 GMT

You may have heard earlier this summer that the Democratic National Committee’s computers were hacked and some very embarrassing emails were leaked, leading to the resignation of DNC chairwoman Debbie Wasserman Schultz. You may have heard too that U.S. experts suspect the Russian government is responsible. In fact, some experts even believe that the hackers deliberately left incriminating digital fingerprints to show that Moscow is a cyberpower deserving of respect.

International espionage, gamesmanship and war are now in part fought online, and national cybersecurity is vital. Homeland Security now dedicates part of its website to cybersecurity, and back in February, President Barack Obama launched a Cybersecurity National Action Plan . Last week, the White House announced Brigadier General Gregory Touhill as the first cyber security chief.

If only each of us had so much brass in our corner. Ordinary consumers have been in the trenches of cyberwarfare for years.

According to the Better Business Bureau (BBB) Institute, marketplace scams affect one in four North American households each year. These scams result in an estimated loss of $50 billion annually. I know what you’re thinking: Your heart goes out to all those old folks.

Millennials are most vulnerable

Wrong. With their lack of digital sophistication, it is widely assumed that older generations are more likely to fall for a scam. However, in a research paper called “ Cracking the Invulnerability Illusion ,” the BBB points out that “We are all at risk, but younger and more educated individuals are actually the most likely to be scammed.” In another recent study, the computer security software company Norton surveyed more than 17,000 adults in 17 countries. They found that 44 percent of millennials had been a victim of an online scam in 2015, compared with only 16 percent of baby boomers.

The architects of the much-heralded "sharing economy" share too much, it seems. Online scammers, employing everything from old-fashioned tricks to malicious software, find their victims through chat rooms, social media, message boards, websites and email in order to steal personal information and defraud consumers. And guess who spends the most time in those digital spaces? That’s right: millennials. Hey, just because we grew up with technology doesn’t means we’re using it correctly!

Tips for preventing cybercrime

Though in no way an exhaustive list, the following are a few basic tips from StaySafeOnline.org to get you started on protecting personal information:

Make your password a sentence: A strong password is a sentence that is at least 12 characters long. Focus on positive sentences or phrases that you like to think about and are easy to remember (for example, “I love country music”). On many sites, you can even use spaces!
Unique account, unique password: Having separate passwords for every account helps to thwart cybercriminals. At a minimum, separate your work and personal accounts and make sure that your critical accounts have the strongest passwords.
Write it down and keep it safe: Everyone can forget a password. Keep a list that’s stored in a safe, secure place away from your computer. You can alternatively use a service like a password manager to keep track of your passwords.
Own your online presence: Set the privacy and security settings on websites to your comfort level for information sharing when they are available. It’s OK to limit how and with whom you share information.
Get two steps ahead: Turn on two-step authentication — also known as two-step verification or multi-factor authentication — on accounts where available. Two-factor authentication can use anything from a text message to your phone to a token to a biometric like your fingerprint to provide enhanced account security.

Jennifer Pagliara is a financial adviser with CapWealth Advisors. Her column appears every other week in The Tennessean. For more information, visit www.capwealthadvisors.com.

Economic Fundamentals ‘are Very, Very Good’ Despite Inflation, Strategist Says

Millennials need better economic prospects to thrive

Fri, 02 Sep 2016 21:17:27 GMT

Last week, I read an article with the title of “The Forgotten Millennials” in The New Republic. The piece was about author Rebecca Nelson’s contention that Hillary Clinton isn’t doing enough to win over millennials who aren’t college educated.

The statistics in the article—not so much the author’s point—along with its title have stuck with me. Popular notions about these 75 million or so Americans between the ages of 18 and 35, propagated by the media, is that they’re entitled, highly educated, self-absorbed, irresponsible, lazy, leeching off mom and dad, obsessively plugged into social media and ethnically diverse. It’s true, millennials are the most educated and diverse generation in history. And it would be difficult to argue that we don’t like our iPhones.

More than one truth about millennials

But there’s another side to millennials that runs completely contrary to those notions yet is every bit as true. It’s rather obvious to say, but it’s too often left out: those who don’t have a bachelor’s degree, don’t have a bachelor’s degree—which is about two-thirds of millennials. In fact, the Center for Information & Research on Civic Learning and Engagement (CIRCLE), reports that 40 percent never made it past high school. It remains to be seen how many of this generation ultimately get or finish a four-year degree—not that a diploma is the silver bullet for all of anyone’s career and financial woes. It helps, but it’s not a panacea.

As it stands, the average 29-year-old, as I learned in an Atlantic article with that very title that back in April, has some college, makes a median $35,000 a year and has had seven jobs in his or her life. Forty percent are married or cohabitating and 35 percent own a home.

As millennials go, so goes America

We hear a lot, including here in my column, about the debt and poor employment prospects of millennials. While that “downward mobility” of educated millennials is certainly cause for alarm, here’s something more alarming: 12 percent of millennials without a four-year degree are unemployed, 22 percent fall below the poverty line, and the median wealth of Blacks and Hispanics has declined for more than a decade. Even for those with that coveted degree, according to a 2015 study from the Federal Reserve Bank of St. Louis.

All of us, myself included and I’m a member, need to conceptualize millennials differently. While there’s much about them that is radically new and unprecedented, there’s much that’s also very familiar and even typical. They are a varied group—blue-collar, educated, white, minority, immigrant and the latest of many generations—trying to make it. Ring a bell? Pretty much the story of America.

Regardless of who our next President is, we need to improve the economic prospects for millennials. A little hint: that’s code for improving opportunities for all of us. As the younger generation goes, so goes America.

Jennifer Pagliara is a financial adviser with CapWealth Advisors. Her column appears every other week in The Tennessean. For more information, visit capwealthadvisors.com.

Should investors go for the gold?

Fri, 19 Aug 2016 21:16:16 GMT

If you’re anything like the rest of the world, you’ve been obsessively watching as much of the Olympics as you possibly can over the past two weeks. Regardless of your favorite sports, your favorite athletes, your favorite storylines or even your nationality, one thing can be agreed upon: Gold is what everyone’s after, the contenders and the spectators alike.

As battles continue and the history book is being written, how much do you really know about gold?

Gold medals? Not quite

For starters, the Olympic gold medals aren’t really even gold. I hate to burst your bubble if you were under the impression that they were, but the last gold medal that was entirely made of gold was back in 1912. Rio’s gold medals are actually 494 grams of silver plated in 6 grams of gold, making them worth approximately $564 at today’s market prices. The host country is responsible for determining the design and composition, with some parameters:

Medals must be at least 3 mm thick and 60 mm in diameter
Minimum of least 6 grams of gold
Made of at least 92.5 percent silver
The gold medals have to be bathed in gold and plated in it

So surprisingly, the medals at each Olympic Games are quite distinctive, based on the host country's preferences. If the gold medals were still solid gold, each medal would be worth about $21,500. As of Monday of this week, gold was worth $43.17 per gram or $1,342.60 per ounce.

Although prizes for the victors of the ancient Greek Olympics were important, they weren’t gold, silver and bronze medallions. Instead, the athletes were presented symbolic prizes, such as a crown of leaves, and value prizes such as horses and bags of money. Typically the financial rewards came from the athletes’ hometowns, to which the winning athletes brought prestige. (Just like today, by the way.) The U.S. gives each gold medal winner $25,000, while Singapore offers three-quarters of a million dollars!

Investing in gold

There has been quite a bit of buzz this year surrounding gold — the precious metal, not the Olympic award — because of its impressive comeback and climb in price throughout 2016. And now you might be thinking, especially with the Olympics on your mind, that you want to invest in gold. Well, there are two different routes you can take to achieve that.

No doubt you’ve seen the commercials claiming that gold is the safest investment possible and to buy it while you still can! However, in today’s world, owning physical gold in coins or bullion isn’t very convenient. You need a safe place to store your gold. Transporting it can be costly. Your investment, like any wealth concentrated in material goods, is also exposed to theft and natural disasters, so there are those risks, plus insurance costs to consider.

For these reasons, many have turned to investing in Gold ETFs. The SPDR Gold ETF-GLD is one of the most popular vehicles for indirectly investing in gold. But realize that you’re really not investing in gold. You own shares of an ETF that is backed by gold. You cannot trade in your shares for physical bullion at any point.

You may now be asking if gold is even a good investment. Most pro-gold investors would say the best reason to buy some gold is as a hedge against inflation. If the value of gold remained constant in terms of the amount of goods and services it could buy, that would be true. But like all investments, the value of gold fluctuates over time, so it’s up to you to decide.

What I will do is leave you with some paraphrased commentary from the famed investor Warren Buffett: Gold produces nothing, it pays no interest or dividends, and when you hug it, it doesn’t hug you back.

The Olympics — warm and fuzzy. Gold — maybe not so much.

Jennifer Pagliara is a financial adviser with CapWealth Advisors. Her column appears every other week in The Tennessean. For more information, visit www.capwealthadvisors.com.

Millennials drive dramatic change in food economy

Fri, 05 Aug 2016 21:15:08 GMT

Food is very important to millennials. That’s not to say it hasn’t been or isn't important to other generations, but let’s be honest: We’ve taken it to the next level. It’s not uncommon for millennials to take a picture of their meal and Instagram it — at least once a day. We’re all about organic food, locally sourced ingredients and farmers markets. We’ve even had the chutzpah to convince Kraft to take the yellow dye out of their iconic mac and cheese and, even as I type, I am reading a headline that McDonald’s has just announced it will no longer make Chicken McNuggets with artificial preservatives! Simply put, we’re a generation obsessed with food, and it’s having an impact on the food economy.

Back to the basics

How can a generation so into technology really be that interested in something so natural, fundamental and even prehistoric as food? According to Eve Turow, author of "A Taste of Generation Yum," millennials’ reliance on technology is precisely why we’re so into food. As she told The Atlantic last year, sitting in front of a screen all day leads to “sensory deprivation” and “craving community.” Eating is a great solution to both.

If you’ve been on Facebook lately, I practically guarantee that you can’t scroll through your news feed without seeing the Tasty videos. These two-minute videos instruct you on how to make a dish, step by step. They’re short, easy to follow and the results are, as the name implies, tasty. Pinterest is another platform that has dramatically increased in popularity, mainly due to millennials. The sites’ food boards are still among its most popular. For millennials, food and technology go hand in hand.

Grocery stores, restaurants evolve

Restaurants and grocery stores are evolving to keep up with 18- to 36-year-olds’ antipathy to processed food and proclivity for convenience. Whole Foods and Trader Joe’s are perhaps the most famous purveyors of organic, natural, small-batch, hand-crafted and artisanal (all words and notions that millennials love) groceries, but nearly all grocery stores carry these products now. In fact, Costco has eclipsed Whole Foods as the No. 1 seller of organic produce, surpassing $4 billion in sales this past year. The organic farmers who supply Costco can’t keep up with the demand, so the warehouse retailer is lending them money to expand their operations. Because not everyone has the time or the money to shop Whole Foods, the company has launched a line of stores called 365 by Whole Foods Market to provide a “streamlined, quality-meets-value shopping experience.”

Millennials also want to know where their prepared food in restaurants comes from and how it’s grown. But it’s not all nutrition and social and environmental responsibility for millennials — food is also fun! Millennials view food as entertainment and self-expression. They want variety and diverse flavors. According to ThinkSplendid.com , 55 percent prefer communal tables, 68 percent of millennials check with friends (often over social media) before selecting an eatery, 87 percent will splurge on meals even when money is tight and 40 percent will order something different every time they visit a restaurant. If you haven’t noticed, the trendiest restaurants are catering to many of these inclinations, and not just inside their walls. Many of today’s most successful restaurants would as soon do without menus as they would a vibrant social presence.

Today’s tastemakers

Millennials are literally today’s tastemakers for what we put in our mouths, where we procure it and how it is prepared and packaged. While some might begrudge giving young foodie whippersnappers the credit, it’s a phenomenon that we can all enjoy!

Jennifer Pagliara is a financial adviser with CapWealth Advisors. Her column appears every other week in The Tennessean. For more information, visit www.capwealthadvisors.com.

Client Services & Communication

How to move out of your parents' house for good

Fri, 22 Jul 2016 21:14:06 GMT

My fellow millennial, are you still living at home with Mom and Dad? You are, aren’t you? Well, you’re certainly not alone. According to a new study conducted by the Pew Research center, 32.1 percent of millennials (ages 18 to 34) were living with their parents in 2014 — the first time in 130 years this living arrangement edged out all others. While you might think Mom and Dad love having you at home, I can almost guarantee that they’ll eventually cut you off and kick you out. To ensure that day never comes, here are some tips for setting up your own house.

Research rents

Find out the cost of living in your area. Start with what apartments rent for in the part of town you’re interested in. Normally, when you sign a lease, you’ll pay the first month’s rent (and possibly the last month’s as well) up front, plus a security deposit. Security deposits cover any damage beyond normal wear and tear during your lease. The amounts vary, so be sure you ask, but often they’re equal to one month’s rent. Apartment managers can also give you details on what the average monthly utility costs are in their units. If this is your first apartment, you might be surprised at how much it’s going to cost to live on your own. You may have to reevaluate the part of town in which you can afford to live.

Start saving

Now that you know what an apartment is going to cost you, you need a savings plan. How much will you save each month? Since you’re living at home, your living expenses should be quite low. On the other hand, you could be contending with student debt. Either way, be disciplined but realistic about how much you’re going to save and stick to it. Consider opening a savings account if you don’t have one and have your monthly amount automatically deposited into your savings account so that you’re not tempted to spend it — out of sight, out of mind!

Obviously, you want to save whatever money will be required upon signing your lease. But it’s also a very good idea to save at least an additional month’s rent as a kind of buffer or emergency fund. You might want to save an additional sum to cover dishes, cookware, some furniture and a stocked pantry. It’s going to be much easier to save now than when you’re on your own.

Ask your parents for advice (not money!)

Your parents are a free source of wisdom. Include them in your planning and preparation. Hopefully they’ll be impressed with your ambition, and undoubtedly they will have ideas for improving upon it! They were once at this point in their own lives, they successfully made the transition to self-reliance, they have many years of living under their belt and, importantly, they also know you well. So check your pride and ask them what they think. You may be pleasantly surprised at what they have to offer.

No doubt your parents and their home have provided you with an amazing fallback plan: a free, nearly free or below-market-price abode while you looked for a job, struggled with college debt and just generally got on your feet. But don’t squander the opportunity to save while you’re living with them. Now could be the time to turn their generosity into a move-forward plan.

Jennifer Pagliara is a financial adviser with CapWealth Advisors. Her column appears every other week in The Tennessean. For more information, visit www.capwealthadvisors.com.

In election season, stock market only cares about certainty

Millennial independence is changing our world

Thu, 07 Jul 2016 21:12:45 GMT

As the United States celebrated its 240th year of independence, people all across the country marked their freedom in a variety of ways: barbecues, fireworks, parades and however else they chose. Naturally, because that’s freedom! As for some of our younger fellow citizens, the millennials, they’re seeking new and expanded freedoms. With many experts predicting that millennials will make up 75 percent of the global workforce by 2025, these freedoms will likely shape our economy, our country and our world irreversibly.

Financial freedom

Every generation struggles in their 20s and early 30s to gain financial freedom. Like the Silent Generation (those born in the mid-1920s to the early 1940s), millennials were dealt an unfavorable hand — the former generation beginning their careers during the Great Depression and the latter in the Great Recession (another name for the financial crisis of 2007-08). So what does financial freedom mean to the average millennial?

The first and probably the most obvious is to get out of student debt. Millennials are strapped with the highest student debt in history at a time when the job market has made it tough to pay it back. According to Cappex, a website connecting students to colleges and scholarships, the college graduate class of 2016 carries an average of $37,172, the all-time high mark. Not surprisingly, millennials are debt-averse.

After living through the dotcom bubble and crisis, and watching parents, grandparents and others lose their homes and savings, they’re also wary of Wall Street. As Jessica Lynn Rabe, a market strategist and millennial, wrote in Investmentnews.com last year, “… my friends are more willing to bet on sports than stocks.”

Yet millennials will soon be on the receiving end of the largest transfer of wealth in human history, as $59 trillion is shifted from 93.6 million American estates through 2061. What will millennials do with that money? Invest? Give to charities? Start their own businesses? Many millennials would rather pour their money and their sweat equity into entrepreneurship.

Workplace freedom

In the 2016 Deloitte Millennial Survey, 70 percent of millennials say they may reject traditional business in order to work independently. Sixty-six percent say they expect to leave their current employer in the next four years. Clearly, this generation doesn’t want to work for “the man” — or in one place for long — and generally rejects rigidly hierarchical offices. The freedom they crave is to create their own schedule, which has given rise to the sharing economy: Uber, Airbnb and the like. One big reason for all of this is because, more than other generations, millennials prefer purpose over profit. When corporate values match their personal values, millennials are more satisfied and more loyal to their employers (and products!).

This flexibility that they crave isn’t just limited to schedules and organizational charts. The formal workplace attire has grown even more casual. They’re incentivized differently because they also prefer experiences over money. Getting an extra week of vacation over a monetary bonus is more attractive to millennials than past generations. In fact, many millennials —and not just this generation — would rather telecommute from home or a coffee shop than sit in a cubicle or office all day. Technology, which may still seem newfangled to older generations, but which millennials have grown up breathing like air, has made that possible.

Freedom of expression

Americans are a freedom-loving people, and with social media we are empowered to freely express as the inclination strikes us to hundreds, thousands, perhaps millions of others in an instant. Millennials are more adept at it and more prone to do so. When they like something, don’t like something or anything in between, they tell the world about it. This has been a game-changer. Before, a purchase was a business transaction. Today, it’s a relationship. Successful relationships require a lot of wooing and a lot of work. Companies that don’t get this stand to lose a huge customer and employee base.

Jennifer Pagliara is a financial adviser with CapWealth Advisors. Her column appears every other week in The Tennessean. For more information, visit www.capwealthadvisors.com.

Articles by Jennifer Pagliara

How millennials can stand out in the job market

Fri, 24 Jun 2016 21:11:33 GMT

Graduation is upon many millennials across the country. Whether they're graduating from high school, college or a graduate program, there are hungry 20- and 30-somethings on the hunt to begin or advance their careers. While this generation is leading us into a digital age, applying for a job is still very traditional. Here are some context and tips for that first “real job” interview.

Disappointing job market

At the beginning of June, non-farm payroll numbers were released, with disappointing results. The U.S. created 38,000 jobs in May versus the expected 162,000. Unemployment fell by 0.3 percent to 4.7 percent — or, if you look at a more encompassing figure that includes part-time workers and those not actively looking for employment, it held steady at 9.7 percent. Though these statistics were not what watchers anticipated, do not let this deter you from actively seeking the position that you want. Put your best foot forward!

Job hopping

Few people stay with one company their entire careers anymore. That said, is the job-hopping millennial stereotype true? In April, the Bureau of Labor Statistics released a study concerning young adults in the labor market. It reported that young adults born in the early 1980s held an average of 7.2 jobs from ages 18 to 28. Another study published in April, this one from LinkedIn, showed that millennials jump jobs an average of four times in their first decade out of college, versus about two times for Generation Xers graduating college from 1986 to 1990.

Use this information to your advantage. Because hiring, training and developing employees is costly, retaining good employees — who are productive and efficient, with institutional memory — for as long as possible makes good business sense. In your interview, explain that you’re interested in finding a good career home and growing along with the company as you contribute to its success. Ask about opportunities for advancing in the position. This will show you’re serious about the job — and increasing the company’s ROI (return on investment) in you.

Five interviewing tips

Resume: As Monster.com resume expert Kim Isaac writes, your resume is a marketing tool, not an autobiography. Keep it concise and focused on your key selling points, with every word dedicated to explaining your value for this role. If this is your first “real job” and you don’t have tons of job experience, try to keep it to one page. More than that and it will look as though you’re overinflating your resume. Get help from a college counselor or experienced mentor in crafting it.
Practice: If an interview is a performance (and it is), you want it more scripted and less reality. It’s almost guaranteed you’ll be asked, “What are your weaknesses?”, “What are your goals?” and “What makes you different/unique from other candidates?” Perfect your answers ahead of time. Be concise, emphasize your strengths while being honest and provide examples. Consider using the STAR format to answer questions effectively and efficiently: Situation or Task, Action, Result. Film yourself practicing in order to improve your delivery and body language. Resources such as Glassdoor.com can help you prepare: It offers job and company information from current and former employees, as well as other applicants.
Attire: Dress professionally and conservatively — generally, if your attire makes an impression, it’s likely to be a bad one. Err on the side of more formal. A good rule of thumb, says Kate Wendleton, founder and president of the Five O’Clock Club, a national career counseling and outplacement firm: Dress one or two levels higher than the job you’re interviewing for.
Mobile phone: Don’t just put it on vibrate. Turn it off or leave it behind. If your interviewer hears it, she’ll likely interpret it as a lack of focus or commitment.
Thank-you note: Don’t underestimate the power of sending a thoughtful, handwritten thank-you card after your interview. It’s common for employers or recruiters to sort through hundreds or even thousands of applications for one position. It could help you stand out.

Jennifer Pagliara is a financial adviser with CapWealth Advisors. Her column appears every other week in The Tennessean. For more information, visit www.capwealthadvisors.com.

FOX 5 DC: Consumer Price Rises

10 tips for keeping wedding costs under control

Fri, 10 Jun 2016 21:08:51 GMT

Americans continue to spend too much on weddings. I know that’s an audacious statement, and some of you are thinking that your wedding is none of my business.

I get that, I really do. But I’m a financial adviser, so financial numbers speak loudly to me. Such as this one: According to The Knot’s 2015 Real Weddings Study, wedding spending reached an all-time high in 2015, at an average of $32,641. And this one: According the Census Bureau, the median household income in the U.S. was $53,657 in 2014 (the latest year for which there’s data). So the average wedding price tag is well over half of what the average family makes in one year. Simply put, that’s ridiculous. The study also reveals that nearly half of couples exceed their budget.

As we continue through June, the most popular wedding month in the U.S., here are 10 tips on cutting costs and staying on budget for your big day:

Quality, not quantity. The No. 1 thing you can do to keep wedding costs down is to limit your guest list. Each person that attends means more invitations, more food, more booze, more décor and more venue square footage.F
Put comfort in the cuisine. Instead of a seated, served and plated dinner, go for heavy hors d’oeuvres or a buffet. Also, don’t be afraid to go with informal, comfort foods like sliders, pizza and macaroni and cheese. Your guests will enjoy it and you’ll cut costs.
Pick a few things and do it well. Don’t go overboard with décor. Stick with simple ideas that are memorable. Instead of renting an electronic photo booth, buy an instant-film camera and create your own photo backdrop. People will remember that. Almost no one will remember your flowers.o
Network. It’s not just for jobs, it’s also for weddings. Instead of hiring expensive vendors, ask your friends about photographers, designers and bakers they know. Chances are a talented friend — or a talented friend of a friend — will give you a great deal.
Un-romanticize the dress. Brides spend an average of $1,469 on a wedding dress. Consider shopping sample sales, buying a floor model, having your own dress made or even purchasing a used wedding dress. If you need help letting go of the perfect dress ideal, remember this: Most grooms rent a tux that’s been worn dozens of times and may even wear plastic rental shoes.
Follow your own timing. Everyone wants a Saturday wedding, as it prevents people from taking time off work and gives them Sunday for recovery. But you can save thousands by booking a venue on any other day of the week. Same goes for choosing a wedding month that’s not high-season, such as January, February, March, April, July or November. Also, vendors often charge less for an afternoon event versus an evening one.
Be smart about the flowers. Only buy those that are in season. Repurpose your bridal and bridesmaid bouquets as centerpieces or common-area décor at your after-wedding venue. Don’t go overboard with the flowers. They’re expensive. Did I mention that no one will remember your flowers?r
The Internet is your frenemy. You see amazing, beautiful, inspiring ideas on Pinterest, but never price tags. There are some other great sites that can help you save money. Canceledweddings.com sells canceled weddings and honeymoons, while Tradesy sells used wedding dresses, for instance.
Plug ‘n’ play. Thanks to technology, invitations and music can be had on the cheap. Vistaprint.com , Tinyprints.com and Etsy.com are great resources for getting great-looking invitations and save-the-dates at reasonable prices. And instead of hiring a band or a DJ, compile a playlist, put it on your phone and plug it into a rented or borrowed sound system.
Beautiful settings are often free. You don’t have to spend an exorbitant amount for a ceremony or reception spot. In the right season, a public park or a friend’s farm can offer a beautiful setting for either.

The main thing is to focus on each other and on having a good time. That’s what you and your guests are going to remember, not all the trappings and accoutrements. And far better to embark upon a long and happy marriage without the added stress of having spent too much or gone into debt for a single day of celebration.

Jennifer Pagliara is a financial adviser with CapWealth Advisors. Her column appears every other week in The Tennessean. For more information, visit www.capwealthadvisors.com.

Investors Unite Jan. 24 Teleconference Recording Online

Millennial downsizing could have big effect on economy

Fri, 27 May 2016 21:07:41 GMT

For most people through most of history, more has typically meant, well, more. More possessions and property have equaled prestige, position, preeminence. For reasons of finance and ethics, many millennials today are concluding that less is more. Given that this generation has bucked the trend on just about everything imaginable — starting families later, leaving the suburbs for the city, valuing lifestyle over career strides, sharing too much over social media — it should come as no surprise, then, that there is a subset of millennials that is all about downsizing.

Tiny houses

The trend has become known as minimalism, and it could mean walking, biking or taking an Uber instead of purchasing and driving a car. Or borrowing a Kindle book rather than acquiring the hardcover version. Or buying a so-called “tiny home” — as in 400-square-feet-maximum tiny — over a traditional-sized house.

There are now an estimated 10,000 tiny houses in the U.S., as tiny-house owner, blogger and author Ryan Mitchell recently told a USA Today reporter. While that’s a minuscule number, it represents a nearly 5,000 percent increase in fewer than five years. Millennials are fueling the rise, and while it may seem impractical, bizarre or even cockamamie to some (hey, I’m a millennial and I couldn’t do it!), in many ways it makes complete sense.

With a tiny home, a person can forgo a mortgage, get unfettered mobility (tiny homes are often on wheels and all are small enough to be transported) and enjoy a radically reduced environmental footprint, all in one fell swoop. All of these things matter a great deal to millennials.

Homeownership and the American dream

Though they’re delaying marriage and kids, are shouldering tremendous college debt and have had difficulty finding employment (as we’ve talked exhaustively about in this column), millennials do want homes. In fact, according to a January 2016 Zillow survey, 65.4 percent of millennials associate homeownership with the American dream, more than any other generation. Yet the average home remains out of reach. According to an April report by Apartment List , an online rental marketplace, 77 percent of millennials say that affordability is the biggest obstacle to buying a home.

High rents across the nation are a major factor, because it makes saving for a down payment more difficult. But Zillow’s chief economist Svenja Gudell agrees that the largest single impediment is finding homes that are affordable. She says the Great Recession is to blame, because underwater homeowners — those who owe more than their house is worth — are staying in their homes, keeping supply low. As a result, homeownership rates among people age 35 and under have been falling for over seven years (according to the U.S. Census Bureau).

As I mentioned, it’s not just economics driving the tiny-house phenomenon. A downsized abode checks a lot of boxes for millennials: in addition to mobility and environmental friendliness, the unnecessity of ownership in a sharing economy, the migration to urban settings, the prioritization of experiences over possessions and even corporate mistrust.

The upshot of downsizing

It’s yet to be seen if minimalism is merely a fad or will grow and persist as a value system with millennials. If it's the latter, the ramifications could be huge. Traditional homeownership, for instance, is a powerful economic driver of GDP. Raw-material suppliers, Home Depot, Lowe’s, building tradespeople, landscapers, appliance and furniture manufacturers and retailers, Realtors and more all depend on the buying and selling of homes. Homeownership is also a critical component of household wealth creation — in fact, the average U.S. household’s net worth consists primarily of home equity. Moreover, it can even be argued that much of our individual maturity, responsibility and civic-mindedness is anchored in homeownership.

On the other hand, the parents and grandparents of millennials have come to live well beyond their means. Our country, privately and publicly, has a crippling debt problem. The average consumer debt per household is over $97,000 (New York Federal Reserve Bank, Federal Reserve, U.S. Census) and our national debt is over $19 trillion. Viewed from that perspective, some minimalism is in order.

If you’re concerned about your own financial outlook, consider advice from a financial adviser.

Jennifer Pagliara is a financial adviser with CapWealth Advisors. Her column appears every other week in The Tennessean. For more information, visit www.capwealthadvisors.com.

Capwealth’s John Lueken In Barron’s Magazine

Comparing the presidential candidates on taxes

Fri, 06 May 2016 21:06:20 GMT

We all exhaled a collective sigh of relief a couple of weeks ago with the end of tax season. Whether you received a refund from Uncle Sam or had to send him some more money, taxes likely weigh heavy on your mind the first quarter of every year.

If taxes occupy your mind the rest of the year, then I say kudos to you. While there are many important issues at stake in every election cycle, and this one is no different, taxes are always in the mix — and for good reason. Taxes are where the rubber meets the road. They’re the difference between poll-driven promises and proper policies, where most of us have skin in the game. Taxation is how everything else the presidential candidates are talking about — be it security, education, health care, infrastructure or social programs — will possibly be funded. Taxation impacts every single citizen, through the government-provided projects and services the populace expects to the paychecks we take home for our no less essential needs.

If you aren’t thinking about taxes at least periodically throughout the year, you might be falling down on your civic duty.

With Donald Trump the presumptive Republican nominee, and Hillary Clinton and Bernie Sanders slugging it out for the Democratic nomination, let’s examine each candidate’s tax reform proposals. And then I urge you to spend some time considering how it will affect you, your family and your country.

Where we stand today

Let’s break the comparisons down by party and the four main issues: rates on ordinary income, capital gains and dividends, corporate income tax and estate tax. But first, let’s talk about these four categories and where everything stands right now.

For 2016, there are currently seven tax brackets that have marginal rates ranging from 10 percent to 39.6 percent. Short-term capital gains is money derived from selling an investment owned for less than a year. These assets are taxed as ordinary income. Long-term capital gains are a bit more complicated. They come from selling investments held for longer than a year. Individuals in the lowest tax brackets of 10 percent and 15 percent pay no taxes on long-term capital gains; those in the highest bracket (39.6 percent) pay 20 percent. Everyone else pays 15 percent. The corporate tax rate for 2016 stands at 39 percent. The average rate over the last 15 years is 39.23 percent. Finally, estates left to heirs valued at $5.45 million or less are exempt from federal estate tax. Beyond that, you are taxed by the federal government at 40 percent (some states have estate taxes as well) — often called the “death tax.”

Hillary Clinton vs. Bernie Sanders

Ordinary income: According to Taxfoundation.org , Clinton would add a 4 percent surtax on income over $5 million. Sanders would add four new tax brackets: 37 percent, 43 percent, 48 percent and 52 percent. The top rate would apply to taxable income over $10 million. Sanders would also raise the rate of all other brackets by 2.2 percent.

Capital gains and dividends: Clinton would raise rates on medium-term capital gains (held less than six years) to between 24 percent and 39.6 percent. Sanders would tax capital gains and dividends at ordinary income rates for households with income over $250,000.

Corporate income tax: Neither candidate currently has a proposal.

Estate tax: Clinton would increase the top estate tax rate to 45 percent and lower the tax exclusion to $3.5 million. Sanders would increase the top estate tax rate to 65 percent and lower the tax exclusion to $3.5 million.

Donald Trump

Ordinary income: According to Taxfoundation.org , Trump would establish three tax brackets of 10 percent, 20 percent and 25 percent. The top rate would apply to income over $150,000 for single filers and $300,000 for joint filers.

Capital gains and dividends: Trump would eliminate the net investment income surtax.

Corporate income tax: Trump would lower the top corporate tax rate to 15 percent.

Estate tax: Trump would eliminate the estate tax.

No matter who you want to vote for in the upcoming election or which proposal you believe will help the United States the most, the important thing is be informed and know how it will affect you and your family.

Jennifer Pagliara is a financial adviser with CapWealth Advisors. Her column appears every other Saturday in The Tennessean. For more information, visit www.capwealthadvisors.com.

How to keep your "I Do" day from creating big debt

10 financial terms every investor should know

Thu, 21 Apr 2016 21:03:05 GMT

The world of finance and investing can be intimidating. It’s a complicated mash-up of business principles, human psychology, mathematical calculations, geopolitical influences — and a lot of jargon. The lingo includes a menagerie of animals — bulls and bears, wolves and sheep, ostriches and pigs, killer bees and dead cat bounces, all words at least you’ve heard before — but there’s also mumbo-jumbo such as “backwardation” and “garbatrage,” “DSCR” and “RTGS,” “Muppet bait” and “gazump.”

If you can’t define most of these terms, you’re not alone. More to the point, as an average investor, you don’t actually need to know all of them. By illustration, consider that the English language contains more than a million words. The average English speaker knows roughly 50,000. Just as most of us are able to converse and write effectively by mastering only a fraction of the lexicon, most of us can understand the basics of investing with a rudimentary financial vocabulary. Here are few terms worth being familiar with:

A bull market is a positive stock market environment in which stock prices are increasing generally and investors who have high confidence are buying stocks. Bull markets can be powerful creators of wealth for both average and expert investors.
A bear market in one marked by negative sentiment, pessimism and declines — typically of at least 15-20 percent and lasting more than two months. The Great Depression of 1929-39 is the most famous bear market in history. While investors quite obviously can and do lose money in bear markets, most advisers and market watchers consider them part of the normal economic and business cycle. To put a positive spin on it, the bottom of a bear market can be considered the ideal buying opportunity.
Asset allocation is how you have your investments distributed across asset classes — equities (stock), fixed income (most commonly bonds) and cash (and cash equivalents) are the three main ones. Each poses different levels of risk and return over time, and consequently the apportioning to each reflects an individual’s goals, tolerance for risk and investment horizon (the length of time you expect to hold an investment). Thus, asset allocation is essentially your investment strategy.
Equities, fixed income and cash are three general categories in which most investors put their money. When you buy an equity — also called stock or shares — you are purchasing fractional ownership of a company. The better the company performs, the more your share of stock is worth. The worse it performs, the less your stock is worth. Fixed-income investing offers return rates or periodic income at regular intervals, at predicted levels. The most common type is bonds, which are essentially IOUs issued by governments and corporations. The investor loans money to the entity and on the maturity date receives the principal and some interest back. Cash is just what you expect — money — and cash equivalents are certificates of deposits (CDs), Treasury bills and money market accounts.
EPS stands for “earnings per share” and is a tool for measuring a company’s profitability. EPS represents the portion of a company’s earnings, net of taxes and preferred stock dividends, that’s allocated to each share of common stock. It’s calculated by dividing net income earned in a given period by the total number of shares outstanding in the same period. Let’s say that Widgets Inc. reported net income of $50 million in the first quarter and a total of 25 million shares outstanding. Its quarterly EPS would be $2.
P/E , or the price-to-earnings ratio, is a method of evaluating stocks. To determine a stock’s P/E, divide its price by its annual earnings per share (EPS). Let’s say that the current stock price (also called market value per share) of Widget Inc. is $130. Its EPS, as we determined above, is $2. $130 divided by $2 is 65, the company’s P/E ratio.
In honor of the Fed and interest rates: monetary policy doves and hawks . Doves advocate low interest rates as a way to encourage economic growth, believing that it stimulates consumer borrowing and spending. For doves, the effects of inflation are secondary. Hawks, on the other hand, are focused on inflation and favor higher interest rates to keep it at bay; they are less concerned about economic growth.

These 10 terms are just a start. There are plenty of great websites for learning the lingo and expanding your understanding of finance and investing. To help you put all the pieces together for your own financial future, consider talking to a financial adviser.

Jennifer Pagliara is a financial adviser with CapWealth Advisors. Her column appears every other Saturday in The Tennessean. For more information, visit www.capwealthadvisors.com.

For 26-year-olds, good health meets insurance anxiety

Mon, 04 Apr 2016 21:01:53 GMT

The dreaded age of 26. Many of you are thinking: Huh? What I wouldn’t give to be 26 again!

Well, I’m here to tell you that 26 can be a scary age. It’s the expiration date, so to speak, for children covered by their parents’ health insurance. Older generations are probably scoffing at the fact that there are young people taking such a long ride on their parents’ dime. However, with the torrid growth in health care costs, it’s a more reasonable — and tempting — decision than you might think.

Parents’ policies offer some benefits

One of the most popular provisions of the Affordable Care Act, the still-controversial legislation passed in 2010, is that children may remain on their parents’ health insurance until age 26. As a result, fewer than half of all eligible employees under age 26 enrolled in an employer-provided health plan in 2015, according to the ADP Research Institute. Can you blame them? Consumer health care inflation grew 2.9 percent last year. Though better than the 5 percent expansion of 2007, that’s still much faster than the broader consumer price index. Last year, in-network health insurance plans charged an average $1,200 deductible (the amount you pay before coverage starts), almost double the 2007 figure. That doesn’t count co-payments or your portion of the monthly premium (employers often pay some portion of employees’ premiums).

Moreover, the insurance of young adults’ parents is more often than not better than that offered by their employers — and if a son or daughter is especially lucky, their parents won’t even make them pay! The only downside to being on your parents’ insurance is if you don’t live near your parents. That could make finding an in-network doctor difficult.

Obamacare policies can be costly

You might be thinking: “You’re 26 now, so suck it up and buy into your employer’s insurance.” Sure, except employer-sponsored health insurance continues to cost more and offer less — and there are still many millennials who are unemployed or underemployed.

“Get insurance on the Obamacare exchange,” you say. According to eHealth, the average monthly premium for coverage found on the Health Insurance Marketplace is $161 for 18- to 24-year-olds and $221 for 25- to 34-year-olds. Using $191 as the average monthly premium for the millennial age group, this means they’re paying on average $2,292 a year in health insurance premiums for policies purchased on the exchange. Based on the highest and lowest median incomes by state, millennials living in D.C. are paying around 5-6 percent of their annual gross income on insurance premiums, and Montana millennials are shoveling out roughly 12-13 percent. That’s a sizeable chunk!

The gamble and the penalty

Many millennials are still rejecting Obamacare and are willing to pay the penalty for not having health insurance — off the top of my head, I know of two friends in this camp. The “I’m in good health and I just can’t afford it” mindset is a gamble, but not a surprising one. The penalty, officially called the individual mandate, went into effect in January 2014 and requires that most Americans (there are exceptions) obtain and maintain health insurance. For 2016, the annual fee comes to $695 per adult and $347.50 per child (up to $2,085 for a family), or 2.5 percent of your household income above the tax return filing threshold for your filing status, whichever is greater.

For those of you out there on the cusp of turning26 — particularly if you’re one of the millions of millennials who is an entrepreneur or self-employed — I hope this information helps. Armed with knowledge, it’s time for you to create a smart health care plan and budget.

Jennifer Pagliara is a financial adviser with CapWealth Advisors LLC. Her column appears every other Saturday in The Tennessean. For more information visit www.capwealthadvisors.com.

A season to give, receive — and talk inheritance

Why ETFs could be millennial investors’ BFF

Tue, 22 Mar 2016 21:00:32 GMT

If you read this column, you’re aware that people of my generation, the millennials, have not invested like previous generations. Having come of age during turbulent economic times, they have been skeptical of Wall Street and of advisers, and also not felt financially secure enough to earmark income for investing. Of those millennials that are investing, many of them are squarely in the “I-can-do-it-myself” camp.

Prioritizing values over value

When it comes to picking investments, these DIYers tend to think more about the values they share than the value of shares. “They [millennials] like the idea of investing in what matters to them,” says StashInvest CEO and cofounder David Ronick, whose Stash app helps users choose investments based on personal values. Stash offers only exchange-traded funds (ETFs), which isn’t surprising, since there are ETFs for just about any and every taste.

What are ETFs?

ETFs are marketable securities — financial instruments easily convertible to cash — that track an index, a commodity, bonds or a basket of assets. While that may sound very similar to mutual funds, with which they do share some attributes, the biggest difference is that they trade intraday like individual stocks; mutual funds do not. The first American ETF was launched in 1993, and they have really proliferated in the last 10 years. Last year set the record for the number of new ETFs created — 266. There are active and passive ETFs. Passive ETFs are meant to mimic an index — an imaginary portfolio of securities representative of a particular market or portion of it, such as the Standard & Poor’s 500 (S&P 500) — and are not intended to beat that index’s return. These ETFs have low expense ratios. Active ETFs, on the other hand, employ a portfolio manager who selects the securities to be included based on an investment strategy and with the goal of beating a specific benchmark (a standard against which to compare your performance, often an index such as the S&P 500). Active ETFs are not nearly as popular as passive ones, and only came about seven years ago.

The first millennial-focused ETF

According to ETF.com, Global X filed for the first millennial generation-focused ETF in December. Its strategy? To invest in technologies and trends that are popular among millennials. Due to the SEC registration period rules, Global X has not publicly commented on the new millennial generation-focused ETF. But, if I had to take a guess, I would imagine Apple, Facebook, Netflix, GoPro, Alphabet, Twitter and FitBit are among its holdings.

As always, with any investment, there are many factors to consider when determining a plan that will best help you achieve financial security. A tool like Stash is an excellent way to dip your toe into the world of investing. As your ability to invest grows, however, I strongly suggest talking to a financial adviser. There are trustworthy ones out there who provide great guidance, I promise!

Jennifer Pagliara is a financial adviser with CapWealth Advisors LLC and a proud member of the millennial generation. Her column, which appears every other Saturday in The Tennessean, speaks to her peers and anyone else that wants to get ahead financially. For more information about Jennifer, visit www.capwealthadvisors.com.

Parenthood beckons millennials, but cost is prohibitive

Fri, 04 Mar 2016 20:59:21 GMT

It’s almost a rite of passage out of probationary adulthood into bona fide adulthood for a woman to hear the question from her older female relatives: “So, when are you going to settle down and start having babies?”

If you’ve heard that question at all, odds are you’ve heard it numerous times. In some families, it can become downright badgering. There are a lot of ways to take it — with a laugh and shrug, with grin-and-bear-it resilience, with vociferous and righteous indignation. But you try to remember that they love you and want you to be happy — and babies are what they believe to be an essential ingredient to happiness.

Millennials feel familial urge

I feel bad for my fellow mllennial women, because we must be hearing that question a lot. As revealed by an Urban Institute study last year, we’re the slowest to have kids of any generation in U.S. history. In the six years from 2007 to 2012 alone, birth rates among women in their twenties declined 15 percent.

I also feel bad for millennial women because many actually want to have kids but can’t. Not for health reasons and not because they’re too career-focused, self-absorbed or glued to their iPhones to do so. It’s economics, plain and simple. As Urban Institute senior fellow and study co-author Nan Astone told “The Washington Post” last year, women under financial duress are saying to themselves: “Things are tough right now. Let me put this off because I can.”

Birth rates dip during uncertain times

Many Americans — and certainly an entire generation of young Americans — are still feeling the effects of the financial crisis of 2008 and the Great Recession. Millennials are so consumed with securing a job, establishing a career and paying off student loan debt that getting married and having children has been put on the back burner. The Great Depression of the 1920s and ’30s as well as the great inflation of the 1970s had a similar impact — birth rates fell. When people feel like the walls of their world are collapsing and the foundation is wobbly, they delay children until they feel as though stability has returned. And for many of the same reasons, people are getting married later than they have historically. In the U.S., the average age for a first marriage for women is 27, and 29 for men. Therefore, couples are having fewer children simply because they have less time to have them.

Babies are cute but costly

Who can blame them? The U.S. Department of Agriculture estimates that to raise a child born in 2013 will cost approximately $245,340. This is simply for “food, housing, child care and education and other child-rearing expenses up to age 18.” College and postgraduate degrees are not included in that figure. Meanwhile, “U.S. News and World Report” predicts that by 2030, the average cost for a four-year public college will be $176,000.

But wait, back up a sec. That $245,340 figure also doesn’t include the cost of actually giving birth. That depends on where you live, the hospital and your insurance. According to a 2013 study by Truven Health, the average total payment for maternal and newborn care for those with commercial (non-Medicaid) insurance was $18,239 for a vaginal birth and $27,866 for a cesarean birth without complications. The average out-of-pocket costs for commercial and Medicaid payers was $2,244 for vaginal births and $2,669 for cesarean without complications. Without insurance, the cost is closer to $30,000 and $50,000. With complications, costs can go north of $250,000.

For a child that’s born naturally to parents with commercial insurance, who attends a state school and whose expenses are altogether average, the bill is $423,584! The bottom line: Having, raising and educating a baby into adulthood is pretty darn expensive.

The good news is I’ve heard they’re worth every penny.

These stats aren’t meant to scare anyone. I’m trying to do two things: to explain why birth rates have fallen recently and to arm would-be parents with some financial knowledge as they prepare to take the baby plunge!

Jennifer Pagliara is a financial adviser with CapWealth Advisors LLC, and a proud member of the millennial generation. Her column, which appears every other Saturday in The Tennessean, speaks to her peers and anyone else that wants to get ahead financially.

Millennials putting their money where their morals are

PAGLIARA: How secure is Social Security’s future?

Fri, 19 Feb 2016 20:53:50 GMT

Social Security has been one of the hottest topics of the past year. Many of you are probably wondering what is going to happen to this federal insurance program, which the retired, unemployed and disabled have depended upon for more than 80 years. Let’s examine the history of Social Security, where it is today and what’s in store for its future.

Social Security then and now

The Social Security Act signed into law by President Franklin Roosevelt on Aug. 14, 1935, looked quite different than it does today — as did the labor force. Originally, Social Security was intended only to pay benefits to the primary worker in a family. When the monthly ongoing benefits began in 1940, there were only 9 million Americans age 65 or older. The number of beneficiaries was about 222,000 and the average monthly benefit for a retired worker was $22.60. The total amount in monthly benefits paid out that year across America — for retirement, disability and widows/widowers — was $4,070,000.

In July of last year, the Social Security Administration’s annual report revealed that the trust that funds Social Security benefits will likely be unable to pay scheduled benefits by the year 2034, the year in which today’s 48-year-olds reach full retirement age. Today, 37 million Americans will receive more than $15 billion in benefits each month. That’s an increase in monthly benefit payout of more than 368,450 percent.

Changes coming to Social Security

What does this mean for millennials? The oldest millennials are turning 36 this year, and in order for them to begin planning their retirement, it’s necessary that they consider Social Security’s future. I think we can all agree that a change to the current system is going to happen, even if no one can predict exactly what that change will be. One of the most commonly proposed changes is to push back the retirement age. Because life expectancy continues to grow with each passing year and many people are working longer, it would seem logical to delay the age that Americans begin receiving benefits. Currently, the earliest you can start receiving benefits is age 62 (at a reduced amount), with full retirement benefits at age 67.

Currently there are several proposals out there from presidential candidates. One of those is to increase Social Security’s current eligibility age by one month every year starting in 2022. Therefore, by 2058, the eligible age for full benefits would be 70, with the option to start collecting reduced benefits at age 65. There is some consensus that these changes should not penalize Americans who are near retirement age. There’s also been talk of means-testing benefits, which is to say that benefits would be phased out for higher-income Americans, and benefits increased for lower earners. It’s also been proposed that those under the age of 30 should be issued individualized Social Security accounts and given the responsibility of managing that money themselves, as you would an individual IRA or 401(k) plan.

A benefit, not a cash cow

More than anything else, we need to remember that Social Security is a benefit. A little something extra. Somewhere along the way in these past 80 years, we began thinking of it as our retirement. The whole kit and caboodle. It is not, and never will be. It’s a supplement for your lifestyle, if you’re fortunate enough to get it one day. But if you want to ensure that your lifestyle is maintained beyond your working years, you need to start planning now. A financial adviser can be a huge help.

The best hands in which to place your future are your own.

Millennials need better economic prospects to thrive

Be knowledgeable about your financial adviser

Fri, 05 Feb 2016 20:49:41 GMT

In a 2015 study conducted by PricewaterhouseCoopers, only 27 percent of millennials surveyed had sought out professional advice on savings and investments within the past five years.

With the Internet, millennials’ home away from home, why would anyone pay for advice? After the Great Recession and the fall of Bernie Madoff, both of which took place during millennials’ formative years, why would anyone trust Wall Street? In the spirit of free advice, I’ll offer some.

The financial services industry is constantly evolving, as is the global economy, the U.S. economy, the various asset classes and individual investment opportunities. Rules are in flux. Everyone’s financial picture is unique, and therefore, so are their needs. For the average person, staying on top of everything is nearly impossible. And trustworthy advisers do in fact exist. Hint: One is talking to you right now!

Hiring a financial professional is a big step. Let’s start, then, with a baby step: defining the professionals, divided into two main camps, who dispense financial and investment advice for a living.

Registered investment adviser (RIA)

The terms “money manager,” “investment consultant” and “financial planner” are thrown around a lot, but all are essentially synonyms for “investment adviser.” A registered investment adviser, or RIA, is a firm or person that is paid to give advice about investing in securities. RIAs are independent, meaning they don’t belong to a bigger financial firm, and though they oversee and manage their clients’ assets, those assets are “held away” by a third-party custodian such as Pershing, Schwab or Sterne Agee, adding an extra layer of security for clients.

Be aware that the word “registered” lends no special credibility or validation upon an adviser. It simply means that the person or firm in question is either regulated (registered) by the Securities and Exchange Commission (SEC) or their state securities agency (depending on how much money they manage). You should get online, do some research and get recommendations when choosing an investment adviser, just as you would a lawyer, doctor or general contractor.

Broker-dealer

The term “stockbroker” typically refers to a broker-dealer, by definition a person or firm primarily in the business of buying and selling securities. They are not regulated by the SEC like RIAs, but rather the Financial Industry Regulatory Authority (FINRA). Broker-dealers have historically been employees of big banks or “wirehouse” firms such as Morgan Stanley, Bank of America’s Merrill Lynch or UBS, but recently there’s been an increase in the number of broker-dealers who work not as employees, but independent contractors of these parent firms. Since both broker-dealers and financial advisers can help clients make financial decisions, you might be scratching your head at this point wondering, “yeah, but what’s the difference?”

Suitability vs. fiduciary standards

Here’s where the two diverge in a big way. Broker-dealers are only legally bound to a suitability standard in their client relationships. That means a broker-dealer must prove a product is suitable for a client, though it might not necessarily be the best product for them. An investment adviser, on the other hand, must have their client’s best interests in mind at all times — they must in fact place the client’s interests above their own interests. It’s called a fiduciary standard. See the difference? It’s a higher bar.

How does each get paid?

Now we get to the important stuff: money. Do you know exactly how much you’re paying the person who manages your money? An investment adviser (RIA) is paid based on the investment advice they offer. Often they are paid a certain percentage of your assets that they manage. Therefore, they get paid more as the value of your account increases — a built-in incentive for the adviser to make good decisions and grow your wealth. Conversely, a broker-dealer is paid on the sale or purchase of financial products, normally in the form of fees and commissions. There are other compensation models, but these are the traditional two and still the most common.

Just know that is there is no right or wrong way to have your money managed. You need to figure out what works best for you and your family. But be knowledgeable about to whom you’re entrusting your assets, how seriously they take your interests, and how and how much you are paying them.

Jennifer Pagliara is a financial adviser with CapWealth Advisors, an independent RIA and a proud member of the millennial generation. Her column, which appears every other Saturday in The Tennessean, speaks to her peers and anyone else who wants to get ahead financially.

5 questions for a summertime financial checkup

Venable: Invest in the future with 529 plans, Roth IRAs

Fri, 29 Jan 2016 21:23:28 GMT

The market hasn’t been pretty so far this year. And while I don’t want to gloss over the agony, I’m going to, sort of, by saying: Don’t worry.

The fact of the matter is that, for the long-term investor, a degree of nonchalance isn’t only admirable, but effective. It means you’re focused years down the road, which history teaches will in probability lead to a market at a higher watermark than today, albeit with plenty of zigs, zags and nosedives along the way. It means you’re strategic, diversified and don’t rely on emotion — a sure growth-killer — when investing.

If you’re still worrying, try this. Instead of dwelling on your portfolio’s dollar amount today, force yourself into long-term thinking by opening a 529 plan or a Roth IRA for your child or grandchild.

What is a 529 plan?

A 529 plan is a savings plan operated by a state or educational institution to help families grow their money for future college costs. These plans can be used for any college regardless of where you, the plan or the college are located. The benefit? An outstanding tax break! Although contributions aren’t tax-deductible, the earnings grow federal tax-free and won’t be taxed when taken out for college. Moreover, most states offer residents a full or partial tax deduction or credit for their 529 plan contributions. There are penalties for non-qualified withdrawals.

There are two varieties of 529 plans. The first are savings plans that work like a 401(k) or IRA, offering investment options such as indexes or age-based portfolios that automatically become more conservative over time. There are also prepaid plans that let you prepay in-state public tuition, often allowing you to convert its use to private and out-of-state colleges. Beyond these two broad categories, the details of fees, investment options, contribution matching and more all differ across plans, so compare them.

TNStars shines

The TNStars 529 plan, administered by the Tennessee Treasury Department, has a solid reputation. There are 14 investment options to choose from, fees are capped at a relatively low 0.35 percent and investments are exempt from the state’s Hall income tax. Quite impressively, SavingForCollege.com has ranked its investment performance one of the top five directly sold plans in the U.S. for five consecutive quarters. Visit TNStars.com for more information.

Roth IRAs are for everyone

Many people don’t realize there’s no minimum age for starting a Roth IRA, unfortunately leaving this powerful wealth-making tool underutilized. As with 529 plans, the money going into a Roth IRA gets no tax deduction but coming out enjoys full tax exemption. The money can be invested in stocks, bonds, Treasuries, mutual funds, whatever.

It’s such an amazing deal that the government puts limits on it: The total yearly contribution (as of 2016) is capped at $5,500, the contributed amount must come from a real job trackable by the IRS, there’s an annual income limit on participation and there are tax and penalty fee consequences for withdrawing before age 59 ¹ / ₂ .

Some of these limits can make deciding between a Roth and a traditional, tax-deductible, tax-deferred IRA tough for middle-aged workers. But for nearly all kids and many teens and college students, the Roth is a no-brainer because they simply don’t make enough to pay taxes or come close to the income threshold.

The difference 10 years can make

Let’s say your 15-year-old makes $2,500 a year mowing lawns or babysitting. As a parent, you insist they save all, part or none of it. With a Roth IRA, he or she could put their saved portion in it and as a parent or grandparent — if you had the means and the desire to do so — you could match or make up the difference up to $2,500, or up to $5,500 if the teen earns that much.

Why in the world would a 15-year-old start investing? Besides the invaluable lessons in priority setting, money management and delayed gratification, here’s why. That yearly $2,500 investment, assuming an average 7 percent annual return, will grow to more than $1.16 million by the time your child is 65. If your 15-year-old waits until age 25 to start, that number decreases by more than half to $570,000. That’s the astounding difference 10 years makes in compounding interest. Either way, it’s an enormous boon in a future possibly devoid of pensions and Social Security. A final bonus: There’s no early-withdrawal penalty for college tuition or the purchase of a first home.

For additional advice planning your child’s educational and financial future, talk to your financial adviser.

Phoebe Venable, chartered financial analyst, is president and COO of CapWealth Advisors. Her column on women, families and building wealth appears every other Saturday in The Tennessean. To learn more about her or her firm, visit www.capwealthadvisors.com.

Pagliara: Markets a little too bearish for comfort

Fri, 22 Jan 2016 20:47:54 GMT

It is abundantly clear that U.S. stock markets have had a rough start thus far in 2016. Volatility seems to be the name of the game — up, down and all around. If you’re a panicky investor, this is the time that your palms start to sweat. If you’re a long-term investor, you are probably buying up whatever stocks you’ve had your eye on for a while. Aside from 2015, the last few years following the recession have been extremely profitable. And many analysts were still very bullish in 2015. So will this be the year of the bear, or is something else causing the current decline?

The bull and the bear are the two iconic animal representations of the U.S. stock market, symbolizing optimism and pessimism, respectively. In a bull market, life is rosy — stock prices are rising, GDP is growing and the economy is just great. On the other hand, in a bear market stock prices are falling, job growth is stagnant and a recession could be looming. Wait a minute, you might be thinking. Isn’t unemployment decreasing? Isn’t GDP growing — slowly, yes, but still going in the right direction? In spite of those positives, the S&P 500 is down about 10 percent in the year to date. This unfortunately makes things appear rather bearish at the moment, even if it may be premature to declare we’re in a bear market.

Let’s go over a few reasons why we’re having this bearish January:

China: Yes, China’s stock markets have fallen quite aggressively in the last few months. But the frenzy around the drop might lead one to assume that China’s economy is in the exact same state as the U.S.’s. And that just simply isn’t the case. We also have to remember that there is always going to be something going on globally that garners a lot of attention. In 2014 it was Ebola, in 2015 it was Greece and it seems that in 2016, it’s going to be China.

Oil prices: A barrel of oil is currently trading at under $30; it was more than $100 a barrel 18 months ago. While the energy sector of the market is surely struggling with this drastic price decrease, the decline is great for consumers. You should be feeling the extra dollars saved at the pump bulging in your wallet. And according to Amherst Pierpont, a fixed-income service provider, for every penny drop in the price of gasoline, $1 billion is added to GDP.

Memories of 2008: Investors often anticipate an oncoming recession when there really isn’t one looming — and for investors today, that dire feeling could be exacerbated by the fact that the collapse of the financial markets in 2008 is still fresh on our minds. A key indicator of a recession would be declining employment and rising unemployment, and neither of those things is happening. Another indicator that we’re vulnerable to a large decline would be if the market had become euphoric in pricing. The S&P 500 today is trading at 15 times earnings, which is right in line with the 60-year average, and is not by any stretch euphoric.

Investing requires intestinal fortitude

As you’ve probably figured out, there isn’t a single reason why we have had such a rough start to the year; rather, it’s a combination of a variety of factors. While it should be reassuring to know that we’re not beset by extremely bleak news, it isn’t easy to watch the stock market slide downward or hear the hue and cry of television pundits. Investing requires intestinal fortitude. While we would all love to have another 2013, when the S&P 500 was up 30 percent, that’s behind us (for now), which is precisely why you and your financial adviser must have a plan in place to buckle down and ride out the bumpy times.

Jennifer Pagliara is a financial adviser with CapWealth Advisors, LLC, and a proud member of the millennial generation. Her column speaks to her peers and anyone else that wants to get ahead financially. For more informationr, www.capwealthadvisors.com.

Millennials prayer: Gimme Gimme Gimme patience to invest

How to protect yourself when shopping online

Fri, 15 Jan 2016 21:19:34 GMT

If you’re like most Americans, you’re spending less time shopping in actual stores and more time shopping on a glowing screen. It is certainly true at my house. We do so much of our shopping online that we had to designate an area in our garage for all of the empty cardboard boxes from almost daily deliveries to our home. As a working mom, I love being able to order anything from toothpaste to flower bulbs with just a click on a website. I also love being able to shop and compare online in order to get the best deal. A mere 10 years ago, I had yet to make my first online purchase.

A brief history of shopping

While this change in shopping habits in some ways seems radical, in other ways it really isn’t. Once upon a time in agrarian America, people produced their living essentials themselves. In the 18th and 19th centuries, general stores cropped up to serve remote, populated places. With the expansion of railroads, mail-order catalogs began to supply what self-reliance and local merchants could not. In the early 1900s, metropolitan cities began building grand downtown department stores that offered the swelling populations of urban dwellers a place to shop while they were in the city to work and do business. In the 1950s, the population shift to the suburbs began, giving rise to shopping malls. In their heyday, they were incredibly popular places to spend a day or an evening browsing through retail shops and department stores. Now shopping malls are becoming relics of the past and outdoor plazas are taking their place — themselves a throwback to the public squares and piazzas of old cities.

But the clearest, strongest trend is indeed online shopping. In the last 14 years, mall traffic has dropped by two-thirds. Just last week, Macy’s announced it would close about 40 underperforming stores as more and more consumers turn to the Internet. JCPenney and Sears have faced similar struggles in recent years. According to the National Retail Federation, 46 percent of holiday shopping — consisting of browsing and buying — was expected to be done online in 2015.

Shop safely online

Many consumers hesitate to make purchases online because of fear of credit-card fraud or uncertainty about the quality of the product or the legitimacy of the seller. Whether you’re an online-shopping veteran or someone who’s still skeptical about the technology, here are some tips from the Federal Trade Commission for increasing security and diminishing hassles when you purchase online.

1. Get the details.

When comparing costs of multiple items, be sure to factor shipping and handling into the total purchase price. Before you make the purchase, be sure you know exactly what you are buying. Words like “vintage” or “refurbished” might mean the product is used or not in mint condition. Be very careful of brand-name items at bargain-basement prices because they very well may be counterfeits. Also, if you don’t know the seller, do some research. Anyone can set up an online shop, so confirm their physical address and phone number for more legitimacy. When browsing a site, if you get a pop-up message asking for your personal financial information, don’t reply or click on the link. Companies on the up and up don’t ask for that information.

2. Pay by credit card.

The Fair Credit Billing Act protects you when your online purchase is made with a credit card. Under this law, you can dispute charges and even temporarily withhold payment while the creditor investigates the transaction. Do not send cash or money transfers under any circumstances. It may seem a little scary to give your credit-card information online, but it really is the smartest way.

3. Keep records.

Print or save records of your online transactions. Be sure to check your credit-card statement and be on the lookout for charges that you don’t recognize.

4. Protect your information.

Do not email anyone any of your financial information. Email is not a secure method of transmitting financial information like your Social Security number, credit card number or banking information. If you begin a transaction and are asked for this type of information, pick up the phone and call them. Make sure the retailer is legitimate before proceeding.

If you encounter a problem with an online transaction that you can’t resolve directly with the seller, you can file a complaint with:

The Federal Trade Commission at www.ftc.gov/complaint .
Your state attorney general, using contact information at www.naag.org .
Your county or state consumer protection agency — visit www.consumeraction.gov and look under “Where to file a complaint.”
The Better Business Bureau at www.bbb.org .

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How to make 2016 financial resolutions that stick

Fri, 08 Jan 2016 20:46:00 GMT

The new year — you know what that means. Resolutions. People flocking to the gym, creating the dreaded b-word (budget) and scouring the self-help section at Barnes & Noble. Our capacity for hope is amazing — and admirable.

One simple survey of Americans and their New Year’s resolutions has been incredibly revealing for me. The personal finance website GoBankingRates.com recently asked respondents about their 2016 resolutions and offered six possibilities (enjoy life to the fullest, live a healthier lifestyle, lose weight, save more and spend less, spend more time with family and friends, pay down debt) along with “none of the above.” Multiple choices were permitted.

Everyone wants to seize the day

Despite — and I would suggest perhaps because of — persistent economic woes facing our country, such as the lukewarm economic recovery, wage stagnation and mounting debt, the most popular resolution choices were “Enjoy life to the fullest” and “Live a healthier lifestyle.” The first was chosen by 45.7 percent of respondents, the second by 41.1 percent. The least popular of the six choices? The two related to finance.

First of all, who checks the box of something so dull as fiscal discipline, which is often about denying one’s urges, when there’s a box offering wild, unfettered, carpe-diem possibilities like “Enjoy life to the fullest”? Thank goodness for grounded, serious-minded realists such as you. Digging a little deeper into the survey responses, however, one discovers that if you add the finance-focused resolution responses together, you get almost 60 percent of respondents choosing one or both of these as their resolutions. I take this to mean that there are a lot of undercover realists out there: a dream tucked away in their hearts, but worry on their minds. The tension in our lives in 2016 is palpable.

Dreams versus reality

Being a millennial, I particularly sense the tension in this generation’s responses to the survey. We certainly want to enjoy life to the fullest and live a healthier lifestyle, but we actually chose these less than both baby boomers and seniors. Young millennials (ages 18–34) were the segment most concerned with making time with loved ones, and millennials overall were the most concerned with spending less and saving money. Even at a young age, and in many cases without homes and households to keep up, this generation, facing enormous college debt and bleak job prospects, knows the need to budget and save.

Pragmatic planning helps dreams grow

For all of you conflicted dreamer realists, regardless of your generation, here’s a few specific financial tips for the new year. Vague goals like “spend less, save more” just aren’t going to cut it. The pathway to real dreams is paved with precision and pragmatism.

Budget: In some ways, budgeting is the financial equivalent of that perennial weight-losing resolution. You must choose necessary spending (“good calories”) over unnecessary spending (“empty calories”). But it doesn’t have to be as painful as it once was. Apps like Mint.com and YouNeedABudget.com can make prioritizing much simpler.
(Student) debt: Like a budget, once you have a plan, it will much more manageable. First, get all the facts about your debt — how much you owe in total, your interest rate, your monthly payment and how long it will take you to pay off the debt. Then you need to create different scenarios. If you pay an extra $100/$200/$300 a month, how much faster will you be able to pay it down? How much interest will you save? Find what works for you and set the goal of reaching that amount to put toward paying down your debt each month.
Credit cards: If you know yourself, and know that you won’t be able to limit how much you spend on them, then tear them up. It’s easier to remove the temptation than let it get out of control. However, if you pay your cards off every month without penalties, then they can be a useful tool to get airline points or cash back.
Large purchase/event: This might be the year that you are buying a house, getting married or having a baby. In that case, it may be time to slash all but the most absolutely essential spending. Try exporting your bank/credit card statements to Excel and sorting your purchases from the largest to the smallest. Review all purchases, big and small, to determine what can be given up. You’ll be amazed at how the monthly savings will add up.

How to get financially fit in the new year

Fri, 01 Jan 2016 21:16:39 GMT

If you want to get your fiscal house in order, a great first step could be a first-of-the-year resolution.

According to the annual New Year Financial Resolutions Study from Fidelity Investments, released in December, people who made financial resolutions at the beginning of 2015 feel much more positively about the coming year than those who didn’t make resolutions. They believed they’d be better off financially in 2016 (51 percent vs. 38 percent), more debt-free (45 percent vs. 33 percent), more financially secure (43 percent vs. 38 percent), more likely to increase their retirement savings (43 percent vs. 22 percent), and that they’d lessen long-term health care costs by improving their physical health (70 percent vs. 57 percent).

Now that I’ve convinced you that making financial resolutions is a good idea, I’ve also got some ideas on what resolutions to make.

Save a specific amount of money each month. “Save more” is vague; $1 a month satisfies this halfhearted dictate. Set a goal for how much you want to save over the course of the year and divide it by 12. That’s your number.
Make your savings automatic. Have a percentage of your paycheck directly deposited into a separate account, such as a retirement account [a 401(k) or 520 College Savings Plan, for example] or an emergency fund (see below). Where you put it depends on your specific needs and goals. The separate account ensures it’s not easily accessible for spending, like a checking account, and with direct or automatic deposit, soon you won’t even miss the money.
Pay off debt. Again, have a specific dollar-amount goal and resolve to pay off part of it each month. Make your number challenging and be disciplined about it, but don’t be unrealistic, either. If your debt is unmanageable and your credit score is at risk, try to negotiate better terms or work with a credit agency to formulate a plan. Another word to the wise: The recent Fed hike in interest rates is going to make debt more expensive. Get serious about paying it off.
Spend less. You guessed it — once more, be specific about how much you want to cut from your weekly or monthly spending. You and your family can give up something nonessential, such as eating out or going to the movies. But you may be able to realize savings that are “hidden” from view, such as refinancing your mortgage if your rate is higher than current rates (which are rising again) or getting insurance quotes from other providers.
Start/replenish your emergency fund. It’s your insulation or buffer against unforeseen financial hits, such as HVAC unit replacements, broken-down refrigerators and lost jobs. Try to build it up to three to six months’ worth of living expenses.
Review your insurance coverage. Major life events — like the birth of a baby, marriage or divorce — necessitate a review of your insurance plans and beneficiaries. If you experienced such an event in 2015, look your policies over and ensure you have appropriate, adequate coverage. The more dependents you have, the more life insurance you’ll need should something happen to you. At least twice your salary is a good place to start. If you’re recently married or divorced, you’ll probably want to change the beneficiaries of your insurance and retirement plans.
Create a budget. Over the course of your financial life, this could be the most important resolution you’ll ever make. Every important effort — particularly if it involves multiple people, such as a family — needs a plan of execution. This is yours for finances. Analyze your living expenses, decide what’s critical and what’s not, determine other needs such as retirement and emergency fund savings, and draft a reasonable budget. Use an online resource such as Mint.com or Youneedabudget.com to help you track and manage your budget. Involve your entire family so everyone has skin in the game.
Stick to it. I said before that creating a budget was the most important resolution. But that one hinges on this one. Those figures you see (or don’t see) in your account — that’s real money. And like it or not, real money paves the way to peace of mind and the attainment of dreams.
Stay optimistic. Consider it a work in progress and don’t be afraid to amend it as you go. The more downhearted you get, the likelier you’ll be to fold altogether. So keep your chin up, congratulate yourself on successes, learn from mistakes and keep at it.
Invest in yourself. Educate yourself about financing and investing. Invest in good books on the subject and maybe even a financial adviser. The payoff could be astronomical.

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Generous millennials donate time, not money

Fri, 25 Dec 2015 20:42:57 GMT

With the holiday season here, many of us are spending time with family and friends and reflecting on the things that we’re grateful for. This naturally brings many of us — including millennials, as you may be surprised to hear — to think about the less fortunate and what we can do to help them.

People frequently try to stereotype my generation. We’re lazy, entitled, apathetic, hopelessly tuned out and excessively plugged into our digital devices. But the truth is, millennials are very much engaged in lending a helping hand to others. Study after study has shown that, rather than making monetary donations, millennials are more likely to donate their time, skills and effort to causes that are important to them.

Passion for volunteering

The majority of charitable giving comes from baby boomers, which is no surprise, given the struggles with college debt and job prospects that millennials face. But instead of pulling out their checkbooks, millennials donate their time to charitable causes that they’re passionate about, according to a recent study by insurer Country Financial.

Befitting a generation that seeks connection (through Facebooking, tweeting, Instagramming, etc.), 97 percent of millennials would rather give skills than money to a cause they support, according to the 2014 Millennial Impact Report by the Achieve research and creative agency and sponsored by the Case Foundation.

Moreover, 78 percent of them prefer working in groups for a cause, rather than alone. Their favorite charities are those that affect a family member or a friend or have strong community ties. Today’s young people volunteer more than their parents did at their age: 20 percent of adults under 30 volunteered in 2013, up from 14 percent in 1989, according to census data analyzed last year by the Corporation for National and Community Service. And it’s likely that millennials’ volunteering rate will increase — past generations have peaked in their 30s and 40s, when as parents they gave time to schools, youth groups or community work.

As 22-year-old fourth-grade teacher Jessica King told The Huffington Post earlier this month, “Checks can be written and buttons can be pressed online, but giving a week’s worth of food to someone that you packaged up yourself, that is a different kind of human connection.”

New approach for charities

So what does this mean for charities? They will need to alter the way that they reach out to millennials by using technology — websites, social media and smartphone apps — and making it clear that volunteer hours are as welcome as monetary donations. As millennials age and accumulate more wealth, they’ll give more green stuff too, but they’ll probably not outgrow their belief that time, skills and effort are equally or more valuable.

Tax tips for giving

For millennials who do elect to give money to charity, this year-end generosity may pay off at tax time. Here are the basics you need to know:

Donations must be made by the end of the tax year for which you want to claim a tax deduction, so make sure your check is dated and postmarked Dec. 31 or earlier, your credit card is charged by year’s end and any cash gifts are recorded by the charity by Dec. 31.
Do your due diligence, because only contributions to IRS-qualified charities are deductible. Check out the charity through GuideStar.org , CharityNavigator.org or the IRS’s Exempt Organizations Select Check tool.
Keep proof of your giving in the form of bank statements, canceled checks and credit card receipts. For gifts of cash or real property of $250 or more, keep the acknowledgement letter that the charity will provide showing the date and value of your donation. For non-cash gifts totaling more than $500 for the year, you’ll need to complete and attach IRS Form 8283 to your tax return.
You must itemize expenses on a Schedule A form to deduct charitable donations. Otherwise, you’ll be claiming the standard deduction and will get no credit for your charitable giving.
The amount you can deduct is limited to 20 percent, 30 percent or 50 percent of your adjusted gross income, depending on what you donated and the type of charity you gave it to. Gifts to most public charities will qualify for the 50 percent limit. For private charity giving, the rules get complicated, so you should talk to your financial adviser or tax professional about these gifts.

Jennifer Pagliara is a financial adviser with CapWealth Advisors, LLC, and a proud member of the millennial generation. Her column speaks to her peers and anyone else who wants to get ahead financially. For more information about Jennifer, visit www.capwealthadvisors.com .

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Has your portfolio been naughty or nice this year?

Thu, 17 Dec 2015 21:02:27 GMT

When it comes to the holidays, it’s better to give than to receive. But when it comes to investing, it’s better to receive than to give. That’s the whole point, after all. You invest your money with the aim of generating future returns — you certainly hope you’re not giving it away!

Now that we’ve cleared that up, what kind of returns should an investor expect? The end of the year is quickly approaching — how will you assess your investment performance when those year-end statements arrive?

Determining your return

If you’ve tried to calculate your own investment performance, you know how difficult the task is to do manually. Investment portfolios experience contributions, withdrawals, dividend payments that may or may not be reinvested, buys, sells, etc. — the numbers you’re using are a moving target. Determining the performance of your portfolio with pencil and paper can be more maddening than trying to help your teenager with their calculus homework.

Most investors don’t need to reach for their calculator to determine the return on their investment account because the statement often provides the return figure (however, many firms make it difficult to find). But what does that performance number mean to you and your family? How do you know if your performance is keeping up with everyone else? If you earned 6 percent this year, is that good?

Performance is always relative

Performance numbers don’t have a lot of meaning without a benchmark index — a group of investments that are similar to yours — as a reference point or measuring stick with which to compare your performance. Your 6 percent return might feel good, but if the benchmark index was up 16 percent, you underperformed the market and probably didn’t keep up with everyone else. Performance is always relative to the benchmark indexes and to the amount of risk you take.

In investing, risk and return go hand in hand. The more risk you take as an investor, the greater the return could be. How much return would you need to invest in swamp land in south Florida? The potential return would need to be huge to compensate you for the risk you are taking by buying swamp land and all its challenges to development. If your portfolio is very conservatively invested, you should not expect to outperform the market because you haven’t taken as much risk as the market. This makes finding a relative benchmark index somewhat difficult, but not impossible. As a general rule, if you’re invested in stocks, you can measure your returns against the S&P 500 Index, which is widely regarded as the broadest measure of the entire stock market. If your portfolio is in bonds, the broad measure of the bond market is the Barclays Capital U.S. Government/Credit Bond Index.

Remember, each person’s investment objectives are based on age, health, income, lifestyle needs and other unique factors and therefore aren’t the same as other people’s. So your returns may very well be designed to be lower because you’re intentionally taking less risk.

The right level of risk

As of Dec. 16, the performances of the S&P 500 and Barclays Capital U.S. Government/Credit Bond Index in 2015 are positive 0.69 percent and positive 0.05 percent, respectively. Unless Santa delivers a large market rally, investors should be expecting tepid returns for 2015 when they open their year-end statements. After you’ve reviewed your year-end statement, if you’re concerned that your performance over the last few years just isn’t sufficient to accomplish your financial goals and objectives over the long term, make an appointment with your financial adviser to discuss the level of risk you are taking. It might be that you are not taking enough risk to accomplish your goals.

If your portfolio is constructed with the right level of risk, and underperformance is more of a pattern than an anomaly this year, it might be time to think about changing your investment strategy, your financial adviser or both.

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A season to give, receive — and talk inheritance

Fri, 11 Dec 2015 20:40:20 GMT

Our parents give us so much. They give us love and support, a phrase not less true for being cliché. But it’s much more than that.

It starts with the essentials — the basic building blocks of life, in fact — of DNA makeup, one-half from mom and one-half from dad, and of food and shelter. They give us a home, an education, advice (whether we want it or not!), and still the parental gifts continue.

Behaviorally, they give us personality traits — either learned or genetically inherited — and they help shape our social conditioning, moral codes and even metaphysical beliefs. From genome to God — that’s the possible gamut of what you’ve received from your parents.

How strange, then, that it’s so taboo for parents to talk to their children about what they might materially give them one day: potentially an inheritance. As families flock together from all corners of the country this holiday season, you might want to consider having a conservation with your parents about what they plan to do with their assets.

An open dialogue about assets, wishes

Many of you might be thinking, is she crazy? I’m not asking my parents if they’re leaving me anything. And you’re absolutely right. I’m not suggesting that you outright ask your parents, “How much money am I getting?” However, it’s important that you have an open dialogue with your family about your parents’ wishes and how they might possibly impact you. According to global investment management firm Federated Investors, millennials stand to inherit $30 trillion dollars. That kind of money doesn’t just change lives, it could change the course of history. Talking about inheritance now could save you and your parents a bundle of frustration, uncertainty, surprises and wasted time one day.

Yes, it’s an awkward subject

First, let’s look at the reasons, all very reasonable, why parents don’t talk about inheritance:

They don’t want to confront the fact that they will die one day.
Money is generally an uncomfortable topic.
They don’t think their children are financially savvy enough to handle the news responsibly — and they also don’t want their children to squander what they’ve worked so hard for.
They don’t want the knowledge of significant financial assets to adversely affect their children’s work ethic and motivation.
Finally, they don’t want to cause strife between siblings.

Approach it seriously, respectfully

Here are some tips on how to tactfully approach this sensitive subject with your parents:

Don’t go into the conversation with any expectations. You might be surprised by what your family has planned. There is a real possibility that your parents plan to spend their life savings during retirement and not leave you (and/or your siblings) anything — and that’s their prerogative!
Acknowledge that this might be an uncomfortable conversation, but one that you feel is important for both of you.
Don’t talk specifics. Explain that you’re less concerned about the amount you stand to inherit and more interested in knowing how to begin your own long-term financial planning.
A good segue into this discussion is to ask them if they have a strategy in place to carry out their wishes after they pass away. If your parents see that you’re genuinely interested in planning your own finances, they may not only share information about their will, power of attorney, insurance policies and estate-planning documents, but they may have suggestions for what you should be doing!
Your conversation with them doesn’t have to be a formal sit-down. It can happen naturally when you feel that the timing is right. However, if you have siblings, you may want to include them. If it will help convey to your parents that you’re doing this responsibly and with the right intentions, then have a more planned-out conversation.

With this conversation, it’s important to demonstrate that you’re serious about their financial goals and your own. But above all, show your gratitude and your respect for all that your parents have done for you — money being the least of these.

Reviewing budget can avoid January financial hangover

Fri, 04 Dec 2015 21:00:48 GMT

The end of 2015 is coming at us fast. But there’s still enough time to blow the whole year’s budget in less than four weeks, so it’s a good idea to get a bearing on your finances now before waking up Jan. 1 disoriented, disheveled and dead broke. I can almost hear a collective sigh at the thought of trying to find the time during the holiday season to review your family’s finances. But allocating some time before year-end could pay off big in avoiding a dreadful New Year’s financial hangover.

Review retirement plan contributions

Contributions to 401(k) plans and Individual Retirement Accounts (IRAs) are tax-deferred, meaning you do not pay income tax on those contributed dollars until you withdraw the funds. Have you contributed as much as you can this year to your 401(k)? Do you need to increase your contributions next year? If your employer offers to match a portion of your 401(k) contributions, make sure you are contributing enough to get that match. Those are free dollars into your retirement account, a wonderful perk. Don’t forget about spousal IRAs for stay-at-home spouses. Although you have until April 15 to make contributions to your IRA for the 2015 tax year, now is a good time to establish a strategy for making these contributions and reducing your tax liability for this year.

How’s your emergency fund?

Is your emergency fund in its own state of crisis at year-end? Did you dip into it this year to purchase a new roof, a special vacation or Christmas gifts? You should have about six months of living expenses available at all times for unexpected financial hits. If some of those surprises happened this year and your fund is low, find ways to build it back up — perhaps through a revised budget.

Learn from your mistakes

So maybe 2015’s budget isn’t going according to plan. Look back and find where the budget fell short so you resolve those items in your 2016 budget. And don’t think of your budget as something that restricts you. Rather, view it as something that gives you control, choices and a sense of calm regarding your money and your lifestyle.

There are three primary reasons that budgets fail: 1) they are too strict (be sure to add a monthly cushion amount to your budget next year to account for the expenses that can’t be planned); 2) they don’t allow for high spending months (while some expenses don’t change from month to month, some months will have extra expenses, like December, so review every month of this year to pinpoint those months in your budget); and 3) tracking spending is exhausting (find a method that works for you, even if it is simply a quarterly recap).

Resolve to keep your budget moving and learn from setbacks. As with many of life’s endeavors, practice makes perfect. A great budgeting resource can be found at www.mint.com .

Put your goals in writing

Whatever your goals might be, you are more likely to achieve them if you write them down. Begin 2016 by writing a “financial blueprint” that outlines short-term (one year) and long-term goals (beyond one year). Detail what you plan to accomplish during that time, what resources you will need to succeed and how you can change aspects of your lifestyle to achieve these financial goals. Remember to be realistic about your goals and allow a little wiggle room from time to time. Check in on your list frequently to watch yourself progress!

Remember that if 2015 hasn’t been the financial success you wanted, don’t dwell on it, but resolve to move forward. Reflect on your accomplishments this year and continue to search for financial and personal satisfaction in the year to come. If you need help, talk to a financial adviser.

Phoebe Venable, chartered financial analyst, is president and COO of CapWealth Advisors, LLC. Her column on women, families and building wealth appears every other Saturday in The Tennessean.

Millennial holiday shoppers mix tech, traditions

Fri, 27 Nov 2015 20:37:59 GMT

Millennials (of which I am one) view love and marriage differently. We view home and habitation differently. We view work and socializing differently. It should come as no surprise, then, that we view the extended Thanksgiving weekend mega-shopping extravaganza (including Turkey Day, Black Friday, Small Business Saturday and Cyber Monday) differently, right?

Yes and no.

Millennials shop till they drop

The National Retail Federation (NRF) predicts from its annual survey that 135.8 million Americans will shop from Thanksgiving Day to Sunday, Nov. 29, and that 183.8 million will do so on Monday, Nov. 30. Combined, those numbers mean that 58.7 percent of the general population plan to shop. As for the 18- to 34-year-old generation known as millennials, the number is just over 77 percent. That’s right, we aren’t bucking the system on this one in the way you may have expected. We’ll be shopping like everyone else — only in a greater per-capita fashion!

As you probably would expect, most millennials who do choose to shop on Cyber Monday will be doing it online — nearly 90 percent, according to NRF. Even when millennials are shopping old-school over this holiday weekend — at brick-and-mortar stores or IRL (“in real life,” an actual marketing and consumer insights acronym) — they’ll be relying on their faithful smartphones. About 88 percent will use them to compare prices, find deals, research merchandise, find stores and post photos and videos of their shopping experiences to social networks, according to the latest Retale shopping survey.

As you’ve no doubt noticed about millennials and smartphones: We don’t leave home without them. Like, ever.

Online and ‘in real life’

If the fact that millennials are enthusiastic “real life” shoppers comes as a surprise given their proclivity for the alternate reality of the Internet, in other ways it fits them to a T. They want experiences, and shopping can satisfy that desire nicely. Pam Goodfellow, principal analyst at Prosper Insights and Analytics, the firm that conducted the NRF study, recently explained to Forbes: “For these adults, it’s less about making room for pumpkin pie and more about going out with friends, checking out the deals through their mobile phones and experiencing retailers’ night owl hours, and perhaps making a dent in their shopping lists.”

Surveying two millennials

My own quick survey of two millennial work colleagues, assistant director of client services Morgan Murphy-Corcoran and portfolio analyst Mike Sherman, bears much of this out.

Murphy-Corcoran will shop with her mom and sister on Black Friday because “it’s a tradition” and “a social experience.” She’ll also shop online on Cyber Monday. Sticking to her principles, also a trademark of her generation, she boycotts shopping on Thanksgiving Day “because I don’t think store employees should have to work that day.”
Sherman will probably shop every day of the extended weekend except Thanksgiving Day — but all of it online. It’s his way to “avoid the chaos” in favor of “doing things like eating turkey, spending time with family and our dogs, being outdoors, and other hobbies.”
Both value the consumer’s empowerment through technology. “I shop online for convenience, price and speed,” Sherman says. “I feel much more knowledgeable on how to navigate deals online quickly versus brick-and-mortar.” Moreover, he doesn’t think these sales days really offer the best deals anymore. There are deals to be had all week long and he’ll buy only “if I feel like it’s a solid discount for a quality item.” Murphy-Corcoran says “shopping online allows me to more easily compare the prices of similar items while also getting a greater selection of products.” In the store, she’ll scan barcodes of some items with a smartphone app to find more information about them — such as where she can purchase them more cheaply.

Surprising findings

Two final surprises. For those who believe millennials are financially irresponsible and apathetic about their personal finances, the millennial marketing and research firm Ypulse finds that 65 percent of millennials have a holiday shopping budget. For those who believe millennials are selfish, self-absorbed and care more about their social networks than their familial ones, Ypulse finds that the primary gift-giving recipient for 84 percent of millennials is dear old Mom!

For the record, I wasn’t surprised on either count.

Jennifer Pagliara is a financial adviser with CapWealth Advisors, LLC, and a member of the millennial generation.

Articles by Jennifer Pagliara

Millennials putting their money where their morals are

Fri, 13 Nov 2015 20:35:43 GMT

Millennials have lived through the longest war in United States history, as well as the worst recession since the Great Depression. Coming of age amid such trying, tragic times, millennials are motivated differently than other generations. This unlucky generation wants to feel like they are a part of something that is making a difference — for the common good, for happiness, for hopefulness, for un-unluckiness — in the world. So, with a cohort so acutely concerned with how they are impacting the world, how does that impact their advisers and their investment choices?

Setting principled parameters

There are many factors that a financial adviser considers when building a portfolio and financial plan for his or her client. Some of these constraints are: time horizon, liquidity, legal and regulatory factors, tax concerns and the client’s unique circumstances. Under this last guideline, it is common for clients, especially millennials, to give their financial adviser parameters for what they feel comfortable investing in or what they don’t.

Socially Responsible Investing (SRI) is essentially an investing strategy that considers environmental, social and corporate governance (ESG) criteria to not only create competitive returns but provide positive societal impact. When a client approaches an adviser with highly attuned social or ethical principles, a good financial adviser will be prepared with SRI strategies that satisfy those dictates of conscience.

The evolution of conscientious investing

SRI is not a new concept. However, it has evolved drastically in the last decade. It was common for baby boomers and Generation X’ers to not allow their financial advisers to invest in companies that dealt with alcohol or tobacco — often called “sin” stocks. But with advancements in technology and a new investing generation that has been through the wringer, SRI has really evolved.

Today, SRI is known by many names: “sustainable,” “socially conscious,” “ethical,” “green” or “impact” investing. Investors not only care what products or services a company provides, they also care about the environmental and social impact that company has on the world — where and how it sources its materials, the byproducts of production and its effects upon consumers. Is the company and its products or services tied to poverty? To obesity? To the environment? According to the Forum for Sustainable and Responsible Investment, SRI investing grew 929 percent, a 13.1 percent compounded annual growth rate, between 1995 and 2014. And in the last few years, there has been a significant increase in the U.S. of SRI assets, growing from $3.74 trillion in 2012 to $6.57 trillion in 2014 in the U.S. and $13.3 trillion to $21.4 trillion during the same time period globally. Clearly, millennials and other socially aware investors are putting their money where their morals are.

Good performance not a sure thing

Today there are mutual funds and electronically traded funds (ETFs) that are solely dedicated to socially responsible investing — more than 100 sustainable mutual funds in the United States alone. One of the first was the MSCI KLD 400 Social Index, a capitalization-weighted index of 400 U.S. securities that excludes companies whose products have a negative social or environmental impact. Originally called the Domini 400 Social Index, it was launched in 1990 by stockbroker Amy Domini, who decided to listen to clients’ qualms and compunctions, including one avid birdwatcher who had inherited stock in a paper company that used a chemical in its manufacturing that was harmful to birds. According to MarketWatch.com , as of May of this year, the MSCI KLKD 400 has enjoyed an average annual total return of 10.46 percent compared with the S&P 500’s 9.93 percent!

Despite that, please remember that investing guided by lofty ideals won’t necessarily bring lofty returns. Like any investment, profit in SRI isn’t guaranteed. But for many millennials, it’s not about how much money they’re making, but the difference they hope to make.

Jennifer Pagliara is a financial adviser with CapWealth Advisors, LLC, and a proud member of the millennial generation. Her column, which appears every other Saturday in The Tennessean, speaks to her peers and anyone else that wants to get ahead financially.

Provable Integrity®

Interest rate hike is coming — here’s the good and bad

Fri, 06 Nov 2015 20:43:05 GMT

When will interest rates go up? This is the burning question that investors and savers have been asking for years now — given that it’s been nearly a decade since the federal funds rate (the interest rate at which banks and credit unions lend money to one another) increased. Speculation has gotten more and more heated throughout the year as Janet Yellen, chair of the Board of Governors of the Federal Reserve System, has made stronger and stronger statements about the improving health of the U.S. economy. Back in July, Yellen said, “Based on my outlook, I expect that it will be appropriate at some point later this year to raise the federal funds rate and thus begin normalizing monetary policy.” Just this week, Yellen said an interest rate hike next month is a “live possibility” if the economy stays on track.

The good and bad of cheap money

All year, market participants have vacillated over their expectations — and their preferences — regarding the rate hike. After all, rates have basically been held at zero since late 2008, when the bottom fell out of the global financial system. Since then, money has been cheap, which is good for borrowers. Individuals, companies and governments have been able to save money by refinancing their debt at significantly lower rates. So why would anyone be anxious to see rates go up?

Cheap money isn’t good for everyone. It is definitely not good for savers, who have seen the rate on their money market funds and certificates of deposit stay below the rate of inflation since 2008. Interest rates on bonds are at historical lows and yields have been trending down since 1981. Instead of seeing their money grow, those who have invested in these vehicles have seen their money shrink in its buying power.

The Federal Reserve met during the last week of October and once again decided to leave rates unchanged. It will meet again on Dec. 15 and 16. Certainly all investors will be anxiously awaiting the Fed’s decision on interest rates.

Federal Reserve’s control of rates

There are actually three rates in the U.S. that drive virtually everything else, from mortgage rates to bond returns to the interest rate on credit cards. Of these three, Janet Yellen and the Federal Reserve Board only control two: the Federal Funds Rate and the Discount Rate. The third rate, called the Prime Rate, is a rate that banks give their best customers on borrowing money. The Prime Rate can vary slightly from bank to bank. The Prime Rate, while not under the control of the Federal Reserve, is the one that is most directly tied to the rate you pay on a car loan, personal loan or credit card loan.

The Federal Funds Rate, also known as the Overnight Rate, is the rate that banks lend their money deposited at the Federal Reserve to each other. By letting banks lend to each other, the Fed provides an opportunity to banks with a surplus to maximize their return on their deposits.

The Federal Discount Rate is the rate at which banks can borrow directly from the Federal Reserve. This rate is typically higher that the Federal Funds Rate to encourage banks to borrow from each other before they borrow from the Federal Reserve.

What happens if rates go up?

When our economy is in trouble, the Federal Reserve can step in and help by cutting rates. Lower rates, at least in theory, encourage spending and increase aggregate demand. Borrowing becomes cheaper (as mentioned above), the incentive to save is reduced, mortgage payments are lowered and owners have more disposable income, home prices rise because homebuying becomes more attractive and the exchange rate falls, making exports more competitive and imports more expensive.

Cutting rates is exactly what the Fed started doing in 2007. It cut rates and cut rates until the Federal Funds Rate was near zero in December 2008, the beginning of the Great Recession. But once the economy improves, the Fed will raise rates such that it is prepared for future hard times. There is very little doubt that the Fed will raise rates. The unanswered question is when.

When the Fed does raise rates, investors should not be expecting an immediate return to normal rates. The normal pace is to raise rates by 0.25 percent. Rates are so low that it could take a couple years to get rates back to historical norms. Investors need to be aware that the Fed will eventually take action, and once it begins this process, the media will give this event a lot of attention. Wise investors will ignore the sensational headlines and exaggerated reactions from financial pundits and instead talk to their financial advisers about how a rising interest rate environment might impact their investment portfolio.

Phoebe Venable, chartered financial analyst, is president and COO of CapWealth Advisors LLC.

CapWealth Founder Featured in December Lifestyles Pubs

American dream of homeownership eludes millennials

Fri, 30 Oct 2015 20:28:42 GMT

Historically, owning a home was a foundation of the American dream. It was evidence that an American had achieved financial success, that he or she had “made it.” But today, U.S. homeownership has reached a near 50-year low, renting an almost 30-year high, and the millennial generation — the largest cohort of the American workforce — is either unwilling or unable to put down roots. So it makes us wonder: Is buying a home still a linchpin of the American dream?

To buy or not to buy

According to a report from the Council of Economic Advisers to the White house late last year, millennial homeownership has fallen to its lowest rate in recent history. Instead, millennials are renting, which itself could be an obstacle to homeownership. According to an August report by Zillow, first-time homebuyers (whose median age has been somewhere between 29 and 33.3 for more than 40 years) are waiting a record six years to make the move from renting to owning. Says Zillow chief economist Svenja Gudell, it’s hard to “save for a down payment … while the rental market is so unaffordable all over the country.”

Other millennials have seen what their parents went through in the 2007 housing bubble collapse. Still others are currently shouldering most of the nation’s $1 trillion student loan debt or are facing 7 percent unemployment, declining credit scores and lower salaries. Whatever the case, it’s clear that many millennials aren’t ready for homeownership.

Financially and culturally unique

It could be that homeownership for millennials, even when financially feasible, isn’t their dream at all. Renting is conducive to millennials’ proclivity to travel and experience the world. The upkeep is easier, and they can often get out of their lease with only one month’s notice. Moreover, millennials are delaying marriage (which, of course, could also be a financial decision), and that may mean they’re also purposely delaying homeownership. The low rate of millennial homeownership could be as much a cultural as a financial phenomenon.

Turning tide

In March 2015, Bloomberg reported that the increases in rental prices aren’t slowing homeownership, as Zillow believes, but are actually giving millennials “a nudge toward homeownership.” And Zillow estimates that 5.2 million renters are going to buy a home in 2015, up from 2014’s 4.2 million. According to a March study by the National Association of Realtors, millennials represented 32 percent of all homebuyers, followed closely by Generation X at 27 percent. And the expectation is that millennials will represent an even bigger piece of all homebuyers in 2015.

Are you ready for homeownership?

If you decide it’s time to buy a home, here are some tips to help you evaluate if you’re really ready:

Preapproval: A lender can give you a preliminary determination of what loan amount you would qualify for under their guidelines based on your income and credit information. This information should help give you an approximate price range that you should look at in your search for a home.
Upfront costs: To ensure that you do not have to pay private mortgage insurance (PMI), you should aim to have a 20 percent down payment.
Home expenses: As a general rule, home expenses should not exceed 28 percent of your gross monthly income. Don’t forget about all the extra expenditures that come along with owning a home, like property taxes, insurance and ongoing maintenance/repairs.
Interest rates: Rates are still at historical lows. However, that will soon change in anticipation of the Federal Reserve raising rates in the near future. This might be the time to buy in order to take advantage of paying less interest.

Until millennials become more optimistic about their financial future, many won’t be convinced to buy homes. And until they buy homes, for them the American dream of homeownership is in suspended animation.

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Trust and transparency are essential to both markets and financial advisers

Fri, 23 Oct 2015 20:32:53 GMT

Two weeks ago, I had the pleasure of representing my firm, CapWealth Advisors, and our local Nashville Society of Chartered Financial Analysts in Hong Kong at the CFA Institute’s Global Leadership Conference. Nashville is one of 135 member societies of the CFA Institute located in 60 countries around the world. CFA Institute is a nonprofit investment education and membership organization. Since its founding in 1947, it has become the largest worldwide association of investment professionals.

Markets function best on the up and up

Many people think the CFA Institute is simply the organization that administers the CFA exams and awards credentials to successful candidates. But the organization is much more. The local CFA societies partner with the CFA Institute to advance a shared mission — to lead the investment profession globally by promoting the highest standards of ethics, education and professional excellence for the ultimate benefit of society. It’s a lofty goal but it’s so important for investors. There must be trust, professional competence and transparency in the world of finance. Another way of putting it: investors’ interests must come first. It’s both ethically and pragmatically right to do so because, under these conditions, markets function at their best and economies grow.

CFA Institute works to shape public policy and promote industry practices that do exactly that, putting investors’ interests first. The organization works with the Securities Exchange Commission (SEC) and other regulatory and legislative bodies on topics such as fiduciary duty, financial reporting standards, corporate governance, market microstructure, systemic risk and shadow banking. With perspectives from around the globe, the CFA Institute can be the voice for market integrity as opposed to commercial interest.

High-frequency trading tracked

High-frequency trading is a hot topic these days. This type of trading relies on powerful computers, big-bandwidth data connections and algorithms to buy and/or sell large orders at incredibly high speeds. Among the concerns: What kind of impact are these massive computerized trades having on the overall market? Do these traders have a market advantage in their access to proprietary data feeds? Are they engaging in abusive trading strategies?

High-frequency trading may have contributed to the Flash Crash in May 2010 and the recent wild Aug. 24 trading session that saw the Dow Jones Industrial Average open down 1,000 points, come back into positive territory by mid-day and then close down 588 points. The CFA Institute tracks the evolution of high-frequency trading in capital markets globally, educates the public on the impacts on market quality and integrity, and works with regulators and industry participants on public policy and regulatory initiatives to sanction this and other forms of manipulation and fraud. In short, the CFA Institute is the voice of all investors about the impact of high-frequency trading on the fairness of our markets.

Demand integrity in your adviser

I went half way around the world to meet a diverse array of my counterparts, to share experiences and viewpoints with them, and to learn from speakers and workshops. I also went halfway around the world to reconfirm something I already knew: that the CFA Institute is doing important work for charter holders (those who have earned the CFA designation) like myself as well as every investor.

Is your financial adviser a CFA charter holder? No credential is as widely regarded in the global financial industry for its rigorous focus on current investment knowledge, analytical skill and ethical standards as the Chartered Financial Analyst designation. That’s certainly not to say that you can’t get proven expertise and ethics from an adviser without the charter — there are a great many exceptional advisers without it. But my suggestion is that you put as much emphasis on seeing (or searching for) this kind of integrity in your adviser as the CFA does in its charter holders.

Phoebe Venable, chartered financial analyst, is president and COO of CapWealth Advisors LLC.

‘Gig economy’ is convenient, but is it fair?

Fri, 16 Oct 2015 20:26:22 GMT

The new gig economy — it’s a big deal, but is it real?

The gig economy, the sharing economy, the collaborative economy, the peer economy. You’ve probably heard or read the names, whether you know what they actually mean or not. What you do know is that it’s further proof that, armed with dazzling technology, we’re all living in the future.

Technology creates new markets

Actually, it’s not that complicated. They’re all terms used for a new socioeconomic ecosystem of sharing of human and physical resources made possible by the Internet, our digital devices and apps. Basically, we can get the things we want (a taxi ride, a grocery delivery or an inexpensive one-night stay in a spare bedroom) or offer services ourselves (as a taxi driver, a grocery deliverer or a spare bedroom renter) with little more than a smartphone as the go-between. Companies such as Uber, Lyft, Airbnb and TaskRabbit have taken off, with Uber completing a funding round this past summer that saw the 5-year-old company reach nearly $51 billion in valuation, surpassing Facebook’s record.

It’s also not that revolutionary. The gig economy allows for part-time, multiple and piecemeal jobs, which people have been doing for centuries. Technology just creates mindboggling new ways to monetize labor and goods.

Consumer freedom or wage slavery?

There’s quite a big fuss brewing over this new gig economy. On one side, you’ve got those who say that the gig economy offers providers independence, flexibility and more opportunity to earn a living. On the other, you have detractors who say these services are a bad deal for providers. Because they’re not full-time employees, gig economy workers aren’t entitled to employee-sponsored health insurance and retirement plans, unemployment insurance and disability benefits.

As Stanley Aronowitz, director of the Center for the Study of Culture, Technology and Work at the Graduate Center of the City University of New York, told The New York Times last year, “It might as well be called wage slavery, in which all the cards are held, mediated by technology, by the employer, whether it is the intermediary company or the customer.” In the same article, labor economist Guy Standing said a new labor class is emerging, one dependent upon precarious work and wages. Instead of the proletariat, it’s the “precariat.”

Lawsuits could affect gig economy

The fuss has gotten nasty — lawsuit nasty, even. Last month a California judge allowed some Uber drivers — considered contractors by the ride-hailing service — to proceed with a class-action lawsuit against the employer for traditional employee rights. The case will likely go before a jury next year and could drastically affect the gig economy. Last year, California FedEx drivers won a case that ruled their independent contractor status a misclassification that allowed FedEx to take advantage of them.

No one, by the way, doubts that the gig economy is great for consumers. With greater choice, and convenience at oftentimes lower prices, what’s not to like? The popularity, coupled with the gig economy service’s ability to sidestep payroll, benefits and other costly overhead, have made venture capital firms very willing to back the gig economy. TaskRabbit has raised tens of millions from investors, Lyft hundreds of millions and Uber billions.

The gig economy is even presidential-campaign material. In July, Hillary Clinton expressed the downside of an informal workforce in July in her economic vision speech. You know a thing has arrived when it’s getting debated by White House aspirants.

The gig economy is a big idea, there’s no question. But is it a reality — are we living in the future or, in this case, is the future still in the future?

It’s big, but is it real?

A few months ago, The Wall Street Journal published an article called “Proof of a ‘Gig Economy’ Revolution Is Hard to Find.” The writers point to official government data — which relies on surveying workers and employers as well as the number of people paying into unemployment — that shows those holding multiple jobs or classifying themselves as self-employed are down versus 10 and even 20 years ago. Others such as Harvard economist Larry Katz and Princeton economist Alan Krueger say current measures of self-employment and multiple job-holding are missing key evidence, such as the increase in 1099 and Schedule C filings throughout the 2000s. The first is used by independent contractors and the second for reporting profits and losses in home businesses.

I, for one, would like to know: Does the gig economy offer worthwhile job opportunities today to my generation, the millennials? Does it provide the answer to our quandaries about work-life balance? Is it how we’ll all work in the future? More reliable data would help. But more than anything, we’ll have to wait and see.

Jennifer Pagliara is a financial adviser with CapWealth Advisors LLC and a proud member of the millennial generation.

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Tennessee’s stealth income tax needs to go

Fri, 09 Oct 2015 20:31:24 GMT

There are some great reasons to live in Tennessee. We have four distinct seasons, none of them too severe. We’re surrounded by awe-inspiring natural beauty and the opportunities for getting out into it abound. There’s a great musical and cultural heritage in Nashville, Memphis and eastern Tennessee. We’re home to Graceland, Sun Studios, the Ryman, hot chicken, Neyland and Rocky Top.

And on top of it all, many might add, there’s no state income tax.

Except that there is. It’s called the Hall income tax. A lot of Tennesseans are unaware of it because it doesn’t affect many of us. And that’s precisely what the tax’s opponents find so unfair about it.

The Hall income tax

The Hall tax, enacted in 1929, is a 6 percent personal income tax on interest and dividends earned from investments. It’s named after Frank S. Hall, the state senator who sponsored it. The tax revenue is split between the state, which gets 62.5 percent, and cities and counties, which get the remaining 37.5 percent. Almost half of the citizens paying the Hall tax are 65 and older. Almost 90 percent of those make less than $34,000 a year in investment income.

The debate

Those opposed to the tax say it puts an undue burden on Tennesseans aspiring to save and grow their retirement. They also point to the fact that it’s especially terrible for two groups — business owners and retirees — who are vital to the state’s economy. Many companies are structured so that their profits are distributed as dividends, and many retirees depend heavily on their investments to get by. What’s more, Tennessee has recently gained attention as an attractive retirement relocation destination, thanks to advantages such as those listed above and its low cost of living. Last year, a Bankrate.com study called Tennessee the No. 1 spot in the nation to retire. The Hall tax encourages both business owners and retirees to look elsewhere, critics say.

Advocates of the Hall tax, on the other hand, typically have a simple defense. The Hall tax provides more than $200 million in taxes, and the counties and local municipalities would have difficultly replacing that lost revenue stream.

Efforts to repeal

Because the tax is such a hot topic, there have been repeated efforts in the General Assembly over the years to repeal it. Just this last session, a full repeal lost in the final hours of legislating, but an increase in the income exemption did pass. Beginning in January 2016, the amount those 65 and older can earn per year without owing the Hall tax will increase from $33,000 for individual filers and $59,000 for joint filers to $37,000 and $68,000, respectively.

Possible way forward

We’re still three months away from the next General Assembly, but State Sen. Brian Kelsey (R-Germantown) has already announced that he’s got a plan to sustain local government funding if the Hall tax is repealed in the next session — which he supports. Kelsey’s amendment calls for the state to provide cities and counties an annual payment equal to the average of the last five years of Hall tax receipts. The state budget has the surplus Kelsey says, pointing to a recent economic forecast by a prominent economist.

I love Tennessee for its climate, its outdoor grandeur, its music, its food and its friendly people. I would like to add to that long list the absence of an income tax — of any kind. Our economy and our businesses could use it, and our retirees who have worked and planned hard deserve it.

Phoebe Venable, chartered financial analyst, is president and COO of CapWealth Advisors LLC.

Local financial adviser to attend global conference

Thu, 01 Oct 2015 20:29:12 GMT

Middle Tennessee-based financial adviser Phoebe Venable will represent the state at the CFA Institute’s 2015 Society Leadership Conference in Hong Kong next week.

Venable is president and chief operating officer of CapWealth Advisors.

The annual event is open each year to select chapters of the CFA Institute throughout the U.S. and the world, each of which sends a limited number of representatives based upon the chapter’s membership. Venable serves as a CFA Society of Nashville director.

The three-day conference will bring together successful CFAs from around the world for industry speakers, educational workshops, debates on hot-topic issues and networking.

Venable previously served as managing director of the private wealth management division of SunTrust’s local offices and as an investment adviser to super-affluent families with GenSpring Family Offices. Last year the Financial Times named Venable among the Top 100 Women Financial Advisers in the U.S.

She writes a financial column for The Tennessean on women, families and building wealth that appears every other Saturday in the business section.

Tim Pagliara named No. 1 in Tennessee by both Barron’s and Forbes

4 things for investors to know about ETFs

Fri, 25 Sep 2015 20:27:43 GMT

Exchange-traded funds (ETFs) are a fairly new innovation in the world of investment products. Since the first ETF was introduced in 1993, ETFs have grown in number and popularity with all types of investors. But despite their growing prevalence, their two-decade-plus age and the fact that there is now more than $2 trillion in ETFs, many ETF investors aren’t actually sure what it is that they own.

Formally speaking, an exchange-traded fund is an investment company that tracks an index, a commodity, bonds or baskets of assets and whose shares trade intraday on stock exchanges at market-determined prices just like a common stock. At first glance, they look a lot like mutual funds. Mutual funds own baskets of stocks or bonds and individual investors are able to buy, sell or own fractional pieces of ownership (shares) in the fund. Similarly, ETFs offer investors a proportionate share in a basket of stocks, bonds or other assets in the same type of structure.

Originally it was thought that ETFs would be used by average investors who needed a less expensive way to diversify their assets, but over the years, more and more active traders and institutional managers have added ETFs to their portfolios. The largest holdings in some of the biggest hedge funds are now ETFs. This popularity means experienced and professional traders are accounting for an increasingly larger share of the trades in ETFs, which means they’re being catered to — and that could spell danger for the inexperienced investor.

Four things the average investor should know about ETFs:

Leveraged ETFs are just awful. Yes, awful. Leveraged ETFs use financial derivatives and borrowed funds to consistently amplify the returns of an underlying index. “Leverage” is such a seductive word — Donald Trump sure uses it a lot — and who doesn’t want to amplify their returns? If the return on stocks is say, 8 percent, wouldn’t it be great to make 16 percent with a 2x leveraged ETF? Just imagine these returns over a long period of time with the power of compounding. The charts look incredible!

So what’s the problem? The problem is that leverage, amplification and compounding all work both ways. They can take you upward fast and they can take you downward fast. Volatile markets can lead to big losses.

Choice isn’t always a good thing. There are about 1,600 ETFs available to investors today, and in that lurks some risk. There is an ETF for just about everything imaginable, and that has led to too many investors buying too many products they don’t understand and don’t need. Be strategic. Don’t buy an ETF that tracks an emerging-market currency index if you wouldn’t own those individual emerging-market currencies. Exotic doesn’t mean good.

ETNs are not ETFs. Similar to ETFs, ETNs track the market return of a basket of stocks, bonds or commodities. They have an expense ratio and are available for purchase alongside the common ETFs. However, ETNs are subject to solvency risk of the issuing company. If you have an ETN issued by a company that declares bankruptcy (remember the financial crisis?), you will be dealing with a bankruptcy court instead of redeeming your shares for par value.

With ETFs, don’t be early and don’t be late. It’s best to avoid buying or selling ETFs just after the market opens or just before the market closes. Before all of the underlying securities begin trading each day, market makers generally demand wider spreads to compensate for the price uncertainty, which means you won’t get the best price. And as the market day winds down, many market makers step back from the markets to limit their risk as they head into the close. Again, this means the spreads widen out, and prices can be distorted.

These warnings aren’t meant to deter investors from using ETFs in their portfolios. It’s just important that the average investor better understands this oft-misunderstood investment vehicle before jumping in. As is true for any investment, the sage advice and counsel of your financial adviser is always recommended.

Phoebe Venable, chartered financial analyst, is president and COO of CapWealth Advisors LLC.

Investing in a changing world requires constant study

How 9/11 scared millennials away from investing

Fri, 18 Sep 2015 20:24:26 GMT

With the 14th anniversary of 9/11 last week, millions of Americans reflected on where we were when those planes struck the Twin Towers. For a great many of us, that day is unforgettable, historic, an annual day of remembrance.

For those who were young, such as the millennial generation, whose members ranged from 4 to 21 years of age on that day, it may even hold more significance. In fact, many experts believe that it and other large-looming events in recent years have played a critical role in molding our psyches about what we value and how we live. This doesn’t diminish in any way what other generations have been through. But neither can it be denied that our formative years have been filled with big, scary events: the dot-com bubble of 1997-2000, 9/11, three wars (two in Iraq and one in Afghanistan) and the 2008 financial crisis.

Those events have shaped our feelings and behaviors about finance and investing. In a nutshell, we’re sitting on our cash and not investing. Many of us have money and are saving, despite the student loan debt and grim job prospects that have dogged us and our peers. And together, we are the current largest living cohort in the U.S., with 92 million people, far surpassing the baby boomers, with only 77 million.

So what are all of these young Americans thinking? For starters:

We’re less trusting. According to a Pew Research Center survey taken in 2012, only 19 percent of millennials believe that most people can be trusted — compared with 40 percent of boomers and 31 percent of Gen Xers, for instance.

Especially when it comes to financial institutions. Journalist Ryan Cooper puts it very pointedly in a piece he wrote last year for The Week magazine titled “Confessions of a Millennial Who Hasn’t Invested a Dime in Stock”:

“I’ve read and written a great deal about economics and finance, but I can tell you that the actual mechanisms of asset purchasing are intimidating at hell. Just looking at a 401(k) booklet feels like the hotly acidic fingers of Satan are clutching at my trachea. It’s almost as if I’d rather die in poverty than figure out which investment option would shaft me the least...” Ouch.

We’re in crisis-aversion mode. According the 2014 Better Money Habits Millennial Report from Bank of America and USA Today, 59 percent of millennials are saving for an emergency fund — more than are saving for retirement, a home, a vacation or a new car.

We define success more emotionally and experientially than financially. In the 2014 edition of the UBS Investor Watch report, 39 percent of millennial respondents answered the question “How do you define success? How do you know that you have arrived — what are the hallmarks of success?” with emotional answers such as “Having a happy family” or “Having a deeply meaningful relationship with my spouse/partner.” Thirty percent gave experiential answers such as “Living a full life with a wide variety of experiences” or “Enjoying the work I do.” That’s compared to 24 percent who responded with financial answers such as “Having financial freedom” or “Being able to provide for future generations of my family.”

Given what millennials have seen throughout their lives, do you blame them for any of these traits?

Getting millennials into the markets

So what is going to change millennials’ attitudes about investing? First, the increasing number of millennials in the workforce financially advising other millennials. Secondly, more stories about financial professionals with integrity who genuinely want to help clients improve their lives — take it from me, they do exist! And finally, time. As millennials get older, they’ll realize that the 2008 financial crisis was a “black swan” type of event that rarely occurs and that, despite the zigzags up and down in the short term, the history of the market is one of an ever-rising trajectory that builds wealth.

Jennifer Pagliara is a financial adviser with CapWealth Advisors LLC and a proud member of the millennial generation.

Dow Books Fourth Straight Day of Losses as Stocks End Mixed -Interview

Unfortunately, the Tooth Fairy mixes money, magic

Fri, 11 Sep 2015 20:25:53 GMT

Do you remember when you lost your first tooth? The only thing fun about it was the cash reward from that bewitching benefactress, the Tooth Fairy.

It’s a centuries-old ritual. Imagine how many 5-year-old faces have lit up with joy upon finding that money has magically appeared under the pillow in exchange for a tiny chunk of calcium phosphate. And with a total of 20 baby teeth, that miraculous enamel-and-dentin-hoarding pixie comes back 19 more times! There’s no doubt about it, the Tooth Fairy is fun stuff for kids and parents.

The problem is, it’s the equivalent of teaching children that money does indeed grow on trees.

Confusing messages

Fairy tales — be they about generous sprites, bunnies or rotund, white-bearded men — can send confusing messages to our children about money and magic. They set unrealistic expectations on how money is acquired and what it is worth.

But the good news is that visitations from the Tooth Fairy also can be turned into basic but instructive lessons on finance. If you follow my column, you’ve heard me say: 6 years old is not too young to begin teaching your child about spending, saving, investing and charitable giving.

Set boundaries

Let family members — and other parents — know your boundaries.

Parents often get their first glimpse of the power of peer influence on the Tooth Fairy’s inaugural visit. Some parents may even hear this for the first time: “But Mooooommmm, everyone gets more than I do!” Yes, even preschoolers compare notes and thus the influence of the outside world begins.

Parents should consider talking to the parents of their child’s neighborhood pals, classmates, soccer teammates, etc., which are often the parents’ own social circles, too, about making a pack about how much a tooth is worth. In today’s world of social media, it’s easy.

By opening a dialogue, you break the parental isolation that can be harmful to your child. Not all parents will agree that the Tooth Fairy shouldn’t pay more than $2. That’s OK. The most important thing is that the discussions will prod these parents to think about the expectations and lessons they’re giving their own children and, by extension, yours.

Even if that conversation isn’t feasible, parents need to let other family members — especially grandparents — know your boundaries when it comes to money and gifts. They need to respect the critical lessons you’re teaching your children about life.

Misdirected magic brings mischief

My son lost his first tooth at home and our generous Tooth Fairy left a crisp $1 bill under his pillow. His second tooth was lost at his grandparent’s home, whereupon their profligate Tooth Fairy left $20. Yes, $20 for one tooth.

When my son came home, he demanded to know why there was such a difference and could it please be arranged that he would go to Grandma’s house every time he had a loose tooth? His grandparents’ good intentions led to a difficult situation as I struggled for an explanation that made sense to my indignant child.

The price of a tooth at age 5 or 6 is just the beginning — there will be birthdays, holidays, bar and bat mitzvahs, first cars, proms and more. Rites of passage don’t have to become more and more extravagant over time.

And if you’ve been good about using both special and banal occasions to teach your child about money and your family’s money values, your child will probably get it. Money doesn’t grow on trees and or arrive by fairy express. One day, they’ll even appreciate it.

What is the going price of a tooth?

According to the Delta Dental Plans Association’s annual Original Tooth Fairy Poll, the Tooth Fairy left an average $4.36 per tooth last year. Another annual national survey, this one conducted by Visa, reported an average of $3.40 per tooth in 2014 and $3.19 so far in 2015.

Why the disparities between the two surveys? Blame it on the high rollers of molars like my in-laws. Within a small sample set — around 1,000 households for Delta and 4,000 for Visa — these $20 and $50 outliers can really skew the average.

In fact, guess what both surveys say is the most common amount given per tooth? A single buck.

Phoebe Venable, chartered financial analyst, is president and COO of CapWealth Advisors LLC.

Volatility in stock market creates opportunity

Fri, 04 Sep 2015 20:21:29 GMT

There is no denying that the kind of volatility the stock market has experienced over the last couple of weeks can cause anxiety in even the coolest, calmest investor. And if the volatility itself isn’t enough to unnerve the investor, then the 24-hour news cycle’s shrill and incessant coverage was certainly sufficient to do so. But is all this anxiety really warranted?

Volatility explained

Formally defined, volatility is a statistical measure of the dispersion of returns for a given security or market index. So when the media discusses market volatility, it is essentially talking about how much stock prices are moving up and down. High volatility means prices are moving up and down quite a bit, and when it is low, there is steadier fluctuation.

There are even volatility indexes that show the market’s expectation of 30-day volatility. The VIX (the trademarked ticker symbol for the Chicago Board Options Exchange Volatility Index) tracks the S&P 500, is forward-looking and is often referred to as the “investor fear gauge.” For the past six months, the VIX has not closed at more than 20.00 (which represents an expected annualized change in the S&P 500 of less than 20 percent over the next 30 days). It peaked on Aug. 24 at 40.74, and fluctuated the first half of this week in the mid-20s to low-30s range.

The good and the bad

Volatility is largely unpredictable. It’s often fueled by fear. It makes headlines. But is it bad? With more movement in the market, there is a wider range of possible outcomes — some of it loss, yes, but some of it reward. If movement is less dramatic and more consistent, there is less possibility for reward. While the downside increases, so does the upside. And as with any investment, the riskier it is, the greater the possible returns.

Risk and reward

For any millennial reading this, here is a non-market example that might help you better understand volatility. Let’s say you’re a college graduate and are a couple of years into a career. Now that you’ve seen what it takes to advance in your field, you’re considering graduate school. If you decide to do this, there is a possible range of outcomes: You could turbo-charge your career and make more money, or it could end up not being as advantageous as you hoped and add debt that will take years to pay down. What’s it going to be? Don’t go, take on no more debt and not speed up your career progression? Or go, risk the debt and possibly accelerate your career?

The emotion of investing

The upward trendline of the S&P 500 is not perfectly smooth. There are spikes and dips, some larger than others, that traverse the line. There is no way to predict when a decline is going to happen. Because technology has created an around-the-clock stream of news, what is happening in the market is often hyped, overhyped and hyped some more. Yes, we did have a big drop, but the media only exacerbated the problem by turning it into a frenzied, self-fulfilling prophecy. It can be easy to get wrapped up in the emotion of what is happening.

The worst thing investors can do is let those feelings get the best of them. Always remember the basic rule of investing — buy low, sell high — along with a corollary: Over time, the market moves higher. Many investors have the 2008 financial crisis still at the forefront of their minds, but that is a “black swan” type of event that doesn’t happen regularly. And the all-time market high at the time (the S&P 500 was at 1,561.80), which the crisis toppled, has been subsequently surpassed by more than 500 points. Thanks in part to volatility, even that dark time has become a blip on the historical radar screen.

Stock market drop shouldn’t faze long-term investors

Fri, 28 Aug 2015 20:14:10 GMT

If you follow the markets — and certainly you do, if you’ve got skin in the game with a 401(k), IRA or other investment account — this week has been one wild ride. It began with a gut-wrenching 1,000-point drop Monday in the Dow Jones Industrial Average within the first few minutes of trading. The day netted out at a 588-point loss, the eighth-worst single-day drop in history. Some are wondering if there’s more to come.

I’d like to offer my take on what happened and how the average investor should respond.

What happened?

The market sell-off comes with a label: “Made in China,” not “Made in the U.S.A.” China’s stock market has been struggling for months as the country’s economic growth appears to be slowing down. China’s manufacturing sector is the weakest it’s been since the global financial crisis. Stocks in Hong Kong, Indonesia and Taiwan have also entered bear market territory.

The Chinese government’s efforts to help have been ineffectual. Most recently, China’s central bank has lowered lending standards, making it easier for the Chinese people to borrow and the Chinese banks to lend money. They’ve also tried an interest-rate cut, threatened rumormongers, allowed the national pension fund to buy stocks and announced plans to investigate short-sellers who place bets on the market falling — but nothing’s worked. Aug. 24 has been dubbed “Black Monday” in China because shares plummeted by more than 8 percent, their worst trading day since 2007.

But if we look the preceding 18 months, China’s stock market had risen a dramatic 150 percent. As prices soared, millions of first-time Chinese investors got into the market, believing prices would continue their upward trajectory. The sell-off in China could be the leveling of stock prices to the reality of their declining growth rate. When an economy slows, company earnings go down and stock prices reset to reflect that. China is the world’s second-largest economy, so markets around the globe reacted.

Impact on U.S. investors

In a phone call my firm participated in on Monday, David Kelly, chief global strategist at J.P. Morgan, said: “In the short term, sell-offs are all about psychology. In the medium term, they’re all about economics. In the long term, it’s really about valuations.” I couldn’t agree more. As proof of the power of psychology, consider that U.S. exports to China are less than 1 percent of our GDP; Europe’s exports to China are less than 2 percent of theirs.

U.S. economic data may not be robust, but it’s solid and growing: Retail and car sales, housing starts and existing home sales are all up, and the July jobs report was good; we expect another solid August jobs report. Falling energy prices will certainly negatively impact energy companies, but they are a net positive for the consumer and companies with high energy input. Compared with the financial crises of 2008 and 1997, our banks are much better capitalized, and our companies are leaner and have much larger cash positions. U.S. stock valuations are below their 25-year average based on forward price-to-earnings ratios, and average dividend yield of an S&P 500 company is 2.5 percent, compared with 2.15 percent on the current 10-year Treasury yield. Both are good news concerning equity valuations and even better news when taken in context with historically low interest rates. In short, U.S. economic and corporate fundamentals are good, and the U.S. is not slipping into a recession.

Keep it in perspective

Finally, corrections are absolutely normal: In 27 of the past 35 years, there have been average intra-year drops of minus 14.3 percent. The stock market simply does NOT go up in a straight line. Investors buy stocks for long-term growth and should expect market reactions to world events. Market sell-offs always test an investor’s true risk tolerance. Talk to your financial adviser and make sure your investment portfolio is constructed to help you achieve your financial goals without taking unnecessary risks.

Phoebe Venable, chartered financial analyst, is president and COO of CapWealth Advisors LLC.

Student loan debt a ticking time bomb

Sat, 22 Aug 2015 15:49:26 GMT

With student loan debt a source of mounting anxiety for many American families generally and an acute pain point for millennials specifically, it should come as no surprise that presidential candidate Hillary Clinton this month made a headline-grabbing proposal: debt-free tuition at public colleges for all students.

U.S. student loan debt totals $1.2 trillion. Yes, that’s trillion with a “T.” In 2014, 70 percent of college graduates left school with an average student loan debt of $33,000. While the National Debt Clock has become quite well-known, student-loan clocks are now cropping up too, and they grow by $3,055.19 every second (as estimated by the Federal Reserve)! To put the skyrocketing costs of college in perspective, consider that since 2000 the Consumer Price Index has climbed about 40 percent, medical costs about 75 percent and college costs nearly 140 percent — while real wages have stayed flat.

Political rhetoric or real solution?

Clinton’s “New College Compact” is clearly aimed at wooing millennial voters, but is there any real substance to her proposal? She says it will cost $350 billion over 10 years and that the money would come from curtailed deductions for upper-income taxpayers. There’s already debate about that, as well as what states and their universities would have to do in order to get the funding, and how she’d revamp the federal student-loan program.

But the merits of her plan (and politics) aside, Clinton’s bold proposal has put education-related debt at the very center of her campaign — and thus in the spotlight of the national stage. There is clearly something wrong with the current system of college costs, and with a presidential election on the horizon, we’re going to hear a lot of proposals for fixing it. Let’s hope we arrive at a real solution.

In the meantime, what can you do about your own student debt?

Your loan’s true cost

First, let’s make the debt problem a little more real for you. Using a hypothetical debt scenario with the student loan-repayment calculator at the Sallie Mae website, it is very easy to see how much any one of us could actually end up paying for an education. Let’s say you’re starting college this month with an annual tuition of $9,139, the average cost today of public colleges for in-state residents, according to the College Board. Your total loan amount over four years would be $36,556. Using a fixed, low-end interest rate of 5.75 percent and making monthly payments of $402.67 after graduation, you’ll end up paying $56,370.12 for that loan — and that’s only if you also make monthly payments of $175.16 while you’re still in college! That’s $19,814.12 in interest, money you could have been investing or using as a down payment on your first home.

Tips for paying back student loans

Let’s be honest: Student loans are preventing many millennials from getting their lives — and finances — properly started. The ripple effect is causing young people to live at home with their parents, put off buying their first home and get married later. Is there any easy way to pay them off? No, but here are some tips to help you stay on track:

Start paying the debt off immediately. It can be tempting to give yourself a grace period after finishing school to reward your hard work, but don’t. The sooner you start, the sooner it will all be paid off.
Make sure you read the fine print. Know exactly how much you owe in total, what your monthly payment is, when it is due and what your interest rate is.
Make sacrifices. Anyone who says paying off your loans is easy is clearly mistaken. Craft a plan and stick to it. The latest iPad and gaming system, as well as new clothes and eating out, are oh so tempting. But paying off more than the minimum due each month on debt will help tremendously in the long run. As in the example above, interest jacks your debt up higher every day. The more you pay off each month, the less interest you’ll owe.

Plan your way to a secure retirement

Fri, 14 Aug 2015 18:09:33 GMT

As a financial adviser, the question I hear most often from clients, prospects and friends is “How do I know if I have enough for retirement?” There’s no single figure that’s right for everyone. However, the basic formula for arriving at that elusive figure is surprisingly constant. The CFA Institute, the organization that offers the Chartered Financial Analyst designation, recently published a paper titled “Essentials of a More Secure Retirement” in which they sum up those steps.

Make yourself save

The most basic thing that everyone needs to do is spend less than they earn. Living within your means may sound simple, but for many it’s a constant struggle that impedes their ability to build a retirement savings.

A general guideline is to spend 50 percent of your earnings on necessities, spend 30 percent on enjoying the present and save 20 percent for the future. One of the best ways to start saving is to open a savings account and begin making regular deposits into it. Think of it as paying yourself before anyone else. Even small, consistent amounts add up over time. Consider having a portion of your paycheck automatically transferred to it each pay period — it’s like a forced saving plan that, over time, you won’t even miss. When you’ve amassed enough for emergencies and then some, it’s time to invest the money (see below).

Another way to save for retirement is to enroll in your employer’s retirement plan. If your employer offers a match on contributions to their 401(k) plan, be sure to contribute enough to receive those free dollars! If you are a full-time stay-at-home parent, look into a spousal IRA.

Maintain a constant lifestyle

The key to long-term financial success is sticking to a plan. Many investors think that financial success comes with conviction or intuition, but what really matters is discipline. Remember, it’s never too late to start, and you can get help. If you’re having trouble figuring out how to save, a trusted financial adviser can help you develop a plan (if the word “budget” strikes fear in your heart, use the word “plan”).

Strive to increase the amount you save each year. Consider saving 50 percent of your pay raises. If you keep your lifestyle constant over time, your pay raises accrue to your retirement, not your expenses. Constantly avoid debt. With the exception of homes, cars and education, using debt to buy things is almost always a bad investment.

Invest wisely

Focus on the long term. Short-term investment performance is going to always be up and down. Instead of focusing on and fretting over this quarter’s performance, remember the end goal — your retirement — and be sure to periodically review your portfolio with your financial adviser to make sure you are on track.

Diversify your portfolio. Diversification means spreading your investment across many different securities, reducing your overall risk, because some companies, industries and sectors are less successful at times while others are more successful. The mix of stocks versus bonds in your portfolio depends on several things, such as your age and target retirement date, as well as your ability and willingness to tolerate risk (the ups and downs of the market).

Think about insurance. Besides life and health insurance, you should also review disability, long-term care and liability insurance with a qualified adviser who can help you determine your needs.

Retire well

The fourth step is actually no step at all — it’s a result. Commit yourself to the appropriate discipline and strategy through your earning/saving years with the three steps above, and your retirement years should be leisurely, comfortable and secure. The best rewards are the ones you earn, and in the case of retirement, earning it is the only way. Other than a big lottery win (whose odds are statistically laughable and should never be considered a retirement plan), no one ever lucked into a good retirement.

Phoebe Venable, chartered financial analyst, is president and COO of CapWealth Advisors LLC.

Millennial generation rises in affluence, influence

Fri, 07 Aug 2015 15:35:48 GMT

Many millennials are living with their parents, struggling to kick-start their careers and drowning in student loan debt. We hear the stories and news accounts all the time regarding this generation born between 1981 and 1997. There are other millennials, however, already earning more than $100,000 a year, putting their energetic faith into the old-fashioned American dream and remaking how our world operates.

Largest wealth transfer in history

According to a white paper by LinkedIn and market research firm Ipsos published in April, there are 15.5 million affluent millennials with at least $100,000 in investable, non-real-estate assets. Although that number only accounts for about 20 percent of millennials, as Forbes writer Jeff Fromm put it in June, “it’s very apparent that this group is the one fueling millennial trends because of their ability to act on millennial aspirations.”

Every younger generation eventually comes of age and is passed the mantle of influence and power. Millennials are in large part to thank — or blame, depending on how you look at it — for the ways in which the world today shops, consumes, interacts and is entertained. They’re expected to spend $2 trillion in goods and services this year. And they’re beginning to marry, have children and move into leadership positions. It’s worth remembering that this entire generation will one day be on the receiving end of the most massive generational transfer of personal wealth in history: at least $59 trillion, says Boston College’s Center on Wealth and Philanthropy.

As the millennial generation reaches its ascendency, chances are the affluent subset is going to wield even greater influence and power. Let’s take a look at the “financial persona” — the attitudes and opinions about money and the finance industry — of the affluent millennial. It could be a window into the future of the financial industry as it evolves to meet their needs.

The LinkedIn-Ipsos white paper sums up affluent millennials like this:

They have an ambitious, entrepreneurial spirit

“Affluent millennials have a progressive and optimistic outlook for the future. Their confidence and trust are unparalleled.”

They want control and guidance in their finances

“… they want to conduct their own research, make their own decisions and execute their own trades. But they also value the insights and guidance of experienced financial advisers … Today, 87 percent of affluent millennials consider finance advisers important, with 37 percent calling them a ‘must-have.’”

They think outside the box but are loyal too

“Despite being loyal customers, they are open to financial offerings from traditionally non-financial brands.”

They live and breathe online social networking

“Social networks are a must-have among any financial institutions that want to win over affluent millennials. They are central to the group’s financial decision-making process.”

They only seek information that’s relevant

“They actively seek out financial content, particularly through their social networks, including customer reviews, expert opinions, educational articles and literature on products and services.”

Finance industry must adapt

As the affluence and influence of millennials grow, we can reasonably expect financial service providers — such as banks, broker-dealers and registered investment advisers — to begin catering to their needs. This might mean that these businesses will provide more information, support and transactions online, perhaps building social networking-esque forums for client-provider and client-client interaction. It might mean that, for some clients, advisers will offer more expert strategy and consulting than trade-making. And it might mean that these businesses become more focused on building trust and credibility and less on marketing and closing a sale.

That’s good news for all of us. Millennials may be leading the way, but all investors will benefit. In fact, I would even say that if you don’t already give your adviser high marks for trust and credibility, then it’s time you looked for another.

CapWealth’s Phoebe Venable Named #8 Forbes Best-In-State Women Advisors

Help your kids learn financial discipline

Sat, 01 Aug 2015 17:02:28 GMT

You want what’s best for your children. Unfortunately it can be tempting for parents to mix up "what’s best" with the easier "what they want." Because of guilt, the limited resources of our own childhood, pressure from our consumer culture, etc., we cave. But constantly giving children what they want is emphatically not the best way to prepare them for life. It has a way of making them whiny and spoiled as children and — worse — financially dependent, irresponsible, debt-ridden and entitled as adults.

Begin with values

Be clear about your values, both to your children and yourselves. Teach your children that in your family there are things far more important than money, such as kindness, integrity and friendship. Explain that decisions — including what one buys — are guided by values. This should help your children as they get older and make decisions not based solely on peer pressure and what happens to be cool at the moment.

Don’t avoid the subject of money

Don’t be afraid to talk about money with your children. We’re bombarded by money messages from television, movies and advertising, and children catch on fast. It’s amazing how quickly they notice when a friend or neighbor has a larger house or nicer car. Use it as an opportunity to explain that some people have more money than others, that there’s nothing wrong with that, but that their real worth as people has zero to do with possessions or bank accounts.

Educate them

My firm begins teaching clients’ children and grandchildren about money at the age of 6. That’s not too young to begin understanding the basics of spending, saving, investing and donating. Depending on their age, going grocery shopping, providing them an allowance, involving them in family budgeting decisions, offering prepaid minutes on a mobile phone and including them in volunteer work are all opportunities to teach children practical lessons in using and managing resources.

Just say “no”

One of the most direct methods of familiarizing your child with reality — the fact they can’t have everything they want — is by not being afraid to use a certain two-letter word beginning with “n” and ending in “o.” If a child or teen feels he or she can’t live without some item, then perhaps it’s an ideal occasion to coach the ideas of saving, delayed gratification and the value of hard work. Consider allowing your child to purchase the item, or pony up the deficit, herself.

Give them a job

A job is a wonderful financial education for children and teens. When they’re old enough, all children should be assigned household chores, an obligation that comes with being part of the family. Consider paying children for work over and beyond their normal duties. For teens, summer and part-time jobs may be appropriate. The lessons are priceless: Running a home (or any other enterprise) requires work, a job well done can be very satisfying, the only way to get money is to earn it, and there’s nothing like having skin in the game to motivate one to plan and set goals.

Walk the talk

One of the best ways to teach, of course, is by example. The way you conduct your decision-making on big purchases, the way you tip and charitably give, and the way you comparison-shop even on small-ticket items will speak volumes to your children.

We live in a culture of hyper-consumerism. Your own financial situation may be one of plenty. But that doesn’t mean that you can’t raise unspoiled children. Start when they’re young to ensure they become adults that you and other people can admire.

Phoebe Venable is president and COO of CapWealth Advisors LLC. Her column appears Saturdays in The Tennessean.

What Are The Unintended Consequences of Low Interest Rates?

Finance tips for newlyweds

Sat, 25 Jul 2015 15:30:51 GMT

Hear that? It’s the sound of wedding bells. June is the most popular month to marry, followed closely by August. And if you play your cards right, newlyweds, there could be another tune to accompany those bells — the sound of cha-ching as you plan a financially secure life together.

Organize, economize and maximize

Marriage is about “two becoming one.” That includes your finances.

Your individual philosophies on financial matters, including saving and spending habits, as well as your once-separate incomes, assets and debts are now under a single roof. You and your spouse must jointly make decisions, compromise, plan and set goals — as openly and lovingly as possible — on how you’ll manage your money going forward.

You may want to combine all accounts; you may prefer a “yours, mine and ours” arrangement. Whatever you agree to, you’ll want to establish a budget, begin building an emergency fund of three to six month’s worth of living expenses (in case of job loss or other unforeseen setbacks) and pay off debt as quickly as possible to begin saving for future goals like big-ticket purchases, a home and retirement.

Retirement may seem far off, but you need to start saving for it now. Saving and investing is a long-term process, and the power of compounding interest can only be unlocked over long stretches of years.

Read more about this in my first column . Even if you can only start small, start. Trim down your lifestyle to make it happen. Decades from now, you’ll either love or curse your younger selves about this.

Adjust to a new tax status

Review your tax withholdings and work on minimizing your taxes.

If both of you work, your combined income could put you in a higher tax bracket; if only one works, filing jointly may reduce your taxes. Either way, you must fill out a new W-4 and decide how many W-2 withholding allowances to take (which determines the amount withheld from your wages for taxes). You don’t want to be taken by surprise by your tax obligation come next filing season.

Also, notify the Social Security Administration should your name change, as well as the IRS and U.S. Postal Service if your address changes (online forms are available for all three).

Tax-advantaged accounts offered by your employer such as a 401(k) and a Health Savings Account (HSA) are great tools for saving and investing. With both, the money deposited isn’t subject to taxes, in the first case allowing your investments to compound more quickly over time (hopefully) and in the second case giving you greater spending power for qualified medical expenses.

With the 401(k), you will eventually pay taxes, but only when the money is withdrawn from the account. With the HSA, you’ll never experience federal tax liability as long as the money is spent correctly — and unspent funds roll over year to year.

Protect what’s precious

It’s time to consider life and disability insurance; with parenthood, it becomes essential. That’s because life insurance replaces lost income should you die and disability insurance covers a portion of salary should you become disabled.

One or both of you may have some life and disability insurance provided by your employer, but it may be insufficient. Talk to an insurance provider about the various options and how much coverage you and your spouse need.

Finally, both of you need a will (or an update if you have one). A will legally declares your wishes on how you’d like your estate — your total assets — distributed after your death. Dying without one can be financially ruinous for your survivors, particularly if you have children, because you can bet that the state and federal governments will have very different ideas about what to do with your estate. Talk to an attorney about this.

Jennifer Pagliara is a financial adviser with CapWealth Advisors, LLC, and a proud member of the Millennial Generation. Her column, which appears every other Saturday in The Tennessean, speaks to her peers and anyone else that wants to get ahead financially.

Personal finance: Here's a helpful checklist for prosperous new year

Getting into college is a job in itself

Fri, 17 Jul 2015 16:59:44 GMT

Most Middle Tennessee students are headed back to school in less than three weeks. Rising juniors and seniors with an interest in college, take special note. Time flies and you’ve got a lot to do to get into college. There’s a lot riding on your bachelor’s degree, including the potential to make 65 percent a year more than those with only a high school diploma (those with a bachelor’s, master’s, professional or doctoral degree make 112 percent more on average, according to the U.S. Bureau of Labor Statistics).

Rising juniors

Rising juniors, the time to start thinking about college is now. This fall, you’ll begin researching colleges and programs. In the spring, you’ll need to register for and take the SAT and/or ACT. You might also consider visiting college campuses while school is in session. One year from now, you should be narrowing your college-application list down to your favorites, including top-tier schools and the fallbacks — those schools you’d attend should you not get into the ones higher on your list. Think about whether you want to make any early-decision applications (if accepted, you’re committed to attend) or early-action applications (not binding).

Rising seniors

In September — that’s six weeks from now — start requesting applications from schools (many are online), paying attention to deadlines and application fees. Decide if you’re going to apply for early action or early decision to any school. Begin applying for local and national scholarship opportunities.

It’s imperative to make a calendar. Colleges have due dates for applications, recommendation letters, transcripts, test scores and secondary school reports.

To be considered for financial aid, the U.S. Department of Education will need your FAFSA (Free Application for Federal Student Aid). Any college or university that awards federal student aid must use the FAFSA to determine eligibility. About 200 colleges also require a College Scholarship Service Profile (CSS profile). For rising seniors, their FAFSA can be filed any time after Jan. 1, 2016. The FASFA application helps determine the student’s expected family contribution toward the cost of college. Many universities use the FAFSA for need-based scholarships as well. It is also required for student loans.

Any scholarship applications will have deadlines, and your high school will probably have deadlines for transcript and secondary school report requests. Meanwhile, it’s time to begin drafting and revising your application essays. If you need to take or retake the SAT, SAT Subject Tests or ACT and you’re applying early action/decision to colleges, the October test dates are the last ones that can be considered; you must register in September. Depending on the admissions deadlines of colleges to which you’re applying regular decision, the November test dates may be your last chance; in that case, you must register in late September or early October.

The deadline for early action/decision applications is usually early November, so in October you’ll need to request and then mail in your letters of recommendation to the schools to which you’re applying, have your high school send your transcript, have your SAT and ACT scores sent, and finish your essays. Most schools require that you complete the CSS profile with the College Board (there’s a small fee) in addition to the FAFSA (free; deadline is January). Complete the former in November if you’re applying early action/decision. By the end of December, colleges will notify you if you’ve been accepted early action/decision.

If you’re applying regular decision, the above timeline shifts forward more or less one month. Most application deadlines are in December or January. In January, the FAFSA is due. Do not miss this deadline.

Most colleges make their regular decision offers of acceptance in March, April and May. Financial aid offers typically arrive about the same time. In May, you’ll need to notify the schools to which you were accepted of your decision. In June, your high school will need to send your final transcript to your chosen college. Your future alma mater can still rescind its offer, so contrary to high school legend, you can’t coast through your final semester!

Phoebe Venable is president and COO of CapWealth Advisors LLC. Her column appears Saturdays in The Tennessean.

Don't make these mistakes when insuring your home

A millennials guide to 401(k) investing

Sat, 11 Jul 2015 15:26:57 GMT

In my last column, I discussed the employer-sponsored retirement plan known as the 401(k) and the importance of availing yourself of one. This week you might be thinking, “well now that I have a 401(k), what do I invest it in and how much should I save?”

Here are the basics:

How much to sock away?

A precise answer depends on how much you need for retirement, how far off your retirement is and what kind of lifestyle you want. Evaluate what contribution will fit your budget; however, you should try to contribute at least enough to get the full employer match. And remember, there is a limit to how much you can contribute annually. For 2015, it’s $18,000 or $24,000 if you’re 50 or older.

To Roth or not to Roth?

Your company may allow you to choose a traditional 401(k), a Roth 401(k) or both. With a Roth, you pay taxes on your contributions on the front end, but you pay none on your withdrawals. (With either option, you must be 59½ to begin using the money or contend with stiff penalties.)

If you’re young or aren’t in a high tax bracket, a Roth could be the way to go because you’ll have plenty of time to make up for the up-front taxes and/or your tax rate isn’t enormous to begin with. If your returns are good, you could build quite a balance over the decades — paying no taxes on it would be some serious icing on that cake!

Set it and forget it?

Your options will likely be mutual funds — an investment vehicle made up of a pool of funds from people like you for the purpose of investing in stocks, bonds and other assets — and will almost certainly include a type known as the target-date fund. As the name implies, these funds have a target date, such as 2040 or 2055, for your likely retirement. The managers of these funds make asset allocation decisions based on that date, generally starting out more heavily weighted in riskier equities and gradually growing more conservative — with bonds, for instance — as the target date approaches.

Target-date funds make investing simple for those who won’t be hands-on. For investors who aren’t impressed with a one-size-fits-all approach — because each of us has different risk tolerances, objectives and investible income, after all — and are willing to rebalance their portfolios themselves, target-date funds may not be the answer.

Index fund or fund manager?

You may see other kinds of mutual funds with words like “index,” “growth,” “value,” “blend,” “large-cap,” “mid-cap” and “small-cap” in their names or descriptions. An index fund is constructed to mimic a market benchmark index such as the S&P 500, Russell 2000 or the Barclays Capital Aggregate Bond Index.

“Indexing” is considered a passive form of fund management because it simply invests in the securities that make up the index. Consequently, index fund fees are very low. Other mutual funds are actively managed because the fund managers are trying to achieve a stated investment objective. Their research, monitoring, analysis and strategy isn’t free. You’ll typically see a larger fee coming out of your account for these funds.

In two weeks, my column will address the variety of mutual funds and the passive versus active debate.

What to look for in any fund?

These are the essentials:

Performance: It doesn’t hurt to look at previous years’ returns; however, remember that past performance does not indicate future performance.
Low fees: A fund’s fees — what you are charged annually — shouldn’t be more than the average of its peer group. These expenses can eat up your gains.
Solid management: If you’re opting for an actively managed fund (as opposed to an index fund), see if the manager has a record of success.
Diversification: Make sure your portfolio isn’t over invested in one sector such as technology or industrials or one style such as growth or value. If one fund doesn’t offer the diversification you want, you can usually divide your 401(k) into multiple funds.

In retirement planning, decisions both good and bad have a way of becoming amplified over time if you don’t frequently review and tweak them. For extra guidance, consider talking to a financial adviser.

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What Greece’s financial woes mean for the U.S.

Thu, 02 Jul 2015 16:31:43 GMT

Greece has consumed the headlines all week as banks closed across the country because of stalled negotiations with its European creditors regarding its debt. The Greek government has promised a popular vote on Sunday to allow the Greek people to decide whether the country should stay in the European Union (EU) or “Grexit.”

The ‘PIGS’ of Europe

The United States has very little direct exposure to Greece and investors have had years to make sure their portfolios weren’t exposed to Greece or the other economically weak and unstable countries of southern Europe. It’s no secret that some European countries are significantly less productive than others. Portugal, Italy, Greece and Spain have been derogatorily called the “PIGS” (an acronym composed of the first letter of their names) of Europe and “club med” countries because they’re thought to work too little, earn too much and receive excessive public benefits.

EU membership brings privileges and penalties

There are economic benefits to being part of the EU, and thus there are rules for maintaining membership. Despite governmental belt-tightening and stricter monetary policies, a program known as “austerity,” Greece’s economy is in shambles and it has not been able to pay off its debt.

With widespread unemployment and deep public discontent, Greece’s government is demanding less stringent terms from its creditors — the European Central Bank, the International Monetary Fund and the European Union. Creditors have resisted and, as a result, Greece faces being kicked out of the EU.

What does this mean to U.S. investors?

In the short term, stock and bond markets are going to be volatile as this situation works its way to a resolution, whether Greece leaves the EU or not. The Greek economy is about the same size as Connecticut and accounts for less than 1% of all U.S. trade, but any trouble in the global economy —whether small tremors or seismic upheaval — is always felt.

If Greece is forced out of the EU by the other 18 member countries, Greece will most likely have to drop the Euro as its currency. If Greece accepts the terms of the newest deal from its creditors, the people of Greece will have to tighten their belts further and take more cuts in their pensions and benefits.

If they don’t make a deal with their creditors, it is likely that Greece will have to start printing its own currency to pay bills. The biggest concern is that an exit from the Euro and debt default by Greece could also pull down Portugal, Italy and Spain and destabilize the entire Eurozone banking system.

European policy makers would need to quickly place a safety net under these other deeply indebted countries to prevent economic disaster from spreading across Europe. Should the disaster spread, expect more volatility for U.S. investors.

Imagine Greece was a household

Greece has been a deeply indebted country for many, many years. It has not taken the necessary steps to correct the situation or even change the tide. To mix metaphors, the chickens have come home to roost and it’s time to pay the piper.

Imagine if Greece were a household instead of a country. While there are good reasons to have debt — for both countries and families — there has to be a reasonable plan for managing that debt over time. Your plan must be flexible because there are so many things that can happen in our lives that can set us back financially. If you have a significant reduction in your income, for instance, then you make a significant reduction in your spending.

“Life happens,” so be ready to adjust, adapt and, most likely, everything will work out fine.

But if you continue spending more than you have coming in by using credit cards, taking out loans, borrowing from you retirement, etc.— then you have a lot in common with Greece and could see your bank shut down on you, too. Let Greece be an example of what not to do. Don’t allow your personal debt to accumulate unchecked until you run out of options.

Ask your financial adviser how he or she can help you and your family avoid financial calamity.

Phoebe Venable, chartered financial analyst, is president and COO of CapWealth Advisors LLC.

The ABCs of 401(k)s and free money

Fri, 26 Jun 2015 21:41:34 GMT

Married couples fight over money and oftentimes divorce over it. This continues to be borne out by research. But there’s a relatively new wrinkle to this ancient verity. Not only are more and more women joining the American workforce, but a full 40 percent of all households with children under the age of 18 include a mother who is the primary or sole breadwinner, according to a 2013 report by the Pew Research Center.

It’s never been fair for one spouse to have the only say in a marriage’s financial matters. But with both spouses earning money and sharing traditionally gender-dictated responsibilities, it’s patently unfair, ill-advised and downright destructive. I’d like to offer some advice on resolving marital money mayhem, in two parts. First of all, agree that money matters, like life itself, are rarely simple and easy. Secondly, accept that if you’re married, you’re already a member of a built-in team for tackling financial problems.

Money arguments are fear talking

Maybe you grew up affluent. Maybe you grew up poor. Maybe you grew up in a family with a favorite child. Maybe you’ve been married before and are still nursing old financial wounds. These and other experiences from our past have sculpted our mindsets on money. When we debate with our spouses on going out to eat, taking a vacation or how much to save, we often are unconsciously giving voice to deep fears and anxieties. As the psychologist, certified financial planner and Kansas State University associate professor Brad Klontz, told The Wall Street Journal in April, “If you realize that your spouse grew up in poverty and as a result of that they have this intense fear around not having enough money, all of a sudden their cheapness takes on an entirely new light.” Such a background might give rise to the attitude of “There will never be enough” or, conversely, one of “There will never be enough, so why try?” Each philosophy poses a unique set of problems.

Similarly, the big-ticket items we desire — like home renovations, new cars or vacation homes — and the big-ramification decisions we make — like wills, trusts and monetary gifts to children — may also be motivated by unspoken but very formidable impulses. I’ve worked hard, I deserve it. This proves I’m not a failure. I know the damage of spoiling a child and I won’t spoil my own.

Couples, discuss your fears and dreams openly and honestly with one another. Learn to recognize that what you hear in money spats — from your spouse and from yourself — could be coming from deep, dark places. Don’t judge. Realizing how powerful these feelings are should teach you compassion and compromise. And finally, after working to understand one another better, set very specific goals together. This will help you see clearly where it is you want to go and how to get there — which is far more effective than wrestling with irrational emotions alone.

Don’t fight, unite!

Marriages and families are built on united effort, sacrifice and goals, and the more united, the more successful. That goes for financial decision-making too. Here’s how to go about it:

Divide tasks by interest or talent, and it’s OK for one person to be the overall lead.
Make important decisions together, even if you don’t want to, because you both have skin in this game.
Men and women typically bring complementary talents to the table — and balance is a very good thing in financial matters.
There’s no “I” in “team,” and that means both should get investment trade confirmation emails, online account login credentials, account alerts, etc.
Make room for individual purchases, even if it’s a tiny budget, so that both of you feel a sense of financial autonomy.
Outsource if it doesn’t jeopardize your financial goals, because cooking and cleaning can be stressful and your family time is worth money, too.
Focus on the overlap: The things you agree on are probably the ones worth spending on.
Get help — a financial adviser may be the best investment you ever make.

Good luck, married folks, and may you grow old — and wealthier — together!

Phoebe Venable, chartered financial analyst, is president and COO of CapWealth advisers LLC.

The Economy's Strong, but How's Your Economic Health?

Mon, 22 Jun 2015 14:43:44 GMT

If I were diagnosing the state of America's economic health, here are a few things I'd look at. The U.S. Current Activity Indicator (CAI) — a real-time measure of GDP growth — stands at 3 percent. The latest jobs report from the Bureau of Labor Statistics shows employers added 280,000 jobs in May and that year-over-year earnings rose 2.3 percent, both higher than projected. Last week we learned that job openings rose to 5.4 million at the end of April, according to the Job Openings and Labor Turnover Survey (JOLTS), and that core retail sales growth in May outpaced expectations at a seasonally adjusted 1 percent. Taken together, it's my professional opinion that after a less-than-hearty Q1 start, our economy is showing unmistakable signs of improvement.

That's the U.S. bill of economic health — but what about your own? What's the state of your personal economy? Find out by asking yourself these five questions:

Is your budget in good shape? At each month's end, does your income cover all expenses? If not, review the percentages allocated to each spending bucket (rent/mortgage, utilities, groceries, retirement, birthdays, holidays, a new refrigerator, etc.). Look for ways to curb overspending. The point of budgeting is to better manage your money on your terms, not the creation of the ideal budget that's impossible to follow. Be honest with yourself about what you really need (typically the "boring" stuff) and what you can really do without (usually the "fun" stuff), but don't be intimidated, either. Keep your chin up and keep trying. Look at it as a work in progress and ultimately the key to financial freedom: freedom from debt and stress today and freedom from worry about tomorrow because you're saving for emergencies and retirement.
Are you contributing to a retirement plan? Are you contributing enough? The type of plan you participate in determines how much you can contribute each year. If your employer offers to match a portion of your contributions, are you contributing enough to get all of those free dollars? If you are 50 or over, are you taking advantage of the catch-up provisions of the tax code? Consistently contributing to your retirement plan will pay off greatly later, and most of us can achieve this through payroll deduction, making it one of the simplest ways to save for our future.
Have you checked your credit report this year? If you haven't, go to www.annualcreditreport.com to request a free copy from each of the three credit reporting companies. Carefully check to make sure that all of the information is correct and up to date on each report. Credit reports can affect your mortgage rate, credit card approvals, insurance applications and even job applications. Suspicious activity or accounts you don't recognize can be signs of identity theft. Review your credit reports and catch problems early.
How is your emergency fund doing after the first six months of this year? Did you have any unexpected expenses that required dipping into your cash reserve? If so, start working on restoring that balance. Most of us should have three to six months of living expenses in some type of savings account that serves as our emergency fund to protect against an unforeseen financial blow.
Has anything about your life changed this year? A change in your marital status, health, employment or benefits? A new child, grandchild or home? Have you received an inheritance or established a college savings plan for your children? An event like any of these can necessitate adjustments to your will, insurance coverage, retirement planning, tax status, investments and more. And if you have experienced a significant change in your lifestyle, have you told your financial adviser? Each time you meet with your financial adviser, he or she should inquire about these changes — but don't wait for them to ask. Schedule the appointment and find out what, if any, adjustments and fine-tunings should be made to your financial life.

Here's to the U.S. economy and your own getting even better! For help improving your financial well-being, talk to a professional: a financial adviser.

Phoebe Venable, chartered financial analyst, is president and COO of CapWealth Advisors LLC. Her column on women, families and building wealth appears each Saturday in The Tennessean.

Millennials prayer: Gimme Gimme Gimme patience to invest

Fri, 12 Jun 2015 19:20:53 GMT

Millennials have a one-click mentality. When we want something, we’re going to buy it via our phones, pay to have it delivered tomorrow and post a comment on Facebook as soon as we get it. That’s just how the Gimme, Gimme, Gimme Generation — born in the early 1980s to the early 2000s — rolls.

And why wouldn’t we be instant gratification junkies? We grew up with the Internet, mobile phones, instant messaging, on-demand TV and no-wait express lines at Disney. The need for speed has been ingrained in us.

But our obsession with instantaneity and nonstop connection has its dangers.

When it comes to millennials’ saving and investing habits, it could have dismal long-term consequences.

Investing requires patience

There’s nothing instant about investing and finance. In fact, one of the essential elements of successful investing is the excruciatingly slow unwinding of the clock.

Defined very basically, investing is when you buy something today that you believe will be worth more later. With any security or assets that you purchase, the way the latent value in the investment is unlocked is by the simple but difficult act of waiting.

Warren Buffett, perhaps the most famous and successful investor in history, describes it best: “The stock market is a highly efficient mechanism for the transfer of wealth from the impatient to the patient.”

Time plays another critical function in investing. It’s in the “power of compounding.” This is the snowball effect that happens when your earnings from investments are reinvested to generate even more earnings. .

With successful investments, over time, the growth becomes exponential and not merely arithmetic or linear.

Millennials slow to invest

According to the 2014 Wells Fargo Millennial Study, only slightly more than half of millennials have started saving for retirement. To be fair, we millennials have been dealt a bad hand by having to launch our careers during one of our country’s worst economic crises.

Of the millennials who are investing, technology caters to their desire for instantaneity. With companies like E-Trade and TDAmeritrade, you can open an account with as little as $100. The application only takes 5 to 10 minutes to complete, and you can then begin trading at any time, often right from your smart phone.

But this convenience and independence can create unrealistic expectations. While everyone wants to believe in tales of people “getting rich quick,” it’s extremely rare. Picking the right investments is a time-consuming process that requires an extensive understanding of the global economy, the stock market, finance and tax implications.

Tick-tock

Though retirement may be 40 or more years away and deferred gratification may feel unbearable, millennials must start saving and investing for retirement. Time is your friend when you’re investing and your enemy when you’re not. You can never get those non-investing, non-compounding years back. The clock is ticking. For help with saving and investing, consider talking to a financial adviser.

Articles by Phoebe Venable

How to Resolve Marital Money Disagreements

Fri, 05 Jun 2015 14:48:30 GMT

Money arguments are fear talking

Don’t fight, unite!

Marriages and families are built on united effort, sacrifice and goals, and the more united, the more successful. That goes for financial decision-making too. Here’s how to go about it:

Divide tasks by interest or talent, and it’s OK for one person to be the overall lead.
Make important decisions together, even if you don’t want to, because you both have skin in this game.
Men and women typically bring complementary talents to the table — and balance is a very good thing in financial matters.
There’s no “I” in “team,” and that means both should get investment trade confirmation emails, online account login credentials, account alerts, etc.
Make room for individual purchases, even if it’s a tiny budget, so that both of you feel a sense of financial autonomy.
Outsource if it doesn’t jeopardize your financial goals, because cooking and cleaning can be stressful and your family time is worth money, too.
Focus on the overlap: The things you agree on are probably the ones worth spending on.
Get help — a financial adviser may be the best investment you ever make.

Good luck, married folks, and may you grow old — and wealthier — together!

Phoebe Venable, chartered financial analyst, is president and COO of CapWealth advisers LLC.

Market Corrections Inspire More Fear than They Merit

Hiring a Financial Adviser Is Absolutely Essential

Fri, 29 May 2015 15:21:31 GMT

I concluded my column last week on the difficulties the middle class faces with the declaration that “you can’t afford not to” budget, invest and perhaps even hire a financial adviser. I’ve done some more thinking on that idea in the past few days and I’ve come to a conclusion.

I was absolutely right. Every one of us could use a financial adviser.

Unfortunately, and understandably, due to the financial crisis many Americans have become leery of the financial sector in general. That’s too bad. Because the truth of the matter is that with better financial guidance, fewer Americans may have gone into too much debt to purchase homes they couldn’t afford. That opinion puts me in good company. Nobel Prize-winning economist Robert Schiller agrees with me.

A critical service

“People make better decisions with financial advisers,” Mr. Schiller told participants at a 2013 conference hosted by the National Association of personal financial advisers and Forbes. Schiller went on to say that it’s even more critical for low- and moderate-income people to get advice because they typically have less financial education and are therefore at more risk. He likened the need for financial advice to the need for health care and even proposed that professional financial advice be subsidized by the government for those who can’t pay for it.

But high-income people, with all their financial sophistication, can make mistakes, too.

An expert in the hot seat

A few years ago, New York Times columnist Paul Sullivan wrote a column called “Financial Advice Gleaned From a Day in the Hot Seat.” In it, the financially shrewd (and wealthy, thanks to a successful career in journalism, authoring books and speaking engagements) Sullivan recounted an afternoon he spent with eight members of the Tiger 21 investment club. Tiger 21 is composed of 300 members who collectively have $30 billion in investable assets — all of it self-made, none of it inherited, by the way. In that session, Sullivan and his wife were grilled on their money decisions and habits: They didn’t have enough insurance, they spent too much and they would be well advised to sell their vacation home.

“What I experienced was rough,” writes Sullivan, “but it was also thought-provoking. The value to me — and to anyone given a similar opportunity — was that the members challenged everything about my assumptions on saving and spending.”

Another objective mind

Sullivan was uncomfortably reminded of something he already knew: It’s impossible for anybody to be an expert on all matters financial. Are you an insurance expert? A tax expert? An education expert? An estate-planning expert? A stock-market expert? A bond expert? A retirement expert? And even if you are super-sharp, have amassed considerable wealth and are the seasoned veteran of many an economic cycle, that same savviness, success and self-assurance can also be a liability. “Pride comes before the fall” because pride lulls us, makes us lazy and deludes us. And if it’s not pride, then it’s emotion. We succumb to euphoria — or, the other end of the pendulum, panic — and we buy and sell according to irrational impulses rather than the dictates of a well-crafted plan.

It’s difficult to be an expert at every financial discipline, just as it is to always remain level-headed when it comes to your own money. And even if you are, you can always, always use another knowledgeable and objective mind.

Phoebe Venable, chartered financial analyst, is president and COO of CapWealth advisers LLC.

Knowing your financial destination can help you prepare for accidents, setbacks

U.S. Middle Class Between a Rock and A Hard Place

Fri, 22 May 2015 15:26:34 GMT

The U.S. is in economic recovery, but it’s been a longer and slower bounce-back than the last five post-recession recuperations. For sure, it could be worse — it has been for the rest of the advanced world — but that’s probably cold comfort for many Americans.

Middle-class financial anxiety

A study published last month by the Federal Reserve Bank of St. Louis titled “The Middle Class May Be Under More Pressure Than You Think” uncovered a deep anxiety and feelings of vulnerability in “families that are neither rich nor poor”: America’s middle class, the social and economic stratum that historically (and perhaps in part legendarily) pulled itself up by the bootstraps, surpassed its parents’ achievements by dint of hard work and dared to dream the American dream. Instead, the study found a middle class whose real incomes, for those who had surpassed their parents’ educational accomplishments, had not significantly improved and, for those who had equaled their parents’ level of education, had actually declined.

Simultaneously, other pillars of middle-class security — housing, higher education, health care, child care and retirement — continue to rise in cost. In short, the middle class’s famed upward mobility has stalled out for many Americans.

The rich getting richer

Meanwhile, incomes have advanced for the uppermost levels of society. That makes many in the middle class mad, though you might consider that ironic given their own wealth aspirations. As Robert H. Frank, a Cornell University economist and author of “The Winner-Take-All Society,” recently told The New York Times: “The gap between you and them is much bigger than it used to be. That’s why people feel more stressed out than they used to be.” Without intending to offer too pat an answer for a complicated issue, I do think this is a tension that’s simply endemic to capitalism: Some have, some have not, but we’re all welcome to try. Economic success always requires hard work, but some luck doesn’t hurt, either.

The elephant in the bank account

What doesn’t make headlines like a struggling economy or the rich-poor gap are the factors that every one of us can control: how much we spend and how much we save. The rich in this country may have outrageous toys and ridiculous amounts of money, but the lower classes do too when compared with much of the world. Many below the poverty line here in the U.S. have smartphones, flatscreen TVs and designer clothes as a matter of course. During the financial crisis and thereafter, American households paid off some debt and got their finances in better order, but only because they had to. According to the latest Federal Reserve data, Americans have been taking on debt once again, with consumer debt now at $11.91 trillion, up 2.6 percent since last year, and average credit card debt per indebted household at $15,609.

Wants vs. needs

While consumer debt does include mortgage and student loans, which finance assets that are expected to rise in value (thus, you might characterize these as “good debt,” or investments in the future), it also includes new cars, video games, $4 coffees and dining out. Things guaranteed to depreciate or be consumed. And more to the point, things you want but don’t actually need.

The middle class is stuck between a rock and a hard place. The rock — recalcitrant and unbreakable by anyone’s individual willpower — is economic realities, which for some can be grim. The hard place — tough, difficult, just not fun — is the disciplined choices we make to improve our own lot and our children’s lot, usually requiring us to forgo immediate gratification for future gratification. Live below your means. Budget, save, invest and maybe even hire a financial adviser for guidance.

You may think you can’t afford to do these things. In reality, you can’t afford not to.

Phoebe Venable, chartered financial analyst, is president and COO of CapWealth Advisors LLC.

Reach Your Financial Goals with A ‘Bucket Strategy’

Fri, 15 May 2015 15:31:33 GMT

Whatever your bucket list, odds are that to-do list of life’s goals will require more than inspiration and derring-do. You’ll probably need a bucketload of money, and that necessitates some financial planning.

Your entire life in buckets

It may help to think of all your wealth and possessions — your assets — as residing in buckets. Cash, including what’s in your checking, savings and money market accounts, as well as in CDs (certificates of deposits), is one bucket. Liquid assets are bucket No. 2: stocks, bonds, mutual funds and the like; they’re called “liquid” because they can be converted into cash quickly and with minimal impact to the price received. The third bucket is real assets — real because they are physical, tangible, not just some figure you see in an account — these include your home(s), car(s), jewelry, land, artwork, etc. And finally, you may have alternative assets such as hedge funds, private equity, venture capital, and options and futures — assets that aren’t traditional “vanilla” investments and are typically used by the wealthy to further diversify their portfolios.

Buckets aren’t created equal

All buckets must be filled, but the rate at which they fill up and pour out are quite different. Some buckets can generate cash. Some buckets eat cash. Some you must dip into continually and others are only for the proverbial rainy day. Let me explain.

We all need a cash bucket to pull from for everyday living expenses. Some of those expenses — groceries, rent or mortgage, utilities, clothing — are essential. Other types of expenses — dining out, vacationing, paying country club fees — are elective lifestyle choices. Your cash bucket can make a modicum of cash through interest (money market rates today are around 0.5 percent), but mostly it’s constantly draining and must be continually filled. You pour in your paycheck during your working years, and you can fill it with cash generated through profits from other buckets.

The bucket challenge: keeping them filled

Your liquid assets bucket is one that, ideally, you feed regularly with direct deposits into your 401(k), annual contributions to IRAs and building out a diversified portfolio. Over the long term you watch it grow as the values of those instruments go up and dividends are reinvested. You only ladle out from it for special occasions, like your kids’ education or a boat, and for your future lifestyle choices, such as your retirement or a vacation home. The alternative assets bucket is similar to this, only you probably dip into it even less frequently. Classically, these investments are multigenerational in purpose: for your kids, grandkids, great-grandkids, foundations and charities.

The bucket challenge: keeping them filled

As you can see, there’s a complex interplay among these buckets, with the contents of one depending on the contents of another. And no matter the specific calculus of your lifestyle, there’s a single truth for all us. The net generation of cash from the buckets must exceed the net depletion of cash, or all buckets go dry. To keep that from happening takes some careful planning and perhaps the guidance of a financial adviser.

Finally, the bucket-list bucket

The good news is that when you understand the bucket dynamics and have a good financial plan, you will observe your income, bucket No. 2 and bucket No. 4, making enough money to keep buckets No. 1 and No. 3, as well as themselves, filled for the rest of your life (and possibly beyond). Which means you can finally add a fifth bucket: your bucket list! Fill it with skydiving, strolling the Great Wall of China, running with the bulls, cruising in your convertible or lying on the beach in Florida. It’s the bucket that has absolutely nothing to do with making money, but making happiness, and you deserve it. But if your desire for it is more than just lip service, it’s time to develop a bucket strategy to make it happen.

Phoebe Venable, chartered financial analyst, is president and COO of CapWealth Advisors LLC. Her column on women, families and building wealth appears each Saturday in The Tennessean.

Financial industry works to regain trust of investors

Fri, 08 May 2015 16:26:09 GMT

Gov. Bill Haslam has proclaimed May 2015 “Putting Investors First” Month as a way to recognize the important place that investing and the investment profession have in a vibrant, growing state economy. The governor’s declaration was done in partnership with the Chartered Financial Analysts (CFA) Societies of Tennessee, which are the local chapters of the CFA Institute, a nonprofit organization that represents investment and financial analyst professionals worldwide.

The financial industry is acutely aware that the financial crisis caused many investors to lose faith in their profession — and rightfully so, given the evictions, foreclosures, unemployment, market declines and ugly headlines that dominated our national life then. So investors should be encouraged that both the governor and a preeminent institution representing investment and financial professionals are shining a light on investing and the investor. After all, much of what you work so hard for — your home, your retirement, your plans for your children and your grandchildren — is predicated on the work of this industry and your decision to participate in it or not.

Investors have rights

The Statement of Investor Rights was developed by the CFA Institute to advise the buyers of financial service products — that’s the average investor like me and you — of the conduct they should expect from financial service providers. These rights reflect the fundamental ethical principles that are critical to achieving confidence and trust in any professional relationship. The list applies to financial products and services such as investment management, research and advice, personal banking, insurance and real estate. Whether you are establishing an investment plan, working with a broker, opening a bank account or buying a home, the Statement of Investor Rights is a tool to help you get the information you need, the service you deserve and the trust that is so vital to a building your financial future with the help of a professional.

Here they are. “When engaging the services of financial professionals and organizations, I have the right to:

Honest , competent and ethical conduct that complies with applicable law.
Independent and objective advice and assistance based on informed analysis, prudent judgment and diligent effort.
My financial interests taking precedence over those of the professional and the organization.
Fair treatment with respect to other clients.
Disclosure of any existing or potential conflicts of interest in providing products or services to me.
Understanding of my circumstances, so that any advice provided is suitable and based on my financial objectives and constraints.
Clear, accurate, complete and timely communications that use plain language and are presented in a format that conveys the information effectively.
An explanation of all fees and costs charged to me, and information showing these expenses to be fair and reasonable.
Confidentiality of my information.
Appropriate and complete records to support the work done on my behalf.”

Take it from me, both as an investor and a financial adviser who has earned the CFA charter, the absence of any of these tenets can mean big trouble for your financial future. So if these don’t accurately characterize your relationship with your financial professional, it’s time for a new relationship. Posthaste.

“Putting Investors First” Month kicks off a campaign by the CFA Society of Nashville to celebrate the independent member society’s 50 years in the city, culminating with the Future of Finance Celebration to be held in July. The theme of the celebration will be to highlight the importance of professionals and regulators working together to protect the interests of the individual investor. As part of the celebration, the society will be raising donations to support two important financial literacy organizations in Tennessee: Rock the Street, Wall Street and the Tennessee Financial Literacy Commission.

Rock The Street, Wall Street promotes careers in finance to high school girls. The Tennessee Financial Literacy Commission is a program of the Tennessee Treasury Department that aims to equip Tennesseans with the knowledge to make sound financial decisions. These two organizations are focused on raising the next generation to be educated and informed investors.

For more information about the CFA Society of Nashville, visit CFASociety.org/Nashville.

Personal finance: Keep your guard up, learn the sneaky ways scammers work

7 Tips for Buying a Home

Fri, 01 May 2015 15:38:57 GMT

Buying a home can be challenging: a nice word for stressful, time-consuming, mystifying and sometimes even heart-breaking. Not to mention, it’s going to involve a whole lot of money.

Here are a few handy tips to make a challenging process a little easier.

1. Are you ready for the plunge?

You’re making perhaps the biggest purchase of your life, so be sure you’ve thought it through.

Do you have good credit? Do you have the standard 20 percent down payment (there are loans for those that don’t)? Prepared for the “sleeper costs” of a home ownership: property taxes, home insurance, HOA dues and maintenance costs? Tallied your must-haves vs. your like-to-haves? Is the neighborhood right? Are the schools right? Is the kitchen tile right? Committed to staying put for a few years?

With the transaction costs of buying a home, you may end up wasting money if you sell sooner, and renting may be the better choice.

There are a variety of rules of thumb on how much home you can afford. But there are even more online calculators that can tell you how your income, debt and expenses affect what you can take on. Use them.

If you’re taking out a Federal Housing Administration-insured loan, your total home payment can’t exceed 31 percent of your gross monthly income. For conventional loans, a safe formula is don’t exceed 28 percent.

2. Don’t try to time the market

Real estate is cyclical, and those market vicissitudes can’t be predicted. If you try to find the perfect time to buy, you might miss out on the perfect home. The ideal time to buy a home is when your desire to do so, the need to do so and your ability to do so are aligned.

3. Pre-approval means preparedness — and an education on closing costs

If you’re a serious home shopper, get pre-approved for a loan. Pre-approval tells you how much you can afford and allows you to be taken seriously by sellers. Hopefully it also means you’ve shopped around for the best deal and interest rates.

If you’ve done your research, you’ll know a lot more about what to expect at closing — namely, a whole litany of fees demanded by lenders, attorneys, insurance and local government that typically add up to 2 to 5 percent of the home’s purchase price. These include appraisal, title insurance, title search, recording, underwriting, attorney, escrow deposit, loan origination, discount points and more. Some fees you can try haggling over — it’s worth a shot.

4. Get professional help

Despite the cost of a real estate agent (the commission rate is generally 5 percent or 6 percent of the sales price) and the fact that you can browse listings online, most buyers are still better off using a professional agent.

“A good agent’s network of relationships can be the deal-maker for a buyer,” says Shelly Bearden, a broker with Nashville’s Worth Properties. “A good agent can find homes that aren’t yet on the market and has numerous resources — electricians, plumbers, contractors, environmentalists — one call away when they’re needed. Inventory and timeliness are critical to successful home-buying.”

5. Do your homework before bidding

Your opening bid should be an educated one, based on what similar homes in the neighborhood —“comps,” short for comparables, in real estate lingo — have sold for in the past three months on a price per square foot basis. If the homes have been selling for 7 percent below asking price on average, then your first offer should be at least that much below the asking price.

6. Inspect what you’re buying

You’re about to spend a whole lot of money on a home — you should know exactly what you’re getting. The only way to get an unbiased and professional opinion is to hire a home inspector. He or she will closely examine the home and point out damage and problems that could cost you big down the road.

The information could change your mind on the home or provide additional leverage as you negotiate the price. The couple hundred dollars is well worth it.

7. You’re a proud homeowner — now what?

Home ownership is rife with surprises, and seemingly never of the inexpensive variety. Roofs to replace, HVAC systems to repair, unexpected weather damage to mitigate. It’s a good idea to start or enlarge an emergency fund for your new home.

To stay ahead of those problems and protect your investment, be sure to perform regular maintenance.

And finally, resist the temptation to believe your new home is the goose that lays the golden eggs for retirement. Many people, if they stay in a home long enough, will see its value grow. But as the housing bubble so vividly demonstrated, not everyone makes a killing on their home. Continue to save as much as you can for retirement, taking full advantage of 401(k)s, IRAs and other investment instruments.

Phoebe Venable, chartered financial analyst, is President & COO of CapWealth Advisors LLC. Her column on women, families and building wealth appears each Saturday in The Tennessean.

Reach Your Financial Goals with A ‘Bucket Strategy’

Will the 20-Dollar Bill Get a Female Face-Lift?

Fri, 24 Apr 2015 15:42:37 GMT

Do you know whose face graces all seven denominations of U.S. paper currency? What about the $500, $1000, $5000 and $10,000, all bills that have been printed in the past?

Here's the short answer: dead men.

Two U.S. lawmakers, and a host of advocates across the country, are working to change that. This past week U.S. Representative Luis Gutierrez and U.S. Senator Jeanne Shaheen introduced bills that would direct the U.S. Treasury Department to select a famous American woman to replace Andrew Jackson as the face of the $20 bill. "If this is a country that truly believes in equality, it is time to put our money where our mouths are, literally, and express that sense of justice and fairness on the most widely used bill in circulation," said Gutiérrez.

Why now?

On Aug. 18, 1920, the 19th Amendment to the U.S. Constitution was ratified and gave women the right to vote — a right known as woman suffrage. The demand for the right to vote was the centerpiece of the women's rights movement and achieving this milestone required a difficult, seven-decade struggle in which supporters marched, lobbied, wrote and practiced civil disobedience. At the time of its passage, it was considered a radical change of the Constitution.

In five years, our country will celebrate the centennial of this victory and a grassroots organization called Women On 20s hopes to generate an overwhelming people's mandate for a new $20 bill to be issued in time for it. The group has asked their website visitors to vote on the female historical figure they would like to see on the 20, beginning with a list of 100 candidates. Today, that list has been narrowed down to four American-hero women: Eleanor Roosevelt, Harriet Tubman, Rosa Parks and Cherokee Nation Chief Wilma Mankiller.

Wait, aren't women already on money?

Currently, there are no women on U.S. paper currency. Susan B. Anthony, our nation's most famous suffragist, became the first woman to have her image on an American coin (not counting Lady Liberty) in 1978. The Susan B. Anthony one-dollar coin replaced the large Eisenhower one-dollar coin. It didn't take long for the public to get frustrated with this new coin that was easily mistaken for a quarter.

With fewer than 800 million minted, Congress decided to replace the Susan B. Anthony with a gold-colored dollar coin depicting another legendary woman, Lewis & Clark's Shoshone Indian guide Sacajawea. This one, too, proved unpopular and usage of both coins is mostly limited to vending machines.

What's wrong with Andrew Jackson?

It is not a coincidence that Cherokee Chief Wilma Mankiller is a finalist. Some would consider it poetic justice to have a Cherokee Native American replace the seventh president of the United States, the man who authorized the Indian Removal Act of 1803 and displaced Native American tribes to make more room for white Europeans — by force, and with loss of life due to disease and starvation, thus the better-known name for the relocation: The Trail of Tears.

Moreover, noted as he was for his military successes and for establishing the Democratic Party, Jackson opposed centralized banking and favored silver and gold coins over paper currency, making him for many an ironic choice for portraiture on our money.

Where I stand

I consider myself a modern woman, I'm a female professional in a male-dominated industry and I'm grateful for all the women trailblazers that came before me. But to be honest, I've never before given much thought to why women aren't represented on our paper currency. During my career, I've been far more concerned about women's representation in leadership roles, in both politics and corporate America, and in how I personally performed.

I applaud the work of this movement for whatever success it may have in empowering women. But I also entreat every woman to do their individual work, whatever it is, as excellently as possible. Because there's power and pride in that, too.

As the famed feminist Gloria Steinem once said, "The future depends entirely on what each of us does every day; a movement is only people moving." If you'd like to learn more about this movement, visit www.womenon20s.org .

Phoebe Venable, chartered financial analyst, is President & COO of CapWealth Advisors LLC. Her column on women, families and building wealth appears each Saturday in The Tennessean.

Benefits of Trusts Shouldn’t Be Overlooked

Fri, 17 Apr 2015 16:39:02 GMT

A lot of estate-planning attorneys think everyone who walks through their doors should have a trust. The actor Philip Seymour Hoffman, who died in February 2014 and left a $34 million estate to his children and their mother by will, didn’t think he needed one.

They’re both wrong, and the truth lies somewhere in between. A will should suffice for many of us. But there are also many people who could benefit from a trust, but don’t have one because they’re either uninformed or misinformed about them.

Will vs. trust

The most common trust is a “revocable living trust,” a legal document created by you (the grantor) during your lifetime that spells out exactly what your desires are with regard to your assets, your dependents and your heirs (the beneficiaries). It names a trustee (like an executor of a will) to carry out those instructions.

So what’s the difference — and the benefit — over a will? When you die with (or without) a will, a court process known as probate begins by which your estate is sorted out and administered. Probate can be time-consuming and costly. With a trust, that’s all bypassed, and your trustee can immediately begin carrying out your trust’s instructions (the same goes if you’re mentally or physically incapacitated). Other benefits include those two adjectives: “revocable” and “living.” It’s “revocable” because the trust can be changed by the grantor anytime he or she wants as long as he or she is competent; it’s “living” because once funded with assets, a trust can start working during a person’s life. There’s another potentially huge benefit to a trust: Probate is a public process, meaning every detail is available to anyone wishing to review court records. A trust is private.

Fortunately, some familiar assets — such as life insurance policies, retirement accounts and annuities with designated beneficiaries, as well as jointly owned assets with rights of survivorship — are exempt from probate. So in determining if a trust is right for you, you must weigh the legal costs of creating a trust, which can easily be thousands of dollars, versus the potential costs and other downsides of probate, and consider assets you own that aren’t exempt from probate in your state.

Many kinds of trusts

This has been a very basic introduction to trusts. There are many kinds of trusts that convey very different benefits to those that use them.

Bypass and generation-skipping trusts help wealthy people minimize estate taxes.
Special needs trusts provide financial support to a person who is disabled or otherwise unable to support himself or herself.
Spendthrift trusts distribute inheritance to an heir in your chosen method rather than in a lump sum.
Life insurance trusts help high-net-worth individuals strategically manage their insurance policies for payment, tax and beneficiary purposes.
Charitable remainder trusts do much the same for an individual’s charitable giving.
A Qualified Terminable Interest Property Trust ensures your estate goes to your chosen beneficiaries and not your spouse’s next spouse, for instance.

‘Trust fund kids’

According to court documents, Hoffman didn’t want his three children to become “trust fund kids” and ignored both his lawyer’s and accountant’s advice to create a trust rather than relying on a will. He had perhaps admirable intentions, if by “trust fund kids” he meant lazy and spoiled. Unfortunately his impulse was an unconsidered and uninvestigated one. It’s now up to his longtime girlfriend and mother of his children to make all the decisions about their inheritance, and the estate will pay dearly in taxes.

With a trust, Hoffman could have saved his loved ones so heavy a tax burden; shielded his children from their mother’s misfortunes should she ever develop debt, spending or health problems; and finally, even protected his children from themselves by dictating precisely when and how much money they would receive. Distributions from the trust could have been predicated upon the children attaining specific ages; getting a college degree; earning an income and becoming self-sufficient; doing charitable work — any number of hoped-for proofs against becoming the proverbial spoiled, unambitious trust-fund kid.

Hoffman got his wish. And in doing so, a large portion of his estate will be squandered in taxes, money that could have been directed to specific uses by him. Moreover, and ironically, his children probably will still inherit substantial amounts of money one day. And without a trust, they’ll get it in one lump sum without any restrictions on how they’ll “earn” it — conditions he could have set that might have helped mold his children into the kind of adults who would have made him proud. “Instantaneously rich kids” may well be a fate worse than “trust fund kids.”

Phoebe Venable, chartered financial analyst, is president and COO of CapWealth Advisors LLC. Her column on women, families and building wealth appears each Saturday in The Tennessean.

5 tips for achieving financial independence

Despite Disappointing Q1, Signs Looking up For Economy

Fri, 10 Apr 2015 16:42:28 GMT

The first quarter is in the books, and it was a disappointing one for the stock market — and perhaps your portfolio, too. Weak beginning-of-the-year growth has been a recurring theme in recent years, with the first quarter averaging a paltry 0.6 percent in growth from 2010 to 2014 compared with 2.9 percent in the other three quarters of those years. Let’s review 2015’s slow start, then I’ll offer signs for a rebound, if not in the second quarter, then the second half of the year.

Equities: U.S. large-cap equities — stocks of companies whose total market value of shares outstanding is more than $10 million, so the “big kahunas” of the market — fell modestly over the quarter. Add to that mixed economic data from the labor markets and consumer behavior, anticipation of an interest rate hike by the Federal Reserve and the effects of a strong U.S. dollar through the global economic landscape, and the U.S. stock market was held to a relatively tight trading range. The S&P 500 fell 1.7 percent in March after hitting an all-time high earlier in the month. The Russell 2,000, an index of small-capitalization company shares (not as well-known or celebrated as those “big kahunas,” but just as critical to our economy and a balanced portfolio), rose 1.7 percent in March and at the end of the quarter was up a strong 4.3 percent.

Fixed income: U.S. government bonds were little changed in March, with the benchmark 10-year yield ending the month at 1.93 percent vs. 2 percent at the end of February. However, it is worth noting that treasury yields have now fallen for five consecutive quarters — the longest stretch since March 2001. Dovish global central bank activity — including low rates intended to keep money moving freely and overseas economies stimulated — and a trend of disappointing U.S. economic data points all contributed to the downdraft in rates.

Foreign exchange market: The U.S. dollar’s rapid ascent against other major currencies continued this past quarter. The DXY (U.S. Dollar Index) rose 3.2 percent in March and finished the first quarter up 9 percent, its largest quarterly gain since 2008. Meanwhile, the euro dropped 4.3 percent vs. the U.S. dollar in March and is now down 11 percent in the year to date. One euro is now equal to $1.08, the cheapest it’s been since 2003. This makes European travel much less expensive than, say, last summer, when the euro was equal to $1.30.

Oil: WTI (West Texas Intermediate, also known as Texas light sweet, is a grade of crude oil used as a benchmark in pricing; “light” because of low density, “sweet” because of its low sulfur content) oil fell to the low $40s before bouncing back by month’s end to $47.60. Overall, it dropped 4.3 percent in March and 11 percent in Q1. Rising domestic inventories (which oil companies are currently addressing by lowering rig counts) and tepid demand (there’s a large inventory backlog) have weighed down oil prices.

Reasons for optimism: There’s no doubt that the market is struggling right now, confronted as it is with disappointing U.S. macroeconomic data that has real GDP tracking at around 1 percent and a trend of negatively revised earnings estimates. However, the not-so-great Q1 data sets us up nicely for a delayed Fed interest liftoff, with macroeconomic data likely to stabilize in the second quarter.

Moreover, there are reasons to believe the first quarter was not as bad as the real GDP number indicates. If you look at the Current Activity Indicator, which aggregates the 25 most important weekly and monthly indicators of U.S. economic activity, and which I tend to consider “real-time GDP,” growth only slowed slightly in March to 2.7 percent. And when you factor in the first quarter’s distortion owing to inclement wintry weather, which was a 0.5 percent to 1 percent drag on the economy, and the positive sign that corporate America is buying back its own stock ($251 billion in incremental authorizations compared with $198 billion this time last year), a rosy second-quarter or second-half forecast is more than justifiable.

Phoebe Venable, chartered financial analyst, is president and COO of CapWealth Advisors LLC. Her column on women, families and building wealth appears each Saturday in The Tennessean.

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Financial market tests automated robo-advisers

Thu, 26 Mar 2015 20:11:34 GMT

Technology has come a long way in a very short amount of time, transforming with ever-accelerating speed the way we communicate, learn, shop, travel, work and gather information. Technology touches nearly every facet of our lives in more ways that we can possibly count, and finance and investing is no exception.

Evolving market

Real-time quotes for stocks, bonds, commodities and currencies from around the globe are available on our phones today; a physical place where buyers and sellers of stock met to hash out prices and trades, how we get the very name stock market, seems rather antiquated now, doesn't it?

As we speak, financial service firms are adopting new technologies to increase their efficiency and increase the satisfaction of their customers. Continuing advances in technology will allow the financial services industry to deploy increasingly complex, powerful analytics to help themselves and their clients make better informed investing decisions.

Traditionally, investors had two choices when it came to managing their portfolios: DIY or hire an adviser. Thanks to technology, there is a new option: robo-advisers. Yes, you read that correctly, robo-advisers. As in robot.

Enter the robo-adviser

Robo-advisers are automated financial advisers that provide portfolio management through the use of computers and algorithms with limited human intervention. The portfolios are constructed with low-cost, passive exchange-traded funds. Fees can be as low as 0.25 percent of the market value of the assets in the portfolio, a rate that compares favorably to the industry average range of 1 percent to 2 percent charged by human advisers. But what does the investor get for this low-priced, software-powered adviser?

Automated investment service providers, the more formal designation for these systems, require new customers to select an asset allocation, the percentage of the investor's money that will be invested in bonds and stocks. Once the split between stocks and bonds is selected by the customer, the robo-adviser does virtually everything else from investing to rebalancing to dividend reinvestment. Some of these new firms have even added tax-loss harvesting to their menu of services.

In infancy, but gaining traction

According to consulting firm Aite , as of last October there were 13 main players with about $4 billion in assets under management. To put that into perspective, Vanguard Group , the country's largest mutual fund company, manages about $3 trillion in assets. Clearly, robo-advisers are still in their infancy but mutual fund companies and investment managers are taking notice. Recently both Charles Schwab and Fidelity announced plan to offer robo-adviser services.

Heavy on robo, light on advice

Are advisers with a heartbeat concerned about competition from advisers with an algorithm? Not terribly so, at least not yet. The single most important service that a financial adviser provides an investor is advice — on just about any issue with financial ramifications that life can throw at you. Which can be a lot.

Meanwhile, the robo-adviser's fee covers the cost of constructing a portfolio based upon a few inputs and, so far at least, that's where its responsibilities end. While most of us don't mind answering a few questions online that help us create a new music-streaming station or purchase a new gadget, few of us would entrust our entire financial future to a similar process.

Living, breathing financial advisers — the good ones — are skilled at changing investment portfolios when a client's life changes, as it inevitably will with career moves, marriage, children, college tuition, divorce, grandchildren and retirement, to name a few life events. Human advisers are there to talk to clients when reassurance about staying the course, or altering the course, is needed during difficult markets.

It would be easy to delete an email alert from your robo-adviser, but a phone call from your financial adviser isn't so easily ignored. And for good reason.

The problem with personal finance is that the finance is just so personal, and that's why the best financial advisers have a knack for both.

Phoebe Venable, chartered financial analyst, is President & COO of CapWealth Advisors LLC. Her column on women, families and building wealth appears each Saturday in The Tennessean.

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‘Perfect’ Wedding Can Cripple Your Financial Future

Fri, 20 Mar 2015 16:46:01 GMT

Couples spent an average of $31,213 last year for their big day (including the engagement ring), according to wedding website The Knot’s latest annual comprehensive wedding study.

Before I go on, let’s be clear: I love weddings. I love marriage. I love my husband and my son, the most obvious and precious result of my own marriage. But I hate this number. I loathe it because there are far too many families who can’t afford it but are finding a way — be it begging, stealing (from their own savings) or borrowing — to fork it over anyway in what amounts to nationwide lunacy.

Too much debt, too little retirement

According to a January article by The Motley Fool’s Todd Campbell, who analyzed data from the Federal Reserve and the U.S. Census, the average amount of credit card debt is $7,630 per American household. The average household debt is $70,323 for a mortgage, $11,245 for student loans and $8,163 for vehicles. I emphasize “average,” because this is across all American households, whether they actually have debt or not. But on average, that’s $97,362 in debt for every American household.

The personal-finance picture gets darker when you consider American retirement savings. According to a Wells Fargo study published last fall, 34 percent of middle-class respondents aren’t saving a red cent for retirement, 72 percent wish they had started saving earlier in life and almost half say they aren’t confident their savings will allow them to live the lifestyle they want in retirement. The median retirement savings is $20,000 — less than the average price tag of a wedding. A recent study from BlackRock, the world’s largest money manager, is bleaker: Surveying Americans from all levels of wealth, it states that a full 40 percent aren’t saving for retirement.

Is a $30,000 party prudent?

What’s my point? Far too many Americans aren’t in good fiscal shape and/or are headed for debt in their lives. Given that, does it really make sense to blow upward of $30,000 on a single day of partying? Whether it’s the betrothed couple or their parents who are footing the bill, why not begin marriage practicing financial restraint and priority-setting? And if money isn’t a concern, why not invest it or make a house down payment instead? Converted into 1988 dollars (the year I got married) and using a historical returns calculator, an investment of today’s average wedding cost into the S&P 500 with dividends reinvested would have yielded my portfolio roughly $190,000 as of the end of last month!

I have irreplaceable memories from my own simple, inexpensive wedding celebration in my parents’ backyard in the Kentucky countryside, and I really don’t think that the most extravagant gala could have enhanced those memories by a dime’s worth of value — and certainly not by nearly $200,000.

Psychological pressure

I get it. Your wedding day is special. It’s symbolic. It’s a day that you may have dreamed about your entire lives. But we’re all victims of a culture of rampant consumerism and a 55-billion-dollar wedding industry bent upon commodifying romance. Up against the pressure of advertisers, of society, of friends and family, even our own ad-influenced psyches, we feel we must have a wedding demonstrative of our love and commitment. Don’t believe it? Consider this: just a few years before the De Beers diamond company launched the “A Diamond Is Forever” campaign in 1947, only 10 percent of engagement rings in the Western world contained a diamond.

I’ll conclude with the worst news of all regarding costly weddings: They may actually be detrimental to your marriage.

Costly weddings increase odds of divorce

According to a study by Emory University economists Andrew Francis and Hugo Mialon published last fall, “marriage duration is inversely associated with spending on the engagement ring and the wedding ceremony.” Let me say that more plainly: The more you spend, the greater the likelihood of divorce. A few of their findings:

In the sample of men surveyed, spending $2,000 to $4,000 on an engagement ring was associated with a 1.3 times greater hazard of divorce as compared with spending between $500 and $2,000. Spending $1,000 or less on the wedding was significantly associated with a decrease in the hazard of divorce in the sample of all persons surveyed.
Using those who spent $5,000 to $10,000 on their wedding as a reference point because their divorce rates were consistent with the national average: Those who spent $10,000 to $20,000 were 29 percent more likely to divorce, those who spent more than $20,000 were 46 percent more likely, those who spent $1,000 to $5,000 were 18 percent less likely to divorce and those who spent less than $1,000 were 53 percent less likely.
Spending less than $1,000 on the wedding was associated with an 82 percent to 93 percent decrease in the odds of being stressed about wedding-related debt.

The study uncovers an associative, not a causative, link and we can only surmise that debt and financial stress played a part in the higher rates of divorce. As you know, money problems are often cited as the No. 1 cause of divorce in the U.S.

Nothing is forever. But financial discipline — along with patience, respect and putting the marriage above the individual — will go much further than any diamond or $2,000 wedding dress. For help realizing your lifestyle and retirement dreams, talk to a financial adviser.

Phoebe Venable, chartered financial analyst, is president and COO of CapWealth Advisors LLC. Her column on women, families and building wealth appears each Saturday in The Tennessean.

Millennials Will Change Jobs More; Be Prepared For It

Smart Money Is Betting on Artificial Intelligence

Mon, 16 Mar 2015 16:48:57 GMT

A couple of weeks ago, it was revealed in the news that Bridgewater Associates, the world’s largest hedge fund manager with over $165 billion in assets, is forming a new artificial-intelligence (AI) unit. The unit will be headed by David Ferruci, the principal scientist behind the team of IBM and academic engineers and researchers that developed the Watson computer system that in 2011 famously competed on “Jeopardy!” against two former winners and took the million-dollar first prize.

Big money is betting on AI

Why in the world would the world’s largest hedge fund company start an AI division? Well, it doesn’t take a lot of smarts, artificial or otherwise, to answer that. It’s precisely because they are the world’s largest hedge fund company. The AI unit will devise trading algorithms that make market predictions based upon historical data and statistical probabilities — and like all AI systems, it will adapt to new information and get smarter as it goes. Bridgewater is betting that AI will make them better bettors!

The bottom line: AI has arrived, it’s powerful and it means business — big, big business with a whole lot of dollar signs. Naturally, a hedge fund is going to take notice. And whether you’ve noticed or not, AI is drawing on and perhaps even impacting your life already.

AI has gotten smarter, faster

Defined simply (but it can get complicated quickly) as the development of computer systems that can behave like humans — performing visual perception, speech recognition, decision-making and language translation, for instance — AI has come a long way in recent years thanks to three advancements, explains Kevin Kelly in a recent Wired magazine article.

These advancements — the parallel graphical computer chip developed by the video-gaming industry; the torrents of data created and collected daily over our computers, smartphone and other connected devices; and, finally, the kind of deep-learning algorithms used by the likes of search engines, Facebook, Spotify, Amazon and Netflix — are empowering the neural networks of AI to act more and more like the neural networks of real human brains.

Every day, the neural nodes of AI software are getting better at mutually interacting and making sense of the input, learning more with each instance of trillions of examples, and accelerating the results up the neural ladder for finer-tuned parsing.

From Siri to saving lives

To cite a few examples, we already have gaming systems that turn the body into a controller and apps for searching photos and are ever-closer to software that can translate speech in real time and self-driving cars. Many of us are already using an AI-aided personal assistant such as Apple’s Siri, Amazon’s Alexa (inside Echo), Microsoft’s Cortana and Google Now.

Watson, the IBM super-computer that beat the “Jeopardy!” champions, has become an assistant himself. But instead of scheduling meetings or finding the closest pizza joint, Watson is saving lives by helping hospitals and clinics diagnose cancer. According to IBM’s healthcare company partner Wellpoint, Watson correctly diagnoses lung cancer 90 percent of the time, compared to 50 percent for human doctors.

Is the future really now?

The sky, it would appear, is the limit. If you believe some prognosticators such as Ray Kurzweil, the author of the wave-making “The Singularity Is Near,” AI will progress so rapidly in a mere three decades’ time that it will be far more powerful than all of human intelligence combined and will utterly transform what it means to be human. While that may sound outrageous, like something out of a sci-fi movie, remember this: Who among you, other than sci-fi enthusiasts, would have predicted our current digital epoch a mere 30 years ago? Kurzweil has his skeptics, but there are plenty of scientists, futurists, analysts and industry watchers that do believe that we’re on the cusp of an AI revolution, even if they don’t go as far as his predictions.

Money is pouring into AI

No matter what you believe about AI, you can depend on this: Private investment is pouring into it. According to a report last year by quantitative analysis firm Quid, AI had attracted more than $17 billion since 2009 and grown over 60 percent a year for the previous four years. And companies such as Yahoo, Intel, Dropbox, LinkedIn, Pinterest and Twitter are eagerly acquiring AI startups to supercharge their own businesses.

Expect Labs CEO Tim Tuttle told The Financial Times in January that there’s a “wild-west mentality” in the AI industry right now, with entrepreneurs scrambling to create real-world AI applications.

“This is a hot place to be,” agreed Stephen Purpura, the CEO and co-founder of Context Relevant , another AI firm.

As you can see, the smart money’s on artificial intelligence.

Phoebe Venable, chartered financial analyst, is President & COO of CapWealth Advisors LLC. Her column on women, families and building wealth appears each Saturday in The Tennessean.

Know Who’s Giving You Financial Advice: Broker or Adviser

Thu, 05 Mar 2015 16:51:36 GMT

President Obama has talked a lot about “middle class economics” and this discussion has now expanded into the investment world. Recently the White House released a fact sheet stating that protecting workers and retirees from conflicted investment advice is part of the president’s focus.

The president’s proposal is to hold financial advisers handling retirement accounts (IRAs) and retirement plans to a fiduciary standard. What does that mean? Brokers would be held to a higher standard, requiring them to put their clients’ financial interests ahead of their own. Speaking at an event hosted by the AARP Inc., formerly known as the American Association of Retired Persons, Obama said, “It’s a very simple principle: You want to give financial advice, you’ve got to put your client’s interests first. You can’t have a conflict of interest.” Shouldn’t brokers already be doing this?

At the heart of this debate is the difference between the fiduciary standard and the suitability standard and the difference is critical in understanding the motivation behind the person offering you financial products or advice.

Broker

A broker is held to the suitability standard. They offer financial products for sale from a range of products carried by the company he or she represents. A broker is paid commissions, which can be flat rates or calculated as a percentage of the amount of money invested into the product.

Adviser

An adviser is held to the fiduciary standard and offers “best advice,” taking into account the needs of each individual client, disclosing all possible conflicts of interest. Advisers are paid a quarterly fee calculated as a percentage of the assets under advisement.

The lower suitability standard means brokers must sell “suitable” products even if they are not the most cost-effective or the best performing option for the investor. The broker only needs to check the suitability of the investor based primarily upon financial objectives, current income level and age in order to complete a commissionable sale. No disclosure of possible conflicts of interest is required.

Under the proposed new standards, brokers would be required to disclose if they are recommending products that are underperforming or more expensive than other available options. President Obama said there are many brokers who receive “back-door payments or hidden fees for steering people into bad retirement investments that have high fees and low returns,” reducing retirement nest eggs.

The White House Council of Economic Advisers said conflicted investment advice for retirement accounts costs about $17 billion each year nationwide.

Just because a broker receives a commission doesn’t mean the investor has been mistreated or swindled. The Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) already have rules on the books that help protect investors and savers.

For the average investor, the real question is do you know if you are working with an adviser (fiduciary standard) or a broker (suitability standard)? Regulators have long been aggravated by brokers using the title “financial adviser.” Investors need to simply ask your current or prospective financial advisers if they are acting as a broker or an adviser. Ask them to formally list all methods in which their company can receive commissions. If they cannot or will not provide this list, find an adviser that will.

Phoebe Venable, chartered financial analyst, is President & COO of CapWealth Advisors LLC. Her column on women, families and building wealth appears each Saturday in The Tennessean.

CapWealth Hosts Tech-Talk Luncheon with FirstBank and Belmont University

Skipping College Could Cost You Half a Million Dollars

Fri, 27 Feb 2015 16:55:24 GMT

The past 15 years has been economic rough going and we’ve all read alarming news about jobless, indebted college graduates. Although it runs defiantly counter to decades — if not centuries — of conventional wisdom and a quintessentially American aspiration, it does beg the question: Is college still worth it?

A billionaire’s experiment

PayPal founder and billionaire Peter Thiel quite famously believes the answer is a resounding “no”: College is too costly, rewards conformity and teaches nothing about entrepreneurship. So in 2010, the Silicon Valley legend established the Thiel Fellowships to give up to $100,000 to people under 20 to “stop out of school” and pursue their vocational dreams. In addition to the money, the fellowship now offers retreats, internships and mentors from the industries in which the fellows are interested.

Has his experiment worked? It’s probably too early to judge, and it depends on whom you ask. According to The Chronicle for Higher Education , which published a story on Thiel’s program on Feb. 8, the 83 fellows thus far have raised $72 million in seed money and produced $29 million in revenue. “Almost all of them learned more than they would have in college,” Thiel says. But even Paul Gu, co-founder of online lending company Upstart and Thiel fellow himself, has some ambivalence about it: “Are there alternatives to college? Yes, but you have to work pretty hard. It’s pretty unrealistic that most people would find those things on their own. Most people would be better off going to college.”

So what’s the real answer? Let’s look at some numbers.

Pay gap continues to grow

According to an analysis by the Economic Policy Institute last year, Americans with four-year degrees made 98 percent more an hour on average than those without a degree. That’s the largest pay gap in history, up from 85 percent a decade ago and 64 percent in the early 1980s. Based on this data, a college degree has never been more valuable. And that’s in spite of the very regrettable facts — which have undoubtedly caused the public to look askance at a college education — that the cost of college has risen by almost five times the rate of inflation since 1983 and graduate salaries have remained flat for nearly 10 years. The grim reality is that much of the reason a college degree is so valuable is because there’s not enough graduates and wages for the uneducated to continue to drop.

The negative cost of college

That’s why the college cost we should really be focused on, argues M.I.T. professor David Autor, is the cost of not going. In a paper he published last May in the journal Science (in which he built on the work of economists Christopher Avery and Sarah Turner), Autor calculates that the cost of a college degree is negative $500,000 — meaning that college is cheaper than free because the decision to not get a college degree will cost you a half a million dollars! Autor arrives at this figure by determining the real cost of tuition plus fees, subtracting that from the lifetime earnings differential between college graduates and high school graduates, and then adjusting for inflation and time value of money.

For those paying off their $25,000 in college loans (the average debt among four-year college graduates, according to the College Board), your debt suddenly appears more than manageable.

College is a hard decision

College is a decision that’s really comprised of many decisions. What school should you attend? Public or private? How much debt should you incur? What major?

How do you put a price tag on the intangibles such as making lifelong friends, networking, meeting your spouse, dramatically expanding your experiences and opening your mind to the lessons and joys of history, art and philosophy?

Colleges and careers were not created equal, so you should be pragmatic enough to consider the salary potential of different majors and the costs of individual schools. The research firm PayScale has gathered data on graduates from more than 900 colleges and estimates the financial returns of different degrees and schools. For instance, the average degree from the University of Virginia offers an annual return over 20 years (calculated as earnings minus the cost of college versus the earnings of average high school graduate) of 17.6 percent; Shaw University offers -10.6 percent.

It’s not an easy decision. But in the sobering light of facts, if you’re fortunate enough to have the ability and the means to go, college is really the only decision.

Phoebe Venable, chartered financial analyst, is President & COO of CapWealth Advisors LLC. Her column on women, families and building wealth appears each Saturday in The Tennessean.

Snow Days Are Ideal Time to Get Finances in Order

Thu, 19 Feb 2015 16:57:22 GMT

Many of us have spent a lot of time indoors this past week due to the weather. And if we believe the weather men and women, it looks like we could have more bitterly cold temperatures and wintry precipitation over the next few weeks. Are you twiddling your thumbs or making good use of all this downtime? Being snowbound inside warm homes is a great time to inspect financial houses — and ward off cabin fever. Here are four financial things that all of us could be doing on a snowy day.

Income taxes

There have been a lot of envelopes arriving in the mail marked “Important Tax Information.” Now is the time to gather those up for your tax preparer. Plan to finish your taxes well ahead of the April 15 deadline. If you owe taxes, go ahead and file the return and pay the amount due. Since most deposit accounts are paying practically zero interest on cash balances, there is very little reason this year to wait until April 15 to file your return. If you are receiving an income tax refund, have a plan for those funds. Consider applying 75 percent of the refund to your top financial priorities. Have you built a cash reserve equal to six months of living expenses, for instance?

IRA contributions

Spousal IRAs are great investment tools for spouses who do not work outside the home and such an account will likely reduce the amount of income tax your family owes to the IRS. Non-working spouses can make a deductible contribution to an IRA of up to $5,500 for 2015 ($6,500 if you are age 50 or older this year) as long as you file a joint tax return and the working spouse earned enough income to cover the contribution. For 2015, the deductibility of the contribution is phased out for couples with adjusted gross income between $183,000 and $193,000, provided that the working spouse is covered by a qualified retirement plan.

Did you make your IRA (of any kind) contribution for 2014? If not, you still have time! The IRS allows you to make contributions for the previous year up until the normal federal tax deadline, April 15. The same rule applies to establishing an IRA. If you didn’t have an IRA last year, it’s not too late. You can open the account and make a contribution for 2014 before April 15.

Home inventory

Do you have a home inventory? This is a comprehensive report, including detailed descriptions and photos, of personal property in and around your home. Should your property ever be damaged or stolen, you’ll need such documentation for the insurance claim. Take time to itemize your belongings, particularly valuable ones, providing purchase date, cost, receipts if you have them, model, serial number and estimated or appraised replacement value. Take pictures or use a video camera and store these pictures along with your other important documents in a fireproof and waterproof safe or in your safe deposit box at the bank. Besides insurance purposes, this is a smart thing to do for estate and financial planning, too.

Summer planning

Do the dreary days and plummeting temperatures have you daydreaming about summer? While you’re taking advantage of the inside time to plan this summer’s outside time, consider some ways to advance your child’s financial as well as recreational education. Have your children participate in the deliberations: how to best spend the budget for camps, vacations, weekly allowances, etc. If your children want to do more than your budget allows, the decision process can be a great learning exercise about needs, wants, prioritization and the scarcity of funds. Remember, throughout most of their lives, our children will be making allocation decisions concerning their own money. The sooner they start practicing this exercise, the stronger their monetary muscles will be!

Taking the time to do these financial tasks isn’t as tempting as snow sledding or snuggling up on the couch for a good movie, but you’ll be probably be quite pleased with yourself when you’re done, knowing your financial house is in better order!

Phoebe Venable, chartered financial analyst, is President & COO of CapWealth Advisors LLC. Her column on women, families and building wealth appears each Saturday in The Tennessean.

Consumers Embrace ‘Sharing Economy’

Fri, 13 Feb 2015 17:01:51 GMT

Has your inner entrepreneur — or perhaps it’s the purger or the pragmatist in you — ever wondered how much you could rent your car, extra bedroom, lawn equipment or even designer handbag for? Or, inversely, how much you could rent someone else’s for? Collectively, we have so much stuff that we can’t possibly use all the time, wouldn’t it be nice if there was a way to monetize the surplus?

Everything has a rental price

Now, thanks to technology, you can. The phenomenon is known as “the sharing economy,” “collaborative consumption” or “peer-to-peer rental” — and it’s gotten big. At the push of a button on a smart phone app, you can hail an Uber or Lyft ride with an ordinary citizen with a car, spend the night in another ordinary’s citizen’s guest room (or on his or her air mattress) through Airbnb or hire yet another ordinary citizen as a “TaskRabbit” to complete some small errand or job for you. To understand just how big the sharing economy has become, consider this: Founded in 2008, Airbnb currently offers more than 1 million listings in over 34,000 cities in 190-plus countries, has an average of 425,000 guests per night and is valued at $13 billion, almost half the value of Hilton Worldwide, which has been existence for nearly a century and actually owns coveted real estate. Five-year-old Uber is valued at $41.2 billion, larger than Avis Budget Group or even American Airlines.

Technology has diminished the effort and the risk

Before the Internet, doing much of this was possible but just not worth the effort or the risk. But today — thanks to trails blazed by eBay, PayPal, Amazon, Apple and Google, as explained by Joel Stein in this week’s Time cover story “Tales From the Sharing Economy” — websites match up sellers and buyers, GPS-enabled smart phones show us where the nearest provider is, social networks allow us to better discern the trustworthiness of those we’re dealing with and online payment systems reliably handle the financial transaction. Add to this fortuitous mix the unfortunate reality of the Great Recession, which left many without jobs and many more wondering why they need so many possessions, and you’ve got a sector that’s booming.

A sense of adventure and community

Mike Sherman, 29, a portfolio analyst with my firm, and his wife Kristen, 27, a physician’s assistant, frequently use Lyft and Airbnb when they travel. While citing the “cheaper rates” and the “ease and seamlessness of the booking process,” Mike emphasizes the sense of adventure and community they experience when using these services: “Traveling in general is always a fun experience, but going to an unfamiliar place and living in it is even better. Nothing is standardized. My wife and I really enjoy meeting hosts and drivers and seeing how they live and how their story is different from ours. We’ve met struggling grad students, really creative people in music and art, and captivating entrepreneurs. It feels good to support them and you just don’t find that in a hotel or a taxi.”

Some issues left to be worked out

There are also some things not to like about the shared economy. Issues such as regulation and labor are still being worked out, both here and abroad. Municipalities, consumer advocates and peer-to-peer’s competitors, such as the traditional hotel and taxi companies, say that these services should be subject to existing taxes, laws and licensing requirements. Uber has been banned from some countries and Airbnb shut down about 2,000 rooms in New York City in 2010 after that state’s attorney general found they were essentially unlawful hotels. Others worry that employees of the sharing economy aren’t getting the benefits — pensions, 401(k)s, health insurance, disability and vacation days — that workers at most traditional companies enjoy. Still others worry that the growing ease with which we can hire someone to do just about anything for us will lead to a widening gap between those who serve and those who are served.

It’s called sharing, but it’s still business

One thing to me is clear. The trend of the sharing economy isn’t going away. Whether you personally want to be driven by or stay in the private home of a total, unlicensed stranger is immaterial. There are plenty of people that want these services, there are plenty of people willing to provide these services, in each case for a variety of very good and compelling reasons, and technology will continue to be the great enabler. What’s more, the portion of the population most likely to balk at the services of the shared economy is giving way to those most likely to avail themselves of it, and the market as well as the savvy investor will take note.

Phoebe Venable, chartered financial analyst, is President & COO of CapWealth Advisors LLC. Her column on women, families and building wealth appears each Saturday in The Tennessean.

How to protect yourself when shopping online

Personal Finance Education Adds up Better in Real World

Thu, 05 Feb 2015 17:04:25 GMT

The best way to teach children about financial management, it turns out, is to not teach them financial management. That’s according to new research from Harvard Business School and a just-published book by New York Times columnist Ron Lieber called “The Opposite of Spoiled.”

The way to go is with math and words — that is, by talking children through the concepts of money and budgeting throughout their upbringing — and not formal courses.

Traditional personal-finance education has flunked.

For years, there’s been a growing consensus that schools should be teaching children the principles of personal finance and, subsequently, 43 states now require it. Yet despite these efforts, most children continue to become financially unsavvy adults who are in debt and don’t save enough.

Harvard Business School Finance Professor Shawn Cole along with Federal Reserve Bank of Chicago Vice President and Director of Financial Research Anna Paulson and Wellesley College Assistant Professor of Economics Gauri Kartini Shastry, investigated vast amounts of financial data on students that graduated high school from states with mandates on personal-finance curriculum, comparing the financial status of students who graduated up to 15 years before the mandate to those that graduated up to 15 years after the mandate. After controlling for state, age, race, sex and time, the researchers found no statistically significant difference in the pool of graduates’ asset accumulation and credit management: simply put, it didn’t work.

Math makes personal finance add up.

What the study did find was that students who had been required to take additional math classes did fare better in their personal finances: They had a greater percentage of investment income as part of their total income, practiced better credit management, had more home equity and were better able to avoid home foreclosure and credit-card delinquency.

•Talking sheds light on the mysteries of money.

The results can be much the same for children who grow up in households that avoid discussing the issues of parental income, budgeting and debt. As New York Times “Your Money” columnist Ron Lieber writes, “Money is a source of mystery to children. They sense its power, so they ask questions, lots of them, over the years.” Often motivated by a sense of etiquette, the shame of our own mistakes or the desire to keep them innocent of matters so adult and filthy as lucre, we adults “tend to do a miserable job of answering.”

As a parent and a financial adviser that’s taught money workshops to clients’ children and grandchildren for many years, I could not agree more. We’re much better served by satisfying their curiosity with real-world lessons in finance. Starting as early as age 6 or thereabouts, begin slowly introducing your children to the concepts of money, earning, wants versus needs and saving. You can do this while grocery shopping, deciding the family budget around the kitchen table or as you head out to a movie, restaurant or other non-essential activity.

Address the taboo before it’s too late.

Lieber says that even topics as taboo as household income (or a parent’s unemployment or a family’s high net worth) shouldn’t be off limits if the child is old enough to be both curious and able to comprehend. With their innate ability to pick up on the subtlest clues as well as instantly, infinitely available information on the Internet, your kids may already know more than you realize. If the information is sensitive, and the kids are already in the know, then convey to them the importance of discretion and the principle that with maturity comes responsibility. Inevitably, you’ll have to do the same with other private issues such as medical information, family secrets and the like as your children grow up. Far better that you try to control the message, and let your children know that you trust them, than to let their imaginations and the influence of their friends control it.

Phoebe Venable, chartered financial analyst, is President & COO of CapWealth Advisors LLC. Her column on women, families and building wealth appears each Saturday in The Tennessean.

Now More than Ever, Stay Calm and Double Check Your Financial Plan

Strong Dollar Is a Double-Edged Sword

Fri, 30 Jan 2015 17:06:44 GMT

What does a strong U.S. dollar mean for you? We commonly think of strong as a positive thing, but we’re talking finance and economics here, where nothing is ever simple and straightforward. A strong dollar is in fact a double-edged sword, and it’s extremely difficult to predict which edge is the more likely to cut you.

Right now, the dollar is dandy.

The U.S. dollar has gained more than 15 percent against the yen, the euro and the Canadian dollar in the past six months, and in fact climbed to its highest point in 11 years. With that news, the patriot in most of us may now be cheering, “Way to go, greenback!” The U.S. is winning, but in a backhanded-compliment kind of way: The dollar is gaining strength not so much because of stellar U.S. economic performance — though it is steadily improving and U.S. corporations are doing quite well — but because of the disappointing economic performance in the rest of world. Our growing energy independence is probably strengthening the dollar, too, reducing our current account deficit and thereby, at least theoretically, shrinking the global supply of dollars and upping the dollar’s value. And thanks to the improving health of our economy, the Federal Reserve has telegraphed that it will raise interest rates, which will encourage more fixed-income investment and further bolster the dollar. Whatever the reasons, we’ll take any good news we can get.

For consumers, a strong dollar is unequivocally good.

As a consumer, the strong dollar is not just good news, it’s fantastic news. Everything you and I purchase that’s imported becomes cheaper, whether it’s clothing, television sets, oil or gold, putting more money in our pockets and driving down inflation. If you’re traveling outside the U.S., your dollar goes further as well, making lodging, transportation and sightseeing — not to mention that Italian leather handbag, silver quaich from Scotland or Thai Sangkhalok pottery — a bargain by comparison.

For investors, it gets more complicated.

As an investor, the strong dollar becomes much more of a mixed bag. It makes U.S. exports more expensive in relation to foreign-made goods, thereby weakening demand, and U.S. companies with overseas revenue streams will see the value of those profits diminished. How does that impact investors? In general, it means that under a strong dollar a portfolio with a high exposure to U.S. equities may do better than one with a high exposure to international equities, but those U.S. equities that do a lot of business abroad may see reduced returns. To use a very concrete example, Proctor & Gamble — a U.S. corporation but also the world’s largest consumer goods company with billions of dollars in annual overseas sales — just this Tuesday reported that their quarterly earnings were down by 31 percent. The culprit, according to P&G? The U.S. dollar, and they warned investors that the burgeoning buck would cut sales by 5 percent and profits by 12 percent this year.

Don’t fixate on fluctuations.

All that said, it’s exceedingly difficult to “time the market” of rising or falling currencies, and most individual investors should avoid trying. Investing for most of us is a long-term game and it can be counter-productive to play it based on short-term trends. My advice to investors is threefold. First, it’s good for the average investor to have a basic understanding of factors such as currency appreciation and depreciation that impact the markets, because it makes you a more savvy and confident investor. Second, consult with your financial adviser about how you might judiciously modify your portfolio in the prevailing market conditions — timing the market isn’t easy, but it’s not impossible with the help of smart, experienced professionals. Third, and above all, stay focused on the fundamental merits of individual investments and your portfolio allocation over time rather than fixating on market fluctuations such as the dollar’s strength. Taking the long view, the dollar’s current value becomes merely a detail — a detail that’s up for now but will most certainly go down again eventually.

Phoebe Venable, chartered financial analyst, is President & COO of CapWealth Advisors LLC. Her column on women, families and building wealth appears each Saturday in The Tennessean.

IRS Changes May Mean Frustrating Tax Season Ahead

Fri, 23 Jan 2015 17:10:34 GMT

The Internal Revenue Service began accepting tax returns for 2014 this week. As if taxes aren’t painful enough, the IRS’s own top taxpayer advocate and the commissioner himself are warning that this year’s season could be one of the most dreadful yet.

Tax season may be ‘miserable’

That’s because of budget cuts approved by Congress that give the IRS its lowest level of funding since 2008. This year’s budget is about $10.9 billion, a billion less than five years ago. As a result, there will be an estimated 12,000 fewer IRS employees to process returns, issue refunds and answer phone calls.

The biggest impact from the staff reduction could be longer wait times for those of us calling the IRS. While the IRS has never been known for great customer service, this year is looking particularly grim. More than 100 million people attempt to call the IRS each year and fewer than half will speak to a human being this year. For those who do, the expected wait time is 30 minutes.

United States Taxpayer Advocate Nina Olson writes in her 2014 annual report to Congress that she and her office “do not think it is acceptable for the government to tell millions of taxpayers who seek help each year, in essence, ‘We’re sorry. You’re on your own.’ ” Even IRS Commissioner John Koskinen concedes that the upcoming tax season will be “miserable,” so taxpayers should be aware and plan accordingly. Koskinen strongly encourages taxpayers to visit IRS.gov as a first stop for information ranging from the status of their refunds to tips on resolving tax issues — and to file their taxes electronically.

Oh, another negative to that hiring freeze? It means a lower ratio of auditors to returns, potentially costing the U.S. government more than $2 billion in uncollected revenue.

File electronically for free

Although taxpayers can still file paper returns, the IRS encourages everyone to file electronically, and most do: More than 80 percent of returns this year are expected to be filed electronically. According to IRS Commissioner John Koskinen, “If you haven’t already, you should consider filing electronically. It’s fast, accurate and the best way to get your refund quickly.” Like last year, the IRS expects to issue more than nine out of 10 refunds within 21 days. Since it takes the IRS staff longer to process paper returns, and the IRS is understaffed (more on that below), those refunds are expected to be issued in seven weeks or more. Moreover, taxpayers who “e-file” make fewer mistakes and it costs nothing for those who choose Free File.

The IRS Free File program provides two free electronic filing options for taxpayers:

Brand-name software, offered by the IRS’s private-sector partners to about 100 million individuals and families with incomes of $60,000 or less.
Online fillable forms, the electronic version of IRS paper forms, available to taxpayers at all income levels and especially useful to people comfortable with filling out their own returns.

Important tax changes in 2015

The IRS recently announced changes to the tax code going forward. I’m highlighting some of those updates to keep in mind when you’re preparing your 2015 tax returns in 2016.

Inflation adjustments:

Each year, the IRS adjusts more than 40 tax provisions for inflation, including the tax brackets. This is to prevent “bracket creep,” a phenomenon by which people are pushed into higher tax brackets or have reduced value from credits or deductions thanks to inflation rather than an actual increase in real income.
The maximum earned-income tax credit increases from last year’s $6,143 to $6,242 this year for those filing jointly who have three or more qualifying children.
The personal exemption is now $4,000 compared with $3,950 in 2014 and phases out at higher income levels.
All of a child’s unearned income above $2,100 will be taxed at the parent’s tax rate; that figure was $2,000 in 2014.

Retirement:

The 401(k) contribution limit increases to $18,000 from $17,500.
The catch-up contribution limit increases from $5,500 to $6,000.
The IRS is limiting nontaxable IRA rollovers to one every 12 months regardless of how many individual retirement accounts one has.

Health care:

The penalty for not having health insurance increases to $325 (or 2 percent of income, whichever is greater) from $95 in 2014 (or 1 percent of income, whichever is greater).
Employees can save $2,550 in an FSA (flexible spending account), up from $2,500 last year.
Employees had a “use it or lose it” rule, but you’re now permitted to carry over $500 from one year’s FSA into the next year; HSAs (health savings accounts) are more popular because they do not have such provisions and the contribution limit is higher.

If your finances are complex, consider hiring a trusted tax professional for help. While preparing your own taxes can save you perhaps hundreds of dollars, those individuals with high incomes, who own their own business or who have a variety of investment vehicles will likely find that the expense of hiring a good accountant is far outweighed by the potential tax savings and peace of mind that comes with their expert advice.

Phoebe Venable, chartered financial analyst, is president and COO of CapWealth Advisors LLC. Her column on women, families and building wealth appears each Saturday in The Tennessean.

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Streaming TV Creates Opportunity for Investors

Fri, 16 Jan 2015 17:21:11 GMT

Last Sunday, as you were watching the Golden Globes, you may have thought you were watching just another celebrity awards show: beautiful, famous, wealthy, talented people garnering trophies and recognition while hanging out with other beautiful, famous, wealthy, talented people. But amid the champagne, Versace gowns and polite applause, an uprising was taking place: a potentially big, fortune- and even history-changing revolution known as “disruptive innovation.”

Content coup

Two upstart providers of content who are decidedly not part of the broadcast television establishment staged something of a coup. “Transparent,” a show from electronic commerce company Amazon.com, won the award for Best TV Series, Musical or Comedy, and the show’s Jeffrey Tambor won Best Performance in a TV Comedy Series. Meanwhile, Kevin Spacey won Best Performance in a TV Drama for his role in “House of Cards,” a series from Netflix. That’s the provider of on-demand Internet streaming media that started out as a DVD-by-mail subscription service and whose insurgent past includes putting Blockbuster out of business.

Disruptive innovations through history

A disruptive innovation is a product or service innovation — typically in cost, capability or convenience — that arrives unforeseen and significantly disrupts an existing market. Ultimately, the disruptive innovation overtakes, replaces or even creates the market anew. Be it through scientific breakthrough (the printing press, the steam engine, electricity, the telephone, digital cameras), technological confluence (digitization plus Internet equals declining music album sales, connected devices plus logistics equals rise of online retail), low-cost competition (economy airlines, data storage, Wikipedia) or solutions to constraints (shale fracking), examples of these innovations fill history and drive it.

Not all big innovations are disruptive. Professor Clayton Christensen of Harvard, author of a seminal book on disruptive innovations titled “The Innovator’s Dilemma,” points out that the automobile was a revolutionary but not disruptive technology. It was unexpected, yes, but initially it was an extravagantly expensive novelty that few could afford and that didn’t threaten the horse-drawn-carriage industry. It wasn’t until Henry Ford’s mass-produced automobile decades later that the new innovation became affordable to the average middle-class American. The assembly line, interchangeable parts and other production techniques were the disruptive game-changer in the history of transportation, not the automobile itself.

Netflix, Amazon and Hulu step in

How are Netflix, Amazon, Hulu and others disrupting the world of television and why should you care?

For starters, you may be one of millions of Americans who are fed up with the high fees and poor service received from the likes of Comcast, Time Warner and Cox. According to a poll of 70,000 consumers conducted earlier this year by the American Customer Satisfaction Index, cable companies and Internet service providers are the two most reviled sectors in the country, and Comcast and Time Warner are the two single most hated companies in the country. According to the survey, “High prices, poor reliability and declining customer service are to blame for low customer satisfaction with pay TV services. The cost of subscription TV has been rising 6 percent per year on average — four times the rate of inflation.” Meanwhile, Netflix and Hulu Plus can be purchased for a total of $17 monthly, about a third of the cost of basic cable.

Cutting the cord

The result is that a small but growing number of consumers are cutting the cord on cable television. According to Forbes, only about 2 percent of the population have done it thus far, but the number is expected to grow to 5 percent in the next two years. And a study from Marchex states that nearly 26 percent of new cable customers only want Internet service from their cable company. Internet-streamed television now reaches 40 percent of U.S. households and Nielsen now measures viewership of those shows along with those of the big broadcasters.

Finally, if you’re an investor, the reason you should care about disruptive innovations is that they can also significantly disrupt, for better or for worse, your portfolio.

Great opportunity, great risk

Disruption brings great investment opportunity in identifying disruptors — hard to do — as well as in identifying incumbents at risk of being disrupted — a bit easier to do. Wouldn’t you like to have bought Netflix in late 2002 at $3 and change per share and held onto it through this past week’s price of well above $300? And wouldn’t you be glad to have avoided buying Blockbuster at its $19 high in 1999 only to see it go bankrupt just over a decade later?

Phoebe Venable, chartered financial analyst, is president and COO of CapWealth Advisors LLC. Her column on women, families and building wealth appears each Saturday in The Tennessean.

Invest in 2015 with The Tried and True

Fri, 09 Jan 2015 20:39:02 GMT

Plunging oil prices. Geopolitical uncertainty. Large-cap mutual funds down for the year. The end of quantitative easing. Yet a solid performance turned in by corporations in general. How does an investor looking out over the new year make heads or tails of all this? More simply than you might think.

Looking back at 2014

This past year was another positive one for the U.S. equity market, following an incredibly strong 2013. The S&P 500 surpassed index-level milestones, posted new highs in earnings and cash balances, and sustained record-high profit margins. Gains were posted despite some major global upheavals and developments such as heightened Ukraine-Russia tensions, the rise of ISIS in the Middle East, a global economic slowdown led by Europe and China, and plunging of oil prices (down 50 percent from the June peak), to name a few.

This storm of global macro and geopolitical uncertainty versus improving economic and corporate fundamentals in the U.S. was challenging for some investors to navigate, as evidenced by the struggles of active fund managers last year. Only 16 pecent of large-cap mutual funds outperformed the S&P 500 index in 2014. That is the lowest share since 1997. Among other things, many mutual funds were hampered last year by high allocations to the energy sector.

Oil prices and their impact

The colossal fall in oil prices over the past six months has certainly wreaked havoc on energy stocks, but what is the impact on the rest of the economy? Most economists predict that the consumer benefit from lower energy costs will more than offset any headwinds for the energy sector of the economy. For example, economists’ estimates suggest that recent declines in oil prices will translate into an at-the-pump savings of $800 per year per American motorist. This is sufficient to boost U.S. gross domestic product (GDP) by three- to four-tenths of a percentage point.

Booming U.S. economy

The U.S. economy is stronger than it has been in several years. Corporate balance sheets are leaner and more efficient than they have been in decades. Interest rates, even if they rise (as they almost certainly will), will continue to hover near historical lows. The average American has less debt, is right side up on their mortgage and has a growing risk appetite fueled by years of pent-up demand. Blended together, this is a growth cocktail that should produce higher corporate earnings more than able to offset any stock market concerns from higher rates.

There is little sign of irrational exuberance in the stock market or in the economy; in fact, many investors are skeptical. This skepticism is a sign of a healthy market. When everyone thinks the stock market can do nothing but climb and all the skeptics have disappeared, that’s when I begin to worry. While consumer sentiment has rebounded from its 2009 low, it is still well below the levels reached in 2007 and 2000.

History guides investors

All this skepticism has led investors to underweight equities in their portfolios while stocks continue to outperform most other asset classes. Before I go one word further, let me emphasize: Every investor should, first and foremost, have a portfolio that passes their sleep test. If your investments are keeping you awake at night, it’s time to make a change. If you’re concerned about risk, you should ratchet it down. Your wealth should enhance your life, not cause stress and sleepless nights.

Now, that said, investors should also do their best to overcome their skepticism about investing in U.S. companies. A disciplined investment approach using equities within a diversified portfolio is the best way to achieve long-term financial goals. You don’t have to take my word on it. Take the proof of history.

Phoebe Venable, chartered financial analyst, is president and COO of CapWealth Advisors LLC. Her column on women, families and building wealth appears each Saturday in The Tennessean.

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7 Tips for Getting Financially Fit in 2015

Wed, 31 Dec 2014 20:36:55 GMT

After a holiday season full of merrymaking, so many of us vow that we're going to exercise more in the coming year. I admire your ambition (and share it). But as we begin 2015, I hope you'll be just as committed to becoming, and staying, financially fit.

Here are some tips to help.

1. Plan for trouble.

We all need an emergency fund because major negative life events always seem to pop up when we least expect them. The general rule of thumb is have six months of living expenses in a bank deposit account or money market fund where the money is readily available for those surprise expenses or to bridge the gap if an income earner in the family loses his or her job.

Every family should also have insurance to cover the cost of major events that might not be covered by an emergency fund. Health insurance, homeowner's insurance, auto insurance and life insurance are vital and most families have these items covered. Depending on your personal situation, an umbrella liability policy might be a good idea. If your family has one primary income earner, consider a disability policy.

You might also consider specialty insurance, such as cancer insurance or accident insurance, depending on your situation.

2. Spend less and save more.

The U.S. personal savings rate as a percentage of disposable income is currently about 5 percent. Thus, the odds a dollar of personal income was actually saved this year was 1 in 20. Current levels of saving are an improvement over the 2007 rate of 2.6 percent (1 in 38.7) but still a far cry from the 1971 height of 13.3 percent (1 in 7.5) — and a faint whisper compared to China's savings rate of 50 percent (1 in 2).

What are the chances an adult has no savings at all? Approximately 30 percent of American adults have no savings.

3. Start saving now for your kid's college.

If you plan to assist with the cost of your child's college education, there are several different options including a 529 Plan, an Education Savings Account or even a Roth IRA. Get informed about these options. If you want to help your children with the soaring costs of secondary education, you can't start too soon.

4. Easy on the plastic.

Credit cards are a wickedly tempting convenience in our busy and consumption-driven lifestyles, but when not used responsibly can quickly become detrimental to our financial health. Think about your credit card not so much as a form of payment but as the incurring of debt — a debt that must be repaid when the bill arrives or the price of what you purchased just went up by the amount of interest you'll pay.

5. Pass the sleep test.

If your investments are keeping you up at night, you need to make some changes. Wealth should enhance your life, not engender stress. If you are worrying about your investments, you likely need to ratchet down the risk in your portfolio. With less stress, you're going to be healthier and empowered to enjoy the fruits of your labor, your discipline and your dreams.

6. Be proactive.

Success in the financial aspects of our lives requires preparation, sacrifice and hard work. But that goes for all aspects of our lives, which are all interconnected. Seek out information on ways to stay healthy and take action to reduce your health risks. Kicking those unhealthy habits today and committing yourself to adopting healthy new ones can dramatically impact your future financial well-being. Control your own financial destiny by taking charge of your physical and mental condition.

7. Think long-term.

Again, this goes for our finances and our lifestyles. Our life expectancy continues to grow, for those in both good and poor health thanks to medical advances, and consequently we have more years after retirement than ever before. If you expect to live well into your 90s, that's probably three decades of the golden years that you'll need to prepare for by properly saving and investing. A healthy person can typically work longer and more successfully than a sick person, translating into more assets to adequately sustain a long life and retirement.

It's worth pointing out that our increasing longevity also means more time for the power of compounding interest, offering us the opportunity to expand the financial legacy we leave to our children, grandchildren, other loved ones and our chosen philanthropic endeavors.

Money isn't everything, but money problems can sure feel close. Get ahead of bad habits, debt and stress this year by adopting a financial fitness regimen. It requires discipline and could come with some pain, but the payoff is worth it: peace of mind and moving closer to your dreams.

Phoebe Venable, chartered financial analyst, is President & COO of CapWealth Advisors LLC. Her column on women, families and building wealth appears each Saturday in The Tennessean.

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Cuban Market Could Be Boon to U.S. Businesses

Fri, 26 Dec 2014 20:33:31 GMT

Cuban cigars and rum next holiday season?

On Dec. 17, President Obama announced that the U.S. would be re-establishing diplomatic ties with Cuba after 54 years of the official cold shoulder. If the move leads to an end of the U.S. trade embargo against this island located just 90 miles off the coast of Florida, it could mean that this time next year, you might be enjoying a fine Cuban cigar with some authentic Cuban rum in your eggnog.

More importantly, it could translate into a big boon to U.S. companies and a welcome tailwind for investors.

Classic cars, brand-new opportunities

Off-limits to both U.S. tourists and businesses since 1960, Cuba is a market whose population exceeds that of the states of Tennessee and Kentucky combined. Under the Castro brand of communism, Cuba has been largely stagnant and isolated from the rest of the global economy, dependent on China and the Soviet Union, now Russia, for critical imports. As a consequence, there are tens of thousands of Fords, Chevys, Studebakers and DeSotos built in the 1940s and 1950s still on the streets in Cuba, kept roadworthy by enterprising owners through repairs cobbled together from Soviet-era junk parts. Only about 5 percent of Cubans have unrestricted access to the Internet. Almost none have ever had a Big Mac. What few foreign consumer goods do make it to Cuba often do so secretly in the luggage of travelers coming to see relatives. The average Cuban makes $240 a year.

There’s far more on the line than the possibility of getting your hot little hands on those prized Cuban stogies or a dram of that sugarcane-derived elixir (the Obama administration is now allowing visitors to come back with $100 worth of cigars or spirits per person — or about two premium cigars and well short of the amount needed to get back with a coveted bottle of Havana Club brand rum). And the issue is far more complicated than the simple laws of supply and demand: Just because you want it or the Cuban people want it doesn’t mean either is going to get it.

Winners and losers

Should trade relations improve, and they no doubt will (after a half century of what amounts to a two-nation Cold War, the only direction is up), Cuba’s leaders still aren’t going to suddenly embrace laissez-faire economics. As pointed out by a Dec. 18 article in The New York Times, the biggest opportunities for business development in Cuba will be for those selling goods and services that will enhance Cuba’s own domestic production: companies like Home Depot, John Deere and Caterpillar. Home Depot would be purveying the country’s own products, John Deere tractors would enable local farmers to raise more crops (many farmers work their fields with teams of oxen, and Cuba imports fully two-thirds of its food) and Caterpillar heavy machinery would help Cuba uncover its vast deposits of nickel and other minerals. An AT&T or a Verizon could be invited in as well to build commercial communications from its current near-nonexistent state — such an infrastructure would be essential to substantial economic growth and would employ Cubans.

Consumer companies like Coca-Cola and Pepsi probably won’t fare so well because of the average Cuban’s lack of disposable income and what the government would perceive as insufficient benefit to the island’s indigenous economy.

“For a company like McDonald’s, the Cuban government is going to ask, ‘How does McDonald’s coming in and selling hamburgers help the economy of Cuba?’ ” says Kirby Jones, founder of Alamar Associates, which has advised companies on doing business in Cuba since 1974.

Lush and opulent delights?

Even hotel owners, who are undoubtedly salivating over the unexpected détente in U.S.-Cuban relations, may be disappointed. Before Fidel Castro’s revolution, Cuba was once the most visited destination in the Caribbean and a playground for America’s rich, famous and infamous: the Vanderbilts, the Whitneys, New York City Mayor Jimmy “Beau James” Walker, novelist Ernest Hemingway, singer Frank Sinatra, silver screen siren Eva Gardner and mobster Meyer Lansky flocked to Cuba for gambling, horse racing, music-club hopping, golfing, fishing and drinking. According to Smithsonian.com, the now-defunct travel magazine Cabaret Quarterly once described Cuba’s capital Havana as “a mistress of pleasure, the lush and opulent goddess of delights.”

The tropical beauty, sunny climate and rum are all still there, but that atmosphere of unfettered freedom is not. The powers that be in Cuba will likely offer hotel companies like Marriott and Hilton management contracts only, and not the chance to actually own any property.

Much like the casinos of Cuba’s ballyhooed past, there will be winners and losers in the bid to reach Cuba’s burgeoning consumers and develop its untapped economy. Overall, however, it will be good for Cuba’s people and for American business interests. That you can bet on.

Phoebe Venable, chartered financial analyst, is president & COO of CapWealth Advisors LLC. Her column on women, families and building wealth appears each Saturday in The Tennessean.

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Hold onto More Green, Stay out Of the Red This Season

Fri, 19 Dec 2014 20:31:35 GMT

It’s beginning to look a lot like Christmas, everywhere you go. Whether you celebrate Christmas, Hanukkah or Kwanzaa, you likely have been doing a lot of shopping lately, but are your holiday expenses in line with your budget?

’Tis the season of giving, and it is so much fun to give, but it is important not to go overboard during the holidays. I know, that’s two “buts” in a row. But smart finance is always predicated on a “but”!

A good year for receivers

According to the National Retail Federation survey, it’s going to be a good year for the receivers.

The annual survey estimates the average person will spend $804.42 this year, up nearly 5 percent over last year’s actual $767.27. The survey found consumers will spend an average of $459.87 on gifts for their family, up 6.5 percent from $432 last year, and $80 on gifts for friends, up from $75 last year.

Those celebrating the holidays also will spend more on gifts for their co-workers ($26.23 vs. $24.52 in 2013) and others like babysitters and even pets ($30.43 vs. $26.65). Spending on traditional items such as decorations and food will remain flat: According to the survey, consumers will spend an average of $104.74 on food, $53.68 on decorations. $29.18 on greeting cards and $20.30 on flowers.

Focus on your own financial situation

Whether your budget is more or less than the national average of $800 doesn’t really matter: What matters is whether or not your budget is reasonable for your particular financial situation.

Having a budget or a plan for holiday spending is the best way to keep yourself in check. And now is the time is to conduct a check before rushing out to make last-minute purchases and certainly before you decide to add more people to your gift list.

Virtually every credit card offers online information reflecting purchases made through the close of business the prior day. Even if you are convinced that you know how much you’ve spent, it is a good idea to add up those charges from your credit cards and bank statements. With online access, this task shouldn’t take too much of your time.

Last-minute shopping tips

If you find that you’ve already blown your budget, here are a few last-minute holiday tips to limit the damage.

Trim your gift list.

It is so easy to add too many people or go overboard on the kids. If you find that you’ve overdone it, consider unwrapping some of those gifts and returning them. It won’t feel right, but you’ll be glad you did when the holiday euphoria subsides and your left with bills.

Most stores have generous return policies and by returning the gifts quickly, you might avoid the trauma of opening your credit card statement and seeing that high balance, not to mention possibly incurring interest charges until those gifts are returned.

Save on the holiday party expenses.

Candles are less expensive than flowers. Consider a potluck instead of providing a meal. Offer one specialty cocktail or wine instead of a variety of drinks. Buy in bulk for the discount.

Shop strategically.

If you still have gifts to purchase, it’s probably time to go offline as shipping costs get more expensive with less time for delivery. Comparison shop online so you have a plan when you head out into the holiday bustle — decisive shopping is smarter shopping.

If you find a deal, consider buying multiples of the same item and mark several people off your list with one find. Consider making a charitable donation for those still on your list.

Take advantage of cheap gas.

If you are traveling during the holidays and haven’t purchased airline tickets yet, consider driving. Gas prices have dropped, so driving may be a cheaper option.

If you must fly, consider a flight on Christmas day when flights can be as much as 50 percent less than the day before or after. Airfares are expected to increase, so finalize your travel plans as soon as possible.

Red and green are the colors of the seasons but they have a way of lingering around for better or for worse long after all the relatives have gone home, the tree comes down and the decorations are boxed and in the attic. After all the festivities of this most wonderful time of the year, I hope you’re seeing more green (money) and less red (debt) in your finances!

Phoebe Venable, chartered financial analyst, is President & COO of CapWealth Advisors LLC. Her column on women, families and building wealth appears each Saturday in The Tennessean.

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Phoebe Venable: Four habits of highly effective generational planning

Sun, 14 Dec 2014 18:25:45 GMT

As a parent or grandparent, how many times have you said, “I want to be able to give my kids more than what I had”?

We all want our children and grandchildren to avoid toiling, scrimping and missing out on family time because of finances. But once we amass a significant amount of wealth, enough to pass on to the next generation, how sure are you that your future heirs will take care of the wealth responsibly?

Most of us have heard of Stephen R. Covey’s bestseller “Seven Habits of Highly Effective People.”

But what about families such as the Rockefellers and Vanderbilts who have carried their wealth through generations? What habits do they share that you can instill in your family?

A house united

Families like these stick together, hold family meetings and understand how to govern one another. Each person contributes to family discourse and embraces the values of all its members. While there will always be miscommunication, friction and even fighting, these families equip themselves with ways to manage these issues.

Action item: Agree upon and write down a set of family goals, rules and values culminating in a family constitution or mission statement. There are great tools available to assist with this task, such as James Hughes’ book “Family Wealth.”

Invest in education

From a young age, members of these uberwealthy families are trained to become responsible wealth owners. They receive personalized attention from CFAs, CPAs, CFPs and other industry experts.

These families understand that if you invest in proper training of stewardship, wealth will last much longer.

Action item: Search for ways you can increase your children’s financial education outside of their school’s curriculum. Ask your adviser to conduct meetings with your children or grandchildren.

Look for a money camp or other creative ways to help children learn financial concepts at an early age.

Charitable donations

When creating a family constitution, include details of your family’s charitable intentions. Financially fit families do the same. Whether donating time, food, clothing or money, all family members should be able to give to their favorite cause.

Action item: If your family chooses to make one large annual contribution, consider making the decision together. This is a wonderful agenda item for a family meeting that can engage family members of all ages.

Clear succession plan

When it becomes necessary to transfer authority in family meetings, make sure each member agrees, understands and feels comfortable with the new arrangement. Families of long-standing wealth recognize the importance of maintaining healthy guidance throughout every generation.

Action item: Discuss with your children the what-ifs of family governance (what if you are in charge of the wealth, what if your siblings begin to fight, what if you disagree on investments, etc.) and make sure you’ve properly devised a plan for conflict resolution.

Incorporating even some of the above habits will produce beneficial results for you and all those who come after you.

Phoebe Venable is president and chief operating officer of CapWealth Advisors LLC. Her column on women, families and building wealth appears each Saturday in The Tennessean.

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