Shutdown Showdown

Americans seemed to be more interested in television’s Breaking Bad finale than Washington proceedings last weekend, but we turned the calendar to October only to welcome the first government shutdown since 1996. With negotiations tied to blockage of new insurance exchanges, it is difficult to see how Republicans and Democrats will ultimately come to agreement and open up America for business as usual.

Here are our economic and investment thoughts on the shutdown:

• Where only chaos sparks results: You have to wonder if Congress was looking for a very bad reaction to the shutdown in order to spark an incentive to start negotiating with each other. Crisis policy seems to have had the most reliable results when it comes to any semblance of political leadership in the past five years. Our leaders didn’t get such a crisis as US stock markets opened higher on the first day of shutdown (Tuesday, October 1st).
• Unpopular politics: Voter frustration can be measured in poll results which show that the health care law is unpopular but the government shutdown is even less desirable. Bloomberg reported Tuesday that 72% of American’s opposed a shutdown tied to ObamaCare in a Quinnipiac University poll.
• The hit to GDP: Growth numbers in the US have already been stymied by fiscal austerity in the form of higher taxes and less spending this year. The biggest impact to those who don’t cash a paycheck from the government or have a trip to a national park planned may be a hit to the US GDP. The 800,000 employees who were sent home represent a workforce larger than Target, Exxon Mobil, General Motors, and Google combined (Tom Keane, Bloomberg Radio, 10/2/13). We should note that the hit might have been higher in past shutdowns as US employment in government jobs has been falling. I tried to pull the exact numbers by accessing the US Census Bureau, but the site was down due to the government shutdown.
• Silver lining: All the rotten tomatoes being thrown at Congress mask the surprising statistic that the US government budget deficit has been falling rapidly in the last twelve months with an even larger decline anticipated. This does not excuse a failure of governance and does not balance the books overall, but it should be noted as we mourn the loss of decorum or certainty in the function of business in Washington DC.
• Avoid at all costs: The government shutdown seems to be a prelude to another debt ceiling standoff which many market watchers consider to be much more threatening. It seems absurd that US policymakers would manufacture a crisis rather than providing the ability to pay bills. Given the beltway dysfunction, though, never say never. We’ll keep you posted with our upcoming quarterly investment commentary.

All this bad news masks a US economy whose private sector continues to grow and a growing chorus of statistics that seem to support global recovery from recessions, especially in Europe. Our advice for investors right now is not to let the political tail wag your investment dog. Excepting short-term cash-flow needs, focusing on the long-term may benefit reward investors by using dips as buying opportunities rather than selling to duck and cover.

Melissa Joy, CFP®is Partner and Director of Investments at Center for Financial Planning, Inc. In 2011 and 2012, Melissa was honored by Financial Advisor magazine in the inaugural Research All Star List. In addition to her frequent contributions to Money Centered blogs, she writes frequent investment updates at The Center and is regularly quoted in national media publications including The Chicago Tribune, Investment News, and Morningstar Advisor.

Financial Advisor magazine's inaugural Research All Star List is based on job function of the person evaluated, fund selections and evaluation process used, study of rejected fund examples, and evaluation of challenges faced in the job and actions taken to overcome those challenges. Evaluations are independently conducted by Financial Advisor Magazine.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Melissa Joy and not necessarily those of Raymond James.

Helping those that help others

 In October the Center will be furthering our vision to help those who help others.  Our financial planners will be spending time with the employees at Community Housing Network in Troy, Michigan.  This is one way we give back to some of the great folks in the area that spend their time helping others make our community a better place to live for all. We will be answering the employees’ personal financial questions pro bono and help them get their financial “houses” in order so that they can be focused on helping those in need.

The Community Housing Network is a passionate advocate, devoted to providing homes for people in need. They give people access to resources to create sustainable communities. This is achieved with proven strategies of homelessness prevention, housing assistance and development, community education and referral, advocacy, and additional services.

Risk vs. Reward: Finding the Right Asset Balance for You

There are inherent risks in investing (you can’t control the market) but there are potential payoffs that help people tolerate that risk (like funding retirement). To better understand your own tolerance for risk, you need to first get the gist of asset allocation.  Asset allocation is a technique used to spread your investment dollars across different asset classes.  Stocks, bonds, and cash or cash alternatives, among others, are generally the most common components of an asset allocation strategy. 

Determining risk tolerance

Deciding on an appropriate allocation is an important exercise because it may be the most important investment decision you make due to the impact it can have on your overall return.  Your financial goals, time frame and personal resources all contribute to the equation. A risk profile questionnaire is a widely accepted method to help advisors and investors make asset allocation decisions.  

However, there are two significant limitations to relying solely on a risk questionnaire to make the asset allocation decision.  First, the way people think about risk is not stable and very often varies with market conditions.  Behavioral science research tells us that when the market goes up, the pain of past plunges typically fades as investors feel they can accept more risk.  The dynamic reverses when markets correct or go down.  Suddenly, the market elicits fear in the hearts of investors and tolerance for risk diminishes.

The second limitation with risk questionnaires is they don’t measure an individual’s need to take risk.  The purpose of an investment portfolio is to support the financial planning objectives or desired lifestyle. The plan will articulate the why as well as the how.  It helps answer questions like, “So, can I retire?” or, “Do I have enough to feel confident?”  The specific goals and time frames are the determinants of how much risk to take, even if there is a willingness to take on additional risk.

Committing to an asset allocation

Picking an asset allocation is important, but committing to it is even more important; especially in light of our changing attitudes about risk and reward.  Don't hesitate to get professional help if you need it. And be sure to periodically review your portfolio to ensure that your chosen mix of investments continues to serve your investment needs as your circumstances change over time.

Laurie Renchik, CFP®, MBA is a Lead Financial Planner at Center for Financial Planning, Inc. In addition to working with women who are in the midst of a transition (career change, receiving an inheritance, losing a life partner, divorce or remarriage), Laurie works with clients who are planning for retirement. Laurie was named to the 2013 Five Star Wealth Managers list in Detroit Hour magazine, is a member of the Leadership Oakland Alumni Association and in addition to her frequent contributions to Money Centered, she manages and is a frequent contributor to Center Connections at The Center.

Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.  Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.  Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment.  Prior to making an investment decision, please consult with your financial advisor about your individual situation.  Asset allocation does not ensure a profit or guarantee against a loss.

Happy Centerversary

 

Join with us as we celebrate two Centerversaries in the month of September.  Our Operations Manager Gregg Bloomfield is celebrating 6 years with The Center.  Gregg says, “My six years at The Center has flown by!   There have been a number of changes in that time, but what has not changed is our strong commitment to helping our clients live their best possible lives.”

Angela Palacios, CFP® Portfolio Manager has been a part of our team for 5 years.  Angie commented, “It is wonderful to come to work each day with such a great group of energized and engaged people!”

Time flies when you are having fun and we are happy to honor both Gregg and Angela on their “Centerversary.”  Not only do we value their experience and commitment ..... quite frankly, we just like having Gregg and Angela around!  

Three Skills to Help Women Become More Confident Investors

Many of my time-stressed female friends, colleagues and clients want to know how to create higher quality work/life balance. Launching meaningful careers, enjoying our families and creating financial confidence are outcomes we work hard to achieve.  At a time when women make up about half of the workforce, and control more than 50% of the wealth in the United States, research shows the financially savvy women have not achieved a level of investing confidence that goes hand in hand with greater wealth.

As a financial planner I work with women who are pioneers in their given career, possess personal confidence in creating wealth, and have strong savings values. However, these characteristics don’t necessarily translate from the office to their personal lives. But personal financial confidence is what gives you the opportunity to grow your savings and to build a solid foundation in retirement.

How to be a Confident Investor

Are you a confident investor?  If you are less than confident, it doesn’t mean you are stuck on that path.  Nothing could be further from the truth.  The reality is that your confidence can be strengthened with a few fundamental moves.

1. Create a financial plan.  This plan should not be viewed as a one-time event; rather a flexible and adaptive vision that you aspire to much like forging a career path that works for you throughout the different phases of your life.

2. Although it may seem counterintuitive, pay less attention to the markets and more to yourself and your financial goals.  Emotional reactions to things we can’t control often cause us the most trouble.  Refer back to your financial plan if your confidence in your investing ability begins to wane in light of current events.

3. Re-prioritize when necessary.   Changes can happen to take us off course in all aspects of life.  When change happens remember that cookie cutter advice doesn’t apply.  Look at your own life and evaluate what you need now and down the road.  Much like a mentor provides objectivity and perspective that can lead to good career decisions, share your current financial challenges with an advisor and address the worries proactively and with confidence.  

Why not leverage what you already have to create a financial plan and investing confidence that keeps you in the driver’s seat through all phases of your life?

Laurie Renchik, CFP®, MBA is a Senior Financial Planner at Center for Financial Planning, Inc. In addition to working with women who are in the midst of a transition (career change, receiving an inheritance, losing a life partner, divorce or remarriage), Laurie works with clients who are planning for retirement. Laurie was named to the 2013 Five Star Wealth Managers list in Detroit Hour magazine, is a member of the Leadership Oakland Alumni Association and in addition to her frequent contributions to Money Centered, she manages and is a frequent contributor to Center Connections at The Center.

Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.  Investing involves risk and investors may incur a profit or a loss.  Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making an investment.  Please consult with your financial advisor about your individual situation.

The Center is Presenting Sponsor of 2013 Vine & Dine

Streetside Seafood, one of the participating restaurants of Vine & Dine 2013, does a cooking segment on Fox 2 News. Learn how to make Rockefeller Oysters from the chef of Birmingham's Streetside Seafood. Center for Financial Planning, Inc. is the presenting sponsor of the Birmingham Bloomfield Chamber's Vine & Dine 2013 Gala benefiting Gleaner's Community Food Bank of Southeast Michigan.

Rockefeller Filling - Yield 16 Coated Oysters

Ingredients: 

• .5 # Bacon
• .5 C Spanish onion, fine dice
• 1 ounce Sambuca or Pernod
• 1 C Heavy Cream
• .25 # Spinach (rough chop)
• .5 C Shredded parmesan cheese
• .25 C Italian breadcrumbs
• 1 tsp. Kosher Salt
• .5 tsp Fresh Black Pepper

Directions:

1. In a medium sauce pot, render bacon until slightly crisp. About 5 minutes on medium heat. Add onion and saute until translucent. Flambe with Sambuca. Cook until alcohol burns off.
2. Add heavy cream and bring to a boil.
3. Add chopped spinach, cheese, and breadcrumbs and reduce until slightly thick. About 3-4 minutes. 
4. Place filling on a sheet tray and refrigerate. Once cooled, generously coat each shucked oyster to cover. Top with a little of the parmesan cheese.
5. Place oysters on a baking sheet with topping and cheese and bake in a preheated 400° oven for 5-7 minutes. Place oysters on a serving platter and garnish with a lemon wedge and cocktail fork.

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Planners' Perspective: From PR to Finance

 Part 4 of a series that will shed some light on who we are and why we love financial planning. Sandy Adams never set out to be a financial planner, but that’s right where she landed and today she’s our resource on Elder Care issues.

I like to think that the Center and I found each other at just the right time.  It was 1996 and I had spent nearly four years searching for the right fit.  I graduated in 1992 from Eastern Michigan University with a bachelor’s degree in Public Relations and Business Management.  My goal had been to use my public relations degree in the non-profit sector; in 1996, I found myself working in the communications department at Hospice of Michigan, with my job on the line due to funding issues.  Just at that time, I received a call from my friend Eric Wade (Estelle Wade’s son who was also the guy who hired me for my first job out of college) to see if I might be looking for a job.  I set up an interview with Dan Boyce, and Marilyn Gunther and that’s where my journey in financial planning began.

I had little experience or knowledge of the industry, but immediately recognized that this was an area where my strengths in organization, problem solving, and helping people could be put to use.  I had learned strong money and savings skills from my parents, but began to learn about financial planning in detail on the job.  Dan, Marilyn and Estelle were all wonderful mentors, willing to share their knowledge and experience with me…and I was more than willing to take it all in.  When I made the decision to pursue my Certified Financial Planner™ designation, the Center was more than supportive in helping me make it happen.  Not only have I learned valuable technical knowledge and strategies, but even more important, I have learned how important trust, relationships, and the desire to help clients is to being a good financial planner.

My desire to help others has led me even further to focus on Elder Care financial planning, which keeps me challenged every day.  I feel that this knowledge helps me to assist not only the Center team, but Center clients and others who are facing challenges as they, or their parents, age.  As the population shift continues, I hope to be a leader in the field when it comes to educating the financial planning professionals and the public in general on aging-related financial issues.  My best advice…plan ahead for EVERY stage of life.

Investing is a Marathon, Not a Foot Race

 I had lunch with a friend that turned 40 years old last week.  He mentioned that he runs in a few marathons. He used to run dashes.  A marathon is a lot different from a 100-yard dash.  Preparation is different, psychologically, mentally and physically you prepare differently.  

He changed his portfolio over the last few years because of the market volatility.  This new portfolio was geared towards mitigating risk in the next few months; kind of like a foot race but he is not considering the implications of the next 25.5 miles. Three things came to mind as I was looking at his new selections.  First, I had my research assistant run some analytics on the two portfolios and then compared the old and new. 

Old Portfolio:

• Centered on equities
• 10 year plus time frame
• Partially passive and partially active approach
• Focus on growth rather than risk, liquidity or safety

New Portfolio:

• 5 year or less time frame
• Focused on a possible need for current income
• Very risk adverse (actually underperforming the market by 2-3% annually)

After taking a look at his portfolio changes and the implications, I offered these three suggestions:

#1 Find a consultant that understands what you want to accomplish.

Sit down and let a planner you trust (that has a similar investment philosophy) really get to know who you are and what your family goals are. Talk about what you want your portfolio to accomplish.  Complete that firm’s financial planning questionnaire, risk tolerance questionnaire, etc.  Start out with someone who is a CFP or has a vast background in working with family planning situations and money.  Pick a person who wants to keep you on track over the next 20-30 years. 

#2 Develop an asset allocation that is right for you.

First you should clearly articulate your goals.  After that is done, get the right mix of asset classes in your portfolio.  Don’t worry so much about the actual investment selection – it has the least amount of validity in the entire process. Look for managers that have 10 years experience and an average or better track record.  If possible select investments that have a small asset base. They may be more nimble than large investments. 

#3 Meet annually with that planner.

And lastly, meet once a year (both you and your spouse) for an hour or two with that planner to discuss your goals, feelings, and perceptions of your planning. Reviewing your financial situation periodically is an important part of the financial planning process; it helps maintain forward momentum, establishes a checkpoint to assess progress, refocus efforts, and ultimately helps you cross the finish line you’ve set for yourself.

Matthew E. Chope, CFP ® is a Partner and Financial Planner at Center for Financial Planning, Inc. Matt has been quoted in various investment professional newspapers and magazines. He is active in the community and his profession and helps local corporations and nonprofits in the areas of strategic planning and money and business management decisions. In 2012 and 2013, Matt was named to the Five Star Wealth Managers list in Detroit Hour magazine.

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Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

The information contained in this report does not purport to be a complete description of the securities, markets or developments referred to in this material.  Any information is not a complete summary or statement of all available data necessary for making an investment decision.  Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment.  Prior to making an investment decision, please consult with your financial advisor about your individual situation.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily hose of RJFS or Raymond James. Asset Allocation does not ensure a profit or protect against a loss.  Investing involves risk and investors may incur a profit or a loss regardless of strategy selected.

My heart couldn't be bigger

 Behind every smiling newborn is a parent counting down the minutes until she can be with her baby again. This was my very thought during my first day back at the Center after what felt like too short of a maternity leave  (how could 10 weeks go so fast?). My husband Kelly and I welcomed our first child, Emma Lynn into this world on May 30^th. We were fortunate to have the 4 weeks together as we explored life with a little bundle of joy.

The Re-entry

The first day back to work, the alarm jolted me up at 5:00 AM, a challenge since Emma and I would typically wake at 6:00 AM or later. I amazed myself by getting ready in a short 30 minutes. Now what? She’s not up, I don’t want to wake her, but it’s time to GO! I’m a scheduler and I am learning Emma is the one setting the pace from this point forward! We made it out the door on time with bottles in tow. We were greeted with a warm welcome from her early morning caregiver, who almost had to kick me out the door!