SRI: Investing in your Ideals & Values

Socially responsible investing (SRI) is a rapidly expanding option in the investment arena.  This includes Environment, Social and Governance (ESG) criteria in the stock and bond selection process.  This approach to investing looks beyond simple financial return, allowing individuals and institutions to express their personal values and ideals with their investments.

Millennials more interested in ESG strategies

We are starting to see generational differences in investing as younger high net worth investors are more interested in expressing their values through investing.   For example, in a survey conducted by U.S. Trust Insights, 63% of Millennials (individuals born between 1980 and 2000) are interested in owning socially responsible strategies versus just 35% of the total number of responders.  These investors believe that they also don’t have to give up returns in order to do so as 60% believe it is possible to achieve market rates of returns while investing in ESG strategies.

Source: U.S. Trust Insights on Wealth and Worth Annual Survey

The Center Expands ESG Recommendations

Based on increasing demand from our clients, our investment committee and research department have expanded our recommended list to include companies that offer these types of investment strategies.  Having applied our same rigorous due diligence process to these selections, we feel we have an excellent combination of managers in a variety of asset classes that will allow our clients to express their ideals in the way they invest their assets (see our recent blog on this).  If you are looking for ways to express your values through your investments don’t hesitate to contact us!

Angela Palacios, CFP®is the Portfolio Manager at Center for Financial Planning, Inc. Angela specializes in Investment and Macro economic research. She is a frequent contributor to Money Centered as well as investment updates at The Center.

Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members. Investing always involves risk and you may incur a profit or loss. No investment strategy can guarantee success. Material is provided for informational purposes only and does not constitute a recommendation. C14-040265

"The Other Talk"—Expressing Your Plans for Aging

 Remember that all-important rite of passage? Having "the talk" with your kids about the birds and the bees? You thought for weeks...maybe months...about the words you would choose, how you would answer the challenging questions and handle the emotions involved. Now might be the time to experience another rite of passage, and have “the other talk" with your children about your plans for your life as you age.

A Helpful Conversation Starter

Holidays are a time when families gather together from near and far; a rare time when parents and siblings are gathered together to catch up on developments of the past year. Before your holiday gathering, take the time to think about how you might bring up the topic of your life as you get older, and how your family can help to support you. A book recently released by the AARP, titled "The Other Talk: A Guide to Talking with Your Adult Children About the Rest of Your Life," might help you to prepare you for this conversation. When you have “the other talk” you’ll want to communicate your current situation, as well as express your wishes for your future living situation and care.

Steps to Prepare for the Talk

In addition to reading the book, here are a few action steps to take to prepare for "the other talk":

Get your records in order: Click hereto use our Personal Financial Record Keeping Document to document things like your insurance policies, your investment accounts, your estate planning documents, the professionals your work with, etc. In addition, gather information about your doctors, medical conditions and medications.

Prepare the paperwork: Gather copies of your current estate planning documents, and consider providing copies to your children.

Cover the bases: Use our Future Care Checklist to determine what topics you might need to discuss and plan for that your haven't already thought of.

If you feel that it might be easier or more productive to hold a family meeting with a facilitator, contact your financial planner to schedule this meeting. Having "the other talk," whether on your own at holiday time or facilitated by your financial planner, will help you address the important issues about your aging in advance of a crisis, allowing you the time and the space to enjoy your life and your family.

Sandra Adams, CFP® is a Partner and Financial Planner at Center for Financial Planning, Inc. Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In 2012-2014 Sandy has been named to the Five Star Wealth Managers list in Detroit Hour magazine. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

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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. C14-040146

Memorable Marriage of Art & Music

Imagine creating visual art while soaking up a classical music concert performed just for you. That was the concept behind the Detroit Chamber Winds & Strings (DCWS) 2014 Rendering Beethoven Concert which explored art, music, and abstract expressionism.

The Center proudly sponsored the first-of-its-kind performance, held at the College for Creative Studies. DCWS musicians performed Beethoven’s Serenade Op. 25 for Flute and Strings. The music served as inspiration for visual arts students and faculty who created abstract works of art before a captivated audience. The exploration of the connection between the visual arts and music was a memorable and thought-provoking experience for all in attendance.

Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed web sited or their respective sponsors. Raymond James is not responsible for the content of any web site or the collection or use of information regarding any web site's users and/or members. C14-038752

Benchmarking in Investing: Tools to track relative performance

 Ever wonder how to know whether your portfolio is performing well?  Some people will simply look at the overall return, and if it’s higher than their neighbor’s, they figure they are doing well!  However, simply looking at the bottom line rate of return doesn’t tell the whole story because returns are directly related to how much underlying risk you have taken in the portfolio. To an amateur investor an annual rate of return of 7-8% might feel good, but a professional looks at how much risk you had to take to achieve such a result.  One method everyone should use to better understand the relative performance of an individual portfolio is referred to as “benchmarking”. 

Performance tracking methods

A few commonly used benchmarks for large U.S. stocks are the Dow Jones Industrial Average and the Standard & Poor’s 500 index (more commonly known as the S&P 500).  You will hear these two indexes referred to constantly in the news. If you hear the Dow was up 100 points, you may find yourself checking how your portfolio’s performance compares.  The problem with this is that you might not own anything in your portfolio that looks anything like the Dow Jones Index. This is why you need to understand what makes up your portfolio and what indexes to track to understand relative performance. 

Benchmarking Best Practices

Hypothetically, let’s say you have a portfolio that looks like this:

30% Large International Stocks

30% Large U.S. Stocks

40% highly rated U.S. corporate bonds   

You look at the annual return for the Dow Jones, see that this particular index was up 9% at the end of the year, and then check your portfolio’s overall return to see that it was only up 4%.  Before you rush to the phone to fire your financial advisor, first get the full picture!  Your portfolio only has 30% of the money invested in Large U.S. companies and 70% of the money invested elsewhere. To expect 100% of the money to perform the same as the Dow Jones is highly unrealistic.  Instead, you should look at a few other “benchmarks” that are commonly used in financial circles to track different types of stocks and bonds.

Here is a list of benchmarks to track different asset classes to help you make a fair comparison about your portfolio’s performance compared to the types of risk you took:

S&P 500-  Large U.S. Stocks

Russell 2000- Small U.S. Stocks

MSCI EAFE- International Stocks

Barclays Aggregate U.S. Bond Index- U.S. Bonds

Back to the example, our hypothetical investor decides to look up the returns for the Barclays Aggregate Index and MSCI EAFE since he has money invested in those types of asset classes as well as Large U.S. Stocks.  Our investor sees that bonds actually had a negative 2% rate of return for the same time frame, and that the MSCI EAFE was essentially flat.  So 30% of his money he expects to be up somewhere near 9%, 30% of his money he expects to be right around 0%, and 40% of his money he expects to be down 2%. 

Putting Performance Benchmarking to Work

If our investor had $100,000 at the beginning of the year invested in our hypothetical portfolio here’s how it breaks down:

Add it up and the ending portfolio balance is $101,900 or a rate of return of 1.9%.  When you understand the whole picture, you might be more satisfied with a 4% return knowing that a portfolio with very similar holdings should only be up about 1.9% according to the benchmarks.

Talk to your financial advisor to find out what makes up your portfolio and what benchmarks to use for your particular situation.

Matthew Trujillo, CFP®, is a Certified Financial Planner™ at Center for Financial Planning, Inc. Matt currently assists Center planners and clients, and is a contributor to Money Centered.

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Information contained in this report was received from sources believed to be reliable, but accuracy is not guaranteed. The Dow Jones Industrial Average is an unmanaged index of 30 widely held securities. It is not possible to invest directly in an index. C14-038979

Slightly Off-Center: Who’s your favorite superstar?

 There’s a lot you know about our team at The Center … but we’ve dug up answers to some questions you might have never thought to ask.

Who's your favorite superstar?

Warren Buffett(!)…smart, irreverent, independent-thinking. –Dan Boyce

Oprah of course! –Gerri Harmer

Mariah Carey, of course –Kali Hassinger

Superman and Clark Kent –Matt Chope

Pavel Datsyuk – in my opinion, the best hockey player in the world right now – the things he can do with the puck is amazing –Nick Defenthaler

Capital Gains: Minimizing Your Tax Drag

The difference between the tax man and the taxidermist is the taxidermist leaves the skin."  Mark Twain

As the bull market marches on, many investors find the capital losses they have carried over since 2008 are gone.  Likewise, many investment companies that have earned 5 years of steadily positive returns are finding themselves in the same situation. While these positive returns have had meaningful impact on achieving our financial goals, we are going to start feeling them in the checks we have to write to the government. 

According to a Morningstar and Lipper study, the average annual tax drag on returns for investors is .92% for owners of U.S. equities.  This means that if you average 10% a year returns in your equities, the amount you put in your pocket is 9.08% after you pay the government its share.  From 1996 to 2000, during the extreme run up of the tech bubble, the average tax drag per year was 2.53%1.  This can happen when there has been no bear market or correction for many years.  We would argue it is happening again now.

4 Tips for Managing Taxes

Perhaps the key at this stage of the game is not to avoid taxes but to take many small steps to manage them.  There are several key steps that we utilize in managing portfolios to also minimize taxes.

1. Asset Location:  Place your least-tax-efficient, highest returning investments in your IRA or 401(k).

2. Loss Harvesting: Continually monitor your taxable accounts for losses to harvest rather than only looking in the last quarter of the year. 

3. Maximize contributions to tax-deferred retirement accounts:  This directly lowers your taxable income when maximizing your contributions to 401(k) plans at work.

4. Harvest gains:  In the long run, taking gains during years your income is lower than normal can potentially reduce the amount of taxes paid to the government over a lifetime.

While paying attention to expenses always seems to top the headlines, taxes are just as big of a drag to long-term investor returns. Consult a tax advisor about your particular tax situation.

Angela Palacios, CFP®is the Portfolio Manager at Center for Financial Planning, Inc. Angela specializes in Investment and Macro economic research. She is a frequent contributor to Money Centered as well asinvestment updates at The Center.

1:Source: http://www.lipperweb.com/docs/aboutus/pressrelease/2002/DOC1118788693610.doc

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Center for Financial Planning, Inc. and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Raymond James does not provide tax advice. C14-036848

Awards & Inspiration at the RJ Women’s Symposium

From helping families prosper to the art of negotiation, the 20th annual Raymond James Women’s Symposium was packed with great insight and inspiring speakers. Marilyn Gunther, Melissa Joy and Laurie Renchik recently traveled to St. Petersburg, FL for the opportunity to take part in thought-provoking education sessions and mingle with other women advisors in the Raymond James family.

The trip this year was especially exciting because The Center’s own founding partner Marilyn Gunther received the Raymond James Network for Women Advisors 2014 Women of Distinction award.  She was presented with the award by the President of Raymond James Financial Services at an opening night awards dinner.  This award is given to women advisors with Raymond James who are exceptional in both their professional and personal contributions.

These are our Top 5 ideas we brought back to Michigan:

1. Susan Bradley from the Sudden Money Institute talked about recognizing the role of money in all of the transitions of life.  We have come a long way from thinking about money as the accumulation and distribution phase.

2. The number of RJ upper management team attending was an acknowledgement of the increasing and effective role of women advisors and women leaders.  We have a long way to go, but it is a start.

3. Author and former sports agent Molly Fletcher shared her insights about the art of negotiating with an emphasis on belief in what you do and not being afraid to ask the tough questions.

4. In the workshop, “The Estate is Set, But Are Families Prepared?” we learned more about helping families thrive and prosper from one generation to the next with family meetings designed to help prepare the next generation for financial and non-financial aspects of wealth transfer.

5. On the topic of Women and the World of Finance, Sallie Krawcheck drew on her Wall Street experiences as well as current research to illustrate how companies that embrace gender diversity on their boards and in management often see improved performance and profitability as a result.   

Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed web sites or their respective sponsors. Raymond James is not responsible for the content of any web site or the collection or use of information regarding any web site’s users and/or members. C14-038768

Unrealized Capital Gains? Consider Gifting Stock Instead of Cash

One of the most tax-efficient ways to give a financial gift to your favorite charity is with long-term appreciated securities.  While gifts of cash are easy to make by simply writing a check, don’t overlook the potential benefits of gifting stock that has gone up in value.  By considering both options, you may be able to increase the tax benefit and make the most of your year-end tax planning and gifting goals. 

Here are four tips to consider:

1. If you own stock investments (held longer than 12 months) with unrealized capital gains, the best way to give may be with a portion of stock rather than an all cash donation.  By gifting stock, you receive a deduction for the market value and reduce future capital gains tax liability.  

2. If you own stock with short-term gains (owned for less than 12 months) the strategy is not optimal because your tax deduction will be limited to the amount you paid for the shares. 

3. If you think the gifted stock still has upside potential, you can use the cash you would have otherwise donated to replace the shares of stock you donated.  This will reset the stock cost basis to the current market value, reducing future capital gains tax liability.

4. If you are holding taxable investments that have lost ground, it may be preferable to sell the investment, claim a capital loss, take the charitable deduction and gift the cash.  In this scenario, the combined tax deductions may make this strategy a winner.

Making the Call between Gifting Cash or Appreciated Stock 

If you are looking to support organizations important to you and maximize your tax benefits, it is important to consult with your tax advisor and include your financial planner to make the most of your tax planning and lifetime gifting goals.  

Laurie Renchik, CFP®, MBA is a Partner and 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.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Center for Financial Planning, Inc. and not necessarily those of Raymond James. C14-036845

Capital Gains: 3 Ways to Avoid Buying a Tax Bill

Many asset management firms have started to publish estimates for what their respective mutual funds may distribute to shareholders in short- and long-term capital gains. Moreover, early indication is that some firms will be paying out capital gains higher than recent years. As you may be aware, when a manager sells some of their holdings internally and realizes a gain they are required to pass this gain on to its shareholders. More specifically, by law and design, asset management firms are required to pay out 95% of their realized dividends and capital gains to shareholders on an annual basis. Many of these distributions will occur during November and December. Remember this is only relevant for taxable accounts; capital gain distributions are irrelevant in IRA’s or 401k’s.

Capital gain distributions are a double edged sword.  The fact that a capital gain needs to be paid out means money has been made on the positions the manager has sold. The bad news – the taxman wants to be paid.

What can we do to minimize the effect of capital gain distributions:

1. We exercise care when buying funds at the end of the year to avoid paying tax on gains you didn’t earn, and in some cases hold off on making purchases.

2. We may sell a current investment before its ex-dividend date and purchase a replacement after the ex-dividend date.

3. Throughout the year we harvest tax losses, when available, to offset these end of the year gains. 

As always, there is a balance to be struck between income tax and prudent investment management.  Please feel free to contact us if you would like to discuss your personal situation.

This material is being provided for information purposes only and is not a complete description of all available data necessary for making an investment decision, nor is it a recommendation to buy or sell any investment. Every investor’s situation is unique and you should consider your investment goals, risk tolerance, tax situation and time horizon before making any investment decision. Any opinions are those of [insert FA name] and not necessarily those of Raymond James. For any specific tax matters, consult a tax professional. C14-040561

Slightly Off-Center: Best Way to Spend a Saturday?

There’s a lot you know about our team at The Center … but we’ve dug up answers to some questions you might have never thought to ask.

Best Way to Spend a Saturday?

On the Golf Course!-Angela Palacios

S-H-O-P-P-I-N-G; I repeat S-H-O-P-P-I-N-G–Amanda Toia

Playing tennis in the morning, making good music with friends in the afternoon, going out to a nice place for dinner, concert or show in the evening. –Dan Boyce

Hanging out with family or watching a football game –Gerri Harmer

Outside enjoying sunny weather –Jaclyn Jackson

Laying poolside reading every trash magazine I can lay my hand on! –Jennifer Hackmann

Relaxing with a good book and then dinner out in the evening –Laurie Renchik

Playing sand volleyball with great friends –Matt Chope

Waking up early, cup of coffee in bed while catching up on some reading on my IPad, nice long walk with my wife, Robin and our black lab, Jax, an afternoon playoff hockey game on TV and wrap up with a barbeque with friends and family in the evening –Nick Defenthaler

Best way to spend a Saturday is to travel to Kansas to watch Matt play football or to Albion to watch Jack play baseball or to one of Kacy’s swim meets. –Tim Wyman

It’s finally fall, my favorite season! So the best way to spend a Saturday is with my hubby at the orchard or cider mill, carving pumpkins, or taking the dogs for a long walk and enjoying the fall scents, scenery and weather. –Melissa Parkins