A Webinar in Review: Elder Care Planning

Contributed by: Clare Lilek Clare Lilek

What do you think of when you hear the term “elder care?” Well Sandy Adams, CFP®, who also has a Masters in Gerontology, thinks about how that term doesn’t exactly explain the type of planning involved and meaning it’s intended to represent. Instead, as Sandy discussed throughout the webinar, she suggests that elder care isn’t about the frail, but instead, it’s about longevity or long life planning for an active and engaged population. Sometimes this can be a sensitive topic, but really it’s about planning contingencies for potential risks as you or a loved one age, in order for that person to retain their dignity and remain in control. Elder care planning emphasizes the social and personal requirements for older adults in order to age in their desired manner.

Sandy emphasized the importance of starting to plan for yourself or your family as early as possible because you don’t want to be in a crisis situation guessing what your parents would have wanted, or perhaps you don’t want to cause your loved ones the stress of making a decision in case of an emergency. Having a well thought out plan with contingencies is the safest and smartest way to successfully age, especially as the “silver tsunami” is looming and the aging population increases and the question of “Who will care for us?” becomes top of mind.

Since these discussions, as important as they are, can be uncomfortable at times to initiate, Sandy provided some helpful tips, as well as resources, to help you start the conversation. Tips included creating a non-threatening environment, engaging the assistance of a professionals (like Sandy herself), including all the family, and having older adults in question do the majority of the talking—it’s their life, listen to what they want! Important topics to discuss are: home maintenance, transportation, and socialization. Sandy suggests framing these conversations using the C.A.R.E. framework: identify the Challenges, think about Alternatives, acknowledge your Resources, and stay true to the overall Experience you or your older parent wants to have.

Overall, Sandy suggests having an open and honest conversation about you and your family’s needs, discuss contingent plans for possible futures, start creating a plan early, and don’t be afraid to enlist the help of a professional team for support and guidance. For more tips on how to go about Elder Care Planning for you or your parents, check out the entire webinar below or feel free to contact Sandy for further guidance.

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.

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.

Any opinions are those of Sandy Adams, CFP® and not necessarily those of Raymond James.

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Chinese Stock Market Manipulation

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Contributed by: Angela Palacios, CFP® Angela Palacios

Since last summer the Chinese government has played a very active role in manipulating their own stock market. Which markets are affected can be very confusing as there are many different exchanges and types of shares that can be purchased.

Chinese Equity Markets: A Tutorial

The Shanghai exchange houses the A share stock market. These are the shares of Chinese companies that are available mostly to domestic Chinese investors (who in most cases are prohibited to invest outside of this market) and institutional investors granted special permission by the Chinese government, denominated in their local currency, the Renminbi. This currency is no longer pegged to just the U.S. Dollar but rather to a basket of currencies. See my colleague, Nick Boguth’s blog regarding the state of China’s Currency.

In contrast, the Hong Kong exchange houses the H share market which is shares of Chinese companies available to investors outside China and can be freely traded by anyone. H shares trade in Hong Kong dollars. In contrast to mainland China, Hong Kong dollars are still pegged to the U.S. Dollar.

B shares, while lesser known than A & H shares, are also available and these are Chinese companies with a face value in Renminbi, but trading in U.S. Dollars on the Shanghai exchange. These are available to foreign investors as well as Chinese investors who have foreign currency accounts.

There has been a huge difference in company prices that trade on both A and H share exchanges and there is no channel to arbitrage this away. A shares ran up coming into the summer of 2015 causing a huge imbalance when compared to the H share market. This means investors in the A share portion of the market were paying far more for a company than investors in the H share market. On the flip side the A shares have declined much more sharply than the H share market as well.

The Pressure in China Picks up

China is nearing the end of incredible growth. It built up far too much capacity and credit. As the economic slowdown in China began to accelerate, volatility in the stock market started to pick up in the middle of 2015 spilling over into our markets here in the U.S. The Chinese government has had to step in to stem the bleeding created by A share sellers. 

A Timeline of Market Manipulation

The government became a buyer of shares on the weakest days and then took even further steps last July suspending the holders of 72% of A share stocks the ability to sell their stock for six months. Investors that held at least 5% of a company’s outstanding stock was simply no longer allowed to sell it. Communism at its best! 

In early January 2016 this ban on sales was set to expire and there was much worry that volatility would come back, which it did. At this point, January 4, 2016, the government put controversial breakers in place to halt trading in case of extreme selling on the A share market, disbanding them only four days later after the widespread panic this caused. They ended up suspending/halting trading twice in this short time. In contrast, H share markets were down also on these days but far less than the A share markets before the halt.

In place of the circuit breakers, China came up with a plan to restrict stock sales again by these large shareholders. At this point a stockholder who owns more than 5% of a company is required to sell shares only through private transactions to help avoid shocks to the market.

With so much intervention we are left wondering if a free market even exists over there and if there ever was one to begin with. Thankfully the selling pressure has slowed and markets both there and here have quieted down a bit. As always though, it will be interesting to watch how events and markets unfold the remainder of this year!

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.

“The ABCs of China’s Share Markets by Mark Mobius http://www.cnbc.com/id/

http://www.voyagercapitalmgt.com/an-update-on-china/

http://www.bloombergview.com/articles/2015-07-09/china-shows-how-to-destroy-a-market

The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. International investing involves special risks, including currency fluctuations, differing financial accounting standards, and possible political and economic volatility. Any opinions are those of Angela Palacios and not necessarily those of Raymond James. Opinions expressed in the attached articles are those of the authors and are not necessarily those of Raymond James. All opinions are as of this date and are subject to change without notice. Please include: 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.

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March Madness: How the Tournament Reflects your Investments

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Contributed by: Nicholas Boguth Nicholas Boguth

I usually don’t think about investments when March Madness rolls around, however this year the correlation is hard to get out of my mind. The past year in the markets has mimicked the past year of NCAA men’s basketball. The markets have been volatile since mid-2015 because of China’s shaky economy and the pending rate hike here in the U.S. In August, we watched the S&P 500 drop almost 200 points and investors wondered, “What is going on?!?!” At the same time, the men’s basketball rankings have been more volatile than they ever have been historically. North Carolina owned the #1 ranking title in the preseason, and then was quickly edged out by Kentucky, who got pushed out by Michigan State, then Kansas, then Oklahoma, then Villanova, and finally back to Kansas leaving basketball fans thinking, “What is going on?!?!”

Now it’s March, which means it’s time to fill out your bracket. There are a total of 63 games that will be played to determine the champion. Correctly predicting the outcome of all 63 of those games is about as likely as getting struck by lightning 5 times this year. Warren Buffet, who in the past has offered $1 billion to anyone who filled out a perfect bracket, must have gotten bored with that challenge and instead is offering $1 million every year for life to any of his employees that correctly guess every game in the first 2 rounds correctly (still extremely unlikely). So, what will your strategy be when filling out your bracket?

There is no guaranteed way to make money when investing, just like there is no guaranteed way to pick the final four teams of the tournament correctly. Sure, you can pick the four #1 seeds and hope that they make it to the final four, just like you can look back and pick the 4 investments or securities that performed the best last year and hope that they outperform again this year, but as we all know from the infamous investing disclaimer, “past performance is no guarantee of future results.” In fact, only picking the #1 seeds in the bracket has left you with the correct final four just ONE time in the entire tournament’s history.

So, odds are that you are not going to pick every winner of the tournament. As investors, there is also a slim chance that you pick every one of your investments correctly and every one of them increases year after year. This is why diversification is key—Jaclyn Jackson recently explained this concept in more detail (which can be found here).That is where talking to a NCAA bracket specialist or an investment professional can help. The correct diversification can ultimately help you reach your end goal, no matter who the #1 seed is.

Nicholas Boguth is an Investment Research Associate at Center for Financial Planning, Inc.

Any opinions are those of Nick Boguth and not necessarily those of Raymond James. Investing involves risk and you may incur a profit or loss regardless of strategy selected. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor's results will vary. Past performance does not guarantee future results. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

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Investor Access: How the Raymond James Online System Allows Easy Access to your Tax Documents

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Contributed by: Jennifer Hackmann Jennifer Hackmann

If you are not currently enrolled in the free, secure, online Raymond James Investor Access portal, then now would be the perfect time to jump on board. It’s a great tool offered by Raymond James that will allow you to access your tax documents online, as opposed to waiting for hard copies in the mail. Tax season can be frustrating enough, so as an added convenience Raymond James now allows you the option to receive your tax documents electronically – this is a new feature that just started with this 2015 tax year. Tax documents are available in PDF format, so you will be able to print and/or save them to your computer.

There are many additional features to the Investor Access system that will help make tax time much less of a headache, including:

  • The ability to access your documents quicker; as soon as they become available.
  • Option to export your 1099 tax information to an Excel format
  • Raymond James has partnerships with TaxACT, TurboTax, and H&R Block, which provides clients with additional information and instructions for downloading your tax information.
  • Information regarding Required Minimum Distributions.
  • A Guide to your Consolidated Tax Statement.

Login in to your Investor Access today to check-out all of these features and if you are not currently enrolled, please click on the Investor Access Tab on our website to get started.

Jennifer Hackmann, RP® is a Registered Paraplanner℠ at Center for Financial Planning, Inc.

A Key to Successful Aging: Livable Communities

Contributed by: Sandra Adams, CFP® Sandy Adams

A topic that comes up often in conversations with clients while discussing plans for their futures as they age usually centers around, "where will we live?" It should not be a surprise that most folks are inclined to want stay in their own homes for as long as possible (or so they think). It may actually be the community, more so than the home, in many cases, that clients are really tied to. The community is where our social contacts are, where health care and other supports are, and often times where our friends and family are. So determining how livable one’s community is for the long haul is important. That is why when I came across the new Livability Index Tool developed by AARP's Public Policy Institute, I stood up and took notice.

The Livability Index (found at www.livabilityindex.aarp.org) scores neighborhoods and communities across the U.S. for the services that impact seniors' lives the most. It looks at housing, transportation, the environment, health, social engagement, and opportunity, all of which are determined by the Public Policy Institute's research and the opinion surveys of 4,500 Americans age 50+. A positive Livability Index means access to a variety of housing, with close proximity to jobs, and access to activities and services to keep seniors engaged and healthy.

So, when the topic of "Where will we live?" comes up, whether the client is looking to stay in their own home, move to a Continuing Care Retirement Community, Independent Retirement Community, or other Assisted Living Community, we may suggest looking up the location in the Livability Index to see how the community in which the housing is located ranks. In addition, of course, to determining how the community fits into the clients plan from a financial and long term care perspective. When discussing with your financial planner where you will live as you age, in addition to the financial aspect, make sure you discuss the livability piece. Making sure you live in a community that provides you substantial support with access to essentials and amenities can keep you socially active and engaged, which is the key to successful aging!

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 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.

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 Sandy Adams and not necessarily those of Raymond James. Raymond James is not affiliated with and does not endorse the opinions or services of Livability Index and/or AARP. Please include: 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.

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What The Bachelor taught me about Personal Finance

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Contributed by: Clare Lilek Clare Lilek

I know what you’re thinking, how could the reality TV show The Bachelor teach me financial lessons? Well, dear reader, you will be surprised at what you can learn from other peoples’ misguided actions.

As of late, I have gotten into a new TV show. Ironically, one I thought I would never watch. Yup, you’ve guessed it: The Bachelor. I never really saw the point in the show—the excess drama, the crafted confessions and personas, and of course, all of this under the guise of finding “true love”—until I had a group of friends to watch the show with and debunk all the over-the-top drama. It actually can be fun and kind of engrossing. So, along with half of America, I resigned myself to having a guilty pleasure.

Recently, I came across an article, “25 Behind-The-Scene-Secrets about The Bachelor.” The title alone caught my eye. I knew it would be a little foray into the actual reality behind the “reality TV show.” Just like the appeal of tabloid magazines, getting behind the scenes gossip on The Bachelor, or any TV show obsession, is deeply satisfying. I, however, was most shocked by the reveal of the financial aspect of the show.

While watching with my friends, we frequently comment on the outfits of the female contestants because during every Rose Ceremony they are all dressed to impress in ensembles that can rival the most ostentatious red carpets. This could be their last chance to appeal to The Bachelor before he makes a final decision—aka their last time on TV—so they consistently look like an entire hair and makeup team, equipped with fashion expert, styled them. According to this article, that is false. These women, apart from the first and very last episode of the season, do all their own styling and have bought all their own clothes. Before coming on the season they have to prepare for 7 weeks of filming. If they are in it to win it, they have to buy gorgeous gowns and sassy dresses for 10 different rose ceremonies! Not to mention group and individual dates, making sure they look approachable yet at the same time like a glam team primped them before. Do you know how much time, effort, and most importantly, money that takes?! A lot. The answer is a lot.

How then, you might wonder, do these 20-somethings afford being on The Bachelor? First of all, it’s important to note that many of the contestants have to either quit their job or go on unpaid leave for two months. After which, the winner, might chose to move locations to be with her new beau. Many of the contestants, in order to foot the bill have reportedly either borrowed against or completely cashed in their 401(k)s. Apparently retirement savings can wait when you’re looking for love on national television. More contestants go into credit card debit to front the money that can’t be found in their savings account.

Let’s look at an example:

The average contestant could be a single woman, age 25, who earns $50,000 a year putting her in the 25% tax bracket. Let’s say she has about $10,000 in her 401(k). If she needs an influx in cash she has a few options: take out a personal loan, remortgage her home, max out her credit cards, borrow against her 401(k), or take a distribution from her 401(k) (essentially cashing it out). Taking out a distribution before you are 59.5 years of age means you have to pay a 10% penalty on that distribution on top of the income taxes for that money. So not only does this particular contestant not have savings for her eventual retirement or investments growing over time, she now has only $6,500 to spend on clothes, beauty products, and whatever else they need in order to find “true love.”

Now let’s look at the potential financial upside of being on The Bachelor, and no, this usually doesn’t come with benefits or a retirement plan. The contestants don’t get paid for going on the show, but when they arrive they receive a goody bag filled with clothes and beauty products. There is also the chance that the contestants fall into fortune after gaining fame from the show by endorsing products and the like. Also, The Bachelor gets paid a reported $100,000 and gets a lot of endorsement deals. So along with getting an expensive Neil Lane diamond engagement ring (which after two years of being together, the couple can cash in with written producer approval— “cha-ching”), winning the show might mean you fall into quite a bit of money.

Of course, not every woman can (or would!) trade in her 401(k)s for a chance at landing a fiancé. But the next time you’re watching The Bachelor (or thinking about applying yourself) remember the money and tough choices it takes to get there. I guess the reality behind reality TV is a lot less glamorous than you might think.

Clare Lilek is a Challenge Detroit Fellow / Client Service Associate at Center for Financial Planning, Inc.

Any opinions are those of Clare Lilek and not necessarily those of Raymond James.

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.

Deducting Investment Management Fees

Contributed by: Timothy Wyman, CFP®, JD Tim Wyman

It’s that time of year again: it’s tax reporting season! Hopefully your 1099 statements have arrived and you have begun your annual tax gathering progress. A common question this time of year is, “Can I deduct investment management fees?” Like many areas of the US Tax Code, this can be anything but a straight forward answer. Your tax preparer is the best person to consult with on this issue – but in the meantime, here are some guidelines.

The first place to start when trying to determine if an investment management fee is deductible or not is to determine the type of account: Taxable, Traditional IRA, Roth IRA, 401k, etc.

Investment management fees paid in taxable accounts (such as single, joint or living trust accounts) are a tax deductible expense and reported as a miscellaneous itemized deduction on Schedule A of Form 1040. That’s the easy part – but not the whole story. There is more to the story because not everyone can actually benefit from miscellaneous itemized deductions. In order to benefit from your miscellaneous itemized deductions, in aggregate they must exceed 2% of your Adjusted Gross Income. As an example, if you have Adjusted Gross Income of $100,000, then the first $2,000 of miscellaneous itemized deductions are not deductible – only the balance or amount in excess of $2,000 can be deducted. To further confuse the issue, if you are subject to the Alternative Minimum Tax some or all of these deductions could be disallowed as a tax preference.

For accounts such as Traditional IRA’s, ROTH IRA’s, and 401k’s, it continues to be my interpretation of the tax code that investment management fees paid by assets in these accounts are not deductible; the positive trade off however is nor are they considered taxable income. So, the fees are not deductible but you don’t pay income on the fee either. That said, some professionals do interpret that the fee is deductible, just as it is for taxable accounts discussed above, if the fees are paid with money outside of the IRA. For example, some tax professionals will suggest that fees attributed to IRA type funds be paid via a separate check or billed to a taxable account making them deductible.

As you can see, there are some gray areas on this topic.  What can you do?

  • Be sure to share the information about your paid investment management fees with your tax preparer.

  • Break the fees out by account type (taxable versus other types, such as an IRA).

Fortunately your yearend tax reports from your brokerage firm (such as Raymond James) should contain the necessary information on investment management fees for correct accounting. And, as always, if you need help getting through the maze give us a call. 

Timothy Wyman, CFP®, JD is the Managing Partner and Financial Planner at Center for Financial Planning, Inc. and is a contributor to national media and publications such as Forbes and The Wall Street Journal and has appeared on Good Morning America Weekend Edition and WDIV Channel 4. A leader in his profession, Tim served on the National Board of Directors for the 28,000 member Financial Planning Association™ (FPA®), mentored many CFP® practitioners and is a frequent speaker to organizations and businesses on various financial planning topics.

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. Please note, changes in tax laws or regulations may occur at any time and could substantially impact your situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS we are not qualified to render advice on tax or legal matters. You should discuss tax matters with the appropriate professional.

Women’s History Month: The Inspiration of Sylvia Lawry

Whether you’ve just started your career or you’re a seasoned professional, establishing yourself as a leader at work can boost your ability to achieve success in the short term and advance your career over the long term. An important part of being an effective leader is inspiring those around you. In honor of National Women’s History Month, I want to take the time to highlight the accomplishment and inspirational leadership of Sylvia Lawry.

Sylvia Lawry is the woman who single-handedly launched an international war on Multiple Sclerosis. In search for a successful therapy for her brother Sylvia put an ad in The New York Times. The year was 1945 and she received more than 50 replies from people who were themselves seeking a cure. This was her first step in the fight for a world without MS. She won over famous scientists to her cause and shortly after her initial ad, in 1947, she had founded the National MS society.

My interest in Sylvia Lawry’s story goes deeper than supporting National Women’s History during the month of March. It’s personal as I have family members, friends, and clients who are affected by MS.  Today, 70 years later I am supporting Sylvia’s vision to find a cure for MS by participating in the 2016 MS Leadership Class. Leadership class members commit to increasing their knowledge about MS, to raising public awareness, and to raising funds for ongoing research.

My interest also has professional roots. At The Center, we are a team that meets you where you are, understands where you want to go and through collaboration with you, we develop and execute a strategy focused on your financial well-being through every stage of life. While retirement planning is a common cornerstone of a majority of financial plans, it is not uncommon for clients to make contingency plans for health related issues or craft philanthropic strategies to ensure their charitable dollars create the desired impact.

National Women’s History month presents an opportunity to be intentional about reflecting on the past successes of women throughout history. It hits home here at The Center too as our 30+ year history reflects the inspired leadership of many women through the years. When you wonder what you can do because you are one person, think about Sylvia Lawry.

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 is a member of the Leadership Oakland Alumni Association and is a frequent contributor to Money Centered.

Raymond James is not affiliated with Sylvia Lawry or The National MS Society.

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How Market Volatility Can Be Your Friend

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Contributed by: Nick Defenthaler, CFP® Nick Defenthaler

Chances are if you’re in your thirties or forties, the financial media is something you don’t watch on a daily basis (don’t worry; we think that’s a good thing). You’re busy with life. Between your career, family, after-school activities for your kids, commitments with friends etc., it’s hard enough to carve out a few minutes to unwind at night, let alone find the time or interest to keep up on recent updates in the stock market.  Even if you aren’t a financial media junky, you’ve probably still seen a few headlines or overheard co-workers discussing how crummy the markets have been so far in 2016 and that 2015 wasn’t a great year either.

If you’re in “accumulation mode” and retirement is 15 years or more out, don’t get caught up in the noise or the countless investment tips and stock picks you’ll inevitably hear from others. If your investment accounts are positioned properly for your own specific goals, with personal objectives and risk comfort levels in mind, roller coaster markets like we’ve experienced over the last few months are your friend. For some reason, investments are the only things I can think of that people typically don’t like to buy when they may be undervalues OR at attractive valuations. Why? Because it can be a little nerve wracking and possibly seem counterintuitive to continue to “buy” or invest when markets are falling. But what is occurring when you do just that? You’re purchasing more shares of the investments you own for the same dollar amount! Let’s look at an example: 

Sarah is 38 and is putting $1,000/month into her 401k, which is roughly 10% of her salary. She owns a single investment with a current share price of $10, meaning for this month, she bought 100 shares ($1,000 / $10/share). What if, however, the market declines like we’ve seen so far in 2016 and now the share price is down to $9? That same $1,000 deposit is going to get Sarah just over 111 shares ($1,000 / $9/share). Since she is about 25 years out from retirement, Sarah welcomes these short-term market corrections because it gives her the opportunity to buy more shares to potentially sell at a date in the future at a much higher price. If we look back in history, those who stayed consistent with this strategy typically had the greatest success.  

Everything I’ve described above is pretty straightforward. It’s not flashy or “sexy” and it might even sound somewhat boring. Good! Investing and financial planning does not have to be overcomplicated. I recently heard this quote and it really resonated with me: “Simplicity wins every time. Complexity is the enemy of execution.”  Why make things more complicated than they have to be?

Here are a few examples of simple, but effective ways to build wealth:

  • Live within your means.

  • Save at least 10% of your income for retirement each year starting early and increase that percentage 1% each year. For more information, check out a blog I wrote on this topic.

  • Invest in a well-balanced, diversified portfolio that matches YOUR needs, not someone else’s.

  • Work together with a financial planner that you trust and who can help to take as much stress out of money for you and your family as possible.

  • Tune out the “noise” from financial media – the world doesn’t end very often!

You might be thinking, “I know this stuff is important, but I just don’t have the time or desire to understand it better.” Fair enough. This is one reason of the many reasons our clients hire us. They know we’re experienced and are passionate about an area in their life that is extremely important, and our clients want to get it right. Our goal is to work with you to make smart financial choices and help take the stress out of money for you and your family during each stage of your life. Let us know how we can help you do just that. 

Nick Defenthaler, CFP® is a CERTIFIED FINANCIAL PLANNER™ at Center for Financial Planning, Inc. Nick is a member of The Center’s financial planning department and also works closely with Center clients. In addition, Nick is a frequent contributor to the firm’s blogs.

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 Nick Defenthaler 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. Past performance is not a guarantee of future results. Dollar-cost averaging cannot guarantee a profit or protect against a loss, and you should consider your financial ability to continue purchases through periods of low price levels. Investing involves risk and investors may incur a profit or a loss regardless of strategy selected. There is no guarantee that using an advisor will produce favorable investment results. Diversification and asset allocation do not ensure a profit or protect against a loss. The example provided in this material is hypothetical and for illustrative purposes only. Actual investor results will vary.

What's going on with China's Currency?

Contributed by: Nicholas Boguth Nicholas Boguth

The biggest Yuan devaluation in over 20 years shook up the markets late last year and has been a recent source of uncertainty for investors. What exactly happened? And why would China want to devalue their currency?

Why peg one currency to another?

Well, many developing countries fix the exchange value of their currencies to one of a more stable economy’s in order to stabilize their currency exchange rate fluctuations and better control domestic inflation. The U.S. Dollar is a preferred target for other countries because it has a highly liquid government bond market and a relatively stable economy. In fact, Saudi Arabia, Venezuela, and Egypt, among others are all currently pegged to the U.S. Dollar.  

Why would China discontinue its Yuan peg to the U.S. Dollar?

The Yuan has been tied to the U.S. Dollar since 1994, but China has had a deep economic slowdown while the US economy has been going through an expansion in recent years. Monetary authorities typically take opposite actions in these two different phases of a business cycle. As we have seen, the Fed has started to raise interest rates, which usually leads to a currency appreciating, and stimulates the economy less. The People’s Bank of China wants to stimulate the economy more during their contraction, so staying tied to the U.S. Dollar would be contradictory. If the dollar rose while the Yuan was pegged to it, then the Yuan would rise too. 

A more expensive Yuan puts pressure on exporters that are a large part of China’s GDP. During China’s economic slowdown, their exports have been hurt. By devaluing their currency and allowing it to diverge from the U.S. Dollar, China is saying that it wants to focus effort on supporting exporters because a cheaper Yuan makes Chinese exports more attractive to foreign countries. This is a stimulus meant to boost economic growth.

What could go wrong?

While a cheaper currency is good for exporters and can help boost domestic economic growth, there is downside as well. A major risk of devaluing a currency is capital outflow. If the value of a currency drops, investors may move themselves or their money out of the country and into another that has a stronger currency.

China is not completely abandoning a peg though. Rather than tying their currency to the U.S. Dollar alone, they are tying it to a basket of currencies. This will allow it to stray from the U.S. Dollar, but will not allow the exchange rate to float independently and risk a larger amount of currency volatility.

Nicholas Boguth is an Investment Research Associate at Center for Financial Planning, Inc.

This material is being provided for information purposes only and is not acomplete description, nor is it a recommendation. Any opinions are those of Nicholas Boguth 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.

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