Download Silicon Hills Client Newsletter - Silicon Hills Wealth Management

Silicon Hills
Client Newsletter // Third Quarter 2014
Advisor Insight
What We’re Thinking
Strategic Financial Planning For Your Marriage
One of our partners, Pam Friedman, said “I do” to Mitch Sundet in a beautiful backyard setting amongst
a small group of family and friends in April. Pam beamed with excitement and happiness and was the
epitome of a blushing, blissful bride. During the groom’s speech, a dashing Mitch couldn’t resist taking
a light hearted jab at Pam’s pre-marriage financial due diligence.
While getting married is exciting and being married is blissful, it is important to understand that
marriage is a financial planning issue. It is difficult to enter into an institution as joyous and sacred
as marriage with an eye toward planning for its dissolution. While marriage is the most special of
all partnerships, the financial aspects of marriage are similar to any other partnership. As a Certified
Divorce Financial Analyst™ (CDFA™), Pam sees couples who didn’t plan for what their life would look
like if their marriage dissolved. It is important to know the rules and regulations and to educate yourself
as to the impacts of marriage on your business, financial, and estate plans.
The act of planning for something does not make it more likely. We plan every day for things that we
don’t expect to happen. We buy insurance on our property and lives, store flashlights around our home,
and carry jumper cables in our car. The fact that we are prepared for these things only makes life a little
easier when they occur. Our approach to marital planning is the same.
Even successful marriages have financial ups and downs. Sadly, unsuccessful marriages can have
catastrophic financial consequences, particularly for baby boomers. In a phenomenon termed the Gray
Divorce, the baby boomer divorce rate is actually booming. According to a study by Susan L. Brown
at Bowling Green State University, since 1990 the divorce rate has doubled among persons ages 50 and
older and remarriages have a 2.5 times greater likelihood of divorce. However, boomers have much less
time to recover financially from divorce. Untangling financial assets at the time of divorce can be time
consuming, frustrating, and expensive. Involving a CDFA™ in the process early on can help ease the
emotional and financial burdens on you.
Marital planning is not synonymous with divorce planning. It is important to understand what property
is owned separately versus property that is owned jointly. This is especially important for those of you
with considerable assets at the time of marriage, valuable business interests, accumulated pension
benefits, potential inheritances, and blended families. Maintaining separate property requires careful
planning and has benefits for all concerned. We are here to help.
At Silicon Hills we are committed to helping with all aspects of marital planning during all stages of
marriage. Pam has the credentials, resources, and hands on experience… just ask Mitch. Investment advisory services offered through Silicon Hills Wealth Management, LLC, a registered investment advisor.
Silicon Hills Wealth Management, LLC does not offer legal or tax advice. Please consult the appropriate professional
regarding your individual circumstance.
Inside this Issue
Advisor Insight
• Strategic Financial Planning for
Your Marriage
Planning Ideas
• Tax Tips for Summertime
Community Spotlight
• Emancipet
The Quarter in Review
Reach Your Peak
Silicon Hills Wealth Management
is an Austin, Texas based investment
and financial advisory firm focused
on providing a complete portfolio
of services to help clients manage
their financial lives. Our teambased approach is led by three
seasoned professionals with a range
of backgrounds including business
ownership, Wall Street, and tax
accounting.
With an in-depth understanding of
Austin’s high-tech and entrepreneurial
economy, our management team
brings relevant experience and a
client-side perspective to financial
planning. As Austin locals, we feel
our professional relationships in our
communities give us an unequalled
view of our history and potential
behind our growing economy.
Planning Ideas
Tax Tips for Summertime
Are your kids in summer day camp? Summer day camp expenses may help you qualify for
the child and dependent care credit.
Qualifying expenses include summer camp as long as there is no overnight stays, summer
school or tutoring programs. Day camp expenses for kids under 13 can provide a tax credit
of up to 35%. Child-care must be necessary to allow the parents to work. The total expense
that you can use for the credit in a year is limited. The limit is $3,000 for one qualifying
person or $6,000 for two or more. Keep all your receipts and records. Make sure to note
the name, address and Social Security number or employer identification number of the
care provider. You must report this information when you claim the credit on your tax
return. More information can be found on the IRS website. For details and guidance in
applying the tax rules to your individual circumstances, please contact your CPA.
Community Spotlight
Child care credit is calculated in the following manner:
Example
Maximum qualifying expenses for 1st child
$3,000
Maximum qualifying expenses for 2nd child
$3,000
Maximum qualifying expenses
$6,000
Applicable percentage
20%
Maximum credit
$1,200
Client Operations Bulletin
New Electronic Approval Tools
The firm can begin sending forms and wires for clients
to approve electronically via the eAuthorization and
eSignature tools. These tools allow clients to quickly
and securely approve forms and wires on the go by
leveraging platforms we already use: Schwab Alliance
and Schwab Mobile Apps. We invite clients who don’t
have a Schwab Alliance login to enroll and to install the
Emancipet is on a mission to make spay/neuter services and preventive veterinary care
affordable and accessible to all pet owners. Emancipet works toward this mission by
operating a network of high-quality, low-cost clinics, training and supporting other
organizations, and advocating for prevention-based solutions to animal homelessness.
Emancipet currently has locations in Austin, Pflugerville, and Killeen as well as mobile
clinics that travel across Central Texas.
latest version of the mobile app.
KYC – Verify your Identity. Why SHWM
requests a copy of your Driver’s License
The Securities and Exchange Commission (SEC) requires
Since 1999, Emancipet veterinarians have safely spayed or neutered more than 200,000
pets at little or no cost!
firms to obtain a client’s name, tax identification number,
address, telephone number, date of birth, employment
status, annual income, net worth (excluding primary
To learn more about Emancipet and support their work, visit:
http://emancipet.org/get-involved/.
Join the mailing list and sign up to tour one of their clinics!
residence), and investment objectives regarding certain
accounts. Firms also are required to put procedures in
place to verify the identity of any person seeking to
open an account and will require a Government Issued
Photo Identification to have on file such as a Driver’s
License or Passport. Please plan on having your photo
ID ready for your next meeting. Katia, our Client Services
Assistant, will be asking for this identification if it is not
Silicon Hills Wealth Management, LLC does not offer legal or tax advice. Please consult the appropriate
professional regarding your individual circumstance.
Silicon Hills
already on file.
Client Newsletter // Third Quarter 2014 // PAGE 2
Investment advisory services offered through Silicon Hills Wealth Management, LLC, a registered investment advisor.
The Quarter in Review
As we proceed into the second half of the year, our eyes remain primarily on domestic earnings reports
and European policymakers. As always, we stay the course and affirm our commitment to diversified1
portfolios and low-cost strategies.
Asset Returns
Our International Focus
Global equities realized modest gains over the quarter with the S&P 500
rising 5.23%2 and international equities3 lagging just behind at 4.6%4.
Domestically, the energy sector had a particularly strong quarter along with
utilities which benefitted from a dip in interest rates and a shift in investor
sentiment as traders grapple with the unease of three years without a true
market correction. As this year’s gains are the result of continued price
multiple expansion alongside tepid earnings growth, our impression is that
investors are expressing a preference for earnings quality in the near-term,
especially in the wake of 2013’s strong price performance.
Greater Asia
As was the case toward the end of 2013, we are seeing a large amount of market
commentary that points towards attractive international equity opportunities
relative to U.S. companies with analysts particularly emboldened by the latest
commitments by the ECB to support more widespread economic recovery.
Broadly speaking, we tend to mirror these sentiments in our portfolios. We
remain balanced with a slight preference for yield, low-volatility equities,
and actively-managed international exposure. We continue to see active
management as a value-add in the international equity market, especially
as countries surprise investors with outsized gains such as those posted by
Japan during the last quarter (+6.66%)5,6, or the frontier markets as a whole
(+11.92%)7,8.
In spite of expectations that the Fed may contribute to rising interest rates as
they end asset purchases around late Q3, global bonds managed a return of
2.5%9,10 over the quarter with the U.S. market slightly trailing at 2.0%11,12.
The Eurozone and the PIIGS (Portugal, Ireland, Italy, Greece, and Spain)
experienced renewed interest in sovereign bond issuances even in spite of
being seen as somewhat distressed as recently as 2012. As investor interest
accelerated over the past 3 months, tightening spreads between European
debt and U.S. treasuries reignited some interest in domestic bonds in spite of
a likely increase in the Fed Funds rate in 2015.
Over the quarter the 10-year treasury slipped from 2.73% to 2.53%13 in
apparent defiance of the Fed’s ongoing taper, though we keep in mind that
in a scenario of renewed skepticism towards European-issued debt (as is
currently the case for Portugal), the resultant flight to quality may contribute
to sustained low interest rates even after the Fed returns to traditional
monetary policy.
Silicon Hills
N/C
0-10
Americas
10-20
20-50
Greater Europe
50-90
>90%
Source: Morningstar Office
1
Neither Asset Allocation nor Diversification guarantee a profit or
protect against a loss in a declining market. They are methods used
to help manage investment risk.
2
Source: Morningstar Office
3
MSCI World ex US
4
Source: Morningstar Office
5
MSCI Japan NR USD
6
Source: Morningstar Office
7
MSCI Frontier Markets NR USD
8
Source: Morningstar Office
9
Barclays Global Aggregate TR USD
10
Source: Morningstar Office
11
Barclays US Aggregate Bond TR USD
12
Source: Morningstar Office
13
U.S. Department of the Treasury
Client Newsletter // Third Quarter 2014 // PAGE 3
Investment advisory services offered through Silicon Hills Wealth Management, LLC, a registered investment advisor.
The Quarter in Review
//
C O N T I N U E D
Growth Continues at a Modest Pace
Source: Economic Projections of Federal Reserve
Bank Presidents, June 2014 & FRED® Economic Data,
Federal Reserve Bank of St. Louis
Inflation reported as-of May 2014, Unemployment
reported as of June 2014
Forward projections based on Economic Projections
of Federal Reserve Board Members and Federal
Reserve Bank Presidents, June 2014 central tendency
projections and equivalent change in indicator value
each month until end-of-year 2014
In the United States, we close the first half of the year with little fanfare.
The unemployment rate has continued to slip lower and was last reported at
6.1%14; however, the Fed has also revised 2014 GDP growth estimates from
2.8 – 3.0% (as of the March 2014 meeting) to an expected 2.1 – 2.3%15
overall so indicators are not all pointing toward a strong finish to the year.
Inflation projections remain muffled at an estimated 1.5 – 1.716 this year vs.
the 2.0 long-term target, but otherwise the aggregate economic situation isn’t
deviating wildly from Fed targets. The oft-mentioned end of QE3 seems
imminent and our view based on the committee notes is that in October of
this year (barring any cataclysmic economic events) the Fed is likely to finally
cease asset purchases related to this third round of quantitative easing.
In stark contrast, our European neighbors are receiving arguably overdue
relief in the form of renewed easing as the European Central Bank begins
to mirror the same near-zero rate environment that U.S. policymakers are
expected to begin stepping away from over the next year. Uniquely, ECB
policy has extended accommodative interest rate policies far enough that,
by one measure, there is a negative nominal overnight rate. The ECB has
committed to a sustained near-zero (or more aptly, sub-zero) policy regardless
of rate increases in the United States or elsewhere, but thus far it is unclear
whether there is potential quantitative easing on the horizon especially as
Germany tends to be apprehensive about nontraditional and potentially
inflationary policy.
Although many nations have taken strides since to reduce their dependence
upon Russian natural gas for that very same reason, there is still potential for
disruption.
Farther east, higher output from the Chinese manufacturing sector may
be signaling a recovery alongside slowed reductions in the Producer Price
Index. Increased stability in the Chinese economy would be welcome news
for investors hesitantly eyeing global growth. The Chinese government has
reported slightly stronger growth in the second quarter than in the first, and
reiterated that targeted economic support is likely to continue into the near
future. We continue to watch for signs of more dramatic success as they
attempt a migration towards a more consumption-oriented economy.
We encourage you to reach out to us for further discussion of these topics.
14
FRED® Economic Data, Federal Reserve Bank of St. Louis
15
Economic Projections of Federal Reserve Board Members and
Federal Reserve Bank Presidents, June 2014
16
Economic Projections of Federal Reserve Board Members and
Federal Reserve Bank Presidents, June 2014
Apart from broad monetary policy, geopolitical tensions have risen
substantially following the downing of Malaysia Airlines Flight 17 over
contested Ukrainian territory. The aftermath of the incident was marked
by investor unease as the 10-year treasury rate inched lower and the VIX
volatility index experienced a boost. As the Ukrainian government has now
inked a deal with the ECB, Russia appears prepared to more aggressively
pursue delinquent payments for natural gas and rhetoric suggests that they
may halt Ukrainian pipeline flows altogether as they did during 2009.
Silicon Hills
Client Newsletter // Third Quarter 2014 // PAGE 4
Investment advisory services offered through Silicon Hills Wealth Management, LLC, a registered investment advisor.
The Quarter in Review
//
C O N T I N U E D
This newsletter contains general information that may not be suitable for everyone. The information contained herein should not be construed as personalized investment advice. Past performance is no guarantee of future results. There is no guarantee that the views and opinions expressed in this
newsletter will come to pass. Investing in the stock market involves gains and losses and may not be suitable for all investors. Information presented
herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security.
Indices are unmanaged and investors cannot invest directly in an index. The performance of indices do not account for any fees, commissions or other
expenses that would be incurred.
The S&P 500 TR Index is a market-capitalization-weighted index of 500 large U.S. companies listed on either the New York Stock Exchange
(NYSE) or NASDAQ Stock Market. TR, or Total Return, denotes that return calculation includes capital appreciation and income (dividends,
interest, etc)
The MSCI World Ex US NR USD Index consists of large and mid-cap equities in developed markets excluding the U.S. The index is balanced
on the basis of the MSCI Global Investable Market Indices (GIMI) Methodology that incorporates market capitalization, sector, style, and
other factors. NR (net return) denotes that dividends are implied to be reinvested after the deduction.
The MSCI Japan NR USD Index is designed to track the large and mid-cap segments of the Japanese markets. NR (net return) denotes
that dividends are implied to be reinvested after the deduction.
The MSCI Frontier Markets NR USD Index is designed to provide broad exposure to 24 of the 33 countries classified as “frontier markets”.
It contains approximately 99% of the investable equity markets across all 33 of these countries. NR (net return) denotes that dividends are
implied to be reinvested after the deduction.
The Barclays Global Aggregate TR USD Index is designed to represent the investable universe of investment-grade global bonds. TR, or
Total Return, denotes that return calculation includes capital appreciation and income (dividends, interest, etc).
The Barclays US Aggregate Bond TR USD Index is an unmanaged broad-based index that consists of investment grade U.S. dollar-denominated, fixed-rate taxable bonds with remaining maturities of one to three years. TR, or Total Return, denotes that return calculation
includes capital appreciation and income (dividends, interest, etc.)
The Producer Price Index (PPI) is a family of indexes that measures the average change in selling prices received by domestic producers
of goods and services over time. PPIs measure price change from the perspective of the seller.
The VIX is a trademarked ticker symbol for the Chicago Board Options Exchange Market Volatility Index, a popular measure of the implied
volatility of S&P 500 index options. Often referred to as the fear index or the fear gauge, it represents one measure of the market’s expectation of stock market volatility over the next 30 day period.
Silicon Hills
Client Newsletter // Third Quarter 2014 // PAGE 5
Investment advisory services offered through Silicon Hills Wealth Management, LLC, a registered investment advisor.
ph. 512.774.5340 // fx. 512.201.6727 // 8834 N. Capital of Texas Highway // Ste. 200 Austin, Texas 78759
www.siliconhillswealth.com
ADV Notice: Please contact us for more information and a copy of our ADV
Investment advisory services offered through Silicon Hills Wealth Management, LLC, a registered investment advisor.