Dear Friend,

It’s hard to believe we’re already talking end-of-year and the holidays, but I guess that’s why they say time is our most precious resource. We write our year-end letter not to burden your inbox, but rather because year-end is a busy time of year for important reasons most people (even some professionals) glance over. If you read no further, please keep in mind the following dates, deadlines, and important messages:

  • If you choose to pursue additional gifts or the creation of a Donor Advisor Fund (DAF), we need your detailed instructions no later than Monday, December 2nd, 2019 to ensure the proper execution of your wishes. Given the year-end burden on transfer agents, registrars and capital gains distributions, we will not guarantee compliance with any transfer instructions provided after December 2nd.
  • Qualified Charitable Distributions (QCDs) and IRA to Roth IRA instructions, with the advice of your tax counsel, must also be received on or before December 2, 2019.
  • Those with net capital gains distributions in excess of $25,000 in their taxable accounts with us will be provided advance notice later this month.
  • If you have executed a sizable capital transaction, unique expense or charitable event away from your relationship with us, please inform us immediately.
  • Don’t be surprised if you see activity within your accounts as we scan for tax-loss harvesting opportunities where/when prudent. This is an important component of any thorough investment strategy meant to reduce your current and future tax burden.
  • We will continue to invest in enhancing our services and process to add greater client conveniences and to better assure you sleep well at night knowing your financial lives are accounted for. 

And now the longer version of our Year-End Update:

We have celebrated a year and a half at our new firm and feel settled, energized, and more capable than ever before. We are grateful to all of you for your trust, investment in your financial lives, and the many introductions we’ve received over the past year. Our decision to join Steward Partners was to protect you and your hard-earned assets, and to allow our team the autonomy to enhance our practice in ways that support your evolving needs, lifestyles, and long-term success. Although the future may appear stormy, our team stands equipped and welcomes the responsibility. 

Our group has increased our services at our new home with better, and more relevant, planning and portfolio tools than were previously available to us. Casey’s suggestion that we invest in new technologies has been a home run for our clients and our team, and we will continue to enhance our nationally recognized process in our effort to improve clients’ outcomes.

2018 was the first year under the tax bill rushed out in December of 2017. The tax years 2018 and 2019 have provided many of you with an awakening as to what might be in store in the future. The 2017 bill presented some of the most significant changes to the code since 1986 and legal and tax professionals are still struggling with its implementation. Planning is not an option; it is a necessity in an environment like this.

Expensive domestic equity markets, 17 Trillion of negative interest rates around the world, and a historically long bull market provide many challenges. As planners, we believe it is responsible for each and every client to prepare for a future of lower returns - in spite of how generous 2019 has been. We will continue to emphasize the importance of planning practices that seek to reduce one’s dependency on the ups and downs of any market.

By now, many of you have enjoyed Calendly, our calendar scheduling tool, and experienced the Riskalyze exercise that allows you to inform us what your appropriate tolerance for risk is. We often joke that everyone wants to jump out of an airplane until they approach that exit door. Who packed your parachute? * Perhaps most importantly, does your tolerance for risk align with your long term goals for success?

As we continue to improve the quality and value of our process for your success, our team has implemented two additional planning components: The Progress Report (formerly the Scorecard) and our Client Financial Review (CFR) designed to keep you on track, in-the-know, and fully engaged in your success. 

  • The Progress Report is designed to summarize your plan into actionable steps to help remain organized and focused on the elements which you have control of that will drive long term success. This will also incorporate your self-assessed risk tolerance for us to customize your portfolio construction and create a plan to achieve your goals. Many of you have enjoyed seeing your ongoing success displayed in your Progress Report and the actionable items you can take to assure your long-term success.
  • The Client Financial Review (CFR) is an immensely simple snapshot of your assets, income generated, allocations and results over time (which is short since you just joined our new firm in the spring of 2018). For those who prefer, we can now send these reports electronically to your encrypted vault within your online account. 

Market Commentary

After a year when “nothing worked” (2018) and where only paltry cash yields prevailed, 2019 provided a reminder as to why global diversification works and why investing with one’s emotions or “gut” does not. As we write this, nearly every major asset class has delivered positive returns year-todate, however, some of this is attributed to the precipitous decline in interest rates both domestically and overseas and warrants a great deal of caution. 

The decline in interest rates represents a tale of two stories: 

  • A global economic backdrop where the rates of growth have slowed, and many economies are flirting with economic contraction. Deep concerns stem from the fact that Central Banks lack the traditional firepower to help mitigate the next recession, and at a time when pension systems, insurance companies, and other are still clamoring to catch up to what they’ve promised.
  • Technological deflationary forces stand to reshape industries and the lives of billions: DNA sequencing, robotics, energy storage/renewable energy, artificial intelligence, and blockchain. These burgeoning industries have incredible economic potential, but the transitory phase is apt to be a bumpy one and may misalign with the ‘normal’ characteristics of the economic cycle leaving many to speculate if “This time truly is different.”

The optimistic overtones appear directly at odds with many underlying layers of risk. These contradictions are why there is so much controversy about the implications of on inverted yield curve. Without the ability to foresee the future, investors must remember that markets are typically cyclical. The most difficult part of every cycle is keeping one’s balance. 

We believe it’s imperative that people prepare for a lower return environment and use these fruitful years as an opportunity to focus on the variables that can be controlled. These variables include taxes, prudent savings, and curtailing one’s own expenditures. With proactive, thoughtful planning in these areas and throughout the balance sheet, one’s probability for success improves. We will continue to work for successful client outcomes. 

Tax Considerations

Those with net capital gains distributions in excess of $25,000 in their taxable accounts with us will be provided advance notice later this month. For your benefit, we continue to employ asset exchanges during times of turmoil (i.e. 2008, 2009, 2014, 2018, and 2019) as well as when our disciplined investment process calls for rebalancing efforts. 

Tax efficiency is the hallmark of our practice and we will act to reduce your tax burden through taxloss harvesting and asset exchanges where prudent and consistent with an allocation strategy aligned with your personal goals. It’s important for investors to remember how favorable today’s tax environment is, and how successful long-term planning requires proper historical context in order to make informed decisions. 

If you have executed a sizable capital transaction, unique expense or charitable event away from your relationship with us, please inform us immediately. 

Please consult your tax counsel on specific tax recommendations relevant to your situation - especially as it relates to capital gains rates, Roth IRA conversions, Affordable Care Act Tax, Alternative Minimum Tax (AMT), and IRA and qualified plan required minimum distributions (RMDs) under the tax bill that passed in late 2017. Everyone’s circumstances are unique, and the accounting community has never been so overworked.

Fund Reporting

IRS requirements have become increasingly complex over the years. Please remember that our IRS compliant and detailed “cost-lot” reporting and historical data on your securities holdings may help you avoid tax surprises and strategically allow us to utilize losses you may have elsewhere, if they exist. You may see a modest increase in year-end trading activity as a result. Our detailed cost-lot reporting will also assist you and your tax counsel in navigating the IRS requirements in the future.

Gifting and IRA Strategies

Following the 2017 tax bill, many of you took our counsel to “bunch” charitable contributions and “share the wealth” with select charitable organizations or family members via a Donor Advised Fund (DAF). If you choose to pursue additional gifts or the creation of a DAF, we need your detailed instructions no later than Monday, December 2nd, 2019 to ensure the proper execution of your wishes. Given the year-end burden on transfer agents, registrars and capital gains distributions, we will not guarantee compliance with any transfer instructions provided after December 2nd. Qualified Charitable Distributions (QCDs) and IRA to Roth IRA instructions, with the advice of your tax counsel, must also be received on or before December 2, 2019.

We are not kidding about the timeline and deadline this year, friends. We have seen too many lastminute efforts work against our client’s interests and cannot support such actions in the future.

Estate Planning Strategies and Planned Giving

For those who engage in more sophisticated estate planning or planned giving, please contact us and we will be pleased to discuss your options with you and your legal/tax counsel. We have a number of planned giving strategies available through local and national organizations to consider, depending on your wishes. We strongly suggest that you engage competent tax and estate counsel considering the ever-evolving tax code. Many prominent estates and trust attorneys have retired in recent years and we have been performing due diligence on your behalf for possible new, and younger, attorneys and accountants to serve you in the future.

Goal Planning and Monitoring (GPM) and the “perfect marriage” with Riskalyze

You all benefit from seeing your financial and life achievements tracked regularly via the planning tool established for you. Most of you have enjoyed the rich and multi-faceted capacity of our planning tools. The addition of Riskalyze in assessing one’s unique tolerance for risk is a recent tool that pulls together the behavioral side of the investment process with one’s financial plan. The marriage of Riskalyze and GPM have proven very useful to the clients that are now, or hope to be, living off the fruits of their labors with regular portfolio distributions. We have returned to our regular review and meeting schedule and clients have been overwhelmingly impressed with GPM and how it can aid them as they accumulate their wealth or live off of it.

Communications

After a rebuild after our migration, we continue to distribute important information to you via monthly email updates and frequent web enhancements at The Sedoric Group. This information is available for our clients, their family, friends, and future clients. We hosted 3 client calls to facilitate your migration to our new firm with a considerable number of attendees. Our July 2019 client call set a new record for client engagement and we are grateful. We will continue to communicate with greater frequency during turbulent times. Engaged and educated clients result in better financial and lifetime outcomes. 

Team Update 

Practice what we preach is a common theme within our office, and just as we ask our clients to prepare for their futures, we do the same as a team. Assuring continuity for our client base is an ongoing hallmark for our practice. Casey Snyder joined the Sedoric Group in 2015, although has worked alongside Tom since 2008. Erika Luczynski’s addition to the team in 2014 was to assure clients a seamless transition for when Michele decided to eventually retire. And most recently, Brittany joined us in 2016 in preparation for Vicki’s eventual retirement. We’re ever appreciative of Vicki and Michele’s stewardship, and check in with them regularly. Between grandkids and golf scores they are invested in our community and doing amazing things in their respective encore careers. 

We find it troubling that most advisors (over 70%) do not have a succession plan for their clients, or them, and wish the research was otherwise. You know us to be diligent in this regard and the average age of our team is now 41.

In addition to assuring continuity, we are also expanding our skills and expertise. As you may already know, Casey is a CERTIFIED FINANCIAL PLANNER having passed his CFP® exam in 2017, and Erika is now diligently studying for her exam in the spring of 2020. The CFP® certification allows our team to expand our insights by compressing decades of experience and wisdom into focused years of rigorous training. After all, planning is the core of what we do for you.

Administrivia

Since we serve as fiduciaries in over 99% of our relationships, the recent “DOL Fiduciary Rule” game of ping pong or the SEC’s BI (Best Interest) ruling has had nominal impact on our responsibilities to you and your family. The “ping pong” and administration change cost the financial services firms an estimated $15 billion dollars which will ultimately be borne by the firms and clients. Feel free to speak with your favorite elected official who passed this expense on to us. Internally, in 2019, we continued to reduce internal management expenses for our clients. As fiduciaries, that is what you pay us to do – look under every rock and around every corner.

For those who have yet to enroll online, we ask that you do so immediately. Our online portal allows for additional functionality, collaboration, and conveniences. Our encrypted “vault” functionality will also become key to our practice and how we deliver important documents and reports with you all in the future. More updates are coming and we’re immensely excited with all that we can offer. Increasingly, our reporting and collaboration will be digital, so we encourage you to embrace it.

A sampling of the tax planning and tax reduction resources available to us through our partners at Raymond James are also attached.

The flood of your referrals since we joined Steward Partners is affirming and heartwarming. We appreciate all of you for validating what, and how, we work for you. We carefully navigate the onboarding process into our practice and we have limited the number of new relationships to 6-8 per year. Our team “vets” any new engagement collectively. If you have someone that needs us, we would appreciate hearing from you first directly before we speak with your friend or family member.

Over a year in, our transition remains one of the most validating and rewarding experiences we’ve ever endured. Our commitment to helping you navigate myriad life transitions, economic events, and an ever fast evolving geopolitical landscape, is the principle on which our team’s foundation was built. 

We’re excited to come to work every day and we are honored to serve as a fiduciary for you, your family, and your friends. 

 

The report herein is not a complete analysis of every material fact in respect to any company, industry or security. The opinions expressed here reflect the judgment of the author as of the date of the report and are subject to change without notice. Statistical information has been obtained from sources believed to be reliable, but its accuracy and completeness are not guaranteed. The material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Additional information is available upon request. Past performance is no guarantee of future results. Riskalyze is an independent third-party service provider and is not affiliated with Raymond James. The projections or other information generated by Goal Planning and Monitoring and Riskalyze regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Results may vary with each use and over time. These is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person’s situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not providing advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. All investing involves risks, including the possible loss of principal amount invested. No investment strategy can guarantee your objectives will be met. Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNERTM, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements. *The material in this section includes articles from The Sedoric Group prior to joining Raymond James and Steward Partners. As of April 26, 2018, The Sedoric Group became affiliated with Raymond James and a partner with Steward Partners.