FPH Insights - August 2017Submitted by Financial Planning Hawaii on August 31st, 2017
Our PR Director has just added "Fashionista Fridays" to the FPH corporate calendar.
Announcements, colorful commentary, and useful financial planning tidbits from John H. Robinson
Off-Season Tax Planning...Minimizing one's tax liability is a critical component of both wealth accumulation and retirement portfolio sustainability. To that end, portfolio optimization often involves close coordination and collaboration between the financial planner (me) and the client's CPA. However, if the only time you meet with your CPA is between December and April 15th for tax return prep, there is little opportunity to explore advanced tax planning strategies. June-November is the period of time when CPAs tend to have the best availability for strategic planning. I am ALWAYS available to work with our clients' CPAs to help them keep more of their hard-earned savings.
You Might Be A Robo-Advisor... Last month, a satirical piece I wrote about the rise of automated trading platforms (a.k.a. "robo-advisors") was published in Advisor Perspectives. The article is a parody on comedian Jeff Foxworthy's classic "You might be a redneck" shtick, and it is intended to highlight some of the unheralded limitations of robo-advice relative to the services and expertise of sophisticated human financial planners.
Black Diamond Reports...Q2 performance reports for clients with asset-based advisory accounts have been posted to your respective "Investments" folders in eMoney. Black Diamond is a the third-party company we use to provide GIPS compliant performance reporting.
A Transfer on Death Deed For Real Estate, also called a "beneficiary deed," can be an extremely helpful estate planning tool. Hawaii is one of a growing list of states that offers the ability to add a beneficiary designation to real estate. As a point of interest for Hawaii clients, a beneficiary designation on real estate may be made in conjunction with forms of joint ownership including Tenancy in Common and Tenancy by the Entirety. Here's a list of TOD Deed states.
Supporting Articles -
Transfer-on-Death Deeds (American Bar Association)
Uniform Law Commission develops transfer-on-death deeds (American Bar Association)
Hawaii Real Property Issues and Techniques (Hawaii State Bar Association)
A Random Walk On A Short Pier...This week's 2 Cents (4 min, 50 sec) features a discussion of the current market environment in the context of established principles of investing.
Random Walk Theory (Investopedia)
Efficient Market Hypothesis (Investopedia)
Jim Cramer's Stock Picks Stink (Kiplinger)
How Mad is Mad Money? Jim Cramer as a Stock Picker and Portfolio Manager (CFA Digest)
Jim Cramer's "Mad Money" Charitable Trust Performance and Factor Attribution (The Wharton School)
This column is dedicated to raising awareness of the value of financial planning guidance beyond just investing.
A client who is approaching full retirement age brought in her social security earnings statement for me to review and upload to her document vault in eMoney. Because of her limited work history, the statement showed that she can expect to receive just $263 per month when she claims retirement benefits later this year at age 66. She was completely unaware that, as a divorced spouse who was married more than ten years, she is eligible to file a claim to receive 50% of her ex-husband's social security benefits. This "catch of the day" will provide her with approximately $15,000 per year of additional income.
Another client with a similarly paltry social security earnings statement was delighted to learn that, upon reaching social security full retirement age in 2020, she will receive 100% of her deceased ex-husband's social security benefits. In this case, her benefit is expected to be more than $30,000 per year!
Given that these benefits are not automatic and require the divorced spouse to specifically make the claim, these tales serve as tangible examples of the value a financial planner can provide. For more on this topic, see the following article links:
Retirement Planner: If You Are Divorced (Social Security Admininstration)
Survivors Planner: If You're The Worker's Surviving Divorced Spouse (Social Security Admininstration)
Social Security Survivor Benefits After Divorce (FindLaw.com)
Will My Divorced Spousal Benefits Be Automatically Adjusted If My Ex Dies? (Prof. Laurence Kotlikoff, Maximize My Social Security)
Social Security Facts About Benefits for an Ex-Spouse (Dana Anspach, TheBalance.com)
Social Security And Divorce: What You Need To Know (WiserWomen.com)
The Blueprint for Successful Dividend Investing (DividendGrowthInvestor.com) This white paper highlights some of the basic principles of investing in rising dividend stocks that I apply - Don't Over Pay (low P/Es), Invest for dividend growth, NOT current divided yield (low payout ratios), Buy & Hold as long as the dividends keep rising.
Do You Still Need an Estate Plan if there is no Estate Tax? (Forbes) As the article articulates, the short answer is YES. Estate planning remains a critical component of financial planning and is among the areas where we frequently catch potentially costly planning mistakes.
Deducting Financial Planning And Retainer Fees, And The (Tax) Problem With Bundled AUM Fees (Michael Kitces, Nerd's Eye View) This article highlights the fact that investment advisory fees may be tax deductible while fees for hourly and flat fee financial planning services are generally non-deductible. As a practical matter, many advisors (myself included) believe that charging clients an advisory fee that is a percentage of investment assets under management offers a tax/cost savings benefit relative to charging the same dollar amount as a flat "financial planning" fee.
Securities offered through J.W. Cole Financial, Inc. (JWC) member FINRA/SIPC. Advisory services offered through Financial Planning Hawaii and J.W. Cole Advisors, Inc. (JWCA). Financial Planning Hawaii and JWC/JWCA are unaffiliated entities.
Fee-Only Financial planning services are provided through Financial Planning Hawaii, Inc, a separate Registered Investment Advisory firm. Financial Planning Hawaii does not take custody of client assets nor do its advisers take discretionary authority over client accounts.
The information contained herein is general in nature. Neither Financial Planning Hawaii nor J.W. Cole provides client specific tax or legal advice. All readers should consult with their tax and/or legal advisors for such guidance in advance of making investment or financial planning decisions with tax or legal implications.