Friday, September 23, 2011

How You Prevent Your Team from Being Productive (and what to do about it)

Taylor Payne interviewed by Nancy Mandell of RIA Central:

If you’re the founder and CEO of an investment advisory firm that has expanded from a one-person shop to a business staffed by multi-professionals, you may well be your firm’s own worst enemy.

And recognizing that possibility can be the key to increased productivity.

So says T. Taylor Payne, CPA/PFS, CFP® and President and Investment Manager of Payne Wealth Partners, Inc. in Evansville, Indiana. In Payne’s opinion, “The most unproductive member of the team is usually the founder because he can’t keep his hands off, and everybody else is reluctant to call him on his unproductive habits.”  

Wednesday, September 21, 2011

Paying for Your Hobby

Have you ever considered the costs of paying for your hobby during retirement?  We recently came across some interesting numbers to help put this question into perspective for our readers. 

A 60 year old retiree, who plays three (3) rounds of golf per week, would need to set aside a lump sum amount today of $138,000 to cover their green fees over the next 22 ½ years.  This assumes that he or she pays an average fee of $36 per round, incurs a 4% inflation rate, experiences a 3% annual rate of return on the money saved and never loses any balls or replaces any equipment. 

These statistics are not only fun to see but interesting in their magnitude…..$138,000 for golf!  When you are seeking financial security in retirement, diligent planning is critical to your success.  Just think about how big the number would be if you lost a few balls along the way!

Source:  Center for Disease Control and BTN Research

Friday, September 16, 2011

August 2011 Market and Planning Update (Posted to our blog two weeks after sending to clients.)

"So what do we do? Anything. Something. So long as we just don't sit there. If we screw it up, start over. Try something else. If we wait until we've satisfied all the uncertainties, it may be too late.”

Lee Iacocca, Business Leader (former Chairman of Chrysler) and Author


We selected the quote above for this month’s commentary because in our economy, in the investment markets and in planning for our clients’ financial future we are constantly faced with uncertainty.  Our goal is to overcome the fear that uncertainty often creates, and then seize the opportunities it presents.   

PLANNING COMMENTARY
Uncertainty has always (and will always) be present for each of us when planning for the future.  What makes the difference is how you approach that uncertainty in the decisions you make today and how that changes the results you see long-term.

While it’s not easy to do, identifying opportunities that present themselves in these difficult times is the first step to prospering from this environment.  The second step is finding the courage to take action, as Lee Iacocca comments upon above, and take the steps needed to implement strategies that make good sense.  The decision of whether or not to refinance real estate related debt is one very simple example of this process.  Many individuals wait for the interest rate “bottom” to show itself so that they can refinance their mortgage or other real estate debt at the perfect time, when rates are at their absolute low.  As with many other strategies, the ideal time to pull the trigger won’t announce itself, and those that wait for the uncertainties about the economy, housing market and Fed action to be worked out will likely miss the opportunity altogether! 

We have been performing tactical Roth IRA conversions for a number of clients when their particular circumstances call for it.  What makes this opportunity so appealing is that lower market pricing allows for conversion of securities at a lower tax cost; any prospective appreciation in these securities enjoys tax-free treatment in the Roth IRA.  Action is what allows this to occur.  Without action, the best you can do is look back at opportunities missed. 

INVESTMENT COMMENTARY
Uncertainty about the direction of our economy (and fear of another recession), uncertainty over whether Congress would raise the debt ceiling and begin to seriously address our budget deficits, and uncertainty hanging over Europe in regards to their debt problems have led to increased nervousness in the financial markets.  As is typical in uncertain times, bonds have been a safe-haven and have helped to reduce volatility in diversified portfolios.  This relationship can be seen in the chart below. 

Financial Market Indices
August 2011
Last 3 Months
Year to Date
Last 12 Months
S&P 500 TR (US Stocks)
-5.4%
-8.9%
-1.8%
18.5%
MSCI Developed EAFE (foreign stocks)
-9.0%
-11.5%
-5.7%
10.5%
MSCI Emerging Mkt. Equities (emerging country stocks)
-9.2%
-11.5%
-10.3%
6.6%
Barclays Capital Aggregate Bond – Intermediate Term
1.1%
2.2%
5.0%
4.4%
Barclays Capital Municipal Bond Index
1.7%
3.1%
7.3%
2.7%
  
We believe the recent weakness in stock markets around the world created an opportunity for long term investors.  Thus, in early August we made a tactical adjustment by moving 5% of portfolios into a combination of large cap growth stocks and emerging market stocks.  Money to fund these purchases came from the complete sale of a long/short fund and the partial sale of an emerging market bond fund.   We have also been busy over the past few weeks rebalancing portfolios back to their asset allocation targets.  With the recent sell-off in the equity markets, stocks had become slightly underweight and bonds slightly overweight in portfolios versus their strategic target levels. 

We would never try to call a market a market bottom, but we do believe that high quality growth companies are fairly priced when looking at various valuation ratios.  The S&P 500 index is trading at a Price/Earnings (P/E) ratio of about 10 times forward earnings estimates and at close to 12 times trailing earnings.  Both these valuation measures show that US stocks are very cheap relative to their long-term historical averages.  For example, the 15 year average P/E ratio is 17 times earnings.  (Note: the lower the P/E ratio, the cheaper stock prices).  We see similarly attractive valuation opportunities in emerging market stocks too. 

EMPLOYEE ANNOUNCEMENTS
At Payne Wealth Partners we encourage our employees to academically challenge themselves and strive to obtain the highest levels of professional designations.  With this principle in mind, Terry Prather has recently earned the CERTIFIED FINANCIAL PLANNERTM certification which signifies his completion of extensive education, examination, experience and ethics requirements in the financial planning profession.  Often referenced as the gold standard in the industry, the CFP® certification exam is a rigorous, 10 hour comprehensive test in the areas of retirement planning, estate planning, investments, income tax planning and insurance.

Terry is the fifth professional at Payne Wealth Partners to achieve the certification.  Team members Taylor Payne, Chad Sander, Ann Pendley and Perry Moore are also CFP® certificants.


Monday, September 12, 2011

Shaping How Clients Share the Wealth

Click here to read the full Dow Jones Newswire article "Shaping How Clients Share the Weatlh" quoting Perry Moore, Director of Wealth Planning at Payne Wealth Partners.