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C.H. Robinson

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Elder Financial Abuse on the Rise

Written by Bruce Primeau on .

I recently read an article on this topic and attended a continuing education class on it as well. The devastating monetary and emotional toll financial abuse is taking on our elders is beginning to become more of a concern across the country. It's disheartening to read some of the statistics, but it's important to recognize when this abuse is taking place and know what to do about it. Here is some of the information I was able to gather that I hope you find useful:

  • The study estimates the average cost per victim is $36,000, which is 20% higher than the study found in 2014.
  • Nearly 50 of respondents say the effect on the elder victim was a "major loss" or "financial ruin."
  • 37% of active caregivers said the elder under their care had experienced financial abuse or exploitation with a loss. This is a considerable increase from the findings of the study's first iteration in 2014.
  • 40% of active and potential caregivers said their elder has been subjected to financial abuse multiple times.
  • 45% of active caregivers surveyed said the elder they cared for exhibited signs of dementia or a decline in mental capabilities.

Beyond the considerable financial loss, the study found that elder abuse is taking a great emotional toll on the victims. According to respondents, 36% of the victims experienced anger, 34% depression, 28% anxiety and 25% guilt. Worse, almost 60% of caregivers reported that the financial abuse had caused the elder with mental decline to isolate him or herself, primarily due to embarrassment or lack of awareness.

Allianz Life suggests several ways you can protect the ones you love:

  • Plan ahead to protect assets and ensure that the elder's wishes are followed.
  • The elder should consult with a qualified financial professional or attorney before signing complex agreements or anything they don't understand.
  • Build relationships with professionals involved with their finances as they can assist in monitoring for suspicious activity.
  • Limit use of cash. Instead, use checks and credit cards that create a paper trail.
  • Feel free to say "no," keeping in mind that it's the elder's money.

Note that much of this information is from a new study of active and potential caregivers by Allianz Life Insurance Company of North America. The study was conducted in August 2016 with 1,000 respondents age 18 to 64 who were either actively providing care for a non-spousal elder age 65 or older, or could be in a position to do so within the next 5 years.


We've Got Your Back

Written by Bruce Primeau on .

Several months ago the Department of Labor passed a new law designed to protect American investors, who have been losing approximately $17 billion annually (in their estimation) due to conflicted financial advice in their retirement accounts. Now, with Donald Trump winning the 2016 Presidential election, the Department of Labor's Fiduciary Rule may be in jeopardy.

This situation doesn't mean anything for SWA clients, as we are already a Fiduciary for our clients. It does mean something for those friends, family members and co-workers of our clients who are not currently working with a Fiduciary. Their advisors and those they are thinking about working with may not be required to look out for their best financial interests.

This is an important ruling in that many unknowing folks have been taken advantage of by their advisors. Those advisors are really representing the best interests of the company they work for and the products they sell and aren't required to take into consideration what might be a better option / recommendation for a particular client. Under the old rules, some advisors are tempted to make recommendations to clientele that maximize their own compensation at the expense of their client portfolios.

For this reason, SWA has operated as a Fiduciary since inception as we feel it is important that clients know that we represent their best interests and clearly sit on the same side of the table with them. The more SWA can cut fees and expenses, as well as reduce taxes over the long-term, the greater chances our clients end up with more dollars in their pockets and a higher likelihood to achieve their financial goals.

If you, or someone you know, feels your best interests are not being represented by their current advisor, please contact us as we are always happy to help.


Market Volatility Following the Election

Written by Matt Wright on .

Emotions are still running high following yesterday's election and Wall Street got hit with the one thing it dislikes more than anything: A surprise. Financial market trading last night implied potentially dramatic losses in the stock market today, but in the morning light, those losses have reversed into relatively modest gains. It's reasonable to assume that the coming days and weeks will see above-average market volatility as investors adjust to new expectations, but we are advising clients to sit tight and let it pass without making changes to your long-term investing strategy.

Several brief points as to why we think this is:

We've seen this before – U.S. stocks dropped 5% in the week following the 2012 election, only to resume a multi-year bull market shortly after. No one can predict what will happen this time around, but we do know that a gut / emotional response to get out of the market at that time was in error.

You're diversified – With very limited exceptions, our clients are invested in balanced strategies that have between 30% to 60% in fixed income. This is your portfolio's counterweight to stock market volatility, and we fully expect this portion to soften the volatility that stocks may exhibit.

We're all in this for the long-term – Our focus as your financial advisor is to implement a successful long-term financial plan. We vow not to make emotional short-term decisions that could impair this plan and we ask that you do the same.

We understand that this is a difficult time for some of you, and there may be a feeling that something has to be done. We're not here to tell you that your feelings are wrong, we just want to make sure that any changes to your financial situation are made in your best long-term interest. Please contact one of us if you'd like to review your financial situation and discuss any actions you are considering before making any changes.


Asset Location is part of our Vocation

Written by Matt Wright on .

Raise your hand if you want to pay more taxes!

No one? Okay, let's talk about whether you're living up to that reality. You most likely know to take advantage of tax-deferred retirement accounts and other tax-favored options such as Health Savings Accounts. You've probably heard about Roth IRA conversions and how, in some circumstances, you might be able to pay some amount of tax today with the expectation of saving taxes later on.

But, if you have taxable investment accounts in addition to tax-deferred accounts, how well are you managing your overall tax situation? If you aren't quite sure how your investment income will be taxed, you may be leaving money on the table.

SWA has always believed in investing client funds in a tax-efficient manner and does so by using mostly passively managed investment options and limiting trading turnover. By doing so, we can take greater control over the timing and amounts of realized capital gains. But we don't stop there – the next level of tax management is called "Asset Location."

Asset Location is a method of allocating your investment portfolio across your different account types in an effort to improve the performance of your portfolio, net of taxes. Certain types of so-called qualified investment income (e.g., qualified dividends and long-term capital gains) are taxed at lower rates than non-qualified income (e.g., interest, short-term capital gains, Real Estate Investment Trust dividends). No matter which tax bracket you land in, non-qualified income is taxed at a rate at least 10% higher at the Federal level than qualified income. Therefore, the logic of an Asset Location Strategy is to position your investment assets between your taxable and tax-deferred accounts in a way which will be more tax-friendly over time. Although it varies based on each client's situation, this could result in higher after-tax portfolio growth of 0.2%-0.5% per year. The key is that you incorporate all of your investment assets in this strategy, otherwise you cannot expect to realize the full benefits.

Many investors and investment managers are still focused on outdated ideas on how to manage their money, still believing that they can pick the next hot stock or successfully time moves in and out of the market. While there are always going to be a small group who do this successfully, there is an overwhelming amount of research (and personal experience) that the net result is much more likely to be higher fees and higher taxes on what you do earn. Instead, we should be focusing on the things we can actually control and understanding the tax code is a critical part of this.

If you need help in investing your money in a tax-effective manner, contact us now before another tax year slips away.



Call It What It Is: A Dividend is a Refund

Written by Summit Wealth on .

Term insurance is something we recommend most clients have in place as we are not typically proponents of permanent life insurance in most cases. That said, a few weeks ago we had a conference call with a life insurance salesman (for a company that shall remain nameless) that caused us to pause and consider what he was selling. Let me lay out the facts for you:

  • The clients (husband and wife) both own a term insurance policy with premiums increasing annually, as each gets older.
  • As you would suspect, neither of these term policies is accumulating any cash value as they are term policies and not permanent (whole life, variable life, etc.) policies.
  • The salesman touted that the clients were "guaranteed" to receive at least a 5.2% annual "dividend" on their policies and, quite often received 6% to 7% annual "dividends" on their policies.

At first, we asked questions like:

  • How can the insurance company afford to pay 6% to 7% annual dividends on their products, given the low interest rate environment we are in?
  • Where could they invest the money to earn a 9% to 10% annual return, since they would have to earn that much, after their fees to afford to pay their clients 6% to 7%, to earn a profit?

After having some discussions with SWA team members and giving it some serious thought, I remembered back to my days working at a CPA practice and recalled purchasing a term policy from the American Institute of Certified Public Accountants (AICPA). At the end of each year, I would receive a refund check from the AICPA, which they called a "dividend."

Simply put, that dividend check was a refund of the premiums I paid in, because fewer than expected individuals in my age group (covered by the same policy) had died that year. Then it dawned on me that the particular insurance company that we're now dealing with was doing the same thing. By that, I mean they are refunding premiums they overcharged their clients and are calling those refunds a "dividend."

Now I don't know about you, but getting a refund of something I am overpaying (every year) in the first place is not a return on my investment. It merely tells me that I am likely getting charged too much for a product I can likely purchase for less somewhere else.

My counsel to each of you reading this blog is to understand exactly what type of life insurance coverage you are paying for and how much it is really costing you. Most importantly, don't let the insurance company convince you that life insurance is a "great investment." We feel, in almost all cases, life insurance should be used to protect your family and not as a tool to create wealth for retirement, college planning, etc.

If you have any questions about this topic, please reach out to SWA as we have the life insurance resources that can review your existing policies, help you understand your coverage, and determine whether other options may prove more beneficial.

North Metro: 763.355.5873
227 East River Parkway
Champlin, MN 55316-5873

South Metro: 612.987.9112
5871 Crossandra Street SE
Prior Lake, MN 55372-3337

West Metro: 763.639.3425
322 Greenhill Lane
Long Lake, MN 55356

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