Category Archives: CapWealth Blog

Will women leading NYSE, NASDAQ exchanges bring more diversity in finance world?

The following column from Jennifer Pagliara, CapWealth Senior Vice President and Financial Advisor, was posted by The Tennessean on May 28, 2018.

(Photo: Richard Drew, AP)

You might have already heard the historic news that Stacey Cunningham was named the first female president of the New York Stock Exchange. But in case you haven’t, you might be interested to know that it only took 226 years for a female to be appointed to this position within the organization.

Women in the NYSE
Many credit Muriel Siebert with paving the way for women on Wall Street today. In 1967, she bought her own seat on the NYSE and worked alongside 1,365 men for the next decade.

Cunningham has had her own impressive career within the financial industry. She began as an intern on the exchange in 1994 while still attending college at Lehigh University. After graduating, she become a trader on the floor of the exchange. She took some time off to work in the culinary industry in 2005 but ultimately came back to the NYSE after working for NASDAQ from 2007 to 2012. She was serving as chief operating officer of NYSE Group before being tapped for the new lead position.

Cunningham assumed the role of the 67th president of the NYSE on Friday, May 25, but she doesn’t sit alone at the top of list of the highest-ranking women executives in the finance world. Adena Friedman became NASDAQ CEO in January 2017.

Baltimore-raised, Friedman has spent most of her life and career in the northeast region of the U.S., but she spent some time in Nashville, where she received her MBA from Vanderbilt University’s Owen Graduate School of Management. She started at NASDAQ in 1993 and steadily rose through the company. Like Cunningham, her career veered onto a different path for a couple of years, when she joined the investment firm Carlyle Group as its chief financial officer ahead of its initial public offering, but she returned to NASDAQ in 2014 as president and apparent successor to Robert Greifeld, who had been serving as CEO since 2003. Her accession, therefore, wasn’t a surprise but still a win for women in finance nonetheless.

After accepting their positions, both Cunningham and Friedman spoke about hope for more diversity in the finance world – noting the importance of spreading positive messages to young girls about their careers and showcasing Wall Street as being more inclusive for other women.

NYSE Background
The NYSE was founded on May 17, 1792, on Wall Street in NYC when 24 stockbrokers signed the Buttonwood Agreement. At this point, the exchange was focused on government bonds until the early 1800s and overtook Philadelphia to be the financial hub of the U.S. It was officially named the New York Stock & Exchange Board on March 8, 1817, but it was later simplified to the New York Stock Exchange. It has been located at 11 Wall Street since 1865.

Membership of the NYSE was originally set to 533 “seats” in 1868. The term “seats” was coined because members sat in chairs to trade. Holding this seat allowed the owner to directly trade on the exchange. The most expensive seat ever sold was in 1928 for $625,000, which today would be roughly $6 million. Eventually the seats were raised to 1,366 in 1953.

In 2005, NYSE became a for-profit, publicly traded company, and at that time, seat owners were given compensation and shares of the newly formed corporation. Now, one-year licenses are sold to trade directly on the exchange.

Where is NYSE today?
Today, the NYSE is the largest stock exchange in the world by market cap and estimated to be $21.3 trillion as of June 2017. It is open between 9:30 p.m. and 4 p.m. EST Monday through Friday marked by the distinguished bell ringing. It is closed for all federal holidays, and it is regulated by the Securities and Exchange Commission (SEC).

Jennifer Pagliara is a senior vice president and financial adviser with CapWealth Advisors, LLC, and a proud member of the Millennial generation. Her column speaks to her peers and anyone else that wants to get ahead financially.

Beyond the movies: Unveiling the mystery of hedge funds

The following column from Jennifer Pagliara, CapWealth Senior Vice President and Financial Advisor, was posted by The Tennessean on April 17, 2018.

Most of us have our own opinions of Wall Street and the financial services industry. Movies like “Wolf of Wall Street” and “Wall Street: Money Never Sleeps” definitely did not help the reputation of industry. I believe there is a particular reputation that hedge funds have earned over the years that have led these investments to have an air of exclusivity, greed and mystery. I’m here to lift the veil back a little and help you understand what this type of investment is really all about.

(Photo: Getty Images/iStockphoto)

What is a hedge fund?
A hedge fund is simply pooled money from investors that can be invested in a wide variety of investments with the goal of having a positive return. In its most basic definition, it’s not as scary anymore, is it?

Hedge fund vs. mutual fund
You might be thinking “Isn’t that the same thing as a mutual fund?” A mutual fund is a company that also pools money from investors to invest in securities such as stocks and bonds. But the difference is that hedge funds are not regulated as heavily as mutual funds, and they can invest in much riskier investments. There are also a few other characteristics that differentiate hedge funds from mutual funds:

  • Accredited investor: In general, you have to be an accredited investor to invest in hedge funds. An accredited investor has a minimum level of income or assets to qualify. This is the main contributing factor that has led to the exclusiveness of hedge funds.
  • Valuation: Mutual funds have a net asset value (NAV) that is computed once per day. NAV is the total value of the securities in the portfolio minus liabilities and divided by the number of shares outstanding. Often, investments in a hedge fund are difficult to value, and therefore, it makes it hard to know what the value of your investment truly is.
  • Redemption: With a mutual fund, as long as it is open-ended, you can redeem your shares any day or time that you would like. With a hedge fund, there is a lock-up period. You cannot redeem your shares within that period, which is often at least one year long. Then, after that period expires, you have to give a 30-, 60- or 90-day notice that you would like to redeem your shares.
  • Initial buy-in: With a mutual fund, you can buy in with often as little as $25 or $50. With a hedge fund, the buy-in is often at least $500,000 or $1 million. But it is not uncommon to see initial investment minimums of $5 million or even $10 million.
  • Fees: In 2016, average expense ratios ranged from 0.5 to 0.75 percent, depending on the type of mutual fund. For a hedge fund, managers are compensated generally on a “2 and 20” schedule. This means you pay 2 percent for the management of the fund, plus the manager keeps 20 percent of the fund’s profits. However, each manager has a unique compensation package, so this can vary.

Why invest in hedge funds?
After all of this, you might be questioning why anyone would want to invest in a hedge fund. The two main appeals are performance and diversification.

Adding a hedge fund does provide another way to diversify a client’s portfolio. And, hedge fund performance does tend to have an allure because of its legendary numbers. We have all heard stories about that one fund that had a 400 percent increase. I hate to burst your bubble, but the average fund just does not have the crazy performance that the rumor mill has spread. In fact, the HFRI Fund Weighted Composite Index has earned an average of 6.1 percent each year since 2003. So, just because an investment has a high minimum investment or requires a certain level of income doesn’t mean that it is guaranteed to have a high return.

Ultimately, hedge funds may or may not be the right investment for you. Be sure you understand what you’re investing in and don’t always believe what you see in the movies.

Jennifer Pagliara is a senior vice president and financial adviser with CapWealth Advisors, LLC, and a proud member of the Millennial generation. Her column speaks to her peers and anyone else that wants to get ahead financially.

4 strategies for getting out of debt

The following column from Jennifer Pagliara, CapWealth Senior Vice President and Financial Advisor, was posted by The Tennessean on April 2, 2018.

Likely, you caught the recent headlines broadcasting the news that Americans’ national credit card debt hit $1 trillion for the first time in history. These findings emerged from WalletHub’s recent Credit Card Debt Study.

(Photo: Getty Images / iStockphoto )

That’s a shocking statistic, but it doesn’t seem out of line when you look at the Federal Reserve’s latest numbers, which show that the average American household has $137,063 in household debt (including mortgages). Add to that the fact that the median household income in 2017 was only $59,039, according to the U.S. Census Bureau, and it’s clear that Americans are putting themselves into a hole they aren’t likely to climb out of.

Unfortunately, debt is a natural part of life for many millennials and young professionals in what we call the asset accumulation phase of life. They are in the early stages of establishing their careers and likely carry a hefty amount of student debt. They also often rely on credit cards for lifestyle spending at this point in their lives and are adding auto loans and mortgages to their financial obligations.

It’s not uncommon for new millennial and young professional clients to come to us with debt burdens. And, we’re prepared to help them chart a course to reducing their debt and begin focusing on growing — and preserving — their assets. Here are a few of the first steps we walk them through.

Consolidate
One of the first things we look to do is consolidate credit card debt into one lump sum with a lower fixed rate. There are a number of methods out there, from taking out a personal loan at your bank to opening a balance-transfer credit card, and each have pros and cons to consider. The best option for each person depends on the individual situation, so the best practice is to lay out all of the options available to your specific situation and weigh the pros and cons to determine the best choice for you.

Set a plan of attack
Next, it’s time to set a plan to attack the debt, starting with the smallest loan. Paying off that first debt will be a psychological win that will serve as motivation to keep going. Determine a set amount to pay toward the smallest loan each month, and be consistent with your payments. And, when you get rid of that first loan, celebrate it!

Budget
“Budget, budget, budget” in finance is as important as “location, location, location” in real estate. It is the key to success. You can be deliberate with your spending by outlining your income versus expenses for the month and identifying spending categories where you can set limitations.

There are a number of budgeting apps and websites that can help you, but you can simply start by tracking your spending for a few months to identify how your money flows in and out of your account.

Before long, you should be able to determine where you may be overindulging and can cut back. And, once you’ve set a budget, stick to it! You will be surprised by how empowered you will feel once you take charge of where your money goes each month.

Persistence pays off
I’m not going to lie to you and say it’ll be easy. It may not feel like much fun to buckle down, set a budget and be diligent in your spending, especially if you’ve become accustomed to a lifestyle of spending at will. But once your debt is down, not only will you feel a sense of relief, but hopefully, you will also have acquired the tools you need to ensure you don’t let it get out of control again.

Jennifer Pagliara is a senior vice president and financial adviser with CapWealth Advisors, LLC, and a proud member of the millennial generation. Her column speaks to her peers and anyone else who wants to get ahead financially.

Stock market volatility: Friend or foe?

The following column from Jennifer Pagliara, CapWealth Senior Vice President and Financial Advisor, was posted by The Tennessean on Feb. 16, 2018.

Volatility is back. While many may not have expected such a swing after the long period of stability, investors and advisers alike know that volatility is simply part of the market cycle.

So, what is volatility anyway?

Photo: Getty Images/iStockphoto

The formal definition of volatility is a statistical measure of the dispersion of returns for a given security or market index. When the media discusses market volatility, they are essentially talking about how much stock prices are moving up and down. High volatility means prices are moving up and down quite a bit, and when it is low, there is steadier fluctuation.

There are even volatility indexes that show the market’s expectation of 30-day volatility. The VIX (the trademarked ticker symbol for the Chicago Board Options Exchange Volatility Index) tracks the S&P 500. It is forward-looking and is often referred to as the “investor fear gauge.” VIX values greater than 30 are generally associated with a large amount of volatility as a result of investor fear. Values below 20 correspond to less stressful, even complacent, times in the market. Until February, the VIX had not closed at more than 16 over the prior six months. At the point of writing this column, the VIX’s highest peak was at 39.60 on Feb. 9.

Volatility can be a good thing. With some volatility, there is a wider range of possible outcomes. If volatility stays consistent, there is less possibility for reward. While the upside increases, so does the downside. And as with any investment, the riskier it is, the greater the possibility of return.

What’s the cause?

The problem with volatility is that there isn’t one particular cause that anyone can pinpoint. For the past couple of weeks, there seems to be several factors at play:

  • We are in a rising interest rate environment for the first time since the early 1980s. There is more conviction that three rate hikes will happen in 2018. Within that realm, the 10-year Treasury yield has rapidly increased to 2.8 percent from 2.5 percent in January.
  • There was a shift in investor sentiment. People started to believe that this bull run couldn’t last for forever.
  • There are also some large macroeconomic events that could have had some effect as well, including the potential government shutdown and concerns over the deficit and increased government spending woven into the bipartisan budget deal coming out of the Senate this week.

Some strategists, on the other hand, have noted more unusual suspects for some of the recent drop-offs, such as “forced selling” by electronic management models.

And still, many strategists point to “market psychology” for the selloff behavior, rather than to fundamental failures. With the economy continuing to move ahead in a positive direction and U.S. businesses reporting repeated earnings growth with the catalyst of major tax breaks still to be fully realized, the stage seems to be set for a sustained and healthy business economy — one to remain invested in.

How to stay the course

We all let our emotions get the best of us at times. We’re human. It’s completely understandable. However, when it comes to investing, making sure you don’t let that happen is going to be key to long-term financial success. We often let fear and greed drive our decisions in making shifts in our investments, rather than sticking to the fundamentals.

You should invest in companies that you believe will be successful and profitable for the long run, and don’t let daily fluctuations in valuation deter you. As Warren Buffet has said, “Games are won by players who focus on the playing field, not by those whose eyes are glued to the scoreboard.”

Volatility is expected and, as earlier noted, can even provide an opportunity to acquire a greater investment in a company you believe in at a lower cost.

Jennifer Pagliara is a senior vice president and financial adviser with CapWealth Advisors, LLC, and a proud member of the Millennial generation. Her column speaks to her peers and anyone else that wants to get ahead financially.

Are we headed for another recession?

The following column from Jennifer Pagliara, CapWealth Senior Vice President and Financial Advisor, was posted by The Tennessean on Feb. 2, 2018.

(Photo: Colin Anderson, Getty Images/Blend Images RM)

2018 marks the 10th anniversary of the beginning of the Great Recession. At times, it feels like the economy is still healing, but on the whole, we have come a long way since then.

With the stock market at all-time highs, unemployment down to 4.1 percent and U.S. home foreclosures down to some of the lowest levels since 2005, it’s natural to worry about being able to continue on this trajectory. But should we be bracing for another recessionary cycle? Let’s take a deeper look.

What is a recession, after all? 

To take some ambiguity away from what a recession really is, let’s define it. A recession is most commonly defined as two consecutive quarters of declines in quarterly real GDP. The National Bureau of Economic Research offers a more detailed definition:

“A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production and wholesale-retail sales. A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough. Between trough and peak, the economy is in an expansion. Expansion is the normal state of the economy; most recessions are brief and they have been rare in recent decades.”

The Great Recession lasted 18 months and was triggered by the bursting of “an enormous speculative housing bubble,” generated by a perfect storm of low interest rates, lenient lending standards, ineffective mortgage regulation and lacking loan securitization, according to a 2011 study released by the Federal Reserve Bank of San Francisco.

While devastating to the economy and to many people and industries, which are still struggling to recover today, a lot was learned from the Great Recession, and many changes have been implemented in both policy and regulation to protect the country from a similar crash.

Where are we today?

While recovery has been slow, it’s been purposeful, driven by caution across the board.
The Federal Reserve has kept interest rates low, easing the burden on those in debt (while counterproductively slowing gains for savers, however). And, central bank regulation is at an entirely different level than it was pre-Great Recession, completely changing how lending institutions operate today. The difference is so great, in fact, that Trump’s administration is seeking to loosen some of the restrictions applied 10 years ago to allow banks back in the game a bit more, if you will. This will likely produce a positive boost to our economy.

Also contributing to the advancement of the economy has been extraordinarily low inflation. Even as growth has picked up, inflation has remained low, meaning that as businesses are doing better, people are making more money and their paychecks are going farther.

What’s to come?

The stock market has always been considered a leading economic indicator, and the health of the economy was certainly reflected in last year’s double-digit positive performance across all major indexes (Dow +25 percent, S&P 500 +21 percent and Nasdaq +28 percent). Circling back to our original question, can this upward momentum continue or should we be on the lookout for a significant stock market correction?

In November, Vanguard Group, one of the largest investment management companies in the world, released research suggesting a 70-percent likelihood of a U.S. stock market correction. However, the prediction was not delivered with alarm, but rather with the intention of preparing investors for an impending downturn and setting right expectations for what the future could look like.

It’s important to note, however, that a stock market correction doesn’t mean we’ve entered a recession. A natural pullback allows the market to consolidate before going toward higher highs. It’s a natural function in the market cycle.

Other factors — such as interest rates and inflation, which are both expected to rise in 2018 — will have more of an impact on a possible recession in the economy. But in usual cautionary fashion, the Federal Reserve is likely to only raise rates slightly, and even inflation is expected to maintain a snail’s pace in upturn.

So, don’t panic.

Warren Buffett has said, “Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.”

I urge you not to panic when a market correction does come. Because it will come, it is inevitable. What’s more important to focus on is the general outlook of your investments. If your perception of the company’s future earnings hasn’t changed, then a correction may only be an opportunity to invest more into those future earnings at a discounted price.

Jennifer Pagliara is a senior vice president and financial adviser with CapWealth Advisors, LLC, and a proud member of the millennial generation. Her column speaks to her peers and anyone else that wants to get ahead financially.

Millennials will change jobs more; be prepared for it

The following column from Jennifer Pagliara, CapWealth Senior Vice President and Financial Advisor, was posted by The Tennessean on Jan. 19, 2018.

(Photo: Getty Images/iStockphoto)

It is easy to paint millennials as self-absorbed, flakey job-hoppers who don’t work very hard. However, through this column over the past several years, I have tried to show a different side to this often misunderstood generation.

A big part of being in your 20s and 30s is figuring out what you want to do in life. Not everyone is born knowing their purpose and exactly how to achieve it. So this can result in several job changes before someone understands the path he or she is supposed to be on.

And, millennials haven’t been afraid to take the leap when necessary. LinkedIn actually evaluated its 500 million users and found that within their first decade out of college, members of this generation changed jobs an average of four times verses Generation Xers who only changed jobs two times. And, this trend is an even bigger shift from our grandparents’ and great-grandparents’ time, when they often held only one, maybe two, jobs during their entire lifetime.

Context matters

It’s interesting to consider the context behind such a trend shift. The financial crisis occurred when the majority of millennials were graduating from college, so I have to believe that had a huge impact on our churn.

There has also been less and less loyalty shown to any one specific company or even industry. So while our grandparents were likely motivated to stay put due to loyalty to the company, younger generations are more focused on finding the right fit for utilizing (and growing) their knowledge, skills and abilities. Times have certainly changed, and I don’t think it’s a negative thing.

The Bureau of Labor Statistics reports that the average American will hold 11.7 jobs between the ages of 18 and 48, but context matters here, as well, because a career change isn’t always as black and white as a doctor becoming a chef. There are parallel moves that might look like a change but are really a necessary shift to get to the next level.

With all of these likely job changes on the horizon for millennials, there are a couple of financial considerations to be aware of and prepare for.

Retirement plans

Employer-sponsored retirement plans, such as 401(k)s , aren’t always top of mind for someone considering a transition into a new career or job. It is not uncommon for me to deal with clients who have three or four employer-sponsored retirement plans scattered around that they have never consolidated. However, I always encourage them to either combine them into a traditional IRA or try or to roll them into a new employer-sponsored retirement plan (if the plan allows).

This is important, first of all, because if you don’t handle it right away, you will forget about it and won’t monitor the investments contained within it. Secondly, you’re missing out on potential money earned, as simple compounding helps grow your money faster if you combine them all together.

Emergency fund

Sometimes life doesn’t happen in the way we plan it, and career shifts are not always intentional. It’s important to have an emergency fund in place should you do lose your job or if you need to quit before you have another job lined up.

You will commonly hear that you need six months to one year’s worth of living expenses as an emergency fund. However, I believe that number is somewhat arbitrary. The real question you should be asking is “How much money do I need in savings to let me sleep soundly at night?” If that turns out to be six months’ worth of expenses or if it’s $25,000, then that is fantastic, but I’m less concerned with what everyone else does and what you need to feel comfortable.

Millennials may be professionally “on the move” more so than previous generations, but such diversity of experience can mold candidates who offer an equally diverse skill set, which should be an attractive quality to hiring managers in today’s fluid business environment.

Jennifer Pagliara is a senior vice president and financial adviser with CapWealth Advisors, LLC, and a proud member of the millennial generation. Her column speaks to her peers and anyone else that wants to get ahead financially.

Tax reform bill expands college savings plans to include K-12

The following column from Phoebe Venable, President and COO of CapWealth, was posted by The Tennessean on Jan. 12, 2018.

(Photo: RonBailey/Getty Images/iStockphoto)

Just before the end of the year, President Trump signed the Republican tax reform bill. The Tax Cuts and Jobs Act has occupied the headlines for the past few weeks because of the major changes being made to personal and corporate tax rates and deductions. The plan also includes a smaller change that will expand the benefits of 529 savings plan to include private school expenses.

A 529 plan is an educational savings plan operated by a state, state agency or educational institution, named after the IRS code section that created them. There were two types of 529 plans created: a savings plan and a pre-paid plan. Tennessee’s pre-paid plan is called TNStars College Savings 529 Program. Visit www.tnstars.comfor more information. The 529 Savings Plan works a lot like other types of savings plans in that contributions are invested into mutual funds or other investment vehicles. The plan you choose will provide you with investment options, and the value of the account will go up and down based upon the performance of the investments you select.

Before the new tax plan, 529 plans were exclusively used for college related expenses, but the new tax plan includes a provision that allows 529 plans to be used for K-12 education expenses. This includes private school tuition as well as public and religious elementary and secondary school expenses. It does not allow 529 plans to be used for homeschooling expenses. Beginning this year, 529 plans can pay up to $10,000 a year for K-12 expenses.

These accounts are easy to set up and contributions can be automatically deducted from your bank account every month. You can contribute up to $14,000 a year for single filers and $28,000 for couples filing jointly. There is also an option that allows you to fund a 529 Savings Plan with up to $70,000 (single) or $140,000 (married) in one year, but then no contributions can be made for five years. Although your contributions are not tax deductible on your federal income tax return, the earnings are tax-deferred.

Distributions from the 529 plan to pay for the child’s college costs are tax-free. You, as the donor, control the account, which means you call the shots. You decide when distributions are made from the account and for what purpose. Funds may be used for any qualifying educational expense. This includes supplies, books and room and board. Savings can be used for qualified higher education expenses at any accredited traditional college or university, community college, vocational or trade school in the U.S. And you, the owner of the 529 plan, name the beneficiary which can be your child, your niece, your grandchild or even yourself!

If your child (the beneficiary of the 529 plan) does not use all of the funds, you can reclaim the funds, but the earnings portion will be subject to income tax and an additional 10 percent federal tax penalty will be imposed on the earnings as well. An exception can be claimed if you withdraw the funds due to death, disability or if your child receives a scholarship and doesn’t need the funds for college expenses.

Another great feature of these savings plans is that a family with more than one child can simply change the beneficiary. If your oldest child receives a scholarship and does not need the 529 funds, you can change the beneficiary to another child and avoid the penalty or at least defer it until all of your children have completed college. What a nice problem this would be — to have over-saved for college!

Phoebe Venable, chartered financial analyst, is president and COO of CapWealth Advisors. Her column on women, families and building wealth appears every other week in The Tennessean.

5 financial ‘don’ts’ for 2018

The following column from Jennifer Pagliara, CapWealth Senior Vice President and Financial Advisor, was posted by The Tennessean on Jan. 5, 2018.

(Photo: Getty Images / iStockphoto)

Happy new year! Are you ready to tackle the usual resolutions to improve the many aspects of your life? I’m sure you’ve got a list of all the things you want to (or need to) do this year to achieve your goals. Let me help you with a few “don’ts” to aid your yearlong journey.

1. Don’t put off saving — not even one more day. You likely have resolutions related to spending less and paying off debt, and maybe you have one related to setting and sticking to a budget. But an absolutely necessary step toward furthering your financial position is to start saving today! (The key word being “today!”) The power of compounding interest is mind-blowingly real — the earlier you start, the more mind-blowing. I can’t stress this enough to my millennial cohorts. If you think you’re too young or don’t have enough money, you’re wrong. Even putting away a small amount each month gains you an advantage for your future. You can actually begin investing in many mutual funds for as little as $50.

2. Don’t miss out on the new available tax credits and savings opportunities in 2018. With the recent tax reform came a number of changes to available credits and savings opportunities that millennials can reap benefits from. One particular note of interest for many of my clients pertains to 529 savings plans. Previously applicable only for college savings, these plans now allow for tax-free withdrawals for K-12 private school education. It would behoove parents (of all ages) to check with their accountants and ensure that they are up to speed on this and other applicable changes resulting from the new tax bill.

3. Don’t let student debt damper your dreams of financial freedom. Student debt is a looming displeasure for many millennials. A recent Nerdwallet report noted that the median student loan debt for a person who has attended some college or graduated from college is more than $49,000. Carrying the burden such a bulk can be overwhelming and may discourage resolutions to “get out of debt” in the new year. Rather than looking at the debt in its entirety, focus on paying off a particular amount each year, and divide that by 12 months. For example, a resolution to pay off $5,000 per year equates to around $415 per month. With just a little diligence in paying this amount (or any other amount you deem doable) each month, you will be sure to hit the annual goal and still take a chunk out of the overall debt.

4. Don’t “just do it.” (Plan for it!) I’ve said it before, and I’ll say it again. You need a financial plan. A plan allows millennials (and others) to set goals for your financial future and monitor progress along the way to ensure you stay on track. Life goes faster than you think, and with huge life events happening for millennials — launching careers, getting married, buying houses, having children — it’s easy to let time get away from you and miss out on the chance to properly prepare for future needs, like your children’s education and your own retirement. Success requires careful thought, discipline and some savvy. If you don’t have it, find a financial adviser that does and keep in touch.

5. Don’t let fear hold you back. Fear can be a roadblock to accomplishing great things. It can hamper the opportunity to try something new, to advance in one’s career or to find that special someone. Fear can also cause people to miss out on advantages others are capitalizing on now. This certainly holds true for those who let fear and worry keep them out of the market last year. It’s no secret that volatility exists within the market; ups and downs are guaranteed. Historically, however, the market has persevered upward, and the longer one is invested in the market, the more time there is to make up market declines and unanticipated sub-par returns. So, if you aren’t invested now, don’t let fear continue to keep you out of the long-term advantage you have at this point of your life.

Jennifer Pagliara is a senior vice president and financial adviser with CapWealth Advisors, LLC, and a proud member of the Millennial Generation. Her column speaks to her peers and anyone else that wants to get ahead financially.

Planning to have a baby in 2018? Count the costs

The following column from Jennifer Pagliara, CapWealth Senior Vice  President and Financial Advisor, appeared in The Tennessean on Dec. 8, 2017.

As we enter the holiday season, millennials’ Facebook and Instagram feeds are no doubt going to fill up with engagement announcements — it’s that time of the year. But for those who have already tied the knot, is a baby announcement on the horizon? Is 2018 going to be the year of “the baby” for you?

Current stats 

Photo: Getty Images/iStockphoto

In 2016, 3,941,109 babies were born in the U.S. This equates to 62 births per 1,000 women aged 15 to 44, or a decrease of 1 percent from 2015. That’s a small decrease, of course, but a decrease nonetheless.

It has been noted that millennials are delaying many of the big life milestones — getting married, buying a home, starting a family — so could this possibly have something to do with the decline? And, does this mean that as our generation ages into our late 20s and early 30s, there may be an uptick in births?

Will U.S. fertility rates rebound? 

There are people on both sides of the fence on this debate. The optimists believe there will be a surge of babies born due to the “tempo effect.” Essentially, demographers claim that fertility declines are followed by rebounds. The U.S. experienced this with the baby boomer generation. The war caused fertility rates to drop and then there was a huge surge of births after. The great recession could have caused a similar affect.

Naysayers, on the other hand, believe that millennials just don’t want large families anymore. Declines in unintended pregnancies is also a contributory factor of lower fertility rates.

But it’s true that millennials are more conscious of the costs of those aforementioned life events and are choosing temporary alternatives to many of those commitments — Uber over car buying and renting over homeownership — so maybe they’ve gotten wind of the costs associated with raising a family.

Babies: They’re cute, they’re cuddly, they’re costly

While I don’t want to cause any more anxiety about having a baby (especially for first-time parents), I want to arm my fellow cohorts with knowledge to help prepare financially for what occurs once a couple becomes a family of three (or more).

The Department of Agriculture estimated that a child born in 2015 cost a middle-income, married couple $233,610 in food, shelter and other necessities through age 17. This number does not include the medical costs associated with having the baby, however, which can range from $18,239 for a vaginal birth and $27,866 for a cesarean birth without complications for parents with insurance, according to a study by Truven Health Analytics.

Additionally, the $233,610 doesn’t include the costs of college, which continues to rise each year according to the College Board, a not-for-profit organization that publishes the annual “Trends in Higher Education” reports. The organization’s “Trends in College Pricing 2017” noted that the average published tuition and fee price for full-time in-state students at public four-year colleges and universities is $9,970 for the 2017-18 academic year. And, with an average increase of about 3 percent reported by colleges each year, think about how much that will cost 18 years from now!

Advantage: Time is on your side

The good news is while the initial cost of giving birth is due right off the bat, you have the next 17 years to plan accordingly to both raise your baby and get him or her through college!

Setting a realistic budget will allow you to outline what you need to support your desired family lifestyle and identify where you can start saving for college and other future life costs, such as retirement. Time is on your side, especially when you put this practice into place before you even have children.

Jennifer Pagliara is a financial adviser with CapWealth Advisors, LLC, and a proud member of the Millennial Generation. Her column speaks to her peers and anyone else that wants to get ahead financially.

Millennials change the landscape of charitable giving

The following column from Jennifer Pagliara, CapWealth Senior Advisor, appeared in The Tennessean on Nov. 27, 2017.

Photo Getty Images/iStockphoto

As we kick off the 2017 holiday season, giving back is at the forefront of everyone’s minds. For 2016, individuals, estates, foundations and corporations donated an estimated $390.05 billion to U.S. charities according to “Giving USA 2017: The Annual Report on Philanthropy for the Year 2016.” Specifically, individuals and households saw an increase in giving by 3.9 percent over 2015.

While many might not automatically associate charitable giving with millennials, people might be surprised to learn that the millennial generation is actually changing the landscape for nonprofit organizations and causes around the world. In fact, there have been several articles just this year noting the disruption millennials are causing in charitable giving, as nonprofit organizations scurry to implement new technology and programs to meet the expectations and needs of this generation.

The old way of reaching out to and collecting donations just doesn’t connect to today’s digitally savvy contributors — millennial or otherwise. The days of sending a letter requesting a donation with a return envelope are over. Many people don’t even use a checkbook anymore, much less pay much attention to what shows up in the mailbox.
So, where are people finding causes to contribute to? Social media.

Remember the ALS ice bucket challenge that went viral a couple of years ago? It took on a life of its own and got people to donate to a cause most knew nothing about. Why? Because it allowed people to visually broadcast their charitable response — something millennials especially love to do.

Our generation (and those coming behind us) have been raised in the digital age, where broadcasting our lives is as much a part of our daily routine as eating and sleeping. And, not only do we use social media to transmit our own life happenings, but we expect to be able to follow the broadcasts of our friends and influencers. And seeing what others are doing can certainly inspire people to check out certain charities and get involved in the causes their friends and influencers care about.

Another charitable giving demand social media has inspired for millennials? Transparency.

With the rise of social media came an overall expectation of greater transparency — from companies, brands and organizations — as people expected to be able to dig deeper into a company’s mission, vision and culture by following them on social media and, thus, learning how they are making a difference in the world.

Millennials care about where their money is going, whether purchasing a product from a company or donating to a charity. An article in Fast Company in October of this year, titled “As Millennials Demand More Meaning, Older Brands Are Not Aging Well,” noted that for brands to continue to perform well with millennials and other “consumers of the future,” they need to have (and communicate) a clear mission.

Charitable giving falls in line with this same expectation — it’s important for us to know exactly how our donations will be spent and how big that impact is on the world around us.

It’s also not all about the money for millennials. For us, it’s not just about how much money we give, but it is also about donating our time. It is just as valuable — maybe even more valuable — for us to give of our time than to hand out a monetary donation. We get more fulfillment out of personally being involved in the impact rather than just handing over some cash.

If we can wear a pair of shoes or eyeglasses by a brand known to give back to charity for every purchase, that’s an active way for millennials to support a good cause. Similarly, if we can attach a charitable offering to an everyday activity, such as shopping on Amazon, that’s a no-brainer for us.

The millennial generation is now the largest living generation, surpassing the baby boomers this past year, so it’s important for charitable causes around the world to start engaging us now. Lucky for them, we are eager to help out — it’s just a matter of getting creative with how we can give back.

Jennifer Pagliara is a financial adviser with CapWealth Advisors, LLC, and a proud member of the Millennial Generation. Her column speaks to her peers and anyone else that wants to get ahead financially.

Got a holiday budget? Christmas offers good lessons for kids

The following column from Phoebe Venable, President and COO of CapWealth, appeared in The Tennessean on Nov. 17, 2017.

Believe it or not, Christmas is just around the corner! Now is the time to start thinking about how much your family should spend on Christmas gifts and festivities this year (and maybe try not to go overboard like last year). Every family has financial limitations when it comes to gifts, however it is easy to ignore these limitations during the holiday season.

Creating a Christmas spending budget is a proactive step, but how do you determine your budget? What does the average family spend? According to Deloitte’s 2017 holiday survey, Retail in Transition, the average expected spend for the 2017 holiday season is $1,266 per respondent. That’s an expected increase of 4 to 4.5 percent over last year, and that includes more than just gifts, as the bulk of shopper budgets go to non-gift items and experiences, according to Deloitte’s data.

If there are two adults in your family, that is $2,532 spent during the holiday season. But is that the right amount for your family?

One commonly used formula for establishing a Christmas budget is 1 percent of your after-tax income. If your family’s income is $100,000 a year and taxes are $20,000 (this will vary greatly but 20 percent is a good place to start), then your after-tax income is $80,000, and 1 percent of that is $800. That might sound like a lot of money to some and not nearly enough to others.

If the average two-adult family is spending $2,532 this year on Christmas, does this mean the average family’s after-tax income is $253,200? Of course not. Clearly not everyone sticks to the 1 percent formula, but being conservative can be beneficial to you in the new year when the credit card bills come rolling in. But if 1 percent doesn’t work for your family, maybe 2 percent does. Find a moderate number that works.

The holidays are a wonderful time to teach children about using a budget. A portion of the family’s holiday budget can be allocated to each child so they can make their own shopping list and decide how they want to spend their holiday budget. Throughout their entire life, they will have to make choices about how to spend a limited amount of money, so this is a great learning opportunity for the kids and a great teaching opportunity for all parents.

By teaching children that everyone has a finite amount of money to spend on the holidays, they start to understand the value of budgeting. While gifts from Santa may magically appear, children need to understand that the other gifts they receive are purchased with hard-earned dollars. Include the children in your decision-making process for the family holiday budget, too, so they can start to see that there is a clear and thoughtful approach to spending.

All families have holiday traditions. At my house, we have a tradition of allocating a portion of our holiday budget for a “house” gift. We all get a vote and the opportunity to campaign for whatever we want the house gift to be. Over the years, this tradition has not only been a lot of fun for all of us, but it has also engaged our son in the decision-making process and helped him understand the budgeting process.

Another great idea is to allocate a portion of the family’s holiday budget to helping those less fortunate. Whether you adopt an angel from one of the Salvation Army’s Angel Trees or donate food to Second Harvest Food Bank, benevolence is about the importance of giving and what it means to both the giver and receiver. Charitable giving has been shown to help raise self-esteem, develop social skills, foster an introduction to the greater world and encourage kids to appreciate their own lifestyle.

By giving children their own holiday budget, they will begin learning very valuable lessons that will benefit them throughout their lives and help them grow into money savvy adults.

Phoebe Venable, chartered financial analyst, is president and COO of CapWealth Advisors, LLC. Her column on women, families and building wealth appears every other week in The Tennessean.  

Millennials spur trend of SRI — socially responsible investing

The following column from Jennifer Pagliara, CapWealth Senior Advisor, appeared in The Tennessean on Oct. 27, 2017.

Photo: Anchiy, Getty Images

Millennials have lived through the longest war in United States history as well as the worst recession since the Great Depression. Coming of age amid such trying times, millennials are motivated differently than other generations. This generation wants to feel like they are a part of something that is making a difference — for the common good, for happiness and for hopefulness — in the world.

So, with a cohort so acutely concerned with how they are impacting the world, how does that influence their advisers and their investment choices?

Parameters

Financial advisers take many factors into consideration when building a portfolio and financial plan for their client. Some of these constraints are: time horizon, liquidity, risk tolerance, legal and regulatory factors, tax concerns and unique circumstances. Under this last guideline, clients can give their financial adviser parameters for what they feel comfortable investing in or what they don’t.

Socially Responsible Investing (SRI) is essentially an investing strategy that considers environmental, social and corporate governance (ESG) criteria to not only create competitive returns, but also to provide positive societal impact. SRI is something that your clients might inquire about, and financial advisers need to choose appropriate investment vehicles that abide by those guidelines.

Evolution

The evolution of SRI has been one of organic growth as the landscape of investing and politics has changed. Traditionally, baby boomers and Generation X did not want their financial advisers to invest in companies that deal with tobacco or alcohol or what is commonly known as “sin stocks.” But, with the advancement of technology, SRI has taken the foundation of what sin stocks stood for and expanded it.

The Forum for Sustainable and Responsible Investment is now the leading voice in the advancement of sustainable, responsible and impact investing across all asset classes. Investors not only care what products or services a company provides, but they also care about the environmental and societal impact that they have on the world. Our world today is faced with a new set of problems that wasn’t at the forefront 50 or 60 years ago. Some of these include obesity, poverty and sustainable agriculture. Leading ESG criteria these days include board issues, pollution, human rights, climate change, executive pay and conflict risk.

How to invest

According to the 2016 Report on U.S. Sustainable, Responsible and Impact Investing Trends, “more than one out of every five dollars under professional management in the U.S. — $8.72 trillion or more — was invested according to SRI strategies.” That figure confirms an increase of 33 percent from 2014 to 2016 and accounts for 22 percent of the $40.3 trillion in total assets under professional management in the U.S. tracked by Cerulli Associates.

There are 1,002 funds that incorporate ESG criteria, including mutual funds, exchange-traded funds (ETFs), variable annuities and alternatives. The largest ESG ETF is the iShares MSCI KLD 400 Social. It is comprised mostly of large-cap companies with slightly higher exposure to technology, industrials and real estate and lower exposure to financials and energy compared to the average large-cap ETF. It does tend to track the S&P 500 within a few points.

Common misconceptions 

While growing in popularity, there are still some misconceptions about SRI. It is often assumed that these strategies produce lower returns. However, just because a company complies with these standards doesn’t necessarily mean that the returns will be lower or higher than the broader market or its competitors.

Another misconception is that the criteria used to screen SRI investments is only negative. Yes, there is screening to exclude companies involved in activities that are deemed unacceptable or have a negative impact on the world. However, there is also positive screening for how much investment is being done to solve environmental, community or societal problems.

Finally, many presume that SRI is only involved in public equities. But, it is also utilized in fixed income, real estate and private equity. What is important to note is that for millennials, it’s not always just about a return; it’s also about the impact an investment is making on the world.

Jennifer Pagliara is a financial adviser with CapWealth Advisors, LLC, and a proud member of the millennial generation. Her column, which appears every other week in The Tennessean, speaks to her peers and anyone else that wants to get ahead financially.

Opinion: We’re long overdue for tax reform

The following column from Jennifer Pagliara, CapWealth Senior Advisor, appeared in The Tennessean on Oct. 12, 2017.

The last time the U.S had any major tax reform was in 1986. That was 31 years ago – in the midst of birthing our millennial generation!

Throughout Donald Trump’s presidential campaign, tax reform was one of his biggest promises of change. And, truthfully, there has never been a better time for the GOP to create these changes with control of the White House and both houses of Congress.

A blast from the past

Let’s go back to the last time there was a major change to the tax code. (Some of us weren’t even born, yet, while others may have just started kindergarten.) At that time, Ronald Reagan was president, and the world looked like a much different place than it does today. The goal back then? To simplify the tax code and more fairly redistribute the tax burden. Sounds familiar, doesn’t it?

Some of the changes successfully made with the 1986 Tax Reform Act were similar to what’s being proposed in today’s reform package, such as consolidating and reducing the number of income tax levels. Another similar focus for both reform packages is on the loopholes that allow certain people to avoid paying taxes.

Three decades later

Since 1986, a number of loopholes, credits and deductions have been added to the tax code, accounting for a 44 percent growth in such additions and resulting in a tax code that went from 30,000 to 70,000 pages. (Are you shaking your head and wondering how that’s possible?)

Throughout our lifetime, lawmakers have added modifications intended to encourage certain behaviors — everything from buying hybrid vehicles to replacing your home’s windows; from adopting children to putting them in daycare. And, now we have a tax code that’s once again quite complicated and confusing — and in need of another major overhaul.

With that understanding in place, let me point out the framework of the changes proposed in the current tax reform package.

Changes for families and individuals

  • The number of individual tax rates would shrink from seven to three. Those rates would be 12, 25 and 35 percent. However, the income ranges have not yet been determined for those brackets.
  • The standard deduction increases to $12,000 for single filers and $24,000 for married ones.
  • The child credit would increase to $1,000 per child under the age of 17.
  • Most of the itemized deductions will be eliminated, which includes personal exemptions of $4,050.
  • There are still incentives for homeownership, retirement savings, charitable giving and higher education. Those deductions are staying around.
  • The alternative minimum tax (AMT) will be eliminated. This tax was designed to keep wealthy taxpayers from using loopholes to avoid paying taxes. It normally becomes effective for filers making between $200,000 and $1 million.
  • The estate tax would also be eliminated. This tax applied to the transfer of any estate valued over $5.49 million upon the death of the owner. Currently, an estate of this size is taxed at 40%; anything under $5.49 million is not taxed.

Changes for businesses

  • The corporate tax rate would be reduced from the current rate of 25 percent to 20 percent.
  • The reform also proposes changes to how multinational companies are taxed on profits made outside of the U.S. Currently, companies with overseas profits are only taxed when they bring those funds back into the U.S. The new tax reform states that those companies would be subject to the tax of the government where the money is made instead of just what’s brought into the U.S.

These changes are pretty drastic. The end goal is to put more money into the taxpayer’s hands and, in turn, into the economy, ultimately increasing GDP and boosting a healthier overall economy. Whether this proposed reform will pass still stands to be seen, but it is certainly time for a simplified tax code.

Jennifer Pagliara is a financial adviser with CapWealth Advisors.

Millennials: Are you expecting your parents to leave you an inheritance?

The following column from Jennifer Pagliara, CapWealth Senior Advisor, appeared in The Tennessean on Sept. 29, 2017.

There are an endless number of reasons that people don’t like to talk about money. When you live in the South, it can be especially taboo. Navigating discussions about family wealth with children and young family members can be tricky, but nevertheless, it’s important to make the effort, especially for the young adults in the family.

Getty Images/Stockphoto

At this point, millennials stand to inherit $30 trillion dollars in assets from their foregoing generations. That will be the largest wealth transfer of any generation. However, some may be shocked at what they actually receive. According to a new Natixis U.S. Investor Survey, nearly 70 percent of young people expect to get an inheritance, while only 40 percent of parents plan to leave anything for their children.

While you might be cringing at the thought of bringing up this topic with your parents, it’s important that you have an open dialogue with them to understand their wishes and how that might possibly impact you. This could honestly save both you and your parents a lot of frustration, uncertainty and wasted time.

There are likely several reasons why your parents have not previously discussed their wishes with you. First of all, many people don’t want to confront the fact that they will die someday. Also, parents sometimes don’t want children to be aware of what they could inherit because it could hinder their motivation in life and in their careers. And finally, it can just be flat out uncomfortable.

Here are some tips on how to tactfully approach the subject with your parents:

Don’t go into the conversation with any expectations. You might be surprised by what your family has planned. There is a real possibility that your parents plan to spend their life savings during retirement and not leave you (or your siblings) anything.
Acknowledge that this might be an uncomfortable conversation but one you feel is important to have. A good segue into this discussion is to ask if they have a strategy in place to carry out their wishes after they pass away.

Take exact numbers off the table. Encourage the idea that it’s not about the amount they are leaving you; but rather, you want to understand how their wishes could impact your own planning.

Ask for their advice. Explain that you are beginning to take a more active role in planning for your own retirement and want to know if they have a will, power of attorney, insurance policies or any other estate planning documents in place. Ask for their suggestions on what you should be doing at your age.

Start small. If you are dreading a formal sit down, then simply start the conversation naturally when you feel the timing is right. However, if you have siblings, you might want to ask in advance if they would like to be included in the discussion so it can be at a time when they are around.

Don’t think of this as a one-and-done conversation. Financial situations can change as life change happens and as time goes on. Keep an open dialogue to ensure everyone maintains an understanding of what’s to come.

The most important thing to remember is that your inheritance is a contingent asset, meaning you have no control over whether or not you will receive the amount your parents intend to pass down to you. If you plan for your financial future as if you won’t receive it, you are only going to be better off if something does come your way.

Jennifer Pagliara is a financial adviser with CapWealth Advisors.

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