Category Archives: CapWealth Blog

Help Your Kids, Don’t Make Them Helpless

The following column from Phoebe Venable, CapWealth Advisors President & COO, appeared in The Tennessean on June 30, 2017.

At the end of this past school year, my middle-school-age son didn’t turn in a paper. My son, who is smart, hard-working (normally) and a good student, took a 0, on purpose.

As if grades didn’t matter. As if all the work he’s put into school didn’t matter. I was shocked — so much so that I had a sudden vision of him growing up to become a lazy and entitled brat of privilege. My shock became fury.

Two kinds of opportunities

Our children live our lives until they build their own lives. We work hard to provide the best education possible, a nice home, vacations and all the material things that our children enjoy. But our children need to understand that all these things we give them are opportunities.

That one day, all the opportunities provided by mom and dad — to be nurtured, to gain knowledge, to make good choices, to learn from mistakes, to experience the good life — will be gone.

The opportunities will then be their own to find, to create and capitalize upon. We’ve done all we could do to get them to the plate. Now they’re taking their own swing at the American dream.

When we heard about my son’s paper, he received a lecture on responsibility, respect and not taking anything for granted. Very directly, we told him how he’s enjoying the results of our swing at the American dream. Whether or not he fully understood, I’m not sure. But I am confident that he’ll never deliberately bomb a school assignment again. And hopefully he got the message that opportunities are everywhere around him.

Avoiding rich-kid-itis

Though I may have overreacted when I learned about the paper, my worry is one that many families share. Having worked hard all your life to attain wealth, be it the upper-middle-class or filthy-rich variety (ours is the former, not the latter), how do you ensure your kids aren’t infected with rich-kid-itis?

How do you teach kids, who’ve only known comfort and plenty, to become independent, productive adults with a work ethic?

Raising independent, productive children

  • First, you must model the behavior you want from your kids. Don’t be blasé about the things you’ve earned. You worked hard to get them and your children need to know that. You value the things you have not because they’re inherently nice, pleasurable, comfortable and expensive, but because of the discipline and labor that was required to attain them. Simpler, less pricey things have value, too, for the same reason.
  • Value what you’ve earned, but value people more. Always think of others and have respect for them, no matter their origins, their vocation, their social strata or their tax bracket. You demonstrate this to your children very simply: in how you treat people. Another is through charitable giving and philanthropy. You don’t have to be rich to give to a food bank or volunteer some time.
  • Make them work. Not only should your children have duties at home, but they should have part-time and/or summer jobs when they’re teens. Nothing instills the value of hard work better than a low-glamour, low-wage job.
  • Finally, your children need to know they’ll be relying solely upon themselves to build a career, find purpose, and get through life’s highs and lows. Sure, you can help them, but don’t make them helpless by giving them too much financial support.
  • I recommend sharing the parable of the man of faith who was sure that God would save him from a flood. First a car, then a boat, and finally a helicopter came, but he declined help from them all. He perished and when he got to heaven, he asked the Lord why he didn’t save him. God replied: “I tried. I sent a car, a boat and helicopter.” Explain to your child that each of those was an opportunity. Help is great, but you must also learn to help yourself.

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

8 Financial Tips for Surviving and Thriving in the Real World

The following article from Tim Murphy contains some financial tips specifically for recent college graduates and Millennials, but all of us would do well to abide by this wisdom! Please feel free to pass this along to any young adult just entering the “real world.”

From Forbes.com

Some 1.8 million students will graduate with a bachelor’s level degree in the U.S. in 2017. That’s a whole lot of Millennials entering, and learning to survive, the real world: earning a living, paying back loans, paying bills and saving for a rainy day, a car, a home and retirement. My hope is that with the following advice—let’s call it a blueprint for early adult financial success—the newly minted graduate that you know can quickly turn surviving into thriving!

1. Create a budget. Manage and track your expected and actual income and expenses using software programs such as Mint or You Need a Budget.

A budget isn’t a one-and-done task. Rather, it’s a work in progress that must be adjusted as your financial circumstances change. And believe me, your financial circumstances will always be in flux. Hard work tends to lead to promotions, getting older tends to lead to marriage and kids, improved finances tends to lead to larger purchases and investments, and so on.

The golden rule of budgeting is to always live within your means, and the only way to know you’re doing that—or to alter behavior in order to do that—is to track what’s coming in and what’s going out. If you’ve heard your parents and grandparents say that bit about living within your means, they were right. As you get older, it’s amazing as much smarter your parents and grandparents get!

2. Have an emergency fund. Life is full of surprises. Like broken-down cars, rent increases, lost jobs and worse. Squirrelling away some savings in an emergency fund —3 to 6 months’ worth of expenses — can really save your bacon when life throws you a curve. You don’t want to put unplanned expenses on a credit card if you don’t have to—that’s incurring debt and interest, which is insult to injury after an unexpected expense.

Ally Bank pays 1.05% on balances in savings accounts, by the way. Earning interest on cash is practically unheard of today, so this would be a good home for your emergency fund.

3. Save and invest. Try to save at least 10% of your income in retirement account, be it a traditional or Roth 401(k), a traditional or Roth IRA, or similar account. At a minimum, save enough to get your employer’s full match on your 401(k) plan. Otherwise, you’re leaving free money on the table.

A Roth IRA is a fantastic investment vehicle for almost everyone in their early 20s. That’s because contributions are taxed at your current rate, which is probably low given that’s the start of your career, but earnings and withdrawals at retirement are tax-free. Plus, there is an income limit. So sock some money away in a Roth IRA before you make too much to do so!

No matter the investment vehicle, speak to a financial planner such as myself on how those funds should be invested. See #5 below.

4. Repay your student loans. Graduates with loan debt need evaluate how best to pay back their federal and/or private loans. Visit the Education Department’s website to determine the right repayment plan, how to make payments and what you can do if you can’t afford your payments.

If you’re facing a dilemma on whether to build an emergency fund, invest or pay off loans, my advice is to build an emergency fund first. Then decide whether an investment or loan repayment will likely reward you best. According to the Department of Education, interest rates on federal loans to undergraduates have ranged from 3.4 percent to 6.8 percent over the last decade. When you pay off a student loan, you’re earning a “return on investment” roughly equal to the interest you no longer have to pay. If you expect to exceed that ROI with your 401(k) or other investments, then do that second and pay off loans last. For a benchmark, the S&P 500 has averaged an annual return of about 7 percent since 1950.

5. Hire a financial advisor. You might not think you have enough income or assets, but now’s a good time to begin a relationship with a competent, reputable financial advisor. An advisor doesn’t just help you invest money. He or she can provide guidance on budgeting, managing debt, making insurance decisions—anything related to money and finance.

If you’re parent or grandparent of a recent grad, consider giving a gift that keeps on giving: an hour or two consultation with a good financial advisor.

6. Living for today or saving for tomorrow? If all this financial advice feels like rain on your graduation parade, it’s not. You don’t have to choose between living for today and preparing for tomorrow. You can, and should, do both.

The secret is striking a balance between your consumption decisions and your investment decisions. The former is for your current, short-term quality of life, the latter is for your future, long-term quality of life. You need to develop a strategy and habits that contribute to that strategy for accomplishing both without compromising either.

7. Your reputation is your most valuable asset. Everyone was young once and everyone has made a bad decision, two things that have a strong correlation. The difference today is that your decisions can be captured, recorded and disseminated to the world in an instant through hand-held devices and social media. Consequently, poor judgement can have remarkably quick consequences. So remember, your reputation is always on the line. Make good decisions and refrain from over-sharing via social media.

8. Change is constant; learn how to manage it. There will always be challenges, opportunities and transitions in your life, some good and some bad. To be successful and to be happy, you have to learn to navigate what life throws at you and make good decisions. It’s important to have help, be it family, friends, mentors or faith, to turn to when life begins to feel overwhelming.

Should I consolidate my loans?

The answer depends on your individual circumstances.

Pros

  • If you currently have federal student loans that are with different loan servicers, consolidation can greatly simplify loan repayment by giving you a single loan with just one monthly bill.
  • Consolidation can lower your monthly payment by giving you a longer period of time (up to 30 years) to repay your loans.
  • If you consolidate loans other than Direct Loans, it may give you access to additional income-driven repayment plan options and Public Service Loan Forgiveness. (Direct Loans are from the William D. Ford Federal Direct Loan Program.)
  • You’ll be able to switch any variable-rate loans you have to a fixed interest rate.

Cons

  • Because consolidation usually increases the period of time you to have to repay your loans, you might make more payments and pay more in interest than would be the case if you don’t consolidate.
  • Consolidation may also cause you to lose certain borrower benefits—such as interest rate discounts, principal rebates, or some loan cancellation benefits—that are associated with your current loans.
  • If you’re paying your current loans under an income-driven repayment plan, or if you’ve made qualifying payments toward Public Service Loan Forgiveness, consolidating your current loans will cause you to lose credit for any payments made toward income-driven repayment plan forgiveness or Public Service Loan Forgiveness.

Fight the Instinct to Flee, Flee the Instinct to Fight

The following column from Phoebe Venable, CapWealth Advisors President & COO, appeared in The Tennessean on June 16, 2017.

As the stock market marches on, setting new highs, some investors are starting to feel a little stress.

They can’t square the strong markets with the pandemonium that is the news: Terrorist attacks in Europe, North Korea edging closer to nuclear weapons, the Russian attempt to influence U.S. elections and Trump’s latest tweet, among others. Surely the markets are due for a correction, maybe even a crash, right? I should sell while the market is high before it’s too late!

That’s our emotions talking. Our “fight or flight” response. Our cognitive biases. I’m not saying they’re right or wrong, I’m saying beware. Be calm. Be self-aware. Because all those emotions and cognitive biases, they often don’t have a clue.

Emotions are a shortcut, often over a cliff

In human decision-making — a process of weighing inputs, assessments, probabilities and predictions — emotions are a shortcut. We use emotions to hurry up and simplify all that analysis and make ourselves more comfortable. While “fight or flight” can be handy when a saber-toothed tiger is bearing down on us, it’s often not so useful for approaching long-term investing. To complicate things even more, we’re not all emotionally similar. Some have bias for loss aversion, some for fear and anxiety, some for overconfidence, some for elation, others for regret.
You may see the same market at an all-time high and think, “I need to buy! Everyone else is! I’m going to miss the boat!”

The markets are more resilient than you think

Two things to bear in mind. First, the financial markets and the global economy are more resilient than we think. Second, the returns of the average investor are astoundingly atrocious.

Exhibit 1: According to a study by InvestTech Research that looked at 11 major geopolitical events of the past century, only two — the Nazi invasion of France in May 1940 and Japan’s bombing of Pearl Harbor in December 1941 — led to market losses over one-week, three-month and one-year periods.

In the case of Pearl Harbor, the one-year decline was less than 1 percent. President Kennedy’s assassination? A year later, stocks were up more than 20 percent. Also worth noting, the bull markets of the last century have on average lasted longer than bear markets. But no matter how long they last, bull markets always end. The one we’re in now will too eventually.

Exhibit 2: People are generally terrible at predicting when the market will swing from bull to bear, bear to bull. According to the market research company Dalbar, the 20-year annualized returns by asset class from 1996 to 2015 is topped by REITs at 10.9 percent, followed by the S&P 500 at 8.2 percent.

At the bottom is oil, at 3.3 percent. The returns of the average investor? 2.1 percent. Incidentally, the rate of inflation during those two decades was 2.2 percent, which means the average investor really didn’t even break even.

Either know and trust thyself — or a good adviser

My point is that every investor should know thyself. Understand your own emotions and cognitive biases so that you recognize how they might steer you wrong. After knowing thyself, then trust thyself. Make sound, emotion-free decisions and have patience.

Trying to time the market by selling when you think it’s high and buying when you think it’s low has been many an investor’s very successful strategy for going broke. If you can’t trust thyself, then I highly recommend you find a good financial adviser and trust him or her.

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

Breaking Down Your First Real-World Buck

The following column from Jennifer Pagliara, CapWealth Senior Advisor, appeared in The Tennessean on June 9, 2017. Read it at The Tennessean here.

Congratulations to all those who have graduated and are starting first full-time jobs. Earning a college, vocational or associate’s degree is no small feat. You should feel proud.

Along with pride, you may also feel apprehension, and rightfully so. From experience, I can tell you that the transition from school to “the real world” is not always a smooth one. It can be a shock to be on your own, with no mom or dad to fall back on.

It can also be a shock to learn how far your dollar goes: not far at all.

Let’s break down your new paycheck to see how it’s diminished before it even gets in your hot little hands. I’ll also offer advice on what to do with your paycheck before you start spending it.

Before you get paid

If you haven’t had a paycheck up until this point, you’re in for a rude awakening. Whatever your annual salary is, that’s definitely not the figure ending up in your bank account. Here’s where it goes before it goes to you.

Federal Income Tax:

The federal government takes a cut of your paycheck each tax period (unless you defer it) depending on how much money you make. These tax brackets change depending on whether you are married, file head of household, and other deductions and credits.

There could be potential reform in federal taxes under the new Trump administration, so be sure to follow the news on this. Currently, Americans pay an average of 20 percent of their income in federal taxes, including income, Social Security and Medicare taxes. If you make $40-50,000, that average is more like 11 percent

FICA Social Security:

FICA stands for the Federal Insurance Contributions Act, a payroll tax which funds Social Security and Medicare. Social Security, as you have probably heard, is a program that we pay into to receive benefits when we retire and for those with disabilities. By law, 6.2 percent of your gross income goes to Social Security.

FICA Medicare:

This tax is used to subsidize health insurance for people 65 and older and those with disabilities. You pay 1.45 percent of your gross income to Medicare.

State Income Tax:

In this respect, you’re lucky — maybe. Tennessee is one of only nine states that does not take additional tax from your paycheck. Instead, Tennessee has state sales tax of 7 percent. Combined with local sales taxes, Tennessee has one of the highest sales-tax rates in the country. So they get you post-paycheck.

City Tax:

Some cities levy income taxes. Nashville does not. However, Metro does have a 2.25 percent sales tax, making the combined sales tax rate for Nashvillians 9.25 percent.

SDI:

This stands for State Disability Insurance. Some states have a mandatory tax to benefit people who become injured on the job or have to take family or medical leave. Tennessee doesn’t have an SDI tax.

After you get paid

Federal, state and local governments have taken their bites. Now I’m going to advise something crazy. Set aside even more to begin building the foundations for a financially secure lifetime. I’ll also briefly solve — for most situations — a common dilemma for young workers: do you build an emergency fund, invest or pay off loans first?

Emergency Fund:

Life happens. Broken-down cars, rent increases, lost jobs and worse. Squirrelling away some savings in an emergency fund —3 to 6 months’ worth of expenses — can really save your bacon when life throws you a curve ball. For that reason, I say this is your first saving priority.

401(k):

Next, I cannot stress enough the importance of beginning to save for retirement now if it’s at all possible — even if it’s $25 or $50 each pay period. History shows that 6-7 percent annual return is a reasonable expectation on stock investments. Moreover, many employers offer a 401(k) match. Finally, you’re young and the power of compounding interest is on your side, so make the most of time you can never get back.

Paying off student loans:

According to the Department of Education, interest rates on federal loans to undergraduates have ranged from 3.4 percent to 6.8 percent over the last decade. When you pay off a student loan, you’re earning a “return on investment” roughly equal to the interest you no longer have to pay. If you expect to exceed that ROI with your 401(k) or other investments, then do that second and pay off loans last.

Jennifer Pagliara is a financial adviser with CapWealth Advisors.

Adults Aren’t Vanishing, They Just Look Different

The following column from Jennifer Pagliara, CapWealth Senior Advisor, appeared in The Tennessean on May 26, 2017. Read it at The Tennessean here.

Ben Sasse, the Republican senator from Nebraska, is an accomplished man. At 45 years of age, he’s already served as president of a college, an assistant secretary in the U.S. Department of Health and Human Services, and has earned three master’s degrees and a doctorate from illustrious institutions such as Harvard and Yale. In addition to being accomplished, he’s principled. Whether you agree with his politics or not, early on in the election last year, Sasse repudiated Trump and never backed down — a rather lonely stance as a Republican.

An accomplished and principled senator

As yet further proof of his achievement and sense of virtue, Sasse has just published a book titled “The Vanishing American Adult: Our Coming-of-Age Crisis—and How to Rebuild a Culture of Self-Reliance.” There’s a lot to like about the book. But there’s also some of it that I take issue with, particularly the disparagement of my generation, the millennials.
I’ll start with what I like. Sasse sings the praises of hard work, travel and reading books, and compellingly explains why. All three teach you about the world and yourself, expanding your mind beyond the immediate, the familiar and the comfortable. Work, in particular, is a favorite subject of Sasse’s, and he shares an incident from his time as president of Midland University that in part inspired him to write his book.

Some students were asked to decorate a 20-foot Christmas tree. They decorated the bottom seven or eight feet, the part that was easy to reach, and then quit without even looking for a ladder.

Writes Sasse: “I simply couldn’t reconcile the decision to leave while the work was still incomplete with how my parents had taught me to think about assignments. I couldn’t conceptualize growing up without the compulsion — first external compulsion, but over time, the more important internal and self-directed kind of compulsion — to attempt and to finish hard things, even when I didn’t want to.”
I completely agree that calling it quits like these students did is pitiful. But I think Sasse comes down too hard on millennials. He fails, for instance, to point out that my generation volunteers more than previous generations and that we’re on track to become the most educated generation in U.S. history. That’s awfully adult of us, I’d say.

Maybe adulthood has more than one definition

Sasse reveres “gritty work experiences” such as farm and ranch work, which he did as kid and which he now ships his own kids off to do in the summer for the construction of their character.

While I would agree that learning the value of hard work is laudable, even critical, and that there are too many people of all ages piddling unproductively on their digital devices, Sasse leaves himself open to some ridicule here.

For starters, less than 2 percent of the American population works in agriculture today. Mark Zuckerberg has probably never driven a tractor — nor even dug a hole — but he built Facebook from scratch. He’s not only shaped the course of human history, last year his company had revenue of $28 billion and today he’s worth nearly $60 billion. And, by the way, he and his wife have pledged to give 99 percent of their Facebook fortune to charity. That’s accomplishment. That’s principled. And last year, a GoDaddy survey found that 40 percent of millennial professionals worldwide consider him their biggest role model.
Moreover, the senator could be accused of fretting over upper-middle-class problems. While he’s concerned about his privileged children learning the lessons of good work, his critics might say there are still plenty of Americans simply looking for good-paying work.
As I said, there’s a lot to like about Senator Sasse’s book. But I don’t think the American adult is vanishing, at least not at any greater rate than in eras before. I think there have always been responsible, hard-working people and less responsible, less hard-working people. Perhaps adulthood looks a little different today and, like beauty, is in the eye of the beholder.

Jennifer Pagliara is a financial adviser with CapWealth Advisors. 

CFA Institute Pens Open Letter to Investment Community in WSJ Today–CapWealth Claims Compliance With CFA Asset Manager Code Too!

The CFA Institute took out a full page ad today in The Wall Street Journal to write an open letter to the investment management industry, urging them to make a bold statement about putting clients’ interests first by claiming compliance with the Asset Manager Code. The letter listed several pension funds and retirement systems that had signed on, and we’d like to say that CapWealth Advisors claims compliance with the Asset Manager Code as well!

CapWealth Advisors Welcomes Financial Advisor Chris Burger to the Firm

Independent registered investment advisory firm CapWealth Advisors, based south of Nashville in Franklin, TN, has added public affairs and advocacy veteran Chris Burger to its roster of financial advisors, Tim Pagliara, CapWealth Advisors’ chairman and chief executive officer, announced today. Burger is the first new advisor to join the top-ranked firm since 2014 and the first new hire since bringing on former Goldman Sachs vice president John Lueken as the firm’s chief investment strategist. Burger will develop new business and provide financial and wealth management advice to clients.

Chris Burger, CapWealth Advisors’ newest Financial Advisor

Having spent the last decade in public affairs, Burger excels at strategic thinking, planning and execution. “That’s a one-sentence summary of what we do for our clients here at CapWealth Advisors,” says Tim Pagliara, who has known Burger professionally for several years. “We develop strong, carefully crafted plans for each client’s unique financial situation and goals, diligently execute those plans and work very hard to make our clients successful. Chris has been doing that for years in another tumultuous, anxiety-ridden industry—politics. Chris is going to be a tremendous asset for our firm, both in respect to serving our existing clientele and further tapping into exciting new opportunities such as the Millennial market. Chris is sharp, has a great can-do attitude and builds rapport with people so well. Our firm is excited to make this announcement.” This year, Barron’s magazine named CapWealth Advisors one of the top two advisories in the state of Tennessee, following five consecutive years named the state’s number-one advisory.

Burger has been onboarding with CapWealth Advisors since February, and has been busy training, shadowing and studying the firm’s wealth-management strategies, operational policies and procedures, and customer service protocols. He’s well versed in CapWealth Advisors’ trademarked investment approach of Sophisticated Simplicity®, the art of thoroughly understanding a complicated global markets landscape and boiling it down to high-quality, straightforward investment ideas.

Prior to joining CapWealth Advisors, Burger served as vice president of Advocacy and Public Affairs for Nashville-based Crisp Communications and, before that, as director with the DCI Group in Washington, D.C. In these roles, Burger led grassroots-management, coalition-building and strategic-communication efforts for both corporations and non-profits that faced legislative, regulatory and competitive challenges. Burger also has extensive political campaign and Congressional office experience, having worked for two presidential campaigns and two Congressional representatives, overseeing field offices, staff, events and communications.

Burger is a graduate of the University of Virginia, where he earned a B.A. in Economics and Government, and holds his Financial Industry Regularly Authority Series 65 securities license. He sits on the Business Advocacy Committee of the Williamson County Chamber of Commerce and on the committee of MLS2Nashville, a group of business, civic and sports leaders committed to bringing a Major League Soccer (MLS) team to Nashville. Additionally, Burger volunteers with UVA Club of Middle Tennessee and is a member of Midtown Fellowship (PCA) church.

About CapWealth Advisors

CapWealth Advisors is a fee-based investment advisory firm based in Franklin, TN, that provides wealth management services, including investment advice, personal financial planning and portfolio management to individuals, families, foundations and endowments. Founded in June 2000, CapWealth Advisors specializes in preserving, growing and distributing assets over our clients’ lifetimes. With over $1 billion in assets under management and advisement, we are one of the nation’s leading independent wealth managers. For more information, visit www.CapWealthAdvisors.com.

 

Teach Your Kids to Budget This Summer

The following column from Phoebe Venable, CapWealth Advisors President & COO, appeared in The Tennessean on May 18, 2017.

Getty Images

Summer is drawing nigh, that erstwhile family season of relaxation and slowing down. In today’s world, it’s just the opposite. It’s all about planning and activities — planning what the children will do while not in school, planning how to get your children to and from those activities while you work, planning vacations, planning to ensure family life runs smoothly when the reliable structure and schedule of the school year is pulled out from under you like a rug.

I’ve been working on my family’s summer calendar practically since last summer ended. With just a few days of school left, I felt confident that I’d struck the right balance of family time, sports and travel for my teenage son. Then yesterday, it occurred to me: I, a financial adviser, hadn’t planned anything that would advance his financial savvy!
Here are some easy ways to insert some financial acumen into your child’s summer:

1.  Give kids a vacation allowance — and stick to it.

Summer vacations are the perfect time to discuss budgeting, a supremely critical financial skill. Before going on vacation, determine how much discretionary spending your children will have. How much cash will you give them and will they be allowed to dip into their own savings?

Once you’ve determined the amount, sit down and talk about it. If each child gets $50 for the week, explain this is $7.14 per day. Make sure they think about how they’ll keep up with the cash while traveling. If on day one, they blow all their money on amazing live sea monkeys that turn out to not be so amazing, they need to understand you’ll not be buying them any more souvenirs.

Allowing your child to experience the consequences of their actions is invaluable.

2. Take them to the grocery — and talk about that candy bar.

A simple trip to the grocery store provides another financial learning opportunity. No matter the age of your children or grandchildren, they can use your guidance on how to be a good spender. Explain what an impulse purchase is and why candy bars are placed near the cash registers.

A candy bar may seem like nothing to worry about because the cost is small, but this lesson isn’t about the size of the purchase. It’s about not succumbing to temptation and purchasing something without considering the ramifications. Talk about the nutrition and food volume of a candy bar compared to, say, a dozen eggs, which is equivalent in price.

Consumption is part of our culture and marketers bombard us with messages to buy things we don’t need. Point these strategies out to your children so they aren’t so easily and blindly “sold.”

3. Make them work a summer job — and watch them learn.

For many of us, our first job was a summer gig. A summer job will teach a child more about personal finance than any lecture from mom and dad ever will. If your teen is working for minimum wage ($7.25 here in Tennessee) and a movie tickets costs $13, let him or her decide if going to the movies with friends is worth two hours of work or not. Besides learning the value of hard work and the value of a dollar, your child may begin learning what kind of work interests them.

They may discover they love interacting with customers as they bag their groceries. Even the process of applying for a summer job is a great experience for teenagers.
Enjoy your summer and make some memories, but don’t forget to give your children some financial lessons they won’t forget either!

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

CapWealth Senior Advisor Jennifer Pagliara to Attend ABA Trust School

A trust can be a powerful tool in managing how your wealth is passed on to your loved ones.

CapWealth Advisors Senior Advisor Jennifer Pagliara will attend the 2017 American Bankers Association‘s Trust School in Atlanta this coming September 24-29. This intensive five-day program is designed to provide a solid grounding in the fiduciary, tax, investment, financial planning and ethical issues associated with the creation of trusts.

CapWealth Advisors Senior Advisor Jennifer Pagliara

The ABA Foundational Trust School offers a state-of-the-art, performance-based curriculum, designed and delivered by a prestigious group of trust professionals, including prominent bankers, attorneys, and industry experts. In addition, students have the opportunity to build a nationwide network of peers and industry leaders, a vital resource for years to come.

A trust is a legal document that can be powerful estate-planning tool for managing how your wealth is passed on to your loved ones and other chosen beneficiaries. Among the advantages of a trust, it can:

  • Put conditions on how and when your assets are distributed after you die
  • Reduce estate and gift taxes
  • Distribute assets to heirs efficiently without the cost, delay and publicity of probate court, which can cost between 5% to 7% of your estate.
  • Better protect your assets from creditors and lawsuits
  • Name a successor trustee, who not only manages your trust after you die, but is empowered to manage the trust assets if you become unable to do so

 

Over the five days of the Trust School, students will receive a solid foundation in the technical skills and knowledge required in the fiduciary and trust, investment, financial planning, tax, and ethics industries, including the latest strategies in:

  • Account Administration
  • Fiduciary Law
  • Tax & Estate Planning
  • Investment Management

Upon completion of the ABA Trust School, Jennifer will earn the ABA Certificate in Trust: Foundational. We’re excited about this continuing education opportunity for Jennifer, just another example of CapWealth’s commitment to our clients’ financial futures!

Tim Pagliara to Attend CFA Institute’s Investment Management Workshop at Harvard Business School

CapWealth Advisors CEO and Chairman Tim Pagliara will attend the Investment Management Workshop, a joint program by CFA Institute and Harvard Business School, on June 25-29, 2017. The executives who participate will focus on three fundamental business concerns: management issues, business strategy and development, and investment strategy.

CapWealth Advisors Chairman and CEO Tim Pagliara

For almost 50 years, the Investment Management Workshop (IMW) has played an essential role in shaping the principles and practices of investment management across the globe. This renowned program, developed by Harvard Business School (HBS) Executive Education and CFA Institute, brings together highly accomplished faculty and leading executives from around the world to confront the ever-changing challenges that define the investment management industry. Since its inception in 1968, the program has provided a forum for more than 3,500 participants to share broad-ranging insights and investigate cutting-edge strategies for balancing risk and return.

Among other issues, Tim and the other workshop participants will explore:

  • Disruptive innovations in both products and services in investment management
  • The challenges of size for both asset allocators and asset managers
  • Investing in a world of low expected returns
  • The future of hedge funds and private equity
  • The rise of smart beta and its implications for the competitive landscape of the active investment management industry
  • Fintech as a disruptive force in the investment management industry and strategic responses from incumbents
  • The drivers of success for activism as an investment strategy
  • Innovative fee structures for institutional investors
  • Investment decisions in a world of low expected returns
  • Implications of the growth in index investing for markets and for the investment management industry
  • Co-investments in private markets
  • Trade execution in a world of high frequency trade and multiple execution venues
  • Liquidity management in uncertain times
  • Innovative investment strategies and the search for alpha in today’s environment

 

CapWealth Invites Client Kids and Grandkids to Money Camp 2017!

The seeds we plant today will grow into future financial, intellectual, personal and philanthropic capital!

CapWealth Advisors would like to invite your children, nieces, nephews and grandchildren ages 6 to 10 to this year’s Money Camp, where children begin learning critical life lessons about spending, saving, investing and donating.

It’s never too early to open the dialogue with your young ones on what money is, what can be accomplished with it and how to successfully manage it. We send our children to lessons and camps for everything from swimming and music to horseback riding and scouting, yet managing money is an activity they’ll be responsible for all their lives—with potentially enormous positive and negative ramifications. And if your family is one of substantial wealth, it’s even more critical that the children begin preparing to become responsible, knowledgeable stewards of wealth.

Money Camp will be led by CapWealth Advisors President & COO Phoebe Venable, a veteran teacher of young people on matters of money, and CapWealth Advisors Senior Advisor Jennifer Pagliara. Phoebe and Jennifer try to make learning about money fun but meaningful. The basic lessons your young ones learn could be the foundation for a lifetime.

Who:   

Children 6 to 10 years old

What:

A FREE, fun, engaging, youth-oriented seminar that covers the basics of spending, saving, giving and investing. The seminar, offered on your choice of two days, will be two hours long and snacks will be provided.

When:

Tuesday, July 18, 9:00 a.m. to 11 a.m.

Thursday, July 20, 2 p.m. to 4 p.m.

Where:  

The Office of CapWealth Advisors, 3000 Meridian Blvd., Suite 250, Franklin, TN 37067

How:

To register your children, nieces, nephews or grandchildren for CapWealth Money Camp, please contact Raechel Mabry at rmabry@capwealthadvisors.com or call 615-778-0740. Thank you!

We look forward to seeing your children here!

7 Tips for Millennials Ready to Buy a Ride — Not Hail It

The following column from Jennifer Pagliara, CapWealth Senior Advisor, appeared in The Tennessean on May 12, 2017. Read it at The Tennessean here.

LWA/Getty Images

Having purchased my first car without moral support (or negotiation) recently from a dealership in Cool Springs, I know how stressful buying a car can be. Other than a home, a car is one of the biggest purchases you’ll ever make, and likely one you’ll make several times in your life. It’s an important financial decision and, unfortunately, my experience didn’t go as well as I would have liked. So I now feel compelled to give my fellow millennials who might be in the market for a new car some warnings and some tips. Hopefully you won’t make the same mistakes that I did!

Just a few years ago, car companies were terrified that the debt-laden millennials would never buy cars, preferring to use ride-hailing services such as Uber and Lyft. As millennials pay off their college loans, get settled into careers and move out of city-center apartments in favor of home ownership, I predict that of most of my cohorts will buy cars.
Here are some tips for when you do, millennials.

  1.  Budget: Know your income, your fixed expenses and how much you can afford —this is called a budget, people — before taking one step onto a car lot. Your budget for a car should also include car ownership costs — fuel, insurance, maintenance and registration costs.
  2. Do your research: Also before you go, get online and narrow down the cars you’re interested in that fall within your price range. That way, you’ll have more clarity and confidence as you shop in person. Know the invoice price for the new cars you’re interested in, as well as the manufacturer’s suggested retail price (the wholesale price and dealer’s asking price, respectively, if you’re buying used). The invoice and wholesale prices are a rough indicator of what the dealer paid for the car, so it may be a good place to begin negotiation.
  3. Secure financing beforehand. Check interest rates on loans from local banks and credit unions and compare those with what the dealer offers. Dealers typically receive an additional fee or commission from every loan they generate.
  4. Know the dealer’s profit centers. Selling you a new car for more than the invoice figure isn’t how the dealer makes most of his or her profit. According to the National Automobile Dealers Association, they make most of their money on dealer cash and holdbacks (this is money the manufacturer kicks back to dealers for selling a car), by selling your trade-in (often for a much bigger profit than they just made selling you a new car), on dealership financing and insurance, and on the service they hope to provide you post-sale. Knowledge is power. Have plenty of it going into negotiation.
  5. Don’t fall for a false sense of urgency: Unless you’re negotiating on the last day of a special promotion, more likely than not the price you hear today will be also be good tomorrow. Car salespeople have quotas to fill and commissions to earn, so they’re going to pressure you to buy now. Don’t be rushed into anything you’re not ready for.
  6. Don’t fall in love with the latest and greatest: If your heart is set on the newest model of a very popular car, you’re probably not going to get a great deal. The dealerships know they have the upper hand in this scenario — you want it and there’s a line of people behind you that want it, too — and they’ve got zero incentive to give you a better price.
  7. Be prepared to walk. Everything is negotiable. The worst that can happen is they say no. In that case, resolve to walk out and try another dealership.

Jennifer Pagliara is a financial adviser with CapWealth Advisors.

CapWealth Advisors Sponsors 25th Annual Nashville Zoo Golf Classic

CapWealth Advisors was delighted to be a Supporting Sponsor again this year of the Nashville Zoo’s Annual Golf Classic, which took place this past Monday, May 8! Hard to beat a gorgeous day on the links having fun while also contributing to a great cause–our fabulous zoo’s animals, educational programs and conservation efforts. Pictured below are Tommy Thompson, Dave Biron and CapWealth Chief Investment Strategist and Nashville Zoo Board of Directors Member John Lueken. Rounding out the foursome was Wayne Vann, who’s taking the picture.

Social Security Not Keeping Up With Seniors’ Rising Costs

Two days ago, the Fox Business News series called The Boomer spoke with Mary Johnson, The Senior Citizen League’s Social Security and Medicare policy analyst about social security. She explains that benefits aren’t keeping up with cost of living increases—a danger that we tell our clients about frequently. Read the full text of the exchange below or here.

For the fifth year in a row, the 60 million people who depend on Social Security have had to settle for historically low increases.  For the average recipient the adjustment adds up to a monthly increase of less than $4 a month.

Meanwhile, older Americans report that their household budgets jumped substantially last year, despite the lack of growth in their Social Security benefits, according to a new survey by The Senior Citizens League (TSCL).

“The gap between benefit growth and retiree costs was particularly pronounced due to rising prices of the most essential items in retirees’ budgets, — medical and food costs,” says Mary Johnson, TSCL’s Social Security and Medicare policy analyst.  TSCL sent a letter this month to Congressional leaders calling upon them to enact legislation that would provide a modest boost to Social Security benefits.

Johnson discussed with FOX Business these additional findings from the survey, and what you need to know to adjust your household budget.

Boomer: To what did the survey attribute the substantial jump in household budgets for seniors?

Johnson: Two factors.  Spending needs typically grow in retirement, and, an extremely low annual cost-of-living adjustment (COLA).  Unfortunately the spending jump isn’t unusual, but a pattern that typically occurs in retirement.  This is something we can try to plan for in retirement, but it’s also a trend that needs to be addressed by our elected lawmakers in order to maintain the adequacy of Social Security benefits for all Americans.

Over any retirement our needs change. We require more medical services and prescription drugs, our need for different housing and supports like transportation services grow, and life events, like caregiving, or the death of a spouse, have a big impact on spending.

Annual surveys conducted by The Senior Citizens League since 2014 confirm this. About 90 percent of survey participants report that their household budgets rose by at least $39 per month over the 12-month period, in each of the past four years.  In each year, the largest percentage of survey participants — 37% in 2017 —report that monthly expenses rose by more than $119.  This year survey participants said their biggest cost jumps were for medical expenses and food — two categories that are essential.

The second factor in addition to the typical trend of rising spending over time, are recent low annual Social Security COLAs.  The COLA isn’t doing its job keeping pace with the inflation experienced by the majority of retirees.

Boomer: Why is there such a gap between retirees Cola and their spending?

Johnson: A major problem is the consumer price index (CPI) that the government uses to determine the annual boost.  One would think that the CPI used to calculate COLAs for retirees would be based on the spending patterns of older people, but it is not.  Instead, the COLA is determined by the growth in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).  Younger working adults spend a much smaller portion of their income on medical costs, and spend more on transportation and gasoline, categories that have gone down dramatically in recent years.  This tends to understate the inflation experienced by the majority of people receiving Social Security who spend more on medical costs and less on transportation and gasoline.

There is a better choice of CPI for calculating the COLA, the Consumer Price Index for the Elderly (CPI-E).  It gives greater weight to healthcare and housing, two categories that form a bigger share of spending for older households.  The CPI-E would for example have paid a COLA of 0.6 percent in 2016 instead of zero, and 1.5 percent this year instead of 0.3 percent.

Boomer: What can pre retirees do to prepare for the cost of living increases in their household budgets in retirement?

Johnson: Work out a household retirement budget, using spending records from several years back. Think ahead for big costs, like transportation needs, replacing a roof or appliances.  Find professional help with the hardest part like planning for growing medical and housing costs in the later part of life.  If you don’t have a financial advisor, check your local senior centers, or for classes in your area that can help.  The National Council on Aging has a free online tool called “EconomicCheckUp” that’s a great way to get started.

Boomer: Are there any legislative proposals in the works that would boost Social Security benefits?

Johnson: Yes!  The Social Security 2100 Act (H.R.1902) would not only keep the Social Security system solvent over the next 75 years and beyond, it would also boost benefits. The bill is estimated to provide both current and new beneficiaries with an average of about $300 more per year.  The legislation would also base the Social Security COLA on the Consumer Price Index for the Elderly (CPI-E).  According to my estimates, that would boost the current average monthly benefit about $75 after 20 years in retirement.  The bill was introduced with the support of 156 original co-sponsors — more than any other comprehensive Social Security reform bill to date.  TSCL believes the bill would go a long way in ensuring the retirement security that older Americans have earned and deserve.