Wealth Talk

News and Ideas

A Special Message from Joe Bonnett

By Joe Bonnett CFP®, ChFC® on April 12, 2012

Exciting Changes are Here at Bonnett Wealth Management

 

BWM Advisors has taken the helm as the sole advisory firm providing oversight of your investments.




Being independent is wonderful. It gives my firm lots of options in providing services. One thing new here is the launch of BWM Advisors, a Registered Investment Advisor or RIA. BWM Advisors is a separate company from Bonnett Wealth Management. Its purpose is to improve client services. Allow me to explain.

What is a Registered Investment Advisor?

An RIA is a registered business that can provide investment advice to the general public. (See more below.) By forming my own RIA firm, I can have client assets held by Charles Schwab Institutional Services, Securities America and a host of other qualified custodians. While Securities America will still be the custodian for many accounts, BWM Advisors will replace Securities America Advisors in providing oversight for client accounts.

What is the difference between Securities America Advisors and BWM Advisors?

Both SAA and BWM Advisors are RIA firms. Both provide financial planning and asset management services. In fact, I was a representative of SAA for many years, until forming my new RIA firm. Little in the oversight process will change. However, most clients will experience lower fees and lower custodial expenses.

Why will investment fees and expenses generally be lower?

All RIAs charge fees for financial planning and asset management services. Expenses vary depending on the account custodian. But …

  1. BWM Advisors uses the latest technology and client management processes. We believe this allows us to run more efficiently, more competitively and with a lower fee structure than many other RIA firms.
  2. BWM Advisors works primarily with low-cost qualified custodians to keep expenses down in maintaining accounts and administering trades. (For example, Charles Schwab does not assess any annual IRA fees at this time.) While some clients and portions of some clients portfolios will remain in custody with Securities America, in general new clients, existing clients with managed accounts and new investments from existing clients will make use of our new relationships with low-cost qualified custodians.

Why else are you forming BWM Advisors?

Setting up my own advisory firm has allowed me to work with some of the best technology partners in the business. These technology partners will provide access to your accounts over iPhone®, iPad® and Android® devices. Since these new platforms will integrate more easily with my practice, I believe BWM Advisors will be able to provide clients with faster and more reliable service — easier online access to accounts, real-time account balances, quick access to documents, such as tax forms and other documents you choose to place online, faster trading and more.

Are you leaving Securities America?

No. Securities America was recently acquired by a new parent company, Ladenburg Thalmann & Company Inc., an old investment banking firm established in 1876. The firm has been a member of the New York stock exchange since 1879. We have a good relationship with Securities America and will continue to use their custodial services.

I think you’re going to be very pleased with all that’s happening at Bonnett Wealth Management. I believe our new advisory firm, BWM Advisors, will bring many benefits to clients.

As always, I appreciate your continued business.

Sincerely,

Jerome “Joe” P. Bonnett, Jr., CFP®, ChFC®

Bonnett Wealth Management
(402) 556-8858 Telephone
800-956-8858 Toll Free

RIAs or Registered Investment Advisors are part of the Investment Advisors Act (IAA) of 1940. Under the act, RIAs must register using Form ADV and are required to update their ADV form annually and file operating reports with the SEC or state regulatory agency. The investment advisor must also provide to clients and prospective clients a written disclosure statement and allow inspection by the SEC or state regulatory agency of any books and records relating to investment advisory activities. Advisors generally cannot receive compensation based on the performance of their advisement, nor can they engage in excessive trading or profit from market activity resulting from their advice to clients. Investment advisors must also act in the best interest of their clients at all times and take into consideration their clients’ financial positions and financial sophistication. Please consult a qualified advisor before making any investment decisions.
Posted in Special Messages |

Hospital Care Costs, Other Items, Increase

By Joe Bonnett CFP®, ChFC® on March 22, 2012

Time to take a sober view of the cost of living.

Based on recent figures from the U.S. Department of Labor, Bureau of Labor Statistics, we see that expenses keep rising. Lately, some necessary items have risen considerably, which need to be accounted for in planning carefully for one’s retirement years.

Here is the latest data:

Overall costs: The Consumer Price Index*, a measure of living expenses, increased 3.0% from December 2010 to December 2011, the largest December-December increase since 2007, according to the BLS.

The following components contributed significantly to the 2011 overall CPI figure.

Energy: The energy index increased 6.6% in 2011. It represented a deceleration from the 2010 increase of 7.7%. Still, this component included indices for gasoline (up 9.9%), fuel oil (up 18.0%) and electricity (up 2.2%).

Food: The food index accelerated in 2011, rising 4.7% compared to a 1.5% increase in 2010. All six major grocery store food group indexes rose in 2011, with increases for fruits and vegetables (up2.3%) and dairy (up 8.1% ).

Hospital and related services: The overall medical care index measured by the government was up 3.0% for 2011. But, hospital and related services showed an increase of 5.6% for the year, after a jump of 7.0% in 2010. The cost of professional services (physicians’ services, dental services and eyeglasses and eye care) were inline with the 3% overall cost of living increases. The cost of a hospital bed and outpatient hospital services, however, exceeded the overall average.

If you are a client of mine and have questions about your current investment plan and retirement plan, please call our office.

*The Consumer Price Index (CPI) is a measure of the average change in prices over time of goods and services purchased by households. The above CPI figures are the CPI for All Urban Consumers (CPI-U), which represents a majority of the total U.S. population. Each month, the government collects prices in 87 urban areas across the country from about 4,000 housing units and approximately 26,000 retail establishments-department stores, supermarkets, hospitals, filling stations, and other types of stores and service establishments. All taxes directly associated with the purchase and use of items are included in the index.

Posted in Health Care, Retirement Planning | Tagged , , |

Cost of Golf in Retirement

By Joe Bonnett CFP®, ChFC® on March 15, 2012

How much savings do you need today in order to play three rounds of golf each week in retirement?

Golf ball on tee

A baby boomer, age 65, who retirees this year has a life expectancy of 78.7 years, according to the Centers for Disease Control and Prevention’s National Vital Statistics Reports (Vol. 60, No.4, Jan. 2012, p. 6).

Assuming an average round of golf costs $40 (which factors in the cost of balls, clubs, etc.), assuming 2% annual inflation on the cost to play, and assuming an annual rate of return on savings of 3%, the boomer needs a $79,812 lump sum ready to go today to fund a 13.7-year golf habit.

Make that $91,500 if inflation ends up being 4% per year for the next 13.7 years.

Posted in Retirement Planning | Tagged |

Tale of Two Investors – Part 2

By Joe Bonnett CFP®, ChFC® on March 10, 2012

Let’s update the performance tracking of two investors that I profiled last summer. Both are real persons.* One panics easily as markets become turbulent. He tends to sell stock holdings at inopportune times. The other is a buy-and-hold investor who remains focused on the long-term.

Stock Data

How are they doing today?

BAD EXAMPLE. This stock investor is pretty much no longer in stocks. He sold most of his holdings in late 2008, right after a large stock market drop (bad timing unfortunately). A market recovery took place, but he didn’t return to stocks until late in 2010, well after the recovery was underway and missing early gains. In June 2011, he panicked again. The markets went through a period of volatility, and he liquidated most of his positions after the S&P 500 had dropped 1,000 basis points. Again, bad timing. To sum up: He’s buying high, selling low, and not really following a plan.

Update: The story today is the same. This investor has not returned to the stock market. Instead, he’s retreated to a short-term mix of investments, including cash, CDs and bonds, which together earn him a combined annual rate of return of less than 3%.

I will never fault someone who is uncomfortable with stocks. Stocks are not a good choice for everyone, depending on a person’s age and goals. However, the S&P 500 was flat in 2011, with large swings in price occurring throughout the year. So, in my opinion, 2011 would have been a good year to dollar-cost average into the market. Such a strategy could have lead to the purchase of several stocks on the relative cheap — on the down side of market vacillations — had he taken advantage of it.

Furthermore, by having little stock exposure this investor missed out on dividends and dividend reinvestment opportunities that could have further improved his stock performance.

Now let’s turn to our good stock investor example. Continue reading →

Posted in Investing | Tagged , , |

Seeing the Future — Part 2

By Joe Bonnett CFP®, ChFC® on February 29, 2012

Wired magazine reported online in November 2011 (and in its December 2011 print edition) that Amazon’s Jeff Bezos “owns the web.” I wrote about this topic, too. (See “I Read an Article, and I Believe I’m Seeing the Future.”) The idea is that Amazon has created a worthy challenger to Apple’s iPad tablet market dominance: the new Kindle Fire. Recent figures, however, suggest that total Web dominance is not quite there for Amazon … or Apple.

The case for Kindle*

Kindle FireSelling at $199 (v. $499 for the lowest priced iPad), Amazon’s Kindle Fire sold more than 4 million units during December, according to PCWorld.com (“Kindle Fire Cut Into iPad Sales, Analyst Says,” Jan. 3, 2012). A source for the article said that overall sales growth for the iPad during the holidays was off. The analyst estimated that Apple sold 13 million iPads during the final quarter of the year, which was better than the third quarter but short of 16 million many expected. But, in the opinion of the source, Kindle Fire cut significantly into iPad sales, and may have trimmed total iPad holiday sales by “one to two million units.” Hence, a win for Kindle. Continue reading →

Posted in Investing, Lifestyle | Tagged , |

It’s Tax Time

By Joe Bonnett CFP®, ChFC® on February 16, 2012

It’s time to get your financial information in order to prepare your 2011 tax return. You and your tax advisor will be looking at your earned income, capital gains and losses (realized and unrealized), and other financial information as you begin your 2011 return.

Tax Forms May Trickle In

You should receive by mail various tax forms that you will need to prepare your return.

Many of the forms you’ll need — such as Form 1099 (which includes interest income, dividend income, miscellaneous income, among other income types) — should have been in the mail to you by January 31. But please be patient. Tax reporting requirements often allow providers extensions.

Other forms, such as Form 5498 (which reports your IRA contributions to the IRS) is filed by your IRA trustee or issuer — not you. They have until May 31 to complete and mail it to you.

So, not every form will arrive in the mail at the same time. In some cases, mailed forms will have to be revised in order to accurately reflect tax related items. If that is the case, the form will be reissued and re-mailed to you with the “corrected” box checked.

Good Time to Revisit Your Investment Plan

Something else to keep in mind while you’re gathering tax paperwork and completing your return is conducting a simultaneous review of your investment portfolio. Doing so may reveal strategies you can use to reduce your tax liability. Some strategies may have a direct impact this year, while others may be implemented over the next several years, depending on IRS rules.

We recommend a coordinated tax and investment planning process working with you and your tax advisor. Please contact us at your earliest convenience to schedule an appointment.

Posted in Taxes | Tagged |

Finding Structure Amid Chaos — Is It Possible?

By Joe Bonnett CFP®, ChFC® on February 9, 2012

I first heard the term “chaos theory” in the 1993 movie Jurassic Park. In the movie, a mathematician played by Jeff Goldblum asserts that life is chaotic, and so spawning genetically engineered dinosaurs would invariably lead to trouble. At the time, I thought chaos theory was just a scriptwriter’s device, added purely for effect. It turns out chaos theory is serous math—the attempt to identify systems that behave without predictability. Like right now.

“The future of business is pure chaos,” states the subheading to a Fast Company article entitled, “Generation Flux” (February 2012, pp. 60-71, 97). The article profiles seven “Fluxers” who profess comfort with change, see more of it coming and invoke the language of “chaos theory” to explain the unpredictability of today’s business systems.

Jurassic Park postage stamp

Today’s ‘New Normal’

“The pace of change in our economy and our culture is accelerating,” says Fast Company. The leading chaos contributors are new technologies that enable greater social interaction and more widespread mobile commerce.

The result: “Our visibility about the future is declining,” states the article. It’s difficult to weigh risk and opportunity as change comes from many directions.

Consider:

  • Smartphones. “Just five years ago, three companies controlled 64% of the smartphone market: Nokia, Research in Motion and Motorola,” says Fast Company. Today, two different companies are at the top: Samsung and Apple.
  • Advertising and publishing. We’ve seen the rise of deal-of-the-day provider Groupon, and the fall of bookseller Borders.
  • Political mapping. Participation by users on Twitter and Facebook can affect candidates’ strategies for election, kill a bill in Congress, affect a charity’s fund-raising ability and contribute to a revolution in Egypt.
  • Entertainment. Cable TV is losing ground to streaming TV, due to products from Apple, Roku, Sony, Netgear, Netflix and Microsoft. (The Wall Street Journal, “Must-Stream TV,” January 7-8, 2012, p. D2.)
  • Leadership positions. A decade ago, who could have seen the rise of Facebook (845 million regular users at the time of its IPO filing)? The fall of Blockbuster? The return of Brazil as an economic powerhouse? The downgrade of U.S. government debt?

“The pace of disruption is roaring ahead,” says Fast Company. “The next decade or two will be defined more by fluidity than by any new, settled paradigm; if there is a pattern to all this, it is that there is no pattern. The most valuable insight is that we are, in a critical sense, in a time of chaos.” Continue reading →

Posted in Investing | Tagged , , |

2010 Estates: IRS Offers Some Relief

By Joe Bonnett CFP®, ChFC® on January 9, 2012

Recently, the Internal Revenue Service recently announced some relief for 2010 estates. While I personally do not provide tax or legal advice, here are the details:

Couple and their iPadDue date extended.

The large estates (normally $5 million +) of people who died in 2010 will have until January 17, 2012, to file Form 8939 and pay any estate taxes due. For estates opting to make this choice, the special carryover basis form was previously to be due on Nov. 15, 2011.

Penalty relief.

In addition, the IRS is providing penalty relief to certain beneficiaries of these estates on their 2010 federal income tax returns. This relief is designed to give large estates  more time to comply with key tax law changes enacted late in 2010.

Extensions available through March 2012.

Those 2010 estates that request an extension on Form 4768 will have until March 2012 to file their estate tax returns and pay any estate tax due.

Revised versions of the estate tax forms are now available on IRS.gov. The carryover basis Form 8939 is also available. More details are available at Notice 2011-76. Please consult your tax advisor, or legal counsel, for advice concerning estate tax and estate planning matters.

Posted in Taxes | Tagged , |

How Much Does Long-Term Care Cost?

By Joe Bonnett CFP®, ChFC® on December 28, 2011

Americans are living longer. The life expectancy of a newborn American male was 46.3 years in 1900, according to National Center for Health Statistics. Today, it’s 75.3 years, which is why long-term care insurance continues to grow in importance.

Meeting with a Financial AdvisorThe American Association of Long-Term Care Insurance (AALTCI) and the U.S. Congress hope to make more people aware of the risks and costs associated with long-term care. Here are some national average cost figures:

  • $85,775/year for a private room in a nursing home,
  • $75,555/year for a semi-private room in a nursing home and
  • $39,240/year for an assisted living facility.
  • $20/hour for at-home care.
Source: 2011 Johns Hancock Financial Cost of Care Survey conducted by LifePlans

 

AALTCI urges Americans to buy LTC insurance before age 65 to avoid the high costs associated with waiting. Factors that affect the cost of LTC protection include your age and health.

  • Good health could help secure discounts that may not change even if your health does in the future.

I recommend taking some steps that can help protect you against the financial risks associated with long-term care. This involves putting together a retirement plan that includes planning ahead for long-term care expenses.  Call our office today to create or review your retirement plan and discuss the importance of planning for long-term care.

Posted in Health Care | Tagged , |

I Read an Article, and I Believe I’m Seeing the Future

By Joe Bonnett CFP®, ChFC® on December 21, 2011

The article I’m referring to appeared in Wired magazine. “Jeff Bezos Owns the Web in More Ways Than You Think” by Steven Levy was posted November 13, 2011, at Wired.com. Last check, it’s still posted online. You can also read it in the December 2011 print edition of Wired.

Of course, I read the article on my iPad2, which is ironic. This article is about Jeff Bezos, Amazon’s resilient and innovative CEO. The article says that he “Owns the Web.” So, I’m sure Bezos read the piece on a Kindle Fire, his bet on the future.

Jeff Bezos, CEO, Amazon*
You don’t hear quite as much about Bezos as you do about former Apple chairman Steve Jobs. There’s a best-selling book out on Jobs. Jobs is even profiled in the same print edition of Wired (see page 230, “The Revolution According to Steve Jobs,” for reflections on Jobs’ legacy.) But in my opinion, I think you’re going to hear more and more about Bezos and his view of the world.

Jeff Bezos, CEO, Amazon
Jeff Bezos, CEO, Amazon

 

Kindle Fire, Bezos says, “is the culmination of the many things [Amazon.com has] been doing for 15 years.” Continue reading →

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