It has recently come to our attention that our government has found a new and creative way to “protect us.”

It turns out that if there has been no activity in a bank account for two years, the bank places the account on “inactive status” and then eventually transfers the assets to the State.

They do make an effort to contact the owner by email and mail but it requires the owner of the account to notify the bank that they are alive and functioning.

Since many of our clients have accounts at Synchrony that they use just for cash reserve, they may not have activity on a regular basis.  If you get a notice, call the bank and get it reinstated promptly.  You can setup a monthly transfer of some small amount to your checking account and avoid the problem going forward or just transfer yourself some cash once a year (on your birthday, a neat gift to yourself).

Either way it is a bit of a nuisance but not a big deal; it just requires a bit of attention. 

Greetings!  This week it’s Charles doing the blogging.  Since becoming the LFS Compliance Officer, I’ve had the opportunity to read more about financial advising and the he industry in general.  One disturbing trend is the rise of financial abuse of the elderly.  The elderly in America are more than 45 million strong, and thanks to the aging of the country's baby boomers — 10,000 of whom turn 65 every day — it’s a fast-growing segment of the population.

Although definitive national statistics are hard to come by, one recent study by the state of New York said about 5 million older Americans throughout the U.S. are financially exploited each year.  Another study published last year estimated an annual financial impact of $36.5 billion.  Even at that, most experts believe the problem is significantly under-reported.  Cases often don't come to light because victims are embarrassed about having allowed themselves to be swindled, or reluctant to point the finger at the perpetrators — often people who are close to them.  The consequences of these cases can be devastating as wealth that has accumulated over a lifetime of hard work can dwindle or disappear.

Financial advisers tend to be on the front lines in the battle against elder financial abuse and are often among the first to spot red flags.  A recent survey of 591 advisers found that 62% have seen or suspected financial abuse of an elderly client at least once.  The problem for advisors is that there are no clear-cut ways to determine whether abuse is occurring and what tools are available for mitigation or intervention.  In fact, more than half of those advisors who suspected abuse — 56% — said they didn't report it for various reasons.

All of this is not just hypothetical for us at Linder Financial.  In recent months, we have had three events of attempted scams of our clients.  In two cases, it appeared to be efforts by someone to gain information about the client for possible thievery or commercial advantage by gaining access to the computer to “repair” non-existent problems.  The third was a direct attempt to transfer funds from a client account.  In all cases, there was no loss as the problem was noted and the proper action by TD Ameritrade and ourselves prevented any theft.

The message is clear.  Be alert and if you suspect there is a problem let us know promptly.  There is no shame in this process.  If you suspect there is a scam LET US KNOW!  We will also continue to watch all client accounts for spurious transactions as part of our normal tasks.

There has been no shortage of financial news as the first quarter of 2017 comes to a close.  Of course, the highlight is the 5% gain in the S&P 500 for the first three months of the year; those gains were driven by technology stocks and healthcare, which were the laggards of 2016.

Just as noteworthy has been the spike in interest rates that has occurred since the election.  The discussion of tax cuts and increases in infrastructure and defense spending have led to whiffs of inflation for the first time in more than eight years, even with no legislation on the table.

Our investment focus will continue to include TIPS (Treasury Inflation Protected Securities) for most of our clients as a way to protect portfolios against both stock volatility and inflation.  As discussed in an earlier blog post, we are also increasing allocations to active versus index investments.  During the first quarter of 2017, more than 40% of active managers outperformed their benchmark indices.

It’s Marci this week updating you on new functionality available at Ameritrade.   In the past, if you wanted to transfer money between your checking account and your Ameritrade account, you either had to write a check or utilize your bank’s bill pay service.  Mail and processing times are slow and we sometimes heard from clients who were concerned about the possibility of lost or stolen checks. 

Ameritrade now has the capability to establish an electronic connection to your checking or savings account and then enable you to initiate a transfer in either direction through your advisorclient.com login.  

If you’d like to set up this new capability, let us know.  We will provide you with the application that is required to establish the connection and then we will enable your advisorclient.com screen to process a transfer request.

The best performing investments since the recovery from the 2008 crash have clearly been index funds.  These unmanaged portfolios, aided by low fees have, with few exceptions, provided better returns than the traditional funds.  As the economy has recovered, the market followed with large advances in most sectors. A rising tide was lifting all boats.

This has resulted in very rich valuations that we believe may be unsustainable. Going forward it appears to us that a portfolio manager with a broad license to invest in his/her best ideas may provide the best option going forward.

We will be investing with mangers who have the freedom to invest anywhere in the world; utilizing stocks, bonds or cash without the conventional restraints that restrict allocations to prescribed formulas.

Our role is to identify competent mangers who will more than offset the inevitable increase in costs by their skill in choosing the right investments.  Of course, it is never all index funds or managed portfolios but trying to find the right balance for the times.

The market reaction to the election of Donald Trump is much different than the pundits had predicted.  The conventional wisdom prior to the election was that if Trump won (which was thought to be highly unlikely) the market would tank, the dollar would collapse, and interest rates would fall as investors fled to the safety of bonds.

So here we are on Inauguration Day and the pundits have been wrong on every count.  The impact of this on most of our client portfolios has been quite favorable in the near term, but the issue that confronts us, as always, is what happens next.

We clearly do not know that answer and never will but with all the uncertainty of a new administration, our inclination is to pull back.  We therefore advised our clients to give up some potential gain, and re-balance to provide an added measure of safety to most portfolios.  The first major step in this process occurred today with the purchase, at auction, of the new US Treasury Inflation Protected Security (TIPS).  These securities will provide about four times the return of the present money market funds, as well as increasing in value as inflation rises in coming years.  Based on the results of the auction, LFS was not alone in purchasing these securities -- 13 billion dollars worth of TIPS were purchased today.  LFS was responsible for 1.9 million of that total.

We certainly hope the added caution will prove to have been unnecessary, but...

Check out this WSJ article for more insights.

As 2016 draws to a close, we want to take this opportunity to wish all of you a happy, HEALTHY, and prosperous New Year!

 This year was another tumultuous one in the world and in financial markets (to say the least) and we thank you for staying the course with us.

 As always, we are grateful for your loyalty, trust, and friendship as we close the year and look forward to the years ahead.  Your confidence in us is the most important and valued part of our relationship. 

 Happy Holidays!

 Bernie, Toby, Marci, and Charles

It’s Marci taking a turn on the blog this week.  Do you have teenagers or millennials in your family?  As New Year’s resolution time nears, how can we help our children and grandchildren get on the path to financial security in 2017?  In our opinion, the single best piece of advice is to open a ROTH IRA.  Teens and millennials get the benefit of decades of tax-free growth and tax-free withdrawals for their own retirement.  The only requirement to open a ROTH is taxable income and you can fund it for them or match their contribution.  A different kind of holiday gift than a gift card!   How can we help?   In addition to opening the ROTH for them and selecting the investment, we can provide them a separate quarterly financial chart, so they can see their own investment growing over time.  Call or email us if we can help get them started investing for their own futures!

It is that time of year when all of us are inundated with requests for support from very many worthwhile organizations.  Clearly LFS has no expertise in helping you select which charities to support.  We can, however, help you in executing the transaction. For our senior clients, those over 70, transferring funds from your IRA is a very tax efficient means of making a donation.  A charitable donation made from your IRA is considered part of your required distribution, but is not taxable.  

For younger clients, donating appreciated shares of stock or mutual funds can be beneficial both to the charity and to your cash flow.  This approach is especially useful if you own shares with a very low tax base since you receive the current value of the shares as a tax deduction regardless of what you paid for them.

If you would like some help in carrying out your charitable plan in a tax efficient manner, just contact Marci or me and we will assist you to make it happen.

One of the many surprises in the fallout from the election has been a sharp increase in interest rates.  Whether this results from an overly optimistic view of the economy or fear of runaway inflation, the result is the same. This, in our view, finally provides the opportunity to establish or reestablish a Treasury bond ladder in many of our clients’ portfolios. A Treasury Ladder is a good way to invest cash that will be available if the need arises, yet earn a return that is at least ten times higher than present money market rates.    A Treasury Ladder consists of a series of US Treasury Notes ranging in maturities from two to ten years.  The notes mature at intervals and the client then has a sum of cash to use if needed or to reinvest in a new Treasury note if the cash is not needed.

Our plan is to have a discussion with all of our clients during the present quarter, with the goal of having a ladder established in many client accounts prior to the Presidential inauguration in January. The detailed composition of the ladder of course will vary by client, but it is our opinion that increasing the safe, income producing segment of a portfolio is prudent right now for most of our clients.

If you’ve been paying attention to any news outside of the political world,  you’ve probably seen or heard a discussion of the new Fiduciary Standard for Investment Advisors published by the Department of Labor.  The rule requires financial advisors, be they brokers, insurance agents, or RIAs (like us) to place the client’s interest first in making recommendations for buying and selling securities.  This is a significant change for insurance agents and stock brokers who never had to adhere to this standard before.

So, what does this mean to you as a client or potential client of LFS?  As investment advisors, Linder Financial Services has been a fiduciary for every one of the more than twenty years we have been in business.  We have always been required to put your interests ahead of our own and have no source of income outside of the fees you pay us.  No commissions, kick backs or incentives from third parties.  We are pleased that the rest of the financial advisory industry will now be held to those same standards.  It makes for a more transparent investment environment for all of us!