THE PRESIDENTIAL ELECTION SEEN THROUGH A CLOUDY CRYSTAL BALL

The question I am asked every four years: “Dave, how do you think that the upcoming presidential election is going to affect my portfolio?”

It’s a fair question, and I wish I had the proverbial crystal ball to provide an answer. But this year the crystal ball is a little cloudy. In the absence of the gift of foresight, there are indicators based on everything from past performance to old-fashioned prognostication.

The answer? Like it or not based on your political leanings, my research indicates that the markets fare better in a Democratic administration. The market is performing fairly well—and at least part of that can be attributed to the market’s presumption that Hillary Clinton will be our next president.

Despite her claims that she is not tied in to Wall Street, for the most part, the markets know what to expect from her. Like her or not, the markets definitely do not like uncertainty, so Wall Street is proceeding on the assumption that the Democrats will prevail in November.

Signs and portents of election results abound, and the stock market seems to have successfully predicted the next U.S. president in the past. In her February 2016 Kiplinger.com article “How the Presidential Election Will Affect the Stock Market,” Anne Kates Smith presents some interesting statistics to support this notion. She notes, “If the stock market is up in the three months leading up to the election, put your money on the incumbent party. Losses over those three months tend to usher in a new party.”

And old-fashioned prognostication seems to be an accurate predictor of election results when people back up their opinions with their hard-earned money. While I’m not advocating their use, prediction market websites abound, where people bet on the outcomes of a plethora of topics, from Oscar nominations to presidential elections. The outcomes of the predictions are thought to be more accurate than polls because people are backing up their opinions with their wallets. Reporter John Stossel and Fox News Producer Maxim Lott host one of the popular sites, www.electionbettingodds.com, which indicated on June 12, 2016 that Hillary Clinton had a 71.2% chance of winning the presidency, while Donald Trump had a 24.1% probability of winning.

The ascendency of Donald Trump as the Republican party’s candidate for president has created some churn for voters and political and economic forecasters. Not being a traditional presidential candidate — a politician with a strong political party affiliation, voting record and policy history — how Trump would form policy positions on the influencers on the stock market and corporate earnings, such as taxes, trade, healthcare, foreign affairs, is a matter for conjecture. And everyone is guessing.

Trump has not yet revealed enough hard evidence of his agenda to alleviate the enigma, but we know that his priorities cluster around social issues, tax reform, foreign trade, and healthcare reform. A repeal of the Affordable Healthcare Act and enacting competitive interstate health insurance sales would certainly be a game-changer in the healthcare industry and affect earnings and stock prices in that sector. Getting tough with our trade policies with China and lowering the corporate tax rate to create a more fertile domestic environment for U.S. companies would affect foreign trade and corporate earnings — and potentially strengthen some segments of the market and weaken others.

Back to the answer to your question about the affects of the presidential election on your portfolio: You and your portfolio are together for the long haul. History has proven that staying the course and making portfolio decisions for the right reasons (decisions based on fear and uncertainty are not sound decisions) are the bedrock of a strong portfolio. As individual investors, we have no control over the politics, climate, economy, and domestic and foreign events that affect the markets and corporate earnings. However, we can control oversight of our portfolios and accept the inevitability of change.

If you think now is a good time for a portfolio check-up, I’ll be happy to meet with you and discuss all of the topics that may affect your current and future situation.

 

David Urovsky is registered representative of Lincoln Financial Advisors Corp. Securities and investment advisory services offered through Lincoln Financial Advisors Corp., a broker/dealer, Member (SIPC) and registered investment advisor. Insurance offered through Lincoln affiliates and other fine companies. It is not our position to offer legal or tax advice.  Wealth Advisors Group is not an affiliate of Lincoln Financial Advisors Corp. CRN-1526180-061516

The views expressed are those of the author and not necessarily that of Lincoln Financial Advisors Corp. Opinions presented may include forward-looking statements that are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied.

What Is an Annuity?

Individuals hold more than $2.0 trillion in annuity contracts; a tidy sum considering an estimated $7.4 trillion is held in all types of IRAs.1

Annuity contracts are purchased from an insurance company. The insurance company will then make regular payments — either immediately or at some date in the future. These payments can be made monthly, quarterly, annually, or as a single lump-sum. Annuity contract holders can opt to receive payments for the rest of their lives or for a set number of years.

The money invested in an annuity grows tax-deferred. When the money is withdrawn, the amount contributed to the annuity will not be taxed, but earnings will be taxed as regular income. There is no contribution limit for an annuity.

There are two main types of annuities.

  • Fixed annuities offer a guaranteed payout, usually a set dollar amount or a set percentage of the assets in the annuity.
  • Variable annuities offer the possibility to allocate premiums between various subaccounts. This gives annuity owners the ability to participate in the potentially higher returns these subaccounts have to offer. It also means that the annuity account may fluctuate in value.

Indexed annuities are specialized variable annuities. During the accumulation period, the rate of return is based on an index.

Annuities have contract limitations, fees, and charges, including account and administrative fees, underlying investment management fees, mortality and expense fees, and charges for optional benefits. Most annuities have surrender fees that are usually highest if you take out the money in the initial years of the annuity contact. Withdrawals and income payments are taxed as ordinary income. If a withdrawal is made prior to age 59½, a 10% federal income tax penalty may apply (unless an exception applies). The guarantees of an annuity contract depend on the issuing company’s claims-paying ability. Annuities are not guaranteed by the FDIC or any other government agency.

 Variable annuities are sold by prospectus, which contains detailed information about investment objectives and risks, as well as charges and expenses. You are encouraged to read the prospectus carefully before you invest or send money to buy a variable annuity contract. The prospectus is available from the insurance company or from your financial professional. Variable annuity subaccounts will fluctuate in value based on market conditions, and may be worth more or less than the original amount invested when the annuity expires.

fastFact-blackFAST FACT: Fine Print.
Since variable annuities

give you the option to allocate your premium
between various subaccounts, it’s important
to read the prospectus before you invest.

Case Study: Robert’s Fixed Annuity

Robert is a 52-year-old business owner. He uses $100,000 to purchase a deferred fixed annuity contract with a 4% guaranteed return.

Over the next 15 years, the contract will accumulate tax deferred. By the time Robert is ready to retire, the contract should be worth just over $180,000.

At that point the contract will begin making annual payments of $13,250. Only $7,358 of each payment will be taxable; the rest will be considered a return of principal.

These payments will last the rest of Robert’s life. Assuming he lives to age 85, he’ll eventually receive over $265,000 in payments.

Robert’s annuity may have contract limitations, fees, and charges, including account and administrative fees, underlying investment management fees, mortality and expense fees, and charges for optional benefits. His annuity also may have surrender fees that would be highest if Robert takes out the money in the initial years of the annuity contact. Robert’s withdrawals and income payments are taxed as ordinary income. If he makes a withdrawal prior to age 59½, a 10% federal income tax penalty may apply (unless an exception applies).

tips-blackTIP:  Still Selling Strong.
In 2014, investors purchased $235.8 billion
in annuity contracts.
Most of this capital—$140.1 billion—
went into variable annuities.
Source: LIMRA, 2015

Two Phases

Deferred annuity contracts go through two distinct phases: accumulation and payout. During the accumulation phase, the account grows tax deferred. When it reaches the payout phase, it begins making regular payments to the contract owner — in this case annually.

Graphic-001-1.jpg

Your Takeaway:

Annuities work well in certain situations. If you would like to see if an annuity would be an appropriate investment vehicle for you, please call me and I’ll be glad to to discuss your options with you.

  1. Insured Retirement Institute, 2015; Investment Company Institute, 2015

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2015 FMG Suite.

Keys to Risk-Adjusted Portfolio Management

Keys to Risk-Adjusted Portfolio Management

By David Urovsky

Not every investor has the same tolerance for risk, which is why risk-adjusted portfolio management is so essential in today’s volatile market.

The risk-adjusted investment approach starts with a clear understanding of the client’s risk tolerance and investment goals. Investment recommendations are initially constructed to match the client’s unique risk level and then carefully monitored to help keep the portfolio on track toward meeting the client’s goals.

Monitoring portfolio risk level

Risk tolerance is often directly related to a person’s experience with investments. For example, somebody who experienced the tech crash of 2000 – 2002 or the financial crisis of 2008 – 2009 is going to have a different perspective on investments than somebody who is coming into the market for the first time or who only has a couple of years of experience.

Time horizon is also a factor in a client’s risk tolerance. For example, a 40-year-old saving for retirement can be more growth-oriented than somebody who is nearing retirement and is going to need their portfolio to provide income.

Takeaway: At the most fundamental level, risk-adjusted portfolio management requires continuous monitoring of the portfolio’s risk level in light of market conditions. In 2016, I don’t expect great growth in the economy. I will be looking for investments that pay dividends.

There are times to take risks and times to wait for better opportunities

Looking back to 2015, with savings accounts or money markets paying less than 1 percent, many investors reached for higher yielding investment vehicles such as high-yield bonds, master limited partnerships (MLPs) and real estate trusts (REITs). Unfortunately, these investors ended up losing a fair amount of principal. As a result, in this uncertain economic and growth environment, you have to be careful not to try to force getting higher rates of return. You have to almost take what the market is giving you. There are times to take risks, and there are times to keep the powder dry, so to speak, and wait for better opportunities.

Little movement in asset classes in 2015

Another key factor in risk-adjusted portfolio management is understanding the correlation between investment/asset classes. Every portfolio must include different asset classes so that they don’t all move up or down at the same time. For example, Treasury bonds have a low correlation with the stock market. At the same time, correlation of high yield bonds with the S&P 500 and other stock indexes is much closer.

As it turned out, 2015 was an unusual year in that asset allocation didn’t help very much. Asset allocation is a strategy focused on how to invest among broad asset classes. The purpose of asset allocation is to control risk by reducing volatility or relative fluctuations in a portfolio thereby optimizing total return (investment returns, dividends and income). Asset allocation won’t guarantee a profit or ensure that you won’t have a loss, but may help reduce volatility in your portfolio. At the same time, diversification cannot eliminate the risk of an investment loss.

In 2015, most asset classes lost value or gained very little. Does that mean asset allocation no longer works? Of course not. Asset allocation is geared to long term success, and just because it didn’t work last year is no reason to discard it altogether. Asset allocation succeeds when it is part of a consistent investment approach over a long term, as opposed to chasing what’s hot today.

Takeaway: What is the key takeaway when it comes to risk-adjusted portfolio management? There are many different types of risks that an advisor reviews when putting together an asset allocation and selecting investments for the client. After all, we are trying to make money for the client. In order to do that on a consistent basis, each portfolio must be customized to reflect the balance between risk and return that the client will accept.

An advisor’s definition of success

Ultimately, our goal is to get better rates of return than the level of risk we have taken. From an advisor’s standpoint, that is our definition of success. When it comes to the client, success is invariably defined by the degree to which their portfolio meets their financial goals.

Questions or comments? Send us an email at David.Urovsky@lfg.com.

David Urovsky is registered representative of Lincoln Financial Advisors Corp. Securities and investment advisory services offered through Lincoln Financial Advisors Corp., a broker/dealer, Member (SIPC) and registered investment advisor. Insurance offered through Lincoln affiliates and other fine companies. It is not our position to offer legal or tax advice. Wealth Advisors Group is not an affiliate of Lincoln Financial Advisors Corp.
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How Is Your Financial Fitness? Find Out With This 8-Point Checkup

By David Urovsky

Helping people achieve their financial goals starts with realistic and manageable planning.

In order to develop a sound financial plan, the financial advisor must determine not only the amount of wealth required to achieve your desired lifestyle but also study your entire financial situation. This includes an examination of the present or potential need for such financial tools as budgeting, tax reduction strategies, retirement planning, insurance, estate planning to avoid long-term tax issues and more. It is important to account for every aspect of your financial well-being.

A great way to start the planning process is with an 8-Point Financial Fitness Checkup, through which you and your financial advisor will come up with answers to the following key questions:

• Do you have a written, detailed and realistic monthly budget?

• How are you funding your emergency fund? How long will these funds last if you needed them to cover monthly expenses?

• How are you planning to guard against income losses from illness, disability or death?

• What tax saving strategies did you employ during the last year?

• How are you funding your retirement plan and when do you plan to retire?

• What are your goals for retirement (i.e., travel, major purchases, lifestyle changes, and so on).

• When did you last review the beneficiaries on your retirement accounts and insurance policies?

• When did you last update your will?

Following these conversations, your advisor can develop a customized plan that responds to your individual goals and gets you strategically positioned for financial health. Quarterly or semi-annual reviews in person and phone calls throughout the year will allow your advisor to respond to changes occurring in your life as well as changing market conditions.

It’s never too late to improve your financial fitness, so why not get started on your checkup today?

Coming next:  How children of baby boomers are playing an increasingly important role in financial planning for their aging parents.

David Urovsky is a registered representative of Lincoln Financial Advisors Corp. Securities and investment advisory services offered through Lincoln Financial Advisors Corp., a broker/dealer (member SIPC) and registered investment advisor. Insurance offered through Lincoln affiliates and other fine companies. Wealth Advisors Group is not an affiliate of Lincoln Financial Advisors Group. CRN-1358518-112015

Great News! Wealth Advisors Group Realigns Broker-Dealer Affiliation with Lincoln Financial Advisors

By David Urovsky

August 25, 2015 represents a major milestone for Wealth Advisors Group. On that date, we realigned our broker-dealer affiliation with Lincoln Financial Advisors (LFA), one of Lincoln Financial Network’s two broker-dealers. As a result, we now have access to Lincoln’s full U.S.-wide planning and technology capabilities.

We could not be more excited about the promise this new relationship with Lincoln Financial Advisors holds for our clients. Now we will be able to tap into all the capabilities and resources of Lincoln Financial Network so that we can serve clients even better and take our firm to the next level. This move will benefit everybody involved.

We’re delighted that we will be affiliated with LFA’s Greater Washington, D.C. Regional Planning Office, which will give our clients access to the full support that Lincoln offers to financial advisors and clients throughout the Greater D.C. marketplace. This includes a local planning department, local operations department and local technology team that provides the latest upgrades and updates in the financial services industry.

One of the most important benefits of our new alliance with Lincoln will be expanded access to research, analytics and financial planning resources.

We will be working closely with Stefan Lambert, managing principal of LFA’s Greater Washington, D.C. office. Here is what he had to say about our new affiliation: “We are delighted that David is bringing his 20+ years of experience in financial planning, investment management and wealth management to our Frederick marketplace. David and his team represent the core values that LFA advisors throughout the country embrace in assisting clients with financial matters, including comprehensive and holistic planning, as well as a risk-adjusted approach to investment management and wealth management.”

Reinforcing Lambert’s comment about risk, one of our hallmarks at Wealth Advisors Group is maintaining a strong emphasis on managing risk in a portfolio. Our number one goal is to obtain optimal returns with the least amount of risk. At the same time, we follow a fee-based approach that always puts the client’s best interests first, avoids conflicts of interest with the sale of investment products, and provides more transparency regarding what clients are being charged.

About Wealth Advisors Group

Wealth Advisors Group draws upon president David Urovsky’s 20+ years of experience in the financial services industry to provide comprehensive, holistic and risk-managed investment management and wealth management services to clients who are ready to retire or who have already retired. The firm is based in the heart of downtown Frederick, Md. David Urovsky is a registered representative of Lincoln Financial Advisors Corp., a broker/dealer (member SIPC) and registered investment advisor. Wealth Advisors Group is not an affiliate of Lincoln Financial Advisors. For more information, visit http://www.wealthadvisorsgrp.com.

About Lincoln Financial Network

Lincoln Financial Network is the marketing name for the retail sales and financial planning affiliates of Lincoln Financial Group and includes Lincoln Financial Advisors Corp. and Lincoln Financial Securities Corporation, both members of FINRA and SIPC. Consisting of approximately 8,500 representatives, agents and full-service financial planners throughout the United States, Lincoln Financial Network professionals can offer financial planning and advisory services, retirement services, life products, annuities, investments, and trust services to affluent individuals, business owners and families.

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Introducing a New Way to Raise Your Investment IQ

By David Urovsky

Investing the intelligent way. That’s what my new blog, David Urovsky’s Investment IQ, is all about.

For more than 20 years, I have been helping clients achieve their financial goals through comprehensive, holistic financial planning and wealth management. Through Wealth Advisors Group, the independent financial services firm I founded in 2002, I work primarily with people who are ready to retire or who have already retired.

The core values I developed over the past two decades set me apart from traditional financial planners. First and foremost, I strongly emphasize managing risk in a portfolio. My number one goal is to obtain optimal returns with the least amount of risk.

My team and I make it a point to know our clients and their objectives, while educating them about their options. Clients tell us that they appreciate our ability to explain the complexities of the financial world in ways that are meaningful, yet easy to understand.

Over time, we have watched our clients work toward achieving their financial goals through well-conceived planning and commitment. Our success is directly attributed to the close relationships we have fostered by playing an active role in the long-term success of our clients’ financial lives.

These values bring me to why I started this blog. Taking care of financial matters with confidence and optimism is a long journey, and I want this blog to be a starting point. My goal is to enlighten and empower those seeking advice about finances.

We will cover a lot of ground in this blog. We’ll deal with financial trends, market developments (both domestic and global), investment planning, tax reduction strategies and pressing public policy issues related to finance and investments. From time to time, we will go beyond financial nuts and bolts and address questions of lifestyle that pre- and post-retirees face.

Along the way, I will tap into the expanded research and financial information resources now available to us through our new broker-dealer affiliation with Lincoln Financial Advisors, one of Lincoln Financial Network’s two broker-dealers. More on that in our next post.

Stay tuned!

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