compasspoints

Compass Points Articles


The following articles were originally published in one of Estes Wealth Strategies’ two e-newsletters: Compass Points (formerly Wealth Manager) or From the Desk of John Estes, CFP.


When Pigs FlyLast month's presidential election outcome stunned most of us—regardless of whom you voted for—and called into question the reliability of political forecasting. In the days that have followed, we have also seen that the financial markets have not gone into free fall, as many predicted.

 

Stock markets declined in the hours immediately following the declaration of a winner, but the overall trajectory in subsequent weeks has been a positive one for equities. On the fixed income side, bond values have declined as interest rates have increased.

 

While the turn of events in our country—both political and financial—may feel like a "when pigs fly" moment, it does reinforce a point we try to make repeatedly in this newsletter: Trying to predict what markets will do in the future is not a prudent strategy for making investment decisions.


Anyone working with--or considering working witha financial advisor should ask this question: What is the value of a financial advisor? After all, you are hiring and paying someone to help you make life-impacting decisions about how to invest and manage your money. You expect, of course, to be better off for doing so.

 

The challenge, however, is how to quantify the value that a financial advisor delivers. Most people think immediately of the gain or loss that shows up on their investment statements. But does that figure really tell the whole story?


College Savings: Get to Know 529s

Compass Points June 08, 2016

College tuition is a big bill to plan for, and even the best savings strategy may leave you struggling to keep pace with the rising cost of higher education.

A 529 plan, however, is a different kind of savings plan—one that can not only grow with your child, but can help reduce your tax liability and benefit your overall estate as well. Here's a quick 529 primer that provides an overview of this savings vehicle and its benefits ...


As a financial advisor, I talk a lot with clients about their goals. It probably comes as no surprise that, more often than not, a client's goals are not just about him or her—but about family.

 

On any given day, for example, I might speak to ...

  • A parent planning how to pay for their child's future college education
  • An adult child handling finances for an aging parent
  • A grandparent helping to financially support a grandchild
  • A young couple juggling childcare with eldercare
  • A couple nearing retirement providing financial support to an adult child
  • Siblings settling the estate for a recently deceased parent

 

Rarely, it seems, do we make financial decisions that do not in some way touch or influence other family members across the generational spectrum. Although most people probably don't think about it when they hire a financial advisor, understanding these family relationships and their unique dynamics is an important and daily part of my job.

 

A financial advisor who knows and understands how your family works can be a valuable partner throughout all stages of life, during times of both stability and difficulty. Here are three examples of the different roles I can play to help ensure your family's financial life runs as smoothly as possible.


"Everybody's got plans ... until they get hit." - Mike Tyson

 

Feeling bruised by the stock market? You're not alone. Equity markets have dealt some stinging blows over the past several weeks, leaving investors limping back to their corners to regroup.

 

Frustration, stress, and even panic are natural reactions when market volatility gets the upper hand. In moments like these, the instinct of many nervous investors is to throw the towel in and pull out. But if you'll allow me a minute, here's my pep talk for shaking off the hurt and staying in the ring.


Gaze into your financial future and what do you see? For individuals planning for retirement, the picture is often a foggy one, clouded by "what ifs" and other uncertainties.

How can you plan for all of the exciting possibilities of your post-work years—while also factoring in unexpected events that could swing your retirement dreams off course? You hope for the best but plan for the worst. But doing so can be a tricky balancing act—a lesson many aging Americans are discovering when it may already be too late.


Last December, we gathered our passports and courage and, with three children under the age of ten, boarded an 18-hour flight to South Africa. It was our first major international travel with all three kids. The trip turned out to be fabulous in every respect, but we confess to feeling a fair amount of trepidation in the days leading up to departure. Typhoid shots and malaria pills aside, were we really ready for this adventure?

 

 

"Run Away!" Lion Attack!
 

Perhaps as an investor you've had similar feelings of trepidation when it comes to leaving the comfort zone of what you know. We hear this often when clients wrestle with the idea of international investing. "Oh, that seems so complicated," is a common reaction. Or "I don't want to take on that kind of risk."


Will Interest Rates (Finally) Pick Up Steam?

Compass Points September 22, 2014

If you have a savings account at a bank or have cash in a money market account, you've probably given up hope by now of ever earning more than 1.0%. On the flip side, if you are shopping for mortgages, you're probably feeling pretty good about the prospect of a 30-year loan at 4.25%.
 
For the past six years, such rock-bottom interest rates have become the new normal. It's hard to believe there was ever a time—like in 1982—when the prime interest rate (the rate banks charge to lend money to credit-worthy customers) spiked in 21% territory.

 

Fed Prime Rate Graph

Back in 1991, when I started my career in the financial industry, the prime rate had settled at around 8%—and seemed low by comparison. No one back then could have imagined we would have such a sustained period of rates in the low single digits.

Surely, this interest rate twilight zone can't last forever ... or can it?


Do you have questions about 529 Plans and how they work? Check out this list of frequently asked questions—or feel free to give me a call to discuss!


529 Day 2One of the best parts of my job as a financial advisor, hands down, is helping clients reach their financial goals. So, it's always very exciting to get a call from a client saying they are sending a child off to college and are ready to start taking distributions from their child's 529 College Savings Plan.

 

For families, this is the happy culmination of making regular contributions and seeing their savings grow (tax-free!) over time. Now, the real and most important investment can begin ... helping their child earn that college degree!

 

For me, it's further confirmation that 529 Plans are a valuable education savings vehicle and that, when actively funded and managed, they really work!


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