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Life Planning Partners, Inc.
Website
Carolyn's Blog:
"The Quest for Simplicity"
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If you received this Newsletter as a forward, you can sign up to get them yourself !!
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Carolyn McClanahan, M.D., CFP®
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Tim Utecht, CFA
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Carrie Jones, CFP®
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Krissy Di Candia
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Greetings,
Spring has been busy already! We all survived Tax Day and Carolyn celebrated her 50th birthday on a safari in Kenya (we are awaiting Trib's elephant and monkey pictures)! The Client Appreciation Party was a blast and we all enjoyed visiting with those of you who could make it. Thank you for welcoming me with open arms and hearts! I am excited to be working with an amazing team and wonderfully down-to-earth clients.
What's next for your planning? We are continuing to get each of you set up on our new software and hope to have everyone on by the end of June. We continue insurance planning and investment planning through this quarter. We are reviewing and updating life insurance, disability insurance, long term care, property and casualty coverage, and umbrella policies. For your investments, we are updating the Investment Policy Statement for your overall "big picture." Your Personal Financial Portal, our new software, goes a long way to helping with both of these - you can see any insurance revisions immediately and even change policies and premiums yourself; investments are updated and aggregated every night so you can see your overall asset mix at any time. And that's just the start of the value of the software. You'll love it.
As a reminder, LPP will be sponsoring the Financial Fitness 5K on September 13th, 2014. This event raises funds for United Way "Real$ense" campaign and Family Foundations, two groups that provide financial literacy education and counseling to those who would otherwise not have access to resources. LPP will pay the entry fee for all clients and their families who want to participate and run/walk with us. For more information contact Krissy.
Our offices will be closed for Memorial Day as we honor the brave men and women who died while serving our country. Then we get Hug Your Cat Day on June 4th (I'm guessing that's Carolyn's favorite), National Doughnut Day on June 6th, Father's Day on June 15th, Flip-Flop Day on June 20th and the longest day of the year - Summer Solstice on June 21st.
With summer around the corner, my mind turns to fun in the sun - sand and surf, slides and seesaws. Tim's article this month reminds us that balancing risk and reward is vitally important to your investments and your plan. Like the seesaw, getting off abruptly can be disastrous and coming down too hard on one side can unbalance the whole thing.
Hope you and yours enjoy your summer, whether its sand and surf or slides and seesaws! Thank you again for your openhearted acceptance and for giving us all a great job.
Best,
Carrie
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 A Balancing Act
by Tim Utecht, CFA
The Jacksonville pension system made headlines recently for having posted the highest return (+22.3%) of any state or "big city" pension fund for 2013. Jacksonville's Chief Financial Officer, Ronnie Belton, even made an appearance on CNBC to offer his account of how those big returns were accomplished.
Unfortunately, the explanation provided was rather unsettling. There was mention of a timing move toward stocks and multiple changes to investment managers over the past five years. Essentially, the story was "we were very smart."
It's interesting to contrast that message with comments from another pension system featured on the same program. Steve Edmundson, Chief Investment Officer of the Nevada Public Employees' Retirement System, oversees three pension funds that also appeared on the top 10 list for performance last year. Instead of attributing his returns to investment prowess, Mr. Edmundson gave a much simpler explanation: "Basically we have an overweight to S&P 500, relative to our peer group."
Edmundson merely acknowledged that they owned more stocks (i.e. took more risk) than most pension funds, and stocks did well last year. Simple as that. And Jacksonville's pension also happens to have a higher allocation to stocks than the typical pension. It wasn't investment acumen, it was risk taking. It paid off last year, but we know that risk is not always rewarded, and it can sometimes be punished severely. My guess is that Edmundson would also concede that a single year is not all that meaningful in regard to pension performance, and higher risk may not pay off over the next year or the next decade.
Interestingly, the Nevada pension system summarizes its investment strategy on its website as follows: "We emphasize a simple, low cost structure that relies primarily on asset allocation, rebalancing and index management." The website also highlights aspects such as global diversification and a long term focus. If that sounds a lot like the Life Planning Partners' approach, it should. Our clients don't have the same exceptionally long time horizon as a pension fund, so we help them select an asset allocation to meet their objectives without taking excess risk that can derail their plan. Then we use a diversified, low cost, passive approach with regular rebalancing to implement it.
All else being equal, higher returns are certainly better. But the problem with the pension story is that all else is not equal. Investment returns need to be examined in the context of risk. Taking more risk is only smart if you clearly understand the good and bad that go along with it. Looking at performance numbers without risk gives a very incomplete (and dangerous) picture.
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Scam Warning
Our IT consultant emailed us about a phishing (or SMiShing) scam making the rounds locally. "This particular scam is one where you will receive a text message that appears to be from your bank. It will ask you (aggressively) to contact the bank at some phone number provided in the text message, because 'Your account requires immediate attention!'. Considering it has become increasingly popular (probably because we asked for it) for the credit card companies and banks to send us 'account update' info via text message, this should seem normal for them to reach out to us this way."
What do you do it you get the text? DO NOT RESPOND. Do not call the number provided. Do not click the link given. Do not respond to the text at all. If you are unsure of the authenticity of the message, contact your bank directly using a number you know is legitimate. Your bank's fraud department may ask you to forward the message or a screenshot to them to help track the fraudulent sites and phone numbers. As always, do not give your personal information to anyone calling, texting, emailing, or otherwise contacting you.
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