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Jim Morgan His Next Try at Retirement
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Caring for an Aging Brain
PLUS Getting a Grip on Gifting How Solid is the Economy’s Foundation? Planning for a Special Needs Child Keeping Family History Alive
FALL 2015
“Give the world the best that you have, and the best will come back to you.” — Madeline Bridges from her poem “Life’s Mirror”
At CAPTRUST, we believe we have a profound responsibility to share our success with those less fortunate than us. One way we do that is through the activities of the CAPCommunity Foundation, our in-house, employee-run charitable foundation. Its mission is to enrich the lives of children in communities we serve. The foundation, a registered 501(c)(3) charity, was formally organized in 2007 to provide our employees with opportunities to participate as a group in community outreach efforts and to offer their time, passion, and financial support as a way to give back.
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Volume 1, Issue 3 | Fall 2015 PUBLISHER & EDITOR IN CHIEF
It has been a busy 2015 for us at CAPTRUST. We have welcomed numerous new clients and colleagues and supported dozens of organizations doing good work in our communities. We are also closing out the inaugural year of VESTED with this third issue of the year. The cover of our fall 2015 issue features Jim Morgan, this issue’s “hero” profiled in our Second Act column. Morgan, who retired from his role as president of Krispy Kreme this past January, tells the story of his transition, what got him started thinking about his legacy, and where he’s headed with his newly minted Second Act.
J. Fielding Miller Chief Executive Officer EDITORS John Curry Senior Director, Marketing
Eric Freedman Chief Investment Officer
EDITORIAL ADVISORY BOARD
CEO Fielding Miller updates employees on the latest corporate developments at CAPTRUST’s quarterly Synergy meeting.
This issue’s columns and feature articles explore a range of topics, including: • How to take care of your brain to stay sharp as you age, • Understanding the basics of gifting, a timely year-end planning topic, • Genealogy as a “treasure hunt” to learn more about your family, • Planning for what happens to your digital assets when you pass away, and • Preparing a special needs child for an independent adulthood. In this issue’s Money Talks column, wealth psychology expert Kathleen Burns Kingsbury offers her thoughts on how to raise children in a lifestyle rich in opportunity without spoiling them. She offers seven tips to put kids (or grandkids) on a path to become financially savvy and responsible adults.
And finally, CAPTRUST Chief Investment Officer Eric Freedman details his thinking on the capital markets in his latest installment of Investment Strategy. As always, our primary aim with VESTED is to provide you with timely, relevant, and actionable ideas and recommendations. Please help by sending your thoughts, reactions, and story ideas to us at VESTEDmagazine@ captrustadvisors.com. We hope you enjoy reading this issue. All the best,
Jeremy Altfeder Client Relationship Manager
Nick DeCenso Manager, Wealth Strategy
Lauren Bartholomew Senior Client Management Consultant
Karen Denise Senior Manager, Wealth Operations
Rush Benton Senior Director, Strategic Wealth
Mike Gray Senior Vice President, Financial Advisor
Hugh (Trae) Cole Financial Advisor
Land Hite Senior Vice President, Financial Advisor
Ellen Crowley Vice President, Financial Advisor
Mark Paccione Director, Investment Research
Teri Parker Vice President, Financial Advisor
ART DIRECTION & MARKETING Jessica Rose Art Director, Marketing Michael Galiano Associate, Marketing
Jennifer Mastrapasqua Manager, Marketing
Shaila Gupta Assistant, Marketing
Greg Middleton Director, Marketing
Jennifer Liebel Manager, Marketing
Colby Warren Manager, Marketing
WITH THE ASSISTANCE OF Azul Photography Raleigh, NC Classic Graphics Morrisville, NC
J. FIELDING MILLER CAPTRUST Chief Executive Officer
800.216.0645 | www.captrustadvisors.com 4208 Six Forks Road, Suite 1700 Raleigh, NC 27609
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rodney brooks
nick decenso
eric freedman
kathleen burns kingsbury
Rodney Brooks is a retirement columnist and author of the book Is One Million Dollars Enough?, a guide to retirement planning. His columns appear in the Washington Post and its personal finance website, Get There. He is the former deputy personal finance managing editor and columnist for USA TODAY. A native of Linden, NJ, he received a B.S. in communication arts from Cornell University. Rodney received an executive certificate in financial planning from Georgetown University in 2010.
Nick DeCenso joined CAPTRUST in 2014 as a wealth strategy manager responsible for assisting wealth management advisors with the implementation of advanced wealth planning concepts. Prior to joining CAPTRUST, Nick served as a client advisor at Crestone Capital Advisors and has worked in the industry since 2005. He earned a Bachelor of Science degree in economics with minors in international business and Spanish from Saint Louis University. He holds the designation of Certified Financial Planner (CFP®).
Eric Freedman is CAPTRUST’s chief investment officer and serves as a member of the firm’s executive and operating committees. He has an undergraduate economics degree from Colgate University and received a Master of Business Administration degree from the Wharton School of the University of Pennsylvania. Eric is chairman of the Diocese of Raleigh Investment Committee and serves on the boards of the Ronald McDonald House of Chapel Hill and Monday Life.
Kathleen Burns Kingsbury is a faculty member of the Certified Private Wealth Advisor® program offered by the Investment Management Consultants Association, an adjunct lecturer at Bentley University, a Certified Professional Co-Active Coach®, and founder of the KBK Wealth Connection. She is a wealth psychology expert and author of How to Give Financial Advice to Women and How to Give Financial Advice to Couples.
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Features
Columns
4 JIM MORGAN
His Next Try at Retirement by Constantine von Hoffman
15 GLEANINGS
35
MARKET REWIND
16 PASSION PURSUITS
36
MONEY TALKS
39
CLIENT CONVERSATIONS
42
CAPTRUST HAPPENINGS
Keeping Family History Alive by Susan Weiner
10 CARING FOR AN AGING BRAIN by Kim Painter
24 LASTING LEGACY
Planning for a Special Needs Child by Nick DeCenso
19 GETTING A GRIP ON GIFTING by Rodney Brooks
28 EXPERT ANGLE
30 CASTLES MADE OF SAND?
Seven Tips for Raising Financially Savvy & Responsible Children by Kathleen Burns Kingsbury
Managing Your Digital Legacy by Todd Stewart
by Eric Freedman
kim painter
todd stewart
constantine von hoffman
susan weiner
Kim Painter is a freelance writer specializing in health and lifestyle issues. She was a USA TODAY staffer for many years and has continued to contribute to the newspaper for many additional years as a reporter, columnist, and blogger. She lives in in McLean, VA, where she practices what she preaches: wearing sunscreen, eating broccoli, and getting at least 10,000 steps a day.
Todd Stewart is a board certified estate planning and probate law attorney in Charlotte, NC. Also licensed as a Certified Public Accountant, he concentrates his law practice in the areas of estate planning, estate and trust administration, and closely held business law. Todd earned his law degree from Wake Forest University in 1990.
Constantine von Hoffman is a business and financial writer. For the past 25 years, he has worked for CBS News, Inc. Magazine, and The Boston Herald, among other news outlets. His writing has appeared in many publications, including the Harvard Business Review, Sierra Magazine, and The Boston Globe.
Susan Weiner is a Chartered Financial Analyst®, journalist, and a writer and editor for leading investment and wealth management firms. Her work has been featured in Advisor Perspectives, The Boston Globe, Bottom Line Personal, CFA Magazine, Financial Planning, Louis Rukeyser’s Mutual Funds, Wealth Manager, and other national publications.
All publication rights reserved. None of the material in this publication may be reproduced in any form without the express written permission of CAPTRUST: 919.870.6822. ©2015 CAPTRUST Financial Advisors. The opinions expressed in this report are subject to change without notice. This material has been prepared or is distributed solely for informational purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. CAPTRUST does not render legal, accounting, or tax advice. If you require such advice, you should contact the appropriate legal, accounting, or tax advisor. The information and statistics in this report are from sources believed to be reliable but are not warranted by CAPTRUST Financial Advisors to be accurate or complete. Performance data depicts historical performance and is not meant to predict future results.
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His Next Try at Retirement by constantine von hoffman
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Having “failed” at his first retirement, Jim Morgan is doing everything he can to make sure he gets his second attempt right. “Somebody asked me what I’m doing with my time now,” says Morgan, who stepped down from his position as president of Krispy Kreme last February. “And I said, ‘You know, I really can’t tell you. But I can tell you this, it’s a good thing I retired, because I definitely do not have time for a full-time job.’”
The Second Second Act of
Jim Morgan Morgan’s first retirement was a failure only in the sense that he wound up working one of those full-time jobs. In every other sense it was a roaring success. Morgan enjoyed a remarkable career in financial services. In 1990, he took over the reins of Charlotte-based brokerage firm Interstate/ Johnson Lane and turned it around before selling it to Wachovia in 1999. That led to a stint as chairman and chief executive officer of Wachovia Securities, Inc. Following that, he served as chairman and chief investment officer of Covenant Capital and general partner of the Morgan Crossroads Fund. His first try at stepping away from the demands of the workplace ended in January of 2008, when his fellow Krispy Kreme board members asked him to become president and CEO. He had been on the board of directors of the iconic donut seller since 2000 and became chairman of the board in 2005. But in 2008, the company had fallen on hard times, a fall that had little or nothing to do with the oncoming great recession.
His first try at stepping away from the demands of the workplace ended in January of 2008, when his fellow Krispy Kreme board members asked him to become president and CEO. The firm had gone public in April of 2000 and, for the next few years, was a darling of Wall Street. A 2003 Fortune cover story named Krispy Kreme “America’s hottest brand” and its stock hit almost $50 a share. But that happened just as the low-carb Atkins diet craze swept through America. That, along with problems in the company, saw the stock fall to $1.08. Continued on page 6
5
“…during a very brief period of time I lost several childhood friends; all of them from different causes, but all of them friends from my hometown. That really got me thinking about, you know, what am I supposed to do with the remainder of
my time on earth?”
Continued from page 5
Morgan had a sense of responsibility to the company, not just because he felt he had fallen short as a director. “I felt like I had an obligation to the people, to the brand, to the company’s future, to be willing to give whatever I could give to be a part of it, and try to be a positive part of it,” he says. Even so, going back to the executive suite wasn’t an easy decision for Morgan. “I had originally told them I didn’t think that was what I was supposed to do with my life at that point, and I had to talk it over quite a bit with my wife, Peggy,” he says. “I don’t make decisions without her on that kind of event.” He also doesn’t make decisions like that without help looking for guidance from God. Faith is at the center of Morgan’s life, so making this decision involved a lot of prayer and meditation, asking “Where does God want to take me from here? What is it that He wants me to do with my life?” Finally, he came to the conclusion that going back to work was the right thing to do. Helping that decision was the fact that, as he saw it, there was nowhere for the company
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to go but up: “The other thing was that the stock was about a dollar and something a share, and I said, you know, I probably couldn’t harm it too much from there.” Far from harming Krispy Kreme, Morgan oversaw a remarkable turnaround. By the time he retired from day-to-day operations last January (he remains chairman of the board), the company’s stock was back above $20 a share. Morgan started thinking about the leavingthe-job part of retirement two years before he stepped down. “It was really clear to me that I needed to start thinking about winding down for two reasons,” he says. “One, during a very brief period of time I lost several childhood friends; all of them from different causes, but all of them friends from my hometown. That really got me thinking about, you know, what am I supposed to do with the remainder of my time on earth?” The second thing was his professional life at Krispy Kreme. The company was once again thriving, but he knew there was more work to be done if it was going to continue to grow. Morgan knew he wasn’t— and didn’t
want to become—the person to take the company to the next stage. His deep conviction that it was time to step away from his job made searching for his successor a very exciting project. That project kept him from thinking too much about what he would do after finding his replacement, who turned out to be then-president of Papa John’s Anthony Thompson. “I will be honest, until I turned over the reins, until Tony Thompson got there and we worked together for a number of months, I really did not give as much thought to what was next, as you would probably think I would have, and maybe I should have,” he says. In order to make up for that and give himself more time to think things over, Morgan decided to take a year off. A great idea, but what does that mean when you’re already retired? Morgan says it means saying no to anything that is a deep, regularly scheduled commitment. He is quick to point out this doesn’t mean saying no to a friend in need or to a volunteer activity, but anything that requires him to fill up his calendar on a recurring basis. Continued on page 8
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Continued from page 7
“I’ve really been using this calendar year as a time to try to answer questions about what I will do with my time,” he says. Simply leaving his calendar clear answered some of that question: “I can be responsive to peoples’ needs without worrying, ‘Oh my gosh, I’ve got a meeting.’” The top of that list of people includes his children and grandchildren. He wants to make up for time he missed because of his work life. Next comes old friends and the young couples he meets teaching a Sunday school class at his church, something he has been doing for 15 years. “I do a lot of one-on-one get-togethers, you know, having a cup of coffee or a
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Coca-Cola. And just getting to know each other and seeing what, if anything, I can share that might be beneficial to them, from my life.” The one thing Morgan says he thinks about now that he really hadn’t thought about before retirement is his legacy. “If I left this earth today, what would be my epitaph? What would people that know me say is the one sentence that should be on my marker? And how would they describe me in one word, in one sentence? I don’t know the answer to that.” Morgan sees retirement, in part, as a time to work on his legacy; not the legacy of worldly accomplishment, but the spiritual legacy of whom we were and how we
“Retirement is sort of the bend in the road. It’s taking a turn in a little bit of a different direction. But, in my opinion, it can be the most exciting turn, the most exciting direction, and the most exciting destination. And you know, there’s an old saying, and you’ve probably heard it, but I love it. It’s ‘a bend in the road does not have to be the end of the road, unless you fail to make the turn.’”
treated people. This is an exciting prospect for him. He says anyone who is retired or is thinking about retiring and isn’t genuinely excited about it really doesn’t grasp what this time can be. He sees it as a chance to build another stage of life, with greater freedom and greater flexibility. “Retirement is sort of the bend in the road,” he says. “It’s taking a turn in a little bit of a different direction. But, in my opinion, it can be the most exciting turn, the most exciting direction, and the most exciting destination. And you know, there’s an old saying, and you’ve probably heard it, but I love it. It’s ‘a bend in the road does not have to be the end of the road, unless you fail to make the turn.’” Or unless you find yourself back at work.
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Caring for an Aging
by kim painter
Hearts do it, knees do it, and even faces do it. Every part of our bodies is subject to aging. So why should our brains be any different? They’re not.
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But the good news is that—contrary to the worst fears of aging baby boomers—brain aging is not synonymous with dementia. Most of us who reach our 60s, 70s, 80s, and beyond will do it without developing Alzheimer’s or other forms of severe cognitive impairment. We might misplace our keys, forget the names of new friends, and find multitasking increasingly challenging, but we are not universally bound for mental oblivion. “When we talk about brain aging, we are not talking about a disease, we are talking about a process that goes on with everyone as they get older,” says Dan Blazer, an emeritus professor of psychiatry at Duke University Medical Center in Durham, NC. And not everything about that process is negative. Older brains really do tend to be wiser brains, thanks to a lifetime of experience and learning. That was one positive conclusion of a recent authoritative report on brain aging from the Institute of Medicine (IOM), part of the nonprofit National Academies of Sciences, Engineering and Medicine, based in Washington, DC. Blazer, who chaired the committee behind the report, said research also shows that vocabulary and factual knowledge increase well past typical retirement ages.
Still, most of us are worried about the not-so-positive side of brain aging, including the possibility that declines in memory, attention, thinking speed, and other cognitive abilities will eventually stop us from doing the things we want to do—from continuing to work to driving our own car and managing our own finances. In a recent survey by AARP, 93 percent of respondents said that protecting their brain health was very or extremely important. But few said they knew how to do it. Luckily, research is producing some answers. “Brain aging need not be viewed as a passive process. We can influence the trajectory,” says Ronald Petersen, director of the Mayo Clinic Alzheimer’s Disease Research Center and the Mayo Clinic Study of Aging in Rochester, MN. Here’s the best advice right now on how to keep those brain cells humming along. (Spoiler alert: staying sharp is going to take a lot more than a few brain games—and it won’t come in a pill.) Continued on page 12
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GET MOVING “News flash—your brain is connected at your neck to the rest of your body,” says Dan Hurley, author of the 2014 book Smarter: The New Science of Building Brain Power. Hurley, 57, a journalist based in Montclair, NJ, spent several months investigating and trying out brain-building techniques. Physical exercise “is the best established” of those techniques, he says. The evidence was convincing enough, he says, to get him off his couch and into his wife’s intense boot camp exercise class—for four sweaty months, anyway.
The IOM committee was just as enthusiastic about exercise, naming it the first defense against brain aging. “There have been studies on exercise and cognition in humans for decades. Not every study finds a positive relationship, but most do,” says committee member Arthur Kramer, a psychologist and neuroscientist who directs the Beckman Institute for Advanced Science & Technology at the University of Illinois. Early studies, back in the 1970s, showed that athletes, on average, did better than non-athletes on cognitive tests as they aged. Other studies show people who remain physically active in middle age and beyond tend to stay sharper. And intervention studies, in which some older adults are assigned to exercise and others are not, have shown particularly impressive gains in executive functioning—the ability to plan, organize and problem-solve—among exercisers. Kramer and other researchers also have found increases in brain volume. While the best evidence points to the benefits of aerobic exercise (such as walking, running, and biking), some studies also suggest that working out with weights can help. Why would exercise help your brain? One likely reason is that movement improves blood flow to the brain. “But it’s not just about blood flow,” Kramer says. Animal studies suggest that exercise increases the production of certain brain chemicals and improves connections between brain cells, he says. “In some cases, in some places in the brain, even new neurons can be born,” he says. Think about that the next time you think about skipping the gym.
MIND YOUR HEART HEALTH “What is good for the heart is good for the brain,” Petersen says. While that includes exercise, it also includes knowing your blood pressure, blood sugar, and cholesterol levels and taking action if your numbers drift out of the healthy zone. Obesity also may contribute to cognitive decline, just as it contributes to heart disease and diabetes, the IOM report said. While it’s not clear why some of these conditions might impair brain health—or whether controlling them with medications and lifestyle changes will directly help your brain—it is clear that they contribute to the risk of stroke. And if you value your brain health, you don’t want to have a stroke. One study found dementia in 26 percent of older people evaluated three months after a stroke; another found that a single stroke doubled the risk of dementia.
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STAY MENTALLY ENGAGED Use it or lose it? Perhaps. There’s plenty of evidence that people who stay mentally active through stimulating work, reading, hobbies, or other means also stay sharper. It’s a little less clear whether that ongoing stimulation makes the difference or whether people with such habits are benefiting from a lifetime of learning and accompanying socioeconomic advantages.
But the big debate is whether formal brain training through games designed to exercise the mind can make a difference. Hurley, for one, is a believer. During the same four months he sweated through physical boot camp, he enrolled in Luminosity, the popular online brain-training program. Many of the games in the program are based on games that produce cognitive benefits in lab studies. “They just dress it up … and make it more fun,” he says. The longer he played, the better he got at the games, and he’s convinced that, along with the other methods he tried, they helped make him a bit sharper. Many scientists are unconvinced. The IOM committee concluded that studies of brain training, while tantalizing, have not been large or rigorous enough to prove the games do more than create better game players. “There’s no question that if you work at these games you will get better at the games themselves,” Blazer says. “But remembering faces in a game does not mean you will remember faces better in real life.”
The longer he played, the better he got at the games, and he’s convinced that, along with the other methods he tried, they helped make him a bit sharper.
STAY SOCIALLY ENGAGED People who spend time with other people maintain better brain power. “We certainly want to avoid the tendency to withdraw and stay home watching TV when we could be going to a church social, going to a movie with friends, or playing bridge,” Petersen says. Whether it’s the socializing or the other mental stimulation in those activities that makes the difference is almost beside the point, he says. Social withdrawal may lead to cognitive decline, and cognitive decline may lead to more social withdrawal, feeding a downward cycle, the IOM report said. Continued on page 14
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Continued from page 13
GET ENOUGH SLEEP How much sleep do you need? Studies suggest a sweet spot of about seven to eight hours a night. People who routinely get less or more than that tend to have more cognitive problems. And quality matters: disturbed sleep and insomnia—trouble falling or staying asleep—are associated with poorer cognitive function. Of particular concern is sleep apnea, a common condition in which people stop breathing many times a night. Treatment for sleep apnea can lead to increases in attention, memory, and other thinking skills, several small studies suggest.
KEEP YOUR DOCTOR IN THE LOOP It pays to keep a pro on your brain-protection team. For starters, you should make sure your doctor knows about all the medications you take, including over-the-counter products. Many medications, including sleeping pills, sedatives, and even common antihistamines, can impair thinking. Your doctor also can help protect your brain by keeping you out of operating rooms and hospitals as much as possible. For reasons not fully understood, many older people suffer bouts of delirium and subsequent cognitive decline after hospitalization or surgery.
Finally, your doctor—perhaps more than your family or friends—may be willing to tell you when cognitive changes mean it’s time to make some lifestyle adjustments. Blazer recalls treating a quite elderly man who did not have dementia, but had many signs of cognitive aging, including reduced reaction times. Blazer happened to know the neighborhood where the man lived and realized the patient was making a left turn onto a four-lane street to get to his office. Blazer did not think the man needed to stop driving, but he did think he should stop making that left turn and told him so. “I suggested he make a right turn and then a U-turn,” Blazer said. “He started doing that, and I felt much better.”
FORGET ABOUT SUPPLEMENTS OR SMART PILLS Despite many studies, there’s no convincing evidence that any vitamin or other supplement, including vitamin E and fish oil pills, will protect or improve your memory, the IOM committee concluded. More promising, but still inconclusive, according to the report, is evidence that eating diets with lots of fish, plus nuts, olive oil, legumes, and whole grains will help maintain brain health. And, sorry folks, science has yet to come up with a drug that makes you smarter. “People like to think they can solve these things by popping a pill,” Hurley says. “But they can’t.”
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MEMORY IMPAIRMENT BY AGE While we all lose memory skills as we age, for most of us, the changes are mild and manageable well into old age. Even at 85, most people do not have the moderate to severe declines in memory associated with Alzheimer’s and other forms of dementia. Proportions of people with moderate to severe memory impairment vs. mild or no impairment at each age, by gender:
Age 65–69
MALE
FEMALE 8% 3%
92%
97%
KEY DIFFERENCES Cognitive aging is not the same as Alzheimer’s disease. Here are the key differences, according to the Institute of Medicine: ALZHEIMER’S DISEASE
COGNITIVE AGING
• Chronic neurodegenerative disease
• Normal part of aging
• Extensive neuron (brain cell) loss
• Neuron number remains relatively stable,
• Affects approximately 10 percent of older Americans
Age 70–74
• Declines are often severe
11%
and progressive
6%
but neuron function may decline • Occurs in everyone, although the extent and nature of changes vary widely • Changes are gradual
94%
89%
17%
11%
83%
89%
22%
compassion,
generally means getting wiser.
and altruism.”
a geriatric psychiatrist at the University of California, San Diego, has worked with
Decisiveness in the face of uncertainty. “A wise person accepts the limits of knowledge.”
widely used definitions include these key attributes, he says: Greater general knowledge of life. If older people haven’t seen it all, they’ve certainly seen a lot.
34%
31%
Emotional stability, “the exact opposite of what we see in teenagers.”
66%
69%
“knowing oneself.”
come up with a definition of wisdom. 1970s, the group has found that the most
83%
Insight, especially
colleagues over the past several years to Drawing on studies published since the
17%
78% Age 85 and older
Experts in brain aging agree: Getting older
But what do they mean by that? Dilip Jeste,
Age 80–84
Age 75–79
THE LATEST WISDOM ON WISDOM
In general, Jeste says, older people are also happier, more tolerant, and more able to take life’s ups and downs in stride. “Some people look at the aging of the population as a disaster, a ‘silver tsunami,’” he says. “But I see it as a golden wave of wiser, healthier, happier older people who can help the younger generation.” Not everyone achieves wisdom, of course.
“Prosocial” attitudes and behaviors. “These
But, Jeste says, “There’s always potential
are the things we do for other people,
for growth.”
Mild to no memory decline Moderate to severe memory decline Source: Institute of Medicine, “Cognitive Aging: Process in Understanding and Opportunities for Action,” 2015.
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KEEPING FAMILY
HISTORY ALIVE
by susan b. weiner
When William Zartman’s grandchildren, Matthew and Grace, were baptized in 2009 and 2015 in a Pennsylvania Dutch church his family helped to build in 1806, two of Grace’s cousins served as godmothers. The family might not have known of the church—or the cousins—without the research carried out by Zartman, professor emeritus at the Paul H. Nitze School of Advanced International Studies at Johns Hopkins University and an active member of the Zartman Association of America.
If Ancestry.com’s subscriber base is any sign, a lot of people take an interest in their family histories and the challenge of researching their family trees. The online resource has more than two million paid members and maintains more than 70 million family trees, although some of them overlap, according to Jennifer Utley, the company’s senior manager of research. Motives vary. “People want to know who they are and where they came from,” says Utley. People often start when there is some sort of family touch point. It could be a retirement, losing a family member, or something as simple as struggling to fill out a family tree in a baby book, as happened to Utley’s mentor. Zartman says, “I’m part of my family’s history and a social scientist, so I wanted to learn more.” He continued a history of family research that
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started with earlier generations. “I wanted to find out where my roots were and how far back they go.” A desire to leave a legacy for their descendants motivates some genealogy researchers. Mike Blair, a senior vice president and financial advisor at CAPTRUST, says that many of his clients “fear that if they leave their children a lot of money, they won’t be good stewards of it.” He suggests that a family history might give them a hook to inspire their children. “In my family, we may have had horse thieves and drunks, but you want to highlight the positives for grandchildren,” he says. He’s impressed by the stories of his hard-working, humble ancestors who farmed in North Carolina following their receipt of a land grant in the 1760s. “They could have sold the land and lived better themselves, but they didn’t.” The family farm lasted for some 200 years before it was sold off.
“Family history is like a treasure hunt. You never know what you’ll find.” Jennifer Utley
Ancestry.com Senior Manager of Research
Nonfinancial values could also be a driver, as Utley found doing research for Who Do You Think You Are, a genealogy show on the TLC television network. For example, actress Zooey Deschanel learned about her Quaker ancestors’ participation in the Underground Railroad when she appeared on the show. The program has shown Utley how stories of heartache and tragedy touch people and how their ancestors persevered and moved on. Such stories may help to make your family more resilient. How can you research your family history? Start with what you know and have at hand. Blair’s research began when, after his father’s passing, he found a wooden box with pictures, deeds, and receipts, some of which were 250 years old. He then did research at this local public library, picked up books, and did online research. Zartman had a head start on his research. One of his ancestors, Rufus Zartman, had published a family history covering the years 1692 to 1942. But there was still more work for family members to do. Zartman’s father used to call other Zartmans he found in phone books when he traveled. Today, as long ago, it’s still important to collect information from family members as part of your research.
Utley recommends that you start with yourself and work backwards, rather than leaping back to try to prove your family legends.
Utley recommends that you start with yourself and work backwards, rather than leaping back to try to prove your family legends. Create a family tree with the information you have. Then call mom, dad, or another relative who acts as the family historian to fill in the holes, she says. Once you exhaust your family resources, there are plenty of resources online. “Family history is like a treasure hunt. You never know what you’ll find. But today it’s faster, easier, and cheaper than ever before,” says Utley. For example, Ancestry has 16 billion digitized records. Other resources include national and local genealogy organizations, some of which focus on specific ethnic groups requiring different research techniques. Utley also recommends doing research to uncover family stories—not just a family tree. “People respond better to a story about a grandmother who had eight children and outlived six of them” than to a list Continued on page 18
Proud moment between William Zartman and his wife, Marie Daniele, after a student of his received his doctorate from Leiden University in the Netherlands. Zartman served as an advisor on the student’s dissertation committee.
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Two generations of Zartmans. William’s daughter Susan, son Alexander (a family name), and grandson Matthew at the beach. Susan and Alexander were baptized at Emanuel Evangelical Lutheran Church in Brickerville, PA, built by the Zartman family. Captioned photos provided by William Zartman
Useful Resources Start with the Vitals Until the twentieth century, most vital documents, like registers, birth certificates, death certificates, marriage certificates, and adoption records were recorded at the state or county level by local churches and religious organizations. With the popularity of the Internet, a lot of emphasis has been placed on publishing many of these records online, through resources like those that follow.
National Archives Continued from page 17
of names and dates, says Utley. Newspapers, census, tax, and court records in the area where your ancestors lived may provide more detail and yield such stories. A more recent innovation is the use of the genetic information in DNA to research genealogy. The DNA test offered by Ancestry will give you an ethnicity estimate, showing your likely regional origins in a pie chart. It also provides a list of cousin matches from its database and identifies other family trees that may include your relatives—all based upon a DNA test. “Most of our respondents have at least a fourth cousin match or better,” says Utley. Connecting with other family members can help uncover new information and create new relationships. “Nowadays, a website is essential,” says Zartman. “People write in to it all the time asking ‘How can I find my ancestors?’” Family reunions can bring a family tree to life and build face-to-face relationships. The Zartman Association of America holds an annual two-day reunion in Brickerville, PA. Saturday features tours of local highlights to familiarize participants with their Pennsylvania Dutch roots. On Sunday, everyone goes to church, and then they picnic on the church grounds. There are smaller, less frequent Zartman reunions elsewhere around the country. Over the years, his family’s paths in the United States have inspired Zartman, including the story of a Zartman in the White House, as a lawyer to a president. The diversity of their roles shows him that a Zartman can be anything. “It’s a challenge to ambition, creativity, and making a good life,” he says. 18
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www.archives.gov In the National Archives, even novice genealogical researchers can find records on their families through: • Census records • Military records • Immigration records (ship passenger lists) • Naturalization records • Land records • Court records
ProQuest www.proquest.com ProQuest’s subscription-based content collection encompasses 90,000 authoritative sources, six billion digital pages and spans six centuries. Many local libraries have ProQuest subscriptions that you can access with a library membership.
Ancestry.com™ www.ancestry.com Ancestry.com is a subscription-based online database that helps people researching their family histories, or as they put it “discovering who and what led to you.” The company also owns other resources including: • AncestryDNA • AncestryProGenealogists • Family Tree Maker • Fold3 (military records) • www.newspapers.com (newspaper articles and clippings)
GETTING A GRIP ON
GIFTING by rodney brooks
Manhattan estate planning attorney Anne-Margaret Carrozza has a cautionary tale of gifting to children gone wrong. One she says is “seared onto my brain.” A client, a retired judge who was very close to his daughter, gifted his home to her, and put it in her name. They lived together with her husband and child. But something totally unexpected happened. The daughter, who was only in her 30s, died prematurely. And because she died so young, she didn’t have a will. “Half of her assets went to her husband and half to her four-year-old son,” Carrozza says. “Because she didn’t have a will, the father was out of luck. The son-in-law suggested that he make other arrangements. He was to blame for putting himself in that position.” Continued on page 20
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Continued from page 19
“In my practice as an estate planning attorney, I see a lot of clients ill-advisedly making gifts to adult children,” says Carrozza, a frequent contributor to TV news shows on estate planning and elder law issues and a former New York state assemblywoman. “Sometimes they are trying to help a child get a mortgage or divest assets in a long-term care situation.” One of the biggest problems is that people are confused. Which is a good reason to get the professionals involved. “I see people confused by some of the basic rules,” says Mike Gray, senior vice president and CAPTRUST financial advisor in Raleigh, NC. “I don’t think people are completely clear on the annual gift tax exclusion and how it works.” Michael Dalton, who has a doctorate, a law degree, and is also a certified public accountant and a principal in financial planning textbook publisher Money Education in New Orleans, agrees. “The public doesn’t know the rules, so they don’t follow rules,” he says. “If it requires a federal gift tax return, they don’t follow the rules. Mostly, gifting is way under-reported because the public doesn’t know. They also don’t know that a gift to a person is not income.” Any discussion of gifting to children and other relatives has to start with the basics: the annual gift exclusion and the estate tax.
The Annual Gift Tax Exclusion Basically, Congress (and the Internal Revenue Service) does not allow people to give away assets and property with tax consequences. The annual gift tax exclusion is the amount that can be given away tax free to as many people as you like during the tax year. This year the annual gift tax exclusion is $14,000 per donor. “If I’m married, I can give that much to my children or grandchildren without any tax effect.” Gray says. “My spouse can do the same.” (For a total of $28,000 per donee per couple.) “It can be powerful if done regularly,” he says. “If you have a combination of 10 children and grandchildren, you’re talking $280,000 a year. That’s pretty powerful when you have a reasonable amount of donees and it is done with regularity.” “If you are an individual who will have an estate subject to tax, you have removed some assets from taxation,” Gray says. “If you were going to be in the 40 percent tax bracket, you just removed $280,000 taxed at that rate. And all the growth on the gifts has escaped estate taxes as well.”
“It can be powerful if done regularly. If you have a combination of 10 children and grandchildren, you’re talking $280,000 a year. That’s pretty powerful when you have a reasonable amount of donees and it is done with regularity.”
“Gifting is the doorway to estate transfers,” says Dalton. “I get wealthy enough so that I have excess money. The first thing I do is buy my 16-year-old daughter a new car. Is that a gift or is that legal support? If it is legal support, it doesn’t count. I can give her $14,000 too. If my daughter is 40 and I buy her a car, it is a gift.”
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Mike Gray
CAPTRUST Senior Vice President, Financial Advisor
The Estate Tax Simply put, the estate tax is a tax on property transferred to your heirs. The amount an individual can leave to heirs without estate taxes, the exemption, increased to $5.43 million this year. “You have to be north of $11 million (in assets) to be subject to estate taxes,” Gray says. For financial planners, it seems that most people are confused by gifting and its consequences—taxes or otherwise. But, you must make sure you do it correctly. Otherwise, it can backfire.
TIPS FROM FINANCIAL PLANNERS AND ESTATE ATTORNEYS:
1
Do the math. The first tip, says Gray, is do the calculations. Be sure that you have the money to gift before you make the donation.
“The last thing you want to do is give money away that affects your own lifetime livelihood,” says Gray. “It is foolish to give money away and 10 years later say, ‘I’m broke, give me some of it back.’” “There has to be some foresight,” he says. “We suggest people in retirement do forward-looking calculations, an educated guess as to how well assets and income sources meet your needs. If there is an excess, you should be thinking about things for kids and grandkids. You also have the non-financial benefit—the warm and fuzzy feeling of getting to see your money make someone happy.”
3
Don’t gift a house to children.
“The single biggest mistake is when parents gift their house or any real estate directly to children,” Carrozza says. “Even if the children are the nicest people in America, they can’t prevent their own legal liabilities from making a claim on the house.” “If I gift a house to my children, if one was divorced, it will be a new claim on the house,” she adds. “I lose a tax exemption and I’m giving the kids a capital gains problem. If I bought the house for $50,000 and it’s now worth $450,000, even if they are nice and let me live there, they will get banged in the head.”
2
Make sure it’s appreciated.
Don’t give someone an asset that you can sell for a loss, says Gray. “You’d be better off taking the loss yourself and giving them the cash from the sale. The donee will have no ability to get the loss. Conversely, it’s a good idea to give an asset that has a lot of appreciation to someone who might be in a lower tax bracket, he says. “If you have a share of Coca-Cola you’ve had for a long time, you might give that to a grandchild and let them sell it.”
4
Consider a trust. Don’t give direct gifts to children, advises Carrozza. “You should consider a properly crafted trust.”
“There are a lot of really mature 25-year-olds and a lot of 25-year-olds who should not have a lot of money in their hands,” says Gray. There was a lot of media coverage earlier this year about a college student who blew through the $90,000 college fund set up by her grandparents on trips to Europe and clothes. The student said she had no money left to pay tuition for her senior year of college, and called into a talk radio show to blame her parents for not teaching her better and for refusing to pay her tuition. Her parents eventually agreed to co-sign a loan—only if she got a part-time job.
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The Case for Trusts Carrozza says there are many reasons she prefers trusts. “When I have three children, the chances are better than 50 percent that one of them has problems, be it disability, divorce, or something else, a factor that can make them unable to manage money,” she says. “I may want to use a trust for money management.” “But it is important that anyone setting up a trust retain certain powers,” Carrozza says. “The trust should always allow the parent to remove and replace the trustee. It should also provide that the beneficiary can be changed. I want the ability to put my hand back into the trust and change the beneficiaries.”
the donor the ability to assess the maturity of a donee’s behavior.” “When leaving money to children you never know what will happen,” says Dalton. “There’s always a risk. Most gifts to minors should be in a trust. That’s my opinion.” High on the list of mistakes from both Crowley and Gray is one that people make often, they say. “If a grandparent, aunt, or uncle pays tuition for children, it is not considered a gift if it is paid directly to the institution,” Crowley says. “If they give it to the child or parents, it is subject to the guidelines—a maximum of $14,000,” she says. “A lot of people will put it into a custodial account or give it to the parent.”
“You can’t ask for it back later,” says Ellen Crowley, vice president and financial advisor with CAPTRUST in Raleigh, NC. “I have seen It’s the same for medical expenses. people gifting and so upset with the way money was handled that they asked for it back. But because it was a gift, it’s gone. You have no control over what the re“When leaving money to children you never know cipient does with it. That becomes a problem in some what will happen. There’s always a risk. Most gifts to family dynamics.” “If you put your home into a trust, you must make sure you put in writing that you have all legal lifetime ownership rights,” Carrozza says. “Now, no one can get mad at me and throw me out of my house.”
minors should be in a trust. That’s my opinion.”
Dalton says one of the biggest mistakes people make is to give up control over something they did not want or mean to give up control of. “With the exception of a 529 plan, there are no strings attached,” he says. “You can’t make a recoverable gift.” “If I give the kids the house and expect them to take care of it, and they don’t, because gifts are irrevocable, there is not anything I can do but complain,” he says. “A trust can be written so that it benefits children or grandchildren, but the trustee has control over the distribution of the assets,” says Gray. “Parents or grandparents make disbursements for college and beyond college, and still decide how and what is distributed. It affords
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Michael Dalton, CFP® Money Education
“If a family member has a lot of medical expenses they cannot handle, if you pay the provider, it is not considered a gift. It is a way to help out a family member and relieve them of a burden.”
The Beauty of the 529 Plan Planners generally like 529 plans. It’s like an individual retirement account aimed at education needs, Gray explains. “If you create one of those for a grandchild, the money put in there is considered to be a gift, and the annual exclusion rules apply.” “I really like the 529,” says Carrozza. “Unlike an informal bank account in a child’s name, the money in a child’s name doesn’t count
against the child, dollar for dollar, when figured into financial aid. Parents and grandparents can use it as a vehicle to make gifts of $14,000 per person per year. If parents or grandparents need money, they can take it out without a problem. Often, the mental negative is ‘What if I need that money in the future?’ With a 529 plan you can get it out freely.” There is a rule that allows someone to catch up on education funding rapidly, Gray says. In effect, you are allowed to act like that deposit was made over five years. For example, he says, take grandparents with a 13-year-old grandchild who has nothing set aside for education. The grandparents can each put in $14,000 times five—or a $140,000 deposit in one fell swoop. “The IRS lets you deem that gift as if it were made over five years.”
Gifting an Interest in a Business Dalton says the best plan for an entrepreneur who owns an interest in a business is to make the bequest after the business is up and running, but before it is poised to take off three or four years down the road. “I can see it is likely to be successful and I own 100 percent,” he says. “Since the value is low, I can give up to 49 percent to a child or grandchild. You use the annual exclusion and file a gift tax return. Three or four years later when you sell the business for millions, the child would receive it in trust and there is no transfer tax.” “Think of a person who created a tech startup,” Dalton says. “If he is paying attention, there is a perfect time to make gifts. It’s not when he wakes up and realizes his business is worth $10 million. The time to make gifts is when the value is very low and he can see it will be a lot more in a short period of time.” The key to gifting, all the experts say, is to get it right. Most times you can’t go back and fix it. And getting it right, most of the time, involves the use of professionals. The result is fewer issues, fewer problems, and a happier family.
Family Time One business owner, who asked not to be named, says he loves to see his children in his home on New Year’s Eve. So, every two years, on New Year’s Eve, he makes a $14,000 gift to each of his children. And then, one minute after midnight, makes a second $14,000 gift. “My kids never miss New Year’s Eve every other year at my house,” he says.
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PLANNING FOR A CHILD WITH
SPECIAL NEEDS by nick decenso
John Kirkland Jr., 26, has a full, rich life. He works at Park Sterling Bank in Charlotte, NC, exercises regularly, and has a close relationship with his parents. Like many 20-somethings, he lives with his parents. But in his case, that’s because John has Down syndrome and needs his family’s support. His parents, Chris and John Kirkland, have made sure they have the necessary documents and assets in place to provide for their son’s financial, medical, and social well-being when they’re no longer able to do so. Their thoughtful preparations have helped ensure that their son will be well cared for throughout his life. Families with children who have special needs face unique challenges. Planning may start with visiting a financial advisor. “I talk with families about their goals.” says Land Hite, a senior vice president and financial advisor at CAPTRUST. “My job is to make them think, help them plan, and put them in touch with people to help.” When a family has a child with special needs, they’re concerned about making plans for how the child will be cared for once the parents can’t. Chris says she and her husband created a special needs trust to make resources available to John Jr. after they’re gone while leaving him eligible for Social Security and Medicaid. “It’s not a lot, but it allows him to work and remain eligible.” She adds, “We also wanted his siblings to have resources for helping him.” Chris Kirkland and her son, John Kirkland Jr.
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“I talk with families about their goals. My job is to make them think, help them plan, and put them in touch with people to help.” Land Hite, CFP® CAPTRUST Senior Vice President, Financial Advisor
A special needs trust enables a child to maintain eligibility for Supplemental Security Income (SSI) and, more importantly, Medicaid, says Larry Rocamora of the law firm of McPherson, Rocamora, Nicholson & Nordgren in Durham, NC. That means the child will have access to free health care, although the implementation of the Affordable Care Act has opened up other insurance options for those who can afford to pay for it. To qualify for public benefits like SSI or Medicaid, the child must be unable to engage in substantial gainful activity, defined as earning more than $1,090 per month, due to a medically determinable physical or mental impairment that is expected to last for a continuous period of at least 12 months or that would result in death, says Rocamora. Another reason Medicaid eligibility is important: Some group homes only accept individuals on Medicaid, says Rocamora. This may be true even if there is $10 million in trust for the individual, says Rocamora. Having a trust means that you need a trustee—either a corporate trustee or an individual—to release funds. The advantage of corporate trustees, often banks, is that they’ll be around for a long time, they know the relevant laws, and they have other expertise, such as investment expertise, says Rocamora. “They won’t take the money and run.” But they may be impersonal, unlike a family member who acts as trustee. Sometimes Rocamora’s firm sets up a corporate trustee and a family member as co-trustees. This way, the trust gets the benefits of both approaches. Naming a guardian who will be in charge after parents can no longer fill this function is another legal decision. “A guardian takes care of the person on a day-to-day basis,” says Hite. He or she helps with issues such as medical decisions. The guardian “may not have enough finacial resources” on his or her own, “so this is where the trust comes on,” he says. Continued on page 26
John Kirkland Jr.’s job plays to his strengths of being social and a people person. His job also highlights the help of organizations.
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John Kirkland Jr. poses in front of his workplace at Park Sterling Bank in Charlotte, NC.
Continued from page 25
Rocamora says that, in many states, naming a guardian requires that the adult child be declared incompetent. “Incompetent” is a harsh
What if there’s no family member willing to act as a guardian? “You can have a public guardian appointed, but that’s not someone who knows the child,” says Rocamora. There are institutions, such as the Corporation of Guardianship in NC, to take on the role.
“Often parents know how to help their children, but when they’re gone, the guardian or trustee has no idea what comforts the child.”
In addition to a trust and a guardianship, Rocamora suggests that parents write a letter of instruction, also known as a letter of intent. It explains the parents’ hopes for their child. Larry Rocamora, When children are unable to communicate McPherson, Rocamora, Nicholson & Nordgren their needs, the document may list their doctors, medications, and daily routine. “Often word. When practical, especially when the child is high functionparents know how to help their children, but when they’re gone, ing, Rocamora suggests establishing power of attorney and healththe guardian or trustee has no idea what comforts the child,” says care power of attorney instead. These documents let the agent act on Rocamora. This document doesn’t need to be drafted by a lawyer. behalf of the child. In John’s case, his parents hold these two powers, Money and health care aren’t parents’ only concerns. They’re also which will pass to his siblings as successors. concerned about their children’s employment, social lives, and
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living conditions. But some are so overwhelmed they fail to plan for a time when they’re no longer in their children’s lives as caregivers, says Robin Shaffert, senior executive officer for individual and family support at The Arc, an organization that advocates for individuals with intellectual and developmental disabilities. She urges parents to engage in what she calls person-centered planning. This means consulting the individual about his or her vision for the future. This process can involve a team, including family and members of relevant organizations. John Kirkland’s job plays to his strengths and highlights the help of organizations. He found his job through “a fellow church member who works at Park Sterling Bank who realized John had some gifts that might mesh well with the bank. John is very social, and he’s interested in people and what they’re doing,” says Chris Kirkland. “For any child, it’s important to focus on and celebrate strengths and to help navigate weaknesses.” During John’s first few weeks at the bank, an agency called InReach sent a worker to act as a bridge between him and his employer, showing him what to do. Prior to that, upon ending his public schooling, John had taken cognitive and aptitude tests when meeting with his individualized education plan team and a vocational rehab team member. Chris says, “The people who have helped us are earthly angels.”
RESOURCES Academy of Special Needs Planners Special Needs Answers www.specialneedsanswers.com The Arc www.thearc.org The Center for Future Planning www.futureplanning.thearc.org National Association of State Directors of Developmental Disabilities Services www.nasddds.org/state-agencies Has a listing of state agencies dealing with intellectual and developmental disabilities. Special Needs Alliance www.specialneedsalliance.org Other resources can be found by checking the websites of organizations focused on the relevant disability.
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MANAGING YOUR
DIGITAL LEGACY
by todd a. stewart, CPA, JD | Stewart Law, PA
In an increasingly technological society, digital assets have become a vital part of nearly everyone’s life. By digital assets, we generally mean both digital files (e.g., photos, music, emails, and documents) and digital accounts (e.g., Facebook, LinkedIn, and Gmail). A login ID and password are common for both categories, especially digital accounts. These services help us stay connected with friends and provide a means for people to share ideas, thoughts, and feelings. But have you thought about what happens to your digital assets when you pass away? Few people have. In some cases, disputes over access to a deceased individual’s digital assets have led to lengthy legal battles and newsworthy headlines. They can be emotional and gut-wrenching. In one case, a young woman died after falling from the twelfth floor of her apartment building. Family members sought access to a social networking account to help determine if her death was a suicide. The deceased woman used this account on a regular basis; her family hoped its contents would shed light on her state of mind around the time of her death. Surviving family members were left without answers when the court ruled that the social networking site was not required to provide the family access. In another case, a blogger passed away leaving an account full of photos and memories. Despite protest, the account was closed and
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unavailable to her family. These problems are not limited only to social media and entertainment accounts. With more and more financial information housed and controlled online, members of your family may also be put to unnecessary expense to access your accounts in the event of your death. With this as background, the question remains: What should you do to protect your interest in these assets? Three main bodies of law—federal law, state law, and service provider agreements—control access to and use of digital assets. There are two relevant federal laws: the Computer Fraud and Abuse Act and the Stored Communications Act. Both are generally designed to protect against unauthorized access to computers and electronic
files. This is a worthwhile goal, but both statutes can impede your family’s access to your accounts on your behalf. Social networking sites and even financial institutions often cite these laws as a reason to not allow any access to accounts after a death. States have introduced legislation intended to ease the hardship placed on families by these federal laws. A handful of states have passed laws that give your representatives, such as your executor, at least limited access to your accounts. Other states are working together to draft a Fiduciary Access to Digital Assets Act (FADAA). FADAA would provide a comStates have introduced prehensive and uniform set of state laws giving fiduciaries legislation intended to ease the access to a deceased individuhardship placed on families by al’s digital assets. In adopting FADAA, a state would provide these federal laws. A handful clarity and guidance for its of states have passed laws citizens when planning for postmortem management of that give your representatives, digital assets.
such as your executor, at least
Despite these efforts, most limited access to your accounts. states have yet to enact laws covering fiduciary access to a deceased’s digital assets. Without such laws, the rules covering access to these assets are often the terms of service provider agreements. Some providers’ agreements, such as Shutterfly’s, do not address what happens at the death of an account holder. Others do. For example, Google’s Gmail agreement allows for the possibility of releasing emails to a personal representative of the deceased account holder, but only upon court order. While federal law, state law, and terms of service agreements all provide hurdles for loved ones to jump over, many companies are coming up with creative solutions to prevent these problems before they arise. In 2013, Google became the first service provider to craft a solution for a user’s account in case of death or incapacity with its Inactive Account Manager. This function allows the user to determine what will happen when the account becomes inactive for an amount of time selected by the accountholder. The user can decide that the data will be deleted or sent to a specified individual. Applications such as 1Password, mSecure, LastPass, KeePass, and RoboForm consolidate login information for multiple accounts in a single place. Simply providing family members and friends with
login information for a single account can help provide them access to all of your accounts. More-comprehensive legislation will help bring clarity to this area. However, as is the case with other areas of your financial life, you should treat these laws as a default or backup to a complete and up-to-date estate plan that you have prepared. For example, you are the only one in a position to say which digital assets should be forwarded to a particular individual and which should be destroyed. With this in mind, we recommend our clients follow three steps to protect their digital assets: 1. Identify and create an inventory of digital assets. You can see our inventory form at http://www.tstewartlaw.com/DigitalAssets-and-Online-Account-Inventory.pdf. 2. Store the inventory in a secure and private location. For a hard-copy format, you may want to use a safe deposit box or a safe at your home. For an inventory in an electronic file or multiple electronic files, consider creating a master password for the storage device. 3. Add provisions to your will and trust, and consider powers of attorney relating to these digital assets. Digital assets will continue to become a more important part of what we all leave behind one day. Staying informed about how to protect this part of your legacy, and being proactive in doing so, just makes sense.
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by eric freedman
Our (no longer new) car has seen its odometer revolve 22,000 times in its first eight months. With three kids in travel sports, we spend a lot of time on the road. Music is our cure for highway hypnosis and, to ensure fairness, we alternate who picks out the next song. I have approached this policy as an opportunity to provide a musical education to our kids. Thanks to streaming music services, we have a wide selection. When it is my turn, I prescribe a steady diet of classic rock, with an emphasis on early Rolling Stones, plus a sprinkling of other durable bands.
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“and so castles made of sand,
slip into the sea, eventually.” — Jimi Hendrix
Using famous quotes, movie lines, song lyrics, and Warren Buffett-isms to start an investment strategy piece is a terrible cliché, but a Saturday morning sojourn in the midst of last quarter’s market movement forced me to borrow Jimi’s quote above. The third quarter’s volatility across riskier asset classes was at least in part a response to global economic growth concerns. Some economists and investors suggest that subdued growth expectations are a natural function of the business cycle. Others express more profound unease. Those deeper concerns represent the capital markets’ corollary to Jimi’s lyrics above, a suggestion that the economic trajectory we have enjoyed since 2008 and 2009’s financial crisis is built on a sandy foundation. To explore these concerns and their implications, we need to review recent economic history and the two dominant forces that have been driving markets.
The End of Pro-Growth Policies? In response to the financial crisis, global central banks launched a uniform policy response: slash interest rates and adopt stimulus programs designed to stoke consumer demand. In the U.S., the Federal Reserve cut its key interest rate effectively to zero, where it has stood since December 2008. The U.S. government also unleashed a series of programs reminiscent of Roosevelt’s alphabet soup to motivate timid consumers and businesses back to spending and hiring.
Some economists and investors suggest that subdued growth expectations are a natural function of the business cycle. Others express more profound unease. Those deeper concerns represent the capital markets’ corollary to Jimi’s lyrics above.
Even after the immediate crisis response, the Fed launched three separate quantitative easing episodes, buying Treasury and mortgage bonds to push down borrowing costs for businesses and consumers. The last installment ended in late 2014, nearly six years after the first round of asset purchases began. During that period, the Federal Reserve’s balance sheet grew from $900 billion in assets to $4.5 trillion today. Continued on page 32
31
Figure One: Select Central Bank Balance Sheets January 2008–September 2015 (in $ trillions) $16 $14 $12 European Central Bank
$10
U.S. Federal Reserve Bank of Japan Bank of China
$8
Aggregate Balance Sheets
$6 $4 $2
2008
2009
2010
2011
2012
2013
2014
2015
Source: Bloomberg, CAPTRUST Research Continued from page 31
The U.S. has not been alone in unconventional policymaking. The UK, Europe, China, Japan, Canada, and other economies recognized the financial crisis’ gravity and designed policies with similar intentions. As Figure One shows, selected countries’ balance sheets and their aggregate reveals a significant upward trend. Their collective balance sheets have grown from $6 trillion in 2008 to more than $15.5 trillion in August. Individual and regional economies have responded disparately to the mass policy elixir. The U.S. and UK have shown improved economic growth. Their stock and housing markets have rebounded and inflationary expectations, while still below historical levels, are positive. Meanwhile, Europe’s economy remains sluggish. Japan has seen some signs of life after decades of deflationary pressure, and China is in an entrenched economic slowdown.
many fear that raising interest rates during a still-fragile economic period may have negative implications for stocks and bonds.
The U.S. has the largest economy and the most influential central bank, and the Federal Reserve has signaled its intent to raise interest rates. While other central banks, including the European Central Bank and the Bank of Japan, have committed to ongoing stimulus measures, the Fed’s interest rate policy shift will reflect a ceremonious departure that could amplify growth concerns. Many fear that raising interest rates during a still-fragile economic period may have negative implications for stocks and bonds. 32
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China: Trees Don’t Grow to the Sky China’s growth trajectory is well documented. The International Monetary Fund ranks China as the world’s second largest economy based on its total share of global gross domestic product (GDP). When adjusted for country price level differentials, China ranks as the largest. Its resource consumption has been insatiable. As an example, China used more cement between 2011 and 2013 than the U.S. used in the entire twentieth century. Mass population movement from rural farms to urban locales has been a major growth catalyst. Urbanization is consistent with China’s goal of moving from an export-driven economy to one grounded in domestic consumer spending and services. However, China’s massive city building has led to vast ghost cities with unused public transit and vacant housing units. Figure Two shows China’s slowing growth, with GDP reaching a 12 percent annual growth rate after the financial crisis and declining to an estimated 7 percent today. Its manufacturing has also slowed. (Note that these are official Chinese government numbers, prone to overstatement.)
Some experts continue to tout China’s current and future economic prominence. Others, including Harvard economists Lant Pritchett and Larry Summers, recently offered a sobering reminder about growth trends. In their paper “Asiaphoria Meets Regression to the Mean,” they conduct a robust analysis of Chinese growth, comparing growth trends across countries and time. The authors find that “there is strong regression to the mean in the growth process, hence very little persistence in country growth rate differences over time, and consequently current growth has a low predictive power for future growth.” In other words, high growth rates like those seen in China tend to revert back to lower, more sustainable levels. Pritchett and Summers note that this is not the first case of Asiaphoria. The overhyped 1960s Japanese growth story led to decades of stagnation, and the 1990s Asian Tiger infatuation ended in an East Asian crisis. The authors do not conclude that disaster is imminent. Instead, they suggest that observers, including investors, should not extrapolate high growth rates ad infinitum. Continued on page 34
Figure Two: Chinese GDP and Manufacturing Data March 2005–August 2015 60
13% China GDP YoY % Change (RHS, through June 2015) China Manufacturing PMI Index (LHS)
12%
56 11% 52
10%
9%
48
8% 44 7%
40
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
6%
Source: Bloomberg, CAPTRUST Research
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Continued from page 33
Investment Strategy Implications So does Jimi’s refrain provide a forewarning about growth prospects? We expect tepid near-term growth but remain optimistic about the global economy over the next two years. August and September’s volatility seemed to price in a Chinese slowdown direr than previously thought, and we anticipate upcoming corporate earnings to provide more clues into Chinese business health. Our belief is that markets are too concerned about China and that any slowdown will be deliberate. As always, that view is subject to change based on emerging data.
if they won’t admit it in public). We expect Europe, Japan, and China will continue stimulus programs and perhaps even add to them. While U.S. and UK stimulus is on the wane and their central banks have declared a bias for raising interest rates, we forecast interest rates well below historical norms for at least the next 18 to 24 months. With interest rates as the basis for all other asset prices, we foresee a more subdued return environment than investors have experienced in recent years. Low unemployment, oil prices, and interest rates are positives for consumers, but markets could remain choppy until we get more clarity on the Fed’s interest rate path and Chinese growth.
Interpreting the implications of divergent central bank policy decisions is more challenging. In prior Investment Strategy pieces, we have Low unemployment, oil prices, shown the relationship between the Fed’s balance sheet size and equity and interest rates are positives market gains. Losing that dynamic for consumers, but markets could could prove to be a challenge for equity investors as they seek other remain choppy until we get more return drivers. Other central banks see clarity on the Fed’s interest rate the balance-sheet-to-equity-market relationship and like the results (even path and Chinese growth.
Sources:
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1
“Credit and Liquidity Programs and the Balance Sheet.” FRB: Recent Balance Sheet Trends. Accessed October 12, 2015.
2
“Adjusting to Lower Commodity Prices.” World Economic Outlook, 2015, page 147.
3
Swanson, Ana. “How China Used More Cement in 3 Years than the U.S. Did in the Entire 20th Century.” The Washington Post, March 24, 2014, Wonkblog. Accessed October 12, 2015. http://www.washingtonpost.com/news/ wonkblog/wp/2015/03/24/how-china-used-more-cement-in-3-yearsthan-the-u-s-did-in-the-entire-20th-century/.
4
Pritchett, Lance and Summers, Larry. “Asiaphoria Meets Regression to the Mean.” NBER Working Paper Number 20573. October 2014, copyright 2014 by Lant Pritchett and Lawrence H. Summers.
5
Ibid.
Fall | 2015
What’s our best advice? Ratchet down your return expectations and don’t expect riskier asset classes to move higher in a linear fashion. And expect the Freedman family truckster to get at least three more oil changes by the time this piece appears next quarter.
MARKET INDEX PERFORMANCE U.S. Bonds
Real Estate
1.2%
0.5%
1.1%
(as of 9.30.2015)
U.S. Stocks
International Stocks
Commodities
Emerging Market Stocks
Q3 2015 YTD 2015 -4.8%
-4.9%
-5.3% -6.4%
AROUND THE GLOBE Capital markets absorbed a global equity market sell-off in the third quarter. U.S. stocks dropped more than 6 percent in their worst quarter since 2011. Weak Chinese growth and concerns about central bank policies impacted asset classes across the globe.
-10.2%
• U.S. stocks are in negative territory for 2015 with small-cap stocks the worst performers. • Developed and emerging market international stocks fell in the third quarter, leaving them down 5 percent and 15 percent, respectively, for the year. • Bonds bounced back from their worst quarterly return in two years, finishing the quarter up more than 1 percent. • Real estate eked out a positive third quarter, but a nearly 10 percent second quarter decline leaves it in negative territory.
LOOKING FORWARD The capital markets have encountered several short-lived periods of volatility in recent months. While this is disturbing to many investors, it is also not unusual. Potential catalysts for a market pullback or more near-term volatility include:
-14.5% -15.2%
-15.8%
-17.8%
Earnings season will be a critical gauge of how of recent volatility may have impacted businesses and consumers. U.S. third quarter earnings are expected to decline for the second quarter in a row, something last witnessed during the financial crisis. International market developments will be critical asset class drivers. Chinese economic health, further Japanese reform, the potential for more European pro-growth policies, and stability hopes for emerging markets are all important as the U.S. cannot grow on its own. The job market has been improving, but has softened in the past few months. It will be important to gauge whether workers can translate a low unemployment rate into higher earnings and, eventually, greater spending. Markets remain focused on timing for higher interest rates. The capital markets continue to expect a later date for interest rate hikes than the Fed does. We will continue to watch how this wedge issue unfolds with future data.
Asset class returns are represented by the following indexes: U.S. large-cap stocks (S&P 500 Index), international stocks (MSCI EAFE Index), emerging market stocks (MSCI Emerging Markets Index), U.S. bonds (Barclays U.S. Aggregate Bond Index), commodities (Bloomberg Commodity Index), and real estate (Dow Jones U.S. Real Estate Index).
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SEVEN TIPS FOR RAISING
FINANCIALLY SAVVY & RESPONSIBLE CHILDREN by KATHLEEN BURNS KINGSBURY
Raising children to be financially savvy presents a unique challenge for affluent parents. How do you let your children enjoy a lifestyle that is rich in opportunity without spoiling them? For Sting, the musician worth an estimated $300 million, the decision was to not leave his six children an inheritance. Instead, he reports that he wants them to earn their own money—and learn the value of hard work, as he did growing up in a working-class family. Warren Buffet and Bill Gates have expressed similar sentiments.
All parents want to rear healthy and self-sufficient children. But when you have wealth, the question of how to do this becomes more complicated. Some well-intended, affluent parents go to extremes and don’t talk about money with their children. Their fear is that, if their children know about their money, they will become entitled, unmotivated, and
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dependent adults. While this concern may be valid, the best way to protect children from this fate is to engage in more communication, not less. As CAPTRUST client relationship manager Jeremy Altfeder, CFP® states, “Communication is key, and the onus is on parents to teach their children about money.”
For parents who grew up in families that talked openly about wealth, teaching kids about money and family values may be second nature. For others, it may be a new skill, perhaps one that a financial advisor can help you develop. Either way, the best place to start is by reflecting on what key skills and core values you want to pass down to your children. Next, discuss these with your partner and, together, set up a game plan for how best to impart this knowledge. Each family’s plan will be unique, but there are some fundamental items to consider when raising financially savvy and responsible kids. These include:
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“Communication is key, and the onus is on parents to teach their children about money.” Jeremy Altfeder, CFP® CAPTRUST Client Relationship Manager
Talk about money early and often. Financial literacy experts agree that it’s important to start talking to your kids about money around age five. This is the age they first become conscious of money and begin developing financial beliefs that will influence their saving and spending habits. They will form their belief system, or money mindset, between the ages of five and fourteen years. While people can change their money mindset as an adult, it is easier to establish healthy thoughts and feelings about money early on. The goal is to make financial conversations a normal and healthy part of your family dialogue.
Make it real. Adam Carroll, financial educator and author of Winning the Money Game, decided to conduct an experiment with his children to test the theory that cash has a different effect on behavior than other forms of payment, such as credit or debit cards, Apple Pay, or online payments. One weekend, they played the board game Monopoly, a favorite family pastime, using real money. Carroll discovered that his children were more conservative in their game play when handling $20, $50, and $100 bills than when using the game’s fake money. This experiment and related behavioral research points to the importance of having your kids engage in cash transactions. They need to experience the pain of losing money when they spend—feelings they won’t feel as sharply with other forms of payment. To help achieve this goal, consider paying their allowance in cash and creating opportunities for them to save and spend using actual dollars and cents.
Capitalize on teachable moments. Were you ever the recipient of a parent’s lectures about life? If so, you have experienced firsthand how ineffective this teaching method can be. While it may be tempting to sit your children down and give them a sermon about family values, fight the urge. Instead, capitalize on teachable moments, impromptu opportunities for learning that come up during the course of a day. For example, if you are grocery shopping and your son is throwing prepackaged food into the basket, let him know you value locally grown products. Then, discuss why you are willing to spend a bit more for these items as a way to express this belief. Teachable moments happen everywhere, from the movie theater to the mall to the car ride home. Keep your eyes and ears open, and take advantage of these moments when they arise. Continued on page 38
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4 5 6 7
Continued from page 37
Let failure happen. It can be painful to witness, but kids need to experience failure. Being able to figure out how to correct their errors and move on helps them develop a sense of mastery. Too often, parents with good intentions bail their children out of tough situations. They pay off an excessive credit card balance or foot a legal bill resulting from bad behavior. When this happens, young people don’t learn how to be self-reliant. Instead, they start to believe they can’t be self-sufficient—and need mom and dad to rescue them. Let your kids fail, support them as they try to figure out how to correct the situation, but don’t fix it for them. They may kick and scream in the short term, but they will be forever grateful in adulthood.
Show, don’t tell. We all know that actions speak louder than words. Financial habits are no exception. It is imperative that your actions be consistent with the values you are trying to impart. For example, if you are teaching your children about caring for others, don’t just write a check to your favorite charity. Volunteer alongside them and let them experience the sense of joy that comes with giving.
Connect the dots. The best way to make sure your children understand what is important to you is to clearly communicate your values to them. Be explicit about what is important and how you use money to express these principals. For example, if you take your family to Europe every year because you want your children to understand and experience the world, tell them. Without an explanation about why you invested money in the trip, miscommunication can happen. While you may have intended them to learn that education is important, they could walk away thinking that room service is awesome. Be sure to connect the dots between family values and how you use your wealth.
Help them find purpose. Finding their purpose in the world is vital for children’s healthy development. Obtaining a job can help them do that. Although your teenager may not need to work, there is no substitute for the real-life experience of working at minimum wage and seeing the time, energy, and effort that go into earning a living. A job also gives young people a sense of satisfaction and a feeling of accomplishment. It helps them decide what they enjoy doing, recognize what they are good at, and learn how to get along with coworkers. These are all skills that will help them thrive in adulthood. Raising healthy and wealthy children is a journey, not a one-time event. There will be many twists and turns along the way and myriad conversations. Be persistent in your commitment to this goal and get support. In the end, your children will be grateful for the priceless gift you have given them.
RESOURCES Raising Financially Fit Kids (Ten Speed Press, 2013). This book by Joline Godfrey is a great resource for parents, grandparents, or anyone interested in teaching young people how to be financially savvy. The author provides lessons, based on developmental theory, that are appropriate for each age group, starting at age five and ending in college. TEDx Talk by Adam Carroll (https://youtu.be/_VB39Jo8mAQ). Adam Carroll talks about his $10,000 Monopoly game with his kids and how to teach financial management in a cashless society.
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Raised Healthy, Wealthy & Wise (Self-published, 2014). This book by Coventry Pitt-Edwards provides lessons and insights from young inheritors who have flourished as affluent children and gone on to become successful, purpose-driven, independent adults. www.SALTMoney.org (American Student Assistance). This website offers free financial literacy lessons for students and young adults, ages 18 to 26. The platform is highly interactive, personalized, and was developed using gamification theory.
READER Q & A In this issue, we address reader questions about why (or why not) to pay off your mortgage before retirement, tax treatment of annuities for beneficiaries, and the long-term effects of recent economic weakness in China.
I am planning to retire in the next few years. Should I pay off my mortgage prior to retiring? Financially speaking, there is no one-size-fits-all answer to this question. With mortgage rates near historic lows and the ability to deduct mortgage interest on your taxes, the economic case for paying off a mortgage before retirement is less clear cut than in the past. The decision is dependent on a number of factors, including: • Retirement and emergency savings. You shouldn’t pay off your mortgage if doing so would substantially deplete the emergency fund you have created for unexpected expenses (like medical costs) or force you to take a large withdrawal from a retirement account. • Taxes. If you are in a high income tax bracket, have a low-interest mortgage (below 5 percent), and benefit from the mortgage interest tax deduction, it may make sense to keep making monthly mortgage payments. • Cost of capital. If you have the funds to pay off your mortgage, it may make sense to do so, particularly if those funds are in a low-yielding account. Meanwhile, if you are willing to accept more investment risk, you may be better off to keep your mortgage; you may be able to generate higher returns elsewhere. • Timeframe. If you’re planning to stay in your home for the long haul, a plan to pay off your mortgage early may make sense. If, instead, you’re considering downsizing or moving to a new locale, you’ll likely want to hold on to your cash.
If you have the funds to pay off your mortgage, it may make sense to do so, particularly if those funds are in a low-yielding account. A final emotional factor should not be overlooked—the sense of financial freedom and security that comes from paying off a mortgage and owning a home outright. Retirees and those a few years away from retirement should examine their unique personal circumstances to help them make the right choice. Continued on page 40
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Continued from page 39
Do annuities receive a step-up in tax basis at death? The simple answer is no. While annuities can be an effective way to save on a tax-deferred basis above and beyond the limits imposed on qualified retirement accounts like 401(k)s, 403(b)s, and IRAs, they don’t benefit from a step-up in basis that most other securities offer. A step-up is an increase in the cost basis of inherited property to reflect its market value as of the date of the owner’s death. For example, an investor invested a total of $100,000 in a mutual fund during her life. Assume her investment is worth $200,000 when she dies. If you inherit the mutual fund, your cost basis becomes $200,000, which means you could immediately sell it tax free. If she had instead invested in an annuity, your cost basis on inheriting it as a death benefit would be $100,000. You would owe taxes on the remaining $100,000 at ordinary income tax rates.
A step-up is an increase in the cost basis of inherited property to reflect its market value as of the date of the owner’s death.
Keep in mind that many annuities allow a spousal beneficiary to keep the annuity policy intact after the death of the owner under a provision called spousal continuation. Unlike a non-spouse beneficiary, a spouse could use spousal continuation to defer taking any distribution and allow the annuity to continue its tax-deferred growth. Annuities are complex and their features, benefits, and expenses are specific to the issuing insurance company, so it is difficult to generalize. Please explore the specifics of the annuity contract in light of your personal circumstances before making any decisions.
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What long-term effects will China’s recent economic weakness and currency devaluation have on the U.S. economy? Our view is that China’s economic weakness is more impactful to the U.S. economy than the mild currency devaluation introduced in August. China’s linkage with the U.S. and global economy is significant. According to the International Monetary Fund, China is the world’s second largest economy, generating 15 percent of global gross domestic product. According to official Chinese statistics, the country’s economy has grown by over 9 percent annually since 2005. Recent reports show that China’s growth has slowed to 7 percent, which is still high, but well below recent levels (even if reported growth levels are somewhat inflated). China’s economy is transitioning away from a historical dependence on exported goods and domestic infrastructure spending toward a more consumer-driven model. Making that transition under any system, let alone within a centrally planned economy, would likely result in some choppiness. To smooth its transition, China has engaged, at times, in reactive policy responses, including its recent decision to devalue or lower the value of its currency relative to the U.S. dollar. Economic theory suggests that a lower currency stimulates exports, which in turn helps economic growth, ostensibly at another country’s expense. Based on Goldman Sachs research, China directly accounts for $168 billion of S&P 500 index companies’ revenues and indirectly accounts for significantly more. U.S. investors should be aware of recent dollar strength relative to China’s and other countries’ currencies. While that dynamic could, in fact, impact U.S. export growth, most economic forecasts anticipate a stronger dollar. A healthy—or at least stable—China will cure lots of ills, but again, we do not expect China to follow a straight linear path toward a more modern and sustainable economy.
A lower currency stimulates exports, which in turn helps economic growth, ostensibly at another country’s expense.
If you have a question for the VESTED team, we’d love to hear from you and see if we can help. Please send your questions to us at VESTEDmagazine@captrustadvisors.com.
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CAPTRUST
GROWTH
From left to right: Jim Edwards, Wes Schantz, Mike Molewski, Chris Butz from CAPTRUST’s new Bethlehem, PA office.
MFP Strategies In July, CAPTRUST announced a merger with MFP Strategies, allowing both firms to broaden and strengthen their menus of services while helping to accelerate growth. Not only does this merger bring new colleagues to the firm, but also new capabilities such as ultra-high-net-worth estate planning and business preservation strategies for private clients. CAPTRUST welcomes advisors Chris Butz, David Cacciabeve, Jim Edwards, Jeff Evans, John Hopkins, Marcus Magyar, Mike Molewski, Wes Schantz, Glenn Thomas, and David Will.
Ryan Leach
Ryan Leach
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Ryan joined CAPTRUST in 2015 as a vice president, financial advisor and is responsible for providing comprehensive wealth management and retirement advisory services to professional athletes, high-net-worth investors, and corporate executives. Prior to joining the firm, Ryan served as an experienced associate for PricewaterhouseCoopers, LLP. He earned a bachelor’s degree in business administration with a concentration in accounting from the University of North Carolina at Wilmington.
Kathleen Carlson
Jim Johnson
Parker Carlson & Johnson In October, CAPTRUST merged Parker Carlson & Johnson Investment Management into its wealth management practice. Based in Dayton, OH, Parker Carlson & Johnson has been providing wealth management and investment advisory services to individuals, families, corporations, and non-profit entities since 1982. Close cultural fit was a significant factor in the firm’s decision. Kathleen Carlson and Jim Johnson’s clients have already expressed enthusiasm about the possibilities to come with CAPTRUST.
RECOGNIZING OUR
COLLEAGUES Mike Blair The Financial Times named Mike Blair to its June list of Top 401(k) Retirement Advisors in the country. This prestigious list recognizes top-tier financial advisors who specialize in serving the needs of defined contribution plan sponsors and participants. The Financial Times’ rigorous screening process considered a number of factors, including defined contribution assets under advisement, growth of defined contribution plans and assets, specialization, experience, participation rates in advised plans, industry certifications, and compliance record.
Jon Strickland In July, Jon Strickland was named to the National Association of Plan Advisors’ (NAPA) Top 50 under 40 Young Guns list for 2015. The list consists of 50 of the top defined contribution advisors in the country, based on a combination of voting by NAPA members and a profile of their businesses. These young plan advisors are recognized as future industry leaders.
Best Places to Work This August, CAPTRUST’s headquarters office in Raleigh, NC, was recognized by Triangle Business Journal as one of the best places to work in the area for the fourth time. Businesses on the list are scored and ranked based on the results of a survey completed by employees. Companies must be rated highly by employees and meet an employee participation threshold to be eligible for recognition.
Top Female Advisors In what has long been a male-dominated profession, a growing number of women are today making significant contributions to the retirement advisory industry. In order to highlight those contributions, NAPA created a list that recognizes leaders among women who are “in a league of their own.” The 2015 list includes the following six CAPTRUST financial advisors: • Beryl Ball • Pat Bills • Karen Casillas
• Susan Clausen • Jean Duffy • Peggy Whitmore
CAPTRUST Board of Advisors Two of CAPTRUST’s board of advisors members, Jeff Montgomery and Quana Jew, recently completed their tenure with us. Both Jeff and Quana have been excellent ambassadors for the firm and have been generous with their insights and counsel for several years. We thank them for their service and wish them the best in their future endeavors. We are pleased to welcome our newest board member, Jenny Eller of Groom Law in Washington, DC. Groom Law is widely recognized as one of the preeminent ERISA-specialist law firms in the nation. Jenny is the co-practice leader for Groom’s fiduciary group and is a member of the firm’s five-member executive committee.
Jim Dunn Chief executive officer and chief investment officer of Verger Capital Management and CAPTRUST board of advisors member Jim Dunn was recognized by Institutional Investor’s Investor Intelligence Awards and given the CIO of the Year award. Those bestowed with this award are viewed as true innovators, leaders, and cutting-edge thinkers. CAPTRUST congratulates Jim and thanks him for his service to the board and the firm.
CAPTRUST employees pose for a photo at the Triangle Business Journal’s Best Places to Work award luncheon.
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GIVING BACK
1
CAPCommunity Music Fest On September 19, the CAPCommunity Foundation held its first ever Music Fest in Raleigh, NC. Local bands Crush, Sleeping Booty, and The Rollovers, CAPTRUST’s house band, headlined the show, which was accompanied by beer from a local brewery, food trucks and stations, and family activities. 1. The Rollovers play at the CAPCommunity Music Fest as Brigid O’Brien, daughter of guitarist Brendan O’Brien, encourages the crowd to dance.
2 3 4
2. Rollovers lead singer Jeremy Altfeder and his son, Elijah, jamming for the crowd at the CAPCommunity Music Fest. 3. CAPTRUST employee volunteers worked in shifts throughout the day to support the event and ensure that everything ran smoothly. 4. CAPTRUST’s Colby Warren and his Sleeping Booty bandmate having fun after their set. 5. Local Beer Lovers and Big Boss Brewing Company team captain Jackie Gannon shows off the Hops for Hope People’s Choice award her team won for its imperial stout. 6. Three Hops for Hope organizers, Blair Johnson (Tír na nÓg), Staci Barfield (Children’s Flight of Hope), and Jennifer Liebel (CAPTRUST), announce the People’s Choice and Critics’ Choice Awards. 7. CAPTRUST employees Stephanie Zegar and Linda McBrayer enjoying the Pretty in Pink Foundation’s Beyond the Ribbon Luncheon. 8. CAPTRUST Financial Advisor Todd Jones poses with Executive Director Penny Lauricella and Michelle Bruer from Pretty in Pink.
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6 7 5
8
Hops for Hope Fundraiser The CAPCommunity Foundation joined forces with local Irish pub Tír na nÓg to hold Raleigh’s first annual cask challenge on October 17. The event paired local breweries with public and corporate teams to each brew a unique beer for the event. Teams raised funds ahead of the event and competed for three awards: People’s Choice, Critics’ Choice, and Most Money Raised. On the day of the event, attendees were invited to taste the beers and enjoy an afternoon of fun to support Children’s Flight of Hope. CAPTRUST’s team won the Most Money Raised award, and a team partnered with Big Boss Brewing Company won both the People’s Choice and Critics’ Choice awards for its Breakfast Battle Dragon imperial stout. Teams
brought in $16,000 through their fundraising, with ticket sales and sponsorships bringing the total to $20,000.
Pretty in Pink Foundation On October 1, CAPTRUST employees attended the 2nd Annual Beyond the Ribbon Luncheon to benefit Pretty in Pink Foundation. The event was a kickoff luncheon to celebrate the beginning of Breast Cancer Awareness Month. The luncheon highlighted the stories of several Pretty in Pink “Champions” who have struggled with and beat breast cancer. It also honored all of the Pretty in Pink volunteers and health professionals that strive daily to save the lives of those fighting breast cancer in North Carolina.
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CAPTRUST Bethlehem, PA office
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CAPTRUST was built on the belief that investors are best served by financial advisors motivated to focus exclusively on their clients’ best interests. Our commitment to independence and transparency has enabled us to grow from the entrepreneurial vision of our founders to one of the largest independent investment advisory firms in the country.
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