Issuu

Getting Personal With Your Genes

Thomas Davis NFL Man of the Year PLUS Creating a Land Legacy Tips for Talking to Parents About Money Vacation Home Alternatives Global Central Banks: Uncoordinated Coordinates

SUMMER 2015

“I have found that among its other benefits, giving liberates the soul of the giver.” — Maya Angelou

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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We invite you to “Like” the CAPCommunity Foundation on Facebook.

Volume 1, Issue 2 | Summer 2015 PUBLISHER & EDITOR IN CHIEF

First, thank you for your interest in the inaugural issue of VESTED, launched in January. It was a bit of an experiment, an attempt to move away from the kind of technical publications typically seen from our industry brethren.

J. Fielding Miller Chief Executive Officer EDITORS John Curry Senior Director, Marketing

EDITORIAL ADVISORY BOARD

I am pleased to report that the feedback has been overwhelmingly positive. We will take that as an early vote of confidence and work to further raise the bar going forward. We have several interesting stories for you in this summer 2015 issue.

Eric Freedman Chief Investment Officer

CEO Fielding Miller (right) addresses employees at CAPTRUST’s annual shareholders’ meeting with CFO Ben Goldstein (left).

Once again, the cover features our “retirement hero” profiled in our Second Act column. This issue’s hero is Carolina Panthers linebacker and Walter Payton NFL Man of the Year Award winner Thomas Davis. At age 32, he proves that you are never too young to start thinking about—and planning for—what’s next. This issue’s columns and feature articles explore a range of other topics, including: • How understanding your genetic makeup could lead to a longer and healthier life, • Transfer-on-death registration, a very effective but scarcely known estate planning tool, • Vacation home alternatives you may want to explore, • Smart ideas for protecting your valuable collectibles, and • Tips to help readers start estate planning conversations with their parents. Lasting Legacy is a must read as CAPTRUST Senior Director of Strategic Wealth Rush Benton tells the story of Tom Mann, a North

Carolinian who is creating a unique and enduring legacy for his family by reconstituting his great-great-grandfather’s farm. And last but certainly not least, CAPTRUST Chief Investment Officer Eric Freedman offers his latest thinking on the capital markets in Investment Strategy. Since our primary aim for VESTED is to provide you with timely, relevant, and actionable ideas and recommendations, we could sure use your help. Please email your thoughts, reactions, and story ideas to us at VESTEDmagazine@ captrustadvisors.com. We hope you enjoy this issue of VESTED.

Jeremy Altfeder Senior Client Management Consultant

Nick DeCenso Manager, Wealth Strategy

Lauren Bartholomew 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 Michael Galiano Associate, Marketing Jennifer Liebel Manager, Marketing Jennifer Mastrapasqua Manager, Marketing Greg Middleton Director, Marketing

Jessica Rose Associate, Marketing Colby Warren Manager, Marketing WITH THE ASSISTANCE OF

All the best,

Azul Photography Raleigh, North Carolina Classic Graphics Morrisville, North Carolina

J. FIELDING MILLER CAPTRUST Chief Executive Officer

800.216.0645 | www.captrustadvisors.com 4208 Six Forks Road, Suite 1700 Raleigh, NC 27609

GETTING PERSONAL WITH YOUR GENES by john curry

TRANSFER ON DEATH REGISTRATION A Little-Known Estate Planning Tool by neil downing

Thomas Davis NFL Man of the Year

Global Central Banks:

UNCOORDINATED COORDINATES by eric freedman

by constantine von hoffman

COLUMNS 31

PASSION PURSUITS

EXPERT ANGLE

9 28

Gleanings

Is a Vacation Home Alternative Right for You?

Protecting Your Passionate Investments

Client Conversations

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MONEY TALKS

LASTING LEGACY

41 42

Market Rewind

Breaking Through Money Silence: Tips for Talking to Parents About Money

Creating a 19th-Century Land Legacy

CAPTRUST Happenings

rush benton

monica keehfuss

Rush Benton joined CAPTRUST in 2013 as senior director of strategic wealth. As leader of CAPTRUST’s private wealth business, he is responsible for growing the firm’s private wealth assets both organically and through acquisition of independent, fee-based registered investment advisors (RIAs). Prior to joining the firm, Benton served as co-founder and chairman of WealthTrust, one of the first consolidators of RIAs.

Monica Keehfuss is a professional sales consultant for property and casualty and employee benefit insurance products with HUB International Insurance Services, Inc. With 37 years in the industry, she specializes in directors and officers, employment practices, management, and professional liability insurance. She is based in Riverside, California.

john curry

kathleen burns kingsbury

As senior director of marketing, John Curry is responsible for all areas of strategic marketing and branding for CAPTRUST. In the industry since 1986, Curry has served in senior management roles with firms such as ProShares and AllianceBernstein and has experience in areas of strategic marketing, including product development and design, market research, branding, and sales campaign management.

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.

neil downing

constantine von hoffman

Neil Downing is a Certified Financial Planner™ and enrolled agent, licensed by the U.S. Treasury to represent taxpayers before the Internal Revenue Service. A newspaper reporter, editor, and columnist for 35 years, Downing has authored several publications focused on maximizing the value of employee benefits and retirement savings vehicles.

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.

eric freedman

susan weiner

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. Freedman 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.

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, 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. This document is intended to be informational only. 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.

Getting Personal with YOUR GENES by john curry

he Human Genome Project began in 1990. The goal of this research effort was to map and sequence the three billion deoxyribonucleic acid (DNA) base pairs and estimated 22,000 genes that make up the human genome—the biological building blocks of human life. Researchers completed the project in April 2003, under budget and more than two years ahead of schedule. The National Institutes of Health and the U.S. Department of Energy coordinated the research efforts of universities across the United States, along with those of international partners. Their work resulted in a high-quality map of the human genome that is now freely available in public databases. Completed at a cost of $3 billion, their efforts also accelerated development of tools and technology for fast and inexpensive gene analysis. Over the past decade, the cost of gene sequencing has plummeted. Today, if you’re interested, you can get your genes sequenced for about $100. This combination of inexpensive access to large amounts of genetic data and researchers’ growing understanding about how genes work has unleashed a genomic revolution. This revolution will have a major impact in the fields of medicine, biotechnology, and the life sciences. Nearly every human ailment has some basis in our genes. Yet, until recently, doctors were only able to take genetics into consideration for a limited set of diseases. Sickle cell anemia is one example. It has a simple, predictable inheritance pattern caused by a single gene change. However, the treasure trove of data generated by the Human Genome Project and subsequent research has enabled more powerful approaches. Scientists are now unlocking the role that multiple genetic factors—acting together and affected by the environment—play in complex diseases. Cancer and Alzheimer’s disease are two prominent examples.

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“Along with Bach’s music, Shakespeare’s sonnets, and the Apollo Space Program, the Human Genome Project is one of those achievements of the human spirit that makes me proud to be human.” — Richard Dawkins English evolutionary biologist, ethologist, and author

THE FIGHT AGAINST CANCER The genomic revolution will be a game changer in the fight against cancer. So far, major advances have come primarily in the form of better diagnostics. A recent New York Times article pointed to a Silicon Valley start-up preparing to offer genetic screening for breast and ovarian cancer so inexpensive that most women would have access to it. Color Genomics plans to charge $249 for an analysis of BRCA1 and BRCA2, the two main breast cancer genes, plus another 17 genes with known cancer risks. While no preventive treatment exists for women with the BRCA mutations, those who test positive can remain alert to the risk and catch potential new tumors as quickly as possible. It is impossible to write about genetic testing and breast cancer without mentioning actor and director Angelina Jolie. Two years ago, Jolie discovered she had an 87 percent lifetime risk of developing breast cancer and a 50 percent lifetime risk of developing ovarian cancer. She made news when she announced she had a double mastectomy and her ovaries removed as a preventive measure after testing positive for the BRCA mutation. But the BRCA mutation is just one example. Cancer, as we know it today, is a family of diseases characterized by the uncontrolled growth and spread of abnormal cells. Each of the more than 400 diseases in this family has a unique genetic signature, a specific set of mutated genes within its DNA. One of the newest developments in cancer detection and monitoring is called liquid biopsy. It’s a blood test that can

detect and identify a cancer by matching DNA fragments circulating in the blood to the genetic signatures of a growing library of known cancers. The capacity to identify cancers this way will have benefits beyond improved diagnostics. It will lead to more targeted treatment. Take the example of prostate cancer. It is difficult for doctors to know which tumors are likely to spread and which are not likely to pose a threat. “As a result, we tend to treat all prostate cancers as if they’re of the most ferocious variety,” according to Edward J. Benz, Jr., MD, president of the Dana-Farber Cancer Institute. “By understanding which genes brand a tumor as especially aggressive, we’ll be able to provide not only the right treatment, but the right degree of treatment, and at the right time.”1

AN INTERESTING APPROACH TO ALZHEIMER’S Alzheimer’s is another complex disease and a looming health problem. The disease currently affects 5.4 million Americans at an annual cost of $200 billion.2 And with leading-edge baby boomers in their late 60s, those costs will rise, putting pressure on families, the healthcare system, and Medicare. Unchecked, prevalence of Alzheimer’s will quadruple by 2050.3 According to the website of Raleigh-based Muses Labs, “Alzheimer’s disease is fatal, and currently there is no cure or even a treatment that significantly slows progression of the disease.” Continued on page 6

Continued from page 5

As Muses Labs’ Chief Technology Officer Dr. John Q. Walker exwhich they think are the best way to reduce the inflammation and plained, “there are dozens of factors that contribute to cognitive system imbalances at the root cause of Alzheimer’s. decline with age, but your genes can amplify or reduce the effect of these factors.” In fact, there is “one gene that swamps all others.” The GENETICS AND ENVIRONMENTAL FACTORS E4 variant of the ApoE gene is the strongest genetic risk Information from the Human Genome Project is factor for Alzheimer’s disease. The ApoE gene leading scientists to re-examine the role of geencodes the protein apolipoprotein E. While netics and environmental risk factors in the our understanding of this protein’s role in development of disease. They are drawAlzheimer’s development is evolving, 90 ing some interesting new conclusions. percent of people with two copies of Virtually all diseases result from the E4 and 30 percent of those with one interaction of genetic variations with copy of the gene today are likely to environmental risk factors such develop the disease. That amounts as infectious, chemical, physical, to 27 percent of the U.S. populaDrugs have not fared well as a way to deal with nutritional, and behavioral factors. tion—or 75 million people—inAlzheimer’s disease. According to Walker, They are finding that genetic variclined toward Alzheimer’s based “Over the past 10 years, of the 244 drugs ations do not cause disease. Rather, upon this single gene pair. they influence a person’s susceptibilthat have gone through trials, 243 of Drugs have not fared well as a way ity to environmental factors, creating them failed, and the one that got to deal with Alzheimer’s disease. a higher risk for certain diseases. This approved treats the symptoms and According to Walker, “Over the past concept also explains why the same makes the condition worse.” 10 years, of the 244 drugs that have environmental factors affect individuals difgone through trials, 243 of them failed, and ferently. For example, how a health-conscious the one that got approved treats the symptoms 40-year-old has a heart attack, while others seem and makes the condition worse.” The research of the immune to heart disease, in spite of smoking, poor diet, Muses Labs team suggests that no simple cure for a disease like and obesity. Genetic variations account, at least in part, for this differing Alzheimer’s exists. Because it is complex biologically, “its treatment response to the same factors. calls for a complex combination therapy that addresses many factors While Angelina Jolie’s case is rare and somewhat controversial, it at the same time.” Muses Labs’ approach includes personalized therpoints out a recurring theme. Genetic testing can identify a potential apies that combine drugs, diet, exercise, and other lifestyle aspects,

THE EVOLUTION OF GENETICS 1859

1869

1879

NATURAL SELECTION Charles Darwin writes On the Origin of Species by Means of Natural Selection, or the Preservation of Favored Races in the Struggle for Life.

DNA ISOLATED Friedrich Miescher isolates DNA from cells for the first time and calls it “nuclein.”

MITOSIS DESCRIBED Walter Flemming describes chromosome behavior during animal cell division. He stains chromosomes to observe them clearly and describes the whole process of mitosis.

1865 HEREDITY TRANSMITTED IN UNITS Gregor Mendel’s experiments on peas demonstrate that heredity is transmitted in discrete units. The understanding that genes remain distinct entities even if the characteristics of parents appear to blend in their children explains how natural selection could work and provides support for Darwin’s proposal.

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1900 REDISCOVERY OF MENDEL’S WORK Botanists DeVries, Correns, and von Tschermak independently rediscover Mendel’s work while doing their own work on the laws of inheritance.

susceptibility to a particular disease. From there, one can take action to track the issue, make preventive changes or, as she did, take preemptive action. It seems that the biggest implication of the genomic revolution may not be treating or curing complex diseases like cancer and Alzheimer’s. It may be avoiding them altogether—or at least delaying their onset. As Muses Labs’ John Q. Walker said about the ApoE gene and Alzheimer’s disease, “if you have one E4, you need to pay attention and if you have two E4s, you really need to pay attention.” In his view, armed with genetic self-knowledge and the right therapy, few need suffer from Alzheimer’s in the future.

THERE’S A DOWNSIDE, TOO Genetic testing has the potential to transform the way we manage health in ways that could lead to longer, healthier lives. Unfortunately, we must also consider the downsides: • Misinterpretation of genetic information. The presence of a genetic variation, in most cases, indicates a susceptibility to a disease, not its presence. Some diseases are more influenced by genetic factors than others. This is called heritability. Meaningful interpretation of test results requires specialized skills and knowledge. Moreover, patients must know enough to make informed decisions. • Workplace genetic screening run amok. Advocates suggest that screening job candidates for susceptibility to workplace risk factors, such as radiation or chemicals, could preempt potential health issues and their costs. While that seems prudent, it’s easy to imagine how reasonable workplace screening could go too far. Critics fear employers could use the same information improperly. For example, they could screen for susceptibility to chronic health issues as a way to reduce healthcare costs or cut down on absenteeism.

In recognition of the potential for genetic discrimination, President George W. Bush signed the Genetic Information Non-Discrimination Act (GINA) into law in May 2008.

In recognition of the potential for genetic discrimination, President George W. Bush signed the Genetic Information Non-Discrimination Act (GINA) into law in May 2008. GINA prohibits discrimination against a person on the basis of genetics for health insurance and employment. • Insurance discrimination. While GINA prohibits genetic discrimination against a person for health insurance purposes, it does not cover life, disability, or long-term care insurance. Insurers can deny policies for the people most Continued on page 8

1902

1911

CHROMOSOME THEORY OF INHERITANCE Walter Sutton observes that the segregation of chromosomes during meiosis matches the segregation pattern in Mendel’s theories.

CHROMOSOMES CARRY GENES Thomas Hunt Morgan and his students study fruit fly chromosomes. They show that chromosomes carry genes.

1953 1952 1909 THE WORD “GENE” IS COINED Wilhelm Johannsen coins the word “gene” to describe the Mendelian unit of heredity.

GENES ARE MADE OF DNA Alfred Hershey and Martha Chase show that only the DNA of a virus needs to enter a bacterium to infect it, providing strong support for the idea that genes are made of DNA.

DNA DOUBLE HELIX Francis Crick and James Watson describe the double helix structure of DNA based on an X-ray image taken and research done by Rosalind Franklin and Raymond Gosling. Maurice Wilkins and two of his colleagues publish additional evidence at the same time.

Continued from page 7

likely to need insurance based upon their genetics. This is especially troubling given a recent Harvard Medical School study that found that people who discover they have the E4 variant of the ApoE gene are five times more likely than the average person to buy long-term-care insurance.4 Given the newness of the genomic revolution, it shouldn’t be a surprise that unresolved social, ethical, and legal issues exist. GINA, for example, is an essential first step in the fight against genetic discrimination and misuse of medical information. But it is not perfect. Technological advances seem to have a way of outstripping norms and, over time, leading to a new normal (with a little controversy along the way). Researchers have made dramatic advances in the decade since the Human Genome Project completed its Herculean task. Fueled by inexpensive gene sequencing and powered by big data, they are making rapid progress toward a better understanding of major health problems. While they have not yet identified many of the genetic risk factors for diseases, and the interaction of genes with other genes and genes with environmental risk factors needs further exploration, it is clear that the genomic revolution has begun. In a 2011 TED Talk, Richard Resnick, Chief Executive Officer of GenomeQuest and former researcher on the Human Genome Project, said, “The prospect of using the genome as a universal diagnostic is upon us today … And what it means for all of us is that everybody in this room could live an extra five, 10, 20 years just because of this one thing.” If he is correct, despite the fact that we face many unanswered questions, we are likely to witness some amazing things in our longer and healthier lifetimes. Sources: 1 Benz, Jr., MD, Edward J. “Genomics and the Future of Cancer Treatment.” Stand Up to Cancer. Entertainment Industry Foundation (EIF). Accessed April 2015. http://www.standup2cancer.org/article_archive/view/genomics_and_the_future_ of_cancer_treatment. 2 Alzheimer’s Association. “2013 Alzheimer’s Disease Facts and Figures: Alzheimer’s & Dementia, Volume 9, Issue 2.” Alzheimer’s Association. Alzheimer’s Association. Last modified 2013. Accessed April 2015. https://www.alz.org/downloads/facts_figures_2013.pdf. 3 Reynolds, Chandra A. “Alzheimer Disease: Genetic and Environmental Influences.” University of California, California, USA, January 2013. Accessed April 2015. doi:10.1002/9780470015902.a0005243.pub2. 4 “It’s Legal For Some Insurers To Discriminate Based On Genes.” Narrated by David Schultz. All Things Considered. NPR, January 17, 2013. http://www.npr.org/sections/health-shots/ 2013/01/17/169634045/some-types-of-insurance-can-discriminate-based-on-genes.

1955

1966

1983

46 HUMAN CHROMOSOMES Joe Hin Tjio identifies 46 as the exact number of chromosomes in human cells.

GENETIC CODE CRACKED Marshall Nirenberg and others figure out the genetic code that allows nucleic acids with their four-letter alphabet to determine the order of 20 kinds of amino acids in proteins.

FIRST DISEASE GENE MAPPED A genetic marker for Huntington’s disease is found on chromosome 4.

1956

1975

1983

CAUSE OF DISEASE TRACED TO ALTERATION Vernon Ingram discovers that a specific chemical alteration in a hemoglobin protein is the cause of sickle cell disease.

DNA SEQUENCING Two groups, Frederick Sanger and colleagues, and Alan Maxam and Walter Gilbert, both develop rapid DNA sequencing methods. The Sanger method is most commonly employed in the lab today, with colored dyes used to identify each of the four nucleic acids that make up DNA.

PCR INVENTED Polymerase chain reaction, or PCR, is used to amplify DNA. This method allows researchers to quickly make billions of copies of a specific segment of DNA, enabling them to study it more easily.

Summer | 2015

HUMAN GENOME PRIMER Boost your Genetic Literacy

HERITABILITY & DISEASE GENOME A complete set of genes for an organism.

CHROMOSOME DNA plus associated proteins. Humans have 23 pairs, one set from each parent.

Heritability helps explain the influence of genetics on the prevalence of disease in a population. It’s often used to provide a sense of what proportion of your risk for a given disease is derived from your genes, rather than environmental factors.

Lung Cancer

Colon Cancer

23%

Longevity

26%

Type-2 Diabetes

26%

Asthma

30%

Bladder Cancer

CELL The smallest unit of life that can replicate independently.

NUCLEUS

7–31%

Stroke

32%

Ovarian Cancer

40%

GENE

Prostate Cancer

42%

A segment of DNA that codes for one protein.

Heart Disease

34–53%

Breast Cancer

25–56%

The cell’s command center, directing the cell to grow, mature, divide, or die.

Obesity

70%

Alzheimer’s Disease 58–79% Source: SNPedia

1996

DNA

MOUSE GENETIC MAP COMPLETED The lab mouse is valuable for genetics research because humans and mice share almost all of their genes, and the genes on average are 85 percent identical. The mouse genetic map increases the utility of mice as models for genetic disease in humans.

1990

2000

LAUNCH OF THE HUMAN GENOME PROJECT The U.S. Department of Energy and National Institutes of Health announce a plan for a 15-year project to sequence the human genome.

HUMAN GENOME WORKING DRAFT COMPLETED By the end of Spring 2000, researchers sequence 90 percent of the human genome. This working draft sequence is estimated to be 99.9 percent accurate.

Deoxyribonucleic acid, the molecule that carries genetic information.

2003 COMPLETION OF THE HUMAN GENOME PROJECT Researchers complete their sequencing of the human genome, identifying its three billion DNA base pairs and 22,000 genes.

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YEAR by constantine von hoffman

In order to retire, you have to be willing to quit. That’s harder for Thomas Davis than it is for most people. As a professional football player, his job requires contempt for the concept of quitting. Like anyone playing in the National Football League (NFL), he has to ignore exhaustion, pain, and the 300-pound giants determined to stop him from doing his job. But even among this elite group, Davis stands out. It’s not just that the Carolina Panthers’ linebacker is a 10-year veteran in a game where the average career lasts 3.3 years, according to the NFL Players Association. It isn’t even that he’s still one of the best in the game after all these years. It’s what he has had to overcome to do that. Tearing the anterior cruciate ligament (ACL) in your knee is a career-ending injury for most athletes. Davis has torn his three times, the last time in 2011. No one else in the NFL has ever come back from three ACL injuries. Davis didn’t just come back, he triumphed. He had three consecutive seasons with 100 tackles, and he had the best year of his career in 2013, starting all 16 games and recording a career-high 123 tackles and 4 sacks.

DAVIS

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As if those accomplishments didn’t make him stand out enough, there’s his attitude. Davis is even grateful for those injuries. “When I look back and reflect on having ACL injuries three years in a row, I feel like, from a football standpoint, it has given me time to refresh and rejuvenate the rest of my body as a whole,” he says. “So I haven’t taken the beating that a normal 10-year linebacker would have taken, from an overall standpoint.” Quitting is such a foreign concept that Davis says he hasn’t put much thought into what comes after football. “I really haven’t put a lot of thought into [retirement] because my main focus has been putting everything I have in me to prolong my football career and make sure that I’m the best player that I can be right now.” That said, money was always on his mind when he was growing up, because his family didn’t have much. He majored in consumer economics at the University of Georgia after a tough childhood. His single mother worked hard but, even so, there were times he had to boil water to take a hot bath, run an extension cord from a neighbor’s house to have light, and make do at Christmas with nothing under the tree. He knows firsthand all the things that can go wrong when someone fresh out of college and coming out of a hardscrabble background is suddenly given a whole lot of money.

“When I look back and reflect on having ACL injuries three years in a row, I feel like, from a football standpoint, it has given me time to refresh and rejuvenate the rest of my body as a whole. So I haven’t taken the beating that a normal 10-year linebacker would have taken.”

“You come in as a young kid into the league, and you see the numbers in your contract, and you think that the numbers are real,” says Davis, who will earn a base salary of $7,250,000 in 2015. “But you have to think realistically when you sign a contract and understand that there’s a lot of money you will never see from it.” That money goes to everything from taxes to sports and booking agents to the various other fees. “I think guys have to take their time and really see the whole number, understand what they’re going to take home, what they’re allowed to spend, and what they need to be saving.” Continued on page 14

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CHARITABLE EFFORTS Davisâ€™ off-the-field impact has been just as great. He and his wife, Kelly, run the Thomas Davis Defending Dreams Foundation. This nonprofit enhances the quality of life for more than 2,000 underprivileged children and their families each year. Since 2007, the foundation has distributed more than $500,000 in aid. Davis is hands-on with every aspect of the organization. He attends each board meeting and fundraiser and assists with the coordination of every event. Davis is also an active participant in the Thomas Davis Youth Leadership Academy, the foundationâ€™s cornerstone program. This 16-week, after-school program provides mentoring for low-income middle school students on etiquette, public speaking, community service, nutrition, writing, debate, leadership, critical thinking, conflict resolution, and academic achievement. This cause is both personal and important to Davis. In August 2011, he became the first member of his immediate family to graduate from college.

Photos coutesy of the Thomas Davis Defending Dreams Foundation.

THE WALTER PAYTON NFL MAN OF THE YEAR Each year, the National Football League honors a player with the Walter Payton NFL Man of the Year award. The NFL bestows this award on a player in recognition of volunteer and charity work, as well as excellence on the field. Previously called the NFL Man of the Year Award, the award was renamed in 1999 to honor the humanitarian legacy of Chicago Bears running back Walter Payton. Payton, who died that year, was recipient of the award in 1977. A panel of judges selects the winner from 32 nominees, one from each of the NFL’s teams. These players represent the best of the NFL’s commitment to philanthropy and community impact. This year’s panel included NFL Commissioner Roger Goodell, former Commissioner Paul Tagliabue, Connie Payton, football hall-of-fame members Frank Gifford and Anthony Muñoz, 2013 winner Charles Tillman, and Sports Illustrated writer Peter King. The Man of the Year winner receives a $50,000 donation in his name to a charity of his choice. Two other finalists receive $10,000 donations in their names. The other nominees also receive $5,000 donations to charities of their choice.

Continued from page 12

Davis understands the intoxication that can come from sudden wealth and fame, but his long career has given him perspective. He stuck around long enough to benefit from the advice of veterans about life off the field, advice he now passes on whenever he can. He has also learned from other people’s mistakes, watching former teammates go broke. That is why, despite his protest that he only focuses on today, he is well aware of what can happen financially and personally to players who retire without planning for it. “You don’t want to end up a statistic,” he says. “You see the numbers, and you understand what goes on in this league when the guys retire. The divorce rate is extremely high, and you want to do everything to fight against those things.”

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While the public may think players get into money trouble because they spend excessively on fancy cars and the like, Davis says the truth is very different. “Many guys don’t end up going broke from having bad spending habits but from trying to take care of everybody in their families,” he says. “As humans, we feel obligated to make sure that everybody else is OK, especially if you come from a background like mine where so many people are struggling, and you’re the guy that made it, and you feel like you want to help out.” Davis’ desire to help others is what led him to create the Thomas Davis Defending Dreams Foundation.

“Many guys don’t end up going broke from having bad spending habits but from trying to take care of everybody in their families. As humans, we feel obligated to make sure that everybody else is OK, especially if you come from a background like mine where so many people are struggling, and you’re the guy that made it.” “The biggest inspiration to start our foundation was how I grew up ... understanding the struggle that my mom had raising me and my sister,” he says. “My wife had a similar struggle growing up in a single parent household. We understood the need.” The foundation helps thousands of underprivileged kids with programs such as a school supply drive, football camp, and Christmas gift giveaway, as well as a Thanksgiving meal program that feeds battered women and children. In addition to that, its Youth Leadership Academy awards two college scholarships every year. Two years ago, he led the construction of the first and only playground in his hometown of Shellman, GA. He also runs a free football camp that, each year, provides more than 350 children with instruction in football fundamentals and life skills. That is just part of the work he does in the community — work that last year earned him football’s most prestigious individual award. “The Walter Payton [NFL Man of the Year Award] is one of the highest awards you can receive as an NFL player,” says Davis. “Not only does it recognize the work you do on the field but also the work you do off the field. That’s very important — being able to do community service and give back and help families and kids out.”

Thomas, and his wife, Kelly, attend a Great Gatsby themed fundraiser event held by the Defending Dreams Foundation.

THOMAS DAVIS DEFENDING DREAMS FOUNDATION Founded in February 2008

MISSION To defend the dreams of disadvantaged students by providing them with opportunities and resources to enable them to strive for excellence in school and life, to build strong character, and become great community leaders.

Davis doesn’t believe in quitting when it comes to helping others any more than he does when it comes to sacking a quarterback. The ability to continue doing community service is really at the heart of what Davis eventually admits are his long-term financial goals. “When I leave this game, I don’t want to leave owing anybody any money or having any debt,” he says. “We’ve put a good [financial] plan in place and make sure we stick to the plan. That’s been important for me. I’m excited about where I am financially. Now it’s all about continuing to grow from there.”

www.DefendingDreams.org 13000 South Tryon Street, Suite F Box 259 Charlotte, NC 28273

by neil downing

Summer | 2015

There is a seldom-publicized tool you can use to ensure that nonretirement investment accounts also pass directly to beneficiaries upon your death. It is called transfer-on-death registration or TOD registration, for short. Following is a summary of TOD registration, how it works, and how it may play a role in your estate plan.

TRANSFER OF ASSETS When someone dies, the person leaves behind assets intended for heirs or other beneficiaries. When this happens, “There’s got to be some orderly process to move assets from an individual to other individuals or an institution,” said Edward M. Mazze, a former dean of the Belk College of Business at the University of North Carolina at Charlotte. The process can be straightforward. Suppose that Mason and Olivia are married, all of their assets are in accounts registered as joint tenants with right of survivorship, and Mason dies. In that case, the assets generally will pass to Olivia, outside of probate. But what if the decedent is not married at the time of death? Depending on the nature of the assets and other factors, it may take time until that person’s assets pass into the hands of beneficiaries, said Karen Denise, senior manager in the CAPTRUST Wealth Operations Group in Raleigh, NC. In some cases, it could take several months or longer, especially if the assets must first go through probate, Denise said.

WHAT IS PROBATE? Probate is the court-supervised, legal process triggered when someone dies. Probate has its advantages. For example, through probate, the validity of the decedent’s will is determined; property and other assets are marshaled, inventoried, and valued; and disputes among creditors and will contestants can be heard and resolved. If there is no will, assets generally pass according to terms of state law as part of the probate process. In some states and for small estates, beneficiaries can expedite the probate process. Too often, however, probate can take a while. “You can’t just take your assets on Monday and give them to someone on Tuesday,” said Mazze, Distinguished University Professor of Business Administration at the University of Rhode Island. Probate “can be cumbersome, costly, and time-consuming,” said Danny Summerlin, CFA, a senior vice president and financial advisor with CAPTRUST. With TOD registration, the account goes directly, without any restrictions, to the named beneficiary, sidestepping probate. Assets can also pass directly to beneficiaries by means of certain trusts. However, trusts can be complex and costly to establish and administer, Denise said. TOD registrations, on the other hand, are easy to set up and administer. More importantly, they enable heirs to receive their shares quickly.

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TOD REGISTRATION ADVANTAGES Some advantages of transferon-death registration: Allows owners of investment securities to designate beneficiaries

TOD RIGHTS If you name a beneficiary through a TOD registration, the assets in your account remain in your name and control. The account does not pass to the beneficiary or beneficiaries until your death. No beneficiary has ownership or other rights to the account while you are alive. During your lifetime, you also have the right to change your beneficiary designation or revoke it at any time without the beneficiary’s knowledge or consent. “You can change the beneficiary designation with great ease,” Summerlin said. In addition, he said, “there is no cost to change the beneficiary designation as there would be in modifying a legal document, such as a will or a trust,” he said.

Provides a simple method for registering a beneficiary

You can name more than one beneficiary for each account. The beneficiary need not be a relative. It could be a friend or neighbor — or even a charity or trust. It’s up to you to choose.

Preserves owner’s control over the securities

HOW IT WORKS: OWNER

Preserves owner’s power to revoke beneficiary designation Bypasses probate so beneficiaries obtain ownership directly at owner’s death

DISADVANTAGES Some disadvantages of transfer-on-death registration: Not a substitute for comprehensive estate planning Account assets still count for federal and state estate taxes Owner could forget that beneficiary was named May not help a special needs beneficiary Most states allow it, but Texas and Louisiana do not

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Although TOD registration is well known among financial institutions, it is not among consumers, Denise said. “It’s not something people think of when they think of brokerage assets,” she said. Even so, it is widely available, and “it’s free ... there’s no cost to do it,” she said. To take advantage, ask your financial institution for a copy of its TOD form. If you work with a financial planner or other advisor, that person may be able to assist you. Complete and file the form as directed by your financial institution. TOD registration applies to the account, whether it is an individual account or a joint account with rights of survivorship, Denise said. Once the form is processed, registration of your account may be shown by the following: • • • •

the words “transfer on death,” the abbreviation “TOD,” the words “pay on death”, or the abbreviation “POD” following the name of the registered owner (and before the name of a beneficiary).

For example, if John S. Brown has a TOD account for his son as beneficiary, the account’s title may read: “John S. Brown TOD John S. Brown, Jr.”

HOW IT WORKS: BENEFICIARY Under TOD registration, your designated beneficiary steps into your shoes as the account owner upon your death, Denise said. The beneficiary can either request a cash distribution of the assets or open a new account in his or her name and have the assets in the deceased’s account transferred in, Summerlin said.

To claim the owner’s account after death, the beneficiary or beneficiaries must provide a certified copy of a death certificate and other paperwork the financial institution requires, such as an application for liquidation, forms for re-registration in the beneficiary’s name, and a tax waiver (depending on state rules).

NOT UNIVERSAL Although registering an investment account through the TOD procedure is usually a simple and straightforward affair, there are some issues to keep in mind. For example, while TOD registration is widespread, it is not universal. It is made possible through the TOD Security Registration Act, developed in 1989 by the National Conference of Commissioners on Uniform State Laws, also known as the Uniform Law Commission. Since then, most states have adopted the uniform TOD law. Texas and Louisiana have not, said Katie Robinson, deputy legislative director and communications officer for the Uniform Law Commission. Also, the law does not obligate financial institutions to offer the TOD feature; it is up to the brokerage, bank, mutual fund, or other custodian of non-retirement investment securities. Most offer the TOD option; some do not. While the TOD beneficiary designation form itself is fairly standard throughout the industry, there are variations, much as there are with beneficiary forms for IRAs and 401(k) plans. So it pays to scrutinize your financial institution’s TOD form to make sure it meets your needs. And remember that if you live in a community property state, special rules apply.

“It’s [TOD registration] not something people think of when they think of brokerage assets. Even so, it is widely available, and it’s free ... there’s no cost to do it.”

— Karen Denise

POTENTIAL PITFALLS One of the TOD option’s chief advantages—its simplicity—can also be one of its disadvantages, depending on one’s circumstances. If you have a complicated estate plan or would like to use your assets in a particular way after your death, the TOD option may not be best for you. Suppose that Sandra wants her investment assets to be used exclusively to pay for the education expenses of her surviving nieces and nephews—and only when they have achieved a certain goal (college graduation, for example). In that case, the TOD option would not work well; Sandra’s investment account would pass directly to her nieces and nephews upon her death with no strings attached. Similarly, someone with children from different marriages, or a child with special needs, may be better off leaving assets in trust, with carefully laid plans for supervision and distribution. Continued on page 20

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Furthermore, “You do not want to name minor children as your beneficiaries” because such a move could be complicated by issues involving guardianship, Summerlin said. A TOD registration is “not the best solution for minors, but a very good solution for adult loved ones,” he said.

DEATH AND TAXES Another point to remember is estate expenses and liquidity. For example, will there be enough assets to cover estate taxes?

which is especially important for people with larger estates and complex financial and family situations. Broadly speaking, estate planning means “getting everything in order” in advance, Mazze said. It may include establishing a will; drafting instructions for your care should you become incapacitated before you die; arranging for a guardianship for minor children; and planning for those with special needs, for example. Estate planning is also important “because it gives an individual as well as a family … an idea of what property exists and where that property is located,” Mazze said.

The TOD account’s underlying assets will be counted for purposes of any As part of the estate planning process, perform a checkup at least anfederal estate tax and state death tax that may apply. In general, the point nually or when there is a major life event, such as a death in the family at which the federal estate tax kicks in—known as the threshold, or exempor a divorce, to make sure that the beneficiary form is current and that tion amount—is set at $5.43 million for the account with a TOD registration 2015, so many estates will not be affected still fits with your plan, Denise said. by the tax. Still, several states have their “If they’re not correct, your wishes at Estate planning means “getting own estate taxes, some with thresholds death may not be fulfilled,” she said. everything in order” in advance, far below the federal one. As Summerlin noted, “Regardless of Mazze said. It may include The lesson: in the event you decide what the last will and testament stiputo use TOD registration, you should lates, beneficiaries named in the TOD establishing a will; drafting also plan to set aside enough cash to trump what the will says.” So make sure instructions for your care should pay any tax that may be due, as well as in advance that the two do not conflict. you become incapacitated funeral and other such expenses. Because one’s estate may be complicatbefore you die; arranging for a ed, and because the process of estate planning can itself be complex, “you CONCLUSION guardianship for minor children; should get professional help” before TOD registration is not a substitute for and planning for those with making decisions, Mazze said. careful and effective estate planning,

special needs, for example.

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BREAKING THROUGH

MONEY SILENCE

Tips for Talking to Parents About Money by kathleen burns kingsbury

The taboo against talking about money runs deep in our society. In fact, 70 percent of families fail to pass down wealth due to a lack of effective family communication about money.1 Many parents don’t have a roadmap for educating their children about wealth or impart them with the information they need to make sure their family legacies lives on. According to a survey by Charles Schwab, 69 percent of parents feel more prepared to talk to their teens about sex than investing.2 It is no wonder that so many adult children don’t know how to talk to mom and dad about money. It may be the first time they have discussed finances with their parents. If you are an adult child struggling to talk to your parents about money, you are not alone. Common fears range from “I don’t want to badger my mom about her estate” to “I worry they will see me as greedy or ungrateful.” In reality, inviting your parents to discuss their financial and estate plans with you (and your siblings) is a caring gesture. While they may be reluctant at first, breaking the family money silence can make a difficult life transition less

complicated, both emotionally and financially. It also provides a roadmap for how future generations can address these same concerns with less angst. CAPTRUST Financial Advisor Michael Blair works with families often and encourages both parents and adult children to communicate about these matters before it’s too late. He feels that many parents who want to keep their kids in the dark about their inheritances fear losing control. His best advice is to approach them in a way where they think “it was their idea to talk.” He encourages the children to consider what might motivate their parents to open up. “If they hate paying taxes, frame the discussion as a way to make sure the majority of their estate doesn’t end up with the government.” Continued on page 22

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Too often, family money conversations begin during a crisis. CAPTRUST Financial Advisor Teri Parker encourages clients to be proactive. She suggests holding regular family meetings. “The dynamics are different in every family,” and these meetings help address concerns. She encourages her clients to “make her the bad guy.” She advocates for and facilitates these meetings. Teri finds that these discussions provide a useful foundation for when a parent dies, an event that can leave surviving members feeling overwhelmed. “It adds a layer of simplicity to a difficult situation.”

Here are seven tips to help you break through your family’s money silence and start talking about finances:

1 2 3 4 QUESTIONS TO GET THE CONVERSATION STARTED

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Extend a calm and loving invitation. Find a quiet time to ask your parents to engage in a financial dialogue with you. Avoid busy holiday times or distracting settings. While you may want to talk about money today, remember, your parents may need some time to adjust to the idea. It’s best to collaborate on a time and place to begin the discussion. Limit the time for each meeting. Keep the agenda for each conversation short. You may have a million questions, but asking one or two at a time is better than overwhelming your parents with inquiries. Remember, this is a journey not a one-time event. Let your parents be in control. A big part of aging is dealing with a loss of control over physical and mental health. Elderly parents know that, in time, they will need more support but often don’t want to face this reality. When discussing how you can help with financial matters, assure them that you are not attempting to take over their lives. Instead, you are offering to help them as they age. Don’t attempt mind reading. It is easy to make assumptions and jump to conclusions about what your parents are going to say or want from you. Fight the urge to read their minds and ask curious questions to elicit more information instead. The goal is to listen to your parents’ plans and wishes. Allow them to do the talking and you do the listening.

What do you consider your biggest financial success and why?

What is your biggest financial concern right now, and how can I help you with it?

5 6 7

Expect and accept differences. Everyone in a family has a unique perspective on family matters. Go into the conversation with an open mind, knowing that you, your siblings, and your parents may have different ideas about what is best. Work to understand these differences rather than trying to convince your family your plan is the only way to proceed. Take a time-out if tempers flare. Talking about money can be emotional. If the conversation gets overheated or a family member gets defensive, take a time-out. Set another meeting date in the near future that allows everyone to calm down and refocus on the task at hand. The most effective communication happens when all parties are open to hearing each other rather than fighting. Consider using your financial advisor to help start the conversation. Financial advisors are great resources when it comes to helping families talk about money, estate plans, and end-of-life wishes. Don’t hesitate to use your advisor as a resource for information, support, or guidance on this topic. You can role-play the conversation with your advisor as a way to anticipate and overcome any roadblocks that may arise. Or he or she can serve as facilitator in a family meeting. Either way, having a neutral party with financial expertise present can be an effective approach for moving the conversation forward.

What did your parents teach you about money, and how did that impact how you handle financial matters?

What role would you want me to play should you become sick and unable to pay bills or oversee your finances?

“When I asked my father who was the executor on his will, I worried he would see it as an attempt to take over control of the family finances. Instead, he seemed relieved to finally have one of us discuss what already was on his mind.” Advisory Client, 52-year-old son, and father of two

If we see signs that your basic finances are becoming overwhelming, what do you feel are appropriate steps for us to take?

How might we work together now to set up some systems to prepare for a sudden or unexpected event?

Sources: 1 Sullivan, Missy. “Lost Inheritance.” Wall Street Journal, March 2013. Accessed April 2015. http://www.wsj.com/articles/SB10001424127887324662404578334663271139552. 2 “Parents Seek Prescription for Raising Financially Healthy Kids.” Schwab MoneyWise Parents & Money Survey, 2008. Accessed April 2015. http://www.schwabmoneywise.com/public/file/P-4054111/Parents_Money_Survey_Factsheet.pdf.

Creating a 19th-Century

LAND LEGACY by rush benton

The William Alston Rives house in Bear Creek, NC didn’t look like the kind of real estate that investors favor when Tom Mann bought it in the 1980s. The farmhouse had an outhouse and no indoor plumbing. Its appeal for Mann, 64, however, was purely emotional: Rives was Mann’s great-great-grandfather who had bought the site more than 170 years earlier. The farmhouse and the surrounding acreage link Mann, a retired financial services executive, to the past and to the future. His great-great-grandfather’s grave is on the land. And Mann’s daughter Ellen accepted a marriage proposal in 2012 on the home’s rustic front porch. Ensuring that his family and its descendants can enjoy this meaningful acreage inspired him to restore the property and, while doing so, create an enduring legacy. It also offers lessons to others who would like to buy and restore property to create a personal and financial legacy. Mann, a North Carolina native, discovered the house on a visit during the 1980s. He asked his mother about her childhood recollections

Summer | 2015

of the house and then started his quest. He bought it and the five surrounding acres. He learned that his great-great-grandfather had done business from a small first-floor room. “The state historian could tell that’s how it was used,” Mann says, “because the room has a door to outside so business visitors wouldn’t have to enter the parlor.” Mann didn’t have any grand plans as his uncle and father restored the house. That changed, however, after he moved back to North Carolina in the mid-1990s. He noticed urban sprawl from areas like Chapel Hill, home of the University of North Carolina, about 30 miles away.

To help reduce accidental fires and promote new growth, controlled fires are occasionally held on the property.

Tom Mann’s father, at 95 years old, continues to make cider for Chatham House Cider of Bear Creek, NC.

Eager to preserve the land’s rural character, he decided to grow his holdings from the five acres around the house to his great-great-grandfather’s 600 acres. This required a long-term strategy. “I developed relationships with landowners around the house,” Mann says. “When someone died, I was the first person who everyone called.” That effort paid off. Today, he holds about 500 acres. Mann’s passion for creating a legacy has earned him the support of his entire family. For starters, “My wife, Jane, has been behind me in every step,” he says. Their three children, two of whom live in North Carolina, love the house. His extended family, especially his cousin Jackie, is also on board. “I have wonderful relatives who’ve been helping me,” Mann says. “For example, when I went to buy a tractor, Jackie did all of the negotiating, even though I used to negotiate deals in my corporate career before I retired.” Mann is also committed to connecting his family to the land by making the Rives House available to his many relatives—at least 120 of whom have attended family reunions—for weekend use. Mann is working with the landscape architecture firm of Nelson Byrd Woltz (NBW) on a master plan for his holdings. He calls it “a forever plan.” “It won’t be completed in my lifetime,” he says.

The William Alston Rives house pictured after one of the few snowstorms in Bear Creek, NC.

Jeremy Jordan, manager for Mann’s project, and a member of NBW’s Conservation Agriculture Studio, says the plan encompasses three overlapping areas of stewardship: timberland, pasture, and wildlife habitat. Until recently, the property was managed solely as a timber plantation. The NBW plan involves clearing some timbered land for pasture to graze cattle, and creating wildlife habitats and meadows. “This was born out of an idea of creating vistas and views to a natural landscape that would also embellish the natural ecology of the site,” Jordan Continued on page 26

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says. There’s a more personal goal, too, Mann confides: “My wife, Jane, wants to sit on the porch and see cows.” Jordan’s colleague Breck Gastinger says, “It’s not just about creating pretty pictures.” Instead, the master plan gives a nod to the Rives House’s history as a farmhouse, a connection lost with the shift from agriculture to timber. “In addition, the plan creates diverse habitats, resists the spread of exotic invasive plants, and creates food sources for pollinators, and buffers for streams and wetlands,” Gastinger says.

“This was born out of an idea of creating vistas and views to a natural landscape that would also embellish the natural ecology of the site,” Jordan says. There’s a more personal goal, too, Mann confides: “My wife, Jane, wants to sit on the porch and see cows.”

Above: The dining room of the William Alston Rives house.

STEPS TO TAKE BEFORE YOU BEGIN A LAND PROJECT • Identify your goals and values. This will help your advisors to advise you better. • Determine whether your children and other family members feel as you do. If they don’t love your property and share your vision for its future, it’s better to allow the property to be sold after your death, Bullard says. • If you do not already have land, Gastinger suggests that you look for property with which you feel a personal connection. In the American southeast, NBW sees a trend of people buying large timber plantations and converting them back to habitat for hunting preserves or to be more sustainable. • Find the right helpers. Mann says he avoided major mistakes because he waited until he found the right people to help him.

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NBW makes long-term plans. It’s unrealistic for landowners to expect “euphoric landscape bliss” right away, Gastinger says. “When a building or house is completed, it looks best on day one. Landscapes look raw on day one. There’s power in waiting and accepting that there’s a tremendous future ahead.” A project of the scope that Mann has undertaken demands a significant financial commitment, which requires help from his financial advisor, lawyer, and accountant, who have collaborated. A limited liability company (LLC) funded with enough assets to cover maintenance and improvements owns the Rives House. An LLC has many advantages as a vehicle for leaving a legacy, says Mann’s attorney, Matt Bullard of Wyrick Robbins Yates & Ponton in Raleigh, NC. An LLC allows the initiator to maintain control over the property. It’s a better vehicle for controlling property through the generations because the majority rules, says Bullard. Without an LLC, dissenting individual owners could seek to have the property partitioned by the court, resulting in the sale or breakup of the property that Mann has so painstakingly assembled. An LLC also holds the potential to reduce eventual estate taxes. “If you make a gift early, you remove appreciation from your taxable estate,” Bullard says. Also, because property in an LLC can’t be freely liquidated, its value is discounted for estate tax purposes. To understand the tax consequences of every significant move, Bullard suggested that Mann ask his accountant to do a mock-up of his current year’s tax return. “There can be counterintuitive results,” he says. LLCs are not only for the very wealthy. Bullard said it could be a viable option even

The kitchen area of the William Alston Rives house.

for a $100,000 home, as long as the LLC also includes assets to pay for the home’s upkeep. If young children are involved, Bullard suggests that a generation skipping or perpetuities trust own the LLC rather than the children themselves. This arrangement offers advantages for estate taxes and creditor protection.

Tom and Jane’s children and son-in-law pose on the house’s porch.

My grandmother used to say, “You take to heaven what you give away.” He would like to head to heaven feeling good about having helped less fortunate members of society, in addition to his family.

Aside from the Rives House, Mann is also creating a legacy through the Tom and Jane Mann Family Foundation, which he established to make educational opportunities available to minority children and children with challenging family dynamics, such as children in foster homes or children of abused women. Mann says “My grandmother used to say, ‘You take to heaven what you give away.’” He would like to head to heaven feeling good about having helped less fortunate members of society, in addition to his family. 27

READER Q & A In this issue, we tackle questions from readers looking for higher yields on their cash holdings, insight into the impact of a strong dollar on investment portfolios, and tips to help prevent identity theft.

Where can I invest my cash holdings to generate better returns than lowyielding bank products? We expect interest rates to remain low for the foreseeable future. In this environment, while a Federal Deposit Insurance Corporation (FDIC) guarantee may be reassuring, bank savings and money market accounts will continue to deliver meager returns. As a result, you may want to consider alternatives to traditional cash investments. A few options you may want to explore include:

In this environment, while a Federal Deposit Insurance Corporation (FDIC) guarantee may be reassuring, bank savings and money market accounts will continue to deliver meager returns.

• FDIC-insured money market funds provide daily access to your money and offer the same FDIC guarantee as traditional bank products, but offer the lowest yields of these alternatives. • Short-term U.S. Treasurys carry the full faith and credit of the U.S. government. However, keep in mind that your principal will fluctuate. Less fluctuation for shorter maturities; more for longer maturities. • Certificates of deposit (CDs) are FDIC insured up to $250,000 (per issuing bank) and are available with maturities up to five years. They are subject to liquidity risk; if you need your money before maturity, you may receive less than the principal amount invested. • Short-term fixed annuities provide a fixed interest rate for a specified period, usually one to five years. They offer higher rates than comparable-maturity CDs, but are not FDIC insured. The issuing insurance company guarantees the interest rate and principal, so you should consider the company’s credit quality. Withdrawals may be subject to a surrender charge if you need your money before maturity. • Short-term corporate bond funds are mutual funds that invest in short-term corporate fixed income securities. They offer daily access to your money and higher yields than comparable-maturity fixed annuities or CDs. However, their principal can fluctuate, so you may get back less than you invested. While these alternatives may generate higher yields, each has its own set of risks you should consider before investing.

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How does a strong U.S. dollar affect investment portfolios? This is a timely question in light of the dollar’s recent strength versus key trading partners’ currencies. The dollar has risen more than 20 percent over the past year due to views that the U.S. economy is in better shape than its global peers. But what does this mean for portfolios? Currency exchange rates affect asset class returns in different ways. Some are more responsive to currency movements than others. Stocks. Large U.S. companies selling products and services outside our borders may receive revenue in a country with a depreciating currency. This can reduce their earnings. Further, many of their costs may be denominated in dollars, which makes a strong dollar a double-whammy. Some global technology and consumer products companies have seen this effect. Of course, the reverse is true as well. Large European and Japanese exporters are seeing improving earnings, thanks to higher demand for their products in the United States. Small- and medium-sized companies tend to sell less of their products and services abroad, so they are less affected by currency fluctuation. Bonds. The bond market can be more complicated. Bond prices waver due to changes in central bank policy, anticipated inflation, and changes in credit quality, among other influences. Currency movements take their cue from these same influences, often reacting to the bond market. This means that higher interest rates in one country can lead to currency appreciation as global investors sell their local investments to invest in a higher-yielding country. Right now, U.S. interest rates are higher than corresponding levels in Japan and most of Europe. This is one of several factors helping to support bond prices and keep interest rates low here in the U.S. Commodities. The strong dollar’s impact on commodities is fairly straightforward. Because they are priced in dollars, a strong dollar makes commodities more expensive for non-dollar holders. The dollar’s ascent is one of the reasons commodities have had an especially challenging time in recent months. The bottom line is that currency movements are difficult to predict and tend to cancel each other out over time. This phenomenon leads us to advocate for well-balanced portfolios that include the stocks of large, medium, and small U.S. companies, international stocks, and bonds.

The bottom line is that currency movements are difficult to predict and tend to cancel each other out over time.

A strong U.S. dollar won’t last forever, so enjoy it while you can. Many extraordinary memories are formed when traveling; use this dollar strength to go and explore the world. Bon voyage! Continued on page 30

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Identity theft is frequently in the headlines. What can I do to prevent it and keep my finances safe? Financial identity fraud occurs when a criminal assumes a person’s identity to conduct financial transactions in that person’s name. It often starts when personal information—such as a Social Security number, brokerage account number, or an investment account balance—is taken from an email. Criminals may also hack an investor’s email account for financial advisor contact information. The thief then sends what appears to be an email from the client to the financial advisor with a request to transfer funds to a third party. To the advisor, the email appears to be from the client. The following list provides best practices to help reduce your risk of identity theft: • Keep your usernames and passwords private, and do not save them on your computer. Sharing this information, even with those you trust, increases your exposure to identity theft. • Check your account information. Diligent review of your financial accounts and statements will help identify suspicious activity quickly. Immediately contact your financial institution if you see transactions you do not recognize. • Be alert to notifications from the financial institutions you do business with. A transaction or change to your mailing or email address should prompt a notice to your previous address of record for security purposes. • Review a copy of your credit report at least once a year. This will allow you to see any accounts opened in your name without your knowledge. You can order a free credit report by calling 877.322.8228 or visiting www.annualcreditreport.com.

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• Change your account passwords every 45 to 90 days. Strong passwords decrease the likelihood of someone hacking your accounts. Make yours at least eight characters long and use at least three of the four character types: uppercase and lowercase letters, numbers, and special characters. • Maintain personal firewalls and security software on your computer. This will block malicious software programs from accessing and transferring your personal data over the Internet. • Avoid using public computers to access financial information, and do not use free wireless connections. • If you receive an email from a financial institution requesting personal information, confirm the request via telephone before responding. Of course, your financial institutions can help, too. At CAPTRUST, we take a number of steps to protect against fraud. Among them: • We train our client service team to spot potential fraud by identifying red flags found in hacked emails. • We confirm money movement requests prompted by email via a call to the clients’ phone number on file. • We use encrypted email and DocuSign, a secure electronic signature application, to send documents for signature as an extra level of protection. For more tips, visit captrustadvisors.com/account or the Federal Trade Commission’s consumer protection site at ftc.gov/bcp.

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.

IS A VACATION HOME ALTERNATIVE

RIGHT FOR YOU? A typical vacation home—one that comes with a mortgage and limits you to one location—isn’t for everybody. Some people want the freedom to vary their location. Others seek hotel-like amenities and other services. by susan weiner

There are alternatives to traditional vacation home ownership that also offer advantages over making hotel reservations for every trip. Options have evolved since the days of the stereotypical hard-sell timeshare sales pitch. “Vacation ownership is more flexible and has more offerings than most people believe,” says Ed Kinney, global vice president, corporate affairs and communications for Marriott Vacations Worldwide Corporation. Traditional vacation homes work for some people, especially those who want a place that’s always available without the need to make reservations. Others may want to build memories in one location over time. Yet, they have drawbacks. They need maintenance and may limit your ability to visit other places. A vacation home alternative may work better for vacationers who like to roam or who don’t like to deal with taking care of a property. Some alternatives involve owning a stake in a specific piece of real

estate. Another option is vacation clubs that charge an initial membership fee and annual dues, much like a country club. In return, you gain access to the club’s units for a set number of weeks per year. Buy a condominium if you want convenience and control, says Brian Wheeler, director of real estate and development at Big Sky Resort in Big Sky, MT. “With a condominium, you don’t deal with any of the maintenance.” You can also decorate in the style that you prefer. If that isn’t an issue, consider a condominium hotel, which offers hotel rooms or units with one to three bedrooms. “In a condo hotel, the furnishings are likely owned by the condo association. You can’t put in your own couch or lamp,” Wheeler says. On the other hand, if you need to rent out your property, the condo hotel can manage that so you don’t have to deal with the renters yourself. If you seek a variety of location and lodgings, consider a hotel-affiliated vacation club. Participants in the Marriott Vacation Club, Continued on page 32

Continued from page 31

for example, can take advantage of different offerings as their needs change over time. Instead of buying a specific unit, they buy points they can use for different experiences, Kinney says. One year, a couple might take a one-bedroom villa. The next year, they might take a multi-bedroom unit for a family reunion in a different location. Different units, locations, and seasons cost different numbers of points. Reservations can be made up to a year in advance.

Photos for this article courtesy of Four Seasons Residences, which offers a variety of locations. Previous page: Four Seasons Bora Bora This page: left, Vail, CO; right, Florence Next page: Mumbai

Summer | 2015

Advantages of hotel-affiliated properties over hotels include the ability to accommodate larger groups, access to amenities such as kitchens, and the properties’ focus on leisure travelers. “It’s like a vacation home in a villa-type setting,” Kinney says. If Marriott isn’t your style, there are plenty of luxury alternatives, including private residences, residence clubs, and residence rentals, says travel agent Elaine Smith of E-destinations. “You can feel like you’re at a resort, but you also have independence and privacy in a villa or condo-like setting.” Her clients often seek out offerings by the hotel brands to which they feel allegiance, such as Four Seasons, Montage, Ritz-Carlton, and Rosewood. The ambiance of the locations may vary by brand and property.

Exclusive Resorts, which offers privately managed luxury residences with two to five bedrooms, along with access to five-star hotels and resorts, suggests that you look beyond hotel affiliates. “Hotel-affiliated vacation clubs provide access to only a select number of their properties, which are often [only] available at off-peak times and subject to an excessive amount of blackout dates. Simply put, they are discounted buying programs with restrictions,” says Adam Wegner, the firm’s executive vice president of strategy and corporate development.

Nontraditional vacation home options may also open the door to other experiences. The Marriott Vacation Club, for example, offers cruises in partnership with International Cruises and Excursions and high-end experiences in places like Tuscany with other third-party providers, says Kinney. For its part, Exclusive Resorts offers its Experience Collection that includes a Kenyan safari and watching the Kentucky Derby from a suite with VIP access to Derby parties. These alternatives aren’t for everyone. The biggest challenge may be the need to plan ahead for vacations. “I have some clients who complain because they paid and didn’t go anywhere because they didn’t plan ahead,” says Ellen Crowley, a financial advisor with CAPTRUST. Regardless, the many options available today mean that there is something for everybody. With a little research and planning, you can find the vacation spot that’s right for you.

QUESTIONS TO ASK BEFORE MAKING A DECISION Figuring out what’s important before you buy will help you make good decisions. Big Sky’s Wheeler suggests that you consider your needs over the next five to ten years, not just right now. This is particularly important for families with children. LOCATION Do you like to visit the same place again and again or do you prefer variety? If it’s the same place, a home or condominium may be right for you. Some condos, like those at Big Sky, offer vacation clubs where you can trade weeks at your unit for weeks elsewhere. SIZE AND TYPE OF UNIT If you buy a specific home, do you want a standalone house, a condominium, or townhouse? For an alternative vacation home, do you want something that’s just big enough for you? Do you want to accommodate a larger group of family and friends? Or do you want to be able to change the size of your group from year to year? BUDGET How much do you want to spend? In addition to travel expenses and annual condominium, association or other fees, you may be responsible for utilities, a golf club membership, and other expenses. A house or condo may bring in some offsetting rental income. ABILITY TO PLAN AHEAD Can you plan your vacation well in advance? If you choose an option other than traditional home ownership and wait until the last minute, your desired location may not be available. AMENITIES Do you want easy access to a spa, golf course, or kiddie pool? Other amenities? List your must have items before you start shopping.

PROTECTING YOUR

PASSIONATE INVESTMENTS by monica keehfuss Vice President | HUB International Insurance Services, Inc.

A growing number of people are adding to their traditional investments in stocks, bonds, and real estate by transforming their passion for collectibles into more than a hobby. These collectors recognize that items such as fine art, wine, antiques, and other unique objects can gain value over time in much the same way as traditional investments. They may even act as a complement to more traditional investments.

The term “passionate investing” is a fitting name for this type of asset, because the value of these items transcends monetary value to include aesthetic, historical, and personal value. They can truly become passions for their collectors. Items may include family heirlooms and rarities of all kinds. Collectors take great pride in the pieces they have curated, often viewing themselves as guardians of history. Yet despite the sentiment that can accompany this kind of investment, many people fail to devote the same attention to managing the risks involved with passionate investments that they do with more traditional investments. Considering the natural and criminal disasters that can befall these collections, curators face a unique situation when it comes to their security. Understanding these risks—and how to mitigate them—can prevent a world of heartache.

HERE ARE 10 STEPS COLLECTORS CAN TAKE TO PROTECT THEIR PASSIONATE INVESTMENTS: 1. Assemble the right team of experts. Collectible prices fluctuate based on unpredictable factors, including market demand, taste, and critical perspectives. It’s essential to understand asset values and potential loss exposures. Creating a team with broad expertise in loss mitigation and prevention is the first step to manage the risk of loss. 34

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The right team of experts should include: • An independent insurance agent or broker, • An insurance company specializing in the risks and issues you are concerned about, • Various appraisers, • A financial advisor, and • An art conservation laboratory for pre-and post-loss advice and services.

2. Establish a system for tracking and valuing items. The larger a collection grows, the more important it is to have a system in place for the regular tracking and valuation of items. Pieces in large collections are often poorly documented or documented using outdated methods that fail to account for rising values. Consider purchasing collection-management software to track details such as the name of the object, size, condition, purchase date, appraisal record, and other key attributes. Keep your records up to date and store them off-site and in a safe location such as a bank safe deposit box or a secure, private data-hosting solution.

3. Consider where you display your items. When displaying your valuables, a little common sense goes a long way. Start by using museum-quality hanging mechanisms, and hire professional framers to hang individual pieces.

Avoid hanging paintings close to the floor where they are vulnerable to flood waters and damage from children and pets. Never display art above an active fireplace. Avoid locating collection pieces near windows where they are vulnerable to sunlight. If that’s not possible, consider installing windows that reduce ultraviolet light penetration. Never place valuable rugs, paintings, or antiques under bathrooms, laundry rooms, or any other area with the potential for pipe leakage or flooding.

4. Store your items properly. Avoid storing collectibles in an attic or basement where heat and humidity reach extremes. For items not on display, consider the services of a company that specializes in storing collectibles. If wine is your passion, store it in a temperature-controlled wine cellar. Make sure your climate-control system has a backup power supply. Place wine bottles on their sides, away from a constant light source.

5. Safeguard against fire and smoke damage. Make sure your homes have functional fire and smoke detection systems. Consider installing a waterless fire protection system that won’t damage your valuables. If you have a water sprinkler system, make sure it is adjusted so that valuable art is safe from water spray. Be sure to inform your local fire department where you store your art, antiques, and collectibles so that they can extinguish a fire without causing further damage.

6. Protect against theft. Consider investing in perimeter and external security systems. When registering collections, make sure registries keep all information confidential so as not to alert thieves.

7. Focus on the safety of items when shipping and loaning. Use professional and reputable art shippers. If you are shipping by air, consider the Transportation Safety Administration’s Certified Cargo Screening program. It allows certified art shippers to inspect and seal packages and reduces the risk of airport security damaging your items. If you loan valuable items to a museum, have your insurance agent or broker examine the museum’s insurance policy to make sure your collection will enjoy appropriate coverage.

8. Expect the unexpected. If you need to move pieces from your home on short notice (e.g., during hurricane season), create a relationship with an art transportation company, and prioritize pieces for evacuation. Continued on page 36

Continued from page 35

9. Properly insure your items.

10. Keep your policies updated.

Many collectors have not secured proper coverage for their passionate investments. Too often, they overinsure against minor risks and underinsure against major ones. In some cases, collectors avoid appraising and insuring valuable heirlooms to avoid payment of estate taxes upon death. In the process, they run the risk of their valuables being sold by heirs.

If you add items to your collection, make sure to update your coverage. The best insurance companies automatically provide coverage for new items but usually require notice between 30 and 90 days after purchase, depending on the item. Talking with your agent annually can keep you timely about changes.

Begin by choosing an insurance company that works with clients like you, and avoid mistakes by considering these often-overlooked coverages: • Valued Items Rider — Many people first discover that a standard homeowners’ policy has minimal coverage for items like jewelry, furs, and wine when a loss occurs. A valued items rider covers items worldwide, including during transit and shipping. In case of a loss, the best policies will pay market value up to 50 percent higher than the scheduled amount of coverage. • Floods and Earthquakes — If you live in an area vulnerable to flooding or earthquakes, this is essential. A basic plan usually excludes water backups, so make sure you have an all risk policy that includes unlimited backup of sewers, drains, and sump pumps. • Mold — If there’s flooding in your home, mold won’t be far behind. All standard homeowners’ policies have limitations for mold, but extra coverage can be purchased for an additional premium. • Liability — Liability insurance protects your assets if you become the target of a lawsuit. People who attempt to self-insure for liability can wind up losing everything. Individuals who want to go beyond the payouts on their home and auto policies should buy an umbrella policy with a personal excess liability limit equal to their net worth.

Natural and criminal disasters are an unfortunate and sometimes inescapable part of life. But with proper preparation you can diminish their impact. If you’re a passionate investor, you know the care and attention that has gone into curating your collection. Don’t leave your investment vulnerable. You should give the same level of consideration required for your traditional investments to your passionate investments. Make sure your unique and valuable items have the safety net they deserve, and don’t underestimate the importance of having the right advisors available to provide sound financial advice and assist with mitigating life’s risks.

Other kinds of liability insurance are available as well. In today’s datadriven world, cyber liability is a huge consideration. If you conduct business online, you will need protection against loss created by the use of the Internet in business and at home. You also may want to consider directors and officers liability insurance if you serve on notfor-profit boards.

If you’re a passionate investor, you know the care and attention that has gone into curating your collection. Don’t leave your investment vulnerable. You should give the same level of consideration required for your traditional investments to your passionate investments.

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GLOBAL CENTRAL BANKS

UNCOORDINATED COORDINATES by eric freedman

The Freedman household runs at a busy, often frenetic pace. My wife, Jamie, and I have demanding jobs; our three kids are spread between different high, middle, and elementary schools; and each plays competitive sports that demand considerable travel. These factors find Jamie, the kids, and me rarely in the same place at the same time. During a recent evening when we were all under the same roof, we introduced our 7-year-old, Conner, to the classic game Battleship. For the uninitiated, the game’s object is to guess where your opponent has placed five ships on his hidden game board faster than he can guess your ships’ locale. Both sides exchange coordinates, hoping to hear their opponent say “hit” rather than “miss.” Conner teamed up with his middle sister, Elle, and proceeded to call out his first guess, to which I replied “Miss!” I called out coordinates C7, to which Conner replied, “Miss…but you’re awfully close.” Despite pleading with an initial disapproving “Conner!” Elle couldn’t help but laugh. Capital markets have been watching salvos of a different sort, with global central banks offering clues about their intentions. Central bank

policy remains the dominant force driving markets; the European Central Bank, the Bank of China, the Bank of England, the Bank of Japan, and most prominently the U.S. Federal Reserve, have dwarfed all other factors. We have seen a positive and, in our opinion, causal relationship between central banks’ asset purchase programs and riskier asset performance. When central banks have announced and carried out policies resulting in their buying of financial assets like bonds and, in some cases, stocks, both stock and bond prices have increased in value. As a recap, global central banks acted in a coordinated fashion during the financial crisis, enacting policies to stabilize financial markets and heal economies. While critical events occurred before and after, those Continued on page 38

Continued from page 37

of us who lived through it cite September 2008 as the weeks where decades of radical change occurred overnight. Once-venerable investment banks disappeared into fire-sale mergers and—in one notable case—bankruptcy, lenders ceased to do business, and unemployment skyrocketed. Central banks responded by cutting interest rates and establishing asset purchase programs to replace paralyzed consumer and business demand. They also provided capital and assurances that they would ensure capital markets could function.

recent price levels are more subdued. Japan is an exception, thanks to its pro-growth policies. Inflation expectations, which central banks emphasize when considering monetary policy decisions, also remain subdued. Low future inflation is a concern since, as the latest release of the Bank of England’s Monetary Policy Committee suggests, “lower expectations of inflation and wages might persist and become at least partly self-fulfilling.”3

Japan has lived through this self-fulfilling prophecy, with its economy suffering two decades of stagnant prices. Almost seven years after This April marks two years those fragile times, econosince Japan embarked on mies and financial markets unprecedented pro-growth are in disparate conditions. policies. Despite recent 1 The U.S. and United increases noted earlier, polKingdom2 economies have icymakers expect Japanese shown signs of durable consumer and producer growth; members of their price levels to be well below central banks have noted their targeted levels with no – VLADIMIR LENIN progress, but they remain respite in sight.4 Japanese concerned about stagnant authorities are hoping large price levels and low inflation. Inflation is the kinetic energy of an econmanufacturers will raise wages in coming months. But, while higher omy, and both central banks’ desired level is 2 percent. As Figure One wages could lead to more consumption, demographics make sustainshows, economies have emitted inflation levels within that range, but ably reviving that economy a challenge.

“Sometimes decades pass and nothing happens; and then sometimes weeks pass and decades happen.”

Figure One: Select Country Consumer Inflation, September 2007 – February 2015 10% 8%

China

United States

Japan

Eurozone

6% 4% 2% 0% -2% -4%

2008

2009

2010

2011

2012

2013

2014 Source: Bloomberg

Summer | 2015

Europe, which has followed its own path since 2008, fears the Japanese experience. After years of false promises, European Central Bank President Mario Draghi announced a $1.3 trillion stimulus program in January. The program, which runs through September 2016, emphasizes bond purchases intended to restrain Figure Two: DXY Index, January 1967 – April 2015 borrowing costs for consumers and businesses 170 while encouraging spending. European stock markets have rallied in response, even amid tensions over Greece’s status in the Eurozone.

160

150 In the board game version of Battleship, the goal is to find your opponents’ ships. In the central 140 banking version, some argue the goal is to depress 130 your currency so that your exports become more attractive to foreign buyers, providing another 120 demand source to bolster your economy. Some 110 economists argue that in the long run, a stronger currency is better than a weak one, while many 100 central bankers appear to believe that short-term 90 currency depreciation is a necessary first step toward stabilizing prices. The United States appeared 80 to be in the latter camp soon after the financial crisis, with the dollar falling against its major trading 70 partners’ currencies through the spring of 2011, 60 rallying a little, and then remaining flat for almost 1970 two years. Recently, with the Federal Reserve hinting at higher interest rates relative to Japan and Europe, the U.S. dollar has shown considerable strength. All else equal, higher interest rates in one country will result in a stronger currency for that country relative to others. Figure Two charts the U.S. dollar against an index of six of its major trading partners. On the 40-year scale of this chart, the dollar’s recent strength appears to be a blip. While it has moved up quite a bit, if it retraces former levels, it can move even higher. Just as Conner indicated when I nearly hit his battleship, market participants are parsing Fed members’ words to gauge how close they are to raising interest rates. Interest rate policy changes could affect both currencies and borrowing costs. Companies and consumers are worse off if financing corporate expansion plans or getting a mortgage become more expensive. Therefore, consistent with our view that central bank policy commands capital markets, we are paying attention too.

1980

1990

2000

2010 Source: Bloomberg

In the board game version of Battleship, the goal is to find your opponents’ ships. In the central banking version, some argue the goal is to depress your currency so that your exports become more attractive to foreign buyers, providing another demand source to bolster your economy.

Continued on page 40

Continued from page 39

Is the Fed close to raising interest rates? When asked that question, Fed Chair Janet Yellen appears to be invoking Conner: We’re close, but we aren’t there yet. She and her colleagues recognize that China is transitioning to a more consumer-led economy, and its growth is slowing. They realize that Japan’s process of unsticking itself may take time and that it faces a demographic headwind. On a different set of coordinates, Europe is starting pro-growth policies, even while it retains rigid labor rules and generous social programs that could undermine Draghi’s efforts. The Fed may also be conscious that the U.S. economy appears to be slowing. Slower job growth, mixed consumption data, and stagnant inflation tell us that the U.S. economy does not need much, if any, coolant. Higher interest rates could further increase the dollar’s value, making U.S. goods more expensive abroad and hurting U.S. producers.

Our chief concern, given our view that the rest of the world is unlikely to grow close to its longer-term potential, is that the Fed gets ahead of itself and moves more than needed in light of current evidence. Inflation is a high-class problem, and the conditions that would cause the Fed to embark on a prolonged inflation fight are not here yet.

We have no edge in predicting when the Fed will raise rates. To us, when it moves off interest rate levels in place since December 2008, the move will be symbolic. Our chief concern, given our view that the rest of the world is unlikely to grow close to its longer-term potential, is that the Fed gets ahead of itself and moves more than needed in light of current evidence. Inflation is a high-class problem, and the conditions that would cause the Fed to embark on a prolonged inflation fight are not here yet.

Therefore, we see assets where central banks are most active as most attractive, including Europe and Japan. We don’t think the Fed will do more than a symbolic interest rate increase before year-end. As such, parts of the U.S. bond market remain attractive, particularly compared to some of its counterparts, given recent price increases abroad. We expect bond prices to fall (and bond yields to rise), but a measured Fed should make that process gradual. U.S. stocks are at least fairly valued compared to past levels, and while corporate earnings expectations are declining versus last year, with global bond yields at historically low levels, stocks could remain a worthy alternative. However, we expect more price volatility than in recent experience. In general, our forecasts predict more subdued returns relative to history. Investors face two choices given today’s low historical interest rates and the main player in the global central bank game moving away from pro-growth policies: Accept lower returns from existing allocations, or accept more risk in an attempt to harness returns. We still see a favorable investment landscape, albeit a rockier one than B4. Pardon the Battleship pun. I couldn’t resist.

Sources: 1 Federal Open Market Committee. “Minutes of the Federal Open Market Committee Meeting.” Committee Meeting, Event from Washington, DC, January 27-28, 2015. 2 Monetary Policy Committee. “Minutes of the Monetary Policy Committee Meeting.” Committee Meeting, Event from London, England, March 4-5, 2015. 3 Ibid. 4 164th Short-Term Economic Survey of Enterprises in Japan. “Tankan Summary of “Inflation Outlook of Enterprises”.” The Bank of Japan. 164th Short-Term Economic Survey of Enterprises in Japan. Last modified April 2015. Accessed April 2015. http://www.boj.or.jp/en/statistics/tk/bukka/2014/tkc1503.pdf.

Summer | 2015

THE MARKETS SO FAR THIS YEAR In a dramatic turnaround from 2014, developed and emerging market international stocks are leading the way this year, posting returns of 9.0% and 5.7%, respectively, through May. U.S. stocks have lagged, up only 3.2%, after a banner year in 2014. Meanwhile, U.S. bonds are up only 1.0% so far in 2015, but continue to defy the expectations of many who predicted higher interest rates and lower bond prices this year.

Real Estate

27.2%

Real estate, last year’s standout, is having a lackluster year, down 1.0% in 2015. Lastly, commodities have rebounded from deep losses earlier this year, but remain in negative territory. They are down 3.2% through May. Crude oil, a big driver of last year’s 17.0% loss for commodities, is virtually unchanged this year.

MARKET INDEX PERFORMANCE International Stocks

Emerging Market Stocks

(as of 5.31.2015)

U.S. Stocks

U.S. Bonds

Commodities

13.7%

9.0% 6.0%

5.7% 3.2% -4.2%

1.0%

-2.1% 2014

-1.0%

-17.0% -3.2%

YTD 2015

LOOKING FORWARD Despite gains for many asset classes so far this year, the capital markets have encountered several short-lived periods of volatility. While this is not unusual, potential catalysts for a market pullback or more near-term volatility include: Lingering tensions over Greece’s future in the Eurozone, The strong U.S. dollar’s impact on corporate earnings, particularly large U.S. companies, Concerns about slower economic growth in the U.S., and Apprehension over when the U.S. Federal Reserve may increase interest rates.

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).

GIVING BACK The CAPCommunity Foundation, CAPTRUST’s employee-run 501(c)(3), has selected Children’s Flight of Hope (CFOH) as the firm’s fundraising focus for 2015. CFOH’s mission is to provide free air transportation to and from medical facilities for seriously ill and injured children who—due to medical, financial, or logistical reasons—are unable to reach their destinations by any other method. The organization abides by a set of principles, including compassion, responsiveness, safety, financial responsibility, transparency, and gratitude as it pursues its mission. CFOH provided more than 200 flights for seriously ill children in 2014. CAPTRUST employees, friends, and family have already held fundraisers and events to help raise money for CFOH. On May 4, CAPTRUST employees spent time volunteering with CFOH at its annual Golf Classic. The Golf Classic was the final event of a three-day fundraising weekend for the organization. The weekend also featured a Tennis Classic and CFOH’s annual Wheels Up Party, which included dinner, entertainment, and a live auction. All proceeds from the weekend go toward providing free air transportation for seriously ill and injured children. CAPTRUST employees look forward to additional volunteer opportunities to support fundraising for CFOH. To learn more about Children’s Flight of Hope, please visit www.childrensflightofhope.org.

CAPTRUST employees have given back to their communities in a variety of ways this year. Run AKPsi 5K On March 22, CAPTRUST sponsored the first annual Run AKPsi 5K in Raleigh, NC. The North Carolina State University chapter of Alpha Kappa Psi, the nation’s oldest business fraternity, organized the race to benefit the Ronald McDonald House of Durham. Ronald McDonald House provides a comforting home away from home and a community of support for seriously ill, hospitalized children and their families in Durham and the surrounding areas. 42

Summer | 2015

CAPTRUST employees Murphy Paderick, Matthew Raines, Jessica Rose, and Robert Wetzel supported the cause by running on behalf of the firm.

National Multiple Sclerosis Society’s Walk CAPTRUST’s Minneapolis office walked in the National Multiple Sclerosis Society’s Walk MS fundraiser on May 3. The National Multiple Sclerosis Society aims to mobilize people and resources to drive research for a cure and address the challenges faced by people living with multiple sclerosis. Walk MS is one of the organization’s largest annual fundraising and awareness-raising opportunities. The Minneapolis team consisted of Suzanne Brophy, Allison Danzl, Dan Esch, Evan Holmes, Lisa Tobey, and Allen Weisz. Continued on page 44

Top: Minneapolis team members Suzanne, Lisa, Allison, and Allen stand by their MS Walk “100% For a Cure Club” sign denoting that 100 percent of the money the team raised goes to the cause. Below: Client Relationship Manager Andrew Battle and Wealth Client Services Manager Michael Salmon represent CAPTRUST at the CFOH Golf Classic. Opposite page: CAPTRUST’s Detroit office holds a french toast breakfast to raise money for the CapCommunity Foundation and CFOH. Laura Vert and Jenna Hester work the griddle, while Jennifer Perkins whips up scrambled eggs.

Farewell, Hilda Bye Please join us in congratulating longtime colleague Hilda Bye on her retirement from CAPTRUST. We thank her for her service to the firm and to clients of the Charlotte, NC office — and look forward to learning more about her second act.

Hilda Bye talks with colleagues about her upcoming travel plans after her retirement ceremony.

RECOGNIZING COLLEAGUES

Beryl Ball sits with Fielding Miller while her partnership is announced to the firm.

Continued from page 43

Beryl Ball

CAPTRUST Akron

In the first quarter of 2015, CAPTRUST named Beryl Ball as an advisor shareholder partner and promoted her to senior vice president. This promotion comes in recognition of her record of contribution toward the success of the firm. Ball joined CAPTRUST in 2008 as a vice president and financial advisor in our Richmond, VA office after a distinguished career in the retirement industry. Today, she provides advisory services to more than 20 institutional clients, representing approximately $2.5 billion of plan assets and more than 60,000 participants.

In May, Crain’s Cleveland Business ranked CAPTRUST’s Akron, OH office second on its annual Largest Investment Advisers list. The Crain’s list represents the top investment and financial services firms in the region. The Akron office consists of Steve Wilt, senior vice president and financial advisor, Susan Clausen, financial advisor, relationship manager, and Paul Stibich, financial advisor, relationship manager.

Ball received her Bachelor of Arts degree in history and foreign language from the University of Richmond. She received a Master of Arts degree from Purdue University. Ball holds a Certified Retirement Services Professional (CRSP) designation.

Vic Bell The Atlanta Business Chronicle named Vic Bell to its Top 100 Leaders in Finance list for 2015. The list identifies the 100 Atlantans who most make deals happen, set standards for others, and move the financial industry forward. This is the fourth year in a row the Business Chronicle has recognized Bell, a CAPTRUST managing principal and financial advisor, with this honor.

Summer | 2015

Mark Davis The National Association of Plan Advisors named Mark Davis as one of three finalists for its 2015 401(k) Advisor Leadership Award. Davis, a senior vice president and financial advisor, works in CAPTRUST’s Los Angeles, CA office. This nomination recognizes his leadership, innovation, and contribution to the retirement plan industry.

Scott Wertheim PLANADVISER Magazine named Scott Wertheim to its 2015 list of Top 100 Retirement Plan Advisors. Wertheim is a vice president and financial advisor in CAPTRUST’s Doylestown, PA office. The PLANADVISER list scores advisors on measures including assets under

advisement, number of plans, and expertise in 403(b), defined benefit, and nonqualified plans.

Kevin Monroe In April, East Carolina University honored Kevin Monroe with its inaugural 40 Under 40 Award in Leadership. Monroe, a 1999 graduate of ECU, is a vice president and financial advisor in CAPTRUSTâ€™s Raleigh, NC office. This annual award honors 40 former student leaders who are making a difference in their professions and their communities. ECUâ€™s Division of Student Affairs presents the award in partnership with the Robert Wright Society and the Center for Student Leadership & Engagement. Right: Kevin Monroe with his 40 Under 40 Award.

CAPTRUST GROWTH CAPTRUST continues to expand its professional ranks and make news in the industry.

Heather Darcy Heather Darcy joined CAPTRUST in 2015 as vice president, financial advisor. She is responsible for providing retirement plan advisory services to corporate fiduciaries. Before joining the firm, she served as a 401(k) sales consultant with Paychex. Darcy earned a Bachelor of Arts degree in economics from Salem College and has worked in the industry since 2005.

Pensionmark Retirement Group In March, CAPTRUST announced a strategic partnership with Pensionmark Retirement Group that will create the premier platform for retirement plan advisors. The firm is making a financial investment in Pensionmark that will result in CAPTRUST owning a significant minority interest in the company.

Troy Hammond Founder, Pensionmark

Pensionmark provides retirement plan advisory services through affiliated advisors. Together, the two firms will serve more than 3,000 institutional clients with $200 billion of assets under advisement.

R. Michael Gray Senior Vice President, Financial Advisor Raleigh, NC

Michael E. Blair Senior Vice President, Financial Advisor Charlotte, NC

We believe an investment advisory firm is only as strong as the people who create the advice.

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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