VESTED Winter 2021

4 8

Gut Check

Chris Martin IV A Journey of Six Generations PLUS Tennis Adds Years Life by Design Boring Is Underrated Highspeed Healthcare

WINTER 2021

At CAPTRUST, we believe we have a profound responsibility to share our success with those less fortunate than we are. One way we do that is through the activities of the CAPTRUST Community 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.

“ Let us sacrifice our today so that our children can have a better tomorrow. �

A. P. J. Abdul Kalam

We invite you to like the CAPTRUST Community Foundation on Facebook.

COMMUNITY FOUNDATION

captrustcommunityfoundation.org | toll-free: 855.649.0943 4208 Six Forks Road, Suite 1700 | Raleigh, NC 27609

LETTER FROM THE CEO

Volume 7, Issue 1 | Winter 2021 PUBLISHER

Despite 2020’s unique challenges, we remained focused on our mission to enrich the lives of clients, colleagues, and communities. In fact, those challenges required us to raise our game significantly—taking care of concerned clients during extreme market distress, shifting to remote work arrangements, and supporting nonprofits doing important work in our many communities. But with 2020 in the rearview mirror, hopefully we can soon get back to some sense of normalcy.

This issue’s Second Act hero is Chris Martin IV, chief executive officer of The Martin Guitar Company, who’s retiring this summer. After a lifetime working at this iconic six-generation, family-owned business—including 24 years as chief executive officer—Martin is downshifting to focus on his health, philanthropy, and other interests.

This issue also features a wide range of other topics, including: • taking a design-oriented approach to life and retirement; • this importance of a healthy gut biome; • the physical and mental benefits of tennis; • the future of technology-powered medicine; and • estate planning strategies for the incoming Biden administration.

This issue’s must-read feature, “Boring Is Underrated” by Editor-in-Chief John Curry, takes a look back at the year that was for lessons on maintaining a longterm focus amid historic levels of market

J. Fielding Miller Chief Executive Officer EDITORS John Curry Editor-in-Chief

Alysa Cronin Managing Editor

EDITORIAL ADVISORY BOARD

volatility. Curry lays out a playbook on how to manage your portfolio—and your mental state—to help you stay the course through difficult markets.

Lastly, in this issue’s investment feature, Chief Investment Officer Kevin Barry and Investment Strategist Sam Kirby look ahead at their biggest worries and best wishes for the global economy and financial markets in 2021, a year that is certain to include a few surprises even as the pandemic winds down.

As always, we appreciate your article ideas, reactions, and feedback. Please keep them coming.

All the best,

Jeremy Altfeder Senior Financial Advisor

Linda McBrayer Associate II, Advisor Group

Kathleen Carlson Vice President, Financial Advisor

Jon Meyer Chief Technology Officer

Rhonda Downum Manager, Client Solutions Group

Greg Middleton Senior Director, Advisor Group

Philip D’Unger Senior Team Leader, Client Solutions Group

Steve Morton Principal, Financial Advisor

Kathleen Hopkins Manager, Advisor Group

Michelle Scarver Vice President, Financial Advisor

Mario Giganti Senior Vice President, Financial Advisor

James Stenstrom Director, Client Solutions Group

Wat Keys Vice President, Financial Advisor

Tiffany Walker Financial Advisor

Ted Lew Vice President, Financial Advisor

Colby Warren Manager II, Advisor Group

ART DIRECTION AND MARKETING Lonzetta Allen Associate Art Director

Elizabeth Altman Distribution Manager

John Curry Art Director WITH THE ASSISTANCE OF

J. FIELDING MILLER CAPTRUST Chief Executive Officer

Azul Photography Raleigh, NC

Worth Higgins & Associates, Inc. Richmond, VA

Gabrielle Burke Pittsburgh, PA

Getty Images Seattle, WA

Justin Gartman Raleigh, NC

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CONTENT AND CONTRIBUTORS

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KEVIN BARRY Kevin Barry is CAPTRUST’s chief investment officer and leads the Investment Group, the team responsible for investment manager due diligence, asset allocation, and discretionary investment management for the firm’s wealth management and institutional advisory clients.

Barry studied finance at La Salle University in Philadelphia and the University of London, where he received a Master of Science degree in financial management.

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8

JOHN CURRY As chief marketing officer, 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.

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Gabrielle Burke

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NEIL DOWNING

SAM KIRBY

Neil Downing is a Certified Financial Planner™ professional and enrolled agent, licensed by the U.S. Treasury Department 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.

As leader of CAPTRUST’s Investment Strategist team, Sam Kirby works with the firm’s financial advisors to assist clients with investment strategy, portfolio construction, and monitoring. He has 15 years of financial services experience. Kirby earned a Bachelor of Arts degree in journalism from the University of North Carolina and a Master of Science degree in management from North Carolina State University. He is a CFA charterholder.

Features 4

GUT CHECK

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CHRIS MARTIN IV: A JOURNEY OF SIX GENERATIONS

by Kim Painter

Columns 15

PASSION PURSUITS

35

LASTING LEGACY

23

EXPERT ANGLE

38

GLEANINGS

31

MARKET REWIND

39

CLIENT CONVERSATIONS

32

MONEY MINDSET

42

CAPTRUST HAPPENINGS

by Nanci Hellmich

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LIFE BY DESIGN

Tennis Adds Years (of Fun) to Life

by Jeanne Lee

The State of Estate Tax

by Neil Downing

Highspeed Healthcare

by Laura Sydell

by Nanci Hellmich

2021: TAKE TWO

Boring Is Underrated

by John Curry

by Kevin Barry and Sam Kirby

JEANNE LEE

NANCI HELLMICH

KIM PAINTER

LAURA SYDELL

Jeanne Lee is a freelance writer living in the lovely college town of Oberlin, Ohio. She has written about consumer and business topics for 20 years, including stints at Fortune and Money. Her work has appeared in publications like USA Today, Fortune Small Business, and Health. She loves thinking about ways for people to hack their finances and daydreams of paying off her mortgage before she has to pay for college for her two boys.

Nanci Hellmich, an award-winning multimedia reporter, covered personal finance, retirement, nutrition, and health for USA TODAY for more than 30 years. She now enjoys writing for AARP, encore.org, and other organizations.

She has been named a top online influencer on weight loss and nutrition. Hellmich has appeared on numerous television shows, including NBC’s TODAY Show.

Kim Painter is a freelance writer specializing in health and lifestyle issues. She was a USA TODAY staffer for many years and has continued to contribute to the newspaper as a reporter, columnist, and blogger. She lives in McLean, Virginia, where she practices what she preaches: wearing sunscreen, eating broccoli, and getting at least 10,000 steps a day.

Laura Sydell has been a correspondent with NPR for over 16 years covering the impact of technology on society and culture. Her award-winning journalism has been heard regularly on NPR’s daily news magazines, Morning Edition and All Things Considered. Prior to joining NPR, she was senior technology reporter for American Public Media’s popular radio program Marketplace, and a reporter at NPR’s largest member station, WNYC in New York City.

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. ©2021 CAPTRUST Financial Advisors. The opinions expressed in this report are subject to change without notice. This material has been prepared or is distributed solely for informational purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. CAPTRUST does not render legal, accounting, or tax advice. If you require such advice, you should contact the appropriate legal, accounting, or tax advisor. The information and statistics in this report are from sources believed to be reliable but are not warranted by CAPTRUST Financial Advisors to be accurate or complete.

Performance data depicts historical performance and is not meant to predict future results.

3

Gut Check

by Kim Painter

We humans share the world with many life forms, but none may be as important to our well-being as the ones that live inside our own bodies—especially those that live in our gut.

Maybe you’ve heard of them: the bacteria, yeasts, viruses, and other microbes collectively known as our microbiota. Or you may know them as the microbiome, the term that describes their genetic mix.

It’s a good thing we have collective names for these houseguests.

After all, there are about 100 trillion of them, mostly bacteria, in our digestive systems alone. And they are not all alike: Hundreds of species live in the average colon. So, while you don’t need to get to know them individually, you should probably think of them more than you do, health experts say.

These microbes “have a very symbiotic relationship with us,” says Sonya Angelone, a registered dietitian in San Francisco and a spokesperson for the Academy of Nutrition and Dietetics. “We need them for good health. And they need us. They’re like pets, only smaller.”

And, like pets, the microbes in our guts are forced, for good and ill, to adjust to our lifestyle choices. When we choose apples over cheeseburgers and brisk walks over sofa time, our microbes, in their

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own way, notice. They repay us for healthier choices in ways that scientists are just beginning to understand.

It now appears that these microbes play key roles in regulating the immune system and may affect a long list of conditions, including obesity, diabetes, heart disease, and, of course, disturbances in the digestive system itself. The mix of microbes in your gut might even influence your appetite and your mood.

“We think about our gut health as just about our gut, but it rules the rest of our body,” says Jill Nussinow, a registered dietitian in Santa Rosa, California, who has written several books on vegan cooking.

“When something is good for your gut, it’s good for you.”

But what is good for your gut or, more specifically, the bugs that live there? Some of the answers may surprise you.

Diversity Is Good Like fingerprints, no two gut microbiomes are the same. Your gut is different from your neighbor’s, and intriguingly, the guts of people from different cultures around the world tend to be quite different from one another. That genetic variation has allowed scientists to study the associations between certain microbial patterns and differences in lifestyle and health.

One key finding: People with greater diversity in their gut microbiomes—a higher number of species—tend, on average, to be healthier. While cause-and-effect relationships have not been established, lower diversity has been found in We think about our gut health as just people with conditions including inflammatory bowel disease, type 2 diabetes, psoriatic arthritis, eczema, and cardiovascular disease. Some about our gut, but it rules the rest of studies have found a link between obesity and low gut diversity; others our body. When something is good for have not.

“

Another key finding: Western diets, high in fat and processed foods, are associated with lower gut diversity than are diets higher in plants and whole foods.

”

your gut, it’s good for you.

Jill Nussinow

“We are a long way from being able to clearly describe what is a healthy microbiota, and there are likely many pathways to [it],” says Wendy Dahl, an associate professor of nutritional sciences at the University of Florida. But, she says, “It’s generally thought that high diversity is good and low diversity is maybe not.”

The reason diversity might matter, she and other experts say, is that the microbes in our guts are down there doing important work. And they are specialists: Think of a hard-hat crew that includes the equivalent of carpenters, roofers, plumbers, bulldozer operators, and the like.

Now imagine that each of these groups prefers a different diet, but you are delivering food that only the bulldozer guys will eat. Pretty soon, the rest of the crew all but disappears, and you’ve got a leaky roof, rusted pipes, and crumbling walls.

And some of the microbes left behind may be real troublemakers—bugs that prefer eating the lining of your gut to eating whatever food you send down. That may be a pathway to a condition sometimes called leaky gut, in which microbes and food particles escape the gut, potentially triggering inflammation, not only in the digestive system but throughout the body.

The good news about a messed-up microbiota? “You can change it,” Nussinow says.

Feed Your Friends When most Americans think about eating better for gut health, they probably think about probiotics—beneficial microbes found in or added to fermented foods or supplements.

Potential sources include some yogurts, sourdough bread, sauerkraut, kombucha teas, kefir (cultured milk), Japanese miso (a soybean paste), and Korean kimchi (a vegetable mix typically served as a condiment or side dish). All contain live microorganisms that might have some beneficial effects. In some circles, fermented foods have become trendy, with aficionados exchanging home fermentation recipes and getting together for festivals and impromptu kraut mobs.

Nutrition educators say these foods can play a role in day-to-day gut wellness. But they are not the secret to long-term microbial bliss. Among the reasons: The microbes in foods (or supplements) do not all survive the digestive process, and even when they do, they do not 5

take up permanent residence in your gut. They are, at best, friendly visitors. There’s also the question of whether the particular bacteria in any batch of sauerkraut or carton of yogurt happens to be what your gut needs that day.

But there is one kind of food that experts agree is good for every gut, every day—and it’s something woefully lacking in most American diets: good old-fashioned fiber.

“In the past, we thought that all fiber was good for was to relieve constipation and, in the case of soluble fiber—like that found in oatmeal—lower your cholesterol,” Angelone says.

But now, she and other experts say, fiber is known to be the most important food source for the microbes in our colons that produce the most benefits. These microbes have evolved to make use of food remnants that travel through the upper digestive tract largely intact—the hard-to-digest fibers in fruits, vegetables, whole grains, beans, and nuts.

The average American adult gets just 17 grams of fiber each day, instead of the recommended 25 to 35 grams, recent research shows.

That’s the result of a diet with too few whole, unprocessed foods, Dahl says.

“Probably the biggest problem with our ultra-processed diet is that we are starving our microbes,” she says. That’s the root cause of our often-underpopulated guts, she adds.

And the answer, according to Dahl, is not to load up on fiber supplements or any one food. It turns out that different beneficial microbes feed on different kinds of fiber. So, “a diverse, fibercontaining diet is going to support diverse microbes,” she says.

Details, Details That’s not to say that all foods with fiber are created equal. Some foods are particularly rich in so-called prebiotics, substances known to feed beneficial microbes. The list includes onions, garlic, leeks, jicama, asparagus, and Jerusalem artichokes.

Another kind of fiber with special benefits is resistant starch. Unlike starches that are digested quickly, raising blood glucose levels, these are starches that arrive undigested in your colon, where they feed

TIPS FROM THE EXPERTS Read on for a few practical and important tips for a gut-friendly diet, as well as scientifically supported ways to improve the gut microbiome and enhance overall health.

Go slow. High-fiber diets are believed to cause bloating by increasing certain populations of healthy, fiber-digesting gut bacteria. They produce gas as a byproduct. If you are not used to a high-fiber diet, a gradual increase is less likely to trigger bloating, gas, or diarrhea.

Get support. Consider getting help from a registered dietitian to establish a healthy diet. Too many people eliminate long lists of foods without guidance, Angelone says.

Stay hydrated. The more fiber you eat, the more fluids you need to maintain bowel regularity. Be especially diligent about your water intake if you’re adding fiber in the form of supplements.

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Beware trendy diets. Diets low in carbohydrates and high in fat, such as the ketogenic diet, can have “profound negative effects on the microbiota,” Dahl says. Gluten-free diets in people who do not have celiac disease or gluten intolerance can also cause harm if people cut out too many fiber-rich foods.

Try new foods. If clients say they can’t eat beans, Nussinow suggests they eat a tablespoonful, three times a day for three weeks. If you choose fermented foods, eat a variety to get a range of potentially beneficial microbes. Look for yogurts that are low in sugar and clearly labeled as containing probiotics, Dahl says.

some especially helpful microbes. Sources include plantains, green bananas, white beans, lentils, and whole grains such as oats and barley.

Exercise may be especially important in establishing the microbiome in childhood.

And it might be one way for older adults to stave off age-related declines in microbe diversity.

Resistant starch also can be created in your kitchen from a few foods that might surprise some healthy eaters: potatoes, rice, and pasta. The secret is that you have to cool these foods after cooking them to produce high levels of resistant starch. You can then eat them cold or reheated. In practical terms, that means leaving cooked rice, potatoes, or pasta in the refrigerator overnight before enjoying them, Angelone says.

Lifestyle Factors A healthy gut is about more than what you eat. It’s also about what you do.

One big factor: exercise. Regular exercisers tend to have healthier guts with higher counts of bacteria thought to fight inflammation. It’s unclear why. Exercise may be especially important in establishing the microbiome in childhood. And it might be one way for older adults to stave off age-related declines in microbe diversity.

Another factor: stress. Stress hormones can disrupt gut microbes in ways that promote inflammation. Stress-eating can also wreak havoc, of course.

And then there are antibiotics. Antibiotics are meant to kill harmful bacteria, but often kill helpful strains too. The gut fallout—which can range from brief bouts of diarrhea to life-threatening infections with drug-resistant bacteria—is a good reason to avoid these medications except when needed.

The bottom line: There’s a lot you can do to nurture a healthy gut. Start with a varied fiber-rich diet. Sprinkle in foods containing probiotics that might help keep digestive microbes in balance. Consider supplements only in consultation with your doctor. Get or stay active. And do what you can to avoid and manage stress. Be good to your gut and your gut will be good to you.

WHAT ABOUT SUPPLEMENTS? Supplements for gut health are a multibillion-dollar industry.

While some research substantiates their use under certain conditions, they are not good substitutes for a diet that supports a diverse microbiota and overall good health, experts say. It’s best to consider them only in consultation with your healthcare providers.

PROBIOTICS. These contain potentially beneficial microbes, usually bacteria. Your healthcare provider may suggest a probiotic during or after a course of antibiotics, which disrupt gut microbes. But some research has questioned that practice. If you want to try probiotics for any particular condition, learn which specific bacteria strains have shown promise for that condition.

PREBIOTICS. These contain fibers, such as inulin, shown to nurture healthy gut microbes.

You can get the same fibers, along with many more nutrients, from foods.

POSTBIOTICS. These contain substances that mimic the helpful byproducts produced by well-functioning gut bacteria. These substances can, in theory, help maintain gut integrity, support immunity, and lower inflammation. It’s unclear how well they work in supplement form.

DIGESTIVE ENZYMES. These enzymes help break down fats, carbohydrates, and proteins, mostly in the stomach and small intestine. While some specific supplements—such as lactase pills for people with lactose intolerance—can help people with certain conditions, there’s little evidence supporting broader use.

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SECOND ACT

A Journey of

Six Generations

by Nanci Hellmich

When Chris Martin IV watches a musician playing the guitar on TV, he looks to see if it bears his company’s logo, C. F. Martin & Co. Even if it doesn’t, he still sees a silver lining. “I am so happy when I see someone playing the guitar. Any guitar. Someday they may play a Martin,” he says.

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It’s that passion for the acoustic guitar industry that helped him steer the family-owned business through good times and bad for the past 34 years.

MAKING A GUITAR

Martin, 65, is playing his swan song this summer, retiring as chief executive officer of Martin Guitar, as well as finishing his tenure as chair of the National Association of Music Merchants (NAMM).

His retirement will mark the end of six generations of Martin men running the 187-year-old Nazareth, Pennsylvania-based company, whose guitars have been played by Elvis Presley, Johnny Cash, Hank Williams, Paul McCartney, Eric Clapton, and Gene Autry.

Martin wanted to exit on a high note. “I have been talking about retirement for at least five years. My father retired under duress, and my grandfather forgot to retire,” he says. His father left the business after making some unsuccessful business decisions, while his grandfather ran the company until his death at age 91.

During his 34-year tenure as CEO of Martin Guitar, Chris Martin IV embraced modern guitar-making technology to make the company more efficient and productive and to reduce repetitive stress injuries among employees.

The original Martin instruments were handmade, but are now produced with the assistance of automation, including wood-carving equipment, robots, and other technology.

Martin Guitar’s board was “hoping I would work for the next 100 years. I knew I would get pushback about the decision. People said, ‘Are you sure? Don’t you want to wait a year?’ But I thought, ‘I don’t know what I’m waiting for.’”

“Some of the high-end models are still handmade, but when you get down in price, we embrace automation,” Martin says. “We don’t have machines that put guitars together. Each guitar is still assembled by hand.”

He wants to focus on his family and health. He is receiving treatment for bladder cancer, and his wife, Diane, is being treated for breast cancer. He says they’re both thankful for the excellent medical care they’re receiving. “It’s the journey Diane and I are on now, and we want to prolong that journey because we have a teenage daughter.”

Martin guitars range in price from $500 to $150,000 for a limited edition. “We don’t make $129 guitars,” Martin says. “That’s where the volume is, particularly around Christmas. That is your first guitar.”

The company, which also makes guitar strings and ukuleles, is searching for a new leader, and for now, someone outside his family will run the business. But one day, another C. F. Martin, Martin’s daughter, Claire Frances, 16, might want to take over.

Someone might start with an inexpensive instrument, but as they get more serious about playing, they upgrade, he says. “What seems to happen is when a guitar player decides to play the guitar as a career, they say, ‘I need a good tool.’ We are fortunate that they often choose to use a Martin guitar.”

Martin has been talking to her about inheriting the business.

“I told her, ‘You don’t have to run it, but you have to manage the people who run it. You are going to own it. You are going to have the opportunity to be chairman of the board.’”

In the meantime, he’ll remain chairman and assume a new role as executive chairman, working far fewer hours but still representing the company.

When the pandemic has subsided, he plans to travel to trade shows, distributors, and guitar stores around the world to share the company’s history. “People get a big kick out of me telling the story about my family business,” he says. “It’s not a video. It’s not a salesman telling the story. It’s a Martin telling the story.”

His retirement will mark the end of six generations of Martin men running the 187-year-old Nazareth, Pennsylvania-based company, whose guitars have been played by Elvis Presley, Johnny Cash, Hank Williams, Paul McCartney, Eric Clapton, and Gene Autry.

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“

I followed a guitar through the guitar-making process and gained tremendous respect for my colleagues who do the work.

I learned I’m a klutz when it comes to doing woodworking.

”

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Learning the Business What a story it is.

Martin’s great-great-great-grandfather was German-born Christian Frederick Martin, the son of a cabinet maker who apprenticed with a renowned guitar maker. He immigrated to the U.S. in 1833 and founded the business.

“For whatever reason, God bless him, C. F. Martin learned how to make guitars, and he decided to make great ones,” Martin says.

Chris Martin IV’s path to CEO took several twists and turns. His mother and father divorced when he was three, and he lived with his mother in New Jersey, but he visited his grandparents, C. F. Martin III and Daisy, in Nazareth during the summer. “I would go to work with my grandfather and pack guitar strings and move wood around in the shop,” he says. “I never got to use a tool, but I got to be around the tools. That was my first exposure to the shop.”

During the summer between high school and college, he worked in the shop. “I followed a guitar through the guitar-making process and gained tremendous respect for my colleagues who do the work. I learned I’m a klutz when it comes to doing woodworking.”

He also didn’t have an affinity for playing the instrument. “I took guitar lessons as a kid,” he says, “but I didn’t click with the teacher, so I never learned to play, which is okay, because I am surrounded by great guitar players.”

After graduating in 1978 from Boston University with a bachelor’s degree in business, Martin joined the family business full-time.

His father, Frank Herbert Martin, struggled toward the end of his tenure as president of the company, so he retired, and his grandfather, C. F. Martin III, assumed control again. “My father and I had a bit of an estranged relationship,” Martin admits. “My grandfather saw my interest in the company and was a great mentor to me.”

His grandfather named him vice president of marketing in 1985. “It was a way for him to say to everyone else, ‘Chris is sticking around, and I want to give him a title that gives him a little bit of heft,”’ Martin says.

After his grandfather died in 1986, Martin was named chairman of the board and chief executive officer. He was 31 and scared to death. He didn’t consider himself a natural leader, and he faced several obstacles. “My father left a whole cadre of mostly male appointees his age who were looking at me a bit skeptically,” Martin says.

Another obstacle: At the time, the acoustic guitar industry was floundering.

“Business was terrible,” Martin admits. “We went from making 23,000 guitars a year in the 1970s to 3,000 a year in the early 1980s. And we had some quality issues. It was little stuff that we needed to address.”

However, Martin’s vision and entrepreneurial spirit turned the business around, says Jackie Renner, president of Martin Guitar. “When the company had quality issues in the 1980s, he brought his manufacturing colleagues together and said, ‘What do we have to do to make this company vibrant again?’ The answer was focusing on the musician and making the highest-quality instruments possible,” Renner says.

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Evolving Over Time As the quality issues were resolved, something else happened to turn things around: MTV Unplugged made its debut in 1989, and by the early 1990s, the phone started ringing off the hook, Martin says.

“MTV recognized how cool the acoustic guitar was and promoted it to an audience that was a little jaded,” he says.

“It didn’t start out wildly successful for us, but pretty soon, the momentum was building, and people said, ‘I have to get an acoustic guitar like the one Eric Clapton played on MTV.’ We paid attention at the time, and we got very lucky.”

Clapton was a fan of the guitar, saying, “If I could choose what to come back as, it would be a Martin OM-45.”

Martin built on that momentum by starting the Signature Series guitar line, featuring instruments played by acclaimed musicians such as Johnny Cash and Gene Autry.

“If you are famous and you agree to do an artist’s model, we will give you a guitar, and you can buy a few for your friends and family,” Martin says. “Then we give some of the proceeds from the other guitars we sell in that line to the artist’s favorite charity.”

“

MTV recognized how cool the acoustic guitar was and promoted it to an audience that was a little jaded. It didn’t start out wildly successful for us, but pretty soon, the momentum was building, and people said, ‘I have to get an acoustic guitar like the one Eric Clapton played on MTV.’ We paid attention at the time, and we got very lucky.

Chris Martin IV

”

The company has made 175 signature models since it launched the series in 1993.

During his time as CEO, Martin began profit sharing with his employees, offering college tuition reimbursement, and working on sustainability issues. “We use rare exotic timbers—rosewood, ebony, mahogany—for our products,” he explains. “We are trying to find a way to make the supply chain more sustainable.”

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Courtesy of Martin Guitar

Renner says Martin has nurtured the culture of Martin Guitar, which employs about 1,000 people in its two factories—one in Nazareth and the other in Navojoa, Mexico. “He introduces himself to all of our new employees in Nazareth and takes them on a tour of our guitar museum to hear a little more about his family history. Chris is incredibly energetic, passionate, and committed to Martin Guitar,” she says.

Continuing to Contribute As Martin winds down his role as CEO, he looks forward to what’s next and to reallocating his time to other causes. The first thing he wants to do in retirement is to take a breather. “I want to do nothing,” he says.

“I’m test-driving that idea now during COVID.” After the pandemic, he and his wife plan to travel more, and he wants to build a kit car, a Caterham, in his garage. “A bunch of crates will be arriving soon at my house from England. This kit is relatively simple. You hear stories that people buy a kit car, and it never gets done. I don’t want that to be me. With the help of some friends, I think I can get it on the road.”

Attorney Chuck Peischl, a longtime friend and a member of the company’s board, says he’s glad that Martin will assume the role of executive chairman. “He really is Mr. Martin, just like his grandfather before him. He was the personification of the company, and Chris is in that same image mold.”

“One time, I asked Chris what he would be if he wasn’t CEO of Martin Guitar, and, without missing a beat, he said, ‘a philanthropist,’” Peischl says. He expects Martin will spend more time serving as chairman of the Martin Guitar Charitable Foundation, which gives money to charities in the community, such as food banks, as well as nonprofit music, arts, education, and environmental action organizations.

Martin says he’s grateful for his career in the music industry. “People are passionate about being part of this industry. Once people join it, they never leave it.”

But he’s especially grateful to have served as head of a company in which both employees and customers value a guitar that’s as good as it can be.

ABOUT MARTIN GUITARS C. F. Martin & Co. has been inspiring musicians for nearly two centuries with its superior guitar and string products. Martin guitars and strings remain the choice for musicians around the world for their unrivaled quality, craftsmanship, and tone.

Throughout the company’s long history, Martin Getty Images

products can be seen and heard across all genres of music and in all segments of pop culture, from concert and theater stages to television and movies.

With an unwavering commitment to environmental sustainability and responsible manufacturing practices, Martin continually drives the acoustic guitar market forward, introducing innovative features that have become standards across the industry. These groundbreaking innovations include the introduction of X-bracing, the 14-fret guitar, and the dreadnought-size guitar. Martin has also led innovations in strings, such as introducing the first high-tensile strength steel-string core wire; the first nickel acoustic strings (Martin Retro®); the proprietary Titanium Core strings; and now the groundbreaking, new Authentic Acoustic line, which offers unmatched stability, tone, comfort, and longevity.

510 Sycamore St., Nazareth, PA 18064 610.759.2837 | martinguitar.com

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A FAMILY BUSINESS The history of Nazareth-based C. F. Martin & Co. is a long and illustrious family story centered around some of the finest guitar craftsmanship in the world.

The brand has transcended generations as a who’s who among famous players and musical royalty.

Take a look over our notes on the big markers for the Martin family and for C. F. Martin & Co. over the last 200 years.

1825

C. F. Martin Jr. is born.Â

1839 C. F. Martin Sr. moves his family to Bushkill Township, Pennsylvania, to a piece of land now occupied by the C. F. Martin & Co. factory.

1866

1811 Christian Frederick Martin Sr. leaves his hometown at age 15 for Vienna, Austria, to work for Johann Stauffer, a well-known guitar maker.

1833 C. F. Martin Sr. gathers his family and heads to New York to form C. F. Martin & Co.

1842 C. F. Martin Sr. invents the first Size 1 model and earliest X-braced guitar ever documented.

Frank Henry Martin is born.

1888 The company is passed to the son of C. F. Martin Jr., Frank Henry Martin, and his mother.

1894 C. F. Martin III is born.

1916

1940s

C. F. Martin & Co. makes the first full-size dreadnought guitars.

Hank Williams, Ernest Tubb, Lester Flatt, Hank Snow, and Kitty Wells all show up on stage with Martins.

1945 1954

C. F. Martin III assumes the presidency of the company.

Elvis Presley bursts on to the music scene playing his 1942 D-18.

1955 C. F. Martin IV is born.

1980 Neiman Marcus features a gold- and pearl-laden D-45 Custom Martin Guitar in its Christmas catalog.

1986 C. F. Martin IV is appointed chairman of the board and chief executive officer.

1992 1999

Eric Clapton plays two Martins on MTV Unplugged.

C. F. Martin & Co. nearly doubles its factory size, employing more than 600 people.

2004 2005 The company announces the opening of a new Martin Guitar Museum and Visitors Center.

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C. F. Martin & Co. makes its one millionth guitar.

2017 Martin made its two millionth guitar.

PASSION PURSUITS

TENNIS ADDS YEARS (OF FUN) TO LIFE

by Jeanne Lee

During his busy corporate years, Joe Tedino always attended to business first and tennis second. Though tennis made him happiest, he had limited spare time to indulge in his favorite pastime. He’d leave for work trips with a racket and gear packed in his travel bag and hope for a chance to squeeze in an hour or two on the courts. Since retiring, though, life is different: Now, tennis comes first.

As he wound down a career in public relations, Tedino actively searched for ways to turn his passion for the sport into a fulfilling second act. He became a certified tennis pro and got increasingly involved with his local club.

Chicago. He also keeps his communications skills honed as an advisor to the Chicago District Tennis Association, a board member at Lincoln Park Tennis Association, and a published tennis writer.

“For me, any day on the tennis courts is a great day,” Tedino says. “I love tennis.”

Tedino firmly believes people of all ages and abilities can get into the game and reap its many rewards, just as he does. “It’s such a great sport in terms of health benefits, socialization, and the ability to learn and continually improve,” says Tedino.

“There is no prior experience or skill that’s needed, just the desire to learn the sport. And it’s fun to be out there playing.”

These days, Tedino spends pleasant afternoons helping high school athletes improve their games as head tennis coach at St. Ignatius College Prep, a private school in downtown

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Stay Strong as You Get Older Unlike, say, tackle football or ice hockey, tennis is truly an activity that can be enjoyed for a lifetime—and it pays enormous dividends in physical fitness as you get older. Tennis involves vigorous use of the upper body and core as much as the lower body. Working out the full range of muscle groups is vital for staving off age-related muscle loss.

Playing tennis regularly is associated with heart-healthy factors like lower body fat, better cholesterol levels, and aerobic fitness.

Tennis players tend to have stronger cardiovascular, metabolic, and bone health. They also often exhibit more agility, balance, and coordination than nonplayers.

Keep Your Brain Sharp Concentrating intensely on that fast-flying ball forces your brain to quickly size up a multitude of different variables. “In addition to the physicality of it, your mind is constantly working,” says Tedino. “If you’re playing singles, it’s just you, figuring out how to win points against your opponent. Tennis teaches people how to problem solve.”

It’s a feat to simultaneously consider the angle of the bounce, speed, and physics so you can line up your body in the right way to direct the ball where it should go. “You have to develop resilience and have a really good mental attitude,” says Tedino.

“You have to be able to shake off the errors, get them out of your mind, and keep going.”

Promote Longevity Tennis has been called the single best sport for a longer life. A 2017 British study found that regular players of tennis and other racket sports tended to live longer, not only compared to sedentary people, but also compared to people who exercised solo through jogging, swimming, or biking, The New York Times reported.

Another study followed in 2018, in which Danish researchers observed over 8,000 participants for about 25 years to compare the effects of a variety of sports on longevity. Again, tennis was a clear winner, associated with an astonishing 9.7-year-longer life span. By comparison, badminton was shown to add an average of 6.2 years to life expectancy; soccer, 4.7 years; cycling; 3.7 years; swimming, 3.4 years; and jogging, 3.2 years.

One possible explanation the researchers offered was that tennis mimics interval training, an especially efficient form of exercise characterized by a mix of high- and low-intensity bursts of exertion. This type of physical workout is believed to improve health more than moderately paced efforts like walking or jogging.

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“

It’s such a great sport in terms of health benefits, socialization, and the ability to learn and continually improve. There is no prior experience or skill that’s needed, just the desire to learn the sport. And it’s fun to be out there playing.

Joe Tedino

”

Foster Friendships Another reason tennis may pack an extra wallop for health is that it involves being with other people. Humans thrive on social interaction and companionship. Getting outside, talking, and bonding with friends provides nourishment for the soul and an all-important sense of belonging. Supportive relationships naturally arise when you play tennis with friends, join a club, or organize a regular tennis meet-up with a partner.

Over the summer, Tedino was at a mixed-doubles event when he met a woman in her 70s. “She had picked up tennis in her 40s,” he says. “She’d gotten remarried, and her new husband played a lot of tennis. She said that as a kid, she couldn’t throw, couldn’t catch, and had always been picked last in all sports, so her goal was just to learn enough tennis to be able to say yes to someone if they asked her to play.”

While the COVID-19 crisis has put a damper on people’s ability to stay active or get to the gym, tennis is particularly well suited to play during a global pandemic. When you’re outdoors on a court that measures 36 feet by 78 feet, it’s easy to stay a healthy 60 feet apart in a singles game.

She practiced, took lessons, and eventually became a solid player, making a lot of friends along the way. Years later, “She’s actually now a widow,” Tedino says. “She’s been able to maintain her social connections through tennis. Tennis is something that brings you together. You’ve got this activity, and then you go out for lunch or a drink afterward. It’s not just for older people—it’s for everybody.”

Relatively COVID-19 Safe While the COVID-19 crisis has put a damper on people’s ability to stay active or get to the gym, tennis is particularly well suited to play during a global pandemic. When you’re outdoors on a court that measures 36 feet by 78 feet, it’s easy to stay a healthy 60 feet apart in a singles game. Doubles is often played with a spouse or a household member, though you can still keep well apart without much effort.

“Tennis is a sport where you can maintain social distancing without being socially distant,” says Tedino. “With [COVID-19], we’ve had an outpouring of people wanting to play. At my tennis club, we have bookings sunup to sundown every single day of the week.” Many people are working from home, so “they can steal an hour or two with a friend and head back in time for the next Zoom meeting.”

The United States Tennis Association (USTA) has a set of recommendations and guidelines on its website for playing tennis as safely as possible, including wearing masks appropriately, avoiding high fives, observing distancing rules, and leaving the area as soon as possible after your game is over.

The International Tennis Federation sponsors world competitions for seniors age 50 to 64 and super-seniors 65 and up. (In competitive tennis, players in their mid-30s and 40s are categorized as young seniors.)

Even if you’re mobility-impaired, don’t rule out tennis. “An area that has taken off is wheelchair tennis for adults or kids,” says Tedino. “It’s the exact same game, except wheelchair tennis players are allowed to have the ball bounce up to twice before they hit it.” There are wheelchair tennis programs around the U.S., and wheelchair tennis players have competed in the Paralympic Games since 1992.

To get started, all you need is a racket, a good pair of shoes, and some tennis balls. To find an appropriate racket, “Go to your local tennis or sporting goods store and get a mid-priced racket with the right-sized grip for your hand,” Tedino says.

No special clothing is required—just comfortable tops and bottoms that are breathable. Pockets are helpful for holding a tennis ball. If you’re older, investing in a good pair of supportive shoes is essential.

“I’d start out spending more money on shoes than a tennis racket,” says Tedino. “Don’t try to play tennis in running shoes, because you do a lot of side-to-side movement on the tennis courts.” Running shoes aren’t made for that.

Anyone Can Play

To find beginner lessons and to find people with similar skill levels to play with, “Most people can find a way to get into tennis through a local parks and recreation department,” says Tedino. “Many cities offer instruction on weekends or in the evening. Tennis clubs do the same thing.”

People of any age can play, and even play competitively. “Anyone with reasonably good mobility and eye-hand coordination can play,” says Tedino. “You don’t have to be particularly athletic, although fitness from other activities will serve you well on the court.”

The USTA website also has helpful information on its local chapters around the country. So, it might be time to consider picking up a tennis racket and trying out your swing. It’s a hobby that could add years—and years of fun times—to your life.

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LIFE BY

Design

by Nanci Hellmich

Stanford University’s Bill Burnett, 63, has sketchbooks filled with ideas to draw from when he retires—teaching, writing, developing new inventions, and painting.

“I’m going to repurpose my time doing things that I find meaningful,” says Burnett, a product designer, who with Dave Evans wrote the bestselling book Designing Your Life: How to Build a Well-Lived, Joyful Life.

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The authors, both Silicon Valley veterans who worked on creative teams for Apple, developed Stanford’s Designing Your Life course, as well as workshops for people retooling their careers, considering encore professions, and planning for retirement.

Burnett is applying the same design thinking he used to create the latest technology and products to prepare for the next phase of his life.

“Designers think differently than other people,” says Burnett, executive director of the Design Program at Stanford, where he oversees the undergraduate and graduate product design programs. They approach problems with curiosity, reframe dysfunctional beliefs that hinder creativity, prototype ideas to figure out what works, and form radical collaborations with others.

“People can use these design tools as they move from the money-making phase of their lives to the meaning-making phase,” he says.

Too often busy professionals don’t give enough thought to retirement, finding themselves adrift after leaving careers, Burnett says. “At work, they have a social network, status, a role they play in the organization. The day after they leave that job, they are just somebody sitting in a Starbucks drinking a coffee. It’s pretty jarring for people who haven’t prepared for it or designed for the change.”

Burnett says people preparing for retirement often use one of three strategies: Reimagine their lives They might be interested in trying something new, maybe they want to develop encore careers, start their own businesses, or take up new activities or hobbies, such as fly fishing or golf. “They want to reimagine their life and go on a new journey. A lot of people use this time for creative expression,” he says. His mother wrote her autobiography when she retired.

Relocate their skills “They relocate their organizational and professional skills to a new type of organization,” Burnett says. “Typically, this means working in a nonprofit or a charity organization.” In fact, he knows a senior executive with a technology company who had excellent organizational abilities, and after she left her job, she worked to help the homeless in her community.

Reboot a deferred life Some people have dreams from their youth that they never fulfilled. Burnett wanted to study art in college but pursued a degree in product design because his father objected to paying for an art degree. Although Burnett is happy with his career choice, he still wants to develop his artistic abilities. “My reboot in retirement is to go back to that deferred life.”

All these strategies require designing your way forward, he says.

Explore New Ideas To begin the process, many people must overcome the fear of leaving their job, which often provides them with their identity, routine, and relationships, says Kathy Davies, managing director of the Life Design Lab at Stanford. The teaching lab runs the university’s Designing Your Life classes, develops the life design curriculum, and trains other universities to teach life design.

“

People can use these design tools as they move from the money-making phase of their lives to the meaning-making phase.

”

Bill Burnett

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One key to making this leap is using your curiosity to explore several ideas, Davies says. “People need to reframe the dysfunctional belief that there is just one good direction in retirement. There are many.”

To help you get started, the Stanford experts suggest that you: •

Write a short reflection of 250 to 500 words about your future.

This is a general statement of what you consider good and worthwhile in work, where work is not necessarily a paid endeavor but how you use your time and energy to accomplish things in your life and community, Davies says.

•

Write another 250 to 500 words about your view of life. These are your critical defining values—what matters most to you, the meaning and purpose of your life, and how spirituality, family, where you live, and the rest of the world fit into your life.

•

Review your statements and see where your views complement each other and where they clash.

These two views are your compass for your life and future.

Outline Your Plans Burnett suggests developing three Odyssey Plans for yourself. Keep a journal and write down the times you feel energized about your life. Consider what you would do in retirement if you didn’t have to worry about money or the possibility of someone laughing at you for doing it.

Create three wildly different five-year timelines filled with activities you might pursue. Developing these three future visions helps people brainstorm ideas for their future, he says.

Maybe you want to become a bartender in Belize or a clown in Cirque du Soleil, Burnett says. “We are not encouraging you to sell the house and join the circus. We’re telling you to let your imagination go for a while.”

Davies says having several routes to explore can open new possibilities and set you free from perfectionist tendencies that could limit you.

Test Your Ideas After you have plans, prototype some of your ideas, Burnett says. One of the easiest ways to do that is to talk to someone who is living the type of lifestyle you’re considering.

Testing your plan requires a small investment of time and can lead to a big payoff in the long run, Davies says. “The magic of prototyping is that instead of sitting around and talking about your plan, you do something. You get out of your head and into the world to try things.”

Davies worked with a retired couple who planned to become what they called silver-haired gypsies by selling their home and touring the U.S. in an 20

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“

The magic of prototyping is that instead of sitting around and talking about your plan, you do something.

You get out of your head and into the world to try things.

Kathy Davies

”

RV. They tried it out for a week and found they loved RV life but didn’t like all the driving, so they decided to take occasional trips and maintain a home base.

People sometimes pay a high price for not prototyping an encore career. One example is a woman who left her job in human resources for a large corporation to fulfill her dream of opening a small Italian deli and café. She renovated the space and launched her business. Her café was successful, but she was miserable. She didn’t enjoy hiring staff, tracking inventory, and ordering stock.

The former human resources professional could have avoided a costly mistake by interviewing small café owners, bussing tables at an Italian deli, or working for a catering business. Eventually, she sold her business and went into designing restaurant interiors, which was her favorite part of opening the café.

Burnett suggests giving yourself time to make the transition into retirement. Some people take at least a year’s sabbatical after they leave their jobs before they try something new. He has a friend who retired from his career as a venture capitalist, a lucrative but stressful job. He told Burnett, “I plan to take three years to ride my bicycle and read books because I don’t want to make a decision about the future with a burned-out brain.”

Talk to your spouse and other people who have retired or are considering it. Get input from people who have different perspectives.

Reframe Your Dysfunctional Beliefs One of the keys to a well-designed life in retirement is reframing some of your dysfunctional beliefs to create a better life for yourself. Here are some examples, according to Designing Your Life: How to Build a Well-Lived, Joyful Life:

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Ask for Help No matter what your retirement plan is, it’s important to form radical collaborations, Davies says. Talk to your spouse and other people who have retired or are considering it, she says. Get input from people who have different perspectives.

Davies says one woman she worked with created three Odyssey Plans for retirement but didn’t know if her husband would be supportive of some of her more creative ideas. It wasn’t until he also outlined some plans, and they shared ideas, that they both fully appreciated one another’s dreams and began working on plans together. Their lists created lively conversations that helped them prepare for the next stage of their lives.

Burnett has been talking to his wife and others about the future, as well as prototyping some of his ideas. Eventually, he’s going to step back from some of his administrative roles but wants to continue to teach. “I love teaching, I love writing, and I love art.”

He is prototyping his future life with a small art studio down the street from his home. He plans to write a book on designing your life for retirement, and he has other creative projects he’s discussing with potential collaborators.

“I am going to spend the next 10 or 20 years doing something interesting,” he says. “I’d like to hang out more with artists and musicians. I’ve got at least two more lives in me.”

BILL BURNETT AND DAVE EVANS: New York Times Best-Selling Authors Bill Burnett and Dave Evans share years of experience and insights in their books—Designing Your Life: How to Build a Well-Lived, Joyful Life and Designing Your Work Life.

Burnett earned his Bachelor of Science degree and a Master of Science degree in product design from Stanford University and worked for start-ups and Fortune 100 companies, including seven years at Apple as part of the original laptop design team.

He’s executive director of the Design Program at Stanford, where he leads the undergraduate and graduate programs in product design. Evans, who got a Bachelor of Science degree and a Master of Mechanical Engineering degree from Stanford, helped market Apple’s first mouse. He co-founded Electronic Arts, an interactive entertainment company, and worked 30-plus years in Silicon Valley, consulting with executive teams. He developed and taught a course called How to Find Your Vocation at the University of California, Berkeley.

Burnett’s and Evans’s paths crossed over the years, and in 2007 they teamed up to create the Designing Your Life course for undergraduates at Stanford, one of the university’s most popular electives. The authors also offer Designing Your Life workshops to adults of all ages outside of Stanford at designingyour.life.

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EXPERT ANGLE

HIGHSPEED HEALTHCARE

by Laura Sydell

We are on the cusp of an extraordinary transition in medicine made possible by high-speed Internet, artificial intelligence (AI), and wearables. Medical experts are calling this new frontier precision medicine because advancing technologies are going to make it possible to consider each patient’s unique lifestyle, environment, and gene variations in ways that will make health care as individualized as a tailor-made suit.

While the global COVID-19 pandemic hasn’t brought us much good news, it has edged us a little further down the road to our digital health future, and many experts think that’s good. Dr. Euan A. Ashley, director of the Stanford Center for Digital Health, says the pandemic bulldozed over one big obstacle to advances in telemedicine—insurance payments—and as soon as the pandemic hit, Medicare and Medicaid began providing full reimbursement for telehealth visits.

Telehealth Though a Zoom call might appear to keep the doctor at arm’s length from the patient, Ashley sees it differently. He says meeting with patients over Zoom during the pandemic reminds him of his childhood, when he would go with his physician father or midwife mother to make house calls. “You actually see [patients] in their home environments,” says Ashley.

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He says this kind of information can really provide insight into someone’s lifestyle so he can give better recommendations on how to stay healthy. “The person who is most important is the patient, and we really have the technology to bring the medicine to them,” says Ashley.

Dr. Michael Blum, chief digital transformation officer at the University of California, San Francisco, and a practicing cardiologist, says technological advances are only one part of the equation. The technology needs social acceptance, and the pandemic has helped that along.

“The pandemic has changed the mind space about how health care is delivered,” says Blum. “Patients are now more comfortable with telehealth visits.”

Wearables Telemedicine is just a small part of the way in which digital technology is transforming health care. Wearables are the start of being able to monitor health between visits to the doctor and detect health problems sooner. Google, Apple, and Amazon are investing heavily in the market.

Google is acquiring Fitbit, Apple has its Watch, and Amazon just released the Halo. Fitbit and the Apple Watch have Food and Drug Administration clearance for an electrocardiogram (ECG) monitor, and they can detect and notify a user of an irregular heartbeat.

Blum says he now has patients who tell him, “I have this device that is measuring my heart rate, or my Apple Watch is telling me I have atrial

fibrillation.” Atrial fibrillation, or a-fib, is an irregular heartbeat that, if untreated, can be a warning sign that you are at risk for a heart attack, have an increased risk of stroke, or have another kind of heart disease.

Blum says these devices provide more than sufficient quality and amounts of data for use in making health and lifestyle decisions.

However, he and other medical experts caution that any reading on these devices must be confirmed by professional-grade equipment.

There are also medical-grade wearables. For example, wearable glucose monitors and insulin pumps for diabetics can monitor 24 hours a day, seven days a week, and send data directly to your physician over the Internet. “That’s one of the chronic disease spaces that is really going to benefit [from wearables], or is already benefiting,” says Blum.

One thing both consumer-and professional-grade wearables are doing is collecting data—lots and lots of individualized data. Ashley, who is also a consultant for Apple, says that as wearables become more sensitive to changes in gait and motion, they will be used to detect early warning signs of neurodegenerative diseases such as Parkinson’s.

“It is very characteristic for a person with Parkinson’s disease to walk with a shuffling gait. People you live with don’t notice small changes.

But now ... we’ll be wearing devices that know us electronically over many years and recognize how we walk,” says Ashley.

Artificial Intelligence and Deep Learning The rapidly advancing field of artificial intelligence and deep learning will help medical professionals predict who might be more vulnerable to a disease.

AI is able to sort through massive amounts of data and find patterns in a way that the human mind cannot. Data collected in hospitals and from healthcare providers can be fed into an AI system to predict the best treatment for allowing a particular individual to recover faster from surgery.

AI will be used to analyze individual DNA and protein-to-protein interactions to detect which traits are manifesting in an individual patient—an important part of the equation, since not everything in a gene sequence shows up. Blum says this will allow physicians to tailor health recommendations to the individual.

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Barriers and Risks While there is great promise and optimism about how new technologies will transform health care, there are also some barriers and risks ahead. AI and deep learning find patterns in the data. But data can reflect class differences, racial divisions, and other biases.

In his private practice, Ashley sees higher-income patients with good jobs in Silicon Valley tech firms, as well as patients from the lowerincome communities of California’s Central Valley. It’s the richer patients who have a Fitbit or an Apple Watch, so it’s their data that’s getting collected. “That’s teaching the AI to begin with,” says Ashley.

There are also complex privacy and security issues that need to be sorted out as we move into the digital health age. Healthcare data is extremely valuable on the black market because it holds personal information that can be used for blackmail or identity theft. There have been numerous attacks on hospitals by hackers who have held data hostage for a price.

All the big tech companies are now looking to disrupt the healthcare industry. But their effort does raise questions about who owns the data these companies collect about you. In fact, the approval of Google’s acquisition of Fitbit has faced hurdles in Europe and elsewhere because of concerns over how the company might use the data it collects, especially when that data is combined with what Google already gathers from YouTube and its search engine.

Most physicians are moving or have moved over to electronic health records. However, you may have noticed that different doctors and health systems choose different electronic record systems, making it harder for each individual provider to get a complete picture of your medical history.

The different companies that digitize medical records have proprietary software. Blum says that for many of his patients, “I still don’t know ... what happened to them previously or what’s happening now, if they go to see multiple different doctors.” In this respect, countries like the UK that have a single nationalized healthcare system are able to make better use of digital records.

Despite the hurdles, Blum says, “I’m highly confident [health care] is going to look dramatically different from the prior decade.” As Microsoft co-founder and philanthropist Bill Gates once said about the computer revolution, “You ain’t seen nothing yet.”

INNOVATIONS IN MEDICINE AI is driving innovation in clinical operations, drug development, surgery, and data management. Being a relatively new technology in health care, AI still has a long way to go, but the progress is impressive. Let’s explore some of the amazing applications and exciting breakthroughs in incorporating AI in medical services.

Robot Doctors AI-enabled robots are increasingly assisting microsurgical procedures to help reduce variations between physicians. Today, top-of-the-line hospitals are equipped with complex and intelligent machines designed to operate with a precision rivaling that of the best-skilled surgeons.

Clinical Diagnosis Did you know that AI algorithms can diagnose diseases faster and more accurately than doctors?

These algorithms are particularly successful in detecting diseases from image-based test results. According to Forbes, AI algorithms can scan and analyze biopsy images and scans 1,000 times faster than doctors, and the algorithms can diagnose with an 87 percent accuracy rate.

Drug Discovery Pharmaceutical giants like Sanofi and Pfizer are teaming up with technology companies already invested in AI technology, like IBM and Google, to build a drug discovery program using deep learning and AI. Rather than using the traditional trial-and-error approach—a tedious venture that may take years and thousands of failed attempts—drug discovery is now data-driven thanks to AI research platforms. Researchers have even been able to redirect already existing drugs to combat new infections.

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INVESTMENT STRATEGY

2021: TAKE TWO

by Kevin Barry and Sam Kirby

This time of year, many in our industry follow the time-honored tradition of penning an outlook for the next year. We can think of few times when this was a more difficult assignment.

A year ago, mere weeks before the COVID-19 pandemic sent the global economy into a tailspin, we laid out our list of wishes and worries that investors would face in 2020. On the wish list were a China trade truce and an accommodative Federal Reserve, while our worries centered upon meager growth conditions for corporate earnings and the global economy.

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The worry list did not include the swift emergence and global spread of a novel, highly contagious virus.

Yet even though we could not have foreseen the unique challenges of 2020, the wishes and worries we outlined last year were, and still are, highly relevant to the investor mindset. After a rapid, V-shaped recovery in many parts of the economy, economic and earnings growth conditions are once again in focus as we think about where the recovery goes from here.

Our first 2020 wish-list entry—for a cooldown of the China trade dispute—failed to materialize this year. Trade tensions moved to the back burner but continued to simmer, aggravated by virus-related accusations. But our final wish-list item from our 2020 outlook turned out to be the most meaningful: an accommodative Federal Reserve.

Aggressive policymaker response, both monetary and fiscal, is largely viewed as the linchpin of the rapid recovery in levels of economic activity and asset prices in the second half of 2020.

As we look ahead to 2021, we see a landscape that is both ripe for opportunity and marred by a continuing health crisis, lingering economic damage, and countless personal tragedies. The winter will likely bring more suffering, even as vaccine distribution begins in earnest and hopefully provides a return to something approaching normalcy sometime in 2021. Barring the disastrous effects of vaccine failures, virus mutations, or an acceleration of bankruptcies or job losses during what may be a very dark winter, the stage is set for a bifurcated year that provides two very different environments for investors.

As in years past, our 2021 outlook does not predict the levels of the S&P 500 Index, the 10-year Treasury yield, or global gross domestic product (GDP). Instead, we will focus on the drivers of those measures, and we begin to think about the implications of some of the changes this crisis has brought about.

Consumer Spending The strength and resiliency of consumer activity has been a significant driver of the economic rebound in the second half of 2020.

Unfortunately, it has also been extremely uneven, with those least able to withstand economic instability suffering the most from job losses and reduced income. The Coronavirus Aid, Relief, and Economic Security (CARES) Act—the largest economic relief bill in U.S. history— provided an important lifeline in the form of direct income replacement, enhanced and extended unemployment benefits, student loan payment suspension, and eviction protections, among other provisions.

Despite the crisis, many households that escaped the direct economic impact of the pandemic have found themselves in strong financial shape and have seen conditions further improve through falling energy bills and shrinking borrowing costs from record-low interest rates— mortgage rates in particular. Meanwhile, the combination of home price and investment portfolio appreciation and high levels of savings have driven household net worth to all-time highs.

Figure One illustrates the reduction in the increase in household net worth as well as consumer debt service cost. This degree of household

Household Net Worth

Consumer Debt Service Costs

140,000

19

120,000

18

100,000

17

80,000

16

60,000 40,000

15

20,000

14 13

0

1990

1995

2000

2005

2010

2015

2020

1990

1995

2000

2005

2010

2015

2020

Sources: Federal Reserve, Cornerstone Macro. The financial obligations ratio includes rent payments on tenant-occupied property, auto lease payments, homeowners’ insurance, and property tax payments.

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financial strength is far from the norm when exiting a recession and may portend a stronger rebound once the crisis passes.

While consumers continued to spend in 2020, their spending behaviors were radically altered by the pandemic. For many decades, there has been a trend in consumer preferences away from goods and toward services, and from in-home dining and entertainment to dining, sleeping, and recreating away from home. In 1998, authors Joseph Pine and James Gilmore described this transition as the experience economy, emphasizing the creation of memorable events with goods as props and services as the stage.

Such experiences typically require the very kinds of physical interactions made impossible by social distancing requirements, and consumers adapted by Source: U.S. Bureau of Economic Analysis rapidly shifting their spending behaviors. In the immediate aftermath of the pandemic, consumer spending of all types declined significantly, with an 18 percent decline in total spending in April compared to January levels. However, as significant policy support came online, restoring confidence, preserving jobs, and directly supporting income, consumers quickly shifted spending from services to goods, including physical items to support their stay-, learn-, and work-from-home experience and their sanity.

Figure Two shows the pandemic’s uneven effect on consumer spending. At the end of October, spending on goods was more than 7 percent higher than January levels, largely offsetting the decline in service spending.

In 2021, widespread vaccinations stand to reverse this trend and may spark a strong revival of the experience economy as pandemic restrictions and fears ease, and weary consumers emerge from their homes. Although some of the pandemic-altered consumer behaviors are likely to persist to some degree—namely the significant expansion of e-commerce across a much wider array of product categories, growth in streaming entertainment, online education, and where we live and work—we expect a reversion of spending behaviors in 2021 that stands to benefit some of the hardest-hit categories within travel and leisure. Of course, these businesses must survive a very tough winter to reach that point, underscoring the importance of the latest stimulus deal reached in December.

Policy Support There are several important preconditions for continued strength in consumer spending. The first, and by far most important, is a resolution of the pandemic itself through effective vaccines and therapies. Until then, appropriately sized and correctly aimed policy As significant support remains critical.

On a global basis, the combination of monetary and fiscal support in 2020 is estimated to approach nearly a third of GDP. This injection of cash and liquidity has eased financial conditions, buoyed struggling businesses and households, and stabilized confidence. We do not expect monetary policy support to disappear; the Fed has made clear its commitment to maintain exceptionally low interest rates and bond-buying programs for as long as necessary.

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policy support came online, consumers quickly shifted spending from services to goods, including physical items to support their stay-, learn-, and work-fromhome experience and their sanity.

On the fiscal policy side, the streamlined $900 billion deal Congress reached in late December still represents the second-largest relief package in history. The package intended to shore up the economy until vaccines are widely distributed and provides targeted aid to consumers and small businesses, especially those within the hardest-hit sectors.

The wide-ranging bipartisan package included:

stimulus that may buoy investor confidence until widespread vaccination is achieved, alongside the potential for higher taxes or other less market-friendly policy shifts. As the dust settles, winners and losers are likely to emerge from the new policy environment.

• • •

The degree of government borrowing and spending at the scale described above naturally leads to a discussion of inflation. A global pandemic, by its very nature, is a deflationary event as it causes capacity underutilization at a massive scale. The signature characteristic of the recession that followed the 1918 Spanish flu epidemic was significant deflation, with price levels declining by an estimated 18 percent.

• • • • •

$600 direct payments to most Americans; $300 per week in enhanced unemployment benefits; $284 billion for the small-business targeted Paycheck Protection Program; $82 billion for schools and universities; $69 billion for vaccine development; $25 billion for rental assistance; A combined $44 billion for support of airlines, live performance venues, and public transit; and $36 billion for additional programs such as food stamp benefits, childcare, and farmer aid.

This stimulus package represents a massive and much-needed injection of cash for households and businesses fighting for survival. The question is one of timing: Will the package provide enough support, for a long enough period of time, until widespread vaccinations allow a full reopening of the economy?

The outlook for follow-on relief packages will be influenced by the outcome of the Georgia Senate runoff elections in January, which set the stage for a 50-50 split within the Senate for only the third time in U.S. history. This outcome brings the possibility of larger and swifter

Inflation

Prior to the pandemic, and on the heels of an expansionary and pro-growth policy environment, we had begun to see some hints of inflation in the form of rising commodity prices and a tightening labor market. As shown in Figure Three, inflation expectations tumbled to near 0 percent at the onset of the crisis in March, as measured by the five-year breakeven inflation rate, before gradually returning to more normal levels of near 2 percent. Thus far, the greatest inflationary effects can be seen in asset price appreciation, including stock and home prices.

The unprecedented amount of monetary and fiscal stimulus applied in 2020 creates natural concern about a period of higher inflation. Yet the same concerns were expressed during the financial crisis, which saw similar policies enacted (although smaller in magnitude), without the appearance of inflation. And Japan has not seen inflation materialize despite decades of large deficits relative to GDP and low (or negative) interest rates.

Source: Federal Reserve

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Our expectation for 2021 is for inflationary pressures to remain subdued. For excessive inflation to appear would require not only the recovery, but the rapid acceleration of economic activity, accompanied by wage growth. The global economic engine still has a long way to go before reaching full capacity, even after widespread vaccinations and a return to normalcy, and the U.S. economy still has nearly 10 million jobs to recover to reach pre-pandemic levels.

Within the fixed income landscape, we expect interest rates to remain low, with gradually rising yields for longer maturity bonds as growth conditions improve. This environment creates a lower return expectation for bonds. We continue to seek opportunities for higher yield from diversified sources, while minding quality, the amount of compensation offered by credit risk exposures, and the diversification and volatility dampening role of fixed income.

However, over the longer term it is important to consider the possibility of rising inflation. Monetary policy tools can be blunt instruments, sometimes with delayed effects—and with nearly every global central bank pulling out all the stops to stimulate and recover, the potential exists for policy overshoot. In addition, the Federal Reserve’s newly stated approach to average inflation targeting signals a tolerance for higher inflation for some period of time.

The COVID-19 pandemic has been a tragedy by any measure—from the personal loss of loved ones, employment, or business failures to the amplified stresses in workplaces, homes, and schools to the scale of the global economy.

Investment Implications The 2021 investment landscape represents a balancing act between short-term threats and longer-term promise. Of these, the emergence of effective vaccines represents the greatest promise, as it mitigates some of the extremely scary worst-case scenarios and a longer crisis timeline. Below are some of the key themes we are watching as we consider portfolio positioning for the new year.

We expect a continued, synchronized recovery in the U.S. and global economies, with corporate earnings reaching and exceeding prepandemic levels. Higher earnings could see stock price valuations— which are currently elevated by historical standards—return to more normal levels, serving to raise investor comfort.

We expect a broadening of equity performance, from the growthoriented and work-from-home winners of 2020—namely technology, health care, and consumer staples—to more cyclical stocks within industrials, materials, and consumer-discretionary sectors. As the economy strengthens and growth resumes, we expect improving conditions for value stocks. Financials stand to benefit from relaxed restrictions on stock buybacks, as well as a steeper yield curve that improves the ability of banks to earn profits from lending activities.

After a decade of U.S. dollar strength, the combination of mushrooming debt, the Fed’s commitment to keep short-term rates lower for longer, and a reversal of safe haven demand may point to a weakening trend in the dollar. This could be positive news for U.S. exports and international stocks.

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Winter | 2021

For the optimistic, a comparison to the Roaring ’20s may be appropriate. A century ago, significant stresses from the conclusion of World War I and the Spanish flu pandemic caused a rapid acceleration of technological advancement that fueled gains in productivity and

“

Technological progress always confounds the pessimists by solving scarce resource problems. It also fuels productivity and prosperity, as it did in the 1920s and could do again in the 2020s.

Ed Yardeni

”

prosperity. Economist Ed Yardeni of Yardeni Research draws this parallel in his blog (blog.yardeni.com), noting that the pandemic has accelerated medical science in the search for treatments and vaccines, while lockdowns and social distancing have significantly accelerated the long-underway digital transformation of our economy. He explains: “Technological progress always confounds the pessimists by solving scarce resource problems. It also fuels productivity and prosperity, as it did in the 1920s and could do again in the 2020s.”

Although there is still much work to be done and significant risks remain, the prospect of widespread vaccinations offering a resolution to the COVID-19 crisis sometime in 2021 offers a very bright beacon after an incredibly challenging year, and what could be a dark and dangerous winter.

MARKET REWIND

TUMULTUOUS YEAR ENDS IN GAINS Despite 2020’s historic ups and downs, stocks and bonds posted strong returns this year, with U.S. stocks closing out the year at all-time highs. Fiscal and monetary stimulus from governments around the world boosted households, economies, and markets even as many countries struggled to contain the COVID-19 pandemic.

• U.S. stocks posted strong gains in the fourth quarter on optimism about a speedy vaccine rollout. A deeper look reveals stark differences in performance between sectors.

• International developed and emerging market stocks rallied in the fourth quarter, outperforming U.S. stocks, and ended the year with solid gains. Emerging market stocks were the fourth quarter’s standout performer, benefiting from China’s post-pandemic recovery and a weaker U.S. dollar.

• Bonds played an important portfolio stabilizer role last year as interest rates fell to historically low levels amid stock market volatility.

• While real estate typically benefits from falling interest rates, that was not the case in 2020 due to the impact of COVID-19related office closures and the economic shutdown on the office and retail sectors.

• Strategic opportunities have managed a modest gain for the year.

MARKET INDEX PERFORMANCE (as of 12.31.2020)

U.S. Bonds

Strategic Opportunities

Real Estate

U.S. Stocks 20.9%

14.7%

International Stocks 17.0% 10.7%

7.5%

2.3%

4.2%

7.7%

0.7%

Q4 2020

-5.3%

2020

LOOKING FORWARD We expect economic stimulus to continue to buoy markets around the world. The Federal Reserve, for example, has pledged to keep interest rates low for several years and continue its bond-buying program. Yet while economic activity surged in the second half of 2020, many parts of the economy will remain under stress until we start to see a meaningful decline in COVID-19 cases.

Investors should expect bouts of market volatility as periods of optimism are countered by the realities of vaccine distribution and the long march toward economic recovery. Meanwhile, the stock market’s rebound from its 2020 lows has left valuations stretched, which, combined with uncertainties related to the Biden administration’s transition, further stimulus possibilities, and geopolitical tensions, will certainly lead to more volatility in the near term. .

Asset class returns are represented by the following indexes: Russell 3000 Index (U.S. stocks), MSCI All-Country World ex-U.S. Index (international stocks), Bloomberg Barclays U.S. Aggregate Bond Index (U.S. bonds), Dow Jones U.S. Real Estate Index (real estate), and HFRX Absolute Return Index (strategic opportunities).

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BORING IS UNDERRATED

by John Curry

Over the past year, we have endured a period of massive uncertainty driven by a global healthcare crisis and its economic impacts, compounded by racially charged social tensions and a contentious U.S. election season. No doubt, we will feel 2020’s impact on our lives, families, household finances, and the economy for many years.

While the past year has highlighted deeply rooted issues that need addressing, hopefully we are closing in on the light at the end of the COVID-19 tunnel. At the risk of giving the all clear too soon, it might be worth a look in the rearview mirror while our feelings are still fresh.

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Winter | 2021

Historically Disconcerting

While the details change, the story is

investors or analysts may have wildly different views—or they may just be reacting to take risk off the table—resulting in significant levels of volatility. The bigger and more complex the uncertainty, the more volatility.

always the same. Markets don’t like With all that happened last year, it’s easy to miss the fact that the major uncertainty. This is true of all markets— stock market indexes—the S&P 500 stock and bond markets around the world Index of large U.S. companies and currency and commodity markets. among them—reached record levels last February. Up to that point, things seemed to be going well, Over time, views converge as more with the markets set for another solid year of gains. Just a few information becomes known, or, as the range of possible outcomes weeks later, as news of the novel coronavirus crept into the starts to narrow, volatility subsides. If you need an example, just headlines, the tone began to change. recall how little we knew about the virus and its effects on society and the economy last spring versus what we knew at year-end.

On Monday, March 9, the markets experienced a tsunami of selling, resulting in a 7.6 percent drop in the S&P 500 Index. At the Of course, realizing this doesn’t make it easier. Even normal levels of time, that was the largest single-day point drop in the index’s volatility—a 10 percent pullback every year or two—can be history. Not to be outdone, March 12 and March 16 both set new disturbing and cause investors to question their strategies, especially records, with the index falling 9.51 and 11.98 percent, respectively. as they get older. The thought of a major market pullback in the last In fact, eight of the 20 largest point declines in the S&P 500’s nearly few years before retirement is enough to cause many to move to the 100-year history happened last March. sidelines. And yet that’s a very bad idea.

Of course, the market didn’t go straight down. March also witnessed eight of the top 20 largest single-day point increases in S&P 500 history, including big bounces on the days after those historic drops.

While investors fret less about big gains than big losses, they count as volatility too and can be equally confusing. In the fog of war, it’s tough to see clearly.

Different This Time?

Last year proved to be a very bumpy ride that challenged the patience of even the most seasoned investors. The fact that all of this market turmoil happened amid—and perhaps because of—stay-athome orders, rising virus case counts, skyrocketing unemployment, and social and political tensions made it seem like it really would be different this time. But it wasn’t.

While the details change, the story is always the same. Markets don’t like uncertainty. This is true of all markets—stock and bond markets around the world and currency and commodity markets. When a new uncertainty rears its ugly head, markets react. The uncertainty could be political (e.g., an election outcome or federal budget impasse), geopolitical (e.g., trade negotiations or terrorist attacks), economic (e.g., pandemic lockdown or Federal Reserve policy change), or natural (e.g., hurricanes or earthquakes).

It’s the surprise that matters. Markets need time to recalibrate, finding new levels as they seek to understand the practical impacts of a new reality. In the beginning, when little is known, different

Boring for the Win Even as you approach retirement age, you still need to think like a long-term investor. A 65-year-old woman has a life expectancy of 86.6 years; a man the same age has a life expectancy of 84.1 years.

That’s a minimum of 20 years to plan for. And remember: Life expectancy is an average. There is a very good chance that you will live longer than that. Perhaps a lot longer.

With interest rates at or near 0 percent, riding out a couple decades in cash is not viable. So how exactly can you get comfortable investing in stocks, knowing that volatility is inevitable? The answers to this question will sound like clichés. They are boring, but that does not mean that they lack merit or are untrue.

Spread It Around Diversification, investing in a variety of asset classes, is both the single biggest investing cliché and single best way to preserve and grow wealth. True, diversification means that you will never hit it out of the park, but it will help dampen risk and reduce the impact of a stock market pullback on your portfolio. Bonds, in particular, have historically been a powerful portfolio stabilizer and continue to add value, even at today’s low interest rates.

There is also a behavioral trick here. Any individual investment or asset class may be volatile at a given moment. However, viewing your portfolio in aggregate—rather than focusing on a single component—will help moderate your fight-or-flight instinct when volatility rises.

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Make a Plan Investing for your major life goals without a financial plan is like going on a road trip without a map—or, these days, your smartphone. You might get there, but it will probably take a lot longer than you expected.

A solid plan will help you understand the income, expenses, and portfolio mix that will get you where you want to go and help you understand best-case, worst-case, and expected outcomes given a range of portfolio returns and market conditions. Done properly, a financial plan will provide you with a sense of purpose—you know where you’re going and what you need to do to get there. When the markets get rocky, revisiting your plan can provide a sense of confidence that the goals you have set remain achievable.

Find Your Sweet Spot Putting it bluntly, if your money is keeping you up at night, you should consider how aggressively you’re invested. An investment strategy that is too exciting may be difficult to stick to for the long haul. And that’s important because staying invested in the stock market is how you generate returns.

Missing even a few days can drastically reduce your return. For example, in 2020, stocks (as measured by the S&P 500 Index) returned 16.3 percent. If you missed the best day of the year, that return falls to 6.3 percent. It falls to -19.3 percent if you missed the best five days.

Over time, a portfolio can stray from its original risk level. For example, if stocks outperform bonds over time, they become a larger relative portion of your portfolio, and it becomes riskier; if bonds

or quarters. While studies report that investing via a single lump sum can be just as effective, systematically investing via dollar-cost averaging can both be efficient and assuage fears of getting in at the wrong time.

Over time, a portfolio can stray from its original risk level. For example, if stocks outperform bonds over time, they become a larger relative portion of your portfolio, and it becomes riskier; if bonds outperform stocks, it becomes less risky. This is completely normal because different investments will perform better or worse in different markets or economic conditions. That’s when rebalancing—a process of systematically selling some of your outperformers to invest in the underperformers—comes in. There are many ways to implement rebalancing that have merit, but they are all designed to keep your portfolio risk on target over time via small, incremental moves.

Scratch the Itch

Our aversion to losses means that, for most people, investing is fraught with angst and emotion. A couple of rules-based strategies that keep your emotions from getting in the way might help.

When the markets get volatile—as they are certain to do from time to time—it’s OK to spring into action. Focus on facts, and don’t act rashly or out of emotion. Ask your financial advisor to rerun your financial plan to make sure you’re still on track for your goals. Take a look at your portfolio’s risk level, and dial it in, as appropriate. Use a pullback as a time to rebalance. Put some of your sideline cash to work in the most beaten-up asset class. Taking action to exert some control over your situation will make you feel better and can turn a crisis into an opportunity.

Knowing when to put money to work is always a difficult question. Is this the bottom? Should I wait for the inevitable pullback? Dollar-cost averaging is a popular strategy for investing cash by splitting it up into a series of installments over a predetermined period, typically months

As the saying goes, “May you live in interesting times.” At first blush, that sounds exciting—a blessing even. But, ideally, your life is more interesting than your money. In fact, when it comes to long-term investing, boring is vastly underrated.

outperform stocks, it becomes less risky.

Put It on Autopilot

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Winter | 2021

LASTING LEGACY

The State of

Estate Tax

by Neil Downing

As Joe Biden settles into office, there’s no doubt where he stands on the federal estate tax.

The Biden-Sanders Unity Task Force Recommendations on the Biden campaign website say that estate taxes should be raised back to the historical norm. In other words, if Biden has his way, estate taxes would increase. That means more of a person’s estate would go toward federal taxes, leaving less for heirs and other beneficiaries.

“

Make moves now, because things are going to change one way or the other.

Brodie Barnes

Even if such a plan were to fail in Congress, there’s another issue to consider: The Tax Cuts and Jobs Act. That law, enacted in December 2017, more than doubled the amount of assets that can be shielded from the federal estate tax and its companion, the federal gift tax. But those provisions apply only for estates of decedents dying (and gifts made) before January 1, 2026. After that, the old, less-generous provisions return.

”

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That’s why he recommends taking advantage of today’s higher lifetime limit. By giving away up to $11.7 million now, you move that amount out of your estate, perhaps transferring it to your children or other beneficiaries. Neither that amount, nor any future appreciation, will be subject to federal estate and gift taxes.

Then there’s the coronavirus. Much of the money the federal government has spent fighting the coronavirus—and stimulating the economy—has been borrowed. At some point, the debt must be repaid—and the federal estate tax is an easy target for raising revenue, says Financial Advisor Brodie Barnes, who works in CAPTRUST’s Salt Lake City, Utah, office.

If you have a sizeable estate, consider taking advantage of current law by reducing the size of your estate to minimize how much may be eaten up in federal taxes later on, Barnes says. “Make moves now, because things are going to change one way or the other,” he adds.

Suppose you do this now. When the lifetime limit drops in 2026 to about $6.5 million, will you be penalized for gifts you previously made? No. The Internal Revenue Service has officially stated that individuals taking advantage of the higher lifetime limit in effect until 2025 will not be adversely impacted after 2025 when the limit drops to prior-law levels.

Background

Basic Steps

When a person dies, that person’s estate may be subject to federal estate tax. The federal gift tax operates alongside the estate tax to prevent individuals from avoiding the estate tax by transferring property to heirs before dying, according to a Congressional Research Service report.

Before considering more complicated maneuvers, remember that you can give away a certain amount each year with no federal gift or estate tax consequences—and without even touching your lifetime limit. It’s technically known as the annual exclusion for gifts, and it’s subject to an annual adjustment for inflation. For 2021, the annual exclusion amount is $15,000, says Patricia A. Thompson, former chair of the Tax Executive Committee of the American Institute of Certified Public Accountants and tax partner at Piccerelli Gilstein & Company, LLP, of Providence, Rhode Island.

There is, however, a lifetime exemption amount. It serves to shield a certain amount of assets from both the federal gift tax and the federal estate tax. That lifetime limit, which is subject to an annual inflation adjustment, is $11.7 million for 2021, as shown in Figure One. Figure One: Lifetime Exemption Amount

Millions ($)

$11.18

$5.00

$5.12

$5.25

$5.34

$5.43

$5.45

$11.40

$11.70

If you’re married, each spouse may give up to $15,000, says Thompson. So you and your spouse can give a total of $30,000 to your nephew and a total of $30,000 to your niece for an overall total of $60,000, she says.

$5.49

In each example, you’d move $60,000 out of your estate, legally sidestepping federal estate- and gift-tax consequences.

2011

2012

2013

2014

2015

2016

2017

2018

2019

Source: Internal Revenue Service

And there’s the rub. Under Biden’s plan, the lifetime limit would be reduced to what it was under the old law—somewhere around $5 million. Even if Congress were to reject such a plan, the lifetime limit, under current law, is scheduled to drop to an inflation-adjusted $6.5 million starting in 2026, Barnes estimates.

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$11.58

That means, for example, in 2021, you can give $15,000 to your son, $15,000 to your daughter, $15,000 to your longtime friend, and $15,000 to your helpful neighbor—for a combined total of $60,000.

Winter | 2021

Another basic technique involves paying for someone’s education or medical expenses. There’s no 2020 2021 dollar limit, and the beneficiary need not be related to you. But it’s important to make sure that you make the payment directly to the educational institution or healthcare provider, Thompson says.

For example, you can pay for your grandson’s law school tuition, no matter how much that is, and pay for your old friend’s medical expenses, no matter how much that is. In both instances, you

would reduce the size of your estate; there would be no federal gift-tax and no federal estate-tax consequences, and you would preserve your lifetime limit of $11.7 million.

Other Options Beyond the basic steps, consider making outright gifts to family members or others, up to the amount of your lifetime limit. This will reduce the amount of your estate that will eventually be subject to the federal estate tax—and its tax rate of 40 percent or more.

Suppose a widow has $50.3 million in assets. If she gives away an amount equal to her lifetime limit ($11.7 million in 2021), no federal gift taxes or estate taxes would apply, and she’d be left with $38.6 million to live on, Barnes says.

Some of his clients have no problem giving away large sums, he says. Others are reluctant, perhaps concerned that they may need the money later on. For them, Barnes recommends other options with more flexibility.

For example, you could make a gift to a spousal lifetime access trust, he says. That would let you move money out of your estate—taking advantage of your lifetime limit—but the assets in the trust would still be available to your spouse and other beneficiaries, such as your children, he says. To maximize this strategy and avoid certain pitfalls, he says, you could establish such a trust one year, to benefit your spouse and others; your spouse could establish such a trust the next year, to benefit you and others; and each trust would hold different kinds of assets.

Beyond the basic steps, consider making outright gifts to family members or others, up to the amount of your lifetime limit.

Another option: Put some of your assets into a family partnership or family limited liability company, Barnes says. You could give your children an ownership stake in the entity, while you maintain overall control. The assets’ value and any associated appreciation would be removed from your estate.

The Right Fit There are charitable options to consider, too, Thompson says, “but the client has to be comfortable giving his or her money away,” she says.

Any strategy should be part of an overall plan, and “it really needs to be customized to a client’s specific objectives and comfort level,” Barnes says. When considering such steps for clients, he says he looks at the client’s need for cash flow, the client’s charitable objectives, the type of assets the client holds, the client’s tolerance for complexity (and ongoing costs), and family dynamics. As always, before you implement any of these strategies, you should consult a tax advisor who can help you understand how they work and how they might best work for you.

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GLEANINGS

The digestive system works with muscles (not gravity) so your body can process food even if you are standing on your head.

Using a machine-learning algorithm to screen more than 100 million chemical compounds, MIT discovered a drug called halicin that kills the world’s most problematic disease-causing bacteria, including some strains resistant to all known antibiotics.

Issue Accoutrements

For someone weighing 155 lbs., the gut microbiota is just under half a pound—the equivalent of a mediumsized mango.

In making this issue of VESTED, the team found several printworthy facts too good to skip over. From what the Massachusetts Institute of Technology (MIT) is doing with artificial intelligence and deep

An important milestone in the history of tennis was the decision of the All England Croquet Club to set aside a lawn at Wimbledon for tennis. In a short time the club changed its name to the All England Croquet and Lawn Tennis Club!

learning to how much After visiting the National Baseball Hall of Fame in the 1950s, Jimmy Van Alen, president of the venerated Newport Casino, lobbied leadership of the U.S. Lawn Tennis Association to sanction his Rhode Island casino, turning it into the National Tennis Hall of Fame.

$25,000 is how much you’ll pay for a nice-looking 1941 Martin D-18 from Elderly Instruments, one of the world’s most respected sellers of new, used, and vintage fretted instruments.

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Winter | 2021

your gut microbiota weighs—we’ve captured some of this issue’s most interesting facts for your quick consumption.

There is a Designing Your Life virtual workshop for women.

The month-long journey of interactive breakout sessions will reframe dysfunctional beliefs, explore social and personal narratives that shape women, and dig into design tools to increase creativity and confidence. designingyour.life/ women

$6,000,010 The amount Kurt Cobain’s MTV Unplugged Martin guitar sold for at Julien’s Auctions in Hollywood. It is currently the most expensive guitar ever sold.

Kathy Davies of the Life Design Lab at Stanford holds five U.S. patents spanning inventions such as an integrated anastomosis tool (U.S. 8574246) and a surgical knot (U.S. 7883518).

Although all Martin guitars were built in Nazareth beginning in 1839, they continued to be stamped C.F. Martin, New York, until 1867 and then C.F. Martin & Co., New York until 1898 because of a sales arrangement with a New York distributor.

CLIENT CONVERSATIONS

READER Q & A

?

In this installment of the magazine, VESTED explores what readers need to know about the long-term effects and associated risks of the swelling national debt, along with a look at the special concerns divorcing couples have when it comes to insurance coverage.

Why hasn’t the explosion in government debt caused a problem for the market?

When will it?

A

If the skyrocketing national debt level keeps you up at night, you’re not alone. Many investors have been concerned about elevated debt levels and their effects on the economy, especially since the two pandemic-related stimulus bills have caused it to soar by more than 25 percent.

In the U.S., fiscal stimulus and relief programs in 2020 are estimated to exceed $4 trillion, or nearly 20 percent of gross domestic product (GDP). With an expansion of unemployment benefits, monetary support going directly to households, grants and forgivable loans going out to small businesses, and support to hospitals and health agencies combating COVID-19, the relief programs are targeted at limiting economic damage while supporting virus containment efforts until widespread vaccination is available.

During a crisis, there is no alternative to acting quickly to limit the damage—and markets have so far cheered the actions of policymakers.

However, government spending on this scale raises questions about the long-term effects of a growing national debt. The Congressional Budget Office (CBO) estimates that the federal budget deficit will reach $3.3 trillion in 2020, a level (as a percentage of GDP) that has not been seen since World War II. This follows on the heels of a $1 trillion budget deficit in 2019.

One risk of our swelling national debt is higher interest rates. If investors were to become less comfortable lending money to the U.S. government

The National Debt Clock is a billboard-sized running total display which constantly updates to show the current U.S. gross national debt and each American family’s share of the debt. The clock sits at Anita’s Way, between One Bryant Park (West 43rd Street) and 151 West 42nd Street on Sixth Avenue in New York City.

The idea for the clock came from New York real estate developer Seymour Durst, who wanted to highlight the rising national debt. He is famously quoted as saying, “If it bothers people, then it’s working.”

If you can’t make it to the landmark, you can still see a real time U.S. National Debt Clock. Visit usdebtclock.org to see the current and archived amount of U.S. national debt.

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to finance its deficits, they would require more compensation in the form of higher interest rates. Higher rates, in turn, would increase the cost of carrying such high levels of debt and serve as an impediment to growth that leads to even more borrowing and so on.

Finally, there is the risk of inflation. Policy tools can be imprecise, sometimes with delayed effects—leading to the risk of an overshoot if stimulus that is applied with the intent of limiting economic damage winds up overheating the economy.

Fortunately, this scenario is less likely to occur in the U.S. than in other parts of the world, because of the U.S. dollar’s enviable position as the world’s reserve currency. Global demand for dollar-denominated assets serves as a steady source of demand for Treasury bonds, keeping interest rates—and therefore borrowing costs—low.

The same concerns were expressed in 2008 when a collapse in housing prices triggered a global financial crisis. During that time, we saw (albeit smaller in scale) similar monetary stimulus but no inflation.

Also noteworthy, despite decades of large deficits and low or negative interest rates, inflation has not become a problem for Japan.

Another consequence of higher debt levels is the risk that servicing the debt reduces our country’s ability to invest in other important areas, such as education, research, infrastructure, defense, and combating climate change, which could harm our competitiveness on the world stage.

Economists are divided on the severity of these risks. Some believe that debt concerns are overblown, while others claim that increased debt places our privileged global position at risk.

Either way, the debt issue (and this debate) is likely to extend well into the future, as an economy that continues to recover would be less tolerant of higher taxes or reduced spending.

My spouse and I are talking about divorce.

What kind of changes should I anticipate around insurance coverage?

A

Few life changes are more consequential than a divorce. In addition to the financial and emotional challenges of ironing out a settlement, attending court hearings, and dealing with competing attorneys, you’ll also face special concerns about your insurance coverage. Since there’s a lot going on during a divorce, insurance may not be top of mind, but it’s important to be aware of how you and your family will be impacted.

Planning for these changes should begin long before the divorce is final.

And because it’s common for one spouse to maintain employer-provided insurance for the family, the breakup of a marriage can have serious insurance consequences for the other spouse and young children in the family, especially if he or she was not employed outside the home.

Health Insurance Often, one spouse participates in a group health insurance plan at work that provides coverage for both spouses. When a divorce occurs, coverage for the other spouse will often end, unless the divorce decree requires continuation of coverage.

If there is no such requirement, temporary protection may be provided by the Consolidated Omnibus Budget Reconciliation Act (COBRA). This federal law protects employees of companies with 20 or more workers and their dependents from losing group insurance coverage as a result of job loss or other life changes like a divorce. Certain governmental and nonprofit enterprises are exempt.

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Winter | 2021

If your ex-spouse maintained family health coverage through work, you may, at your own expense, continue this group coverage for up to 36 months, or until you remarry or get coverage under another group health plan.

If you are eligible for health insurance through your own employer, talk to your human resources department about your options.

This can be more cost efficient than COBRA and keeps you out of your ex’s company plan. Although you generally have to wait for certain times of the year to join employer health insurance, losing your previous coverage due to a divorce launches a special enrollment period for you to sign up for your employer’s plan.

Life Insurance If you’re a custodial parent, make sure the life of the noncustodial parent is insured. You don’t want to end up in a position in which child support payments suddenly end because an ex-spouse dies.

The same principle applies to alimony payments. Life insurance can protect you and your children in case of untimely death. If you have trouble paying the policy premiums, you can petition the court to have alimony and child support payments increased to cover the cost.

If you don’t have custody of your children, you’ll still want to insure the life of your ex-spouse. If he or she were to die, you would likely gain custody of your children, increasing your expenses dramatically.

If you can’t get new insurance on your ex-spouse, have his or her existing policies transferred to you as the new policyowner and beneficiary. This can be planned as part of the divorce agreement.

Disability Income Insurance If you receive alimony or child support, another risk to your income may arise if your former spouse becomes disabled.

If he or she has no disability insurance and is unable to work, the court may modify the alimony and child support obligation, reducing or eliminating payments to you.

With a disability policy, your ex-spouse will receive benefits each month and may be capable of paying the same amount of alimony and child support. Planning for disability insurance should be completed before the divorce is final. Unlike life insurance, you can’t own a disability policy on someone else. So, the divorce decree may require that your ex-spouse pay the premiums on a policy and that you are entitled to regularly receive proof that the policy is in force.

Property Insurance At a high level, you’re going to have three options when changing your home insurance after a divorce: You can cancel your joint policy, you can take a person off of your shared policy, or, if you’re ordered to stay in the same dwelling, you can keep the coverage the way it is. However, there are a few different things that you’ll have to do to for each scenario.

Canceling your joint policy will be a group effort—your insurance agent will require consent in writing from both ex-spouses. This method will probably work best if you are both leaving the house and going your separate ways.

If you’re the primary policyholder, you can remove your ex-spouse from the policy by giving your insurance carrier a copy of your divorce decree. If you’re not sure who the primary policyholder is, it’s usually the person who called in to set up the policy (even if you’ve both signed the deed, loan, or policy). If you are not the policyholder, the options you’ll have are to prove that you have insurable interest, remove yourself from the policy, or arrange to be the responsible party for the insurance payments.

Insurance Beneficiaries During or after a divorce, your choices on beneficiaries may be somewhat limited. For example, if a court ordered that you must continue an existing policy with your ex-spouse as beneficiary, you cannot change it. If you’re under no such constraints, however, your choice usually boils down to either your estate, your ex-spouse, or your children.

Designating your estate as beneficiary will tie up the insurance proceeds in probate. And unless you need to protect alimony or child support payments, you probably have no need or desire to name your ex-spouse as beneficiary. Designating your children as beneficiaries may be your best course but doing so can be very complicated if they are minors. One solution is to create a trust for the children and name the trust as beneficiary.

Remember: Divorce laws may differ from one state to the next, so consult an experienced legal professional before proceeding. Your situation is unique, so make sure that you also sit down with your financial and tax advisors to make sure that your plan is right for you.

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@captrust.com.

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CAPTRUST HAPPENINGS

GIVING BACK

COMMUNITY FOUNDATION

Year-end Wrap-up During 2020, the CAPTRUST Community Foundation (CCF) provided more than $1,000,000 of financial support to more than 211 deserving charities serving the needs of children around the country. Included in this amount was a $100,000 donation to TeamSmile, our 2020 Charity of Choice. This nonprofit organization partners oral health professionals with professional athletic organizations to provide underserved children with a life-changing dental experience in which the excitement and allure of sports reinforce the value of a lifelong commitment to dental health care.

Additionally, each year, CAPTRUST collects applications from charitable organizations throughout the country that support our mission.

Each qualified applicant goes through a strenuous vetting process, and, if selected, will receive one of three $25,000 grants. This year’s national grant award recipients are Note in the Pocket, Parkland C.A.R.E.S. Food Pantry, and Respite Care of San Antonio.

Giving Thanks Campaign In December, the firm recognized Giving Tuesday with its own Giving Thanks Campaign. As part of the initiative, each CAPTRUST office chose a nonprofit in its community to receive a $10,000 donation through the CCF. The campaign wrapped up with a grand total of $450,000 in donations going to 45 charities around the country. The charities that received a $10,000 donation are:

• MUST Ministries • Nourish NC • Our Community Place • Out of the Garden Project • Rockbridge Area Relief Association • Ronald McDonald House Charities of Central Florida • Shepherd’s Gate

• Alexander Youth Network

• For the Kids

• Bethlehem Emergency Sheltering

• Fully Equipped

• Bradley Free Clinic

• Greater Dayton Union Co-op Initiative

• Brother Dan’s Food Pantry

• Green Good Neighbors

• Catholic Charities Maine

• Hand2Hand

• Central Texas Food Bank

• Harbor House

• Cincinnati Freestore Foodbank

• Homes with Hope

• Coastal Bend Food Bank

• Houston Food Bank

• United Way of the Inland Valleys—Olive CrestRiverside

• Durham Rescue Mission

• Integrated Family Community Services

• Unity Shoppe

• Family Services

• Island Harvest

• Valley Youth House

• Feed More of Central Virginia

• Meals on Wheels of Greater Lynchburg

• Vista Maria

• First Light Shelter

• Mercy House

• Vogel Alcove

• Food Bank of Northwest Indiana

• Metropolitan Ministries

• Youth Homes of Mid-America

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Winter | 2021

• South Oakland Shelter • Sussex County Crisis Housing Services Inc. • The Children’s Home Society of New Jersey • The Greater Boston Food Bank • The 30-Days Foundation • United Way of Central Missouri

Angel Tree (Top left) The Dallas Magnolias presented over 800 Bye-Bye-Bags, along with 80 three-foot tall Christmas stockings filled with toys to the children of Vogel Alcove in Dallas, Texas. The event was a part of CAPTRUST’s Giving Thanks campaign.

The Salvation Army Angel Tree program has been a big part of the holiday season at CAPTRUST headquarters in Raleigh for many years. The program specifically focuses on fulfilling the biggest need: clothing items for children up to age 12. In December, CAPTRUST hosted its first drive-thru Salvation Army Angel Tree drop-off. Colleagues stayed in their vehicles while a group of fastmoving elves unloaded new clothing, toys, and stockings for distribution to children in Wake County.

Foundation Board Members The CAPTRUST Community Foundation is pleased to welcome seven new board members who will serve two-year terms, along with announcing a new organization president. The board welcomes new members Josie Dorris, Vivian Houchens, Veronica Karas, Bryan Lewis, Ashley May, Michelle Miller, and James Stenstrom. CCF president Philip D’Unger will be supported by the following board officers in 2021: • Kim Griggs-Murray • Vickey Collins • April Winters • David Wahlen

• James Stenstrom • Ashley May • Michelle Miller • Josie Dorris

Philip D’Unger President

Kim Griggs-Murray Vice President

Vickey Collins Secretary

April Winters Treasurer/Finance

David Wahlen Events Chair

James Stenstrom Grants Chair

Ashley May Fundraising Chair

Michelle Miller Volunteer Chair

Josie Dorris Marketing Chair

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CAPTRUST GROWTH

Denver, CO

We are pleased to announce four new regional offices and one new financial advisor.

New Office in Colorado

New Offices in Arizona, Minnesota, and Nevada

In November, CAPTRUST added to its ranks the first location in Colorado. Shine Wealth Partners has been led by founder and CEO, Judy Shine, since 1995 and advises on more than $785 million from individuals and families. In addition to Judy, the team is led by President and Senior Wealth Advisor Karen Salvatore, Senior Wealth Advisors and Principals Beth Cornell and Elisabeth Jacobson, and Senior Wealth Advisor Peter Vander Ploeg. They bring along with them four additional team members.

CAPTRUST added Phoenix-based MRA Associates to the firm in December. Founded in 1991, MRA provides investment advisory, wealth management, and tax consulting for private clients and institutions. The firm is led by Managing Partner and Chief Executive Officer Mark Feldman and includes 58 advisors and staff. In addition to $3.29 billion in assets under management, MRA brings to CAPTRUST a new service offering: income and estate tax compliance and consulting services for individuals, families, trusts, and related closely held operating businesses and entities.

CAPTRUST RECOGNITION

NAPA Aces

Top Women Advisors

Top 401

Minnesota 500

The National Association of Plan Advisors (NAPA) recently announced its 2021 list of Top Retirement Plan Advisors Under 40—also known as Aces. NAPA launched this list in 2014 to highlight young advisors at registered investment advisors and broker-dealer partners.

CAPTRUST’s David Cacciabeve, Shaun Eskamani, Patrick Flint, Evan Holmes, Cameron Kleinheksel, Paul Stibich, and Jeremy Tollas were among the 100 advisors named to the list.

In November, NAPA announced its 2020 Top Women Advisors List. The list acknowledges the contributions of a growing number of women who are making significant contributions to the retirement industry and bringing excellence to their profession. This year, eight CAPTRUST advisors were on the list: Taria Agbelusi, Beryl Ball, Deanna Bamford, Karen Casillas, Heather Darcy, Dori Drayton, Jean Duffy, and Susan Shoemaker.

The Financial Times included 25 CAPTRUST advisors in the publication’s 2020 list of the 401 Top Retirement Advisors. The prestigious list recognizes financial advisors who specialize in serving defined contribution retirement plans, such as 401(k) and 403(b) plans. We are very proud of all the dedicated and hardworking CAPTRUST financial advisors who made this list.

CAPTRUST Principal and Financial Advisor, David Koch, was honored as one of the 500 most powerful business leaders in Minnesota in 2020. The inaugural issue of Minnesota 500 features executives across more than 60 industries, including business, nonprofits, health care, and manufacturing.

Koch is listed in the Investment Banking and Wealth Management section.

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Winter | 2021

Christopher Huber Christopher Huber joined CAPTRUST’s Bethlehem, Pennsylvania, office at the end of 2020 and serves as a financial advisor responsible for providing investment advisory services, financial planning, and comprehensive wealth management services to high-net-worth individuals, families, and institutions. Prior to joining CAPTRUST, Huber was a manager for Buckno Lisicky & Company. He earned his Associate degree in accounting from Lehigh Carbon Community College and a Bachelor of Science degree in mathematics from Kutztown University of Pennsylvania.

No. 1 Financial Planner The Triangle Business Journal recently released its list of financial planners for 2020, ranking CAPTRUST in the number one spot. The annual list is based on the number of licensed professionals in the Raleigh, Durham, and Chapel Hill areas.

2020 Brick Award Winners CAPTRUST presented its annual Bricks of Success Awards at the company’s virtual Advisor Kickoff held in January. Award nominations and final voting are employee-driven, and the awards recognize employees and contributions that exemplify the very best of our company’s values, mission, and vision. Each winner was presented with an engraved marble brick, symbolizing that our best colleagues are the building blocks of CAPTRUST’s culture and that any great company is built one brick at a time.

Congratulations to this year’s Brick of Success Award winners in the following categories: CLIENT SERVICE Sonya Glenn Alex Badger Francetta Slacum COMMUNITY SERVICE April Winters Vickey Collins Ashley May STEP-UP Kevin Monroe Mary Earls Tiffany Larew Chelsea Batts-Wood

INNOVATION CAPTRUST Studio/Video Team MOST VALUABLE PLAYER Margaret Jarocki ONEUP Paul Owen RAINMAKER Jim Edwards ADVISOR OF THE YEAR Beryl Ball

Excellence Award Winners The Excellence Award is a way for CAPTRUST associates to recognize colleagues who go above and beyond the scope of their typical roles and consistently perform at the highest levels.

The award winners represent an elite group of CAPTRUST colleagues whose attitudes and performance have positively impacted the firm’s clients and the company.

The firm’s Excellence Award winners for 2020’s fourth quarter have a combined tenure of nearly 15 years with CAPTRUST, and span several different groups, including IT Information Security & Networks, Institutional Operations, and Wealth Services Groups.

Congratulations to our latest group of Excellence Award Winners that includes two senior associates, one team leader, and a client management consultant.

Brett Burmeister Senior Associate, Security Engineer

Jared D’Orazio Team Leader, Wealth Investments

Denise Mollo Client Management Consultant, Wealth Client Service

Jeff Willman Senior Associate, Institutional Operations

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We know that investors are looking for experienced and trusted advisors who can provide wealth management services that are focused on their unique circumstances and tailored to their goals.

In more than 30 years of acting as a fiduciary to some of the country’s biggest retirement plans, we have gained valuable insights that we can apply to your

Alan Bishop Jr., CFA, CFP® Vice President, Financial Advisor Montgomery, AL Kim M. Elliott, AIF® Vice President, Financial Advisor Montgomery, AL Brian S. Mitchell, CFP®, CPWA® Principal, Financial Advisor Montgomery, AL

wealth planning and investment challenges.

captrust.com • 919.870.6822 | toll-free: 800.216.0645 • 4208 Six Forks Road, Suite 1700 | Raleigh, NC 27609