SAX QUARTERLY NEWSLETTER
COMPANY SPOTLIGHT: MANUFACTURING & DISTRIBUTION
Unique Photo, Inc. on Succession Planning
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CONSTRUCTION CORNER
Tax Reform Implications for Construction Companies
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Gina Perrone, CPA, MST & Ivonne Rayo, CPA Co-Written by:
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HEALTHCARE CORNER
Strategic Planning for the Independent Physician
Written by:
Susan E. Reed, CPA, CFP
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®
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NOT-FOR-PROFIT CORNER
Rising Above Adversity
Written by:
Joshua Chananie, CPA
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REAL ESTATE CORNER
Qualified Opportunity Funds
Jeffrey P. Roude, CPA & Michael Benguigui, CPA Co-Written by:
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TECHNOLOGY CORNER
Planning for the Unplanned Written by:
Matthew Hahn
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WEALTH MANAGEMENT CORNER
Investor Behavior: FoMO vs. PoGO
Co-Written by: Gregory Duffy & Joseph Piela, CFP ®
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The information contained within this newsletter is provided for informational purposes only and is not intended to substitute for obtaining accounting, tax or financial advice from a professional.
M&D CORNER: COMPANY SPOTLIGHT
Succession Planning Spotlight:
Unique Photo, Inc.
From Left to Right: Alexander Sweetwood (Unique Photo President), Jonathan Sweetwood (Unique Photo CEO), and Jack Sweetwood (Unique Photo Vice President)
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SUCCESSION PLANNING
or a business owner, developing your succession plan should F be at the top of the to-do list as determining and molding new leaders to succeed you is an ongoing process that takes great care and consideration. For family-owned businesses, succession planning is a unique animal as family dynamics, family structure, hierarchy and many other components come into play. Business owners are understandably absorbed in the day-today operations of their present business, in addition to leading their companies to their long-term goals. But, what happens when you cease control of leadership either voluntarily or due to unforeseen circumstances? Will your company function the way it did under you? Is it acceptable if it doesn’t? A recent survey concluded that 69% of family-owned businesses expected ownership of the business to continue into the next generation, but only 23% had a robust, thought-out business succession plan. This is troublesome as significant issues can arise within or close to a transition that need to be considered beforehand: What if the next generation is unable, reluctant, or unprepared to lead? What are the repercussions if your successor is not accepted by stakeholders? Does the business have enough liquidity to support the transition of ownership within the family? As a client of Sax LLP, we asked to sit down with Jonathan Sweetwood, CEO for over 30 years of family-owned Unique Photo, Inc., who understands the importance of succession planning and its many facets. Unique Photo is one of the largest privately owned photographic supply distributors in the world, and recently named Jonathan’s oldest son, Alexander Sweetwood as President, marking the 3rd generation of family members to run the company.
Bernard Sweetwood
What is Unique Photo’s Succession Snapshot? Bernard and Harriet Sweetwood established the company in 1947 and opened over 20 retail outlets across the tri-state area, eventually opening the Hoboken Camera Center in 1954. At the transition between generations, Bernard and Harriet split the company evenly between their two sons, Jonathan and Matthew. Between both generations, Unique Photo since grew to become one of the largest privately owned photographic supply distributors in the world. In 2015, Matthew’s share was bought out. Jonathan mentioned that he was always at his parent’s office growing up, and he saw that as an advantage because the business became his life. “My father and mother taught me everything I know when it comes to running a successful company with integrity, commitment and high effort,” said Jonathan. “However, I believe they had an old school mindset when it came to succession. Splitting power down the middle absolutely has its merit, but can sometimes make things difficult when it comes to effective internal control without conflict.”
Harriet Sweetwood
(continued on page 6)
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M&D CORNER: COMPANY SPOTLIGHT Jonathan shared two common schools of thought when it comes to succession planning: Children and/or family members should gain business experience elsewhere to avoid a sense of entitlement within the family company; Children and/or family members should spend all their time within the family company so they know it’s workings inside and out. Jonathan opted for the latter approach, and his two sons Alexander and Jack have only worked at Unique Photo. This allowed for the accumulation of time and experience within the company, and Jonathan stressed that no Sweetwood receives special treatment. Each child started in the warehouse, and then moved to accounting, and so on in each department, and in 5-10 years they had experience in every aspect of the company. “In my oldest son Alexander’s case, he always wanted to be heavily involved in the company and started working here earnestly at the age of 16. He has no ego, and it is a privilege to watch him lead the company with competence and motivation.” Just as Jonathan had done when his parents ran the company, Alexander and Jack spent much of their time growing up at the office. Before becoming President, Alexander observed Jonathan on the phone and in the decision-making capacity on a daily basis. Jonathan then began bcc’ing Alexander on all communications to allow him to see the workings of the company and accounts. In meetings today, Jonathan feels comfortable and happy to let Alexander run the show. “I’m done steering the train, and can mostly just relax in the caboose. I have to occasionally get out and help push, but that’s fine and is expected. I am still here at the company full-time to provide guidance and input where needed,” said Jonathan.
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When it came to my own succession, I decided to make it so my children write their own story at Unique Photo,” said Jonathan. As a successor to his parents and now relinquishing power to his own children, there are two primary things Jonathan identifies is needed for a successful business transition between generations: The next generation must have the desire and aptitude to lead. A business owner must have the will to let go and stand back. “If you have those two things, the rest is relatively simple,” said Jonathan. WHAT IS UNIQUE PHOTO’S CURRENT SUCCESSION STRATEGY? The Sweetwood family has a unique family-owned operation. Jonathan explained that titles are something they need only for business cards and that each family member has equal access to all business accounts and is fully invested in the company. That is not something that can necessarily be reflected on paper, but the combination of both family and personal lives produces a sense of pride and effort out of the Sweetwood family that has propelled them to so much success over their 70+ years in business.
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Jonathan mentioned that his younger son Jack is a vital asset to the company and one of its hardest workers. He goes on to state how proud he is of his sons for gaining the respect of the company’s employees and not relying on the Sweetwood name. “That respect is essential to a smooth transition of power as well, and is not something I could just raise a wand and make happen. They had to individually earn that respect for themselves and they certainly rose to the occasion.” “IT’S NOT ONLY UP TO THE NEXT GENERATION, BUT ON THE BUSINESS OWNERS TO HAVE A SUCCESSFUL SUCCESSION.” Business owners relinquishing control to the next generation can understandably have fears about the unknown. However, it is important to have trust in the next generation, and trust in your own efforts to teach and mold them appropriately. Jonathan firmly stands behind the notion that the next generation needs the room and opportunity to find their own way. “I know many family-owned companies where the parents / owners do not have the will to let go. They are either scared their child may make a mistake or won’t make the same decisions they would,” said Jonathan. He went on to explain why this can cause major issues in the transition phase, as past owners can undermine their children in meetings, or publicly challenge their executive decisions. “This not only blurs the lines on who is truly in charge, but can significantly deflate the confidence of the next generation coming in, and can hinder their growth in finding their own style of leadership.” Jonathan explained that Alexander and Jack made the decision to move into “Used” photo products which he thought may be a dead-end, but it ended up being a significant portion of their business. They saw something that he didn’t - they went for it, and it proved to be successful, and that was because
SUCCESSION PLANNING he gave them the freedom to stand and fall on their own decisions. He states, “Some days I find myself saying, ‘I would have handled that differently’ and other days I say ‘Wow, I wouldn’t have thought of that’. It’s a necessary evolution and learning process for us all.” Jonathan also shared that Unique Photo will be opening a new store in Philadelphia, PA at the end of 2018 / early 2019. “Alexander and Jack want to take this on, and it is very exciting but also a large amount of work. I am content with staying put while they are eager to grow and expand,” he laughs. “This is just a true testament to why succession is necessary”. In conclusion, business owners cannot lead forever – a “changing of the guard” is inevitable, and a proper plan in place is vital to the success of the transition. Succession planning is undoubtedly difficult, and there are countless items to take into consideration like the economy, the state of the market you’re in, and with family-owned businesses, you must consider family dynamics, individual skillsets, the maturity of the upcoming generation of leaders and their career objectives. “Since my children had the aptitude and desire to lead the company, succession was rather easy for me. I admit that sitting in the passenger seat takes some getting used to, but I had the will to let go and the confidence in my children to take this on which made all the difference to a smooth transition,” concluded Jonathan. “Now I have my granddaughters coming into the office every day, and I can witness the 4th generation running the halls of Unique Photo. I can honestly say I have my dream job.” For more information or questions on succession planning, please reach out to a Sax Advisor at (973) 472-6250.
FUN FACTS ON UNIQUE PHOTO’S FAMILY HISTORY
In 1936, Bernard Sweetwood’s father built him a bike out of spare parts when he was 16 years old so he could deliver prescriptions for Goldberg Pharmacy in Brooklyn, NY. He later opened a photo studio and at that time, Bernard discovered that Macy’s needed a significant amount of Kodak cameras and film, but at the end of WWII, photographic supplies were on allocation because of the raw materials used for the war unless you had a preexisting dealership with Kodak. Recognizing the business opportunity, Bernard called in a favor from his first employer, Goldberg Pharmacy, who he remembered had a Kodak dealership. He made the bold request for this substantial order of Kodak product that he admittedly could not pay for. The owner, Sarah Goldberg, agreed to take a leap of faith for Bernard because of the loyalty and honesty he demonstrated when he worked for them. Bernard then immediately went to Macy’s to obtain a PO which was a feat, claiming he could get them something no one else could. From there, Bernard fulfilled the order, picked it up and delivered it to Macy’s, ran to accounting and had them immediately issue a check that he then returned to Goldberg Pharmacy – all in one day. The profit from that business transaction provided the seed money that started Unique Photo.
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CONSTRUCTION CORNER
How Tax Reform Changes Will Impact Your Construction Business
Co-Written by:
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Co-Written by:
Gina Perrone, CPA, MST
Ivonne Rayo, CPA
Senior Tax Manager
Tax Manager
Sax LLP
Sax LLP
gperrone@saxllp.com
irayo@saxllp.com
TAX REFORM IMPACT he Tax Cuts and Jobs Act is the most significant tax reform T legislation in decades, and contains many provisions that will
Business Interest Expense
have a direct and significant impact on the construction industry. Even though we are still awaiting more guidance from the IRS and Treasury Department on certain provisions, it is important to understand what this tax reform means for your construction business now, and what you need to account for in the future.
Limitation applies to all corporate and noncorporate taxpayers for tax years beginning after December 31, 2017.
Here are some of the main provisions in the new tax law that will directly impact your construction business:
- Business interest income
Methods of Accounting for Long-term (LT) Contracts
• Limitation does not apply to:
Certain construction contracts may be eligible to use the cash or the completed contract method of accounting for LT contracts OLD LAW – Contractors with average gross receipts for the prior three years under $10 million are exempt from the requirements to account for LT contracts using the percentage of completion method (POC) for income tax reporting. NEW LAW – The $10 million threshold is increased to $25 million for contracts entered into after December 31, 2017. Thus, construction companies with average annual gross receipts under $25 million may be exempt from the requirement to use POC. The exemption only applies to contracts expected to be completed within two years of the commencement of the contract. Considerations – If eligible, does it make sense to switch to the cash method of accounting for LT contracts? Any deferral of income or acceleration of deductions creates current tax savings by deferring taxable income into future years. Tax Rates Reduced For contractors operating a construction business as a C-corporation – the tax rate has been reduced to a flat rate of 21% for taxable years beginning after December 31, 2017. Fiscal year C-corporations have a “blended” 2017-2018 tax rate. Considerations – C-Corporations in the lower tax bracket in prior years will experience a tax rate increase. Does it make sense to convert to an S-corporation? Considerations – The tax rate differential between C-corporations and pass-through entities warrants a re-examination of entity choice. Considerations – For fiscal year corporations, a 2017-2018 blended tax rate will result in a higher tax bracket in 2017-2018 than in future years when the corporation is taxed at 21%. To benefit from the higher tax rate in 2017-2018, fiscal-year corporations should take actions to defer income to a future year and accelerate deductions to the 2017-2018 tax year. Pass-Through Deduction Known as the Qualified Business Income (QBI) Deduction, this new deduction is available for non-corporate taxpayers.
Annual deduction for business interest incurred is limited to the sum of: - 30% of the taxpayer’s adjusted taxable income
- Taxpayers with annual gross receipts of $25 million or less - Real Estate businesses that elect to exempt themselves. Limitations include: • Irrevocable election Businesses making the election must use the Alternative Depreciation System (ADS) for certain property (generally real property with period of 10 years or more). ADS depreciates property over longer periods compared to MACRS (Modified Accelerated Cost Recovery System). Businesses making this election cannot claim bonus depreciation Considerations – Real estate businesses making the election to be exempt from interest expense limitations should weigh the advantage of avoiding the limitation against a longer depreciation period. Considerations – Businesses subject to limitation should consider limiting debt exposure by relying more on equity financing for capital. Meals and Entertainment OLD LAW – Business meals and entertainment expenses are only 50% deductible. Employee meal expenses incurred for the benefit of the employer (in-house eating facility, de minimis food and beverages such as coffee & donuts) are 100% deductible. NEW LAW – Entertainment expenses – 0% deduction Business meals with clients and prospects – 50% deduction remains Employee expenses incurred for benefit of employer – 50% deduction Meals provided at employee recreation events – 100% deduction remains Considerations – Businesses will need to account for travel, meal, and entertainment expenses separately. Considerations – Consider other benefits to employees that are deductible, such as employer sponsored IRAs and 401(k) plans.
Generally, the deduction is 20% of qualified business income from a partnership, S-corporation or sole proprietorship. Certain limitations apply to service related businesses. There is also a limitation based on W-2 wages and the adjusted basis in acquired qualified property. Considerations – The greater the qualified business income, the greater the QBI deduction. Analyze strategies to increase the bottom line, but keep in mind that you must have a business purpose that falls within IRS guidelines.
Depreciation Bonus Depreciation First year additional depreciation is 100% for qualified property acquired and placed in service after September 27, 2017 and before January 1, 2023. (continued on page 10)
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CONSTRUCTION CORNER (continued from page 9)
Election can be made to claim 50% bonus depreciation instead of 100% for property acquired and placed in service after September 27, 2017. Now allowed on used property. Section 179 Expensing limit increased to $1,000,000 with phase-out threshold increased to $2,500,000 for property placed in service after December 31, 2017. Qualified improvement property now includes roofs, HVAC, alarm, fire, and security systems for nonresidential properties. Luxury Automobile Deductions Applies to a luxury automobile which is any automobile with a minimum cost basis of $50,000.
Domestic Production Activities Deduction DPAD – Section 199 This deduction is repealed for tax years beginning after December 31, 2017. In general, contractors benefitted from this deduction, which was equal to nine percent of the lesser of qualified production activities income (QPAI) or taxable income. The deduction was limited to 50% of W-2 wages paid. Excess Business Losses for Noncorporate Taxpayers Disallowed for tax years beginning after December 31, 2017 and before January 1, 2026. Treated as a net operating loss (NOL) that will be carried over to the next tax year. Calculated as follows:
Depreciation Limits for passenger automobiles over $50,000 that are placed into service after December 31, 2017: 1st year: $10,000 2nd year: $16,000 3rd year: $9,600 4th year and beyond: $5,760 Additional first year bonus depreciation: $8,000, which brings the total depreciation for Year 1 to $18,000. Like-Kind Exchange – 1031 Exchange
Taxpayer’s aggregate deductions from taxpayer’s trade or business LESS sum of taxpayer’s aggregate gross income or gain from such trade or business PLUS $250,000 ($500,000 joint return) For tax years after December 31, 2017, the NOL may only reduce 80% of taxable income determined without regard to the NOL deduction. For tax years after December 31, 2018, the threshold is adjusted for inflation. Partnerships and S Corporations: The limit on excess business losses is applied at the partner or shareholder level and not at the entity level.
Beginning in 2018, like-kind exchanges are limited to real property (real estate) that is held for business use or investment purposes.
The limit is applied after the limit for passive activity losses (PALs).
There are no more gain or loss deferrals for vehicle trade-ins.
Considerations:
Qualified Improvement Property (QIP) QIP qualifies for 100% (50% if elected) bonus depreciation for property placed in service after December 31, 2017 and before January 1, 2024. * QIP qualifies for Section 179 Expense. QIP eliminates different classes for 15-year qualified leasehold improvement, retail and restaurant property; Eliminates lease requirement. Applies to any improvement made to an interior portion of nonresidential real property and placed in service after the date the building was first placed in service by any taxpayer. Does not apply to the enlargement of a building, any elevator or escalator, the internal structural framework of a building, or external improvements to a restaurant and restaurant buildings.
Joint Returns – The limit applies to ALL of a couple’s trade or businesses. Non-business income (including spouse’s) can be offset only to the threshold of $250,000 ($500,000 joint return) Cash Flow Planning – expect to receive refunds from the loss carryforward at least a year after the year the carryforward loss is used to reduce taxable income. Further guidance is needed to clarify the interaction between the passive activity rules and the excess business loss rules. There is always uncertainty with change, especially when there is limited guidance available. A positive, however, is that tax reform opens new doors regarding business and tax planning that can be valuable if you prepare appropriately. It is important to act now to capture beneficial opportunities and eliminate any negative “unforeseen” consequences.
The recovery periods: General Depreciation System (GDS) – 15 years using the straight-line method Alternative Depreciation System (ADS) – 20 years using the straight-line method Considerations – Real property trades or businesses (real property development, redevelopment, construction, reconstruction, acquisition, conversion, rental, operation, management, leasing, or brokerage) electing out of the new rules for interest deduction limits must use the ADS recovery period for the following property they hold: Nonresidential real property – 40 years Residential rental property – 30 years, or Qualified improvement property – 20 years* * Note: Recovery periods were not explicitly included on the final bill. A technical correction will be needed.
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Reach out to Sax’s Construction Practice to help you navigate the complex terrain of tax reform. We can help you evaluate both the short-term and long-term effects that impact future cash flow, analyze your current entity structure, and maximize the 20% QBI deduction, among many other important items to consider. Gina Perrone, CPA, MST is a Senior Tax Manager at Sax LLP and a member of Sax’s rapidly growing Construction Practice, specializing in high-quality tax services and planning opportunities to meet clients’ ultimate goals and objectives. Gina can be reached at gperrone@saxllp.com. Ivonne Rayo, CPA is a Tax Manager at Sax LLP and member of Sax’s rapidly growing Construction Practice, and specializes in solving the tax challenges of businesses in multiple states. Ivonne can be reached at irayo@saxllp.com.
Sax is thrilled to announce the 2018 Founder’s Award which will offer local not-for-profits the opportunity to showcase their efforts in propelling their mission forward for a chance to win a $15,000 unrestricted gift to support their organization. This year’s theme is inspiration, and we invite not-for-profits in the NJ/NY area to apply by telling us: How do you inspire? HOW TO APPLY Sign up HERE to join the 2018 Founder’s Award distribution list and receive: • The 2018 Founder’s Award Application • Defined criteria for award submission • The Founder’s Award event information SAVE THE DATES Monday, July 30: Founder’s Award Application will be released Friday, September 14: Deadline to submit application (firm) Thursday, January 24, 2019: Founder’s Award event (formal invitation to be sent)
Please reach out to foundersaward@saxllp.com for questions or for more information.
Sax is a champion of not-for-profits. Through our Fist to Five® process, we strive to support, empower and guide organizations in ways that ensure their continued existence and positive impact on the world. Last year, the Founder’s Award event brought together not-for-profits on the importance of social and fiscal sustainability, and was a night to remember. We are proud to showcase those not-for-profit organizations who came together to celebrate their missions. Check them out on our Founder’s Award Wall of Appreciation.
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HEALTHCARE CORNER
Strategic Business Planning for the Independent Physician
Written by:
Susan E. Reed, CPA,CFP® Partner
Sax LLP sreed@saxllp.com
Posted with the permission of MDAdvisor, A Journal for the Healthcare Community.
As Einstein so wisely reminds us: Insanity = Doing the same thing over and over and expecting different results. The healthcare industry is not one where you can remain stagnant if you want to thrive and flourish, and it is vital to remain flexible and fluid to keep pace. One key to remaining relevant is to invest time in planning your best route forward. When planning for success becomes an integral part of the lifeblood of your organization, you will gain a competitive advantage. The terms business plan and strategic plan may sound like buzzwords straight out of a large corporation’s boardroom, but the truth is that they are essential for all businesses and can be scaled for any size. The difference between the two is that a business plan is typically done as a feasibility study for a new business or service line, while a strategic plan is a short-term plan to guide an active business to meet its goals. This article presents information on both types of plans, which are vital to your ability to keep your practice evolving and flourishing. BUSINESS PLAN A business plan serves as the foundation for your practice. It addresses the questions of “who?” (your customers, competition and management team) and “what?” (the services your business will provide). It shows where you are starting, where you want your business to be in the future, and how you plan to get there. Portions of your plan may change over time, but when challenges come up, the business plan will keep you focused on the goals you have established for your practice. A formal business plan contains the following sections, which will answer those very questions:
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Executive Summary: A high-level narrative summarizing your overall plan; can be a standalone document used for internal and/or external use. Practice Description: A detailed description of your practice’s service offerings, your specific areas of expertise and the identification of your target audience. Market Analysis: Detailed outline of your target market where you will provide services, coupled with a review of your competition both direct and indirect. It also includes your patient demographic. Marketing and Sales: Identification of your growth goals and a detailed analysis of the marketing efforts required to effectively promote your services. Management Team: A detailed outline of the skill sets needed of your management team and the specific staff needs. Finance and Operations: Detailed financial and operational projections for the start-up and/or management of the practice. You should be creating projections for expected expenses and revenues for the next several years. For practices that are considering forming a new medical group, it is imperative that you produce a strong business plan to assess the viability of the new group. The preparation of a business plan often requires the use of outside professionals and services. For example, your practice may hire a firm to assist with market analysis or use a facilitator to guide the practice through the process. There will be three people who will be very helpful in guiding you through your practice start-up: your tax accountant or advisor, a legal advisor and a practice start-up consultant.
THE HEALTH OF YOUR PRACTICE While a business plan is commonly created for new businesses, it can also be utilized to evaluate new service offerings your practice might be contemplating as well. For example, a pain management practice might consider purchasing a C-Arm machine. Before making a major investment like this, you’ll need to ask yourselves the following questions: Who are your customers? • Do your patients have insurance that covers this procedure? • How many patients are you currently referring out for this procedure? • Will your referring physicians be supportive of you providing this procedure? Who is your competition? • Where are they located? • What alliances do they have? Who is managing this new procedure? • Who has the skill set needed to perform this procedure? • Who is going to take responsibility for managing this new service line? What are the details of providing this procedure? • Clinical operations • Administrative operations • Profitability analysis After formulating your business plan, and once you determine your business idea is viable, then you must strategically plan for executing it and making it a reality. STRATEGIC PLAN A strategic plan provides a roadmap to accomplishing your business goals, whether they are related to forming a new business or improving an existing one. A strategic plan is generally shortterm in nature, typically spanning 2-5 years and answers the questions “how,” “when” and “where” you will meet your goals. A well-structured strategic plan provides clear direction for the practice, offers the opportunity for physicians, owners and managers to collaborate in setting the future direction, allows the practice to set priorities and offers the potential for enhanced financial performance and improved quality of patient care. Over the long-term, a practice can use the strategic plan as a benchmark against which to measure progress in achieving the goals which have been set. Here are signs that may indicate you are in need of a strategic plan: • Lack of clear goals with measurable targets • Outdated systems and processes • Stagnant patient volumes • Deteriorating financial performance • Low patient satisfaction results • Lack of capital • Missed growth opportunities • Underperforming personnel • The desire to affiliate with another healthcare entity or organization A formal strategic plan contains the following sections: Vision Statement: This is an aspirational statement that answers the question: Where do we want our practice to go? It must be concise and easy to communicate. Mission Statement: This defines your core business and explains the path to achieve your vision and the benefit you will provide to customers. SWOT Analysis and Gap Analysis: These compare where the practice is versus where it hopes to be; they identify gaps to address and practice Strengths, Weaknesses, Growth Opportunities and Potential Threats.
Goals and Responsibilities: Goals must be detailed regarding responsibilities and ownership and must produce answers that are SMART: • Specific: What will the goal accomplish? • Measurable: How will you measure the goal? • Achievable: Do you have the knowledge, skill, ability and resources? • Realistic: Is this goal achievable? • Timely: What’s the timeline you will hold yourself to? Continual Monitoring: Progress towards a goal should be monitored on a regular basis; updates and challenges should be communicated, and those responsible for certain tasks should be held accountable. The first two steps of the strategic plan (mission and vision) are very cathartic, but keep in mind that it is common for groups to come to the table with differing ideas of what the practice stands for and the direction it should take. Be sure to fully work through differing views to determine the best way forward. By having an open dialogue and vetting ideas, practices can unify their vision and mission and determine a direction the whole group can stand behind. Efficiency and effectiveness are much easier to obtain when the entire team is on the same page. A SWOT and/or Gap analysis is truly beneficial with drilling down into internal and external factors that affect your practice. Internal factors pertain to your strengths and weaknesses. External factors include opportunities and threats in the marketplace. Both should be considered in the context of meeting your vision and mission as these analyses will highlight gaps that your practice needs to address. After your practice has defined its vision and mission and determined how your practice is positioned to accomplish them, you will then move into the implementation stage of setting goals. The goals of your practice must be SMART, and at least one person must take ownership of them. This is critical as your plan will not move forward unless there is accountability for execution. Be sure to receive input from all participants to understand how the goals affect them to ensure that one step forward isn’t really two steps back. At the end of the process, all members of the management team should agree to the goals and thoroughly understand their role in achieving them. As with a business plan, outside professionals can be used to drive the process of a strategic plan forward. It is often beneficial to have a neutral party to find common ground when encountering differing opinions. When developing your plans, keep in mind this quote by Jim Rohn that is fitting for the healthcare industry: “You cannot change your destination overnight, but you can change your direction overnight.” Medical practices that invest in developing a business plan and a strategic plan are better equipped to evolve, adapt and change directions as healthcare reform continues. Your company’s plans should improve communications and provide team members with a firm understanding of the practice goals, the direction to reach them and their part in obtaining them. After all, it is much easier to get one boat to a desired destination when everyone is rowing in the same direction. Also keep in mind that business plans and strategic plans are not static, but works in progress and should be reviewed, at least, on an annual basis. The failure to update a plan can lead to complacency. As the healthcare industry changes, any plan your practice has developed must be updated to reflect the current and anticipated shifts in the internal and external environment. By doing so, you have control over your own success. Sax LLP’s Healthcare Practice specializes in guiding physicians through the complex issues of practice management and provides expert solutions in an independent, objective and integrated fashion that benefits every area of your practice. For questions or for more information, feel free to reach out to a Healthcare Advisor at (973) 472-6250. Susan E. Reed, CPA, CFP® is a Partner with Sax and is Head of the firm’s Healthcare Practice. Susan is turned to by medical and dental practices to provide innovative and tailored solutions to combat industry challenges and acts as an operational consultant for clients focusing on but not limited to physician practice assessment, physician compensation, practice succession, taxation, strategic business planning and new practice set up. Susan can be reached at sreed@saxllp.com.
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NOT-FOR-PROFIT CORNER
Written by:
Joshua Chananie, CPA Partner
Sax LLP jchananie@saxllp.com
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RISE ABOVE ADVERSITY t has been well documented and publicized that the not-forIprofit community may feel the biggest impact in terms of future funding as a result of the tax law changes. These changes on the individual level include limiting state and local tax deductions, nearly doubling the standard deduction and the estate and gift tax exemptions which could leave not-forprofits witnessing cutbacks in donations.
Skilled writers can craft grant requests, knowledgeable management members could provide consulting services, billing and financial services you provide can be outsourced to other organizations who do not have the capacity for it. There are a multitude of opportunities for additional revenue if you think outside the “survive on donor funds only” box. Don’t forget your roots.
I implore nonprofits to work around these hurdles and consider new ways to supplement lags in funding. In this time of uncertainty, these are areas of opportunity. Nonprofits typically wait until December to run their annual campaigns. However, expectations need to be tempered as this may be a bumpy ride due to the uncertainty created by the new tax law. The main questions I believe we need addressed at this point are: “How will the increase in the standard deduction impact giving?” and “How will the increase in the estate exemption impact giving?”. Realistically, by November and December there will be much more information out there regarding the IRS approved tax changes, and individuals and families will have a much better grasp on their tax situation. At that time, they then may be less inclined to give if they will not receive a benefit. So, why not rethink your current campaign strategy? It would be wise to make your asks now before it may become more difficult to do so. Proactively inform donors on the best ways they can support you. Start by playing off the market. Speak with your investment advisors to make sure you have the ability to accept donations of stocks and other investments. One of the positives to come out of the tax change is that individuals and families can donate up to 60% of adjusted gross income, which is up from 50% previously. The play to the donor is that they can get a tax benefit by taking 100% of the donation in the year it’s given, and avoid the burden of having to pay the capital gains tax in the event of potential sale. It is becoming increasingly popular in the industry to receive donated stocks in lieu of cash for annual donations and other program related fees, and this avenue would be a win-win for both donors and nonprofit organizations. If your potential donor is unwilling to commit to donating stocks and other investments, then consider pivoting your ask to a donor advised fund. Donor advised funds can be funded with the appreciated stock we previously mentioned and provide the benefit of a tax deduction to the taxpayer in the year it is funded. It also allows the money to be released to your charity over time. Donor advised funds have historically been looked at as a long range planning opportunity but that concept is quickly changing. In uncertain times, maximize on what you know and do best. Next, I would focus on earned revenue. After the dust settles and there is a better understanding of the new tax changes, nonprofits may receive less in monetary contributions and those missing funds will need to come from somewhere. Most organizations do not realize the assets they are sitting on. My creative suggestion is to do more with what you have, and use what you have to generate additional income.
In a recent seminar I attended on private foundation granting, the most glaring weakness in a nonprofit’s ability to secure funding is their inability to articulate on paper or to the public their programs, their mission, and/or their impact. In an ever-growing competitive space coupled with increasing funding challenges, it is vital to stand out from the crowd. It is important to focus on securing funding, but it is just as important to spread your mission. By effectively doing both can produce great results. The growing lapses in a nonprofit’s ability to get their mission out there immediately jumped out to me as an opportunity for somebody with the human capital and skill set to be of service to nonprofits, and without you digging too deep into your organization’s pockets. The going rate for an outsourced grant writer in Northern New Jersey is $250/hour, and they are experienced in identifying qualified prospective donors and securing them by appropriately articulating your mission and impact. Although an expense, you can certainly see your return on investment once you gain traction through approved grants with this strategic measure. Show your support and others will support you. Consider supporting local and big businesses just as you hope they will consider supporting you. This is more of a big picture initiative. One of the largest benefits in the recent tax reform is the potential break for corporations and pass-through businesses. With increased funds available as a result of paying less taxes, ideally there should be money left over for charity, especially in our current climate where corporate philanthropy is not only called for but expected. While corporations may not give directly to charity, they can still provide support through tax credit programs. One of the best ways to gain their support is to back their advocacy behind programs such as new market tax credits and neighborhood revitalization tax credits. You can also look for opportunities to collaborate with other local organizations on events and/or initiatives to combine resources, cut costs, strengthen community ties, and gain more exposure. So, long story short, we need to rethink the way we do things to secure additional revenue in these times of uncertainty. Reach out to Sax’s Not-for-Profit Advisors to help you unpackage the new tax changes, formulate a plan to overcome challenges and ensure your continued positive impact on the world. Joshua Chananie, CPA is a Partner at Sax and a member of the firm’s Not-for-Profit Practice. He specializes in auditing and advisory services focused on governance and best practices on fiscal policy. Josh can be reached at jchananie@saxllp.com.
For examples: If you have a building not in use every Sunday, consider renting it out for another stream of income. If you have staff that is skilled in certain areas, utilize them in other ways.
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REAL ESTATE CORNER
Qualified Opportunity Funds Encourage Long-Term Investments in Economically Distressed Areas
he Tax Cuts and Jobs Act (“TCJA”) enacted a new opportuT nity to incentivize real estate investment and development
Co-Written by:
Jeffrey P. Roude, CPA Partner
Sax LLP jroude@saxllp.com
in low-income communities across the country. This new incentive creates Qualified Opportunity Zones (“QOZs”) in which investors who previously recognized a taxable gain can defer or eliminate it by investing the gain proceeds into a Qualified Opportunity Fund (“QO Fund”). QOZs are designated low-income housing communities in the United States (or Puerto Rico) in which a population census tract is above the poverty rate, or median family income does not exceed a percentage of the statewide median family income. This program is designed to be a complement to other Federal incentive programs such as Low-Income Housing Tax Credits or New Market Tax Credits. QO Fund Tax Incentive:
Co-Written by:
• Tax deferral of previous disposition gain.
Michael Benguigui, CPA Senior Tax Manager
Sax LLP mbenguigui@saxllp.com
Page 16 Sax Focus • www.saxllp.com
The investor interested in benefitting from this newly created program must invest their gain from a previous transaction in a QO Fund, which can be structured as a corporate or partnership entity. This can be any gain from the sale of real or non-real property, even assets which generate ordinary income. The gain is deferred by investing the amount of the gain into a QO Fund, hence the return of
OPPORTUNITY FUNDS the capital portion does not need to be invested to benefit from the deferral. The investment must be made within 180 days after the sale of the property which triggered the gain. The gain is deferred to the earlier of (i) the date on which a QO Fund is disposed or (ii) December 31, 2026. • Basis increase of a QO Fund. An investor’s initial tax basis of a QO Fund is initially zero since the cash invested is from a transaction in which the gain is being deferred. However, if the investor holds its interest in a QO Fund for at least five years, the tax basis is increased by 10% of the deferred gain; if the interest is held for at least seven years, the basis of the deferred gain is increased by an additional 5% of the original gain. Hence there is a potential for an overall basis step up of 15% on the deferred gain. • Elimination of the gain on certain properties held by a QO Fund. Investors that hold the Opportunity Fund investment for at least 10 years can receive the added benefit of paying no tax on any realized appreciation in investments made with the QO Fund. This permanent exclusion would only be beneficial for any gain appreciation after December 31, 2026 since the original gain invested in the QO Fund will need to be recognized.
A domestic corporation or a partnership will be treated as either QO Zone Stock or QO Zone Partnership Interest if such entity was acquired by a QO Fund after December 31, 2017, and solely for cash. Furthermore, the QO corporation or partnership in which a QO Fund invests must have an underlying active business located in a QO Zone, and the business itself does not operate in certain types of entertainment or recreational activities (i.e. golf course, country club, massage parlor, hot tub facility, suntan facility, racetrack, gambling casino, or any store the principal business of which is the sale of alcoholic beverages for consumption off premises). The certification process to become a QO Fund is a selfcertification process in which the corporate or partnership entity will self-certify by attaching a form to their timely filed federal income tax return for the tax year. No approval or action by the IRS is required. If at any year the QO Fund holds less than 90% of the QO Zone Property, it would be subject to a penalty for each month it fails to meet the requirement. How the Deal is Structured: • A QO Fund is formed and self-certified.
In a real estate deferral structured as a like-kind exchange, the investor would need to invest all of the proceeds related to the sale of the disposed property, and the gain and return of capital proceeds. This is not the case with QO Funds since the investor would only need to invest gain from the previous transaction. Qualified Opportunity Zone Designations: State governors were required to nominate Qualified Opportunity Zones within their state to the U.S. Department of the Treasury by March 21, 2018 to be considered for approval. As of May 21, 2018, the Treasury announced that 20 states and two U.S. territories have designated QOZs including New York and New Jersey. This designation is retained for the next 10 years until it would be required to be renewed. The New Jersey approved designations include (but are not limited to) tracts of land in the Atlantic, Bergen, Camden, Essex, Hudson, Middlesex, Monmouth, Morris, Ocean, Passaic and Union Counties. Please click here to reference the complete list. The New York approved designations include (but are not limited to) tracts of land in the Bronx, Kings, New York (Manhattan), Nassau, Queens, Richmond (Staten Island), Rockland, Suffolk and Westchester Counties. Please click here to reference the complete list. QO Funds and the Certification Process: A QO Fund is designed to be an investment vehicle that is set up as either a partnership or corporation by investing at least 90% of its assets in an eligible QO Zone Property. A QO Zone Property is either one of the following: QO Zone Business Property, QO Zone Stock, or QO Zone Partnership Interest. QO Zone Business Property is tangible property used in a trade of business of the QO Fund and meets the following requirements: • The property must be acquired by the fund by purchase and from an unrelated party to the fund;
• An investor with a recently realized gain elects to invest this gain into the QO Fund, taking stock or partnership interest in return. By so doing, the investor gets to defer the gain and is required to invest only the amount of the gain to be deferred, not the total amount realized. • The QO Fund uses the investment to acquire a QO Zone Property. This investment represents the QO Fund’s interest in the underlying business in the low-income community. • If the investor sells or exchanges his QO Fund interest before December 31, 2026, the investor will recognize the deferred gain. However, if the investor holds the investment for at least 5 years, the investor will receive a 10% step up in basis in connection with the original gain. • On year seven, the investor receives an additional 5% step up in basis in connection with the original gain, so 15% of the gain is reduced. • By December 31, 2026, if the investor has not sold the interest associated with the original gain, they must then recognize the gain. If the investment was held by at least seven years, the investor would only pick up 85% associated with the original deferred gain. • If the investor holds their interest in the QO Fund for at least 10 years, the investor would not owe any tax related to any QOZ property which has been appreciated during such time. Investing within a Qualified Opportunity Fund can be truly beneficial to developers who will see significant tax incentives, and property owners who can sell these properties and defer their taxable gains. This new development opportunity will draw additional investments to low-income communities and generate economic growth for their respective residents. The advisors at Sax will be sure to release updates and further information on Qualified Opportunity Funds as they emerge. For any questions or additional information needed, please feel free to reach out to Sax’s Real Estate Practice.
• The QO Fund substantially improves the used property.
Jeffrey P. Roude, CPA is a Partner at Sax LLP and a member of the firm’s Real Estate Practice. With over 30 years of experience, Jeff provides industry specific services to family-owned and closely-held residential and commercial properties, in addition to common interest realty engagements for cooperative housing corporations and condominium associations. Jeff can be reached at jroude@saxllp.com.
Substantial improvement requirement is met if 30 months after the date of acquisition the additional improvements to the property exceed the cost of acquiring the property.
Michael Benguigui, CPA is a Senior Manager at Sax LLP and a member of the firm's Tax and Real Estate Practices. He specializes in tax and accounting services for property owners, developers and private equity investors. Michael can be reached at mbenguigui@saxllp.com.
• The original use of the acquired property must start with the QO Fund; or,
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TECHNOLOGY CORNER
Is Your Business Planning for the Unplanned?
Written by:
Matthew Hahn Chief Technology Officer
Sax Technology Advisors mhahn@saxtechnology.com When it comes to speaking with business owners about their current Business Continuity and Disaster Recovery (BC/DR) strategy, I am usually met with one of the same four responses time and time again: • “Our IT team handles that for us.” • “We currently backup to a USB drive or a tape drive that is taken off-site.” • “A disaster is highly unlikely.” • The deer in headlights look.
An effective business continuity plan and data recovery capabilities will ensure you are proactively protecting your systems and data from disasters of all types (natural disasters, system malfunctions, malicious intent, human error, etc.). This will increase savings, enhance system reliability and improve security so you do not forfeit sales, data, client relationships or your reputation because you are unable to control damage. In today’s day and age, with our businesses so reliant on data and the functionality of technology, it is imperative that we take the threat of system failure and data loss very seriously. Here are some stats on the main threats businesses face:
The only way to appropriately protect your organization is to be properly informed about what the current threats are to a company, and properly educated on the right tools to combat them. You don’t know what you don’t know, but business owners should come to understand the workings of their technology environment as it most likely drives much of their business. But first, let’s all get on the same page. What exactly is a BC/DR strategy? Data backup answers the questions: “Is my data safe?”; “Can I get my data back in the event of a system failure?”. Business continuity involves thinking about the business at a higher-level and answers the question: “How quickly can I get my business operating again in case of an unforeseen disruption?”.
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Hardware Failure: Roughly 45% of a company’s unplanned downtime is caused by hardware failure. This could be out of your control, but by backing up your infrastructure and being mindful and proactive with replacing aging hardware can be the difference between a major problem, and not facing one at all. Power Failure / Natural Disasters: Power outages account for 35% of unexpected downtime. We’ve seen how disasters like SuperStorm Sandy, Hurricane Maria and the California wildfires in 2017 alone can wreak havoc and the damage they can cause. Natural disasters will never not be a threat, and they can be quite often unforeseen. Power can be out for days, or even weeks and an adequate BC/DR plan would address quickly moving critical business operations elsewhere.
PLANNING FOR THE UNPLANNED Cyberthreats such as Ransomware: This is malicious software intended to block one’s access to their data until a “ransom” is paid, and it is one of the leading causes of business downtime. Here are some not-so-fun facts: 97% of IT professionals report that ransomware attacks against businesses are on the rise. A whopping 6 in 7 IT professionals report business clients were recently attacked by ransomware.
I can’t stress this enough – disaster can strike at any time, to any kind of business, and at any size. To turn a blind eye to preparing for data loss or planning for service disruption is a sure-fire way to lose pertinent data and functions to your company, from which you may not recover. So, what can you do? As a start, ask whoever is protecting your data the following questions: • When was the last time we tested our restore or business continuity solution/abilities?
An unlucky 26% of small-medium sized businesses reported multiple ransomware attacks in a single day.
- If they were tested: How long did it take us to restore or become operational again?
75% of businesses report a ransomware attack has led to business-threatening downtime; 57% report critical data and/or hardware loss.
- Is the answer you receive adequate for your business operations?
The big one – 96% of companies survive ransomware if they have a reliable BC/DR solution in place. Inadequate Protocols: 1 in 3 businesses were unprepared for disaster, despite having a plan in place. This can represent internal issues, whether they be breakdowns in communications or inadequate protocols established. Your business continuity plan and data recovery measures must be tested consistently to address any needs for improvement so there are no issues when it is time to put them in place.
What is your organizations RTO position? The term RTO stands for Recovery Time Objective which is the maximum tolerable length of time that a computer, system, network, or application can be down after a failure or disaster occurs. How many hours can your business be down without having an impact on the business? If the answer is “days,” is this acceptable? If the answer is “anything other than within 2 hours,” is this acceptable?
With that, let’s dive into the common responses I get when I ask business owners about their plan for business disruptions:
What is the minimum amount of time between backups? This term is called RPO (Recovery Point Objective). If this is anything less than 4 times a day and not hourly then you should investigate further options.
“Our IT team has it covered.” While this is absolutely a great answer, it can also be a misinformed belief. Business owners should know precisely what their company’s BC/DR plan is. The whole company should at that, as there should be a procedure in place the company as a whole must follow if a disaster were to hit. Keep in mind, a disaster can be as simple as losing an important document in a ransomware attack to a full-blown disaster like a flood or fire that requires providing an alternate location for key company resources to continue operations. When I get the response, “Our IT team has it covered”, I encourage the company to perform a parallel test to see if in fact their solution can live up to what it was sold to do.
Is the answer you receive adequate for your business operations?
“We currently backup to a USB drive or a tape drive that is taken off-site.” Although technology has advanced by leaps and bounds, there are many companies who still continue to backup company data to a device that they store elsewhere – often times an employee’s house or a personal/company safety deposit box. The good news is that technically this does allow for a copy of data to be stored in an alternate location. However, the bad news is that most times these tapes or USB drives aren’t encrypted which makes it easy to access sensitive data if the device is stolen, lost or unattended. It is also important to take into consideration that this media may not be handled properly or stored in an environment which can lead to corruption of the data (i.e.: not the appropriate temperature for storing the device). Sensitive data must be handled sensitively. “A disaster is highly unlikely.” This is obviously not an appropriate data protection strategy for any company and can usually go hand-in-hand with the fourth most common response I get when I ask, “What is your BC/DR plan?” The deer in headlights look. Believe it or not, many business owners have no idea how their company’s data is being protected.
Now ask yourself “Can my business stand to lose that much productivity?” If you keep your servers and data within your physical office, what would happen in the event of a disaster like a fire or flood? Would you lose everything? How long would it take your business to become operational again? How does such an event get perceived by your customers, vendors, and employees? Take a look for yourself. Click here for our Recovery Time Calculator so you can determine how much revenue your business would lose if you experienced downtime. At the end of the day, a company needs to meet many objectives to reach their overall business goals, and preparing for the unforeseen to accomplish those objectives is vital. A BC/DR strategy is your safety net, and your last saving grace should an incident occur and you lose data or operating time. Reach out to Sax Technology Advisors to learn more, and to identify the right solution for your specific business. Matthew Hahn is the Chief Technology Officer at Sax LLP and Head of the firm’s newest practice, Sax Technology Advisors – a Cybersecurity and Managed IT practice. Matt has over 25 years of experience in the technology industry, and his proficiencies cover all areas of technology business solutions. He can be reached at mhahn@saxtechnology.com.
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WEALTH MANAGEMENT CORNER
Investor Behavior: Why FoMO Can Lead to PoGO
Co-written by:
Ihas n recent years, the expression fear of missing out or FoMO, entered the popular lexicon and social discourse,
Gregory Duffy
particularly among young people.
Wealth Advisor
Sax Wealth Advisors gduffy@saxwa.com
Co-written by:
Joseph Piela, CFP ® Wealth Advisor
Sax Wealth Advisors jpiela@saxwa.com
Page 20 Sax Focus • www.saxllp.com
While FoMO is a generalized formulation, it begs the question: “Missing out on what?”. The “what” stems from the notion that some other individual, at that moment, may be having a more rewarding or fulfilling experience, which manifests in feelings of disaffection in the individual harboring FoMO. This article explores FoMO and its similar affect PoGO (panic over getting out), in relation to investor behavior. As the FoMO meme propagated, social scientists began to examine its origins and the factors behind its emergence. Early research focused on the rise of social media platforms (i.e. Facebook, Twitter) whose explosive growth mirrored the profusive and extensive use of easily accessible personalized digital devices. Highly portable smart phones and tablets provided both the means and the motivation for instantaneous connection among users virtually anywhere, anytime and with anyone.
INVESTOR BEHAVIOR In 2013, a group of academics conducted a series of surveys to assess how FoMO correlates to motivational, behavioral and well-being measures commonly used in peer accepted tests. Based on their analysis of survey responses from the groups studied, the researchers reported the following observations: Participants measuring high in FoMO tendencies generally scored low in the three measures of the Self Determination Theory (SDT): competence, autonomy, and relatedness. Those with high FoMO tendencies also exhibited greater reliance on social media to facilitate social engagement and increase their sense of relatedness. They also noted a recursively inverse relationship between social media engagement and social relatedness: greater use of social media was associated with lower SDT measures. Among population groups, higher measures of FoMO were found among younger segments of the population, and within that segment, were skewed toward males compared to females. Also, males high in FoMO measures tended to engage in riskier activities compared to males having lower FoMO correlates. Case in point: 20% of students surveyed with loans outstanding reported using their loans to fund investments in crypto-currencies like Bitcoin, with males showing a higher reported use at 27% vs 16% of females. FoMO and Investor Behavior Since March 2009, the value of U.S. stocks as measured by the S&P 500 has increased over 360% at an annualized compound rate of 18.77% through January 2018. Despite the extraordinary performance of the S&P 500, the participation rate among individual investors receded over much of the period. According to a Gallup survey published in May 2017, the percentage of survey respondents holding stocks during the current bull market declined to 54% compared to 62% of respondents reporting stock ownership up until the Great Recession. This held true across all age and income groups, with only those older than 65 and those reporting incomes greater than $100,000 showing a 1% increase in stock ownership between the two periods. As the S&P 500 climbed higher during 2017, retail investors finally began to increase their exposure to equities and other risk assets. Discount brokerages reported increased client activity beginning in December 2017 which continued into January 2018. Spokespersons from brokerage firms reported on the “strong performance of the market, gains in crypto-currencies, increases in cannabis investments, and ‘the fear of missing out’”. In a paper written by De Marzo et al in 2007, the authors explain how relative wealth concerns cause investors to emulate the portfolio choices of their cohorts rather than trade against the crowd, providing a theoretical insight into (fo)motivated investor behavior.
Looking at money flows into the U.S. equity markets as measured by the Dow Jones Index, inflows surged by $12 billion from November 2017 to January 2018, driving the markets higher. In February, money flows reversed as investors pulled $29.4 billion out of ETFs and mutual funds during the three months ending March 31, 2018, suggesting fear of missing out (FoMO) was giving way to panic over getting out (PoGO). While the market has since recovered, corporate stock buybacks responding to lower corporate tax rates have led the rally. Avoiding the FoMO – PoGO Merry-Go-Round Whether an investor experiences FoMO or PoGO, the underlying motivation is fear. By exiting the market during the inevitable downward phase, such investors incur real losses, intensifying their regret and risk aversion. Then, as the market reverses course and starts to climb, they remain risk averse until the fear of missing out overwhelms the memory of their panic over getting out. Buying after the market has already made significant gains brings them full circle and positions them for a PoGO reaction when markets decline. One way to resist being drawn into the FoMO - PoGO vortex is to refocus attention away from the urge to react. Resisting impulsive reaction is more easily accomplished if an investor has a well thought out investment policy to forestall rushing into a rash decision. When constructed properly, an investment policy (IPS) establishes an investor’s behavioral risk coordinates based upon their need, ability and willingness to take market risk. These parameters form the basis of their portfolio allocation, and the time frame in which the portfolio will be maintained. Moreover, the IPS will emphasize the most important investor behaviors for success: consistent portfolio contributions, persistent adherence to their plan, and working with an advisor who is insistent about regular contributions and risk management discipline. The acronym PoGO brings to mind Walt Kelly’s popular comic strip character, Pogo, who famously remarked, “We have met the enemy, and he is us”. In a similar vein, numerous articles citing academic studies make essentially the same point about investors: most are often their own worst enemies. Fortunately, investors can avoid becoming their own worst enemies by working with an experienced and qualified investment advisor who will assist them in creating an investment policy suited to their goals, financial circumstances and risk tolerance. At Sax Wealth Advisors, we believe an investment plan should be defined by, and aligned with, a client’s life time aspirations and values. From there we design a long-term financial and investment plan based on a consistent application of investment principles and practices supported by academic research. To learn more about our process, visit www.saxwa.com.
From FoMO to PoGO
Gregory Duffy is a Wealth Advisor at Sax Wealth Advisors with over 40 years of experience designing and implementing comprehensive financial and investment plans. He can be reached at gduffy@saxwa.com
Beginning in February, momentum in the equity markets reversed as the S&P 500 index declined by 3.69% during the month. In March, the S&P 500 fell 2.54% closing out the 1st quarter of 2018 with a decline of .76%, marking the first negative calendar quarter for the S&P 500 since September 2015.
Joseph Piela, CFP® is a Wealth Advisor at Sax Wealth Advisors with over 15 years of experience specializing in investing, insurance, financial and estate planning. He can be reached at jpiela@saxwa.com.
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