What is a Fiduciary?

What Is A Fiduciary?

 

You have probably heard this term Fiduciary thrown around a lot here in the last few years. It is a question you should be asking your current Advisor, “Are you a fiduciary?” At 56 Capital Partners we are a fiduciary and are proud of it! In fact, our agreements specify our fiduciary capacity a total of ten (10) times. 

Why is this question so important and a point of pride for us? Merriam-Webster defines fiduciary as “one that holds a fiduciary relation or acts in a fiduciary capacity”. We like to define fiduciary as earning a person’s trust by acting in their best interest as if it were your own. Many people might relate this to the ‘Golden Rule’. 56 Capital Partners holds a high standard and tries to stick to the Golden Rule.

The fiduciary topic received plenty of coverage in the media in summer of 2017 when the Department of Labor (DOL) first proposed the fiduciary standard on retirement accounts such as IRAs. Instantly, the financial and insurance industry lobbyists went to work to water the law down and eventually ensure that it was not implemented. Most recently, the Securities and Exchange Commission (SEC) proposed a similar law, but decidedly voted on a watered down “best interest” policy with the mild expectation to be compliant by June 30, 2020. To add further fuel to the fire, this conflicts with the proposed Certified Financial Planner (CFP) Board’s proposal to make its designees act as a fiduciary when using the designation.    

In response to these regulatory proposals, Financial Planning Magazine presented a great article “Will Edward Jones stop advisors from using the CFP designation?” Edward Jones as a firm does not act as a fiduciary, but in certain capacities its independent advisors might be acting as a fiduciary when planning under the banner of the CFP designation. If the CFP enacts the fiduciary standard in its Standards of Conduct Manual it puts many firms and advisors in a legal predicament. 

To be fair, the industry needs both advisors acting as fiduciaries and broker dealers whose standard is only suitability. Guidelines that clearly define what role the professional is fulfilling should be given to the client, so they are aware. For example, when paying for long-term family retirement advice clients should expect the advisor to be acting as a fiduciary and putting their interests first. However, if you have a smaller ‘fun’ account that you are trading in and out of the market and want to bounce a new trade idea off a professional; that professional acting as a broker is simply helping facilitate the trade that is likely highly speculative in nature. These examples seem straight forward, but the lines blur when there is not enough communication and disclosure to define the multitude of services provided throughout a client’s tenure with a firm. 

Having kept up to date on this, it could take regulators years to sort this out, if they ever do. Along the way there will be a plethora of changes proposed by attorneys and lobbyists, that could result in lawsuits and could potentially cost taxpayers billions. In the meantime, we are happy to set a standard for others to live up to.

Are You Holding Cash?

Do not think of this as holding cash in your wallet or literally in your hand. Think of the bigger picture and your overall portfolio. As I was browsing through a magazine, I noticed an article* about holding cash and the long-term effects it has on planning.  Given the sharp decline in the market and rapid rise that created a “V” on the chart, many clients asked about going to cash during the December swoon. You can find a lot of articles out there in which they talk about not being invested during the top ten return days in a year and the cost it has on long-term performance. This article though, took an inverse look at the problem and not being invested at all. 

During December, we advised clients to stay invested for several reasons such as, dividends and interest would be reinvested at lower values.  We also had accumulated a higher cash position naturally, that we also put to work during the rebound.  While cash plays a role in planning, more so in emergency fund planning, it does come in handy for portfolio allocation.  However, to go to all cash out of fear as many clients wanted to, would have caused them to miss out on one of the largest meteoric rises in history. 

The final point of the article is that not all cash is created equal, which we agree with.  This is why we come up with the allocated ratios to accounts like, Saving, Checking, Brokerage, IRAs, and other types of accounts.  We maintain liquidity, but are careful to have nothing too excessive and with the cash we do hold, we look to higher rate accounts.  

All said and done, the lesson we recognized was cash is a tool in financial planning that can be used efficiently and inefficiently; question is do you know which one you are?

*Source: Money Magazine (T. Rowe Price)

Tax Time

Tax Season… everyone’s favorite time of year… just kidding!

We know how stressful tax season can be. Waiting patiently for all those tax documents to arrive in the mail so you can file as soon as possible. As we engage with clients this time of year, we are excited that our new platform has a simple solution to retrieve those documents. Under the reports section titled “Tax”, you can find all tax statements and dates of availability for your accounts to help ease your stress level.  Below we have compiled a list of tax lessons that we have learned, that we hope will help minimize the stress year after year.

Our tax lessons for the ages:

·            Admit to yourself if you need help.  Ignorance is not an excuse to the IRS, it might abate the penalty and interest you are assessed, but does not alleviate it fully.

·            Expect as your situation complicates itself that you will get closer and closer to filing April 15th or even asking for an extension (there is nothing wrong with this). Do not rush to get your filing done and miss important documents that have not even been sent to you yet.

·            Adjust your W4 withholdings as your situation changes so you do not give the government an interest free loan; the goal is NOT to receive a refund.

·            Make a list of this year’s statements, so next year you have an idea of how many you are likely to receive, where, and when they will come and online availability.

·            Strategize not only for this year but for years to come. Ex: Make sure IRAs are maxed out before year’s end so the statement the investment company generates matches your taxes versus calling us and saying “I can save on taxes if I max out my IRA”.  We reach out to everyone with IRAs in Oct/Nov to help with this as we knew that.

·            CPAs have limits, they account for what has happened but rarely strategize what to do going forward. 

 

**Our attorneys would want me to make sure I remind readers that we are not CPAs nor do we give tax advice and you should seek advice from a tax professional.

 

Start the New Year with New Books

“Education is the passport to the future, for tomorrow belongs to those who prepare for it today.” - Malcom X

With the New Year comes new books. As we grow each year we want to keep you updated on what we are diving into. 56 Capital Partners is committed to further education, ongoing training, research and continuing to learn about relevant subjects. We want to grow our library to help pass along educational information we have learned. Here is this years start to the reading list. Enjoy!

56 Capital Partners 2019 Reading List

Pesky Unwanted Gifts....

It is the day after Christmas and you are bright eyed and bushy tailed to try out all of your new gadgets and gizmos. Well, except that one in the corner from Aunt Sue that you set off to the side hoping to forget about it. The ant farm makes you cringe at how little she knows about you and has no clue how old you are! A gift that cannot possibly be meant for you, but there it is, your name on the tag, “To Bob Merry Christmas! With love, Aunt Sue”. What do you do now? You have this awful gift that will never be used. You smile at her kind gesture and wonder, “Why Aunt Sue?”

This has happened to you at least once in your life. Take a stroll down memory lane and remember that one gift that you had to like because Aunt Sue gave it to you “with love.” The one that still has the tag on it, but you cannot part ways with it because if she found out World War III would ensue! Yes, that is the one. The gift you kept it in the closet to collect dust for 30 years hoping Aunt Sue would never ask about or ask why it was not sitting out. Just a sneaking suspicion that is what you did.

                Instead of locking away that horrid gift, why not do something else with it. Let it see the light of day and shine somewhere else besides the closet. Here are a few alternatives for those unwanted gifts.

·         Return it to the store: Typically, around the holidays a gift receipt is given with the gift. This allows you to return it to the store for cash or exchange to be able to get something you can use. If they do not have a receipt with it, you can ask where it was purchased and return for a store credit (depending on the store).

·         Donate the gift: There are plenty of charitable organizations that will take items you do not care for. You can look up specific organizations if you have an item meant for a specific person. For example; a child’s toy could go to Toys for Tots etc.

·         Re-gift the gift: If you know of someone who would be thrilled to have that gift you cannot stand, simply give it to them. If there is a party you are going to attend, like a White Elephant, then take your gift with you. Re-gifting is a great option especially if it is not something you can return or want to give away to just anyone.

·         Upcycle or re-purpose the gift: This is a trend that has been more prevalent in the last few years. Upcycle the gift by changing it to be something better or more useful for you. Put a coat of spray paint on it, use it to clean the car (that ugly Christmas sweater) etc. and now you have a usable gift. Using the ant farm example here is what I would do. Free the ants (of course away from you), paint the plastic (not the clear part so you can still see through), and create sand art. Have fun with it and get something more useful out of it. Make it into something you like and let the creative juices flow!

·         Sell it on Amazon, eBay or other places: Post it on the websites to see if someone out there can take your gift off your hands and get some use out of it. You would be surprised at how much you can get for items.

·         Local or Neighborhood buy/sell sites: If you know there are a lot of neighborhood kids or you would rather put items online locally, you can always post on LetGo, Craigslist or your local Facebook pages to see if anyone in your area is interested and get a few bucks for it.

·         Put it in the pile: The garage sale pile is a perfect place to put those unwanted gifts. Yes, you might only get $.25 cents for it, but it was a gift and that is $.25 cents more than what you had and now is it someone else’s treasure.

·         Trash: You simply want to get rid of it as fast as possible by tossing it out. If this is the route you decide to go, make sure to do so properly. If the product is recyclable make sure to take it to the proper facility. If it is electronics try recycling places like Best Buy etc. Do not simply just throw it out as there are hazardous materials in a lot of our everyday items that cannot decompose properly or cannot even go into landfills. A lot of those items can be recycled, but it might take a few phone calls to double check if they are.

·         Last Resort: If all options have failed or you are just a straight forward individual, go tell Aunt Sue, “Thank you! But I really do not need this and would rather have it go to a more loving home.” Their feelings might be hurt at first but later they will appreciate the honesty. Sometimes honesty can be the best policy and will prevent future headaches for Aunt Sue and you! This will help alleviate the cycle of unwanted gifts from Aunt Sue and ultimately help you both in the end.

Holidays are stressful, and it can be very hard to pick gifts for people. When receiving a gift always have an open mind and heart to those who gave you the gift. Remember, it is the thought that counts not the actual gift and they were thinking of you when they purchased it. These are just a few ways to help you enjoy an unwanted gift you received for Christmas. Think outside of the box if none of these alternatives work for you and find a solution to your ant farm!

Holiday Shopping Without Chaos

Now that your meal is planned out for Thanksgiving, your gift list is made, and you plan out Black-Friday stampede; how do you keep your wallet full before the New Year instead of running empty? We want to lend a few ideas that will help ease the spending of typical Thanksgiving traditions.

Instead of making the all-day event of Black Friday from sun up to sun down and three meals out on the town later, try a few of these things to find yourself less stressed and more relaxed during the holiday.

Stay in…PJ’s, leftover turkey legs, deviled eggs, pecan pie, feet up on the couch and a movie marathon sounds great after a long day’s work of slaving away in the kitchen, am I right? Add in a little bit of online shopping and I would say you have it made! We all have at one point ordered something online but why do we never think of doing it after Thanksgiving? Due to the family traditions of making the day an Olympic event to be the first one in line at the store and spending numerous hours crossing off our list of gifts seems to consume the minds of retail goers. Online shopping is easier than ever. You can quickly search for products instead of going store to store and see instant reviews and price comparisons. Many companies are joining the craze of online shopping and even have sales before and after the big day. Amazon’s Countdown to Black Friday and Cyber Monday are just a few examples that have sales outside of the normal Black Friday.

Procrastinate…I know procrastination is something we all loathe but sometimes it can pay off. Retailers will typically have big sales towards the Christmas holiday to get rid of inventory on the shelves. Here is a point in life where procrastination can pay off if you are willing to wait. Do a little research on the products you want and keep your eye on them.  Derek shopped for part of his list on Christmas Eve when stores opened, he encountered less than a dozen men in any one store, plenty of parking, helpful service and the best deals (make sure you get the must haves done earlier though).

Support local business…Go out for Small Business Saturday the day after Black Friday. This gives you a chance to support local businesses in the community and enjoy a less stressful retail experience, while still getting great bargains. I know how nice it is to not go out at all, but this tradition is one I can get down on! Think about your gift list and how generic it likely is. I know you are thinking in your mind right now, “I will get my cousin a gift card and let’s go in together and get mom and dad this toaster oven.” Instead of that thought try, “I found this amazing painting by a local artist that would fit perfectly above the fireplace at mom and dad’s and my cousin would love these one-of-a-kind handmade earrings!” The feeling of supporting local businesses and getting a gift that is memorable and handcrafted by a local shop owner is an unforgettable one, not only for the gift giver but for the receiver as well.

Celebrate each other…My way of holiday thinking is a little different, but I think this is a trend that is really taking off. I do the typical holiday things like decorating the house, baking a pie etc. but instead of celebrating the holiday slaving over a stove and going to shop till I drop, my husband and I take a trip to Moab, Utah every Thanksgiving (among our friends we call the day, Friendsgiving). We make the 7 hour drive out to the middle of nowhere, camp or split a cabin with everyone and go enjoy the outdoors. Instead of one person cooking the meal on Thanksgiving we all pitch in to make the turkey, dressing, sweet potato souffle and other yummy sides and split the cost. We then go hiking, mountain biking, climbing and other fun activities and make a weekend of it. This allows us to truly experience the meaning of Thanksgiving and not be anywhere near a retail store to have the temptation of shopping. We build lasting memories with friends and family and do not spend a fortune on Black Friday.

Set a budget…the last piece of information I have is one that you will gasp at or flat out just laugh in my face, but it is the most cost efficient! Set a budget or do not buy a gift at all. People are more understanding now to the reality of life that gifts can be expensive, time consuming and just an exchange of gift cards is not as emotional. I know this is not the normal way of doing the holidays but if you are on a budget or do not want to dwindle your savings down, it is okay to skip the gifts.  Derek and his brother have not done gifts in over a decade, instead it is about family time for them.

I hope these little tidbits help you in making some of those tough decisions during the Black Friday and Holiday chaos. Whether you are a gift giver or receiver, a thrill seeker, a family goer or a couch potato you have options this holiday season to be whatever you want to be without breaking the bank. Happy Thanksgiving to you all!

56 Capital Partners is Leaning Into the Future

In everything we do, everything we put our hands to, we are leaning into the future.  We have just completed a total overhaul of our public face, because we want to stay current, to keep leaning into tomorrow.  The story of 56 Capital began a year ago, at a moment we were not sure this journey was possible.  But we leaned into the future, and we are now settled in and enjoying our venture.  Many of you know the story of how we came to be, but we want to dive into that a little further.

Derek, with a dream in mind, wanted to create something that would help people in their pursuit of happiness. As a lover of numbers, education, our country, and the principals it was founded on, Derek sought to bring all of that together in the financial world.  He leaned into the future, and 56 Capital Partners was born.

On an extraordinary day in July of 1776, 56 men leaned into the future, imagining another way of thinking and being in the world.  These men signed a document that would lead to the prosperity of the new world: The Declaration of Independence allowed for new freedoms, and recognized for all people the right to pursue happiness.  56 Capital Partners is named for and works in the spirit of those courageous men.

56 Capital Partners allows Derek to fulfill his dream of helping people pursue their happiness. He strives to get you to your goals in the frankest and most efficient way. Derek and Erin are ready to take you on a journey, to be your guide on your pursuit. We are looking forward to the road ahead, let’s lean into the future together.

56 Capital Partners

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