Dividends Resources

Dividends

Sean C. Kelly, CFA®, CFP®, CIMA®
Senior Vice President, Investments

Lifestyle, community, and market insights from your St Pete Wealth Management team

How the Right Advice Can Boost Financial Confidence

What value does a financial advisor actually provide? This may surprise you, but the value of a quality financial advisor goes far beyond portfolio advice. It’s about guiding clients to develop sophisticated financial behaviors. With robo-advisors and consistent market volatility in the headlines, it’s important to realize the comprehensive advantages of working with a personal advisor – not a computer algorithm.

A recent study by Fidelity Investments discovered that working with a financial advisor can add up to 4% higher investment returns. In a similar study, Vanguard estimated that the quantitative value of a financial advisor is about 3% on a net basis (4% minus a 1% fee). Additionally, an advisor can give you confidence by boosting your financial confidence in the following areas:

1. Developing a workable financial plan
2. Serving as a behavioral coach
3. Creating a consistent investment strategy
4. Navigating retirement savings plans
5. Developing a tax-sensitive investment strategy

1. Developing a workable financial plan
Regardless of life stage, we work with families and individuals to develop plans that allow them to achieve several financial goals at once, such as paying off student loans, saving for a desired vacation, and building a reserve for emergency expenses. After examining a client’s income, expenses, and spending habits, we can set priorities, identify areas where expenses can be reduced, and develop a savings plan to achieve both short and long-term goals.

2. Serving as a Behavioral Coach
In a world where personal financial issues have become increasingly complex, we help clients figure out what’s true or false, what works, what matters, what is useful, and what can go wrong. Not many people have sufficient expertise to do that themselves—especially with an objective mindset. We provide support to clients so they stay on course in times of financial stress to help eliminate poor financial decisions. It’s easy for investors to fall victim to common cognitive biases that affect their decisions. Guiding clients to more responsible financial behaviors can help in a myriad of ways, such as realizing the benefits of long-term investments and enjoying the security and confidence that comes from having sufficient retirement funds.

3. Creating a consistent investment strategy
Numerous studies show that when investors manage their accounts themselves, they tend to overreact to market changes by trading too frequently. According to the 2016 Dalbar Quantitative Analysis of Investor Behavior Study, disciplined investors can see nearly double the returns on their investments over 20 years compared to those who try timing the market. With many clients, we guide them through selecting an appropriate mix of investments, rebalancing their investments as needed, and executing a consistent investment strategy that will keep them from making rash decisions.

4. Navigating retirement savings plans
A lack of retirement savings is a significant problem for many Americans due to longer lifespans, expensive medical care, and the rising cost of living. Without the guidance of a financial advisor, many Americans ignore the need for a solid retirement savings plan. Working with a financial advisor can help you determine the ideal time for retirement, the amount of savings needed to meet your retirement goals, and your ideal retirement age to guarantee income for life.

5. Developing a tax-sensitive investment strategy
While financial advice is often perceived as simply implementing an investment portfolio or dispensing financial guidance, that truly is just one slice of the pie. When it comes to the five financial areas above, you can’t get any better than having a personal advisor there to help you navigate the complexities of your financial situation.

Tax efficiency is a critical part of financial planning. We often give advice on issues such as tax-loss harvesting in brokerage and other taxable accounts, managing exposure on short-term capital gains, charitable giving, and more. While tax issues are not the main focus of our clients’ investment strategies, advice on how to manage, defer, and reduce tax exposure has the potential to improve returns by as much as 1% to 2% per year.

If you’re interested in learning more about how we can help you with your finances, please contact us for a complimentary consultation.

How the Right Advice Can Boost Financial Confidence

Sources:

Fidelity Investments. (2017, Dec. 14). The value of advice [Blog post]. Retrieved from https://www.fidelity.com/viewpoints/investing-ideas/financial-advisor-cost

Pfau, W. (2015, Jul 21) The Value of Financial Advice [Blog post] Retrieved from https://www.forbes.com/sites/wadepfau/2015/07/21/the-value-of-financial-advice/#71caf4ca1333

Douglass, M. (2017, Apr. 2). Yet another study shows that timing the market doesn't work [Blog post]. Retrieved from https://www.fool.com/investing/2017/04/02/yet-another-study-shows-that-timing-the-market-doe.aspx

Benjamin, J. (2014, Jan 27) Financial advisers can add 3 percentage points to client portfolios: Vanguard [Blog post]. Retrieved from http://www.investmentnews.com/article/20140127/FREE/140129915/financial-advisers-can-add-3-percentage-points-to-client-portfolios


4 Reasons Your Retirement Plan Might Fall Short

St. Pete Wealth Management Group

Ever find yourself daydreaming about retirement? Whether your dream retirement entails traveling the world, dedicating time to beloved hobbies, or helping your children and grandchildren, saving enough for retirement is critical to enjoying all of these endeavors. Everyone deserves the best retirement possible, but numerous planning mistakes can cause retirement plans to fall short.

According to recent studies, retirement savings look grim for many Americans for reasons such as living longer, expensive medical care, and the rising cost of living. One survey showed that 45% of all Americans have saved nothing for their retirement, including 40% of Baby Boomers. This trend continues with younger generations too, with a recent report from The National Institute on Retirement Security showing that 66% of Millennials haven’t saved a penny towards their retirement.

retirement blog

If you have started saving for retirement, you’re definitely ahead of the curve. However, you could still be engaging in some of the biggest retirement planning mistakes—without even realizing it. How can you save enough to thoroughly enjoy your ‘golden years,’ without hurting your finances in the meantime? Here are 4 retirement planning mistakes worth avoiding:

Mistake #1: Focusing on the Return Rate

If you have an investment that produces a high rate of return, it’s easy to get caught up in always pursuing that outcome. However, be wary of that type of bias, as it could negatively impact your future investments. Rather than chasing rates of returns, shift your focus to creating a diversified portfolio that spreads out investments through a variety of fund types. This might include balanced, index, equity, or global. Working with a financial advisor that helps you diversify your portfolio can help protect your retirement savings if/when the economy goes sideways. Plus, they’ll help you discover investments that match your retirement goals and risk tolerance.

Mistake #2: Retiring Too Early

Many of those saving for retirement aren’t saving as much as they need to continue their lifestyle during retirement. If that sounds like your situation, then possibly consider staying in the workforce a little longer and wait to take your Social Security benefits. This will allow you to save longer and also maximize your benefits if you don’t apply for them at age 62.

Additionally, Social Security data shows that around 33% of retirees live until 92 years old, and 75% of retirees apply for benefits as soon as they hit 62. With this in mind, pushing retirement back a bit could benefit you in the long-run.

With that said, pushing back retirement isn’t the best option for everyone. There are many reasons to retire as soon as you can, such as having health issues or other life circumstances that encourage early retirement. Whether you plan to retire early or need to retire later than expected, working with a financial advisor can help you determine the best way to prepare yourself for your specific retirement needs.

Mistake #3: Not Saving Consistently

One of the worst retirement mistakes to avoid is saving too little now and hoping you can ‘catch up’ in the future. The truth is, catching up rarely happens, and unexpected life circumstances can make catching up impossible in some cases.

According to the Center for Retirement Research at Boston College, the median retirement account balance for 55 to 64-year-olds was just over $110,000. If this money had to stretch over 20 to 25 years (which it likely will as people are living longer), it amounts to just over $400 per month to live on. We can see this is just not realistic in today’s world.

To save more, create a budget, cut out unnecessary spending, open a 401(k) through your employer or an individual retirement fund as a self-employed individual, and save extra money with each raise or bonus you receive from work. Working with a financial advisor is one way to shed light on other financial strategies to boost your retirement savings.

Mistake #4: Not Factoring Taxes into the Equation

Another common mistake made during retirement is forgetting about taxes and their effect on your savings. Tax deductions change for many people once in their in retirement, and some retirees end up paying more in taxes. Consider speaking with a financial professional about tax-free withdrawals from Roth IRAs or about timing withdrawals from accounts that will be taxed.

Want to avoid other retirement saving mistakes and create a personalized retirement plan? Contact us today for a complimentary consultation.

Sources

https://www.nirsonline.org/2018/02/new-research-finds-95-percent-of-millennials-not-saving-adequately-for-retirement/

https://www.fool.com/retirement/general/2016/01/26/20-retirement-stats-that-will-blow-you-away.aspx

https://money.usnews.com/money/retirement/articles/2016-01-28/5-retirement-planning-mistakes-and-how-to-fix-them

Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed web sites or their respective sponsors. Raymond James is not responsible for content of any web site or the collection or use of information regarding any web site’s users and/or members.


Preparing Your Children for Adulthood through Financial Literacy

St. Pete Wealth Management Group

As financial advisors, we learn a lot about clients’ short and long-term financial goals through many conversations and building relationships with them. We also often learn about their frustrations and regrets regarding past financial decisions. During these conversations about financial regrets, we often remind clients that it is important to remember that with time comes perspective and experience. So while they, as adults, may have regrets about past financial blunders, they can use their knowledge and experience to help their children steer clear of the same mistakes. With April being Financial Literacy Month, there is no better time to learn about the importance of teaching children about financial matters and helping them form good habits.

Are you hesitant to speak with your children about financial matters because of how you’ve handled past situations? Well, you aren’t alone. Many parents are reluctant to speak with their kids about finance but haven’t considered using their personal experiences as a lesson to teach their kids about financial consequences. While some parents think their child will learn financial literacy in school, only 17 states in America currently require students to take a personal finance course. If children aren’t learning about money from their parents and/or guardian, many children are left in the dark or could learn negative financial habits from their peers or media.

Broach the financial conversation with your children knowing you don’t have to be a financial genius in order to teach them helpful lessons for the future. Sometimes these conversations even help parents take better control of their own financial situation, in order to be a strong role model for their children.

Not sure which financial lessons are most important for your children to be aware of? Here are 4 to consider when you prepare to teach your son or daughter how to build a solid financial future:

1. Earning Money. One of the first experiences your child will have when it comes to financial matters is earning money. Whether you are offering a small stipend for jobs around the home or your child has a part-time job after school, earning money through physical or mental effort helps your child associate value to labor. In my case, we have two teenagers who are active in sports and train 4-5 times a week. It’s next to impossible for them take part-time jobs because they would have to give up the sport in which they truly love participating. So we have taught them that school is their job, and it’s up to them to do well in order to get the rewards they would otherwise be getting from a part-time job. Our 16 year old also has a car, and he is sometimes given the responsibility for driving his younger sister. We choose to pay him by transferring money to a debit card that we opened for him when he got his driver’s license. While this is safer than carrying cash, we have discovered that using a card vs. pulling out those dollar bills can have the negative effect of them not learning the real value of money.

2. The Importance of Budgeting. The topic of budgeting can be brought up at a relatively early age. Whether your child earns an allowance or is paid from a job outside of the home, discuss how he or she can create a budget with the earnings. Some parents require the income a child earns to be used for their discretionary spending - things like gas, going out with friends, or buying a new clothing item. Be sure to help your child create a system where a portion of his or her money will go into savings, an emergency fund, their car or phone payment, etc.

Budgeting helps children learn the value of money and gain a clearer picture of the time and effort involved in obtaining something of value or make a major purchase in the future.

3. Saving Money. It seems like such a simple topic yet saving money is often not discussed with younger generations. As young men and women between the ages of 17 and 25 make plans to move away from the family home, many are unprepared for the shock of monthly bills and being tied to contractual obligations, such as rent, phone, and monthly car payment contracts.

By having a firm grasp on saving money and budgeting ahead of time, your child can bypass “bill shock”, in addition to feelings of anxiety and confusion when he or she moves out of the home.

You can teach younger children about the topic of saving money through the use of a piggy bank, and older children through opening a savings accounts and setting up various goals.

4. The Difference of Needs vs. Wants. Because we live in a want-driven society, this is a crucial discussion to have with your child. We “need” food, shelter, clothing and security to survive - whereas our “want” is something we desire but do not depend on to live. Teach your child that “needs” should be built into their budget, whereas a splurge or extra money fund is what should be paying for the “wants” in life.

Of course, this can segue into a much broader discussion of why your child wants something - possibly because his or her friends have it, because they think it will make them more likeable, etc. There are many helpful conversations that can come from this topic that can benefit your children for years to come!

Take advantage of Financial Literacy Month and make a plan to start having regular discussions about money with your children. Teaching them while they’re young can help them build a strong and positive relationship with money, and instill in them the value of earning money, budgeting, saving, and setting up a secure future.

For more information on how to teach financial literacy to tweens, click here, and for teens, click here. Both links offer concepts and tasks that will help them develop the financial skills they need as they prepare for adulthood. If you would like more personalized financial guidance as you educate your kids about money, please contact us for a complimentary consultation.

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Announcements

Sean C. Kelly, CFA®, CFP®, CIMA®
Senior Vice President, Investments

St Pete Wealth Management Group has a great deal to be excited about, and we wanted to share the news with you.

We are proud to announce that our partner Sean Kelly has attained his Chartered Financial Analyst (CFA®) designation. The CFA® credential is recognized by many as the “gold standard” of the investment industry. Sean completed a rigorous 3 year curriculum which included three six-hour examinations offered only once per year. Candidates report dedicating in excess of 900 hours of study to become a CFA® charterholder and as such, it is recognized as one of the most challenging examinations in the world. Sean is now in an elite group of financial professionals around the world to hold the CFA® after having passed each level in his first try.

Please join us in welcoming Jason Wolgemuth - the newest member to our team. Jason has been in the home office of Raymond James for almost seven years. Born and raised in Daytona Beach, he moved to St. Pete in early 2001 and is happy to call it his home. Recently he received a Bachelor of Science in Finance from the University of South Florida and is currently working on his Master’s in Business Administration. Jason is married to Elizabeth, and they have two daughters ages 4 and 18 months. We are excited to have Jason join our team as a Client Service Associate.

And finally, we wish the best of luck to our longtime associate Kim Barber who has retired from Raymond James. After spending 28 years in the downtown St Pete branch (yes, she practically grew up here), Kim is pursuing her dream of becoming an event and party planner. I’m sure you will join us in wishing her the best in her pursuits.

We are constantly striving for ways to improve and provide more robust services and the highest level of support to you. We look forward to hearing from you and as always stand ready to assist in whatever way we can.

Sincerely,
Your Team at St. Pete Wealth Management Group


Elections and Investments

Good morning friends.

In a matter of days we will have a new president elect. Let’s agree that many in the country will be elated, many will be disappointed and many will be indifferent. The good news, I suspect, is that most of us will also be relieved that the election is in the rearview mirror. All elections cycles tend to stir up passion and often can get mired in negative news cycles to the detriment of real issues that directly affect our lives. The history books will show that the election of 2016 was absolutely no exception.

While we are not swamped with calls from concerned clients, we are getting the occasional question and request for a defensive posture in case of a Clinton/Trump victory on Election Day. And yes, those calls are coming in from both sides of the isle. We have always made it a point to stay non-partisan at the St Pete Wealth Group. We are essentially split down the middle in terms of our viewpoints and have representative opinions from all walks of life. We always see our job as stewards of our client’s wealth and that requires us to exist more as umpires calling balls and strikes than actually being a participant in the game. This is a position that we are very comfortable with and in this election, as you can imagine, we can find pros and cons with regard to proposed policy from both parties.

It is with this in mind that we wanted to propose an alternative viewpoint to many who are contemplating whether this is a do or die election with regard to your investments. To be clear, there are policy decisions regarding tax, healthcare, entitlements, etc. on the ballot that will likely touch your wallet. However, the impact of this election on the direction of capital markets over the long term is more predictable and less impactful than you probably think. Let us explain.

In the research attached by Federated and Strategas from April of 2016, we see average annual performance of the S&P500 under various party controls of the Presidency and Congress. For example, in years from 1933-2015 when you have had democratic President and a republican Congress (seen in red) the S&P has grown by an average of 13.3%. You can simply read the rest of the chart to see historical results under other configurations of partisan control. Keeping in mind that timing of events such as recessions, world wars, geopolitics and leaps in technology (to name a few) play a role in those results is encouraged.

In our opinion, the difference in historical performance dependent on party control is not the most interesting part of this study. The highlight is the worst historical configuration of republican President and democratic Congressional control still yielded a positive 4.9%. A number unlikely to occur by investing in cash or fixed income over the next 4 years. This R/D configuration occurred in 11 years in that sample (3 Eisenhower, 3 Nixon, 1 Nixon/Ford, 1 Ford, 1 Reagan, 2 Bush Sr, 1 Bush.) As you can see, the 2nd worst configuration was 9.3% and so on and so forth.

The take away, as an investor, should be that stocks in particular discount prices as a result of economic growth, innovation, entrepreneurship, velocity of capital (confidence) and many more nonpolitically related inputs. Presidents come and go but growth in capital markets and investment accounts on average have sustained and thrived under every single political party control. Consider also that these sample periods include world wars, global recessions, terrorism and worse. As investment managers, we are more concerned world population growth, capital becoming more readily available to developing countries and technological innovation than we are with political parties. The intention here is not to foolishly diminish politics all together but to highlight that stock returns and political parties have a lower correlation than most would think and therefore, in our opinion, do not warrant a wholesale change in strategy dependant upon the victor.

With that said, there are two caveats to this very important call for patience. First, we actually do expect a continuation of the short term volatility we have experienced the past few months to continue in the near term. Uncertainty is the foundation of risk and right now we have uncertainty both in the result but also in policy being discussed from both sides. This is the second and more important point. While markets tend to ignore party politics, they do not ignore long term economic growth trends and thus, we are on the lookout for trending policy decisions that could slow or accelerate economic growth. As always, we will act accordingly if we believe the odds of an elongated negative investing environment become more likely. However, our base case for near term volatility with a long term positive outlook remains intact.

We hope this gives you some confidence in the future of stocks regardless of who enters the White House. Of course, if you remain uneasy about your current strategy, please do not hesitate to contact us and we can walk you through options. Until then, we hope you are having a wonderful start to the fall season.

Views expressed are those of Raymond James & Associates and are subject to change without notice. Information provided is general in nature, and is not a complete statement of all information necessary for making an investment decision, and is not a recommendation or a solicitation to buy or sell any security. Past performance is not indicative of future results. There is no assurance these trends will continue or that forecasts mentioned will occur. Investing always involves risk and you may incur a profit or loss. No investment strategy can guarantee success.


Building a Memory and a Dream

September 12th, 2016
Marcia F. Person, CDFA™
Senior Vice President, Investments

We all have memories from our childhood that elicit a warm feeling when we think about them. For some of us it’s a passing thought that brings a smile to our faces, but for others it lingers in our minds. For a client (who I shall call Jane), the happy memory of boat rides with her family to a small island with a lighthouse off the coast of Maine was the inspiration for a gift that would change the future of a historic landmark.

During an annual visit to a 4th generation family vacation home, Jane decided to take a tour of the aging lighthouse from her childhood to see its current condition. Much to her surprise she found that a major restoration project was underway. Jane was impressed with how hard the group was working and what they had been able to accomplish with such limited funds. She penned a letter to a committee working on the project to better understand the scope of the work and what would be required to complete it. Regarding that letter Jane said, “My longtime interest in historic preservation and my fascination with Wood Island Lighthouse from my many summers at our family home in Saco, prompted me to write.”

Following two more trips back to the island and some communication with the folks at FOWIL (Friends of Wood Island Lighthouse), Jane knew that her financial commitment could help secure the future of the Wood Island Lighthouse. She wanted to ensure that generations to come could begin making their memories there. After corresponding with Brad Coupe, the Chair of FOWIL’s Executive Committee, Jane learned of the magnitude of the project. This only served to bolster her commitment to helping to save this New England treasure. She learned that she could help them complete the restoration, and as an additional benefit, funds could be diverted from the refurbishment to other important work.

So how does one go about making significant, systematic donations to a charitable organization in a judicious and well-orchestrated way? Budgeting can be a challenge for a small organization as they do not regularly receive large donations like larger organizations do, and we want our charitable gifts to be used prudently.

Most often clients make charitable contributions simply by writing checks and taking the appropriate deductions at tax filing time. However, as part of an overall estate planning strategy we devised, Jane established a Raymond James Charitable Donor Advised Fund a few years ago utilizing low cost basis stock. (Of course funding with cash is also fine.) Raymond James Charitable makes grants to charitable organizations on behalf of the client so that they can enjoy the power of giving without the hassle of timing, tax concerns, expenses and record-keeping. Because Raymond James Charitable is a tax-qualified public charity, Jane received an immediate and full tax deduction while the funds had the potential to grow over time.

There are several other vehicles available to create gifting strategies during one’s lifetime or after their passing. The Donor Advised Fund worked well for our purposes and continues to be available for other grants Jane may wish to make in the future.

Working directly with the committee from FOWIL in charge of the restoration, we were able to submit requests for grants to coincide with each phase of the construction. Once the organization was verified by Raymond James Charitable, the funds were sent directly to the 501(c)(3) for their use.

On August 20th, I had the overwhelming privilege and pleasure of accompanying Jane and her husband as she was awarded the American Lighthouse Foundation’s (ALF) “Keeper of the Light” award for “helping to preserve American’s lighthouses and their rich heritage”. Following the presentation we were treated to a boat trip out to the 35 acre island to tour the property, the keeper’s house, and the lighthouse itself.

The original Wood Island lighthouse was built in 1808 and constructed of wood, but the current lighthouse which replaced it was erected in 1839. Standing 47 feet high, I braved the steps to the top as they narrowed to the remaining wrought iron steps barely wide enough for my size 6 feet. Perched on that narrow platform surveying the Atlantic Ocean in the distance, I had a brief glimpse into what the life of a lighthouse keeper might have been like in the harsh winters of Maine in 1839. After a glorious lobster roll picnic on the porch, we reluctantly boarded the boat for our journey back to the future.

We all have the ability to help build a dream and a memory for someone’s future. Whether telling tales of your youth to your children and grandchildren or contributing to an organization to see it sustain and thrive, these are the building blocks that help enrich the future for generations to come.

If you would like more information on charitable gifting strategies, please feel free to email or call us.


Back to School

August 12th, 2016
Ross D. Preville, WMS
Senior Vice President, Investments

As summer vacation from school comes to an end, my wife and I will soon be fighting the battle of getting the kids up in the morning. This fracas is a daily ritual in our house during the school year as one enters high school and the other one continues in middle school. Fortunately, we have learned the system of divide and conquer to get it accomplished. As I reflect back over the summer, I’m amazed at what a 14 year old’s life looks like in 2016. I commented to a friend recently that when I was our son’s age, my summers were spent running around the streets of St Pete - no organized programs - just having fun. It illustrates how much more sophisticated our kids have become and just how competitive the educational landscape is.

During his school break this year, our son headed off to Duke TIP Camp (Duke University Talent Identification Program) just outside of Dallas where he took a three week course on Engineering Design Flaws. Founded in 1980, Duke TIP’s mission is to find “academically talented students” and give them an outlet to take their education to another level. It was an eye opening experience for our teenager to be independent (within reason) and to take responsibility for himself in an environment where his parents were not there to push him. Last year’s curriculum was Physics and Design at Rollins College in Winter Park. He came home a different kid after that time away.

Today the post high school educational path often starts very early. This year, when my wife flew with our son to Dallas for the Duke program, she decided to go early to tour Southern Methodist University (SMU). Even though our son was just entering 9th grade, they were happy to schedule an appointment for them to meet with an academic advisor. While in Nashville two years ago, they spent a day visiting the campus of Vanderbilt.

Going to college is not optional according to my wife. This is certainly an opinion shared by many of our readers. That edict comes with its own set of responsibilities for the parents and/or grandparents. We feel that it requires our commitment to pay for that higher education, but we present it as a team effort. We are pledged to do our part, but we clearly set out their duties as well. Our expectation of our kids is that they do the work required to achieve the grades that will afford them the opportunity to apply for scholarships.

In addition, we are planning ahead for the costs not covered by scholarships by establishing 529 College Savings Plans for them. These plans are similar to a 401(K) plan in that they offer a menu of investments from which to choose. There are no income restrictions for those funding these accounts and one of the many other benefits includes their tax deferred growth. The tax free withdrawals for qualified educational expenses are another great reason to fund your 529 early and often. (It makes a great birthday gift from Grandma too!)

According to College Board, the average cost of tuition and fees for the 2015-16 school year was $9,410 for in-state public universities, $23,893 for out of state public universities, and $32,405 for private universities. Since our son had visited the campuses, I checked the websites of Vanderbilt and SMU. Their tuitions this year are $64,654 and $67,284 respectively. (Gulp)

It is never too early to plan for life’s biggest financial goals, and based on the cost of tuition today, a college education could be one of them. At St. Pete Wealth, we utilize software called Goal Planning and Monitoring (GPM) to help our clients plan for the future. Whether it’s college planning, retirement, a vacation house, or a bigger boat; this state of the art program assists us in preparing a plan for achieving those goals. I tell our clients to “dream big” when they come in for their initial meeting utilizing GPM, and together we will see what’s possible.

Please feel free to reach out to us if you want to work on those dreams and evaluate the possibilities for making them a reality. Best of luck this school year.


Brexit: A lesson in patience

July 6th, 2016
Sean C. Kelly, CFA®, CFP®, CIMA®
Senior Vice President, Investments

The whipsaw of almost all capital markets post the Brexit vote was incredible. We saw two days of market carnage followed by 4 straight days of rebounding markets worldwide. Economists, influential business leaders, and politicians alike were fighting for space on your computer and TV screens to tell you how awful or how wonderful the decision was. At the end of the week, most of us in the investment community were left scratching our heads a bit at the V-shaped recovery we had just experienced. Candidly, it seemed likely that this would play out over weeks or months, not days. This is not to say that the market implications surrounding these events are over. In fact they are likely just beginning as geopolitical uncertainties have been inserted into an already volatile international investment landscape. That said, the first inning of Brexit is in the books, and I thought it a prudent time to discuss what we all just witnessed and hopefully learned.

First and foremost, we were reminded that markets don’t like surprises. There is a saying we use quite often in the office. “It’s not the train I see coming that worries me.” Our money management process involves planning for events in which we assign probabilities to the likely outcomes and we invest accordingly. This is not an uncommon practice and certainly not exclusive to the investment world. Every once in a while, however, a train sneaks up on you from behind. Nassim Nicholas Taleb has written a series of books about uncertainty and randomness in which he uses the term “black swan” to essentially make the same point. This is a phrase you have probably heard before. Technically, statisticians refer to this as Kurtosis risk or tail risk, but “black swan” has a more appealing sound. According to Wikipedia, it’s a metaphor that describes an event that comes as a surprise, has a major effect, and is often inappropriately rationalized after the fact with the benefit of hindsight. So by that definition, was Brexit a black swan event? It was a bit of a surprise, and it did have a short term major effect (with the long term prognosis yet to be determined). In addition, you probably heard at least one person say, “I saw this coming.” So sure, by that definition it was - so what?

The stigma of black swan events is that they are all considered to be earth shattering events like the 2008 financial crisis or Black Monday in 1987. The danger for many investors is their hypersensitivity to these events since the great recession does not seem that long ago (Even though the market bottom occurred over 6 years ago.) Those constantly on the lookout for the next catastrophe are likely to misdiagnose many events as having more destructive power than they actually do. If that fear generates rash investment decisions then real damage is done to their long term financial well-being, and that is a shame. There were likely a number of investors scared out of their retirement investment strategy on Friday after the Brexit vote only to see markets roar higher by the next week’s end.

The lesson here, in my opinion, is that being aware of world affairs and how they are likely to affect your wealth is a good thing. However, making snap investment decisions because you are always waiting for the next shoe to drop is an exercise in futility. Sometimes patience is the best medicine for uncertainty. Regardless of the countless talking heads in the media speaking in absolutes within minutes of the vote, uncertainty is exactly what we have in the wake of this event. Only time will tell if Brexit becomes another overlooked black swan blip on a long term chart or something more. We will, as usual, stay glued to the situation, the implications as details emerge and will update where appropriate. We hope everyone had a wonderful holiday weekend!

Views expressed are those of The St. Pete Wealth Management Group and not necessarily those of Raymond James & Associates and are subject to change without notice. Information provided is general in nature, and is not a complete statement of all information necessary for making an investment decision, and is not a recommendation or a solicitation to buy or sell any security. Past performance is not indicative of future results. There is no assurance these trends will continue or that forecasts mentioned will occur. Investing always involves risk and you may incur a profit or loss. No investment strategy can guarantee success.


Thoughts on Brexit

June 26th, 2016
The St. Pete Wealth Management Group

Good morning friends,

As the saying goes, may you live in interesting times. It appears this morning, at least for now, we have just that with the overnight vote in the affirmative for the United Kingdom to initiate leaving the European Union. Polls going into yesterday’s event had the leave and remain voting blocs basically in a dead heat which would insinuate that no one should be surprised over the final tally. Although as of this morning, surprise is exactly what we have with worldwide currency, equity and bond markets repricing. The major reason for the volatility, aside from the long term consequences of this decision, is that over the past months global strategists, economists and columnists alike were handicapping the decision to a much heavier probability of UK remaining in the EU. The common wisdom is that the UK, England in particular would be so financially damaged in the aftermath of an exit that there is no way that a rational nation could inflict that upon themselves. Influential leaders such as Christine Lagarde at the IMF, British Prime Minister David Cameron (who resigned this morning), our own President Obama, et al. flexed the unified weight of their respective institutions in pleading and threatening to the UK citizens in an attempt to quell the unrest. All this for naught, of course as the result of last night’s vote seemed to regard trade, immigration and sovereignty policy issues at a premium to short term economic consequences.

Our interpretation of Brexit, first and foremost, is that this move does not mark the end of days. This is, however, a significant geopolitical event that will have ripples across investments, countries, companies and politics. As investors it is important to remember that ripples are not always bad and often times create opportunities. It is with this in mind that we have detailed a couple of bullet points below to consider in the initial stages of this event.

1. The UK leave vote has true policy implications that will begin to take shape a couple of years from now, not today. This is the core argument for our base case of global volatility being heightened in the short term but receding to more appropriate levels in the coming months.

2. One of the great advantages of EU membership is trade policy between nations. Through leaving the Union, they will renegotiate trade deals with member nations that may be more or less favorable than the current status quo. Britain runs a large trade deficit with greater Europe, meaning they buy more products and services from European countries than they sell. This infers that the UK will have leverage in negotiating the terms of its restructured deals although there will likely be some counterbalance by EU’s need to issue a penalty for trading with a nonmember.

3. The UK always maintained its status as a semi-detached member of the EU by its reluctance to adopt the EURO. Dissimilar from nations like France for instance, the UK never relinquished it national currency.

4. From an economic standpoint, the common wisdom is that the UK has the most to lose as a result of Brexit. By isolating their economy further, economists suggest that they will experience recessionary pressures. Meanwhile, it remains unclear what the economic implications are for the EU. The greatest and most damaging result would be if the UK exit is not an anomaly, and instead sparks a trend of future nations leaving the EU.

5. Even with this morning’s snap downside volatility, US equity markets are trading higher than they were a week ago today as of this writing. This suggests that our markets had priced in a remain vote and are unwinding due to the surprise. It does not appear that today’s action is pricing in a further discount due to new global uncertainties. Hopefully this holds up although our suspicion is that we see further pressure next week before leveling off.

6. The major currency victims of the vote thus far seem to be the British Pound which dropped over night from a high above 1.50 to a low of 1.32 relative to the US dollar. The Euro fell modestly from 1.14 to a low of 1.09. Both currencies have rebounded off their low points overnight suggesting that leveraged currency trades were being unwound. As long as this remains orderly we are likely to avoid any currency crash that could result from reversing carry trades. The US dollar and Yen conversely spiked as a result of the vote.

7. The international markets most affected by the vote seem to be the familiar (PIIGGS)*. The Athens composite, Madrid IBEX 35 and FTSE Borsa Italiana indexes were all down over 10% as of this writing. Surprisingly though, many European stock indexes saw weakness but rose well off the lows of the day. Similar to the US market, the UK FTSE saw downside pressure but is higher than this point last week.

We will update more content in the coming days as the event evolves and information becomes more clear. In the short term we must reiterate that while we do consider this a significant development in global capital markets and geopolitics, we are not of the opinion that this represents a tipping point that would require a massive change to your current selected allocation. This is a great opportunity however, to reevaluate your allocation in reference to risk appropriateness and security selection both of which we would be happy to help you with. As always, please contact us with questions and keep an eye out for updates in the coming weeks.

*Portugal, Italy, Ireland, Greece, Great Britain (UK) and Spain

Views expressed are those of The St. Pete Wealth Management Group and not necessarily those of Raymond James & Associates and are subject to change without notice. Information provided is general in nature, and is not a complete statement of all information necessary for making an investment decision, and is not a recommendation or a solicitation to buy or sell any security. Past performance is not indicative of future results. There is no assurance these trends will continue or that forecasts mentioned will occur. Investing always involves risk and you may incur a profit or loss. No investment strategy can guarantee success.


June 6th, 2016
Ross D. Preville, WMS
Senior Vice President, Investments

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