Carnegie Wealth Management Blog

The world lost a great man this week with the passing of Arnold Palmer...

We have several connections to the “King” in our firm, not the least of which is our very own Chad Warmbein who had the honor of playing in the Palmer Cup at Latrobe Country Club the past two years. It’s hard to imagine the world without Arnold Palmer; he was such a permanent figure, not only in golf, but as a person and all of the good that he did outside of the game. It is only in Arnie’s style that he would pass on the eve of the Ryder Cup, an event he cherished and is the person who still holds the title of the most match wins at 22. Never one to seek the limelight, he wouldn’t have wanted to disrupt the event.

Many of you from Northeast Ohio area are familiar with “Brady’s Leap,” if only from the eponymous Ohio Turnpike service plaza at mile marker 197. For those of you who are not native to the area or simply need a refresher of this legend, gather round. 

Captain Samuel Brady

Captain Samuel Brady came from a notorious family of American Revolutionary soldiers and fought alongside George Washington with his father and brother. Throughout the Revolution, the Bradys fought in every major battle. By 1778, the Bradys were deployed to man the frontier, then located in Central Pennsylvania as most of the country anywhere West of that was occupied by Indians.

While the recent market headlines have focused on Britain’s decision to leave the European Union, or “Brexit” as it has been dubbed, I came across an interesting news article last weekend. The article from the Wall Street Journal described how a certain robo-advisor froze all trading activity on their platform for two and a half hours after the market opened on June 24^th (the first day of trading after the Brexit results were known). Even worse, they did not even communicate this in a simple email to their users. What would you do in this situation?

We live in an age of amazing technological promise. One where machines and software programs are developing at an astonishing rate, and where the possibility of encountering real-life robots - like the fantasy versions from 1970’s TV shows and film, such as B-9 from “Lost in Space” or C3PO from “Star Wars” - doesn’t seem so other-worldly anymore.  Today companies as different as Google, General Motors and Tesla are vying to develop self-driving cars, and Virtually Reality, or “VR” for short, is for Real.   With self-driving cars literally just around the corner, perhaps it is time to consider the question: are you ready to hand over the keys to your car and trust your life to an Uber machine? 

As a follow up to our previous post "Fiduciary Rules? Or April Fools...", The Department of Labor’s regulations, aimed at curbing abusive fee practices in regards to the management of IRA, 401(k) and HSA accounts, was finally released on April 5^th.  The draft regulations released for comment earlier in the year were tough, substantive and had teeth.

However, the final regulations, just released, are virtually meaningless as a consumer protection and may even be softened. 

This coming Wednesday:  “Hump Day” or “Wacky Wednesday”?

The U.S. Department of Labor has an opportunity to make an historic ruling that will benefit everyone saving for retirement. The final version of the highly anticipated “Fiduciary Rule” is to be announced on Wednesday, April 6.

Why is this important? The fiduciary standard that Registered Investment Advisers (like Carnegie) live by will be forced upon any adviser providing investment guidance to retirement plan accounts. In other words, advisers that are currently permitted to recommend only products that earn them the most commissions will finally be forced to come clean.

Since 1907, “Be Prepared” has been the motto for millions of Boy and Girl Scouts around the world. The expression represents the constant readiness and willingness in both mind and body to do the right thing at the right moment.   But what goes unspoken is “What exactly are we preparing for?”  That is a great question, but you do not have to be a Scout to understand the motto applies to all of us.  After all, life has a way of throwing us curves and the only way we navigate these treacherous waters is to be prepared.

As the calendar turns, we look towards the New Year with optimism on what can be accomplished over the next twelve months.  Not in terms of performance, as 2015 reminded us, much of that is out of our control.  We can construct solid portfolios, but the market will deliver what it will.  What is in your control is the action you take this year that you didn’t take last year to improve yourself.  This is often called your New Year’s resolutions, typically a list hastily compiled and often dismissed by Martin Luther King Day.  This year we’d like to suggest making one resolution in 2016 that will improve either your life or the life of someone else you love.

Congress once again waited until the final hours to provide tax clarity by passing the Protecting Americans from Tax Hikes Act of 2015 (PATH). The Act does considerably more than the typical tax extenders legislation seen in prior years. It makes permanent over 20 key tax provisions. Here are some of the more popular provisions. 

For Individuals:

Charitable Distributions from IRAs

The Act permanently extends the provision for individuals age 70 1/2and older to be allowed to make tax-free distributions from individual retirement accounts (IRAs) to a qualified charitable organization. The treatment continues to be capped at a maximum of $100,000 per taxpayer each year. Therefore, amounts in excess of $100,000 must be included in income, but may be taken as an itemized charitable deduction, subject to the usual adjusted gross income (AGI) annual caps for contributions.

Points to note about the IRA charitable rollover:

• Married individuals filing a joint return may jointly exclude up$200,000.
• You can use an inherited IRA to donate but you have to be at least 70 ½
• The charity receiving donated IRA funds may not be a donor advised fund, supporting organization, or most private foundations.

IRA assets are particularly favorable when donating to charity, rather than leaving to heirs, because

Have you had the talk yet?  No, not “that talk”.  To mix a metaphor, the birds and the bees are already out of the barn at this point!  No, this talk is about your financial plan. With the holidays approaching, you may want to consider using this time to enter this conversation. Below are some practical tips you can use to get the conversation started.

1. Don’t Make It Awkward

Appropriate communication of your financial picture is very much a part of a successful financial plan.  After all, it is likely that family members will be the recipients of your estate someday.  They may even be called upon to help manage your finances should the need arise.  It can be a little intimidating for someone thrust into that position without any prior knowledge. Remember to keep calm and have patience.  After all this involves money, family, and the future.  All the makings of a soap opera!  If it helps, have an outline or topic list prepared.

Thanksgiving is a time when families traditionally get together and celebrate the holiday.  While spending time with family often involves eating/drinking, and watching football (and the occasional nap if you’re lucky), it also may be a great time to discuss family finances at some point over the extended weekend together.  After all, how many times can you rave about those sweet potatoes?