Why it Matters – Issue 3

Welcome to this quarter’s Why It Matters.

What a difference three months make. Since December’s market sell-off, the S&P 500 Index posted its best quarterly results since the financial crisis of 2008-09 on March 29. In part, the gain is attributed to a change in policy by the Federal Reserve, which is holding interest rates steady in the 2.25% to 2.5% range. Industrials, Technology, and Real Estate are three sectors that particularly benefited from low interest rates, as evidenced at the close of the bell: The Dow Jones Industrial Average, the NASDAQ Composite, and the broader S&P 500 Index produced respective total returns of 11.81%, 16.81%, and 13.65 percent.

The gains are also credited to growing optimism about trade progress. Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer wrapped up meetings in Beijing on March 29, and negotiations are scheduled to continue.

These favorable proceedings have calmed concerns about a recent yield-curve inversion (the yield on 10-year Treasuries dipped below that of 3-month Treasuries), which is historically viewed as an indicator of a coming recession. The technical definition of recession is two consecutive quarters of negative GDP growth — which is not an imminent concern. (While we’re on the subject, PWA believes that guessing the starting point of a recession is a bit fool’s game.)

What does all of this mean to you? Heavy swings in quarterly returns are part and parcel of investing for the long term. At PWA Wealth Management, we work with every client to establish a Goal Policy Statement (GPS). Literally, your roadmap for reaching your goals, the GPS helps to define an objective course of action during periods of market elation and disruption.

 

Goal Policy Statement(GPS)

PWA is committed to working with clients to craft and implement a GPS — a wealth fulfillment roadmap — that lays out where you want to go and the best path to get you there. Your custom GPS also includes planning for unexpected events, both speed bumps and detours, on your way to wealth fulfillment.

When meeting with your PWA Wealth Consultant, expect to revisit:
  • The Starting Point: Assessing assets, debts, spending habits, and budget
  • The Destination: Identifying where you want to go and what you want to accomplish
  • The Journey: Mapping time horizons and strategies

After years of applying a disciplined approach to saving for retirement, people often recognize that the complexities of making their savings last a lifetime require professional assistance. At the same time, they are reticent to let go and like the notion of maintaining a modicum of control. Enter myQuest, a personal wealth fulfillment hub that affords you a Quantitative Understanding of Everything, yielding Stability and Trust.

A Case Study of Mr. and Mrs. Jones…

Barry and Theresa Jones came to PWA Wealth Management to help them transition into retirement. Barry is 55 and Theresa is 54; both are highly successful in their respective professions as an engineer and an attorney. Their children have “launched” — on their own personal and professional paths. Barry and Theresa knew it was time to focus on the next stage of life and determined they needed professional assistance.

Goals

  • Retire within the next 5-7 years
  • Purchase a vacation home within the next 10 years
  • Establish a proper estate plan
  • Establish an efficient distribution plan

Challenge

Comprehensive retirement and estate planning are complex processes that evolve. Barry and Theresa recognized the intricacies require the talents and skills of a professional advisor. The test was finding someone they could trust, while maintaining a certain amount of control over their financial plan.

Solution

When Barry and Theresa encountered the PWA Wealth Management team through exploratory questions and active listening — and sampled our technology for planning and analysis, they knew we were a good fit. In particular, myQuest resonated with Barry. He was accustomed to a hands-on approach to managing their finances, so having a personal wealth fulfillment hub that offers interactive future expense and cash flow planning, along with access to real-time aggregated financial data, was a bonus.

When a sooner-than-anticipated opportunity surfaced to purchase a $550k condo near their favorite beach, Barry and Theresa were thrilled. They brought the possibility to their PWA Wealth Consultant; working together, they identified various scenarios:

  • Should they take 20% from savings (110k down payment) and mortgage the balance at 3.5% interest?
  • Alternatively, should they pay cash for the entire amount?
  • The Jones’ investment objective detailed an annualized 8% return. What would be the impact of not putting $110k — or $550k — to work in the markets for the next ten years?

Since myQuest enables online collaboration, the couple and their PWA consultant were equipped to explore the impact a vacation home purchase would have on achieving longer-term retirement goals. Using what-if analysis tools, it became apparent the couple would either need to work several more years than initially planned or dramatically increase their savings toward retirement. Ultimately, the Jones elected to sacrifice the immediate opportunity in favor of longer-term outcomes. Being directly involved in the process fueled the couple’s peace of mind.

PWA Wealth Management is a problem-solving, goal-oriented firm that provides the advice and services individuals require to define, plan for, and meet their financial goals. Our proven skills and credentials, combined with state-of-art technology, create trust and understanding. For Mr. and Mrs. Jones, the result is clear: They have a strategic ally guiding them on their path toward a comfortable retirement.

The information is provided for illustrative purposes only to provide an example of PWA Wealth Management’s process and methodology, and is not a guarantee of future results. No reliance should be placed on any such information when making an investment decision. Nothing herein is intended as an endorsement or testimonial by any person of PWA Wealth Management nor should the information be construed as a statement of a typical client’s experience with PWA Wealth Management.

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Why it Matters
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