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Financial Wellness for Gen X and Millennials – It’s About More than Investments

Part 1: Car Insurance

I’ve noticed a few recurring themes from financial plans this past year. They have nothing to do with investments, but they are in many ways, so much more important. It turns out, there are a few items in your financial life that require consistent maintenance. Dropping the ball could cost you quite a bit of money.

If you have any financial assets, you need full liability coverage car insurance. The state minimum amount will not be enough to cover you in an accident when you’re at fault, and the other party can sue you personally after the insurance maxes out. In Louisiana, the state minimum liability insurance is 15/30/25. That means $15,000 for bodily injury per person, $30,000 for bodily injury to more than one person in an accident, and $25,000 for damage to the other person’s vehicle. So, the next time you total someone’s $80,000 Tesla, you’re on the hook after the first $25,000. But the larger risk is the bodily injury limits. Have you ever seen a hospital bill, with an ambulance ride, for less than $15,000? If you carry minimum liability insurance, the injured person will be suing you for the remainder of their medical bills.

You need the maximum liability coverage of 100/300/100. That’s $100,000 bodily injury per person, $300,000 per accident, and $100,000 in property damage. In addition to full liability insurance, you might also want uninsured and under-insured coverage in case the other driver is at fault and doesn’t have enough insurance. To protect your assets further, you should consider purchasing an umbrella policy on your homeowner’s insurance that pays an amount above the maximum car insurance rates.

There are a few things you can do to lower your car insurance premiums. You might consider a higher deductible of $1,000 rather than $250 or $500. If you don’t owe anything on your car, and you have enough in savings to buy a replacement car, you might consider dropping collision coverage on your vehicle. If you run the numbers, self-insuring may be cheaper over the life of your vehicle.

Many car insurance companies are offering a discount to drivers who place a tracking device in their car for up to six months. This allows the insurance company to confirm the number of miles driven and analytical data such as speed and brake usage. Drivers deemed to be “safe” drivers are given a discount of up to 20% based on the data collected. This can backfire, however, if you’re a hot-rodder, so consider you’re driving style before taking this route.

Are you adding a teenage driver to your car insurance soon? Good luck! As parents before you know all too well, car insurance for teenage drivers is expensive. However, many insurance companies offer discounts for teens who have completed approved driver’s education classes and logged enough practice time behind the wheel with a parent. Teens can also get a discount for having good grades. Check with your insurance company to find out what information they need to apply for a teen driver discount.

I used to be the person who never changed car insurance, accepting the annual premium increase into infinity. It makes sense to shop your coverage every couple of years. Although the process is tedious, many people find significant savings by switching companies.

This is Part 1 of a series on financial wellness for Gen Xers and Millennials. Check back next week for a discussion on shopping your cash savings rate.

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3rd Quarter 2017 Market Commentary

Stocks continued to climb higher during the third quarter, with international and emerging market stocks increasing their lead on U.S. markets. S&P 500 earnings rose to an all-time high of $30.51 per share for the second quarter. International and emerging markets continued to soar, assisted by a declining U.S. dollar, low valuations, and strong earnings. Large cap stocks performed better than small caps, and growth stocks outperformed value stocks. Technology was the highest performing sector in the S&P 500, and was up 27.4% for the year. On the flip side, energy and telecom stocks have posted negative returns this year. Bonds posted small positive returns as short-term interest rates ticked higher. International and emerging market bonds outperformed U.S. bonds.

*US Stocks represented by the S&P 500 Index, International Stocks represented by the MSCI EAFE Index, and Emerging Markets represented by the MSCI Emerging Markets Index

Where is Volatility? Read more

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Women Impact Strategy highlighted in FA Magazine

In an article titled “An Advisor Portfolio Built Around Gender-Diverse Companies”, the Women Impact Strategy was featured in FA Magazine last month. Here is a preview of the article:

Suzanne Mestayer and Blair duQuesnay, RIAs with ThirtyNorth Investments, are setting themselves apart from competitors in New Orleans and nationwide with the launch of the Women’s Impact Strategy (WIS), a portfolio based on gender composition of corporate boards and executive management.

“It’s a differentiator,” Mestayer told Financial Advisor. “In conversations, potential clients consistently indicate a genuine interest in the strategy and it demonstrates overall that we’re thinking beyond traditional types of investing.”

Continue reading the article on FA Magazine’s website by clicking here.

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Blair duQuesnay One of FA Magazine’s 10 Young Advisors to Watch

ThirtyNorth CIO Blair duQuesnay was recently named one of FA Magazine’s 10 Young Advisors to Watch. The article states:

“Still in her 30s, Blair DuQuesnay has carved out a role as thought leader in her CIO and partner role at New Orleans’ ThirtyNorth Investments, a firm with $135 million in assets. She’s written papers on everything, questioning how cheap ETFs really are to showing the stock performance risks companies take when they have no females on their boards.”

Read the rest of her profile on the FA Magazine website by clicking here.

 

 

4th Quarter 2016 Market Commentary

Executive Summary

  • Year in Review – “Worst Start”, Brexit, Trump surprise victory
  • Small cap and Value stocks outperform
  • Interest rates decline mid-year, then rise to finish year higher
  • Will the US pass income tax and corporate tax reform in 2017?
  • Late innings for the current US economic expansion
  • The folly of forecasts 

In 2016, the US stock market reached new highs. You may recall that the market began the year with the “worst start” of any year on record. The “worst start” began early, with a 5% decline in the Dow Jones Industrial Average in the first four trading days in January. It continued in mid February, with US stocks down more than 11% for the year. By year-end the S&P 500 Index was up 11.96%. That’s a remarkable difference in market performance within the same calendar year. It makes the case for long-term thinking and following a disciplined approach to investing.

Last year was also a year marked by surprises. In June, voters in the United Kingdom voted to leave the economic agreement with the European Union. Prior to the voting results, almost every poll, and certainly the financial markets, expected a vote to remain in the EU. The reaction from financial markets to this surprise was initially strong. The Dow Jones Industrial Average lost 900 points in two days, and the British Pound declined below $1.30, a level not seen for over 30 years. However, within a week, global stock markets recovered their initial losses and even climbed higher. It was a remarkably fast reversal in market sentiment.

Markets reacted strongly to the surprise victory of Donald Trump in the US Presidential Election in November as well. This time, markets corrected even faster … literally overnight. On November 8, the day before the election, almost every poll predicted a win for Hillary Clinton. The New York Times gave Clinton an 85% chance of winning, and famed pollster Nate Silver of FiveThirtyEight predicted a 71.4% chance for a Clinton victory. To say that Trump’s win was unexpected is an understatement. What is more interesting, however, is the initial reaction and subsequent reversal in financial markets. As the election results became clear, Dow futures fell as much as 800 points. S&P 500 Index futures declined 5%, prompting a halt in trading. In Japan, the stock market was open overnight and closed down -5.4%. European markets initially traded down but finished the trading day higher than the open. US stocks initially opened lower on November 9, but recovered by mid-morning and closed in positive territory for the day. Stocks continued to rally through the end of the year. Read more

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Impact of Women in Corporate Leadership

Despite a plethora of academic research on the benefits of gender diversity in groups, corporations are painfully slow in adding women to their boards. The main question for investors, however, is whether the presence of women on boards improves stock performance. In order to answer this question, we evaluated the companies in the S&P500 Index in 2006 and tracked their performance for 10 years.

We looked at the gender makeup of the boards of companies in the S&P500 Index and tracked their stock performance over a ten-year period. We then divided the stocks into portfolios with zero women, one or more women, and more than 25% women on their boards. The results are fascinating, although not necessarily surprising given the breadth academic research on the benefits of cognitive diversity in teams.

These results do not imply that one gender is superior to the other, but that the combination of both genders has the potential to unlock value in publicly traded stocks.

To read our whitepaper – Impact of Women in Corporate Leadership: The Relative Stock Performance of Gender Diverse Boards, click this link below:

Impact of Women in Corporate Leadership

2nd Quarter 2016 Market Commentary

Despite tumultuous headlines, global markets finished the second quarter of 2016 on a high note. In the weeks since quarter end, major US stock market indices have reached new all time highs. US stocks were up 3.84% through the first half of the year, measured by the S&P 500 Index. Emerging market stocks snapped a pesky losing streak, gaining 6.41% through June. International developed stocks suffered a setback with the UK’s Brexit vote in late June. The MSCI EAFE Index was down -4.42% year to date. Interest rates plunged to new lows after the Brexit vote and global bond prices soared. The Barclays US Aggregate Index was up 5.31% for the year. Both real estate and commodities fared well during the first half of 2016. Global REITS were up 12.33%, and the Bloomberg Commodity Index was up 13.25%.

Brexit, What Brexit?

On June 23rd, the U.K. voted to leave the European Union. The “leave” vote, titled Brexit, was unexpected, and markets reacted violently. The Dow Jones Industrial Average fell more than 600 points on Friday, June 24th.  The British Pound fell more than 7% overnight, to levels not seen since the mid 1980’s.  The Pound has not recovered its loss as many other financial markets have in the weeks since the Brexit vote.

One-Year Chart of British Pound to US Dollar

Pound Chart

Source: Bloomberg.com

After a sharp two-day drop, most global stock markets recovered quickly after Brexit. Bonds rallied as interest rates dropped to new lows, in anticipation of a rate cut in the U.K. and continued delay of a rate hike by the Fed. But the U.K. economy, European banks, and the U.K. property market continue to suffer.  Michael Hasenstab, global bond manager at Franklin Templeton, expects a 2% – 7% contraction in the U.K.’s economy over the next several years.(1)  That is a brutal economic disruption, as the U.K. must negotiate every trade agreement with the European Union, presumably on less favorable terms.  Hasenstab expects a modest hit to the remaining EU economy of 0.5% and minimal negative effects for the U.S. and emerging market economies.  Markets do not like surprises, and the Brexit vote was unexpected.  However, after the steep initial decline in global stocks, cooler heads prevailed, realizing that Brexit’s impacts outside the U.K. are likely to be minimal and won’t take effect for some time. Read more

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DOL Fiduciary Rule

On April 6th, the U.S. Department of Labor (DOL) issued its final rule on the fiduciary standard for retirement accounts. The rule stipulates that brokers cannot give conflicted investment advice to consumers in 401k, IRA, or other qualified retirement plans. There is an exception that allows brokers to enter a Best Interests Contract agreement with customers to allow flexibility of services and products provided. This agreement stipulates that the broker will provide advice that is in the Best Interests of the client and opens the broker up to litigation, including class-action litigation, if the contract is not honored. Prior to the Best Interests Contract, brokers were able to force customers into arbitration agreements, keeping disputes out of the courts.

You might be asking yourself – Don’t brokers already have to look out for the best interests of their clients? The short answer, is no. The financial service community is broken into two (or three) types of regulatory regimes. Brokers, or registered representatives, operate under FINRA’s Suitability Rule. Brokers work for large and small broker dealer firms such as Bank of America’s Merrill Lynch, Morgan Stanley, Wells Fargo, and LPL Financial to name a few. Financial advisers, employed by Registered Investment Advisory firms, are held to a fiduciary standard. Insurance agents adhere to yet another set of rules, but many are also registered representatives who follow the suitability rule. The suitability rule is a lower bar than the fiduciary standard, allowing brokers to put their firm’s interest ahead of clients in many cases.

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1st Quarter 2016 Market Commentary

If I simply told you that US Large Cap stocks were up 1.35% and bonds were up 3.03% in the first quarter of 2016, I’d be leaving out a large part of the story. In between January 1 and March 31, stocks declined as much as 10% in early February, only to reclaim the entire loss and post a small positive return by quarter end. That’s a rocky ride, even compared to historical market moves. International developed stocks fared worse, the MSCI EAFE Index was down -3.01% for the quarter. Emerging market stocks finally shined, with the index up 5.71%. Commodities posted a slight positive return, up 0.42%. Global REITS had strong performance, up 7.22% in the first quarter of the year.

While Americans watched our new favorite reality show “The 2016 Presidential Election,” there were several fascinating and important stories developing for investors around the world.

Negative Interest Rates in Japan

On January 29, the Bank of Japan (BOJ) announced a negative interest rate policy. The Japanese equivalent of the Fed Funds rate is now -0.1%.[1] This negative policy rate is effectively a penalty on banks that do not lend aggressively since banks have to pay interest on excess reserves. The BOJ is now the second major central bank to adopt a negative interest rate policy. The European Central Bank (ECB) has been negative since mid 2014. Other countries with negative policy rates include Switzerland, Sweden and Denmark.

The BOJ’s announcement was a shock to market participants, sending Japanese stocks higher and the Yen lower against the US Dollar. Previously, Bank Governor Haruhiko Kuroda stated that Japan would not adopt negative interest rates. Currently 60% of global government bonds are paying less than 1%, with almost 30% paying less than zero. [2] It remains to be seen whether these extreme and unconventional central bank policies will have a positive or negative effect on their home economies.

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