Bruce Harrison

HCO Private Wealth

2008 Stephenson Ave.

Roanoke, VA 24014

540.204.9310

bruce.harrison@hcowealth.com

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Market Update
(all values as of 09.30.2020)

Stock Indices:

Dow Jones 27,781
S&P 500 3,363
Nasdaq 11,167

Bond Sector Yields:

2 Yr Treasury 0.13%
10 Yr Treasury 0.69%
10 Yr Municipal 0.84%
High Yield 5.77%

YTD Market Returns:

Dow Jones -2.65%
S&P 500 4.09%
Nasdaq 24.46%
MSCI-EAFE -8.92%
MSCI-Europe -10.53%
MSCI-Pacific -6.19%
MSCI-Emg Mkt -2.93%
 
US Agg Bond 6.79%
US Corp Bond 6.64%
US Gov’t Bond 8.04%

Commodity Prices:

Gold 1,892
Silver 23.37
Oil (WTI) 39.88

Currencies:

Dollar / Euro 1.17
Dollar / Pound 1.28
Yen / Dollar 105.60
Dollar / Canadian 0.74

Restructure 401K Business Goal: ? Implement a new 401K client model that only has us working with plans where we manage assets ? directly. No longer handle plans with outside assets and plans must net a minimum of $5K per year. ? Convert existing plans to this model.? Impact Filter Review/Discussion:? * How do we figure the cost of forcing existing accounts to convert? ? o How many existing 401K accounts are there? ? o Can we figure / do we know the existing cost of keeping these? ? ? Range of $$ we earn annually currently?? ? is there an average we can use?? ? are we losing $$ on any of them?? o Are these accounts on their own contract timeline? ? o What’s the current plan setup? Any minimum net?? ? Need to determine what it means money-wise to change it * Worth time/effort and possible alienation?? o Ethically ok to say “your place of employment uses us so you have to also?”? o Are there any plans where we already have doc assets?? ? If so are we making them convert or do we allow them to be “grandfathered” ? * Is there a possibility of losing current business if we rock the boat ? with the administrator/other docs?? * Is there a way to somehow quantify what “significant service hassles, revenue collection ? issues and outside time it takes to service” means?? * E&E o What’s the extent of his involvement / current deal with him?? o Do we have to have his blessing on the conversion plans or just his buy in on this ? restructure moving forward? ? o What’s the possibility that something like Launch401K appeases him? ? ? Are there other programs like that?? * Timeline o Do we have any prospects of 401K plans coming up?? o What’s the usual lead time when those do pop up?? o Mention was made on some kind of reworking that has already been done (maybe ? for Albemarle??)? ? Is that a plan we can take forward or was that a one off?? * One criteria was “We position with our clients that we cannot accept implied fiduciary liability ? on non-HCO outside accounts.” ? o Is this just in case we decide not to do this project for current plans? Or is it needed ? regardless? It seems like if we move ahead and force current plans to adopt the new ? structure then this isn’t a needed outcome???

 

 
Tax Rule Changes for 2019

Tax Rule Changes For 2019 – Tax Planning

Various changes are effective for the 2019 tax year beginning January 1, 2019. The changes affect most every tax payer both as an employee and self employed business owners.

A provision in the tax code known as indexing will affect 2019 Tax Brackets & Rates, which is essentially an inflation adjusted modification to account for rising inflation trends. For 2019, income brackets increased by roughly 2% across all income levels.

Income brackets for capital gains have also increased slightly for 2019.

With personal exemptions eliminated under the new tax law, a larger single standard deduction was devised in order to streamline returns for taxpayers. Standard deduction amounts increased slightly for 2019.

For both employees and self-employed individuals, IRA and Qualified Plan contributions have increased as well for 2019.

Other significant changes occurring for 2019 include:

-Estate Tax Exemption increases from $11.18 million to $11.40 million in 2019. -Elimination of the ACA penalty for not having health insurance becomes effective -Unreimbursed medical expenses must exceed 10% of AGI in order to deduct -Alimony is no longer deductible for the payor and no longer taxable for the recipient for divorce decrees issued after December 31, 2018.

Sources: https://taxfoundation.org, IRS.gov

oil prices falling

Short Term Bond Rates Rise – Fixed Income Review

Shorter term bond yields rose closer to longer term bond yields, thus further flattening the Treasury bond yield curve, an economic gauge closely followed by market analysts. The benchmark 10-year Treasury Bond ended the year at 2.69%, down from a mid-year high of 3.24% it reached in November.

The Fed indicated that it would continue to shrink its balance sheet by $50 billion a month, a reversal from balance sheet expansion following the 2008-2009 financial crisis. What this means is that rather than buying government bonds in the marketplace and placing them on the Fed balance sheet, the Fed will instead forego holding additional bonds and allow bonds to mature without replacing them. This is a form of quantitative tightening as is raising short-term rates.

Over the past year, nearly every developed country central bank began reversing monetary stimulus and started tightening just as the Federal Reserve has. The anticipation of rising rates and less accommodative policy may be prohibitive for smaller emerging market economies in need of inexpensive capital.

The Fed raised rates four times in 2018 and has risen rates nine times since it began tightening rates from near-zero three years ago. The Fed signaled that it expects to raise rates at least twice in 2019. Some analysts believe that the Fed has raised rates in order to be able to lower them as a form of stimulus should economic conditions deteriorate.

Sources: Treasury Dept., Federal Reserve

 
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Restructure 401K Business Goal: ? Implement a new 401K client model that only has us working with plans where we manage assets ? directly. No longer handle plans with outside assets and plans must net a minimum of $5K per year. ? Convert existing plans to this model.? Impact Filter Review/Discussion:? * How do we figure the cost of forcing existing accounts to convert? ? o How many existing 401K accounts are there? ? o Can we figure / do we know the existing cost of keeping these? ? ? Range of $$ we earn annually currently?? ? is there an average we can use?? ? are we losing $$ on any of them?? o Are these accounts on their own contract timeline? ? o What’s the current plan setup? Any minimum net?? ? Need to determine what it means money-wise to change it * Worth time/effort and possible alienation?? o Ethically ok to say “your place of employment uses us so you have to also?”? o Are there any plans where we already have doc assets?? ? If so are we making them convert or do we allow them to be “grandfathered” ? * Is there a possibility of losing current business if we rock the boat ? with the administrator/other docs?? * Is there a way to somehow quantify what “significant service hassles, revenue collection ? issues and outside time it takes to service” means?? * E&E o What’s the extent of his involvement / current deal with him?? o Do we have to have his blessing on the conversion plans or just his buy in on this ? restructure moving forward? ? o What’s the possibility that something like Launch401K appeases him? ? ? Are there other programs like that?? * Timeline o Do we have any prospects of 401K plans coming up?? o What’s the usual lead time when those do pop up?? o Mention was made on some kind of reworking that has already been done (maybe ? for Albemarle??)? ? Is that a plan we can take forward or was that a one off?? * One criteria was “We position with our clients that we cannot accept implied fiduciary liability ? on non-HCO outside accounts.” ? o Is this just in case we decide not to do this project for current plans? Or is it needed ? regardless? It seems like if we move ahead and force current plans to adopt the new ? structure then this isn’t a needed outcome???

 


 

 

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