Business Update

Taxes are Complete: With the help of Todd Costigan, CPA, we completed all of our Affordable Family Office (AFO) client’s taxes on time.  Four items of note:

  1. Todd has joined D3 as an employee and works Tuesdays and Thursdays throughout most of the year. Please introduce yourself to him when he answers the phone.
  2. Follow this link for a summary of the tax savings we generated for some our AFO clients based on their 2016 tax returns. We helped our clients maximize their after-tax wealth by integrating these tax strategies into their financial plans and investment portfolios.
  3. The IRS has become very stringent on using their information return matching routine, which compares W-2’s, 1099’s, K1’s, etc., to your 1040 tax return. We have been made aware of an IRS letter received by a client where the matching system made an error. If anyone gets a letter from the IRS, please let us know immediately.
  4. To help our clients better organize and keep track of the numerous records that are necessary to file tax returns, we have developed Tax Organizer Spreadsheets for your use. They are organized by type of record (medicalcharityvehiclehome officerental and business). These spreadsheets will help you organize your expenses as required by the IRS. You can use the links to access them on a desktop or laptop computer that has Microsoft Excel software. If you would rather have us print them and mail them to you, call or email Todd.

Financial Plan Update Season: The most valuable service we provide is integrated financial planning. These integrated financial plans help our clients achieve their life goals.

For all of our AFO clients, we have started to use your tax returns to update your financial plans. Towards the latter half of May, we will be putting your financial plan Data Confirmation onto your client portal. This Data Confirmation is the summary of your financial goals and the financial resources used to achieve those goals. It is extremely important that you review your data confirmation to maximize the value of your financial plan update.

If any Advanced Portfolio Management Client (APM) would like a financial plan update, please contact Don or Adam.

Market Insight

Real GDP rose just 0.7% in the first quarter of 2017. This is the weakest quarterly economic growth in three years. The April jobs numbers released this morning showed payrolls rose by 211,000 and the unemployment rate reduced to 4.4%. These numbers exceeded market expectations. Although the first quarter GDP numbers were weak, they may have been distorted by weather, inventory spending, and government spending, which can be volatile figures. We expect more favorable jobs and GDP figures for the second quarter.

Even though first quarter GDP growth did disappoint, corporate earnings reported for the first quarter have been strong. Reported first quarter earnings growth for the S&P 500 currently stands at 12.5%, which is the highest year-over-year growth since 2011. This earnings growth has been led by the financial, materials, and technology sectors. Using the S&P 500 price/earnings ratio, U.S. stocks are slightly overvalued relative to historical valuations. We think the strong earnings growth can potentially justify higher valuations. The S&P 500 is currently up approximately 1% since earnings season started April 1st.

The month of April saw the first iteration of President Trump’s proposed tax cuts, which are anticipated to be a form of economic stimulus in the U.S. We do not see these tax cuts passing in their current form due to opposition from both Democrats, who do not want to reduce taxes, and fiscal conservatives, who have concerns about adding significantly to the nation’s debt. We will continue to monitor these proposals as they become more concrete. Our goal is to determine the projected impact to our clients both from an investment and income tax prospective.

Investment Strategy

As part of our service for all clients for whom we manage assets (AFO and APM), we perform a quarterly review of all of the funds in your portfolios. We also screen for potentially better products in each asset class.

We have completed our quarterly review of our non-401k plan investment funds. With the exception of a handful of funds, the majority of the investment products we use in your portfolio performed on a risk-adjusted basis better than or equal to their asset class benchmarks. We will only be making a few fund swaps as a result of this review.

We have also completed the review of all the funds in our client’s 401k plans. We will be making some minor changes in these accounts during the rest of May (depending on account access).

This quarterly fund review process continues to reinforce our objective of striving to add value to your portfolios. By identifying investment products that can potentially out-perform on a risk-adjusted basis their asset class benchmarks, we hope to increase the expected return on your individual portfolios. The benefit to you of this effort is to increase your probability of achieving your life goals.

Final Thoughts

Thank you for letting us serve your financial planning and investment management needs. Let us know if you or any of your friends or relatives would like to have a financial plan update.

Happy Cinco De Mayo. May we all win the successful retirement battle.