|as of March 31, 2016|
|DJ Industrial Average||2.08%||2.20%||2.20%||7.22%|
|MSCI EAFE Index||-8.27%||-3.01%||-3.01%||6.51%|
|MSCI Emerging Markets||-12.03%||5.71%||5.71%||13.23%|
|Barclays US Aggregate||1.96%||3.03%||3.03%||0.92%|
|Barclays Intermediate US Gov/Credit||2.17%||2.58%||2.58%||0.75%|
Wendy Beaver is a financial advisor in our Southern Pines office. She got her start on Wall Street and we wanted to know what her experience was on the NYSE. Here is what she had to say:
As a former Head Equity Trader of NationsBank and a former Manager of Business Development of Prime Executions, a firm on the Floor of the New York Stock Exchange, I spent many years closely involved with the workings of the NYSE. It all started in the early 1980s, when I was a junior equity trader at InterFirst Bank in Dallas, Texas. For many years, The New York Stock Exchange held a program to introduce up and coming people in equity trading to the NYSE, called the FACTS Program. An invitation to attend this day long program was coveted among my peers. When I received my invitation, I was honored, and, I must admit, a little nervous at the thought of spending a whole day at the venerable New York Stock Exchange.
As it turned out, that day began a life long love and respect for the New York Stock Exchange, whose history began with the signing of the Buttonwood Agreement by 24 New York City stockbrokers and merchants on May 17, 1792, outside at 68 Wall Street under a Buttonwood tree. Twenty-five years later, on March 8, 1817, the organization officially became the New York Stock Exchange Board, later simplified to the New York Stock Exchange. The location changed several times over the years before settling into its present locational 11 Wall Street in 1865. The Neo-Classical building was registered as a Historic Landmark in 1978.
A few years after this important registration, I was there attending the FACTS Program. The day started with an introductory meeting outlining the days events, after which my fellow attendees from throughout the country and I were taken to the NYSE Trading Floor. My first stop was at the post of a Specialist firm. The Specialist was a member of the NYSE, whose role was to maintain a fair and orderly market in his inventory of stocks listed on the New York Stock Exchange. They had actual long and narrow books with lined pages where the existing buy and sell interest was written at particular prices. If there were no actual client interest, the Specialist firm had to use their own capital to facilitate the trade. It was fascinating to me to observe as the Floor Brokers approached the Specialist post, checked the book up and down and began negotiating their order.
The next stop was to be assigned to a Floor Broker, who could be employed by a member firm of the NYSE (Merrill Lynch, Paine Webber, etc.), or be an independent $2 Broker representing many member firms. Their role was to execute the orders from the clients of those firms. The Floor Broker picked up the order from his clerk in his firm’s booth around the perimeter of the Trading Floor. Buy orders were written on green tickets and sell orders were written on pink tickets. Then the Floor Broker walked very quickly(running was prohibited) to the Specialist post where that stock was traded. After negotiating with the Specialist and executing the order, the Floor Broker tore the ticket off the pad and threw it on the floor. At the end of the day, paper tickets were knee deep on the Trading Floor! The Floor of the New York Stock Exchange was the busiest and most exciting place I had ever been. Through human communication and interaction, a large majority of the equity trades that took place in this country were executed there.
The rest of the day was spent with lunch in the Stock Exchange Luncheon Club, a wood-paneled dining room that served members of the NYSE and other Wall Street professionals from 1898 until it closed in 2006, and a visit to the Boardroom of the NYSE, which held a rostrum from the original floor from the early 1800’s and the urn given as a gift to the New York Stock Exchange by Czar Nicholas II of Russia in 1904. ( I was fortunate enough to return to the Boardroom quarterly from 1994 to 1997, when I was asked to be a member of the Institutional Traders Advisory Committee to the Board of the New York Stock Exchange.) A closing reception was held for us in the Luncheon Club at the end of the day.
The bull markets of the 1980s and 1990s shattered all trading records. In fact, volume topped 2 billion shares a day in 2001. Although the NYSE upgraded its technology constantly over the years to meet the increasing volume, this amount of volume presaged changes to come. In 2005, the New York Stock Exchange merged with Archipelago, the first all-electronic exchange in the United States. In 2006 the NYSE ArcaEx merger created NYSE Arca and formed the publicly owned and traded for profit NYSE Group, Inc. In turn, NYSE Group merged with Euronext, creating the first trans Atlantic stock exchange group. In 2008, Specialist firms became Designated Market Makers. Finally, on December 20, 2012, Intercontinental Exchange, an American Futures Exchange, bought NYSE Euronext.
In October 2014, my Parsec colleague Greg James and I visited the NYSE Floor. It is a much quieter place now, with Floor Brokers working from trading desks with Designated Market Makers, often using hand held computers. Today more than half of all NYSE trades are conducted electronically, and Floor Traders are used to set prices and deal in high volume institutional trading. It is considered the largest equities-based exchange in the world based on total market capitalization of its listed securities. That being said, I still got that same awe-inspiring feeling walking onto the Trading Floor with Greg that I got many years ago walking onto the Trading Floor as a junior trader at the New York Stock Exchange for the first time.
Wendy S. Beaver, AAMS®
As a result of low inflation during the past year, it appears that there will not be a Cost of Living Adjustment (COLA) applied to 2015 Social Security Benefits for the 2016 year. This is only the 3rd time in the past 40 years this has occurred. Because there will be no 2016 COLA, it enacts an obscure provision in the Medicare laws which prevents Medicare premium increases in a year in which there is no COLA. However, Medicare is required to pay for a part of its funding through beneficiary premiums. This means that approximately 70% of Medicare beneficiaries will be “held harmless” and will not experience a premium increase. However, the other 30% made up of non-exempt beneficiaries and new enrollees will endure all of the premium increases.
For tax year 2014, those whose modified adjusted gross income (MAGI) is greater than $85,000 filing as individuals or $170,000 filing as couples do not fall in the “hold harmless category” and are subject to premium surcharges on a graduated scale from 42 percent to more than 200 percent (see below chart). Others not protected by the hold-harmless rule include those who do not have Medicare Part B premiums deducted from their Social Security benefits. This includes individuals who are delaying Social Security benefits even if they are enrolled in Part B — e.g., many who elect to delay or “file and suspend” their Social Security benefits. Those individual’s Medicare Part B premiums may increase regardless of family income.
These are huge premium increases, and we recognize that this will have a major impact on many of our client’s annual medical spending. The good news is that the Medicare Trustees anticipate this increase to be a one-year phenomenon with premiums returning to a normalized level in 2017. However, we anticipate that increases in Medicare premiums will rise faster than COLA increases provided by the Social Security Administration over the coming years. For this reason, we plan with our clients for medical costs rising faster than broad market inflation to ensure that they will have adequate spending power necessary to maintain a high level of medical care. If you have questions about your own Medicare coverage, let your advisor know. Medicare is an important part of every retirees financial plan.
Daniel Johnson III, CFP®
|as of June 30, 2015|
|DJ Industrial Average||7.21%||0.03%||-0.29%||-2.06%|
|MSCI EAFE Index||-4.22%||5.52%||0.62%||-2.83%|
|MSCI Emerging Markets||-5.12%||2.95%||0.69%||-2.60%|
|Barclays US Aggregate||1.86%||-0.10%||-1.68%||-1.09%|
|Barclays Intermediate US Gov/Credit||1.68%||0.82%||-0.62%||-0.60%|
|as of March 31, 2015|
|DJ Industrial Average||10.57%||0.33%||0.33%||-1.85%|
|MSCI EAFE Index||-0.92%||4.88%||4.88%||-1.52%|
|MSCI Emerging Markets||0.44%||2.24%||2.24%||-1.42%|
|Barclays US Aggregate||5.72%||1.61%||1.61%||0.46%|
|Barclays Intermediate US Gov/Credit||3.58%||1.45%||1.45%||0.49%|
|as of Dec 31, 2014|
|DJ Industrial Average||10.04%||10.04%||5.20%||0.12%|
|MSCI EAFE Index||-4.90%||-4.90%||-3.57%||-3.46%|
|MSCI Emerging Markets||-2.19%||-2.19%||-4.50%||-4.61%|
|Barclays US Aggregate||5.97%||5.97%||1.79%||0.09%|
|Barclays Intermediate US Gov/Credit||3.13%||3.13%||0.89%||-0.32%|
Last night Parsec celebrated our Parsec Prize recipients. The event served as a means to get members from each recipient organization together to thank them for their important work in the community. One of these organizations is the Council on Aging of Buncombe County. The Council on Aging is dedicated to promoting independence, dignity and wellness for older adults through education, innovative programming, and coordination of resources.
At the event the Director of the Council on Aging reminded us that the Medicare Annual Election Period is now open. We thought this information was useful enough to pass on. Below is helpful information the Council on Aging provided us about the election period. Please remember that situations vary and you should consult a Medicare expert if you have questions.
Medicare Annual Election Period
October 15 – December 7
The annual election period for Medicare is October 15th through December 7th. During this period, Medicare enrollees can make changes to their Medicare coverage. You may want to contact your Medicare eligible clients and remind them of the annual election period.
Prescription Drug – Part D Coverage. Many of your clients may be covered by prescription drug plans through Medicare. These drug plans all have different formularies and premiums. A formulary means that the plan will only cover certain drugs and if the consumer’s drugs are not on the formulary they will have to pay the full cost of the medication. The important thing to remember is that the formularies and premiums can change from year to year. It is highly recommended that the Medicare beneficiary review their drug plan coverage every year to make sure that their medications (usually maintenance drugs) continue on their plan’s formulary. They can do this at Medicare.gov webpage under Find Drug and Health Plans or call the Council on Aging for a no cost review of their plan. If they do not change by December 7th they are locked in for the next year.
Medicare Advantage Plan – Part C. Some of your clients may be enrolled in a Medicare Advantage plan. If they are happy with it, they don’t need to do anything and will be renewed into the same plan. If they are not happy, they can change Advantage Plans or go back to original Medicare. If they indicate that they are considering returning to original (traditional) Medicare, caution them that they must also chose a free standing drug plan or they will have not drug coverage for the following year. This has happened to several consumers with extremely negative financial consequences.
Medicare Supplements (Medigap) Perhaps most of your clients will have Medicare supplement policies that help pay for deductibles and coinsurance. A supplement policy can be change at any time and is NOT subject to the annual election period. If a consumer already has a policy and wants to change, they will probably have to submit a health statement (medical underwriting) and if the new carrier does not like what they see, they can deny coverage. Always caution your clients not to cancel their old policy until they have been accepted IN WRITING by the new carrier. Sometimes beneficiaries cancel their old policy as soon as they apply to another carrier and if they are turned down they may be left without any supplement as they may not be able to rescind the cancellation. A trustworthy insurance agent should be able to guide them through that process safely.
Private Insurance Exchanges. Some retirees have Medicare secondary coverage through former employers. Many of these employers are moving to private exchanges in which they contract with a large benefits management company to administer the program. The employer funds a Health Savings Account (HSA) to pay the premiums; however, if the retiree wants to use those funds to purchase a Medicare supplement policy, they must do so through the private exchange and may have a limited choice of companies and policies from which to choose. Failure to do so may result in the retiree not being able to pay for the supplement from the HSA. Caution clients in this arrangement to follow directions carefully.
Retiree Coverage. Some clients will have retiree health coverage and will not be able to make many choices. If this is the case, they need to be sure to respond to information requests from the retirement plan on a timely basis. If choices are available and they fail to respond, they may be continued with the same coverage or placed in a default plan.
If you have any questions please feel free to call John Wingerter at the Council on Aging. 828-277-8288. Be sure to say you are calling from Parsec Financial. Navigating the Medicare benefits can be tricky and might result in penalties or loss of coverage if the beneficiary is not careful.
For Medicare assistance, clients may be referred to:
Council on Aging of Buncombe County: 828-277-8288
Charlotte Senior Center: 704-522-6222
The Shepherd’s Center of Charlotte: 704-365-1995
Moore County Senior Enrichment Center: 910-215-0900
Seniors’ Health Insurance Information Program of the NC Department of Insurance: 855-408-1212
|as of Sept 30, 2014|
|DJ Industrial Average||15.29%||4.60%||1.87%||-0.23%|
|MSCI EAFE Index||4.25%||-1.38%||-5.88%||-3.84%|
|MSCI Emerging Markets||4.30%||2.43%||-3.50%||-7.41%|
|Barclays US Aggregate||3.96%||4.10%||0.17%||-0.68%|
|Barclays Intermediate US Gov/Credit||2.20%||2.22%||-0.03%||-0.51%|
Mark A. Lewis
Director of Operations
I read many articles about ERISA plan governance, including articles about fiduciary duty, proposed changes to legislation, and the delivery of advice. One article, in particular, did an excellent job describing the ineffectiveness of employee education. Admittedly, I was a little off put by the premise, especially considering how hard I work as making these meetings interesting. But by the time I finished reading, I had to agree with the author. The author describes education material that includes an overwhelming amount of charts and graphs with a delivery filled with industry jargon and terms that the average person cannot understand. What does work, however, are personal stories and relating the topic in plain English.
Story telling also helps to pique interest, especially when the story is memorable. One such story I tend to share is how people often act like ostriches. An ostrich is a very fast bird, among its other notable characteristics. We too are like ostriches, in that we are often distracted by the speed of life. Our daily routine is predictable and busy. We wake, we work, we pick the kids up from their extracurricular activities, we go to bed, and then we do this all over again. Rarely do we take five or ten minutes out of our day to focus on other important matters. Rather we will put it off for another day.
Retirement plan participants are often very driven by their work schedules and things that need tending to after work. The education meeting, if structured properly, serves as motivation for the participant to take action with a sense of urgency. After all, if something is not addressed immediately following the message or shortly thereafter, then the attitude of “take care of it tomorrow” will turn into next week and next week will turn into next month, and so on.
So what can we do? Start by having meaningful conversations and consider changing the way participant education is delivered. It’s okay to open up and share personal stories if it helps deliver the message. Have fun with the presentation because humor helps take the edge off serious matters. Most importantly, be available to answer questions. Participants are more likely to seek advice after the education meeting, especially when they know you’ll hang around to answer any questions.
Neal Nolan CFP(R), AIF(R)
Director of ERISA
Senior Financial Advisor
|as of May 15, 2014|
|DJ Industrial Average||10.25%||0.15%||0.30%||-0.57%|
|MSCI EAFE Index||7.81%||1.65%||1.83%||0.94%|
|MSCI Emerging Markets||4.45%||2.11%||2.58%||2.72%|
|Barclays US Aggregate||1.43%||3.58%||1.71%||0.85%|
|Barclays Intermediate US Gov/Credit||0.80%||2.12%||1.11%||0.59%|
Mark A. Lewis