401k Plan Loans: Are They Right For You?

This is the third in a three-part series on 401k retirement plans. In this article, we examine the value of a 401k Loan Plan.

There are at least 18 factors that need to be considered when deciding whether a client should take a 401k loan. This excerpted article taken from the July 2019 Journal of Financial Planning Professionals offers a brief overview of the considerations, pro and con.

401k Loan application.jpg

When clients look to borrow funds, there are a variety of alternatives, including their 401k plan. Many financial planners believe that a properly handled 401k loan might be the least costly source of funds for their clients. To best understand how to advise clients on the benefits of such a loan, the rules that pertain to borrowing from a qualified 401k Plan must first be examined.

Plan Loan Rules

A plan loan allows individuals to borrow from their vested retirement account, without taxation on loaned funds. Not every 401k plan allows for loans and even when the plan is designed to include a loan provision, the plan administrator can restrict loans to specified circumstances (e.g. loans may only be taken in similar circumstances to the requirements for a hardship withdrawal.)

401k tapped nest egg gold.jpg

There is a ceiling on the amount that can be borrowed from a 401(k) plan. Plan participants can borrow a maximum amount equal to the lesser of $50,000 or half of the vested account balance. Many plans are also designed so that clients cannot take a loan of under $1,000. The loan must also charge a reasonable rate of interest, providing comparable return with rates being charged by most lending institutions that provide similar loans.

Plan loans must be paid back using level amortization (usually in equal monthly installments) and within 5 years. If a client leaves their job, they have until October of the following year to put the money back into the 401(k) with their new employer. If the client were to default on the loan, any of the benefits payable are reduced by the outstanding balance, which is treated as a taxable contribution of the amount that was defaulted.

compare loans.jpg

For a client who needs to borrow, the plan loan has several attractive qualities in comparison to commercial alternatives.

  1. Simple access, typically through a website provided either by the plan sponsor or the investment company managing the plan funds.
  2. No need to verify eligibility for the loan.
  3. No paperwork needed to verify that the client possesses sufficient collateral for the loan.
  4. Funds often quickly available.
  5. Generally lower transaction costs, allowing the client to keep more of what is borrowed.

Those reasons aside, a commercial loan may be preferable to a loan from a qualified plan center, for a number of reasons.

Plan loan vs other loan.jpg
  1. The amount of money that can be borrowed from a plan loan is generally restricted to the lesser of $50,000 or one-half the vested account balance. Commercial loans can exceed such limitations if the client’s needs warrant such.
  2. A plan loan that is not being used to purchase a principal residence must be paid off in 5 years, as opposed to commercial loans that can offer smaller repayment amounts over a longer payback period.
  3. A plan loan revolves around the continued employment of the client with the employee. Eighty six percent of those who leave their job default on their loan, which can result in unwanted tax consequences, including imposition of a penalty tax. Conversely, leaving a job has no adverse impact on a commercial loan.

An additional concern of a plan loan is the opportunity cost of being out of the market.Market timing can be a key determinant of the desirability of a plan loan in losing out on the opportunity for market gains.

Double Tax issue.jpg

Finally, there is a question of a double tax issue on plan loans, based on the facts that loan repayments are not deductible (tax 1) and they are taxable on withdrawal (tax 2).

However, financial researchers, Geng Li and Paul Smith, have partially debunked this thinking by pointing out that loan proceeds are coming from pretax 401k dollars, which are not taxed when the loan is distributed.

Repaying the loan with after-tax dollars is merely replacing the initial tax savings that were available to the before-tax 401k contribution.

Further in their research, Li and Smith used a mathematical model to calculate the cost differentials between a plan and commercial loan and determined them to be negligible, suggesting that plan loans can be a desirable choice for the client.

For more information on 401k loans contact Angela Hall at GCW Capital Group 716.256.1682 or ahall@gcwcapitalgroup.com

Meaningful 401k Plan Options for Employees

This is the second in a three-part series on 401k retirement plans. In this article, we examine various and lesser known options that can make plans more meaningful for employees.

Piggy Bank 401k.jpg

When employers started phasing out traditional pensions, 401(k) plans were introduced to fill in the gaps and have since become the primary retirement savings vehicle for many people.

While tax deductions and employer matching contributions are well-known benefits of these plans, there are other, lesser known perks of 401(k) plans, including after-tax savings options, financial resources and government protections.

Roth 401(k) option. When first created in 1978, 401(k) accounts had uniform provisions. All of them were funded from deductible contributions and required withdrawals in retirement to be taxed. However, in 2006, the Roth 401(k) was introduced.

The newer 401(k) plan does offer deductions for contributions. After-tax money is deposited into the account, and withdrawals in retirement are then tax-free. For younger workers who see significant gains in their investments over time, or workers who are in a lower tax bracket in retirement, a Roth 401(k) can mean substantial tax savings.

Similar benefits are offered through Roth IRAs, but there is one important distinction. Unlike Roth IRAs, the Roth 401(k)s have no income limit. Workers can also contribute more to a Roth 401(k) than a Roth IRA.

After-tax contributions. In addition to making deductible and Roth contributions to a 401(k), workers have the option of making after-tax contributions, which can provide an array of additional savings options.

After Tax 401(k) Contributions.jpg 300.jpg

The first option is a a "mega backdoor" Roth. In this, the government allows up to $55,000 in combined employee and employer contributions to a 401(k) each year for younger workers and $61,000 for those age 50 and older. Assuming someone has maxed out their tax-advantaged contributions, they could make up to $36,500 in after-tax contributions to a 401(k) depending on if and how much their employer matches.

Assuming it is allowed by the employer, this after-tax money can then be transferred to a Roth IRA so that future gains can be withdrawn tax-free. While only a certain percentage of American workers can afford to contribute at this level, it is a valuable tool for those able to use it.

There are also other after-tax contributions that offer employees a convenient option to build up their nonretirement savings. For instance, one national provider recently rolled out a feature that allows workers to make automatic after-tax contributions to their 401(k) plan that can be used to build emergency savings. This money can be accessed whenever needed, and any withdrawals of the principal amount can be made without having to pay taxes or penalties.

Financial safeguards. All 401(k) plans must comply with the Employee Retirement Income Security Act (ERISA). That means plan administrators can't push investments that maximize profits. Rather, they are required to ensure workers have access to stable funds with reasonable fees. They also must disclose information such as administrative expenses and historical fund performance to help employees make informed investment decisions.

Another benefit of ERISA is that it protects assets from creditors. In the event a judgment is entered against a worker, assets held in qualified funds such as 401(k) accounts cannot be garnished. This protection does not extend to certain government garnishments such as those for federal income taxes or criminal fines.

IRA auto enroll stats.jpg

Automatic enrollment. The convenience of 401(k) plans is an often-overlooked benefit. Not only do payroll deductions make it simple to fund retirement savings, but many companies have also set up automatic contributions for new hires.

Nearly 70 percent of large employers now auto-enroll their workers in a 401(k) plan, according to a 2017 survey of 333 companies by the Benefits Solutions Firm, Alight Solutions. Nearly three-quarters of those firms will also automatically increase employee contributions over time. Though they offer a convenient way to put retirement savings on autopilot, employees can opt out of these contributions at any time.

Financial resources. Another benefit of 401(k) plans is the opportunity to obtain financial guidance. The Alight Solutions survey found 61 percent of companies offer one-on-one financial counseling and 60 percent provide online guidance.

If you are an employee thinking about a 401(k) plan, give us a call and we will advise you on choosing a plan that will help you make smart investment decisions, build emergency savings and provide valuable tax benefits.

Parts of this article excerpted from US News and World Report: http://bit.ly/2Sla7QW

Meaningful 401Ks for Employers

This is the first in a three-part series about 401k retirement plans. In this article, we look at the ways in which employers can afford to put together and offer a meaningful 401k plan to their employees.

A 401(k) is one of the most common retirement investment options offered by employers in the United States today. It’s not surprising why; these plans provide both employers and employees with a flexible way to save money for retirement and have been around for almost 40 years.

However, if you’re an employer who hasn’t offered a 401(k) benefit before – or even if you have – it’s important to understand the basics before you decide on the plan that’s right for your organization.

What is a 401(k) plan, and how does it work?

A 401(k) is an investment plan that allows employees to contribute a percentage of their salary to a designated retirement account. Contributions to the 401(k) are invested in a portfolio made up of mutual funds, stocks, bonds, money market funds, savings accounts, and other investment options.

These deferred contributions are usually taxable only when the employee makes a withdrawal: typically at retirement. 401(k) plans offer a good way for employees to save money for their futures, and for both employers and employees to save on taxes.

What role does the employer play in a 401(k) plan?

Unlike a pension, employers are not obliged to make contributions to employees’ 401(k) retirement accounts.This flexibility makes the overall costs much more manageable. While it isn’t required, many employers choose to match 401(k) contributions up to a certain percentage or make contributions based on a profit-sharing arrangement, as an added benefit for their employees. These matching funds can be modified or eliminated at the employer’s discretion.

Why do employers offer 401(k) plans as an employee benefit?

One of the primary reasons companies offer 401(k) plans is to attract and retain top talent at every level of the organization. A 401(k) is attractive to employees because it provides a simple, cost-effective way to plan for retirement by making tax-deferred contributions to an investment fund. However, employees aren’t the only ones who receive tax benefits from a 401(k) plan. Employers can also deduct contributions made to their employees 401(k) accounts.

What are the requirements of a 401(k) plan?

The IRS requires that a 401(k) plan satisfy a list of criteria, including but not limited to: · Contribution limits: The IRS determines annual contribution limits for 401(k) plans.

There are two limits: one for employee contributions, and the other for overall contributions (including the total of all employee and employer contributions). Employees who are age 50 and older by the end of the year may also make additional “catch-up” contributions up to an amount determined by the IRS.

What are distribution rules?

The money inside a 401(k) plan grows tax-deferred, but withdrawals must meet specific conditions, such as the employee’s retirement, death, disability, or separation from employment. Additionally, if an employee reaches the age of 59.5 or experiences a hardship, as defined and permitted by the plan, they may also withdraw funds.

What are the limits for high-income earners?

As determined by the IRS, employees whose annual income or percentage ownership in the company meets a specific threshold may only contribute a portion of their earnings.The IRS performs non-discrimination testing (NDT) on 401(k) plans to ensure that these highly compensated employees are not contributing disproportionately more than other employees at the company

GCW Capital Group has developed an expertise in advising business owners looking to set up and/or reorganize 401k plans that will provide long-term benefits for employers as well as their employees. If you are a business owner in need of 401K advice, give us a call and let’s start adding a whole new benefit to your business.

Tee It Up for the Troops Wanakah Featured on WGR Sports Radio 550 tee2green Show

As the primary sponsor of Tee It Up for the Troops Wanakah (TIUW), GCW Capital Group is proud to promote and support this golf tournament fundraiser dedicated to helping veterans, active military and their families.

Recently, GCW Capital Pricipal, Tom Waring, was featured on WGR 550 Sport Radio's tee2green Golf Show where he spoke about TIUW and how it is making a difference in the lives of military woman and men locally and nationally. https://www.teeitupforthetroops.org/wanakah/[][1]

Congress Acts to Secure Retirement for Americans

Not enough Americans have access to a workplace retirement plan. Barely half (51%) of the workforce is covered by a retirement savings plan through their employer or union. Access varies by demographics, education, full-time versus part-time employment, and employer size.

House Secure Act.jpg

To ensure more people have reliable access to such plans, lawmakers in the House of Representatives and the Senate have overwhelmingly approved the Setting Every Community Up for Retirement Enhancement (SECURE) Act, which would help to close significant gaps between the resources Americans need for retirement and the resources they have.

The SECURE Act involves provisions that encourage more employers to provide retirement savings plans, particularly for the nation’s 27 million part-time workers—most of whom are women.

REtirement plan.jpg

For example, the bill enhances tax credits for employers offering retirement plans with automatic enrollment. It also enables employers to join multiple-employer defined contribution plans that serve as fiduciaries, and to offer automatic contributions and low-cost savings accounts—features that can be especially helpful to small business owners.

Additionally, to grow retirement savings, the SECURE Act enables seniors to delay the withdrawal of retirement savings to age 72, allowing more time to accumulate assets.

As a way to boost savings, it eliminates the restriction on contributions to a traditional IRA after the age 70 1/2, and raises the savings limit for automatic enrollment, which can encourage employees who are able and want to save more to do so sooner.

REtirement paycheck.jpg

To guard against outliving savings, the SECURE Act helps facilitate access to annuities in retirement plans so that more workers can have a source of guaranteed lifetime income, distributed monthly in retirement—which is what they want.

The bill also strengthens lifetime income disclosures, requiring an annual statement illustrating an account balance as a monthly income stream—thereby showing savings not just as a nest egg, but also as a “paycheck” meant to last throughout retirement.

Portions of this article were excerpted from a [commentary written by ROGER W. FERGUSON JR. and JO ANN JENKINS]1

IRA's for 16 Year Olds: Yes or No?

Imagine if the sum of the wages from your high school job washing cars were invested for retirement?

At a 7% average rate of return for stocks, just $1,000 saved at age 16 would be almost $40,000 by age 70.

Tobias Reed.jpg

That is exactly what Oregon State Treasurer Tobias Read wants. He is pushing Congress to lower the minimum age for IRAs contributions to age 16 (the minimum age to open an IRA now is 18).

During recent testimony before the Senate Finance committee, he said “we sure like the idea of getting them in the habit of saving from the beginning of their career.”

For Read, 18 years old is “sort of an arbitrary date,” adding, “it just seems to me that we should not treat people who are working legally differently.”

Oregon has a program in place that automatically enrolls workers in an IRA if their employer doesn’t offer a retirement plan.

Chris Carosa, the author of “From Cradle to Retirement: The Child IRA,” wants to go even further. During an appearance on Yahoo Finance’s YFI PM, he said, “I would prefer that they lower it more,” noting that it currently is legal for a parent to set up an IRA for their children.

“The child IRA is really an underutilized tool," he said. "It’s available now but the requirement is that you need to work in order to do it.”

MIllennials not saving.jpg

Policymakers are struggling for ways to spur retirement savings among young people. A 2018 study by the National Institute on Retirement Security found that two-thirds of working millennials have nothing saved for retirement.

In Washington, lawmakers are currently considering an idea to allow employers to make matching contributions to an employee’s retirement account equal to the amount of that employee’s student loan payment.

Treasurer Read remains optimistic that Congress will take some action to help young people save.

“There was general agreement [in the Senate Finance hearing] that helping people to get started saving earlier is a good thing” he said.

As for the idea to lower the savings age to 16, Senate Finance committee ranking member Ron Wyden is “exploring the idea,” according to an aide. But there is no provision in the current bill and new policies are not expected to be added.

As for the chances of his idea ever becoming law, Read demurred, saying that “of all the people who are prognosticators about Congressional action, I gotta rank right near the bottom.”

This article excerpted from Yahoo Finance

How to Start A Financial FIRE

FIRE. 400.jpg

Are you looking to incorporate some FIRE into your life?

We're not talking about combustion and flames. We mean the national movement towards early retirement entitled FIRE---Financial Independence/Retire Early.

If you're unfamiliar with the ideal, it's a movement growing in popularity across the United States, especially among younger adults, that preaches extreme saving, side gigs, long work hours and aggressive investing to achieve financial independence on an accelerated timeframe, often within 10 to 15 years of entering the work force.

How, you ask?

Here are some basic FIRE guidelines featured in a recent USA Today Article written by Personal Finance and Real Estate Reporter, Janna Herron.

Janna Herron 200.jpg

In her article Herron notes, "Just like saving for regular retirement, it's easier to start early when you have more time to build up money and assets and no children to support. It is also important to realize that your FIRE journey could take longer than others who had a leg-up with a higher-earning job. Here are the basic steps."

1) Save: FIRE adherents aim to put away a significant chunk of their income – at least half, often more. To do that, they slash their costs, typically aiming for the biggest expenses first – housing, food and transportation – and then moving onto smaller bills and more discretionary spending like the internet, cellphone and entertainment.

financial puzzle.jpg

2) House-hacking is a common strategy, usually taking on roommates to defray shelter costs. FIRE followers avoid dining out and get creative on food costs. For instance, Dogen squirreled away free food his employer handed out when he was in his 20s. As for transportation, many rely on just one older, cheaper model. Others choose public transit or bicycle for commuting.

3) Earn: While they save, FIRE aspirants work to increase their income, either logging in overtime or taking on outside gig work such as freelance writing, consulting or driving for Uber or Lyft. Many of them blog about their journeys as another way to earn extra income.

4) Invest: They max out their 401(k)s and IRAs, which help lower their taxable income. Leftover money is poured into low-cost index funds. Others buy rental properties to create a passive income stream. The goal is to reach the 4% rule, or building up a large enough nest egg that you can safely withdraw 4% a year in retirement without touching the principal.

Why Should You Still Pay A Financial Advisor?

Online Investing.jpg

At a time when computer models can create and rebalance our portfolios, and index funds offer inexpensive exposure to every corner of the investment universe, why would anyone pay a premium for human advice?

Increasingly, the role of advisor isn’t picking stocks or even working through the intricacies of asset allocation. It’s coaching clients through decisions that have the greatest impact on returns: aligning life goals with financial realities; saving money consistently; and, when the going gets tough, sticking to your knitting.

Paying out 1% of your assets under management–the industry average for professional advice–might seem like a high price for handholding, but studies suggest that, for many people, there is a noticeable return on investment.

Consider this: In a recent study of K-12 teachers by AXA Equitable Life, those educators who worked with advisors had nearly double the retirement assets in their 403(b) plans than those who chose to go it alone.

While some of this gap might be explained by better returns in their portfolios, the biggest drivers seemed to be behavioral. On average, teachers who worked with a pro contributed 49% more to their plans annually and increased their contributions 24% more frequently than peers who flew solo.

Investment nest egg.jpg

Now, studies about the impact of advisors don’t always address the question of cause and effect. It stands to reason that people who work with advisors have larger nest eggs. The fact that they hired an advisor suggests they are motivated to save and they have the resources to do so.

What’s notable about this study—which spanned 20 different financial institutions, not just AXA—is that it controls for some of that causality. There were no statistically significant differences between the advisor and non-advisor groups with regard to age, gender and income. Moreover, most of the teachers who connected with advisors did so through onsite services provided by retirement-plan providers.

The upshot, says Steve Scanlon, head of group retirement at AXA Equitable Life, is that individuals in all income brackets could benefit from some professional advice.

Digging a little deeper, Vanguard does ongoing research on how advisors can add value. While the researchers acknowledge that it’s difficult to quantify how and where professional advice adds value, they estimate that advisors who follow best practices in wealth management can add an additional 3% in net returns—with half of that coming from behavioral coaching.

Financial Behavioral Modification.jpg

To be sure, good financial planners don’t just map out a saving and investing plan that fits into the broader context of your situation. They take steps to make sure you buy into the plan, stay motivated and adjust judiciously.

Meanwhile, more advisors are earning their keep through comprehensive financial planning where investment portfolios are just one part of the equation.

“The broader context of financial planning is, ‘When I invest, what does that mean for me in the future?’” says Anne Marie Stonich, co-founder and chief operating officer of Paracle Advisors in Seattle. “In our meetings with clients, we spend 95% of the time talking about financial-planning topics and 5% of the time talking about the investment return.”

An attorney turned senior wealth advisor, Jared Snider and his team at Exencial Wealth Advisors, in Oklahoma City work with clients on an exhaustive list of issues, from investments and taxes, to debt management and philanthropy. The real art, however, is in overlapping these details with what they talk about as “things that matter most,” which they put in four main categories: family and relationships; occupation and meaningful pursuits; recreation; and money.

Work life balance.jpg

It’s not unlike the difference between working with a personal coach, psychologist, and nutrition expert, versus dieting and exercising on your own. Your smartwatch might be able to analyze your daily activity, track your progress and tell you to get up and move around, but it’s not going to talk you through an injury or fitness plateau.

By that same token, human advisors still have a role–provided they don’t simply check the boxes, and offer a plan that doesn’t reflect your individual goals and challenges. “Just as you wouldn’t want to go to a trainer who charged you $50 to watch you run on the treadmill,” AXA’s Scanlon says.

THIS ARTICLE WAS WRITTEN BY SARAH MAX, PUBLISHED JANUARY 20, 2019 ON THE BARRONS WEBSITE (https://www.barrons.com/articles/you-should-pay-for-a-financial-advisor-51547985601)

Waring Elected Trocaire College Board Chair

GCW Capital Group today announced that Company Principal, Tom Waring, has been elected to the leadership position of Board Chair for Trocaire College.

TW headshot.400.jpg

The election took place at a special meeting, held on March 27, 2019, where a slate of new board members was elected and will be in effect through the college’s annual business meeting in 2020. According to Trocaire President, Bassam M. Deeb, the elections occurred due to a Trustee vacancy.

“We are sincerely grateful to Tom for his willingness to serve as our new Board Chair and to all members of our leadership group who have stepped up to fill board positions,” Deeb said. “Together, these outstanding WNY Citizens will help Trocaire continue to find new ways to provide the community with meaningful and cutting-edge educational opportunities, such as our new programs in Cybersecurity and Data Analytics. They will also, undoubtedly, help accelerate the college’s ability to make needed critical strategic decisions over the next several years.”

Mr. Waring holds a master’s degree in financial services and is a certified business specialist. He has 38-years’ experience in the financial services business, initially as the head of Waring Financial Group and, since 2014, as a Principal with Shawn Glogowski at GCW Capital Group. He is also the CEO of Family & Business Directions, LLC, a company aimed at helping business owners successfully navigate family wealth transitions. In acknowledging his election as Trocaire Board Chair, Mr. Waring noted his career of community service.

“Throughout my business career, I have considered it a professional requirement to give of my time and talents to community organizations and projects,” Mr. Waring said. “I was honored to be invited to serve as a Trocaire board member in 2016 and look forward to extending my service to the college over the next two years in the role of their board chairperson.”

Helping Those Who Give Their Lives to Serve and Protect

TIUFTTW sm logo.jpg

As the organizer and main sponsor of Tee It Up for the Troops Wanakah, GCW Capital Group is pleased to announce that in the tournament's first two years, almost a quarter of a million dollars has been raised to directly benefit local and national veterans, active military and their families.

That impressive amount is, in part, due to your our tournament sponsors and for that, we are most grateful.

We’re also pleased to announce that the TIUW Committee has already been meeting to plan this year’s event, with exciting new tournament offerings,including our VIP Sponsorship.

Any sponsor who registers by May 1st at a level of $350 or more per golfer, FOR A FOURSOME, will earn VIP status, which includes express pro shop check-in on the day of the tournament. No standing in line. No waiting. Your cart will be outside the pro shop filled with all your tournament information, ready for your clubs.

Each VIP Sponsorship also includes four tickets to the KitchenAid Senior PGA Championship May 21 - May 26 at Oak Hill Country Club in Rochester for all five days of the tournament.

VIP Registration is quick and easy.

PGA Senior Full and trophy.jpg

1) Click on this link and you'll be taken to our sponsor webpage. http://bit.ly/2PerpO9.

2) Look for sponsorship categories noted as "VIP Eligible."

3) Choose your sponsorship level, fill in the quantity and click the continue button at the bottom of the page.

4) Fill in your team information and pay.

5) Once you have registered, we will contact you about receiving your PGA Senior Championship tickets.

If you have any questions, feel free to reach out to Shawn Glogowski (sglogowski@gcwcapital.com). We look forward to welcoming you to Wanakah Country Club on September 9th for Tee It Up for the Troops Wanakah 2019.

https://www.teeitupforthetroops.org/wanakah/

https://www.pga.com/events/seniorpgachampionship

Do You Know The Seven Questions to Ask?

_GCW square Swirl with name 300.jpg

GCW Capital Group is comprised of a team of financial, fiduciary advisors.

That statement may raise a question or two in your mind, wondering what that extra word, "fiduciary" means, or why it even matters?

According to life-and-business strategist and author, Tony Robbins, if you are trusting any financial advisor with your money there are actually seven key questions you should be asking.

With acknowledgment of Robbins' "Power Report" Newsletter, here is an article about those seven questions adapted from his monthly publication. If after reading you want to know more, give us a call and let's talk about planning your financial future.

"Unless we take the precaution of learning how the financial advisor system works against us, and how to counter it, we are part of a recipe for financial disaster. So, how do you start? By making sure to ask these seven questions of a financial adviser, or any adviser, you are considering:"

1. Are you a registered investment adviser?

If the answer is no, this adviser is a broker. Smile sweetly and say good-bye. If the answer is yes, he or she is required by law to be a fiduciary. But you still need to figure out if this fiduciary is wearing one hat or two. That’s because Its not enough that your financial adviser is an independent RIA. You need to be careful that the RIA is not also a broker.

You heard that right. In a strangely allowable arrangement, an RIA can be both a broker and a fiduciary in a process called “dual registration.” When someone is “dually registered,” at one moment they play the part of an unbiased adviser, reassuring you that they abide by the fiduciary standard and can provide you with conflict-free advice for a fee. But they can switch hats and act as a broker, earning commissions or kickbacks by selling you specific products. When they’re playing this broker role, they no longer have to abide by the fiduciary standard. In other words, they’re sometimes obliged to serve your best interests and sometimes not. How warped is that? These arrangements are perhaps the most dangerous for consumers as it creates immense confusion.

2. Are you or your firm affiliated with a broker-dealer?

If the answer is yes, you’re dealing with someone who can act as a broker and usually has an incentive to steer you to specific investments. One easy way to figure this out is to glance at the bottom of the adviser’s website or business card and see if there’s a sentence like this: “Securities offered through [adviser’s company name], member FINRA and SIPC.” This refers to the Financial Industry Regulatory Authority and the Securities Investor Protection Corporation, respectively. If you see these words, it means he or she can act as a broker. If so, run. Run for your life!

3. Does your firm offer proprietary mutual funds or separately managed accounts?

You want the answer to be an emphatic “no.” If the answer is yes, then watch your wallet. It probably means they’re looking to generate additional revenues by steering you into these products that are highly profitable for them (but probably not for you).

4. Do you or your firm receive any third-party compensation for recommending particular investments?

This is the ultimate question you want answered. Why? Because you need to know that your adviser has no incentive to recommend products that will shower him or her with commissions, kickbacks, consulting fees, trips, or other goodies.

5. What’s your philosophy when it comes to investing?

This will help you to understand whether or not the adviser believes that he or she can beat the market by picking individual stocks or actively managed funds.

6. What financial planning services do you offer beyond investment strategy and portfolio management?

Investment help may be all you need, depending on your stage of life. But as you grow older and/or you become more wealthy with various holdings to manage, things often become more complex financially. For example, you may need to deal with saving for a child’s college education, retirement planning, handling your vested stock options, or estate planning. Most advisers have limited capabilities once they venture beyond investing. In fact, most aren’t legally allowed to offer tax advice due to their broker status. Ideally you want an adviser who can bring tools for tax efficiency in all aspects of your planning — from investment planning to business planning to estate planning.

7. Where will my money be held?

A fiduciary adviser should always use a third-party custodian to hold your funds. For example, Fidelity, Schwab, and TD Ameritrade all have custodial arms that will keep your money in a secure environment. You then sign a limited power of attorney that gives the adviser the right to manage the money but never to make withdrawals. The good news about this arrangement is that if you ever want to fire your adviser, you don’t have to move your accounts. You can simply hire a new adviser who can take over managing your accounts without missing a beat. This custodial system also protects you from the danger of getting fleeced by a con man like Bernie Madoff.

GCW Principal Elected Chair of Lawsuit Reform Alliance of NY

Tom Waring (l) receiving 2018 award from LRANY Executive Director, Tom Stebbins

Tom Waring (l) receiving 2018 award from LRANY Executive Director, Tom Stebbins

GCW Capital Group Principal, Tom Waring, has been elected Chairman of the Board for The Lawsuit Reform Alliance of New York (LRANY). In announcing Mr. Waring’s selection LRANY Executive Director, Tom Stebbins, noted the organization’s requirements.

“LRANY is the only advocacy organization in New York solely dedicated to tort and civil justice reform. When considering qualifications for our board chair we look for an active member of the business community as well an engaged supporter of philanthropic organizations. Tom Waring is an experienced and committed participant in both realms, which allows him a powerful perspective on the ways New York State’s notoriously litigious environment harms communities in Western New York and throughout the state. He has also been an outspoken proponent for lawsuit reform on a statewide basis for a number of years. That’s why our members felt he was the best choice to represent us and are honored to welcome Tom as our board chair.”

Founded in 2010, LRANY is a nonpartisan not-for-profit association of businesses, healthcare providers, membership organizations, and concerned taxpayers committed to fixing New York’s civil justice system to help create jobs and energize the state’s economy. According to newly-appointed Chairman Waring, the organization’s purpose and achievements align with both his professional perspective and business expertise.

TW headshot.jpg

“I started working in the financial services industry almost four decades ago and, even then, I was a strong public advocate against frivolous litigation that hurt small business owners and individuals and wasted exorbitant amounts of taxpayer money. When I first became aware of LRANY, I immediately became a part of their organization and have since partnered in bringing to light and fighting against irresponsible lawsuits. As board chair, I look forward to advancing the LRANY cause and protecting residents across New York State from such damaging and costly legal actions.”

GCW Capital Principal Featured at National Conference

Working with business owners is one of the mainstays of GCW Capital Group. It's a niche we have aggressively pursued and in which we have become respected experts.

It was that expertise that recently led to national recognition for Company Principal, Tom Waring, as he was invited to serve as a speaker at the National Plasterers Council Conference, held in Washington,D.C.

It was the 30th year for this gathering of business owners from across the country. The council was founded in 1988 with a focus on studying plaster surface problems and the writing of technically sound practices for the industry.

The topic of Tom's presentation was, "Succession Planning---Your Business Succession/Transition." It's a subject Tom knows well from his thirty years experience in counseling businesses, families and individuals on ways to protect and distribute the wealth they have accumulated while building their companies and/or portfolios.

If you're searching for the most effective way to transition your business or family estate, why not partner with a financial advisory firm with the experience, knowledge and dedication to helping you grow and manage your core wealth for generations to come? Why not partner with GCW Capital Group?

Call Shawn, Angela or Tom today and let's get started in ensuring your financial future.

GCW TW Speaker.jpg crop 400.jpg

Tee It Up for the Troops Wanakah Southgate Plaza Sponsor Flag Presentation

Another tee flag presented to a Tee It Up for the Troops / Wanakah Sponsor by GCW Capital Group. Principal and tournament co-chair,@Thomas Thomas H Waring.

TiuW Andy DeVincentis Southgate Plaza.jpg

A huge thank you to Andrew DeVincentis (l), Leasing Director of Walden Development Group, LLC for the Southgate Plaza KEY Sponsorship in both 2017 and 2018.

The success of our tournament and the $120,000 plus that was raised in our first two years was directly related to the generous support of the DeVincentis Family and their company.

Would you like to become a Tee It Up for the Troops Wanakah Sponsor?

Sign up by April 15th and receive an early bird VIP Package, including a week-long grounds pass to the PGA Senior Tournament at Oak Hill Country Club in Rochester.

For more information click on the link below https://www.teeitupforthetroops.org/wanakah/

GCW Capital Group Featured on International Stage

Tom at Family Business Challenge.jpg

In January GCW Capital Principal, Tom Waring, was one of 51 world business leaders invited to serve as a judge for the 2019 Grossman School of Business Global Family Enterprise Case Competition. The Grossman School is a division of the University of Vermont, located in Burlington.

The competition is an annual event focused on preparing participants to understand the critical issues unique to family enterprise. The format involves participants being given complex family business cases to analyze and manage, using the knowledge and expertise they have developed in the classroom.

During four tough rounds of competition, teams present their cases to a panel of judges who determine which group best understood, analyzed and presented the case. By the end of the competition, winners in both Graduate and Undergraduate Divisions are chosen. This intensely competitive, four-day event is organized by Grossman students. It is the only family business case competition presented on a global level.

GCW Capital Principal, Tom Waring and 2019 Grossman School of Business Global Family Enterprise Case Competition Participant, Cole Green. 350.jpg

Due to the event's prestigious reputation, this year's competition attracted 25 teams of more than 200 competitors from six countries and across five continents. In total attendees amassed more than eighty thousand miles traveling to the event.

Pictured here are Tom and Cole Green, a UVM student and competition lead coordinator. According to Green the impact of organizing a competition of this scope is long-ranging.

“I have a passion for entrepreneurial family firms with aspirations to pursue a career in real estate. UVM’s belief in the value of experiential education and sustainable innovation has honed my appetite for more rewarding work in future endeavors.”

GCW Capital is dedicated to engaging with organizations that bring together financial leaders from around the world, supporting future industry leaders and gaining experiences that can ultimately benefit our firm and our clients.

Economics of the Blizzard of 2019

While the blizzard of 2019 has closed roads, schools and businesses for a few days, many are wondering about the long-term impact of the blizzard on our economy?

snowy streets.jpg

In the excerpted article below, Smart Asset Web Reporter, Amelia Xu, assesses major weather events from the the drought and fires in California to the flooding in Texas and record snowfall in the northeast and the ways in which such extreme weather can affect the economy.

Lost Productivity

Significant storms preclude many workers from being able to report to their jobs and that can create significant declines in revenue for the duration of the inclement weather, or even a much longer period of time. What’s more, consumer activity is usually suppressed during extreme weather events. Not many people are browsing and shopping during major snow- or rainfall. Thus we often see massive losses in sales and revenue. For example, according to Planalytics, the snowstorm that hit the northeast in late January of 2018 eliminated $500 million in sales, even though the storm did not even remotely live up to expectations.

Spike in Sales

storm essentials.jpg

Extreme weather tends to incite fear among the general population. Common behaviors in response to dangerous forecasts include filling up gas tanks and stocking up on essential items such as nonperishable food, water, flashlights and batteries, in the event that power outages ensue. While such behaviors can pump significant money into local economies, this effect is usually temporary.

Insurance companies also see more activity in the aftermath of extreme weather events as people worry about ‘what if’ it happened to them. The Insurance Council of Texas recently reported that less than half of homeowners affected by the 2018 flooding in Texas had flood insurance plans in place for their homes. After this tragic event, companies that offer flood insurance policies may very well see a spike in interest.

Incite Innovation

Extreme weather can also inspire companies to innovate in preparation for future occurrences. For the winter season, products that have become commonplace include snow chains for automobile tires and snow blowers for quick snow removal. In anticipation of tornadoes and hurricanes, innovators have developed products like hurricane shutters, doors that can sustain heavy wind-pressure and concrete walls.

Dealing With the Damage

Buffalo snow removal.jpg

Snow removal, rehabilitation and repair efforts can cost a lot of money. For example, the city of Buffalo budgeted approximately $9 million for snow removal alone in 2014-2015. BBVA Compass economists estimate the 2018 flooding caused by heavy rains in parts of Texas to cost anywhere between $200 million and $550 million. This cost accounts for physical damage, in addition to lost productivity and revenue.

Relative to California's statewide drought, Governor Jerry Brown proposed a $1 billion plan to bring aid to the communities hardest hit, which created jobs across the state. So extreme weather can both stimulate economies while also costing city, state and national governments great amounts.

Wary Attitudes

What happens when forecasts are incorrect? While meteorologists are very skilled and technology is ever-advancing, forecasts are still predictions of the future. There is no guarantee of accuracy and when it comes to weather, things can change very rapidly. But when it comes down to it, people hate being told the wrong thing. So when communities are being instructed to take significant precautions against impending weather conditions and the conditions don’t ever come, people are often not pleased, to say the least. This sort of discontent can lead to a general sense of distrust, especially with regards to where their precious tax money is going. It can also lead to people not listening to authorities the next time extreme weather is predicted, leading to more costly damages or clean-up efforts.

The Bottom Line

There are a great variety of factors that show the economic effects of weather. Some of these effects are positive (inciting innovation and creating jobs) while others are negative (lost productivity). Whether that hurricane hits or changes course at the last minute, whether you get excited for a big storm or hibernate until it’s over, whether you get the day off or get called in for extra hours, the economy will likely feel the impact.

Amelia Xu has a degree in Economics from Princeton University. She is an expert in investing and taxes.

Helping Family Businesses Thrive

Posted by GCW Capital Group Principal,Tom Waring

A year ago I had a chance encounter with a woman in an airport that resulted in a most interesting conversation.

Mitzi Purdue

Mitzi Purdue

As it turned out, the woman was Mitzi Henderson Purdue. If her last name sounds familiar, it may be because she is the widow of poultry magnate, Frank Purdue. However, her maiden name of Henderson may also ring a bell as her father was, Ernest Henderson, co-founder of The Sheraton Hotel Chain.

These days Mitzi is earning her own renown as the head of her family's successful wine grape business, one of the larger wine grape suppliers in California. Additionally she has become a respected author on a topic she knows well----helping families in business communicate, thrive and sustain through generations.

As Mitzi and I became acquainted, I shared with her my background in financial advising and the evolution of my company to GCW Capital Group. Where we really connected though was when I shared the story of a branch of my business I launched several years ago called, Family & Business Directions, LLC.

Family & Wealth Directions logo.jpg

As I explained to Mitzi, I launched the separate entity after years of watching families work together to establish and advance their businesses, only to fail in accomplishing any sort of transition planning between the generations to ensure continued success.

That topic immediately bonded Mitzi and I in friendship and since our fortituous airport meeting, we have been working on collaborative projects

Recently Mitzi approached me about guest-writing a column for her in Family Business Magazine. It is the only North American multimedia publication dedicated to serving the unique information needs of multigenerational family businesses, by providing news, profiles, expert advice and thought-leadership to foster business continuity and family harmony.

Family Business MP article rewrite.border.jpg

After some discussion, Mitzi and I agreed that I would focus my article on choosing the right trustee to manage the estate of a family business.

I was honored by Mitzi's consideration of my expertise in this area and appreciated the opportunity to express my thoughts on a national forum.

If you and your family are trying to work through perosnal or professional end-of-life planning, why not consider including an objective third-party in your discussion?

From my years of experience in such mediation, the peace of mind and close-knit family relationships that result are well worth your investment.

To read my Family Business article, click here.

**************************************************************

GCW Capital Group Founder and Principal, Tom Waring has spent almost four decades building his business, serving as a board member for not-for-profit and public companies and as Chairman of the Evans Bank Compensation Committee. In that time, Tom has become expert in the following

GCW Capital Principal, Tom Waring, receiving award from Lawsuit Reform Alliance of New York.

GCW Capital Principal, Tom Waring, receiving award from Lawsuit Reform Alliance of New York.

 Core wealth creation, preservation and transitions

 Estate planning and charitable giving

 Family business dynamics and governing

 Mission and vision development

 Strategic planning

 Business leadership succession

 Surfacing core values

 Planning, design and implementation

If your business, organization or group is looking for a speaker for your next event, Tom can tailor a presentation to suit your audience, using concepts and terms that will allow all in attendance to relate. Following the presentation Tom will further engage audience members in a question and answer session that will encourage interaction and participation.

To schedule Tom as a speaker for your event, or for more information, call 716.256.1682*

GCW Capital Group Money SavVy Kids: Five Phrases

Susan Beacham

Susan Beacham

In putting together our GCW Capital Group Kids Money SavVy Program, we are partnering with Money SavVy CEO, Susan Beacham. Below is a portion of Susan's blog on five phrases you can use to help teach your children and grandchildren the language of money.

1. “I don’t know.”

A tough one to say out loud. People often think it as they are about to sign important financial documents, but few stop themselves from signing on the bottom line and actually say those words out loud.

Young kids rarely have a problem asking questions. Show them how to ask questions in different money situations. Talk about what you are doing and why. Get them used to asking questions until they fully understand. That way, it will be instinctual for them to do this as they become young adults.

2. “I need help.”

Help your kids think outside the box when they need money. Today, people are getting more comfortable asking for start-up help from social media sites like Kickstarter. Crowdsourcing is a concept most of our older kids get and use to their advantage. Leverage this trend with a lesson of your own on the importance of asking for help when it comes to money.

When your youngest children ask for money, help them come up with an age-appropriate plan to earn the money for the item they need or want. Help nurture the entrepreneur in them by suggesting they create a plan for a lemonade stand, gluten-free baked good sale or a snow shoveling business. Help your kids think outside the box when they need money and learn to develop creative funding strategies for the things the need or want in their lives.

family money talk.jpg resize.jpg

Support their desire to get a job. Research tells us that 15 hours of work per week in high school does not have a negative impact on grades. So, encourage the job urge.

3. “I made a mistake.”

Tough to admit, and even harder to live with! Money mistakes that get buried become compounded disasters. Teach your child that it is only human to make a mistake and that by admitting to the mistake, you can fix it and learn from it.

Talk about your own money mistakes and explain how you fixed them. Mistakes are powerful teachable moments. They are experiences that can help your child avoid the same pitfalls if you share.

4. “I’m sorry.”

Not easy to say, but saying it can be incredibly freeing. Finances are the most likely point of contention in marriages. When my husband and I got married, we established a money rule: Each of us would have independent authority over transactions up to $500; after that we had to discuss the proposed transaction. But, everybody makes mistakes, and so did we. “I’m sorry” was critical to making it through to the other side.

Mom and daughter dollars. 50.jpg

Conversations around money help keep relationships healthy. And being able to say “I’m sorry” when you do trip-up will go a long way towards creating a solid money plan for your future.

5. “Thank You.”

The research on the ability to feel gratitude is compelling. Kit Yarrow, author of “DeCoding the Consumer Mind: Why We Shop and Buy” explains that kids who experience higher levels of gratitude also have: “stronger immune functioning, more and better friendships, higher pay, more energy, more optimism, more happiness, sounder sleep, fewer addictions.”

How do you teach gratitude? Start with thank-you notes. Make a list of each gift your child receives, and help them write a thank you note. Show them how to address the envelope. The concrete action of writing a note allows them to stop, think and reflect on the gift and experience gratitude.

GCW Capital Group Money SavVy Kids Interview

Erica Gellerman

Erica Gellerman

In conjunction with our December, Kids Money SavVy topic, the following is an interview with Money SavVy CEO, Susan Beacham, written by blogger, Erica Gellerman amd originally posted on The Every Mom Website. Their topic is What You Need to Know in Talking to Your Children About Money.

Start the conversation early.

According to Beacham, we should start talking to kids about money earlier than we think, and it’s not a one-time conversation. We need to constantly be modeling the behavior that we want them to adopt.

It’s not enough to talk to kids about making smart spending choices and saving money for big purchases — we have to actually do that ourselves because they are constantly watching our every move and will reflect the behaviors we show them. No pressure.

Beacham suggests starting the conversation and activities early but in an age-appropriate way. Money is an abstract concept, and it’s our job to make it concrete.

For example, when we’re grocery shopping and deciding between two products, don’t keep the decision-making process in your head. Give your child a window into the choices you’re making by saying,”This brand is great, but it’s $0.10 more expensive. Should we buy the cheaper brand and try it?” Beacham says by doing this you’re helping your child understand the tradeoffs that you’re making with money on a daily basis.

Susan Beacham

Susan Beacham

Help them understand goals.

Because money is such an abstract concept, it’s your job to provide concrete ways for your kids to understand money. Beacham suggests a goal-setting activity to help with this. You can do this activity with your kids even before they are in kindergarten. As soon as they understand that we use money to pay for things, they are able to grasp this activity.

Give your child a piece of paper and have them draw something that they’ll save to buy one year from today. If they are younger, help them understand the concept of time by asking them questions like what grade will they be in next year and how old will they be.

Once they’ve drawn the picture of what they’ll save for, put it up on your refrigerator so they can have a constant reminder. And remember what Beacham advised about modeling the behavior you want your child to adopt? The perfect way to do that is by doing this activity yourself.

Adopt a conditional allowance.

When I was a kid, my parents tried to teach me money lessons through an allowance, but the exercise never really stuck. Because of that, I’ve been a little unenthused about the idea of establishing an allowance.

But Beacham broke down how to create a conditional allowance that actually works and is relatively easy to implement. She advises starting your child on an allowance around age eight. At this age, they’ve probably realized that there are certain things in life you are paying for and you’ve seen a pattern of what they are constantly asking for.

For example, if your child loves reading new books and is asking for a new book every time you go shopping, keep a tally of how much you spend on books for them. Let them know that this is an expense that they’ll now take over and manage themselves.

If they usually ask for $25 worth of books each month, you’ll give them $25 to buy their books. Once the money is gone, it’s gone. Then help them understand the choices in their spending behaviors.

They can continue to use the entire allowance to buy books they’re excited about, or they can go to the library and borrow some books for free. If they borrow books, they can save more of that allowance toward the goal that they’ve set. Beacham advises making this lesson concrete by using an allowance contract.

To learn more about how to talk to your children about money, we would like to invite you and your children and/or grandchildren (ages 4 to 10) as our guests to our GCW Capital Group Money SavVy Holiday Party, December 27 from 10 am-2 pm. at Platters Chocolate Factory 908 Niagara Falls Blvd, North Tonawanda, NY 14120.

To make reservations call 716.256.1682, or email info@gcwcapital with the names of all attending the ages of the youngsters.

GCW Capital Group Plays Major Role in Veteran's Fundraiser

FB Profile Wanakah good. crop.jpg

Since 2017 GCW Principal, Tom Waring **and his wife, Sara, have served as co-chairs and GCW Capital Group has served as a major sponsor for Tee It Up for the Troops Wanakah. It is a WNY golf tournament dedicated to honoring, remembering, respecting and supporting those who serve(d) in the armed forces for this great nation.

In the event's first year at Wanakah Country Club, more than $30,000 was raised and donated to three Western New York Veteran's Organizations including: Buffalo Healthcare for Homeless Veterans (HCHV), Veterans One-stop Center of WNY, Inc. and The WNY Section PGA Foundation.

Based on that inaugural success, The Warings and their TIUW Committee decided to increase their donation goal in 2018. However, when the September tournament date came around, Mother Nature interfered with the committee's best-laid plans.

On the morning of the tournament, the skies opened up with a downpour that lasted through the afternoon. The rain was so intense that Wanakah Country Club Management was forced to close their course, in effect canceling the golf outing.

With a field of 142 golfers and a roster of over 20 generous sponsors committed to benefitting WNY veterans, the TIUW committee scrambled to decide the best course of action. Ultimately, they called, emailed and texted everyone involved with the tournament to explain that while the round of golf was cancelled, the dinner and fundraising auctions would still be held.

In true WNY style, almost the entire field of golfers and sponsors showed up and gave generously. As a result, the event met the increased fundraising goal, garnering $34,000 dollars to donate to the 2018 designated veteran’s organizations.

The WNY Veteran's groups that benefitted from Tee It Up for the Troops Wanakah 2018 include:

Buffalo Healthcare for Homeless Veterans (HCHV) an office of the U.S. Department of Veterans Affairs, providing emergency, transitional and permanent housing options to homeless veterans and their families throughout the 8 eight counties of WNY.(Pictured are GCW Capital Principal, Tom Waring and HCHV Representative, Kristen Weese, from Lockport.)

Higher Ground New York Military Program a 501(c)3 organization that provides innovative sports and recreational therapy treatment programming to enhance the quality of life for members of the injured military community and the local population of children, teens, and adults of all abilities/needs.(Pictured are GCW Capital Principal, Tom Waring, WNY Section PGA Foundation Executive Director, Steve Bartkowski, from Kenmore and Treasurer of PGA REACH WNY Foundation, Jeff Mietus, from N. Tonawanda.)

WNY Section PGA Foundation created with a goal of providing support to various organizations, including veterans, in the Buffalo, Rochester, Erie and Southern Tier through the game of golf. (Pictured are GCW Capital Principal, Tom Waring and Higher Ground New York Military Program Board Chair, Roger Woodworth, from Orchard Park.)

Each organization received a check for $11,508 dollars. That amount represents almost a $1,000 dollar increase from the checks distributed by TIUW the previous year thanks to the people of the WNY community who participated as sponsors, golfers, auction donors and bidders.

Erie County has the state’s second highest veteran population. That is why the Warings, GCW Capital Group and the affiliated TIUW sponsors and volunteers are dedicated to continuing this tournament and increasingly raising funds to make a difference in the lives of WNY veterans and their loved ones.

The 2019 Tee It Up for the Troops Wanakah is scheduled for September 9th. If you'd like to know more information about Tee It Up for the Troops Wanakah go to: https://www.teeitupforthetroops.org/wanakah/