Beauport Financial Times | PDF Version

Inside This Issue: A Rationale for Chocolate | Give Yourself a Bonus! | Jon in Focus

Welcome to the Fall 2007 Edition of the Beauport Financial Times.
With each issue of the Times our goal is to bring you insightful financial information and general items of interest to better serve you and our community. Autumn is in full swing and as we write to you it’s during one of our busiest and most exciting times of the year. We are pleased to announce the addition of two new team members to further enhance our services to you. The next time you call or visit us please say hello to Leah and Drew, and in the meantime we have included their bios inside. In addition, we are pleased to report we have added key technological enhancements to make our investment reporting and advisory business flow more smoothly.

For this issue, our feature editorial focuses on our BFS Advisory Model and how it works through our advisor team, especially during these volatile times in the economy. Thanks for your positive feedback about our Q&A format to bring you the Times’ lead story in each issue. We continue our series, “Retirement…now What?” with the second installment from Derek addressing the importance of an income plan and the ownership of equities throughout retirement.

We are very pleased to report that our advisory business upgrade to the Charles Schwab Institutional platform is going well and will be completed by year’s end. Your patience and understanding are appreciated and will be rewarded with this state of the art reporting and technology system. We have significantly improved our client database and account aggregation software with the addition of Albridge Solutions. This technology allows us to go to one source to gather all of our clients’ investment and insurance statements from the various providers. This capability will prove to be a very efficient and practical tool for our reviews with you.

It’s official, Derek passed the Certified Financial Planner exam and is now utilizing his CFP ® capabilities by developing financial plans and utilizing the strategies this highly specialized training provides. This spring Derek and his wife Karen welcomed baby daughter Katherine Rose to their family on April 9, 2007.

In the Beauport Community column the acclaimed local not for profit, Pathways for Children, has chosen its new Chairman of the Board. In addition, David returns this year as Chairman for the annual YMCA of the North Shore gala fundraiser “Celebrating New Orleans” on Saturday November 17th at the Sheraton Ferncroft in Danvers. This year’s program is most unique. Besides presenting the special cultural heritage of the Queen City, the extraordinary efforts to rebuild this cultural icon are seen through the Y’s direct involvement to foster affordable housing there, and here on the North Shore.

We hope you will benefit from timely tax tips seen in the Final Quarter, and there’s a chocolate primer, a chocolate quiz with chocolates to win from Turtle Alley, and our Times Trivia puzzler.

In the Save This Date category, please plan on joining us on Wednesday December 12th for our Holiday open House, and the 3rd Annual Richard D. Wilson Award presentation – can you guess this year’s recipient?

This letter also gives us the occasion to thank you for placing your confidence and trust in us during these challenging financial times, and to many of you for your thoughtful gestures in referring friends and colleagues to our team. We are pleased to have the opportunity and responsibility to serve your financial needs now and in the future.

On behalf of Serena, Danielle, Drew, Jon and Leah,

David S. McKechnie, CLU and Derek J. Reed, CFP ®

The Fourth Quarter…

• For tax planning purposes please be sure to double-check your account statement for cost basis information. Also, now is a good time to take care of any gifting of stock or cash, and satisfy your required minimum distribution if you are over 70½.
• In a generous mood and over 70½? – you can donate up to $100k to a charity from your IRA. Distributions are tax-free and count toward the “required minimum distribution” IRA holders (70½+) must take from their accounts each year. There are some technicalities, and we’ll be happy to walk you through them.
• For 2008, your 401k contributions max out at 15.5K and if you are 50+ you can stash away another $5K. IRAs don’t change, a max of $4k if you’re under 50 and $5k if you’re 50 or older this year.

We welcome your questions about these “tax reminders” and other financial requirements you may have.

— David & Derek

The BFS advisory Model: When The Times Get Tough

Beginning this past June the financial markets have experienced teeth-chattering volatility.

First the NYSE breaks through 14,000… weeks later the sub-prime debacle hits real estate investments and the housing market… foreclosures skyrocket… the market plunges… talk of a recession surfaces…the Dollar drops against the Euro… the Fed cut the Prime by a ½ point… lenders and the real estate market continue to be shaky…renowned economists, financial gurus are reluctant to project the length or depth of the sub-prime issue… markets appear to stabilize shaking-off adverse conditions and rallying back. So here we are… and the BFS Advisory Model has been working for our clients every step of the way, in both good and challenging times.

There is no better time than the present to explain how and why our advisory approach/model works and adjusts to continue to build and protect wealth. We turn to David to refresh our thinking and for calming insights and wisdom… to review how and why the BFS Advisory Model is ideally suited to respond to these unsettled times… lessons David has learned in 20+ years evaluating market dynamics, and subsequently applying the principals of the firm’s signature advisory model.

Q. When a hard-hitting market event like the sub-prime debacle strikes, what should BFS clients expect from the advisory model? What do you advise?

David: We’ll spend a substantial amount of time communicating with our clients, updating the data of each relationship, reevaluating and refining clients’ specific short-term needs and long term goals. With a current and comprehensive understanding of our clients’ needs, combined with market research, we can then design (for new clients) or re-balance (existing clients) portfolios that match their risk tolerance. Therefore, as we experience these volatile times our clients can feel confident that their portfolios mirror their personal “investment policy statement”.

Q. What is the essential point about the advisory approach that will give clients comfort regardless of market conditions?

David: As previously mentioned, the “investment policy statement” is one of the crucial factors in delivering comfort and confidence to our clients regardless of market conditions. By assessing clients’ needs for income and when they will need it, discussing their attitudes about risk/reward, collecting data relevant to their age/longevity in terms of receiving an income stream throughout retirement, we produce a blueprint to guide the design of a portfolio that fits a client’s specific needs and objectives. Often, this fundamental discussion doesn’t take place at other institutions that may be chasing “hot” investments instead of focusing on
the client’s long-term goals and objectives.

Q. if recession indicators were to surface, does the advisory model focus to building wealth…protecting wealth…or a little of both, or is it employed in an altogether different way?

David: Whether we are experiencing recession or expansionary indicators in the economy, client portfolios are rebalanced periodically to take advantage of changing market conditions. The philosophy of “rebalancing a portfolio” to its original target asset allocations inherently involves taking profits from asset classes that outperformed their peers in a given period of time, and then buying into asset classes that are undervalued. By emphasizing this strategy we are in effect building wealth and protecting wealth at the same time regardless of economic conditions.

Q. What do you see as the overall benefit to the BFS advisory Model for clients and for the Beauport team?

David: Although we can never promise that our clients’ portfolios will always have positive returns, we do believe that we are employing every available resource to fit their portfolios to their long-term goals and objectives. Our mandate is to render portfolios in careful consideration of expenses, design proper asset allocation models based on the client’s personal “investment policy statement”, provide careful tax planning throughout the year, and provide full transparency on fees assessed to their portfolios, positioning us to deliver solid results to our clients.

In our next newsletter we will discuss how our advisory approach to insurance products differentiates us in the marketplace and delivers a comprehensive analysis that yields targeted recommendations in this complicated and often misunderstood marketplace. Whether you have a new or existing policy this will be a must read.

Retirement… Now What? Part II

Proper allocation of assets and an appropriate withdrawal rate are vital to maintaining purchasing power throughout retirement.

By Derek J. Reed, CFP ®

We all welcome receiving a raise, or satisfying the criteria to gain a bonus. And, even though your working years may be behind you, it doesn’t mean increases in your income have to stop. In the last newsletter we focuses on the importance of having an income plan for retirement, identifying your monthly needs throughout retirement, and referring to your “road map” to maintain a comfortable lifestyle. This article speaks to the necessity of effective asset management creating that monthly income, and the key role a predictable withdrawal rate plays in protecting your purchasing power.

the reality

Ordinary living expenses seldom decrease. As your living costs rise so should the amount of income you derive from the asset base you have accumulated during your working years. We live in a world of rising costs. Yes, you need a raise!

your annual raise

Customizing a mix of stocks and bonds in a portfolio, and resisting the temptation to use only fixed income assets for your income plan, is essential to produce that annual raise. Effective asset allocation in itself can reduce the volatility of the portfolio producing that income stream. Therefore, when you combine a sensible blend of stocks and bonds with an appropriate rate of withdrawal, you can confidently and consistently fund your retirement lifestyle.

case in point

For example, a retiree living 25 years in retirement receiving a 3% annual raise and withdrawing 4% of a 60/40 stock/bond portfolio has a 95% chance of having assets remaining after that time period. However, a 6% withdrawal rate reduces those chances to 58%, therefore increasing the likelihood of exhausting resources too soon.* Paying careful attention to your rate of withdrawal in the early years of financial independence helps avoid a financial disaster at any point in retirement.

assumptions…

These are assumptions to make before you head down that path to retirement. Many of our clients use their income stream to supplement social security or a private pension/annuity, and rely on this additional 4-6% withdrawal rate from their portfolio to live well. With a higher portfolio withdrawal rate, you reduce the likelihood of receiving a retirement raise as resources can run out sooner. It pays to understand this scenario before you start your income stream.

concerns addressed

We know the deep concern of retirees – outliving their monetary resources. To address this we build an income plan based on a foundation of a well-diversified portfolio complementing a reasonable withdrawal rate to produce predictable streams of income. And, we take advantage of tax-deductible salary deferral plans…IRA’s designed to pay you first by saving a piece of your working income to accumulate a significant retirement portfolio. It’s that straightforward.

starting point

Predictability is essential when it comes to funding your retirement needs. Successful solutions for your retirement income plan start with a well-defined strategy. Evaluate the withdrawal rate your retirement will require, and monitor your asset allocation consistently. Go ahead, give yourself a raise… you’ve earned it!

* T. Rowe Price 7/06 “Help sustain your assets: be bullish in retirement”

Beauport Financial News

This past June Derek achieved certified Financial Planner ® status, one of less than 2k CFP ® professionals practicing in MA.

“Over the months going through the coursework and then the two-day exam confirmed my passion for this career’s work…problem solving clients’ financial issues and needs. I welcomed the challenge of this learning experience knowing a more meaningful and effective client relationship would result. My role is to create and protect wealth, and with CFP ® skills

I’m looking forward to this planning process more than ever. It’s an opportunity to create a financial blueprint for our clients’ future…something we can all feel confident about.” – Derek reed, CFP ®

We are pleased to announce two new team members. Your and our needs and opportunities are growing, and the arrival of Drew McKechnie and Leah Lovasco couldn’t have been timed any better.

We coaxed Drew away from Booz Allen Hamilton in Washington, D.C., where he was working as a senior consultant specializing in organizational design, strategic planning, and business process re-engineering for clients in the US Government and Intelligence Community. He is leveraging these skills and related experience at BFS, while on a fast track to develop new ones as a member of the financial services industry. His Bachelor of Arts degree includes majors in Economics and International Studies, and a minor in Computer Science from Colby College. Personal time finds Drew on the links; enjoying fine wines, theater, music, and films.

With years of experience at a law firm, and in the mortgage industry, Leah brings us sixteen years of administrative experience, and likewise is learning the financial services landscape. Her interests in community youth are exemplified in her Vice President role for the GHS Docksiders Jazz Band in which her son Nick plays drums. A lifelong Gloucester resident, Leah enjoys reading, travel and time with her family.

On the road to financial planning… Jon and Drew recently attended the Financial Planning Association conference in Seattle. The conference provides timely information, resources, services and programs to help financial services professionals keep pace with rapidly changing developments in the financial planning profession.

Back for a second year as chairman of the 2007 YMCA of the North Shore’s Gala Fall Fundraiser, last year David’s leadership contributed to a record-breaking $125,000 being raised benefiting our region’s kids,
families and communities.

Celebrating New Orleans

“This year’s YMCA of the North Shore gala fundraiser, Celebrating New Orleans, will be the most rewarding of my two-year Chairmanship. I’m proud to be part of a team that thinks well outside the box when it comes to making an impact on the lives of people in need. As you are reading these comments, a team of 20+ North Shore “Y” volunteers will have just returned from a special 4-day experience in New Orleans partnering with Habitat for Humanity to build affordable housing for Katrina victims. In fact, 10% of the funds the Y gala raises will be going to Habitat’s work in the Queen City. This ties in perfectly with the Y’s commitment in taking a leadership role by developing affordable housing for working families here on the North Shore. I hope we can raise a bundle this year for this truly great outreach to provide quality shelter for our neighbors.” – David

An uplifting experience on Mt. Washington

We are proud to report that on June 16, 2007, Danielle and David competed in and finished the annual Mt. Washington Road race… all 7.6 miles and all up-mountain! Quite an accomplishment when you consider the average grade is 11.5%, at times extending to 18% with the last 50 yards… at 22%. WHEW!

Jon Park: In Focus

As the Director of Investments, Jon’s main role is the design and daily management of investment portfolios for clients. He works closely with the Investment Department of Valmark Securities, Beauport’s broker-dealer, and utilizes the research capabilities of Charles Schwab Institutional to custom-design investment portfolios for each client.

In his fourth year with the firm, we thought the time was right to ask Jon to share some insights about the people and things that hold his interest… in addition to your portfolios.

• Currently reading / “Quiet Strength: The Principles, Practices & Priorities of a Winning Life” by Tony Dungy
• What you would be doing if not financial services / philanthropy, non-profit work
• Public figure(s) you most admire / Bill Gates, Warren Buffett
• Best place to go to recharge the batteries / a nice drive around the North Shore
• Need more time to / read, sleep, exercise
• The car you will be driving someday / a 100% battery-powered car, go green!
• Your primary source for inspiration / church, God, the bible, in no particular order
• Favorite TV show(s) / The Office, Lost, 24
• Favorite musician / Bono of U2
• Favorite restaurant / Wild Horse Café, Beverly
• Favorite electronic device / iPod
• Favorite sport/team / you may have guessed it – BOSTON RED SOX!!!

Beauport: To the Good Times

The Benefits of Chocolate!

“Strength is the capacity to break a chocolate bar into four pieces with your bare hands and then eat just one of the pieces.” – Writer Judith Viorst

Is chocolate good for you, even healthy? … according to our research reinforced by its constant presence at the firm, a qualified yes. And, as with many of our favorite foods and beverages, the “good for you” tag is based on moderation. More important is the definition, for healthy benefits to come into play the benchmark is chocolate in its purest form, and that doesn’t include Reese’s Cup, or its brethren. The gold standard in chocolate is measured by a high degree of cocoa content – the higher the cocoa content the less room there is for the list of ingredients you typically see on the side of a Milky Way bar.

Win Chocolates from Turtle Alley!

Before we make our case for the benefits of chocolate, you need to know one of our factoids is untrue, false, unchocolate… for a delicious reason. If you can pick out the counterfeit fact and report it to us, we have a chocolate treat for you from one of the region’s premier chocolatiers, Turtle Alley. Simply email info@beauportfinancial.com or mail (attention BFT Editor/chocolate) the bogus fact, and if you correctly ID the counterfactual fact… chocolates for you!

Wine & You Photo Gallery

It was a beautiful evening at the North Shore Art Association this past May 31st as Beauport clients sampled springtime wines from Atlas Liquors at our Wine & You event while viewing the acclaimed “Traveling Show” of the American Watercolor Society. Special guest speaker Richard L. Elia, founder and publisher of the Quarterly Review of Wines demystified
wine with great whit and insights.

Photographer David Stotzer was on hand to record the evening…