October 1, 2011

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Healthcare Heroes

With unwavering courage and compassion, the 2011 Healthcare Heroes are imp...Read More

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A Closer Look at the Utah Health Exchange


Economic Insight
A Deficit of Leadership

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Around Utah

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In Up to Your Neck

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On the Offense

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Stroke of Genius

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Wealth Management

Sean Whalen

Do Payday Lenders Offer a Way Out or Just Enough Rope to Hang Yourself?

Kris Rudarmel


Wealth Management

Utah Business Staff

October 1, 2011

ULBRICH: It’s sort of back-to-basics time. There’s absolutely no substitute for solid planning and going back to the basics of what your goals and objectives are, and laying a risk tolerance over that. And then creating scenarios for your clients that meet those goals and objectives and speak to that risk tolerance. There is never a substitute for solid execution in that regard.

It’s really time to go back and communicate with your clients and make sure you’ve got those goals and objectives at the forefront in their mind and that you take a long view of it.

KRULL: Certainly we’re not advising for any significant changes in the client’s strategic asset allocation unless there are lifestyle changes or material changes taking place in our clients’ lives.

But where we are recommending making changes are small tactical shifts within a client’s portfolio in the 2 to 4 percent range to be opportunistic and take advantage of the volatility in today’s marketplace. We are not talking about major shifts in a client’s asset allocation, 10 or 20 percent swings in and out of an asset class. History has proven that investors who are moving in and out of asset classes significantly or are in and out of the markets significantly are not keeping pace with the average returns in the market. So small tactical shifts within your client’s portfolio.

The political environment is very uncertain right now. The Bush taxes may be allowed to expire, or tax reform may end up flattening the rate and eliminating some deductions. We’ve got some very different things that could happen politically, so how do you advise clients who are trying to make decisions today about things like, for example, a Roth or a traditional 401(k)?

ULBRICH: The point is that they are saving—they need to start and they need to create some goals and objectives. The Roth versus the regular 401(k) issue, it differs from person to person in their own individual circumstances. If you are trying to create goals and objectives based on tax strategy and what Congress is going to do, you will be up all night trying to figure that out. So just saving is the important part.

HOLMGREN: It’s not necessarily an either/or, but maybe a combination. Diversification not only by asset type but by taxability of the assets is important with our clients as well. There are three main places you are putting money. First you have before tax—that’s gross tax deferred and that comes out taxable. We think our tax rates are going to go up at some point, so we have to plan for that, but at least you control to some degree when you take money out and how. Second, you have after tax and gross tax deferred, like your Roths and muni bonds—even your home, as far as the appreciation goes. And third, you have the after taxes subject to capital gains.

So as a three-legged approach, I like to see clients filling each of those buckets. Congress can come back later and say, “We’re not going to allow, going forward, Roth IRAs.” They can always change the rule, but it’s most likely going to grandfather those kinds of accounts that are set up.

JEFFERIES: Another key effect of that strategy is you can use that to help determine your tax bracket for the year. If you want to take a portion of your withdrawals from a taxable-deferred account and supplement that from income that’s coming from capital gains or tax-free income, that can help put you in basically the tax bracket you choose.

BAPIS: There might be a little bit of light at the end of the tunnel with this three-ring circus that we just witnessed with the debt ceiling. The light at the end of the tunnel is that we are finally addressing the situation and realizing that there is something wrong with the way we’re doing things. Even if we have something come out of this panel that they’ve set up, it might be a positive going forward. It can’t be changed overnight because if it’s changed overnight, we’ll plummet into even a further downturn than we’ve got right now. But if they make some adjustments going out three to 12 years, that might be beneficial in the future.

NEWTON: I disagree that they are going to substantially address it because both parties have kicked the can down the road for years. They don’t want to address it because addressing it means we’ve got to make some hard choices, and we’ve already seen senior citizens saying, “Don’t cut my Social Security.” We saw the same thing when Bush was trying to reform Social Security—the Democrats accusing Bush of wanting to eliminate Social Security.

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