Financial Life Planning & Investment Strategies
Published Biannually • Summer 2009

2009 Markets

Is it a bull? Is it a bear? If we asked this question March 1, the answer was clearly bear. Since then the stock market has staged a significant uptick and many investors now rejoice that we are entering a new bull market.

Wiiken & Gorman does not see a clear answer because there are both cyclical and secular cycles and the terms are often used interchangeably. Secular cycles, bull or bear, run for many years and cyclical cycles, bull or bear, occur within them. 

Wiiken & Gorman does not believe in the power of prediction. We do believe that if your portfolio is properly tailored to your risk tolerance and well diversified, you will survive the economic crisis. Many pundits are saying that diversification failed last year. We suggest that bonds and cash did well, while the growth markets tanked (stock, real estate and commodities). This is what we expect with a diversified portfolio. Some assets will perform well and some assets will not and these assets will change positions as time goes on.

We have enjoyed talking with you all more in the last six months—it has been harrowing and we are proud to have been here to listen to your worries and your hopes. The economic crisis is not yet resolved, although the horizon looks a little more promising that it did a few months ago. As we meet this year, we are paying particular attention to your risk tolerance, which may have shifted since the financial downturn. By balancing your risk tolerance with your goals, we can make any revisions needed to your plan.

Here is a quote from comedian Jackie Mason that might make you chuckle: Right now I have enough money to last me the rest of my life - unless I buy something.

It’s Always Buyer Beware

All of us receive invitations in the mail to “free” lunch seminars that purport to educate us about finances. Some of us also get solicitations to buy amazing investments but we have to act now!

Unfortunately these offers are often hard-sell pitches for financial products that are unsuitable. State investigations have uncovered that products can be pitched as low risk but may actually be complicated instruments with significant downsides. These have included cases where investors thought they were buying a CD but instead were locked into an annuity that restricted access to their money.

The frequency of scams seems to increase in troubled times. We are always in favor of our clients learning about financial issues. However, we strongly caution against succumbing to any sales pitch without checking with us first.

529 College Savings Plans: 
Time to Review

529 Brief Review. These college savings plans allow tax-deferred saving and tax-free withdrawals when the funds are used for qualifying college costs. 

Every state now offers a plan and you may invest in any plan regardless of where you live.

Oregon 529. In April 2009 the State of Oregon sued Oppenheimer, the provider of its 529 college savings plan. The suit is on behalf of Oregon residents and alleges that the Oppenheimer Core Bond Fund took on more risk without notifying plan participants. The Core Bond Fund lost 36% in 2008 while its index was up 5% for the year!

That is the worst story we have heard about these college plans. However, it is important to periodically review the plan you own and consider switching if your plan is substandard.

Morningstar. Morningstar publishes an annual survey of 529 plans and offers advice on certain features to avoid. One issue is that some plans may use age-weighted allocations that are too aggressive as students approach college. Other plans have kept investment choices too long after they have underperformed or do not offer enough choices for adequate diversification. Yet other plans charge fees that are too high.

California Scholarshare Ranked. The California plan started in 1999 and was managed by TIAA CREF until 2006. At that time Fidelity won the contract and became the new plan provider. Morningstar rates the plan reasonably priced but not as well diversified as it could be. California also does not allow a tax deduction for a contribution.

Winning Plans. Morningstar recommends Ohio, Virginia, Indiana and Utah for various reasons.  For the complete analysis, go to:

http://www.morningstar.com/529/529Table.html

Please call us if you would like to review your 529 plan features or make changes to the investments.

Mission Statement

At Wiiken & Gorman we pledge to use our expertise to help clients imagine a better financial future and develop a plan to experience more financial security and happiness in their lives.


Financial Tips

Two Property Casualty Reminders

Issue: 

A recent survey by a Princeton New Jersey company that estimates costs of rebuilding stated that 66% of US homes are underinsured! This occurs for many reasons including remodels that are not reported, rising construction costs, insurance policies that cover less and new building code requirements.

Action: 

Please speak to your agent about the dwelling coverage and code upgrade on your home and verify that the amounts are adequate to rebuild in the event of complete destruction.  Remind your agent if your home has special features that would make rebuilding more expensive than for the average home.  You might consider asking the agent to visit your home for a more accurate assessment.

Issue:

If your home is destroyed, how will you verify the contents?

Action: 

Complete a home inventory.  The company that insures your home can provide you with an inventory.  Store the inventory in a safe place and consider backing it up with photos or videos.

Best Time to Claim Social Security

There is a new study from the Center for Retirement Research at Boston College.  The authors suggest that although more than half of retirees take Social Security at age 62, many would be substantially better off if they waited to claim until their full retirement age or later. Although the article is a bit technical, there is an excellent two page summary. The report is titled “How Much Do Households Really Lose by Claiming Social Security at Age 62?”

http://crr.bc.edu/working_papers/index.php


Mutual Fund News

ETFs

Wiiken & Gorman has begun using more exchange traded funds in client accounts. These are baskets of stocks or bonds that trade all day, like a stock.  This is in contrast to a mutual fund that trades only at the end of the day.

Most ETFs track an index and are well suited for taxable accounts. They tend to be low in cost and tax efficient. Many providers now offer ETFs along with their mutual fund line-up. We will be discussing the suitability of ETFs for your accounts at our meetings.


Management

Wiiken & Gorman manages money in pension plans, IRAs, personal accounts, and trusts. We charge a retainer fee for portfolio development, monitoring and reporting. We also help with financial life planning issues that arise. Please call us if you would like to work with us in this capacity.  The minimum portfolio size is $500,000 and we welcome your business.

ADV and Code of Ethics

When you became a client of Wiiken & Gorman you signed a contract and received a document known as the ADV form. The ADV is the form that we file regularly with the SEC. We revise this document annually and whenever there is a material change in our business. We continue to give the ADV out to all new clients. 

If you are interested in seeing the current Wiiken & Gorman ADV, updated in 2009, ask for it the next time you are in for a review or we can e-mail you a copy on request. We also have our Code of Ethics available for review.

About Your Planners


Paula Wiiken

Paula attended the NAPFA National Conference in Washington DC in early June.  She also spent time visiting her recently widowed mother in Virginia.

Mike attended the NAPFA Investments Conference in Florida in January.

Paula and Howard are flying to Chicago for a week of fun and family in late June.

Mike and Pat’s younger son Andy was married in April at the Petaluma Golf and Country Club. In June Mike and Pat flew to Southern California to celebrate the awarding of a PhD to their daughter-in-law, Jessica. 

Paula’s son Matthew is finishing his tour of duty in Afghanistan and should be coming home soon.

Growing a Strong Financial Future

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Updated 5 December 2009