Rebalancing Investment Geography

by Kevin Slater, CEO, Lead Advisor, CFP®

We recognize there are many great companies that are based outside the US and are therefore long-time investors in international equity markets.  After a few years of allowing the international portion of portfolios to drift lower, we are rebalancing and bringing international equities up to approximately 35% of our overall equity allocation. For portfolios that are more growth-oriented, we are allocating 20-25% of that international equity to emerging markets. 

We are not trying to time the market but rather strategically position portfolios for the long run.  Most of the prognosticators we consult (JP Morgan, Vanguard, State Street, and others) suggest that over the next 10 years, non-US markets are likely to outperform the US.  There are several reasons for this including relative prices, dividend yields, growth, and changes in currency.   

Equity valuations (based on price-to-earnings ratio) are lower outside the US.  This is to say, you can buy profitable companies more cheaply.  The graph below shows the cost to buy $1 of profit in a public company over the past ten years.  Prices are more expensive in the US than in developed or emerging markets with the gap between the US and developed markets widening substantially. 

After a long run up against foreign currencies, the US dollar has started to drop which provides additional returns to US investors with international holdings.  The graph below shows how the dollar has significantly strengthened since 2015. 

We have already begun making these changes in portfolios.  Please reach out if you have any questions. 

Looking Back And Looking Ahead: SVA

by Kevin Slater, CEO, Lead Advisor, CFP®

Despite the markets, 2022 was a good year for the SVA team.  We made two fabulous hires (Nichole Harrison, CFP® and Austin Boyce) and had three people make significant advances in their roles. Julie Gibson became my Executive Assistant, immediately improving my ability to serve clients and our team.  Lisa Graber is now our Client Operations Manager, coordinating client support to improve our responsiveness to our client’s needs. Vicki Simpson earned her Certified Financial Planner™ certification and is a Financial Advisor in addition to her role with investments.  Please congratulate each of them!

To improve our service to you, we are restructuring roles and changing some client assignments.  Many of you have already received some communication on this topic. Every client has an assigned Support Advisor (Deb, Sophea, or Austin) to handle administrative needs.  Every client will also have either an Advisor (Krista, Nichole, Vicki) or a Lead Advisor (Kevin Rigg, Ben, or myself) handling strategic planning—in some cases clients may have both.

Since all of our Advisors and Lead Advisors are CFP®s, we are taking this opportunity to reallocate client assignments in order to increase time for further investment research and more advanced planning analysis.  Thanks to the abilities of our advisors, I will significantly be reducing my client load and spending more time digging into alternative investments, such as real estate partnerships.

A few other changes are worth noting as well.  We will be replacing our 20+ year old CRM (customer relationship management) system in the first half of the year. While we are excited about the new system, we do have a lot of information in the old system. Austin, Nate, and Julie will be spending a lot of their time making sure the important information is carried over so we can continue to serve you well!

We are also replacing our financial planning software.  The new program will give us a deeper level of sophistication in long-term planning and enable us to better communicate the broad impacts on clients in numerous new ways.  We are incredibly excited to roll this out to all of our clients in the latter half of 2023.

2023 will be a year of significant changes—our goal is that the only things you notice in the process are an improvement in the depth of our relationship with you and the quality of our work for you.  Happy New Year!

Looking Back And Looking Ahead: Markets

by Kevin Slater, CEO, Lead Advisor, CFP® & Vicki Simpson, Research Analyst, CFP®

2022 was a tough year for portfolios.  While we made some good choices that reduced impact to portfolios, such as shortening duration in the bond portfolio and reducing exposure to growth-oriented active managers, there was just no escaping losses when virtually every financial market was dropping.  According to the Leuthold Group, 2022 was only the sixth time since 1878 that both stocks and bonds had negative returns.  Macrotrends Data notes 2022 was the 7th worst year for the S&P 500 since 1928.

While we aren’t thrilled with 2022 performance, we aren’t giving up on stocks either.  Equity markets have bad years more often and by a wider margin than we would like.  The S&P 500 has lost money in 19 of the 73 years (26%) since 1950, with an average loss in those years of 13.1%.  Even so, the overall average return has been 9.09 % since 1950.  (Source: https://www.macrotrends.net/2526/sp-500-historical-annual-returns )

Based on analysis by JP Morgan, Vanguard, Northern Trust, BlackRock and Invesco, we anticipate average stock and bond market returns will be notably higher over the next ten years than what we forecasted last year.  Last year we projected 2% for bonds but have increased that to over 4%.  Equity expectations were around 5% and are now over 7%.  These are estimates of the averages over the long run—we still expect a lot of bumps along the way.

While we have no idea what market returns will be in 2023, we anticipate we will be actively trading in bond portfolios until the FED is convinced inflation is within their target range.  We will also take a hard look at international stock allocations in both developed and emerging markets. The outperformance of international developed stocks in 2022 may be a sign of things to come.  Meanwhile, the ripple effect on emerging markets from the shift in US relationships with Russia and China is yet to be understood. Higher interest rates change the landscape for many alternative investments - and may create even greater opportunities in some.

Bottom line, we will continue to look for creative ways to help our clients invest wisely, and within their means and comfort level.

Footnote sources:

Vanguard 2023 Market Outlook: https://investor.vanguard.com/investor-resources-education/news/vanguard-economic-and-market-outlook-for-2023-beating-back-inflation

JPMorgan: https://am.jpmorgan.com/us/en/asset-management/institutional/insights/portfolio-insights/ltcma/

Northern Trust: https://www.capitalmarketassumptions.com/?utm_id=go_cmp-18337096007_adg-149769370068_ad-621781617982_aud-320129996831:kwd-1014316320717_dev-c_ext-_prd-_sig-CjwKCAiAk--dBhABEiwAchIwkUSuXHH3wEo-wfDBmtLkhqNTzG_y6jN7A2jIS7NwvTBEqZf13gNcpRoC1eYQAvD_BwE&utm_source=google&gclid=CjwKCAiAk--dBhABEiwAchIwkUSuXHH3wEo-wfDBmtLkhqNTzG_y6jN7A2jIS7NwvTBEqZf13gNcpRoC1eYQAvD_BwE

BlackRock: https://www.blackrock.com/au/intermediaries/insights/blackrock-capital-markets-assumptions

Invesco: https://www.invesco.com/apac/en/institutional/insights/multi-asset/long-term-capital-market-assumptions.html

2022 Tax Planning

by Kevin Rigg, Director of Financial Life Planning, Lead Advisor, CFP®, CPA

As 2022 draws to a close, here are some tax planning tips and a reminder of upcoming tax-related deadlines.  

  1. Fourth-quarter tax estimates are due soon. To avoid penalties, be sure to have your payment in the mail no later than January 15, 2023.  

  2. Review your pay stubs. If cash flow allows, make sure to maximize contributions to your tax-qualified accounts before year-end (e.g., 401k, HSA, FSA). 

  3. Consider filling up lower tax brackets. If you expect your tax rate to increase in the future, look for ways to accelerate income that can be taxed at lower rates today. If you have an IRA, a great way to get this done is with a Roth conversion, which must be completed by December 31st. 

  4. Maximize itemized deductions. Consider the timing of state/local tax payments, medical expenses, and/or charitable contributions to bring itemized deductions above the standard deduction ($12,950 for singles and $25,900 for marrieds). 

  5. Harvest losses in your portfolio. A turbulent market like 2022 means larger than usual capital losses in the portfolio. We took the opportunity to “harvest” losses throughout the year and will evaluate taking more before year end. The losses can be used to offset capital gains this year (and future years, if not all used this year). 

  6. Maximize charitable giving tax savings: 

  • Contribute to a Donor-Advised Fund and receive an immediate tax deduction while maintaining the ability to distribute funds to a preferred charity later.  

  • Use a Qualified Charitable Distribution (QCD) to contribute directly to a charity out of an IRA (a QCD is only available to IRA owners over age 70.5). 

  • Donate shares of appreciated securities (stocks, bonds, mutual funds) to receive a tax deduction and avoid capital gains tax. 

At SoundView, we evaluate your personal tax situation and let you know if any tax planning strategies should be considered before year end. We also make every effort to coordinate this planning with your tax preparer, both to get their input prior to implementation and to ensure they have everything needed to file your return accurately in the coming year. 

Your input in this planning process is crucial, so please let us know if there have been any major life changes that might impact your tax situation.  

2023 Annual Review Update

by Kevin Rigg, Director of Financial Life Planning, Lead Advisor, CFP®, CPA

The SoundView Team is already hard at work preparing for 2023 Annual Review meetings. By early January we will have sent all clients (yes, including you!) a request for 2022 cash-flow information, as well as year-end values of non-portfolio assets and loans.   

The primary objective of the Annual Review meeting is to accurately assess your financial situation and track your progress toward meeting long-term goals. To do this well, we need timely and accurate financial data and appreciate your help in providing the information requested.   

We will review financial reports at the meeting, and discuss important life changes you made in the last 12 months along with any key, upcoming decisions. Ultimately, we want to increase the chances of you achieving your life (and financial) goals — so if there need to be changes made, this meeting is where we’ll talk about them.   

We continue to refine and improve our Annual Review data gathering and reporting processes, so you may notice some slight differences from prior years. That said, the Annual Review meeting's core purpose remains the same: bringing the focus back to long-term planning while keeping our eyes on the path you're walking today.  

Inflation: Stickier Than Some May Think? 

by Kevin Slater, CEO, Lead Advisor, CFP®

As you certainly know by now, the US is experiencing inflation unlike anything we have seen in 40 years. The Federal Reserve (Fed) has been raising interest rates rapidly and we have begun to see the effects: inflation seems to have started to plateau. Here is the inflation index the Fed watches: 

The markets in the past few weeks seem to think the Fed has accomplished their mission. They are projecting interest rates will not only peak early next year, but begin falling steadily immediately thereafter. 

We are skeptical of the market’s view. While the Fed is likely to slow down the rate of increases, we are still a long way from their target inflation rate of 2%. And we suspect that not only will they be looking at the rate of inflation but also at the components of inflation. 

The Fed knows that a little inflation is a nice thing, but a lot of inflation can be destabilizing to economies and social structures. It is problematic if large portions of the population cannot afford to eat or pay their rent.  Here is a breakdown of the components of a more popular inflation measure - Consumer Price Index (CPI): 

Look not only at the current inflation rates, but where they are relative to where they have been in the past year (peak and trough). As an example, used car inflation has dropped from over 40% to 2%. A great success that clearly reflects the higher cost of financing.   

Other variables may not be as responsive to higher interest rates. For example, food inflation is high in part because wages are a big variable in food costs: 

With the demand for workers being significantly higher than the number of unemployed:

Workers are able to command higher incomes which will continue to push costs higher…

We expect that until the number of job openings and the number of unemployed people better balance out, we will continue to have elevated interest rates. In the meantime, we will continue to keep duration unusually low in your bond portfolio. 

Here’s hoping inflation comes down sooner than later! 

Employee Spotlight: Austin Boyce

Austin Boyce

Austin Boyce is the newest member of the SoundView team!

Austin received a bachelor’s degree in Business Administration from the University of Puget Sound in 2010, and has been honing his skills ever since. He added a Master of Business Administration (MBA) from Seattle University to his resume in 2017. He’s had a desire to transition to the Wealth Management industry for some time now, and has been a wonderful addition to the growing team here at SoundView. As he's learning more about you, we thought it would be good for you to know a bit about him, too.

KEEP READING FOR AUSTIN’S ANSWERS TO OUR “GET-TO-KNOW-YOU” QUESTIONS!

 

That’s Austin. Really.

What's the craziest thing you've ever done?
I'm not known for doing crazy things… but I did jump into the ocean off “The Rock” at Waimea Bay in Hawaii. It was at least 20 feet high.


What’s your favorite movie?
Man on Fire. You can't go wrong with Denzel.


What’s your favorite quote?
"The only place success comes before work is in the dictionary.”
- Vince Lombardi


What’s the most important thing in your life?
My wife Alyssa and our daughter Avery, who will be two years old in December.


If you could be any animal, what would you be?
A leopard. In the world of the African big cats, they’re the perfect combination of power and speed.

What would be your “last meal”?
Steak, Caesar Salad, Asparagus, and Mac & Cheese. (Cheesecake for dessert.)



What is your favorite thing about working at SVA so far?
My favorite part about SVA so far is definitely the people. Everyone has been extremely welcoming and helpful in my first few weeks.


What drew you toward Financial Planning?
I first become interested in working in personal finance a few years ago primarily through listening to podcasts. Over the years that interest continued to grow and I decided it was time to make a career change and pursue personal finance. I also really enjoy working with people, and getting to know them, and helping them reach their goals.

Thanksgiving in Difficult Markets

by Kevin Slater, CEO, Lead Advisor, CFP®

2022 has been a terrible year for financial markets. The Fed has been forced to raise interest rates to combat the highest levels of inflation we have experienced in 40 years. The double whammy of inflation and higher interest rates have driven up the cost of doing business, subsequently squeezing profits and investor returns. 

Domestic and international stock markets are all down over 15% this year. Bonds are down double digits as well. This is the first time in over 30 years that both stocks and bonds are down in the same year. 

But there is good news!  

First, even with the dramatic losses we have experienced this year, the majority of portfolios are still higher than they were three years ago. 

Second, higher interest rates mean bond holders will receive more income on their bonds going forward.  

Third, drops in equity markets have brought equities back to more traditional valuation ranges as measured by the Price to Earnings ratio (stock price divided by earning per share). 

History suggests that the lower the Price to Earnings ratio, the higher market returns will be for investors over the following 10 years. The chart below shows P/E ratios on the X axis, with more expensive starting points (i.e. higher PE ratios) to the right. The Y axis shows the subsequent returns.

Putting higher bond returns and higher equity returns together; we think investors may be able to take a little less risk going forward. That is, a portfolio with a somewhat higher allocation to bonds may produce a return that meets a given investor’s needs without as much volatility.  

We may still have some pain to endure in this market cycle, but we think we are in a better place for the long run. So, feel free to complain about the markets over your turkey dinner AND be grateful for the opportunities the markets seem to be presenting. Happy Thanksgiving!

Medicare: Open Enrollment and Upcoming Changes

By Kevin Rigg, Director of Financial Life Planning, SoundView Advisors

Medicare's Open Enrollment Period — which began October 15 and runs through December 7 — is your annual opportunity to switch your current Medicare health and prescription drug plans to ones that better suit your needs. During Open Enrollment, you can: 

  • Switch from Original Medicare to a Medicare Advantage Plan 

  • Switch from a Medicare Advantage Plan to Original Medicare 

  • Change from one Medicare Advantage Plan to a different Medicare Advantage Plan 

  • Change from a Medicare Advantage Plan that offers prescription drug coverage to a Medicare Advantage Plan that doesn't offer prescription drug coverage 

  • Switch from a Medicare Advantage Plan that doesn't offer prescription drug coverage to a Medicare Advantage Plan that does offer prescription drug coverage 

  • Join a Medicare prescription drug plan (Part D) 

  • Switch from one Part D plan to another Part D plan 

  • Drop your Part D coverage altogether 

Now is the time to review your current Medicare benefits to see if they're still right for you. If your current plan doesn't meet your needs or fit your budget, you can switch to a new plan and any changes made are effective January 1, 2023. If you are satisfied with your current Medicare plan and it's still being offered, you don't have to do anything.  

Just in time for Open Enrollment, 2023 Medicare premiums, deductibles, and other costs have been announced. Surprisingly, some of these costs are lower than they were last year. The details of these changes are listed below: 

Medicare Part B (Medical Insurance) costs for 2023 

Most people with Medicare who receive Social Security benefits will pay the standard monthly Part B premium of $164.90 in 2023. This premium is $5.20 lower than it was in 2022. People with higher incomes may pay more than the standard premium. If your modified adjusted gross income (MAGI) as reported on your federal income tax return from two years ago (2021) is above a certain amount, you'll pay the standard premium amount and an Income-Related Monthly Adjustment Amount (IRMAA), as shown in the following table. 

People with higher incomes may also pay a higher premium for a Medicare Part D prescription drug plan because an IRMAA will be added to the Part D basic premium based on the same income limits in the table above. Part D premiums vary, but the average basic monthly premium for 2023 is projected to be $31.50 (down from $32.08 in 2022). 

People with Medicare Part B must also satisfy an annual deductible before Original Medicare starts to pay. For 2023, this deductible is $226 (down from $233 in 2022). 

Medicare Part A (Hospital Insurance) costs for 2023 

  • Part A deductible for inpatient hospitalization: $1,600 per benefit period (up from $1,556 in 2022) 

  • Part A premium for those who need to buy coverage: up to $506 per month (up from $499 in 2022) — most people don't pay a premium for Medicare Part A 

  • Part A coinsurance: $400 per day for days 61 through 90, and $800 per "lifetime reserve day" after day 90, up to a 60-day lifetime maximum (up from $389 and $778 in 2022) 

  • Part A skilled nursing facility coinsurance: $200 for days 21 through 100 for each benefit period (up from $194.50 in 2022) 

 Please let your advisory team know if you have any questions related to your Medicare coverage and they will be sure to point you in the right direction. You can also view more information in the Medicare & You 2023 Handbook and access a Medicare plan finder tool that allows you to compare health and drug coverage options at medicare.gov.  

Recessions and Market Returns

by Kevin Slater, CEO, Lead Advisor, CFP®

2022 has been a terrible year for the financial markets. The Fed has been forced to raise interest rates to combat the highest levels of inflation we have experienced in 40 years. The double whammy of inflation and higher interest rates have driven up the cost of doing business, subsequently squeezing profits and investor returns. 

Domestic and international stock markets are all down over 15% this year. Bonds are down double digits as well. This is the first time in over 30 years that both stocks and bonds are down in the same year.   

But there is good news!  

First, even with the dramatic losses we have experienced this year, the majority of portfolios are still higher than they were three years ago. 

Second, higher interest rates mean bond holders will receive more income on their bonds going forward.  

Third, drops in equity markets have brought equities back to more traditional valuation ranges as measured by the Price to Earnings ratio (stock price divided by earning per share). 

Market Summary - October 2022

By Vicki Simpson, Trading Analyst, SoundView Advisors

While 2020 was a year unlike any most investors have seen before, 2022 is serving up its own unique experience for investors. All markets have been on a downward slide for most of the year. Traditionally, we think of stocks and bonds moving in different directions – when one is doing poorly, the other is doing better. This has not been the case in 2022. Bond prices continue to fall as interest rates continue to rise and equity markets have seen a significant correction since January.  

One small piece of encouragement can be found in the bond market. As interest rates increase, bond income is also increasing, especially on the short end of the curve. SVA has made several changes in the core portfolio to take advantage of this income potential by using short term bonds and floating rate funds. While values may be declining broadly, these short-term funds are less sensitive to interest rates which helps stabilize their price, protect investor capital and generate income. 

A notable development is the aggregate bond market, emerging markets and international markets each have negative annualized returns over the last three and five-year periods through 9/30. Bond markets are typically thought of as a safe haven, but these numbers demonstrate there is volatility and risk associated with all types of investments. Looking at year to year returns, any given asset class may be one of the best or worst performers, but when you average the returns you see the net effect of investing in those markets over time. We continue to keep a long-term perspective and trust that everything won’t be awful forever. 

New Client Portal

Our client portal, provided by Orion Advisor Technology received an upgrade and a facelift! I can hear the questions already: Client Portal? Orion? Huh?

Never fear, brave reader. Nate’s here to set the record straight and put your mind at ease.


GRAND CENTRAL STATION

Orion is our Portfolio Management Software. Think of it as the Grand Central Station of all your account and investment information. Thousands of data points flow in and out of the software every day to help keep us (and you) up-to-date on your complete financial picture.

One of Orion’s many features is a Client Portal, a place where you can log in and see the balances of your investments, transaction details, and even performance data. It can be pretty handy.

If you’re already utilizing the portal, you won’t have to change or update your credentials — the switch should be seamless. Many of the core functions of the portal will remain the same, but the user interface will be much smoother. Some of the main features of the dashboard can be seen below.

We’re excited for the change, but this ain’t our first rodeo, either. We know there can be hiccups in anything involving technology. Once you log in and poke around for a while, let us know what you think. If you have questions, ask your Support Advisor, and they’ll point you in the right direction.

YEAH, BUT WHAT IF…?

I know, I know. FOMO (fear of missing out) is a real thing, folks. So real that you might be feeling its impact as we speak. If you’d like to find out how to access the Client Portal, let us know and we’d be happy to help get you up and running. If you don’t care either way, that’s fine, too. We’re not gonna push, if you’re not gonna pull.

Whether through the Client Portal, random check-ins, or your normal client meetings, we want to make sure you have access to all the information you can stand. If you have any questions , don’t hesitate to reach out. We’re here to help.

Inflation Reduction Act: What You Should Know

By Kevin Rigg, Director of Financial Life Planning, SoundView Advisors

The Inflation Reduction Act, signed into law on August 16, 2022, primarily addresses changes to Medicare, health insurance, and energy-related tax credits. It also provides additional funding to the IRS and is paid for by a new corporate alternative minimum tax and an excise tax on certain corporate stock buybacks.

You can expect to hear more from us in the coming months about the planning implications of this Act, but for now, we have summarized the key consumer provisions below.

Medicare

  • Authorizes the Department of Health and Human Services to negotiate Medicare prices for certain high-priced, single-source drugs. Only 10 of the most expensive drugs will be chosen initially, and the negotiated prices will not take effect until 2026. 

  • Starting in 2025, a $2,000 annual cap (adjusted for inflation) will apply to out-of-pocket costs for Medicare Part D prescription drugs.

  • Starting in 2023, deductibles will not apply to covered insulin products under Medicare Part D or Part B for insulin furnished through durable medical equipment. Copayments for covered insulin products will be capped at $35 for a one-month supply.

Health Insurance

  • Starting in 2023, a high-deductible health plan can provide that the deductible does not apply to selected insulin products.

  • Affordable Care Act subsidies (scheduled to expire at the end of 2022) have been extended through 2025.

    • Indexing of percentage contribution rates used in determining a taxpayer's required share of premiums is delayed until after 2025.

    • Those with household incomes higher than 400% of the federal poverty line remain eligible for the premium tax credit through 2025.

Energy-Related Tax Credits

  • Starting in 2023, a tax credit of up to $7,500 is available for the purchase of new clean electric vehicles meeting certain requirements.

    • The credit is not available for vehicles with a manufacturer's suggested retail price higher than $80,000 for SUVs and pickups, $55,000 for other vehicles.

    • The credit is not available if the modified adjusted gross income (MAGI) of the purchaser exceeds $150,000 ($300,000 for joint filers and surviving spouses, $225,000 for heads of household).

  • A tax credit of up to $4,000 is available for the purchase of certain previously owned clean electric vehicles from a dealer.

    • The credit is not available for vehicles with a sales price exceeding $25,000.

    • The credit is not available if the purchaser's MAGI exceeds $75,000 ($150,000 for joint filers and surviving spouses, $75,000 for heads of household).

  • The residential clean energy credit extends the current 30% tax credit towards the installation cost of solar panels and expands it to include other equipment used to harness renewable energy (including battery storage technology).

  • The current 10% residential energy credit (with a lifetime cap of $500) is replaced with a “nonbusiness energy property credit” that offers a 30% tax credit and an annual cap of $1,200 (although some projects allow for a higher $2,000 cap).

Social Security Reform

By Kevin Rigg, Director of Financial Life Planning, SoundView Advisors

It is projected that starting in 2035, just 80% of promised Social Security benefits will be payable if Congress doesn’t fix the program sooner. Making the program sustainable will generally mean raising taxes, cutting benefits or a combination of both. 

The coming shortfall has been well known for years and many proposals have been put forth to shore up Social Security. A recent survey of voters by the University of Maryland’s Program for Public Consultation sought to assess what changes had the most public support. These are the changes to help sustain the Social Security program that had the most support amongst survey respondents:

1. Raising the Social Security payroll tax cap

In 2022, Social Security payroll taxes are applied on up to $147,000 in income, a level that is adjusted each year. Several proposals have been put forth to either increase this threshold (to $250,000) or reinstate it at higher income levels (over $400,000).  These changes would have the most significant impact on sustaining the Social Security program, in some cases eliminating up to 61% of the shortfall.

2. Reducing benefits for high earners

Wealthier retirees receive more generous benefits on an absolute basis, although the percentage of benefits relative to earnings goes down as income increases. There are proposals to perform means testing that would further reduce benefits for top earners, which are estimated to eliminate the shortfall by 11%.

3. Gradually raising the retirement age

Your retirement age is when you stand to get the full benefits you earned based on your work record. Increases to the retirement age that were enacted in 1983 are still getting phased in today. For people born in 1960 or later, the full retirement age is 67. Because many people work and live longer, proposals have been made to raise the retirement age again, which could reduce an estimated 14% of the shortfall.

4. Increasing the payroll tax

Currently, employers and employees each pay a tax of 6.2% of wages, and raising those rates could have a big impact on the program’s solvency. A simulation showed that raising those rates to just 6.5% would help eliminate 16% of the shortfall.

It’s hard to predict what will happen with Social Security reform, but changes to the program are likely in the coming years, and the proposals listed above are certainly garnering more attention. We don’t anticipate significant changes to actual benefit payments in the near term, and any that are made are likely to be phased in over several years. We will continue following these issues, and you can expect further analysis and conversation from your advisory team as we learn more.

Source: https://www.cnbc.com/2022/08/03/changes-americans-are-willing-to-make-to-fix-social-security.html

Employee Spotlight: Nichole Harrison

Nichole Harrison is the newest member of the SoundView team!

Nichole received her Master of Science (M.S.) in Personal Financial Planning from Kansas State University in 2018. She’s been honing her skills ever since, and has been a wonderful addition to the growing team here at SoundView. As she's learning more about you, we thought it would be good for you to know a bit about her, too.

KEEP READING FOR NICHOLE'S ANSWERS TO OUR “GET-TO-KNOW-YOU” QUESTIONS!

 

What's the craziest thing you've ever done?
On a beach in Costa Rica, I held the back flipper of a SEVEN FOOT female leatherback turtle while she laid her eggs—and lived to tell about it!


What’s your favorite movie?
Escape to Witch Mountain—the version from the 70’s, of course!


What’s your favorite quote?
"When you are happy you can forgive a great deal."
- Princess Diana


What’s the most important thing in your life?
My four children, and continuing to learn for the rest of my life.


What’s your dream vacation?
I enjoy connecting to my roots, so I want to take a nice, long family-history tour across Europe! I recently found out I have family heritage in Italy—sounds like a good place to start!

If you could be any animal, what would you be?
An Otter. I have my reasons.

What would be your “last meal”?
I would skip it. If I knew I wouldn't be around much longer there would be other things I would rather do than eat.

EDITOR’S NOTE: firm leadership does not endorse the skipping of last-meals. Food is amazing.

What is your favorite thing about working at SVA so far?
The people! My very first day, Vicki showed true emotion while sharing at our staff meeting, Lisa willingly picked out my lunch, and I received multiple messages of support and encouragement from the rest of the team.


What drew you toward Financial Planning?
SoundView’s purpose is “to have a deep and lasting impact on people’s lives” — that spoke to me. Money was my first language. I counted, saved, and invested from an early age. When I discovered more about how it impacts the quality of life, I was all in!

The Markets Keep Moving

by Kevin Slater, CEO, Lead Advisor, CFP®

The Fed has finally acknowledged what many have been communicating for some time; inflation is a real and persistent issue in the U.S. The problem of inflation is more complex than a temporary supply chain slowdown. Many blame Russia’s invasion of Ukraine, which has ballooned commodity prices of many types: oil, gas, grain, and precious metals. Certainly, it’s a factor.

But much like a noxious weed, inflation’s roots go deeper. Over the past few years, the economic policies of both Republicans and Democrats injected massive amounts of cash into all parts of the economy, including the markets. As a result, we have much higher housing costs, heavier consumer spending, and aggressive business expansion (paired with worker shortages).

By raising interest rates, the Fed is increasing the costs of borrowing and thereby reducing spending capacity. They hope to slow inflation from the current 8%+ rate to a target 2% rate. Their challenge is to slow the economy without doing major harm. This is difficult as some sources of inflation, such as commodity prices, may not be impacted by these actions.

The markets, as always, are trying to forecast the future. The bond markets have already priced-in additional interest rate hikes. The stock markets are assuming companies will not be able to grow as quickly and, in many cases, may need to contract. Where will consumers spend their money? How will each company be impacted by higher rates and reduced overall spending?

At SoundView, we don’t believe in “timing the markets.” In the short run, no one knows how the markets will react to inflation reports or Fed actions. However, as a firm we do make strategic changes at times based on significant economic shifts. We will continue to keep portfolios well-diversified and look for opportunities to add stability should the broader market continue to slide.

Our current focus with fixed income (bonds) is the preservation of capital. Bonds lose value when interest rates are rising so we have shortened duration significantly to reduce this impact. Once rates stabilize, we will extend duration to take advantage of the higher income offered from higher rates.

On the equity side, we have seen prices become much more reasonable according to traditional metrics. That said, the S&P 500 remains growth-biased and many of those companies have greater business risk as rates rise. On the other hand, even if the Fed triggers a recession, many companies will remain profitable and may outperform the rest of the market. We are exploring ways to balance this exposure without making a market call.

These are challenging times for investors, and we anticipate there could be more losses ahead. Even so, we believe in the long-term value of investing and the opportunities market corrections create.


Falling Markets & Portfolio Changes

by Kevin Slater, CEO, Lead Advisor, CFP®

It has been a rough year in all parts of the financial markets. Due to several factors, nearly every part of the bond and equity markets have fallen dramatically.  How do we respond? Our goal is to remain strategically disciplined in our portfolio allocation and adjust only for long-term changes to the markets while also taking in new information as it arises. 

We feel some changes are in order due to the following:

  • Increased government intervention in China across multiple industries with focus on the most profitable companies

  • Russian invasion of Ukraine and the impacts on commodity supplies (grain, oil, and natural gas) and on geopolitical alliances

  • Higher inflation as unemployment remains low

  • Rising Interest rates and a flatter yield curve

China’s crackdown, the invasion of Ukraine, and the shifting allegiances have reduced our expectations for emerging market returns. Some emerging markets will benefit from higher commodity prices while others will suffer for the same reason. Some may see a jump in trade while some will not. We are reducing our allocation to emerging markets while retaining the use of active managers.

Rising interest rates and increased geopolitical uncertainty hurt international small cap companies disproportionately. This portion of portfolios has struggled despite low-interest rates, we think it will get harder. We are reducing our allocation to international developed small cap.

Amid the array of headwinds, international developed markets have thrived, most notably in Europe as the scope of the war remains limited but the side effects benefit larger companies in developed markets (ex: defense and energy companies).  We will reallocate the proceeds from emerging markets and international developed small cap to international developed large cap.

While we use broad index funds for most of our equity investments, we also use a select group of active global managers who tend to have a growth-oriented bias in their company selections. Growth oriented stocks have been punished by rising interest rates. We are reducing our allocation to active global managers and redirecting the funds across US companies.

On the fixed income side of portfolios, we have seen a rapid and massive jump in interest rates across the yield curve which reduces the value of bond holdings. Longer term bonds are punished more severely than shorter term bonds.  We will further reduce the average term of bond holdings until the yield curve stabilizes.

We intend to make these changes in the coming weeks. In the process, we will reduce the average manager cost and the level of volatility in portfolios. Please let us know if you have any questions.

Market Summary - May 2022

By Vicki Simpson, Trading Analyst, SoundView Advisors

If you don’t already know, there is no nice way to say it – at the moment, everything about investing looks awful. Bond values are declining as interest rates rise and equities markets are well into a correction. In addition, high inflation is reducing the purchasing power of your dollars. The downward trend of the first quarter continued into April. While many things are out of our control as investors, SoundView’s Investment Committee is focusing on ways we can mitigate the impact of current volatility, reduce risk and preserve capital in portfolios. I encourage you to read Kevin Slater’s article for insights on the factors affecting various markets and how our Investment Committee is responding and repositioning client portfolios.

Click HERE to find out more!

Staff Changes at SoundView

by Kevin Slater, CEO, Lead Advisor, CFP®

We are blessed with an incredible team at SVA. I appreciate the heart, knowledge, and wisdom each member of our team brings to the table. Our team is a strong community who depend on each other in order to provide you with our best insight and service. They are a wonderful group of people.

Change, however, is inevitable. Cole Spence will be taking an indefinite leave of absence to pursue personal interests. He is leaving on good terms, and we would welcome the opportunity to work with him again in the future. He has been a significant part of our team, and we wish him the very best in his pursuits. His last day will be May 27th.

At the same time, I am excited to announce we have hired Nichole Harrison, a longtime acquaintance of Kevin Rigg's. She has worked for financial firms in the Olympia area and has passed her CFP exam. She has communicated that our culture and the manner in which we serve our clients has really resonated with her. She will join our team on Monday, May 16th, and we are looking forward to sharing the gifts and talents she brings to SVA.

Predictably, these changes will require some reorganization of client assignments. We are committed to serving you well, especially during this time of transition.

Please join us in welcoming Nichole, and wishing Cole well.

It’s Good To Hear Your Voice

by Nate Porter, Chief Operating Officer, SoundView Advisors

IT’S GOOD TO HEAR YOUR VOICE

My kids love to sing. Around the house, on a road trip, in the shower — you name it.

For my son who’s 12, it’s mostly Imagine Dragons these days. He did, however recently request a playlist from an ancient band called “U2”, which shows that I’m doing SOMETHING right. For my daughter, 9, it’s the songs from whichever Disney/Pixar “joint” that has most recently dropped; currently, it’s all Encanto, all the time. And Queen. Can’t forget Queen.

A hand holding a microphone in a stadium

Now, when they sing, whether the notes are spot-on or not, I know it’s them. Being their dad, their voices are unmistakable to me. Heartwarming, I know, but how does this relate to you? A few weeks ago I read these statements on FTC.gov:


“Newly released Federal Trade Commission data shows that consumers reported losing more than $5.8 billion to fraud in 2021, an increase of more than 70 percent over the previous year.”

And “Of the losses reported by consumers, more than $2.3 billion of losses reported last year were due to imposter scams—up from $1.2 billion in 2020.”

That’s a tune I definitely don’t want to hear around the office.

A DIGITAL DISGUISE

Imposter scams are nothing new, but they are more sophisticated these days: email-spoofing, robocalls, they can even come via text message! The notes differ slightly different, but the tune is always the same: a scammer pretends to be someone you trust in an effort to convince you to send them money. In our world, these scams are almost entirely digital. Here’s the million-dollar question: why? Because using the written word, scammers can impersonate anyone they like. They can wear any mask.

That’s why your voice is so important! If a scammer gets on the phone and pretends to be someone you’ve had dozens of conversations with, you’d know instantly something was wrong. To bring it home: you know us. You know our voices and our faces, and we know yours—and that’s a powerful thing.


TRUE “VOICE RECOGNITION”

We’ve set up a few new rules for our firm to ensure neither you nor the firm falls victim to this type of fraud:

  • An outgoing funds transfer (out of a your investments to a bank account), must be verbally authorized by the client. This can be via phone, or in meeting.

  • In the same way, an outgoing funds transfer may not be authorized solely digitally.

  • Your Lead Advisor will be notified of all transfer requests, big or small.

  • Note: if you’ve set up a standing/automatic transfer, say, on a monthly basis, the rules are different. We won’t call you every time!

While some of this might sound like a hassle, I hope you’d agree a quick phone call may end up saving us all a ton of grief. And this goes both ways. If you receive written communication from someone on our team that seems strange, err on the side of caution. Let us know. Forward the message to us so we can look it over. Or you can even call us and we would be happy to talk about it with you. 


NOT JUST A BOX TO BE CHECKED

At SoundView, we insist on understanding our clients well. Our advisors don’t (and won’t ever) have hundreds of clients apiece. You’re not just a name on a list, or a box to be checked. You’re a household we have a unique relationship with. Knowing you well helps us do our jobs better, but it also has other effects. We can better sense if someone is experiencing cognitive decline. We can pick up on higher levels of stress and anxiety. Most of all – we know what you look like, sound like, and how you communicate. This can diminish the dangers of imposter scams.

Knowing you helps us learn from you, protect you, and serve you better. If you have any questions, or just want to say hi, never hesitate to give us call. I love talking to our clients-- it’s always good to hear your voice.