viewpoint newsletter for october 2010

Clear View Wealth Advisors, LLCis an independent Registered In-vestment Advisor providing finan-cial planning, tax consulting, andinvestment advisory services toindividuals and couples throughoutMassachusetts.

Clear View works on a FEEONLY/FEE-for-SERVICE basis.

www.ClearViewWealthAdvisors.com

Free Rollover Helpline978-388-0020

Call for Your Free Guide“Six Best & Worst IRA Rollover

Decisions”

V IEWPOINT

October 2010

Volume 1 Issue 3

Convertibles - For More Than Driving Fun

About Clear View

Find Free Money forCollegeby Steve Stanganelli, CFP®

If you are a business owner or

self-employed, consider this

strategy to help pay for college

and lower your income tax bill.

Offer an employer education assistance

program. As noted in Section 127 of the

Internal Revenue Code, an employer can

pay up to $5,250 per year per employee to

cover tuition, fees, books and equipment.

If you employ a child in your business, this

is one way to lower your business income,

lower your personal taxes and decrease

your Expected Family Contribution (EFC)

which may increase the potential for more

financial aid.

Scholarship Lotteries. In an effort to drive

traffic to their websites, some are offering

free scholarships. These include:

iWon.com

Jackpot.com

Publisher’s Clearinghouse

Free Scholarship Databases. There are a

number of options available:

FastWeb Scholarship Search

CollegeBoard.com FUND FINDER

Scholarships.com

NOTE: Avoid sites that may require an ap-

plication fee.

(Continued on Page 2)

Steve Stanganelli, CFP®, CRPC®

Hybrid Bond Investment Increases Income and Reduces Some Risks.By Steve Stanganelli, CFP®

While the summer season has come and gone, Convertible Bonds arealways in fashion as part of any all-weather investment portfolio.

Hybrids are all the rage with auto buyers. And convertibles are a perennial favorite of autoenthusiasts. Both can be part of a long-term investment portfolio, too.

Convertible Bonds may be unfamiliar to most investors but they are a great tool for helpingto minimize risk in any investment portfolio. Convertible Bonds are hybrid investment vehi-cles that offer the best of both worlds — income now like a bond and the potential to cap-ture appreciation later like a stock.

Get Paid While You Wait

Convertible Bonds offer investors a fixed yield like any other bond. This regular incomeoffers better downside protection than simply holding the stock. They also have a featurethat allows the bondholder to trade in the bond for a certain amount of stock on a predeter-mined date. This feature makes CBs advantageous during inflationary times when stockprices might be increasing and other bonds drop in value. During market corrections orbear markets, investors receive interest while waiting for the next recovery or bull market.

Like any other bond, there is underlying credit risk of the issuer. The opportunity to convertalso means that the CB may track the stock more closely and have higher volatility thanstraight bonds. Yet the hybrid nature of this investment provides corresponding benefits.

Viewpoint is produced by Clear View Wealth Advisors, LLC for the benefit of its clients and allied professionals. Although the information here is gathered from reliable sources, readers should notact upon it without professional advice. Past performance is no guarantee of future results. Examples with hypothetical returns illustrated are not representative of a specific investment. Clear ViewWealth Advisors, LLC 12 Amidon Ave., Amesbury, MA 01913 & 25 Lowell St., Wilmington, MA 01887 Tel: 978 388-0020 Email: [email protected]

Volume 1, Issue 3

Clear View’s risk-controlled investment style is based on amulti-bucket approach: safety net, core allocation and tacti-cal opportunity (or satellite).

Core buckets are based on asset allocation and ModernPortfolio Theory (MPT). Commentators in the financialpress have said that MPT is dead because the concept“failed” as all asset classes went down in value during theGreat Recession. But to paraphrase Mark Twain, the de-mise of MPT is “greatly exaggerated.”

MPT is a way to organize a portfolio to minimize risk but itdoesn’t eliminate it. The theory is based on the premise ofasset allocation and finding the right mix producing the bestreturn for the least risk: When one asset zigs another zags.

To be effective, MPT does its job when you move beyondsimply “buy and hold.” To properly manage risk, ClearView builds core allocations, reviews market conditions andthen either over-weights or under-weights certain assets.The asset allocations are not static because the world isdynamic.

The Great Recession has taught us to look at risks of cer-tain assets differently. Most investors would have thoughtthat bonds from developing countries or stocks in emergingmarkets would be riskier than those from large companiesin developed countries. But that kind of conventional think-ing would have proven dangerous, nearly fatal, to a portfo-lio and future retirement income hopes. Just think aboutFannie Mae, GM or Greece compared to the stocks andbonds of companies in the MSCI Emerging Markets Index.The key to successful investing is flexibility of thought andexecution.

Morningstar research shows that emerging-market bondshave outperformed US corporate and government bondsfor every time period: One through 15 year periods.

SPOTLIGHT on MarketFlex Portfoliosby Steve Stanganelli, CFP®

(Morningstar Advisor, Oct/Nov 2010, page 14).

Through Clear View’s MarketFlex model portfolios, an in-vestor has access to a core (example: 60% stocks/40%bonds and cash) but the actual components (mutual funds,stocks, bonds and ETFs) are monitored and substitutionsmade based on review criteria that includes the economicBig Picture.

Market View

It is my belief that the economy will continue to grow butslowly. Real estate will continue to struggle - office vacan-cies continue to rise and there remains a huge inventory ofbank-owned property that will continue to depress prices.

Inflation in the near-term (1 to 3 years) is not a threat de-spite doomsayers on TV. A recent briefing by a Boston Fedeconomist to the Financial Planning Association furtherconvinces me that the Fed’s market operations are in checkand will not contribute to “run-away” inflation.

US Treasury bonds and gold show signs of a bubble.

Tactical Investing Strategies Reduce Risk

Based on my reading of the tea leaves, I have modeled theportfolios to increase alternative assets and include moretactical bond strategies by proven local money managers.

This means that there will be an increased allocation toconvertible bonds and managed futures which tend not tomove in tandem with the S&P 500. Dividend-paying stockswill continue to have a significant role in all models.These moves will provide a hedge against market volatility.

Times like these also offer opportunities for increasedmerger activity by larger companies that are flush withcash. So there will also be an allocation to mutual fundsthat specialize in M&A as a way to benefit from this near-term trend.

Convertibles for Driving & InvestingBy Steve Stanganelli, CFP®

Clear View Wealth Advisors, LLC 978-388-0020 or 617-398-7494

Convertible Bond AdvantagesAs an asset class, Convertible Bonds have been around formore than 150 years. Since December 1973 through mid-2010, the CB index has had total returns (interest plus appre-ciation) of 2736%, outpacing the government/corporate bondindex by 943% and hi-yield (aka junk) bond index of 1585%(BofA/Merrill Lynch Convertible Research, 6/30/10).

CBs have evolved. In the past, many were issued by smallercompanies that did not have other means of accessing capi-tal. Over the past 15 years, CBs have become more preva-lent among larger brand name firms as well. Many now offerwindows to convert to stock that are relatively short: 3 to 5years, reducing the CB investor’s needed holding period tocash out and get his money back with interest or a stock gain.

During Fed tightening, CBs have performed well. It is inevita-ble that interest rates will rise from their historically low rateswith or without inflation. While the value of other governmentand high-quality corporate bonds will suffer when interestrates rise, CBs will likely hold their value, continue to pay outinterest and offer the potential of greater return when con-verted to stock. [For a whitepaper detailing this, please call].

1. Higher yield than most equities (presently > 3.5%)

2. Potential to capture appreciation

3. Enhanced diversification and lower potential risk resultingfrom low correlation with stocks and bonds

4. Track record of preserving capital

5. Unlike other bonds, Convertible Bonds have generallyperformed well during periods of increasing interest ratesor inflationary periods.


Volume 1, Issue 3

BREAKING UP IS HARD TO DO: MISTAKES TO AVOID IN DIVORCE (continued from page 4)


Special points of interest: Common Mistakes

Producing an inaccurate budget of how you live now

Being too emotionally attached to assets during settlement negotiations

Disregarding the impact of taxes on divorce

Forgetting to update estate documents or beneficiary designations

Failure to adequately model a post-divorce financial plan

Not insuring the settlement against death or disability

Call the Clear View Divorce Planning Helpline for a FREE copy of

“Divorce Financial Planning Fact Sheet and Checklist” at

978-388-0020 or 617-398-7494.

“Using Convertibles to Protect & Grow Wealth”

Amesbury * Wilmington * Woburn

FREE e-ReportClear View Wealth Advisors, LLC

Expiration Date: 11/26/2010

Don’t become a financial victim. If you suspect a spouseis planning a divorce, make copies of important records andnotify creditors, banks and investment companies in writing.

Don’t prepare an inaccurate budget. Individuals are usu-ally required to produce a budget for temporary maintenance(aka Pendente Lite). But through oversight or inaccuraterecord-keeping, this invariably leads to problems when theyfind that they are having trouble making ends meet with thecourt-approved maintenance based on the budget provided.It makes more sense to bring in a qualified financial profes-sional at this stage to help in preparing the budget.

Don’t try to use the courts to punish a spouse. In moststates, equitable distribution is the basis of settlements. Hir-ing a combative attorney or ignoring other options like me-diation or Collaborative Practice will be costly and toxic topost-divorce family relationships especially with children.

Don’t forget the common enemy: the IRS. As the proverbsays: the enemy of my enemy is my friend. Both parties willbe impacted by taxes. With careful planning ahead of time,this can be minimized. If assets need to be sold or qualifiedplans prematurely withdrawn, this may increase the tax billwhile reducing assets to live on post-divorce.

A 50/50 split may sound fair. But the bottom line is the shareof marital assets each gets net of the tax man.

Don’t use a divorce lawyer as a financial planner, ac-countant or therapist. At rates in excess of $300 per hour,it’s easy to rack up big bills and not get the specialized ad-vice that other professionals can offer.

Don’t forget to insure the settlement. The prematuredeath or disability of a spouse means lost support, mainte-nance or help paying for college tuitions and health insur-ance.

Make sure that life insurance names the spouse receivingsupport as the owner of the policy. This way if the spousewho’s paying for the policies stops paying the premium at

least the beneficiary/owner will receive notice and can take legalsteps to deal with the breach.

Don’t keep the marital home if it’s not affordable. Too oftencouples will fight over who keeps the marital home. While theremay be sentimental value or legitimate concerns about uprootingkids from schools, it may not make financial sense to keep thehouse. After all, real estate is a low return asset (and has in factbeen negative in recent history) while the mortgage, taxes andmaintenance expenses can be a drain on post-divorce budgets.It usually makes more sense to sell the property while still tech-nically a couple to get the maximum exemption of capital gains($500,000 above cost basis) and split the proceeds to buy orrent another place.

Don’t forget to change beneficiaries. Forgetting to delete andchange one’s spouse from qualified plans or insurance policies,unless required by the settlement agreement, could result inbenefits or assets passing to someone the divorcing coupledoes not want to receive them.

Don’t forget to close or cancel joint credit cards. To avoidproblems its best to close credit cards to any new charges pend-ing the final divorce. This will avoid the temptation of onespouse running up charges.

Don’t agree to a settlement without having a QDRO in place.Whenever a spouse has a qualified plan (ex. 401k or pension) aQualified Domestic Relations Order will inform the plan adminis-trator who is entitled to the asset and when. This is sometimesan afterthought but is critical. It’s a good idea to watch the lan-guage in these orders. If not worded correctly, it could delaywhen a spouse will be eligible to start receiving benefits or itcould lead to investment decisions that may be reckless or detri-mental to the spouse’s retirement interests.

Don’t underestimate the impact of inflation. Without properhelp in reviewing settlement options or preparing a post-divorceplan, it is easy to forget that the lump sum received today maylook like a huge sum but may be inadequate for inflation.Whether for college tuition, medical care or housing, inflationcan take a big bite out of one’s budget and resources.

For more tips and help, consider using a qualified Divorce Fi-nancial Planner. Call Steve at Clear View Wealth Advisors formore details and a personalized plan.


Volume 1, Issue 3

About Clear View Wealth Advisors, LLC

Clear View is a Registered Investment Advisor providingfee-only / fee-for-service financial planning, consultingand investment management services.

Our Mission:

Guiding individuals to better financial decisions throughall of life’s transitions by planning well and investingsmart so that clients can live better.

THE BOTTOM-LINE

When your life savings are at stake, you want advice youcan trust and someone you can count on. You need atrusted advisor that is objective, an advisor that is notpaid more to sell you one product over another. Youneed a relationship with a firm and an advisor that prom-ises to always put your interest first, a firm with provenexperience and the right professional credentials.

To explore how Clear View and Steve Stanganelli, CFP®can help you, call 978-388-0020 today to schedule anexploratory meeting (via phone or in-person). There is nocharge or obligation.


Primary Business Address

12 Amidon Avenue

Amesbury, MA 01913

Branch Offices:

Woburn & Wilmington

Phone: 978-388-0020 or 617-398-7494

Fax: 866-654-4301

Email: [email protected]

Visit us on the Web!

More Financial Tools: www.ClearViewWealthAdvisors.com

FREE Road Map Tool: www.BabyBoomerRetirementPro.com

Our Blog: www.MoneyLinkPro.Wordpress.com

Visit our website to find out more about our approach and services.

FREE Online Planning Tool

Get Yours at www.SmartMoneyRoadMap.com

Steve Stanganelli and Clear Viewspecialize in the following services:

Retirement Income Planning IRA Rollovers Roth IRA Conversion Analysis College Funding Strategies &

529 Plans Divorce Settlement Analysis Qualified Plans for Businesses One-to-One Money Coaching Periodic or One-Time Invest-

ment Advice On-Going Investment Manage-

ment & Monitoring Financial Education Programs

for Groups

Breaking Up is Hard to Do:11 Critical Financial Mistakes to Avoid in DivorceBy Steve Stanganelli, CFP®, CRPC®

Long after the wedding bells have faded, you may know someone who has come to afork in the road and has decided to go in a different direction than his or her partner.

Building a life with someone involves many things. There are the memories, friend-ships, family relationships and possibly children and pets. Love plants a seed thateventually grows deep roots as a family is born and grows. And while love is not al-ways about money, divorce certainly can be.

Whether there’s just a house and a retirement account or something more complexlike business ownership, other investments and stock options, unraveling a lifetime ofwork is tough and complicated by emotional issues.

Although escaping the emotional toll that a divorce can have is not possible, it is notin a person’s best long-term interests to make or avoid decisions that will impact thefuture well-being because of emotion.

Individuals considering a divorce should assemble a team of qualified professionalswho can advise on the legal, tax and financial impact of various proposed divorcesettlements. Here are some tips to consider and mistakes to avoid:

Check the Clear View Site

“The Money Coach Road Map Series:”

FREE WebinarsLive on the 2nd Thursday Each Month

(Continued on Page 3)

viewpoint newsletter for october 2010

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