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BlogOur thoughts on investing and the financial markets

David Haverstick serves as Vice President for Ables, Iannone, Moore & Associates, Inc.  Prior to joining AIMA, he was an advisor for a national firm specializing in retirement plans for non-profit organizations. He later moved to a regional bank where he worked as an advisor in the wealth management division focusing on investment manageme...nt for individuals and organizations. David attended Bethel University where he was a two-sport athlete earning All-American honors on the basketball floor as well as being a 16th round selection by the Arizona Diamondbacks in the 1997 MLB Draft. He earned his master’s degree in management from Dallas Baptist University and as Vice President at AIMA, David holds the Series 66 license. More

Know Your Retirement Plan Options

Earlier this week, the IRS made some adjustments to the required minimum distribution (RMD) rules for 2020.  First, some background.  With the passage of the SECURE ACT, an RMD for 2020 is no longer required.  But what if you had already taken your RMD?  Can you put it back?  Well, that depended on when you took it.  For those people who took their RMD out during the March through June window, they were allowed to reverse the transaction and put it back into their account without penalty.  In April, the IRS announced it would allow distributions that were taken in the month of February to be returned.  However, if you happened to have taken your RMD anytime in January, you were out of luck and could not put that money back into your retirement account. 

Just this week, things changed when the IRS announced that anyone who had taken withdrawals, regardless of when they were taken, would be allowed to put the money back into their retirement account as long as it was done prior to August 31st.  Effectively, this was an extension of the normal 60-day rule.

Depositing the funds back into your retirement account has several possible benefits and considerations:

  • Lower income usually means lower taxes.  You should certainly check with your CPA regarding your particular situation as to whether it is beneficial for you to return some or all of this year’s distributions, but in doing so you likely will save on this year’s taxes.
  • The lower income for 2020 could impact your Medicare rates, again this should be discussed with your CPA.
  • Consider converting the RMD into a Roth IRA. In this scenario, you would not put the distribution you received back into the same account, but rather into a Roth IRA where the amount can be invested, tax-free.
  • For some that may have taken the RMD and simply deposited into a non-qualified investment account, moving the money back is a relatively simple process. 
  • For others, particularly if you are using the funds as a source of regular retirement income, coming up with the money to deposit the funds back into the retirement account can be a bigger challenge.
  • However, if the RMD is not needed for monthly retirement support or a specific purpose, it may even make sense to borrow the money for a few months in order to avoid the extra taxes.  This should be determined on an individual basis as to what makes sense for you, but an example could be:
    • A client could draw on a home equity line or take a short-term margin loan in order to generate the cash needed to deposit the funds back into their retirement account.
    • Since they will not be needing the 2021 RMD for living expenses, they will simply use that money to pay off the loan in early 2021.

In short, every investor, whether it is a traditional IRA or perhaps an inherited IRA should review their situation and determine whether reversing the RMD is beneficial to them or not.  If you and your CPA decide it is beneficial then we welcome the opportunity to assist you with finding a source of funds to make the deferment a reality.  Whether you are an existing client or simply need some independent guidance in regards to these questions we hope you feel comfortable contacting us for a complimentary review of your specific situation.

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Tackle Your Student Loan Debt

If you are one of the 44 million borrowers saddled with student loan debt, it can be a heavy burden to carry. According to Forbes, student loan debt is the highest it has ever been at more than $1.5 trillion. That ranks second, behind only mortgage debt, as the highest consumer debt category. The Institute for College Access and Success pegs the average amount owed for borrowers in the 2017 class at $28,650. 
There are many contributory factors to the student debt crisis, but three in particular stand out. The first is the cost of education. Using inflation adjusted data for Americans 25 – 34 years old, as reported by the Philadelphia Inquirer, the cost of a four-year public education is 2.5x more expensive than it was in 1977. The second factor is the median level of debt has increased 3.3x. And lastly, the median income has stayed exactly the same at $34,000. Simply stated, we have a situation where costs are going up, debt levels are going up but income is staying the same. This is otherwise known as a recipe for disaster.
Beyond the dollars and cents, carrying high levels of debt can affect your mental and emotional well-being by causing stress, anxiety, insomnia and even feelings of isolation. Financial anxiety is no stranger to most Americans. However, letting it overcome you will not make it go away, it will only make it worse. There are strategies to tackle your debt and begin on the road to financial freedom.
First Things First
The first step is to know what debt you have, as in how much is owed, are they federal or private loans, and what interest rate (cost) you are paying? This information is important and a needed first step in making a plan to tackle the debt load.
Spending and Cash Flow
Now that you have a clear picture of your debt, it is important to prioritize your monthly spending. It’s unwise to sacrifice all other planning and opportunities due to the overhang of the student debt. For example, you need to work on building an emergency fund to cover the unexpected turns in life. Everybody’s circumstances are different but a good rule of thumb is to start by shooting for two to three months of expenses.
An opportunity that you should take advantage of because it will pay off in the long run is your 401k and IRA’s. Not saving for your retirement simply because you have debt is a bad idea. There are tax benefits, possible matching money contributed by your employer and not to mention, the greatest benefit of all which is the opportunity for compounding interest on your investments over time.
Making the Payments
Depending on your monthly cash flow, the quickest and most efficient way to tackle your debt is to pay more than what is owed. If you are able to get into the habit of putting even a little extra per month on top of the minimum this will save you money over the life of the loan. If this is not an option based on your circumstances then look for opportunities throughout the year to add to your payment by using extra funds that you may earn from a bonus, raise or side gigs. The takeaway here is that anytime you can accelerate your payments beyond the minimum, you will save money in interest charges that otherwise would be applied to the loan.
Restructuring: Consolidation vs Refinancing
Consolidation typically refers to federal student loans that get combined and repackaged as one loan with an extended term. Since the term of repayment has been extended, the monthly payment most likely will go down. The interest rate will be fixed but it becomes a weighted average of your previous loans that were combined. Bottom line, if you pursue this option, do know it is free and can be done online through the Department of Education. Take a skeptics approach and perform due diligence on any service offering to handle your consolidation for a fee.
Refinancing, while technically a form of consolidation, largely centers around private lenders combining your private student loans into one. If you have both federal and private loans, they can be refinanced together as well. The lender will look at your entire financial picture to determine the refinancing offer so the terms and interest rates will vary. Depending on such things as your credit score, job and salary, it may or may not make sense to refinance so be sure to evaluate each lender and offer on its terms to understand total costs.
Get Started Now
Whether it’s student loan debt, credit card debt or even just concerns over retirement planning or preparedness take the time to sit down with a financial advisor and establish a plan designed to meet your specific needs. Our firm provides this type of guidance in a complimentary fashion and as an independent fee-only RIA we always act as a fiduciary and do what is in our client’s best interest. There are many free resources available and addressing your financial future now will be beneficial on so many levels. Let us know if we can help.
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Firms Threaten to Pull Business if Fiduciary Rule is Set

We need to talk about Nevada, where leading broker-dealers including Morgan Stanley, Edward Jones, Charles Schwab, Wells Fargo and TD Ameritrade have sent letters to the state threatening to stop doing business or reduce investment services for investors if a fiduciary standard is put into place.  They argue it is too expensive and the burden of compliance to meet a fiduciary duty would have a negative impact on investors, particularly low-and-middle income investors.

Wait, what?  If the state of Nevada implements a rule which essentially states brokers and advisors must put the best interest of clients above all else, these firms are taking their ball and going home?  That, is unbelievable.  Are they going to leave New Jersey and Maryland as well since both states have put forth fiduciary proposals?  Before we rush to judgement, let’s be fair and look at what Nevada is proposing, maybe we are missing something.


Well, that seems pretty straightforward and reasonable – that somebody performing any of the above actions or holding themselves out to be a financial advisor will be held to a fiduciary standard of putting the best interest of the client first and foremost.  Morgan Stanley had this to say about it:

Absent substantial changes to the proposal, Morgan Stanley will be unable to provide brokerage services to residents of the state of Nevada.

That seems a bit extreme, does it not?  Regardless, let’s dig deeper.  Maybe the backlash stems from the definition of what actually constitutes investment advice per Nevada’s proposal.


I don’t see the debate here either.  I guess if I was forced to play devil’s advocate, I could argue that providing security analyses or reports needs more clarity or redefined in order to trigger a fiduciary relationship.  Otherwise, the framework presented here is spot-on.  Think about it this way, re-read the above bullet points but this time in the context of, “An advisor does not have to put their client’s best interest above all else when they provide …”  That definitely feels uncomfortable and misaligned.

There must be more to the story that has these firms and lobbyists all twisted up and bothered.  Let’s keep going and look at the exemptions to the rule and another hot topic which is how a dually registered representative is treated.


To summarize, Nevada has carved out space for transactional services by limiting the duration of the fiduciary responsibility of the broker or sales rep.  The proposed regulations go even further in providing exemptions.  For example, there is no fiduciary duty applied to brokers who execute unsolicited transactions for clients whose assets they are not managing.  Additionally, the standard does not apply to clearing firms or to those who are executing orders from a registered investment advisor.  Still there is more:


But yet it’s still not enough for the broker-dealers.  Puzzling, right?  What exactly is behind the threat to leave Nevada simply because they want to implement regulations that require brokers, sales reps, advisors, etc. to put a client’s best interest above their own?  There appears to be ample exemptions and room for everything from selling proprietary products to receiving commissions.  Enter the dually registered representative.


Now, we might be onto something serious.  Why?  Because what this says is an advisor can’t switch hats anymore.  What most people do not understand is their advisor can be dually registered.  In other words, they can be a broker (who is not a fiduciary nor required to act in such a capacity) and an investment advisor (who is a fiduciary and must act at all times as such duty requires).  Therefore, under current regulation, an advisor can act as one or the other or even switch hats within a relationship based on a variety of factors. 

Nevada is saying no more.  If you’re dually registered, you’ll be held to the fiduciary duty at all times.  This will impact, if not fundamentally change, the business model of these firms, their brokers and sales representatives.  Whereas before, they could technically work with the client however it best suits their business, now there would be a burden of proof to act in the client’s best interest.  I presume this is inconvenient and less profitable and these firms simply don’t want to do business this way.

I do not buy for one second the argument that holding an advisor to a fiduciary duty excludes low-and-middle income investors.  What excludes low-and-middle income investors are the firms and advisors who do not want to work with them unless they can transact business on a commission basis out from under a fiduciary duty.  Why?  Because it is more lucrative and there’s less responsibility to the client. 

To be clear, there is nothing inherently wrong with commissions or the business of brokering transactions in the marketplace.  What is outrageous is presenting the argument these firms are fighting for what’s in the best interest of investors, regardless of account size, by NOT implementing a fiduciary standard – which by the way mandates the client’s best interest remain first and foremost above all else.  Think about that for a second.  It makes zero sense.

AIMA, Inc. is proof a fiduciary model works

Ables, Iannone, Moore & Associates, Inc. is a fee-only, SEC registered investment advisory firm located in Savannah, GA.  We provide asset-management to clients in over 20 U.S. states, Europe, Asia and South Africa.  We are fiduciaries and do not impose minimums on our clients because we believe the size of the account should not dictate the quality of service or the depth of the relationship. 

As an independent advisory firm, we get to know our clients and put ourselves in their shoes.  We have a fixed and transparent fee structure that is easy to understand.  Our investment process combines independent research, information from analysts and think tanks and we listen to the companies themselves.  Next, we apply our beliefs and expertise within the markets and ultimately invest for our clients as if we were in their specific situation.  Our business model, growth and support from our clients proves a fiduciary model works if the advisory firm wants it too. 

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20145 Hits

Powerful tools for the self-employed and business owner

This time of the year brings a myriad of questions surrounding retirement plans for the self-employed and the business owner.  Whether you are a sole proprietor, small business owner, medical practice or larger corporation, retirement plans are essential tools for tax and retirement savings.  We understand every business is different and welcome the opportunity to discuss your needs and help design a plan that makes sense.  If you currently have a plan in place and would like to review it, we would be more than happy to look at it with you.  In the end, there are few tools more powerful than retirement plans for the business owner – they can create annual tax savings, provide tax deferred growth to fund retirement and if applicable, aide in the recruiting and retention of employees.


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4637 Hits

Midterm Madness and the Markets

The highly debated midterm elections have come and gone. After the dust settled, Congress is split as the Democrats secured enough seats to flip the majority and retake the House while the Republicans added seats to their majority in the Senate. Let’s take a look under the hood, courtesy of our friends at CFRA Research, and see what history tells us about post-elections, political gridlock and market returns.

This was the 19th midterm election since 1946. 

Did you know? 

  • From election day to the end of the year, the S&P 500 has averaged a 3.3% gain and it has advanced 67% of the time.
  • Looking at the six months after the election, the S&P 500 has advanced 13.8% on average and did so 94% of the time.
  • Going out a year after the election, the average price gain in the S&P 500 was 14.5% and it advanced 100% of the time.


History is only a guide, not a guarantee, but what stands out most to us is the 100% advance rate in the 365 days after the election in comparison to only 2/3rds of the time in the short timeframe up to year’s end.  Clearly, investors become more and more bullish once the midterm elections pass.  A large part of that bullishness can be credited to the fact that the uncertainty leading up to the election is now minimized, if not gone entirely.  Will it happen again after this midterm election, in this environment?  That is the million-dollar question, as the saying goes.  The actual legislative environment does matter so let’s dig even deeper and see what history tells us about political gridlock.

  • Since WWII, the best market returns as measured by the S&P 500 occurred when the Government was unified. In other words, the President and controlling majority in Congress were from the same party.
  • The second-best scenario for the S&P 500 occurred when Congress was unified but the President was from the other party.
  • The third-best scenario overall for the S&P 500 occurred with a split Congress.


The Unified Government scenario is by far the best and it makes clear sense because there is little need for compromise to get legislation and policies approved.  The 80% frequency of advance is the telling number in that scenario.  Under a Unified Congress, there is still room to approve stimulus and policy, albeit with a bit of compromise.  The least favorable set-up is a Split Congress because both sides typically dig their heels in and all but refuse to compromise.  We believe volatility and returns will be influenced by how Congress decides to govern.  The President will likely focus in on key areas where his executive powers can be maximized such as tariffs.  Other legislative items such as immigration, further tax overhauls and healthcare reform will likely face stiff headwinds.

It is important to remember that markets are a reflection of several variables, domestic politics being just one of those inputs.  We believe a couple of the challenges facing this market are very real but controllable, namely tariffs and Fed monetary policy.  A healthy skepticism is welcomed as we progress forward under a split Congress, in this global economic environment at this stage of the corporate earnings cycle.  However, on balance we believe history has written a strong case for continued market gains post midterms.  We take a wide-angle view and understand this is not the first-time investors have differed on politics or faced trade wars, inflation or rising interest rates.  The short-term view isn’t always the clearest one so we must continue to invest with the long-term in mind.

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Why we use individual bonds vs bond mutual funds

One important note to distinguish us at Ables, Iannone, Moore & Associates from other firms is we use individual stocks and bonds.  This helps us manage portfolios with tremendous flexibility, control and transparency.  It also allows us to reduce costs.  We believe this makes it easier to align our management to the goals of the client vs a one size fits all feel that is associated with model portfolios and financial products.

The other week I wrote a post about some of the opportunities we are seeing in the fixed income space in current market conditions.  I won’t rehash that discussion but it largely centered on individual bond structures we like in a rising rate environment.

What you may have noticed is it did not include bond mutual funds or ETF’s for that matter.  Here are 3 reasons why:

  1. The mechanics of a traditional bond mutual fund make it impossible to guarantee your return of principal because you don’t own the actual bonds in the fund, you own proportional shares of the mutual fund’s net asset value (NAV). More importantly, there is no maturity date established in a traditional bond fund.  This is because they are pooled investment vehicles in which thousands of investors aggregate their money together with a manager who is charged with following the investment goals of the fund in perpetuity as outlined in the prospectus.  Therefore, when an investor wants to redeem their money they do so at the NAV of the fund at the end of that given day.  In response to this, fund sponsors developed mutual funds and ETFs that have a defined maturity (DMF).  These products do offer a close approximation to a return of principal in the form of a final investment value but may still fall short of actual principal return due to costs and other factors in running the fund.  Further research shows that DMFs can produce more volatility than traditional funds due to their structure and carry higher costs which can drag on overall performance.  Contrast this with owning bonds outright.  Minus an issuer default or another agreed upon structure to the bond, the investor gets their principal back at maturity regardless of the fluctuating value of the bond during the holding period.
  1. It’s hard to actually get fixed income out of them because of the numerous variables in determining the yield of the fund. It is beyond the scope of this post to dive into all the factors that determine bond fund yields but suffice it to say, it can get complicated.  However, it is important to understand that distribution yields are calculated on a per-share basis, typically dividing the most recent per-share distribution by the current per-share net-asset value (think share price of the fund).  That means if either of these inputs change it will result in a fluctuating distribution yield (think payout to you as shareholder).  And it will change because new bonds are constantly being added, cash is constantly moving in and out of the fund, prices of existing bonds will change and the manager is under pressure to maintain a competitive yield in order to attract new investors.  Is your head spinning yet?  You’re not alone.  Years ago, the Securities and Exchange Commission stepped in to mandate a standardized yield calculation, called the 30-day SEC yield, largely in response to the fact managers were manipulating their fund’s stated yield to appear more attractive than it actually paid out.
  1. They seem expensive when factoring in all the fees and expenses. Many investors miss or don’t understand the true cost of ownership which may include commissions, 12b-1 fees, soft dollar arrangements, transaction and brokerage costs, tax implications and annual expense ratios.  Depending on the fund, these costs can range between 2% - 4% per year.  This would be in addition to whatever you may be paying your finanical advisor.

Let’s recap.  There is no guarantee made as to the return of principal.  It’s hard to nail down the cash flow that will be generated from owning shares of the fund.  And they are expensive.  So why use them?  First and foremost they are easy to own.  It makes getting diversified exposure to fixed income really simple.  Also, there are times in which no alternative exists such as inside a company 401k or other retirement plan.  On the more nefarious side, advisors can be incentivited for selling or using the funds in client portfolios.  We see this quite a bit with the big name places – looking through a statement and seeing the firm’s own funds conveniently being used.  I digress. 

Our goal isn’t to rail against bond mutual funds or ETFs and it’s not to suggest you are going to investment hell for using them.  Rather, it is to highlight the alternative of using individual bonds to customize specific fixed income solutions.  Instead of pooling that money with thousands of other investors under one goal of a fund manager, we find it is superior using individual bonds to manage various risks such as duration, reinvestment, interest rate, principal and credit for our clients.  It provides flexibility and clarity on what you own, how much cash flow will be generated and an end date for when we can expect a return of principal.


Ables, Iannone, Moore & Associates, Inc. is a fee-only, SEC  registered investment advisory firm providing asset-management to clients in over 20 U.S. states, Europe, Asia and South Africa.  We have over 50 years of combined experience in the financial services industry.

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How can I put money to work in these market conditions?

This is literally a question we get asked all the time, regardless of the market environment.  It is understandable – not all portfolios are created equal regarding entry price and allocation – and people come to us at differing times with new money or cash positions asking what is the best route to take?  How can we help get their money working harder?  Of course the answer to those questions are very specific to each client but we thought it would be helpful to show an example of an opportunty we are seeing right now in the markets.  Something you could possibly adapt to your own personal situation.

Let’s start in the stock market, fresh off its all-time highs.  We do see some attractive names, but in general stocks seem fairly priced.  In other words there aren’t a lot of great deals to be had.  Some?  Yes, but not a lot.  It rarely does us any good to chase prices.  Instead, taking some profits where appropriate, waiting for better pricing on entry and slowly building positions has been our recent approach with equities.  That said, we also aren’t feeling any dramatic recession is upon us.  How about elevated volatility?  Sure, but nothing more than the healthy garden variety type.

Now let’s look at the fixed income side of things.  We know bond yields are gradually rising.  Remember, when interest rates rise, the price on existing bonds fall.  With the FED continuing to increase short-term rates, we know market forces will also gradually increase the yield on the bonds available.  This is largely due to supply and demand.  Foreign yields are a drag on this at the moment, but eventually longer-term bond yields should rise back toward normal levels.  This can cause a decline in the value of your portfolio of existing bonds and leave you with a multi-year underperforming asset.  Many investors see this backdrop as a catch-22.  But there are creative ways to invest in this environment and we have been successfully using a hybrid approach to boost yields during this time.

Specifically, we see a ton of opportunity in short-term corporate bonds linked to underlying stocks.  Because of the structure of the bond this has produced attractive yields with short maturities.  Another area is in longer-term bonds that have adjustable rates tied to economic measures such as the consumer price index (inflation) or the difference between say the 30-year treasury rate and the 2-year rate.  Take the 30/2 example for instance, since there is virtually no difference currently in the spread, these bonds are being sold at a deep discount.  However, if you believe as we do that the yield curve will eventually return to a more normalized level, you could see bonds such as these appreciate in price and produce rising coupons simultaneously.  That is a good thing.

Here’s the point of all this.  Instead of sitting around fearful of the next bear or trying to perfectly time the markets, there are ways to take advantage of opportunities as they are presented.  Currently, it happens to be with some creativity and a hybrid approach to fixed income while maintaining discipline within the equity market.


Ables, Iannone, Moore & Associates, Inc. is a fee-only, SEC  registered investment advisory firm providing asset-management to clients in over 20 U.S. states, Europe, Asia and South Africa.  We have over 50 years of combined experience in the financial services industry.

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