November 2017

A Busy Fall

This fall has kept us busy! Typically, November ramps up with year-end investment planning and contributions since many of our clients want to wrap things up before the holidays are in full swing. We spend a lot of time helping set up and make contributions to IRAs and college savings accounts, assisting clients with IRA conversions, and setting up required minimum distributions for our investors that are over 70 ½.  As the new year approaches, we’re busy onboarding new clients, and Matt and Will work to stay on top of the comprehensive plans we’re completing for new and existing clients.

In October, I attended the ADISA conference in Las Vegas. The Alternative & Direct Investment Securities Association (ADISA) is a national trade association for professionals involved in alternative investments, primarily non-traded alternatives. The conference is an opportunity to further enhance our knowledge in these products. It is also an effective environment to meet with and ask questions to a large number of product sponsors all in one place. This year, I attended sessions focused on 1031 exchanges and alternative investments. Below, I share a 1031 exchange update; plan to read my update regarding alternative investments in the next newsletter.

Of course, you can’t get out to Las Vegas without having a little bit of fun! I snuck out of Chicago early in order to ensure I arrived in time for the extreme racing event. After last year’s experience, you better believe I wasn’t going to miss it this year, especially since I had the opportunity to race in a Porsche GT3. Check out one of the laps here. I also did a heated mini cooper race; check it out here (I’m the second driver).  I highly suggest that the next time you’re in Las Vegas, save some money from the black jack table and try racing one of these cars. Even though this year’s lap time in the Porsche was better, the Ferrari is still my car of choice!

While it's hard to beat the thrill of racing a super luxury sports car around a track, the opportunity to hear George W. Bush, this year's key guest speaker, in an intimate and informal environment was a true once-in-a-lifetime experience. The event was set up as a Q & A; a moderator asked the former President questions, he would answer and, in many instances elaborate until, often, I forgot the initial question.

President Bush spent time discussing the current issues facing our country, from the seemingly ever-growing tension with terrorism to the continued heated exchanges with North Korea. He reflected on his term as President and the many tough decisions he made. He got some pretty good laughs when he referred to Vladimir Putin as simply “Vlad” and told stories about “Vlad” meeting the Bush’s dog at the White House. He did talk about his new-found love of painting, as well as what it takes to be a good leader and parent. It’s hard to do justice to the conversation but I will say that, afterward, people I talked to from both sides of politics enjoyed hearing him speak. It was not a political conversation; rather, it was a reflection of a time in our country. When speaking about where the future lies for America, the former President said something to the effect of “American people are people of great resolve and America is awesome.” Obviously, I’m paraphrasing (we weren’t able to record the event), but it was a simple sentence at the end of a long reflection. I think it’s important to remember the great things about this country, especially those things that bring us together rather than those that pull us apart.

After the conference, I hopped a quick flight to San Francisco for our broker dealer’s elite producers conference. This conference is a mix of education and fun. We share ideas with other thought leaders in an open networking environment and, similar to the ADISA conference, I have the opportunity to discuss investment products in person and with people from the various companies. Sara joined me for this part of the trip and we had a great time. We even made it to Sonoma for some wine tasting!

Sara and I made it home just in time for Halloween. Since many of you have not seen the little ones in a while, here are some pictures of them ready for trick-or-treating. They really are getting big!

All of us here at Kuhn Wealth hope that you and your family have a very happy Thanksgiving and a wonderful holiday season.

Best,
Nathan

More on Tax Reforms

News around the House and Senate proposals for tax reform is moving quickly. If you want to read the in-depth analysis on the House proposal that we previously emailed, please click here. While we plan to wait and see what, if anything, actually becomes law before we dedicate more time on this issue, we do want to offer some insight into the Senate proposal. There are key differences between the House plan and the Senate proposal recently released, and we break it down for you here.

One key difference between the two plans is that the Senate proposal would delay the reduction in the corporate tax rate until 2019. It would also retain 7 tax brackets versus reducing the number to 4, and doubles the estate tax exemption rather than eliminating it. In addition, the Senate proposal includes a provision that would have made stock options taxable at the time they vested rather than at the time they were sold. This proposal incited major blow back as it would have grossly impacted startups. Thankfully, given the potential for the negative impact on the economic growth and innovation spurred by startups, it was pulled.

As it relates directly to our clients, the biggest difference between the plans is that the Senate proposal completely eliminates the deduction for state and local taxes, while the House bill allowed deductions of up to $10,000 for property tax.  With a large percentage of our client base being Illinois residents, and Illinois being one of the highest tax states, this change would absolutely have an impact on our clients.

While there are other differences between the proposals, nothing is finalized yet. We’ll continue to monitor the changes as the situation evolves. If and when tax reforms become law, we will perform a thorough evaluation and share additional insight with you at that time.

1031 Exchange Updates

With discussion of tax reform this year, there were concerns the 1031 provision would fall on the chopping block.  Fortunately, it appears our legislators recognize the benefit the 1031 provision provides our economy. Neither the House or Senate proposals include any proposed changes to real estate 1031 nor the step up in basis upon death provision, a relief for individuals who wish to defer gains until death via exchanges..

As I mentioned earlier, I traveled to Las Vegas in October to attend the 2017 ADISA Annual Conference and Trade Show. There, I had the opportunity to continue to hone my knowledge in everything 1031, including exchange investment solutions, processes, and advanced strategies. I attended sessions where we not only learned from 1031 legal and tax experts, we were also able to ask them questions.

This conference is a great place for me to catch up with the various 1031 exchange investment sponsors and meet new companies and their people. Overall, everyone seemed optimistic, not only about where the 1031 market is today but also where it seems to be headed. One thing that excites me is the growing number of quality sponsors entering the space. As the volume of individuals interested in DST investments for 1031 exchanges continues to grow, it will be beneficial to investors to have additional quality sponsors in the space.

Back in the office I continue to evaluate 1031 (typically DST) investment offerings. We continue to see offerings in Net Lease, Medical, Retail, Self-Storage and Multifamily. The operating assets are still where we are seeing most of our client’s money deployed, with a large portion of that to multifamily. The fact that there are more and more renters in the US likely validates those investors. In fact, according to the Census Bureau, the 111.4 million households that existed in the United States on 9/30/09 were split between 75.3 million owners and 36.1 million renters. The 119.1 million households in the United States on 9/30/17 were split between 76.2 million owners and 42.9 million renters.

As always, I and my team are here for you and happy to answer any questions you may have. If you’re in the middle of an exchange or simply thinking about something down the road, please feel free to reach out to us.

Jerome Powell as New Fed Chairman

While President Trump did not follow recent precedent in re-appointing current Federal Reserve Chairman Janet Yellen, by nominating Jerome Powell he also made a change that’s unlikely to cause a major shift in policy. Powell is widely expected to stay the course on monetary policy, as he has largely followed majority opinions led by Janett Yellen.

In reviewing Powell’s previous comments and votes, it is widely expected that he will continue to unwind the federal reserve’s balance sheet while continuing to slowly push up interest rates.  Of course, all of these trajectories could quickly change if the economy were to shift gears.

There is one area where it is thought that Mr. Powell may differ from Ms. Yellen, and that’s in regards to regulation.  President Trump’s administration has been actively working to roll back regulation they feel is overly burdensome and, therefore, a drag on the economy. It’s possible Mr. Powell’s nomination indicates that President Trump feels Mr. Powell will be more in line with his agenda. However, there were other potential nominees that were more clearly aligned with the administration’s de-regulatory agenda that President Trump ultimately did not nominate to the position. Ultimately, maybe President Trump felt Mr. Powell is a balanced candidate and someone who has garnered support from both parties in the past.

Mr. Powell’s confirmation hearing is set for November 28^th. Given that he enjoyed support from both parties in previous nominations and positions, it would be a surprise if he is not confirmed.

Financial Clarity Through Financial Planning

This year, our firm has already completed more comprehensive financial plans for our clients than we have in all previous years. This has been possible because of the additional staff we hired, the technology we implemented, and the procedural optimization we accomplished while working with our outside consulting team.

In the process of completing a financial plan, our team really gets to know a great deal more about our clients. And, in the case of new relationships for our firm, completing a comprehensive plan really puts the whole process in motion. Designing so many plans has put into even sharper focus the value of this service. Even I was surprised by the amount of additional useful and actionable information our planning team and our long-term clients were able to gain from participating in the process. There is truly so much value gleaned through this service.

If you are considering working with our firm to create a financial plan, or are an existing client who has not done a comprehensive plan yet, please consider reading the materials we have published on the subject. Then, schedule time for a e a financial planning demonstration with our team. After the demo, we’ll customize a solution for you and then develop your plan when you’re ready.

Want to schedule a demo? You can do it here. Scroll down to Financial Planning Demo and follow the prompts to book your demo.

As of 11/17/2017. The opinions expressed are those of the writer and does not necessarily represent the views of the presenting party, nor their affiliates. Past performance and predictions are not a guarantee of future results. The material contained hearin is obtained from sources believed to be reliable, but its authenticity, accuracy or completeness is not guaranteed. Projections are inherently limited and should not be relied upon as an indicator of future results. The S&P 500 Index is a widely recognized capitalization – weighted index that measures the performance of the large-capitilization sector of the U.S. stock market.  Direct investment in an index is not possible. Because investor’s situations and objectives vary, this information is not intended to indicate direct investment advice and suitability for any particular investor. This material is not to be interpreted as tax or legal advice. Please speak with your own tax and legal advisors for advice/guidance regarding your particular situation.

Securities offered through Concorde Investment Services, LLC (CIS), Member FINRA/SIPC. Advisory services offered through Kuhn Wealth Management, Inc., a state registered investment advisor. Kuhn Wealth Management, Inc. is independent of CIS and Concorde Asset Management, LLC, all of whom are unaffiliated with third party sites, and cannot verify the accuracy of nor assume responsibility for any content of linked third party sites. Information available on third-party sites is for informational purposes only.