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Stock Market Recap: July 2024


  • Major reversals across the equity market, with small cap stocks and value stocks outpacing the large-cap and growth peers sharply in July.
  • Catalyzed by decelerating inflation data, small cap stocks (Russell 2000 TR Index, +10.16%) finished significantly ahead of large cap stocks (S&P 500 TR Index, +1.22% and large cap growth stocks (Russell 1000 Growth TR Index, -1.70%).
  • Additionally, the S&P 500 had its first daily drop greater than 2% in July, the first time in over 350 trading days. This was the longest such streak of low daily volatility in over 15 years.

Last month’s monthly update discussed the record levels of concentration in the S&P 500 – a factor that likely played a role in the significant shift equity markets saw in July.

After the June inflation (CPI) report was released, investors shifted expectations to a much higher likelihood of a rate cut in September. Generally, small cap stocks have a greater sensitivity to interest rates, given the use of more floating rate debt compared to large cap stocks. This factor, combined with improving earnings fundamentals, resulted in the Russell 2000 outperforming the NASDAQ by over 5% the day of the inflation report. This represents the largest single day outperformance of small cap stocks versus technology stocks in over 40-years (chart below)

Source: JPMorgan Asset Management, Bloomberg, as of July 21, 2024

Small caps kept up the momentum of July, along with large cap value stocks (Russell 1000 Value TR Index, +5.11%).

July represented an important reminder to long-term investors about the benefits of maintaining a diversified approach

  • Earnings season wraps up in August: as of 7/29/2024, 40% of S&P 500 companies have reported earnings, and 76% are beating expectations for the second quarter.
  • The Federal Reserve is expected to use August to signal its intentions around cutting interest rates during its September meeting. The Federal Reserve last hiked in July 2023 and has held rates constant since.
William Winkeler
About the Author

Bill has more than 12 years of experience in the investment industry, most recently as Managing Director of Investments at a private wealth management firm. In his role at Confluence, Bill chairs the…

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Are you Creating Space? Establishing New Habits


Although many of us have good intentions when it comes to prioritizing physical, mental and emotional health, the necessary action of consistency with establishing new habits to support these categories doesn’t just happen overnight.

Most of us can identify areas in our daily routines that need improvement. However, factors such as energy levels, time and effort required, childcare availability, and finances can present significant obstacles to making beneficial changes. As a result, most of us continue on the path that works “well enough” for the short term, even if it’s not ideal. The issue typically isn’t a lack of desire or knowledge to make changes, but rather the absence of a conducive environment for these changes to take root and flourish. In other words, a space needs to be created for change to happen.

Take healthy eating for example. It’s something you know you want to do more consistently, it’s something you know would be beneficial to your short and long term health, but you can’t seem to bring yourself to take inventory of your fridge and pantry to begin to stock quality items in your home, to set yourself up for success. Or maybe preparing food is a barrier. You have access to cooking and food prep videos and articles at your fingertips, but where in your schedule have you created time to prepare then execute actually trying it yourself?

Peeling back the layers on why good intentions don’t necessarily translate to actions can be painful and humbling. It’s caused many of us to stay stuck in the same place, in different areas of our lives, for a long time. So, what’s the solution?

It’s time to stop fooling ourselves that changes just happen without our concentrated effort. If we fail to plan, we plan to fail. Once evaluated that a certain tweak/change would be advantageous, it’s time to take the step to create the structured space in the schedule where a new habit can take root. Keep it simple. Narrow the focus. Most of us are juggling many “glass balls” that we cannot afford to drop and have shattered. An example of this would be personal health, which too often can be put on the backburner for a time period out of practical necessity, but where does this lead to in the long run? Consider this encouragement to start where you are.

Here are some tips for getting started:

1. Identify. What is really frustrating you about your daily or weekly routine? Frustration is a driver to change. Be specific here. If you just focused on what was frustrating and what would make it less frustrating/better, what would it be?

2. Reserve. Pick a time in your schedule and dedicate yourself to education (self-education through reading, watching how-to videos, podcasts, in person professional help), as you prepare to make a change.

3. Clarify. Write down a clear goal and put it somewhere you can see it daily, as a reminder to yourself.

4. Take Action. Go and do it! It’s time to execute rather than thinking about it anymore!

5. Practice this for small habit changes or big habit changes. Enlist accountability people as desired. Pat yourself on the back for taking a step of action.

My goals may differ from yours, and in fact, they likely do, spanning personal to professional aspirations. However, the implementation of self-discipline to commit to change and adapt to new ways of living will likely positively impact all areas of your life.

“If you talk about it, it’s a dream, if you envision it, it’s possible, but if you schedule it, it’s real”. Let’s have less talk, more scheduled action and a space created for ourselves to actually adopt behavior change. Cheering you on today!

Disclaimer: This article offers educational insights from a registered dietitian on establishing healthy principles. It is a supplementary resource and not a substitute for personalized advice from a medical professional familiar with an individual’s health history.

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Organic or Conventional? Equip Yourself to Make the Best Choice for Your Health


Label reading, ingredient decoding, deciphering marketing terminology – all of these aspects individually or combined can create an environment of confusion for shoppers at the grocery store. Amongst product labels, “USDA Organic” is found on many foods and beverages, but what does it really mean? Let’s focus in and unpack this particular label.

What is meant by the label “USDA Organic”?

The United States Department of Agriculture (USDA), is a division within the US government that focuses largely on the country’s safety and efficiency of farming, food and sustainability practices. The USDA Organic label is federally regulated, meaning the product its placed upon has met the standard requirements to earn the status of this particular label (more on this, below). Because this is a regulated label with strict criteria, the consumer can have confidence when they see this symbol on a product that the process in which the ingredients have gone from farm to table has been verified through a system of checks and balances.

  • The standards the USDA has set for being labeled organic are the following¹:
    • No synthetic chemicals used on the product (such as pesticides and fertilizers otherwise used in conventional foods to keep bugs and termites away)
    • No genetically modified organisms (GMO’s)
    • No antibiotics or growth hormones given to animals (when the product itself comes from an animal) but rather a focus on their welfare, such as raising animals in natural conditions
    • Sustainable farming practices used to protect the environment currently and long term

These standards are in place to ensure both the consumers and environment are set up for better health outcomes, given how products are grown and processed. More information surrounding these categories can be found on the USDA website.

If a food product does not have this label, the default is known as a conventional food.  A conventionally grown product such as a head of broccoli, for example, could miss the mark for organic in a minimum of one category or at most, all categories. Conventional foods are found in most products in store and have their own system of checks and balances for consumer health, as well.

Whereas conventional foods are still federally monitored for safe limits of pesticides using scientific data and risk assessment on a regular basis, these types of products do not have to meet as rigorous requirements surrounding chemical usage on crops and soil health, for example. Additionally, they may utilize GMO’s, and/or differ in the treatment of animals and farming practices.

In summary, organic verified products have tighter regulations when it comes to how a food is grown and processed, and also how animals are fed and raised. Common concerns from consumers regarding conventional foods vs. organic surround long term pesticide intake risk on human health, animal welfare, and the question of varying levels of nutrient composition. Given the increased cost of production to farm organically, organic products most often have a higher price tag than their conventional counterparts. Many believe there are benefits to choosing organic, but it may not be necessary or realistic to consume all or even most food intake organic, depending on food budget and/or availability of items where someone lives and shops on a regular basis.

When it comes to a measurable benefit to human health, choosing organic foods vs. conventional, the scientific evidence is not definitive, although observational studies point to better health outcomes over time for organic consumption vs. conventional². Like any decision in the adult world, the type of food you purchase requires taking inventory of what you value, prefer, and can afford.

If at this point you’ve identified you’d find it worth the money and efforts to choose organic, in some capacity, for yourself and family, it can be helpful to have a simple starting point.

Each year, the Environmental Working Group (EWG), a non-profit organization whose focus is public health and the environment, releases two lists – the dirty dozen and clean fifteen. These lists are considered “shopper’s guides” for the consumer who wants to better understand which foods have been tested and shown to have a greater amount of pesticide residue (dirty dozen) compared to produce with less or no traces of pesticides (clean fifteen). This is a great place to begin for a consumer who desires to limit pesticide residue on food they’re consuming, due to potential health risks associated with chemical exposure for adults and children, alike.

2024 Dirty Dozen³ – EWG recommends to buy these organic, when possible, to avoid concentration of pesticides:

  • Strawberry
  • Spinach
  • Kale, collard & mustard greens
  • Grapes
  • Peaches
  • Pears
  • Nectarines
  • Apples
  • Bell and hot peppers
  • Cherries
  • Blueberries
  • Green beans  

2024 Clean Fifteen⁴ – EWG reports least contaminated with pesticides, among produce tested. OK to buy conventional:

  • Carrots
  • Sweet potatoes
  • Mangoes
  • Mushrooms
  • Watermelon
  • Cabbage
  • Kiwi
  • Honeydew melon
  • Asparagus
  • Sweet peas
  • Papaya
  • Onions
  • Pineapple
  • Sweet corn
  • Avocadoes

You can request a copy of these lists from the EWG website, print them out for your fridge or screenshot them for your next trip to the grocery store. You can also take a deeper dive to learn more about the EWG’s process for food testing on their website.

When it comes to eating nutritiously by principle, it’s best to consume whole foods, as close to natural form as possible, and a variety of types within each food group (fruits, vegetables, fats, proteins, whole grains, dairy). If a fixation on choosing organic vs. conventional is presenting as a hindrance from eating animal products or produce, that may be missing the point for what healthy eating actually looks like. The term organic isn’t necessarily synonymous for better health, so it’s important to view the whole picture.

As a consumer, it’s important to be aware of common food labels such as “USDA Organic” on products like meat, dairy, fruits, vegetables, eggs and other processed foods. Understanding what the term implies can assist in avoiding conflicting information and confusion, in this area. The choice of conventional vs. organic is yours, and it’s a personal one. My hope is that you feel better acquainted with the facts and are empowered to make your choices with confidence!

Sources:

  1. McEvoy, Miles. 2012, March 22. Organic 101: What the USDA Organic Label Means. USDA. https://www.usda.gov/media/blog/2012/03/22/organic-101-what-usda-organic-label-means
  2. Vigar, V., Myers, S., Oliver, C., Arellano, J., Robinson, S., & Leifert, C. (2019). A Systematic Review of Organic Versus Conventional Food Consumption: Is There a Measurable Benefit on Human Health?. Nutrients12(1), 7. https://doi.org/10.3390/nu12010007
  3. EWG’s Shoppers Guide to Pesticides in Produce: The Dirty Dozen. Environmental Working Group. https://www.ewg.org/foodnews/dirty-dozen.php
  4. EWG’s Shoppers Guide to Pesticides in Produce: The Clean Fifteen. Environmental Working Group. https://www.ewg.org/foodnews/clean-fifteen.php

Disclaimer: This article offers educational insights from a registered dietitian on establishing healthy principles. It is a supplementary resource and not a substitute for personalized advice from a medical professional familiar with an individual’s health history.

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Maximize Your Year End Giving: Charitable Planning Strategies for Individuals


As the end of the year approaches, it’s an opportune time for clients to utilize strategies that align charitable goals with their financial objectives. In this article, we will explore various charitable planning opportunities and strategies to leverage to help our clients optimize their giving while improving their overall financial situation.

One of the primary incentives for charitable giving is the potential to reduce taxable income. However, timing and method play a crucial role in maximizing these benefits. Below are several techniques to consider as part of year-end planning:

  • Avoiding Capital Gains Tax: Donors avoid paying capital gains tax on the appreciation of the asset.
  • Maximized Tax Deduction: They receive a charitable deduction for the fair market value of the donated securities, provided they’ve held the asset for more than one year.
  • Watch Your Limits: The IRS places limits on the amount clients can deduct for charitable contributions. For cash donations, the limit is typically 60% of AGI, while donations of appreciated assets are limited to 30% of AGI. If the total contributions exceed these limits, the excess can be carried forward for up to five years.
  • Helps Portfolios: This strategy is particularly useful in bull markets, where many clients may have appreciated assets they would otherwise sell to rebalance their portfolios.
  • Satisfies Required Minimum Distributions (RMDs): For clients who have reached their required beginning date, QCDs can reduce taxable income by offsetting RMDs.  However you need to be careful to make QCDs first, before taking any other income yourself.  The first dollars out of a qualified account are the RMD dollars; if you take your RMD first and then try to make a QCD later, it won’t count.
  • Tax-Free Distribution: Unlike regular withdrawals, the QCD is excluded from the client’s taxable income, offering a substantial benefit for those who don’t itemize deductions, which can help clients stay within lower tax brackets or avoid Medicare premium increases.
  • This strategy is particularly advantageous for clients who may no longer need the full amount of their RMD for living expenses but are still required to take it.

One way to implement this is through a Donor-Advised Fund (DAF):

  • Clients can make a lump-sum contribution to a DAF and receive an immediate tax deduction.
  • In subsequent years, the client can take the standard deduction and not make additional charitable contributions until the next “bunching” year.
  • The funds can be distributed to charities over several years allowing donors to maintain their philanthropic commitments.
  • It’s ideal for clients facing a windfall year or who have highly appreciated assets they wish to donate.
  • For clients seeking to create a structured giving plan, or for those who may not have specific charities in mind yet, a DAF can serve as a helpful intermediary.
  • Generate Income Streams: Charitable trusts allow donors to convert highly appreciated assets into a steady income. For example, with a Charitable Remainder Trust (CRT), donors or their beneficiaries receive a fixed or variable income for life or a specified period. This can be an attractive option for retirees or clients seeking supplemental income while also supporting charities in the future.
  • Grow the Legacy: One of the most significant benefits of charitable trusts is the potential to transfer appreciated assets, such as real estate or stocks, without triggering capital gains taxes.  When assets are placed into a Charitable Remainder Trust (CRT) and sold, the proceeds are untaxed to the trust, allowing more principal to be retained for both income generation and charitable legacies.
  • Immediate Tax Deduction: Contributions to a charitable trust are eligible for an immediate charitable deduction, based on the present value of the future charitable donation. This deduction can help offset taxable income in the year of the contribution, providing immediate tax relief.

Your wealth manager can help you formulate a personalized year-end charitable giving plan. Here’s a checklist approach to developing it:

  1. Identify Charitable Goals: What causes are important to you?
  2. Review Taxable Income: Determine whether itemizing or taking the standard deduction makes sense.
  3. Evaluate Assets: Identify appreciated securities or other assets that could be donated.
  4. Consider Timing: Ensure donations are made before December 31 to qualify for the current tax year.
  5. Explore Donor-Advised Funds: If clients plan to give over multiple years, DAFs may be an optimal solution.
  6. Engage Family: Involve family members in the charitable conversation.
  7. Check Matching Programs: Encourage clients to explore employer matching gift
Chuck Zuzak
About the Author

Chuck joins Confluence Financial Partners with 13 years of experience in the financial services industry, most recently as Director of Financial Planning at JFS Wealth Advisors. At a fundamental level, Chuck’s passion for…

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Monthly Market Recap: September 2023


Month in Review

  • Stocks had their worst month since December 2022 and bonds fell for the fourth straight month. 
  • Rising Treasury yields were the primary catalyst – the 10-year Treasury yield hit a 16-year high during September.
  • Restrengthening inflation data and the prospect of additional interest rate hikes by the Federal Reserve are the main catalysts for the pressures.

Bond Yields Return to Average

Despite nearly a decade of low interest rates, the 10-year Treasury yield typically averages 3% to 5% yield, going back to the late 1800’s. For the first time since 2007, the 10-year Treasury rose to 4.5%, comfortably returning to long-term averages. Recent inflation data was stronger than expected, contributing to the increase in yield, along with the prospect of additional rate hikes from the Federal Reserve. The increase in yields reduces the value of bond investments in the short-term, and higher yields present a more attractive alternative to stocks – two reasons stocks and bonds struggled in August and September.

What’s on Deck for October?

  • Outside of fundamentals, there are headwinds from the on-going autoworkers’ strike, and a potential shutdown of the US government. Both events historically have not had lasting impacts on the economy and markets.
  • The surprisingly strong labor market was the primary reason the predicted 2023 recession did not happen – investors will be watching job creation and unemployment claims data closely for any softening.
  • An additional interest rate hike in November or December is very much up in the air. Inflation data had strengthened somewhat, along with energy prices increasing sharply since June. It is unclear if this is enough for the Federal Reserve to hike one more time.

Download the September 2023 Market Recap below:

William Winkeler
About the Author

Bill has more than 12 years of experience in the investment industry, most recently as Managing Director of Investments at a private wealth management firm. In his role at Confluence, Bill chairs the…

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Stock Market Recap: August 2024


  • Broad-based gains during the month of August, with US large cap stocks finishing the month up +2.43% (S&P 500 TR Index). In the US, large cap value (+2.68%, Russell 1000 Value TR Index) finished ahead of large cap growth (2.08%, Russell 1000 Growth TR Index) for the second consecutive month.
  • US small cap stocks took a breather after a strong July, finishing August down -1.49% (Russell 2000 TR Index). Outside the US, developed international equities benefitted from a weakening US dollar, rising +3.25% in August (MSCI EAFE NR USD).
  • Bond markets rose for the fourth straight month in August, with the Barclays US Agg Bond TR Index finishing the month +1.44%.

The Federal Reserve is poised to cut interest rates in September, the first interest rate cut since they began increasing interest rates in March 2022. Investors are now pondering, “what happens next?”: a “soft” or “hard” landing for the economy.

While not officially defined, a soft landing would be a continued decline in inflation and interest rates, without growth slowing down enough to enter a recession. Hard landing would be the opposite – a continued increase in unemployment and a slowdown in economic growth, resulting in a recession. Soft landings are historically less common, with the most recent (and classic case) being the 1994-1995 period.

Inflation has fallen closer to the Federal Reserve’s target rate, while unemployment has also begun to increase, prompting the likely rate cut in September. However, other signs indicate continued strength in the economy: for example, estimates for GDP growth this quarter stand at +1.5%. With no clear forecasts for a soft or hard landing, investors have priced in three to four rate cuts by the end of 2024, indicating expectations that the Federal Reserve will start and continue rate cuts in September.

Sources: Capital Group, Bureau of Economic Analysis, FactSet. Figures for Q1:20, Q2:20, and Q3:20 are –5.5%, –31.6%, and 31.0% respectively, and are cut off by the y-axis given the extreme fluctuations associated with the COVID-19 pandemic. Estimate for Q3:24 is based on the mean consensus estimate from FactSet. As of August 22, 2024.

  • With  earnings season wrapped up in August, investors will be watching the Federal Reserve’s FOMC meeting closely for color around a potential rate cut. 
William Winkeler
About the Author

Bill has more than 12 years of experience in the investment industry, most recently as Managing Director of Investments at a private wealth management firm. In his role at Confluence, Bill chairs the…

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Maximize Your Legacy: The Great Wealth Transfer and Your Opportunities


We’ve all heard the numbers. Over the next 30 years, an estimated $70-$90 trillion is going to pass from the Baby Boomers to the next generation. This will be a transfer of wealth the likes of which the world has never seen. Not only are the Baby Boomers the wealthiest generation ever to live, their wealth is broad and relatively spread out. Generally speaking, this is the first generation in which the middle class will play a significant role in the wealth transfer. While Boomers’ parents largely had pensions that ended at death, their children instead have sizable retirement accounts that will be passed down. Add that to the fact the American and global economies have massively expanded over the past 50 years, and we have a recipe for a wealth transfer for the ages.

At Confluence Financial Partners, our mission is to help our clients maximize their lives and legacies. When it comes to legacy, the upcoming wealth transfer is an important issue for the majority of our clients. That means that a major part of our job is to help our clients, where appropriate, engage the next generation in hopes that the family legacy will continue. Studies have shown that 70% of families lose their wealth by the second generation, and 90% by the third. We want to help families avoid being part of this statistic, and instead build something that lasts.

Here are four steps that you can take to help ensure that your legacy is secure.

Consider a Multi-generational Advisory Relationship

Over 50% of our clients are multigenerational, meaning we have family members in more than one generation who we are serving. Often children are clients with their parents from a young age, but as they become adults, they become more independent and establish their own relationship with us as their advisor. Another common situation is when clients refer their parents to us, forming a multigenerational relationship from the other direction. Still another way this happens is when adult children establish a relationship with us as their parents (who are clients already) age and it becomes even more important to all be on the same page.

Even if you are not a Confluence client, we would encourage you to find an advisor and a firm that is making multi-generational wealth considerations a priority. Your advisor should help you bridge the gap between the wealth that you’ve built and the next generation for whom you hope that wealth will be a blessing. We have shepherded many families through this difficult period already, and the whole process is undoubtedly much easier if the parents and the children share the same advisor.

Take Another Look at Your Estate Plan

When was the last time you had your estate plan reviewed? If you are like most Americans, it’s probably been a few years. The typical estate plan is adequate for only a certain season of life, and it will need to be redone as children get older and circumstances change. Like a financial plan or an investment portfolio, an estate plan should be periodically updated as goals change. An estate plan update is almost always needed after a major life event such as a birth, a death, or a change in marital status.

Sometimes an estate plan can be as simple as a pair of wills and power of attorney documents. More often, however, trusts should be involved and more careful consideration should be taken to help ensure that wishes are carried out. For example, what would happen in the event of a death or divorce of a child? If protections aren’t built into the estate plan, it’s possible that a parent’s wealth ends up with a child’s ex-spouse instead of the grandchildren. That is an avoidable scenario, but it’s important to ask the right questions and think critically about the key factors that will cause the plan to either be successful or not.

We don’t have attorneys at Confluence, but we do have a robust process for reviewing your existing estate plan so that you understand your current situation. Once we learn where you are today, we can help educate you so that you are prepared when you speak to your attorney about updates. We work closely with our clients throughout the whole process and are there to help in every way we can.

Communicate, Communicate, Communicate

The primary reason that the wealth transfer could go poorly for the majority of families is a lack of communication. An inheritance can be a difficult subject to broach, especially for the first time. As a result, many families put these conversations off until it is too late. Don’t let that be your family.

We find that most families assume that their children will handle the inheritance with ease, but that isn’t always the case. We’ve seen many situations in which the heirs were paralyzed by their newfound wealth and the responsibility that comes along with it. They don’t feel prepared to handle the wealth, and so it wears on them. Rather than enjoying the legacy that their parents worked so hard to build, they instead live in fear of losing it all. Fortunately, this can be remedied by simple and consistent communication. Imagine if those same heirs had been let in on the family wealth along the way. Imagine if they knew how the accounts and estate plan were structured. Most importantly, imagine if they understood their parent’s dreams and wishes around the wealth. Imagine they understood the values and expectations that go along with the wealth being transferred.

One question we often ask our clients is this: Will your children still speak to each other after you are gone? Many clients take this for granted, but an estate plan that has not been communicated will inevitably lead to disagreements and fraught relationships. This is especially true in unique situations where the split is not even amongst the heirs, but money can cause even the most reasonable people to turn their backs on each other. Thankfully, again the odds of this happening can be greatly reduced with solid and consistent communication on the part of the wealth creators. Don’t leave ambiguities that can be interpreted. Make your wishes known and take the (sometimes) uncomfortable step of starting a pattern of communication.

Have a Family Meeting

One concrete way to start or solidify communication around the great wealth transfer is to have a family meeting. Ideally, this would lead to a regular cadence of meetings, but the first one is usually the hardest. These meetings can take many different forms, but they are typically initiated by the wealth creators of the family and include the adult children in the upcoming generation. Many families want to communicate better about important topics like their estate plan, financial expectations, and charitable goals, but they don’t know where to start. That’s where a family meeting can be a great opportunity to open important lines of communication.

At Confluence, facilitating these family meetings is one of the most important things that we do. We regularly sit down with our client families at our office or their homes to help get everyone on the same page. We don’t believe this type of meeting should be only done in an emergency after a terminal diagnosis, although that may sometimes be necessary. Rather, we think it is essential to start thinking about this now, before there is a crisis of any kind. Communication around wealth transfer that is done while the whole family is focused and not in crisis is ideal because it prepares the family to be ready if or when the crisis does arrive.

Conclusion

The largest wealth transfer that the world has ever seen is coming. For many, it has already started. That transfer is going to go well for some families, but very poorly for many. At Confluence, we’ve made the next generation a priority, right down to the way we have structured our firm. Many advisors work as lone wolves, with no real succession plan or assurance of what will happen to the families they serve once the advisor retires. At Confluence, we are building a firm so that we can help not only our current clients, but their children and grandchildren as well. We work in teams, and we have advisors who are in their 70s all the way down to their 20s. We’ve made significant investments in growing the next generation of advisors so that our clients’ children and grandchildren can be confident in the Confluence of the future.

As you read this today, we implore you to start thinking about what your next step may be towards making sure that your financial legacy is secure. Perhaps you need to have your estate plan reviewed, or you should make that call to your attorney that you’ve been putting off. Maybe you’ve been meaning to ask your advisor about a family meeting or considering introducing your parents or children to your financial team. Whatever the next step is for you on this journey, we ask you to take it. Your family will be grateful that you did.

Confluence Wealth Services, Inc. d/b/a Confluence Financial Partners is a SEC-registered investment adviser. Confluence Financial Partners only transacts business in states where it is properly registered or notice filed or excluded or exempted from registration requirements. The security of electronic mail sent through the Internet is not guaranteed. All email sent to or from this address will be received or otherwise recorded by the Confluence Financial Partners corporate email system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. Confluence Financial Partners recommends you do not send confidential information to us via electronic mail, including social security numbers, account numbers, and personal identification numbers, unless properly encrypted. A copy of our current written disclosure statement discussing our advisory services and fees continues to remain available for your review upon request or by visiting the following link:https://www.confluencefp.com/form-adv-2a/

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Tax Planning Tips for the Charitably Inclined


You can do well by doing some good!  Not only can giving to a charity make a positive impact, it can provide an opportunity for some tax benefits too. If you are a high-income earner or a retiree who plans on writing checks to your favorite charities, then you may benefit from these three wealth and tax planning tips you can take advantage of in the future.

Donor Advised Funds (DAFs)

  • An immediate tax deduction can be taken for the amount donated in the year the contribution is made to the DAF.  Then, you as the donor advisor to the DAF decide which 501(c)(3) organizations (e.g., religious organization, college, hospital/clinic, community center, etc.) receive grants from the fund at any time in the future.  DAFs are a great vehicle to us if you have a big cash flow year and you know you want to make a large deductible contribution, but you aren’t sure to which organizations yet. A DAF allows you to get the deduction today and decide which charities will be ultimate beneficiaries at a later date.
  • If a client contributes long-term appreciated securities to their DAF, they can avoid capital gains tax on the appreciated portion and receive an immediate charitable tax deduction for the full market value of the gift.
  • Assets donated during the life of the client are no longer part of the client’s estate, and therefore, are not subject to probate or estate taxes. The DAF can also be named as a beneficiary to an IRA, a charitable remainder trust, or other asset.
  • Unlike private foundations, there are no start-up costs, no tax on the fund’s investment income, no individual payout requirement, and all record keeping services are included.

Qualified Charitable Distributions (QCDs)

  • A QCD allows individuals who are 70.5 years of age or older to donate up to $105,000 per year per individual to one or more charities directly from a Traditional IRA (For 2024, QCD limit increased to $105,000 from $100,000 in 2023). The charity must be a 501(c)(3) organization. Private foundations or donor advised funds are not eligible to receive QCDs.  
  • QCDs count toward your required minimum distribution (RMD) amount. (Inherited IRAs also qualify for QCD provided you meet the age requirement.)
  • QCDs are non-taxable distributions and not included in your adjusted gross income (AGI).  This is important because regular charitable contributions do not lower AGI.  Lowering AGI can have a number of benefits, including bringing down Medicare Part-B premiums, qualifying for certain deductions, and lowering the taxable portion of Social Security.
  • Keeping your taxable income lower can help avoid elevating to the next federal tax bracket or potentially provide opportunities for other tax planning considerations.

Donate appreciated investments.

  • Look at your portfolio as an opportunity toward donating long-term appreciated securities (e.g., stocks, mutual funds, bonds). 
  • Capital gains are eliminated when you contribute long-term appreciated assets directly to a charity (via the charity’s trustee or custodian) instead of selling the assets and donating the after-tax proceeds.
  • The charity can then sell the assets and pay no tax on the appreciated gains because of their tax-exempt status.

Act today and consult your fiduciary wealth manager and tax professional to develop a plan to best align with your goals and charitable endeavors. You have an opportunity to make a positive IMPACT on charities both today and tomorrow while also receiving some tax benefits along the way. Please do not hesitate to contact us if you have any questions or if we can help in any way.    

Zac Saunders
About the Author

Known for his professionalism and calming demeanor, Zac is focused on helping his clients reach their financial goals through comprehensive financial planning and unbiased guidance.  Zac and his team support and care for…

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4 Investment Themes for 2023


Heading into 2023, the Investment Advisory Committee believes we are beginning to return to a more historically normal, rational economic environment.

The Committee has identified four key themes for 2023 and the years ahead:

1. Fundamentals Matter Again:

  • From 2009 to 2021, expansive government and monetary policies kept interest rates and inflation near record lows.
  • This environment favored US and growth stocks, whose stock prices are driven primarily by future growth prospects, as opposed to things like profitability and earnings.
  • The unwinding of these accommodative policies is leading us back to an environment where strong company fundamentals will likely again be vital when building investment portfolios.

2. Dividends Back in Focus:

  • Dividends represented a historically small amount (16%) of the S&P 500’s return during the 2010’s and early 2020’s.
  • Going back to 1926, dividends have contributed 38% of the market’s annualized return.
  • As we return to a more normalized environment, we believe dividends will likely become a larger portion of total return.

3. “Income” is Back in Fixed Income:

  • The rise of inflation was a key catalyst for pushing interest rates back to historical levels.
  • While difficult in some ways, the new interest rate environment means investors can likely rely on bonds again for income.

4. Asset Allocation Works Again:

  • In 2022, value stocks performed better than growth stocks and international stocks beat US stocks. This was in contrast to the past decade where returns have been concentrated primarily in US Growth stocks.
  • We believe the shifting environment could result in continued normalization, benefitting diversified portfolios.
  • For the first time in over a decade, bonds will likely play a meaningful role in portfolio composition.

Source: Morningstar

The future is impossible to predict, and nobody has a crystal ball. However, we believe that the four themes listed above will likely have a major impact on investor outcomes over the next year and beyond.

If you would like to talk through how these themes may impact your portfolio, please give us a call.

William Winkeler
About the Author

Bill has more than 12 years of experience in the investment industry, most recently as Managing Director of Investments at a private wealth management firm. In his role at Confluence, Bill chairs the…

Confluence Kimmich Team

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5 Benefits of working with a Registered Investment Advisor


by Jackson Elizondo

Working with a Registered Investment Advisor (RIA) is desirable for high-net-worth individuals, families, and institutions for the personal, unbiased, and tailored advice to their unique financial situation. They have a fiduciary duty to act in your best interest while providing comprehensive financial services to meet your goals.

What is an RIA? 

A Registered Investment Advisor is a firm registered with the Securities and Exchange Commission (SEC) that provides clients with financial advice. A team of advisors will often employ their expertise for customized guidance with the freedom to choose from a wide range of investment options for tailored advice for you.

What is the benefit of working with a Registered Investment Advisor?

  1. A legal obligation to act in your best interest

The fiduciary standard of an RIA has a “fundamental obligation” to work in the best interests of its advisory clients. Recommendations will be made in good faith, based on your needs, and allow a direct line of communication if there is a need for clarification or change.

  1. Providing more than just investment advice

Financial professional teams within an RIA firm are often skilled in disciplines beyond just portfolio management. They include retirement, estate, charitable legacy, tax, insurance, education planning for you and your family, and corporate services, including employee benefits. These teams will work hand-in-hand with an established financial network to develop investment strategies considering tailored solutions for your unique financial situation.

  1. Transparent & available public records

Each RIA must file and publicly post a Form ADV that offers a comprehensive view of the organization. A Form ADV offers objective and transparent information, including conflicts of interests, compensation, disciplinary filings, education, and the firm’s key personnel.

  1. Straightforward fee-based compensation

Many RIA’s offer financial advice and planning for a fee based on a percentage of your assets under management. This service creates a mutual benefit of a transparent fee structure that aligns the clients’ best interests with those of the RIA.

  1. Professional Education

Many wealth management teams will usually include highly experienced financial professionals with prestigious designations. These teams often bolster professional training and certifications such as the Certified Financial Planner® (CFP®) designation, Accredited Asset Management Specialists® (AAMS®), Certified Public Accountant (CPA) or Accredited Investment Fiduciary® (AIF®) and commit themselves to continuous education on your behalf.

Consider a Registered Investment Advisor at Confluence Financial Partners

Simple, straightforward, and non-biased assistance with your comprehensive financial plan aligns with the priorities of an RIA. If you are looking for wealth management advice at a concierge level of service, Confluence Financial Partners, may be the team of financial professionals for you.

Please contact a member of the Kimmich Team if you’re interested in having a discussion.

Jackson Elizondo
About the Author

Jackson Elizondo is dedicated to making a positive impact in his community, a commitment that led him to a career in wealth management. Jackson understands the importance of integrity and trust when building…

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