Health savings accounts (HSAs) are a savings vehicle increasingly being used to offset health care costs and improve awareness when utilizing health care simply because there is additional skin in the game. Further, HSAs provide potential savings and accumulation of assets that work well with long-term financial planning.

“HSAs encourage us to be better consumers, plan ahead and consider the ramifications of health care, as it applies to your long-term financial plan,” says Michael Bartolini, President and CEO of First Commonwealth Insurance Agency.

“It might be a very good opportunity to save more tax-deferred and tax-free money, depending on your situation,” says Nancy Kunz, Lead Financial Planner at First Commonwealth Financial Advisors.

Smart Business spoke with Bartolini and Kunz about how health savings accounts operate and where they fit in with your financial planning.

How does an HSA work in conjunction with your health insurance?

Many people are going to a high-deductible health care plan that has premium savings as a result of the larger upfront deductible. The idea is to shift those premium savings to an HSA, which can be used to pay for unreimbursed medical expenses on a pre-tax basis. The list of applicable expenses is long and includes dental, vision, long-term care insurance premiums, home improvements for medically necessary conditions, etc.

An HSA does not have to be provided by an employer; it can be set up on an individual basis. You also are able to accumulate funds year after year, with the idea of using those dollars against future medical expenses.

The current annual contribution limits, which tend to increase, are $6,450 for a family or $3,250 for an individual. If you are over the age of 50, you are able to contribute an additional $1,000.

How does this differ from a flexible spending account?

Typically provided by employers, a flexible spending account (FSA) works on a pre-tax basis for many of the same unreimbursed medical expenses, but the money does not roll over to the following year. If the monies that are in the FSA are not spent by the end of the calendar year, they are lost. Unlike an HSA, all monies you plan to contribute to the FSA throughout the year are available as soon as you sign up, whereas only the actual contributions are available in an HSA.

How does an HSA help you better manage health care expenses?

When something hits your pocket or you have a new cost, it causes you to be more responsible and a better consumer. If you have to pay $2,000 first with the high-deductible health plan, you’re going to be more mindful of where you go for health care expenses, including which hospital or provider you choose for a procedure.

The economics of health care don’t follow traditional economics where you choose wisely based on price points and/or quality. What one provider may charge for an MRI versus what another provider charges could be very different, but you’re not likely to care if it’s a $10 or $15 copay. We don’t have the mindset that even if insurance companies are paying, so are we — one way or another.

HSAs and high-deductible health plans with their greater level of upfront deductible  pushes consumers to exert more energy to pick up the phone and find out what a procedure costs. In addition, many health insurance carrier websites are starting to populate this kind of transparent data to show provider price points.

How does an HSA fit into your overall financial plan?

An HSA can act as another retirement vehicle, especially if you start young enough to accumulate funds without having to — or choosing not to — use those dollars against medical expenses. Once you’ve reached age 65, HSA funds can be used without penalty for any purpose. An HSA also will follow you wherever you go; it’s not tied to an employer.

Many people have reached their maximum on 401(k) or IRA contributions, so depending on your age and health needs, this may be an option to look at seriously for tax benefits and long-range financial planning.

Michael Bartolini is president and CEO at First Commonwealth Insurance Agency. Reach him at (724) 349-6028 or

Nancy Kunz, CFP®, ChFC®, CLU®, is lead financial planner at First Commonwealth Financial Advisors. Reach her at (412) 562-3232 or

Insights Wealth Management  is brought to you by First Commonwealth Bank



Published in National

When Congress passed the American Taxpayer Relief Act, it came with just enough time to give a clearer picture of expectations for the year ahead.

“There was a lot of anxiety and uncertainty in the last quarter of the past year as the deadline got closer and people had no idea what to do about their tax planning,” says Rick Applegate, president and CEO of First Commonwealth Financial Advisors.

Smart Business spoke with Applegate about the changes and how they impact your tax and financial planning.

What are some of the tax law changes? 

The act avoided higher ordinary income tax rates for most Americans, but higher-income earners — $400,000 per year for single filers or $450,000 per year if married and filing jointly — will have their tax rate revert back to 39.6 percent, the highest ordinary income tax rate in this country before the tax reductions instituted by President George W. Bush. This impacts approximately 1 to 1.5 percent of Americans.

The biggest overall impact is the 2 percent increase in the payroll tax back to 6.2 percent, which might slow the economy’s growth rate in the first six months of 2013. In the year ahead, the Social Security tax tops out at incomes of $113,700 — therefore, an individual could pay up to an additional $2,274 and a working couple even more. It’s estimated that the 2 percent increased payroll tax will generate about $125 billion for the Social Security system, but that’s money that reduces discretionary consumer spending, which has otherwise helped to drive a U.S. economic recovery.

Another notable change is the 5 percent increase in capital gains and dividend rates for higher-income earners to 20 percent. This increase was not as bad as it could have been — capital gains rates on dividends were scheduled to go to ordinary income tax rates, which could have been as high as that top income tax bracket of 39.6 percent.

Investment income also gets the new Medicare surtax of 3.8 percent tacked on for anyone making more than $200,000, or $250,000 if married and filing jointly. It’s not a killer, but people at these income levels who rely on investment income will pay.

Some other changes are:

  • Estate tax exemptions and rates. Congress extended the $5 million exemption and adjusted it for future inflation, and upped the top estate tax rate to 40 percent.

  • Permanently indexing the Alternative Minimum Tax to inflation. This fixed the problem where more and more middle-class Americans were paying a tax originally meant to catch high-income earners who used deductions and loopholes to avoid paying any taxes.

  • Reinstituting phase-outs of certain deductions for those with higher incomes.

If anyone was a winner in the tax bill, at large, it was people with educational loans and families trying to pay for college. The act extended certain credits and deductions for qualified taxpayers.

How do investment advice and tax considerations go hand-in-hand?

You don’t want your investments to be ruled by tax decisions — you want investments to be made based on the projected economics of the deal and its potential returns.

That’s why it’s an adviser’s job to get people past their fears and emotions, and focus on making money. If investors can’t get past it themselves, they should sit down with a trained adviser who has a perspective on why there are always opportunities out there.

What are some strategies that can add value in the year ahead?

The average investor shouldn’t be too intimidated by these adjustments because, by and large, they mostly impact those in very high-income brackets. High-income earners may benefit from tax-exempt income from municipal bonds, tax deferrals like low-cost annuities, and/or decreasing their ordinary income by deferring more taxable income today into a retirement plan.

Until Congress permanently deals with the debt ceiling, headline volatility will likely be a fact of life. However, we still think that 2013 will be a fairly good year for the stock market. We would advise taking advantage of market declines that are likely to occur and to buy into opportunities such as the emerging markets. Investors shouldn’t let headlines make decisions; smart investors take advantage of market dips because, long-term, the stock market offers good value.

Rick Applegate is the President and CEO of First Commonwealth Financial Advisors. Reach him at (724) 933-4529 or

To connect with First Commonwealth Bank, visit our Facebook page.

Insights Wealth Management is brought to you by First Commonwealth Bank

Published in National

When choosing a wealth advisory firm to partner with, there are a number of characteristics you should look for to ensure the firm is well equipped to address your unique needs, says Norman M. Boone, founder and president of Mosaic Financial Partners Inc.

“With so many firms out there, it can be difficult to identify the right one for you,” Boone says. “You should expect a lot from your wealth advisory firm, and knowing what to look for can help you make the right choice.”

Smart Business spoke with Boone about the keys to choosing a wealth advisory firm.

What are some key characteristics when seeking a wealth advisory firm?

Professional success is based on a firm caring about its clients, being sensitive to their needs and concerns, providing a high level of expertise and doing what it says it’s going to do. A wealth advisory firm should empower clients by providing them with financial education to help them feel more comfortable and allow them to make better-informed financial decisions.

You want a firm that is willing to commit to being a fiduciary — always putting the needs of its clients first. Independent firms are beholden only to their clients and have no other loyalties. How the firm is compensated is important. Fee-only firms are paid only for their advice and service. They avoid the potential conflicts of interest of receiving commissions, referral fees and the like.

Look for a firm that you trust and respect, and that trusts and respects you and your needs. The firm should aggressively honor the confidentiality of its clients. You should have a relationship with a team of people at the firm, not just one person, so you can benefit more from their collective expertise. Look for a firm that is large enough to bring the necessary resources to bear, yet is still small enough to remember that its members work for you.

Your wealth advisory firm should stay in the forefront of technology development to be equipped to meet your needs. It also should be committed to its employees, providing a good work environment and building the professional capabilities of staff with ongoing education and training.

How important is transparency?

Transparency creates the basis for trust. The firm and its members should be willing to answer any and all of your questions. In addition, objective, unbiased and personalized advice should be the foundation of every client relationship.

The firm also should offer a fully customized investment policy statement for every client providing a unique ‘road map’ for how that client’s money is to be managed. An investment process works best when it is disciplined, thoughtful, strategic, tax- and cost-sensitive, and well diversified. The investment world is constantly changing, and it’s important for a firm to stay ahead of the curve, choosing an independent course that reflects the best research and thinking of its members.

How should a firm tackle financial planning?

Financial advice shouldn’t just be about investments. Financial planning should be the underpinning of how the firm serves its clients. Financial planning is a lifelong process — as your circumstances change, plans should be updated. Good advice must be given within the context of your total circumstances and specific needs. When other expertise is required, it is the firm’s responsibility to recommend other professionals who are able to meet those needs.

Should a wealth advisory firm’s actions go beyond financial planning?

Your advisory firm should respect the importance and distinctiveness of the many pieces of your life, while embracing how those pieces fit together. The firm should answer your calls promptly and always be thinking about how they can serve you better.

Your financial adviser can and should be your partner — always sensitive to your particular needs and concerns while giving you the best advice for your circumstances in the framework of the current laws and world context. If you don’t trust them and look forward to receiving their advice, you may want to look for a different adviser.

Norman M. Boone is founder and president of Mosaic Financial Partners Inc. Reach him at (415) 788-1952 or

Social media: Stay up to date on financial news by visiting Mosaic Financial Partners Inc.’s Facebook page.

Insights Wealth Management & Finance is brought to you by Mosaic Financial Partners Inc.

Published in National

The election is over and there are still many unanswered questions regarding tax law, making it difficult to do tax planning for 2012 and beyond.

“You need to partner with a tax adviser,” says Rich Lundy, CPA, Director, Tax and Business Advisory Services with GBQ Partners LLC. “It’s difficult for the general population to stay up to date because a lot is still up in the air. It is not yet known when any potential changes will take effect and what the outcome will be, both in the short term and long term.”

Lundy says working with an adviser on year-end planning can result in potential permanent savings due to possible changes in tax rates.

Smart Business spoke with Lundy about the major tax issues impacting year-end planning for businesses and individuals.

How is the fiscal cliff affecting year-end tax planning?

Late in 2011, Congress couldn’t agree on spending cuts, so it put in automatic mechanisms to reduce expenditures. In addition, if nothing is done by the end of the year, tax rates will increase for almost everyone. There are major economic concerns over the impact of reduced government spending and increased tax rates going into effect at the same time. If Congress doesn’t act by the end of the year, the top tax rate would revert to 39.6 percent, up from the current 35 percent, and there would be increases in the lower brackets, as well.

President Barack Obama has proposed keeping the rates the same for the lower brackets — less than $200,000 of taxable income for individuals, or $250,000 for those married filing jointly. Tax rates currently range from 10 to 28 percent below those income levels. In a potentially higher tax rate environment, in general, individuals could benefit from maximizing income before tax rates increase.

Businesses, specifically C corporations, are currently subject to a maximum tax rate of 35 percent, one of the highest corporate tax rates in the world. The president has proposed reducing that rate to 28 percent, along with potentially curbing some business deductions. The strategy for a C corporation would be to try to defer deductions and/or income to some time in the future when rates may be lower.

What impact will the Medicare tax increase have on year-end planning?

There are two types of tax increases enacted by the health care reform in 2010 that take effect on Jan. 1, 2013. The first is on earned income: If you exceed the earned income limit of $200,000 for individuals or $250,000 for those married and filing jointly, there will be an additional 0.9 percent tax, increasing the Medicare tax rate from 1.45 to 2.35 percent. Those who will fall into this category in 2013 may want to consider taking an early bonus in 2012, or maximizing income before the end of the year if self employed.

The other tax is on unearned income, including interest, dividends, rental income, royalties, passive income and capital gains. This will be an additional 3.8 percent tax if you have income in these areas and exceed modified Adjusted Gross Income of $200,000 if single or $250,000 if married and filing jointly. Those whose modified AGI exceed these limits should consider accelerating these types of income into 2012, rather than deferring to 2013, to the extent possible.

What other areas of concern exist?

One is the capital gains tax. Currently, the long-term capital gains tax rate is 15 percent. In 2013, with no further action, rates could increase to as high as 25 percent. Many people are choosing to take their long-term gains now by selling stocks and bonds to generate long-term capital gains, and some who were already considering selling their businesses have moved the timeline up to this year. This is one of the most significant changes and an area where you can take action in your year-end planning to avoid those higher rates next year.

Another area of concern is qualified dividends, which are now taxed at 15 percent for higher- and middle-income taxpayers. If Congress does nothing, the phrase ‘qualified,’  which generally means that you’ve held the stock for 120 days, disappears from the tax code. The higher bracket could increase from 15 percent to 39.6 percent, the middle bracket from 15 to 28 or 33 percent and the lowest bracket from zero to 15 percent.

As noted earlier, the new Medicare tax on unearned income applies to interest, dividends and capital gains as well, so there would be an additional 3.8 percent tax for the upper-income individuals in this area. This could potentially triple the tax rate on qualified dividends. This is problematic because not only are dividends subject to double taxation, but many investors have invested in companies that are paying reasonable yields because they cannot get reasonable investment income from vehicles such as CDs and money market funds.

These expiring tax rates could wreak havoc on the stock market. There has been discussion about whether companies will unleash some of their cash before the end of the year in the form of dividends while the rate is still 15 percent. This could potentially impact stock valuations and large company behavior toward shareholders.

Finally, alternative minimum tax could hit an additional 33 million taxpayers if Congress does not implement a patch before the end of the year. The proposed two-year patch would restore exemptions to near 2011 levels, retroactive to the beginning of 2012. Because alternative minimum tax is not indexed for inflation, more and more people will be subject to it.

Rich Lundy, CPA, is Director, Tax and Business Advisory Services with GBQ Partners LLC. Reach him at (614) 947-5264 or

Insights Accounting & Consulting is brought to you by GBQ Partners LLC

Published in Columbus

As a business partner, a lender should understand your business and its needs, says Mike Dalton, vice president of commercial lending at National Bank and Trust. But often business owners don’t consider other banks until they have a problem.

“In a lot of cases it just gets to be old habits. ‘This is what I’ve done since when I started my company. I see no reason to change.’ But quite often there is a reason to at least look at another bank,” Dalton says.

Smart Business spoke with Dalton about how to evaluate your banking relationship to determine if you should switch banks.

What should you consider when choosing a bank, and how often should you re-evaluate where you bank?

There are three categories you need to look at:

  • The relationship you have with your contact person.

  • Do the products and services the bank offers fit your company’s needs?

  • The stability of the bank, both from a financial standpoint and its direction.

At least every few years you should look at some options. If you have specific concerns with your bank, then that’s always a reason to re-evaluate.

What questions should you ask when reviewing a bank?

The important thing is to go back to those three things previously mentioned. You want to look at the relationship you have with the individual you’re going to be dealing with because your lender is truly your business partner. You need to have a good communication stream. Look at his or her background and experience. Does he or she have experience in your industry?

How do you determine what you need from a bank?

That falls back to the relationship; a good lender is going to ask you about your business. If you have a lender that’s just an order taker, that wants to ask you if you want fries with that Big Mac, then you’re probably with the wrong person. You need somebody that’s going to ask you about what products and services you use, what kind of pain do you have in your business. If there are needs that aren’t being met, a good lender can come up with solutions — a product or service that would make something easier for you and your company.

For example, a prospect comes in, wants a loan and provides financials. He or she may be overextended or can’t get what he or she is looking for, so the prospect and the banker need to have a conversation. The banker should tell the prospect, ‘We can’t meet that request right now but here’s a path to get there.’ Commercial lenders especially need to be an adviser for your company, by saying ‘Here’s another way of doing it.’ Or, the lender could help with a plan to get your balance sheet or your income statement in the condition it needs to be in.

The first thing a commercial lender should do with a new customer is sit down with the business owner. Financials aren’t always discussed in the first conversation. It’s more about developing the rapport and getting to know each other. For the banker, it’s about learning the business that you’re in and what you’re looking for in a bank.

What should you look at when evaluating a bank?

A majority of banks are publicly traded companies. Look at their annual reports, the balance sheets, etc. If they’re not a public company, go into the bank and ask to see their reports. The best way is to consult your CPA or attorney and ask for a referral. Your CPA is always a good referral source in that aspect and a good first step.

How do you know a bank will stick by you in tough times?

That’s an impossible question to answer, unless you know someone who has been a client at that bank and gone through a hard time of their own. No banker is going to tell you that if it’s tough times they’re going to ask you to leave the bank, but there are certainly some banks with that history. Ask your individual lender if they have other clients that are experiencing difficult times; how did they interact with them and what was the result of that transaction? Any commercial bank will have had a couple of different clients that have been through some very tough times in this down economy; so, did they work with them or find a way to get rid of them?

How important is it to have loan decisions made locally?

It makes a big difference, as opposed to an underwriter halfway across the country strictly looking at the numbers. When you deal with a local bank, local people who know your market and conditions make decisions. If there are questions they can come out to your facility and sit down with you, rather than you having to go to them.

Should you start a banking relationship before you have a pressing need?

When someone comes to a bank with pressing needs for equipment or an expansion, it could be a red flag. It may seem as if the company wasn’t planning ahead for this need. Or, maybe the bank it was with didn’t want to finance the project. If you think you might have a need coming up that your bank can’t meet, start looking. Think about how often you talk to your banker. If you’re not having regular conversations and they’re not meaningful conversations, then you probably have an issue. As banks, we like to do business with people that we know, so developing a relationship is important.

Mike Dalton is vice president of commercial lending at National Bank and Trust. Reach him at (937) 382-1441 or

Insights Banking & Finance is brought to you by National Bank and Trust

Published in Cincinnati
Sunday, 30 September 2012 21:01

The power of character

In last month’s article I discussed getting rejuvenated as you revisit your journey of personal wealth management and life planning. So let’s assume that you have your data updated and you have a rough draft of your goals, passions and purpose in life. As you review with your significant other and family members what you compiled, ask yourself a question: How important is it to achieve these goals? And how do you make this goal setting/goal achieving experience enjoyable?

Will this be another task you have to add to your “to-do” list? Is it going to interfere with anything else that is going on in your life, and do you have time right now to do this? Do you have a profound passion to get this journey started? Let’s look and listen for the language that you use to describe your interest in personal and/or business financial planning. Is it another process? Is it another task to do? Or is it a journey? Many years ago I heard Paul J. Meyer, motivational speaker and author, define success. “Success is the progressive realization toward a worthwhile pre-determined goal.” Mr. Meyer was extremely direct in his precise use of key words to define such an esoteric term as success.

Personal and business financial planning is a journey as well as a destination. The journey may never end because as you progress through the many phases of the strategic process, new destinations may be identified and clarified. So, in this beginning stage of your decision to do a financial plan (integrating it with your business plan), what thoughts and words will you use to describe your involvement with your wealth manager and life planner? How important is the outcome to you, and will you take joint responsibility with your life planner to create the highest probability for success?

If you compare financial planning to a diet for example, you realize that weight-loss is a lifestyle change, not a quick fix. Financial planning is identical. To get to a new life plan, you cannot keep doing the same things that have not worked in the past, and just buying products doesn’t fix it long term. You cannot keep doing the same thing over and over again and expect different results.

Wealth management and life planning at RAV is much more than just dollars and cents. Typically, people expect dollars and cents to dominate conversations they have with a wealth adviser, but when it comes to life planning topics of discussion extend to matters far more personal than money, addressing your deepest life dreams and goals — and how to make them a reality through sound financial planning. When developing a life plan with your RAV adviser, there are a few key factors that must come into alignment — mutual trust, understanding, and a wealth adviser who has the courage and honesty to tell you whether your current reality can support your future dreams. If it can’t, our wealth manager has the risk management know-how to assess what, if any, adjustments can be made to your current lifestyle and wealth strategy to help you achieve the life plan you’ve outlined. But you as a client also bear a large responsibility in the life planning process — particularly if you long for a future that looks very different from your current reality. Like all strategies, the more time you have to take risks and plan, the better your odds are of achieving long-term success.

Start out with a clean slate in your mind as to the experience you are undertaking. Refrain from beating yourself up that you have waited so long to get started. Embrace the co-responsibility that you and your wealth manager will commit to, being mindful that it is your financial plan. You are in charge of its destiny. Know that there are distractions and other ingrained attitudes and beliefs that may attempt to undermine your tenacity in staying on the journey. Keep two words always in mind — character and persistence.

I remember in the 1970s listening to a personal development record. Not a CD or cassette tape, but a 78 rpm vinyl record. The motivational instructor, whose name I have forgotten, defined the word character. “Character is the ability to carry out a decision long after the enthusiasm in which it was made has left you.”

Ray Kroc, the late founder of McDonalds, put it best when he said (and I paraphrase): “Nothing in this world can take the place of persistence …… persistence, determination and love are omnipotent.” All successful people persist at accomplishing their objectives. The greater the passion for the outcome, the easier it is to persist. So keep in mind a visual of what that end result will be. In dieting, you may hang up a picture of yourself on the refrigerator of the new you. Compare this experience to putting together a jigsaw puzzle. Rather than focus on how many pieces, colors, corners or edges are in the box, concentrate on the picture on the box top. That picture is the joyful outcome as the pieces come together. Your financial and business plan will also be the outcome of your journey with your wealth manager and life planner as you both use art and science to assemble all of its components.

Robert A. Valente, CFP®, AEP®, is CEO and Managing Member of RAV Financial Services LLC. He can be reached at

Insights Wealth Management is brought to you by RAV Financial Services LLC

Published in Cleveland

Dividends have accounted for 40 percent of total returns in the market since 1940. Some investors are concerned about recent stock price increases, but there still is room to invest in dividend-paying stocks, especially for the long term, says Sonia Mintun, vice president and portfolio manager at Ancora Advisors LLC.

“For the long term and at current valuations, particularly given historically low payout ratios, dividend-paying stocks can see strong relative and absolute performance. The outlook is enhanced by near all-time low U.S. Treasury yields and the Federal Reserve’s extended dovish position on interest rates,” she says.

Although the upcoming election and global economic environment are areas for concern, Mintun says an emphasis on high-quality dividend-paying stocks at low valuations should cushion investors from volatility and provide real returns over the long term.

Smart Business spoke with Mintun about the current stock market and how dividend-paying stocks remain a smart investment.

With the recent run-up in equities, is the dividend-paying strategy overvalued or a crowded trade?

Over the last year or more, the dividend theme has been the popular trade and the market has run up. There are a number of ways to evaluate if the market — and therefore dividend-paying stocks — is overvalued. You can examine whether it is trading at lower-than-average yields, or higher-than-average valuation ratios such as price-to-earnings (P/E), price-to-book (P/B) or price-to-cash flow.

The current market’s value is dependent on an investor’s time frame and risk tolerance. Is it overvalued for the next several months? It is possible we could see some pullback, but looking over the long term, it is our view that dividend stocks are not overvalued. The trailing P/E ratio of the S&P 500 index is around 14, which is lower than its historical norm and nowhere near where it was during the tech bubble when P/E ratios were closer to 50. While you can argue that the economic growth outlook is sluggish, companies have become operationally leaner, which has helped boost profit margins. They have better positioned their balance sheets by refinancing debt at extraordinarily low interest rates and have historically high cash levels. Lastly, with regard to dividend payers in particular, yields are at close to seven-year highs, while payout ratios are low, suggesting current yields are well supported by earnings. So overall, our opinion is that dividend-paying stocks remain attractive for long-term investors, especially in comparison to fixed-income yields.

What sectors have performed better and may be perceived as overvalued?

Defensive sectors such as consumer staples, health care and utilities have attracted a lot of capital and could be perceived as overvalued. Their P/E multiples compared to the overall market are trading at premiums to their five-year averages, but it is not a significant premium. Utilities, for example, are the most correlated sector, with 10-year treasury yields that have an 80 percent correlation since 1990. If you think that rates are going to stay low for some period, utilities may not be overvalued based upon the five-year averages.

What dividend-paying sectors have underperformed?

Economically sensitive stocks, such as energy, industrials and materials, have fared the worst, largely due to fears about slower growth in emerging markets and from concerns in Europe. However, many stocks in these sectors are trading at attractive discounts to their historical valuation ratios. They have ample cash on their books, generate consistent cash flows and could see improving profitability with higher commodity prices and demand if global stimulus takes hold.

What impact will the potential tax changes have on dividend-paying stocks?

A potential dividend tax increase has concerned some investors about owning dividend-yielding stocks. In 2001 and 2003, dividend tax cuts were put into place that reduced the dividend tax rate to 15 percent from 35 percent. These cuts are set to expire at the end of this year unless Congress extends them or passes new legislation. If no legislation is passed, taxes return to a top marginal rate of 39.6 percent. This tax increase may be a short-term negative for stocks and high-yielding stocks.

However, history has shown that tax increases do not have a long-term negative effect on dividend-paying stocks, as stocks typically recover after six months or so following an increase. This may be because an estimated 50 percent of equity held is owned by tax-exempt entities — such as qualified plans, foundations and foreign investors — all of which are somewhat indifferent on taxes. In addition, when tax increases are anticipated, it has typically not been problematic over the long term. For example, beginning in 2013, a new Medicare contribution tax of 3.5 percent will be imposed on investment income. This proposed tax increase has had minimal effect on the stock market so far.

What is the long-term outlook for dividend-paying stocks?

Longer-term dividend-paying stocks remain an attractive option for risk-averse, equity-oriented investors. Dividends provide a cushion during poor equity markets and are relatively stable over time. Consequently, by being less volatile and being more disciplined with capital because of the dividend policy, dividend-paying companies have outperformed non-dividend-paying companies for more than 80 years. Additionally, with dividend payout ratios near historical lows and weighty cash balances, companies may return more cash to shareholders in a low-growth environment. Given today’s low interest rates and continued global economic turbulence, we see dividend paying stocks as attractive now and for the long term.

Sonia Mintun is a vice president as well as an Investment Advisor Representative of Ancora Advisors LLC (an SEC Registered Investment Advisor). In addition, she is also a Registered Representative of Ancora Securities, Inc. (Member FINRA/SIPC).  Reach her at (216) 593-5066 or

Insights Wealth Management & Investments is brought to you by Ancora

Published in Cleveland

In the current economic environment, many businesses are finding financing difficult to come by. But with the proper preparation, gaining funding for your business is not impossible, says David Shaffer, director, Audit & Accounting, Government Contracting Industry group leader at Kreischer Miller.

“Getting your business in order and presenting a strong case to your banker can improve your chances of getting financing,” says Shaffer. “It’s not as easy as it once was, but even in difficult economic times, banks and other organizations are still providing financing to businesses.”

Smart Business spoke with Shaffer about how to position your business to succeed when seeking financing.

What does a business need to have ready prior to looking for financing?

Whether you are a new business or have 50 years of history, anyone looking to provide financing is going to want to see the plan of how the business is going to repay the loan.  Most lenders do not want to have to liquidate the collateral to collect the loan; they want to set up reasonable terms and conditions so the business can repay the loan, over time, and the lender can make a reasonable profit.

In most cases, this means providing the lender with a monthly budget of the business’s income, balance sheet and sometimes cash flow for 12 months, and an annual budget for at least two years from that point. The lender will use these statements to create financial covenants, so management must be comfortable that they can meet, or preferably exceed, the budgets.

Lenders are also going to review management’s history and the business’s history of repaying debt. If there have been any issues with historical debt, this should be discussed with the lender up front, prior to the bank discovering it on its own.

If you are an existing business, three years of historical financial information should also be provided. Audited financials are best, but in most cases, reviewed financials will be sufficient. If the company does not have audited or reviewed financial statements, compiled or internal financial statements should be provided, but if this is the case, be prepared for more due diligence from the lender. If there have been historical losses or other items that might give a lender concern, discuss the issues with the proposed lender prior to sending.

If this is the first time through the process, owners should consider having their CFO/controller involved, or involve their CPA or legal counsel who is familiar with typical terms and conditions of business loans. But even if you have done this before, no matter how experienced you are, make sure that you have an experienced attorney who has knowledge of these loans review all documents prior to signing.

How long does the process typically take from start to finish?

Most banks need 45 to 60 days from the initial meeting to the time of funding a loan. If the loan is more complex, it may take longer.

What collateral will a lender typically request?

Most banks will request that all business assets collateralize their loan (assuming they are the only lender) and, in most cases, will require the business owners to personally guarantee the loan. If the loan is very risky, they might also request liens on specific owner assets such as stock portfolios, personal home, and/or cash surrender value of life insurance.

What interest rate can businesses expect in the current environment?

Banks and other lenders determine their interest rates based upon the perceived risk of the loan. Most business loans that are not high risk have variable interest rates ranging from prime minus .5 percent to prime plus 1 percent. Fixed rate loans will vary depending on the length of the loan and the collateral.

Other than banks and personal savings/assets, where else can a business seek funding?

President Obama recently signed the Jumpstart Our Business Startups Act, and one aspect of that, called crowdfunding, provides up to $1 million of loans for businesses. Transactions must be administered by a broker or a funding portal that is registered and complies with the Securities and Exchange Commission requirements.

The Small Business Administration and other government-guaranteed loans also provide funding alternatives to businesses. The SBA can provide loans up to $5.5 million. Such loans require a lot of documentation from a business, but their rates are very competitive. In most cases, a bank will still need to be involved to underwrite the loan, and many banks have specific lenders specializing is SBA loans.

Some companies also consider joint ventures. However, this is quite risky because it requires a strong leader to bring together a group of businesses so that each member of the group understands the risks and responsibilities involved. It also requires the involvement of an experienced attorney who can write a joint venture agreement that everyone understands and is willing to sign. Joint ventures are often used to complete a specific project for a customer when one company does not have all the skill sets to complete the contract on its own, so will go out and find a ‘partner’ with those necessary skill sets to propose on the project.

Venture capitalist/private equity is also viable, especially if the business is promising and can grow quickly with the proper funding. Typically, these companies will get an ownership in the business. Some firms have been willing to lend money to a company, but it is typically at a much higher interest rate than a bank may charge.  The advantage of venture capital/private equity, however, is that the business now has the network of contacts of the venture capitalist or private equity provider at its disposal.


David Shaffer is director, Audit & Accounting, Government Contracting Industry Group leader, at Kreischer Miller. Reach him at (215) 441-4600 or

Insights Accounting & Consulting is brought to you by Kreischer Miller

Published in Philadelphia

The most damaging thing women business owners can do regarding financial planning is nothing.

“It’s often the last thing that people want to talk about because they are so busy living their lives and running their businesses,” says Nancy Kunz, CFP®, ChFC®, CLU®, Lead Financial Planner at First Commonwealth Financial Advisors, Inc. “Then, by the time they figure it out, they are 65 and staring at retirement. A woman’s instinct often is to help everyone else first, to take care of everyone else, and that is compounded when a woman is also running a business,” says Natalia Paich, CPA, AIFA®, Wealth Relationship Manager at First Commonwealth Financial Advisors, Inc. “But sometimes she needs to put herself first and plan for the future of herself and her business.”

Smart Business spoke with Kunz and Paich about business and financial planning for women business owners.

How do women need to plan differently than men?

There is a high probability of a woman being alone late in life, as men tend to have a shorter life expectancy. It is important to take control of finances now, as doing so will lay the groundwork for making the choices for the future. While the thought of taking ownership of one’s finances may seem daunting, doing so both personally and professionally is imperative.

A common mistake made by women business owners is trying to do it all themselves. Instead, get help from the beginning and find the appropriate professional. Most people don’t truly understand their financial decisions and therefore make uninformed choices or no choices at all. When working with a trusted professional, women should ensure that they are active participants throughout the partnership, from hiring a professional to understanding the decisions and implications of those decisions.

What are some of the biggest financial mistakes female owners make with their business?

We mentioned that the biggest mistake women can make in regard to their finances is doing nothing. The same can be said for women business owners using slightly different words, ‘failure to plan.’  Very few businesses take the time to plan income, expenses, management of receivables and cash flows, money for capital expenditures, etc. Women should take the time to create a financial plan for their business. A big part of creating the financial plan is finding the right professional expertise for legal, tax, financial planning, etc. A business owner’s time should be spent doing what she does best — not on the behind-the-scenes mechanics.

Part of creating the right team of professionals includes where to look for them. Women should look for professionals who are familiar with and have experience with small businesses. Spending the money upfront to pay professionals can save a lot of headaches further down the road.

What do women business owners need to know about saving for retirement, and how can they balance that with other needs?

Women business owners have many options to save for retirement. The best option often depends on whether the business owner has employees, and if so, how many. Some retirement options include SEP IRAs, self-employed 401(k), self-employed Roth 401(k), SIMPLE IRAs and Keogh plans. Each type of plan has different contribution limits, may allow for tax-deductible contributions and withdrawal provisions, and may require taxation of monies at distribution.

It is important to consult with a financial adviser and/or accountant to determine which plan is best suited for the business and business owner. In regard to retirement savings, women business owners should avoid using their own retirement money to fund their business. The long-term effect on retirement savings can be significant. Monies designated for retirement should remain in retirement. Monies designated for business development and growth should be used for the business. A woman doesn’t want to find herself at retirement with only illiquid assets.

What should women know about financial planning when one spouse takes times off from work?

Keep retirement funding going, if possible. If one spouse takes time off to raise the family, increase savings into the spouse’s company-sponsored retirement plan and/or consider establishing a spousal IRA. This may not always be an option, so it is important to confer with a trusted adviser. Expectations for the family’s standard of living are paramount not only to planning but also to adjusting to one income, so those need to be realistic and continually reviewed.

If a woman business owner decides to leave her business, she should keep current with her profession so that when she is ready to re-enter the work force or start a new business, doing so will be easier.

When running a business, how can women incorporate their role as a primary caregiver to an elderly parent?

This can be financially and emotionally difficult, especially when paired with taking care of children and running a successful business. This is where long-term care insurance comes in, helping to ease the burden. Women should ensure their parents have long-term care insurance, even if they have to pay for it themselves. Oftentimes, care starts being required when a daughter is trying to raise her own family and her business is taking off.

When purchasing long-term care insurance, do the research to ensure a quality product. Certain companies are better with premiums and rate increases than others, and large annual rate increases can lead to unaffordable premiums. Financial stability of the insurance company is also important, as the need for the insurance may not arise for years.

The peace of mind acquired after confronting one’s own financial planning situation and working with a trusted adviser to put a sound plan in place is priceless, allowing you to focus on other things.


Nancy Kunz, CFP®, ChFC®, CLU®, is Lead Financial Planner with First Commonwealth Financial Advisors, Inc. Reach her at (412) 562-3232 or

Natalia Paich, CPA, AIFA®, is Wealth Relationship Manager with First Commonwealth Financial Advisors, Inc. Reach her at (412) 562-3232 or

Insights Wealth Management is brought to you by First Commonwealth Bank

Published in Pittsburgh
Saturday, 01 September 2012 10:38

Getting refocused for financial success

The road to financial success is paved with good intentions. We all know intellectually and appreciate how Albert Einstein defined insanity as “doing the same thing over and over again and expecting different results.” We create goals and objectives, but habits and attitudes get in the way.

Think back when you were a child and you were about to go to your first day of school. How did you feel? You may have been filled with angst and fear as to what would actually transpire. So there may be fear of the unknown that comes with new experiences. How we kept our room, did our school work, kept track of records and information all set the stage for our adult financial planning habits. Even your annual April income tax pilgrimage of collecting your financial data reminds you of those acquired habits of dealing with financial matters. This tax preparation scenario may exacerbate your sense of frustration and angst by adding the dimension of fear of missing the deadline.

So what is all of this preliminary conversation leading to? What does this have to do with September? It appears that our lives are in sync with the school calendar. Summer has been a time to vacation away from responsibility, so September is charged with a get-back-to-work mentality. Rather than dread this, embrace this time of year. Incorporate a new habit of fiscal responsibility into your life now without applying pressure to your daily routine. Understand that there are obstacles that are physically, behaviorally and inherently in the way, but you can choose a financial partner/coach to make the journey an integrated life-planning experience.

Meet with a bona fide wealth manager. Who is that and what is the process? Wealth management is an investment advisory discipline that incorporates financial planning, investment-portfolio management and a number of aggregated financial services. High-net-worth individuals, small business owners and families who desire the assistance of a credentialed financial advisory specialist call upon wealth managers to coordinate estate planning, legal resources, tax professionals and investment management. Ideally, you are looking for an all-inclusive and objective wealth management company.

Financial planner, broker, wealth advisor … they all sound the same. How do you choose?

Look for an individual or firm that agrees to work in a fiduciary capacity. A fiduciary agrees not to put his interests before the duty to serve you. The fiduciary duty is the ultimate standard of care, and a fiduciary agrees to eliminate potential conflicts of interest in the relationship. This standard is in opposition to the suitability standard used generally in the brokerage and financial services industry. Suitability obligation by members of the broker/dealer community dictates the representative has to reasonably believe that any recommendations made to you are suitable to you in regard to your financial situation. The representative’s loyalty is to his or her firm, and that person is not obligated to disclose conflicts of interest.

Uncover how the professional is compensated. When it comes to compensation, there are basically two groups: fee-only and all others. Innovative firms have introduced an annual flat fee retainer working agreement in response to the age-old ambiguity that has prevailed in the financial industry relative to how advisors are paid. These new pioneering wealth management companies have eliminated from their vocabulary all of the jargon about percentage of assets under management (AUM) charges and commissions charged on implementation. The retainer is achieved by determining the client’s desired scope of services, complexity of personal and/or business situations, and other qualitative and quantitative data. Transparency and disclosure are at the root of their relationship with you.

Be prepared for that visit with your wealth manager. Begin to identify and accumulate two types of data — quantitative and qualitative. The quantitative data can be easier to retrieve, such as assets, liabilities, cash flow, employee benefit statements, estate documents, buy-sell agreements and the like. You may experience some angst if your personal filing system is not quite up to date.

The qualitative data resides in our intellect and our hearts. What is your personal purpose, passion and legacy goals? You as a client also bear a responsibility in the life planning process — particularly if you long for a future that looks very different from your current reality. Like all strategic goals, the more time you have to take risks and plan, the better your odds are of achieving long-term success.

The wealth management process is really a life-planning passage. Answers to these qualitative questions will help identify the drivers in your financial life-plan. Wealth management and life planning are much more than just dollars and cents. Typically, people expect dollars and cents to dominate conversations they have with a wealth advisor, but when it comes to life planning, topics of discussion extend to matters far more personal than money, addressing your deepest life dreams and goals — and how to make them a reality through sound financial planning.

The life-planning experience takes you to new dimensions of goal accomplishment. We have focused so much on goal-setting; the life-planning process focuses on goal accomplishment.

Robert A. Valente, CFP®, AEP®, is CEO and Managing Member of RAV Financial Services LLC. He can be reached at

Insights Wealth Management is brought to you by RAV Financial Services LLC.

Published in Cleveland
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