4 Tax Changes You Should Know About for 2020

By: Al Ryerson

It’s a new year, and with it comes new tax guidelines. At the start of the new decade, the IRS has made adjustments to a number of points, ranging from the amount of money you can contribute to your 401(k) retirement plan to the income tax brackets that help you determine your tax rate.

Here are a few changes you should know about for 2020:

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STANDARD DEDUCTION

When filing your federal tax return, you may either take the standard deduction or itemize deductions on your tax return in order to reduce your taxable income. In 2020 the standard deduction has risen to $12,400 for single tax filers, $24,800 for married couples filing jointly and $18,650 for heads of households.

Remember, although using the standard deduction is easier than itemizing, it’s worth seeing if itemizing will save you money. Taking the standard deduction means you won’t be deducting home mortgage interest or other popular tax deductions such as medical expenses or charitable donations. Work with your tax preparer to identify what itemized expenses may qualify. If your standard deduction is more than your itemized deductions, it might be worth it to take the standard deduction and save some time.

Note: Although it might make sense to take the standard deduction for federal tax purposes, it may still be appropriate to itemize your deductions for state tax purposes.

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CONTRIBUTIONS TO RETIREMENT ACCOUNTS

The IRS has raised the employee contribution limit for 401(k) and 403(b) plans to $19,500 – an increase of $500 from 2019. Savers age 50 and older can contribute an additional $6,500 as part of their “catch-up” contributions, up from $6,000 in 2019.

Contribution limits for IRA & Roth IRA accounts remain the same at $6,000 (plus an additional $1,000 for individuals age 50 and over). 

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HEALTH SAVINGS ACCOUNTS

If you are eligible for an HSA (Health Savings Account) you have the opportunity to put aside pre-tax, or tax-deductible, dollars which can be withdrawn tax-free to cover qualified health expenses.

Health Savings Accounts are a tax-advantaged account for which the contribution limits generally increase year after year with inflation. This year, the 2020 limits have increased to $3,550 for individual coverage, and $7,100 for accounts covering a family plan.

HSA bonus – the monies in your account remain available for you from year-to-year. They are not subject to annual forfeiture like a Flexible Spending Account (FSA).

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GIFT & ESTATE TAX

As you may remember, in 2019 the Tax Cuts & Jobs Act nearly doubled the amount of assets allowed for decedents to gift over their lifetime - and shield from federal estate and gift taxes. In 2020 the lifetime gift and estate tax exemption increased slightly to $11.58 million per individual. An individual can leave $11.58 million to heirs and pay no federal estate or gift tax, while a married couple will be allowed to gift $23.16 million.

The annual gift exclusion – the amount you can gift to another person without it counting against your lifetime exemption – remains at $15,000 annually. Remember - a husband and wife can each make $15,000 gifts, doubling the impact. Separately, you can make unlimited payments to medical and tuition expenses on behalf of others if paid directly to the institutions.

Disclosure: Gilbert & Cook, Inc. does not offer tax or legal advice. You should consult with an attorney for legal advice and a qualified tax professional for tax advice.

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About the Author

Al Ryerson, ASA
Lead Strategist

As a Lead Strategist at Gilbert & Cook, Al focuses on the complex business and personal financial inter-relationships of our clients.

Contact Al Ryerson: aryerson@gilbertcook.com

What is the SECURE Act?

By: Jarret Sheets, CFP®

Welcome to the new year (and decade)! Many take this time of year to look forward and plan for the upcoming year (or decade in this case). One thing we can plan on for sure is that the Setting Every Community Up for Retirement Act (SECURE Act) is officially becoming a law, and changes to how we plan for retirement come along with it. In this article I will discuss the new SECURE Act and highlight a few areas I think will create additional planning conversations as we move into the new decade.

So - What Changes?

Required Minimum Distribution (RMDs)

When money is contributed to a pre-tax account such as a 401k or an IRA, you receive tax benefits when you contribute. Those benefits come in the form of a lower taxable income (your income's reduced by the amount you contribute) and your money can grow tax-deferred until you decide to take it out. Eventually, however, the IRS would like to receive their taxes and you're forced to take money out through a Required Minimum Distribution (or RMD).

An RMD is a minimum amount you’re required to take out each year once you've reached a certain age and it changes yearly based on your age and account size. You can always take out additional money above the RMD amount, but you must distribute the required amount each year. If you don’t, you’ll be facing a 50% penalty on the amount you did not withdraw.

With the SECURE Act, RMD’s weren’t eliminated, but the starting age did increase from age 70 ½ to age 72, which provides a little extra time for tax-deferred growth.

Note: If you turned 70 ½ in 2019, unfortunately, you still fall under the old rules and must start your RMD’s in 2020.

STRETCH IRAs

Under the old rules, if you inherited a retirement account as a non-spouse beneficiary, you could elect to keep the money in that account and let it grow tax-deferred. If you chose that option, you were required to take an RMD out each year, but RMD’s could be "stretched" over your lifetime, resulting in smaller yearly distributions. As a non-spouse beneficiary, which is typically a younger individual, this was a great opportunity to let that account grow for future use while incurring minimal taxes each year from the required distribution.

With the SECURE Act, those rules changed quite dramatically. Now, as a non-spouse beneficiary, you must distribute the entire retirement account (IRA, 401k, Roth IRA, etc.) within 10 years of receiving that account. During those 10 years, you have flexibility on when to take distributions and how much those distributions are (i.e. could take a lump sum or take 10 yearly distributions), which creates an important planning opportunity for inherited retirement accounts. Additionally, if you've saved a large amount in pre-tax accounts, this may be a good time to review your beneficiaries and consider how those accounts will be passed on.

Note: The SECURE Act would NOT eliminate the stretch IRA for existing inherited IRAs for the current beneficiary.If the IRA owner is already deceased and there is an existing inherited IRA, the SECURE Act would not eliminate the stretch for the current beneficiary. Existing inherited IRAs would be grandfathered. The bill as currently written would make these provisions effective for inherited IRAs when the IRA owner dies after December 31, 2019.  If the current beneficiary dies after December 31, 2019, the successor beneficiary would be subject to the new rules of the SECURE Act.

CONTRIBUTIONS & DISTRIBUTIONS 

If you're charitably inclined in any way and may not need your RMD (or at least a portion of it), a Qualified Charitable Distribution (QCD) may be a strategy to utilize. With a Qualified Charitable Distribution, you can donate up to $100,000 per year ($200,000 for couples) directly from an IRA to a public charity and you can exclude the donated amount from your taxable income. With the SECURE Act, the age to begin utilizing QCDs remained unchanged (starts at age 70 ½).

The last two items to touch on before I close are the age limits for IRA contributions and 529 distributions. With IRA contributions, there is no longer an age limit for when contributions must stop while previously contributions were required to end at 70 ½. For 529 plans, student loan repayments up to a lifetime limit of $10,000 are now considered a “qualified expense”. As an added benefit, an additional $10,000 distribution is allowed for every 529 beneficiaries siblings.

As you can see, the SECURE Act brought about some interesting changes and in turn created new areas for unique planning conversations. If one of these topics or any of the other unmentioned changes from the Act creates questions for you, please reach out your Gilbert & Cook team. - Jarret Sheets, CFP®

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Jarret Sheets, CFP®, Associate Advisor

Jarret joined our firm as an Associate Advisor in November 2019. In this role, he works with the Lead Advisor to help his clients and their families meet their financial goals.

Contact Jarret Sheets: jsheets@gilbertcook.com

2019 Market Review & 2020 Outlook

By: CHRIS COOK, CPA, CFA
Partner, Chief Investment Strategist

Market Update : 2019 Year in Review

Trade wars and a decline in global manufacturing weighed heavily on the overall state of the economy this past year. However, resilient consumers and a cut to interest rates provided a positive counterbalance for the stock market, which reached record highs in 2019.

What drove the 2019 markets? Three key factors had the most influence over investment performance in 2019:

The Fed did a major pivot in U.S. monetary policy in 2019.

In 2019 the central bank made three quarter-point cuts to the benchmark short-term interest rate. Investors welcomed this change, counter to the interest rate hikes in 2018. Since January, when the Fed began changing course, the S&P 500 index has risen more than 600 points, or 25 percent and the unemployment rate fallen from 4 percent to 3.5 percent - putting the economy on solid footing heading into 2020.

 (washingtonpost.com/business/2019/12/11/year-federal-reserve-admitted-it-was-wrong/ [12/11/19])

The trade quarrel with China cooled down slightly.

In December, representatives from both nations agreed on a “phase-one” trade deal after a year-and-a-half of imposing tariffs on each other’s products. The new agreement, which is expected to be signed in early 2020, will be the initial step toward a larger deal in hopes to reduce some US tariffs in exchange for more Chinese purchases of American products and better protection of US intellectual property. bbc.com/news/business-45899310 [12/16/19]

Earnings beat (low) expectations. 

One year ago, stock market analysts were pessimistic about corporate profits. With economies worldwide slowing down in 2018, year-over-year earnings growth for S&P 500 firms seemed ready for a slowdown as well.

Deceleration was evident, but as the year passed, many firms managed to exceed reduced estimates. According to stock market analytics firm FactSet, 75% of S&P 500 components beat earnings-per-share estimates in Q3, compared to a 5-year historical average of 72%. (insight.factset.com/earnings-insight-q319-by-the-numbers-infographic [11/21/19])

The S&P 500 climbed above 3,000 for the first time finishing 2019 up 31.49%. The Dow Jones Industrial Average advanced 25.34%, while the Nasdaq Composite was up 36.69%. (Morningstar)

Certainly an impressive year by any measure, but let’s look longer term. Specifically, at the last two decades. The 2000’s were much tougher for the S&P 500. For the 10-year period 2000-2009, the index was down a cumulative -9.1% (-0.95% per year). The next decade, capped by a notable ‘19, was up by +256% (annualized +13.65%). The average for the entire 20 years? +6.06%.

An innocuous prediction for the next 10 years would be somewhere between those two decades of extreme.

Looking Ahead to 2020

The news and political cycle will remain volatile this year. A U.S. economic outlook split between manufacturing and business investment still struggling to decipher trade deal(s), however, interest rates and borrowing costs are likely to remain unchanged for some time and consumer confidence and spending is expected to stay healthy and strong with low unemployment.

As we’ve said before; Rely on process, not prediction. The Gilbert & Cook team keeps focus on patience and a long-term perspective. Living an abundant life and fulfilling the needs of your future is dependent on the plans and solid process executed today.

Introducing, Jarret Sheets & Garrett York

We are excited to announce that Jarret Sheets and Garrett York have joined our Gilbert & Cook team!

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Jarret Sheets, CFP®, Associate Advisor

Jarret joined our firm as an Associate Advisor in November 2019. In this role, he works with the Lead Advisor to help his clients and their families meet their financial goals.

Prior to joining our team, Jarret was a Financial Advisor in the Des Moines area and obtained the Certified Financial Planner designation in 2018.

Jarret, his wife Jessica and daughter Sophie, live in Des Moines and they enjoy being active outdoors, cycling, and traveling to new places.

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Garrett York, Relationship Manager

Garrett is the newest addition to Gilbert & Cook, joining us in January 2020. In his role as Relationship Manager, Garrett serves as a direct contact for his clients to answer questions, while conducting client specific tasks and assisting the Advisor in helping clients and families achieve their goals.

Prior to joining Gilbert & Cook, Garrett worked in the financial services industry with an emphasis in compliance and operations.

Gilbert & Cook Awarded one of the Top Advisory Firms in 2019 from Investment News

Our firm is dedicated to providing our clients and their families with sophisticated strategies, and genuine relationships, creating a truly unique experience. Each team member is driven by the same passion and focus to help our clients and empower one another to Live a Life of Abundance®. For these efforts, we are proud to be recognized as a leader in our industry. In November 2019, Gilbert & Cook was honored to receive the 2019 Best Practices Award from Investment News.

November 2019 - Linda Cook & Heather Knight received the Best in Practices Award on behalf of Gilbert & Cook.

Investment News honored a group of Top Advisory Firms who are growing with intent and a focus on fostering a culture of excellence within the firm. Learn more about this award.

Economic Expansion - 2019 Mid-Year Market Outlook

On July 18th 2019, Gilbert & Cook hosted a Mid-Year Market Outlook luncheon and panel discussion.

Chris Cook, Chief Investment Strategist at Gilbert & Cook highlights what’s driving our continued economic expansion and what we can expect to see looking forward:

The economy is now in an uninterrupted expansion for what’s been the longest period in history - It’s also been one of the most uneven. We’ve marched forward, but we’re running at more of a marathon pace than say a Usain Bolt pace. Think of past recessions, the 2008/2009 Recession was the worst since the Great Depression. Where as a more “run of the mill” recession, like in the late 70’s early 90’s is very short-lived and life moves on fairly quickly. The most recent recession was greater in terms of the downside - it lasted a longer period - but we’ve bounced back and this growth trend has been very slow but very steady.

So, what stops an expansion? Let’s go through a normal list of things:

Spike in commodity prices

• That could be a rise in the price of oil, cost of inputs are higher, metals go up – we haven’t had an inflationary period in quite some time, so let’s cross that off the list.

Interest Rates

• An aggressive Federal Reserve raising in interest rates to slow down the economy. Most recent Fed move was easing, not tightening. Again, not an imminent threat.

Extreme valuations in the stock market

• The US stock market, even on the heels of all this growth, is still valued fairly in the global economy. I don’t think that valuations are extreme, I think they’re “fair” and that doesn’t send us into a recession.

Rising Unemployment

• We are moving in the opposite direction – at a 50-year low unemployment rate.

If you check all those boxes, just short of something major and unforeseen in our current economy, our economy is going to keep chugging along – and this recovery, this expansion is going to keep growing. If this is baseball, our economy is going into extra innings… but it’s a double header. We’ll see a brief recession, a pullback in our growth rate for 1 or 2 quarters which will give all the newscasters something to talk about, but then we’ll move on into the future and have further expansion.

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Mergers & Acquisitions - 2019 Mid-Year Market Outlook

Excerpts from Gilbert & Cook's "Mid-Year Outlook - Plans, Priorities & Expectations in the Public & Private Marketplace" By Steve Jacobs

What is the status of the U.S. M&A market and what is the future outlook?

1. Competitive environment and it is definitely a seller’s market, but buyers are doing more strenuous due diligence to make sure of what they acquire.

2. Prices and multiples are high for quality companies due to lack of quality businesses on the market.

3. PEGS and large corporates are willing to look at smaller transactions, actually making venture and angel investments to bolster R&D and technology.

4. Cross border deals are down 50% from last year.

5. Key reasons are unresolved issues like Brexit and trade policies.

6. U.S. economy has been surprisingly resilient as we are experiencing our longest ever economic expansion of 11 years (but global growth has slowed).

7. FACTSET U.S. MergerMetrics for trailing twelve months: 13,569 deals closed, up over 7% year over year.

What is impacting valuations in today’s market?

1. Low interest rates.

2. Banks hungry for earning assets (loans) – funding up to 50% or more of transaction value.

3. Plenty of equity capital.

4. Lack of quality companies on the market for sale.

5. Strong buyer demand for growth via acquisition.

6. According to Warren Buffet’s letter to shareholders the last 3 years, he shared, “Given the army of optimistic purchasers, price seems almost irrelevant.”

Read the full article from Steve Jacobs and BCC Advisors.

Trade Tensions - 2019 Mid-Year Market Outlook

On July 18th 2019, Gilbert & Cook hosted a Mid-Year Market Outlook luncheon and panel discussion.

TRADE TENSIONS

(Moderator, Brandon Grimm)
Obviously there’s a lot of news right now about trade tension. So let’s put that into perspective from each of your respective markets. How is trade impacting your markets and what are some other disruptors that we might see?

(Response by: Dr. Keri Jacobs - Economist, ISU Extension)

As far as tariffs being put on goods, retaliation from china and then our subsequent retaliation. The biggest sectors for Iowa that are feeling the impact are soybean production and pork production.

There are short term consequences, outlined in the recent report released by the Center for Agricultural and Rural Development: CARD Report. This report states that overall losses in Iowa’s Gross State Product are calculated to be $1 to $2 billion. Short term losses are about 10% of the pork and soybean industries respectively.

Longer term, as this trade war continues and as other countries stop taking our goods, what happens is that the countries who can’t produce goods at the low cost that we can, now they have an opportunity to step into the market. The biggest challenge that we could face is some of those markets going away from the US. The longer term challenge is not the acute loss of trade, it’s the larger risk of losing our place in the trade market. If we are no longer the lowest cost producer and if we’re out of the game for some time, we could lose our seat at the table.

(Response by: Steve Jacobs - President, BCC Advisers)

From an M&A  perspective, supply chain disruption can be a key factor. Increase cost of sourcing good and shipping goods, make it very difficult for distributors and manufacturers to be competitive.

The US and China relations on trade seem to have taken another step backwards. But as long as businesses in this country remain profitable and we keep inflation under control, there should be no reason for the market to step back or near a recession.

(Response by: Chris Cook - Chief Financial Strategist, Gilbert & Cook)

If you remember for last year’s event, 1-year ago we were talking about trade in the headlines. Since our discussion last year, we’ve improved our relations with trade partners, Canada, Germany and Mexico, however hog and soybean producers continue to get a disproportionate backlash from the tensions with China.

I think back on a quote from Mike Pyle, and I’ll use his words, “China never intended to ‘Play Fair’ …. Their intention was to take the worlds technology, copy it and make their economy around it”. Is it worth the fight? In my opinion it probably is. Because if we can’t get paid for the technology that we develop in the United States, by the rest of the world, then we will slowly fade. That’s where I come back and say, “Is it worth fighting? Yes”. People that we know in Iowa, people that we share a state with are bearing the brunt of it and hopefully we make it through. On a big picture, it is a very small percentage of our Net GDP is being impacted dollar wise by the tariffs so far. It’s a net effect, a fraction of our GDP in our global economy. At this point we see no clear end, and we should expect it to continue to invoke volatility.

Financial Spring Clean-Up

Spring cleaning season may be coming toward an end as we head into summer, but did you actually take a look at your finances as part of your spring cleaning? 

It’s that time of year again, where people start to open their windows, dust out their closets and start to organize and “tidy up”. Whether it’s deep cleaning the house, garage, yard, or office, it’s about prioritizing. All this spring-cleaning buzz got me to thinking, what are some of the spring-cleaning items people should think about when it comes to their finances.

Often times we get busy in the other things we have to do in life, be it work, family, kids’ activities or social events, whatever it is we put those things in front of less important things like our finances. Wait -I just said our finances are less important than all those things? Well to some degree I do think that is true, because living your life of abundance goes much deeper than your finances. BUT in 10, 15, 20, 25, 30 years, we are all going to want to retire and spend even more time on the afore mentioned things.  So now we should spend time on getting our financial lives organized and prepared for our future goals.

Where do we start?
TAXES

A good time to start thinking about these spring-cleaning finance items could start right after you file your taxes. After you see how your previous year taxes have shaken out, you can make any important changes for the following year. This is a good opportunity to update your tax withholdings or increase your 401k contributions ($19,000 employee max with an additional $6,000 for over 50 catch-up). 

Speaking of 401ks, if you’re a business owner, you should be thinking about what type of retirement plan is right for you and your employees.  A 401k can be a great tax and retention tool for the business.  After tax season, It’s also a good time to start thinking about the other things you can do to reduce your taxable income for the year or even put pencil and paper (yes it’s ok to still use those in this tech world) to your charitable giving strategy for the remainder of the year. 

PERSONAL CREDIT
Next Up – Credit Check

During your spring financial clean-up, you should think about running your first of three free annual credit reports for the year available to you by the credit bureaus, Experian, TransUnion, and Equifax.  (click link for more info: https://www.ftc.gov/faq/consumer-protection/get-my-free-credit-report). 

Looking at your credit report will allow you to see what current credit cards and credit lines are open/closed in your name, what personal information the credit bureaus have like addresses reported, telephone numbers, and employment data, and also current inquiries on your credit which you should be familiar with the names showing up. 

INSURANCE
Now let’s start thinking ahead to fall benefit enrollments. 

It seems like this always sneaks up on us, however, if we start thinking about it early, it should put us in a good spot to make good decisions when the enrollment window opens.  Make sure you are utilizing the benefits right for your family, whether it’s utilizing an HSA account, flex spending accounts, increasing your group term life insurance, or adding something like disability coverage, it’s important to maximize those benefits.

Insurance coverage, yes, I mentioned we should be thinking about it before enrollment period, but it’s also good to review your overall insurance coverage.  Have you had any major life events over the last year which might mean a change to coverage is needed like a big raise, having a new baby, bought a new house, got married, or even retired?  All these life events are good reasons to revisit your insurance plan, but I think it’s also just a good job to think about it annually during your financial spring cleaning.

SPENDING
Now I know you’re waiting for me to write about something fun, so how about I throw one out that we all care about tracking and monitoring…our monthly budget! 

Ok, we all know putting together (and more importantly, following) a budget isn’t the most enjoyable past time; however, it’s a place we can save a few bucks.  Here are a few easy ones: have you looked at different cell phone carrier options lately or compared cable/satellite tv options?  How about looked at your home and car insurance premiums?  Looking at those three items during the spring cleaning could help save $100s of dollars annually.  That’s more money to spend on lattes! (Oh wait, think about cutting that daily drink at your favorite coffee shop as well.)

Wait did I just say you could save $100s of dollar annually? Ok, maybe that doesn’t get a lot of people too excited, so let’s talk about something that can save or make you thousands of dollars annually. I’m talking about having a coordinated allocation for your investments.  Hang with me here, I’m not saying you have to do this on your own but working with a good financial advisor can help ensure this part of your spring financial cleaning is done.  I’m sure lots of us hire someone to do our actual spring cleaning at our house, so there’s nothing wrong with doing the same here with your investments. 

ESTATE PLANNING
Lastly, and this thing is probably more like the basement which only gets cleaned every 5-10 years during spring cleaning and it’s ensuring your estate planning documents are up to date with your wishes.

I know most of you are thinking, now where did I put those things again?  Make sure they are still relevant with current legislation and the people you wrote into the documents are still willing and/or able to handle their duties.  I definitely saved one of the more important things for last on purpose (I was hoping you would read the whole blog).  This is something that’s easily overlooked, and we all know a friend or family member who forgot to update their documents or worse yet, didn’t have any in place.  Blow the dust off the documents and give them a read or contact a good attorney to help in your review.

I’m sure you’ve had enough of my rambling at this point, but let’s recap the Financial Spring Cleaning items quick:

-          Make tax adjustments as needed whether it’s withholding or 401k contributions

-          Run your first of three FREE annual credit reports

-          Start thinking about fall benefit enrollments

-          Review current insurance coverage

-          Update your monthly budget

-          Have a plan for your investments

-          And finally, make sure your estate planning documents follow your current wishes. 

Ok, now what are you waiting for, get a move on it!  Please contact our Gilbert & Cook team if we can help answer any of the questions on this honey-do-list.

Author: Jerit Tripp, Advisor

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Disclosure: This presentation is limited to the dissemination of general information pertaining to its investment advisory/management services. Opinions expressed are those of Gilbert & Cook and are subject to change, not guaranteed and should not be considered recommendations to buy or sell any security. Gilbert & Cook is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Gilbert & Cook, Inc. and its representatives are properly licensed or exempt from licensure. Past performance is not indicative of future results. Investing involves risk and possible loss of principal capital. No advice may be rendered by Gilbert & Cook, Inc. unless a client service agreement is in place.

Ribbon Cutting at Our New Home!

It has been a very big year for Gilbert & Cook. Celebrating our 25th Anniversary as a firm; we expanded our team to 22 people, added 3 new partners, and found a new home!

The Gilbert & Cook team hosted a Ribbon Cutting event with the West Des Moines Chamber of Commerce in April to welcome guests to our new home in West Des Moines.

Ribbon Cutting Ceremony with the West Des Moines Chamber of Commerce.

Gilbert & Cook Partners: Brandon Grimm, Chris Cook, Linda Cook, Marlis Gilbert, Jerit Tripp & Megan Rosenstiel

Linda Cook, President, Welcoming Guests at the Gilbert & Cook Ribbon Cutting Breakfast

Introducing Al Ryerson, Lead Strategist

We are pleased to announce that Al Ryerson, ASA, has joined our firm as a Lead Strategist.

Al joined Gilbert & Cook in January 2019 following a successful career as a Certified Public Accountant and Tax Advisor, Chief Financial Officer and Business Valuation and Financial Litigation Consultant (and a brief, unsuccessful attempt at retirement).

Over his 40+ year career, Al has earned the following designations and certifications: Certified Public Accountant (CPA), Accredited in Business Valuation, Certified in Financial Forensics, and Accredited Senior Appraiser. He has been active in the Iowa Society of CPAs, Financial Executives International, Des Moines Estate Planners, ESOP Association, and Wednesday Tax Forum.

As a Lead Strategist at Gilbert & Cook, Al focuses on the complex business and personal financial inter-relationships of our clients. We are honored to have Al join our Gilbert & Cook family. Al has been a trusted friend of the firm for many years and we are looking forward to adding his vast experience and talents to our team.

Contact Al via email at: aryerson@gilbertcook.com or call 515.270.6444

Read more about Al and the rest of our Gilbert & Cook team in our “About Us” section.

Market Update - Is This Normal?

From Your Gilbert & Cook Investment Team

Market fluctuations (volatility) come in many shapes, sizes, and timeframes.  The origin of a stock falloff sometimes stares us right in the face such as the horrific terrorist attacks of September 11, 2001 or the Great Recession of 2008-2009.  Other times the downturn is a detached concern when compared to negative movement in investor portfolios.  In those cases, it matters most that the downturn is occurring, not necessarily what event is the catalyst.

Most trading days in October of 2018 fall into the latter category.  There are a litany of issues drifting in and out of headline news.  Mid-term elections, unemployment, interest rates, trade and tariffs, corporate earnings, etc, etc.  Important sure, but not enough on their own merits to cause a meltdown.  These issues and many others are the stuff of “normal” stock market volatility.  Let us explain.

For the next few minutes, grant us that “normal” shall be defined by “how it usually works”.  Usually, generally, typically, regularly, customarily, you get the picture.  The chart below shows the price action of the S&P 500 index in each of the past 38 years.  The gray bar shows the price change for the respective calendar year.  The red dot illustrates the largest intra-year decline.  So what is “normal” in this graphic?  Well, usually, the market has gone up.  29 of the past 38 years or 76% of the time.  76% does not equal “always”, only typical.  The red dot average is down -13.8%.  So, a normal year still sees a pullback of nearly -14% at some point.  Even if we eliminate the two worst years, the average downturn is -12.3%. Ups and Downs in stocks are normal.  

Back to the year 2018.  The S&P 500 saw a drop from January 26th to February 8th of -10.2%.  Our worst stretch of the year, so far, and it happened in the timeframe of 9 business days.  That February 8th low point marked the S&P 500 being down just -3.5% from the beginning of 2018.  At its highest, the S&P 500 index level was up +9.6%.  The Dow Jones Industrial Average follows a similar pattern up +8.5% YTD at peak and down -4.8% YTD at bottom.  Through October 24th, both of these US Large Cap indices are hovering around flat for the year while bonds, small caps, and international stocks are all negative on the year.  Pullbacks feel painful when happening, but don’t let emotions get the best of you.  After some extraordinary years in 2012, ’13, ‘16 and ‘17, treading water in 2018 would appear quite possible.

The entire Gilbert & Cook team is here to help you navigate and discuss any topics you feel are key.  We know it is imperative that you have access to your G&C Investment Team portfolio managers and to understand what is driving your investment performance.

Is this still normal?  Yes.

Good News from Gilbert & Cook

Please join me in welcoming long-time team members, Megan Rosenstiel, Brandon Grimm and Jerit Tripp as new Gilbert & Cook shareholders. We celebrate this growth during our 25th Anniversary year and look forward to a great future. - Linda Cook, President

Shea Mears joins Gilbert & Cook as Financial Advisor

We are pleased to announce that Shea Mears has joined our team as a lead Financial Advisor.

Shea brings a rich background and skillset to the Gilbert & Cook team, with experience in financial planning strategy and implementation, education, investments and tax planning. Utilizing his experience and talents as a former tax professional, Shea looks forward to creating financial planning and tax mitigation strategies for the clients of Gilbert & Cook. 

“Gilbert & Cook is one of the most respected Wealth Management firms around.  From inception the Gilbert & Cook team has focused on taking care of clients through sophisticated planning and investment techniques. With that philosophy, they have built a team of highly educated, highly experienced professionals that work together to ensure that the client experience is second to none.” Shea explained.

“When an opportunity arises to join a firm like this, you don’t even pause.”

This year, Gilbert & Cook, Inc. is celebrating 25 Years in business. Founder, Linda Cook states, “We are honored to have Shea join our team. We have known Shea for many years and are looking forward to adding his experience and talents to our financial planning team. This is a big year for our firm, celebrating 25 years, and I am so happy to welcome Shea to our Gilbert & Cook family and have him share this journey with us.”

Not only has Shea been a Financial Advisor, he has been dedicated to giving back to others as an educator – formerly an accounting professor at the Des Moines Area Community College and currently an adjunct professor at Simpson College.

Shea earned a bachelor’s degree in accounting from the University of Northern Iowa and a Masters in Business Administration with accounting emphasis from Drake University. Additionally, Shea is both a Certified Public Accountant (CPA) and Certified Financial Planner (CFP®)

Contact Cara Shindler at cshindler@gilbertcook.com for more information regarding the latest updates with Gilbert & Cook. 

Read Shea's full bio online. 

Investment Strategists Show Confidence in Economy

DSM Wealth joined us at our recent Mid-Year Economic Update event. Gilbert & Cook hosted a panel discussion on the state of the public and private marketplace - moderated by Brandon Grimm, and featuring panelists: Chris Cook, Eric Lohmeier, and Matt Schilling. 

Read the article, written by DSM Magazine author, Steve Dinnen.

Gilbert & Cook Celebrates 25 Years - Business Record Feature

This article was featured in the Des Moines Business Record, published on July 6th 2018. Read the full online issue (here). 

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Gilbert & Cook Celebrates 25 Years!

The Gilbert and Cook core belief that people always come first finds its roots back to 1993.

After Linda Cook’s early career in investment planning convinced her long-term relationships are much more valuable than selling something, she started her own independent firm in Des Moines. Linda set out to truly understand her clients, listen to what they wanted to achieve and find the right solutions to meet their needs.

25 Years later, the mission remains the same.

 “The core of what we do is caring for people and helping them make good decisions,” Linda said. “Just seeing what clients needed and how to help them wasn’t just about solving their problems with a product, it’s really solving it with a strategy. It’s helping them find the confidence to make good decisions on their finances.”

Linda was joined in 2000 by Marlis Gilbert. Marlis’ many years of experience, including a primary focus on financial planning, made her a great match and asset for the firm. Together, the two worked to build a team environment, cultivating a partnership mentality to grow the firm.

In 2009, Linda’s husband, Chris, who is a Certified Public Accountant (CPA) and a Chartered Financial Analyst (CFA), joined the firm as the Chief Investment Strategist.

Because of the well-rounded leadership at Gilbert and Cook, clients get specialized expertise in many different fields.

“We are an ensemble practice,” Linda said. “As a client is engaged with Gilbert and Cook, they don’t just get me or one of the advisers. They get the whole team, and we’re all there to be available and helpful while bringing in additional expertise when needed.”

As a private wealth management firm, Gilbert and Cook offers many different services in financial planning and investments. The firm specializes in life transitions, whether that be a major business transaction, a death in the family, divorce, retirement or many more major life events. Gilbert and Cook serves families, individuals and businesses.

In all of those services, clients are treated with personal care and receive tailored solutions to problems, rather than a one-size-fits-all approach. The team at Gilbert & Cook works to bring clarity to the various choices their clients face, and provide the confidence needed to make important wealth decisions. In short, if you are dealing with something complex - Gilbert and Cook professionals can break it down and make it simpler to understand.

“Our mantra is Live a Life of Abundance, and we have each one of our clients define what abundance means to them, allowing us to help in a personal and tailored way,” Linda said. “We keep what’s important to them at the top of our minds in each and every meeting.”The Gilbert & Cook philosophy is predicated on sincere concern for their clients and maintaining a genuine relationship. “We have special relationships with our clients,” Linda said. “It’s not just something we say, but it’s something that we live every single day. We’re there for them every step of the way.”

The Gilbert and Cook investment team has three Chartered Financial Analysts on staff. The CFA designation is regarded as one of the highest certifications in the finance industry. As an independent firm, Gilbert and Cook tailor’s the investment strategy and proprietary asset allocation models for each individual client situation.

Going forward, Gilbert and Cook is looking to grow its team with quality and experienced professionals. “We’re always on the lookout to bring on amazing new team members to join our family and provide value to our clients.” Linda said.

Mid-Year Market Event - Recap and Recording

On July 10th, guests joined Gilbert & Cook for a discussion on the current state of the market, the 2018 economic outlook and expectations in both the public and private marketplace with recent changes and events. 

The event was moderated by Gilbert & Cook Portfolio Manager, Brandon Grimm, and featured the following panelists:

Chris Cook, CPA, CFA
Chief Investment Strategist - Gilbert & Cook, Inc.

Eric Lohmeier, CFA
President - NCP, Inc.

Matt Schilling, CFA
Analyst, Real Estate Securities - Principal Real Estate Investors

Mid-Year Economic Outlook

Mid-Year 2018 : Economic Update

THE MONTH IN BRIEF

U.S. stocks have been trending higher, but have endured some rough water over the past few weeks. In May, investors were left to interpret mixed signals. The historic U.S.-North Korea summit was on, then off, then on again. An apparent truce emerged in the U.S.-China tariffs battle, but it did not last. Oil rallied, but then prices fell. Federal Reserve policy meeting minutes indicated central bank officials would accept above-target inflation for a while. Other economic signals were clear: new and existing home sales were down, consumer confidence was back up, and consumer spending was strong. In the end, the markets took all this in stride – the S&P 500 rose 2.16% for the month.

Now in June, U.S. stocks continue to fall as a threat of new tariffs on Chinese imports from the U.S. is ramping up global trade fears. Treasury yields are dropping and the U.S. dollar is rising.

HOUSING

Mortgage rates may have soared in April, but they stabilized in May. On May 31, Freddie Mac’s Primary Mortgage Market Survey found the mean interest rate for a conventional home loan at 4.56%, which was 0.02% lower than on April 26. (At the end of May 2017, the average interest rate on a 30-year ARM was 3.95%.) 

Home buying fell off in April. According to National Association of Realtors research, there was a 2.5% retreat in the pace of existing home sales. Construction for single and multi-family units were solidly higher compared to the prior month and are up noticeably year over year. Building permits, one of the leading indicators tracked by the Conference Board as it is a gauge of future construction, fell in May compared to April. Permits for single and multi-family unit structures both declined month over month but both remain higher year over year.

LOOKING BACK…LOOKING FORWARD

The economy is still in good shape, and is likely to withstand possible storms ahead. Volatility is unlikely to diminish Fed tightening expectations for the rest of 2018. The Fed hiked rates 0.25% on June 13th.

Trade concerns continue to rise. Tariffs are now being levied on imported steel and aluminum, and the trading partners affected by these taxes are responding or planning to respond with tariffs of their own on U.S. goods. Could stocks stall out because of this? An impeded flow of international trade would certainly impact the GDP of the world’s major economies and exert a drag on corporate earnings. The uneasiness about the brewing trade war gives some investors pause; the potential scope of it seems too large to price in. It is hard to imagine any kind of summer rally if the measures and countermeasures taken by various countries escalate. Not all investors appear to be worried, though – witness what happened in May even as the distinct possibility of trade wars emerged. The blue chips were hurt, but the tech sector and the small caps held up. Do these shares have further room to advance, and will investors retain their bullishness about them? June presents significant questions for investors worldwide, and we may see equities take a pause as threatened tariffs become reality.

That being said, patience and endurance are important in the face of occasional ominous headlines as we look forward to long-term goals.

2018 Economic Outlook

2017 turned out to be a very attractive year in financial markets around the world.  Stocks were the story, but even bonds (Barclays US Aggregate index) were up +3.54%.  US large companies (as represented by the S&P 500 index) rose +21.83%, US small companies (Russell 2000 index) posted +14.65%, and international stocks (MSCI EAFE index) won the year at +25.03%.  The first year in 5, by the way, where Europe Australia and the Far East developed markets (EAFE) performed better than the S&P 500, and only the 2nd year in the past 8.  The S&P 500 had a positive total return (price + dividends) each and every month during 2017.  Remarkable.

So where from here?  What does 2018 hold for investors?  We’re side-stepping the direct question a bit as we paint a broader perspective.  Whether we credit Nostradamus, Mark Twain, or Yankee catcher/philosopher Yogi Berra, it is true; “It is difficult to make predictions, particularly about the future”. Certainly, that humorous quip does not keep mortal men from offering our honest and educated guesses about future events.  (Think politicians, economists and meteorologists).  But let’s have some candid reflection about our collective ability to do so.

Who would have predicted nine years ago that we would stand on top of mounting records in US equity markets?  That interest rates would still be near historic lows?  Or that Amazon’s market capitalization would easily eclipse that of Wal-Mart, Target, Kroger, Best Buy, Kohls, Macy’s, Dicks Sporting Goods, Under Armour, Dollar General, TJ Maxx, (plus others) combined?  A family can’t live in a virtual single-family home, but they certainly can shop for goods that way.  FYI…Target on its own made more profit over the past year than Amazon.

That nine-year reference is an important one.  2008 saw the S&P 500 drop by -37%.  The world was in the vice grip of financial system paralysis, and predictions of economic prosperity, lets be honest, were as scarce as home equity.  We all remember it.  How it felt.  Not to read about it from a 1929 history book, but to run our lives through it.  To make a forecast on January 1st, 2009, that the S&P 500 would increase on average more than 15% per year for the next nine would have come with a side of pixie dust.  Incidentally, the market would have been down nearly -25% to start that bold prognostication before ultimately coming true.

Backtrack even further to 1968.  The brightest minds from multiple disciplines were assembled in New York for the Foreign Policy Association’s fiftieth anniversary.  Within the throws of the Vietnam War and the cloud of Martin Luther King’s assassination, their charter was to look fifty years into the future, documented in a book called “Toward the Year 2018”.  Clear misses such as nuclear replacing natural gas and “the suppression of lightning” can be coupled with eerie accuracies like “large-scale climate modification will be effected inadvertently” from carbon dioxide.  Or, “a global communication system (of weather and communication satellites) would permit the use of giant computer complexes” with the revolutionary potential of a data bank that “could be queried at any time”.  Spooky.  So is “putting broad-band communications, picture telephones, and instant computerized retrieval in the hands of (humans)…is much too optimistic” to assume that these same technologies would entail the ability to use them wisely.
The biggest misses, however, were outlined recently by Paul Collins of The New Yorker in the current, real-life 2018.  “Not a single writer predicts the end of the Soviet Union – who in their right mind would have.  There’s also nary a woman contributor, nor a chapter on civil rights in sight.”  The 1968 book did ask the question: “Will our children in 2018 still be wrestling with racial problems, economic depressions, other Vietnams?” and then forgets to answer.

Today we sit in the comfort of hindsight.  Basking in the profits and prophesy.  But what did we really learn?  We learned that a forecast, if overtly relied upon, can miss the eventual truth considerably. A solid process, on the other hand, captures the “when”, not the “if”.  Process waits for the future patiently and
does not attempt precise calculation.

The Gilbert & Cook investment process shapes to each circumstance.  Future client events are planned for now and a diverse mix of tools are set in place to anticipate multiple forecasts. Near-term, mid-term, and long-term categories are matched to the risks and rewards fashioned together by our team and the client.  We spend our predictive power and experience on those issues that can be controlled.

We do still have thoughts around the obstinate big picture as the US economy has every chance to continue growing the next few years, thereby setting the record for the longest uninterrupted (by a recession) expansion in our nation’s history.  While stretched in terms of time, the dollars produced in this recovery trail past accounts so our view is toward sustainable growth.  New US corporate tax laws are favorable to company profitability and free cash flow providing a 2018 tailwind for stocks.  International equities may continue to outperform the US due to being earlier in their economic recovery cycle and more favorable in valuation and currency effect.  And our expectations for bond returns are muted, but continue to provide inevitable volatility control for stocks.

That’s the beauty, excitement, and reward of it; that no one can truly know in absolutes what lies around the corner.  Rely on process, not prediction.
 

Mary Ann Baker Announces Her Retirement

Too quickly, the time has passed us by. After 14 years with Gilbert & Cook, Mary Ann Baker will retire at the end of the year. She has been an important part of our family and truly embodies what it means to have a genuine relationship - a core value of the Gilbert & Cook team.

A letter from Mary Ann Baker: 

Fourteen and a half years ago, I moved to Des Moines and was known by what mortgage people call the "trailing spouse", as I relocate a lot because of my husband's advancing career. As usual, I had applied for positions online during the moving process. While unpacking, I received a call from Gilbert & Cook to come in for an interview. 

Upon arriving at the office, my first impression was that this place was nothing like any other office I had worked in - and in all of my travels, I have worked in several. The office had a warm, cozy, home-like atmosphere. It was something that I had never seen in an office environment before and I welcomed it. I had found an office in which their clients and staff came first. Caring for people is my passion, so I accepted the offer in a heartbeat. 

I have come to love the team at Gilbert & Cook and "my" clients as if they were my family. Yes, I call each and every one of them "my clients", as I have come to love them all as if we were related. I love to hear about their families, adventures and care about their trials and troubles. 

This letter is bitter sweet. I am off on a new adventure called "retirement" and I have very mixed feelings. I am excited for my husband, Marty and I to enjoy what we have worked so hard to accomplish, but I am also going to miss the daily connections to my office family and "my clients" lives. Fourteen years is a long time, in which I have made some lifelong friends. 

I will keep you all in my thoughts and prayers and hope you know that I will always be thankful for this experience. Thank you to all for being a part of my life. I will cherish the memories. 

Mary Ann Baker