Our Blog

DWM is committed to learning for its team, clients and friends. In this changing world, it’s extremely important to stay current in all areas impacting your financial future.

We encourage all of team members to “drill down” on current topics important to you and contribute to our weekly blogs.  Questions from our clients and their families are often featured in our blogs.  

Financial literacy for clients and their families is very important to us.  We generally hold an annual wealth management seminar for all of our clients.  We encourage regular, at least semi-annual, meetings in person with our clients to review family updates, progress on financial goals, asset allocation and performance of investments.  We’re happy to assist younger members of the family as part of our total wealth management program.

Here’s our latest blog:



Looking through the Gender Lens

Written by Ginny Wilson.

Woman_with_wealth.jpgLast week, we celebrated International Women’s Day. Adopted by the UN in 1975, we recognize this global day of advocacy to celebrate women’s work and to promote women’s rights. It has been a troubling year hearing women’s stories of facing sexual harassment in the workplace and elsewhere, but yet a momentous year of watching women gain a collective voice against this treatment. The #MeToo movement has catapulted women’s rights to one of the top national conversations and focused attention on the goal to removing gender bias in many aspects of our culture. You’ve come a long way, baby, indeed!!

This conversation has also put the spotlight on the gender gap for pay and hiring practices. According to an article in Businessweek, working women still earn between 57% - 80% of the salary of a working man, depending on whether they are white, black or Hispanic. Women’s pay is catching up, but is predicted not to achieve equal status until 2058. This affects all of us, as women have less opportunity to save, contribute to Social Security and participate in the economy. Achieving adequate retirement savings is harder for women. Women are able to save less for several reasons, the gap in pay being one of them.   There may be career interruptions for children, a need to pay for child care while in the workplace, higher healthcare costs and, of course, women live longer, which all puts a strain on women’s ability to save for retirement and have adequate means when older.

Adding to the difficulty in obtaining adequate saving levels, research has shown that women are, on average, less risk tolerant in their financial decisions than men. According to Associate Professor from the University of Missouri Rui Yao, women and men do not think of investment risk differently, but income uncertainty affects women differently from men. That uncertainty may result in women keeping funds in asset allocations with lower expected returns to “buffer the risk of negative income shocks”. This can be a concern for any investor with low levels of risk tolerance, as they might have greater difficulty reaching their financial goals and building adequate retirement wealth because they are less likely to invest in more growth-oriented asset classes with bigger returns, like equities. "Risk tolerance is one of the most important factors that contributes to wealth accumulation and retirement," said Rui Yao. At DWM, we review the risk tolerance of all of our clients very carefully. We make sure that their investment strategy matches well with their capacity for risk, as well as their tolerance for it, while making sure that they can achieve their goals for financial independence.

Despite fighting issues of sexual harassment and glass ceilings in the workplace, women have made some remarkable gains in their financial status. In 40% of American families, the primary breadwinner is a woman and, for the first time in history, women control the majority of personal wealth in the U.S. In fact 48% of all millionaires are women. Also, women will benefit immensely in the future transfer of wealth – from husbands who are older and die sooner or parents who now bestow equal inheritances to sons and daughters. Breadwinner women may control more wealth, but there is still a shortfall in other areas.

There are many arguments for equalizing our gender dynamics at home and at work – there is no doubt that enabling women to achieve their full potential is certainly better for women and their families. There is also a universal financial argument to be made. By some estimates, according to Sallie Krawchek of Ellevate Network, if women were fully engaged in the economy, GDP would increase by 9%! Ms. Krawchek’s article also cites multiple studies that conclude “companies with diverse leadership teams” outperform other companies on metrics including higher returns on capital, lower risk and greater innovation.   This translates into healthier corporate environments that are rewarded on the bottom line. That is good for men, women and families! All of the reasons for closing the gender gap are important, but the financial benefits for everyone are significant and certainly can’t be considered controversial. As someone once said, “It’s the economy, stupid”!

While there remain roadblocks to women achieving equality in their financial status with men, we do think having these national conversations and educating both women and men on the benefits of empowering women will begin to make progress. We agree that deficiencies in retirement savings and the economic engagement of women are highly related and we hope changes are coming. At DWM, we look at the total wealth management for all of our clients equally and with consideration for every one of their life situations. We know that anything that has a positive effect on the financial success of women is good for us all.


How to Avoid a 2018 income Tax Shock

Written by Lester Detterbeck.

tax shock womanDid your paycheck get a nice bump in the last few weeks? Employers are just starting to use the newly issued IRS withholding tables for 2018. All things being equal, employees may see a 5%-15% reduction in their federal tax withholding, resulting in a boost in their take home pay. Who doesn’t love that? However, the question is, when you file your 2018 tax return a year from now, will you owe a substantial amount? Has your withholding been reduced too much? How do you avoid a tax shock?

The various changes of tax reform passed in December plus lower withholding may lead to unexpected results. Itemized deductions were generally reduced; in some cases, in major ways.  Standard deductions were doubled. Income tax rates were lowered. Exemptions were eliminated. Lots of moving pieces to consider.

Let’s take a look at an example, as presented by the WSJ last Saturday. Sarah is a New York resident. For 2017, she had $200,000 of wages and other income and $33,000 of itemized deductions, including $28,000 for state and local income taxes. Her federal tax, including AMT, was $41,400. Her withholding was set at $41,500, so that she would receive a tax refund of about $100.

For 2018, Sarah has the same income and deductions, and she doesn’t adjust her withholding certificate, even though her itemized deductions are reduced by $18,000 to $15,000. Using the 2018 withholding tables and her withholding certificate (W-4) from 2017, her employer reduces her withholding and increases her take-home pay by $5,300, about $100 per week.

Here’s the problem: Because her deductions were greatly reduced and she lost her personal exemption, her income taxes will only be reduced by $500 in 2018. She’ll owe $4,700 (plus a penalty for underpayment) come April 2019.

All taxpayers, even those that don’t get paychecks, need to get ahead of curve and project their income taxes for 2018 and review how tax reform is going to impact them. You need to do it early. Sarah can change her withholding now (by increasing withholding $100 per week-back to what it was) to avoid a big tax shock in April 2019. In addition, as you and your tax professional review the elements of your 2018 projection, you may identify some changes that made now could reduce your ultimate 2018 income taxes.

The IRS has put together a withholding calculator, https://www.irs.gov/individuals/irs-withholding-calculator that seems to work fairly well with simple returns. It’s a “black box” with little detail of the calculations.

At DWM, we consider our role in tax planning a very important element of the value we provide to our Total Wealth Management clients. We don’t prepare returns. However, since our inception, we’ve been doing projections focused on eliminating surprises and often finding potential tax savings ideas to review with our clients and their CPAs. This year we are using BNA Income Tax Planner software to make sure that all the new tax provisions are being considered and calculated properly as we are doing the projections. We’ve done about dozen so far.

We’ve already seen some major eliminations of itemized deductions on projections we’ve done. One couple lost over $100,000 of itemized deductions, primarily due to the new $10,000 cap on state and local income taxes and elimination of miscellaneous deductions. Similar to the example above, without a change in their W-4s and, therefore, a change in their withholding, they would have owed over $30,000 in federal taxes in April 2019.

Tax reform didn’t have much impact on IL income taxes, as taxes are passed primarily on adjusted gross income. However, the full year tax rate of 4.95% in IL is roughly 16% more than the effective 2017 rate. In SC, where the state tax is based on taxable income, the tax will generally be going up for those taxpayers with large itemized deductions in the past. SC tax in 2018 will likely rise at the rate of 7% of the amount of lowered deductions and exemptions as compared to 2017, all other items being equal.

We encourage you to prepare or get assistance to prepare a 2018 income tax projection now and check it in the fall as well. Even if you haven’t received a larger paycheck recently, it’s really important to go through this process to avoid tax shocks and, maybe, even find some opportunities to reduce your taxes for 2018. 


SC Business Review Interviews Les Detterbeck on Risk Profile and Asset Allocation

Written by Les Detterbeck.


Press Release: On January 25th, SC Public Radio host Mike Switzer interviewed Les Detterbeck.   On that date, the Dow Jones Industrial Average (“DJIA”) was at 26,269; near its all-time high. Three weeks later, on February 20th when the interview was aired, the DJIA had dropped 5% to 24,884. Yet, the message was the same: Investors need to regularly review their risk profile and asset allocation.

Click here to listen to the audio http://southcarolinapublicradio.org/post/are-your-investments-getting-little-too-risky or please read the transcript below.

Mike Switzer: Hello and welcome to the SC Business Review. This is Mike Switzer. A regular review of your financial plan and investment portfolio is always a good idea. This is not just to make sure you are still on track to meet your goals, but to also make sure your risks haven’t increased past your initially desired risk threshold. And our next guest says that is an especially a good idea when financial markets have been setting record highs. Les Detterbeck is a Chartered Financial Analyst (“CFA Charterholder”) and a member of the South Carolina chapter of the CFA Society and he joins us from his office in Charleston, SC. Welcome, Les. Thanks for joining us today.

Les Detterbeck: Thank you, Mike. Great to be here.

MS: Les, first of all, please tell us how establishing a risk profile works for an investor.

LD: Certainly, Mike. There are three components of your risk profile. First, your risk capacity, or ability to withstand risk. Second, your risk tolerance, or willingness to accepts large swings in investment returns. This is how you are “hard-wired.” And, third, your risk perception, which is your short-term subjective judgment about the characteristics and severity of risk.

MS: I’m assuming people receive a questionnaire or an online form to determine all of this.

LD: That’s exactly right, Mike. There are different formats that are used for this and the result is to classify your risk profile into one of five categories of risk: Defensive (very low risk), Conservative (low), Balanced (moderate), Growth (high) and Aggressive (very high).

As a general rule, older investors would be thought to take on a lower level of risk than younger investors. However, that’s not always true. Investors in their 80s and 90s, who know that they have ample funds for their lifetimes and who can emotionally handle high risk, may have an aggressive risk profile; particularly when they plan to leave most of their money to their beneficiaries.

MS: And of course, a young person can be very defensive?

LD: By all means, Mike. And, people’s circumstances and risk profiles can change with life events, such as marriage, birth of a child, loss of a job, retirement, changes in health and others. So, it’s important to review your risk profile regularly.

MS: Les, walk us through the importance of reviewing the risk within your portfolio after some market cycles.

LD: What we suggest is you start by quantifying the risk you need to accomplish your goals. What market return is required to provide the likely outcome of success (also known as not running out of money)? Do the goals require a high rate of return just to have a chance of success, or is the demand on the portfolio low?

MS: The actual risk level of your risk profile can change over market cycles, right?

LD: Yes, it can. And, the emotional piece can be a big issue as cycles go up and down. Investors can become elated as markets climb and therefore increase their equity allocation for fear of missing out on the rally. And, then as the markets decline, they ultimately reduce their equity allocation just as stocks hit bottom. Instead, we suggest that you establish an appropriate risk profile and asset allocation to meet your goals and stay with it through the long-term.

MS: Once you’ve stuck with your asset allocation, then you need to rebalance it, correct?

LD: Yes, rebalancing is huge.

MS: How often should you rebalance?

LD: At least once a year, Mike, though 2-4 times per year is much better with all the changes in our world. You do this by comparing the asset allocation in your portfolio to your target asset allocation. You split your holdings into the three asset classes; equities, fixed income (including cash) and alternatives and calculate percentages for each.   A balanced portfolio might have a target of roughly 50% equities, 25% fixed income and 25% alternatives. In a bull market, your equities will outperform the other asset classes and when you compare your actual asset allocation to your target, the equity percentage will very likely exceed your target. This means your assets are more risky than your plan and you need to rebalance by trimming back your equities and getting your allocation back into your desired risk profile and asset allocation.

MS: Les, thank you so much for your insight and your time today.

LD: Nice talking with you, Mike.

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