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Mid-Quarter Newsletter – November 2020

Year-End Tax Planning

Yes, it’s that time of year again: When it starts to get a bit nippy in Southern California and we have to wear long-sleeve shirts with our shorts and sandals. The time of year when things start to get a little cheerier and we look forward to the promise of a new year ahead (especially after 2020). Yes, you guessed it—it’s time for tax planning!

This year has been an eventful one, to say the least. Amid the social, medical, and political turmoil of 2020, there have been two laws passed that may affect your year-end tax-planning: the CARES Act and the SECURE Act (passed a lifetime ago in January). Let’s take a look at some key opportunities in the new laws, as well as some oldie-but-goodie strategies, to see what’s best for you.

  • Maximize your retirement savings
    • Did you turn 50 this year? If so, you’re entitled to a $6,500 catch-up contribution for your 401(k) plan and an extra $1,000 for traditional and Roth IRAs.
    • If you’ve already maxed out your 401(k) contribution, and your company retirement plan allows you to, consider contributing additional funds to your plan on a non-deductible basis. For 2020, the total contribution limit is $57,000 (made up of your first $19,500 employee elective deferral + any employer matching + any additional contributions you make).
    • If you’re over 70.5 and still working, the SECURE Act increased the age limit to contribute to your traditional IRA to 72.
      • Note, though, if you’re considering making a qualified charitable distribution (QCD), making a deductible IRA contribution may reduce how much of the QCD you can deduct.
    • Take advantage of deductions
      • Charitable deductions
        • The CARES Act increased the limit on charitable deductions in 2020 to 100% of AGI for cash contributions made to public charities.
          • Note: contributions made to a private foundation or a donor-advised fund do not qualify as qualified charitable contributions (QCCs) so the 60% AGI limitation for cash would apply.
        • If you don’t itemize deductions, the CARES Act also permits an above-the-line deduction of $300.
      • Consider a Roth conversion
        • If your income is lower this year—either due to COVID-19 and/or the CARES Act waiver of required minimum distributions for 2020—consider doing a Roth IRA conversion since you’ll already be in a lower tax bracket.
        • The SECURE Act requires that IRAs inherited by non-spouse beneficiaries be distributed within 10 years. Mitigate the tax impact on your heirs by converting funds from a pre-tax IRA to a Roth so the distributions to your heirs will be tax-free.
        • If a Roth conversion is appropriate for you, you can pair it with your QCC to offset the income recognized from converting pre-tax funds into a Roth.

If you’re interested in discussing any of the above strategies further, contact your wealth advisory team now. The last couple months of the year can get very busy with tax-planning requests, so processing times can be delayed at brokerage account custodians. If you and your advisor decide that one (or more) of these strategies is right for you, start early to ensure any transactions are processed by year end. The holidays are going to look a lot different this year, so perhaps a silver lining is the opportunity to be more strategic when it comes to another December tradition—tax planning.

Disclosures: This information is presented for educational purposes only. It is not written or intended as financial or tax advice and may not be relied on for purposes of avoiding any federal tax penalties under the Internal Revenue Code. You are encouraged to seek financial and tax advice from your professional advisors before implementing any transactions and/or strategies concerning your finances.

 

Schwab IMPACT Video & Sharkpreneur Podcast

Featuring our CEO, Jeff Sarti

Our CEO, Jeff Sarti, was featured at Charles Schwab’s virtual IMPACT conference. Thousands of investment advisory professionals gathered remotely to learn about how to think differently about the issues that matter most to their practices. This year Schwab highlighted four firms based on the impact they are making in the industry. In a year that has brought so much change, we are honored to be chosen. Watch the video below as Jeff shares his personal thoughts on serving our clients during these uncertain times.

Jeff was also featured on a recent episode of the Sharkpreneur podcast with host Seth Greene, one of the original sharks from the hit TV show Shark Tank. Jeff discusses Morton’s market outlook given the challenging economy and also explains how our three core beliefs drive our business decisions and empower our internal teams.

To watch Jeff’s video from the Schwab IMPACT conference or listen to his podcast with Seth Greene, click below or visit our Insights page on our website.

Links:

Schwab IMPACT video link:  https://mortoncapital.com/schwabimpactvideo/

Sharkpreneur podcast link: https://mortoncapital.com/sharkpreneur-podcast-featuring-jeff-sarti-growing-to-2-billion-aum/

 

What Does “Money Printing” Really Mean?

In recent years, the term “money printing” has become commonplace with investment professionals, economists and politicians. But what does it actually mean? While the specific execution can be highly nuanced and rather complicated, at its core, money printing is when assets suddenly appear on the balance sheet of the Federal Reserve (Fed), which then facilitates the distribution of those assets to privately held banks. Contrary to its name, money printing doesn’t constitute the use of a physical printing press, but, in our electronic world, just requires the push of a button to make digital assets appear.  To better understand what money printing is and why we should care about it, let’s take a look at money printing in action over the last two global economic recessions.

 

Money printing during the Great Financial Crisis (GFC)

To ensure they can meet their obligations, banks must hold a certain amount of cash as reserves. In 2008, according to the FRED economic database, U.S. banks had very low cash levels (only around 3%!), which meant that, as millions of Americans defaulted on their mortgages, banks didn’t have the cash on hand to remain solvent on their own. The Fed stepped in and essentially created “cash” in banks’ accounts with a few keystrokes. The hope at the time was that this move would shore up bank balance sheets and allow them to start lending again to stimulate the economy. While the first objective was accomplished, the higher level of lending activity didn’t materialize, leading many to cite this example as evidence of how money printing was not economically stimulative or inflationary.

 

Money printing during COVID-19

Over the last several months, the financial media has highlighted numerous ways in which banks are now in better shape than in 2008. However, total debt as a percentage of the gross domestic product in the U.S. economy remains very high. High debt levels make the economy fragile to external shocks—COVID was an example of such a shock. As millions of people lost their jobs and businesses struggled to remain solvent, it quickly became clear that this round of money printing needed to channel money directly into people’s pockets rather than shore up the cash reserves of banks.

To provide the economy with trillions of dollars, the government passed a large fiscal package, which included increased unemployment benefits, stimulus checks and paycheck protection loans. To fund these fiscal outlays, the government had to issue even more Treasury securities, which the Fed stepped in to purchase as the buyer of last resort. Unlike during the GFC, money was poured directly into the economy. As a result, the money supply sharply increased.

The real risk of all of this money printing and fiscal stimulus is that there are now more dollars out there chasing the same number of goods. While money printing may not be obviously inflationary in the short term, it’s essentially adding powder to the inflation keg. Just because it hasn’t ignited yet doesn’t mean that all that extra powder won’t ultimately matter. While some investors may choose to ignore this risk, we’ve turned increasingly to real assets such as real estate and gold to protect client portfolios. Money printing may seem like a harmless push of a button, but its prevalence as the stimulative tool of choice for those in charge makes it especially important to understand and monitor.

Disclosure: This information is for educational purposes only. It should not be taken as a recommendation, offer or solicitation to buy or sell any individual security or asset class. This document expresses the views of Morton Capital and such views are subject to change without notice. Any investment strategy involves the risk of loss of capital. It should not be assumed that MC will make investment recommendations in the future that are consistent with the views expressed herein.

 

Welcome Judy and Cameron

Judy Lee

Private Investments Administrator

Judy Lee came to Morton Capital in March of 2020, after previously working in graphic design, copy editing, and project management for over 20 years. She brings a wealth of experience and organizational skills, having worked in the fields of publishing, product design/manufacturing, corporate/marketing design, and education. Judy graduated with a Bachelor of Arts degree in English from the University of California, Los Angeles. When not at work, she enjoys spending time with her family, collecting children’s books, cooking, watching Dodgers and Bruin sports, and serving at her church.

 

Cameron Meek

Client Service Administrator

Cameron Meek joined Morton Capital in May 2020 as a Client Service Administrator. Cameron is originally from North Dakota, and moved to California to pursue work in the entertainment industry before attending Pepperdine University. She graduated from Pepperdine with a degree in communications. Cameron enjoys spending time at the beach with friends, hiking, and trying new recipes.

 

DISCLOSURE: Your security and privacy protection is important to us. All emails with attachments or the word “secure” appearing in the subject line have been sent with the highest level of security and encryption available to protect your privacy.

Please contact your Wealth Advisor at Morton Capital if there are any changes in your personal or financial situation or any changes in your investment objectives, or if you wish to add, or to modify any reasonable restrictions to our investment advisory services. A copy of our current written disclosure statement (Form ADV Part 2) discussing our advisory services and fees continues to remain available for your review upon request. All e-mail sent to or from this address will be received or otherwise recorded by Morton Capital in accordance with SEC regulations and is subject to archival, monitoring, or review by someone other than the recipient. The information contained in this e-mail message is intended only for the personal and confidential use of the recipient(s) named above. If the reader of this message is not the intended recipient or an agent responsible for delivering it to the intended recipient, you are hereby notified that you have received this document in error and that any review, dissemination, distribution, or copying of this message is strictly prohibited. If you have received this communication in error, please notify us immediately by e-mail, and delete the original message.

Past performance may not be indicative of future results. Therefore, it should not be assumed that future performance of any specific investment, investment strategy (including the investments and/or investment strategies recommended by Morton Capital) will be profitable. Many factors affect performance including changes in market conditions and interest rates and changes in response to other economic, political or financial developments. There is no guarantee that a particular investment objective will be achieved and Morton makes no representations as to the actual composition or performance of any security.

Sharkpreneur Podcast featuring Jeff Sarti ‘Growing to $2 Billion AUM’

Morton Capital CEO Jeff Sarti joined host Seth Greene on the Sharkprenuer podcast this week to talk about growing Morton Capital to $2 billion in assets under management.

Here are some of the key takeaways from this podcast:

  • Why people should view their wealth as more than just a number.
  •  How building a portfolio for the correct economic season is vital.
  • Why real estate investments allow people to be more conservative if necessary.
  • How they include real estate as assets under management at Morton Capital.
  • Why diversifying portfolios is important for people who are investing.

Thank you to Kevin and Seth for allowing us to share this segment of your podcast. We encourage listeners to head to MarketDominationLLC.com to hear more insightful episodes of Sharkprenuer episodes.


About the Podcast:
The Sharkpreneur Podcast was founded by Kevin Harrington and Seth Greene. On the podcast, Kevin and Seth interview SharkPreneurs who share straight talk on what it takes to explode your business.

About the Hosts:
Kevin Harrington is the inventor of the infomercial, one of the original sharks from the hit tv show shark tank, and has generated over 5 billion dollars in TV and digital direct response sales.

Seth Greene is the world’s #1 trusted authority on cutting edge direct response marketing, a best-selling author, the only 3x Marketer Of The Year Nominee, and the founder of http://www.MarketDominationLLC.com

Guest:
Jeff Sarti, Morton Capital, Chief Executive Officer


Disclosures

Information contained herein is provided for educational purposes only, and should not be taken as a recommendation, offer or solicitation to buy or sell any individual security or asset class. The views expressed are those of the author and are subject to change without notice.

Certain private investment opportunities may only be available to eligible clients and can only be made after careful review and completion of applicable offering documents. Private investments are speculative and involve a high degree of risk. References to specific investments and performance information contained herein are for illustrative purposes only. This is not a representation that the investments described are suitable or appropriate for any person. 

Winners of InvestmentNews’ Best Places to Work are selected based on surveys voluntarily completed by employees and employers of participating firms.  Scores from the employee survey represent three quarters of the weight of the final rankings. To be eligible for the award firms must be a registered investment adviser or broker-dealer; be in business for at least one year and have at least 15 full-time employees.  Firms do not pay a fee to participate in the survey process or rankings.

Past performance is not indicative of future results. All investments involve risk including the loss of principal. Details on MC’s advisory services, fees and investment strategies, including a summary of risks surrounding the strategies, can be found in our Form ADV Part 2A. A copy may be obtained atwww.adviserinfo.sec.gov.

Mid-Quarter Newsletter – August 2020

Our Investment Philosophy

The last several months have been extraordinary to say the least and there are still so many unknowns in terms of the financial markets, our economy, and what our world will look like post-pandemic. As a firm, we have undoubtedly adapted how we communicate with our team, other business professionals, and our clients. Throughout all of these changes, the element of our business that has stayed consistent is our investment philosophy. At Morton Capital, we’ve always taken a different approach to investing—one that we believe is the best way to provide the returns our clients need for their lifestyle while trying to protect them from the swings of the market. Our beliefs have remained the same since our founder, Lon Morton, started our company almost 40 years ago and we take great pride in carrying on his legacy.

As we continue to communicate virtually, our Investment Team recently created a video that speaks to how we design portfolios to help our clients get the most life out of their wealth. Watch the video to meet the team and learn a little more about us.

Watch our Investment Approach Video here.

 

Financial Advisor Success Podcast & RIA White Paper
Featuring our COO, Stacey McKinnon

Our Chief Operating Officer, Stacey McKinnon, was featured on a recent episode of Michael Kitces’s Financial Advisor Success Podcast. Michael is a well-known speaker, writer, and editor in the financial services industry. In the episode “Scaling an Advisory Firm by Finding New Talent Outside the Financial Services Industry,” Stacey and Michael talked in-depth about how Morton has grown and evolved as a firm in recent years. Stacey touched on our culture of trust initiative in 2017, our non-traditional approach to hiring talent from outside the industry, and the way we’ve restructured our compensation model.

Stacey also co-authored an RIA white paper with the CEO of PFI Advisors, Matt Sonnen, called “The New RIA Workplace.” The industry report explores the changes firms have had to make to their businesses since stay-at-home orders began. It also shares the pros and cons of both office and remote work environments, how leaders and managers are maintaining company culture during these times, and what the office of the future could look like.

Click here to listen to Stacey’s podcast with Michael Kitces and read the RIA White paper here.

 

Why Is Gold Going Up?

Gold is making headlines in 2020, as its performance leads most other asset classes year-to-date and investors are starting to take notice. In particular, Warren Buffet’s recent purchase of a gold mining stock has caught the attention of the media. Those who only think of gold as a “safe-haven” investment have been surprised by its strong performance even as the stock market rallied from its March low. But fundamentally, we believe that gold is not an investment at all. Instead, it’s just another form of money like the U.S. dollar or the Euro. So, if it’s not an investment, what’s driving this big rally in gold? While the answer can be complex, we’d argue that there are two main areas on which to focus when it comes to understanding the price of gold: the money supply and investor sentiment. Read the Full Article here.

 

A Conversation About Change with Chris Galeski
Featuring Retired PGA Tour Player Peter Tomasulo 

Chris Galeski, Wealth Advisor and Partner at Morton Capital, speaks with Peter Tomasulo, retired PGA Tour player and Director of Investor Relations at Lyon Living. In this 30-minute video interview, they reflect on their former sporting careers, life lessons, family, and the triggers and milestones that opened the door for transition and career change.

 

Watch the video!

Scaling An Advisory Firm By Finding New Talent Outside The Financial Services Industry, hosted by Michael Kitces featuring Stacey McKinnon

Michael Kitces sat down with our own Stacey McKinnon on his Financial Advisor Success podcast to discuss:

  • Morton’s non-traditional approach to hiring talent from outside the financial services industry to grow and scale. How Stacey has developed hiring practices to spot talent from outside the industry.
  • The in-depth interview process that Morton Capital uses to evaluate both prospective job skills and culture fit over a series of five to six meetings, and the career track that Morton has created to give everyone in the firm upward mobility to grow their careers over time.
  • The growth and evolution of Morton Capital itself as a multibillion-dollar RIA. The way the firm restructured its compensation away from traditional revenue-based approach to better align everyone on the team, the way Stacey helped the firm reduce the tendency to micromanage as the business grew by helping everyone across the firm build stronger relationships and what they dubbed a year-long culture of trust initiative, and how the Morton team now structures its weekly firm-wide education sessions every Thursday morning.

Be sure to listen to the end, where Stacey shares the challenge she faced in her own career journey when she had to decide whether to pursue an advisory or operations path, why the word “because” is so crucial in leadership conversations, and why Stacey believes the key to future success for advisors isn’t simply about finding a niche or specialization, but immersing yourself into a community of people that you can serve and with whom you have shared beliefs.

To access the show’s notes or read the transcript please click here.

About the Host:
Michael Kitces, Buckingham Wealth Partners, Head of Planning Strategy.
He is also a co-founder of the XY Planning NetworkAdvicePayfpPathfinder, and New Planner Recruiting, the former Practitioner Editor of the Journal of Financial Planning, the host of the Financial Advisor Success podcast, and the publisher of the popular financial planning industry blog Nerd’s Eye View through his website Kitces.com, dedicated to advancing knowledge in financial planning. In 2010, Michael was recognized with one of the FPA’s “Heart of Financial Planning” awards for his dedication and work in advancing the profession.

Guest:
Stacey McKinnon, Morton Capital, Chief Operating Officer

Joe Seetoo (Podcast) – The Realities of Selling your Business in a Zero Interest Rate Environment

Joe Seetoo is a Partner and Vice President with Morton Capital Management – a Registered Investment Advisor managing about $1.6 bn in assets under management as of June 30, 2016. As a Certified Financial Planner and Chartered Financial Analyst, Mr. Seetoo has 17 years of experience in developing investment strategies for affluent business owners and high net worth families.
Questions Answered:
1. Why is it important for business owners to do financial planning prior to selling their business?
2. Your firm has a niche in identifying alternative investment strategies – why is that?
3. How can business owners (or any investor) generate sufficient income in Zero interest rate environment after they
sell their businesses?

Disclosures:
Morton Capital Management ($1.6 billion in assets under management (“AUM”) as of June 30, 2016) is registered with the SEC under the Investment Advisers Act of 1940. SEC registration should not be interpreted to mean that Morton Capital or its personnel has been sponsored, recommended or approved, or that Morton Capital’s or its personnel’s abilities or qualifications have been passed upon, by the United States or any agency or office thereof.

The alternative investment opportunities discussed may only be available to eligible clients and involve a high degree of risk. Opportunities for withdrawal/redemption and transferability of interests/shares will be limited, so investors may not have access to capital when it is needed. Additionally, the fees and expenses charged on these investments may be higher than those of other investments.

Barron’s rankings are based on data provided by individual advisors and their firms. The ranking reflects the volume of assets overseen by the advisors and their teams, revenues generated for the firms and the quality of the advisors’ practices. Only firms that submit information are considered.

Past results are no guarantee of future results. Inherent in all investments is the possibility of a loss.