European exposure and global diversification

Some of our clients occasionally express concern about the situation in Europe. Here’s what our Director of Research, Larry Katz, has to say about Merriman portfolio exposure to those markets:

Europe’s ongoing debt problems have prompted many investors to consider their European exposure, especially to the euro zone’s weaker countries. While there certainly could be global impacts emanating from any area of the world, a major benefit of true global diversification is the controlled direct exposure to the problems of any given geography.

For example, one of our major portfolios is MarketWise Tax-Deferred, a globally diversified, buy-and-hold portfolio with a value and small-cap tilt.  Half of the stock exposure of this portfolio is in the United States. The other half is distributed throughout the world.

Of the 50% overseas exposure, as of the end of March 2012 just over 22% was in Europe. Notably, most of that exposure was to the stronger European countries. The top six European countries by exposure (United Kingdom, France, Germany, Switzerland, Sweden and the Netherlands) comprised almost 18% of the total invested in Europe. The weaker countries of Greece, Ireland, Portugal, Spain and Italy totaled only 1.73%.

So a 60/40 stock/bond portfolio had just over 1% exposure to these five troubled countries.

Every portfolio has to incur various risks to generate returns. The key is to intelligently diversify so that, under a variety of market conditions, those risks remain under control.

And the envelope please……

One of life’s happiest moments for any financial advisor who seeks the CERTIFIED FINANCIAL PLANNER™ designation is the day a letter arrives in your mailbox, congratulating you on passing the very challenging ten-hour comprehensive CFP® exam.

After using all your free time for one to several years to study for this difficult exam, it’s a huge relief to know you’ve accomplished what you set out to do. Soon, you’ll be able to use and display the CFP® credential proudly and forever.

This week, two of our financial advisors at Merriman, Mark Metcalf and Eric Jonson, received their “pass or fail” letters from the CFP® Board of Standards. Opening the envelopes to discover they had passed the exam was a very proud moment for the two of them, their families and for our entire company.

As the good news spread around the office, there were a whole lot of high fives, hugs, laughter, slaps on the back, sighs of relief and very big smiles. When I learned the news, I threw in my own loud “WOO HOO!!”

An advisory firm is only as good as its people. That’s why we are very proud that all ten of our advisors have successfully gone through the very challenging process of acquiring this credential. Throughout our advisory offices, you will see our CFP® diplomas displayed proudly.

Why do we care about this designation and why should you care? Click here to for more information about the CFP® designation.

Not only has the sun been shining all this week in Seattle, it came out just in time to shine a spotlight on two of our talented advisors! Congratulations, Mark and Eric, on a job well done!

Are you prepared? I am!

Recently, my daughter’s preschool put on an emergency preparedness seminar. Preparing for a disaster of some kind has been in the back of my mind for a while, but I hadn’t really given it my full attention until I was listening to the Red Cross representative walk us through possible scenarios and realized how entirely unprepared my family is.

Just last week, local news stations shared a warning from the U.S. Geological Survey: There is an 84% chance of a 6.5 magnitude earthquake in Seattle in the next 50 years. Our office is certainly prepared for an event like this — we have trained floor wardens, supply kits in the office and plans for running operations in the event of a disaster — but at home, I’m not nearly so prepared. (more…)

Five easy strategies to save on college costs

High school seniors are now in the process of getting acceptance letters to colleges.

When the thick envelope comes, there will be well-deserved joy, possibly followed by the dismaying thought on how to actually pay for those four expensive years.

Hopefully, parents will have done some advanced planning and saving for this major event. There are various strategies which can substantially ease the financial burden of higher education, some of which should be started many years before high school.


Before we discuss strategies, let’s review some key terms, as they say in school.

There are two major financial aid forms which could be completed. The first is FAFSA, the Free Application for Federal Student Aid. This has to be submitted to be considered for any federal financial aid. It can be completed as early as January of the child’s senior year in high school. FAFSA assumes that 5.64% of parental assets can be used to fund annual college expenses, while the assessed rate on the children’s assets is a much higher 20%.


Why lose what you’ve worked hard for?

Recently there was a nine car and truck pile-up in Florida caused by fog and smoke that suddenly came across the highway in the middle of a dark night. Unaware of the danger ahead, drivers blindly slammed into each other at high speeds. The light of day revealed a gruesome scene of twisted metal strewn for over a mile. Ten lives were lost.

About six months ago, someone I know was standing on a wooden deck at a friend’s home when suddenly the deck gave way and crashed to the ground. He fell from a height of around seven feet, leaving him with bruised ribs, cuts, and a very sore knee. Fortunately for the homeowner, no one was killed or seriously injured and no lawsuit ensued.

For those who have worked hard and saved a sizeable amount of wealth, these stories highlight that, without the right kind and amount of liability insurance, the risk is very real that you could lose all or part of your nest egg to some sudden and unpreventable event. Many people correctly buy an umbrella policy to cover these kinds of risk, but they fail to increase the amount as their net worth increases over time.

If I haven’t scared you enough already, the median award nationwide as a result of a wrongful death due to an auto accident is $1.5 million, not including loss of service, grief, sorrow, or punitive damages or payments to additional injured passengers riding in a car owned by you.

Another scary thought….the next time you’re driving along the interstate, look around at the drivers surrounding you. One out of six has no auto insurance whatsoever. And that number is rising. This does not even include the people who are underinsured.

With the cost of umbrella insurance averaging only $100 to $200 per $1 million in coverage per year, why keep this on your worry list any longer? Although this is beyond the scope of the advice provided by Merriman to our clients, your property and casualty insurance agent stands ready to do a personal insurance review for you.

So if you want to sleep better tonight, pick up the phone and make that call today!