Fall 2017 Newsletter

Dear Clients, Advisors and Friends:

We hope you have been enjoying the warm fall weather and are looking forward to the not-too-distant holiday season! We are thrilled to report that the newest member to our Sandy Cove family has arrived! Kelley Ellis gave birth to a beautiful baby girl on Tuesday, October 17^th. She and Charlotte Ann are home, happy and healthy. Our sincerest congratulations to Kelley and Ben!

The good news keeps rolling in as the global markets continue to rally, with investors enjoying another quarter of strong gains with returns at the halfway mark well above what most expected to earn for the full year. Please see Rob’s Market Commentary for a review of the markets and thoughts on the months ahead. Rob will also feature a recap from our recent Investment Committee Meeting featuring thoughts from both internal and external investment professionals.

In our Estate Planning section, we provide a guideline of how to write a Last Wishes & Instructions Letter. This is intended to be a helpful resource for clients to provide to their families to ease their burden during a very emotional time. In light of recent cyber security breaches, we provide an update on attentiveness and best practices for ongoing peace of mind. In our Education section we discuss the CIMA® and CDFA® certifications, and why Sandy Cove Advisors is proud to continuously expand our knowledge base for our clients.

In September we hosted our first local networking event in our new location. The evening was a success, as we enjoyed welcoming and connecting with new friends and old. We look forward to hosting more events like this.

Our goal, as always, is to offer sound investment advice, guide our clients and help simplify the management of their financial affairs. Please feel welcome to introduce us to like-minded friends, family and advisors that may benefit from our services.

Wishing you and your family a happy and enjoyable fall.

Warmly,

Deirdre, Rob, Jennifer, Kelley, Sherm, Toni, Courtney and Suellen

Market Review 2017 3Q: In this quarterly newsletter, we are taking the opportunity to not only review the markets but to also introduce our Investment Committee and explain how they are integral to our investment process.

That was a great quarter for risk assets! Stocks just capped an eighth straight quarter of gains, the longest winning streak since the start of 2015. International equity markets again outpaced U.S. markets with emerging markets (EM) leading the way, up 8% for the quarter. The EM asset class is leading all others and is up 27% year to date (YTD). The MSCI EAFE Developed Markets Index, which is made up of mostly foreign blue chip companies (think Nestle, Novartis, Toyota, etc.), also had a strong showing – posting a 5.5% return for the quarter and a 20% YTD gain. Foreign equity markets are enjoying improving economic data and earnings expectations. A weaker US Dollar also served to make foreign goods more competitive on the world scene, which has led to better sales for these firms.

In the US, weak inflation figures caused investors to doubt the Fed’s desire to hike interest rates, leading to a 0.8% return for Bonds (US Barclays Aggregate Bond Index) for the quarter and a very respectable 3.16% YTD return. In US Equities, small cap stocks led large caps as the Russell 2000 returned 5.7% vs a 4.5% quarterly return for the S&P 500 Index. US stocks benefited from the lower for longer interest rate environment, improving earnings and hopes of a corporate tax cut. The third quarter’s benign interest rate environment also helped REITs to a 1.1% gain. Commodities had a broad resurgence after a weak 2Q and were up 2.5% for the quarter but they remain down 4.5% so far YTD.

We are cautiously optimistic here in the fourth quarter of 2017 because history has been kind when a year’s prior three quarters have been positive. Theories abound as to why the fourth quarter is often the best one for equity bulls. Fund managers need to catch up, holiday spending kicks in, investors celebrate the “January Effect” of rising stock prices a bit early. For whatever reason, the S&P 500 Index has been up in seven of the last eight years between October and December. This recent strong “seasonality” has been a force to be reckoned with. Since 2009, the S&P 500 has averaged a 6.2% fourth quarter return! Current valuations keep us cautious while we are mindful of this historical pattern of momentum.

Helping us to make sense of all of these markets is the Sandy Cove Advisors Investment Committee (IC) which is made up of the investment professionals here at Sandy Cove and three other professionals with very strong investment backgrounds (Kate Saltonstall, Dan Butler and Maureen Depp). Our last meeting was held on October 4^th at our offices in Boston. At this meeting, the committee came to a number of important conclusions regarding “Active” management, the direction of interest rates and rightsizing our international equity weighting.

On the question of “Active” vs “Passive” management, we have answered “both” in the past. Depending on the asset class, our skew of active and passive investments varies. However, due to the extreme amounts of cash chasing index investments, as fiduciaries, we feel our clients will be best served with a healthier skew to “active” going forward. As the chart below (from our IC meeting) highlights, the blind buying of index funds since 2012 has led to a situation where unprofitable companies have virtually the same return as profitable companies. Good active managers should be able to differentiate themselves in this environment going forward.

On the direction of interest rates, our Investment committee had a strong consensus of thought that interest rates would rise only modestly in 2018. We project the US 10 year Treasury bond yield to rise from 2.30% to 2.75%-2.90%. Given this moderate rate rise, we feel it is best to leave the management of duration to our active bond managers. Since our Manager Selection Screening process has done a very good job in selecting outperforming managers, we believe it is best to give these managers a relatively free hand. However, we believe that our bond average maturities should be a year or two short of the 7-8 year index average to protect capital if rates rise more than we expect.

On the question of our International equity weighting, the IC decided to raise our exposure across all of our asset allocation models. We initiated this discussion with an acknowledgement of the fact that roughly 50% of the world’s equity market capitalization is non-US. We also highlighted the fact that for significant periods of time, over the past few hundred years, International stocks have outperformed US stocks. In the relative short term, since 2012, International stocks have lagged their US counterparts by a wide margin (see chart below). Today, the valuations of International equities are well below their US counterparts by several measures. For example, according to FactSet, International Developed stocks (MSCI EAFE Index) trade at nearly half the price of the S&P 500 as measured by the current Price/Book Value ratio. Those same International stocks pay a 3.03% average dividend while the S&P dividend is 1.95%. Our manager selection process identified two great international active managers that have provided us with robust returns. We’ll be adding to these managers in coming days.

We’d be happy to pass along the full recap presentation from our last investment committee meeting to all those who wish to have a copy. We are ready to discuss any individual, more pointed questions, you may have as well. Best wishes for a great 4^th quarter and holiday season.

Continuing Education at Sandy Cove Advisors

The Sandy Cove Advisors team is constantly striving to develop professionally to enrich our clients’ experience. There are many opportunities to seek out continuing education, and this quarter two of our colleagues went the extra yard and received certifications. Rob Reilly obtained the Certified Investment Management Analyst® (CIMA®) certification, and Toni Grimm obtained the Certified Divorce Financial Analyst® (CDFA®) certification. What are these designations and what do they mean for clients, friends and prospects of Sandy Cove Advisors?

What is a Certified Investment Management Analyst® (CIMA®)?

A CIMA® professional is an investment advisor who wants to further their credentials to reflect their experience, education, examination, and ethical standards in the field of wealth management. The CIMA certification is delivered by Investment Management Consultants Association® (IMCA®) and is the only credential designed specifically for investment advisors.

The ICMA Code of Professional Responsibility was adopted to promote and maintain the highest standard of personal and professional conduct in the investment and wealth management profession. The ICMA Code serves to assure client’s confidence in the integrity and service offered by professional investment advisors.

Why Hire a CIMA Professional?

CIMA professionals go through extensive training both in the classroom and through examinations to focus and hone their skills and knowledge base in the following areas of investment management:

Governance
Fundamentals
Portfolio Performance and Risk Measurements
Traditional and Alternative Investments
Portfolio Theory and Behavioral Finance
Investment Consulting Process

Please visit www.IMCA.org for more information, or feel welcome to contact Rob directly.

What is a Certified Divorce Financial Analyst® (CDFA®)?

CDFA professionals work alongside the client and their divorce attorney to provide an analysis that shows the financial effect of any given divorce settlement. At Sandy Cove Advisors, we have always provided these services to our clients and encourage collaboration among the divorce-advisor team. Specifically, CDFAs provide insight and support on financial issues such as:

Understanding the short-term and long-term effects of dividing property.
Analyzing pensions and retirement plans.
Determining if the client can afford the marital home, and if not, what he or she can afford.
Recognizing the tax consequences of different settlement proposals.

Much of a CDFA professional’s role is to aggregate and analyze the client’s financial data to help manage a client’s expectations of their financial future. CDFAs are trained to:

Collect financial and expense data.
Help clients identify their future financial goals.
Develop a budget.
Set retirement objectives.
Determine how much risk they are willing to take with their investments.
Identify what kind of lifestyle they want.
Expert witness and litigation support.

Why Should I hire a CDFA® During the Divorce Process?

Financial analysis conducted early in the divorce process can save time – and money.
A CDFA can help their clients avoid long-term financial pitfalls related to divorce agreements.
CDFA professionals can assist their clients with developing detailed household budgets to help avoid post-divorce financial struggles.
Using a CDFA professional can reduce the amount of apprehension and misunderstanding about the divorce process.

Please visit www.institutedfa.com for more information, or feel welcome to contact Toni directly.

We are proud of the accomplishments of our colleagues, and look forward to adding future professional designations for the benefit of our clients.

Last Wishes & Instructions to Family

A post-mortem letter is not meant to replace a Will and is not a legal document, but it can provide a family with instructions during a very emotional time. This advanced planning and consideration is a gift that you can provide your family as to your last wishes and to help alleviate any stress on next steps. A copy of this letter should be placed where it can be easily found, and you should provide a copy to your attorney, CPA and/or financial advisor. They will be able to advise your loved ones as to certain matters that they will be facing in the months to come. Here are some items that should be addressed:

Funeral Arrangements

If you have made arrangements for funeral services, provide details in this letter, including the location of the deed or certificate related to the cemetery plot. Express your wishes as it relates to visiting hours, funeral services, and where you would like it to be held. If you prefer to be cremated, let your family know if you would like your ashes to be buried, spread across the ocean, etc., otherwise, they may sit on the bookcase for years. You may want to address the following in your letter:

Do you have certain facts about yourself or a favorite picture that you would like highlighted in your obituary or eulogy?
Would you like any of your organs donated?
Are there certain songs or readings that you would like used at your funeral?
Is there a particular family member or friend that you would like to participate in the service?
Would you prefer donations be made to a certain charity, in lieu of flowers?
Are there any specific traditions that you would like followed?

There are so many immediate decisions to be made at the time of death, often with many family members having differing opinions. By expressing your wishes, you allow your family to grieve and focus on getting through those initial days without extra turmoil. You may want to suggest a non-family member to accompany a visit to the funeral home to ensure that there is no undo pressure, guilt and overspending in making the arrangements. The funeral home can provide you with certified death certificates, we recommend 10 copies.

In addition to your last wishes, providing guidance and instructions to your family and your personal representative on the location of important documents, list of advisors and immediate administrative matters that need to be addressed can alleviate a lot of stress at a very trying time.

Estate Planning File

You should identify your personal representative (executor) and where to find a copy of your estate plan. Also, provide contact information for your estate planning attorney. Your personal representative will want to make an appointment with your attorney within two or three days after the funeral so that he/she can start the estate settlement and distribution process.

Finances

You may want to explain in layman’s terms or provide an illustration as to how your assets will be distributed to your family members. For example:

By the terms of my will, you will receive outright everything in my estate, except the assets used to fund a credit shelter trust, of which you shall receive the income for life. In addition, you will receive my life insurance proceeds, social security benefits and pension plan benefits. You must apply for my social security benefits within one year of my death.

These assets should provide you with enough income to live comfortably. Our children are established both financially and emotionally to take care of themselves and you should not feel obligated to withhold from yourself to support them.

Bank Accounts and Credit Cards

All checking, savings accounts and credit cards should be listed with the respective account numbers and passwords for access. Instruct the personal representative whether an account should have a stop on withdrawals placed from these accounts or whether a co-owner has a right to these monies. Joint accounts should be changed to single name. Credit cards should be destroyed and reissued in the survivor’s name, if desired and the company allows.

Safe Deposit Box

Include information on where the safe deposit box is held and where the key is located. Include a list of its contents. Your personal representative will have to contact your attorney as to the right of access under state law.

Brokerage and Investment Accounts

Provide contact information for your personal representative to notify your financial advisor in writing and instruct them to nullify standing or special instructions that may be in place to buy or sell certain securities and to refrain from making any dramatic changes to the investments until they have an opportunity to meet with them.

Life Insurance

Make a list of any life insurance policies and their respective policy numbers along with the beneficiaries. Your personal representative should request the life insurance companies to send them claim forms. They should confer with your financial planner before deciding whether to take the proceeds as a lump sum or in installments. Beware of converting these policies to annuities which could lock the proceeds up years and may incur a penalty on withdrawal. If you are unsure if there are any life insurance policies, you can contact the American Council of Life Insurers (www.acli.com) which offers guidance on tracing missing policies.

Employment

If still employed at time of death, your representative should notify the Human Resources department so that they can provide a list of any retirement assets (401k, Pension, Deferred Comp) and a list of beneficiaries. Also, provide instructions regarding any stock options, restricted stock or other ownership interests that you have earned. Other things to consider:

Are there any additional benefits such as health insurance that a spouse may be eligible to receive for a period of time?
Were there any earned bonuses or commissions, accrued vacation or sick time that have not been paid?

A list of all prior employers should be kept, no matter how long ago you were employed, as your spouse may be entitled to pension benefits or death benefits. Provide the executor with a record of any governmental employment, past or present. For the armed services, include the branch of service, serial number, and approximate dates of service. Your spouse may be entitled to veterans’ benefits or survivors’ benefits. The Social Security Administration will pay a $255 death benefit upon application. Your personal representative should check with them as to any other benefits for which your issue may be entitled.

Offer a contact at work that would be a good resource to claim any personal items from the office, as well as any personal correspondence files. You may suggest that your personal representative request that your employer monitor emails for a period of time to make sure no personal correspondence or statements are being sent to the work email.

Home

Include how your home is titled. Full title will pass to your spouse by operation of law, outside of the probate court (or the Trust will continue to own our home). Let them know where the title papers are located. You may want to include the particulars of your mortgage and if you have mortgage insurance, specifically if it will be paid off by insurance proceeds. If the deceased’s home is unoccupied, cancel unnecessary home services, such as newspaper delivery, cable service, etc.

Income, Estate and Other Taxes

Your CPA and attorney should be contacted regarding the tax returns and forms to be filed. Indicate where recent copies of your tax returns are located. Federal and state income taxes are due for the year of death on the normal filing date, unless an extension is requested. The estate may need to file an estate tax return within nine months from the date of death. State estate tax and/or inheritance tax returns may also need to be filed, and may have a different filing date.

Passwords

With an increasingly digital world, it’s very important to compile a list of all online logins and passwords with the respective security questions. Let a trusted person know where these passwords can be found and make sure that you update this list periodically.

Social Media

Social Media accounts are stored online these days, usually behind password access, so what happens to them when we die and they’re inaccessible? In the digital age, keeping our personal affairs in order includes social media accounts and emails.

Facebook - will delete an account permanently upon the family's request. They will never release login information to anyone other than the account holder, even after death. First, someone must use an online form to report the user's demise. Within that form is a space to include a link to an obituary or news report confirming the death. Before making any changes, Facebook requires proof that the user has died. Facebook employees then review the user's profile to verify there has been no recent activity. Only then will the company begin the conversion process.
LinkedIn - you can close an account if you have basic personal information plus a link to their obituary, and the name of the company they last worked for.
Instagram can memorialize or deactivate an account in a similar way to Facebook, while Pinterest can deactivate it.
Google - by using Google’s Inactive Account Manager you can specify what you would like done with your accounts after you die, or are no longer able to use them, by adding trusted contacts. Google will not provide login data or passwords - they hold all the data.
iTunes - music files are not ‘owned’, they are ‘licensed’ - hence when you die, the license goes with you. However, Apple does allow switching accounts if the login details were known.

Miscellaneous

If you own your cars or boats, make sure you provide the location of the Titles to these assets. Make a list of all publications to which you subscribe. You may want your representative to cancel those which are no longer relevant. They will also want to notify any clubs to cancel memberships, and review statements to see if any of them are on auto-pay.

Attach a listing of names, addresses and telephone numbers for easy reference. As questions come up, your representative may wish to call your attorney or financial advisor.

Contacts:

Entity	Company	Name of Person	Phone Number
Attorney
Financial Planner
Insurance Agent
Employer
Bank
Veterans Admin.
Golf Club

We have created this guide to be as comprehensive as possible, certainly as each situation is unique there may be other topics that should be addressed in yours

Cyber Security: Annual Update of Best Practices, Tips & Tricks

October is National Cyber Security Awareness Month, so we would like to take this annual opportunity to share some best practices, discuss the use of public WiFi, and shed some light on some increasingly growing threats.

Best Practices for You, Your Business & Your Family

WiFi – If not needed, turn it off, and mind what networks you connect to
Bluetooth – If not being used, turn it off
Make sure home computers are patched and kept up to date
Ensure that home PC’s are protected against malware and viruses with real AV protection
Use phrases instead of words for passwords - do not use “remember my credentials or password”
Change your passwords every three months
Do not use the same password for multiple websites and log-ins.
Change default passwords to routers, printers, TV’s, anything that connects to internet
Don’t click ad links – go directly to websites
Do not email statements or documents with personally identifiable information (i.e. social security numbers or account numbers)
Be vigilant about emails received, does it sound like the sender?
Change your security questions. For example, consider selecting security questions where the answers cannot be googled or found on social media
Add a second type of authentication on your accounts, many institutions are offering this… just ask
Scan your outgoing email folder for suspicious activity.

Public WiFi

In May of 2016, a newspaper columnist reported he became a member of the mile-high hacked club while using American Airlines' Gogo inflight internet service. USA Today’s Steven Petrow said a fellow passenger dropped a bombshell bit of information on him after the flight.

“I hacked your email on the plane and read everything you sent and received. I did it to most people on the flight.”

Many of us enjoy taking our laptop or mobile device down to our local coffee shop, grabbing a cup of our favorite brewed beverage and sitting down to surf the web. Free WiFi is a luxury we’ve come to expect at these establishments, airports, on commuter vehicles or in our favorite stores.

But are you aware of how vulnerable you are when you’re using your favorite WiFi hotspot?

Most WiFi networks that are created for home and business uses are password-protected and encrypted. However, most public WiFi hotspots are set up strictly for convenience – not security.

When you’re using an unprotected public hotspot, whatever you do online while connected to the internet is wide open for viewing by hackers and other various perpetrators. That means your messages, emails, banking and shopping information, and every login under the sun is an open book to anyone who knows how to intercept your wireless connection.

In addition to electronically eavesdropping on you, hackers can also set up a network honeypot to entice you to connect to it, thinking you’re connecting to the usual free wireless hotspot. Hackers will give this access point an inviting label so users will feel comfortable accessing it. Such an access point might be named “Starbucks Free Wi-Fi” or “Target Guest WiFi.”

If you see an access point with a name such as these while you’re blowing the foam off of your cappuccino or trying on that new blouse, you’re liable to connect without a second thought.

The easiest way to ensure you don’t fall victim to connecting to a fake hotspot is to ask an employee what the name of the hotspot is, and think twice about connecting if it isn’t password protected.

Basic Security Terminology

There are many terms we hear used when discussing the topic of Cyber Security. The following is an abbreviated glossary to help you make sense of “what exactly are they talking about?”

Phishing – Is disguising as a trustworthy entity in an electronic communication with the intent to obtain sensitive information such as usernames, passwords, and credit card details (and, indirectly, money), often for malicious reasons.
Spoofing – Is the forgery of an email header so that the message appears to have originated from someone or somewhere other than the actual source
Virus – A type of malicious software program that, when executed, replicated by reproducing itself or infecting other computer programs by modifying them.
Malware – Any software used to disrupt computer or mobile operations, gather sensitive information, gain access to private computer systems, or display unwanted advertising.
Trackers – Practice of tracking web and mobile app users on the Internet. Including browsing history, email interactions, and website visit behavior.
Scripts – Malicious code or web script designed to create system vulnerabilities leading to backdoors, security breaches, as well as information and data theft.
Cookies & Super Cookies – A cookie is a message given to a browser by a web server in a text file message. A super cookie is designed to permanently store on a user’s computer. Generally more difficult to detect and remove.
Ransomware – Extremely volatile malicious software designed to block access to a computer system until a sum of money is paid.

This chart highlights the most common forms of malware.

As always, please feel welcome to contact Sandy Cove Advisors if you have any questions or would like to further discuss any of these cyber security measures.