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How investment advisers can win DIY clients

Friday, August 22, 2014 – Article by Hilary Johnson.
James Gambaccini was recently quoted on a Reuters article on How Investment Advisers can win DIY clients.

Retirement Income Planning

The pre-retirement phase of clients’ working lives is the primary focus of most financial advisors. But it is possible to build a thriving practice in the retirement income planning market even after clients stop working.

Here is James Gambaccini’s approach to retirement income planning as illustrated in the Financial Planning article Specialized Practice: Retirement Income Planning.

Niche Play 21, 2014

James Gambaccini is featured in this Wealth Management article, Niche Play.  Advisors who target a niche, often one based on a particular profession, often stand a better chance of growing a business. Printed article on REP Magazine will hit stands late September.

An Open Letter to our interns…

This summer, Acorn Financial Services had the pleasure of having 4 sets of extra hands to help us migrate to “the cloud”… It wasn’t always fun and games, our lovely interns had the tedious task of scanning & labeling endless folders, moving furniture, picking up lunches, stuffing envelopes and updating our new database.  On the rare days that things were slow around the office, we all shared stories over lunch…and sometimes, they even got to participate in fun activities outside the office (Bowling, Nats Games, Golf Outings, Yard Sales and go-kart racing).

We would like to take this opportunity to thank them for the hard work that they put in over the summer.  Our youngest intern, Dillon Foley will be a Freshman at Wake Forest University (NC), Evelyn Rivera (Patty’s sister) & Sahar Zamani (Heela’s sister) will be starting their Sophomore year at Northern Virginia College and our oldest intern, Delaney Besecker will be starting her Senior year at St. Joseph’s University (PA). We are sure going to miss you guys!  Best of luck this year, we look forward to hearing about your new experiences.

Market Volatility

We wanted to take this time to provide you with a brief refresher on market cycles.  With the total U.S stock market and international markets up more than 193% and 124% respectively since their lows of March 2009, patient long-term investors — like you — certainly have much to celebrate.

While strong bull markets like these can have a major impact on your portfolio, one of the biggest determinants of the success or failure of an investment portfolio — in our experience — is simply this: emotions.

As this Cycle of Market Emotions chart illustrates, it is all too easy to let emotions guide how we react to market movements. Exuberance or panic can cause us to buy high or sell low — and thereby potentially compromise, even derail, our long-term financial plans. Sadly, we can’t predict the future, and were skeptical of those who try. But since 1926, we’ve seen down markets in America (as measured by the S&P 500) occur about 27% of the time.1 And this isn’t necessarily a bad thing.  Periodic market declines are the necessary and normal price of successful investing. You can’t earn the long-term historical returns of global markets without experiencing some ups and downs along the way. To state the obvious, if there was no risk, there’d likely be no return. Our role as your Advisors is to help you manage through bear and bull markets and keep you on track towards what matters most — achieving your long-term goals. We work with you to do this in at least three crucial ways: •   Rebalancing your portfolio periodically so it stays aligned with your goals •   Making sure emotions and short-term thinking don’t compromise your future •   Not trying to outguess markets We would like to set aside some time for us to go over any questions you may have. We’d also like to review how you are doing in terms of your wealth plan and investment portfolio, as well as your progress towards your goals. We want to make sure you are well positioned, no matter what the markets are doing. As always, I encourage you to call us at (703) 293-3100 if you ever have any questions or items you want to discuss further or if you want additional perspective on your portfolio and why we invest the way we do.

CRSP data provided by the Center for Research in Security Prices, University of Chicago. The S&P data are provided by Standard & Poor’s Index Services Group. MSCI data copyright MSCI 01/2014, all rights reserved. Cycle of Emotions Chart created by Loring Ward 01/2014.  1There were 24 down calendar years out of the 88 total calendar years tracked by the S&P 500. 24/88 = 0.2737.


Contact: Eric P. Scruggs, CFP®
Phone: 703.293.3100


For Immediate Release

ERIC P. SCRUGGS, CFP®, Financial Advisor at Acorn Financial Services in Fairfax,VA has been authorized by the Certified Financial Planner Board of Standards (CFP Board) to use the CERTIFIED FINANCIAL PLANNER™ and CFP® certification marks in accordance with CFP Board certification and renewal requirements. Mr. Scruggs has worked at Acorn Financial Services since 2012 and is responsible for comprehensive planning and analysis to help clients achieve their goals.

The CFP® marks identify those individuals who have met the rigorous experience and ethical requirements of the CFP Board, have successfully completed financial planning coursework and have passed the CFP® Certification Examination covering the following areas:  the financial planning process, risk management, investments, tax planning and management, retirement and employee benefits, and estate planning.  CFP® professionals also agree to meet ongoing continuing education requirements and to uphold CFP Board’s Code of Ethics and Professional Responsibility, Rules of Conduct and Financial Planning Practice Standards.

CFP Board is a nonprofit certification organization with a mission to benefit the public by granting the CFP® certification and upholding it as the recognized standard of excellence for personal financial planning.  CFP Board owns the certification marks CFP®, Certified Financial Planner™ and federally registered CFP (with plaque design) and CFP (with flame design) in the U.S., which it awards to individuals who successfully complete initial and ongoing certification requirements.  CFP Board currently authorizes more than 69,000 individuals to use these marks in the United States.  For more about CFP Board, visit

5 Money Saving Tips for Exchanging Currency


abc News/July 16, 2014
James Gambaccini is featured in this abc News article, 5 Money Saving Tips for Exchanging Currency.  Headed overseas for summer vacation? It’s easy to get hit with extra fees and expensive exchange rates when switching currencies.

Major Stock Market Indexes

There are a number of stock market indexes that are frequently mentioned on television and cited in financial newspapers and magazines. They measure various slices of the stock market and can be used as performance benchmarks for both investment vehicles (such as mutual funds) and one’s own portfolio returns. Here are three of the most popular and referenced indexes. Read the rest of this post by downloading the attached PDF

Don’t Let Small Numbers Distract You From the Big Picture

Even though it’s all about dollars and cents, the financial industry runs on percentages; dollar signs are few and far between. The use of percentages is an understandable, and helpful, convention when communicating financial information. After all, a headline saying “Company A’s Net Jumps by 16%” is more helpful than one that reads “Company A’s Net Jumps to $1.02 billion.” Providing percentages rather than dollars also allows investors to compare apples to apples: You can readily discern that an investment that has gained 8% during the past 10 years has been a better bet than one that has gained half as much.

Yet dealing in percentages, especially relatively small ones like inflation rates, expense ratios, and long-term annualized returns, can also distract from important information that factors into your financial plan. Those small and innocuous-looking percentage figures, when translated into dollar terms and compounded over many years, can make a huge difference between success and failure.

How Small Numbers Can Make Your Investment Plan…:Say, for example, that you stick with the 3% 401(k) contribution rate that your company uses as the default, contributing $1,500 of your $50,000 salary for 40 years and earning 5% on your money. You’d have about $190,000 at the end of the period; not too shabby. But bumping up your percentage contribution just 2 percentage points (to 5%) would have a meaningful impact on your bottom line, increasing your nest egg to nearly $320,000.

In a similar vein, you might choose to keep your child’s college fund in cash. Assuming cash yields stay as low as they are now (which is, admittedly, a big assumption), a $50,000 investment that earns just 1% for the next 10 years will amount to just $55,000 at the end of the period. But by maintaining a 60% stock/40% bond portfolio and assuming a not unreasonable 4% return, you’d be able to grow your $50,000 investment to $74,000. Neither return rate will allow you to keep up with college inflation, sadly, but at least it’s better than putting the money under your mattress. However, keep in mind that the 60/40 portfolio entails market risk.

…or Break It: Just as seemingly small percentage changes (either in contributions or return rates) can provide investors with an enormous helping hand, they can also work in reverse, and this is where many investors run into trouble. They blow off small percentage amounts like expense ratios and inflation rates when making investment decisions.

For example, let’s say an index fund has a fairly low expense ratio of just 0.63%. It’s certainly cheaper than most actively managed funds, and it doesn’t appear to be that much more expensive than most other S&P 500 index funds, some of which charge as little as 0.06%. If you opted for the expensive fund rather than a cheaper alternative and you held it for a long time, you’d be shortchanging yourself. Assuming a 10% annualized return and a $100,000 initial investment, you’d be leaving a lot of money on the table during a 25-year period by opting for the more expensive fund: nearly $170,000, to be exact. All because your fund charged 0.57% per year more than a comparable option.

Inflation is another factor that investors tend to underestimate, because the average historical inflation rate of roughly 3% looks pretty benign when viewed without any context. Should the fact that bananas that are $0.59 a pound today but might be $0.79 a pound 10 years from now cause a major rethinking of your financial plan? Yes, actually. When you extrapolate inflation across all of the items in your shopping cart and compound it over many years, it can have a hugely corrosive effect on the purchasing power of your savings, meaning you need to save a lot more than you thought you did.

The samples provided are hypothetical and do not represent an actual investment.  They are meant for illustration purposes only.  Investors should carefully consider the investment objectives, risks, charges and expenses of the products prior to investing.

Click to download this post in PDF format.

The Best Ways to Give a Financial Gift to Children

Here are some of the key strategies to consider when giving children and grandchildren a financial boost. There’s no one-size-fits-all answer: The right choice for your situation will depend on how much you intend to give as well as on your grandchild’s life stage and the goal of financial assistance.

Set up a UGMA/UTMA account: UGMA/UTMA accounts provide a way to save on behalf of a minor child without setting up trust funds or hiring attorneys. As a donor, you appoint yourself or other adults (such as the child’s parents) to look after the account. One of the key advantages with UGMA/UTMA accounts is flexibility: You can put a huge range of investment options inside a UGMA/UTMA, including stocks and mutual funds. If you’re saving fairly small sums, these accounts can be a decent way to go, but there are two major hitches. The first is that the assets become the child’s property when he or she reaches the age of the majority (18 or 21, depending on state of residence). This leaves the donor with no real control over how the money is spent. The second is that for college-bound children, substantial UGMA/UTMA assets can tend to work against them in financial-aid calculations.

Contribute to a 529 Plan: These plans may build college savings while possibly obtaining a tax break. If you’re saving for a college-bound child or grandchild, section 529 college-savings plans may help you avoid the two key pitfalls of UGMA/UTMA accounts. First, the assets are the property of the account owner, not the child. So if one grandchild doesn’t end up going to college, you can use the 529 assets for another grandchild. Second, because 529 plan assets are considered the property of the account owner, they can have a relatively limited impact on financial-aid eligibility. In addition, you won’t owe taxes on 529 plan investment earnings from year to year, and withdrawals from a 529 plan account will be tax-free provided you use them to pay for qualified higher-education expenses, such as tuition and room and board. Finally, you may be eligible for a state tax break on your contribution to a 529 Plan. The availability of such tax or other benefits may be conditioned on meeting certain requirements.

Fund a Roth IRA: If your grandchild is older and working, you can contribute an amount equal to his or her earned income, up to $5,000, to a Roth IRA. As with a UGMA/UTMA account, you can put a range of investments inside a Roth; there are no investment minimums or age limits on contributions. The money inside the Roth can grow tax-free until retirement, and the vehicle also offers some flexibility for withdrawals before that time. Specifically, contributions to a Roth IRA can be withdrawn at any time and for any reason, to pay for college or anything else. Those who need to tap the investment-earnings piece of an IRA will owe income tax on that portion of the withdrawal, but they’ll circumvent the 10% penalty on early withdrawals if they use the money for qualified college or certain other expenses. Despite the big tax benefits, Roth IRAs for children carry one of the key drawbacks that also accompany UGMA/UTMA accounts: The child maintains control over the assets and can use the money for whatever he or she wants at the age of majority.

Funds in a traditional IRA grow tax-deferred and are taxed at ordinary income tax rates when withdrawn. Contributions to a Roth IRA are not tax-deductible, but funds grow tax-free, and can be withdrawn tax free if assets are held for five years. A 10% federal tax penalty may apply for withdrawals prior to age 59 1/2. Please consult with a financial or tax professional for advice specific to your situation. 529 plans are tax-deferred college savings vehicles. Any unqualified distribution of earnings will be subject to ordinary income tax and subject to a 10% federal penalty tax.

Click here to download the PDF version of this post.

Acorn Tax Planning
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Reston, VA 20191
Phone 703-293-3100

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