ADVISORS:Jude McDaniel, CLU, ChFC

Peter D. Knutson, CFP®, CLTC

Victoria M. Bogner, CFP®, CFA

Jim M. Moore

STAFF:Wayne L. McDaniel

CFP®, CLU, ChFC, CAP®

Tammy Barnes

Karey Chester

Brenda Coffman

Cindy Folks

Kara Gourley

Heather Zoeller

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JULY 2016ConGRADulations Class of 2016!!

You did it! It may have taken more time (and money) than you thought, but you did it. You graduated and have taken yet another step down the path of adulthood (which—at times—is very rewarding).

We have had the privilege of getting to know some of our clients’ children over the years and it’s fun to see them all grown up and graduated. You recent grads may not realize it just yet, but your parents are about to get really smart. You’re going to be astounded at how much your parents are going to learn in the next five years…prepare yourselves.

None of our loyal newsletter readers have kids that don’t listen to their parents. I know I listened with baited breath for the next pearl of wisdom from my parents. And I know my own kids are chomping at the bit to hear the sage advice from one of their family’s tribal elders.

Still, we get requests from clients to meet with their kids and help them get off on the right foot. On more than one occa-sion, we (as advisors) can be the swing vote in how best to proceed down life’s financial path. Parents say one thing and kids say the other. I guess sometimes it sounds better coming from someone other than mom and dad.

With this as a backdrop, I (and your par-ents) would like to share some practical financial advice that can make your lives better.

If you’re fortunate enough to have a job lined up, then 2016 is likely the biggest pay raise you’ll ever get. Assuming you made zero to $15 per hour up to this point, you are likely to see a (hopefully) tremendous bump in pay. You might get dental and health insurance and a retire-ment plan to boot.

1. Max out your retirement plan con-tributions and if possible contribute to a

Roth. Don’t put off saving until your 25 or 30 or have kids. Kids are expensive and they don’t like it when you don’t spend money on them.

2. If you have college debt, divert some of your retirement contribution to this, but still contribute the maximum to your re-tirement plan. If you were going to save $1000 per month as recommended in Item 1, then do $250 to school debt and $750 to retirement savings.

3. Be realistic about graduate school. I’m pro education. My wife has a mas-ter’s degree from Penn State. DO NOT IGNORE THE ECONOMIC IMPACT OF GRADUATE SCHOOL LOANS. Especially if you already have a mountain of college debt to pay off.

4. If you’re getting married soon, be realistic about your budget. I’ve been to big, expensive weddings and I’ve been to small, “inexpensive” ones. The people who matter most are going to think it’s fan-tastic whichever route you go. Your par-ents might have some guidance for you here as well. Every dollar you spend on flowers and music is a dollar not available for other priorities. Do not ignore the eco-nomic impact of weddings.

5. If you plan on buying a house: 1) I wouldn’t buy one unless you think you’ll be there for 3-5 years, and 2) only take out a 15 year mortgage, and 3) don’t let the bank tell you what you can afford.

6. If you have a retirement plan at work, talk to a trusted advisor about how to allo-cate your investments. Take full advantage of any company matching program they have.

7. Set up a separate account (like a Roth IRA) and fund it automatically every pay-check. If you get paid on the 1st and 15th of the month, set up your auto draft to run

(Graduates, continued to page 2)

page 2

Special Moments from Our Bicycle Adventurecony about 30 feet from the ocean’s edge. That evening we saw our first whale and a stunning sun-set.

Everyone said we had to try it. While in Tilamook OR we went to Fred Meyers and bought a carton of Tilamook Marionberry Chees-cake ice cream. Ate every drop before we put our spoons down.

The highest and longest hills I have ever ridden in my life were on this trip. Wayne clocked himself coming down one hill at 37.5 mph. The down hills really were the scary part of the trip. Some were just too steep to control the speed safely. It did seem to me though, that the traffic nearly disappeared or the shoulder got very wide, just when we needed it.

We saw so many amazing and beauti-ful sights on our nearly 1000 mile ride. It was far more difficult than I had an-ticipated; grateful for so many hot tubs at the end of the days ride. The Or-egon coast is stunning. California has so much variety. Then there was MDRT convention and Vancouver before we pedaled in northern Washington down to Whidby Island and finished in Se-attle.

We had ridden about 2/3 of the way though the Redwood National forest and stopped for lunch. I was tired and sweaty. The restaurant, for some rea-son, had to turn off their water for a while. While we ate a couple came in and sat down at a table beside us. The woman was in a crisp, cool light blue shirt, her graying blonde hair was in perfect order, she was very attractive. I turned to Wayne and said, “I think you could have married a real woman“. He had no idea what I was talking about so I pointed him in the woman’s direc-tion. He turned his gaze and looked for a few moments then turned back to me and said, “I don’t think she could ride around the block with me. I did really well.” Yep, that was a highlight for me.

Wayne has waited his whole life to see the Redwoods. They were like riding through a cathedral. We were amazed and astounded at how tall they grow and how tough they are that they can live so long. If you know Wayne, you know he spent as much time hugging trees as we did riding that day.

About day three on the Oregon coast we checked into this little hotel. We car-ried our bikes up the stairs; you never know what you will find when you first open that hotel room door. We were thrilled to open the door to this room which was fresh and clean with a bal-

As astute readers of our newsletter, you were probably wondering if there was an update on the status of Prince’s es-tate. There is.

Not only did Prince not have a will, it appears as though he did very little estate planning at all. And it’s going to cost his heirs quite literally tens of millions of dollars. The heirs are likely to still end up sharing over $100 mil-lion (so they’ll land on their feet) but as advisors we hate to see one our cli-ents inadvertently become one of the IRS’s best customers. Not that the IRS was going to throw him a party or even send a thank you card, but still.

For most of us, estate taxes are about as relevant to our finances as chemical composition of the atmosphere of Nep-tune, but Prince’s heirs are going to learn a lot about estate planning over the next few months.

Generally speaking, estates under $5.4 million don’t pay federal estate taxes. Some states (like Minnesota in Prince’s case) have a much smaller ceil-ing before estate taxes kick in (Minne-sota is $1.6 million). Some states also assess inheritance taxes in addition to the estate taxes. I’m guessing if dead people got to vote these laws would change, but maybe not.

Prince’s estate and his heirs could be looking at literally over $100 million in taxes. This would still net them over $100 million BUT…Prince’s estate is not exactly liquid. If the estate has to sell his homes, cars and (the real trea-sure in my opinion) his unpublished songs, they would have to be done at fire sale prices. The IRS has deadlines by which certain taxes must be paid and forms filed. In order to meet these deadlines, the executors will have to sell them at deep discounts so as to comply with the deadlines. Missing the deadlines would incur more penalties.

When I was younger and knew every-thing, I used to think we in the financial planning business were like doctors. We’re not. Doctors save lives.

I think we’re more like dentists. While I believe what we do is valuable, we are not essential in the way physicians are. But, like dentists, your lives will be better if you bring us into the process.

Prince Update

With just a little bit (and I mean little bit) of estate and financial planning Prince could have done something im-pactful and permanent with his estate. Our great grandkids could be talking about Prince’s legacy in the same way we talk about Rockefeller, Gates and Carnegie.

As it stands now, Prince is likely to be in the IRS Hall of Fame, but not be around to see his induction ceremony.

-Pete Knutson

on the 2nd and the 16th. The best way to accumulate wealth is not to spend it.

Financial success is hard and will re-quire a sacrifice on your part. If you want life to be easy now, it will be hard later. Or, you can make it hard now and when you really need it to be easy (like when you’re 40 and kids, tuitions, braces and car insurance hit) it should be pretty easy.

If you make the hard decisions now, it will set you up for success later. Your parents already knew this, of course. They learned it about ten years after they graduated. But you’re going to learn it now.

Congrats again and wishing you a healthy and prosperous adulthood.

-Pete Knutson

Graduates(continued from page 1)

Our office will be CLOSED

ON JULY 4TH for Independence Day

Our office will be CLOSED

ON JULY 4TH for Independence Day

July 2016 page 3

Market Commentary: Britain serves divorce papers to the European Unionmessy divorce or a ‘let’s still be friends’ divorce? I think it’ll have to be a little bit of both. More importantly, it’s going to be LONG. Years, at least 2 if not 3 or 4. This isn’t an overnight thing, although the market’s reaction makes it seem like it.

So, let’s now look at this event in its proper context. Up close, this looks like a Godzilla monster coming to devour each country in the EU one by one until the entire continent goes up in flames.

I think we can all agree that’s not a very helpful perspective. If we pull back a little bit,

we see that what looks like Godzilla up close is actually more like a guy in a rubber suit.

Now don’t misinterpret me here. This is a big deal. It will make waves. It creates

a lot of uncertainty in the market. But my analogy is this: like little kids seeing old, cheesy Godzilla movies for the first time, inexperienced investors will be tempted to point and scream and panic and run, because it’s scary and big and unknown. But for experienced investors, especially those that took my advice in prior commentaries to make portfolio adjustments while the market was near its peak, don’t have to fear market volatility.

Remember, you’re an investor. Not a trader. You can’t control the market, and unexpected events like this will happen. You can’t predict them, no matter how much you convince yourself otherwise when you look in the rearview mirror. That’s why, as an investor, you take control where you can: how much you’re saving, how long you’re working, and how much you’re budgeting to spend toward your goals, whatever those may be. Those are what dictate your portfolio allocation, those are what direct how you rebalance your investments over time. Not Britain, not Europe, not Trump, not Clinton.

Cut out the graphic on the back of this newsletter, laminate it, and tape it to your bathroom mirror so you can look at it whenever you brush your teeth.

Take control where you can. Don’t try to control what you can’t. You’ll drive yourself NUTS.

Here’s a graph of the S&P 500 on Friday morning at 9 AM Central, as to-the-minute as I can make it:

This is a daily graph of the last year of the S&P 500. Look at today, that one red bar on the right. Sure, it’s a pretty big red bar. But it’s not catastrophic. Now look back at last August. THOSE are big red bars. Remember that? When was the last time you thought about last August? Probably last August. So don’t let the shock of one day (or week or month) dictate how you invest your accounts. You didn’t do that in August, did you? If you did, let’s not repeat that. Let’s learn from the past.

If you’re doing your own investing, I can hear some of you saying, “Sure sure, I read your commentary and I had every intention under the sun to rebalance my accounts like you said but…I didn’t. So now what do I do?”

Honestly, it’s okay. Imagine I’m holding you by the shoulders right now and looking you in the eye. Repeat after me: it’s okay, I will not make emotional decisions, I am an investor, not a trader. Also keep in mind that unless you’re invested in 100% pure stocks, your portfolio isn’t experiencing the same volatility as the broad market. What the S&P 500 does probably isn’t what your accounts are doing.

The market is still near prior highs, so again, if you’re a conservative or moderate investor, this would be a good time to shift out of aggressive assets or those based in Europe. Shift more toward US assets, especially in the dividend-paying large cap space, or individual bonds issued by good companies with set maturity dates. As far as sectors, utilities, staples, and retail usually hold up well during volatile market moves. Want help doing all that? Call us, and we’d be happy to help you.

If you’re aggressive, I recommend you rank your holdings from strongest to

peopleofBritainhavebasicallystated,withthisvote,thatthemoneythey’repayinginduesisn’tworththebenefitsofbeingapartoftheEU,andtheydon’twanttosharetheirbordersbybeingforcedtoacceptimmigrants.Therefore,theywantout.However,fortheBrits,thatmightmeanfrozenpensions,theendoffavorabletradewithotherEUcountries,nomoreEUhealthcare,nomorerighttoliveabroadinEUcountries(youknow,asimmigrantsthemselves,andthereareLOTSofBritsthatdon’tliveinBritain).ItbasicallydependsonhowharshlytheEUwantstopunishBritainforleavingandmakeanexampleofthemtoothercountriesthinkingaboutfollowingsuit.Inotherwords,isthisgoingtobeamessydivorceora‘let’sstillbefriends’divorce?Ithinkit’llhavetobealittlebitofboth.Moreimportantly,it’sgoingtobeLONG.Years,atleast2ifnot3or4.Thisisn’tanovernightthing,althoughthemarket’sreactionmakesitseemlikeit.So,let’snowlookatthiseventinitspropercontext.Upclose,thislookslikeaGodzillamonstercomingtodevoureachcountryintheEUonebyoneuntiltheentirecontinentgoesupinflames.

Ithinkwecanallagreethat’snotaveryhelpfulperspective.Ifwepullbackalittlebit,weseethatwhatlookslikeGodzillaupcloseisactuallymorelikeaguyinarubbersuit:

Nowdon’tmisinterpretmehere.Thisisabigdeal.Itwillmakewaves.Itcreatesalotofuncertaintyinthemarket.Butmyanalogyisthis:likelittlekidsseeingold,cheesyGodzillamoviesforthefirsttime,inexperiencedinvestorswillbetemptedtopointandscreamandpanicandrun,becauseit’sscaryandbigandunknown.Butforexperiencedinvestors,especiallythosethattookmyadviceinpriorcommentariestomakeportfolioadjustmentswhilethemarketwasnearitspeak,don’thavetofearmarketvolatility.Remember,you’reaninvestor.Notatrader.Youcan’tcontrolthemarket,andunexpectedeventslikethiswillhappen.Youcan’tpredictthem,nomatterhowmuchyouconvinceyourselfotherwisewhenyoulookintherearviewmirror.That’swhy,asaninvestor,youtakecontrolwhereyoucan:howmuchyou’resaving,howlongyou’reworking,andhowmuchyou’rebudgetingtospendtowardyourgoals,whateverthosemaybe.Thosearewhatdictateyourportfolioallocation,thosearewhatdirecthowyourebalanceyourinvestmentsovertime.NotBritain,notEurope,notTrump,notClinton.Printthisgraphic,laminateit,andtapeittoyourbathroommirrorsoyoucanlookatitwheneveryoubrushyourteeth:

ThisisadailygraphofthelastyearoftheS&P500.Lookattoday,thatoneredbarontheright.Sure,it’saprettybigredbar.Butit’snotcatastrophic.NowlookbackatlastAugust.THOSEarebigredbars.Rememberthat?WhenwasthelasttimeyouthoughtaboutlastAugust?ProbablylastAugust.Sodon’tlettheshockofoneday(orweekormonth)dictatehowyouinvestyouraccounts.Youdidn’tdothatinAugust,didyou?Ifyoudid,let’snotrepeatthat.Let’slearnfromthepast.Alotofyouaren’tourclients,you’redo-it-yourselfers.Andthat’sfineifyoucanstayontopofyourownaccountswithrationalismandthoughtfulplanning.Butifyou’redoingyourowninvesting,Icanhearsomeofyousaying,“Suresure,IreadyourcommentaryandIhadeveryintentionunderthesuntorebalancemyaccountslikeyousaidbut…Ididn’t.SonowwhatdoIdo?”Honestly,it’sokay.ImagineI’mholdingyoubytheshouldersrightnowandlookingyouintheeye.Repeatafterme:it’sokay,Iwillnotmakeemotionaldecisions,Iamaninvestor,notatrader.Alsokeepinmindthatunlessyou’reinvestedin100%purestocks,yourportfolioisn’texperiencingthesamevolatilityasthebroadmarket.WhattheS&P500doesprobablyisn’twhatyouraccountsaredoing.Andhere’swhatIsuggestyoudo.Forwardthiscommentarytoyourfriendsandfamily.Themarketisstillnearpriorhighs,soagain,ifyou’reaconservativeormoderateinvestor,thiswouldbeagoodtimetoshiftoutofaggressiveassetsorthosebasedinEurope.ShiftmoretowardUSassets,especiallyinthedividend-payinglargecapspace,orindividualbondsissuedbygoodcompanieswithsetmaturitydates.Asfarassectors,utilities,staples,andretailusuallyholdupwellduringvolatilemarketmoves.Wanthelpdoingallthat?Callus,andwe’dbehappytohelpyou.Ifyou’reaggressive,Irecommendyourankyourholdingsfromstrongesttoweakest,basedonhowwellorpoorlytheydidinthepriortwomarketdownturnsandhowwelltheyrecoveredfromFebruary

Written June 23, 2016“I want a divorce.”

That’s essentially what Britain told the European Union in a shocking (understatement of the year) referendum vote on Thursday, made all the more mind-boggling because:1. It seemed so obvious how much of a bad idea leaving would be, and2. All of the ‘reliable’ polls ahead of the vote pointed to a pretty solid majority in the ‘stay’ camp.

Extreme, irrational emotions rule the day on the morning after. Which is today as I’m writing this, incidentally!

The questions are pouring in: “What does this mean, really?” “How does this affect my investment accounts?”

“What should I do, if anything?” “Why won’t my child sleep?!”

Okay, that last one might just be me.

First of all, you’re not alone in the global

chaos. What is all this hub bub and what does this mean, exactly? Well, in case you have no idea what we’re talking about, there were 28 countries in the EU, with the UK among them until today. Those countries have economic, political and immigration agreements with each other, and they all pay dues to the European Union in exchange for cohesiveness and continuity, financial aid (to a degree), beneficial trade, and access to all the other countries in the EU as far as working, living, and receiving social benefits. But the people of Britain have basically stated, with this vote, that the money they’re paying in dues isn’t worth the benefits of being a part of the EU, and they don’t want to share their borders by being forced to accept immigrants. Therefore, they want out.

However, for the Brits, that might mean frozen pensions, the end of favorable trade with other EU countries, no more EU healthcare, no more right to live abroad in EU countries (you know, as immigrants themselves, and there are LOTS of Brits that don’t live in Britain). It basically depends on how harshly the EU wants to punish Britain for leaving and make an example of them to other countries thinking about following suit.

In other words, is this going to be a

MarketCommentary:BritainservesdivorcepaperstotheEuropeanUnionWrittenJune23,2016“Iwantadivorce.”That’sessentiallywhatBritaintoldtheEuropeanUnioninashocking(understatementoftheyear)referendumvoteonThursday,madeallthemoremind-bogglingbecause:

1. Itseemedsoobvioushowmuchofabadidealeavingwouldbe,and2. Allofthe‘reliable’pollsaheadofthevotepointedtoaprettysolidmajorityinthe‘stay’camp.

Andso,muchlikethetweensthatlamentedthebreak-upofSelinaGomezandJustinBieber,extreme,irrationalemotionsrulethedayonthemorningafter.WhichistodayasI’mwritingthis,incidentally!Thequestionsarepouringin:“Whatdoesthismean,really?”“Howdoesthisaffectmyinvestmentaccounts?”“WhatshouldIdo,ifanything?”“Whywon’tmychildsleep?!”Okay,thatlastonemightjustbeme.

My3monthold,Max

Firstofall,you’renotaloneintheglobalchaos.That’sright,youhavemeheretogiveyoumyopiniononallofthis,whetheryoulikeitornot!Whatisallthishubbubanddoesthismean,exactly?Well,incaseyouhavenoideawhatwe’retalkingabout,therewere28countriesintheEU,withtheUKamongthemuntiltoday.Thosecountrieshaveeconomic,politicalandimmigrationagreementswitheachother,andtheyallpayduestotheEuropeanUnioninexchangeforcohesivenessandcontinuity,financialaid(toadegree),beneficialtrade,andaccesstoalltheothercountriesintheEUasfarasworking,living,andreceivingsocialbenefits.Butthe

My 3-mo-old, Max

(Market, continued to page 4)

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Takecontrolwhereyoucan.Don’ttrytocontrolwhatyoucan’t.You’lldriveyourselfNUTS.Here’sagraphoftheS&P500onFridaymorningat9AMCentral,asto-the-minuteasIcanmakeit:

Takecontrolwhereyoucan.Don’ttrytocontrolwhatyoucan’t.You’lldriveyourselfNUTS.Here’sagraphoftheS&P500onFridaymorningat9AMCentral,asto-the-minuteasIcanmakeit:

Takecontrolwhereyoucan.Don’ttrytocontrolwhatyoucan’t.You’lldriveyourselfNUTS.Here’sagraphoftheS&P500onFridaymorningat9AMCentral,asto-the-minuteasIcanmakeit:

weakest, based on how well or poorly they did in the prior two market downturns and how well they recovered from February through June. Then sell the 20% at the bottom of your list and buy high quality US stocks or ETFs in defensive sectors, like utilities and consumer staples. I’d stay away from new international positions for now.

What I really advise against is moving completely to cash. If you do this, you’re basically betting on black. Not only that, but you’ll have to figure out when to get back in, and most investors that are nervous enough to move to cash are also too nervous to buy back in at the bottom.

-Victoria Bogner, CFP®, CFA

Disclaimers and NotesThe views are those of Victoria Bogner and should not be construed as investment advice. All information is believed to be from reliable sources, however, we make no representation as to its completeness or accuracy. All economic and performance information is historical and not indicative of future results.

Securities offered through Cetera Advisor Networks LLC, Member FINRA/SIPC. Investment Advisory Services offered through Cetera Advisor Networks LLC and McDaniel Knutson Financial Partners. Cetera is under separate ownership than any other named entity. All information provided in this e-mail has been prepared from sources believed to be reliable, but is not guaranteed by Cetera Advisor Networks and/or McDaniel Knutson and is not a complete summary or statement of all available data necessary for making an investment decision. All information provided is for informational purposes only and does not constitute a recommendation.

Investors cannot invest directly in indexes. However, indexes are accurate reflections of the performance of individual asset classes shown. Dollar Cost Averaging does not assure a profit and does not protect against loss in a declining market. Such a plan involves continuous investment in securities regardless of fluctuating price levels of such securities. Investors should consider their financial ability to continue their purchases through periods of falling prices, when the value of their investments may be declining.

*Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing.

Market(continued from page 3)