Morgan Stanley Smith Barney LLC. Member SIPC.
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Looking Beyond
Short-Term Volatility
Whether you get your news from the papers, television or the Internet, you know how quickly the financial markets can change. Some days are euphoric (a key economic report may bolster consumer confidence or a company reports better-than-expected earnings for the quarter, igniting market indexes). Other days, however, aren’t as sunny—and some of them may be downright unnerving. So what are some of the possibilities when an inevitable downturn occurs in the market?
An important piece of advice to keep in mind during a market slide is one you’ve no doubt heard before: Do not overreact. Even though your instincts may be telling you to try to protect your investments by switching to a more conservative approach or to liquidate your positions in hopes of buying them back at lower prices when the worst is over (an approach known as “timing” the market), it’s important to keep your emotions in check—and your eyes on the long-term horizon. History tells us that over the long run the stock market can be quite resilient. From wars to natural disasters to economic meltdowns, the market has seen it all—and over time has shown remarkable capacity to bounce back.
While it’s not always easy to maintain long-term perspective, overreacting to events as they unfold may compound the damage—and you may end up selling at the bottom or missing part or all of a subsequent market recovery. To help protect against short-term volatility and the anxiety it may create, together, we can help develop a diversified investment plan that reflects your long-term goals and tolerance for risk. By reviewing the investment plan on a periodic basis, we can try to alter it as needs change. Our primary focus is ensuring that your wealth continues to work hard for you day in and day out. ■
Past performance is no guarantee of future results. Diversification does not ensure against loss.
SECOND QUARTER 2011 720 S. Atherton St. Ste 101 State College, PA 16801 Phone: 814-861-1738 Fax: 814-861-1750 Tollfree: 800-238-3666 [email protected] www.fa.smithbarney.com/thevkgroup BRUCE E. VINION Vice President Financial Advisor Portfolio Manager MARVA L. KING, CRPC® Financial Advisor COURTESY OF THE VK GROUP
DIALOGUES//2
made it clear that Angela should get the proceeds from all of his investments. It wasn’t until Dave died suddenly that Angela learned that Connie, Dave’s first wife, was still the beneficiary on the annuity. Dave’s will did not supersede the annuity contract, even though it seemed clear that Dave wanted Angela to receive his assets. In the end, Connie received the proceeds from the contract.
WHEN PLANS CHANGE, PORTFOLIOS SHOULD TOO
Wendy, 63, purchased a variable annuity when she was 55. At the time, she had intended to retire at 65—but that was before the market downturn in 2008. Wendy had a living benefit that allowed her to lock in any gains in her annuity contract, but since she was invested in a conservative portfolio in-line with her risk tolerance, the gains were modest. Since 2008, Wendy has revised her retirement age to 68 and updated her In fact, many investors have either
had to delay retirement or modify their retirement lifestyle to reflect their changing circumstances. According to a recent study conducted by the Employee Benefit Research Institute (EBRI), “among the wealthiest quartile of Americans, 13% are in danger of churning through their savings within 20 years of retirement.”1
If you own an annuity, you may already be well positioned to receive a guaranteed income stream, but it is still important to review your contract annually to help ensure that the annuity’s features and benefits remain competitive and are still in line with your goals.
If you want to know how important an annuity review is, consider the following three scenarios:2
WHERE THERE’S A WILL, THERE’S A WAY? NOT ALWAYS… Angela is Dave's second wife. They wisely wrote new wills after their wedding, but Dave overlooked reviewing his annuity beneficiaries. He assumed that his new will
NOW Is the Time for an
Annuity Review
Over time, your financial needs and future plans can change, and this
is especially true during times of economic uncertainty or prolonged
market volatility.
1 “Even the Wealthy Can’t Count on their Retirement
Years Being Golden,” by Walter Hamilton, Los Angeles Time Online, July 13, 2010.
2
Hypothetical examples. Any resemblance to real clients at Morgan Stanley Smith Barney is purely coincidental.
An annuity review can help ensure that you leave
your assets to the people you intend.
risk tolerance to a moderate aggressive allocation in hopes of maximizing her retirement savings. She recently changed Financial Advisors, and it was Wendy’s new Financial Advisor who, while conducting an annuity review, discovered that the underlying investments in her variable annuity did not reflect her new level of risk tolerance. Wendy has since modified her annuity portfolio for a more aggressive model which is in-line with her new investment objectives.
THERE’S NO SUCH THING AS A “SMALL” CHANGE
James has been a successful corporate attorney for the past 35 years. He recently took an early retirement package from his firm—two years earlier than his planned retirement date. A week later, James received a call from his Financial Advisor offering him a complimentary review of his two variable annuity contracts. His first inclination was to decline the offer, since
An annuity review can help ensure that your
significant had changed to warrant a review. Besides, his severance package was substantial enough to last two years, so he wouldn’t have to alter his current retirement strategy.
James called his Financial Advisor to decline the offer. During their conversation, James mentioned that he had some new health concerns that could potentially be expensive in the future. His Financial Advisor told him about several options, including long-term care
For clients whose account is carried by Morgan Stanley Smith Barney LLC, insurance products are offered in conjunction with Morgan Stanley Insurance Services, Inc. For clients whose account is carried by Citigroup Global Markets Inc., Morgan Stanley Smith Barney LLC offers insurance products in conjunction with SBHU Life Agency, Inc.
Variable annuities are sold by prospectus. Investors should carefully read the prospectus which includes information on the investment objectives, risks, charges and expenses along with other information before investing. To obtain a prospectus, please contact your Financial Advisor. Please read the prospectus carefully before investing.
Living benefits are optional and are available for an additional cost. When evaluating a living benefit there are several key factors that must be considered such as: cost, investment limitations, holding period, liquidity, withdrawals and the client's age and risk tolerance. The cost for these optional living benefits typically ranges from 0.40% to 1.50% annually. You should review and discuss all of these general points with your clients before they invest.
Variable annuities are long-term investments designed for retirement purposes and may be subject to market fluctuations, investment risk, and possible loss of principal.
All guarantees are based on the financial strength and claims-paying ability of the issuing insurance company. Exchanging annuities may result in surrender charges and a new surrender charge period. New surrender charges may be imposed with a new contract; and the new contract may be subject to additional insurance and investment related fees as well as increased risk. Taxable distributions (and certain deemed distributions) are subject to ordinary income tax and, if taken prior to age 591¼
2, may be subject to a 10% federal income tax penalty.
Morgan Stanley Smith Barney LLC, its affiliates and Morgan Stanley Smith Barney Financial Advisors do not provide tax or legal advice. Clients should consult their tax advisor for matters involving taxation and tax planning and their attorney for matters involving trust and estate planning and other legal matters.
© 2010 Morgan Stanley Smith Barney LLC. Member SIPC.
3Long-term care insurance is medically
underwrit-ten and insurability is subject to the insurance company's underwriting requirements.
planning needs.
insurance,3which James had never heard
of before. He immediately scheduled a meeting with his Financial Advisor to review his variable annuity contracts, as well as the options they had discussed on the phone.
If you own an annuity, we can evaluate your annuity’s features—including the rating of the insurance company, the performance of the contract, liquidity and living benefit and death benefit options—to ensure that your contract is still in-line with your investment objectives and retirement goals.
Call us today and request a complimentary annuity review.n
DIALOGUES//4
Morgan Stanley Smith Barney LLC and its affiliates do not provide tax or legal advice. To the extent that this material or any attachment concerns tax matters, it is not intended to be used and cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Any such taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor.
Investments and services offered through Morgan Stanley Smith Barney LLC. Member SIPC. © 2010 Morgan Stanley Smith Barney LLC. Member SIPC.
Whether you’re running a business, raising children or pursuing a new venture (or doing all of these things and more), your life is busy enough without having to spend extra time each day sorting through an unruly pile of mail at home. While there’s not much we can do about retail catalogs or coupons from your local grocer, we can help you minimize your mail clutter through our E-Delivery service.
With E-Delivery, you can cut down on the amount of paper being sent to you by receiving all your monthly statements, trade confirmations, prospectuses, proxies, 1099 forms and year-end summaries online at smithbarney.com. All of these
documents can then be viewed at your convenience, 24/7. Stop all the paper, or just some of it.
What’s more, E-Delivery reduces paper production and helps lower water con-sumption, greenhouse gases and solid waste. Delivering statements electronically instead of by postal mail also reduces gas consumption and carbon monoxide emis-sions—so your home mailbox won’t be the only thing with a little more breathing room.
HERE’S A QUICK OVERVIEW OF HOW E-DELIVERY WORKS:
»You are notified by e-mail when your statements are ready for online viewing.
»You can view your statements in a safe and secure online environment. » You can discontinue delivery of your
paper statements by mail (year-end summaries will continue to be mailed unless you choose to also receive these by E-Delivery).
So, whether you’re motivated by clutter or climate change (or both), sign up for E-Delivery today. For more information on how to enroll, talk to us or call the Online Client Service Center at 1-800-221-3636. ■
Prevent Clutter (and Save a
Tree or Two) with E-Delivery
THE VK GROUP at
Morgan Stanley Smith Barney
720 S. Atherton St. Ste 101 State College, PA 16801 TELEPHONE:814-861-1738 TOLL-FREE:800-238-3666 FACSIMILE:814-861-1750 [email protected] www.fa.smithbarney.com/thevkgroup
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