VOL. 6, ISSUE 2
Inside:
Single DB Plus
Congress is making
defined benefit plans
more attractive to small
businesses. — Page 2
Meet Ashley Wall
FFA has a new face in
the office.
— Page 2
Estate planning
Sometimes in estate
planning, a Will is not
enough.
— Page 3
Client audit
report results
Almost half of you
responded! — Page 3
Upcoming
Events
Coffee &
Conversation
“529 plans”
August 17
Ladies’ Outing
Holiday
Client Event
Fall
Thank
You
Each year we dedicate a
section of our newsletter to
thanking those clients who
have helped us to grow our
business. Client referrals
are the primary means by
which we grow our firm.
BUILDING LONG TERM RELATIONSHIPS THROUGH KEEPING PROMISES
SUMMER 2005
Who wants to play musical chairs?
A
s a child, you might remember playing
musical chairs. Everything goes well
while the music is playing … fun,
laughter, anticipation. But when the music
stops, you’d better have a chair or the results
are … well, less favorable. Eventually, someone
doesn’t get a chair and loses. When you use
this analogy regarding your future financial security, the impact becomes particularly
important. Let’s look at what this game
can teach us about the real world.
Yogi Berra once said, “You can learn
by Vinton
a lot just by watching.” I was recently
struck by this thought while attending
a meeting on the virtues of investing in real estate. To
illustrate my point, I would like to share a true story.
In the fall of 1999, I was attending a luncheon of
about 150 individuals who were gathered to hear about
an emerging fiber optics technology. Corning, whose
primary manufacturing plant is in Wilmington, was
presenting their business plan for a compelling future.
As I listened, I watched the eyes of the audience.
I could see that as each glowing statistic and fabulous
prediction was introduced, each new claim stirred an
emotion that can be a weakness for individuals. The
dangerous emotion is called greed, and its impact can be
defined in the investment world as the “herd instinct.”
That means that we tend to chase performance of the
hot sector of the day. Or, we like to buy today what did
well yesterday. And we do in mass, thereby creating a
“herd” mentality.
This luncheon was pre dot-com bubble. I was witnessing 150 well-educated, very astute individuals become
mesmerized by the “herd instinct.” At the time of the
meeting, Corning was trading above 100 and two years
later, the stock fell below five.
ing. The speaker was the president of one of
the largest real estate companies in America.
And again, all of the wonderful charts with
colored arrows were pointing up, up, up …
As I sat through the presentation and listened to the motivating statistics of real estate,
I began to look into the eyes of the audience
in the hopes of reaching an understanding
of the “herd instinct” phenomena.
What was amazing was that you
could see it in their eyes. I was witnessing a scenario similar to the 1999
Fountain
luncheon whereby euphoria set in
regarding the hope of making a lot of
money fast. Yes, I was watching irrational exuberance
in the making, but this time real estate was on the menu.
KEEPING PROMISES
What can be learned?
The point I would like to make is be careful if you
are playing musical chairs within the real estate sector.
The music will stop, it always has, and it always will;
and you want to be sure that you have a chair when that
occurs. Real estate tends to include debt which makes
cycles more problematic. We are experiencing some of
the most phenomenal investment returns that I have
ever witnessed in the real estate area. I would like to
urge caution to all individual investors. Be careful with
speculation based on a rosy future without grounded
economics. It may be time to leave the “herd.”
In closing, I am very bullish on real estate in general. I am optimistic about the future of real estate
in North Carolina and specifically, in Wilmington.
While I believe real estate should be a part of every
investor’s portfolio, I think it is time to take a look
at where we are in the cycle and make sure that we
are comfortable. Diversification is a good idea when
the music stops.
Exuberance Revisited
I would like to take this story forward into April of
2005. I recently attended the same luncheon, with the
same people, and heard a similar presentation. This time
the presentation was on the virtues of real estate invest-
FOUNTAIN FINANCIAL • SUMMER 2005 • Page 1
Vinton Fountain, President
Fountain Financial Associates
Wisdom of
a donkey
O
ne day, a farmer’s donkey fell
down into a
well. The animal cried
piteously for hours
as the farmer tried to
figure out what to do.
Finally, he decided the
animal was too old to
bother retrieving and
the well needed to be
covered up anyway.
He invited all his neighbors to come over and
help him. They all began to shovel dirt into
the well. At first, the
donkey realized what
was happening and
cried horribly. Then, to
everyone’s amazement,
he quieted down.
A few shovel loads
later, the farmer finally
looked down into the
well. He was astonished at what he saw.
With each shovel of dirt
that hit his back, the
donkey would shake it
off and take a step up.
Pretty soon, everyone
was amazed as the donkey stepped up over the
edge of the well and
happily trotted off!
Moral of the story:
Life is going to shovel
all kinds of dirt on you.
The trick to getting out
of the well is to shake it
off and take a step up.
Each of our troubles is a
stepping stone. We can
get out of the deepest
wells just by never giving up! Just shake it off
and take a step up.
Single DB Plus plan
Congress’s new retirement program for small businesses
A
s many of you may know, Congress
who is interested in contributing more than
has opened up some terrific new
$41,000 annually and expects to contribute
opportunities for small business
to the plan for at least three years.
owners in the area of retirement planning.
How does it work? A defined benefit
New pension legislation has recently raised
promises you a specific total accumulation
contribution and deductibility limits as well
or benefit at retirement. You decide what
as simplified plan fund requirements, makpercent of your annual income you can
ing defined benefit plans more attractive to
comfortably afford to contribute to the
small business owners.
plan. The annual contribution is
For instance, the Single DB Plus
based upon your age, your income
plan is a new turnkey program deand your planned retirement age.
signed for self-employed individuals
Fund performance also impacts
by Ashley Wall
and business owners with one to
the annual contribution amount.
five employees. This plan offers the
Assets in most existing retirement
highest deductible contributions when compared to plans may be consolidated into a Single DB Plus acother retirement plan types. High-income earners age count. At termination, Single DB Plus assets can be
50 or older may be eligible to save three to four times rolled into an IRA.
the amount when compared to SIMPLE plans, IRAs,
As you can see, the Single DB Plus plan holds
SEPs, 401(k) or Profit-sharing plans. The maximum great potential for accumulating large amounts of
annual benefit limit to a Single DB Plus is $165,000 assets in a relatively short time frame. Of course,
or more in some cases. All employer contributions are there are some things one would need to consider
tax deductible, and investment income grows tax-free before establishing this type of plan. Inadequate
until withdrawn.
and excess funding can trigger penalties. Also, if
Who should consider this plan? The DB Plus is the plan experiences substantial investment losses,
designed for anyone 45 years or older who typically the employer will probably be required to make adearns $75,000 or more. Ideally, these people would ditional contributions to the plan. For these reasons
include business owners with one to five employees, it is important to work closely with your investment
independent contractors or consultants, employees who advisor and a professional administrator.
also receive self-employment income from a side busiIf you think you or someone you know may be a
ness, and self-employed spouses of high-income earners. good candidate for this retirement program, please
It is important to note that this plan is for someone contact us for more information.
FOCUSED PLANNING
Meet Ashley Wall
A
shley Wall joined Fountain Financial Associates as a financial advisor
registered with the NASD having Series 7, 63 and 66 licenses since
‘99. She is also licensed in life and long-term care insurance.
Ashley respects the client-advisor relationship and understands that
each individual’s needs are different and uniquely important to them. “By
listening, I feel that I can help clients focus on their goals so that we can
together create a solid financial plan while managing risks.”
Ashley is Treasurer of the New Hanover – Pender County Medical Alliance and has served on the Greater Wilmington Chamber of Commerce’s
Legislative Committee since moving to Wilmington in ‘98.
Ashley is from Kinston, North Carolina and a graduate of the University
of North Carolina at Chapel Hill. She and her husband Ben have a son,
George, and two dogs.
FOUNTAIN FINANCIAL • SUMMER 2005 • Page 2
“By listening, I
feel that I can help
clients focus on their
goals so that we
can together create
a solid financial
plan while
managing risks.”
Email Ashley:
[email protected]
Estate planning
Tragic story emphasizes importance
of end-of-life planning
M
ost of us were touched
• Power of Attorney for
by the heartbreaking
Health Care Decisions
story of Terry Schiavo
This document designates someone
earlier this year. This was the case
to make medical decisions in the
of a 41-year-old Florida woman
event you are unable to make health
who suffered severe brain damage
care decisions for yourself, this perin 1990 after her heart stopped.
son should share similar views on end
She became the center of a national
of life issues, clearly understand your
debate, as doctors said she
wishes and ensure they are
was in a persistent vegetafollowed as you intend.
your
tive state and her husband,
• Durable General
Michael Schiavo, said he
by Tracy Brown, CFP
Power of Attorney for
had promised his wife he
Financial Decisions
wouldn’t keep her alive
A
Power of Attorney desigby artificial means. Her
The legal documents
nates
someone to act for you
parents said that would
needed
to
affect
your
wishes
in
the
event of your incapacity
not have been her wishes,
in
the
event
of
incapacity:
with
respect
to any assets that
and battled in court to
have
not
been
transferred into
keep their daughter alive.
your
Revocable
Living Trust.
Living
Will
You might have related
This
document
will not take
as a spouse or as a parent.
effect
until
you
are
certifiably
Power
of
Maybe you thought about
unable
to
make
your
own
Attorney
for
Health
what you would want for
financial
decisions
and
will
Care
Decisions
yourself in that situaremain
in
effect
only
while
tion. Certainly none of
Durable General
you are incapacitated.
us would want to have
Power
of
our families or loved
The Living Will and
Attorney for
ones put in that position.
Health
Care Power of AtFinancial Decisions
As planners we hoped
torney are also referred to as
that this tragic story would
Advance Medical Directives.
create a call to action for our friends and clients These documents not only protect your own
to make their own wishes known and put the wishes, but also protect your family from the
proper legal documents in place to affect these burden of making these decisions during a time
wishes. In the case where these documents were of emotional distress. In the absence of these
in place we hoped it was a time to review them documents, family members are forced to make
and discuss desires with loved ones.
difficult choices and will usually make decisions
In estate planning, there are documents based on their own wishes and not necessarily
that come into play at our incapacity and those the wishes of the incapacitated person.
that come into play at death. It is important
The task of estate planning is far from pleato realize that your Will, a document that surable. I have heard it compared to looking
comes into play at death, is not enough. The straight into the sun, you can only do it for a
legal documents needed to affect your wishes short time and then you have to look away.
in the event of incapacity are:
It is difficult for any of us to think about our
PROTECT
1
3
• Living Will
A Living Will is an individual’s written
declaration of what life-sustaining medical
treatments he or she will or will not allow in
the event they become incapacitated.
WISHES
2
own incapacity or demise. To make it worse
it takes time, effort and will probably cost
money. So is it worth it to you? Is it worth
it to your family? Probably more than you’ll
ever know.
Client audit
report results
F
irst of all, we’d like to thank
everyone who participated in
our 2004 Client Audit Survey.
We received a 44% response rate for
the surveys and were able to conclude
the following results:
• Over 96% of respondents are
satisfied with their relationship
with FFA. (4% were neutral, none
were dissatisfied!)
• 100% of respondents believe the
importance of a clear retirement
plan is critical or somewhat important and 97% agree that their
FFA advisor fully understands their
goals for the future.
• Three topics that ranked high
among respondents for learning
more about were investment
management, estate planning and
retirement planning.
• 90% of respondents found our
quarterly newsletter and periodic
financial articles to be valuable.
• 100% of respondents said that they
would recommend FFA’s services to
family, friends and colleagues.
We are continually searching for
new and better ways to serve our
clients, and we hope this survey will
help us to serve your interests at the
highest level possible. Thank you for
your support and participation.
FFA News
Vinton Fountain of Fountain Financial
Associates has recently been elected to
the Greater Wilmington Chamber of
Commerce Board.
Vinton also chairs the State Governmental Affairs Committee.
FOUNTAIN FINANCIAL • SUMMER 2005 • Page 3
FFA Events
In & around the office
Coffee & Conversation (L to R): Bob Seeling,
Vinton Fountain and Jon Kates.
Valentine’s Luncheon (L to R): Andy and Pat
D’Angelo and Mike Brown.
Coffee and Conversation
ountain Financial hosted three speakers in 2005.
In January, Dr. William “Woody” Hall, Professor of Economics at UNCW spoke on the economic
outlook for southeastern North Carolina. In March,
Mayor Spence Broadhurst spoke on his vision for the
redevelopment of the downtown riverfront. In June,
Matthew Beaudry, Senior Portfolio Manager with
Alliance Bernstein, spoke about the outlook on capital
markets and the international opportunity.
F
Valentine’s Day Luncheon
ur annual Valentine’s Luncheon was held at the
Bluewater Grill. Hannibal, the magician, entertained all, and it proved to be a truly wonderful day.
O
Valentine’s Luncheon (L to R): Jim and Kathy
Busby and Charlie and Phil McGee.
Valentine’s Luncheon (L to R): Linda and Kevin
O’Brien and John and Diane Cashman.
Port City Capital Bank
ountain Financial Associates and Port City Capital
Bank co-hosted a cocktail party on February 17
at the Port Land Grille for the founders and board
members of the bank.
F
Valentine’s Luncheon (L to R): Terry and
Deme Nunley, Gayle and Harry VanVelsor and
Carolyn and Paul Chopko.
Wine Tasting
ountain Financial Associates hosted a wine tasting at Red Bank Wine on March 31. Owner Eric
Copeland introduced a wonderful variety of wines. The
company and conversation made it a lovely evening.
Port City Capital Bank (L to R): PCCB Founder
Ken Dull, Vinton Fountain, Linda O’Brien and
CEO Keith Betts.
Wine Tasting (L to R): Irene and Fred Hathaway
and Clayton and Vinton Fountain.
Wine Tasting (L to R): Tracy Brown, Ken Dull, Clayton
Fountain, Vicki Dull and Linda O’Brien.
Wine Tasting (L to R): Gayle VanVelsor, Bob
Warwick and Susan James.
Our Team:
1209 Culbreth Drive, Suite 100
Wilmington, NC 28405
Phone: (910) 256-8882
Fax: (910) 256-3688
www.fountainfinancial.net
F
Vinton E. Fountain, III
Investment Advisor
Wine Tasting (L to R): Irene and Fred Hathaway
and Clayton and Vinton Fountain.
Ashley Wall
Retirement Plan Specialist
Tracy Brown, CFP
Planning Associate
Linda O’Brien
Client Services Associate
Debbie Dyar
Client Services Associate
FFA staff (clockwise from top left):
Ashley Wall, Vinton Fountain, Debbie
Dyar, Linda O’Brien and Tracy Brown.
Securities offered through Financial Network Investment Corporation/SIPC. Fountain Financial Associates and Financial Network are not affiliated.