Investors Fare Differently in Wake of Interest Rate Hike

Thursday, February 23 at 09:30 AM
Category: Personal Finance

What does the interest rate hike mean for consumers?

Consumers have enjoyed years of record-low interest rates that provided borrowers with low repayment options on everything from cars to homes, but the Federal Reserve’s rate hike in December caused some investors to wonder how the rate increase will affect their financial portfolios.

Additionally, the central bank has indicated more rate hikes could be coming as soon as this year. If these hikes happen, rates would begin to move out of the historically low range they have been in for the past decade.

What does this mean for consumers? How will higher interest rates impact investors and consumers who have become accustomed to a low rate environment?

Consumers who have savings accounts, or who invest in certificates of deposit or money market accounts, will earn more on their cash savings. For people dependent upon investment income from these low-risk options, even a modest increase in the rate of return can make an impact.

“Many older Americans, in particular, draw income from Social Security and from the interest they earn on their retirement savings,” said Clay Nickel, director of investment strategy for Arvest Wealth Management. “As long as inflation stays in check, the possibility of a higher rate environment may be welcome news to these people.

“However, rates are likely to increase more slowly than past interest rate hiking cycles by the Federal Reserve. This means it may still be difficult to achieve longer-term financial goals through bank deposits, many of which still yield less than the inflation rate. Savers may need to look to investing in financial markets to meet longer-run objectives.”

Investors who will likely see the biggest negative effect on their money are those who have longer-dated bond holdings such as 30-year and fixed-rate bonds. Ironically, as rates go higher, the value of existing contracts decreases. While investors may not lose money per se, they will see a decline in the value of their bonds compared to what they could have earned prior to rate adjustments.

“Every portfolio is different and there are several factors to consider,” said Scott Phillips, chief investment officer for Arvest Bank. “In a rising interest rate environment, you want the maturity date of the bond to be short. The longer the maturity term, the more its value will fall.”

Phillips said selling longer-term bonds and reinvesting in shorter-term bonds puts investors in more of an offensive position and can help minimize loss for investors who may be considering selling their bonds. Investors who purchase a bond and hold it until maturity may be able to avoid any depreciation in the bond’s value, depending on where interest rates stand when the bond matures.  

Stocks, meanwhile, traditionally gain value during times of rising interest rates.

“Initially, people are fearful that rising interest rates will result in slower economic activity and that it’s not a good idea to invest in the stock market,” said Christopher Magee, senior trust investment officer for Arvest Bank. “Historically, stocks have reacted quite well after a jump in interest rates, but it’s still important for investors to be selective when purchasing stocks, as some sectors will perform better than others.

“Ultimately, every investor is unique with their own goals, timeframes, portfolio mix and risk profile. The important thing for them to know is that after 10 years in an historically low interest rate environment, the Federal Reserve has announced its belief that we will likely see rates slowly moving upward in the next year, so investors need to get with a trusted financial advisor, review their current plan and see what, if any, adjustments they need to make.” 

Tags: Financial Education, Investing, Press Release, Savings

My Money Five

Monday, January 09 at 03:25 PM
Category: Personal Finance

Making the most of your money starts with five building blocks for managing and growing your money  The My Money Five. Keep these five principles in mind as you make day-to-day decisions and plan your financial goals. 


The earn principle is about more than the amount you are paid through work. This principle is about knowing the fine print and details about your paycheck, including deductions and withholdings. To put it another way: In order to make the most of what you earn, it helps to understand your pay and benefits. Check out* actions you can take and more hints and tips to earn.
Save and invest
Saving is a key principle. People who make a habit of saving regularly, even saving small amounts, are well on their way to success. It’s important to open a bank or credit union account so it will be simple and easy for you to save regularly. Then, use your savings to plan for life events and to be ready for unplanned or emergency needs. Check out* actions you can take and more hints and tips to save and invest.    

The protect principle means taking precautions about your financial situation. It stresses the importance of accumulating savings in case of an emergency, and buying insurance. Be vigilant about identity theft, and keep aware of your credit record and credit score. Check out* actions you can take and more hints and tips to protect yourself.

The fundamental concept of spend is: make a budget or a plan for using your money wisely. It’s helpful to set short-term and long-term financial goals and manage your money to meet them. Check out* actions you can take and more hints and tips about spending.

Sometimes it’s necessary to borrow for major purchases like an education, a car, a house, or maybe even to meet unexpected expenses. Your ability to get a loan generally depends on your credit history, and that depends largely on your track record at repaying what you’ve borrowed in the past and paying your bills on time. So, be careful to keep your credit history strong. Talk to your lender to learn about other considerations that determine loan eligibility. Check out* actions you can take and more hints and tips about borrowing.

As you focus on these foundational money management elements, you’ll be better able to manage your money in both the short term and long term.
Information courtesy of*.

Links marked with * go to a third-party site not operated or endorsed by Arvest Bank, an FDIC-insured institution.

Tags: Financial Education, Investing, Lending and Financing, Savings

Why Choose a Corporate Trustee for Your Company's Retirement Plan?

Wednesday, June 15 at 07:10 AM
Category: Business Banking

As a business owner who sponsors a tax-qualified retirement plan, you know whether it's a traditional pension (defined benefit) plan or a 40l(k) or similar defined contribution plan, there are stringent rules that must be followed in order to maintain the plan's tax-deferred status.

The "master rulebook" for retirement plan sponsors to follow is the Employee Retirement Income Security Act of 1974 (ERISA). Failure to follow the requirements and standards set by ERISA may result in severe consequences. For instance, plan fiduciaries may be personally liable to reimburse any losses to the plan, or to restore any profits made through improper use of plan assets.
Plan Fiduciaries and Trustees
ERISA protects a plan from mismanagement and misuse of its assets by establishing a fiduciary relationship between the plan and anyone who exercises discretionary control or authority over plan management or assets; anyone with the discretionary authority or responsibility for management of the plan; or anyone who provides investment advice to the plan and its participants for compensation (or has the authority or responsibility to do so).
Plan fiduciaries include the plan's administrators, investment advisors and members of a plan's investment committee. Because ERISA requires the assets in a retirement plan be held in trust, a trustee of the trust is considered a fiduciary as well.
The primary responsibility of a trustee, as with any fiduciary, is to operate the plan solely in the interest of the plan participants and their beneficiaries for the exclusive purpose of providing benefits and paying plan expenses. The trustee must act prudently, using the same care and skill an expert would in similar circumstances. When it comes to investments, they are required to diversify in order to minimize losses (unless it is determined it is not prudent to do so). In addition, they can act only as directed in the retirement plan document, unless for some reason the provisions in the plan are not in compliance with ERISA. 
Every plan must have at least one "named fiduciary," who serves as the plan's administrator, and at least one trustee.
Benefits of a Corporate Trustee
Some business owners wonder whether it's necessary to employ a corporate trustee or, instead, to "self-trustee" the plan. This idea might seem appealing in instances where the trustee is not the investment advisor. To the casual observer, it might appear a corporate trustee merely serves in an administrative capacity taking in and disbursing funds and doing the record keeping involving addition and subtraction of plan participants as they come and go. Aren't these tasks easy enough for the company to take on itself, rather than going to the expense of paying a corporate trustee?
Schultz Collins Lawson Young & Chambers, Independent Investment Counsel of San Francisco, discusses this issue in an article entitled "Why Employ a Corporate Trustee?: The Costs and Benefits of Using an Institution to Trustee Your Qualified Retirement Plan." They offer several good reasons to seek the services of a corporate trustee:
  • Fiduciary responsibility, when distributed broadly over several parties, reduces the potential for conflicts of interest.
  • There is a multitude of time-consuming administrative functions that can be delegated (processing receipts and disbursements, preparing consolidated asset and income statements, filling out and filing tax returns, to name just a few).
  • A corporate trustee is "in the business" of providing trustee services, thus minimizing the possibility of mistakes and oversights that might lead to imposition of penalties or even cost the plan its tax-qualified status.
  • When plan assets are managed by a corporate trustee, participants enjoy an extra degree of protection that the assets will be used in the way they should.
Turn to Us
As you can see, there are many reasons to seek a corporate trustee, such as us, an institution with broad experience in plan administration and investment management. Please contact a local Trust Officer to discuss in more detail what our services and capabilities as a corporate trustee can offer you and your company's retirement plan.

© 2015 M.A. Co. All rights reserved.Any developments occurring after January 1, 2015, are not reflected in this article.

Tags: Arvest Biz, Business Banking, Financial Education, Investing, Retirement

Benefits of a Co-pilot in Portfolio Management

Monday, June 13 at 09:45 AM
Category: Personal Finance

Appendix removal? Use a professional every time. Root canal? Same answer. Litigation? Go with the best pro you can hire. Car repair? Hire a specialist. Invest your money? Save money by doing it yourself. Do you see any inconsistencies in this thinking?

It's true an investment advisor is going to charge a fee for services rendered. That seems to be a reasonable expectation. But, why wouldn't you be inclined to hire a professional in this case, as you would in the other examples above?
It's fairly easy to simply hold your investments, make few changes, collect the income, and distribute funds according to your financial plan. It's often sound financial advice to find some good investments and hold them for the long term. So maybe in that case, where everything is on autopilot, an investment advisor may seem unneeded.

But, as you are automatically flying along, do conditions change? Do objectives change? Does the equipment you are using need attention? Are there facts that arise you did not consider when you filed your flight plan?

You understand the need to hire a pro when it involves something you absolutely cannot do yourself. You also know you can't simply create a plan and make no changes for the rest of time.
Now, consider the possibility your results would improve with the help of an investment advisor. Consider whether the advisor might earn a fee and still return more to you than you are earning right now. Consider also the possibility the advisor will not make rapid changes but will make adjustments to your investment portfolio that make sense as times change. It might just make sense to sit down periodically with your advisor to take an independent look at the portfolio. With this outside push and evaluation, you could more likely be motivated to take a hard look at where you are now, and if that is where you want to be in the future.
Also, consider all of the time and resources the fee you pay will bring to the table. You cannot possibly duplicate the knowledge and experience of a firm of advisors who are doing investment management full time. You may read the Wall Street Journal and other financial periodicals or even have a newsletter or two you read faithfully. You may tune into your favorite cable financial show. But, does that give you a base knowledge to assist you with your financial management? Yes, it does that very thing. But, can you do better with an investment advisor who has made a career of it? Probably so. In fact, if you are a knowledgeable user of those services, the advisor will appreciate your input and the discussion about your investments will be even more productive.
There is another reason to use a professional. That is when one marriage partner has little investing experience. When one’s chances of dying or developing a serious illness is greatly increasing you want to have a trusted financial advisor in place. So, test drive an advisor before that happens.
Certainly, look around at the alternative services available. Meet with the potential advisors. See if you like their approach and relate well to what they say. Yes, you can compare costs from one to another. You can also ask to see what their past performance has been. You can even start out with a small part of your portfolio to see how it goes. 
You may find you get better results. You might have a better assurance your investments are being well taken care of. Plus, there is the added benefit of more time to enjoy the fruits of your investments and less time to spend studying, managing, changing and updating your portfolio on your own. You may not be on autopilot, but you will feel better, perhaps, having a co-pilot on board.

If you have additional questions, please feel free to contact your local Client Advisor.
© 2015 M.A. Co. All rights reserved. Any developments occurring after January l, 2015, are not reflected in this article.

Tags: Financial Education, Investing, Retirement, Savings

How and Where to Save

Monday, November 02 at 08:45 AM
Category: Personal Finance

Everyone knows they should save money to help pay for their future needs or wants, but not everyone knows the best or easiest ways to save. Here are a few ideas.

Review how and where you are saving for retirement. Options include workplace retirement plans, Individual Retirement Accounts (IRAs) offered by many banks and investment companies, and the U.S. Treasury Department's new "myRA" (myRetirement Account), which is a simple, safe, and affordable savings program to help individuals start saving for retirement. The myRA program offers a new type of Roth IRA, guaranteed by a new U.S. Savings Bond that costs nothing to open and carries no risk of losing value.
Because myRA accounts do not have minimum contribution requirements, savers can contribute the amount that best fits their budget. During the first phase of the program, myRA accounts can be funded through automatic payroll deduction. To open an account or learn more about the myRA program, including eligibility requirements, go to* or call (855) 406-6972.
Set savings goals for specific reasons. "Designating accounts that you will regularly contribute to for a particular purpose, such as for a vacation or the next holiday season, will help motivate you to meet your goals by a certain deadline," said Luke W. Reynolds, chief of the FDIC's Outreach and Program Development Section. "Some banks offer 'club' accounts that promote regular, small savings for a certain reason, but you can use regular deposits into any savings account to reach your target."
Certificates of deposit (CDs), which provide a predetermined fixed- or variable-rate interest payment for a set time period (usually three months to five years), also may be an option.
Find more money to save by cutting expenses. A great resource for ideas on how to use your money wisely is,* the U.S. government's main website about personal finances with information from more than 20 federal agencies, including the FDIC. Start at the "Spend"* page.
If you get a large, one-time "windfall," consider using some or all of it to help build your emergency savings. Start by checking whether you have enough in a federally insured deposit account to cover three to six months of essential living expenses. If you don't have that much in your "rainy day fund," consider adding funds from a tax refund, an inheritance, or other new-found money. This account may help pay for major unexpected expenses or tide you over during a disruption in your income.
For more ways to save, including ideas for keeping banking costs down, search for articles in FDIC Consumer News* and check out the FDIC's Money Smart* financial education program.
Information courtesy of FDIC Consumer News.

Links marked with * go to a third-party site not operated or endorsed by Arvest Bank.

Tags: Financial Education, Investing, Retirement

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