Client Newsletter 2Q20

Dear Ambassador Family,

I hope this letter finds you well during these difficult times.

This isn’t the spring we were all looking forward to, but we are thankful that Washington is trying to manage the spread of COVID-19. We look forward to the next several weeks and months as this crisis begins to subside and we can all get back to our normal daily lives.


What Is the New Normal?

Our lives have changed dramatically over the last few weeks.

This invisible enemy has altered our travel plans, work schedules, and daily life routines. Not only as individuals but as a company, we at Ambassador Wealth Management, LLC are adjusting the way we operate.

We have made adjustments to how we invest your money and help you plan for the future.

One example: we are scheduling phone reviews rather than meeting in person. Utilizing technology allows us to keep meeting with you while keeping everyone safe.


Consumer Spending & its Impact on the Economy

We do not anticipate life returning to what it was two months ago for the foreseeable future. The places we used to eat at, visit, and enjoy with loved ones might not be as prevalent in our lives when this is all over.

To prepare for this new economy, we are looking ahead and shifting towards companies that will benefit this new way of doing business, at least for now. For example, instead of holding stock in airline companies, we have built positions in companies that sell essential goods.


Important Update on RMD’s for 2020

Due to the CARES Act, TD Ameritrade has automatically canceled Required Minimum Distributions. This does not mean you will stop receiving distributions.  Rather, any distribution you take is not technically an RMD.

If you:

  1. Don’t need that money
  2. Don’t want to pay tax on that money
  3. Want to change your distribution amount and/or frequency
  4. Want to convert your RMD to a Roth account

Please let us know if you would like to reverse or completely stop your RMD. If you want to proceed, please let us know and we will look into your specific situation.

Please also note that:

  1. If you already took your RMD, we can roll it back within 60 days of the distribution
  2. These exceptions DO NOT apply to Beneficiary IRAs


Dividends and Sustainability

We had considered companies’ guidance (predictions) in our decision making. Now, large corporations have admitted that their guidance going forward is not reliable. Others have started to withdraw their guidance altogether due to there being so much economic uncertainty

We are carefully monitoring your portfolios for potential vulnerabilities.  Even in spite of the recent recovery in the market, we have chosen to err on the side of conservatism at this time. We are willing to forgo further modest market upside of 5% or so in exchange for protection against the risk of a decline of -20% or more.  Economic weakness, political uncertainty, and expensive valuations in many cases give us continued caution near term.  Continued low-interest rates and eventual recovery next year lead us to be more constructive on a strategic view, but not now.

We are also monitoring the direction of earnings, dividend payments, and how that can potentially impact families who heavily rely on dividends as a source of income.


Earnings for 2020 and Beyond

As we look ahead for the rest of 2020 and even the next several years, we believe this pandemic will drastically reduce earnings across all industries.

Our research suggests it might take up to two years to return to pre-pandemic earnings, assuming that there is no relapse or additional economic deterioration.


First Quarter 2020 in Review

Financial Planning

I started 2020 with a letter of encouragement to you. To know where you stand so that when the unexpected happens, you are prepared. Some of you took my advice and are reaping the benefits of having a thoughtful plan.

Amidst the havoc and uncertainty, many of you have peace of mind, confidence, and freedom in knowing that you were proactively planning and taking care of your financial health.


2020 RMD Questions

Q. Can I do a partial Roth IRA conversion in 2020 without taking my 2020 RMD first?
A. Yes. The CARES Act RMD waiver makes this possible in 2020.

Q. I already took part or all of my RMD for 2020, am I allowed to roll back or “undo” this distribution?
A. Because of the CARES Act RMD waiver, the distribution(s) you received was not technically an RMD. It can be rolled over assuming:

      1. The RMD was taken between February 1st and May 15th.
      2. This is the only rollover of its kind in the last 12 mo.

If your situation meets to criteria, you have until July 15th to roll your RMD.

***Please know that new rules, requirements, exceptions, and specifications are changing almost daily.



Over the last three months, I have been constantly communicating with you. If you have not already done so, please take the time to read through my updates.


In all of these updates, I have encouraged you not to panic.

Those who have panicked have already hurt the success of their retirements. Their portfolios might not appear as “red” with declining stocks, but they are missing some of the best opportunities for big positive returns. In my experience, once an investor goes out of the market because of fear, it’s hard to go back in. Emotions tend to control logic.

Families with strategic discipline have the potential of benefiting where others might panic.


Tax Planning

The last bull market caused problems for investors who are in high tax brackets by generating Large Capital Gains.

The recent market volatility has provided some rare opportunities to help manage taxes more efficiently. We have been taking gains and offsetting them with more recent losses and trying to create a tax neutral environment.

This has also been a good opportunity to review current investment holdings and when appropriate, swap them for higher quality and greater diversification. (In some cases, we have shifted from individual stocks to baskets of stock for greater diversity.)

Washington DC is continuing to produce further opportunities to help some of you with taxes in 2020. Congress has eliminated RMD’s for the year. The stimulus bill also raises limits on qualified charitable deductions.


Portfolio Management

Our goal has been to avoid unnecessary risk through prudent diversification. You own stocks, fixed income, and alternatives such as gold. Since 2018, we have been reducing many areas that were exposed to credit risk.

Specifically, we began reducing small-cap, international, and high yield debt from many portfolios over a year ago. We also eliminated dedicated REIT exposure for clients without the need for high income. This year, we sold small-cap, high yield, and emerging markets in favor of gold and large-cap domestic equities.

Your investment portfolios reflect your family’s risks, objectives, income needs, and time horizon based on our conversations with each of you.

Recently, we have started to make selective additions to your investment portfolios. Many of you will recognize a new investment in one of the largest consumer goods companies in the world. It has paid a consistent and meaningful dividend and appears to be able to grow even when the economy remains sluggish.


Watch Out for Scams!

Due to recent events, the Department of Business Oversight (DBO) warns consumers and investors to be aware of scams and unlawful activity in the investment and other financial service industries.

Deed-Transferring to Third Party

Scammers are telling homeowners that if they transfer their deed to a 3rd party, they will no longer have to make mortgage payments. This is NOT true.

Intentional Default

The terms and standards for loan modification can only be determined by the mortgage company. Always contact your mortgage servicer directly. Before deciding to default, remember modification might not work for all. Be careful!

Advance Fee Scams

Do NOT pay anyone asking for upfront/advance fees for loan modification services or mortgage forbearance services.

Pension Advance Scams

Scammers suggest investors turn over future pension payments in exchange for an immediate lump sum cash payment.

Check before you invest and protect yourself. Never invest in or agree to something you don’t fully understand.


Going Forward: What We Are Doing 2Q20

  1. Carefully investing in quality companies that will weather the recession and continue to find a way to innovate and grow their revenue. We also will be focusing on companies with sustainable dividends to minimize the risk to your income.
  2. As we brace and position ourselves for a new way of thinking, way of life, and economy, we will be looking for opportunities.
  3. We are encouraging all of you who have not developed a plan, or have not reviewed it in a long time, to please be proactive. Now is the time to invest in yourself to make sure that your holistic financial picture (not only what we manage) encompasses your goals and dreams.


What Should You Be Doing?

  1. Don’t panic – it’s so important to stay calm and collected during these uncertain times. Let logic lead your decisions. Talk to us if you are struggling to understand where you are at.
  2. Have a plan – It’s never too late to start planning. If you already have a plan, it’s time to review it and make sure it still aligns with your family’s needs and goals.
  3. Look for opportunities – I encourage you to shift your thinking from worry and fear into optimism. Let this pandemic be your chance to look for opportunities.


We appreciate your trust in us as we partner with you on your financial journey. Thank you for being part of our family.

As things change in your life, please stay in touch with us so we can continue to make decisions that are best for you and your family.



Petr Burunov, CFP®
President / Wealth Strategist

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