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First Horizon to be Acquired by TD Bank Group

First Horizon president and CEO Bryan Jordan (Credit; First Horizon Corporation)

One of the region’s biggest financial institutions is about to be under new leadership. Earlier today, First Horizon Corporation announced that it is set to be acquired by Toronto-Dominion Bank and its subsidiaries (TD Bank Group). The all-cash transaction is valued at US $13.4 billion.

“First Horizon is a great bank and a terrific strategic fit for TD. It provides TD with immediate presence and scale in highly attractive adjacent markets in the U.S. with significant opportunity for future growth across the Southeast,” said Bharat Masrani, group president and CEO of TD. “Working with the First Horizon team, TD will build upon the success of its strong franchise and deliver the legendary customer experiences that differentiate us in every market across our footprint.”

As of December 31, 2021, First Horizon boasted 412 branches across 12 states and assets totaling $89.1 billion. Meanwhile, TD is the fifth largest bank in North America and serves more than 26 million customers. As of October 31, 2021, TD reported overall CDN$1.7 trillion in assets.

The transaction will turn TD into a top 6 U.S. bank, with about $614 billion in assets and a network of 1,560 stores across 22 states. According to TD, there are no plans to shut down any First Horizon branches in connection to the transaction. Upon closing, TD will also make a $40 million donation to the First Horizon Foundation.

First Horizon president and CEO Bryan Jordan will join TD as vice chair, TD Bank Group.

“We have built a very strong business at First Horizon, and by joining forces with TD, we will create extraordinary value for our key stakeholders with a shared customer-centric strategy, enhanced scale and a broader product set for our clients. This is a true growth story,” said Jordan. “We have long respected TD as a leader in U.S. banking and are confident that its continued and growing investments in our local markets will extend our long history of community support. Thank you to our First Horizon associates for their efforts and dedication to our clients and communities as we continue to deliver for them every day. We look forward to successfully completing this transaction and are excited to join TD.”

The deal is expected to close in the first quarter of TD’s 2023 fiscal year.

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New Year, New Budget

Invest in 2022. (Photo: Visual Stories || Micheile | Unsplash)

This time of year is always busy with new beginnings and new ideas. Resolutions sometimes stick but always give a good chance to think about the future. Here are three ideas for 2022 to help keep your finances running smoothly.

Watch out for cash.

With 2021’s inflation uptick and the low interest rates in bank accounts and CDs, there’s almost never been a worse time to hold cash. A cash position is losing 5-6 percent of purchasing power every year at this rate, so stashing cash isn’t as defensive as it might seem. While the stock market might seem due for a correction (and in fact one might be right around the corner), putting money in a diversified portfolio is still the best way to fight inflation and hopefully achieve some real returns.

If you have a specific need for cash soon, like an upcoming down payment or college expense, it can make sense to hold cash. However, if you’re holding cash just because you’re hesitant about uncertainty with no specific spending needs in the near future, you probably should consider putting that money to work. Big cash positions are eroded by inflation and can’t enjoy the long-term power of compounding.

Be skeptical.
I enjoy a good conspiracy theory, but I work hard to differentiate what might be possible from what might be probable. In the last year, I’ve seen an unprecedented number of people make major life decisions (financial and otherwise) on what I might charitably call questionable theories. Keep in mind that the modern information industry is extremely good at getting us hooked on information that connects with our biases and fears. Increasingly, the selective presentation of facts can appeal to our worst instincts.

Yes, our national discourse and politics seem unusually polarized right now. However, there are countless things that are going very right in our world. Markets move up and down and politicians come and go, and staying the course in a diversified portfolio is the best way to navigate toward a secure financial future.

Think about spending.
Markets are uncertain and always seem the most uncertain now. In retrospect, everything has always worked out okay in the past, but will this time be different? As investment professionals, we spend a lot of time and effort building the best portfolios we can for our investors, but we don’t know the future, either.

If you’re concerned about the future, the one thing you have absolute control over is to spend less. If you’re really concerned about the future, spend a lot less! This has two powerful effects. For one, less spending allows you to more quickly build up savings and investments, which give a margin of safety for future needs. Building a fulfilling life with less spending means in the worst case you can be more resilient to a job loss, unexpected health event, or other financial shock. In the best case, it means you can retire or downshift your career sooner than you planned. Investments are just one small part of a successful financial plan, and spending discipline can have a much more dramatic effect on your future than any other factor.

Gene Gard is Chief Investment Officer at Telarray, a Memphis-based wealth management firm that helps families navigate investment, tax, estate, and retirement decisions. Ask him your question at
ggard@telarrayadvisors.com or sign up for the next free online seminar on the Events tab at telarrayadvisors.com.

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Paying Off Debt: When Should I Pay What?

Towfiqu Barbhuiya | Unsplash

Q: I have debt I want to pay off, but I also want to start investing to enjoy the value of compounding. How should I think about household debt?

A: It’s probably never truly wrong to pay it off, but sometimes a little debt might not be a bad idea.

Let’s start with the easy part. Some types of debt should be attacked mercilessly with singular focus and attention until it’s gone. This would include any kind of payday loan, credit card debt, predatory car loans, or anything with a high interest rate. To me, a high interest rate is anything above what a reasonable investment portfolio could hope to produce on average in the future. Over the last 20 years, U.S. stock market returns have annualized about 10 percent a year and are unlikely to exceed that going forward, so any 10%+ interest rate should certainly be considered high these days and attacked with all available resources.

What about loans with lower interest rates? There’s still a good case to be made for paying them off as soon as possible. Even 0 percent interest sounds like a great deal, but it’s still money spent that you didn’t have at the time, and those payments impact your future financial security and flexibility until they’re gone.

There’s a lot of debate about what defines good debt. The most common example is a mortgage, as it represents a hybrid of paying for shelter and investment in the future. Real estate has made many people wealthy over the years, but not without risk. It’s hard to make big returns in real estate without borrowing, which works great most of the time, but can also go wrong, as we saw leading up to 2008. I believe in buying a house because you need a place to live, not as a speculative investment. Enjoy any appreciation, but don’t expect it and certainly don’t rely on it. A mortgage is usually the lowest-priority debt to pay off in a given household.

A case can be made against almost all other kinds of household debt. The problem is that virtually all household borrowing is financing consumption of things that are currently unaffordable. Some things might be necessary, like a reliable car, but a lot of unnecessary money is spent and justified in the name of reliable transportation. Generally, consumer loans like these should be minimized and paid off as soon as possible.

Student loans are a tricky subject, because right now, many people are expecting eventual forgiveness from the government. Forgiveness might come, or might not. Regardless of your expectations, it’s probably wise to avoid taking advantage of any kind of deferment where payments stop but interest continues to accrue.If possible, make payments so that the balance declines each month.

Credit scores are also tricky. On one hand, a decent credit score is necessary for basic tasks like renting apartments or opening bank accounts. On the other, I’ve seen many financially destructive things done in the name of establishing credit or building credit history. In my experience, credit history will naturally build up over time with things like car loans and a credit card with reasonable limits. There’s no reason to focus on gaming your score.

For some debt, it might make sense to keep the low-interest debt and invest any extra money in the markets. Keep in mind that we may not get another 20 years of 10 percent stock market returns, but there’s a good chance the market will outperform a 2.5 percent mortgage in the long term. Investing in things like 401(k) plans with an employer match should probably be prioritized even above paying off non-mortgage, low-interest debt. Ask your financial advisor about both opportunities and risks in your particular situation. It’s important to look at the big picture.

Many lives have been ruined by overwhelming debt, while I’ve never heard anyone complain about being debt-free, even if it’s not optimal. If in doubt, it’s probably never completely wrong to just pay your debts off if you can.

Have a question or topic you’d like to see covered in this column? Contact the author at ggard@telarrayadvisors.com. Gene Gard is Co-Chief-Investment Officer at Telarray, a Memphis-based wealth management firm that helps families navigate investment, tax, estate, and retirement decisions.

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PayPal Brings Crypto to the Masses

Photo by Bitcoin BCH

Last month, PayPal announced that its users would be able to buy, sell, and hold four prominent cryptocurrencies – Bitcoin, Ethereum, Bitcoin Cash, and Litecoin – via Paypal.com. Through its website, users will be able to buy and manage their cryptocurrency in one place.

Globally cryptocurrency has quickly been growing in popularity as an alternative form of currency since its inception in 2009. Cryptocurrency, as the name implies, is a digital form of currency that is meant to take the place of, and function as, a real form of currency. Unlike traditional forms of currency, nothing physical exchanges hands, and its value is not backed by a bank in the same way most modern currencies are. Instead, users hold their “currency” in digital wallets and make all their transactions digitally, with the vast majority of cryptocurrency being backed by their communities.

The “currency” in cryptocurrency, usually referred to as tokens, is a unique string of numbers and letters that is tied to the specific cryptocurrency being used. While in a traditional transaction users would exchange money, cryptocurrency users exchange tokens. When users trade tokens, the transaction is sent to a continuously growing list of transactions called a blockchain. The transactions added to the blockchain are then verified by users through a process called mining. Users’ work for mining does not go unrewarded and the “miners” are rewarded in tokens for each successful transaction that they verify.

Buying is as simple as a few button clicks.

Due to the various steps and knowledge needed to jump into the cryptocurrency world crypto had long been pursued by few. As the popularity of cryptocurrency began to grow in early 2018 websites began popping up advertising easy ways to buy and sell crypto but PayPal is one of the largest and most recognizable names to join the cryptocurrency wave.

I tested out PayPal’s new crypto service, throwing in $10 for the opportunity to play around with buying and selling. For someone that has never bought cryptocurrency, the entire process was quick and easy. Within minutes I was the proud owner of $10 worth of Bitcoin and Ethereum.

The Crypto screen gives an accurate representation of the market trends for PayPal crypto partners.

After setting up my account, I was presented with a screen showing my present balance, as well as guides explaining the ins and outs of crypto. For someone less familiar with the technical aspects, the guides were helpful and gave me a better understanding of where my $10 had gone. They also assured me that the prices would rise and fall naturally depending on the current exchange rate of my specific currency.

The move to PayPal has made breaking into the cryptocurrency sphere a reality for the average person. It’s cool and an easy process, and PayPal recommends investing just a dollar to play around with it before making more rash decisions. Though it may not be the most feasible way to diversify your assets, PayPal’s expansion into the crypto market is a great way for the average person to jump into the world of cryptocurrency.

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When Should You Take Social Security?

As we head into the last stretch of summer, my thoughts go to my favorite part of August — my birthday! This year, I will be one year away from my ability to start drawing my Social Security benefit, albeit reduced since I would be starting at the earliest age of 62. And so I will begin the decision-making process: Should I draw, or do I wait?

Let’s start with a quick synopsis of Social Security. If you have earned income, you pay a percentage of that income into the Social Security system. The amount that you contribute over time will dictate what your monthly benefit will be when you begin receiving payments. Your primary insurance amount (PIA) is the benefit you will receive if you begin benefits at your normal retirement date (also known as your full retirement age, or FRA).

Kathy Williams

Let’s pretend I was born in 1960. Currently, if you were born in 1960 or later, your FRA is 67. What if I want to start receiving my benefits as early as possible, which is at the age of 62? Since this is five years prior to my FRA, Social Security will reduce my benefits a little for each month that I begin receiving benefits before age 67. Why? Because they will be paying me a benefit for a longer period of time than if I waited until my full retirement age of 67. A five-year (60-month) reduction is 30 percent of FRA. If my age 67 benefit is $1,000 per month, my age 62 benefit will drop by 30 percent to $700 per month. Except for certain circumstances, this is a permanent reduction in my benefit. Yikes!

What if I want to get a bigger Social Security benefit? Maybe my handsome husband is rich and I don’t need to begin taking benefits until later. Well, Social Security has a plan for that, too. For each year that I defer taking my benefit past my FRA of 67 up to age 70, I will get an 8 percent increase in my monthly check, guaranteed! This would amount to a 24 percent bump, which is a fun benefit … if I live that long. Of course, I can start any time during that three-year period and still get the raise for the months I defer.

Here is the easy math: If I begin my benefit at FRA of 67, I will get $1,000 per month. If I begin my benefit at age 62, I will get $700 per month. And if I begin my benefit at age 70, I will get $1,240 per month. How do I know which door I should choose? The only way I can give you a definitive answer is if I know exactly when I am going to die. That makes the math very easy. Other than that, my life and lifestyle will hopefully give me enough clues to make an educated decision. Here are some things I will consider:

How much money do I have saved?

How much money do I spend?

How much money should I spend?

What other income will I have during retirement?

Am I married?

Am I divorced?

Am I still working?

How’s my health?

The answers to these questions will help steer me to the optimal option available for my circumstances. I shouldn’t assume that starting at age 62 always makes the most sense “before Social Security runs out of money.” Nor should I assume that waiting to the age of 70 will always make the most sense. I would recommend consulting with my personal wealth strategist (me) to help devise my plan, and would advise you to do the same.

Kathy Williams, CFP, CDFA, is Principal and Senior Wealth Strategist at Waddell & Associates. She can be reached at kathy@waddellandassociates.com.