What Florida Trustees Need to Know About Interest Rates & Janet Yellen
If you are a Florida trustee of a Palm Beach trust, how are you investing your Trust Money or protecting your trust portfolio in light of Wednesday’s Federal Reserve meeting and Fed Chairman Janet Yellen’s first news conference? If you think that a Palm Beach trustee does not need to know about interest rates & Fed policy, think again. Here are some things you want to consider RIGHT NOW for your Palm Beach trusts.
Palm Beach trustees have FIDUCIARY DUTIES : legal obligations to serve your Florida trust beneficiaries. After all, Palm Beach trust beneficiaries have rights, too, and you agreed to respect them when you consented to serve as a Palm Beach Trustee. We also know that under Florida Trust law, you have to be a “prudent” investor of trust funds.
So, why am I so interested in Federal Reserve Chairwoman Janet Yellen and the direction of interest rates? Because they affect your Palm Beach Trust and your Palm Beach trust investment portfolio, even if you are holding cash. (Especially if you are holding cash).
Yesterday’s Wall Street Journal, www.wsj.com, lead with an article on the new Fed Chairwoman and how US markets were “rattled” this Wednesday. Here’s the link: http://online.wsj.com/news/articles/SB10001424052702303802104579449321003326880?KEYWORDS=yellen&mg=reno64-wsj
Short term interest rates are set to rise beginning about a year from now: in 2015. Not a huge surprise, but…..what are you, a Palm Beach Trustee, doing about it?
Q: How are you protecting your Trust portfolio?
Here are 5 things which you want to talk to your Florida Co-Trustee, investment agent, or money manager about:
- What effect will rising interest rates have on the Palm Beach Trust investments? (How do I invest TRUST MONEY in a potentially rising interest rate environment ?)
- How can I , as a Florida Trustee, protect the Florida Trust in a(n) (anticipated) rising interest rate environment ?
- Are there assets which I should invest in if I believe that interest rates are going to increase ? (Put another way: WHAT assets should I invest the Florida trust in NOW if interest rates are going up in the near future ?)
- What possible downside is there to the trust portfolio if interest rates rise ?
- Basically/summarily: what can I do now to help the trust portfolio deal with anticipated rising interest rates? (Remember: Florida trust law says that you need an “investment strategy.” What’s yours ?)
Florida Trustees know that you, as a trustee, must be PRUDENT. You have to comply with the Florida Trust Code and Florida’s Prudent Investor Rule (Act) which is found in Chapter 518 of Florida Statutes.
Perfection is not required but you need to at least:
- ask these questions,
- recognize the issues,
- analzye the issues and
- take action, including staying put (Remember: for good or for ill, in-action (non-action) is an action in trust investing: it’s an affirmative decision to hold or stay put, forsaking alternatives. )
Finally, congrats to all the Palm Beach trustees who purchased financial stocks like big banks over the recent past: you got a great day on Wall Street yesterday as the big banks passed the “stress tests”. …….Big gains for the likes of Wells Fargo, JP Morgan (which traded above the important $60 price), and Bank of America, all of which, I own and have been buying aggressively since last July at much lower prices.