Clubs are an education vehicle, not for saving
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In another thread, (http://www.bivio.com/club_cafe/mail-thread?p=225134000003) relating on how to handle the death of a partner, a comment was made suggesting that club's should only hold enough assets to learn rather than actually save. The club I'm in was formed in 1990 and quite frankly we never leave the room with cash on the table. We've been invested only in growth stocks for more than 25 years. It's been a fruitful learning experience but also profitable. I'm wondering if others in clubs with longer histories encourage partners to withdraw assets and discourage partners from using the club as a savings vehicle? Hi Scott
I own a business. If you do not make a profit you soon will be out of business.
I think a lot of clubs disband because no one wants to contribute to a losing cause.
Education in investing is good, but sooner or later how much education do you need.
Our club would never agree with her. Our club is 20 years in business.
The IRS claims we are a business.
Wish you well
Frank
From: "Scott Freeman" <scottbefreeman@gmail.com>
To: "club cafe" <club_cafe@bivio.com> Sent: Wednesday, January 11, 2017 10:25:34 AM Subject: [club_cafe] Clubs are an education vehicle, not for saving (http://www.bivio.com/club_cafe/mail-thread?p=225134000003) relating on how to handle the death of a partner, a comment was made suggesting that club's should only hold enough assets to learn rather than actually save. The club I'm in was formed in 1990 and quite frankly we never leave the room with cash on the table. We've been invested only in growth stocks for more than 25 years. It's been a fruitful learning experience but also profitable. encourage partners to withdraw assets and discourage partners from using the club as a savings vehicle? I agree with both of the comments. We definitely have an education component to our club and we have certainly always taught that the money in the club is at risk but it is most definitely a savings vehicle for many if not all of our members. We are always striving to make a profit and improve our members positions within the club. Andy On Wed, Jan 11, 2017 at 8:38 AM <Jednotakid@comcast.net> wrote:
-- Andy Do you ever ask that members withdraw assets to keep them from having too much at risk? s No. Why would you think that their investment club assets are any more at risk than their other investments? It's up to each member to determine how much they want to keep in the club. If they think they have too much in the club, they can always take a partial withdrawal. Ira Smilovitz On Wed, Jan 11, 2017 at 10:52 AM, Scott Freeman <scottbefreeman@gmail.com> wrote: Do you ever ask that members withdraw assets to keep them Continuing on... the only time we as a club would ever ask a member to withdraw some of their investment is a reason peculiar to NJ. If a club in NJ gets too large (asset value), it becomes subject to a $150/member/year Partnership Filing Fee. If our club were approaching that size, we would probably force all members to withdraw a portion of their investment to lower the total club value. Ira Smilovitz On Wed, Jan 11, 2017 at 10:54 AM, ira smilovitz <ira.smilovitz@gmail.com> wrote:
Well the exact comment from Lynn M. Ostrem (garbagecop@gmail.com) was: For 2 decades, I've preached that clubs are an education vehicle, not a retirement savings account. It's meant to be a place to learn how to invest for your future. But when member accounts grow to the point where people feed the need to "protect" them, I think it's time to take a distribution. Maybe Lynn will see the post and clarify. Scott Interesting discussion. We have asked members to take a small distribution once since 1998 when their share approached 20%. Ourbylaws prohibit any one member from owning more than that amount. See real members have taken partial withdrawals for unexpected expensive reasons like health care costs. Otherwise we invest in growth stocks and have some sort of education segment like reading a book together or going to seminars. Education is key, but nothing is more fun than making 800% getting in on a winner at the start of its run! Peg Wentworth, Women's Investment Network On Wednesday, January 11, 2017, Scott Freeman <scottbefreeman@gmail.com> wrote: Well the exact comment from Lynn M. Ostrem We do have in out partnership agreement that if one member has more than a certain percentage of the total assets the shoud reduce their holdings. This may help. On Jan 11, 2017 11:02 AM, "Scott Freeman" <scottbefreeman@gmail.com> wrote: Well the exact comment from Lynn M. Ostrem Unless you have a voting mechanism that allows members more votes based on percentage owned, what is the reasoning behind the 20% cap? We don't have this provision in our club because every member has exactly one vote regardless of percentage owned. Just curious. Andy On Wed, Jan 11, 2017 at 9:41 AM Eric Swift <swift.eric@gmail.com> wrote:
-- Andy This 20% maximum was suggested by NAIC in sample bylaws. We do have one vote per member regardless of percent ownership. One thought is that a longtime member could have a large enough share that their total withdrawal would be a big blow and cause a major disruption. We are actually discussing bylaws at tonight's meeting. Will bring up this point in discussions. Plan to share some comments on paying out deceased members. On Wednesday, January 11, 2017, Andy Butler <abutler911@gmail.com> wrote:
We had the same question in one of my clubs and came up with the same reason as Margaret stated ("equal voting" clubs). But we came up with a reason to not enforce it. For no reason other than we had two partners bypass the 20% on due to longevity, withdrawal of a portion would require them to take the money and pay taxes earlier than they had planned. Because of the latter, we voted to suspend that provision (and later voted to delete it). Weigh what is important to the entire club, as both views seem valid to me. Thank you, Roy Chastain "The single biggest problem in communication is the illusion that it has taken place." George Bernard Shaw
Yes, I'm watching and reading and would be happy to respond. In context, we were discussing the death of a member and what to do with the money. People have brought up trusts and beneficiaries and, in past discussions, we've heard about lots of different ways to circumvent and/or delay the inevitable. What I wanted to convey was that most people who set up an investment club are not aware it can be very complex. Too complex for most of us who are not business majors. For THAT reason, we need to keep things as simple as possible at the club level. I was an NAIC chapter director at one time. I worked with clubs issues for many years, and I saw kind-hearted members try to do things that accommodated one or two members, rather than making the best interest of ALL members the priority. In the original post, Gary's club wanted to help this poor lady who lost her husband. If his club account was the only item to go into probate, it would no doubt complicate her life, and possibly hold up her financial support. Sad as that may be, it simply cannot become the club's problem due to the complexity of death taxes. The NAIC founders always said the #1 reason for the club was "to pool our time and talent to learn to invest in good quality growth stocks." And these guys had a million dollar club! So, my point was, if you look at the situation Gary's club is facing, and you consider how you would want it handled if it were your spouse, you might not want to use the investment club as your retirement account. Especially if it could adversely affect your loved ones due to probate issues. That's all I meant. I firmly believe that the club is an education vehicle. I faithfully pay my dues and contribute to the benefit of the club by continuing to learn and share. But if I have any extra $50 or $100, I'm going to put that money into my personal retirement account and use the education I've learned to grow my own nest egg. And that's what I've taught my club members to do. Our beloved Ellis Traub used to say it wasn't the amount of money in the club account. It was how well you invested what you had. You may not agree, but I know many do. I have seen young, inexperienced kids start clubs with $10 or $20 per month and make the club their only savings vehicle while they are learning. That's great! But I've also seen adults make their club account their only savings vehicle and let everyone else in the club grow it for them. I'm only saying, if you accumulate enough money in your club account that you are worried about trusts and beneficiaries, consider moving some of it to a personal account and continue to invest alongside the club. Or, speak to an estate attorney to find out how to classify your partnership. Just don't put the onus on the club, I hope that clarifies. Lynn O. Lynn M. Ostrem Resource Management Group, Inc. 171 Rickard Road On Wed, Jan 11, 2017 at 10:25 AM, Margaret Wentworth <pegwentworth@gmail.com> wrote: Interesting discussion. We have asked members to take a small distribution once since 1998 when their share approached 20%. Ourbylaws prohibit any one member from owning more than that amount. See real members have taken partial withdrawals for unexpected expensive reasons like health care costs. Otherwise we invest in growth stocks and have some sort of education segment like reading a book together or going to seminars. Education is key, but nothing is more fun than making 800% getting in on a winner at the start of its run! I'm really sorry, as I said I was not going to use or recommend using this vehicle for club advice, but I too have watched the responses generated by my original question. A member recently passed away, and we are going to payout -First of all, our agreement calls for either a payout of a members request as either stock or cash (with the definition of "cash" simply meaning a check), as stated above. Again, someone did not read or understand the question.
-Also, there were statements made in various posts : "Gary's club wanted to help this poor lady who lost her husband." "possibly hold up her financial support", "too complex for us that are not business majors" "Only hold enough to learn", "When an account
grows to a point where people feel the need to protect them, take a distribution"
*First of all, the club did not need to "help this poor lady". Please google "How to avoid probate". There are many ways, such as account titles and ownership, that avoid the time consuming and costly process of probate. This lady has more than
enough financial support. It appears that this might be the only asset that may need to go through probate. No deception or evasion of any responsibility was ever mentioned or intended . I was simply asking how other club's have handled this.
*Our club has been in existence in excess of 30 years. I can assure you that many of the club participants were not "business majors", yet amazingly understood how to run a business or make wise investments. Withdrawals over the years have started
businesses, helped pay for houses, weddings and vacations. And yes, we do have a limit on how much a partner's ownership of assets can be of the total value of the club.
*I would also say that "protection of one's investment" should very much be part of the education provided by being in a club. This should have nothing to do with the amount of your investment. It should be part of the education from the first deposit
the member makes.
It appears to me that 1-2 people on this "thread" still continue to make assumptions and dispense opinions that seem to belittle others. I enjoyed most of the other questions, comments, and experiences concerning my original post, but have to say I do
still take issue with a couple.
---There, done with my rant!
From: club_cafe@bivio.com <club_cafe@bivio.com> on behalf of Lynn Ostrem <garbagecop@gmail.com>
Sent: Wednesday, January 11, 2017 11:13 AM To: The Club Cafe Subject: Re: [club_cafe] Clubs are an education vehicle, not for saving Yes, I'm watching and reading and would be happy to respond.
In context, we were discussing the death of a member and what to do with the money. People have brought up trusts and beneficiaries and, in past discussions, we've heard about lots of different ways to circumvent and/or delay the inevitable.
What I wanted to convey was that most people who set up an investment club are not aware it can be very complex. Too complex for most of us who are not business majors. For THAT reason, we need to keep things as simple as possible at the club level.
I was an NAIC chapter director at one time. I worked with clubs issues for many years, and I saw kind-hearted members try to do things that accommodated one or two members, rather than making the best interest of ALL
members the priority. In the original post, Gary's club wanted to help this poor lady who lost her husband. If his club account was the only item to go into probate, it would no doubt complicate her life, and possibly hold up her financial support. Sad
as that may be, it simply cannot become the club's problem due to the complexity of death taxes.
The NAIC founders always said the #1 reason for the club was "to pool our time and talent to learn to invest in good quality growth stocks." And these guys had a million dollar club! So, my point was, if you look
at the situation Gary's club is facing, and you consider how you would want it handled if it were your spouse, you might not want to use the investment club as your retirement account. Especially if it could adversely affect your loved ones due to probate
issues. That's all I meant.
I firmly believe that the club is an education vehicle. I faithfully pay my dues and contribute to the benefit of the club by continuing to learn and share. But if I have any extra $50 or $100, I'm going to put that money into my personal retirement account
and use the education I've learned to grow my own nest egg. And that's what I've taught my club members to do. Our beloved Ellis
Traub used to say it wasn't the amount of money in the club account. It was how well you invested what you had. You may not agree, but I know many do.
I have seen young, inexperienced kids start clubs with $10 or $20 per month and make the club their only savings vehicle while they are learning. That's great! But I've also seen adults make their club account their only savings vehicle and let everyone
else in the club grow it for them.
I'm only saying, if you accumulate enough money in your club account that you are worried about trusts and beneficiaries, consider moving some of it to a personal account and continue to invest alongside the club. Or, speak to an estate attorney to find
out how to classify your partnership. Just don't put the onus on the club,
I hope that clarifies.
Lynn O.
Lynn M. Ostrem
Resource Management Group, Inc. 171 Rickard Road On Wed, Jan 11, 2017 at 10:25 AM, Margaret Wentworth
<pegwentworth@gmail.com> wrote:
Interesting discussion. We have asked members to take a small distribution once since 1998 when their share approached 20%. Ourbylaws prohibit any one member from owning more than that amount. See real members have taken partial withdrawals for unexpected expensive reasons like health care costs. Otherwise we invest in growth stocks and have some sort of education segment like reading a book together or going to seminars. Education is key, but nothing is more fun than making 800% getting in on a winner at the start of its run! When a member reaches 20% in our club, they stop paying monthly dues - they remain active, voting members - and restart monthly dues when they fall below 20%. It encourages us to bring in new members and have current members increase their monthly dues when this happens to help distribute member ownership more evenly. We do not want members who reach 20% to withdraw any funds as that impacts all members and our portfolio. On Wed, Jan 11, 2017 at 12:04 PM, Roy Chastain <roy12@me.com> wrote: > We had the same question in one of my clubs and came up with the same reason > as Margaret stated (“equal voting” clubs). But we came up with a reason to > not enforce it. For no reason other than we had two partners bypass the 20% > on due to longevity, withdrawal of a portion would require them to take the > money and pay taxes earlier than they had planned. Because of the latter, > we voted to suspend that provision (and later voted to delete it). Weigh > what is important to the entire club, as both views seem valid to me. > > Thank you, > Roy Chastain > “The single biggest problem in communication is the illusion that it has > taken place.” George Bernard Shaw > > > > > On Jan 11, 2017, at 8:51 AM, Margaret Wentworth <pegwentworth@gmail.com> > wrote: > > This 20% maximum was suggested by NAIC in sample bylaws. We do have one vote > per member regardless of percent ownership. One thought is that a longtime > member could have a large enough share that their total withdrawal would be > a big blow and cause a major disruption. > We are actually discussing bylaws at tonight's meeting. Will bring up this > point in discussions. Plan to share some comments on paying out deceased > members. > > On Wednesday, January 11, 2017, Andy Butler <abutler911@gmail.com> wrote: >> >> Unless you have a voting mechanism that allows members more votes based on >> percentage owned, what is the reasoning behind the 20% cap? We don't have >> this provision in our club because every member has exactly one vote >> regardless of percentage owned. Just curious. >> >> Andy >> >> >> >> On Wed, Jan 11, 2017 at 9:41 AM Eric Swift <swift.eric@gmail.com> wrote: >>> >>> We do have in out partnership agreement that if one member has more than >>> a certain percentage of the total assets the shoud reduce their holdings. >>> This may help. >>> >>> On Jan 11, 2017 11:02 AM, "Scott Freeman" <scottbefreeman@gmail.com> >>> wrote: >>>> >>>> Well the exact comment from Lynn M. Ostrem >>>> (garbagecop@gmail.com) was: >>>> For 2 decades, I've preached that clubs are an education >>>> vehicle, not a retirement savings account. It's meant to be >>>> a place to learn how to invest for your future. But when >>>> member accounts grow to the point where people feed the need >>>> to "protect" them, I think it's time to take a distribution. >>>> >>>> Maybe Lynn will see the post and clarify. >>>> Scott >> >> -- >> >> Andy > > |
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