We are excited to announce…..

Blog post #407

We are very pleased to announce that Wasserman Wealth Management has added a new member to our firm, to enable us to continue, and improve, the excellent guidance and service that we provide to our clients.

As we have grown over the years, we realized that we needed to expand our capabilities and depth to better serve our current clients, as well as to accommodate future clients.

After an extensive search, we are excited that Bradford Newsome, CFP®, joined our firm this month, having more than 10 years of extensive experience in the financial industry. Bradford will be an Associate Wealth Advisor (AWA), supporting our advisors, Brad Wasserman and Keith Rybak, as well as servicing and expanding his own client base.

Bradford holds the Certified Financial Planner™ (CFP®) designation, which represents extensive skills in areas such as investment planning, education planning, risk management, tax planning, retirement savings and estate planning. He graduated from Wayne State University’s School of Business with a major in Management Information Systems.

Bradford will be expanding our utilization of technology and software in many areas, including retirement and college planning, as well as working on client matters, such as trading, rebalancing and various research projects.

Bradford and his family, his wife Nina, their sons (ages 10 and 12), as well as their Airedale Terrier dog Max, live in Clinton Township, Michigan. They are very active in many sports, particularly basketball, baseball and football. Bradford enjoys coaching his sons’ basketball and baseball teams. Bradford has been a longtime member of the Central Macomb Optimists Club, including many years as a Board Member.

We look forward to you welcoming Bradford to our firm, as well as the benefits he will bring to our future interactions with you, our valued clients.


It’s that time of year……again

Blog post #406

Over the next few weeks, students will be going back to school. 

Two of my nieces will be leaving for college soon, starting in 10 days. Other children of the members of our firm will be returning to college, high school, elementary and middle schools shortly.

It used to be that nearly all schools, colleges or K-12, started after Labor Day.

Times have changed. Schools start earlier now.

And that is one of the key lessons for saving for college….start saving early.

We all know college is quite expensive and over past decades, costs have generally risen much more than inflation. College debt is now a major national issue for many young people.

If you have children or grandchildren, we recommend that you begin starting to save for college as soon as you are able to. Depending on what fits your financial ability, we recommend a regular savings plan.

Generally, the most optimal way to save for college education is using a 529 savings plan. These plans, offered by nearly all states, allow the money that is invested in the plan to grow tax-free, as long as the money is used for college-related expenses when withdrawn.

By using a 529 plan, you will avoid having to pay taxes on any dividends, interest or capital gains. Thus, it is advantageous to move funds intended for college savings into one of these plans, rather than incur taxes in a taxable account.

These plans allow for the money to be used at nearly any college or university, and permit families to use funds for other siblings, so there is built-in flexibility.

The 529 plans offered by each state will be different than those offered by other states.Some states provide a tax deduction for deposits made by residents of their states, but these are usually minor and probably should not be a major factor when selecting which state 529 plan to use.

Each state 529 plan uses different investments or mutual funds. Each plan will have different asset allocations and varying costs. 529 plans usually offer various investment options, such as 100% stock, 100% fixed income and age-specific choices. Within these choices, there may be vast differences between how the money is invested, such as how much large v. small stocks or how much International exposure the plan provides. The key is that you should review and understand how the money is invested, or have us review this for you.

Many people choose the age appropriate option, as a default option. It is simplest. As a child gets older, every few years the age based plans decrease the stock allocation and the fixed income allocation increases. Age based plans offer diversification, automatic re-balancing and the investment becomes more conservative as college gets closer.

This concept makes sense. We have found that many age based plans may be appropriately allocated between stocks and fixed income for younger children. However, many age based plans may get much too conservative for many of our clients’ children well before they near college age. It is important to gradually reduce the stock allocation as a child gets closer to college age, say by age 15-16, which is 3-4 years before you would initially need the money, but some plans may have stock allocations of well below 50% even before high school. As college lasts 4 years, and many students take longer, and some people save more money for graduate school, your actual time horizon for using/needing the money may be longer than the perspective of many age based college 529 plan asset allocations.

Thus, it is important that you review the asset allocation of the 529 plan at various ages to determine if the asset allocation makes sense as part of your family’s overall financial portfolio. We can provide valuable advice by reviewing this for you.

By starting at a young age, you should benefit from compounding. The opposite applies if you start to save if your child is older. The later you begin to save, you will likely need to save much more each month or each year. We can help you determine how much you should begin to save based on the age of your children or grandchildren, the projected cost of the colleges that you think may fit for your child and family, and prepare projections to assist you in developing a college savings plan for your family.

If grandparents have the financial resources and it fits into their financial plan, providing money for college savings for their grandchildren can be a wonderful legacy and certainly helps their children and grandchildren. Grandparents can fund 529 plans as well as parents. If you think this may be applicable to you, please contact us.

College is expensive. Saving in the most tax efficient manner, choosing the most optimal 529 plan and monitoring how you should invest the funds are all services which we can provide to you, our clients and your families.

We can provide you with clarity in helping to save for college.

We can help you overcome confusing choices and overwhelming options.

Talk to us. 

And we would be pleased to talk to your friends and relatives about this or other topics.

Fed Lowers Interest Rates, Needed or Not

Blog post #405

After raising short-term interest rates from 2016-2018, the Federal Reserve voted to lower short term interest rates by .25% on Wednesday, to 2-2.25%. At least temporarily, this ends the Fed’s efforts to return short-term rates to more normal levels. Short term interest rates were around 5% in late 2007.

As we have explained before, the Federal Reserve has a dual mandate to foster maximum employment and price stability, which they define as inflation of around 2%.

Jobs gains have been solid in recent months and the unemployment rate is low, at a 50 year low in fact. Consumer spending is solid and growing, but the “growth of business fixed investment has been soft.”*

The Fed feels that inflation, other than for food and energy, are running below 2%. They feel this is not good enough, as if an economy was expanding and doing even better, market forces have historically caused inflation to grow at 2% or above. By cutting short term interest rates to stimulate the economy, they want to slightly increase inflation to 2% or above.

The Federal Reserve in their statement Wednesday cited “implications of global developments for the economic outlook as well as muted inflation pressures” as reasons for the rate cut.* We feel this means concerns about economies outside of the US, as well as negative effects of the ongoing trade tensions.

We are not sure if these actions were completely warranted by the Fed at this time, but they can be viewed as a preventative step to keep the economy strong and possibly to avoid any further weakening. I had written that sentence after the Fed’s written statement was released and later, in his press conference, Chairman Powell said “there is definitely an insurance aspect” to the rate cut.**

The Fed also said that “uncertainties about this outlook remain.”* This does not surprise us, as we feel there always will be uncertainties of some type. No one, including the Fed, can anticipate the future or what unpredicted events could occur that will impact the future of the US or global economy.

As the Fed’s outlook was uncertain, it caused them not to clarify or signal their future moves. What the Fed did not clarify, which the financial markets may find troubling, is guidance regarding future interest rate moves. Chairman Powell was not ready to confirm that more cuts are imminent, as if this was the beginning of a multiple rate cutting cycle. He said “that’s not our perspective now” in his press conference after the statement was released. This does not mean that there will not be future cuts, it means they don’t know yet if there will be more or how many. Powell viewed the Fed actions as a “mid-cycle adjustment” to monetary policy to help the economy perform as the Fed desires.**

In a technical move, the Fed will also stop reducing the bonds which they hold, two months earlier than they previously stated, which is also a loosening of credit policy.

US interest rates are quite low now, and longer term rates have been dropping. For example, 30 year fixed mortgage rates, which at one point neared 5% in the past year, are now around 3.75%.*** You should consider refinancing if you have a mortgage that is above these levels.

The US faces the challenge of lower interest rates throughout the rest of the world, as there are now at least $13 trillion of dollars of bonds issued outside of the US that have negative yields.**** This is one factor, though not stated, that may have impacted the Federal Reserve’s decision to lower short-term interest rates.

It is important to note that the Federal Reserve is supposed to act independently of any political pressure and make their decisions based on data they observe and their economic training. They are to act in the best interest of the US economy, to achieve their dual mandate stated above. Powell reiterated in his afternoon press conference that this move was not politically influenced.

We do not anticipate or recommend any changes to your investments or Investment Policy Statements as a result of these actions.

We hope this analysis is helpful to you, and provides you with clarity and information that is understandable and timely.

If you would like to discuss your specific situation, in lieu of this news, please contact us. That’s what we are here for!


*Federal Reserve Policy Statement, Federalreserve.gov, July 31, 2019
**”Federal Reserve Interest-Rate Decision-Live Analysis,” wsj.com, July 31, 2019
***”Rates Already Cut-For Mortgages,” wsj.com, July 31, 2019 p. A8
****”The World Now Has $13 Trillion of Debt With Below-Zero Yields,” Bloomberg, June 20, 2019

Why can’t I watch CBS on my TV?

Blog post #404

Starting this past Saturday, my home TVs show the following message when my wife or I try to watch CBS:

Due to a fee dispute between CBS and ATT, CBS decided Friday night to discontinue providing their content to ATT’s TV services. We get our television service from ATT’s satellite service, DirecTV.

This is certainly not the most important or pressing issue to me right now, but my curiosity drove me to research the issue. There are a number of interesting points and lessons to be learned, as I delved into this matter.

The major dispute is how much ATT should pay CBS each month, per subscriber, for their content. Currently, and since 2012, CBS receives $2 per subscriber, per month from ATT. CBS wants to increase the fee from $2 to $3 per subscriber, per month.***

As the two sides could not reach an agreement, CBS took the action of withdrawing their television feed to ATT’s 6.5 million customers in many large metropolitan cities, including metro Detroit, LA, NY and San Francisco who have U-Verse landline cable TV or DirecTV.

I reviewed my cable bill. We pay over $100 per month for cable TV, without any extra premium channels. And then ATT/DirecTV charges another $7 per month for each TV that is used. That is all pure profit, after the minor cost of the cable box.

The lesson from my shockingly large cable bill is that these two companies should be doing everything they can to keep me happy, not upset me…. and potentially cause me to consider doing what my kids and so many others are doing, which is to cut the cable cord and get the TV channels/networks we want in another, cheaper manner.

Then I read this week that ATT lost almost 1 million pay TV customers in the last 3 months alone.**** That is a lot of customers and a lot of money. This industry is undergoing major change, and has been for years. I’m not sure these companies are effectively dealing with the rapidly changing environment they face.

So what are the financial lessons from this?

Change. Business and technological evolution have caused incredible change in certain industries, which are difficult to predict and anticipate.

If you go back 10 or 15 years, would you have thought that TV and cell/telephone phone providers would be profitable and great stocks to own? Likely most of us would have said yes.

You would have thought 10-15 years ago that everyone would have both a home phone and a cell phone, so the revenues and profits would be terrific going forward. Cell phone services were growing rapidly. The iPhone had just been introduced.

Except something which was NOT anticipated 15 or 20 years ago happened…..most of us stopped having home phones, or highly profitable landlines. This has had a major impact on the stocks of the companies in this industry.

A decade or two ago, who could have envisioned that millions of people would be watching TV without cable service? On their phones and other small devices? Netflix was something that existed as a mail order or drop off service. Dial up Internet was slow. You couldn’t download a movie or TV show via the Internet, at least not very quickly. Of course, all this has changed quite dramatically.

Let’s look at a few stocks in these related industries and see how they have performed over the long term, as compared to other large US stocks (as measured by the S&P 500 Index).

These are the average annual returns over the past 5, 10 and 15 years:*

5 Years
10 Years
15 Years
S&P 500**

What you see is that over the past 5, 10 and 15 years, all of these companies have vastly underperformed over every time period, other than CBS over the 10 year period. ATT, which is in the phone and cable/internet business (and just recently became a content provider as well); CBS, which is a content provider; Verizon, which is a phone and cable/internet provider; and Dish, which is a satellite TV provider, all have been lackluster performers compared to other large US-based companies.

Our firm’s objective is to provide advice to you to help you reach your financial goals, through understanding your goals, assets, income, time frame and level of risk that you can handle. Then we develop a financial portfolio and make investment recommendations for you.

What we don’t do is try to pick individual stock winners, and the stocks above are an excellent example of why we do not try to play the stock picking game. It is very hard. As we discussed last week, What does our crystal ball show?, we cannot accurately and consistently predict the future….and neither can anyone else.

Instead of the companies above, let’s say you had purchased Comcast stock many years ago. How would that have worked out? As you can see below, Comcast has outperformed the benchmark over each time period and far outperformed the other companies discussed.*

5 Years
10 Years
15 Years
S&P 500**

How could someone have known 15 years ago that Comcast stock would do so much better than ATT, CBS, Verizon or Dish?

Going forward, do you know whether Comcast will continue to be the best or most successful stock of these companies? As we have all heard and read….past performance is no guarantee of future results.

This is why we focus on structuring your portfolio based on what financial and academic data indicates will provide you with the best expected future returns over the long term, not based on what we or other financial analysts think may do best in the future.

  • We cannot know which asset class, industry or geographic region will do best in the future, so we recommend having exposure to all of them by being broadly globally diversified.
  • We don’t think the US will always outperform other countries in the world. Historically, the US has had years of outperforming other countries, and then there are other periods where investing Internationally has outperformed US based portfolios. Thus, we invest globally, to have exposure to both.
  • Over the very long term, we know that value stocks have outperformed growth company stocks. Similarly, we know that over the very long term, small company stocks have outperformed large company stocks.
  • However, we know that during some periods (which can be for many years) these “premiums” do not appear, and growth stocks outperform value stocks, and large stocks outperform small company stocks.
  • During these time periods, like in down markets, is when investors are tested and challenged to remain disciplined and adhere to the Investment Policy and portfolio allocation that is designed for many years, not just 6 months or 1-3 years.

Our goal is to provide you with excellent financial guidance. We want to be available and for you to talk with us when you have financial questions or issues in your life. We want to help you, and members of your family, including future generations, plan and make good financial decisions.

We want to structure financial portfolios that you are comfortable with and which provide good financial returns over the long term, so that you can stick with them through volatility and change.

We know change will happen. We want to help you deal effectively with future changes, with the markets, economic swings, tax matters, as well as technology.

What we don’t plan to do is cut off your service. We will not be your CBS, and pull the plug over $1 per month. In fact, our office did not have electricity for a few days this week, due to storms that hit the Detroit area over the weekend. With planning, technology and providers we work with, we were fully functional working remotely from our houses. And I was not distracted by any CBS televisions shows!


Morningstar.com as of 7/24/19

**S&P 500 Index represented by Vanguard 500 Index fund, VFINX, per Morningstar as of 7/24/19. Does include deduction of the mutual fund management fee. Does not include deduction of any advisory fees.

***“CBS is Blacked Out for 6.5 Million AT&T Customers. Here’s Why” NY Times by Edmund Lee, 07/20/2019

****“Cord-Cutting Hits AT&T Again While Wireless, Media” WSJ by Drew Fitzgerald, 07/24/2019

Note: As the portfolios that we recommend are broadly diversified, the stocks discussed above may be held in one or more of the mutual funds that we may recommend.

What does our crystal ball show?

Blog post #403

This is a question that clients and prospects frequently ask.

They want our opinions, predictions and insights about the future.

They want to know what we think will happen to the stock market in the next few months or the next year.

They want to know what the financial implication will be of various political and economic matters, such as the trade war issue or what will happen if so and so is elected or not elected.

These are all valid questions.

However, our crystal ball is almost always cloudy and murky.

The reality is that like everyone else, we cannot accurately predict the future.

Unlike some other forecasters and market analysts, we accept the reality that we cannot accurately predict the future. Even though other investment professionals may do lots of research and analysis, they still cannot reliably predict the future.

What does this mean for you, as clients and prospects?

We want you to ask whatever questions that you may have. Even if we cannot predict the future….about the stock market, specific companies, interest rates or future political events, we try to provide insights or perspectives that may be helpful to you.

In other words, we want to understand the background or concerns that your questions may represent and address those issues with you. If you have concerns about the future, we should talk about it. Even without a clear crystal ball, these can be valuable and worthwhile conversations.

Accepting that we cannot predict the future is an important element of the investment philosophy that we adhere to.

This concept may be new for people who have not worked with us.  This may go against what people traditionally thought about their financial advisors and money managers. Ideally, you want to meet with an advisor who has all the answers and will be able to tell you when the markets will be going down, when they will rebound, which stocks will do best and which areas to avoid.

That sounds great, except that we should all realize that no one can accurately and consistently predict the future. Yes, there have been a few very successful money managers who have beaten the market over the long term, but they are hard to identify in advance.

If you think another investment manager/advisor/broker can predict the future, or do detailed analytical work and research to try to accurately predict which company stocks will do better than others over the long term, that is called “active management.” Active management generally costs more, but over the long term, active managers’ performance in all (or nearly all) asset classes have been below their respective benchmarks.

We believe it does not make sense to pay higher costs for investment managers to try to beat a benchmark, based on trying to predict the future, when tons of academic and financial data shows that most of these efforts are not successful. Why pay more and generally get less?

If the Federal Reserve members cannot consistently and accurately predict the future of interest rates, even 3-6 months in the future, let alone 1-2 years into the future, how do you expect an active bond manager to consistently be able to predict the future of interest rates?

It may sound contradictory, but accepting that we cannot predict the future can be a source of comfort for you and enable you to have greater confidence in us, as your financial advisor.

  • We are up front with you and tell you that we are investing your money based on financial and academic data, not based on predictions of what may do best.
  • We are not continually calling our clients with our latest and greatest ideas, and not frequently changing our mutual funds because they are underperforming.

We want you to understand why we invest in the manner that we do.

We want you to understand your asset allocation and be comfortable with it.

We want you to be comfortable with the amount of risk that you are taking.

We want you to know that we will answer your questions as clearly as we can, in English, not in technical jargon.

We want you to know that we will adjust your portfolio and your asset allocation for reasons generally specific to you, not based on what we think may occur in some region, company or election. Changes to your portfolio are generally based on changes in your personal financial situation, your age, your health and your need and willingness to take risk, with a focus on reaching and maintaining your financial goals and and desired lifestyle.

We want you to know that we will provide you with analysis and insights about the financial markets, tax and estate law changes, but we will not make investment decisions based on what we think may happen in the the future.

Our investment philosophy and strategy is logical and rationale. It can be successful for the long term. It can provide you with financial comfort and security.

We can provide you with advice, guidance, excellent personalized service and clarity.

However, we cannot provide you with a clear crystal ball.

If this makes sense to you, we would be pleased to talk with you.

If you are a client and you have friends or family who could benefit from our approach, we would be pleased to talk with them.


Blog post #402

How much is enough?

How much money do you need, to have “enough”?

How much money do you need to support your standard of living?

How much money do you need to maintain your lifestyle, shop, travel, enjoy yourself, pay for medical expenses, support charitable causes you value….as well as provide financial support to children, grandchildren or relatives?

These answers are obviously very personal and will be different for each of us. One of the roles that we play as financial advisors is to help you, if you need it, to quantify how much money you will need in the future, to support the lifestyle that you desire.

In developing your investment plan, how you define “enough” is vital, as it defines your need to take risk. The more wants and needs that you desire, the larger the portfolio you will need to support your lifestyle. The more financial assets that you need, the more financial risk that you may need to take, and for how long, depending on what assets you already have and your ability to save.

If you already have adequate resources to support your lifestyle, then you would have less need to take financial risks. We would work with you to focus on maintaining your assets, taking intelligent steps to reduce your risks, such as being broadly diversified and determine an appropriate exposure to stocks. If you have already “won” the financial game, meaning you have adequate assets to meet all of your needs, your plan and strategy should be developed so that you don’t permanently lose a significant portion of your financial assets.

If you already have significant assets, then you should consider whether your portfolio has excess risk. Is the risk you are taking to reap potential stock market gains worth it, versus the potential negative outcome of financial losses?

A few things to consider. As your wealth and portfolio grow, some people convert what were once desires into needs or wants. Desires become expectations and reality. A vacation or trip that once seemed unattainable becomes an annual part of your life. You go from one home to wanting a vacation home. The nice car becomes a luxury car. These are all choices each of us make. Myself included.

These changes, which can occur gradually over time, can increase the need to take risk (and to save more), to cover the additional expenses as your lifestyle changes. If you need to take on more risk, you would need to increase your equity allocation. And that can lead to problems when risks appear, such as in 2000-2002 and 2007-08, and other time periods. While these losses were not permanent, they can be emotionally difficult without proper guidance, planning and your emotional ability to handle the risks and market volatility.

We advise clients when developing their investment plan and asset allocation. It is generally important to have some exposure to stocks, so your portfolio has some opportunity for growth which exceeds the rate of inflation, so you don’t lose your spending power over the long-term. But this may mean that if you have adequate (enough) resources for your needs, you likely don’t need to have more than 50% (and maybe even less than that) invested in stocks.

Some risks are worth taking. Sometimes you need to take long-term, rational financial risks, especially if you need to accumulate and grow your financial resources over a long time period.

However, some risks are not worth taking, or risks should be reduced. Prudent investors should not take on more risk than they have the ability, willingness or need to take.

The important question to ask yourself, and discuss with your financial advisor, is where are you in this financial game? What inning are you in? Are you winning, losing or still have a long way to play? How much risk do you really need to take?

If you have already won the financial game, are you only taking the financial risks which need to be taken, and not excess risk?

We would be pleased to discuss this important topic with you, or with others close to you, who could benefit from such a discussion or portfolio review. 

Talk with us.

This blog post was inspired by “Enough,” an essay in Appendix E of the book Reducing the Risks of Black Swans, by Larry Swedroe and Kevin Grogan, 2018 Edition.

Freedom and opportunity

Blog post #401

As we celebrate the long 4th of July weekend, we should be thankful for the freedom and opportunities which we have in our country.

We should be proud about many aspects of the US and our history.  However, like most other countries, companies, institutions and individuals, our country has room for improvement. We can all strive to be better.

We should be grateful for the incredible innovations and thoughtfulness that the our country has as core, guiding principles based in the Constitution and Bill of Rights.

We should celebrate capitalism and the opportunity that it has provided to so many of us.

We should celebrate innovators, as well as the people who protect and serve our nation, both past and present.

We should celebrate the freedom of the many choices that we have, including the freedom to get an education, choose a career (or a few of them), earn, save, spend, take risks and invest money freely, without the government controlling all of our actions.

We hope that you celebrate and reflect upon the vast freedoms, choices and opportunities which our country enables us to have.

If you are sometimes overwhelmed by all these financial choices, you know that you can rely upon our firm to help guide and advise you in making sound financial decisions.

We hope you enjoy the 4th of July holiday weekend with your family and friends!

A Milestone and reflections

Blog post #400

Numbers can represent milestones. Significant events. Progress. Moving forward. Growth, age and experience.

This is the 400th blog post we have written as a firm. 

What began as irregular blog posts in 2009 became a weekly commitment 5 years ago, in June, 2014. Since then, writing weekly has been a firm-wide effort, which involves coming up with an idea, writing, research and editing, compliance reviews and the final processing so the blog post is emailed to you for Friday am reading and adding to our firm’s website.

For me, as the founder of WWM, and primary author of nearly all of these blog posts, it represents a true source of pride and commitment to our clients. It represents the dedication and discipline to write, research and communicate to you, our clients and friends across the country, about relevant topics on a timely, regular basis.

There are very few independent financial advisors that have made this type of commitment to their clients to produce their own, original content on a weekly basis. We hope you find this valuable and helps you to be a better and more successful investor.

As this can be thought of as a milestone blog post, I wanted to share some bigger picture thoughts. Lessons. Key advice. Reflections since founding this firm in 2003.

We truly value the client relationships that we have developed. We take very seriously the trust that each client and their family places in us. We are confident that putting our clients interest first and using a transparent business model are vital to our past and future. That we own the same types of investments as our clients should give you even greater confidence that we strive to always act and be on the same side of the table as you, our clients.

During informal conversations, I have sometimes reflected that clients come to us for investment advice, but we can (and do) provide you with so much more. We help to determine a safe and reasonable annual withdrawal rate during the retirement phase of your life. We assist with college funding, retirement planning and analysis, aging, life transitions, estate planning and charitable giving. It brings us great satisfaction when clients request our input and advice on important decisions and transitions in their lives.

One of the core elements of our success was the adoption of an investment philosophy that we have been able to stick with, through all kinds of market ups and downs, as well as dramatic changes in the economy and companies, over the past 16 years. We are able to communicate our investment philosophy to clients, so they can understand it, adhere to it and appreciate that it is rationale and not guess work. More importantly, we continue to be confident that our core investment principles are valid and should remain so for the future.  Please read our blog, “A Philosophy You Can Stick With”, for further reading on why having an investment philosophy that we believe in allows us to be more disciplined and help our clients adhere to their financial plan.

Structuring a broadly diversified, global portfolio means that during some time periods we will outperform certain widely cited indexes, and at other times we will underperform these indexes. We structure and tilt our portfolios for the long term, towards asset classes that we believe will provide you with the best chance of long-term investment success, such as small and value, with significant International exposure. Sometimes value will underperform growth, or large companies will do better than small companies. We realize and accept this and explain this to you when we begin our relationship. We discuss and write about this often. We feel that providing you with guidance and discipline should help you to reach your financial goals.

One of our core principles since day one has been globally diversified stock portfolios, constructed with low-cost asset class mutual funds. There have been times, such as in recent years, that investing primarily in the US has been more successful than having a significant International allocation. As we base much of our investment advice and guidance on academic data, and not predictions, we remain confident that over the long term, our belief and adherence to being globally diversified will be beneficial.

While we listen to and read extensively from others we respect and trust, we make our own firm policy decisions after careful evaluation and analysis.

One of the few major portfolio changes we have made relates to commodity holdings. Many years ago, prior to 2008-09, academic data showed that adding commodities to a diversified portfolio would provide even more diversification benefits, as a hedge against inflation. The thought was that a commodity investment, with a significant component of oil related holdings, would provide good returns, particularly when inflation rose. As a firm, we later made the decision to drop most of these commodity allocations from client portfolios, as we perceived that the inflation hedge may not exist as often in the future because of the huge structural changes in the oil industry, mostly due to the growth of the US fracking industry. This has turned out to be a good strategic decision.

As interest rates dropped in the past decade, we made the decision to invest in high quality corporate bonds for certain clients who hold large fixed income investments. Some in our industry feel that high quality corporate bonds are not worth the additional default risk. We make the decision when we purchase new fixed income investments for clients, if the high-quality corporate bond interest rate premium is worthwhile over CDs and government securities, that this is a beneficial risk-reward trade-off. We remain confident that this has been very beneficial for our clients.

Another area that we differ from many advisory firms, both small and large, is our avoidance of many types of alternatives investments (such as alternative lending, reinsurance and hedge fund like investments). We believe that the investments we own and recommend to you should be as liquid as possible, have low fees, and are understandable and transparent. We have evaluated many such alternatives, and we remain very comfortable that our policy in this area has been to your best interest.

We wish that we had a clear crystal ball for the future. Unfortunately, we do not.

What we do offer to you is our goal of providing excellent financial advice, dedication to client service, the continued value of being lifelong learners in many areas of financial and investment matters, the intent to listen to your questions and concerns, and the commitment to invest in people and technology to provide the level of service and advice that you deserve.

We plan to remain disciplined and stick with our commitment to communicate with our clients regularly, via this blog, phone calls and meetings with you.

Thank you for reading.

And thank you for being a loyal client!

Good Decisions…..A better financial life?

Blog post #399

To be a good investor, you need to be able to make many good decisions over your lifetime.

Good decisions should be made rationally, not based on emotions. There will be circumstances and situations when time is of the essence and you would be best to act quickly.

Working with an advisor as a guide can help you make even better quality decisions.

You may not own any Bitcoin, but you can learn some great lessons from what has occurred to the price of Bitcoin over the past few years…..and what decisions those who have owned Bitcoin could or should have made.

Bitcoin is a type of currency, but it is not an investment that has a discernible value or worth. Other investments, like a company stock, bond, mutual fund, real estate, collectibles or commodities have prices and values that fluctuate, but there are generally underlying ways to value them over time.

Importantly, our firm does not consider Bitcoin to be an investable asset and we don’t recommend it to our clients. We consider it to highly speculative and very risky. For further background on Bitcoin, see our blog post “Bitcoin Mania: What’s it all about”from December 14, 2017.

The following are selected prices ranges of Bitcoin over the past years:

As you can see from these figures, the price of Bitcoin has fluctuated widely, both increasing and decreasing. It has been very volatile.

As discussed above, unlike other types of investments, we are not aware of a method to determine Bitcoin’s relative value.

Thus, if someone has decided to buy Bitcoin, we would recommend that they take advantage of price increases to sell some portion of their holdings. You must monitor the price constantly, be decisive and act when the time is right. For example, if you had Bitcoin in December, 2017, you should have sold some then, when the price soared to $16-17,000. The price has more than doubled during the past few months, and risen significantly in the past weeks. Now would be another appropriate time to take some profits. Waiting a few weeks to see what happens would not be rational.

When we invest for our clients, generally in asset class stock mutual funds and conservative fixed income securities, we don’t need to react with quite the same level of speed, as Bitcoin prices have been so much more volatile than stocks.

However, we do monitor and react with decisiveness and speed when appropriate. We are regularly monitoring client accounts for rebalancing and tax loss harvesting during periods of market declines and rebalancing as markets increase. Unlike some investors or advisors that only rebalance or tax loss harvest once per year, we act quickly when market and situations warrant it, as prices can change rapidly. For example, in late 2018 and early 2019, when stock markets decreased then increased, respectively, we placed trades to rebalance or recognize tax losses for clients as appropriate, based on market and timing opportunities. We did not wait, as the opportunity to act and obtain these benefits were gone within days or weeks.

Someone who holds Bitcoin may feel that because the price briefly went above $15,000 in December, 2017, it will reach that level again. There is no way to know when or if that will happen. You should be disciplined. You should not get emotionally attached to this or any other investment. You are best to follow the concept of buying low and selling high. If you bought some Bitcoin for way less than the current price, which is now around $9,000, then you should sell some of your holdings and be happy with your gains. Do not be too greedy.

We are rational buyers and sellers of investments on behalf of our clients. We have a plan in place for each client, called an Investment Policy Statement (IPS), which guides this process. We alleviate the buying and selling decision process for clients, which can provide them with greater peace of mind, as they know we are monitoring when to make these decisions and act. By acting rationally and having an established process, we are not making emotional decisions.

If you own Bitcoin and know you probably should be selling some of it now, but you can’t do it, you are likely letting your emotions control your actions. That is not the ideal way to handle financial decisions.

Diversify. Don’t have too many of your eggs in one basket. This seems so simple and logical, but many people evolve into this situation by owning company stock, receiving stock as an inheritance or getting lucky with Bitcoin they may have bought years ago. It is generally not a good idea to have more than 5-10% of your investable assets in any single investment (not including diversified investments, like a mutual fund). You cannot be afraid to take some profits. Even if you sell a percentage of what you own now, and retain a certain amount, you have to learn not to regret taking your profits….as there can be just as much chance the price could go down, or up, in the future.

When we design portfolios for clients, we evaluate how much risk they need to take, in order to reach their financial goals. We construct portfolios that are broadly diversified across many industries, asset classes and throughout the world. We want to avoid the risk of one bad thing that could happen to any company from having a material impact on your financial future. This is rational, logical and just makes sense.

If you have a significant portion of your portfolio in a few stocks or something like Bitcoin or gold, then you are taking on more risk than is necessary. Even if you own lots of a stock that has done really well in the past, like Apple or Amazon, there is no guarantee how that stock will perform over the next 5, 10 or 15 years.

We believe in broad diversification, knowing that it may not be as exciting. But this approach will likely enable you to reach your financial goals and also do it in a manner that will allow you to be less concerned about your finances than if you only held a few stocks in your portfolio.

We can help you be more decisive, rational and less emotional about your investments. Just talk with us.

In Your Best Interest

Blog post #398

When you buy something, you want to know what you are buying. Or you should know what you are getting.

When you want to buy some packaged ice cream, you make a series of decisions.

  • You may decide you want to go for taste, not low calories.
  • So you purchase some Haagen-Dazs, Ben & Jerry’s, or your favorite local brand of ice cream. You may have had them in the past and know they will satisfy your craving for ice cream.
  • You can decide how much you want to eat. The package provides you with the calorie and fat content, so even though you didn’t buy the “low-fat” product, you can easily see the information and choose how much you want to eat in each serving.
  • The key is that the packaging provides you with information that is transparent. You can read the label and make an educated decision.

What does this have to do with investing and your financial future? A lot.

In most important decisions or situations you face in your life, you hope that the people or advisors you work with will always have your best interest in mind.

When you go to a surgeon, you hope the surgeon will do his or her best. You hope the surgeon’s only objective that day is for a successful surgery. You hope the surgeon is using the newest and best tools, techniques and medications. You hope the surgeon is not choosing to use 2nd class technology or equipment because she is being compensated or getting other benefits from a medical supplier.

When you retain a financial advisor, you should want them to provide you with advice, guidance and recommendations that are solely in your best interest.

However, the financial industry is not set up this way.

Our firm, as Registered Investment Advisors (RIAs), are legally bound to make decisions that are in our clients’ best interest. Isn’t that what you would want and expect?Don’t you want an advisor that is going to be transparent about their fees and costs, and clearly explain the internal fees of the investments that they recommend? We would want this….and we are transparent about all these matters.

However, brokers at the major brokerage firms and banks don’t operate under these same very high standards. Now, they operate under a suitability standard, which means that an investment or product can be recommended to you, even if there are better or less expensive choices, as long as they are “suitable” for you.

Under current standards, a broker could be making decisions on your behalf, but influenced by compensation structures that impact their decision process. They are supposed to disclose these conflicts and costs, but in reality, these disclosures are provided to their clients after the investments have been purchased.  Further, this  information is buried in long and complicated documents like prospectuses, which few people ever read, or can understand.

Is this really what you want?

Do you want an advisory firm that will always strive to recommend what they feel is in your best interest? Or, do you want a broker which makes decisions on your behalf that may not be “best” for you, but would be “good” for you…..but better for them, than another investment choices?

We bring this to your attention because the SEC last week approved new regulations for the investment industry that will be effective by June 30, 2020, but the new rules will continue to allow for two somewhat different standards.

The new rules will feature “Regulation Best Interest,” which will raise the bar for the brokerage industry, but it will still be lower and less transparent than the standard for a firm such as WWM.

WWM will continue to have a higher standard of fiduciary conduct to act in your best interest, now, and after these new rules become effective next year.

WWM is very transparent about how we are compensated. Our only compensation is from fees paid by our clients, based on the assets we manage for you. If your assets increase, we both benefit. If your assets decrease, our revenue goes down. We are on the same side of the table as our clients. We are not paid by any mutual fund, investment provider or custodian.

However, now and under the new rules, brokers can be compensated for total products sold and rewarded for asset accumulation. Current conflicts, such as contests for the sale of a specific product will be allowed to continue for another year. Brokers will be permitted to continue offering proprietary products and use compensation to incentivize sales.

If you have accounts only with WWM, you do not need to be concerned about such practices.

If you have assets at major brokerage firms, banks, insurance companies or other financial institutions that are not RIAs, you should be aware of these matters. You should ask questions, or we can help you to review your accounts and help you to understand what you are really being charged.

We are not saying brokers are bad, but the manner of compensation and conflicts of interest which can and do exist may not be in your best interest.

You should be fully informed with transparent information.

When you buy food, you can read the label. You can then make an informed decision.

As it is hard to read a prospectus, maybe you are better off with a financial advisor like WWM, that is clearly working only in your best interest.

Talk to us.


“What’s in the final SEC advice rules?” Investment News, by Mark Schoeff Jr. and Jeff Benjamin, Pages 10-11, 6/10/2019