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.

Source:

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

Market update – June 2019

Blog post #397

We always advise you to focus on the long-term and today is no different.

Years from now, the market moves of the past 6 weeks or few months will not be remembered and will likely be irrelevant to your long-term financial future.

However, at times it is important to review what has been occurring in the financial markets, so you can have a better understanding and perspective of the financial world.

We feel the main factors that have influenced stock market and economic movements in recent months are:

  • trade war and tariffs
  • interest rates
  • oil prices
  • still solid economic figures, such as generally strong earnings and employment numbers.

Trade and tariff issues: Over the past 6 weeks, since May 5th when President Trump announced new trade tariffs on China and more recently potential new tariffs on Mexico, global stock markets have declined. We cannot forecast how these trade matters will play out, as to who will win and who the losers will be.

We generally are in favor of free trade, if the playing field is considered fair to all parties. As many observers of International trade matters feel that China does not treat US companies fairly, the longer term goals and objectives of the Trump administration may be worth pursuing, even if they cause some near-term problems.

As in most situations, businesses and markets adjust to new realities. Already, we are reading that major companies that produce goods in China are implementing and making plans to change where they manufacture these products, away from China to avoid these tariffs. This will likely cause/force China to be more willing to reach an agreement at some point with the US administration.

While these recent developments have caused declines in broad US and International stock markets in recent weeks, on a year to date basis most major asset classes remain positive for the year, with wide variances between asset classes.

Interest rates: Interest rates within the US and globally remain historically very low and have dropped significantly in recent months. The 10 year US Treasury Note is considered a benchmark for many loans, including mortgages. The 10 year rate peaked at 3.2% in early November, 2018, when fears of rising interest rates caused stock markets to decline.

Since then, the 10 year Note has decreased dramatically to around 2.1%. Some feel the cause of this decline is due to concerns of slowing future economic activity. Others attribute the drop to foreign factors, as interest rates in most of the world remain far below these levels.

Earlier this week, Fed Chair Jay Powell stated that the Federal Reserve “did not know how or when the trade issues will be resolved….(but) as always, we will act as appropriate to sustain the expansion (of the US economy).” This was interpreted as another step towards the Fed decreasing/cutting short-term interest rates, and certainly not increasing them, as the Fed was projecting in the fall of 2018 for most of 2019.

Whatever the cause, many economists and forecasters are now predicting the Fed to decrease short-term interest rates later in 2019, which is a complete reversal from what most were predicting a year ago, or even 4-6 months ago.

This change in the Fed’s position in Tuesday’s speech led to one of the largest daily gains of 2019 for the US stock market. On Monday afternoon, stock market analysts were gloomy and pessimistic. And then on Tuesday, markets had their best day since January 4th. This is just another example why we advocate not trying to time the stock market.

Oil prices: Interestingly, oil prices peaked in early October, 2018, about a month earlier than the interest rate peak. Oil prices, as defined by WTI price per barrel, peaked at $76.41 on October 3, 2018 and have dropped to nearly $51 per barrel, a decline of over 30%.

The huge oil price drop can be attributed to many factors, including a perceived decline in demand due to a potentially slowing global economy, as well as increased supply in oil due primarily to US production increases.

Demand will always fluctuate based on changing needs and economic swings. The more important long-term trend that has had a major impact on oil prices is the huge increase in US oil production over the past years. We think this is a significant positive, which will have an ongoing positive influence for corporations and consumers alike, as it will provide for a cap/limit on oil prices. If overseas oil producers reduce production to limit supply, that would temporarily drive oil prices higher. And those higher prices will induce even greater US production, which would then drive oil prices back down.

Takeaways:

  • The trade tariff issue will cause short term volatility and the outcome cannot be predicted in advance. There are likely to be settlements at some point, but there will also be new threats, new tariffs and unexpected surprises along the way, both positive and negative.
    • These issues should not cause you to change your investment policy or strategy.
  • The decline in interest rates and oils prices are good for the economy and may in fact prevent a recession or economic slow down, if one was even going to occur.
  • Cheaper oil prices and lower interest rates are good for consumers and companies, as it makes buying and producing products cheaper. It makes house purchasing cheaper, transportation less costly…..all positive factors.

We hope this information is helpful to you.

Again, it is in your best interest that your investment policy for the long term should not be influenced by short term trends and issues.

But understanding why markets have reacted over the last few days or months may be important for you to be aware of. If this can provide you with that knowledge and comfort, than our guidance and insights are valuable.

Is the a better way?

Blog post #396

How do you make key financial decisions?

Are you up to date on all the issues you need to know?

The world keeps changing at a seemingly faster pace.

Decision making, especially in regards to financial matters, can be complex to begin with. Then factor in the rapid pace of change and it is clear that using a financial advisor, and sometimes a team of advisors, should help you make better and more informed decisions.

Let’s consider some of the financial issues that you may have to deal with during your life and how they have changed over the years.

Saving for Retirement: Decades ago, most workers had pension plans, which provided income for retirement. Now, this type of plan is almost extinct within corporate America, except for some government employees and teachers.

Today, most people are primarily responsible for their own retirement planning. You can save through 401(k) and 403(b) plans, for non-profit organizations, as well as IRAs, Roth IRAs, and Roth 401(k)s. These plans come with many choices. You must decide how much you should save, to fund your retirement. You should consider whether your employer provides a match and whether your contribution maximizes this match.

You need to decide how to invest this money, as your employer does not provide investment advice. Some plans come with many choices, dozens or more than a hundred is not uncommon. Do you coordinate your retirement savings allocation with your other investments? Do you realize that certain asset classes would be best to invest in a tax-deferred account? Do you consider the investment costs of the retirement plan investment choices and how they compare with your other investment choices?

Consulting with us as your financial advisor about how best to save and plan for retirement could be quite valuable, providing you with clarity and useful information.

Saving for college: A few decades ago, when my children were young, we saved money for their college education in what was known as UGMA accounts (Uniform Gift to Minor Accounts). These accounts are subject to Federal and possibly state kiddie taxes, which have become more burdensome in recent years.

Today, most states offer tax-deferred college savings plans called “529 plans.” Using a 529 Plan is more advantageous, as under current tax laws the UGMA accounts would likely incur taxes, whereas a 529 plan may avoid all income taxes.

However, you still must decide which plan to use, and how to invest the money. There are major differences between plans and just using an age-based allocation may not be the best strategy from birth until your child reaches college.

Consulting with us as your financial advisor about college savings strategies could be quite valuable, providing you with clarity and useful information.

 

Other examples of financial issues and topics which have changed dramatically over the past years are….

• Mortgages and home equity loans
• Life insurance
• Long term care insurance
• Estate planning and estate tax laws
• Tax laws, which are constantly changing
• Charitable giving
• Social security distribution planning
• Retirement plan distribution planning

Consulting with us as your financial advisor about these topics could be quite valuable, providing you with clarity and useful information.

Investing: It is obvious that the economy and the investment world is always changing. The rate of change is rapid. It is hard to predict which companies, and therefore their stocks, will succeed or not.

How can you determine which investments to choose? Which investments have the best chance to help meet your short and long term goals? How should you react to news, market predictions and swings in the stock market? How much of your money should be invested in stocks versus safer investments, such as fixed income? How do you decide how much of your money should be invested in the US and how much overseas? How much risk do you need to take? And what are the tax ramifications of all these investment decisions?

Working with us as your financial advisor for your investments can be quite valuable, provide you with clarity and a greater chance of long term investment success.

We feel there is a better way….which is to work closely with a financial advisor, such as our firm, on all the various financial decisions you face during your lifetime. By working with us, these matters can be discussed, analyzed and coordinated in a rational and effective manner.

We look forward to helping you, and others you know, make decisions like these.

When the unexpected occurs….are you prepared?

Blog post #395

Are you and your loved ones protected if the unexpected occurs?

Do you need life insurance? What kind? How much?

These are important questions and the answers can be complex. We can provide you with valuable and useful guidance, both in this blog and discussing this with you.

The most common purpose of life insurance is to provide replacement of income or earnings for family members who survive a spouse or parent who dies prematurely, or before the family had built up adequate resources.

If you have loved one(s) who depend on you monetarily and you do not have adequate savings or investment accounts if you were to die, then you likely have a need for some form of life insurance. Good financial planning would guide you to have savings and life insurance to cover living costs in excess of what your survivors can generate, to cover basic living expenses, such as housing, clothing, everyday expenses, as well as what your family may want to provide for college education, if you have children who will likely be attending college. Life insurance can also cover funeral expenses and other items, such as outstanding debts, including car loans and car lease obligations.

How much life insurance coverage do you need?

Everyone will have different needs for life insurance, based on their assets, age, stage of life and other specific issues. If you are in your 30s or 40s, have children and are just beginning to save for college and retirement, you may have a significant need for life insurance. If your children are grown and on their own, and you have significant assets, you may have much less need, or no need, for life insurance.

You should consider how much money your loved ones would need in both the short and long term. Ask yourself what are the immediate expenses they would need to cover if you passed away and how much money they would need for the future? Especially if you have children. You should consider your housing costs, property taxes and insurance, as the later items likely increase over time.

Calculating your need for life insurance is where our guidance, along with an insurance professional, can begin to provide you with answers, as determining the amount of coverage that is needed is difficult. Then, once the cost of insurance premiums are obtained, we would work with you to see what is an appropriate balance of insurance coverage and premium cost that could fit into your family’s budget.

Beyond determining how much life insurance you and your family may need, and then the cost of insurance, there are many types of life insurance. To keep things simple, let’s focus on the two major types of life insurance….term and permanent (whole life) life insurance policies.

Term life insurance policies provide insurance for a certain period of time and the premium paid into the policy provides a death benefit to your beneficiaries if you pass away during that stated term. Most common is a renewable term policy, for a certain period of time, say 20 years. With such a policy, you pay the same premium every year, and any health changes in your life do not impact the premiums, as long as you pay the annual premium on time each year. Term life insurance policies are generally more affordable than whole life policies because the insurance is only for the specified term. Term policies usually do not cover you late in life and there are no other features, such as investment aspects of these policies.

Term policies are generally best for younger people, as the cost is less and more insurance can be obtained. These policies are best to cover you and your family into your 50s and 60s, as your children may become independent and you build your family savings. However, the cost of term insurance, especially if the premium is not fixed, can become prohibitively expensive as you get older, certainly beyond 70-80 years old.

Permanent life insurance policies can be useful when you want to provide coverage for later in your life, well past your 60s. There are many types of permanent life insurance, such as Whole life, Universal and Variable Universal life insurance, each which can have many different and sometimes, complicated and/or expensive features.

Whole life insurance can provide coverage for up to a lifetime (a term that you need to verify within each policy, as the policy states an expiration age, such as age 95 or 100), if you stay current on your premium payments. Some whole life insurance policies build cash value or pay dividends during the life of the policy. You can borrow against the cash value, if needed. We would not advise this, unless you carefully weigh your alternatives, as if you do not pay the borrowed cash value back, your loved one(s) will get a reduced death benefit due to the unpaid loan, at the time of death.

In general, we feel that insurance policies should provide you with insurance only, and not offer investment aspects, as the investment features of those types of policies can be quite expensive. Universal life insurance can offer flexible premiums and have the potential to build account value and Variable Universal life insurance can also offer flexible premiums, investment options and the potential to build account value.

As you consider various types of insurance policies, they can get quite complicated. We recommend that you consult with a licensed life insurance advisor, who can help you navigate which life insurance policy and company you should use, review with you which life insurance policy you should consider and help you decide on the amount of coverage that works best for you and your family.

We are independent investment advisors, meaning we are not compensated by any investment firm. The insurance industry is quite different, as most life insurance professionals are paid by commissions for the products they sell. We recommend you consult with an independent insurance professional, who works with more than one company. That does not mean you should not talk with an insurance agent who only represents one company, but make sure that you talk with multiple agents or at least one independent insurance professional.

As part of the comprehensive financial planning that we provide to clients, we can provide you with a referral to an independent insurance planning firm that we have worked with, that has been vetted by our back-office firm. They can provide you with independent, expert analysis and advice, as well as work with us to coordinate the planning, decisions and process with you. We do not receive any compensation by working with them.

Together with this outside firm, we can help to guide you through the complex maze of life insurance policies and terminology.

In the past, life insurance was also a key part of estate planning, as many more families were subject to estate taxes. As the estate tax exemption is now over $11.4 million per person (almost $23 million for a couple), unless you have assets in excess of that amount, you would not have estate tax obligations and would not need life insurance for the liquidity that life insurance provided to pay for estate taxes, if the bulk of your assets were illiquid.

If you have older life insurance policies which you obtained many years ago, for estate tax or just general coverage purposes, please contact us if you would like this outside insurance firm to review your existing policies. This may be helpful if you have a policy with cash value or to confirm the age at which your policy may expire.

Life insurance can be another place to find financial comfort and security for your future. It can also be a very complicated area. While we are not experts, we are knowledgeable and can work with you and other experts to help you through this process.

Please contact Brad or Keith if you would like to further discuss life insurance related matters.

 

 

Different choices, same end goal

Blog post #394

What do you do to be healthy? 

Have you tried different diets?

Do you take vitamins or supplements?

Have you tried different workouts?

Do you use a coach, trainer, fitness tracker or attend a regular class? 

Have any of those led to greater success?

To stay healthy, there are so many different options and choices we can and need to make. There is not a “one size fits all” fitness category. As with investment choices, which can be overwhelming, not all fitness levels and activities are appropriate for each person. Every WWM firm member has their own way that we choose to exercise to maintain our idea of a healthy lifestyle, such as walking, intense exercise classes, running, lifting weights, yoga, play a sport and biking, to name a few.

Just like our health, there are many choices or decisions for your financial road map to retirement and beyond. You know or you may have an idea or a vision of when and what you want your retirement lifestyle to look like. To get there it takes planning and making many decisions. This is where a financial advisor, just like a fitness trainer or nutritionist, can be helpful. 

If you have a fitness or eating routine in place, sometimes you go off course. You stop exercising. You add a few pounds. Even though it is easy to “not get back on the bike,” we all know it is in our best interest to resume with our fitness routine or eating best practices, to stay healthy. It is the same with investing, as even if there is volatility in the stock market, it is best to just continue with your long-term investment plan. 

Similarly, like investing, real life sometimes gets in the way. Even though you have a plan, there can be small or large bumps in that plan. Unplanned job changes. Illness. Unexpected expenses. Stock market declines.

It’s our job as financial advisors to help you navigate through real world circumstances and to help you reach your individual and family retirement goals, which are different for every person. We want to listen, learn and help you develop an investment strategy to help you reach your goals. 

When you become a client, we put together an Investment Policy Statement (IPS) that allocates your current assets, while considering your expected future savings and retirement goals. It is our goal to meet with you on a regular basis to make sure your goals are in line with the Investment Policy Statement put in place when you first became a client. 

If your plans change, or other outside factors change, we review and possibly revise your plan by amending your Investment Policy Statement, to make sure your asset allocation is in line with your goals. These adjustments could be due to changes in your goals, where you want to live or when you want to retire. Changes could also be for financial reasons, if you need to take more risk or less risk, based on how the financial markets have performed over time and your projected life expectancy.

Your Investment Strategy should be as important as your health. We all want to be the best versions of ourselves. 

If you have concerns about your health, you may visit your preferred health care professional to get help. If you have financial concerns or need guidance regarding your investments and financial planning topics, why not reach out to your advisor.

If this makes sense to you, please contact us to schedule a conversation.  We want to learn more about you and your goals, and how we can help you reach them.

A Key to Financial Success

Blog post #393

It can seem easy to remain invested in stocks when they are increasing.

You likely don’t feel worried or stressed when your assets are increasing, when you are making money. 

Your real test occurs when financial markets are down…when you are losing money. 

As your advisor, some key information can be helpful to your financial success. 

We want to help you to have reasonable expectations of the stock market. 

If you have reasonable expectations of the stock market, in advance, both positive and negative, this should help you to be a better long term investor. 

The US stock market, as defined by the S&P 500 Index**, has delivered an average annual return of around 10% since 1926. 

While we recommend investing in a globally diversified stock portfolio, using the S&P 500 Index as a base for discussing the stock market in general is appropriate for purposes of this post, even though the Index consists of only US based large companies. 

How often has the S&P 500 Index’s annual returns actually delivered returns near 10%? Actually, quite infrequently. 

The results are surprising! In Exhibit 1 below, there is a shaded band which represents the 10% historical average, plus or minus 2%. Thus, the band represents annual returns between 8-12%. As Exhibit 1 below shows, the S&P 500 Index has had returns of between 8-12% in only 6 of the past 93 calendar years, between 1926-2018. 

In most years, the Index’s return was outside of the 8-12% range, often above or below by a wide margin, with no clear pattern or predictability. 

The Index was down in 24 of the 93 years. That is 26% of the years. That means that 74% of the years, or almost 3 of every 4 years, the Index has been positive. That should help you to remain invested when the down years do occur. 

This emphasizes the point that while investing in stocks comes with significant volatility, the downward fluctuations are temporary. You need to have the emotional ability to stick with your asset allocation to stocks during the down years, to reap the long term positive rewards which stocks have provided in the past and are expected to in the future. 

You can potentially increase your chances of having a positive financial outcome by maintaining a long term focus. As Exhibit 2 documents, the longer you invest, your odds of success improve. While positive performance is not guaranteed, the past evidence is very strong. 



This data is for 12 month rolling time periods, not calendar years, between 1926-2018. For example, the first period starts in January, 1926. The second period starts in February, 1926. 

As the chart shows…
* 95% of the 10 year rolling periods were positive
* 88% of the 5 year rolling periods were positive and
* 75% of the one year rolling periods were positive. 

What can help you endure the ups and downs of the stock market?

There are no easy or simple answers. We feel that working with an advisor that provides you with this type of data, and explanations, can be a valuable starting point. 

If you are aware of the range of potential outcomes of the stock market, it should help you to remain disciplined. In the long term, this can increase your odds of a successful financial experience. 

We want to help you to be prepared for stock market volatility, as no one knows when that will occur. 

We want to help you to react rationally, and not emotionally, to the stock market, so that you can focus on the long term and strive to reach your long term financial goals. 

We strive to provide you with clarity and guidance, so you can have a greater sense of financial security, comfort and success

If you are not a client, we would be pleased to talk with you.  Call or email us.

If you are a client and have friends or relatives that could benefit from this type of guidance which you have received, please let them know about our firm.  We would be pleased to help them as well.  You can start the conversation.

For more reading on this topic, see our prior blog post, “When Average is Not Average.”

Source: The Uncommon Average, White Paper published by Dimensional Fund Advisors, May 2019 

**The Standard & Poor’s Composite 500 Index consists of 500 of the largest companies based in the U.S. The companies in the Index change over time. You should also realize that the companies within the S & P 500 have changed frequently over this period, as companies grow, fail, merge and get acquired.


Changing Perspectives

Blog post #392

After my three-day learning group session ended with fellow advisors from across the country in Monterrey, California, I went for a walk before heading north towards the airport. 

As I walked along the jagged, rocky Pacific Coast, I came upon a group of people peering into the Pacific Ocean. 

I took the following picture…..as I was focused on the ocean waves crashing into the rocks. 

As I got closer to this gathering, it seemed like some of them had pretty extensive photography equipment. Some were talking, others just looking out. But I didn’t listen carefully enough. I took this next picture….still focusing on the water. I was looking for sea lions, but didn’t see any in the water. But I kept looking…..

Then I heard what the others were saying. I listened better. Then I realized my focus was wrong. I had the wrong perspective.

I was looking out too far. My focus was incorrect. 

Much closer to me, but not in the water, were many sea lions or sea otters warming themselves on the beach… not in the water. This is what the others were focused on, which I did not see at all. 

*******

As investors, you may sometimes be focused on the wrong thing. It is our role, as your guide and financial advisor, to help you to focus on the right things. We want you to have the proper perspective.

You may be focused on political concerns or that the US or other International economies may be slowing. 

However, we feel that it is vital to remain invested, as appropriate to your personal Investment Policy Statement (asset allocation plan). We feel that this discipline is important to help you reach your long term financial goals. We think this is the best perspective for your financial future. 

So while it may be true that the US or International economies may be slowing, with that perspective, you may not realize that US and globally diversified stock funds are up double digits for the year. 

Is your focus and perspective on the right things? Are you focusing on the long-term or what you can control?

*******

For the past 15 years, I have been privileged to be part of an incredible learning group. We started in 2005, with a core group of advisors who were willing to try something new and join a program led by a financial industry expert, for a significant fee. The group’s members and how it has been run has gradually changed and evolved over the years, but the focus has always been on learning from each other and from the many speakers we brought in.

These meetings and the discussions, and during regular calls between meetings, gave us new perspectives. It helped to make sure we were focused and had the right perspective….what were the best ways to serve and advise our clients. We wanted to keep current and exchange ideas, so we could be better for you, our clients. 

Since the very first session in the summer of 2005 in Santa Monica, CA, I have not missed what became an annual Spring meeting, as well as October sessions, and for the past few years, a few days in January. 

For a multitude of reasons, I will likely be part of a new learning group starting this fall.I have mixed emotions about this transition, as I have developed great personal relationships with the members of my group. However, many of these advisors are older than me and will become part of a group which will have a greater focus on issues related to their own retirement transitioning. Their perspective is different than mine, as I am not retiring anytime soon. 

As we discussed the group’s transition Monday morning, one member from Nashville stated “this is about business. It’s not personal.” And he is right. I need to do what is best for my clients, which is what we always strive to do. 

While I may miss some of these personal connections that I have made, I will surely develop new ones….and that is exciting and invigorating to me. It is an opportunity to learn and exchange ideas with a new group of outstanding advisors. 

And that is really the primary goal of these learning groups. My responsibility, focus and perspective is always to strive to be a better advisor, to continually learn and develop a better firm, so we can better serve, guide and advise you, our clients, as best as we can. 

*******

As I write this on the plane back from California Wednesday morning, I have many pages of notes, ideas and concepts. I look forward to digging deeper and implementing the ideas that were presented and discussed, which will benefit you, our valued clients. 

From the broadest perspective, I remain very confident in our long- term investment strategy. 

As I tighten the focus, our mission is to strive to provide each of you with an excellent financial experience, hopefully for your lifetime.

And we will have a far better chance of providing you with a successful financial experience by participating in these learning groups, as well as other ways to learn and strive to always get better. 

******

If you have worked with other financial advisors, you may (or may not) realize that many of them likely do not participate in these types of learning experiences. Ours are not trips provided as a reward for selling a certain mutual fund or reaching some sales/commission target. 

If you have friends or relatives that could benefit from the advice and guidance which you have received, and from the dedication to continuous learning that we have, please let them know about our firm. We would be pleased to help them as well. You can start the conversation. 


Should You Get Out or Stay for the Ride?

Blog post #391

As many US market indices are at or near all time highs, and International markets are also performing strongly, many are asking the opposite question. Have US markets reached new peaks? Will they go higher? 

On Monday, the Wall Street Journal had an article titled “As Stocks Climb, Some Investors Wonder When to Get Out.” The article started by asking that as stock indices approach new record highs, it “leaves investors with a difficult choice: Lock in this year’s startling gains or hang on for the ride?”*

As an investor (and client), this may seem like a reasonable question. What should you do and how should you react when markets set new records? Will markets go higher? Should you be selling now?

This is another time we can be valuable as your financial advisor and guide, to provide you with advice and clarity during key moments and to help you avoid what could be a critical financial mistake.

We encourage and help you to be rationally optimistic. We help you to be rational, and not emotional, as you deal with uncertainty, especially in the financial markets. These principles enable us to provide you with financial and investment advice that is timeless and can be effective, if you are disciplined and patient.

We remain rationally optimistic about the long term financial markets, both in the US and overseas. History and academic data teaches us that corporate earnings will continue to grow, which will lead to higher stock markets in the future, both in the US and Internationally. 

Despite the fears and declines at the end of 2018, far more corporations have reported solid earnings for the first quarter of 2019 (so far) than declines in their revenues or earnings. Good earnings reports and guidance for continued earnings growth, along with the change to stable interest rates, have propelled stocks so far in 2019. 

Even though US markets may be at or nearing highs, and International markets are doing well, we recommend that for your long term financial future, you do not exit the stock market. This should not be a time to sell off a major portion of your stock investments.We know that you cannot successfully and accurately time the markets and predict the high and low points.

Instead, as your financial advisor, we already have a plan in place to handle market increases, which we call “rebalancing.” We have developed an Investment Policy Statement for each client, which details the intended allocation to stocks, based on your specific circumstances. 

For example, if your target allocation to stocks is 50%, as markets increase and the stock allocation increases to 55%, we would review your accounts and consider selling certain stock asset classes, to bring that allocation back towards 50%. We do not do this in an attempt to time the markets or make short-term market predictions. This is a disciplined strategy of maintaining your desired stock allocation, which has the long-term benefit of selling high and buying low. 

This gradual tweaking of your portfolio does allow for some selling as markets reach new highs, but more importantly, also allows you the opportunity to gain from further long-term increases in the markets.

Remember, the stock market has many more positive days and years than negative ones.

Remember, US and International stock markets have increased significantly over years and decades. We expect these long term trends to continue, with bumps along the way, of course. 

To reap these long term rewards, you must remain invested in stocks. You must be in the game.  You should stay for the long-term journey.

And it’s our role to help you along the way, so you can remain invested and have the ability to reap the long-term benefits that stocks can provide. 

Prior to working with our firm, you may not have had a disciplined strategy for how to handle the stock market reaching new peaks. Now
you do. 

We provide you with understandable answers and advice to these key questions. We provide you with clarity and guidance, so you can have a greater sense of financial security, comfort and success. 

If you have friends or relatives that could benefit from the advice and guidance which you have received, please let them know about our firm. We would be pleased to help them as well. You can start the conversation. 

Source

“As Stocks Climb, Some Investors Wonder When to Get Out.”The Wall Street Journal, by Ira Iosebashvili 04/22/2019  


Make Things Better

Blog post #390

Better implies that what you have right now can be improved. It is an assertion that requires confidence to say it and the optimism that it’s possible. 

Make implies that it’s up to you (and us). Someone needs to make it better. Better requires change, and change can be scary for some people. 

These are thoughts from a recent blog post, Make Things Better, by Seth Godin. Seth writes a daily blog, which I highly recommend, and is a prolific author.

Godin’s blog post about “make things better” is meaningful to us for what it represents about the values, goals and service that WWM provides to our clients.

We started WWM in 2003 to make things better. We entered the financial advisory business because we knew there were better ways to provide comprehensive financial and investment advice.

Investing can be complex. You may have had bad experiences in the past. You may have had advisors or brokers you thought were doing a good job, but something went wrong. You may not understand how to choose your 401(k) plan investments.

The financial world can be daunting and ever changing. You may not know what stocks, mutual funds or other investments are best for you. Tax and estate laws change. Retirement planning requires understanding and coordinating many types of data. 

You may not know the actual costs of your investments and whether you are paying hidden fees. You may not know how your money is really invested, especially if you have accounts at multiple places or brokers. 

Fees and costs are important and a critical component of investment success. We are transparent about our fees and the costs of the investments that we recommend to clients. When we meet with prospects, our fees and the total costs are generally much lower than the prospects current situation. We are not compensated by the investments we recommend, which is very different than traditional brokerage firm models. 

We believe your investments should be coordinated, so you have a real financial plan, which we call an “Investment Policy Statement.” We will advise you on your 401(k) plan and the many retirement decisions and issues you face. We can help you plan for Social Security and develop retirement projections. By having advisors develop a coordinated plan for you, this should reduce your financial anxiety and stress.

Working with a firm with a long-term investment philosophy which we feel is understandable, disciplined and rationale can help to provide you with confidence and security, regardless of how the financial markets are doing. We explain things in English. We communicate with you regularly, such as this blog, in a manner that helps you understand what is going on in the financial world. We know that clarity and understanding are important. 

We are very pro-active in our efforts to reduce and minimize the taxes related to your investments. We utilize tax-managed asset class mutual funds, which strive to minimize the taxes distributed from the fund, without hindering the performance. This type of fund is still relatively rare in the financial world. When appropriate, we place trades to recognize tax losses or avoid taxable fund distributions. We did a lot of these for clients last year, as applicable. 

For those clients who are now working with us, in Seth Godin’s terms, these people reviewed their situation at the time they first talked with us and thought working with us could make their financial lives better. They took the initiative to change, even if the change was difficult to do. 

We work hard at getting better. We take our role in providing you and your family with financial advice and guidance very seriously. 

If you are a current client, we hope that we have made things better for you. That is certainly one of our goals. If you have friends or relatives that could benefit from the advice, clarity and guidance we provide, please let them know about our firm. Forward these blog posts or share with them. 

If you are not yet a client but a reader of these posts and think you may be ready to consider a “change for the better,” please call or email us to schedule an appointment. 

Jeopardy phenom continues at record pace

As a follow up to last week’s blog post, James Holzhauer has continued with his incredible pace of Jeopardy winnings, as he has won $697,787 in 10 straight wins. Holzhauer now has the 4 highest winning games, including 3 games of more than $100,000 each. He is averaging almost $70,000 per night, while 74 game winner Ken Jennings averaged below $34,000 per game.

His speed, knowledge and confidence in betting are remarkable. My big question is when he eventually loses, will he be beat by a smarter and faster contestant, or will the cause be his own overconfidence? 

“All in” on must see Jeopardy phenom

Blog post #389

A professional sports gambler set a Jeopardy single game winning record of $110,914 on Tuesday’s episode. 

But that one day win is only part of the story. 

James Holzhauer has won an astounding $298,687 in 5 wins. His aggressive betting, different game strategy and vast knowledge has resulted in must see viewing. He is averaging almost $47,000 in his other 4 wins, which is far higher than typical winners. For perspective, Ken Jennings averaged $34,000 per night during his record 74 game win streak in 2004.

Holzhauer has turned the game upside down with his strategy. Most contestants start at the top of the board, starting with the small dollar clues in each category. Holzhauer picks the most valuable clues across the entire board first, which can earn him the most money the fastest. This enables him to bet super aggressively if he gets one of the 3 Daily Doubles, which he can bet up to his full winnings at that point in the game. He has repeatedly gone all in with huge bets, even at critical points in the game.

His change in strategy, how he plays the board, is interesting. I wonder why no other contestants, particularly those who have been very successful on the show in the past, have not tried his strategy? 

Similarly, for many of our prospects, and now clients, we present a different approach to investing than most had used in the past. However, once you understand it, you see the logic in our investment strategy. It will be interesting to see if future Jeopardy contestants adopt Holzhauer’s strategy in the future.

On Jeopardy, speed and information are key. Holzhauer is very fast with the buzzer, which then gives him an advantage, so he can try to answer the question correctly. And he is certainly well informed, as he correctly answered 129 of 133 attempts, through the 4th game. 

In investing, we do not feel that speed or certain information matters. Company specific information is supposed to be public and disseminated to all at the same time. Unless you have inside information, which is illegal, speed should not be an advantage. Earning announcements are generally either before or after the markets open or close. Major financial institutions can react quicker than individuals can, but they all get public information simultaneously. We rely on academic data and historical information for our investment philosophy, so speed is not critical. At times, we feel patience can actually be an advantage over speed. 

Holzhauer can have a significant advantage by being faster with the buzzer. However, he cannot control what categories he will face each show and the knowledge or expertise his fellow contestants have. He may be very skilled, but he may face a competitor that is even faster at the buzzer or smarter than he is on certain topics. He can only control his ability. 

In our investment strategy for stocks of using asset class mutual funds which are globally diversified, we take the view that active money managers cannot provide added value to you by being smarter than the market, over long periods of time. Active managers do research and charge higher costs to their investors, but extensive data shows that these active managers generally underperform their respective benchmarks.

Holzhauer has made very aggressive bets. So far they have paid off spectacularly. But his overconfidence may cost him a win at some point.

During his record breaking one night win, he bet all his money, about $34,000, early in the second “Double Jeopardy” round. He was far ahead of the two other contestants, but if he had answered the question incorrectly, he would have blown his insurmountable lead.  When he made this $34,000 wager, he must have felt that if he answered wrong, he was very confident he would recapture the lead because he was faster at the buzzer and then could answer subsequent questions correctly. He did get the question correct and went on to win.  His great confidence has resulted in huge success, so far. To keep winning, he will have to balance his aggressiveness without being too overconfident.

For many investors, investing in individual stocks has great appeal. You think you know what company, store or product will be successful, so you invest in it. Many years ago, before I began this firm, I thought I could identify mutual funds based on their past track records or reading about the money managers. All too often, this overconfidence in our abilities to pick financial winners does not prove out to be as successful as we would hope. Unexpected things happen to companies or sectors that we think are good ones. The world changes. Amazon comes along and online shopping has hurt the stocks of many retailers, for example. 

Holzhauer has made huge bets, relative to what others contestants have done in the past. I went back and watched online the previous highest single game winner, from 2010. That contestant bet $7,000 when he had $25,800 and $5,000 when he had $33,600. In comparison, Holzhauer bet his entire $14,600 early in the game, $25,000 later in the game and then wagered $38,314 on the Final Jeopardy question (though he could have bet more), as his goal was to win $110,914, as the total represented his daughter’s birthday, 11/09/14. 

Holzhauer is a professional gambler and he may already be wealthy. He obviously is a risk taker. He told ESPN “…my work is similar to an investment bank, except that I’m the analyst, trader, fund manager and day trader all into one.”**

In our investment firm, as we work with clients, we want to take appropriate risks, but not more risk than is necessary. We plan and discuss with you how much risk you need to take, and are comfortable with, to reach your various financial goals.

James Holzhauer is a highly intelligent person and professional gambler. I hope he continues to win, as he is great to watch.

This contestant is playing a game. He may be ok with “risking it all” on one question or taking outsized gambles on his ability to answer a single question, which may lead to huge success or failure. 

We feel strongly that broad diversification is prudent and advisable for your financial future. We are not “going all in” on one stock or any particular financial sector. 

As we manage your investments and provide you with financial advice, we want you to be comfortable and be able to sleep well at night.

Cite:

**”Sports Gambler James Holzhauer Shatters ‘Jeopardy!’ Winnings Record”,www.huffpost.com, 04/10/2019 by Ron Dicker

Sources:
“Professional sports bettor sets ‘Jeopardy!’ record”www.ESPN.com, 04/10/2019 by David Purdum

The secret weapon of the sports gambler who just broke the single-game ‘Jeopardy!’ record?  Children’s books.“,www.washingtonpost.com, 04/10/2019

www.jeopardy.com