Letter to Stakeholders, February 2023
Read or Listen here:
Friday, February 10th, 8:58 am EST. Predictably, we enjoyed positive stock market growth last month, just when prognosticators and pundits assumed declines. During these first few days of February, we’ve started to see “the market” give some of those gains back. Why did it shoot up in January, and start trending down here in February? Well, those pundits are back out with their explanations but you will do well to ignore those. The best quote I heard about the markets (and the economy) this week was, “If you’re not confused, you don’t understand what’s going on.”
A Good Defense (and a Good Offense)
Last month we wrote about how we “...Reduced your risk without greatly reducing your potential for return.” This month we’ll start describing alternative strategies that can be used to maintain your risk profile while enhancing returns.
Structured Notes are bonds with options (derivatives) that can increase the expected return. Now wait, don’t stop reading! Last Fall we changed your bond allocation into individual bonds securities. Structured Notes add a layer to bond securities that, depending on the direction of the stock market, can create increased return. That return can be in the form of higher interest earned or higher capital gains (over the average market returns). The “catch” is loss of liquidity – ability to “cash out” – for a period of time. There’s also the possibility that “buffers” put in place are inadequate to cover market loss or (underlying) bank insolvency. Structured Notes aren’t designed for your entire portfolio. But thankfully, planned liquidity risk is manageable, levels of buffer (protection) can be screened for, and multinational bank defaults are infrequent.
With any financial tool we use on your behalf, risk of loss is our primary concern. You may not be a candidate for Structured Notes depending on your plan. Alternative strategies in general are not one-size-fits-all and they are not risk free. What any new strategy must do however to make our list is give you a chance for greater upside. Since 2021 we have been evaluating Structured Notes and other strategies. Beyond communicating with vendors like CAIS, iCapital, First Trust and Halo Investing, I’ve also completed 12 hours of continuing education credits in alternative strategies. If it fits, we will bend the strategy around your individual plan. Without a plan, 2023 would be a tough year to navigate. But thankfully, financial planning is not your concern.
Did you watch this year’s State of the Union address? Many topics were covered – as per usual – but the focus on how business, banking and competition affect consumers got my attention. The Spring college semester recently began. I tell my George Mason University financial planning students about legislation like the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 which helped to regulate T-shirt give aways for credit card applications (remember those?), fee disclosures and charges. Now through his “competition agenda” President Biden is proposing an update to the CARD Act and proposing a Junk Fee Prevention Act to reduce the recent proliferation of restaurant, resort, bank and airline charges.
Nicholas Kiniry, CIC, CPRIA, VP of the Private Client Division at B.F. Saul Insurance is under the Stakeholder Spotlight this month. Nick and I met almost a year ago to the day. Since then, he’s not only worked with our family of clients, he has also become a resourceful friend. Nick updated me on his 100-year-old, independent, high-end property & casualty insurance firm last week. Higher inflation, supply chain constraints and increased lawsuits is making cost/benefit evaluations harder for policy owners.
Doug and I worked with you on calibrating the right level of protection. With over 15 years of specialized experience, Nick will review our work to ensure we didn’t miss the new risks he’s seen since the onset of the pandemic. More on this later this month.
For now, enjoy the big game this weekend, the half-time show and/or the commercials!
Jason J. Howell, CFP®, CPWA®, CSRIC®
Jason Howell Company is an independent, family wealth management firm run by two owners who believe you should feel good about money.
Jason J. Howell, CFP®, CPWA®, CSRIC® and Douglas W. Tees, MBA, CFP® are each married to patient wives and are dedicated to their kids. Jason and Doug have built a firm with a great reputation. The firm is based in Northern Virginia but serves clients (virtually) all throughout the United States.
Our typical "first generation" client households include dual income parents who work, save and have just the right amount of fun. They trend a little older - Gen-Xers (born 1965 - 1980) and Boomers (born 1946 - 1964) - but we're starting to see more Millennials (born 1981 to 1996) who don't want to wait until it's too late. They earn impressive incomes and have accumulated (or are accumulating) a good bit of savings. As experts themselves, they expect expertise from people they hire.
First generation clients feel more confident about their decisions because:
- Implementing a professional investment strategy relieves the stress of managing $1 Million+
- Discussing money with professionals improves family communication about family values and lifestyle
- Identifying time and money for causes they believe in make them feel like whole persons
- Working directly with independent business owners rather than "big box" bank employees just feels right
- Redefining the meaning of affluence in the 2020s (and beyond) is important to their legacy
To contact us for a free initial conversation, click here.