Letter to Stakeholders, October 2023
Friday, October 6th, 9:34 am EST. Before we write about the month can we talk about the week? Our country made history by ousting our own Speaker of the U.S. House of representatives. Interest rates in the bond markets have risen and the stock market didn’t like it (those two are related). We averted a federal government shutdown but may face one next month unless we pass Oklahoma Senator Lanford’s legislation: Prevent Government Shutdowns Act. As I tell my students at my alma mater, George Mason University, law and money go together. Markets react to politics, policy and the present. Doug and I are always investing (and planning) for your future.
Present vs. Future
Stocks “prices” are down this month but so are bonds (because of expected higher interest rates). When interest rates go up, it’s more expensive to borrow, making corporate earnings harder, so stock prices trend down. But it also makes bonds issued with previously lower interest rates look like unappealing investments so their “prices” go down too. The phenomenon of lower bond and stock prices typically occurs in a higher inflationary environment like the 1970s, early 1980s and today. So what are we doing about it as your advisors? That work began years ago and continues today.
We invest your portfolios to ride the good times and weather the “storms” of markets. We start with a low-cost, efficient, diversified portfolio and adjust from there. Last Fall, we took advantage of rising rates by investing in U.S. Treasury bonds. We also suggested you move your savings accounts to higher yielding savings accounts which in some cases increased your rainy-day fund returns by 400%! (By the way if you are still saving with one of the major banks, compare rates online!) Last week we hosted some of you for a What is a Structured Note? discussion and next year we will explore private investment alternatives to serve clients who qualify. All of the diversification we provide you – exchange traded funds, mutual funds, treasury bonds, structured notes, private investments, etc. – are designed to balance the anxious volatility (up and downs) of the present with nearly “academic” expectations of the future. We will continue to evaluate how we balance risk and return on your behalf as fiduciaries. And we will use your plan to anchor your investment requirements to - at minimum – the needs of your family.
September’s statements now say “Charles Schwab” instead of TD Ameritrade. If you haven’t yet, create your online login here: http://SchwabAlliance.com. As mentioned before, your accounts are now in custody with Charles Schwab & Co., Inc., a registered broker-dealer, member FINRA and SIPC (“Schwab”). But we are not otherwise affiliated with Schwab. We have retained our independence and yours.
Arbitration is not Mandatory
For clients who signed on with us sometime before 2020, you may have a version of our agreements that mention “arbitration.” As an independent, fiduciary, Registered Investment Advisory firm (RIA) we do not require arbitration for disputes. The language would have looked something like this:
12. ARBITRATION: Any controversy or claim arising out of or relating to this agreement or the breach thereof shall be settled by arbitration, and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. The Client understands that this agreement to arbitrate does not constitute a waiver of the right to seek a judicial forum where such waiver would be void under federal or state securities laws. Arbitration is final and binding on the parties.
We will send some of you an amendment to your agreements to remove this clause “in writing.” If you joined our client family after 2020, your agreements are up to date.
Note: If you haven’t responded to Doug’s call for a Fall Check-In, please do.
Otherwise, it’s getting chilly. Let’s grab coffee this month.
Jason J. Howell, CFP®, CPWA®, CSRIC®
Jason Howell Company is an independent, family wealth management firm that offers accredited investors the confidence to overcome financial imposter syndrome.
Jason J. Howell, CFP®, CPWA®, CSRIC® and Douglas W. Tees, MBA, CFP® CAP®, CBDA have spent a lot of time in the Washington, DC area, and are aware that many people who are first generation wealth suffer from a kind of "financial imposter syndrome." Successful entrepreneurs are always looking over their shoulder; government contractors worry about the next contract; former Capitol Hill staffers privately wonder if they should "feel bad" for the money they now make. Imposter syndrome is common among people who work for the many corporate headquarters based in this area as well. These feelings get in the way of properly managing wealth. We empower them to get organized, build a team of advisors and make decisions.
Our typical "first generation wealth" families include dual income parents who work, save and have just the right amount of fun. They trend a little older - Baby Boomers (born 1946 - 1964) and Gen-Xers (born 1965 - 1980) - 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 a good bit of savings. As bona fide experts themselves, they expect fiduciary expertise from people they hire. They are just not sure about the "big box" brokerage firms that advertise one thing and seem to do another.
First generation wealth accumulators realize that they:
- Need to “do something” with the cash in their checking/savings
- Need an investment strategy for “up” and “down” markets
- Need a plan to mitigate market, credit, inflation, and political risks
- Need to start tax planning instead of just tax paying
- Need to be sure they are choosing the right work benefits
- Need to reduce financial miscommunications between partners
- Need to separate business finances from personal finances
- Need to plan for money while alive and for what happens after death