Business Journal wealth managers survey 2014

The Federal Reserve policy has also impacted our discussions with clients. With rates remaining near historic lows, investors are looking for higher yield but need to understand the greater risks associated with those investments. In anticipation of a possible rate increase, we suggest investors consider spreading out the maturities of bond in their portfolio across time, with the average duration in the intermediate term. We’re also looking at credit quality and international bonds to help diversity the fixed income portion of portfolios.

One thing I like to remind clients in any economic environment is that even with a well-constructed investment strategy, it’s the market that largely determines our returns. So to help maximize the returns we are able to achieve, it’s important to follow tax-efficient investment strategies and to watch investing costs – to know how much we’re paying in fees. These are some things we can control.

What mistakes do you see individual investors making in the current financial climate?

Investors have been increasingly anxious about where the market will go next, given increasing chatter about the potential for a pullback in stocks. While we haven’t seen the stock market experience a correction (a decline of 10% or more) in about three years and think a consolidation period would be healthy at this point, it’s important that individual investors don’t try to time their investing decisions around those types of short-term moves. Most of us are long-term investors and should maintain a long-term view. For us, investing is about time in the market rather than timing the market.

What trends are you anticipating will most impact investors over the next year?

We expect that the economy will continue to improve and stocks will continue to move higher over the intermediate and longer term, and we recommend that investors focus on sticking to their investment plans that are aligned with their goals. One big focus area for investors over the next year will likely be Federal Reservepolicy-the market is currently expecting the rate hikes to begin in 2015. While it’s common for the market to experience some volatility around the initial rate hike, it’s important for investors to remember that the economy is indeed making progress and the Fed is moving towarda more “normal” monetary policy, which is a good thing.

 Is there anything you would like to add?

I think it’s most important for individual investors to make investment decisions primarily based on their long-term goals-not  short term economic or market news. And this sounds basic, but it is really hard to do that without a plan. More of our clients are seeking  our help to manage their wealth and get a plan in place. In fact, according to a June survey of more than 1,000 clients, roughly 75 percent said they feel most confident when they have at least periodic advice from a professional. And that is playing out in how we work with people - we’ve conducted financial planning conversations with more than 100,000 clients during the past year.Steven T. Jenkins, CTFASenior Vice President; Trust & Investment Management

Exchange Bankinvest.exchangebank.com

Have you adjusted your investment strategies in response to economic trends over the past year? Why, or why not?

[caption id="attachment_97148" align="alignright" width="173"] Steven Jenkins[/caption]

Our strategic investment philosophy of investing in a globally diversified portfolio of asset classes has remained intact over the past year. This includes the use of short and intermediate-term fixed income securities as a core component of client portfolios. One year ago, the consensus was that bond yields would continue to soar (and prices to tumble) with the advent of QE tapering. Based on this, a variety of investment strategies were marketed as "bond substitutes." As history has shown, accurately forecasting future market and economic events is extremely difficult. Bond yields have not risen as forecast. In fact, the bellwether 10-year U.S. Treasury note yield is substantially lower today than it was on December 31, 2013. As for most of the bond substitutes, they have been significantly more volatile than short to intermediate-term fixed income securities, making their representation as bond substitutes fallacious. We are certainly not bullish on fixed income securities. However, for investors who do not have the capacity to accept a great deal of market volatility, bonds will continue to play a role in prudent portfolio construction.

What mistakes do you see individual investors making in the current financial climate?

The most frequent mistake we see today is that far too many investors have no idea what they are paying for investment advice and for investment products. A sea change has occurred with 401(k) plans over the past couple of years as the Department of Labor has required plan fiduciaries to clearly disclose the investment and administrative costs foisted on plan participants. In some cases, the use of expensive retail mutual funds and annuity contracts resulted in having 2 percent or more annually deducted out of participant accounts. The focus on curbing excessive 401(k) fees has benefited participants by bringing costs down in many plans. Unfortunately, the same trend has not occurred for individual investors. Mutual funds and annuities come in a dizzying array of share classes, fee arrangements, and commission structures. A core tenet of our investment philosophy is that costs matter and that reducing costs will increase portfolio returns with no additional risk. One can choose a high cost approach if it is believed that the higher cost will be rewarded with outsized returns. But, if an investor does not have the cost information, an informed decision cannot be made.

What trends are you anticipating will most impact investors over the next year?

Stocks will experience a decline of 10 percent or more at some point in the future. This correction may or may not occur within the next 12 months, but it will happen. A common trend in an up market like this one is to "let the bulls run" by not periodically rebalancing portfolios back to target risk parameters. After stock prices eventually fall, these same investors often dump their stocks and lock in large losses. Far too many investors have not learned that their behavior of buying high and selling low is a poor strategy to build wealth. Instead, investors need a disciplined rebalancing process throughout both good times and bad.

Is there anything you would like to add?

With the aging of Baby Boomers, estate planning has become a more pivotal topic in client meetings. In addition to discussions on various strategies to establish trusts for children and grandchildren, philanthropic planning discussions about leaving a legacy within the community are common. With the rebound in real estate prices and the long bull market run since March of 2009, many Boomers are considering the tax and estate implications of establishing private foundations, charitable trusts, scholarship trusts, and donor advised funds among other strategies. That being said, some Boomers are nearing or have entered retirement with no plan as to the ultimate distribution of their wealth. Investors should focus not only on the accumulation of wealth, but the orderly and tax-efficient transfer of wealth to their families and the institutions and causes that are important to them.Andy MathiesonCEO; Fairview Capital300 Drakes Landing Rd., #250, Greenbrae 94904, 415-464-4640

Have you adjusted your investment strategies in response to economic trends over the past year? Why, or why not?

[caption id="attachment_97149" align="alignright" width="192"] Andy Mathieson[/caption]

We prepare a recommended asset allocation for each client upon the inception of a relationship, and generally don't make significant changes other than to rebalance accounts back to the target based on the price movement of underlying securities. Since the rising liquidity tide has lifted prices across virtually all asset classes, we have not needed to rebalance the mix over the past year.

What mistakes do you see individual investors making in the current financial climate?

Individual investors tend to make variations of the same mistake. First, many fail to adequately plan for retirement. Second, those that plan don't necessarily follow the plan. Third, many investors allow short-term considerations (fear, greed) to override the long-term necessity of charting a steady stable course and sticking with it. Investors who lost confidence in the dark days of 2008 not only sold their stocks and bonds at fire sale prices, but they sat in cash as the markets steadily recovered. In the current climate, we are very concerned that investors don't fully understand the implications of very low interest rates. These low rates imply lower long-term financial asset returns, and investors must either save more or spend less (or both) to maintain the ongoing purchasing power of their retirement funds.

What trends are you anticipating will most impact investors over the next year?

Over the next year, we expect that market volatility, which has been abnormally low, will pick up. Our greatest concern is understanding the consequences of how the Federal Reserve plans to unwind the unprecedented buildup of its balance sheet over the past six years. We are truly in uncharted waters in this respect, and our general bias following a sustained period of asset appreciation is to err on the side of being conservative.

Is there anything you would like to add?

The majority of investors, including anyone under the age of 50, have only known interest rates to decline. It is critically important to understand that at these low interest rate levels, even a modest uptick in rates will cause substantial losses in longer-term fixed income investments. Investors need to diversify their assets across a broad range of assets, both U.S. and international, to mitigate the volatility that will ensue as central banks across the globe eventually adjust their extremely accommodative monetary policies.Jill Hollander, MBA, CFPFinancial Connections21 Tamal Vista Blvd., #105, Corte Madera 94925, 415-924-1091, FinancialConnections.com

Have you adjusted your investment strategies in response to economic trends over the past year? Why, or why not?

Yes, we've made adjustments in anticipation of inflation and rising interest rates.

What mistakes do you see individual investors making in the current financial climate?

Individual investors are getting complacent about the risk profile of their portfolio. In an effort to reach for yield, they have taken on additional risk potentially in the form of high-yield bonds or dividend paying stock not recognizing that equity has risks.

What trends are you anticipating will most impact investors over the next year?

The obvious is monetary action by the Fed and European Union and its impact on the global economy. Also, there are many "hot spots" politically in the world today that may have an impact.

Is there anything you would like to add?

It is important that investors not react emotionally to what they see on the news. It is better to design your portfolio with your advisor based on your objectives over the long-term and not worry about short term fluctuations of the markets. By the same token, if you are nearing retirement or just retired, considering adjustments to your portfolio and not becoming "married" to a particular holding is important. Many newly retired investors need to redesign their portfolio for withdrawing money. Before, efforts have been accumulating money. Now the time is to distribute the money. The strategies are different.Timothy J. Delaney, CPA/PFSPartner; JDH Wealth Management, LLC187 Concourse Blvd., Santa Rosa 95403, jdhwealth.com, 707-542-1110

Have you adjusted your investment strategies in response to economic trends over the past year? Why, or why not?

[caption id="attachment_97150" align="alignright" width="192"] Timothy Delaney[/caption]

If you are referring to the investments themselves, nothing has changed. If you are referring to one's exposure to risk, it depends on whether something has changed with that client. If it has, then it would be appropriate to determine whether a change in equity exposure is warranted, and that change could be either an increase in equities or a decrease in equities. The change would be based on whether the client's personal situation requires a change, such as the loss of spouse, retirement, inheritance, kids out of the home but not due to a change in the stock market.

What mistakes do you see individual investors making in the current financial climate?

Not having a written investment policy statement or having one but then not sticking to it when market volatility shows up. Without a well thought out IPS, an investor will most likely wind up buying high (i.e., becoming greedy) and/or selling low (becoming fearful). If this natural human behavior continues, one will wind up woefully short of their expectation/goal.

What trends are you anticipating will most impact investors over the next year?

Every year is like the year before, namely events will occur that says that this time is different, which unfortunately cause investors to sell high and buy low. I have no idea what next year will bring, nor does anyone else. It is those unknown events (which is why they are called surprises) that causes the market to significantly move. You need to have a plan that takes into account these surprises before you make your investments, which hopefully will allow you to stay the course while riding the outcome of those "surprises." Another way to say it is to not take more risk than you need to and than you can handle.

Is there anything you would like to add?

Investors should ignore retail Wall Street and all of its so-called market gurus/forecasters. No one can predict the future and no one can call market changes on a consistent basis. The best advice is to create your investment policy in a calm environment and then stick to it, even when the winds of economic changes are blowing hard outside.James PatrickCorporate and Institutional Advisory Services, Merrill Lynch Financial Advisory TeamTwo Belvedere Pl., #100, Mill Valley 94941, 415-289-8853

Have you adjusted your investment strategies in response to economic trends over the past year? Why, or why not?

Our investment strategies are customized for each individual client we work with. The portfolios are designed to provided targeted rates of return integrated with the clients' financial plan. We typically review allocations quarterly and rebalance if necessary.

What mistakes do you see individual investors making in the current financial climate?

Investors typically make investment decisions based on emotions. This behavioral aspect of their decision-making process tends to generate long-term underperformance. In the current financial climate they tend to have too much fear.

What trends are you anticipating will most impact investors over the next year?

We will most likely experience increased volatility in the market as investors adjust to the end of the Fed tapering program along with a tightening of rates in the future.

Is there anything you would like to add?

We believe investors should take advantage of all of the expertise an experienced financial adviser has to offer. We would urge them to share their dreams and goals with an advisor who can build a valuable relationship that goes beyond traditional investment management and financial planning.Ted Murphy, CFPFirst Vice President-Wealth Management; Merrill Lynch Global Private ClientTwo Belvedere Pl., #100, Mill Valley 94941, 415-289-8812, fa.ml.com/ted.murphy

Have you adjusted your investment strategies in response to economic trends over the past year? Why, or why not?

[caption id="attachment_97151" align="alignleft" width="192"] Ted Murphy[/caption]

We have only adjusted our strategies in fairly minor ways, and each client's situation is assessed individually based on their risk tolerance, time horizon, liquidity needs and overall investment goals. We like our overall positioning, and continue to rely heavily on municipal bond ladders and our hedging investments (over more traditional treasuries) to help protect our portfolios and reduce downside risk.

What mistakes do you see individual investors making in the current financial climate?

According to Pew and Gallup polls in 2013, almost half of Americans don't have any stock market exposure. Unfortunately, I think the lesson many took from the dot-com blow-up, and from the Great Recession – two peak-to-trough corrections over 50 percent in a 10-year period - is that equities are frightening. As a result, too many "twice-bitten" investors went to cash near the bottom of the market in 2009, and have missed a tremendous bull run, and what may have been the opportunity of a lifetime to increase their wealth and retirement savings. In fact, research published this week by Richard Bernstein Advisors shows that returns for "average investors" lags all but three of 44 different asset classes over the past 20 years, including cash. Hope may not be a strategy, but neither is fear. Unfortunately, the media and pundits tend to focus on the negative, and that percolates through to investor psychology.

What trends are you anticipating will most impact investors over the next year?

The U.S. is now the world's leading producer of oil and gas. How amazing is that? This, combined with robust global production levels, has helped lead to some of the lowest August gas prices in four years, and to oil prices under $100/barrel – if this continues, it would help the finances of everyone from consumers to companies.

Rates. We may continue to be "low for long" under Janet Yellen, but at some point the taper ends, and short term rates must rise. Once the market decides to focus on that, we may see a revaluing of equity and bond prices, and could finally see a meaningful correction. Or, the market may shrug, and decide that rising rates mean a healthy self-sustaining economy that is good for companies and investors alike, and continue to drive equity prices higher.

Geopolitical tensions. if the U.S. and other developed nations are drawn further into global policing (or back into a war stance in the Middle East), it would be a negative. If diplomacy fails in the major conflict regions, everyone loses.

Is there anything you would like to add?

My hope for your readers is that they find the advice they need; that they develop a plan to realize their goals, hopes and dreams, and a disciplined approach to help them stay on track; that they maximize their retirement savings and minimize their revolving debt; that they not try to time the market; and that they trust in an intelligent, well-diversified investment portfolio to participate in the upside the markets have to give, while helping protect them when the inevitable market corrections occur.Montgomery Taylor, CPA, CFPMontgomery Taylor & Co.

2880 Cleveland Ave., #2, Santa Rosa 95403, TaxWiseAdvisor.com, 707 576-8700

Have you adjusted your investment strategies in response to economic trends over the past year?

[caption id="attachment_78842" align="alignright" width="160"] Montgomery Taylor[/caption]

Yes, I use a dynamic approach to investing with the primary objective of pivoting between wealth accumulation strategies (i.e. offense), or wealth preservation strategies (i.e. defense), in a timely fashion based upon asset class leadership. The methodology used is 100% rules-based, and designed to follow the strongest sector and asset class trends within a broad array of investment options. The strategy is based upon dynamic asset level investing, relative strength-based ranking process for each major asset class (including cash), and the rankings are then used to construct multi-asset class portfolios. Allocation changes have been required over the past year in order to compensate for the performance of certain assets classes. For example, in 2013 International Stocks were doing well and Corporate Bonds not so well. Those two have reversed in 2014.

What mistakes do you see individual investors making in the current financial climate?

For most of 2014, stock investors have seen little volatility and steady gains, giving them confidence to put money back into the market. The growth of this market may also make them complacent and not watch for a long term trend change. What seems to be most absent from individual portfolio management is a buy and sell discipline. They need to establish rules to follow, so they can protect their investments.

What trends are you anticipating will most impact investors over the next year?

If Harry Dent, Jim Rogers and other notable investment gurus are correct, the U.S. will be heading into a severe recession -- worse than in 2008. I don't know if it will happen or not, but I'm prepared to cut losses and protect the clients I manage money for.

Is there anything you would like to add?

Yes, our parents and grandparents could buy and hold stock in great companies like Chevron, Exxon Mobile, Enron, WorldCom, General Motors, collect their dividends and never worry about the principal. In our day and age, that is dangerous. These companies are not too big to fail -- and take your wealth with them. You need to monitor your stock, have a sell discipline and make sure it is working hard for you.John WhitingMoss Adams Wealth Advisors3700 Old Redwood Hwy., Santa Rosa 95403, 707-527-0800, john.whiting@mossadams.com

Have you adjusted your investment strategies in response to economic trends over the past year? Why, or why not?

[caption id="attachment_97152" align="alignright" width="173"] John Whiting[/caption]

We've shifted our philosophy from an asset-based allocation strategy to a risk-based allocation methodology. We believe portfolios should be viewed in the context of their risk exposure rather than solely by their return potential. For example, investing in international stocks involves two types of risk: equity market risk and currency risk. We'd take both into account as we allocate investments in a given portfolio. And speaking of international investments, we've shifted a greater portion of our equity allocation to international developed and emerging markets. Given the domestic market's performance in response to better economic growth prospects, the domestic equity market's future expected return is now lower. With Europe just emerging from a protracted recession and the divergence in performance compared with domestic equity, we place a higher expected return on European equity in the coming years. Emerging markets also have better growth prospects as a result of the demographic tailwind of an expanding middle class, which should lead to increased internal consumption. And, as with Europe, given the large divergence of equity market performance among emerging nations versus domestic markets, the expected return for this asset class is even greater.

What mistakes do you see individual investors making in the current financial climate?

Individual investors have been apprehensive about investing in equities, thinking they've already missed out on gains and feeling wary of a market correction. However, since it's virtually impossible to determine with a high degree of certainty when a market correction will occur, the opportunity cost of not participating in the stock market's appreciation until that point can be and has been very costly. We've been speculating about a market correction for the better part of two years without a meaningful downturn. From the beginning of 2012 through July 28 of this year, the S&P 500 has appreciated nearly 50 percent. In monetary terms an allocation of $500,000 at the start of 2012 would have resulted in a $250,000 gain. So if a correction of 15 percent were to occur starting July 28, investors would still have netted a gain of 27.5 percent, or $137,500, on their $500,000 investment. Moreover, given the available liquidity in the global markets today, the systemic market risk has diminished greatly, also reducing the risk of permanent impairment as a result of a market downturn. Therefore, the best course of action for individual investors is to act like an institution, which means differentiating your portfolio's sources of risk.

What trends are you anticipating will most impact investors over the next year?

The ongoing revolution in U.S. energy production is a trend we see as being secular in duration. We also think the federal government will enact energy export legislation, which means making a specific allocation to energy could have a very positive impact on portfolio performance over the next year and beyond.

Is there anything you would like to add?

To paraphrase an old investment adage, "The best time to invest was yesterday, and the next best time to invest is today." There will always be reasons not to invest, but if not investing is the result of fear of a potential market correction, investors may find that inaction proves to be more costly to them over the long run, as recent years have proved.Jonathan Leidy CFA, CFPPortico Wealth Advisors17 E. Sir Francis Drake Blvd., #218, Larkspur 94939, 415-925-8700, porticowealth.com

Have you adjusted your investment strategies in response to economic trends over the past year? Why, or why not?

[caption id="attachment_97153" align="alignright" width="192"] Jonathan Leidy[/caption]

We have not made many significant changes to our overarching investment strategies over the past 12 months. In general, we adhere to a philosophy rooted in the pillars of cost containment, global diversification, and sound risk budgeting. That noted, we have continued to tactically tilt our equity/stock positions more towards low volatility holdings and dividend payers, both domestically and abroad. In addition, recent geopolitical unrest has offered an opportunity to increase our emerging markets positions, with some emerging countries trading at meaningful discounts to the U.S. markets.

What mistakes do you see individual investors making in the current financial climate?

Mistakes might be a bit strong (or early), as that determination is one that can only be made through the rearview mirror. However, we have definitely observed a fair amount of investor complacency in response to the decrease in stock market volatility over the past 18-24 months. In turn, we see investors reaching for yield in the both the stock and bond markets as well as generally chasing performance as valuations appear increasingly stretched. Although we have no way of knowing whether or not a correction is imminent, one will eventually occur. In fact, we are rapidly approaching 1,100 days without a 10% correction in the S&P 500 index. There have only been four other times since World War II that U.S. stocks have evaded a correction for as long as the current 34-month stretch. In three of those previous instances, when stocks did finally fall, the corrections were greater than 20%. As a result, we believe those investors who remain true to their fundamental risk preferences and long-run objectives will fare better than those who overextended themselves in the short-term.

What trends are you anticipating will most impact investors over the next year?

The most likely trend investors will face heading into '15 will be rising interest rates and their impact on both bond and stock holdings. The Federal Reserve has been reasonably clear that it intends to cease its bond buying program sometime in the fourth quarter of '14. When that occurs, there will be a decrease in demand for U.S. Treasury bonds, likely leading to a decline in prices and an associated increase in yields. That increase will, in turn, likely result in higher borrowing costs for businesses, homeowners, and consumers. The question will be, has the economy recovered enough that it can continue to keep the bike upright, once the Fed has removed the training wheels? The outcome, of course, remains to be seen, but we believe volatility, which has been uncharacteristically low over the past few years, will increase next year.

Inflation, a close companion to rising interest rates, may well be a theme for investors in '15. Although gas prices have remained low, there have been some signs of inflationary pressures, both locally in housing as well as more broadly via healthcare costs in the wake of the ACA. Inflation is the "silent killer" of the investment world. Up to this point, individuals who have opted to leave money in cash, although not earning much if any real return, have not been explicitly penalized for doing so. However, if inflation mounts, in particular without simultaneous growth in the economy, cash earnings could turn negative on an inflation-adjusted basis.

Is there anything you would like to add?

There are very few things that an individual can control with respect to their investments. Wars, diseases, interest rates, Federal Reserve policies, politics, etc. all have effects on investor outcomes. These factors are also, by and large, beyond an individual investor's control. However, there are two things that every investor can control: cost and allocation. Moreover, it has been academically substantiated over the last 50 years that, above market timing and individual investment selection, cost and allocation are two of the most meaningful factors when it comes to explaining a portfolio's long-term performance. In other words, by focusing on the factors that an investor can control, he or she cannot only increase their chances of long-term investment success, but do so with the enhanced peace of mind that their portfolio is both risk-appropriate and cost-effective.Fred Dopfel, Ph.D.Co-Chairman of Investment Committee; Private Ocean750 Lindaro St., San Rafael 94901, 415-526-2900, www.privateocean.com

Have you adjusted your investment strategies in response to economic trends over the past year? Why, or why not?

[caption id="attachment_97154" align="alignright" width="173"] Fred Dopfel[/caption]

We continually monitor economic trends and new ideas in investing to ensure that our investment strategies are on the leading edge of financial thinking and are also well matched with investors' objectives. Over the last two years, we have shortened the duration within our bond portfolio to protect against rising interest rates and we have incorporated multi-asset alternatives strategies to improve diversification in an environment with high uncertainty about economic growth. Overall, the investment strategies have been fairly constant with minor adjustments, as our priorities remain to generate superior long-run returns via globally diversified portfolios with low-cost and tax-efficient implementation.

What mistakes do you see individual investors making in the current financial climate?

Investors have been inundated with news about the slow economic recovery, inflation, unemployment, the Fed-induced "taper tantrum," geo-political storms, and recent record highs on the stock market. It is hard for individual investors to maintain investment discipline in such an environment, as these headlines cause fear about one's life savings. Therefore, it is understandable that some investors have mistakenly reacted tactically by holding cash on the sidelines or otherwise trying unsuccessfully to time the market.

We also see some business owners not planning ahead on what to with their money when they eventually sell all or part of their enterprises. Many executives and entrepreneurs are so busy making money that they do not spend enough time thinking about how to manage their wealth and plan for financial security.

What trends are you anticipating will most impact investors over the next year?

The key trend is continuation of the global economic recovery. A consequence of recovery is that central banks will unwind easy money policies and that will have an impact on the trajectory of interest rates, real asset values, and global equity markets.

 William F. DagleyPresident and Senior Portfolio Manager

Private Wealth Partners80 E. Sir Francis Drake Blvd, 4th fl., Larkspur 94939, 415-461-3850, www.pwpart.com

Have you adjusted your investment strategies in response to economic trends over the past year? Why, or why not?

Yes, we have adjusted our investment strategies in response to economic trends, but not dramatically. Over the years, we have always strived to be proactive and disciplined. We spend a lot of time thnking about risk and what could go wrong. That said, our mandate is to invest money intelligently for high net-worth individuals and families. We have consistently focused on investing in "best of breed" companies that are well-positioned in the global marketplace, well-capitalized and well-managed. More than ever, it is important to remain patient and disciplined. Interest rates are artificially low and investors are scrambling to get yield. The "savers" are under a lot of pressure to make ends meet with the assets that they have accumulated during their careers.

What mistakes do you see individual investors making in the current financial climate?

Individual investors probably do not fully appreciate the amount of risk they might be taking. It was only a few years ago that the markets suffered big losses. The low-interest-rate environment serves to force investors farther out on the "risk curve" than appropriate, and that is because the so-called risk-free bonds do  not offer an attractive yield. On a relative basis, stocks are more attractive, especially if one has a 3-5 year time horizon. It is important to create a strategy that is consistent with one's risk tolerance and then execute the strategy with some tactical changes along the way.

What trends are you anticipating will most impact investors over the next year?

Certainly the geopolitical headlines are nerve-wracking. The Fed is stepping away from "quantitative easing," and yet, the 10-year Treasury yields only 2.5%! What is the appropriate asset allocation for for a retired couple that should not take excess risk and how does one make "ends meet" in the current low interest-rate environment? That is the assignment that we are asked to solve.Chris A. WaltersEVP & Director of Wealth Management; Rabobank, N.A.915 Highland Pointe Dr., Roseville 95678, 916-797-8215

Have you adjusted your investment strategies in response to economic trends over the past year? Why, or why not?

[caption id="attachment_97155" align="alignright" width="192"] Chris Walters[/caption]

The macroeconomic environment has caused us to re-evaluate all of our portfolio strategies in light of evolving risk/return scenarios. With a very impressive year in the equity markets in 2013, we continued to believe that the market would have another good year albeit, not at the level of 2013. Our equity philosophy shifted to larger capitalization companies and a greater focus on domestic versus international names. Our fixed-income strategy continued to shorten our portfolio durations to mitigate the effects of rising interest rates in 2015.

What mistakes do you see individual investors making in the current financial climate?

We see most individual investors lacking a comprehensive strategy. While they may have opinions or concerns regarding the global economies, these are not reflected in the positioning of their portfolios. They too often have poor visibility with respect to the interplay between the various investments they own and the concomitant risks incurred therein.

What trends are you anticipating will most impact investors over the next year?

The most significant trend to watch will be the eventual move in the interest rate policy of the Fed. We don't believe that Chair Yellen will be spooked into moving policy more quickly as a result of improving employment figures and their implications on inflation. It is our opinion that the Fed is focused on not derailing a recovery and, therefore, willing to be a little late with rate increases. Also important to the continued recovery is an improving housing market. Without improvement in this area, we are less sanguine about the economy and more concerned with a potential pull back in the markets.

Is there anything you would like to add?

I believe that what the past decade has taught us is that you cannot simply buy and forget. The interplay between asset classes and global economies can cause significant movement within a portfolio. Investing requires constant diligence.Tom HubertWealth Management Program Director; Redwood Credit Union, CUSO Financial Services, L.P.3033 Cleveland Ave., Santa Rosa 95403, 707-576-5040, redwoodcu.org/investments

[caption id="attachment_97156" align="alignright" width="192"] Tom Hubert[/caption]

At RCU Investment Services, available through CFS, our strategy has not changed. We tailor our recommendations to the individual, their goals, risk tolerance and long-term needs. As you can imagine, some may need to make adjustments to their investment strategies or specific holdings in a given environment, such as today's, while others will remain constant. The key is helping people to remain focused on their goals and to systematically review their portfolio with a professional.

What mistakes do you see individual investors making in the current financial climate?

There are many mistakes individual investors can make, and the biggest one is not having a plan. The absence of a plan leaves us to make decisions that are short-term oriented and overly emotional. Additionally, this can lead to procrastination. Life events such as retirement or funding a child's education can seem far in to the future and possibly an insurmountable task. While creating and following an investment plan won't guarantee anything, it certainly improves your chances for success. Everyone is different and we should all take the time to personalize our finances to match.

What trends are you anticipating will most impact investors over the next year?

Economically, it is widely reported we could see rising interest rates in the relatively near term. This is great for our savings accounts, but is not always as positive borrowers or bond owners. Separate from economic conditions, we are in an ever-evolving technological and regulatory environment. As we progress, as in the past, investors will need to adjust as well. This is why it is so important to regularly review and make changes that make sense for you.Bruce RaabePresident; Relevant Wealth AdvisorsTwo Belvedere Pl., #350, Mill Valley 94941, 415-925-4000, relevantwealth.com

Have you adjusted your investment strategies in response to economic trends over the past year? Why, or why not?

[caption id="attachment_97158" align="alignleft" width="211"] Bruce Raabe[/caption]

We have made small adjustments to our strategy as the U.S. economy continues to recover. No doubt, middle class income is still struggling to keep pace with inflation. The new jobs, welcome as they may be, are not necessarily solving this problem. Our bias remains focused on U.S. equities and international equities. We see ample opportunities to deliver excellent risk adjusted returns. On the income side, we see interest rates remaining stable for another three to four quarters. Our alternative income strategies continue to produce 5 percent--6 percent income while keeping duration short.

What mistakes do you see individual investors making in the current financial climate?

Individuals can become overwhelmed with the financial headlines and over concentrate investments in areas that are too risky. Asset allocation and diversification are often misunderstood by individuals which could be problematic as market volatility returns in coming years.

What trends are you anticipating will most impact investors over the next year?

We actually expect the next year to be rather calm. Interest rates should rise somewhat. This will slow the housing market down, but should not impact the equity markets. Technology and globalization will continue to pressure middle class wages. Global politics will continue to make headlines, but the global economic weakness will likely prevent a major disruptive event.

Is there anything you would like to add?

It is never too late to revisit your wealth strategy and professional relationships. Sure, the S&P 500 Index has doubled in just a few years. That does not mean there are not ample opportunities for investors to be successful. We've had great success with our clients over the last two decades by knowing that economic cycles are just that. Furthermore, wealth management is more than investment management. By addressing advanced planning topics such as tax, estate planning, insurance, and gifting, successful families can maximize the value of their investment success and ultimately achieve what is most important to them.Ivar J. Bolander, CIMA CWSFamily Wealth Director, Senior Vice President-Wealth Management, Wealth Adviser, Senior Investment Management Consultant; Sonoma Wealth Management Group at Morgan Stanley3562 Round Barn Cir., 1st fl., ?Santa Rosa 95403, 707-524-1068, morganstanleyfa.com/sonomawealthmanagementgroup

Have you adjusted your investment strategies in response to economic trends over the past year? Why, or why not?

[caption id="attachment_97159" align="alignleft" width="192"] Ivar Bolander[/caption]

We typically utilize Morgan Stanley's Global Investment Committee (GIC) recommendations, which we incorporate into recommendations we make to our clients for their portfolios. Clients will have a strategic allocation or benchmark portfolio constructed with longer term (GIC) inputs and tailored to their unique situation. We will recommend tactical shifts in the asset allocation of the portfolio as opportunities arise during the course of the year. We continue to recommend that investors tactically vs. strategically underweight cash and global bonds, and overweight equities.

What mistakes do you see individual investors making in the current financial climate?

It is not uncommon to find individual investors that lack proper diversification and do not have a strategic asset allocation framework in place that matches their unique circumstances and risk tolerances. Without a solid plan or "roadmap," they are subject to making financial decisions based on the most recent news, whether it comes from a "financial expert" on TV or a sound bite on the radio. There is a tremendous amount of daily noise and I believe that individual investors for the most part should embrace a longer-term focus to match their goals. They need to save for retirement, educate their children, provide for aging parents, leave a legacy and so on, all of which are longer term liabilities and need to be matched to the appropriate asset allocation from a portfolio perspective. Proper planning is the key.

What trends are you anticipating will most impact investors over the next year?

I anticipate that the Federal Reserve will dominate the investment conversation as it moves away from an expansionary monetary policy as it is currently winding down QE3, and the prospect of the first increase in the Fed Funds rate looms on the horizon. My concern is that investors, and in particular bond investors, may not be prepared for the negative impact a rising interest rate environment will have on their bond holdings.Michael J. SchmitzChief Operating Officer and Vice President of Investments; Schmitz Capital Partners655 Redwood Hwy., #109, Mill Valley, 415-381-9076, schmitzcapital.com

Have you adjusted your investment strategies in response to economic trends over the past year? Why, or why not?

Yes. Our investment strategy has been slightly adjusted to reflect improving economic growth in the U.S., continued geopolitical concerns (Cold War revival in Ukraine and Middle East instability) and the likelihood for longer term interest rates to begin to normalize from historically low levels and gradually trend higher. As a result, our investment strategy adjustments have been threefold. 1) Our overall fixed income strategy has involved the migration to strategic/unconstrained income funds that have a more flexible mandate to actively hedge duration risk; a shift away from government issued fixed income securities into shorter maturity fixed income securities to help reduce interest rate risk, and carefully monitored, but continued exposure to high yield securities because of the spreads and low defaults. 2) Despite difficulties in Russia and slowing growth in China, we are increasing allocations to emerging markets (EM's). EM's were hit particularly hard by the prospects of tapering and policy normalization in the U.S., and therefore underperformed other asset classes last year. We see this as an opportunity to invest at lower valuation levels versus developed markets, within a diversified portfolio. 3) As global economic activity has improved we believe in maintaining allocations to developed market equities, especially the U.S., but, given the potential for future volatility, we've added long/short strategies which may have greater ability to manage downside risk.

All of these strategy adjustments have been implemented with the hopes of stabilizing portfolio values in a gradually improving economic environment, but one that is riddled with uncertainty.

What mistakes do you see individual investors making in the current financial climate?

Theoretically, investors should be realistic about their appetite for risk and implement portfolio strategies within that risk tolerance in order to meet their long-term goals. However, since risk carries a "recency effect" (e.g. investors' most recent investment experiences are often what they expect to happen in the future), the market's record-breaking spree has certainly induced envy and the fear of missing out on the potential for generating larger returns. To make matters more difficult, often times investors are not always accurate in describing their risk tolerance thresholds and make costly decisions based on emotion. In the current financial climate, one of the most easily identifiable problems are the rapid changes in investor sentiment and a corresponding willingness to immediately accept more risk, or remain in an unproductive, defensive investment posture worrying about an impending Armageddon that may never materialize. This bifurcation in "stated" and "psychological" risk tolerances can pose some unique problems.

Exposing oneself to greater risk can prove particularly painful in the event of a correction, especially when one's risk tolerance and circumstances have not substantially changed. However, extreme risk aversion and not exposing oneself to an appropriate amount of risk can cause an inadvertent reduction in wealth.

Risk tolerance is often heavily influenced by outside, disinterested parties (e.g. friends, family, media) and traditional behavioral finance shows that investors usually have an asymmetric view of risk -- they are more scared of sustaining losses than they are of missing the opportunity to generate returns. While changing investor appetite for risk is not a mistake in and of itself, not understanding the underlying implications for making a change is a mistake.

In general, investors appear nervous and highly focused on bond performance and the possibility that rising interest rates could lead to losses in their fixed income holdings. Therefore, some individuals are dramatically reducing their fixed income holdings in anticipation of rising interest rates and blindly rotating into equity-oriented investments, some of which are trading at or near all-time highs. If one of the primary purposes of bonds/fixed income in a portfolio is to serve as ballast for risk, this may be an ill-advised strategy. Equities often demand significant time in the market to compensate for increased volatility, therefore the potential for a rising interest environment should not necessarily send a message to reallocate to equities. It should serve as an opportunity to evaluate stepping down the fixed income ladder toward shorter maturity fixed income securities to help reduce interest rate risk, and a potential migration up and to the left along the yield curve to things like strategic/unconstrained income funds that have a more flexible mandate to actively hedge duration risk.

What trends are you anticipating will most impact investors over the next year?

Global central bank policy has remained at the forefront of the economic debate since it has wide-reaching implications for growth, interest rates, currency valuation, and export growth trends. We believe that there will be some monetary policy divergence in the future as the Fed continues to tighten (via combination of tapering and raising interest rates sometime in 2015), while the Bank of Japan (BOJ) and European Central Bank (ECB) are pursuing expansionary monetary policies. The disparate growth results globally has the potential to create bouts of sharp volatility at times, particularly in equities. Therefore, despite continued global economic growth, the financial markets, which have seen strong and broad gains both in 2013 and so far in 2014, will likely face a more challenging environment. Increasing focus on the timing of the Fed's decision to raise rates along with the expiration of the taper in October 2014, potential headlines out of Europe, the Middle East and Asia, could lead to increased volatility in the global markets and impact the improving, but still fragile, U.S. economy.

We would expect to see:Increased volatility in global financial markets. While domestic volatility as measured by the VIX index has come down sharply recently, we expect bouts of volatility surges that coincide with unexpected pressures, political or otherwise, that might appear in a world with a delicate economic and geopolitical balance.Allocation shifts back to emerging markets, which lagged the U.S. last year, but have favorable demographics, valuations and growth outlooks.Continued domestic growth and relatively low inflation.Allocation shifts in fixed income portfolios in an effort to reduce interest rate risk and overall duration.The need for active management to make tactical adjustments in order to mitigate potential losses.

Is there anything you would like to add?

We have entered into an incredibly interesting time. The combination of recovering growth, low inflation and ultra-accommodative monetary policy has been a boon for the global financial markets. However, it has also created substantial debate and a fair amount of future uncertainty. On the one hand you have a relatively stable economic environment of growth, low inflation and low rates. On the other hand, equity markets seem to be frothy, and may have already prematurely priced in continued recovery and improving growth. Although insistence on waiting for the next pullback has proved costly for those who have waited to allocate, lower growth potential can mean less capacity to absorb negative shocks and sudden bouts of volatility. Markets can move away from fundamentals, and move away for prolonged periods of time, so a rotation away from equities and into fixed income is not necessarily the answer.

Unfortunately, the bond market is no safe haven for diversifying away from equity market risk. It is incredibly delicate, primarily because of interest rate risk. The fear of rising interest rates and the impact on bond prices loom, but how far out and how aggressively the interest rate adjustments happen remain up for debate. The uncertainly about how quickly and how high interest rates will rise makes prematurely rotating out of fixed income into a potentially more volatile equity market a risky strategy.

This particular environment takes extra special attention and continued diligence. Overall, we see several key downside risks which could derail any strategy. Weaker-than expected global growth, a hard landing in China, a reversion back to crises in Europe, geopolitical challenges from the Middle East and Russia, or a market sell-off in credit or emerging markets driven by risk aversion or a repricing of US rates.

In order to navigate these turbulent times and help mitigate some downside risk, we believe that successful investing will be predicated upon a thorough investment process, a carefully crafted investment plan that includes an understanding of the true nature of investment risk and continual monitoring and evaluation of that plan as the highly dynamic economic climate changes. We believe that in order to achieve investment objectives, in this climate investors must create an investment policy that addresses their unique investment goals, time horizon, timing of net portfolio additions or withdrawals, and, most importantly, their risk tolerance (understanding of the relationship and tradeoffs between risk and return and their own ability, willingness and need to accept market risk).Timothy Russell , CLU, ChFCValley Oak Wealth Management2 Ranch Dr., Novato 94945, 415-898-4439, valleyoakwm.com

Have you adjusted your investment strategies in response to economic trends over the past year? Why, or why not?

[caption id="attachment_97161" align="alignright" width="192"] Timothy Russell[/caption]

Our investment strategy is consistent. Our investment process employs a combination of fundamental and technical analysis, allowing us to closely evaluate market trends and make appropriate financial and investment decisions based on the trend data. We call this process, "Advance and Protect."Our history shows that this process positions us to perform well in positive markets and sidestep market drops. We used the very same process and strategies in the record-breaking year of 2013 as well as during the great recession of 2008.

What mistakes do you see individual investors making in the current financial climate?

Individual investors may not always have access to the latest research and financial results. They might be making decisions based on limited or old information, or what they read in newspaper and on-line financial and world news headlines.

The current financial climate is complex. We have seen individual investors make poor investment decisions recently simply because they didn't have the time or resources to put into research and assessment of where to put their money. They will either just "wing it" or possibly just leave their assets in cash. Both of these strategies can be very detrimental to their portfolio.

It is our belief that individual investors can benefit greatly from having a wealth management advisor who has a process that can be articulated in simple terms. Having an investment process is critical in this current financial climate because an individual investor can get lost in all the noise. A good wealth advisor can filter that noise.

What trends are you anticipating will most impact investors over the next year?

We believe that the three most important trends that will have an impact on investors over the next year are:

Geopolitical risk: It is important to understand that there are different types of geopolitical risks. Military posturing between countries has a temporary affect on the markets but if China decides to cut their purchase of U. S. Treasuries, this could significantly depress economic growth for a long time. Hedging and diversifying to protect a portfolio might be a sound strategy.

Inflation will beat deflation: Investing during times of high inflation like the 1970s is different from investing in low inflationary periods. Stocks and bonds that benefit from low inflationary periods may not act the same in high inflationary periods.

Healthcare will continue to change because of new legislation: Although we see this as a longer-term trend, there will be an increasing demand for healthcare services because of the aging population and shortages of physicians. We believe that health care will undergo profound changes and that managed care and medical device companies will benefit from these changes.

 Robert M. Cheney, CFA, CFPFounder and Wealth Adviser; Westridge Wealth Strategies650-233-9122, westridgewealth.com

Have you adjusted your investment strategies in response to economic trends over the past year? Why, or why not?

We have made only small adjustments to clients' asset allocation over the last year to reduce an over-exposure to equities and rebalanced those funds to non-traded alternative investments (for Accredited Investors) and to stable-principal insurance assets. Generally, we expect to help clients ride out any market volatility with this kind of allocation to a broad portfolio that encompasses assets beyond just traditional, listed stocks and bonds and to stick with their long-term plan.

What mistakes do you see individual investors making in the current financial climate?

Market timing: sitting in cash waiting for the right "entry point." Again, we recommend people stick with a long-term allocation plan and do not market time with the majority of their portfolio going into or out of the market.

What trends are you anticipating will most impact investors over the next year?

We are preparing clients for increased market volatility, in both equity and fixed income, in coming years.

Is there anything you would like to add?

Advisers should help clients control those variables which can be controlled, such as maintaining the right risk levels, maintaining reasonable expenses, and implementing tax planning where possible. Despite claims of the active fund management industry, market timing is not one of those variables that can be controlled, and hence should not be an emphasis.Bruce Dzieza, CFPWillow Creek Wealth Management?825 Gravenstein Hwy. N., #5, ?Sebastopol 95472, 707-829-1146, willowcreekwealth.com

Have you adjusted your investment strategies in response to economic trends over the past year? Why, or why not?

[caption id="attachment_97162" align="alignright" width="192"] Bruce Dzieza[/caption]

Rather than react to ever-changing economic trends, we continue to keep our focus on the things we can control: low cost investment options, global diversification, strategic rebalancing, asset location and tax-efficiency. In keeping with our philosophy to utilize a disciplined long-term investment strategy, we find no reason to alter portfolios based on current economic trends. That said, the North Bay economic recovery is allowing our clients to feel more optimistic about their financial future and their willingness to take some additional equity risk. On the bond side, we maintain our bond duration in the low to intermediate term. The expected increase in interest rates has not yet occurred, but we believe that rates will eventually rise and, if done in an orderly manner, should not have a dramatic affect on bond values.

What mistakes do you see individual investors making in the current financial climate?

The aftermath of the Great Recession lingers in many investors' minds. It's been more than five years into the bull market and the North Bay economy is improving; job growth is good with housing prices increasing at a reasonable rate. Prior to the recovery, investors were hesitant to invest in equities for fear of losing not only their jobs, but their nest eggs. Now things are different and we see investors, once again, confident enough to ask us about the same Wall Street pushed -- products like private-equity deals, Hedge Funds and Annuities that they were asking about in 2007.

The mistakes we see investors make are allowing their emotions to rule their financial decision making. Typically they are either excited about buying more stocks (increasing investment risk) or remaining on the sidelines in cash (increasing purchasing power and longevity risk). Unfortunately, this type of investor can be susceptible to Wall Street predictions on what markets will do in the future. Numerous academic studies have shown "market timing" doesn't work. What investors need to focus on is developing a financial plan, coordinating the plan with their personal portfolio and making sure both are properly implemented and maintained. And where the portfolio is concerned, simple is better – if you don't understand it, don't invest in it!

What trends are you anticipating will most impact investors over the next year?

Women are becoming more confident in their abilities to invest their family's money. According to Boston College's Center on Wealth Philanthropy, the generational transfer of wealth is snowballing. Women will inherit 70 percent of the $41 trillion in inter-generational wealth over the next 40 years. We see a marked increase in women who want to develop both investment and financial plans. This historic change of financial control will alter the investment landscape and preparation for this significant shift needs to start now. Millenials, on the other hand, are avoiding risk at their own peril. According to Greg McBride of Bankrate.com, 39 percent of millennials say cash is their No. 1 choice to invest money they don't need for at least 10 years, compared to 25 percent of all respondents. Approximately 24 percent of millennials preferred to invest in real estate, while just 13 percent selected the stock market. This preference for the safety of cash is cause for concern. With ever increasing life expectancy, millennials should start investing in equities to be able to keep up with inflation – cash won't do it.

Is there anything you would like to add?

Investors long for simpler solutions to their financial situations. Wall Street creates complicated products that confuse and distract the investor from focusing on the things they can control; making it increasingly difficult for investors to make smart investment decisions. Savings, systematic investing in broad markets, monitoring investment costs, and developing and understanding your investment plan are the key to a successful investment experience.

There are many things investors can do to gain control of their investments: 1) Consolidate your accounts -- you don't need IRA's at three custodians or multiple brokerage accounts. 2) Markets work -- accept that market prices are a fair reflection of the collective opinions of millions of investors. Bet with the market, not against it. 3) Taxes matter -- think twice before selling appreciated assets. Always consider tax planning in conjunction with your investment planning. 4) Stay engaged -- maintain a disciplined approach and rebalance your portfolio on a regular basis. 5) Get professional help if investing isn't your strong suit. Objective, unbiased, independent advisors can help you meet your goals and have peace of mind.Alice King, J.D.CEO; Wine Country Wealth Management755 Baywod Dr., 2nd fl., Petaluma 94954, 707-933-1549, winecountrywealthmanagement.com

Have you adjusted your investment strategies in response to economic trends over the past year? Why, or why not?

Our approach to investing combines more than eight decades of market data, Nobel Prize-winning academic research and the latest discoveries in behavioral finance. The main objective is reducing investment risk through diversification, which we call asset allocation. Diversification is intended to reduce the volatility (fluctuations in value) of the investment portfolio. In addition, we exercise care to minimize income taxes and investments' expenses by utilizing institutional mutual funds that have less overhead expense and turnover than their retail counterparts. Furthermore, we manage the behavioral risk of investors (our clients) guided by the latest insights of behavioral finance – to make sure emotions don't get in the way of sound financial decisions. Because our approach is comprehensive and consistent throughout the markets' ups and downs, no, we do not change course in response to specific events.

What mistakes do you see individual investors making in the current financial climate?

Some investors have a tendency to become paralyzed and hesitant to make decisions, because the continuing volatility in the stock markets at home and abroad (and the protracted real estate recovery) has them second-guessing themselves. We see our role as being their objective "sounding boards" and encouraging them to take a long term view as opposed to reacting to the doom and gloom in the media.

What trends are you anticipating will most impact investors over the next year?

We continue to keep a close eye on all the many factors that affect our clients' abilities to reach their financial goals, especially their lifestyle in retirement. Of course, this goes beyond how their portfolios are invested, as there are many other variable to consider such as future income tax rates' likelihood to increase, rising costs of uninsured medical expenses in retirement and options for funding long term care expenses (with fewer insurance companies staying in this business). In the near term, for high income and high net worth clients, we are reviewing tax mitigation and estate planning strategies in light of the previous year's income tax increases and Congress' enactment of the new federal estate tax regime.

Is there anything you would like to add?

Our firm's investment approach is based on our belief that an effective investment strategy can only be designed as a component part of the financial planning process. This enables an investment strategy to be personalized and integrated with a client's specific goals and objectives, while also considering income tax considerations and a client's financial and emotional ability to handle risk. Please visit our website for more information.