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Road ahead for your money: North Bay wealth managers unpack what’s known and possible in this challenging year

Closing out more than a year of uncertainty, those who are in the business of helping others maximize their money answered the Journal’s questions about where we are and where we are headed.

In the pandemic, more people saved. Did they sock money away in safer, but lower return vehicles like saving or money market accounts? And if so, are they already moving money to more return-driven investments?

John Baxman, CFP, director and senior adviser, Litman Gregory Asset Management, 900 Larkspur Landing Circle, Suite 285, Larkspur 94939; 415-461-8999; www.lgam.com
John Baxman, CFP, director and senior adviser, Litman Gregory Asset Management, 900 Larkspur Landing Circle, Suite 285, Larkspur 94939; 415-461-8999; www.lgam.com

John Baxman: We are constantly working with our clients to determine an appropriate amount of money to keep in safer investments like money markets to draw on for short-term cash needs or for an emergency.

The onset of the pandemic was another opportunity to reassess our client’s cash reserves to ensure that their short-term cash needs can be met. While it has been appropriate for some of our clients to build a higher level of cash reserves than usual, throughout the pandemic most clients have agreed to consistently add excess cash from savings to their diversified investment portfolios opportunistically or as way to rebalance their existing portfolio holdings.

Although adding to more return driven investments can be uncomfortable during this period of extreme uncertainly, our clients’ have been feeling better about investing more aggressively as signs of a global economic recovery continue to take hold.

Related, have you moved on your outlook, now that there are signs that the economy is quickly shaking off the pandemic, to a more aggressive stance with your investment suggestions for clients.

We expect that the global economy will continue to recover, and that corporate earnings growth will be solid. We believe that this backdrop will favor higher-returning asset classes. While our portfolios are diversified across many types of investments, we have slightly increased our allocation to stocks across our portfolio strategies.

Because there is still a high level uncertainly around the course of the pandemic, we are sure to be in contact with our clients to continually discuss their portfolio strategy and any changes that should be made as their circumstances, or our investment outlook changes.

Colten Christianson, senior adviser, Moss Adams, 3558 Round Barn Blvd., Suite 300, Santa Rosa 95403; colten.christianson@mossadams.com
Colten Christianson, senior adviser, Moss Adams, 3558 Round Barn Blvd., Suite 300, Santa Rosa 95403; colten.christianson@mossadams.com

Colten Christianson: Consumer balance sheets are much stronger than they were in 2008 during the Great Recession, with a higher household net worth and a lower debt-service ratio. Trillions of dollars in fiscal stimulus have certainly been a contributor, but I think many investors also learned from the past and were better prepared this time around.

Volatility in the markets is challenging even for experienced investors, but it also represents a great deal of opportunity. We’re certainly not market timers, but we do work with our clients to ensure they’re investing new capital and rebalancing existing portfolios when it makes sense. Although it may seem counterintuitive, buying into market volatility allows you to access more attractive entry points—we saw this back in March 2020 when investors purchased at 2016–2017 prices, for example.

Tom Hubert, senior vice president of auto, insurance and wealth services, Redwood Credit Union, 3033 Cleveland Ave., Santa Rosa 95403; 707-576-5040; redwoodcu.org/investments
Tom Hubert, senior vice president of auto, insurance and wealth services, Redwood Credit Union, 3033 Cleveland Ave., Santa Rosa 95403; 707-576-5040; redwoodcu.org/investments

Tom Hubert: Yes, we experienced a significant increase in the average balance of savings products. The expectation is this will remain the case for the near term. Given the increase savings rates during the pandemic, members are investing some of money that has built up in their accounts. In addition to the team of financial advisers that serve the membership, we’ve accelerated efforts to make investment services available remotely through the use of digital documents and access alongside our more traditional accounts in our online banking portal.

This creates additional convenient digital access points for those with investment accounts. The key for most individuals is to determine the destination for money they have accumulated and then find the right product to meet that goal.

Rupa Jack, 700 Main Street, Suite 315, Napa 94559; 707-254-4432, rupa.jack@morganstanley.com. Craig Franklin, 3562 Round Barn Circle, first floor, Santa Rosa 95403; 707-524-1001, craig.franklin@morganstanley.com. Senior vice presidents, wealth advisers, family wealth directors, Sonoma Wealth Management Group at Morgan Stanley; advisor.morganstanley.com/sonoma-wealth-management-group (Robet Pierce photo)
Rupa Jack, 700 Main Street, Suite 315, Napa 94559; 707-254-4432, rupa.jack@morganstanley.com. Craig Franklin, 3562 Round Barn Circle, first floor, Santa Rosa 95403; 707-524-1001, craig.franklin@morganstanley.com. Senior vice presidents, wealth advisers, family wealth directors, Sonoma Wealth Management Group at Morgan Stanley; advisor.morganstanley.com/sonoma-wealth-management-group (Robet Pierce photo)

Rupa Jack and Craig Franklin: According to the U.S. Bureau of Economic Analysis, in April 2020, the personal savings rate blasted to over 33% as a reaction to COVID-19. Consumer spending has grown and the categories that were strongest in June included department stores, electronics & appliances, clothing, gas stations, and restaurants.

The savings rate as of June 2021 is at 9.4%. There is still quite a bit of cash on the sidelines. Perhaps consumers are less willing to spend it due to the potential impact of the Delta variant of COVID-19 on the economy. (Source: U.S. Bureau of Economic Analysis)

Emily Menjou, vice president and personal trust fiduciary manager, Exchange Bank Trust & Investment Management, 545 Fourth St., Santa Rosa  95401; 707-522-2361; emily.menjou@exchangebank.com
Emily Menjou, vice president and personal trust fiduciary manager, Exchange Bank Trust & Investment Management, 545 Fourth St., Santa Rosa 95401; 707-522-2361; emily.menjou@exchangebank.com

Emily Menjou: We found that people applied their excess liquidity based on their nature. Some clients took a risk and invested in cryptocurrency and meme stocks, while more risk-averse clients held savings in short term fixed income vehicles or money market accounts.

For the investments that Exchange Bank continued to manage during the pandemic, we counseled our clients to make financial decisions based on their long-term goals and financial needs, not based on fear or emotion due to short term market volatility.

While some of our clients shifted to more conservative allocations, most maintained their pre-pandemic target allocations.

Greg Onken, managing directors, J.P. Morgan Advisors, OS Group, 560 Mission St., Suite 2400, San Francisco 94105; 415-772-3123; greg.onken@jpmorgan.com ; jpmorgansecurities.com/os-group
Greg Onken, managing directors, J.P. Morgan Advisors, OS Group, 560 Mission St., Suite 2400, San Francisco 94105; 415-772-3123; greg.onken@jpmorgan.com ; jpmorgansecurities.com/os-group

Greg Onken: We saw relatively early in the pandemic that for certain clients it made sense to allocate more to equities rather than “sock money away” in low-return, cash-like investments.

Back then we saw value in “secular growth” and “dividend growth” strategies in both the US and International equity markets. Every situation is different and each client’s position is unique, but equities are currently supported by earnings momentum, accelerating buybacks, an improving but evolving COVID environment, additional stimulus and a potentially improving labor market. In addition, dividend growth offers an alternative to cash flows from a traditional bond allocation and garner a different potential appreciation profile for some portfolios.

Bruce Raabe, Relevant Wealth, 2 Belvedere Place, Suite 350, Mill Valley 94941; 415-609-8546; relevantwealth.com
Bruce Raabe, Relevant Wealth, 2 Belvedere Place, Suite 350, Mill Valley 94941; 415-609-8546; relevantwealth.com

Bruce Raabe: The massive government stimulus over the last year has resulted in a V shaped economic recovery. GDP is once again at an all time high. Our clients have generally retained their long-term asset allocation which emphasizes U.S. equities. This asset class has been the clear winner over the last 5 years and especially in 2021.

Charles J. Root Jr., CFP, managing director, Double Eagle Financial, a registered investment adviser, 2300 Bethards Drive, Suite R, PO Box 2790, Santa Rosa  95405; 707-576-1313
Charles J. Root Jr., CFP, managing director, Double Eagle Financial, a registered investment adviser, 2300 Bethards Drive, Suite R, PO Box 2790, Santa Rosa  95405; 707-576-1313

Charles J. Root Jr.: Our clients didn’t seem to move much more money around than usual. We have most of their investable assets, so that is not a factor.

We didn’t see any changes in strategy. Most clients are retired and they are spending the money they receive.

Rory Springfield,  CFA, senior vice president and wealth management adviser, Springfield Wealth Management Group, 555 California St., San Francisco 94104; 415-676-2626; rory_springfield@ml.com
Rory Springfield, CFA, senior vice president and wealth management adviser, Springfield Wealth Management Group, 555 California St., San Francisco 94104; 415-676-2626; rory_springfield@ml.com

Rory Springfield: Clients in general added to their current investment strategies or withdrew less if retired and kept their investment strategies intact.

During the start of Covid I was optimistic that the markets would recover and recommended that they rebalance their fixed income allocation into equities to take advantage of the aggressive move in bonds and the depressed prices of stocks, glad that worked out so well!

Montgomery Taylor,  CPA, CFP, CEO, Montgomery Taylor Wealth Management, 2880 Cleveland Ave., Suite 2, Santa Rosa 95403; 707-576-870; monty@montgomerytaylorwealth.com
Montgomery Taylor, CPA, CFP, CEO, Montgomery Taylor Wealth Management, 2880 Cleveland Ave., Suite 2, Santa Rosa 95403; 707-576-870; monty@montgomerytaylorwealth.com

Montgomery Taylor: Yes, I’ve seen clients building up cash reserves in their bank account. This was a temporary move and they have been moving that money into their brokerage accounts, to achieve higher investment returns, under our management.

Related, have you moved on your outlook, now that there are signs that the economy is quickly shaking off the pandemic, to a more aggressive stance with your investment suggestions for clients.

We are not moving to a more aggressive stance with our clients. However, we are having more communications about investment strategy and updating their risk tolerance profiles to ensure they are invested appropriately to achieve their long-term goals.

Lily Taft,  manager, Main Street Research Wealth Management, 30 Liberty Ship Way, Suite 3330, Sausalito 94965; 415-289-1010; lily@ms-research.com; ms-research.com
Lily Taft, manager, Main Street Research Wealth Management, 30 Liberty Ship Way, Suite 3330, Sausalito 94965; 415-289-1010; lily@ms-research.com; ms-research.com

Lily Taft: Everybody has a unique relationship to money, although it was no surprise when the volatility in 2020 spooked many investors and their fears triggered a large, conservative shift. Although most have begun to move towards more “risk on” investments in light of the vaccine effort and economic reopening, we are still seeing record amounts of cash holdings.

On the other hand, some investors “stayed the course” and did not move their savings, and others actually saw opportunistic valuations and were buying at pandemic lows. We think it is important to have a plan and stick to it, especially during recessions.

We would also caution against following the crowd’s mentality of when to take investment risk, as a contrarian stance has historically been most lucrative.

Our firm’s strategy lies in the middle – we still bought stocks for clients during lockdown, although we focused on businesses with stable demand such as food, household products, and internet providers. Now that the worst of COVID is likely behind us, we are focusing on more cyclical areas of the economy like luxury goods, automobiles, and credit cards.

John Thiel, MBA, CFP, financial adviser, Private Ocean Wealth Management, 100 Smith Ranch Road, Suite 300, San Rafael 94903; 415-526-2900; www.privateocean.com/john (Christophe Testi photo)
John Thiel, MBA, CFP, financial adviser, Private Ocean Wealth Management, 100 Smith Ranch Road, Suite 300, San Rafael 94903; 415-526-2900; www.privateocean.com/john (Christophe Testi photo)

John Thiel: During the pandemic many people did save more as well as pay down debt. The federal stimulus packages also contributed to the amount of cash held. Most of the clients we worked with had very little change in how much cash they held relative to their invested funds.

Given how unpredictable markets are in the short term, we don’t encourage clients to fundamentally change their portfolio based near term market changes. Rather, we believe that markets will reward us for taking a long term diversified approach to investing.

Jake Weber,  CFP, wealth adviser, Willow Creek Wealth Management, 825 Gravenstein Highway N., Suite 5, Sebastopol 95472; 707-829-1146; jake@willowcreekwealth.com; willowcreekwealth.com
Jake Weber, CFP, wealth adviser, Willow Creek Wealth Management, 825 Gravenstein Highway N., Suite 5, Sebastopol 95472; 707-829-1146; jake@willowcreekwealth.com; willowcreekwealth.com

Jake Weber: Whether or not someone was able to save more during the pandemic is different case by case. The people who did save more did not significantly invest more in aggressive investments.

Most of the savings seem to be set aside for house projects, charitable giving, helping family, and vacations as things begin to open back up.

In my experience, more people saved in low-risk cash alternatives during the initial stages of the pandemic. Still, as the stock market rebounded, as might be expected, more investors felt comfortable with rebalancing into stocks and return-driven investments.

David Wissinger, director of investment management services, Mechanics Bank, 1111 Civic Drive, Suite 333, Walnut Creek, 94596; 800-781-3441; mechanicsbank.com/Wealth-Management
David Wissinger, director of investment management services, Mechanics Bank, 1111 Civic Drive, Suite 333, Walnut Creek, 94596; 800-781-3441; mechanicsbank.com/Wealth-Management

David Wissinger: During the pandemic spending opportunities were few and so savings rates increased. These increased savings were met by low interest rates, close to zero. That’s not a new story. Low rates have pushed savers into the stock market for the past 10 years, and that trend is continuing, especially now with many investment avenues like Robinhhood catering to new investors with a smaller net worth.

Related, have you moved on your outlook, now that there are signs that the economy is quickly shaking off the pandemic, to a more aggressive stance with your investment suggestions for clients?

John Baxman: We expect that the global economy will continue to recover, and that corporate earnings growth will be solid. We believe that this backdrop will favor higher-returning asset classes. While our portfolios are diversified across many types of investments, we have slightly increased our allocation to stocks across our portfolio strategies.

Because there is still a high level uncertainly around the course of the pandemic, we are sure to be in contact with our clients to continually discuss their portfolio strategy and any changes that should be made as their circumstances, or our investment outlook changes.

Colten Christianson: Historically investors have been rewarded for not trying to time short-term market actions. Therefore, it’s important to select a stance that you’re comfortable with over the long term.

We employ a comprehensive financial-planning process to help our clients evaluate and ultimately select an appropriate risk profile. This process includes an evaluation of several factors including:

  • Balance-sheet composition
  • Appetite for risk
  • Use of funds
  • Timeline for the use of funds
  • Level of risk required to achieve the goals and objectives

As an example, the strategy for the portion of your portfolio or balance sheet that’s intended to cover future lifetime consumption goals may be—and often is—different than the strategies for shorter-term expenses, multigenerational wealth, philanthropic and wealth stewardship, and other aspirational goals and objectives.

Tom Hubert: There are times when portfolio adjustments make sense and times when staying the course is the right decision. This is generally not determined by the external economy but rather by your own personal needs and goals. With a focus on education, our advisers take the time to help our clients re-evaluate their portfolios based on changes to their goals, and then recommend appropriate adjustments only if necessary.

This ensures financial decisions are personal to the individual but not necessarily applicable to everyone in a general sense.

Rupa Jack and Craig Franklin: We do a lot of planning and coaching with our clients to take emotions out in order to help them avoid selling out of panic when markets decline, or chasing gains out of exuberance when markets rise – in other words, the possibility of buying high and selling low.

Investors tend to be reactionary and may enter/exit the market at the wrong time. Taking a longer-term perspective and not reacting instinctively can help preserve or enhance gains and minimize losses.

We take other important factors into account to guard against more than just market volatility, such as the possibility of retiring too early, spending more than what their investments can sustain, failing to withdraw less from their retirement funds when markets turn choppy, or the possibility that they may outlive their assets.

Emily Menjou: No. If you think about the story of the turtle and the hare, Exchange Bank is the turtle. Our process-based approach includes making a long-term plan and sticking with it, to help our clients achieve the most desirable outcome given their unique goals and risk tolerances.

There is considerable evidence that changing asset allocation in an attempt to time the market is very destructive to long term performance.  We believe that slow and steady wins the race, and we manage investments accordingly.

Greg Onken: Our primary exposure to any economic recovery is through our dividend growth allocation and investments.  A lot, but not all, of the companies that possess the financial strength and have demonstrated a propensity for dividend hikes are more cyclically exposed to an economic reopening.

Over time, we have increased this allocation as the reopening gained probability. We have also begun to reduce some of our credit-related investments as the appreciation has been rapid and the risk of increasing interest rates could negatively impact certain credit investments.

Bruce Raabe: No. We are far from out of the woods with the delta variant rising at a rapid pace.  Now is not the time to be adding additional risk. In fact, we are remaining laser focused on the current trends as a reversal in the re-opening of our economy would be problematic.

Charles J. Root Jr.: We have not changed our investment strategy. We invest assets that cannot be lost, so risk is a primary concern. We need to be proactive so that people who take retirement income do not reduce their account balances, which would reduce their income. With many retired clients we send out a lot of money each year.

Rory Springfield: I believe all the low hanging fruit has been picked, but the large amount of liquidity/stimulus that was put into the economy along with low rates will continue to keep the market healthy and make new highs into 2022.

Lily Taft: Yes, with so much pent-up demand and monetary stimulus, we are seeing estimates for GDP growth as high as 6% — these are levels we have not seen for decades. We’re focusing on “high Beta” stocks to take advantage of such record growth.

Beta is a data point that measures the sensitivity of a stock to the overall market. For example, if stock ABC has a beta of 2, and the market goes up 10%, some models would predict a 20% move in ABC (2 times 10%). The reality is never perfectly reflected by financial models, but it is still important to pay attention to this type of data. We are also paying attention to stocks with smaller market capitalizations, as small companies tend to outperform in the early phases of the business cycle.

Growth can be easier to achieve at smaller, more nimble companies, given the right economic backdrop.

John Thiel: My outlook on markets is always the same, volatility in the short term and growth in the long term. While we expect continued economic recovery from the pandemic, it’s not over, and we are still unsure when the end will be in sight, especially with the onset of the Delta Variant.

However, even if the economy takes a long time to fully heal, 2020 showed us that the stock market and economy do not move in lock step with each other. Our clients do not change their portfolios based on where anyone thinks the market will go in the short term. Rather, we recommend clients stay with a diversified investment portfolio that seeks growth over the long term.

The best time to have taken an aggressive stance with investments would have been in late March of last year, but it wasn’t obvious how bad things were going to get at the time. Since then, the market has grown extraordinarily! We don’t know where the market will go from here, which is why investing now with a short term profit goal could prove to be very risky.

Jake Weber: I have not shifted my stance to be more aggressive with investment suggestions. My investment recommendations and investment schedules are consistent regardless of short-term market events. The recovery that we saw in markets since March 2020 is not an event that would cause us to change our investment style.

David Wissinger: Our outlook has been consistent that equities are the place to be for long term growth, especially now with bond yields at historical lows. So, no, we have not become more aggressive, but we see no real alternative to stocks for acceptable returns.

You have experienced the very brief recession from the pandemic, perhaps even the Great Recession of a few years back. Survived or thrived? Did you learn some lessons that you take forward now?

John Baxman: The first lesson is to continually make sure that our clients have enough money in safe investments to whether a downturn in the economy and the markets for an extended period. Establishing a short-term cash reserve or an emergency fund has always been a part of the planning process, but the nature of the past two recessions have highlighted the importance of carefully determining the correct amount to hold in safe investments.

Another important lesson is to take the time to understand how your longer-term investment portfolio will fair during a time when the economy and financial markets are under a high level of stress.

Our client portfolios are diversified, but there have been periods when many of the major asset classes have declined in value at the same time. We help our clients to understand how their portfolio strategy will perform under different economic and market scenarios to ensure that they can stick to a disciplined investment strategy through a market downturn which we believe will lead to long term success.

Colten Christianson: Recessions and market volatility in general are normal and frankly, to be expected. Each one is a bit different, but they’re all challenging—even for experienced investors.

It’s critical to establish a comprehensive financial plan that is longer term in nature and considers the impacts of market volatility on the results.

This will help ensure that the targeted approach will be successful in various market environments. It’ll also reduce the likelihood of an emotional reaction or deviation from the plan if there’s extended volatility in the capital markets.

Tom Hubert: We’ve experienced both and thrived. We work hard to support our members not only in the good times, but more importantly in the bad. The lessons learned are not new even if the cause is different. We find the best strategies come from having a plan that supports financial decision-making. Once there’s a solid plan in place, remain disciplined and focus on the goal while taking an active role by educating yourself, and work with an advisor you connect with at an organization you trust.

Rupa Jack and Craig Franklin: Our team continues to thrive. I believe that taking emotions out of the investing and using goals-based planning is of value to our clients.

We work closely with our clients to understand their needs while maintaining focus and discipline to help guide their portfolios through the most challenging market cycles. Market timing is a costly strategy.

Large downswings in the market tend to coincide with large upswings; therefore, trying to time the market may lead to missing some of the strongest days of returns. Investors who have held or bought on market weakness have progressively higher returns historically.

Emily Menjou: The pandemic has highlighted so many life lessons, and one of the biggest takeaways for me is the importance of planning. On the investment side, we know it is important to have a plan and stay the course.

On the trust administration side, we’ve all been reminded that life is fleeting, and there is no time like the present to complete an estate plan.

On the flip side of planning, we also learned the vital importance of flexibility as the pandemic rules were continually changing. We had to learn new ways of connecting with our clients, advisers and staff, including virtual meetings and working from home. While we are happy to be back in the office, we will keep our ability to connect virtually should future emergencies arise and for the comfort of our clients.

Greg Onken: Personally, I have seen a lot during my four decades in the financial services industry, and while the COVID-19 pandemic and resulting market volatility defied any comparison to previous experiences, we simply applied what we have learned in previous disruptive periods.

Notably, we wrote something a couple of quarters ago about the use of the word unprecedented and how many times it showed up in different reports and commentaries. The appearance of the word unprecedented was unprecedented.

We were trying to be clever but at the same time illustrating that no one had actually seen anything like this before. There was a risk of death, which made it more serious.  I found that our team’s preparations before the crisis meant we didn’t have to make many large changes.

The most work we did was ensuring consistent communication with clients which was made challenging because some of us were working remotely.

Bruce Raabe: Yes. We are fortunate to live in a society with a resilient workforce and economy. Even the Great Recession was short lived. Today, our economy is reinventing itself once again ensuring the future prosperity of our society.

Charles J. Root Jr.: We didn’t see a recession except in the media, and in some restaurant or personal service businesses. Our clients are very comfortable with out investing plan, so there was no change.

Rory Springfield: Our practice and clients balance sheets have never been stronger with mortgage/lending rates at all-time lows and statement balance sheets at all-time highs.  The Internet Bubble and Great Recession helped me to stay calm and not overreact to the situation.

Montgomery Taylor: We’ve worked through many market corrections over the decades we’ve been in business. The 2020 pandemic induced market downturn happened more suddenly than usual—as market corrections go. However, the market recovery was also quick and complete. We have not experienced market losses.

Lily Taft: Though some moments felt more like surviving, looking back I am extremely proud of my team and our strategy and how we have thrived during these periods. As I mentioned earlier, we think the most important thing is to have a plan and stick to it. I am not sure where we would be if we deviated from our original ideas, but I am so thankful for our disciplined process.

As human beings, we naturally second guess big decisions, and I have learned to continue to block out the noise and focus on the time-tested, process-oriented strategy that my team has created.

We call this process “ARM,” or Active Risk Management. The first facet of ARM involves strategic asset allocation, because we believe certain environments warrant a more conservative approach.

Our clients simply own less stock during these periods. The second facet of ARM includes tactical sector rotation, meaning we intentionally overweight attractive themes such as EVs, internet infrastructure, and e-commerce while underweighting less attractive areas such as utilities or Chinese technology. The last facet of ARM includes the use of carefully placed stop-losses orders, which help us protect against catastrophic decline.

John Thiel: When the pandemic first hit, we didn’t know how bad it was going to affect the economy and markets, so we had to prepare for the worst should it come to be.

As the year went on, markets began to recover at a rapid rate, such that by the time we were in December the wealth management industry as a whole was thriving.

This is also when the gap between economic growth and stock market growth was incredibly large. 2021 has also been a year of extraordinary stock market growth and the economy has also had positive growth, but we are not out of the woods yet.

For those that could, the speed at which people adapted to working remotely and using technology to facilitate the change was stunning. The pandemic was a technology accelerator, and we all learned a lesson in how fast we can adapt to these types of changes.

However, even if we can effectively operate from remote locations, we all still need some degree of human interaction. Throughout the pandemic we had to learn creative ways to stay connected with each other such as staying in your “bubble,” having Zoom social hours, lots and lots of hikes, and a variety of other activities.

Jake Weber: Our clients have thrived. These economic events, although challenging, present us with more examples for clients of the importance of standing by your investment strategy and not divesting or shifting away from stocks during a recession.

My clients who stuck with their investment strategy and rebalanced their portfolios by buying stocks on the downside have come out of the March low far and above where they were beginning of last year.

David Wissinger: The key takeaway from any economic downturn is that it will end. Long term investors can, and should, weather the storm. Investors with a shorter time horizon or a particularly low risk tolerance should keep their asset allocations trimmed to minimize the negative impact of lower stock prices, however temporary.

Real estate is hot, at least for now. What are the investment opportunities there, or is it something you’d suggest people go easy on?

John Baxman: Getting the timing right with a real estate investment can be tricky in most market environments. The purchase of real estate can certainly work out over a short time horizon, but it’s best to treat a real estate investment as a long-term holding while considering it as part of an overall investment plan.

We help our clients to understand the economics of buying a property while also helping them to think through what are often other non-financial considerations that are driving the decision pro

Colten Christianson: Candidly, it depends on the type of real estate you’re looking at. For example, local residential real estate has appreciated nicely throughout the pandemic—largely driven by the supply-and-demand imbalance as the number of buyers continues to outweigh the number of sellers.

There are segments of the market, however, like commercial real estate, where we’ve certainly seen some disruption as businesses continue to evaluate their corporate footprint post-pandemic.

Ultimately, we believe real estate belongs in an investment portfolio and is additive to returns over time. It can also serve as a nice inflationary hedge.

That said, as with any other investment class, real estate has risk—particularly when you consider the high concentration of capital in one asset. It’s important to understand and feel comfortable with your real-estate exposure and risk level in the context of your broader balance sheet as well as ensure you have proper diversification in place in terms of the types of real estate you hold.

Tom Hubert: Real estate can be part of a portfolio, but only if it fits into an individual’s financial goals. As with all other asset types, it should complement the other products. The short-term environment shouldn’t determine if it is right for an individual.

Rupa Jack and Craig Franklin: In August 2020, the Fed announced “average inflation targeting.” Should the Fed achieve its mission and inflation take hold, this may be broadly positive for real assets, which can serve as an inflation hedge and portfolio diversifier.

Within real estate, consider investing in actively managed strategies across both public and private markets. Public REITs have been severely impacted during the pandemic and represent an opportunity due to attractive valuations and significant dispersion across property types (as COVID-19 has exacerbated both positive and negative trends within the industry).

Further, we believe that although COVID-19 risks have not fully abated, private core real estate strategies, such as non-traded REITs and real estate interval funds, that have largely avoided the most problematic areas (e.g., shopping malls and hotels), may be well-positioned for long-term investors.

Emily Menjou: Real estate investing certainly has its benefits and many of our clients come to us with significant real estate exposure. It is important to recognize the associated risks including vacancies, difficult tenants, repair costs, liquidity issues, and changes in the real estate market.

While we do manage real estate in many of our portfolios (particularly in trust administration), real estate is not a key component of our investment management strategy. Instead, we favor well diversified portfolios of high-quality, low-cost investment vehicles which help to minimize risk while maximizing return for our clients.

Greg Onken: Real estate can be a great asset class, and we are investors in real estate for some of our clients where it’s appropriate. On the residential side, we try to advise our clients to be cognizant of the utility value of a home: how will they live in and use it?

Additionally, we have applied borrowing techniques to increase the deductibility of interest and take advantage of low rates for clients. Once again, when it’s appropriate.

Bruce Raabe: Investing in real estate often brings with it specific risks, a hands-on approach, and unpredictable outcomes. We partner with Bay Area real estate experts whose funds offer our clients a hands-off diversified exposure to the opportunities in the Bay Area.

Charles J. Root Jr.: Most of our clients have already set their investment plans, being near or in retirement. We counsel clients not to be hasty with large investments like real estate.

Following the crowd is not part of our client plans. They look to us for advice and we would not allow them to pursue a hot item, that could have losses.

Rory Springfield: I suggest taking advantage of the low fixed rates one can borrow at and to think about diversifying into real estate if they lack exposure in this space.  We’ve used some Private Equity Funds as well to gain exposure in this area.

Montgomery Taylor: Owning real property is not a bad investment. The problem with it is the lack of diversification. You also have to enjoy being a landlord or content in working with a management company. Some of our clients own investment real estate, while keeping the majority of their wealth in a well-diversified investment portfolio.

Lily Taft: We are seeing some attractive opportunities in REITs (real estate investment trusts). REITs trade just like stocks, pay great dividends, and can provide exposure to areas of the real estate market such as cell towers, data centers, shopping malls, hospitals, and more.

When it comes to individuals owning real estate, we believe it can be a valuable piece of their overall portfolio, but we caution them against being real estate rich and cash poor.   We like to encourage a completed financial plan to ensure that they have a balanced mix

John Thiel: The U.S. real estate market is hot, but it may have reached its peak earlier this year as recent reports are showing that it might finally be cooling down a bit. The U.S. Census Bureau published data showing sales of new single-family homes dropped by 6.6% in June compared to May. Annually, sales of newly constructed houses were down by more than 19% compared to a year ago, June 2020. (Source: Census Bureau)

How hot real estate remains moving forward is an open question.

Regardless of where the market is, it’s important to think about why you would want to buy or sell real estate in the first place. It is often a very personal decision and depends on what your goal is.

If your lifestyle dictates that you should find a new home, as was the case for so many throughout the pandemic, then it could very well make sense to explore purchasing real estate.

If you are purely looking for return and not lifestyle, you should approach it as you would any other serious investment, consider whether you have the risk tolerance and capacity to take on the investment, evaluate the risks and potential benefits, and consider consulting an expert in the field.

Jake Weber: In my eyes, real estate is an important asset class and diversifier. While I think having some exposure to real estate is important, how you own it and what you own is a conversation that differs for everyone.

I would suggest that you treat it like any other investment: hold it as a portion of your net worth, but don’t put all your eggs into one basket and don’t buy more real estate than you can manage yourself (which for most of us is just our own home).

Make sure when real estate markets pull back and decline, you are comfortable holding through a downturn. Buying real estate does not need to be complicated: you can buy a low-cost Real Estate Investment Trust (REIT) index fund and get all the real estate exposure you need.

David Wissinger: We would avoid real estate involved with office space until we understand more about the work from home trend. Residential rental real estate looks good as housing prices climb. Most forms of real estate exposure is available through real estate investment trusts (REIT’s).

Inflation talk abounds, without real clarity on its direction. What’s your advice now to cover the future risks if inflation spikes, or are you not seeing that as a true risk at this point?

John Baxman: We are not seeing inflation as a major concern currently but acknowledge the risk of inflationary pressures potentially becoming a factor that we will need to address in a more meaningful way across our client portfolios.

Colten Christianson: Inflation is certainly at the top of investors’ minds. In the near term, we expect inflation will likely remain elevated due to the supply-chain struggles we’re seeing as our economy recovers from the pandemic.

The Fed has used the term transitory when speaking about inflation, and this is something we would support given that supply-and-demand issues do ultimately sort themselves out through market forces. Ultimately, the Fed has several tools it can use to combat inflation if it becomes troublesome.

In terms of being best positioned, equities have historically performed well in an environment of higher inflation. Accordingly, real estate, infrastructure, and emerging markets historically have been good inflation hedges. On the fixed income side, a bond ladder can do a nice job countering inflation and protecting your portfolio from interest-rate volatility.

Tom Hubert: Inflation is a risk for everyone over time. This is because consumer prices have a general tendency to steadily rise reducing affordability.

There are many investment instruments that can help offset inflation and are important in every economic environment. No one knows how consumer prices will be affected by the complex economic factors. For many, a balanced approach to investing will help ensure that their portfolio is able to keep up with inflation.

This means you must have some money allocated to investments that can outpace the rate of inflation but are also likely have some risk to principal. At the end of the day, the best thing to do is diversify and plan for the long term.

Rupa Jack and Craig Franklin: Morgan Stanley & Co. economists are forecasting higher persistent inflation or inflation normalization.

What our economists are watching are headline and core consumer prices index (CPI), personal consumption expenditures (PCE), supply chain/inventory pressures, speed of improvement in labor market and wage growth, value of the US dollar, and Fed policy stance.

Preparing portfolios for inflation normalization requires reducing duration in fixed income and bond portfolios. We are assuming that nominal 10-year Treasury rates trend toward 2.5% over next 2 years.

We believe equity portfolios should focus on companies with pass-through pricing power and where management is navigating margin pressures and supply chain constraints. Adding real assets like commodities, infrastructure, gold, real estate and cryptocurrency-linked investments where appropriate.

Emily Menjou: Inflation has always been a natural occurrence in our economy.

We continue to believe that the best way to achieve long-term investment success is to select an asset allocation which optimizes risk and return, with a strong emphasis on low-cost investment vehicles.

Our advice to clients is to be well aware of the internal costs of their portfolios, as these costs are a drag on their returns and could hinder the success of their investments.

Greg Onken: We think inflation is coming but don’t see it as a material fundamental risk in the near term. Assured increasing cash flow can be a good tactic to offset some of the risk, hence another reason we currently like dividend growth strategies.

Bruce Raabe: We are all certainly experiencing inflation today. The question is what does 2022 and 2023 look like?

Our expectation is that inflation will remain in check. That being said, we are invested in a number of assets that will benefit if inflation is above expectations. Diversification is boring, and were fine with that.

Charles J. Root Jr.: We pay attention to all the near and far term indicators. So far we don’t see any indication that significant inflation is eminent. That said, if we saw any changes we would make sure our client accounts are adjusted when needed.

Rory Springfield: Stay balanced and have exposure in both areas so that you stay protected against higher than expected inflation as well as any fake-out that we may currently be experiencing as the low-for-longer mantra may continue into this next decade.

Montgomery Taylor: Inflation hurts those investors holding very conservative vehicles, such as bonds and bank CDs. Those holding well-diversified portfolios will continue to see growth, which is critical to maintaining their standard of living as prices rise.

Lily Taft: We think inflation carries a negative connotation, but it does not have to be scary! Yes, inflation is a risk, but it is also natural with such high economic growth.

The stock market “prices in” inflation and has historically been the best way to make sure your dollars maintain their purchasing power. This is because many companies that have pricing power – meaning they can easily raise their prices to keep up with rising input costs and maintain their margins.

Companies that have the easiest time maintaining margins are often raw materials producers, energy companies, and recognizable brand names.

John Thiel: While inflation has increased this year, we can’t be certain whether we will have broad and persistent inflation moving forward. It’s also possible that as global supply chains and economies recover, inflation slows down and we enter a disinflationary environment.

Regardless of where inflation is heading, we recommend our clients stay invested in a broadly diversified portfolio that isn’t reactive to inflationary swings. Simply staying invested is one of the best ways to outpace inflation over the long term.

Jake Weber: Our investments are well-positioned to deal with periods of high inflation. I don’t expect the rise in inflation we saw year-over-year recently to be sustained.

Much of the increase we are experiencing now has more to do with supply chain disruption and lifestyle adjustment caused by the pandemic. I don’t see indications that it is going to be a long-term shift.

Regardless, a well-diversified portfolio should invest in inflation hedges, like shorter duration bonds and Treasury Inflation-Protected Securities.

David Wissinger: The Federal Reserve targets inflation at 2% per year, so even that poses a risk to investors, and a grave risk to savers. If inflation spikes, commodities are a good place to invest, as well as inflation protected bonds, all of which are available through exchange traded funds (ETFs).

From what you have seen in your practice, the three qualities of an ideal investor are, and why?

John Baxman: I believe that humility, discipline, and patience are three ideal qualities for investment success. Humility is important because in my experience investors make a lot of mistakes because they are overconfident.

A good investor understands that there are elements of any investment that they cannot be completely sure about. Following a disciplined investment process or portfolio strategy is the best to stay on track toward your long-term goals.

A disciplined investment strategy will provide clarity in terms of any changes that should be made to the strategy, and it will also help the investor to understand the level of risk that they are taking.

Patience is key because it’s very common for investor to make changes to their investment strategy at precisely the wrong time. Once a well thought out portfolio strategy is in place, it will likely need time to perform as expected.

Selling out of investments that have performed poorly in the recent past is likely to be a mistake for an investment strategy that is meant to be in place for the long-term.

Colten Christianson: Trust: It’s important that an investor find an advisor they trust wholeheartedly and can lean on in the good times but also the bad.

As an adviser, I help my clients make calm and measured decisions in times of chaos and crisis—which is certainly not a responsibility I take lightly. Having an adviser you trust will give you peace of mind that your financial life is in good hands and allow you to spend time doing other things in life you care about.

Patience: Investing can be challenging and at times will test your patience. Again, investors have been rewarded when maintaining a long-term mindset and avoiding short-term and reactionary decisions. Having an advisory team that you trust and a comprehensive financial plan in place are critical.

Communicative: It’s important that your adviser understands the bigger picture in order to give you the best advice. You should be in regular communication with your advisory team—who should be in communication with you as well—throughout the year and as major events occur.

Assurance, tax, and consulting offered through Moss Adams LLP. Investment advisory services offered through Moss Adams Wealth Advisors LLC.

Tom Hubert: The most successful investors are planners, curious participants in the process, and patient in understanding that the short term is temporary.

The first step is to take the time to learn about all the different aspects of money which include investing, saving, debt, and how to protect yourself from the unknown. Financial literacy is extremely important when it comes to financial planning in general.

Many financial topics can be complicated, so we encourage people to ask questions and seek guidance from someone they trust. This is important because it is more likely to help you avoid emotional decisions and inspire you to take an active role in building wealth for the future.

Rupa Jack and Craig Franklin: The ideal investor understands that managing their wealth can be challenging. A seasoned financial advisory team provides knowledge and thoughtful guidance, so the investor is able to reduce their stress around making financial decisions.

The ideal investor believes in having a disciplined plan. Without a disciplined plan, emotions often drive investors to try to “time” the market by moving in and out.

Studies show that investors who missed only a few days by being out of the market sacrificed significant performance. Professional advice keeps investors focused, taking emotions out of the equation. This helps to add value to their portfolio over time.

The ideal investor understands that reaching goals often involves going beyond investment advice.

An experienced financial advisory team provides a wide array of offerings and services centered on the investor that is customized to help meet their specific needs, provide access to specialists to help pursue specific goals such as cash flow and liabilities solutions, philanthropy, insurance and asset protection, and estate and wealth transfer planning strategies.:

Emily Menjou: The expression “Good things come to those who wait” is particularly true when it comes to investing.

An ideal investor typically exhibits patience and discipline, as investing is a long-term prospect and investors are best served when they can avoid emotional reactions to market risk.

It also helps when investors have an understanding of investment concepts such as the efficient market hypothesis, the importance of diversification, and how costs can affect a portfolio’s performance.

Greg Onken: That is a great question. Firstly, they should know and not forget what they are trying to accomplish.

Secondly, they should make sure their Risk Tolerance (appetite for risk) is aligned with their Risk Capacity (ability to take risk).

Finally, they should try to avoid reacting. The goal isn’t to get every market move right by moving in and out but to capture the majority of the upside growth. Investors have more tools now than ever, but they also have more distractions.

We believe that if one can keep a level head and keep the main thing, the main thing, there’s always an opportunity to be found.

Bruce Raabe: Our most successful clients realize the benefit of teams and are typically “who not how” people. They appreciate that partnering with subject matter experts allows them to achieve their most important life goals.

If we do our job, our clients are able to leverage the four freedoms of successful financial plan (time, money, relationships, purpose).

Charles J. Root Jr.: When clients come to us, they are concerned about having a professional take care of their investing.

Rarely do we see someone who does well on their own. It takes many years to get proficient at investing, even in my case. There are so many ways to make mistakes, and lose money. We eliminate that concern with our experience and prudence to manage for risk first then return.

As usual there is not guarantee that we can deliver perfect results.

Our philosophy has always been to take care of clients and help take away their concerns about the future. Our focus is to help them to live a Rich Life, free from worry about money.

We don’t believe that clients should make those decisions, they only need to understand their plan that we put together for them with their input.

Rory Springfield: Constant communication. Need to stay connected with your clients at all times and keep them engaged as well as on top of any pressing needs that they may have:

High quality service. It’s a competitive environment and the one thing we can always control is how we treat our clients and that their needs are always being met in a timely, efficient, and effective manner

Listen. So important to hear what your clients are saying and understand what matters most to them so that we can help be there for them during any circumstance that comes their way.

Montgomery Taylor: I’ve been working with people and their investments for over 40 years. I’ve seen what works and what doesn’t.

The three qualities or virtues of a great investor, are these:

  1. having a vision for the future you truly desire, and the positive outlook that anything is possible;
  2. putting a plan in place for the achievement of your vision, and realizing this takes time, patience and perhaps even a coach; and
  3. staying the course, over the long-term, not allowing the highs or lows of the market to sway you to take inappropriate actions, due to fear or greed

Lily Taft: Discipline, patience, and curiosity.

Because you need to be disciplined enough stick to your plan and be patient throughout volatile times. However, the market is always changing, and innovation is abundant. A savvy investor needs to know how to analyze and adapt to change.

John Thiel: Three qualities that I believe serve investors very well in their journey is they invest for the long term, they understand their relationship with risk, and they have a willingness to bear uncertainty.

  1. A long-term focus puts the strategy in clear perspective and really allows compounding to work for you.
  2. A clear relationship with risk means knowing yourself and what you are willing to handle.
  3. A willingness to bear uncertainty allows you to navigate markets knowing there is always going to be some unexpected or unwelcome event, and rather than making an impulse decision you are committed to your investment strategy and long-term goals.

Jake Weber:

  1. Optimistic (for the most part) because decades of economic history have shown us that the stock market does one thing: goes up.
  2. Disciplined with their portfolio strategy. When markets change rapidly, they stay true to their original strategy.
  3. Passionate about building the life of their dreams because that is the ultimate goal – not some arbitrary dollar amount in the bank.

David Wissinger: The three qualities of an ideal investor are patience, patience and patience.

Most investment mistakes are made by selling at the wrong time, or attempting to time the market. Time is every investor’s best friend. Markets regularly decline, sometimes dramatically.

And they always recover. To think otherwise is to lose confidence in the economy altogether. The ideal investor should pick an asset allocation program that is comfortable and stick with it through thick and thin. Adjustments should be made if personal circumstances change, not because markets are trending down.

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