Our Blog

DWM is committed to learning for its team, clients and friends. In this changing world, it’s extremely important to stay current in all areas impacting your financial future.

We encourage all of team members to “drill down” on current topics important to you and contribute to our weekly blogs.  Questions from our clients and their families are often featured in our blogs.  

Financial literacy for clients and their families is very important to us.  We generally hold an annual wealth management seminar for all of our clients.  We encourage regular, at least semi-annual, meetings in person with our clients to review family updates, progress on financial goals, asset allocation and performance of investments.  We’re happy to assist younger members of the family as part of our total wealth management program.

Here’s our latest blog:

 

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Brexit- A Surprise?

Written by Les Detterbeck.

brexit-first-starThe Brexit vote Thursday was a big surprise to some. As voting closed, some London bookies were putting the odds of a vote to leave at less than 10%.   Pollsters and “experts” had shown a 10 point margin 24 hours earlier for “Remain” yet “Leave” prevailed 52%-48%.   Stock markets don’t like surprises and responded with declines of 3% to 9% worldwide before markets closed for the weekend. With the flight to safety, as expected, most fixed income and some alternatives, especially gold and some managed futures, were up.

The result shouldn’t have been a surprise. We said the referendum was “too close to call” a month ago in our blog.  http://www.dwmgmt.com/brexit/.  In large numbers, the “Leave” supporters were expressing their anger with the status quo and a desire to return to the “good old days.”  They haven’t benefited personally from globalization and now their homeland is being “taken over by immigrants.”

The issue isn’t just Britain leaving; it’s really about the future of the EU.  EU institutions have failed in a number of key areas; including lack of planning and administration relative to the integration of the various member nations and migration of people among the countries.   Now, Britain and the EU have two years to work out what could be a highly acrimonious divorce.  And, while this is happening, all across Europe countries, including Germany, France and Spain, will be holding national elections debating the question of whether sovereignty and nationalism outweighs economics.  These same issues frame the U.S. Presidential election and others around the world.

Despite Friday’s selloff, Brexit is no Lehman.  Back in 2008 after the collapse of Lehman Brothers, investors indiscriminately fled all assets connected to the American housing bubble.  Subprime mortgages had been sold to investors worldwide and panic spread like a virus.  This time, the trouble is more identifiable.  London’s ambition to be the world’s most important city is over.  The pound has lost some luster.  The EU will likely continue to splinter and perhaps disband.  If nations reject globalism and free trade, world economic growth will likely be reduced.  In 2008, central banks did not recognize nor prepare for the mounting disaster.  Today, the financial systems in the U.S. and Europe are less leveraged and better capitalized than eight years ago. Just last week, all major American banks passed the new stress test requirements.  The CBOE, Market Volatility Index, or VIX, remains far below the level of past panics.

The U.S. economy should weather the Brexit storm. American companies remain more insulated from global developments than any other country.  U.S. companies generate 70% of revenues domestically.  U.S. corporate balance sheets are strong, interest rates are low and the U.S. economy is on a pace for a 2.5% growth in the second quarter.  Consumer sentiment remains strong in the U.S., coming in at 93.5.

However, expect more volatility. Britain’s decision to leave the EU could cause more fault lines in Europe.  Elections across the globe could reverse globalization’s trend.  Chinese growth could continue to decline. There is always a list of potential fears, many of which never materialize (e.g. the “hyperinflation” predictions of 2010 due to Quantitative Easing).

Some investors have not recovered financially and/or cognitively from their losses of 2008.  They are dedicated to making sure that never happens again.  No drawdowns for them-every market blip is cause for concern. “Another collapse is coming.” This risk aversion has led them to miss a huge run-up in U.S. equities (200% since 2009) , as well as decent returns for fixed income and alternatives in the last seven years.

Certainly, one day the expansion will end and investors will feel some temporary pain.  But, trying to determine when and how that will happen is a money-losing proposition.  Maintaining a well-diversified portfolio is a better approach than having a fearful, concentrated one.  Equities, in the long run, will outperform fixed income and alternatives.  And, as we discussed in our seminar last October, the equity “premium,” obtained for taking on risk, will continue- impacted greatly by inflation and economic growth.  Lower inflation and/or lower growth, means lower equity returns.  Your risk profile determines your appropriate asset allocation and the volatility of your portfolio.

Hold on tight, the road ahead may be bumpy, but, since no one knows the future (not even the “experts” as demonstrated above), it’s the best route we have to accomplish our goals for the long term.

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Career Crossroads: The Right Path for My Career in Wealth Management

Written by Nickolas Schiavi.

 

Fork roads in steppe on sunset background

I’d like to start by introducing myself.  My name is Nick Schiavi and I recently joined the Detterbeck Wealth Management team in the hopes of learning wealth management and becoming a Certified Financial Planner.  As I approached the end of my college days, I thought I had everything figured out.  I was about to graduate from Northern Illinois University with a Bachelor’s degree in Finance, Marketing Minor, and a Professional Sales Certificate.  I studied these subjects with the intent of pursuing a career in wealth management.  This seemed like a fairly straight forward career path at the time with the thinking that strong advisors are good with numbers, comfortable with communication and receive the proper training.  I had no idea there were so many different routes this career path offers.

Out of school, I accepted a job with an insurance company and thought I was on my way to becoming a financial planner.  On the first day of training, we were required to cold call and set up meetings with the goal to sell life insurance.  The company did a great job selling the in-training representatives on the idea a whole-life insurance policy is the best place to put your money for retirement.  The other trainees and I were impressed when learning a policy and reinvested dividends grow tax free and can (somewhat) diversify a portfolio.  It made me wonder how many other/better approaches there are in the field.  If a whole life insurance policy is the answer to everyone’s long term financial needs, then why doesn’t everyone just do that?  Why is the field so complex and difficult?  Why do hundreds of books and dozens of TV shows analyze this topic to no end?  I knew there was more to it and I wanted to learn.  So… I decided on a new path and set out to interview at as many financial services companies as possible, and this time, do as much due diligence as I could before making a decision.

I started my search by applying to all of the major wirehouse and brokerage firms with the assumption they were the best at what they do and train their employees to be the best in the industry.  That is what I had heard and believed.   However, the more I interviewed, the more it dawned on me all of these companies are similar in practice to the insurance company that first employed me.  The business model they use is to have their employees pass the licensing test, start selling the products and achieve required sales goals to keep their job.  Many times I was told I could give it a shot, but it would be better to get a sales job for a couple of years and come back when I was ready.  Why would I get a random sales job to become a better financial advisor?  If anything, it seemed I might forget most of what I just spent four years studying in school.

What I really felt was most important was to find someone to mentor me in the industry. I was ready to work long and hard to learn the complexities of investing, planning and overall comprehensive wealth management.  I wanted to believe there are advisors who succeed by being investment experts and wealth managers, instead of being great salesmen.  Don’t get me wrong, sales is great and arguably the most important aspect to any business.  I just felt a financial planners’ best skill should be financial planning, not sales.  The tides turned when I received the advice to look on NAPFA.com and search fee-only advisors in my area, ultimately leading me to exactly what I had been looking for at Detterbeck Wealth Management.

Since starting at DWM, I have learned a lot and now respect how many different hats a strong wealth management team must wear in order to best serve clients.  One of the first things I learned is how little people know about the industry and how easy it is to believe that the big firms are the best place to invest your money.  It reminds me of golf, it is a game of opposites; if you swing left, the ball curves right- swing right, the ball curves left.  Wealth management is similar.  It is normal to think having your money with a big firm is a good idea, it makes sense to think they are the best at what they do (given all the marketing dollars they have to convey that message).  In reality, it is the RIA (Fee-Only Advising) firms who typically have the best client-centric culture rather than a company-centric mentality.  At DWM, it’s about providing value to customers.  These are the advisors who place their clients’ interests first in a fiduciary manner and do not make commissions on sales.  RIA firms like DWM bring clients on slowly to fully understand their needs and create the best possible plan.

All in all, the start to my career has been great.  Coming out of school I wanted to learn this industry and had no interest in “faking it until making it.”  There is no faking at DWM; every time I am given an increase in responsibility it is because I have been trained and fully understand what I am doing.  I’m new to the real world, but this seems like the proper way to run a business – especially one focused on helping people achieve their personal and financial goals.

Nickolas SchiaviEditor’s Note:  Please join us in welcoming Nick Schiavi to our DWM team.  Nick joined our firm in late April as a service associate and is training/learning/working toward becoming a junior advisor. Welcome aboard, Nick!

 

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"Your Future Depends on What You Do Today" - Mohatma Gandhi

Written by Les Detterbeck.

 

100-candles

No one has a crystal ball.  If we did, we might ask three important questions:

-How long will I live?

-Will I have enough money if I live to age 100?

-How will I spend the time I have on this earth?

As wealth managers dedicated to increasing families’ wealth and legacies, we consider these questions and the related answers as extremely important.

We Americans are living longer.  From 1980 to 2020, the number of Americans 90 years of age and older tripled to 1.9 million. And, by 2050, it is expected there will be 8 million 90 and over.  This is a new paradigm.  Historically, people retired in their 50s and early 60s and lived their last few years retired in comfort during the “golden years”.   These days, someone retiring in their early 60s could live 30 or 40 more years.  If so, will they have enough money and what will they do for that time period (perhaps 1/3 or more of their lifetime on earth)?

Life Expectancy. There are some good tools to help you estimate when your “plan will end.”  Here are three:https://www.livingto100.com/https://www.bluezones.com/ (click on tools), andhttps://www.myabaris.com/tools/life-expectancy-calculator-how-long-will-i-live/, (Note: each site will require you entering your email address) These tools can take 5-10 minutes.  All look at personal health, family history and socioeconomic status.

Will My Nest Egg Hold Out?  Next, it’s time to calculate your expected “financial independence” date.  See our blog of April 21, 2015 http://www.dwmgmt.com/plan-for-financial-independence-not-retirement/  This is the date at which you have enough assets for the rest of your life without needing to work for money.  Recently this “independence” date has been extended for many due to three principal factors; increased expected longevity, lower expected returns, and reductions in and uncertainty about pensions and social security. The financial independence calculation requires a review and monitoring of key current and expected metrics: assets, additions to assets, longevity, retirement income, inflation, investment returns, tax rates, and spending goals.  Of course, all results must be stress tested and regularly monitored and revised as appropriate.

Meaning, Identity and Purpose in Remaining Years.  Planning for the “golden years” goes well beyond money.   Happiness, of course, is more than that.  We discussed it in our September 9th bloghttp://www.dwmgmt.com/how-would-you-rate-your-life/.  We ask our clients not only about their financial priorities, but also about their visions for their family, career, health, dreams, legacy, education and charity.

These days, more and more seniors are taking inventory on who they are, their accumulated skills and experience and want to stay engaged in the broader society and economy, continuing to be useful, active and “keep going”.  Here are some recent inspiring examples in the news:

  • Gerry Marzorati, former editor of the New York Times and author of the new book “Late to the Ball” has immersed himself in tennis since taking it up in his mid-50s. Mr. Marzorati recognizes that “Sixty is not the new 40. Fifty isn’t either.  Your lung capacity in late middle-age is in steady decline as are your fast-twitch muscle fibers that provide power and speed. Your sight, senses and balances are getting worse.”  Yet, undaunted, Mr. Marzorati concluded that for him, his “golden years” would be spent on “finding something new, something difficult- to immerse yourself in and improve at.”  He threw himself into his new passion, hiring a coach, practicing for hours and hours and even entering competitions in his new love.  No trophies yet, but fulfillment.
  • Alan Page, the leader of Vikings’ Purple People Eaters, is about to start his third career at age 70.  After his Hall of Fame NFL career, Mr. Page finished law school and became a Justice in the Minnesota State Supreme Court for 24 years until recent mandatory retirement.  Now he and his wife will commit their full-time efforts to their Page Foundation, focused on educating young children, through money and mentoring.
  • At 100, Ida Keeling is still running for her life. She has the fastest time for American women aged 95-99 in the 60-meter “dash” at 29.86 seconds.  She is 4’6” and weighs 83 pounds.  She said she was fast as a girl, though back then there were few opportunities for girls.  What makes her faster now is that “everyone has slowed down.”  She became a single parent of four when her husband died at age 42.  Ms. Keeling’s daughter, Shelley, herself a track coach, got Ida back into running when Mom was 67.  Her one hour of daily running gives Ms. Keeling a sense of serenity: “Time marches on, but I keep going.”

Go ahead.  Take the test!  See how long you will be at life’s party.   Then, by yourself, or with help from a wealth manager like DWM, develop, monitor and maintain a financial, personal and family plan for the future that meets your priorities and visions. The future depends on what you do today.  Go for it!

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