Should I Hire an Online Financial Advisor?

Should I Hire an Online Financial Advisor?

COVID-19 has changed our lives and the effects will be felt for years to come, and in some cases, forever. As we migrate to more of a virtual office, one should question whether they are better served by other professionals more equipped to handle this medium. Is it time now to hire a virtual financial advisor?

When we say “virtual”, basically it means that your relationship is handled completely online rather than at an in-person location. With technology tools, we can use screen sharing and video conferencing to enhance the client experience far beyond a phone call. 

How Does This Differ From an In-Person Experience?

One benefit is that you don’t have to leave work or your home and fight traffic to get to an office. You (probably) won’t be shaking hands anyways, so the contact attribute will likely be removed from the picture. You won’t get to immerse yourself in some of the office amenities such as great coffee at the Madison Chocolate Company, our rustically comfortable decor, and of course, our friendly staff that will greet you and make you feel at home. Aside from these niceties, you will still get the same experienced advisors, software tools, and our “comfortably unique” experience. Additionally, due to fewer logistical barriers, we can offer an expanded calendar for appointments.

For busy professionals and those where travel presents a major headache, this is becoming an essential way to meet with the professionals in their lives. Also to consider, does one of the main factors in finding an advisor – proximity – is that really that important an attribute to you? There may be more important items to consider in experience, personality, and expertise. 

Is My Current Financial Advisor Equipped to Offer a Virtual Experience?

For many advisors, the answer to this simply is “no”. Some firms are still resistant to offering virtual meetings due to (in our opinion) overly onerous and conservative compliance restrictions. Others are using dated technology that may not show well in a screen sharing environment. Demographically, financial advisors are quite an older group. According to a J.D. Power article, “the average age of financial advisors is about 55, and approximately one-fifth of advisors are 65 or older.” As this technology may present challenges for older advisors not accustomed to using screen sharing and other financial software tools, we expect clients to be seeking advisors that are better equipped to offer these services.

The other challenge for clients that are explicitly seeking a virtual advisor is that the financial advisors that may be most comfortable using this technology may also be the least experienced. It is certainly not unreasonable to desire a wealth manager that isn’t “practicing” on your accounts to gain experience. 

The Walkner Condon Virtual Experience

We are ready to assist clients virtually in both of our divisions: our domestic wealth management, as well as our U.S. expat financial advisory services. Our staff is very familiar with “Zoom meetings” as well as screen sharing, financial planning, and investment management software. We offer our clients our proprietary GAPP process as well as the comfort in knowing that in comparison to our peers, we are young and experienced. Additionally, we also have a variety of trusted business professionals in our network that are also able to assist our clients virtually where appropriate.

As we all migrate to the “new normal” of a virtual office setting, we are committed to making the experience as close to our in-person meetings as possible. Perhaps we will institute online greetings by our administrative staff, or find a way to enjoy a cup of coffee together regardless of where you live? The possibilities remain endless and we look forward to serving our clients in their preferred medium. If you’re ready to explore our virtual services, you may schedule a no cost, no obligation appointment here.

Clint Walkner

 

What’s Going On With The Price of Oil?

What’s Going On With The Price of Oil?

On April 20th, 2020 something happened that has never happened before in history. The price of a barrel of WTI oil for the May contract went negative and closed at -$37.63 for a barrel. But what exactly does this mean and why did it happen? 

It’s Not As Simple as Just Supply and Demand 

The price of oil is usually determined by supply, demand, and market sentiment toward the product. With the entire global economic situation suffering from shutdowns to combat the coronavirus outbreak, the demand for gasoline has drastically reduced and looking forward is expected to remain that way for at least several months. The supply of oil which is used to refine into gasoline as well as other energy sources has been increasing to unprecedented levels. There is only a limited amount of storage capacity available globally for this oil and due to the scarcity, the price has drastically dropped this year. On April 10th, the market went negative because traders capitulated based on the fact that it is cheaper to pay to have the oil hauled away and stored than it is to build more storage capacity or to shut down the wells that are producing it. So, with this historic market event, where do we go from here?

The Unprecedented Impact of Coronavirus

Moving forward, it is likely that many of the states will begin to reopen their economies. Other countries will also resume economic activity. How long this will take is speculative, but one thing that is certain is that the dramatic drop in price is evidence that the coronavirus has dramatically impacted the global economy, and it is going to take some time for the prices to recover. It is likely that some oil and gas companies will go bankrupt if this downturn in economic activity and oil persist. President Trump announced that the US would open up the strategic oil reserves and ask permission to buy up some of this oil and take advantage of the low prices as well as attempt to stabilize the market. It is likely that oil prices could continue to go down or stay down until the global economy resumes at or near “normal” levels. While it feels good to fill up our tanks for less than $20, it is not always a good thing for the overall health of our economy. 

How Does It Impact Investments?

There are more liquid investments on exchanges that attempt to track the price of oil such as USO, which tracks West Texas oil price, and BNO, which is tied to the Brent Crude oil price. It is important to know that they are investing in futures contracts of the commodity, and are not always able to take advantage of the drastic price swings. They are risky investments and complex in nature because of the rolling over of the monthly futures contracts and there should be significant due diligence done to understand the underlying risks of the investments before they are considered. 

There is a lot that goes into the market for oil and it is certainly a worry about the impact that it will have on the economic recovery. In the 1980’s there was a drastic drop in price and it took 7 years for prices to recover. Understanding the underlying reasons why oil prices fluctuate are important for investors, but it does not mean that you should necessarily take significant actions. 

Where Will The Price of Oil Go From Here?

As it has in the past, prices are likely to stabilize in the future. The economy will open up, and people will get back to work. The future will be determined by the tremendous global economy that has been built and grown on innovation and adaptability and there is no reason to believe that will not be the case this time either. In the meantime, go for a drive (safely and observing social distancing of course) and enjoy these low gasoline prices while they are here!

Jonathon Jordan

 

Disclosure Note: The discussion of oil and ETFs such as BNO and USO are illustrative in nature only. You should check with a trusted professional advisor before implementing any of these investments into your own portfolio. 

 

I Just Got Laid Off. What Should I Do?

I Just Got Laid Off. What Should I Do?

Layoffs aren’t new, but that doesn’t make it any less shocking when you get laid off without warning. The swift surge of layoffs in the US and around the world due to the coronavirus shutdown is something that we’ve never seen before. For many, this is unfamiliar territory. The purpose of this blog is to give a few actionable items if you have recently found yourself out of a job. Take a deep breath, realize that you’re not alone, and then start to work through some of these items. 

Stay positive.

OK – I had to get my “fluffy” point out of the way. But during this time remember that it isn’t your fault that you found yourself in the position that you’re in. You didn’t know that a virus was going to cripple the global economy and that the government was going to basically halt your (former) employer from conducting its business. Doom and gloom won’t help you get through this time; there is a light somewhere at the end of this tunnel. 

Review formal communications from your employer.

Have a professional (e.g. attorney that knows employment law and knows contracts) review letters that you have received from your employer. Be careful before signing anything! Many times people can be caught off-guard by the job loss and may not be in the right mindset to review and sign documentation. Others feel forced to sign in order to collect any sort of severance pay. Be sure to know what you’re signing and how that will affect you. 

Determine what benefits will need to be replaced.

I’m not talking about your 401(k) here – more on that later. A more urgent need will likely be health insurance. Work with your employer and HR department to determine the timeline of when your current coverage will end and when you will need to determine your coverage going forward. You may be eligible for COBRA. Many people are shocked to find out how expensive health insurance can be through COBRA. In actuality, the overall cost to continue your coverage will likely be about the same. However, you are now responsible for the entire premium payment (vs. your employer. They may have been paying a good portion of said premium). Another option is to shop for a health care plan through  the Marketplace, a product of the Affordable Care Act

File your unemployment claim.

Don’t be scared or ashamed to do this! For most professions, your employer has been paying Unemployment Insurance premiums for times like these. The system isn’t designed to pay you 100% of what you were making when you were employed, but a weekly benefit can help you get through some tough financial times. We are also in unique times as the CARES Act will provide some claimants with an additional $600/week! Note that severance pay, if applicable, will likely impact the amount of unemployment benefits payable to you. Tangentially related to cash flow needs, The CARES Act also enabled the IRS to deploy “Economic Impact Payments”, or more commonly referred to as coronavirus stimulus checks. You may not have to take any action to receive your check, assuming you are eligible and have filed your 2018 or 2019 tax return. This could add up to $2,400 (if married) to your bank account, plus $500 per qualifying child

Review your employer-sponsored retirement plan.

You may be lucky enough to return back to your employer after a temporary layoff (typically called a furlough). If that is the case, you will likely start participating in your retirement plan when you return to work. There are others that have been permanently laid off with no prospect of returning to their former employer. Determining your cash flow needs, finding health insurance, and searching for your next career move should come first. But it is important to determine a plan for your old 401(k), 403(b), or pension plan.

Be careful when considering taking advantage of the relaxed retirement plan rules that were implemented as part of the CARES Act. For example, in 2020 there is no early withdrawal penalty for distributions from qualified retirement accounts and the amount that you are able to loan to yourself from your 401(k) has doubled. You may run into unintended consequences if you utilize these approaches. Just because you can do something doesn’t necessarily mean that you should. Layoffs are short-term; making wise decisions about investing for your future will have lasting effects for you and your family. Don’t make any knee-jerk reactions and talk to a professional advisor first.  

I’ll end with a phrase that is becoming all too common at the end of Walkner Condon’s blog posts: This Too Shall Pass. 

Mitch DeWitt

What I Learned About Money From My Parents… And My Kids

What I Learned About Money From My Parents… And My Kids

As spring springs, the color of the season is green. From green shoots to green clovers, it is everywhere this time of year. It also colors the currency of the United States. From an early age, I have always loved the topic of money. Not from a greed or gluttony standpoint, but more so from an interest in how it drives our economy. This curiosity was likely born out of seeing the entrepreneurial mindset of my parents. I was exposed to many facets of economics that never impacted my friends and classmates. I was constantly asking questions and striving to learn how it all fit together; from how a tax law change affected business planning and forecasting which, then, affected budgeting and capital expenditures. And, more so, how these aspects then influenced budgeting and cashflow at a personal level. My parents were generous with their time and knowledge which inevitably helped me to get to where I am today.

My parents taught me many valuable money lessons during my adolescence, however, there are two that have stayed with me into my 40’s:

Keep an eye on the pennies and the dollars will take care of themselves

At the heart of this lesson is patience and staying consistent. The key to most any long-term financial plan is a systematic investment plan over a long period of time. Markets fluctuate, economic cycles go through ebbs and flows, and the news media constantly finds a new way to scare us – all things we can’t control. However, staying dedicated to saving in long term instruments is something we can control and it can lead to a tremendous amount of financial stability. The lessons don’t have to be complex to be effective.  

Never be afraid to invest in yourself and your abilities

This one can be taken a couple of different ways. To me, it always meant that having a strong belief in your talents and abilities is necessary for success, and investing monetarily to develop those talents and abilities will lead to positive outcomes. This lesson was the impetus for one of the Walkner Condon Core Values – “incremental personal and professional improvements”. We, as a team, believe strongly in striving to be better everyday. Investing in yourself and your abilities is a great way to make that happen!

While it shouldn’t be surprising to recognize that kids can teach us adults a gigaton about life, I am always caught off guard when I learn money lessons from my kids. My most recent and now favorite money lesson from kids is rooted in dedication. 

When you want something, save your money until you can buy it

This is maybe the simplest of all money lessons, but it is so often overlooked by adults. When kids want to buy something, they have one option; save their allowance or part-time job income over an extended period of time until they have enough to make the purchase. This isn’t the case for adults. We can use any number of instant gratification mechanisms – credit cards, payment plans, leases, installment loans, etc. When is the last time you can remember wanting something and delaying the purchase until you have saved enough money. Yes, it happens but far too often we fail the lesson and finance the purchase. Obviously not all financing is bad as is the case with house and car purchases. However, our country has a credit card debt problem and it is a direct result of not heeding the advice of our children. 

We would love to hear some of the money lessons you have learned from your parents or children. Please share those thoughts with us. If we are able to gather enough lessons from our readers, I will put together a second blog post on this topic with the responses. 

Nate Condon

How Does The CARES Act Impact Retirees?

How Does The CARES Act Impact Retirees?

Recently the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. There are a few important items that may impact retirees.

Required Minimum Distributions

For 2020, Required Minimum Distributions (RMDs) have been waived for all retirement accounts, including IRA, 401(k), 403(b), and 457 plans. This includes beneficiary IRAs as well. If you were in the category where you were required to take two RMDs in one year due to delaying your first RMD, you happen to be in luck – no RMD is required. 

No 10% Penalty For Early Retirees

For early retirees that qualify for “coronavirus-related distributions” (an intentionally broad definition), if you took out money prior to age 59 ½ or 55 depending on the type of retirement account, you were potentially subject to a 10% penalty. For 2020 you may now take up to $100k out of your pre-tax retirement accounts without penalty. You are still subject to reporting your distributions as income, though you are allowed to stretch the recognition of this income over three years. 

Stimulus Payments for Tax Filers

For those that earn under $75,000 in adjusted gross income for singles and $150,000 for married filers, they will receive direct payments from the government in the amount of $1,200 (single) or $2,400 (married). This will be sent via direct deposit for those that have set up ACH, and a check will be sent to those that do not have that established. There is a phaseout for those earning above $75k/$150k, ending at $99k for single filers and $198k married.

Clint Walkner

Investment Concepts: Keeping a Healthy Balance

Investment Concepts: Keeping a Healthy Balance

The aims of a diversified portfolio and how it works can be difficult for many investors to understand and in particular a concept that often trips up investors is the concept of “rebalancing”. Rebalancing generally means selling stocks while they are going up and buying them when they are going down.

The first goal of rebalancing is to ensure that investors are not taking more risk than they should or are comfortable with.

For instance, a $10,000 simple portfolio invested in half US stocks and half bonds illustrates this most clearly. If the investment started in January 1987 and was left untouched until the end of 2019, it would’ve ended up as approximately 79% stocks and 21% bonds: meaning that it would have been more risky than an investor originally intended. By rebalancing, that portfolio would stay in line with the targets and give the investor the protection they thought they were getting for down markets. As of writing on March 19, a 50/50 (using VT for the total stock market and BND for the bond portion) portfolio on January 1 would be down only 14.6% versus 21.3% for an unrebalanced balanced portfolio (and 26.2% for an all stock market portfolio) year-to-date.  

Rebalancing then provides insurance on the downside: if disciplined, investors will lose less money when the market goes down. However, there is a less remarked upon side to rebalancing: it means the portfolio potentially will recover more quickly.  

To turn back to the two most recent market downturns (that of 08-09 and 00-02), a 50/50 diversified portfolio returns to flat much more quickly than one without rebalancing. For a non-rebalanced 50/50 portfolio first invested in 1987, the portfolio would have a “drawdown” (or decline off of its peak) of 33.96% in February 2009. The portfolio would recover to its original levels in January 2011. If the same portfolio were rebalanced quarterly, it’s drawdown would be 26.45% and it would return to it’s previous levels by April of 2010. The recovery time for a similar portfolio that was first invested in January 1987 and rebalanced quarterly during the bear market of 2000-2002 would’ve been 12 months less (November 2003 versus November 2004 for an unrebalanced portfolio). 

The case for rebalancing can be made in a variety of ways on paper, but putting the rebalancing in practice can be tricky, taking into account the tax ramifications (this is particularly tricky for US expat clients as they have to take into account tax rules both in the United States and abroad) and the varying time horizons for the variety of cash needs required. However, those who haven’t prepared their portfolio in the face of a downturn by rebalancing, can, hopefully, improve their recovery time by turning to a financial advisor who takes into account their individual challenges but still maintains the discipline needed.

Keith Poniewaz

 

Disclosure note: These securities mentioned were meant to be illustrative in nature only and were not meant to be advice or an inducement for someone to purchase it. You should consider your own personal situation and expertise of a trusted advisor before you implement any investment strategy. The rates of return quoted here are thought to be reliable, but there is no guarantee that they are correct. Again, it’s the premise we are trying to show rather than the actual numbers.