Lowell: I’ve worked at Merriman for 13 years. I started in client services before moving to my current advisor role. I made the switch because I wanted to help people achieve their goals and provide peace of mind along the way.
Scott: What do you love about working here?
Lowell: The opportunity to help my clients articulate, achieve, and expand upon their financial and associated life goals.
Scott: What’s on your wish list for the next 10 years?
Lowell: To raise my children in a way that they are responsible, give back, and are well rounded. Professionally, I want to continue developing in my career; and now that I’m getting older, I’m excited to help the next generation do well and advance through their careers.
Scott: If you could give one piece of advice, what would it be?
“‘Would you tell me, please, which way I ought to go from here?’ said Alice.
‘That depends a good deal on where you want to get to,’ said the Cat.
‘I don’t much care where—’ said Alice.
‘Then it doesn’t matter which way you go,’ said the Cat.”
–Lewis Carroll, Alice’s Adventures in Wonderland
What an amazing quote! My takeaway is that if you have clear direction, you can achieve whatever you set out to do.
Scott: Where are you originally from?
Lowell: Issaquah/Preston/Enumclaw, WA.
Scott: What’s the weirdest thing you’ve ever eaten?
Lowell: Chicken feet at Dim Sum in Vancouver, BC.
Scott: How was it?
Scott: What’s your hidden talent?
Lowell: I took up the guitar about 20 years ago and have steadily improved. My next level goal is to start playing acoustic sets at local venues.
Scott: What is the last experience that made you a stronger person?
Lowell: Coaching my son’s basketball team. Patience and repetition!
Scott: Merriman has employees take the StrengthsFinder quiz so we can understand how to best work with each other. What are your top five strengths?
Achiever: Those with the Achiever theme have a constant need for achievement. Every day they need to achieve, no matter how small. They take immense satisfaction in being busy and productive.
Learner: Those with the Learner theme love to learn. The process, more than the content or the results, is especially exciting for them.
Self-Assurance: People with this strength feel confident in their ability to take risks and manage their own lives. They have an inner compass that gives them certainty in their decisions.
Competition: People exceptionally talented in the Competition theme measure their progress against the performance of others. They strive to win first place and revel in contests.
Focus: People exceptionally talented in the Focus theme can take a direction, follow through, and make the corrections necessary to stay on track. They prioritize, then act.
Maui was always a favorite vacation spot of mine growing up. One of the best parts was my aunt and uncle’s snorkel business. We would wake up early for the calm water, quickly eat a pineapple donut for breakfast, and set sail. Having been in business for decades, they knew the island well. Whatever you were looking for (or not looking for, like sharks), they could find it.
Thirty years later, I am now taking my family to Hawaii. While we still enjoy the water and all it has to offer, things have changed, most notably the coral reefs and the ecosystems they support. (more…)
This post was co-authored by Wealth Advisor Lowell Parker, CFP® and Information Systems Manager Rodney Gonzales.
As banks become increasingly difficult for cybercriminals to hack, high net-worth families are the next logical targets. These criminals are organized, patient, and in some cases, well-funded. Cybercrime is also underreported, and while the court system is catching up with the expansion of laws and penalties for cyber-related crimes, cases remain hard to solve or even prove.
Having your personal information compromised isn’t a matter of “if,” but “when.” It’s less expensive to take preventative measures than it is to investigate and eliminate threats. It’s imperative that you take the right precautions both externally, with your vendors and service providers, as well as internally with your home computers and networked systems. (more…)
Joe grew up in a financially relaxed household. Money came easily to his parents and when they needed something, it was there. He wasn’t spoiled, just well taken care of. Lucy was just the opposite. Money was scarce. Choices had to be made.
When Joe and Lucy got married, their two very different financial tracks had to merge. Much like Joe and Lucy, all of us have stories about what money was like growing up. As we enter into and manage relationships, merging those financial stories is a crucial element to the relationships’ long-term success. The following points provide guidance on how to do so.
Set expectations around your goals
Funding your children’s schooling is a classic example. For the Joe-like individuals, the answer seems obvious – their parents paid for their schooling, so they feel obligated to do the same. The Lucy answer is starkly different. Whether it’s paying for schooling themselves, or getting some kind of scholarship, they need to have some skin in the game. Whatever the outcome, being proactive with a plan is what matters.
Couples at or near retirement can face equally difficult crossroads. One person may be under the impression they’re going to downsize the home to buy a small condo and spend their time traveling. The other person is completely attached to the home they’ve lived in for 40 years and has no intention of selling it. They want to stay closer to their family and the community relationships they have built. Wow! Sounds like fireworks. Again, plan ahead. Don’t wait until your last day of work to have this discussion. Have it now.
If your goals align, great. If not, tweak them to arrive at a compromise. Goals, plans and circumstances change, so continue to have the conversation. I suggest an annual check in. That way things can evolve naturally and you’re not stuck dealing with a dramatic change 20 years down the road.
Who manages the finances?
It’s completely natural for one person in the relationship to gravitate to the finances. In our example, it’s typically the Lucy types – those that had to make choices about how to spend their money. Over time, that person comes to know their finances like the back of their hand. So what happens if that person is suddenly no longer around? Financial relationships can often live on a teeter totter. One person carries the weight, and the other is left suspended in air. Once the weight is gone, the other person may land pretty hard. Neither person in the relationship wants this, so it’s best to take steps to ensure both people have a baseline understanding of the household finances.
Tip: If you’re working with professionals (CFP®, CPA, etc.), make sure the non-financial person attends all meetings. This allows all parties to increase their plan acumen steadily over time and establish relationships with the professionals.
Be honest with yourself and with your partner about your financial habits. Until recently, I’d never encountered a “secret bank account.” In this case, someone siphoned money into a bank account their spouse was completely unaware of. The intention was to create a pool of money that could continually fund their spending habits. A secret like this is a ticking time bomb. It’s probably one of the primary factors behind the statistic that finance-related issues are the number one cause of divorce. Divorce is much more catastrophic than a secret bank account. Again, it’s best to have full disclosure.
Review your various account statements – bank, investment, credit cards, loans, etc. I know it’s easy to toss them into the shredder with the envelope still sealed, but most of us need to be aware of what we spend, so it’s good to get in the habit of reviewing the statements. Twenty minutes a month is all it should take. The intent is for you to get a rough baseline of where your money is going. Knowledge is power. Understanding the big picture of your spending and savings habits is crucial to your long-term success.
Like Joe and Lucy, we all come from different financial backgrounds. The above discussion topics will help those looking to merge paths as well as those who are on an independent path. Start with setting the expectations and defining goals together. From there, ensure that all parties have a baseline understanding of the financial picture. Move to full disclosure – for most of us, this should be nothing more than getting all of the information on the table. Before you know it, you’ll have a mutually agreed upon plan. Day by day and week by week, you’ll live this plan so you can accomplish all that is important to you.
I recently received a question from a client of mine about an article that referenced rebalancing a portfolio at the same time each year. In theory, an annual rebalance is not a bad way to go. However, there’s quite a bit more to how we manage the rebalancing process than that.
For Merriman clients, we:
Avoid unnecessary transaction costs by using cash inflows and outflows as a tool to rebalance a portfolio back to its target allocation. Cash inflows are used to buy underweight asset classes and cash outflows are used to sell overweight asset classes.
Allow assets that are performing well to continue to perform – a documented trend called momentum – by placing tolerance bands around our allocations. This also helps avoid excessive rebalancing transaction costs.
Favor rebalancing tax-deferred accounts in December to coincide with mutual fund distributions and Required Minimum Distributions (RMDs), again reducing transaction costs.
Help defer taxes by rebalancing taxable accounts in January, when appropriate.
Market performance can also have an impact on the need for rebalancing. If returns are flat for a few years, there is less need for rebalancing. In volatile times, more.
In addition there will be one-off cases such as:
Tax loss harvesting. If there is a significant downturn in the markets (think 2008), we can use that as an opportunity to harvest losses to be used against future gains. We did this for our clients in 2008 and it is paying dividends today.
Introduction or deletion of an asset class can also provide an opportunity to rebalance your portfolio.
Rebalancing your portfolio is an integral step in maintaining a well-balanced portfolio and reducing its risk. But to do it once a year at the same time every year may not be the best solution for you. Depending on your situation, a more customized rebalancing approach may save you significant money in transaction costs and taxes in the long run. As always, check with your advisor to find out what’s right for you.
Monday, October 19, 1987—aka Black Monday—was a fearful day for investors across the globe. The damage exceeded 20% in stock market declines by the time the exchanges closed. In the wake of such steep declines, investors too often are driven to act by their emotions. In this case, fear. Fear that the decline will continue. Fear that their hard earned savings will be sucked dry by the markets. A more recent example of this fear was invoked by the financial crisis. In both cases the markets recovered in short order. But, the market never recovers for those who sell out of it. Clearly, fear selling is a bad idea.
Fear is not the only emotion that muddles our investment decisions. Greed is just as dangerous.
The 1990s seemed too good to be true. Investors could not lose money in technology stocks. Valuations seemed to have changed and the exponential rising prices were within the new norm. People got greedy. Some went so far as to use their home equity to purchase stocks. And then, just like that, the party was over. The end of the decade saw technology stocks come crashing down. Those who got greedy and concentrated all of their holdings in technology stocks paid the price.
Anytime the sky is falling or the markets seem too good to be true, remember the mantra—be greedy when others are fearful and fearful when others are greedy.
While fear and greed top the list of emotions that can wreak havoc on your investments, there are others: angst and excessive pride, for instance.
The issue with angst is if you wait for events to happen (government shutdown, fiscal cliff, quantitative easing, etc.) or for the markets to “normalize,” you often miss the boat.
Excessive pride can sometimes drive people to buy individual stocks. It’s the classic cocktail party conversation where someone tells you they bought Microsoft stock in the 1990s or Apple stock at the turn of the century. They do not tell you about the other 10 stocks they bought that went south. By focusing on the one home run, people subconsciously convince themselves that investing in individual stocks is a wise venture. It’s not. In fact, it’s speculation, not investing. Do not let pride get in the way of making smart investment decisions.
Clearly we cannot let our emotions guide our investment decisions. Emotional investing is not successful investing.
Follow these steps to help avoid the pitfalls:
1) Build a plan. Write it down and stick to it. If the markets turn over, do not deviate from your plan. If anything, rebalance your accounts back to their initial targets.
2) Turn off the news and tune out the financial pundits. In the age of information, the evening news is not going to give you a leg up on investing. That is, everyone knows everything and it is all factored into the price of securities.
3) Do not assume things are correlated when they are not. GDP is not nearly as highly correlated to stock market returns as people think. Nor, for that matter, are political events.
4) Diversify your portfolio. Put another way, do not put all of your eggs in one basket. Remember what happened to technology stocks in the 1990s.
5) Focus on what you can control. You can control how much you save and whether or not you succumb to your emotions. You cannot control the markets and politicians.
Here’s the exciting part: if you can keep your emotions at bay, invest wisely and let the markets work, you can reduce your stress and increase the likelihood of a successful retirement period.