News & Blog

Financial markets saw healthy gains during the first quarter of 2017. In the US, the Dow Jones Industrial Average reached 20,000 for the first time on January 25. 20,000 is a symbolic number that perhaps eases investor fear lingering from the 2008-2009 financial crisis. Growth stocks outperformed value stocks, and large caps fared better than small caps in the first quarter. International and emerging market stocks performed better than US stocks. Interest rates remained steady, allowing for modest, but positive, returns for bonds. The only negative performers were international bonds and commodities.

New Administration

In the US, stocks continued their post-election climb dubbed the “Trump rally”. Investors expect a positive environment for businesses from a Republican-controlled White House and Congress. Consumer confidence rose in March to a level not seen since December 2000.[1] Late in the quarter, markets cooled as key healthcare legislation failed to achieve enough support to pass the House. President Trump previously stated that healthcare must come before tax reform.

Delivering on his campaign promise of less regulation, President Trump ordered a review of the Dodd-Frank financial regulation and the DOL Fiduciary Rule on February 3. The Fiduciary Rule required that financial advice given to investors with 401(k) or IRA retirement accounts be in their best interest. Currently, the DOL rule is under a 60-day delay. Regardless of the outcome, the DOL Fiduciary Rule has let the “cat out of the bag” with regards to the best interest standard for retirement advice. Many of the largest financial services firms have already made changes to reflect the intent of this rule.

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“’I think the genie is out of the bottle,’ Ms. Borzi [Phyllis Borzi, former Labor Department assistant secretary] said in an interview. ‘The market has already spoken. The best interest is what they are asking for and what consumers are now beginning to expect…’”  The Wall Street Journal, February 6, 2017

Last Friday, President Trump issued a Presidential Memorandum delaying the implementation of the Department of Labor’s fiduciary rule, and an Executive Action calling for a review of the Dodd-Frank legislation signed in reaction to the financial crisis. This allows his administration to further review the DOL fiduciary rule put in place under the Obama administration and set to take effect in April. This should come as no surprise as President Trump has telegraphed this action for quite some time. Whether or not you agree with the rule, its purpose was to require that financial advice given to investors with 401(k) accounts or IRAs be in their best interest. This rule has been debated far and wide since it was announced, but I don’t believe it is the rule that matters most.

As an investor, regardless of the rule, you should make sure that you understand the basis of the business relationship you have with the person providing you investment advice. Are they required to place your best interest first, or are they selling you a product as a broker or agent?

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When is the last time you reviewed your 401(k) or retirement account? I’m not talking about opening your statement and taking a cursory glance at the balance. The beginning of the calendar year is a good time to do an annual review. Too many times, investors set the deferral rate and investments in their retirement accounts and forget about it. You should annually review your portfolio to make sure that you are (1) saving as much as you can, (2) your risk level remains appropriate and (3) that you have selected the right investments. Reviewing your account annually will help you better understand your financial path to retirement and allow you to correct mistakes that could otherwise linger for years.

Increase your Savings Rate

Research suggests that the single most important factor in achieving retirement readiness is how much you save. The concept of retirement readiness can be boiled down into one simple concept. Will you be happy in retirement without worrying too much about money? We measure retirement readiness as the ability to use your investments to generate income that will replace your salary when you retire. Rather than think about how much money is in your account, make sure you are aware of how much monthly income you can expect that money to provide. Most of the major 401(k) plan providers offer tools that help project how much monthly income you can expect given current savings rate. The example below shows various sources of income, current estimated monthly income goal and your shortfall if applicable. Additionally, the Plan’s investment advisor can often help with retirement planning questions.

Source: Voya Financial

For 401(k) plan accounts, this time of year is a good time to assess whether or not you are saving as much as possible. If you have received a raise, or your financial circumstances have changed, consider increasing your savings rate. As a rule of thumb, the 401(k) industry recommends saving 10% to 15% of your salary. The earlier you start the better off you will be because you will have longer to enjoy the benefits of expected compounded growth. The more money in your account at retirement the more income it will be capable of generating. Remember, generating income in retirement is one, if not the number one purpose of the 401(k) retirement plan account.

Review your Risk Tolerance

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Executive Summary

  • Year in Review – “Worst Start”, Brexit, Trump surprise victory
  • Small cap and Value stocks outperform
  • Interest rates decline mid-year, then rise to finish year higher
  • Will the US pass income tax and corporate tax reform in 2017?
  • Late innings for the current US economic expansion
  • The folly of forecasts 

In 2016, the US stock market reached new highs. You may recall that the market began the year with the “worst start” of any year on record. The “worst start” began early, with a 5% decline in the Dow Jones Industrial Average in the first four trading days in January. It continued in mid February, with US stocks down more than 11% for the year. By year-end the S&P 500 Index was up 11.96%. That’s a remarkable difference in market performance within the same calendar year. It makes the case for long-term thinking and following a disciplined approach to investing.

Last year was also a year marked by surprises. In June, voters in the United Kingdom voted to leave the economic agreement with the European Union. Prior to the voting results, almost every poll, and certainly the financial markets, expected a vote to remain in the EU. The reaction from financial markets to this surprise was initially strong. The Dow Jones Industrial Average lost 900 points in two days, and the British Pound declined below $1.30, a level not seen for over 30 years. However, within a week, global stock markets recovered their initial losses and even climbed higher. It was a remarkably fast reversal in market sentiment.

Markets reacted strongly to the surprise victory of Donald Trump in the US Presidential Election in November as well. This time, markets corrected even faster … literally overnight. On November 8, the day before the election, almost every poll predicted a win for Hillary Clinton. The New York Times gave Clinton an 85% chance of winning, and famed pollster Nate Silver of FiveThirtyEight predicted a 71.4% chance for a Clinton victory. To say that Trump’s win was unexpected is an understatement. What is more interesting, however, is the initial reaction and subsequent reversal in financial markets. As the election results became clear, Dow futures fell as much as 800 points. S&P 500 Index futures declined 5%, prompting a halt in trading. In Japan, the stock market was open overnight and closed down -5.4%. European markets initially traded down but finished the trading day higher than the open. US stocks initially opened lower on November 9, but recovered by mid-morning and closed in positive territory for the day. Stocks continued to rally through the end of the year.

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ThirtyNorth’s Fritz Gomila contributed to an article in this month’s edition of Biz New Orleans magazine. In “Resolving to be Financial Sound”, Fritz discusses the challenges retirees face in a low interest rate environment and offers advice for employees saving and investing in their retirement plans.

Here is an excerpt from the article:

“ThirtyNorth’s Gomila says trading on emotion can be costly. ‘Be cautious about changing long-term investment strategies based upon short-term headlines and events.’ Protecting your financial assets, he continues, is critical. ‘Make sure you understand the risk in your portfolio. The last thing you want is to take more risk than necessary to earn your returns.'”

To read the entire article on Biz New Orleans’ website click the link below:

Resolving to be Financially Sound

The Women Impact Strategy finished 2016 strong, outperforming the Russell 3000 Index by 1.88% net of fees since the strategy’s inception on April 7, 2016. As we look forward to our 1-year anniversary in the strategy, we are quite excited by this early performance.

The portfolio is comprised of fifty stocks, purchased at equal weight, and mirrors the sector weighting of the Russell 3000 Index. These companies have a minimum of 20% female board members and at least one woman in the executive suite. The portfolio average is 30.4% female board members and 26.0% female executives. Four of the companies are run by female CEOs and seven have a female Chairman of the Board.

In addition to screening for gender diversity, we look to buy companies we believe can outperform the market. We evaluate companies based on their size, value, and profitability. The Women Impact Strategy offers a potential first-movers advantage and is intended to provide the benefit of social impact with competitive returns.

View the 4th Quarter Fact Sheet for the Women Impact Strategy:


Despite a plethora of academic research on the benefits of gender diversity in groups, corporations are painfully slow in adding women to their boards. The main question for investors, however, is whether the presence of women on boards improves stock performance. In order to answer this question, we evaluated the companies in the S&P500 Index in 2006 and tracked their performance for 10 years.

We looked at the gender makeup of the boards of companies in the S&P500 Index and tracked their stock performance over a ten-year period. We then divided the stocks into portfolios with zero women, one or more women, and more than 25% women on their boards. The results are fascinating, although not necessarily surprising given the breadth academic research on the benefits of cognitive diversity in teams.

These results do not imply that one gender is superior to the other, but that the combination of both genders has the potential to unlock value in publicly traded stocks.

To read our whitepaper – Impact of Women in Corporate Leadership: The Relative Stock Performance of Gender Diverse Boards, click this link below:

Impact of Women in Corporate Leadership

As I am sure you have heard by now, Bob Dylan was recently awarded the 2016 Nobel Prize in Literature and that the award has stirred much debate. In fact, to add to the controversy, the Swedish Academy that awards the prize, after many failed attempts, gave up trying to reach Dylan to notify him of the prestigious honor. No doubt, Dylan’s lyrics, which were poetic and never shied away from controversy, will long be remembered for the impact they had on our world. Perhaps, at least for me, his most meaningful verse was in the song, “The Times They Are A-Changin’.” “If your time to you / Is worth savin’ / Then you better start swimmin’ / Or you’ll sink like a stone / For the times they are a-changin’.”

This lyric stands out to me because of the simple fact that we do live in an ever-changing world. Our ability to adapt to change is the key to not sinking like a stone. As an investment advisor assisting retirement plan sponsors and participants, I look for ways to help clients deal with the imminent changes on the horizon. Currently, the retirement plan industry faces significant change driven by the Department of Labor (DOL). In April of 2017, the DOL will begin to phase in new rules requiring investment advice to be held to a best-interests standard. I will write more on this in blogs to come. Today, I want to stress that while the times will continue to change, those changes often impact how we do things. But changes do not necessarily impact what we are attempting to do and why we are doing them.

The purpose of a retirement plan is simply to help participants save for retirement. There are many reasons for the complex rules that govern the administration of a plan, but when you boil it all down, the end goal is to help participants build wealth that can be used in retirement. With that goal in mind, my logical next question, as an advisor, is how can I help clients best reach that goal? What can be done to help drive the best possible outcome for plan participants? Two things immediately jump to mind.

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The third quarter finished strong for most global stock and bond markets. U.S. stocks, measured by the S&P500 Index, were up 7.84% for the year. Markets have pulled back a bit since the end of the quarter, however. Most of the economic news in the U.S. was positive over the summer, and corporate earnings recovered from last year’s decline in energy profits. International developed stocks fared the worst, yet the MSCI EAFE Index ended the quarter in positive territory year to date up1.73%. This is despite a rate cut by the Bank of England and a lackluster GDP report from Japan. Emerging market stocks soared. The MSCI Emerging Markets Index was up 16.02% year to date at quarter end. Despite painfully low interest rates, even bonds posted healthy returns. The Barclays Aggregate Bond Index was up 5.80% year to date. Both real estate and commodities had strong returns. Global REITs were up 12.35%, the Bloomberg Commodity Index was up 8.87% through the end of the quarter.

No One is Talking About Emerging Marketspicture1

Quietly, emerging market stocks and bonds have outperformed US and International developed
countries by a wide margin this year. Yet, this is getting practically zero coverage in the media. For almost 6 years, emerging market stocks underperformed, and investors lost interest. Fair weather fans rarely have the opportunity to bask in their team’s glory. So far in 2016, emerging market investors who have stuck to their discipline, were handsomely rewarded. The MSCI Emerging Market Index is up 16.02% versus 7.84% for the S&P500 Index and 1.73% for the MSCI EAFE Index.

The table to the right illustrates the dispersion of stock returns across various emerging market countries. Strong performance is not limited to a particular geographic region. Countries in South America, Asia, Eastern Europe, and the Middle East all exhibited double digit returns.

The story is similar for emerging market bonds. The JPMorgan EMBI Global Index of dollar-denominated emerging market sovereign bonds is up 15.04% versus 5.80% for the Barclays US Aggregate Index and 6.68% for the Citigroup World Government Bond Index (hedged to the US Dollar).

While we knew that emerging markets were undervalued, we had no way to predict the timing of a turnaround. What’s most surprising is the lack of coverage by the financial media. We are happy to keep this secret to ourselves for now.

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These days, we can hardly pick up a newspaper and not find an article about retirement. Of course, the endless articles addressing the current election often camouflage these articles. Elections, especially Presidential elections, always make for meaty reporting, but I don’t have to tell you that this one seems to be over the top. However, hidden amongst the election news are important articles about how to prepare for retirement. I’d like to add a piece to that stack.

Retirement seems daunting to many because of the multitude of worries regarding money, healthcare and simply what will you do in retirement. There are too many unknowns; market returns, interest rates, future taxes, and inflation are all uncertain. All of these worries can cloud the fairly simple concept of how to save for retirement. At the risk of sounding like a cliché, I recommend that clients apply the KISS approach – Keep it Simple Stupid. You can achieve success in retirement savings by focusing on three basic factors.

1. Save as much as possible (and a little more). The amount to save will depend upon your retirement goals, but an easy back of the envelope approach is to save 12-15% of salary over a career. The single most important factor in saving for retirement is how much you save. Take full advantage of the company match (if offered) to help you reach that 12-15% goal. Compounding returns also help, which means that the earlier you start to save for retirement, the better.

2. Diversify your investments and take an appropriate amount of risk. Younger savers can afford to take higher risk in their portfolios because they have more time to weather market downturns. Riskier portfolios achieve higher expected returns over time. Investors should reduce risk as they move closer to retirement. Regardless of risk level, prudent investors should broadly diversify their portfolios globally and across asset classes.

3. Seek advice from a professional when making decisions about how much to save and how to invest your money. Retirement is the largest investment most people will make. These are extremely important decisions that have the potential to significantly impact your life. Getting them right could make the difference when it comes time to retire.

So, going back to the KISS concept, saving for retirement can be simplified into three key principles. Save as much as possible, invest smartly by taking the appropriate amount of risk and diversifying broadly and seek advice when you need it. It does not have to be more complicated unless you want it to be.

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