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Lauren’s blog covers topics that impact your finances, your family, and your future. Is there a topic you’d like Lauren to tackle? We’d love your suggestions and feedback.

A little plain speak about investing

A little plain speak about investing

I’m continually amazed by the mixed messages that investors are hit with daily—mostly from the media, but the media is not the only culprit. At Klein Financial Advisors, American Century Investments is the manager for many of our fixed income funds (also known as bond funds). Of course, I pay close attention to their market commentary. In their most recent note, The Bull vs. Bear Battle in 2019, Rick Weiss, a skilled investment manager, writes that he’s “not predicting a recession this year,” but that he’s “taking note of some signals.” Yet, in the same section of their website, investment manager Cleo Chang presents a different view. “Let’s take the emotion out of [the volatility],” she writes, “because we often get too caught-up in the real-time emotion of market selloffs.”  She then goes on to give facts and figures to support her perspective.

Here’s my take: Weiss is ‘mansplaining’ investments, while Chang is refocusing the attention on investors’ reactions. If that’s not a muddled message, I don’t know what is! This is a pervasive problem I see in the investment world. When I sit back and listen to the chatter around the table at investment committee meetings, the language and attitude about the markets, the economy, the Fed, and all the rest begins to sound more like a conversation about the Superbowl than about something as significant as investing for growth and security. It’s a problem that inevitably impacts the thinking of individual investors as well.

This past summer, I met with Ed. He and his wife Ann had been clients of mine for years. After Ann’s death in June, Ed was forced to take an active role in the financial planning process—something Ann had managed mostly on her own. In Ed and my first meeting one on one, it became clear that our work together would have a vastly different tone than my work with Ann.

As a key executive at a large corporation, Ed has participated in many investment committee meetings, and he has often sat through the inevitable ‘dog and pony shows.’ If you’ve never witnessed one yourself, investment committee meetings have a pretty standard agenda. The portfolio manager presents how the market performed in the past quarter, what their analysts predict will happen in the future, the status of your portfolio, and, last but not least, the “brilliant moves” they are planning to make your portfolio better than ever. Once they’ve offered their brilliant solutions, they welcome the audience’s brilliant questions—which usually sound something like this: Who do you think is going to come out on top? What is the Fed’s next move? How will the trade war with China/Canada/Mexico affect tariffs? (I always find myself wondering: if we were talking about a sports team, would the questions be any different? Everyone wants to know who will win the next game, what ‘management’ will do to improve their team’s odds, and what outside factors might impact their success. Same game, different playing field.)

At the end of my meeting with Ed, I asked what he would like to have more of in future meetings. Ed’s reply: he wants more ‘Weiss’ and less ‘Chang.’ In other words, he wants to talk sports. He wants the full dog and pony show, including charts, graphs, and prognostications so I can prove I am a ‘brilliant’ investment manager.

But why? Why play that game when I could be spending my time doing the right things to help him protect his financial security? Do I have market perspective, a high conviction portfolio, a deep understanding of economics and investment theory, a reliable investing process, a research capability, and the skill to employ these things to deliver a successful investment experience? Yes, I do. So why do I need to suit up, put on my game face, and sit in the press box to opine on the markets?

As an advisor, I get it. For certain investors, I have to to pull out my script and get to ‘work.’ Harumph. The last thing I want to do is talk about investing (to Ed, to you, or to anyone!) in an overconfident and condescending manner. If I need to demonstrate my investing chops, I prefer to do it in honest language. I’d rather show the projection of the long-term plan and walk through how that plan is structured to protect and grow assets over time. I’d rather focus on what matters most.

Another interesting thing about investment committees is that, in my experience, they are mostly (almost solely) attended by men, and so the language spoken there is inherently male oriented. Why? Do men really know more about investments, or are these meetings simply designed for a male audience—another symptom of the ‘good ‘ol boys network’ that has dominated the business world for years?

The March 2019 cover of Rolling Stone magazine features a photo of U.S. Congresswomen Jahana Hayes, Alexandria Ocasio-Cortez, and Ilhan Omar, along with House Speaker Nancy Pelosi. The title: “Women Shaping the Future.” The focus is all about the new and boldly female voices that are helping to lead the country. Perhaps it’s about time we start accepting new voices in the investment world as well and, indeed, inject a little plain speak about investing using language that's more than just talk.

I remember a time when news reporters were only men. Back then, the audience (me included) had a cognitive dissonance when listening to a woman’s voice reading news. Times have changed on TV news. Times are changing in Congress. Maybe one day soon, it will change in investment review meetings, too. I plan to be here to help make it happen.

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Facing divorce? Take these 5 steps to find your inner power

Facing divorce? Take these 5 steps to find your inner power

Anyone who has divorced knows how long and difficult the process can be. From the decision to divorce, through the separation and judgment, and on to the new normal, the process is fraught with details, meetings, and compromises. Divorce rocks your world, and a late-in-life or gray divorce disrupts decades of expectations and plans. The key to a successful transition—in divorce and other shattering experiences—is finding your power.

Easier said than done? Perhaps. But it can be done. Many wise women have gone through the transition and set inspiring examples of transformation. Their examples show us the way to move through change with grace and strength, and with our eyes laser-focused on building a happier future.

My friend Janet is one example. When she was in her late 40s, her husband walked out and left her with two teenage boys, a handful of unexplained debt, and her own recent diagnosis of MS. It wasn’t easy shifting from her initial rage at the situation to acceptance and, eventually, a good life for herself. But she did it. How? Armed with friends, family, professional advisors, and a skill at making lists, she broke down what she needed to do into small, manageable steps. The smaller the step, the better. Here’s what helped her find her inner power and take the first baby steps towards her new life:

  1. She got help from her closest friends.
    First, she reached out to her inner circle of friends. Sharing your reality can help you face the truth, and even your shame. Luckily for Janet, she had more than a few women ready to support her, including old college friends, other parents she’d met through her kids’ activities, and a circle of friends from her book club. “I was floored by the support they offered—not only from day one,” remembers Janet, “but for what seemed to me like the endless months that followed.” I believe women who have friends that are more than ‘pals who want to socialize’ are particularly fortunate. Our true friends can become our fiercest defenders, our most honest critics, and the people we can count on for a kind word or a strong hug. No matter how young or old you are, or how large or small your challenges may be, look around and treasure your circle of friends.

     
  2. She hired a (great) attorney.
    And not just any attorney. She found a family law specialist with skill, experience, and strength. He helped her achieve a fair settlement, wrote up the judgment, and then went the extra mile (or two) to follow up with all the post-judgment details. That’s where the magic happens. For example, the marital settlement agreement stated that the house was to be sold and the proceeds used to equalize the financial settlement, but with her ex on the title, Janet needed his signature to move forward. The ex tried to nickel and dime her in the transfer of assets. Her attorney stepped in to enforce the judgment and facilitate the process. (I recently sent him a personal thank you for using his “super powers” to help Janet with the most finite details. He was amazing!) That level of dedication and support made a world of difference.

     
  3. She hired a financial advisor who specializes in divorce.
    Yes, that’s me. (Though I was thrilled to learn that her attorney had made certain she was working with a good advisor… and a good therapist. He definitely gets it!) Together, we went through our financial checklist to be sure she was on her feet financially, taking care to break down each step into manageable, bite-sized pieces. I’ve been through my own divorce, and I know just how disempowering it can be. I also know how amazing it feels on the other side! An advisor who specializes in divorce can help you navigate the unique challenges of this transition—emotionally and financially—to get you back on your feet and moving forward.

     
  4. She tackled her cash flow.
    Janet had been a stay-at-home mom for more than fifteen years, so to begin to earn an income was a major hurdle. We immediately looked at her cash flow to identify what bills needed to be paid in the first six months and the resources on hand to cover them. Next, we looked at where she might live after the house was sold and discussed rent versus buy, and how much rent or mortgage was prudent. Cash management is the foundation of all financial decisions—whether for a pack of lifesavers or for real estate purchases. Knowing what resources would be available long term helped her gain her confidence and feel less like the whims of her ex were dictating her life.

     
  5. She looked beyond today.
    After a divorce, life starts anew. With any plan or journey, the starting point is precisely where you are today. Janet had a Gavron order, which meant that in a few years she would have to begin to earn a living. At the moment, however, her primary source of income would be spousal support, so she needed to insure that income via a life insurance policy on her ex. Together we looked at these and other important pieces of her financial puzzle, including updating her estate plan, deciding what kind of mortgage would be best, and investing her marital assets, as well as analyzing her income, protection, debt, and more. The millennials call all this holistic planning ‘adulting.’ After a divorce, gray or otherwise, ‘adulting’ starts anew with baby steps. Janet’s MS diagnosis required some specialized planning, so we made some assumptions about her health and her future. Step-by-step, the myriad details necessary to reestablish her financial future were addressed, and life went on.

A good two years after Janet’s divorce, she told me that she could remember the moment she began to feel confident and in control again. In her words, “I’d found my inner power that had been missing for years, and the moment I did, I could tell my kids could sense it too. Because when I’d found my power, they suddenly felt safe. That was the biggest payoff of all.”

If you are facing divorce, I urge you to take the first steps toward finding your inner power today. If it feels impossible or overwhelming, break it into smaller, manageable actions. One tiny action is to ask for help. Or tinier yet, decide you need help. You can build your new normal… step by step by step.
 

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Mindfulness and markets: a perfect match

Mindfulness and markets: a perfect match

Last weekend I attended a day-long workshop with Sharon Salzberg, a world-renowned author,  teacher, and influencer who, for decades, has been an important voice in the modern movement toward mindfulness and meditation. The title of the workshop was “Equanimity in challenging times.” The timing couldn’t have been more perfect.

Salzberg opened the morning with a simple sentence: “Some things just hurt.” (Isn’t that the truth?!) Of course, her message was about much more than the fact that pain exists. The focus of the day was learning how to stay balanced—to find a path to calm even when it feels like you are being tossed in the storm. Sharon went on to talk about how maintaining balance inside ourselves gives us the power to stop reacting to the small things, and (at long last) to focus on the things that matter.

What an important message! It’s something most of us know on some level, but achieving equanimity is easier said than done in our day-to-day lives. After all, “some things just hurt,” and trying to stay calm when we feel pain can be a major challenge.

That can be especially true when facing a financial challenge. Money, inherently, is an emotional hotbed, which means that the smallest issue can create fear, panic, shame, and a slew of other negative feelings. We’re human: we imbue money with power, and we often cannot control our obsession with it. (Read more on money and emotions in my blog post, Finance, and feelings: Navigating life's twists and turns.) However, what we can do is find a new perspective.

Maria called me the other day, awash in emotions about the current stock market and its impact on her portfolio. At 67, she is in her first year of retirement. As a widow, she is on her own financially. Like many women in her position, her biggest fear is outliving her assets—of becoming a penniless bag lady in her final years. “Since December, I’ve lost more money than I can stand to think about,” she told me. “I worry about it night and day. I can’t take it much longer!”

Maria is no financial novice. She understands how the markets work, she has saved well and invested wisely, and she’s old enough to have watched the market swing back and forth—sometimes wildly—many times. Her fear of the future has thrown her off balance. To ease her mind, I began by telling her a story about one of my challenges: acrophobia. Yes, I suffer from a terrible fear of heights.

I told Maria the story about the night I drove up the coast to a fabulous party with great friends. I had been looking forward to the evening for weeks. As I approached the Malibu cliffs, that old fear started to take hold. I suddenly had the overwhelming desire to turn back. All I wanted in that moment was to be home, safe and sound, with no cliff to be found. (Even re-telling the story now, I can feel my heart beating way too fast in my chest!) I felt totally and completely defeated. I pulled over to the side of the road—not the cliff side!—and called the host to tell her I couldn’t make it. I can still hear her calm, soothing response:

“Lauren, you can do it. Just breathe…and don’t look.”

My friend was right. It wasn’t easy, but I took a deep breath, and I just drove. Once I arrived, every minute at the party was extra sweet. I had accepted that the best way out of emotions is through them. I’d found a path to equanimity by simply following the road to the party.

Of course, keeping Maria’s portfolio is much more important than my ability to attend a party (no matter how fabulous it may be!), so I added to my story by reminding her that this momentary dip in her portfolio is likely just that: momentary. Then I showed her this chart that illustrates the percentage of positive returns of the S&P 500, from the beginning of the index through 2017:

Providing this new perspective helped tremendously. Looking at the market from a distance, Maria saw today’s shifts in the market for what they are: short-term “blips.” Did that make it any less painful for her to see that her nest egg is down by double digits? Absolutely not. As Sharon Salzberg said last weekend, “Some things just hurt.” Despite the pain, Maria could feel that there was no reason to panic. I repeated the words of my friend in Malibu: “Just breathe…and don’t look.” Easier said than done, I know, but Maria is doing just that.

Late in the day on Saturday, someone asked, “Does meditation really work?” Salzberg replied that, yes, it does, “just not always the way we expect it to.” She said that it “works” as the result of a lifetime of regular, dedicated practice. I have to wonder: maybe she was talking about investing the whole time after all. 

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To help the next generation, equip them for a ‘hero’s journey’

To help the next generation, equip them for a ‘hero’s journey’

Have you ever heard of a ‘hero’s journey’? Years ago, I read Joseph Campbell’s classic The Hero with a Thousand Faces, which discusses a path of personal growthshared across time and cultures. In it, a hero leaves home, goes on an adventure, encounters a crisis, is taught by a mentor, wins a victory, and comes home transformed. As parents and grandparents, it’s an important reminder that simply offering a helping hand (or an open checkbook) to the next generation isn’t always the best path forward. Instead, it’s often wiser to give them the tools they need to take their own ‘hero’s journey’ and return with a lifetime of wisdom.

I’ve been in practice for many years. As a result, the majority of my clients are older. With age often comes a complex set of financial challenges—retirement income planning, tax-advantaged charitable giving, risk management, and health issues. At the same time, we see our children and grandchildren experiencing their own challenges. Just as their parents did a generation earlier, those in their 30s and 40s and beyond are building a foundation and pursuing careers. If married, they must manage financial realities with a partner (rarely an easy task!). They may have kids of their own to raise and educate. Perhaps they’re struggling to buy their first home. Yet their journey is not like their parents’ was. In many ways, it is wildly different.

For starters, they have more college debt than any previous generation (an average of about $33,000), and more credit card debt (an average of about $42,000[1]—far above the national average of $5,700). They’re also born entrepreneurs (a study by the American Small Business Development Center found that 59% of Millennials say that with the right idea and resources they would start a business within the next year). Many have grown up with the Internet at their fingertips and a smart phone in their hands. And perhaps because they felt the impact of the financial crisis as kids, they understand the importance of saving for the future; 45% of millennials are actively saving for emergencies, 41% are setting money aside for retirement, and 41% are actively saving to buy a home[2].

But knowing the importance of saving isn’t enough. To reach their financial goals, they need a mentor or guide. According to a recent study by Broadridge Financial Solutions, they’re not getting the advice they need. Sixty-nine percent of millennials reported that they are not working with a financial advisor. Among those who are managing to save and invest, most don’t know what they don’t know, putting their future at risk. For this generation, the time for a financial hero’s journey has come. As parents and grandparents, our role is not to step in and fix their problems, but to prepare them for the journey. It’s time to teach them to fish.

Give a man a fish, and you feed him for a day.
Teach a man to fish, and you feed him for a lifetime.

A few weeks ago, my client Gina put me in touch with her daughter and son-in-law who need help kick-starting a financial plan. In their early 30s, they’re late starters to financial planning. Like many people their age, they have a negative net worth and spend more than they earn. Rather than having someone their mother’s age (yes, that’s me!) work with them, I asked Brittany, our Associate Financial Planner, to step in. Brittany is their age, and she brings lots of financial planning skills to the table (she is a CFP® with degrees in finance, financial planning, and taxation). It was an even wiser decision than I could have guessed. When I handed her their file, her first question was this: “Do you mind if I recommend some Millennial strategies to them?”  My answer: “I don’t mind one bit!” (Honestly, I didn’t even know what she was talking about!)

She elaborated before I had to ask. To help them manage their debt, she wanted to set them up on a personal financial management app like Digit, which tracks spending and analyzes income and then uses that data to determine the right amount of money to save, even transferring the amount into savings automatically. To help them supplement their income, she wanted to recommend a tool like Gigwalk, an app that allows users to earn up to $100 a project by matching their skills with the needs of local businesses on a one-off basis. I was thrilled. Brittany had the right tools to offer—tools a younger couple would appreciate and, most importantly, use to their advantage. By showing them how to catch up financially, set long-term goals, and build a wiser path forward, she is teaching them how to fish. She is the ideal mentor to guide them through their ‘hero’s journey.’

When you want to help your next generation succeed financially, resist offering your gems of parental wisdom (no matter how great they may be!). Don’t offer your assets to fund a ‘solution’ (for more on this tricky topic, read my blog post MoneyRules). Instead, allow them to take their hero’s journey of discovery and arm them with tools and resources to help them pave their own path forward—even when it hurts to watch them suffer.

One place to start is William J. Bernstein’s great little handbook If You Can. (It’s free on Kindle, or This email address is being protected from spambots. You need JavaScript enabled to view it. , and we’ll happily send you a copy to share!). It’s a quick and easy read that offers a simple approach to tackling some of the biggest hurdles to financial success, including cutting back on unnecessary spending, sticking to long-term saving and investing plans, and recognizing bad financial advice before it’s too late. Of course, our team is always here to help as well. The key to success is to give the next generation what they need today to create a strong, confident financial future. Whether that resource is a peer mentor or a little booklet that is packed with great advice, make it your mission to “teach them to fish” so they won’t be, as Bernstein says, “living under a bridge” at our age. 

 


[1]According to Northwestern Mutual’s 2018 Planning & Progress Study

[2]According to data from Ally Financial, Business Insider, January 22, 2019

 

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In Your Best Interest: Our Winter Newsletter 2018/2019

In Your Best Interest: Our Winter Newsletter 2018/2019

Click here to view the full newsletter, including recent news, important dates, financial tips & tools, and more.


Market Highlights Q4 2018

On September 20, 2018, the S&P closed at an all-time high. Then came the new era of volatility. Despite the economy expanding at a rate not seen in many years, mostly favorable corporate earnings reports, strong consumer spending, tepid inflation, and plenty of jobs, investors ended the year feeling anxious and often afraid. As a result, the S&P declined more than 14% in Q4, wiping out earlier gains and closing down 6.24% for the year.

The news media is awash with speculation as to the causes, and with every overwrought pundit and fantastical headline, the market seems to overreact. Yet despite a disappointing Q4, the aging bull did deliver positive highlights. The economy expanded at an annual rate exceeding 3.0%. Unemployment reached the lowest point since 1969. Consumer income rose and purchases increased.

Still, it’s easy to become nervous in such a volatile investment environment. My goal is to be the calming voice of reason and provide much-needed perspective to help you rise above the headlines. Here is some food for thought: 

  • There are not more sellers than buyers in the market. For everyone selling shares, there is someone buying. This interplay between buyers and sellers is how market participants drive price equilibrium.
     
  • Our free market economy will always experience periods of both growth and recession. Economists agree that we are in the late stage of a growth cycle. At this stage, the economy is still growing, but at a slower rate.
     
  • Wise investors don’t get distracted by the short game but focus on long-term growth. No one can reliably predict the timing or severity of a recession, but we’ve been here before. Since 1980, despite annual pullbacks, stocks have returned a compound annual rate of return of 11%. 

Perhaps what is most important is that your portfolio is invested in high quality, diversified investments to protect you from excessive downside risk. And if you’re not mentally prepared for the ‘weather of the day,’ rest assured that we are here to help you benefit from the ‘climate of the era.’ When you need a team to get you through the storms, we are always here to help! 

 


Click here to view the full newsletter.

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All written content on this site is for information purposes only. Opinions expressed herein are solely those of Lauren S. Klein, President, Klein Financial Advisors, Inc. Material presented is believed to be from reliable sources and we make no representations as to its accuracy or completeness. Read More >