February 2018 | Posted By John Reagan

You know all those tax season emails you get from Charles Schwab and others, informing you that your Form 1099s are ready to download and share with your tax professionals?

Hill Investment Group clients can largely disregard those notices, because we take care of this busy-work for them. We aggregate all of their 1099s, and send the documents to those who need them, safely, securely and without our clients having to lift a finger. (Unless you count that single click to delete the email notifications.)

This is just one way we strive to simplify our clients’ busy lives, so they can focus on the things that are important to them.

February 2018 | Posted By Rick Hill

Rick Hill, HIG Co-Founder

Recently, my family and I quietly celebrated my 75th birthday. We didn’t make a big to-do over it. That’s not my style (except for the party we had on my 70th – oh what a night).

Will I retire soon? I hope not.

Maybe I’m trying to catch up with St. Louisan  Oliver “Ollie” Langenberg, an A.G. Edwards (Wells Fargo) broker, local philanthropist and all-around good guy who passed away in 2012. He was just shy of his 100th birthday and, as Wells Fargo’s oldest active advisor, he was happily plying his trade right up until quitting time.

That said, friends and clients of Hill Investment Group may wonder why I’m still here. The simple answer is, I like the work. I have always enjoyed reading books and articles about investments. I find it rewarding when I can apply my interests and experience to advise clients on how to pursue their own personal and financial goals. I also find it invigorating to spend time with my younger co-workers, serving as an in-house mentor.

Besides all of this, I am grateful for what I no longer have to do. These days, I’m retired from financial budgets, personnel reviews and similar operational projects; I’ve happily passed those duties off into able hands. Instead, as a member of our Investment Policy Committee, I am free to focus more deeply on new evidence-based investment strategies and solutions we may want to employ, exploring whether they might improve on our clients’ investment experience.

Why am I still here? Because I am still in a great place!

February 2018 | Posted By Matt Hall

In the wake of February’s recent market volatility (after a nice, long lull), we thought this would be a good time to remind our readers how unusual it is for markets to deliver their “normal” average returns in any given year.

For example, while the S&P 500 index has delivered average returns of around 10% per year since 1926, the six orange dots in our “Illustration of the Month” below are the only years it’s actually toed the line of its long-term average.

What’s the real “norm”? Expect volatility far more often than not along the road to future growth.

Click on image to enlarge it.

January 2018 | Posted By Matt Hall

We encourage investors to mostly look past annual returns and keep their eyes on the market’s long-term performance. But it can be helpful to consider annual reports too, as long as we do so within this greater perspective.

Speaking of perspective, there’s also global versus domestic viewpoints. The Dimensional Fund Advisors chart below, ranking 2017 return sources, illustrates why we continue to believe it’s best to globally diversify your risks and expected returns around the world. While the U.S. S&P 500 performed nicely in 2017, returning just under 22 percent, notice how many international markets did even better, with emerging markets significantly outpacing all the rest.

Of course, from one year to the next, the reverse can easily be true. So, to quote Nick Murray, an industry thought leader:

“We will never own enough of any one idea to make a killing in it. We will never own enough of any one idea to risk being killed by it.”

This is what diversification is for.

January 2018 | Posted By Henry Bragg

One of the things that differentiates Hill Investment Group (HIG) is the simple, transparent philosophy behind our investment strategy. As we like to remind clients, the data and evidence tell us that one of the best ways to pursue long-term financial goals is to essentially own the world and, of course, take the long view with our ownership – relying on the expected long-term gains of global capitalism to deliver growth.

This philosophy does NOT mean our portfolios operate on auto-pilot. In fact, we’re regularly reviewing the latest academic research and innovations in financial products to evaluate available options. Like other aspects of our investment process, we tackle this job through a rigorous, disciplined approach guided by our internal Investment Policy Committee (IPC), comprised of me (Henry Bragg), Rick Hill, John Reagan and Nell Schiffer.

Our IPC assesses the ongoing performance of our current holdings and occasionally adds new investment opportunities when they make sense within our evidence-based infrastructure. (Remember, as fiduciaries by choice and design, it’s our legal duty to make decisions that are in our clients’ best financial interests.) In addition, it may be even more important for us to assess and reject countless supposedly “new and improved” offerings when closer analysis reveals them as pointless distractions to our Take the Long View® strategies.

To accomplish these missions, our IPC follows a regular process that includes:

  • Monthly reviews of our model portfolios and individual fund performance
  • Quarterly IPC meetings and semi-annual meetings with financial product providers
  • Regular communication with the rest of the firm through meeting minutes

Our processes are grounded in the following key principles that help the IPC perform due diligence and make recommendations.

  • Factor-based investing beats traditional active management. Roughly 85% of active funds trail their benchmarks over periods of 15-20 years, compared to factors such as small size, value and momentum that have demonstrated long-term return premiums. For that reason, we won’t even consider traditional actively managed funds. We opt for evidence-based strategies, which helps weed out a lot of options that simply don’t fit with the way we serve our clients.
  • Data and evidence drives decision making. Academics and practitioners are constantly producing new research into how markets work, and the IPC is committed to following these developments. We read academic and financial journals, attend conferences, and speak with experts to ensure that our investment options reflect what the evidence is telling us.
  • We always seek to add value to portfolios. With fund companies continually developing new products – and sometimes changing the way they manage existing funds – the IPC must re-assess whether the funds we’ve chosen are the best possible options. We examine whether there are new fund variations that target established premiums in a better way, or if new factors could help boost returns, decrease volatility, or provide another distinct advantage.
  • Costs matter. Because the fees charged by mutual fund companies directly affect our clients’ returns, we’re diligent about finding the best possible balance between cost and value in every fund we select.

As touched on above, thanks to our disciplines, the IPC only recommends changing our investment lineup when there’s a clear reason to do so. Changes don’t happen overnight either. If a new opportunity is sustainable, there’s no need to rush into it. If it’s not, it won’t be in our clients’ best interest to chase after it.

For example, our IPC recently recommended adding a new fund that targets evidence-based factors, using an investing strategy to hedge against scenarios when all asset classes decline at the same time, like in 2007-2008. A fund like this essentially didn’t exist then, but it does now, in what we deem to be a cost-effective vehicle. So we have added it to our lineup.

Again, more often, our IPC looks at new opportunities and decides not to make a change. For example, in 2017 we also examined a new kind of fund that claims to provide a hedge against widespread downturns by investing in an asset class with low correlation to the equity market. Upon careful review, the IPC found the fund to be incredibly complex – to the point that we couldn’t easily understand exactly how it would accomplish what it claimed to do. It was also extraordinarily expensive! When a product is this complicated and expensive, and we’re not clear on the benefit it would provide our clients, it’s just not right for us.

Putting the pieces in place

Besides establishing our investment lineup, the IPC has another important role: Creating the proper asset allocations for our model portfolios. This task involves understanding correlations between factors and asset classes, and analyzing expected returns/volatility, to develop portfolios that offer the highest potential returns for the amount of risk a client is comfortable taking. It’s akin to cooking a soup: You might have the same set of ingredients, but depending on how much you add of each one, the result is going to taste very different. The IPC uses our standard set of ingredients to develop different portfolio “recipes” to suit each client’s taste.

We hope you’ve enjoyed this close-up look at our long-view IPC, and the process and principles that guide our decisions. Our IPC plays a crucial role in our mission to do what’s right for our clients – period – while simplifying the otherwise complex world of investing. If you have any questions for us, feel free to reach out.

January 2018 | Posted By Nell Schiffer

Not long ago, keeping your financial stuff secure meant having a safety deposit box at your local bank. Wow, times have changed. A real or virtual safety deposit box still comes in handy, but it’s only the beginning. Not sure where to start building solid cybersecurity? Welcome to our periodic column, “In Your Cyber-Corner.” As Hill Investment Group’s Chief Operating Officer and resident “sheriff,” I’ll be offering one or two take-homes at a time. Today, I’ll take on the role a Trusted Contact Person (TCP) can play in safeguarding your stuff.

Picture this. You’re celebrating your 25th wedding anniversary on an ocean cruise. Halfway through, your account custodian receives an unusual electronic request from “you,” asking for a substantial cash transfer abroad. Naturally, they would like to confirm whether it’s really you, but they are unable to reach you. They ask us, your advisor, but we can’t confirm your intentions either.

Or here’s another, far less happy, but increasingly common scenario. Unfortunately, your spouse is exhibiting early warning signs of dementia. One day, he contacts your account custodian out of the blue and asks for a cashier’s check on the entire $550,000 balance in his IRA account. Of course it’s his money, but …

What next? Many custodians (including Charles Schwab) allow you to designate TCPs to contact if they suspect you may be subject to financial exploitation, or with questions about your mental or physical well-being. For example, if you’ve named your daughter as a TCP, they can contact her, let her know what has transpired, and seek her input. Spouses also can name one another as TCPs for each other.

Your TCP does NOT have power of attorney (unless you’ve granted that separately). Schwab notes that your TCP “is not authorized to make investment decisions or withdraw funds from your account.” Naming a TCP does enable your custodian to place a temporary hold on suspicious transactions and report the incident to law enforcement agencies.

So go ahead, pack those bags, enjoy your busy life and make the most of your wealth. If you’re interested in more information on designating a TCP, simply email us at service@hillinvestmentgroup, or call us if you’re a Hill Investment Group client and we’ll make it happen.

January 2018 | Posted By John Reagan

Hill Investment Group Client Service Associate Jared Machen

What leads to exemplary client care? It begins with planning: Defining goals, building processes, documenting procedures. Then there’s the action: Owning all the nitty-gritty details that are every bit as essential as the more showy services. For that, we’re delighted to announce that our team has grown again, with the addition of Jared Machen as our new client service associate.

We knew we’d found a good match when we asked Jared why he was interested in transitioning from the world of active investing (where he’d been a wealth strategist for another firm in Fayetteville, Arkansas) to our evidence-based environment. He’d been reading up on the subject in his free time, and realized it was time for a change – for his own career satisfaction, as well as to contribute more meaningfully to other people’s financial lives.

In addition to several years of financial planning, investment management and client service experience, Jared holds a bachelor’s degree in finance. He also shares our passion for establishing enduring, “long view” relationships with clients.

Jared reports to me (John Reagan). We spent a lot of time looking for just the right person to join the HIG family and continue building on our client experience. Even after the short while he has been with us, I’m already confident we’ve found that fit. I am thrilled to welcome Jared to Hill Investment Group.

January 2018 | Posted By Rick Hill

John Jennings, IFOD Author and President, St. Louis Trust Company

Diversification isn’t just for investing. Discovering interesting perspectives from diverse sources strikes us a wise strategy as well.

John Jennings’ “Interesting Facts of the Day” or IFOD blog is one such source several of us at Hill Investment Group have been enjoying; we think you might too. We’re familiar with John’s firm, the St. Louis Trust Company, because it’s just a few floors up from our St. Louis offices.

John was originally inspired to launch IFOD based on the far-reaching facts he was hunting down to engage his young children (now teenagers). He discovered we grownups enjoyed IFODs as well, such as his recent post on the late Hyman Minsky’s Financial Instability Hypothesis. Minsky (who also has St. Louis connections as a long-time professor of economics at Washington University) proposed that financial stability has a way of sowing the seeds of its own, destabilizing destruction. His theory may go a long way toward explaining why markets can so rapidly swing from boom to bust … which circles us back to our ongoing advice on maintaining a globally diversified portfolio in markets fair and foul.

Interesting stuff. We encourage you to subscribe to IFOD if you’d like to consider just about every subject under the sun (including this one on the sun itself).