February 2019 | Posted By Jared Machen

Financial simplicity, like many goals, is as desirable as it is elusive.  

Or so it seems. 

If you took a sample of 100 investors and asked each one about the vital signs of their portfolios – their fees, returns, and allocations – you’d be hard-pressed to find many who could speak confidently and accurately about them.

This isn’t just a guess from left field. In 2016, MarketWatch cited a Prudential Investments retirement preparedness survey that  found more than 40% of Americans had no idea how their investments are allocated. We’ve seen similar stats from other surveys published since then. 

What’s most disappointing about this apparent collective bewilderment, is that the system seems designed to be this way. We work in an industry where thousands of “advisors” are not only encouraged to sow seeds of confusion, they’ve made millions of dollars doing so. 

When a broker pulls an investor out of their comfort zone and into the weeds, the investor becomes vulnerable. Accordingly, advice becomes a sales pitch, and costs become confusing –  a pattern we see time and again. 

We know investors deserve better, so we’re on a mission to make the complex simple, to make financial conversations comfortable, and ultimately to shed a liberating light into the dark corners where families have been harboring their greatest financial fears for years. 

As our friend Carl Richards has embodied in his Behavior Gap sketch above, an advisor’s job isn’t to prove how much they know. It’s about helping investors see the few, elegant, simple changes they can make to their plan, to make a huge impact over the long-term.  

There’s nothing more rewarding for us at Hill Investment Group than seeing someone’s reaction when the air finally clears for them, and they realize that simplicity wasn’t as elusive as they once thought. 

In the words of pianist and composer Frédéric Chopin, “Simplicity is the final achievement.” 

February 2019 | Posted By Henry Bragg

Whether the subject is sports, fashion or fiduciary investment advice, it’s always gratifying to be found in good company. We are honored our special friends Sid and Ann Mashburn recently added Odds On to their website, in Sid’s Home / Books collection. Better still, we’re right next to a favorite read of our own: Astroball, by Ben Reiter. And who doesn’t want to be seen hanging out with tennis legend and shoe icon Stan Smith (whose book I bought for myself at Christmas)?

If you’re from LA, Houston, Dallas, DC or Atlanta, you likely know what the Mashburns are all about, as these fine American cities are lucky enough to have physical Mashburn stores. For the rest of the U.S., with just a taste of their world through the web, know this: The Mashburn stores are as closely aligned with our evidence-based investment firm as any clothing retailer could be. It may sound weird, but it’s true. Their people, values, and vision all mirror our own. Sid said it best the first time we met him: “Either you stole my playbook or I stole yours.”

Henry and Sid (Houston, 2016)

Bottom line, we’re honored to have made the list and hope Odds On will continue to inspire and welcome readers to seek fiduciary investment advice for their wealth management. And even if you don’t walk away with a copy of our book from Sid and Ann’s site, you’ll still know more about one of the great emerging retailers in our country.

February 2019 | Posted By John Reagan

There are many aspects of wealth management we cannot control. Tax codes evolve. Global events come and go. The markets will go up and down. By carefully minimizing taxes due, we can exert an important degree of control over maximizing end returns – the kind you get to keep as your own.

It starts with our annual tax packets. Each year, we aggregate our clients’ Form 1099s from Schwab, and deliver them to their tax professionals for timely and efficient tax-filing.

That’s just one small thing. We are working all year round to help our clients keep a lid on their taxes due. Below are additional examples:

  • Asset Location: Locating the most tax-efficient holdings in taxable accounts, and the least tax-efficient holdings in tax-deferred or tax-free accounts, to minimize a portfolio’s overall taxes due.
  • Tax-Loss Harvesting: Acting on opportunities to reduce taxes through tax-loss harvesting when appropriate.
  • Tax-Managed Funds: In taxable accounts, using tax-managed funds whenever possible, to reduce the capital gains and dividends that fund managers must pass on to shareholders.
  • Tax-Favored Accounts: Helping clients establish tax-favored IRAs, 529 plan accounts, Healthcare Savings Accounts (HSAs) and similar accounts as appropriate.
  • Charitable Giving: Helping clients shift their tax-wise charitable giving plans following the Tax Cuts and Jobs Act of 2017. For example, implementing Donor Advised Funds and Qualified Charitable Distributions when appropriate.
  • Estate Planning: Collaborating with clients’ estate planning and insurance professionals to consider advanced planning strategies for minimizing and covering taxes due upon estate transfer.

So, this spring – or any time of year – let us know if you’d like to explore how you might increase your overall wealth by decreasing your taxes due.

January 2019 | Posted By Henry Bragg

Who will you be rooting for in Super Bowl LIII on February 3rd – the Patriots or the Rams? Either way, you’ll be among millions of fans tuning in for the big game.

That means the pressure is on, for both teams. You’d think this would encourage players and coaches to give it everything they’ve got. By some measures, I’m sure they do. But I also believe there’s a secret weapon neither team will be taking advantage of: Forgoing the option to punt.

What if more coaches were willing to let convention-challenging research be their guide? They might end up featured in an HBO “Real Sports” segment. That’s what happened to Pulaski Academy Head Coach Kevin Kelley from Little Rock, Arkansas. He earned a reputation for being “the coach who never punts,” after he decided to heed the data, and employ an atypical tactic of almost always going for the fourth down instead of punting. Check out the trailer here:

Of course, we feel the same sort of data-driven strategy and disciplined perspective should be applied to your evidence-based investing. So do others, which is why our friends at AQR featured a conversation between AQR Principal Toby Moskowitz and the same Coach Kelley in one of their podcasts, “Hot Hands and Cold Feet.” (Fast-forward to minute 10:00 to hear the specific conversation.)

While we call Kelley evidence-based, others have called him “crazy,” “insane” or “mad scientist.” If he is, his results don’t show it. In his conversation with Moskowitz, Kelley notes his record at Pulaski Academy is 179 wins/25 losses, with seven state titles in the past 15 years.

Consider these insights as you enjoy Super Bowl LIII. Consider it, too, as you stick with your best-laid investment plans in our competitive markets. I say, go ahead and let others call you crazy, if that’s what it takes to achieve your personal financial goals.

January 2019 | Posted By John Reagan

Abby Crimmins, Client Service Associate

While our newest Client Service Associate – Abby Crimmins – has been with us for six months, she’s been missing from our website’s team section. That’s now been fixed! Check out Abby’s detailed profile, recently added. Some of you may be familiar with our website’s team section. If not, I encourage you to check it out. It has been applauded by top folks in our industry for showing both what our key people do and who they are as individuals.

Who are Abby’s best friends? What is her favorite 11 a.m. habit? What’s the scariest thing she’s ever loved the most? You’ll find all this and more by visiting her new profile. You’ll learn not only what inspired her to join us at Hill Investment Group, but also about her people, passions and personality – everything that makes Abby the amazing new team member she has fast proven to be.

While we introduced you to Abby last fall, we’re delighted to reconnect you with her at this time. Welcome to the team (again), Abby Crimmins!

January 2019 | Posted By Matt Hall

 

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

There are so many songs, books and movies about what it would be like to travel in time. What if we told you there is one way you actually can – sort of – make good use of time travel with respect to your wealth?

Remember our friend John Jennings, and his Interesting Fact of the Day (IFOD) blog? John recently covered this subject in his IFOD post, “Discounting the Future,” and how this phenomenon can impact your personal and financial habits.

For example, when his daughter Claire decided to put off doing her homework, she told him she was “going to let future Claire worry about the project.” (I kind of hope my daughter Harper isn’t reading this!) She was prioritizing the instant gratification of enjoying her current leisure time, and discounting the more distant reward of having the project already completed by the time “future Claire” was wishing she could goof off.

When it comes to our money, discounting the future can trick us into treating future dollars as less valuable than current ones. For example, if someone offers you $100 today or $200 six months from now, you may opt for the instant cash, discounting the extra $100 your future self would have enjoyed. Which choice you’ll prefer can vary, depending on how far in the future you’re being asked to wait, as well as how much money is involved.

If we haven’t yet nailed the idea, please take a minute to read John’s phenomenal post, and be sure to look for comedian Jerry Seinfeld’s explanation of the concept. Before you know it, you’ll be asking yourself questions about what your future self will think about your current self for the next few weeks – and likely making better decisions for the long view.

January 2019 | Posted By Rick Hill

It takes only a glance at Dimensional Fund Advisors’ 2018 market summary to recognize global markets didn’t leave anyone applauding in the end. The volatility put the popular press in a tizzy (with no certainty on what lies ahead). Not surprisingly, our response has been to double down on our perspective on how to maintain “unruffled serenity” in volatile markets.

Click to enlarge

For example, in our fourth quarter client letter, we revisited an important, annually updated Dimensional chart depicting yearly market premiums since 1928. We’ve shared similar charts before, but it remains worth repeating whenever the going gets tough. As we wrote in our letter, “No one complains when they finish the year with stock returns much higher than average, but the typical investor has a hard time handling a big down year.”

We share an excerpt from our client letter today, hoping we can help you, too, Take the Long View®.


January 2019

Unruffled Serenity and Taking the Long View

Why would an investor want to accept wild, short-term swings in the markets? Because investors are paid for enduring those swings. It’s that simple and that hard.

Because stocks ended 2018 with a series of dramatic gyrations, we decided to illustrate just how normal these big market movements really are. The following chart, which shows the annual performance of the U.S. stock market since 1928, illustrates why it’s worth maintaining a long view and disciplined investment strategy.

Click to enlarge

The blue bars indicate years in which the broad U.S. market delivered an average return above T-bills (i.e., a positive premium). The dark blue bars indicate years when a positive equity premium was within a 2% range of its long-term average (represented by the dotted black line). On the other side, the red bars indicate years in which the market underperformed T-bills (i.e., a negative premium).

The first thing to notice is that on average, the annual market premium has been strongly positive and there have been more years of overperformance than underperformance. But in any given year, the U.S. market premium has varied widely—sometimes producing extreme positive or negative performance relative to T-bills. It’s worth repeating: The premium has been within 2 percentage points of the long-term annual average in only four years since 1928.

As savvy long view investors, we know that if we want a long-term average annual premium from the equity portion of our portfolios we have to expect and endure returns in any given year that are wildly above or below that average. No one complains when they finish the year with stock returns much higher than average, but the typical investor has a hard time handling a big down year. What separates us is knowing that we win over the long run by embracing this volatility. We win because in the boring math of investing, the long-term owner of global capitalism is likely to end up in the top decile of all investors. It’s simple, but it ain’t easy. Maybe we should call it a serenity premium?

January 2019 | Posted By Nell Schiffer

At best, they’re annoying as all get-out. At worst, you end up falling for them. Either way, with phone services gone mobile, scam callers are finding us wherever we go. As stated in this recent AARP Bulletin, “5 Ways to Stop Spam Calls,” American homes are receiving about 4 million robocalls every hour.

That much ringing sure is one big headache. Although I can’t promise to eliminate those pesky calls completely, I can offer several tips for managing them.

Silence Is Golden

You can start by reading the AARP Bulletin I referenced above. One simple tip requires no action at all, just a little habit change. The author suggests answering your phone with several seconds of silence when you first pick up. You may even want to let the other party say “Hello?” first.

While this may seem harsh, the reality is, if it’s a real person trying to reach you, the pause shouldn’t impede the conversation. If it’s a voice-activated robocall, the silence should not only cause them to disconnect and move on, it could trick them into assuming the number is invalid, which might also discourage them from trying to call back.

Pros and Cons of the Cold Shoulder

Should you simply skip answering the phone at all, assuming anyone who matters will leave a message? It’s an easy way to avoid speaking with anyone you shouldn’t. Especially if you find it hard to hang up on an unwelcome call once you’ve answered it, this might still be your best bet. But recognize that, unlike the silent treatment above, reaching your voicemail confirms that your number is indeed in service. This can set you up for repeat attempts and increased robocall volume in the future.

Who’s There?

With most phones offering CallerID, you may be able to identify unwelcome calls on your own. For example, the AARP Bulletin notes, “Beware of area codes 268, 284, 809 and 876, which originate from Caribbean countries.” If the caller’s number is similar to your own, that’s another red flag. For example, say your phone number were 123-456-7890. Any unfamiliar call supposedly from the same 123-456 prefix is likely bogus.

The AARP Bulletin also suggests several free services and apps to help you further identify, flag and block spam calls on your cell phone and landlines alike.

Tough Love About Phone Etiquette

If you do end up answering a spam call despite your best efforts, your top concern should be ensuring you don’t fall into any traps once they get you on the line. The instant you recognize the caller may be illegitimate, go silent. Don’t ask or answer any questions. Don’t even explain why you’d rather not speak with them. Just hang up. Immediately. If the caller was claiming to be from an institution you do business with, such as your bank, you can always call that institution directly to report and ask about the suspicious call. This is similar to the advice I offered on email phishing.

The time has come for us to reframe phone etiquette! The old way called for being immediately pleasant and engaging when a stranger called. The new way? Let the stranger say “hello” first. Although Miss Manners may not approve, answering a stranger’s call with a couple seconds of silence may reduce these calls for good. If you have additional ideas, we are always here to discuss.