February 2020 | Posted By Katie Ackerman

Take the Long View with Matt Hall is back with a new episode! Matt kicks off Season 2 of the podcast with a man who may exemplify long view thinking more than any other guest he’s had on the show. How is he so long view? David Stine is a woodworker (understatement) and makes products that last forever, using material that was likely born before he was. Who do you know who can make the same claim? David has also done the thing most people don’t have the guts to do. He quit. He quit the thing that most stick with their whole lives. He left office life and made the outdoors his new workplace. He’s thriving – so much so that media gurus are working to make a TV show about his life. David has clients around the world, awards from industry experts, and more than two decades in business, but the thing Matt loves most about him, is he’s not just an artist, not just a craftsman, he’s deeply philosophical.

David Stine joins Matt for Episode 1 and covers his journey from growing up on the family dairy farm to deciding to go to law school and eventually realizing his dream and passion for creating custom furniture handcrafted from sustainably harvested American hardwoods. Matt says “David is smart, funny, talented, brave, and kind. These characteristics are a tough combination to beat and episode 1 sets the bar high for season 2.”

Click here to listen to episode 1 and check out the short video below to learn more about David.

 

February 2020 | Posted By Henry Bragg

20 things I’ve learned about investing and how people approach money.

I’ve been engrossed in personal finance and the financial services industry for more than 25 years, and I’ve seen some amazing successes and some things to be avoided. I decided to compile a list of 20 observations based on my experience—and the ways people can do better. See the bulleted list below.

1. Wealth, career success, and financial sophistication are not perfectly correlated.

Whether you have $50 million, $5 million, or $500,000, success in one area of life doesn’t mean you’re ready to be a good investor; investing is a totally different skill set.

2. Most people spend too much (today) and save too little (for tomorrow).

Taking the long view is an adjustment for a lot of people. If you want to live comfortably for your entire life, you have to start planning early—while you’re earning an income that gives you the flexibility to save and spend.

3. Most portfolios are not properly diversified.

The typical non-Hill investor owns too much of too few things—like U.S. large-cap stocks. Being truly diversified means owning global capitalism. Think 10,000+ stocks, not 500.

4. Most investors pay too much in tax.

Common mistakes include high-turnover investments, not taking advantage of tax-loss harvesting, not matching the right assets to the right accounts, and not coordinating charitable giving with an investing strategy.

5. After-tax returns don’t show up in annual performance numbers.

But they do show up in the total dollars that  compound in your investment account, which is more wet snow for the snowball to gather during its long roll down the hill.

6. Most people don’t take the time to understand the three definable investment philosophies.

There are critical differences between the three main approaches:

  • Active investing (believing that you or your fund managers can pick investments better than the market)
  • Plain indexing (a passive approach that captures the returns of a given market index, but rarely results in good coverage across asset classes)
  • Evidence-based investing (which captures investment premiums shown by historical data to work across asset classes)

7. Strategy can be controlled, outcomes can’t.

This simple fact is why it’s so important to understand—and choose—an investment philosophy that you can stick with.

8. At any given time, there’s a balance between lucky investors and unlucky investors. Together, they create the market’s return.

The market is smarter than any one of us, and the math of investing is a zero-sum game. You want to put yourself in the best position to reduce the likelihood of being on the losing side.

9. Understanding investment premiums is the surest way to superior long-term outcomes.

No one is lucky all the time. Applying everything we know about the science of investing to create portfolios is the closest thing to a repeatable, reliable strategy.

10. Frustrated investors lack patience.

Investment returns are not linear; therefore, patience is essential.

11. Only a small percentage of people have an integrated financial plan.

Investments are just one piece of your financial puzzle. A good advisor can bring order to chaos.

12. Do-it-yourselfers need supervision.

You need someone to help you use your time wisely and to reveal your blind spots.

13. You can have the best attorney and CPA and still have an inefficient plan.

This costs you money and maybe more importantly, time. Decisions should be made in context of the overall plan with an advisor that knows how to optimize the full picture.

14. Few people can see the big picture and make it work.

Each person’s financial situation is different—it’s like a 1000 piece Lego set with no instructions. Only a good advisor can see how to fit those pieces together and build something uniquely strong and beautiful for your family.

15. If you’re focused solely on low-cost funds and ETFs, your strategy may be due for an upgrade.

Focusing solely on cost can cause you to miss the forest for the trees. Instead focus on the value of your investments with tax strategy and planning. You need both to capture the highest return.

16. “Money managers” are not financial advisors.

The job of a money manager is simply to invest the money you give them. They don’t think about estimated tax-payments, after-tax returns, insurance strategies, estate planning, and all the other pieces of a financial plan.

17. Private equity and venture capital funds have their place.

…in someone else’s portfolio. If you give up liquidity (as you do with these investments), you should expect outsized returns. More often than not, you just end up with a bigger tax bill each year and less money at the end versus a buy-and-hold strategy. Plus, you have to deal with K-1s, capital calls and long-winded updates along the way.

18. Most people don’t understand that 90% of financial advisors in the U.S are not required to give advice that’s in the client’s best interest.

The so-called “suitability standard” lets these financial professionals make decisions that benefit them personally, or that benefit their companies. Fewer than 10% of the market—Registered Investment Advisors—are true fiduciaries, legally required to put clients’ needs first. They are the only help worth considering.

19. If you have accounts at major Wall Street brokerage firms, you can do better.

The professionals who work there are among the 90% who have an incentive to serve their companies, not just their clients. Today, these are high-cost custodians that are marketing as much to advisors as they are to current and prospective clients.

20. Be prepared, because life happens.

If you love your spouse and your kids, you should have an advisor. We’re like the co-pilot flying this plane with you. When something happens, we are prepared, we have the experience and proper motivations to see your family through a time of crisis.

February 2020 | Posted By Nell Schiffer

This month we celebrated the anniversaries of three committed HIG team members. Buddy Reisinger (11 years), Henry Bragg (6 years), and Katie Ackerman (5 years) have unique abilities that make our firm better. Beyond their talents, we love them for the way they love our clients. We hope this is the last job any of them have!

February 2020 | Posted By PJ McDaniel

Much like people scramble to shed a few pounds before summer vacation, it’s not uncommon to see people frantically searching for ways to minimize their taxes due as April looms. Inevitably, when the vacation ends or tax season is over, many of the procrastinators look back despondently and think, I could have done better.

This pattern appeared again recently, as I heard steady chatter from investors who ended up paying more taxes than they had anticipated. But could it have been possible for them to save themselves from that unpleasant surprise (and spare a good chunk of change in the process)? You bet—if only they had been planning all year. But don’t just take our word for it. This sketch by our friend Carl Richards sums it up perfectly.

There are, of course, facets of wealth management that lie outside the realm of our control. At first, taxes would seem to fall into that category. Truthfully, though, there are steps all investors can take to minimize their taxes due. But planning can’t wait until the last minute.

Moving forward, here are four best practices to tame your taxes before April.

Tax-Loss Harvesting: Those familiar with tax-loss harvesting may assume that losses are best harvested in April, when taxes are top of mind. In reality, tax-loss harvests can be utilized whenever market conditions and the investor’s best interests warrant it.

Enroll in Tax-Favored Accounts: Examples of tax-favored accounts include IRAs, Roth IRAs, 529 plans, and Healthcare Savings Accounts (HSAs). Opening these accounts as appropriate can keep a lid on your taxes when April rolls around.

Asset Location: To put it simply: minimizing a portfolio’s overall taxes due entails locating the most tax-efficient holdings in taxable accounts and the least tax-efficient holdings in tax-deferred or tax-free accounts.

For example, income from real estate investment trusts (REITs) are best-suited for an IRA where it won’t be taxed until retirement. Alternatively, mutual funds, ETFs, and stocks are best-suited for taxable investment accounts since capital gains taxes are generally lower than typical income taxes.

Tax-Wise Charitable Giving: In addition to helping a cause you believe in, charitable giving is also favorable for optimizing your taxes. Specifically, opening a Donor Advised Fund can enable investors to avoid capital gains tax on their securities and deduct the total value of the contribution from their federal income taxes. Appreciated long-term investments are the ideal asset to contribute to a Donor Advised Fund.

Do you want to get ahead of the curve in 2020 with these tax-planning strategies? I’m happy to walk you through them in detail. Schedule a quick call with me.

February 2020 | Posted By Buddy Reisinger

Our friend and future podcast guest, John Jennings, wrote a thoughtful piece in his IFOD blog that captured our team’s full attention. His post on Clayton Christensen, who recently passed away from leukemia, was enough to have some of us circling back to reread Christensen’s book How Will You Measure Your Life?  A long time professor at the Harvard Business School, Christensen challenged his students to find answers to three questions:

  1. First, how can I be sure that I’ll be happy in my career?
  2. Second, how can I be sure that my relationships with my spouse and my family become an enduring source of happiness?
  3. Click to read the rest of the story…

 

January 2020 | Posted By Buddy Reisinger

It’s that time of year—investors are eager for advice and herds of “thought leaders” are competing for your attention to tell you what to do during the new year. Instead of adding to the cacophony of 2020 to-do lists, we’re switching it up by telling you what to ignore.

We’re big fans of the author and celebrated podcast host Tim Ferriss’ Not-To-Do-List, so we decided to put our own twist on his concept.

“Not-to-do lists are often more effective than to-do lists for upgrading performance,” says Ferriss. “The reason is simple: what you don’t do determines what you can do.”

Below are four types of financial information that, at best, waste time and, at worst, create stress and anxiety. It’s our hope that you’ll ignore them so you can stay focused and productive, and live richly.

Any Variation of the Headline: “X Stocks to Buy”

The 4+ billion Google results for “stocks to buy in 2020” aren’t just risky—they’re almost certainly doomed to flop.

“The track record of expert forecasters is as dismal as ever,” says David Epstein, author of Range. “In business, esteemed forecasters routinely are wildly wrong in their predictions of everything from the next stock-market correction to the next housing boom.”

As our co-founder Rick Hill says, “Stop trying to find the needle in the haystack—just buy the haystack,” which is what our clients do.

Stock Market News and Notifications

Just like watching what you eat keeps you fit and healthy, a low information diet can keep you calm and focused, especially when it comes to your personal finances. As important as the latest headlines might seem, it’s important to remember: The media’s job isn’t to keep you informed, it’s to keep you tuned in 24/7/365 so they can sell advertising. We stay tuned in to what matters over the long term, so that you can focus on what matters today. That’s the kind of tradeoff we like.

Your Short-Term Portfolio Performance

It’s nice to have our sleek app that puts your entire investment portfolio in your pocket, but that doesn’t mean you should monitor it incessantly. Redefine how you measure success – we suggest measuring your performance against your goals in terms of decades and generations rather than 24-hour news cycles.

Financial Advice from Anybody Without a Fiduciary Standard

As Matt Hall covered in his book, Odds On, most big-name brokerage firms prize sales quotas and their compensation over client care and education. In any industry, a convergence of greed and incompetence is dangerous. In wealth management, the consequences can be life-shattering for you and your family. 

Before considering any financial advice, always ask: Is our relationship a fiduciary? If the answer is anything besides, “Yes, always” or if the written version is accompanied by an asterisk and a bunch of legalese, ignore it.

It’s great to pick up new productive habits, but sometimes the best way to improve your life is by subtracting, not adding. You might surprise yourself with how much you accomplish with the extra breathing room.

January 2020 | Posted By Nell Schiffer

We work for our clients. It’s that simple. We value the work of our partner firms (mutual fund companies and custodians), but we never forget who we serve and our fiduciary duty to them. To that end, you should know we routinely ask our partners for better options and lower fees – when and where appropriate. Hill Investment Group is pleased to announce significant fee reductions related to 14 funds in our recommended portfolios. The largest reduction is a 20% drop in fund expenses and the smallest change is 3.6% in one of our fixed-income solutions. Big or small alterations, it’s good news and savings for clients. We will not list individual funds here, but look forward to sharing the details with you during your next review. For now, we end this post with a quote from Dimensional Co CEO Gerard O’Reilly:

“We expect to do better than benchmarks and peers, after fees, so we fight for every basis point. We continue to gain insights from research and innovate across all aspects of our process.”