The St. Louis Business Journal recently featured HIG’s partnership with Focus Financial Partners. We are honored to be chosen by Focus as one of the top 70 firms in the country to join their network and are even more excited about the possibilities that Focus will be able to bring to our clients. Read more about it here.
The entire world changed in countless ways in 2020. Our investing strategy did not.
Here are 10 lessons from 2020, and for the long view, that remind all of us what didn’t change in a year filled with non-stop uncertainty.
The principles outlined are timeless.
Choose an investment philosophy you can stick with for the long haul
- As Dimensional Executive Chairman and Founder David Booth says, “A philosophy serves as a compass to guide you through turbulent times. When you’ve got a compass, it doesn’t take drastic directional changes to find your way. Small adjustments are all you need to stay on course.”
- While there is no silver bullet, understanding how markets work and trusting market prices are good starting points. By adhering to a well-thought-out investment plan, ideally agreed upon in advance of periods of volatility, investors may be better able to remain calm during periods of short-term uncertainty.
Create an investment plan that aligns with your risk tolerance
- As investors, our risk appetite often changes based on the market environment we are in. In early March when we experienced the fastest bear market in history, some would have slept better at night knowing they had allocated more to bonds or cash. In April, when the market had its best monthly return since 19871, those same investors would have felt better knowing they were allocated more to stocks. The point being, you want to have a plan in place that gives you peace of mind regardless of short-term market swings.
- Over time, capital markets have rewarded investors who have taken a long-term perspective and remained disciplined in the face of short-term noise. By focusing on the aspects within their control (like having an appropriate asset allocation, diversifying their investments, and managing expenses, turnover, and taxes) and sticking to a long-term plan that is in line with their risk tolerance, investors may be better able to look past short-term noise and focus on investing in a systematic way that will help meet long-term goals.
Don’t try and time the market
- The 2020 market downturn offers an example of how the cycle of fear and greed can drive reactive decision making. Back in March, there was widespread agreement that COVID-19 would have a negative impact on the economy, but to what extent? Who would’ve guessed we would’ve experienced the fastest bear market in history in which it took just 16 trading days for the S&P 500 to close down 20% from a peak2, only to be followed by the best 50-day rally in history?3 I would be hard-pressed to find someone who had that in their market timing forecast.
- Trying to time the market based on an article from this morning’s newspaper or a segment from financial television? It’s likely that information is already reflected in prices by the time an investor can react to it. For investors trying to time the market the odds are stacked against you, the good news is, you don’t need to be able to time markets to have a positive investment experience.
Know what’s in your portfolio
- Investors want reliable portfolios with robust risk controls, unfortunately, it often takes a market decline for many to take a closer look at what is actually in their portfolio. In times of market stress, investors rely on the fixed income portion of their allocation to serve as the ballast of their portfolio, helping to provide downside protection. Many investors learned the hard way earlier this year that what they thought were safe fixed income products, were actually stretching for yield, leading to fixed income portfolios that did not hold up during the market downturn.
- We take a transparent, low-risk approach to managing fixed income – in which we are able to pursue higher returns while staying within the guardrails of the portfolio guidelines. Our investing partners perform market-informed credit assessments, providing a more complete picture of an issuer’s credit quality in real-time, helping to ensure that your portfolio behaves in a way that is commensurate with the intended credit risk exposure.
Build flexibility into your investment process – this principle is even more crucial in times of high stress
- For many, the heightened volatility we experienced this past year adversely affected trading processes as traders were forced to demand immediacy, instead of waiting for the best value, when going to the market to trade. We choose partners who approach trading differently. Dimensional’s investment and trading process, for example, is designed to function robustly and account for high volatility, changes in available liquidity, and sharp market movements. While markets were stressed and returns were somewhat unusual, the efficacy of this approach remained true and performed as expected. The approach delivered risk management in a robust fashion, delivered outperformance across many different asset classes, provided daily liquidity to investors in our portfolios throughout the period, and added value to investors.
- What was the impact on clients? In March, Dimensional was able to buy corporate bonds for 50.7 bps cheaper than the trade prior and 21.5 bps cheaper than the trade after. When going to the market to sell bonds and provide liquidity to allow clients to rebalance into equities, we were able to sell corporate bonds for 104bps higher than the trade prior and 116bps higher for the trade after.
Stay disciplined through market highs and lows
- Financial downturns are unpleasant for all market participants. When faced with short-term noise, it is easy to lose sight of the potential long-term benefits of staying invested. While no one has a crystal ball, adopting a long-term perspective can help change how investors view market volatility
Look beyond the headlines
- Read the newspaper to be an informed citizen, not for advice on how to navigate the financial markets. Daily market news and commentary are designed to challenge your investment discipline, and not in a good way. Some messages stir anxiety about the future, while others tempt you to chase the latest investment fad. The result? You buy or sell, and Wall Street gets richer. When headlines unsettle you, consider the source and maintain a long-term perspective – growing wealth has no shortcuts.
Focus on what you can control
- To have a better investment experience, people should focus on the things they can control. It starts with HIG creating an investment plan based on market principles, informed by financial science, and tailored to a client’s specific needs and goals. Along the way, we can help focus on actions that add investment value, such as managing expenses and portfolio turnover while maintaining broad diversification. Equally important, an advisor can provide knowledge and encouragement to help investors stay disciplined through various market conditions.
Hill Investment Group to Join Focus as a Partner Firm, Further Strengthening Focus’ Presence in the Midwest
New York, NY – January 15, 2021 – Focus Financial Partners Inc. (NASDAQ: FOCS) (“Focus”), a leading partnership of independent, fiduciary wealth management firms, announced today that Hill Investment Group, LLC (“Hill”), a registered investment adviser headquartered in St. Louis, Missouri, has entered into an agreement to join the Focus partnership. The transaction is expected to close in the first quarter of 2021, subject to customary closing conditions.
Founded in 2005 by Rick Hill and Matt Hall, Hill is a fee-only firm that provides wealth management services to a diverse array of high net worth families. Hill is respected as one of the outstanding boutique, evidence-based firms in the country. The firm has a motto of “take the long view,” which teaches patience and discipline to wealthy clients throughout the U.S. and beyond.
“When Rick and I launched Hill, we knew we wanted to build a great team so that we could deliver an exceptional client experience. I’m proud to say that over the last 15 years our business has grown because our talented team members have consistently put our clients first. When it came to choosing Focus as a strategic partner, we reached the same conclusion,” said Matt Hall, Co-Founder and President of Hill. “Through its independent partnership model, Focus embraces Hill’s mantra to ‘take the long view.’ We expect our strategic partnership with Focus to keep our clients front and center while accelerating our growth trajectory . Access to Focus’ capital, scale and value-added resources will also help us further enhance our clients’ experience,” added Matt. “We look forward to our partnership with Focus as we enter our next chapter of growth.”
“We are honored to welcome Hill to our partnership,” said Rudy Adolf, Founder, CEO and Chairman of Focus. “Matt and his impressive team of next-generation leaders share an entrepreneurial mind-set and passion for serving their clients that make Hill an ideal Focus partner. These attributes, combined with Hill’s high-touch service model and well-defined brand, make them an excellent firm to grow through M&A. We believe the Hill team will take full advantage of the breadth of resources Focus has to offer and continue their robust growth track record as they build their business.”
About Focus Financial Partners
Focus Financial Partners Inc. is a leading partnership of independent, fiduciary wealth management firms. Focus provides access to best practices, resources and continuity planning for its partner firms who serve individuals, families, employers and institutions with comprehensive wealth management services. Focus partner firms maintain their operational independence, while they benefit from the synergies, scale, economics and best practices offered by Focus to achieve their business objectives. For more information about Focus, please visit focusfinancialpartners.com.
About Hill Investment Group
Founded in 2005, Hill Investment Group, LLC is an evidence-based investment advisory firm serving a select group of clients nationwide. The firm’s holistic service offering includes fee-only investment management and deep financial planning and wealth mapping intended to transform the financial lives of its clients. Hill’s team serves clients through a clear and transparent process that navigates clients through all of life’s milestones. For more information about Hill, please visit www.hillinvestmentgroup.com.
Cautionary Statement Concerning Forward-Looking Statements
This release contains certain forward-looking statements that reflect Focus’ current views with respect to certain current and future events. These forward-looking statements are and will be, subject to many risks, uncertainties and factors relating to Focus’ operations and business environment, including, without limitation, uncertainty surrounding the current COVID-19 pandemic, which may cause future events to be materially different from these forward-looking statements or anything implied therein. Any forward-looking statements in this release are based upon information available to Focus on the date of this release. Focus does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any statements expressed or implied therein will not be realized. Additional information on risk factors that could affect Focus may be found in Focus’ filings with the Securities and Exchange Commission.
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Focus Financial Partners