Tag: Financial Advisor

Three Things to Consider in a Bear Market

October 19, 2022
Economy, Investing, Investment Updates, Stock Market

I’d like to address the elephant in the room. This year has been incredibly volatile for the stock market, and we’ve experienced some steep declines. It can be frustrating, confusing, and even frightening. Currently, we are in a bear market. Perhaps you have heard the term before and understand the feeling associated with a bear market but aren’t exactly sure what it is (besides scary). A bear market is when a market experiences a prolonged drop in investment prices. This is typically referenced when a broad market index falls by 20% or more from its recent high. There is tremendous noise in the media. Many investors are anxiously looking at account balances more frequently, particularly after experiencing a long run for the bull market. Experiences with past down-market events may be triggering strong feelings of concern. One of my greatest strengths is being able to stay calm in difficult situations and it serves me well as an Advisor. To help you tackle a difficult situation head on in hopes of instilling some calm in the chaos, I’ll discuss three things to consider in a bear market

Communication with your Advisor is Critical

I love talking to my clients. They share their dreams and lives with me. They trust me enough to delegate a large amount of their financial life to me. It’s very difficult to do my job well without clear and consistent communication from clients. It’s also difficult to plan for clients without truly understanding how they feel about risk, how they view money and even some of the personal biases they may have in their approach due to previous experiences. Some of my clients have never worked with an Advisor before working with me while others have unfortunately had very negative experiences working with an Advisor which is why they sought a change. For some, I serve as a sounding board and for others I offer trusted advice and guidance. The one unofficial role I never knew I would take on is counselor.

We often think of money as transactional. Most of our money exchanges are even labeled as transactions. We use labels such as “good” and “bad” to describe debt, investments, and even Advisors. We spend a great deal of time thinking about what we want to do with our money as well as thinking about what our money is doing in the markets. We don’t often talk about how we feel about money or our life experiences with money. This is ironic as the field of Behavioral Finance is growing. Research consistently indicates that client behavior is also a key indicator of financial success. One of the leading organizations in the financial planning industry, FPA, recently announced a new partnership to offer its members a Psychology of Financial Planning Specialist program. Covered in the program are topics such as Behavior Finance for Financial Planners, Counseling in Financial Planning Practice, and Implementing Financial Psychology into Practice. The industry has recognized what we as individuals may not be able to see right in front of us – dealing with money comes with a lot of emotion. It’s time we start talking about it.

While I believe communication is always important, communicating with your Advisor during a bear market about how you are feeling is crucial. A client recently shared that this was the first time they have ever felt uneasy. We had a long conversation about why they felt uneasy. We had reviewed the financial plan and were well in the confidence zone. There was plenty of cash to fund their needs for an extended period. We began to peel back the layers and have the hard conversations around emotions. Throughout the conversation I learned that when I said “everything is fine” the client perceived that as being dismissive. While that was never my intent, their honesty and vulnerability allowed me to clear the air and lean into even deeper conversation. I decided to ask the client a very tough question – are you uneasy because you have lost trust in me? Thankfully, they had not. After a while, they shared that they felt uneasy because it was the first time that they were experiencing a bear market while in retirement. It was scary to see the losses while on a fixed income. The client’s vulnerability in sharing those feelings took courage. We walked back through their financial plan, discussed “what ifs” and discussed how we might address them in the future. We didn’t abandon the plan and we didn’t make any sudden investment changes that were out of scope of the plan.

During this bear market, if you find yourself dealing with emotions that are new or ones you haven’t experienced in a while about your money, please tell your CapSouth Advisor. We truly care about you and we are here to listen. It is our responsibility to coach and guide you through the emotions so that we can limit behavioral influences. There is an adage that says, “the only people that get hurt on a roller coaster are the ones who jump off”. Advisors often use this to explain how behavioral changes impact money such as selling when the market is declining. We understand the emotions and we will spend the time needed to address concerns. Let us serve as the safety bar to keep you locked into the seat while we ride this roller coaster together.

Your Financial Plan Has a Long-Term Outlook

One of the things I love most about CapSouth is our dedication to Financial Planning. For most of my life, I only thought of a Financial Advisor as someone who manages money. My experience with them had been limited to those that work in the Broker world as an investment manager. Unfortunately, our industry has limited regulation on how the title Financial Advisor is used. I have had many new clients come to CapSouth with the same limited viewpoint. When I explain that we view investment management as a commodity and that our real value comes in planning, it can be a true mindset shift. Perhaps you had a similar experience when starting to work with us. We ask a lot of questions! We ask for a lot of information. For those that are just starting to work with us, it can be overwhelming although we do our best to make the onboarding process enjoyable. With all the information provided we then craft a financial plan and begin working with you to implement it. We review the financial plan every year in meetings and are consistently adjusting it because life happens. We start to focus more on the Confidence Score to answer the question “am I going to be, okay?”

Like the Wizard of Oz, I’m going to give you a peek behind the Advisor curtain. The Confidence Score is generated through a process called Monte Carlo simulation. So, what is it and why does it matter? Surprisingly, it’s not unique to the financial industry. It’s also used in physics and engineering. In our financial plans, we don’t have the certainty of knowing what the future holds. That includes knowing what the average rate of return will be for your plan. Therefore, the Monte Carlo simulation runs 1,000 trials of your plan using 1,000 different return possibilities to calculate the probability your plan will be successful. While you may not have considered worst case scenarios or bad returns, your financial plan already has.

When we dig into these simulations and look at the 1,000 Trials detail, we can get an even better understanding of the numbers. We can see year data in 5 year increments (Year 5, Year 10, etc.). We can also see End of Plan Dollars and The Year Your Money Goes to $0. These time frames are charted out by Trial Percentile. They include 1%, 25%, 50%, 75% and 99%. My personal plan has a Confidence Score at 88% (at time of writing this). When I look at these trials, I can see that in the very best scenario my plan would end with more money than my husband and I would know what to do with and would need a fantastic estate plan. I can also see that in the very worst scenario, we would run out of money in the year 2049. Does that scare me? Not at all. The reason? It’s an extremely unlikely scenario just like the one that looks amazing. The most realistic scenario is somewhere in between, and it’s why my Confidence Score is reassuring. (Friendly reminder here: This is not like school where the highest score is the best score. If my score is in the blue zone, it is considered an overfunded plan, and I need to ensure my estate plan is in order because I will likely be leaving money to heirs).

We don’t often get into these types of details in meetings because it can be data overload. The key takeaway right now during a bear market is that your financial plan is not surprised by a down market with negative returns. Neither is your Advisor. We take a long-range approach and understand that markets go down just like they go up. Historical charts show that the markets have always recovered. While history is not a predictor of the future, it does give us data to consider. While it can be difficult to zoom out when emotions are high it is important to remember the decisions made together with your Advisor when times were not as tumultuous.

It’s Not All Doom and Gloom

When we set the fear and frustration of a bear market aside for a moment, we can turn our focus to the bright spots in this market. No, I’m not talking about a “sweet deal” a friend is telling you about or even buying treasuries at 4%. I’m talking about the planning opportunities that present themselves during a bear market.

If you are still working or have cash on the sidelines, it’s an excellent opportunity to dollar-cost average new money into the market. If you are participating in a company retirement plan, it’s likely that you are already using this approach. Each time you contribute to your 401(k) you are investing new money. This may be weekly, bi-weekly, or twice a month depending on how your payroll is processed. It’s a great buying opportunity. I like to say we’re buying on sale and it’s an opportunity we haven’t had in a long time due to high market prices. We may only know that the bottom of the market has occurred when we are able to look back, so trying to time cash into the market isn’t a great approach. By leveraging dollar-cost averaging, you smooth out your investment purchases and remove market timing.

Now is also a great time to consider a Roth IRA conversion. Roth conversions are a part of our normal consideration process for clients with IRAs, but they are particularly appealing when markets are in decline and your portfolio value may be lower. Conversions now may increase the likelihood of tax free growth as the market recovers. You may even be able to save on the tax bill you are paying now for that conversion due to the lower portfolio value. Less taxes and increased potential of tax free growth? That sounds like a great opportunity to be considering in a bear market.

A bear market also presents you with the opportunity to revisit your market risk tolerance. Are you feeling different now than how you felt when you originally discussed your risk tolerance with your Advisor? Perhaps you overestimated how much risk you could tolerate and need to evaluate dialing back market risk long term. The opposite could also be true. You may have always feared the worst and now, faced with a bear market, you aren’t as bothered as you thought you would be. These are valuable, real-time insights that can help you and your Advisor plan for the long term.

Above all else, remember that you are not alone. You are a part of the CapSouth family, and we value our long-term relationships with clients. We are here in the good times and in the bad. Do not hesitate to reach out to your Advisor at any time.

To discuss this article further or to learn more about CapSouth Wealth Management, visit our website at www.capsouthwm.com or call 800.929.1001 to schedule an appointment to speak with an advisor.

by: Jennifer Fensley, CFP®️,CRPS®️

Pigskins and Procrastinations

October 19, 2022
Finances, Financial Lessons, Financial Planning, Guidance

So, I have two sons who have flirted with college football. One, a quarterback, opted to forego several college football opportunities turning instead toward a career in medicine. Fine, whatever. Maybe I’d have better luck with number two? Sure enough, despite numerous run ins with the law – me – he managed to graduate near the top of his class and was presented with numerous opportunities to play football at the next level – only to delay the decision until the absolute last moment. For us parents, this was, as you might imagine…unpleasant…and ripe with anxiety, frustration, regret and maybe a few four-letter words from his mother. (Or maybe that was me. Heck, I don’t recall.) And we’re just talking about football here! How might a belabored, or in some cases, a broken decision-making process affect your family when it comes to your finances? And why is it so difficult at times to make financial decisions?

Large Financial Decisions are Ripe with Emotion:

Decisions involving money can take on a life of their own. For most of us, or unless you’re the Fed, there’s not an endless supply of money. We just can’t print more when we need more (the aforementioned once again excluded). Money is inextricably linked to provision, and provision is tied to those we care for most. And therefore, large financial decisions can be ripe with emotion. As objective as we may believe we are, when we make large financial decisions, we invariably do so with emotions having a seat at the table. And understandably so, right? Emotions are involved because we recognize the weight of the decision and how it may impact those around us. Can we afford this home? Can I afford to remain in this career? Can we make it with one income? Will we have enough to live off during retirement? Now, with those questions, you may have some control over the outcomes. But what about those you have zero control over? Are we about to enter a global recession? What happens if Europe and Asia become further unstable? Will inflation continue to rise?

All of these concerns have the potential to lead to emotionally based decisions. And equally concerning, they can also lead to paralysis or making no decision at all. It’s a well-known question for a reason: Why do today, what you can put off until tomorrow? When you’re stressed and tensions are high, emotions go from having a seat at the decision-making table to holding the pen in their hand. And that doesn’t often end well.

In Light of the Above, Now What?

Well, that’s the first step – acknowledging that emotion can play an important role in making financial decisions. Not that emotions are bad, mind you, they may just need to be tempered. You may need only to think back a day, a week, or five years ago when your emotions led to a decision, which then led to an outcome, which may have then led to regret. (If not, then you’ve not made many decisions up to this point, have you?) Instead of rushing into a decision or putting it off altogether, let’s pause, take a step back, and insert a little objectivity. Can’t find it, you say? Then allow me to offer the following:

Are you able to recognize when your emotions are making the decisions?
What are the possible consequences of the decision that you’re contemplating currently?
What emotion typically drives your decisions? Fear? Happiness? Empathy?
And if you have a spouse, do you have an agreed upon process with which to make large financial decisions?
And finally, what is it that you value most out of life?

Here’s what I know about you, if I may be so bold. If you’re willing to honestly address the five questions above, you’re on your way to living your one best financial life. At the time this article was written, there’s quite a bit of uncertainty and volatility in the financial markets. And I’m going to presume that such times may create a little stress? If I’m speaking to you, as I’m speaking to myself, there’s little value in delaying a decision based on fear alone. Just as there’s little value in rushing into large financial decisions based on want alone. If you’re in need of some objectivity within your financial decision-making process, that doesn’t make you unique, it makes you human. I happen to work with some pretty special humans who are quite gifted in helping with financial decisions. You don’t have to go it alone. In CapSouth, you have a team to rely on. We can help.

So back to football. The second son did – finally – choose a school. In full disclosure, the emotional wear and tear was on that of his mother and me. He was dead set on what he wanted from a college experience, and he made a plan to get there. He contacted over 50 division1 football programs in search of a home, and he turned down nearly as many – some of which were financial no brainers. But that wasn’t his sole motivation. He was set on certain parameters and was willing to forgo others. He made a series of tradeoffs based on the realities of his recruiting process and chose – albeit 8 days before he was to report to camp – the opportunity that satisfied his ultimate goal – to be a part of a winning program and have an opportunity to play a role in the coming years. He didn’t do it alone, I must admit. He sought counsel from those he trusted and who could help him sort through the emotions that so often accompany large decisions.

If we can help you sort through your own emotionally charged decisions, please allow us. You don’t have to go it alone. We were made to live in community, and we’d be honored to serve our role in yours. You don’t have to go through it alone. We can help.

Happy fall and *Go Eastern Kentucky Colonels!*

To discuss this article further or to learn more about CapSouth Wealth Management, visit our website at www.capsouthwm.com or call 800.929.1001 to schedule an appointment to speak with an advisor.

by: Billy McCarthy, Wealth Manager

Am I Going to be Okay?

May 10, 2022
Budgeting, Financial Planning, Wisdom

Worry is defined as a state of anxiety and uncertainty over actual or potential problems. That’s the noun form of the word. I’d like to focus on the verb form, if I might, which is defined: to give way to anxiety or unease, to allow one’s mind to dwell on difficulty or troubles. Anybody resemble that remark, as they say? [Billy raises his hand]. This may or may not come as a surprise, but my worry typically has little to do with the stock market.

I worry more about things I’m less familiar with. How, for example, can I ensure my family remains safe through a global pandemic? Not only for their physical well-being, but from the effects of isolation from friends and teammates to media-driven fear and hyperbole. Wading through the psychological make up of teenagers can be challenging enough let alone during the last two years! Well, I’m still not sure how to address all of that, but my belief is that my family and my children are here, in this community, in the midst of all that’s going on, at the precise time they were appointed to be. And sometimes, when you don’t have all the answers, you seek wise counsel in conversation with a friend or mentor, or maybe in the pages of a book. (Or in my case, you do both…and often.)

And then you keep moving.

How are you faring through all of this? A recent study* by the American Psychiatric Association suggests that 40% of Americans were anxious about becoming seriously ill or dying from coronavirus and 62% were worried about the same for their loved ones. Bad thing about worrying is that it’s a slippery slope – things you may not otherwise worry about now have you on edge. Ordinary and routine events may now become sources for worry. And left unchecked, worry can – for some – manifest physically and affect the way you feel even to the point where you live in a constant state of fear and dread. All of this leaving us wrestling with this question:

Am I going to be okay?

As many of you can attest, numbers aren’t the only things CapSouth pays attention to. And quite frankly, they’re not even the most important. Sure, there are certain numbers that are likely to be part of the conversation. Returns, Probability of Success, for some, 33-18, for others. But out of context, they’re only numbers. What gives meaning to those numbers is the life you want to live and how you’re planning to get there. Or as you’ve heard us say, living your one best financial life. A lot of what’s going on in the world today I don’t even have a name for. At least not one suitable for this article. Quite a bit of what we see, read, and hear these days is certainly good for news stories. (Not that I always believe it’s newsworthy. That’s a topic for another day.) They do, however, generate viewership, readership and advertising. And so, the machine churns. And in the process, the narrative causes uncertainty, concern, and for some, full-fledged worry. And so that machine churns, also.

As it relates to your financial plan, to your one best financial life, allow us to join the conversation if you feel yourself slipping toward worry. Is it okay to be concerned? Of course, and it’s prudent. Your retirement assets may likely be the single largest asset you’ll ever have. Is it okay to be uncertain? Of course, and it’s unavoidable at times. The news cycles have and will forever generate short-term market movement. We see this play out daily. The market’s going to go up, sideways, or down. Whether you watch it on TV or on your phone, or maybe choose to go for a walk with a loved one instead – it’s going to happen. All of which, quite likely, in the same day. That said, please allow us to help you filter through the noise and help keep it in context. Not all of it matters, and you don’t have to go through it alone.

There are some pretty sharp individuals you have working on your behalf here at CapSouth. I’ve spent ten years of my life working with them. People I trust and depend on greatly. Not just because of how smart they may be or how hard they work for the benefit our clients, but because of the type of individuals they are. I may be preaching to the choir as some of you have been around CapSouth longer than I have. One of our values is to treat others the way we want to be treated. Maybe it’s a clarification of a news event? Maybe it’s a recap of your estate plan? Or maybe it’s just having someone who’ll listen.

We’re here. How can we help? Click here to Connect With Us

To discuss this article further or to learn more about CapSouth Wealth Management, visit our website at www.capsouthwm.com or call 800.929.1001 to schedule an appointment to speak with an advisor.

By: Billy McCarthy, Wealth Manager

*New Poll: COVID-19 Impacting Mental Well-Being: Americans Feeling Anxious, Especially for Loved Ones; Older Adults are Less Anxious

American Psychiatric Association, May 25, 2020

https://www.psychiatry.org/newsroom/news-releases/new-poll-covid-19-impacting-mental-well-being-americans-feeling-anxious-especially-for-loved-ones-older-adults-are-less-anxious.

Investment advisory services are offered through CapSouth Partners, Inc, dba CapSouth Wealth Management, an independent registered Investment Advisory firm. Information provided by sources deemed to be reliable. CapSouth does not guarantee the accuracy or completeness of the information. CapSouth does not offer tax, accounting, or legal advice. Consult your tax or legal advisors for all issues that may have tax or legal consequences. This information has been prepared solely for informational purposes, is general in nature and is not intended as specific advice. This article contains external links to third party content (content hosted on sites unaffiliated with CapSouth Partners). CapSouth makes no representations whatsoever regarding any third party content/sites. Linking to these third party sites in no way implies an endorsement or affiliation of any kind between CapSouth and any third party, including legal authorization to use any trademark, trade name, logo, or copyrighted materials belonging to either entity.

Tag: Financial Advisor

Three Things to Consider in a Bear Market

Pigskins and Procrastinations

Am I Going to be Okay?

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