wealth management 2019 - crain's chicago business...comeback kid? by jane adler “the advisor...

WEALTH MANAGEMENT

ADVERTISING SECTION CRAIN’S CONTENT STUDIO

+ Investment tips from 7 top wealth advisors

+ Active Investing makes a comeback

+ Why your portfolio might not be as diversified as you think

2019 EXECUTIVE GUIDE: WEALTH MANAGEMENT

CRAIN’S CONTENT STUDIO ADVERTISING SECTION

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CONTENTS

Matrimonial and Family Law Attorneys

FEATURESACTIVE INVESTING: THE COMEBACK KID?.................................................22 WHAT TO EXPECT FROM A FINANCIAL ADVISOR: A CHECKLIST............24IS YOUR PORTFOLIO REALLY DIVERSIFIED?................................................26

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Is active investing right for you? Our lead feature explores how worries about market volatility and a possible downturn are helping active investing strategies make a comeback.

Read on for a helpful checklist on what to expect when working with a financial advisor—“We can help inspire people to meet their goals,” promises one—as well as a detailed look at how to ensure your portfolio is as diversified as you think it is.

Looking for more strategic investment advice? Check out chicagobusiness.com/wealth-management for additional features, including seven tips for protecting your investment gains in a volatile market.

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MANAGING EXECUTIVE: Brent R. Brodeski, Chief Executive Officer

REGULATORY ASSETS UNDER MANAGEMENT: $6 billion

MINIMUM ACCOUNT: $500,000

AVERAGE ACCOUNT: $1.25 million

FOCUS: Serving as a personal CFO, Savant helps its clients manage the complexities of their investment, planning and tax strategies. Using a time-tested and evidence-based approach, we provide investors access to a personalized portfolio option and proactive, customized planning advice, all while considering the tax implications over their lifetime. We believe Savant’s unique approach can help provide clients with an advantage.

Savant is a Registered Investment Advisor, which means we are required by law to act in clients’ best interests. Savant remains independent and is not swayed by things like in-house products or quarterly earnings reports. Savant has a transparent fee structure based on how well we manage assets, not on how often trades are made or products are sold. We are a vibrant firm that uses a team approach, and we pride ourselves in the time we take to get to know our clients and what is most important to them.

CLIENTS: Savant offers integrative investment management and financial planning solutions to individuals, families, foundations, trust funds, retirement plans and nonprofit organizations. We also provide portfolio design, tax planning, tax preparation, advanced estate and wealth transfer planning services.

INVESTMENT PHILOSOPHY: Our investment philosophy is designed to engineer broad, globally diversified portfolios that minimize risk and maximize after-tax return. This evidence-based strategy is founded on tried-and-true principles:

• The markets are efficient• Asset allocation is important• Markets are not predictable• Broad diversification is necessary• Take a global approach• Actively manage taxes• Eliminate excessive costs• Systematically rebalance• Optimize cash-flow management

Disclosure: Savant Capital Management is a Registered Investment Advisor. Savant’s marketing material should not be construed by any existing or prospective client as a guarantee that they will experience a certain level of results if they engage Savant’s services. Please see Important Disclosures at savantcapital.com.

High-Net-Worth Individuals: 65%

Individuals: 21%

Pension and Profit Sharing Plans: 11%

Charitable Organizations: 2%

Corporations and Other Businesses: 1%

CLIENT DIVERSIFICATION:

COMPANY NAME: Savant Capital Management

ADDRESS: 190 Buckley Drive, Rockford, IL 61107 (Headquarters) Chicagoland offices: Chicago, Downers Grove, Hoffman Estates, Naperville, St. Charles, Wilmette

PHONE: 866.489.0500

WEBSITE: savantcapital.com

TOTAL EMPLOYEES: 163YEAR ESTABLISHED: 1986

2019 EXECUTIVE GUIDE: WEALTH MANAGEMENT 22

I nvestors have flocked to passive index funds over the last decade. In fact, passively managed funds now have a 45% market share, according to recent data from Bank of America Merrill Lynch.

It’s easy to understand why. The average annualized total return for the S&P 500 stock market index over the past 90 years is 9.8%. Not bad, especially for an investment that requires little attention.

But active investing could be making a comeback. Worries about market volatility and a possible downturn after a 10-year expansion may give an advantage to investment managers who take an active approach.

“Active investors are outperforming passive investors so far this year,” says Bob Diedrich, director of wealth management, First Midwest Bank, Chicago.

Active portfolio management is a strategy in which the manager makes specific investments with the goal to outperform a benchmark index such as the S&P 500. When the bull market inevitably ends, so will the positive returns for passive index investors.

Active investment managers can mitigate risk by reducing exposure to the stocks that will be hit the hardest. They can also buy undervalued assets to capture upside as markets recover.

The relative benefit of active vs. passive investing is an age-old question, according to Don Duncan, financial advisor and managing director, Savant Capital Management, a registered investment advisor. He has offices in Chicago and Downers Grove, as well as in Santa Fe, New Mexico. The firm has a handful of offices in the Chicago area, as well as in Virginia and Wisconsin. Duncan attributes the rise in passive investment strategies, such as index funds, to the fact that many Americans don’t require sophisticated asset management approaches. A passive strategy just makes life simpler.

Another potential drawback to active fund investing is that the investor has less control over the tax

consequences of the various investments. Portfolio managers make decisions that may result in unwanted gains, resulting in higher tax payments.

HOW TO MANAGE OUTCOMESStill, active investing can make sense—especially in a bumpy market, experts say.

Index funds performed well after the recession. But now that the bull market is into its tenth year, not all sectors are making uniform gains. “It’s time to look at defensive plays,” First Midwest’s Diedrich says.

Individual securities can be a good defense, if managed properly. For example, First Midwest Bank tracks capital gains in client portfolios. The stock market rose for the first three quarters of 2018, generating a lot of gains. But the market experienced a sell-off in the last quarter,

which presented the opportunity to sell securities to manage the tax liability. “We were very active,” Diedrich says, explaining that the securities can be repurchased when the price is right.

Active investing can help manage outcomes in other ways.

A passive strategy assumes the investor’s risk tolerance matches that of the index fund. But what if the investor has a lower risk tolerance than that of the index, or perhaps the investor has a greater need for income? asks Bill Gleason, market investment executive, Bank of America Private Bank, Chicago. An active manager can craft a portfolio that is more defensive or more aggressive. “The clients have the opportunity to have the portfolio tailored to their needs,” Gleason says.

A financial advisor can help investors pick the best mix of investment funds—either indexed or managed—to meet their goals. “It’s one of the advisor’s biggest values,” Gleason notes. The advisor also helps the investor stay on track, making appropriate decisions based on market conditions and changes in the investor’s personal situation.

Don’t overlook the value of an outside financial advisor. Too often, busy executives think they’ll make investments, but then never get around to it. An advisor

can fight investor inertia. “The advisor is often the difference between the investor having a plan in the back of their mind and actually executing on that plan,” Gleason says.

TAKE THE LONG VIEWActive investing is not all about outperformance, but balancing risk and return, says Jackie Moss, a member of CFA Society Chicago and managing director at William Blair Private Wealth Management, Chicago. As a portion of a well-balanced portfolio, she looks for small- and mid-cap companies that will grow to large-cap companies over time. “We are believers in active investing,” Moss says.

Investors don’t necessarily have to choose between an active and passive approach. A blend of both is often best, according to Mike Stritch, chief investment officer,

BMO Wealth Management- U.S., Chicago. The recent uptick in market volatility could be a good time for index investors to add actively managed funds to help mitigate downside risk. Active managers also have the flexibility to make targeted purchases. “Be careful of fees,” Stritch warns, advising investors to ask about the costs associated with actively managed funds.

Is there an ideal percentage split between active vs. passive investment funds? No, Stritch says, adding that the decision of how to divide a portfolio will depend in part on the asset classes being purchased. For example, an actively managed small- cap international stock fund could outperform an indexed fund.

Not all passive funds are equal, advisors say. Some index funds are concentrated in a few companies—a fact investors may be unaware of. The widely held QQQ fund, for example, tracks the NASDAQ 100 market. But 45% of the index’s holdings are made up of just five companies—Amazon, Facebook, Google, Microsoft and Apple.

“Think about the risks,” William Blair’s Moss says. There are emerging privacy issues that could impact these companies. There’s talk about the government intervening to break them up because they’re too big. Europe is already placing restrictions on the companies. “Investors need to consider the environment,” Moss says.

Active Investing: The Comeback Kid?

By Jane Adler

“THE ADVISOR IS OFTEN THE DIFFERENCE BETWEEN THE INVESTOR HAVING A PLAN IN THE BACK OF THEIR MIND AND ACTUALLY EXECUTING ON THAT PLAN.” -Bill Gleason, market investment executive, Bank of America Private Bank, Chicago




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MANAGING EXECUTIVES: Michael Scudder, Chairman and CEOMark Sander, President and COORobert Diedrich, President - Wealth Management Division

ASSETS UNDER MANAGEMENT: $11 billion MINIMUM ACCOUNT: $500,000

FOCUS: The mission of First Midwest Wealth Management is to help people, organizations and businesses manage their finances and investments so they can achieve their goals. We offer trust and fiduciary services, wealth planning, investment management, real estate and farm management, custody and institutional asset management, retirement benefit services and private banking.

We know that your financial life can get complicated and we help you manage it. We have the depth of resources you need and the personal service you want. We can help with your business and your retirement, so you can work on your legacy.

CLIENTS: Trust and private banking clients include high-net-worth individuals and families, corporations and nonprofit organizations.

INVESTMENT PHILOSOPHY: We begin by assessing your complete financial situation and goals. We help you weigh the trade-offs in financial decisions and then develop an investment plan customized to you.

We employ a “core” and “satellite” approach to portfolio construction. The core portion consists of traditional asset classes of stocks, bonds and cash; when determining the appropriate percent, we use a quantifiable model of risk and return statistics from Modern Portfolio Theory. The satellite portion is designed to help achieve greater diversification and may include asset classes or strategies such as real estate, commodities, high-yield and emerging markets, depending on the investor profile.

“Structuring wealth is as important as creating it.”

High-Net-Worth Individuals: 65%

Pension and Profit Sharing Plans: 20%

Charitable Organizations: 10%

Corporations and Other Businesses: 5%

CLIENT DIVERSIFICATION:

COMPANY NAME: First Midwest Bank, Wealth Management

ADDRESS: 8750 W. Bryn Mawr Ave., Suite 1300, Chicago, IL 60631

PHONE: 800.369.4065

WEBSITE: firstmidwest.com/wm

TOTAL EMPLOYEES: 2,000+

YEAR ESTABLISHED: 1940

Creative solutions to complicated problems.

CHICAGO OFFICE 161 North Clark Street, Suite 2800 Chicago, IL 60601 312.782.3456

LAKE FOREST OFFICE 300 East Illinois Road, Suite 200 Lake Forest, IL 60045 847.405.9500

2019 EXECUTIVE GUIDE: WEALTH MANAGEMENT 24

G ood wealth managers know how to multitask. They can offer trusted financial advice, help a family plan for college, and map out the fastest route to retirement—all at the same

time. But what else should we expect? Here’s a checklist of what to look for when selecting a financial advisor.

Robust services. A financial advisor should offer a full menu of services. These can include portfolio management, investment recommendations, financial planning, tax strategies, and estate and retirement planning. “An advisor should be well versed in all these areas,” says Bob Diedrich, director of wealth

management, First Midwest Bank, Chicago. That includes understating how to navigate the maze of Social Security benefits and gaps in insurance coverage. “An advisor with expertise adds value,” Diedrich says.

Ask what services are provided and how the advisor is compensated. They may charge an hourly rate, a fixed annual retainer or a percentage of the investments they manage. Some take a commission on the products they sell.

Savant Capital Management is a fee-only registered investment advisor. It provides analysis and

recommendations in 10 areas: vision and goals, retirement planning, educational planning, investment planning, estate planning and administration, business and succession planning, risk management and asset protection, debt management, income tax planning and charitable planning. “These areas are all interrelated,” says Don Duncan, financial advisor and managing director, Savant Capital Management, Chicago. “We focus on the client’s goals and the plan to achieve those goals.”

In addition to the traditional set of services, BMO Wealth Management-U.S. offers investment teams that

What to Expect from a Financial Advisor: A ChecklistBy Jane Adler




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Bank of America Private Bank is a division of Bank of America, N.A., Member FDIC, and a wholly owned subsidiary of Bank of America Corporation.

Investment products:

Are Not FDIC Insured Are Not Bank Guaranteed May Lose Value© 2019 Bank of America Corporation. All rights reserved. | ARJJNMYL | AD-04-19-0517 | 04/2019

An approach that brings global vision and local insight to your front door

To learn more, please contact:

Amy Hughes Managing Director Market Executive, Illinois - Michigan 312.828.9530 [email protected]

135 S. LaSalle Street Chicago, IL 60603

Offering insight, dedication and a global perspective to Chicago. Deeply understanding your individual needs. Creating a customized wealth management strategy that’s right for you. All aspects of an approach that connects to your values and goals. One that’s been trusted for over 200 years.

specialize by industry. One team, for example, works with physicians to address their particular needs. Another team works with business owners and entrepreneurs to help reduce the complexity associated with business ownership, including succession planning. The team that works with corporate executives understands issues such as how to handle concentrated stock positions. “We know how to think through their specific issues,” says Mike Stritch, chief investment officer, BMO Wealth Management-U.S., Chicago. He adds that a growing number of clients want their investments to align with their social values. An advisor should be able to handle those kinds of assignments.

Access to outside services. A financial advisor is unlikely to provide some services, such as the preparation of legal documents. The financial advisor, however, should be able to refer clients to attorneys, accountants and other trusted providers with whom they’ve worked. For example, Berger Schatz is a matrimonial and family law firm that often consults with financial advisors. “We work like a team,” says Andrew Eichner, principal at Berger Schatz, with offices in Chicago and Lake Forest. The team can share financial information, which is especially important in a divorce situation. An attorney can help protect assets while the financial advisor can devise a new plan to meet long-term income and investment goals.

A holistic approach. The advisor should offer an integrated approach. Investment planning and

selection is important, but the advisor should take the time to learn about your goals and objectives, and your family, according to Lynne Pantalena, wealth strategy executive, Bank of America Private Bank, Chicago. “The advisor should listen to your concerns.” Then the advisor can craft a comprehensive plan tailored to your stage of life whether you’re preparing to send a child to college, or getting ready to retire.

Productive relationship. Money talk can get personal. It’s hard to discuss wealth management goals without diving into topics such as inheritances, business succession issues and what’s going on with the kids. It’s really important to have a strong

relationships with your advisor, says Amy Hughes, market executive, Bank of America Private Bank, Chicago. “The advisor will understand your values.” A trusted advisor can nudge families to prepare wills and estate plans without stepping on toes. Budgeting can be a tough conversation, too. Bank of America in conjunction with Khan Academy has created a website called Better Money Habits with videos and tutorials to teach money management. (bettermoneyhabits.bankofamerica.com/en)

Good character. Financial information is now widely available, but good advisors should offer something extra. Look for the qualities that set someone apart from the competition. Do they have integrity? Are they trustworthy? Dependable? Are they transparent? Do they have a fiduciary mindset? In other words, are

they looking out for you rather than trying to make a sale? Another quality often overlooked is whether the advisor is inspirational, BMO’s Stritch says. The advisor should be able to motivate the client to execute on the financial plan. “We can help inspire people to meet their goals,” Stritch says.

Regular communication. Clients typically determine how, and how often, they want to be contacted by the advisor. Some clients prefer emails, phone calls or in-person meetings. But regular updates are important to stay on track, advisors say. Clients at Savant Capital receive quarterly performance reports. “We encourage clients to review their portfolios and talk to us about the

performance,” Duncan says. Regular communication includes an assessment of changes in the family. A new grandchild may prompt the need for a college savings plan. An unexpected inheritance may necessitate a revamp of the financial plan. Red flags. Beware of those who want to sell an investment product before asking about your situation. Investment selection comes after a solid financial plan is in place, advisors say. If you don’t feel comfortable with an adivsor, walk away. An advisor shouldn’t be dismissive. There are no dumb questions. Explanations should be in plain English. “The advisor should listen and be respectful,” says Jackie Moss, a member of CFA Society Chicago and managing director, William Blair Private Wealth Management, Chicago. “The advisor should take you seriously.”

“WE ENCOURAGE CLIENTS TO REVIEW THEIR PORTFOLIOS AND TALK TO US ABOUT THE PERFORMANCE.”- Don Duncan, financial advisor and managing director, Savant Capital Management, Chicago

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W ith savings in eight mutual funds, an investor felt good that his portfolio was diversified. The funds included a range of holdings such as U.S. stocks, money-

market funds, bonds, and funds with a combination of stocks and bonds. The investor figured the portfolio would be protected in today’s market if wide swings become more common. But a closer analysis of the portfolio showed that it wasn’t as diversified as he thought. The funds overlapped and many investments were duplicated, which left him wondering how best to optimize diversification and mitigate risk.

“Investors need to take a deep dive,” says Bob Diedrich, director of wealth management, First Midwest Bank, Chicago. He explains that investors should look well beyond traditional advice calling for an asset allocation of 60% equities and 40% bonds. A financial advisor can help investors determine if they have the right mix of investments.

A good mix should include large-, mid- and small-cap stocks as well as international stocks. Bond funds

should have short (less than five years), intermediate (5-10 years) and long-term maturities (more than 10 years) as a hedge against inflation.

It’s important to carefully screen investment funds, Diedrich says. Make sure the manager of a large-cap growth fund, for example, isn’t putting a significant portion of the investment funds into small-cap stocks to boost returns. “That can create more risk in choppy times,” Diedrich says.

First Midwest Bank has a proprietary program that uses a dozen criteria to screen investment funds. One criterion is style drift, a situation where investments diverge from the original objective of the fund. Some of the other screening criteria include fund performance, manager tenure and expense ratios.

AVOID OVERLAPA simple way to avoid investment overlap is to check names. See if the same companies appear in the different funds, says Don Duncan, financial advisor and managing director, Savant Capital Management, Chicago. If you own a large-cap growth fund and an S&P 500 index fund, for example, you’re probably

doubling up, he says. “We spend a lot of time and effort doing deep dives into the products,” Duncan says.

Too many overlapping securities in a portfolio can lead to unintended consequences, says Jackie Moss, a member of CFA Society Chicago and managing director, William Blair Private Wealth Management, Chicago. “You might be doubling up on risk,” she says. Moss recommends simplifying the process by selecting fewer funds, but ones with proven results in specific areas. She uses what she calls a “high conviction” strategy—selecting funds with managers she trusts.

Over-diversification can lead to excessive fees, according to Mike Stritch, chief investment officer, BMO Wealth Management- U.S., Chicago. Investors who buy 10 mutual funds related to the U.S. stock market are really paying a lot of unnecessary fees. “Be focused on the purpose of each strategy in your portfolio,” Stritchsays. “Ask yourself why you are adding a fund.”

Other nuances come into play. Certain asset classes may move in the same price direction even though

Is Your Portfolio Really Diversified?By Jane Adler





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they might seem at first glance to be in very different categories, according to Bill Gleason, market investment executive, Bank of America Private Bank. Investors might think their holdings are diversified, but they’re not. “It’s a subtle distinction,” he says.

For example, high-yield corporate bonds act very similarly to small-cap U.S. stocks pricewise. “When one performs poorly, the other performs in much the same manner,” Gleason says.

THINK OUTSIDE THE BOXOf course, a diversified portfolio not only covers securities, but also other types of assets. Alternative investments can boost portfolio diversification and generate positive returns.

Alternatives include holdings such as real estate, commodities, hedge funds, venture capital and private equity. These investments typically don’t move in correlation with the equities markets, experts say. The alternatives are also less likely to overlap with each other.

“For qualified clients, alternative investments make sense,” says Gleason at Bank of America Private Bank. Qualified clients are those who have a $5 million portfolio. One caution: alternative investments can be illiquid. For example, private equity and venture capital

investments are typically held for five to ten years. “The client has to deal with illiquidity,” Gleason says. “We do not want a repeat of the financial crisis when investors needed liquidity and could not access their funds.”

Real estate investment trusts (REITs) have been great investments, notes BMO’s Stritch. According to the National Association of Real Estate Trusts (NAREIT), many REITs have had double-digit returns so far this year.

Publicly traded REITs typically invest in a particular property type such as warehouses, multifamily projects, office buildings or healthcare facilities. REITs are interest-rate sensitive, but can provide dividends and give the investor exposure to real estate markets.

A primary home is another asset that provides diversification, though housing values in the Chicago area have risen only narrowly. Some practical advice: If you’re thinking about downsizing, now may be the right time, Duncan at Savant Capital says. Income taxes and property taxes could be going higher. And even though interest rates may remain low, people could have less disposable income to buy a home. Also, taxpayers can only deduct $10,000 of their property taxes. Homeowners are concerned about how to incorporate these changes into their financial plans, says Duncan, who predicts more market volatility ahead. “Make sure your plan can handle it.”

Does your wealth manager measure up?A CFA® CHARTERHOLDER DOES.

Find one at cfachicago.org

© 2019 CFA Institute. All rights reserved.

“INVESTORS NEED TO TAKE A DEEP DIVE.”

-Bob Diedrich, director of wealth management, First Midwest Bank, Chicago

Find more great wealth management advice online at chicagobusiness.com/wealth-management, including 7 tips for protecting investment gains in a volatile market.

2019 EXECUTIVE GUIDE: WEALTH MANAGEMENT X


A s markets experience an uptick in volatility, investors are seeking ways to protect the gains they’ve earned over the last several years. Here are seven tips from the experts

on how to stay on course during a bumpy patch.

1) Work with an advisor who can execute your plan. It sounds simple, but one of the best ways to protect and grow net worth is to create a financial plan. In fact, the median net worth of the average U.S. household is less than $100,000, notes Bob Diedrich, director of wealth management, First Midwest Bank, Chicago. “It’s because people don’t plan.”

Based on his experience, investors who plan are most likely to hit their financial goals. A financial advisor can help set goals and then devise investment instruments to reach those goals, whether it’s early retirement, charitable giving, leaving a legacy for family members, or buying a second home.

Also, recognize that the plan is a living document. It will change based on life events, such as the birth of a child, or divorce. For example, the single best way to protect personal assets prior to marriage is with a prenuptial agreement, says Andrew Eichner, principal, Berger Schatz, a matrimonial and family law firm with offices in Chicago and Lake Forest. Work with your financial advisor to assemble a detailed balance sheet. A prenuptial agreement without a full disclosure of income and assets is not worth the paper it is written on, Eichner says. “Be prepared.” A post-nuptial agreement, although less commonly used, is also an option. It separates and protects assets if a divorce should occur.

2) Conduct a risk assessment. Now is a good time to re-evaluate your risk. This will help determine any adjustments that need to be made to the portfolio’s asset allocation, which drives long-term returns, Diedrich says. First Midwest Bank offers a risk profile of 15 questions to help determine where investors fall on the scale from very cautious to aggressive. Couples should take their risk temperature together, Diedrich says. “It may be different.”

Another approach is to take a clue from the past, says Mike Stritch, chief investment officer, BMO Wealth Management-U.S., Chicago. Investors were lulled into a sense of security in 2017 because market volatility was so low. Investors got a wake-up call at the end of 2018 when the S&P 500 stock index fell briefly into bear territory, ending the year down nearly 7%. “That made a lot of people nervous,” Stritch says. How investors felt during that time, or during the financial crisis of 2008, can be a guide to their baseline risk tolerance. BMO has developed risk analytics software that shows how a current portfolio would have performed during a previous downturn. “It provides a lot of clarity,” Stritch says. Clients are able to judge better for themselves how they feel about risk when they see the actual numbers. The scenario also demonstrates how long it would have taken for today’s portfolio to recover based on how the market actually performed after the downturn. “It’s very tangible,” Stritch says.

3) Stick to your long-term plan. “Hold steady,” says BMO’s Stritch. Excessive trading based on market ups and downs can damage long-term outcomes. Also recognize that volatility is really a function of the time horizon. Historical returns show that risk diminishes as the time investment horizon grows.

4) Revisit asset allocation. Market volatility is a good reason to recheck asset allocations in a portfolio, and rebalance. “Risk tolerance usually goes down when volatility goes up,” says Bill Gleason, market investment

executive, Bank of America Private Bank, Chicago. Is your current asset allocation helping you accomplish your financial and life goals? The holdings in a portfolio may need to be tweaked. Years of gains may mean it’s time to rebalance the portfolio. But Gleason cautions against reading too much into how the market reacts on a daily basis to rhetoric around global economic news, such as trade disputes. An advisor can help investors stay on track. “That’s important,” Gleason says.

5) Cash is king. A good buffer against market volatility is cash. What’s the right amount? The average bear market lasts about 18 months, according to Don Duncan, financial advisor and managing director, Savant Capital Management, Chicago. Savant is a registered investment advisor with 15 offices. Cash reserves of 18 months should be enough to outlast an average downturn. In other words, investors with that amount of cash can fund their lifestyles without having to sell assets in their portfolios. More conservative investors may want to have 36 months of cash on hand. The amount of cash needed will depend

on how much the investor spends each month as well as sources of income. “Make sure your financial plan can handle the volatility,” Duncan says.

6) Remember the basics. Don’t ignore basic investment principles that will help you reach your goals. Start saving as early as you can, save often and invest in the stock market, says Jackie Moss, managing director, William Blair Private Wealth Management, Chicago, and a member of CFA Society Chicago, the world’s oldest investment analysts society, which aims to lead the investment profession by promoting the highest standards of ethics and education, while serving as the premier local resource for Chartered Financial Analysts, candidates, other investment professionals and our community.

Contribute as much as you can to your 401 (K) retirement account. Keep tabs on spending. Have a budget. Check monthly automatic payments. There may be services you’re not using that can be cancelled. “Being intentional can make a big difference,” says Moss. “Every dollar you save can be invested.” Another tip: Consider gifting appreciated stock instead of cash to a favorite charity. That avoids the capital gains you might have otherwise had to pay and the charity gets the full value of the stock because it doesn’t pay taxes. “It’s a great way to maximize a gift,” she says.

7) Consider alternatives. An elevated period of volatility may call for a tactical shift, says BMO’s Stritch. He recommends investment strategies with results that are not correlated with stocks and bonds, or ones

that benefit from volatility. Strategies include hedge fund investments, or the reinsurance market. Another example is structured notes, a debt instrument issued by a financial institution. These cap the investment upside but also protect the downside. “It can be a nice tool,” Stritch says. “They can provide a good risk reward characteristics when volatility is high.”

7 Tips to Navigate Choppy MarketsBy Jane Adler


X 2019 EXECUTIVE GUIDE: WEALTH MANAGEMENT

“BEING INTENTIONAL CAN MAKE A BIG DIFFERENCE...EVERY DOLLAR YOU SAVE CAN BE INVESTED.”- Jackie Moss, managing director, William Blair Private Wealth Management, Chicago, and a member of CFA Society Chicago

wealth management 2019 - crain's chicago business...comeback kid? by jane adler “the advisor...

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