Dana Peterson Chief Economist Talks Economics

JULY 2022

ISSUE 109

ADVISORS magazine

DANA chief economist

PETERSON

the conferrence board

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HOW SMALL BUSINESS CAN THRIVE IN UNCERTAIN TIMES ARMs ON THE RISE! INFLATION SPURS COMEBACK

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JULY 20

CONTENTS FEATURES 26

6

ARMs On The Rise!

Inflation spurs come back of once vilified mortgage loans

Unlock The Sales Game

Why “Follow-Up” should be banned from every financial advisor’s vocabulary

28 32

44

16

ON THE COVER

Helping Small Businesses Thrive in Economic Uncertainty

Dana Peterson

Small businesses are integral to the Chief Economist at The Conference health and regrowth of the economy Board talks: Inflation, Rate hikes, The Fed, Recession (and Stagflation)

46

42

Book Review

by Regina Johnson

Reconciling Regulating Compliance Tailored digital solutions are essential for advisors

“FLEX: A Leader’s Guide to Staying Nimble and Mastering Transformative Change in the American Workplace.”

36

ADVISOR INTERVIEWS 10

MADE FOR YOU Our picks from the around the globe

16

4 / ADVISORS MAGAZINE

JULY 2022

Beyond Financial Planning

Specializing in equity management

28

Dealing with Market Volatility Jitters High-touch, low pressure approach

32

Leaving Silicon Valley for Management

An entrepreneurial odessey 38

Aligning Assets for the Future Leveraging businesses and property

38

Preserve your wealth with CitiTrust’s knowledge and

Financial Management Solutions www.cititrust.biz

i n t e r n at i o n a l i n c .

Belize | BVi | Malta | UK | SaMoa | BrUnei | BritiSh angUilla | CyprUS | giBraltar | iSle of Man | geneVa | JerSey | lieChtenStein | lUxeMBoUrg | United araB eMirateS | China | Switzerland | MarShall iSlandS

By Amy Armstrong

ADJUSTABLE RATE MORTGAGES

MAKE A COMEBACK

How have today’s ARMs changed since the 2008 crash?

T

he recent uptick in the use of Adjustable-Rate Mortgages (ARMs) is raising financial eyebrows as analysts in the housing loan market watch for its potential impact.

“Be aware, be educated before you jump in,” Linda McCoy, president of the National Association of Mortgage Brokers, told the New York Times in midJune 2022. “There are still risks.”

Colorado, group specializing in assisting first-time home buyers and credit-challenged buyers, reports that nearly 70% of its home loan applications in 2022 include use of ARMs. 2. The Mortgage Bankers Association based in Washington, D.C., with more than 2.200 members nationwide, reports ARM-style loans comprise 10% of its current activity as of June, up 6% since January 2022.

ARM’s Increase by The Numbers Nearly 11% of all mortgage applications in May 2022 were of the ARM variety, according to HousingWire. com, an independent analysis and commentary news source covering the nation’s housing, mortgage, and real estate markets. This marks a 14-year high in ARM applications and helps ARMs recover from a sullied reputation earned during the 2008 mortgage crisis. More importantly, this 11% represents 19% of the total dollar volume of home loans for the week ending May 6, 2022.

Additional data points to the rise – and return – of the ARM to the mortgage loan market across the country: 1. Neat Loans, a Boulder,

Driving the Increase In a breath of fresh air, it appears the increase in ARM loans isn’t being blamed on the COVID-19 pandemic. Well, at least not directly. Dramatic inflation increases in 2021 and especially the first half of 2022 associated with the lingering economic impact of the pandemic prompted the Fed to raise interest rates. This, combined with rising home prices, has priced some would-be home buyers out of fixed-rate mortgages.

“With rates on fixed-rate mortgages running close to 6% and likely higher for less-qualified buyers, getting an ARM to snag a rate that’s south of 5% looks much more appealing,” Kate Wood, a home loan expert with Nerdwallet, told Marketwatch.

6 / ADVISORS MAGAZINE

JULY 2022

com.

As of mid-June 2022, borrowers could lock in a 4% rate for the first five years of an ARM loan, according to Bankrate.com.

For example, on Thursday, June 9, borrowers using Freddie Mac could get a 4.04% rate on the initial first five years fixed rate of an ARM loan as compared to the 5.09% available that day for a loan with a fixed-rate for the entire term. For a loan on a $350,000 home that 1.5% rate difference represents $200 per month.

Maybe Not So Dangerous?

What analysts consider to be a lower risk of ARM loans today has much less to do with a variable interest rate than it does with the quality of borrowers qualifying for it in 2022 as compared to borrowers defaulting back in 2008.

ARM loans begin with an initial lower-fixed rate for a predetermined period of time ranging from three to ten years – but typically five years – and then transition to a “floating” rate of interest based on the market conditions at that time.

What has changed is significant reform in housing loan regulations – particularly under the DoddFrank Act enacted in 2010 and regularly updated since – in an

in the specific terms as to how much the rates can go up and how quickly,” David Mendels, a certified financial planner with Creative Financial Concepts in New York told CNBC. “No one can predict what rates will do, but one thing is clear – there is a whole lot more room on the upside than there is on the downside.”

Olsen echoes concerns regarding the use of ARM loans.

“The danger still comes down to the fact that an ARM is a more complicated product – there are more ticky-tacky details that will really matter after that fixed rate period,” Olsen said. “Let’s say your mortgage contract doesn’t spell out that the payment will increase when the rate increases.

Higher rate but same payment means the balance on the loan could actually increase.” effort to reform Wall Street and protect consumers from the federal level.

“The main differences between now (2022) and then (2008) are heightened income and credit requirements to qualify for a mortgage and requirements that banks keep proof (a huge deal), requirements around disclosure/ loan counseling (maybe a big deal), and limitations on repayment penalties (which matters more for ARMs since one of the reasons you might get one is to lower payments and pay off the loan before your rate has a chance to increase),” Skylar Olsen, a PhD housing economics professor at the University of Washington, founder of

Reimagine Economics, a Seattlebased data leverage firm and a former senior principal economist and director of economic research at Zillow, told Advisors Magazine.

Maybe Still Somewhat Risky As with any other financial tool, the user is best advised to consider all the possibilities of using it. The same applies to an ARM loan.

One risk is an increase in the interest rate.

That risk is getting closer to being a sure bet in 2022 and beyond as the Fed has announced a series of interest rate hikes as part of combatting inflation.

“There is a lot of variability

Bottom Line An ARM loan can still make financial sense if the initial fixedrate period provides enough savings to pay down the principal.

This is especially applicable in cases when homeowners know they won’t be in the home they financed with the ARM loan for the long-term.

The old adage, “buyer beware,” applies to use of ARM loans in 2022, but perhaps is more accurately stated as, “borrower be educated.”

The Consumer Financial Protection Bureau created by the federal government in July 2011 offers a comprehensive look at ARM loans. Click here to view.

ADVISORS MAGAZINE / 7

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Breakthrough Actionable Strategies

IQT Managing Editor & CIO

Kelley Wright

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JULY 2022

advisor feature written by: joe innace

Beyond Financial Planning Specializing in Equity Management

ADVISORS MAGAZINE / 11

There are currently just short of 100,000 certified financial planners (CFPs) in the United States, according to the CFP Board, a non-profit organization that serves the public by fostering professional standards in personal financial planning.

But once an individual has a financial plan, what happens thereafter? An equity/portfolio manager specialist might be the answer for many.

A specialist — like Kelley Wright of Investment Quality Trends (IQT), who serves as managing editor of the IQT Newsletter and as chief investment officer and portfolio manager for IQ Trends Private Client, which is based in San Juan Capistrano, California.

“At IQ Trends Private Client, we’re strictly an equity manager. We don’t offer planning services; we want you to have all that worked out before coming to us,” Wright told Advisors Magazine in a recent interview. “And when you do come to us, we want you to say ‘here, this is my equity allocation.’”

Given Wright’s past experience as a partner in a full-service financial planning firm, he recognizes that the planning is an excellent

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JULY 2022

exercise and a useful tool to organize financial activities and to create a disciplined structure.

“But a lot of planning practitioners can overwhelm you with the minutia,” Wright observed. “Some of that is by accident, some by design. So, what I call client control should be the objective.”

He added: “But that being said, just an understanding of your current cash flow and budget is sufficient to make some reasonable assumptions for a retirement budget.”

Such fundamental information will provide a framework for how much a client needs to save, the required rate of return on those savings to meet desired goals, as well as how much insurance might be needed for one’s

family in case a client becomes disabled or dies prematurely.

“I would just say this though,” Wright emphasized, “If you’re unsure about where you stand, don’t guess. And if you need help, I recommend that you engage a fee-only financial planner, not a planner that also sells products, or implements the plan—I just don’t think that they’re objective enough.”

Wright maintains that a reputable fee-only financial planner will help the individual structure all those elements. He notes that one’s tax preparer or attorney should be able to provide some good financial planning references.

“And whether you decide to go it alone or you require some assistance, just make sure that you get that part of the process

“KNOWING WHAT YOU NEED AND WHEN YOU WILL NEED IT IS CRITICAL” done,” Wright stressed.

“Knowing what you need and when you will need it is critical to the process. So, when it comes to your future, don’t be afraid to ask questions.”

Role models and Heroes Wright’s first job in 1984 was as a stockbroker at a small privately held boutique in

La Jolla, California. One day, his manager handed him a financial newsletter. He told Wright, ‘I think you’d like this; you and the publisher seem to be of like minds.’

It was a copy of Investment Quality Trends, first created in 1966 by Geraldine Weiss, who came to be known as ‘The Grand Dame of Dividends,’ courtesy of the LA Times.

“I started to read it and it did resonate with me,” Wright recalled. “It was very much in keeping with my upbringing and my education. And then in 1988, Geraldine Weiss had authored a book titled Dividends Don’t Lie—and I absorbed all of that.”

Wright was raised by his maternal grandparents in Kentucky. After the Great Depression, Wright’s

grandfather struck out on his own with his brothers and started a painting and construction business. They landed a contract with the Commonwealth of Kentucky to paint the electrical towers that line highways.

“It was really dangerous work, and they were one of the few to bid on it,” Wright said.

“So, they got the job, started making money and then they opened a retail painting and glass business,” he added.

“After a while, when my grandfather had a few nickels to rub together, he wanted to put it to work, and he decided to use the stock market as his vehicle.”

Wright learned many valuable lessons from his grandfather and fondly recalls him as his very first teacher.

ADVISORS MAGAZINE / 13

“He was not formally educated,” Wright said.

“Everything he learned about investing was from hands-on experience. And that helped form his philosophy, which was to buy high-quality dividend paying stocks.”

And as Wright grew up, his grandfather imparted a wealth of first-hand investing concepts—knowledge that the grandson took with him to the University of Kentucky.

Flash forward to 2002 when Wright had an opportunity to meet Geraldine Weiss who was already one of his heroes.

It was supposed to be just a 30–45-minute meet and greet at her place in La Jolla.

“But some two hours later, she reached over and patted me on the knee and said, ‘Honey, you get it. I think you should run it’,” Wright chuckled. “And so that’s how I came to not only run my own practice, but to also become the managing editor of Investment Quality Trends.”

Framing the Goals In his role as chief investment officer and portfolio manager at IQ Trends Private Client, Wright’s approach is to frame all a client’s investment activities around achieving goals based on current and projected needs.

“We will have a long discussion,” he said, “And that’s usually around a client’s needs; needs being anything that makes us feel safe and comfortable—the obvious things like food, clothing, shelter, medication, education, recreation, and more.”

Wright added: “And the way that we pay for those needs is

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JULY 2022

with cash. The whole purpose of investing is to generate cash to meet our needs. It’s a business.

And I want people to think about it as a business—not as a casino or an auto-pilot computer or app.”

In being clear about what for, when, and for whom a client’s money will be used, and in approaching it all like a business, Wright helps his clients then establish rate of return goals— around how much risk they can tolerate.

“It’s not about how educated you are, or how much you’ve read on the Internet, or how much you’ve been engaged in online trading platforms and apps,” Wright said. “It’s a way of thinking about and asking, ‘what’s the end-result here’?

What exactly are we pushing towards?”

And that ‘pushing towards’ often means what stocks should be bought, sold, or held.

“Investment Quality Trends is a laboratory of quality and value,” Wright said. “And while the analysis itself is pretty sophisticated, we’ve really drilled it down to make it simple for the do-it-yourselfer, where all they have to do is look at dividend yield to make those critical buy,

“IF YOU’RE UNSURE ABOUT WHERE YOU STAND, DON’T GUESS. AND IF YOU NEED HELP, I RECOMMEND THAT YOU ENGAGE A FEE-ONLY FINANCIAL PLANNER.” KELLEY WRIGHT

for the enlightened investor

hold, and sell decisions.”

In fact, Wright tells clients that a portfolio of 25-30 stocks is really all that’s needed. “There are 10 sectors, and if you can diversify equally across those 10 sectors, you will end up with 25 to 30 stocks and that’s sufficient. If you start getting too much more than that, hell, you might as well go buy an index fund.”

Wright added: “And for those folks who don’t have the time,

inclination, or confidence to do it themselves, we will do it for them as an investment advisor over at IQ Trends Private Client, where we are dealing with highquality, blue-chip stocks.”

The focus is on equities, according to Wright, which tend to perform well regardless of the macroeconomic environment.

“Over the course of 25 years, you’re going to get hit with the kitchen sink in terms

of geopolitical, economic, whatever events,” Wright said.

So, one of his core principles is that IQT’s stock picks should have 25 years of uninterrupted dividends –because those are the companies proving time and again how well they are positioned to withstand anything that happens.

For more information, visit: www.iqtrends.com

ADVISORS MAGAZINE / 15

cover story by joe innace

DANA PETERSON Chief Economist at The Conference Board talks:

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JULY 2022

INFLATION

STAGFLATION

RECESSION

RATE HIKES

ADVISORS MAGAZINE / 17

Since its founding in 1916 The Conference Board has been a member-driven think tank — as well as a non-partisan, and a not-for-profit entity. Its mission has been steadfast: to provide trusted insights to help its members anticipate what’s ahead, improve corporate performance and better serve society.

T

he Conference Board was established by executives and U.S. business leaders “during a prolonged period of economic turmoil,” as noted in its historic timeline.

Turmoil might be too strong a word to describe the current economic environment. But from Main Street to Wall Street, there is plenty of uncertainty, nervousness about a recession, and concern about inflation, supply-chain issues, interest rates and more.

Helping to make sense of it all – as she has done for CNBC, FOX Business, Bloomberg, Thomson-Reuters, CNN Finance, Yahoo Finance, TD Ameritrade, Barron’s, the Financial Times, and the Wall Street Journal—is Dana Peterson, Chief Economist & Center Leader of Economy, Strategy & Finance at The Conference Board.

“In economics, a lot of things are repetitive; it just comes in a different package, but it’s the same thing,” Peterson told Advisors Magazine during a mid-June interview. “And those who understand such history, they’re oftentimes the better economist. So, if you meet an economist who’s 80 or 90 years old,” 18 / ADVISORS MAGAZINE

JULY 2022

she laughed, “listen to them, because he or she lived through something.”

Peterson is nowhere near that age range, but her experience is deep.

She joined The Conference Board in September 2020—at the height of the pandemic and its attendant global economic upheaval. She had been with Citi, where for many years she served as a North America Economist and later as a Global Economist. Her wealth of experience extends to the public sector, having also worked at the Federal Reserve Board in Washington, D.C. The day Advisors Magazine spoke with Peterson was the day the U.S. Federal Reserve raised its target federal funds rate by 0.75% in an effort to rein in inflation. The Federal Reserve had said that it is prepared to push the economy into recession to confront inflation if absolutely necessary, believing that “soft” or “softish” landing is achievable, according to The Conference Board.

“It was a big move, not seen in some 30 years” she explained, “but what I think was also quite striking is the fact that the Fed indicated it’s willing to raise interest rates to 4% over the next 18 months.”

Dana Peterson is the Chief Economist & Center Leader of Economy, Strategy & Finance at The Conference Board.

ADVISORS MAGAZINE / 19

The Many Pathways to Global & Regional Recessions

Peterson came away with two interpretations of the move. The first is that nearly 4% is indeed the goal.

“The other is that maybe it’s a shock-and-awe situation where you put the idea of 4% out there, everyone responds to it, and you achieve your goal sooner than you expected,” she said. “So, you don’t have to really go all the way there.”

The goal of the rate hikes is to bring inflation back down towards a 2% target, which carries the risk of a recession.

“If the Fed does increase the funds rate to 3-3.5% this year,” Peterson explained, “we could potentially have a period of recession 20 / ADVISORS MAGAZINE

JULY 2022

-- defined as negative GDP, but also higher unemployment and strains and stresses across a number of industries.”

But if the Fed’s rate does increase to 3.5-4% to try to tame inflation, is it a given that a recession can be avoided, or at least mild?

It’s tricky because inflation has demand-side drivers and supplyside drivers. Peterson said the Fed’s policies can only affect the demand side, not the supply side.

Dampening demand-side inflation drivers On the demand side, Peterson points to the fact that the U.S. is nearly

at full employment. “Most people are working and they’re also seeing their wages increase,” she said. “You also have very strong demand for housing and that was fueled by mortgage rates reaching very low levels over the pandemic period.”

Many people, she observed, have savings—some of which was generated by the pandemic’s fiscal stimulus from last year.

“People spent some of it, some paid down bills with some of it, and then socked away some of it in banking accounts and wherever,” Peterson explained. “So, you have all these things with the potential to drive demand to buy goods and services

you now don’t want to finance it.”

And then, once there are signs of growth rates slowing, many people may start to feel threatened with the possibility of not having a job soon, so they pull back on spending.

“Likewise, if you’re a business, all of a sudden it’s more expensive for you to borrow money,” she added. “And also, a business might start thinking, ‘you know, the economy’s slower, so maybe we won’t hire as many people,’ or in some cases they may even let people go.”

Of course, as demand cools, prices come down.

“The problem is that you also have these supply drivers that the Fed can’t do anything about.” Peterson said.

and houses, all of which is influencing inflation.”

She noted: “Consumers, even though they’re complaining about inflation, they’ve continued to spend.”

Peterson maintained that the retail report, released June 15, wasn’t great, but good. “Plus, it doesn’t reflect all the services people are buying and during the pandemic, people bought more goods than services.”

She suspects people are probably shifting away from buying goods.

“You know, a consumer is maybe not interested in buying two or three cars or five or six lawn mowers, but they are considering going out again and on vacation. Services, right?” she

reasoned.

“So maybe you’re going to spend on those baseball tickets or going back to the movies, those kinds of things,” Peterson said, “but none of that’s reflected in the retail sales report. The only thing in the retail sales report are restaurants and people went to restaurants—they spent money on that last month (May).”

Peterson explained, “With the Fed raising interest rates, all of a sudden it becomes much more difficult to buy a house because the mortgage rates are going to rise, and maybe you don’t want to pay that higher rate. Or maybe you won’t buy a car because

Supply-side concerns “The war in Ukraine is raising prices for commodities globally,” Peterson said. “We’re feeling that here in the U.S. even though the war’s on the other side of the world. It’s raising prices for food, gasoline, metals, and even computer chips that go into just about everything we use—all those prices are rising, and the Fed can’t stop that.”

What’s more, global supply chain disruptions remain.

“Some of it’s linked to the war,” Peterson said. “Some of it’s also linked to semiconductor shortages, and a lot of it is also linked to the fact that China has a zero COVID policy.”

Under China’s zero Covid policy, the Chinese government is quick to shut down entire cities, as it did most recently in Shanghai.

“China’s a huge manufacturing and shipping hub,” Peterson said, “and if you shut everything down with the result being they are not manufacturing or shipping anything, there will be supply-chain disruption.”

A third element of supply is labor shortages in the U.S., acknowledges The Conference Board economist.

“It seems weird to say that we’re having a labor shortage, but we ADVISORS MAGAZINE / 21

”

So, you have these wages that are rising and that means more money floating around, which means more capacity to spend, which means higher inflation... those are the kinds of things the Fed doesn’t have the power to deal with.

”

‑ Dana Peterson

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are—and it’s mainly in industries that involve in-person services,” Peterson said.

These would be occupations where a person cannot work remotely, where they physically must go to the workplace to get a paycheck. These would include restaurants, hotels, sporting and events entertainment, and such.

Even most manufacturing—although not in the service sector—most people need to physically be on the factory floor. It’s the same with transportation and warehousing.

“These are the areas where you’re seeing these big shortages of workers,” Peterson said. Some of those shortages were caused because a lot of people decided to retire and they’re not coming back to the labor market.”

But Peterson also points to the trend of people in such sectors deciding to quit the jobs where they had to be physically present and starting more flexible or remote work—and perhaps make even more money.

“Wages are rising,” she said. And that’s because businesses are paying more to keep the workers they have, as well as advertising higher salaries to attract new labor.

“So, you have these wages that are rising and that means more money floating around, which means more capacity to spend, which means higher inflation,” Peterson said.

“Those are the kinds of things the Fed doesn’t have the power to deal with it,” she added.

No doubt, it’s a difficult tightrope act for the Fed. There are things happening elsewhere in the world beyond its control.

“And while the labor shortage in the U.S. is a domestic issue, the Fed can’t necessarily get people to go back to work, nor force people to work in a particular industry,” Peterson said. “So, on the demand

side the Fed can hike interest rates to 4% if they want to, but you could still have these outside, or supplyside forces that continue driving inflation higher,” she said. “And that makes it very difficult for the Fed.” Recession and Stagflation A possible outcome is a period of stagflation in the U.S. The official and latest Conference Board economic outlook, is that it does foresee a brief but shallow recession starting in the final quarter of 2022 and into the first quarter of 2023.

“We now expect a recession given the Fed’s more hawkish policy stance as well as periods of stagflation both before and after the recession,” it said in its latest report (June 21).

Stagflation is described as a period of very low growth and high inflation.

“There are also other downside risks to this outlook that could make the recession longer and/ or deeper,” The Conference Board noted citing the top risks as: 1. economic weakness outside of the US hurting the domestic economy 2. inflation rising higher than currently forecast, 3. a sharp correction in US housing prices, and 4. a delay in the deployment of government spending associated with the 2021 infrastructure bill.

She added: “The Fed is expected to raise the federal funds rate to 4 percent by early next year, which includes bigger hikes and faster than economists previously expected. So now, you’re going to see growth dip into negative territory.”

As of this writing, The Conference Board forecasts that US Real GDP growth will rise to 2.1% (quarterover-quarter, annualized rate) in Q2 2022, vs. -1.5% growth in Q1 2022.

Annual growth in 2022 should come

in at 2.0% (year-over-year) and growth of 0.6% (year-over-year) is expected in 2023.

“Currently, US economic activity continues to expand despite headwinds from persistent inflation and rising interest rates,” The Conference Board said. “While consumer confidence has cooled, real consumer spending continues to grow. Furthermore, business activity also appears to be holding up despite continued input costs pressures and a tight labor market. Wages continue to rise rapidly, although when adjusted for inflation, consumer purchasing power is declining. Excess savings are helping to bridge the gap.”

Generally, a recession is defined as a period of economic decline during which trade and industrial output are reduced, marked by a fall in GDP in two consecutive quarters. Peterson, however, notes that not always the case.

And she points to the recession resulting from the pandemic, which

wasn’t two successive quarters.

“It’s not about the length, it’s about other things as well,” Peterson explained to Advisors Magazine.

Key considerations are how much economic activity falls and by how much does GDP fall.

“During the pandemic we had seriously negative growth,” Peterson said. “And on top of that, widespread diffusion that negatively affected many industries by what was happening.”

Economists assess how various contributors to economic activity behave, including consumers, businesses, the government and if or how it responds, trade, and more.

“A number of factors determine if an economy is in a recession,” Peterson emphasized. “it’s not a hard and fast rule of just two quarters of negative GDP growth.”

Main Street vs. Wall Street Peterson received an undergraduate degree in economics

from Wesleyan University and a Master of Science degree in Economics from the University of Wisconsin-Madison.

Her sophomore year she took Economics 101 and that was the inspiration for her career—thanks to a great teacher.

Professor Miller, she recalled, was amazing.

“He made all the boys take off their hats and he took attendance,” Peterson smiled. “Such things were foreign in a college setting, you know, but he insisted upon some measure of decorum—so that made him unique and memorable as a person.”

As far as his teaching, Peterson remembers how “he wrote two things on the board that were just so simplistic, which really helped to explain a very complex world.”

Number one: macro-economics is based upon supply and demand— and when those two things are out of balance, you have problems.

“And the second thing was, he ADVISORS MAGAZINE / 23

said, ‘Macroeconomics is about what, how, and for whom.’ So that all just means what are you making, how are you making it, and who wants it?

He wrote that on the board the very first day of class, just those two things.

“And it turned out that was what the final exam was about--those two questions and a bonus question,” Peterson laughed. “Like literally there were three questions on the final. I remember it being such a very simplistic framework for explaining a very complex world. So that just really turned me onto economics, and I’ve been doing it ever since.”

Among the books that made a profound impression on Peterson: Capitalism in America: A History, by Alan Greenspan and Adrian Wooldridge.

“It was truly fascinating to kind of look at how capitalism has evolved over the centuries,” she said. “And, right now, there’s this big focus on stakeholder capitalism, but it was always there.”

Peterson echoes some of the lessons of that book: You can’t have a corporation without a consumer, someone to buy the good or service; so certainly, the customer matters. And you can’t produce anything 24 / ADVISORS MAGAZINE

JULY 2022

unless you have workers who are willing to do the job.

“And you can’t have a corporation without shareholders— so stakeholders have always been there, needing to be considered— especially any public company,” she said.

Turning to financial markets and the economy, Peterson notes that they are not always in sync. Markets tend to be volatile, with higher peaks and lower troughs than GDP, for example.

And while she generally doesn’t give investment advice, she did share some ideas should a recession come about.

“Typically, consider anything that speaks to necessities,” Peterson advised. “Think about the things that people need--food, housing, paper products, toothpaste—things that people always need to use.”

Another area for ‘recession-proof’ investing: consider things that are

pervasive, according to Peterson.

“For example, like semiconductor chips. They’re in everything and we don’t have enough of them,” she said.

Peterson also noted that even in times of economic woes, people still like to be entertained.

“And they’ve gotten used to streaming, which, costs less than taking a family of four or five to the movie theater and buying popcorn and tickets and everything else,” she observed. “You pay $10 or $20 to stream a movie, whereas that might have been a hundred-dollar trip to the theater.”

In fact, almost anything that is at the vanguard of changes in consumer and business behavior could make good investments in a recessionary environment, Peterson summarized.

is for contributing more to retirement whenever you can.

Get more tips from your Retirement Coach AVO at: SM

Why “Follow-Up” Should Be Banned From Every Financial Advisor’s Vocabulary

By Ari Galper, the world’s #1 authority on trust-based selling When a potential client ends your initial conversation with: “I’ll think about it”, you probably feel a sense of disappointment that they didn’t commit.

You tell yourself: “At least they didn’t say no, there’s still hope”, and then you add them to your “follow-up” list. A week of anticipation goes by, then you call them and say: “Hi, hope you’re well, I’m just giving you a call to follow-up on our initial conversation…”.

But what you hear next, sends an ice cold shiver down your spine: “We haven’t made a decision, but will let you know when we do”. That’s the last thing you want to hear.

It’s tempting to keep clinging to hope, but deep down, you probably knew it was over before you called them. What’s going on here?

Why can’t they just tell you the truth up front, why string you along giving you hope they might work with you? What’s going on here?

Why can’t they just tell you the truth up front, why string

you along giving you hope they might work with you?

Why is this such a familiar pattern for Financial Advisors.

To fully explain this scenario, I would need to share a lot with you about mindset shifting, reengineering your sales process, trust-building, and so on.

But for this short article, I’ll give you one powerful and easy solution so that on your next “follow-up” call, you get to the truth, rather than the typical “shut down” response.

First, never use the phrase “follow-up” in your conversations or your emails ever again. It’s a stereotypical “sales” phrase that only sales people use.

When you say: “Hi, I’m just ‘following-up’…”, it sends the message that you care about making the sale, more than solving their problem.

Say this instead: “Hi, I’m just giving you a call to see if you have any ‘feedback’ on our initial conversation, as I’d like to hear about what’s still on your mind about your financial concerns and if they are still a priority for you to solve once

Ari Galper is the world’s number one authority on trust-based selling and is the most sought-after sales conversion expert for Financial Advisors. His newest book, “Unlock The Sales Game”, has become an instant best-seller among Financial Advisers worldwide – you can get a Free copy of Ari’s book here and, when you click the “YES” button in the order form, you’ll also receive a complimentary client growth consultation with Ari or one of his trust-based consultants. Ari has been featured in CEO Magazine, Forbes, INC Magazine and the Australian Financial Review. He is considered a contrarian in the Financial Services industry and in his book, everything you learned about selling will be turned upside down.

Order your FREE book at www.UnockTheGame.com/FreeBook

26 / ADVISORS MAGAZINE

JULY 2022

and for all.”

That makes it all about THEM, and not about your goal of acquiring them as a new paying client.

Also, the word “feedback” elicits the truth of what they are thinking, and it avoids triggering the “wall of silence” from them.

When they feel comfortable sharing what’s really on their mind, you can address their concerns and create trust.

Once you’ve done this, then say: “Would you be open to scheduling another conversation, so we can get more clarity of how to get control of your retirement planning?”.

If you deliver this with authenticity and sincerity, without a hidden agenda to “make the sale”, don’t be surprised if they ask you to move things forward, on their own.

ADVISOR FEATURE

BY JOE INNACE

DEALING WITH MARKET

VOLATILITY JITTERS A high-touch, low pressure approach

Through early May 2022, the S&P Index was down nearly 13% from its December 31, 2021, recent high. Others — the Dow, NASDAQ, bond markets — also continue to struggle with volatility and investor uncertainty.

“It comes down to the Fed and the Administration committing to working together to reduce the money supply, restore the labor markets (11-plus million jobs currently available) and raising interest rates only as much as needed to curb inflation,” Bill Hastie, managing partner and registered principal with Hastie Financial Group, told Advisors 28 / ADVISORS MAGAZINE

JULY 2022

Magazine in a recent interview.

“It will be a difficult and delicate task,” added Hastie, who has an MBA and is also a CIMA® (Certified Investment Management Analyst), AIFA® (Accredited Investment Fiduciary Analyst), RMA® (Retirement Management Advisor), C(k)P® (Certified 401(k) Professional), and CPFA (Certified Plan Fiduciary Advisor).

Based in Salinas, California, Hastie Financial Group pledges

to clients that it will only offer services in which they have a strong expertise, and the firm limits its scope of practice to those services.

“I call it high touch, low pressure,” Hastie said. “We make it understood that we are not here to sell anything, and clients’ needs are our first and foremost consideration.”

Hastie’s financial services journey began in college when he pursued a degree in economics with a concentration in finance. He took several investment and securities analysis courses as part of his concentration and was drawn to the industry. Soon after graduation from California

“SOME PEOPLE DREAM OF SUCCESS, WHILE OTHERS WAKE UP AND WORK HARD AT IT.” Napoleon Hill

Polytechnic State University, Hastie was offered a job with Bank of America in San Francisco as a financial analyst.

“I waited one year — the advice from my college’s MBA director — before applying to Golden Gate University’s MBA – Financial Planning program,” he recalled. “I completed a three-year program in two years and began in the industry with my father-in-law who had a significant insurance business.”

At his father-in-law’s firm, Hastie managed the investments and financial planning. Sometime thereafter, he broke away to start his own firm. Hastie also returned to Golden Gate University to teach in their MBA – Financial Planning program. That was some 36 years ago—but Hastie continues to value teaching his clients to this day.

“As a former instructor in the MBA – Financial Planning program at Golden Gate, education takes a strong role in most everything we do,” he said. “We take the time to fully inform clients what we are doing and why we are doing it, although we have discretionary trading authority.”

The core values underpinning his practice: “Full disclosure and transparency, serving our clients as a fiduciary in everything we do, never compromising our integrity,” Hastie summarized.

Asked what books or people influenced him, Hastie quickly ticks off: The Bible, the economist and author Austan Goolsbee, who chaired President Obama’s Council of Economic Advisors, and Richard Thaler, the economist

and behavioral economics professor at the University of Chicago Booth School of Business.

Meanwhile, today’s proliferation of desktop and mobile trading platforms have also worked in Hastie Financial Group’s favor and its emphasis on education.

“Online and mobile platforms often do us a favor,” Hastie noted. “They educate some clients enough to realize they do not want or cannot be their own advisor; a more highly educated client is a better client,” he said.

Armed with his array of credentials and certifications, Hastie (along with his partner Haley Hitchman, AIF®, CPFA and Ryan Hastie, CPFA) provides services to a diverse client base that requires tailored planning solutions.

In order to better serve the growing practice, Hastie noted that Haley Hitchman joined Hastie Financial Group in 2008 and began serving clients as a financial advisor in 2010. In 2016 she became an equity partner and shares duties that include portfolio design and management for private clients and 401(k) plans, as well as developing financial and retirement income plans.

Ryan Hastie joined the firm in 2021 and currently performs fund and portfolio analysis and monitoring for all clients.

“Different clients have different needs in retirement planning,” Hastie said. “For a physician, for example, we focus on optimizing their retirement plan to maximize contributions in order to realistically plan for significant ADVISORS MAGAZINE / 29

L/R: Ryan Hastie, Haley Hitchman Partner, Jessica Rios, Bill Hastie Managing Partner

retirement income,” he explained. “This often involves adding a cash balance plan to an existing 401(k) plan once the physician is reaching the 415 limit in the 401(k) plan. For a W2 wage earner, it’s often a matter of matching sources and uses of future income.”

Life expectancy is the primary factor in determining future income needs, and nowadays Americans are living longer than in years past. In fact, California is one of the top two states in the country for life expectancy, clocking in at 81 years old, according to the website californiabeat.org.

“Planning as far in advance of a client’s expected retirement date and matching sources and uses of future income play a key role,” Hastie said. “The first ‘draft’ of a retirement plan can often serve as a reality test which helps keep a client’s expectations in line with what is possible,” he added. “If we find that a client’s expectations are 30 / ADVISORS MAGAZINE

JULY 2022

unrealistic, we work to adjust income expectations and savings commitments to help reach a more realistic level.”

Both clients and financial advisory firms alike had to adjust to the reality of the 2020-2021 pandemic.

Lessons were learned amid a fast-changing, competitive landscape.

“Being able to adapt to clients’ changing needs has been key for surviving 2020 and 2021,” Hastie said, “2022 seems to be converging pre- and post-pandemic environments – let’s call it the ‘new norm.’”

But that ‘new norm’ may be a bumpy ride—with economists warning about the risks of inflation and the possibility of a recession.

“Fixed income management is by far the most difficult in this environment,” Hastie said. “I am concerned that the Fed has waited far too long to act, and that the money supply (M2) has grown to astronomical levels – all spelling inflation,” he added.

“The key question right now is: can the Fed slow inflation without driving the economy into recession?” Hastie said. “It will also take the Administration to commit to reducing or temporarily eliminating any future stimulus programs that played a significant role in expanding the money supply.”

From Hastie’s vantage point, clients may have to experience lower investment returns than in the recent past and may even require revisiting their long-term planning.

“More volatility in both the equity and fixed income markets is likely,” he summarized.

“Recession seems to have a high probability in 2022 or 2023, and inflation is higher than many people have ever seen.”

For more information, visit: hastiefinancialgroup.com

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BY JOE INNACE

LEAVING SILICON VALLEY FOR WEALTH MANAGEMENT An Entrepreneurial Odessey

There are more than 31 million entrepreneurs in the United States, according to research by the Massachusetts-based Babson College team of the Global Entrepreneurship Monitor.

William (“Bill”) Pollak, Founder of Itineris Financial Advisors

32 / ADVISORS MAGAZINE

Most of them, as expected, are motivated by opportunity. They are quick to identify a need and then act to monetize it. Others are naturals.

For example, consider the journey of William (Bill) Pollak, founder of Itineris Financial Advisors based in Walnut Creek, California.

“I think I was born to be an entrepreneur,” Pollak told Advisors Magazine in a recent interview. Right after college graduation, Pollak began a career working with startup enterprise software companies in the San Francisco Bay area.

He was attracted to the idea of working in the technology industry and especially working for new and innovative companies that would help large enterprises solve difficult business problems.

Pollak worked in the business applications software industry for 26 years. His responsibilities spanned various functions—including sales, solutions engineering and systems implementation. Over time, he moved into senior management roles.

“And then, at the tender age of 47, I got really interested in becoming a financial professional and eventually just made the decision to start a wealth management business,” Pollak said.

JULY 2022

The driving force: When in the software sector, Pollak recalls being challenged to find a knowledgeable and trustworthy financial advisor for his own family. “I never could find that person who I really loved working with and, frankly, whose knowledge was greater than my own.”

So, over time he began to think that the wealth management field would be a great place for someone to make a difference.

“I’d been one of those underserved clients for a long time, and I had a vision about how I could make a very positive impact, similar to what I’d accomplished in the software industry for about two and a half decades.”

And so it was that about 12 years ago, Itineris Financial Advisors came to be. Since then, Pollak’s practice has grown to appeal to clients who are like-minded and ready for a change.

“My current practice is focused on serving clients who are really very much like my myself during those years when I was thinking about going through my own career change,” he said. “Overwhelmingly, I primarily work with mid-life professionals who are about to, or are already experiencing, some sort

of career transition.”

Pollak explained that his typical client today is in their 50s or 60s and in between jobs.

They are considering a range of options, including finding new work in their current field, pursuing a “working” retirement, or they might simply be ready to leave the workforce entirely.

Understanding each individual is at the core of Pollak’s clientservice philosophy. Crunching the numbers is always important, but the financial strategy must ultimately reflect and support the lifestyle that the client wants for themselves as they move into a new life chapter.

“My approach is based on the idea of getting to know my clients very well,” he explained, “at a human level first, because I think that is essential in

developing a comprehensive financial plan.”

His process, therefore, is based on initially doing a very thorough review of a client’s or a couple’s total financial picture to assess where they are today and where they see themselves going.

“But the numbers shouldn’t necessarily drive all the decision making,” Pollak said. “I really want to understand what my clients want so that they can have joy, happiness, fulfillment, and satisfaction in their lives.”

Not part of Pollak’s process is any emphasis whatsoever on selling products. And this is where, in his opinion, the financial advisory industry needs to change the most.

“The financial industry is absolutely focused on selling product,” he said, “and that’s

deeply offensive to me.”

Pollak maintains that whether it’s an investor in individual stocks or mutual funds or exchange-traded funds, or a client that buys an annuity or a life insurance product, or a longterm care insurance product, trust in those in the industry is violated when such products are pushed.

“This needs to change, because the industry violated that trust by conveying that their need to meet some company or individual revenue objective is more important than a client’s needs,” he said.

“In my 15 years of doing this, I’ve never asked a client for anything,” Pollak added.

“I’m very enthusiastic about my business and what I do, and my qualifications. And I absolutely ADVISORS MAGAZINE / 33

convey enthusiasm and positivity, but I never ask a client to give me their business.”

Instead, he explains what he does and how he does it—explaining options and educating clients along the way as needed.

“I give them balanced and comprehensive information so that they can make an informed decision. If they want to work with me, that’s awesome,” Pollak continued. “And if they decide I’m not the right guy to work with, I am 100% fine with that. I don’t say that out of arrogance; rather, they’re making an informed decision and I would not want to have a client who wouldn’t want to be in my club.

It wouldn’t be a good fit for either of us.”

Pollak says his business has

attained consistent growth by following three core principles.

One is caring for clients at a human level, as noted earlier.

Another is being proactive in communicating and for a willingness to discuss problems or situations before they can become problems. The third is being on top of one’s game as a financial professional and always seeking ways to enhance and improve the underlying methods used to serve clients.

Inflation is higher, but not new Changing the game currently is a higher rate of inflation not experienced in four decades, which is causing uncertainty about the future. As a financial professional, Pollak recommends thinking about inflation strategically as part of a long-

term financial plan, which reflects the reality that inflation is a persistent phenomenon.

“Even when we had low inflation, we still had inflation and the purchasing power of our money is declining all the time,” he explained. “And one of the important reasons that people want to invest in the financial markets is they’re looking to get a return so that they can try to maintain, or perhaps even enhance, their purchasing power over the long-term.”

To prepare for the longer-term inflation phenomenon, Pollak uses cashflow projections that assume there’s going to be some inflation. “The rate of inflation that I’ve used for my long-term planning has always been at least 2.5%, sometimes 3%,” he said, noting, “It may not sound

William (Bill) Pollak, Founder of Itineris Financial Advisors at a speaking engagement 34 / ADVISORS MAGAZINE

JULY 2022

Do I still like to work?

Some people enjoy remaining engaged in their professional life, even if they can afford to stop working. Others might decide they want to stop working and pursue other interests!

Do I want to consider a “working retirement”?

You might not be ready to stop working entirely, and want to pursue a new professional passion or work that fits new lifestyle goals.

Am I financially prepared for what’s next?

You might be ready to leave the world of work, but you want to understand the financial aspects of this important milestone.

a lot given what’s going on right now, but when you look at the history of inflation over the last 15 years before the pandemic, inflation rates were between 1.5% and 2%.”

When looking at the capital market assumptions of many large investment companies, 2.5%-3% inflation might likely prove to be on the high side— over the long-term, according to Pollak.

“But I just think that being more conservative about inflation, given how low it’s been from a long-term standpoint is very important,” he said. And that’s the kind of strategic perspective he imparts to clients.

A second foundational view of Pollak’s when helping clients is an emphasis on maintaining a cash reserve based upon the client’s circumstances. This can an effective way to respond to shortterm surprises, such as dealing with the very high rate of inflation the economy is experiencing this year.

“This is especially important for clients moving toward retirement or already out of the working

world. They are typically relying on some degree of portfolio withdrawals to pay for living expenses or one-time expenses,” he said. “I always want to understand what they might be taking out of their portfolio over the next one to two years.”

Pollak thinks client should keep adequate cash reserves to meet such withdrawal needs so they are not forced to liquidate investments when there are periods of market turbulence like now.

“In the current environment, almost all asset classes are declining in value,” he noted.

“And you don’t want to be selling investments in such turbulent times because your financial advisor did not plan ahead and failed to understand your cash distribution needs.”

For money not needed for 1–2-year withdrawal needs, Pollak recommends maintaining a longterm focus and not trying to time the market and/or predict which asset classes may do the best.

“Selling investments might feel better in the short term,” Pollak said, “but it could really impair a client’s ability to meet their longterm goals. And I emphasize to my clients that investing is a longterm game.”

He added that there are often investment opportunities to respond to short-term market movements and/or to attempt to sidestep market risks. But such investment changes should be made carefully and with a focus on not sacrificing the client’s investment goals over the longer haul.

For more information, visit: Itineris Financial Advisors yourmoneyjourney.com

ADVISORS MAGAZINE / 35

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In a world of fast food and one-size-fits-all sensibilities, how often does something feel made especially for you? The "Made for You" section celebrates those items that are created with such high quality of hand workmanship and degree of customization that they become individual to you. In each issue, our editors will endeavor to bring you special things from anywhere on the globe, choosing them solely on the basis of outstanding quality. Our goal is to give you guidance on the best of everything.

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Its character focuses on black pepper, raspberry, cinnamon and milk chocolate. It’s a varied selection resulting in a big-flavoured dram that works very well together.

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What more could you want? Signature Shampoo will make you feel fresh and clean all day long. UV protection and is free from parabens and sodium chloride. mrproter.com 3 UNAGI — BEST OVERALL ELECTRIC SCOOTER Unagi took a little from column A and a little from column B when designing The Model One. And, on top of that, it also included a little from column C, D and E along with basically the rest of the alphabet. Its aluminium and carbon fibre makeup helps you to glide along the road in a slim, portable fashion that works for both commuting and journeying for pleasure. Incorporating into your lifestyle like a second pair of legs. unagiscooters.com 36 / ADVISORS MAGAZINE

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4 BOWLUS TRAVELR TRAILER — BEST LUXURY RV Step into your Bowlus travel trailer for the first time and prepare to feel a little overwhelmed by all of the possibilities running through your mind.

Wake up in the Zen Master Bedroom and make a coffee using the twostage water filtration system. You can even bring a furry friend along, thanks to this camping trailer’s seamless features: remote temperature monitoring, bowls that slide out seamlessly from a drawer and a coordinated pet bed. bowlus.com 5 250 GTO — ANTIQUE FERRARI In 1964, the 250 GTO won the Tour de France Automobile – marking the ninth year in a row that Ferrari won that race.

Only 36 of these cars were made between 1962 and 1963; the specific Ferrari that’s the most expensive in the world, at an unbelievable $70,000,000 price point, was victorious not only in the Tour de France, but it also placed in the Le Mans. www.ferrari.com/en-US 6 RIVIAN R1S — BEST ELECTRIC OFF-ROAD SUV Because we’re focusing on 2021 SUVs, we can’t ignore the fast-growing and incredibly promising EV sector of the market. This year, we award a prize not only to the best off-road SUV – but also to its most promising electric counterpart. It’s certainly powerful: You can select from three different battery sizes in this EV pickup, including 105, 135, and 180 kWh options. With the largest battery, there’s no need to worry about range.

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ADVISOR STORY

by joe innace

STEVE

WILKINSON

Aligning Assets for the Future LEVERAGING BUSINESSES & INVESTMENT PROPERTIES FOR RETIREMENT

T

here are 32.5 million small businesses in the United States, according to the U.S. Small Business Administration. Many are now selling their businesses and properties with an eye toward retiring comfortably. There were changes in 2017 in the capital gains tax code that can make this tricky.

Specifically, the 1031 Exchange section of the IRS code used to mean that if someone sold a business for another similar property, the capital gains didn’t need to be reported and paying taxes on them could be avoided.

“But such business owners cannot utilize the 1031 exchange anymore, and many need to use the entire gain from selling their businesses toward their retirement,” Oakland-based Steven Wilkinson Sr. told Advisors Magazine in a recent interview.

As managing principal at Wilkinson Wealth Management, Wilkinson said his primary focus nowadays is on this 1031 Exchange issue, retirement planning and the markets.

“More broadly, I’m working with seniors, business owners, and property owners on this issue of appreciated assets,” he emphasized. “Anyone who would like to sell and defer taxation so they can align their assets with their future needs in retirement.”

Wilkinson said many of his clients are in complicated situations where they have assets that have large capital gains. “So, we’re looking at ways to change and diversify

38 ADVISORSMAGAZINE MAGAZINE MAY JULY 2022 40 // ADVISORS 2022

those assets,” Wilkinson said. “The goal is to have the entire amount going towards their retirement.”

In fact, Wilkinson started his own small business at the age of 15: Wilkinson Enterprises, a vending machine company that later evolved into real estate ownership and management.

“I have either owned or worked with small businesses ever since,” he said. “Small businesses are the foundation of our communities. “They create a lot of wealth.”

An early passion for business and investing Wilkinson’s passion for small businesses actually dates back to high school in Nashville, Tennessee—when he first came to appreciate his classmates’ parents running their own businesses and seeing their profound impact on the community.

As early as seventh grade, in fact, Wilkinson became interested in finance and investing as a student at The University School. A school that was part of the Vanderbilt University community.

“At that school, during junior high, we played a stock market game. They had us choose teams and read the “Wall Street Journal” and compete against each other,” he recalled. “And then, at the end of the competition, we visited, J.C. Bradford, a local investment bank where a classmate’s parent was a partner. It all made an impression on me, and I wanted to learn more.”

ADVISORS MAGAZINE / 39

“YOU HAVE TO BE KNOWLEDGEABLE OF THE CHANGES THAT ARE HAPPENING IN YOUR ENVIRONMENT, AND YOU HAVE TO BE WILLING TO ADJUST TO THOSE CHANGES.”

Wilkinson also grew up around the Civil Rights Movement, and he developed a strong conviction for economic equality. He went on to major in finance at Indiana University and received an MBA from Harvard — STEVE WILKINSON Business School. He began his financial career as an FDIC bank examiner and then in financial services with Morgan Stanley. He founded Wilkinson Wealth Management in He added: “Once they have those concepts and January of 2004 as an independent advisory firm to serve understand the variables that you’re working on, it gives The Bay Area. them a lot of confidence and understanding of how they “This kind of became a second act,” he smiled. “I can actually control what happens in their own personal decided to go independent largely because technology economic environment.” was a game-changer that would allow me to customize the services for my clients.”

Flexibility is vital As part of his own education, Wilkinson became The pandemic has changed our economic knowledgeable about how the world’s economy works, environment and Wilkinson like many others—especially how a nation’s economy works, how the global financial business owners—found that flexibility is key. system works, and how it all ties into the markets and “You have to be knowledgeable of the changes that various asset classes. He has been appointed by two are happening in your environment, and you have to be different Oakland Mayors as a Trustee for the city’s willing to adjust to the changes,” he said. “Those that Police and Fire Retirement System. He often serves don’t adjust are no longer relevant in the future.” as a panelist or moderator for institutional investment Working through the pandemic accelerated the conferences around the country. acceptance of Zoom meetings and other conferencing Such expertise not only connects him and his clients technologies, which Wilkinson said now allow for more with some of the best fund managers in the U.S., but he client touches. Other technologies like electronic docuis able to impart broad knowledge to his clients as part signing have lessened the need for mailing and faxing. of their own financial education. They come to appreciate “All these factors, as well as using technology to the macroeconomic impact on their personal situation. create more customized financial solutions, have given “Education is vital,” Wilkinson said. “And there is a lot us more detailed records and made us even more of information that can be boiled down to a very simple productive.” level and aligned with commonplace terms that our Wilkinson also serves as Chairman of the Board of clients understand.” the Northern California Small Business Financial 40 / ADVISORS MAGAZINE

JULY 2022

Development Corporation. A state guarantee loan program that is part of the California Infrastructure Economic Bank.

During the pandemic, he noted, a lot of small businesses struggled, and many went out of business.

“But you saw a lot of big businesses like Amazon, Walmart, Target and Chipotle—as well as some new startups—grow, just because of the destruction of small business,” Wilkinson added.

Many families depend on small businesses, which is why he’s so enthusiastic about helping them.

“It’s a major reason I work with business people,” Wilkinson said. “And also, why for the last 15 years I’ve chaired the Nor-Cal Financial Development Corporation—to help get small businesses that capital to be able to grow and sustain their businesses.”

What’s more, Wilkinson Wealth Management has always provided tailored solutions for wealth creation, retirement, and as part of advanced financial planning.

“It’s not just about returns,” he said. “To get higher returns, you have to take more risk—but that’s not necessarily appropriate for each and every client.”

So, during an over-hour-long meeting, Wilkinson conducts his discovery process, learning all the different aspects of a client’s life—from their financial state to what they value and are aiming to accomplish. From that, he begins to formulate a tailored plan based on what a specific client is most concerned about.

“With that foundation we are then able to get into all the different advanced wealth management topics,” Wilkinson said. “These might include estate planning for the next generations, detailed tax planning, financial planning, and more, depending on whatever needs to be customized for each client.”

Nonetheless, planning during a period of rampant inflation has now become part of every client’s tailored

solution—although to varying extents. It’s all about how to keep up with inflation—or possibly stay ahead of it— but at a suitable risk level, according to Wilkinson.

“If you kept your money under a mattress for the past year, its purchasing power has nearly declined by double digits,” he said, “and it’s likely to continue to do so over the next year.”

Wilkinson added: “So you have to put your money to work and allow it to reduce any erosion from inflation.”

And that comes down to the lifestyle of each client as well as the lifestyle the client wants in the future.

The key question when working to develop an inflation-fighting plan: “What’s the cost of that lifestyle?” asks Wilkinson.

At the same time, Wilkinson’s firm is currently focusing on any looming storms, including the possibility of a recession, which he believes is more likely in 2023-2024.

Living and practicing in the Bay Area, he and his clients have experienced earthquakes, which he cites as an analogy for surviving any financial upheaval.

“Homeowners here are aware of where they live and can prepare for earthquakes in advance,” Wilkinson said.

“They can take steps to strengthen the foundational points of their houses. Likewise, we are doing exactly that for our clients’ financial foundations.”

Wilkinson noted: “Minor earthquakes happen every day and market volatility is common. Mainly, you want to be ready to survive when the big one comes.”

For more information on Wilkinson Wealth Management, please visit: stevewilkinson.com

ADVISORS MAGAZINE / 41

BOOK REVIEW by regina johnson

The market rewards organizations that are responsive to change, connected to their communities, and embrace learning.

W

e are looking at the Great Resignation all wrong.

The Great Resignation is about change and migrating towards new opportunities. It is not a time of people quitting their jobs because they are lazy or feel entitled, and it’s not because nobody wants to work.

FLEX: A Leader’s Guide to Staying Nimble and Mastering Transformative Change in the American Workplace, written by Rick Grimaldi, is a reminder that the Great Resignation should be seen as a gift, for employees and businesses, according to Grimaldi.

“I think it’s less of a great resignation and more of a great migration, a great reset, and a great reshuffle,” Grimaldi told Advisors Magazine. “People aren’t resigning much as looking around and seeing that there are other opportunities.”

Grimaldi, a Philadelphia-based attorney, and partner at Fisher Phillips LLP can write passionately about labor and the workplace because he has spent 30 years as a labor lawyer. His time working with employees and employers has given him a perspective on

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JULY 2022

what changes should be made and how to go about them.

Grimaldi was also chief counsel for the Pennsylvania Department of Labor and Industry.

“I started to see changes at my law firm, especially with people younger than me, and I thought, I must evolve, or I’m going to become irrelevant. And that’s what prompted me to think through these issues and say, you know what, that’s true on a bigger scale,” said Grimaldi.

According to Grimaldi, there’s

a willingness to move around that was spurred on by the COVID-19 pandemic. People began to think it might be time to start that business or try a new career. Some began to think this company no longer fits the value proposition they hoped it would, but this company over here does. However, this willingness to change has created challenges for employers, and they must overcome those challenges if they are going to recruit and retain talent.

The 228-page book is part a history lesson on how society and businesses met the labor challenges of the past, and part guidance on what needs to be done to meet today’s labor challenges. Grimaldi excels at reminding us that we have been here before as he discusses how the Great Depression ushered in the Works Progress Administration and the Civilian Conservation Corps aimed to get people back to work, while the Social Security Act, the Fair Labor Standards Act, and the National Labor Relations Act made sure workers were treated fairly and established minimum wages.

Yet, Grimaldi points out in his book that while we are also experiencing labor and wage issues, they are different from previous years. Today’s challenges include remote vs. full-time or hybrid environments. While face-toface interaction will always be required, employees want to be able to meet family or personal obligations at the same time.

We’re grappling with how to rework education to focus on skill

and not just academic history.

Grimaldi suggests the United States change its educational system to help people acquire skills so that jobs don’t go unfilled. One way is through an apprenticeship and partnerships between businesses and community colleges.

According to Grimaldi, employers would be wise to create a work culture where everyone belongs.

“Companies need to ramp up ways to meet the needs of boomers even as they redesign the workplace to accommodate the preferences of millennials, Gen X, and eventually Gen Z,” he wrote.

For instance, the book reminds the reader that an estimated two million women left the workforce during COVID, which was due, in part, to childcare and healthcare issues. Unfortunately, many of those women haven’t returned to work. Part of this is driven by our inability culturally to recognize that we need to improve childcare and family leave. If companies want those women back, they must consider changes

to their healthcare and wellness programs.

The pandemic has taught us one important lesson, according to Grimaldi. You must be flexible and willing to change, which requires looking forward and thinking about what’s next as businesses will continually face new challenges. There is a business case for not ignoring climate change, social justice issues, or changes needed in education.

“The market rewards organizations that are responsive to change, connected to their communities, and embrace learning,” Grimaldi writes. The key is to be flexible and to remain flexible. We must have the ability to evolve and change in business and personal our lives.”

Grimaldi seems to throw down a challenge to companies to be a disrupter and not to be brought down by the disruptions.

Author Rick Grimaldi

ADVISORS MAGAZINE / 43

by bpt

HELPING SMALL BUSINESSES THRIVE IN ECONOMIC UNCERTAINTY

As

the country faces uncertain economic conditions including record-high inflation, small businesses are integral to the health and regrowth of the economy.

They currently account for 99.9% of American businesses and 46.8% of employed adults in the United States, according to the U.S. Small Business Administration.

Digital Payments Are a Lifeline to Small Businesses It has become clear over 44 / ADVISORS MAGAZINE

JULY 2022

the past two years that digital payments, including credit and debit cards, fuel growth for small businesses. Throughout the COVID-19 pandemic, electronic payments provided a lifeline to small businesses, allowing them to continue to serve their customers, sometimes in new ways, in their local communities and in the broader global market. As inflation rises with no sign of slowing down and the economy faces unprecedented volatility, digital payments will continue to help small

businesses thrive - in challenging economic times and in good ones.

Small businesses have been empowered by digital payments because they level the playing field with big retail and large e-commerce in many ways, including: * More access to sales, guaranteed payment, added security and transaction protections, and a payment option that is less expensive for businesses than cash; * E-commerce capabilities, allowing for online sales during lockdown

Visa is lowering key in-store and online consumer credit interchange rates for more than 90% of American businesses by 10%, effective April 2022. These rate changes will apply to businesses with $250,000 of Visa consumer credit volume, which generally applies to businesses with $2-2.5MM in revenue. These small businesses make up the vast majority of businesses that accept Visa payments.

These reductions are in addition to steps Visa took over the past two years to support American businesses, including committing to digitally enabling 50 million small businesses globally, launching programs and directing resources to provide the essential digital capabilities needed for recovery.

periods; and * Convenient offerings for customers who are seeking new, safer ways to shop, such as buy online - pick up in store or contactless checkout.

Data has even shown that businesses that had access to digital payments during the pandemic were more resilient and better able to compete than those that did not. In fact, 90% of small businesses attribute their pandemic survival to e-commerce, according to the Visa Global Back to Business

Survey - 2022 SMB Outlook.

While the United States economy has begun to rebound from pandemic lows, small businesses continue to face new challenges.

The question is how can they get the support they need?

Taking Action Now to Help Small Businesses by Making it Less Costly to Accept Digital Payments Recognizing the power of digital payments to help small businesses compete and thrive,

Looking to the Future to Help Small Businesses Succeed Beyond these actions, there are numerous resources available for small business owners who are working to grow their business and "go digital," and for consumers eager to support their local merchants during challenging economic times. * Small businesses can access Visa's Small Business Hub, which features digital enablement tools, and solutions for small businesses to help them reach more customers. * Local communities can use a Back to Business tool to easily find and Support Local Businesses in their vicinity.

The prosperity of small businesses is not only important for the health of the global economy during periods of uncertainty, but for the everyday strength and vibrancy of our local communities. As the future of money continues to evolve, it is critical that small businesses have the resources and support they need to succeed and keep up with big retail in the increasingly digital economy.

ADVISORS MAGAZINE / 45

RECONCILING REGULATORY COMPLIANCE The key role of digital

W

ealth managers, insurers, advisors and banking businesses operate in one of the most highly regulated sectors in the world: the financial services sector.

While making sure to attract new customers and grow their business, financial services businesses are in fact required to strictly adhere to a growing number of rules and regulations that in the last few years have become increasingly complex and cover areas like ESGs, transparency, data security and cryptocurrency.

In its “mission of protecting investors, maintaining fair, orderly and efficient markets and facilitating capital formation”, the US Security and Exchange Commission (SEC) is currently considering introducing climate risk disclosure and ESG related claims, that will require collection and management of large amounts of data. In the US, investors and wealth managers also need to take into consideration increased income tax rates for high net-worth individuals, announced by the Biden administration , that will likely exacerbate an already challenging outlook.

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To make things worse, the regulatory landscape tends to be geographically fragmented and in constant evolution. Changes have already taken place in the EU, where higher standards on disclosures and new requirements to report adverse investments’ impact on social and environmental issues have been set with the introduction of the Sustainable Finance Disclosure Regulation (SFDR), effective since March 2021. Significant regulatory shifts are also expected to take place in Japan, Canada, Benelux, Australia, US and France, making wealth managers’ operating scenarios look incredibly complex.

In its latest report, Wealth and asset management 4.0- How digital, social, and regulatory shifts will transform the industry, ThoughtLab collected wealth management professionals’ views finding that 55% expect data privacy to be the top area for regulatory change in the next two years, closely followed by cybersecurity (50%) and other fintech-related regulation (36%). All these areas have a significant impact on data collection and management, where there is a high risk of human error. As a

By Mark Shields, Director Solution Marketing at Appway, an FNZ company

result, wealth management businesses will need to closely reassess the way advisors and backoffice employees collect and process costumer information.

Data management should not be underestimated, especially as it is essential to weave regulatory compliance seamlessly into the high-end service of private wealth management. Advisors are in fact required to ask customers to fill out extensive documentation to build their profiles and ensure transparency. This can be a tiresome and complex task for clients, that can rapidly escalate into irritation, if they need to repeat the whole process due to avoidable minor omissions or mistakes. In addition, clients are often required to input the same data, such as an address, at every compulsory regulated review; it’s clear that data collection and verification pose a very real threat to customer experience.

Opting for greater automation and compliance by design can avoid a lot of headaches, however, as the risk of human error, from an illegible file to an accidental omission is directly linked to carrying out

data entry processes manually.

It is clear then that to remain competitive wealth managers need to stop relying solely on manual and legacy processes, email or phone. Introducing new flexible solutions, that allow wealth managers to digitalize and automate lengthy processes, such as client onboarding, will help guarantee a precise and secure data collection processes. Automation can also help achieve a high compliance level and ensure companies are ready to deal with future regulatory changes quickly and efficiently, without impacting client engagement.

Digital solutions, that can be easily tailored to respond to specific geographical regulatory needs, are now more essential than ever if wealth managers wish to deliver a seamless customer experience, to increase transparency and to improve the auditing processes. These solutions are also instrumental in reducing frustration and the risk of error, in ensuring the high standards required by investors and regulators are met without fail, all while improving customer experience.

Find out more at: www.appway.com ADVISORS MAGAZINE / 47

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