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Talking Coffee with Atomic Coffee Roasters: Virtual Event Series

This November, as part of our ongoing Virtual Event Series, we present a conversation with Atomic Coffee Roasters to clients and friends of the firm. As we have done all summer and now into the fall, we are taking a moment to highlight a local family owned business and sharing their story and expertise.

For this event, we will talk with Logan Mahoney about Atomic’s role in the community that started 22 years ago on Cabot Street. We are excited to hear about their process of roasting coffee, where they source their ingredients and who they work with “behind the scenes” to bring their flavors to the North Shore.

As a bonus, Atomic is sharing a unique blend of whole bean coffee called Rocketeer with our guests.

As part of the programming, we will also hear a presentation about the current outlook for international investing by a guest speaker from Franklin Templeton. We figured a chat about coffee and international investing would go hand in hand!

Stay tuned for more information about more events in our series. We look forward to hosting more events with local businesses and appreciate all the support our clients have shown.

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A Reset in the Midst of Unprecedented Uncertainty


At US Advisory Group, we are committed to helping our clients navigate these challenging times.  While we continue to monitor the economic changes that are happening at an unprecedented, rapid pace, we are also taking all recommendations by our local and national experts seriously.  The health and safety of our clients, employees and communities that we serve is incredibly important to us.  We know that this virus is unsettling to all of you and we want to let you know what we are doing about it and how we will continue to assist you.


First, a quick reset on recent financial events

One month ago, major US equity indices registered all-time highs, and new employment numbers, GDP, and corporate earnings data suggested the US economy was strong as ever. Interest rates were low and stable, the Tariff rhetoric had subsided, and we were gearing up for 2020: The Year of the Election. We were heading towards a positive opening quarter of 2020 on the heels of a year where we saw enormous growth in both of the leading equity indexes. On February 12, the Dow Jones closed at 29,551. 

The last few weeks have been dominated by extreme and historically large pull-backs due to Coronavirus fears, along with a few other factors.  After Monday’s close (3/16/20), the Dow has fallen to 20,187, close to January 2017-levels. As we have mentioned many times in this space, the markets do not perform well under uncertainty – COVID-19 has proven the axiom tenfold. Monday’s -2,997-point drop was the largest one-day-decline in Dow Jones history. In the last month, the Dow Jones has seen daily changes of > 1,000 points ten times, including three days of over 2,000-point swings.  Monday’s change represented a decline of 12.9%, the 2nd largest ever.  To be clear – volatility is normal, and to be expected for stock/equity investors. Most years have multiple 5% swings in the market. But these levels are clearly historically atypical. We believe, along with many of the analysts we follow daily, that the market has already priced in a recession, as the 30% drop in the Dow most obviously indicates.  The bigger question remains how long we will stay down.


Why the Drop? COVID-19 is Answer #1

When we talk about uncertainty, COVID-19/the coronavirus presents the most complete scenario imaginable for investors.  While experts predict cases will continue to rise as testing becomes more available and accurate, there are questions about how this will affect supply chains and services, let alone who is sick or contagious.  What we do know is that testing capacity is being ramped up and the US Government’s response from a medical/healthcare policy perspective appears to be trending in the right direction. We can also draw some conclusions from how other countries have responded, albeit these are not apples-to-apples comparisons. China is perhaps most comparable from an economic perspective, and we at USAG are buoyed by actual data that show the Chinese economy getting back online at a rather rapid pace – we will be watching this closely and more on this as the picture becomes more clear.

With the US Federal healthcare response causing some of the market turmoil in the last few weeks, the US Government’s economic response has been frustrating for investors as well.  Monday, the White House said that it supports the idea of sending cash payments directly to Americans as part of a broader $850 billion stimulus proposal.1 We believe the market will react favorably to concrete leadership, and it seems as if the government has taken this far more seriously in the past few days than in weeks past.  While we know this will not single-handedly turn around a falling stock market, we also know that the fewer questions the market has about government leadership the better.

Additionally, the Federal Reserve (the Fed) cut interest rates on 3/3 by half a percent.2 This was another historically unprecedented move, and already-jittery investors, fearing the Fed knew something they didn’t, fueled another rapid stock market selloff.  On Sunday, March 15, the Fed went further in slashing rates, this time by a full percentage point to near zero.3 The moves are aimed at stabilizing the stock market and allowing business across the country to borrow money more easily in order to stave off recession. So far, the moves have yet to yield a less volatile stock market. Having said that, we believe the Fed’s actions were and are absolutely necessary – what is important, however, is that they are working in concert with and in conjunction with Congressional & Trump Administration policymakers.

Finally, on top of all the fears around COVID-19, Russia & Saudi Arabia have decided to get into an oil war following an abrupt end to negotiations on easing oil supply in the current global economic environment. The falling price of oil has had a ripple effect on many industries.  Crude oil settled at a 4 year low on Monday, with US prices below $30 a barrel.4 The timing of Russia and Saudi Arabia’s plans was both unpredictable and alarming, and adds another layer of uncertainty for investors to work through.


So What is Next? 

Coronavirus WILL be contained, businesses will get back to business, and the US economy will roll on. It will certainly take weeks and months to recover, but we started 2020 with a solid economic foundation, and we can get back to that point. We will be living in a post-Corona-world, but we will get back on track! Again, China has levers to pull that the US does not, and vice-versa, but as an economic engine, the Chinese market is already showing signs of getting back to pre-virus strength. The US can absolutely do the same. The coming weeks will be consequential as tests are given to more citizens and we learn more about the spreading, containment, and treatment of COVID-19, and they will be consequential for markets as well.

In the meantime, as always, we will continue to monitor & adjust our portfolios as needed, even if the State asks us to work remotely.  As we relayed last week, we take an individual approach to all of our portfolios to ensure asset allocation aligns with each of our clients’ needs, and that philosophy remains the same.

In light of the Fed’s moves (lower rates & greater liquidity), we made adjustments last week to a portion of our fixed income allocations.  We lean towards shortening the duration and high credit worthiness of the debt we want to own.  Fixed Income is an instrument we use to dampen volatility in your portfolios, and relative to your benchmarks, we are doing well there.

On the equity side of portfolios, we are confident in the managers and analysts we use in our portfolio construction.  It is important to emphasize, the ETFs that many of you own have active management in many cases, which means that investment decisions are made continuously to best position a given allocation for the intended purpose of a specific fund.  At this time, given the spike in volatility and uncertainty about the direction or duration of what lies ahead, we are sticking with the equity managers that we have used to grow our portfolios at a time when the market was in the “later innings” of the market cycle – this is intentional, deliberate, and by design!

Having said that, the same managers and styles we want to use for the next part of this cycle may be a bit different as the market settles and the economic outlook grows less hazy and more opportunistic. We have no intention of abandoning the strategies that are time-tested and data-driven, but we will be looking to likely add more opportunistic tools as the market begins its recovery – we will be talking about this more with all of you on both a larger & individual basis, and this is not something we are planning to do in the immediate future, but more on this as volatility settles over the coming weeks.


We will closely evaluate opportunities that will undoubtedly arise from this crisis with the goal of stability and generating higher returns.  When we identity those opportunities, we have the tools to capitalize and we will communicate our thoughts at that time.  It is important to remember: Markets rebound! A brief look at history reminds us of this. Even in the last 24 months, we saw a 20% dip in the 4th Quarter of 2018, the markets recovered. In February 2018, a trade dispute with China sent the market down 10%, markets recovered.  While there are obvious differences at play here, we believe in the resiliency of the market & the US economy as a whole.

When it comes to investing, we believe we add value to our clients in two ways: We provide a guiding hand to reduce emotional behavior so that you can realize your investment goals, and we provide an exceptional blend of both active & passive management for your portfolios, especially for when markets become unpredictable and uncertain. Every day, we get more information about our fight with COVID-19.  It may take months, but we will get through this. We thank you for the confidence you have placed in us.  And we will continue to keep you all apprised of our ongoing efforts. Please do not hesitate to reach out to us anytime.

In the meantime, let’s all practice the new “social distancing” policy – stay safe, and stay healthy!

Sincerely,

  • Tucker, Chris,
    & Rick McDonald
  1. https://www.nytimes.com/2020/03/17/world/coronavirus-update-latest-news.html
  2. https://www.nytimes.com/2020/03/03/business/economy/fed-rate-cut.html
  3. https://www.washingtonpost.com/business/2020/03/15/federal-reserve-slashes-interest-rates-zero-part-wide-ranging-emergency-intervention/
  4. https://www.marketwatch.com/story/oil-prices-plunge-after-fed-move-doesnt-stem-fears-of-global-economic-collapse-2020-03-16
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How to Determine if We are a Good Fit

“Rick, you said that one of the things Warren Buffet looks for is someone he enjoys spending time with. How do you know whether it is going to work out when you meet a new advisor?” asked Mr. Giaconda, a retired CEO.

That’s a very good question. Here’s what I know: there must be a good fit for long-term success. While you are evaluating an advisor for a good fit they must be evaluating you as well.  We reviewed our most enduring relationships and have identified Seven Key Characteristics.

They Live Their Life by Principles

Principles like honesty, integrity and hard work—to name just a few—are the foundation of everything that they do. They do not sacrifice principles for results… the ends never justify the means.

They Know the Value of a Dollar

Mr. “Plimpton,” a successful family business owner, said it best when he said, “Every dollar that I have is valuable to me. It came by the sweat of my brow and I risked everything I owned to start this business and keep it running. I don’t want to pay one more dollar in taxes than I am required.” They have worked hard to earn, save and accumulate their money.

They Believe Wealth is More than Money

They know that True Wealth has many dimensions… it is more than just “money.”  It includes personal, social, spiritual, familial, and intellectual capital. They believe all wealth is worth preserving and nurturing“Relationships are more important than my money. Of course, I want to have enough to secure my lifestyle, but I want to positively impact my family and my community,” confided Dr. Lynnfield, a long-time widow.

They Are Open to New Ideas

They know there is no monopoly on ideas, no corner on the creativity; therefore, they approach new ideas with an open mind. Many have a reasonable plan and good advisors… yet, they want to move to the next level and live impactful lives.

They Know Strategy Trumps Tactics

Their experience has taught them the value of strategy first: aim before you fire. Even though strategy requires more time up front, it pays off handsomely in the long run.

They Know What They Do Well

By implication, they know what they don’t do well. “I tried the do-it-yourself route with my money. What a disaster! I know enough to be dangerous … besides, I can make more money with my time than it costs to delegate,” shared Mr. Watts, a business owner who recently converted the wealth in his business to cash.

They Care about Value and Quality

They agree with John Ruskin when he said, “There is hardly anything in the world that some man cannot make a little worse and sell a little cheaper, and the people who consider price only are this man’s lawful prey.”

They hire, respect and reward talented specialists… and desire win-win relationships with people they enjoy.

These Seven Key Characteristics have been the foundation for every enduring relationship we have… and we look for them in everyone we work with… whether business owners, retired professionals or women on their own.

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Debunking Common Retirement Assumptions

Across the country, people are saving for that “someday” called retirement. Someday, their careers will end. Someday, they may live off their savings or investments, plus Social Security.  They know this, but many of them do not know when, or how, it will happen. What is missing is a strategy – and a good strategy might make a great difference.

A retirement strategy directly addresses the “when, why, and how” of retiring. It can even address the “where.” It breaks the whole process of getting ready for retirement into actionable steps.

This is so important. Too many people retire with doubts, unsure if they have enough retirement money and uncertain of what their tomorrows will look like. Year after year, many workers also retire earlier than they had planned, and according to a 2019 study by the Employee Benefit Research Institute, about 43% do. In contrast, you can save, invest, and act on your vision of retirement now to chart a path toward your goals and the future you want to create for yourself.1

Some people dismiss having a long-range retirement strategy, since no one can predict the future. Indeed, there are things about the future you cannot control: how the stock market will perform, how the economy might do. That said, you have partial or full control over other things: the way you save and invest, your spending and your borrowing, the length and arc of your career, and your health. You also have the chance to be proactive and to prepare for the future.

A good retirement strategy has many elements. It sets financial objectives. It addresses your retirement income: how much you may need, the sequence of account withdrawals, and the age at which you claim Social Security. It establishes (or refines) an investment approach. It examines tax implications and potential tax advantages. It takes possible health care costs into consideration and even the transfer of assets to heirs.

A prudent retirement strategy also entertains different consequences. Financial advisors often use multiple-probability simulations to try and assess the degree of financial risk to a retirement strategy, in case of an unexpected outcome. These simulations can help to inform the advisor and the retiree or pre-retiree about the “what ifs” that may affect a strategy. They also consider sequence of returns risk, which refers to the uncertainty of the order of returns an investor may receive over an extended period of time.2

Let a retirement strategy guide you. Ask a financial professional to collaborate with you to create one, personalized for your goals and dreams. When you have such a strategy, you know what steps to take in pursuit of the future you want.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
Citations.
1 – ebri.org/docs/default-source/rcs/2019-rcs/rcs_19-fs-2_expect.pdf?sfvrsn=2a553f2f_4 [2019]
2 – investopedia.com/terms/m/montecarlosimulation.asp [6/10/19]
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Succession Planning In A Family Business

Katlyn Graham:  Hello, I’m Katlyn Graham, here with Rick McDonald, the president of US Advisory Group. Welcome, Rick.

Rick McDonald:  Hello, Katlyn.

Katlyn:  Thanks for joining us here today.

Rick:  My pleasure.

What does US Advisory do?

Katlyn:  Rick, would you mind starting off just explaining a little bit about what US Advisory Group does?

Rick:  Sure. US Advisory Group was a New England‑based wealth management company. We work primarily with family business owners and individuals who have collected a fair amount of assets and are looking to put the money to work in a way that supports what’s important to them.

How do people get to be successful business owners?

Katlyn:  Let’s talk about family business owners here. How do people get to be successful business owners?

Rick:  Most family business owners ended up where they are today by one of a couple of different ways. Either they inherited the company and they’re in the second, third, maybe fourth generation in running a family business. Or they basically, once upon a time, realized that they wanted more freedom and flexibility. They thought starting a business would be a good way to do that, to be their own boss. Lo and behold, they were successful.

Obviously, some weren’t, some are. But through trial and error, you find yourself years later running a company that’s been successful. It’s working for you. You’re at a position now where you’re trying to figure out, what are we doing with this business? Where’s it going and what’s its role in the family?

What is important about succession planning for family businesses?

Katlyn:  I see. Now, about succession planning. What is important about succession planning for family businesses?

Rick:  Well, that’s a good question. A lot of people are looking back at as they get older and trying to figure out, where’s the exit plan? Is there any exit plan? For many people, there isn’t one.

But the point is, most folks will find that 80, 90 percent of their net worth is tied up in the bricks and mortar of the business. The question is, how do you transition that from illiquid net worth into something that’s investable or something that’s able to be repositioned in the areas and places that will better support what’s important to you as you get older, as you retire.

The issue then becomes, where are you going with the business and what role is the business’ net worth to you? Particularly, it might be giving you a fine earning or a fine lifestyle. But if you’re going to slow down, if you’re going to retire, if you’re not going to be showing up at work on Monday morning and putting 60 and 70 and 80 hours of work a week in. How are you going to recreate your income?

Is the business capable of paying you the kind of lifestyle you want by having interim or non‑family member, someone else manage the company other than you? What risks are associated with you not being there if you’re the most important person in the company? Alternatively, is it time to start looking at an exit plan, a succession plan?

Katlyn:  Some deep questions for owners of family businesses for sure. I could see why they would need some advisers during that critical period. Thank you so much Rick for explaining all this. I really appreciate it.

Rick:  You’re very, very welcome.

Photo credit: FutUndBeidl / Foter / Creative Commons Attribution 2.0 Generic (CC BY 2.0)

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