Wealth Management

Voted #6 on Top 100 Family Business influencer on Wealth, Legacy, Finance and Investments: Jacoline Loewen LinkedIn Profile

August 31, 2019

Cash out of the market now?

Timing the market seems like a good idea but is difficult to execute. I have a close friend who was one of the few people in my network to successfully predict 2008–2009.
However, even during March 2009, the lows for markets at 7.300, he wanted to wait until `further falls`.
Then markets hit 10,000 in 2010. He thought it was a dead cat bounce.
By 2013 or so, he was even more worried. Markets were at 14,000. Record highs! Higher than during 2007–2008.
Surely this was a bubble! Then 16,000, then 18,000. But now Trump was running for election.
Then Trump won!
Surely, now markets would fall incredibly? Then markets hit new highs.
When markets fell 20% or so in December, he finally bought in, but suddenly the reality downed on him.
He got in at 21,000–22,000, a discount of 20%+ compared to where prices were a few months previously, and yes he has made 20%+ in the space of 6 months or so.
Yet he realized something. `I should just have invested from day 1`. He missed out on all those gains, and dividends.
People forget that point as well. Even stagnant markets, give dividends.

April 3, 2019

Many Seniors Fail This Retirement Income Quiz — Would You?

Senior women are planning their retirement better - Alainnah Robertson
Basic finance is a tough topic that many people fail to learn.  I had a recent conversation with an entrepreneur who sold his trucking company last year for over $20 million.  Despite having spent decades negotiating contracts and also selling his company to a publically traded company, he did not know how to manage his new found wealth.  When he was running his trucking business, it was all about re-investing his money to his business, which was a ravenous fire for cash.

Every day, I meet with entrepreneurs who were terrific at inventory and counting their costs and cash flow needs for the business, but do not have apply this thinking to retirement.

Another former business owner, Alainnah Robertson, says that she ran a business yet did not have the first idea about retirement and managing wealth.  Since she has learnt the concept of not touching her capital, and living off the interest and dividends, her views of retirement have changed to the positive.

Here is a fun quiz to check up on your financial literacy and how to retire at the top of the class!

Link - click here


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March 22, 2019

What job do you want your money to do?

Business Transition Forum and speaker, Jacoline Loewen
When an owner of a business sells, it is a challenging time as they go from being the smartest guy in the room in their business, to being a money manager.

These owners find it tough to trust a wealth management expert, even if they are asking the most important question:

What job you want your money to do?

To have that fancy car, that new home with the best furniture, that golf club membership, that cottage in Muskoka,, that home in Costa Rica?
Or is to educate your kids, support a charity, gift to your alma mater or for scholarships? Or to invest into the VC community?

One question I do not hear being discussed with enthusiasm is how can the wealth take you to retirement and beyond?  The latter question is rarely examined early in the sale of business process. It can be more appealing to have to go to the dentist, it seems.

Sudden wealth does happen for business owners, people inheriting wealth and the notorious lottery winners. There are popular strategies used by those gaining this sudden wealth.

Fire Hose Strategy

One of my top prospects sold his trucking company a few years ago and has been all over the place with managing his cash outflows. Probably managing his wife and grown up offspring was the hardest. as they were spending money using the fire hose strategy. He just called me all excited because he had just figured out that he only needs dividend strategy.

"So I don't touch the capital, live off the dividend and if you get 5% interest, you are fine.  The market is going up 90% of the time, and I get a check every month."

I was frustrated that my conversations with him had not unearthed that central and very core point about managing wealth.  Needless to say, he has not become my client.

We are actually doing a highly complex business of wealth management and along the way, this entrepreneur had got the message from his own networking because that is what he trusts.

Pin the Tail on the Donkey Strategy 

What seems blindingly obvious to you, often is not the full answer or even close to the possibilities. If you are relying on your golf buddies or YPO Forum to figure out your wealth management, you will not be getting a full picture of what your could really achieve for you. Your strategy is to go forward blindly and put the tail where you hear your friends telling you to press that pin.  When you take off the blindfold, you discover your buddies did not do a good job of guiding your guesses and also, they don't need to care.  You need to care.

What job do you want your money to do?   What is your money for? It can be difficult to get going and it is helpful to think about these questions to prod, push and poke your thoughts. there is no correct answer.

  1. What gets you out of bed in the morning,  What would get you out of bed?
  2. Do you think globally or locally?
  3. Are you concerned with making a difference? Where? With your family?  Or with the community or with a large internet audience?
  4. Are you impulsive or considered?
  5. How much control do you have over your time?
  6. How much money do you need monthly?

Use my coupon to get a discount to the Business Transition Forum. 20% discount  you can share with your network using the code jloewen20
   
The Business Transitions Forum<https://businesstransitionsforum.com/> (BTF) is a multi-city conference for business owners seeking expert insights for how to approach the most monumental decision in their company’s journey. Whether their objective is to grow, sell or buy, BTF will give them the tools to enhance the value of their business. Our 2019 Spring line-up includes BTF Atlantic (April 2-3), BTF Edmonton (April 15-16) and BTF Toronto (May 28-29).

   


January 3, 2019

The #1 threat to a client by their financial adviser

In managing a client's wealth, the threat of a client outliving their wealth is a far more serious failure than failing to grow the client's wealth at a maximum pace.

However, clients bring their many personal biases to the portfolio asset allocation recommended by the investment adviser. In fact, there are approximately 20 types of biases and even the genders tend to favour the same sets of biases. Each of these biases can seriously compromise a portfolio.

Going back to the question, what is the number one threat to a client by their advisor? The answer is if you are likely to run out of cash and have a hit on your life style.

For your Client Adviser, their challenge is to understand the client's biases and to be able to make sure they are not compromising the performancae of the portfolio.  For example, men tend to be over confident and load up on a stock that is sure to hit it out of the ball park - such as a crypto-currency or marijuana company. An excellent Client Adviser is paid to help you understand your biases and how your behavioural biases impact on the pace of growth of your wealth.  Your biases, if unchecked, could also seriously compromise your retirement money.

 It is how the allocation across your portfolio impacts the day-to-day living if there is a market crash.  Since the market volatility is increasing, this is an important question for anyone working with a Client Adviser to manage their wealth.

Do you really know and understand your own biases?

Your Client Advisor knows the 20 biases and have seen them in many combinations over the years of their career. This natural human behaviour - to follow your own bias - is exactly why you pay your Client Adviser. They are there to save you from your own human imperfections.

If an asset allocation performs poorly due to a client's bias, what will be the impact on their lifestyle? For the investors with $2M and under, the consequences could be dire.  For those with higher levels of wealth, the bias will not have the same consequences.

Every client brings their set of behavioral biases to the investment relationship with their Client Adviser (CA). Pompian and Longo recommend to CAs that they first determine how much they need to adapt to client bias which can be" irrational". As a suggestion, they advise weighing the rewards of sustaining a calculated, profit-maximizing allocation of assets against the possibility of upsetting the client if they try to educate the client about their biases and end up upsetting them instead. If the client is very wealthy, and insists on irrational decision making, there is far less risk for serious damage to lifestyle and retirement plans.

Clients are human and have their natural biases and may be wanting a completely different portfolio. When does the CA try to educate and to modify the client bias and when to let it go?

The key is to look at the worst case scenarios of the investments. If the worst markets happened, would the client run out of money? Would they outlive their cash supply?

If the answer is yes, the client would suffer, then the CA needs to do their job which is to protect the client from their behavioral biases. The CA needs to moderate the client's views on the asset allocation. It takes courage, but the CA needs to step up and explain the potential outcome to the client. Equally, a client needs to realize they are not seeing the whole picture and their Client Adviser may be making sense. Then, together, they can moderate their expectations for the portfolio.

If the client has substantial wealth and their day-to-day living would not be impacted by a market crash, then their biases could be accommodated. Overcoming sub-optimal impact of behavioral bias on portfolio returns becomes a lessor consideration. Adapting to, rather than moderating, the client's behavioural bias is then possible.


December 12, 2018

Why the wealthy are not satisfied with their money

Jacoline Loewen
A business owner and her husband recently sold her family business for $50 million. When we met a few months after the sale, we talked about how her life was unfolding. Keep in mind that she and her husband had worked together for thirty years in their business.  Their favourite saying was, "When the client says JUMP, we say, how high?" You can gather that this couple were A type personalities and the level of adrenaline they created in their business had been enjoyable to them as a couple.  Now that pressure was completely removed. They could also now afford anything they wanted. All those trips they had postponed to keep their business humming were now available and they had the time.

The family went on a high-end cruise which sounds wonderful, but there was not a business for them with its pressures and its processes and people to great them after a relaxation period.  They had not replaced their busy and high pressured lives yet. Hopefully, they will find a new journey to challenge them.

This dissatisfaction with the new wealth and the freedom it brings can also amplify boredom and lack of purpose in people's lives. It is common with people who make sudden wealth. Money magnifies who they are.  If they were workoholics, it will be a while to find new ventures and challenges.
At a certain point, another million dollars doesn’t make anything newly affordable. That’s when other motivations take over.

This article in The Atlantic sums up this man's issue perfectly.

Excerpt:

As the number of millionaires and billionaires in the world climbs ever higher, there are a growing number of people who possess more money than they could ever reasonably spend on even the lushest goods.
But at a certain level of wealth, the next million isn’t going to suddenly revolutionize their lifestyle. What drives people, once they’ve reached that point, to keep pursuing more?
There are some good explanations, I found, after talking to a few people who’ve spent significant amounts of time in the presence of and/or researching the really, really rich. Michael Norton, a Harvard Business School professor who has studied the connections between happiness and wealth, had a particularly elegant model for understanding this pattern of behavior.


This article in The Atlantic