elmwood's 2nd anniversary

Financial Planning Investment Management Tax & Estate Services

Elmwood’s 2nd Anniversary!

November 2014

Elmwood Wealth Management 2027 Fourth St., suite 203

Berkeley, CA 94710 www.ElmwoodWealth.com

We have had an amazing two years since the launch of Elmwood Wealth Management! Perhaps the most rewarding part of these past two years has been all the personal time we’ve spent with our rapidly growing client base (see chart below) and others whom we have met along the way. Thank you for all your support! So much has happened over the past two years. Inside we share our top insights and observations since the launch of Elmwood.

We Build and Preserve Wealth


Elmwood Wealth Management

Top Insights and Observations since the Launch of Elmwood:

There is a difference between ‘Wealth Management’ firms and ‘Capital Management’ firms. To most individual investors, these phrases are just more industry jargon, but if an advisor’s business model truly reflects their name, it has much more meaning. Wealth Management means a client is taken care of on all fronts; retirement and college planning, investment management, and receives guidance on any estate, tax, and insurance needs they may have. A Capital Management firm is typically one that just manages specific investment accounts. A Wealth Management firm, on the other hand, will take a holistic approach to your entire financial situation and translate that into a plan that is customized to you.

Asset allocation should be more than a marketing strategy. We have seen too many times where a client is put into an asset allocation (mix between stocks, bonds, etc.) without any supporting data to justify the allocation. Financial planning should be used to help validate your mix of investment assets as a “proof statement”, rather than the advisor simply using their intuition based on a few form filled questions. Diversification, just for the sake of it, never really seems to pan out. With every investment, an advisor should ask themselves how the holding benefits the client and will the client financially gain from the investment. Again we have seen many investments where the advisor may have gained financially but the overall investment was not beneficial for the client. Clients should review their asset allocation and look to see how it has evolved over time relative to market conditions and their own personal situation.

November 2014

Hire great partners, not just great people. Everyone has heard the old, sage business advice that you should hire great people. We share this philosophy, but feel a successful Wealth Management firm needs to take it a step further. The service we provide clients is complex and far reaching, which means that to offer our clients the best possible advice we need great partnerships with other firms. A common industry mistake is for a firm to try and do everything in house, which often leads to biased advice and lackluster investment returns. We’ve worked hard to establish business partnerships across the board, which has helped us in virtually every aspect of our business. We have experts that provide seamless operations of our firm, we receive independent investment research allowing us to focus on portfolio management, and our estate, tax, and insurance professionals work with us to provide advice that is integrated for each client’s circumstances.

The advice component of our business is growing rapidly. This is really a reflection of what our clients need. It’s safe to say that the investment world has only grown more complex over the last several years, which means we need to constantly keep up to speed on the industry and issues that affect our clients in order to better serve them. Clients own personal finances also seem to get more involved and complicated as time progresses, and we try to be there for them when significant life events take place.




Technology has fundamentally changed our business model. Unless you are an industry insider, many people do not fully grasp the enormous changes that have taken place within the past few years due to new technology. Literally, every aspect of how we manage our business is defined by what software we use, and over the past couple of years, huge strides have been made in automating new account processing, managing operational tasks, providing better client service and portfolio management tasks. Our business model is arguably more efficient than any other advisor (big or small) you may come across, and much of that was due to our ability to start from scratch two years ago and implement the most efficient and cutting edge technology available without the handcuffs of any legacy systems older firms may have in place.

Communication comes in multiple formats. Building a relationship takes time, and staying in touch can be hard work. All of us seemingly lead busy lives, which means the advisor-client relationship requires all forms of communication. We use everything at our disposal, including on-line video, phone calls, emails, newsletters, iPads, and good old-fashioned in-person meetings either at our office, your office or in your home. The important thing is to find what medium is best and most preferable to the client, and then go the extra step to stay in touch.

Portfolio management should be something special to you. There are a lot of impersonal ways to have your money managed, such as using Target Date Funds, ‘Robo Advisors’, or simply by a firm that sticks you in a generic model portfolio. Just because someone is the same age as you doesn’t mean that their investment portfolio should be exactly the same as yours, does it? Everyone is unique in some way and the advice you receive should be reflective of your own circumstances.

November 2014

Your advisor relationship should be with the decision making professional. Simply put, if you are not interacting with the professional responsible for making planning and investment choices on your behalf, how could one reasonably expect them to do what’s right for you? As an advisor, the main tenant of our job is to act upon the best interest of our client, and if you don’t personally know the client it seems hard to imagine this task is carried out. It further stands to reason, that if you are going through the trouble of building a relationship with an advisor, it makes sense to build it with someone who will be working with you the next 10-20 years.

Personal finance is a full time job. Most of us have adopted bill-pay to some extent, which saves time and helps keep us up to date. But how many of us have actually created a budget, or filled out a financial inventory of all their assets, liabilities and documents? When was the last time you checked to see if your trust was up to date, or your beneficiaries were filled out correctly when you enrolled in a 401(k) or opened up an IRA? Helping clients stay organized is not typically on the list of services an advisor provides to their clients, but we’ve found it to be one of the most widely needed tasks and something that clients really appreciate.

As a client, or perspective client, if there is anything more we can do to improve our advice and service to you, we would welcome your feedback. We look forward to another forthcoming year of growth for both our firm and clients, and will continue to seek out ways to improve our client experience in this ever changing and dynamic industry. It is our privilege to be part of the financial services industry and work with clients to help them fulfill their financial goals. We thank you for allowing us to be your partner!



Quarterly Insights: January 2014




November 2014

Investment Theme: U.S. Energy Resurgence – Not only has there been a tremendous amount of natural gas discovered in America, but new technology has led to a boom in new oil discoveries as well. The abundance of new energy will mean our country must invest in virtually every aspect of our energy infrastructure to make this resource available.

Elmwood’s Strategy: We are investing in companies that have large underground reserves of both natural gas and oil. We are also taking advantage of less obvious ways to exploit this theme. For example, companies which help clean up gas and oil wells, and transportation companies that move both supplies and the commodity itself across the country.

Investment Theme: Total Return Equity Investing – investing in companies that take into consideration both price appreciation and dividend payments. Companies are increasingly raising dividends and buying back stock as a return to shareholders.

Elmwood’s Strategy: Invest in companies that have the cash flow to both buy back their own stock and increase their dividend. If a company bought back 2% of their outstanding shares annually and paid a 2% dividend yield, your total return would theoretically be 4%. This is a great backdrop in any circumstance.

Investment Theme: U.S. Health Care Needs – With new health care legislation now in place, approximately 40 million individuals will become eligible for health care coverage. This fact, coupled with the aging baby boomer demographic will create substantially more demand for health care going forward.

Elmwood’s Strategy: An increase in both the number of participants and the frequency of accessing health care inevitably will drive up the cost to cover this phenomenon. By investing in companies that will benefit by serving a larger number of participants, and able to help reduce the cost of service. Insurance and benefit management firms look to benefit.

Elmwood’s Strategy: Taking active approach to our bond portfolio, we are buying high current income corporate bonds (6-7%) with good credit quality, relatively short maturities that will likely be sold before maturity. We are also using higher income paying preferred stocks (6%) that offer more favorable tax treatment as a substitute for longer maturity bonds.

Investment Theme: High Current Bond Yields – Yields for most good quality bonds are extremely low. Yet there is a segment in the market where you can buy both high quality and high current interest paying bonds.

Investment Theme: Developed Foreign Equities – The emerging markets have been a hot place to invest for over a decade now, but their relative growth is slowing. The risk/reward tradeoff is no longer attractive as their higher inflation and political instability are cause for concern.

Elmwood’s Strategy: Investors have been reluctant to invest in both the European and Japanese markets for years, especially in the case of Japan which has been out of favor for decades. Easy monetary policy and the plain fact that their economies are improving argue for exposure in these areas.

Source: JP Morgan


Elmwood Wealth Management 2027 Fourth St., suite 203

Berkeley, CA 94710 (510) 858-2723

[email protected]

www.ElmwoodWealth.com

Elmwood is committed to making life easier for

you while maximizing your investment potential.

mailto:[email protected]

http://www.elmwoodwealth.com/

elmwood's 2nd anniversary

Economy & Finance