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From the desk of Doug Wells: “Should You Invest More Money in the Stock Market?”

It is now four weeks since the March market lows. We have more information on how the pandemic will impact our lives and the economy and we have seen both bad and good come out during this unprecedented time.

Sadly, we have seen the virus spread quickly to every state in our nation.  Nationwide there have been over 750,000 cases and over 40,000 deaths. Many of our favorite local businesses have temporarily closed or dramatically scaled back their services, all of us know at least a few people who have lost their jobs and most of us have been sheltering in place for over four weeks.

There has also been uplifting news. Many of our neighbors have become local heroes by opening their hearts to help others – whether that be through grocery runs for others, celebrating a child’s birthday with a drive-by parade or health care workers continuing to risk their own well-being every day to help those infected. In addition, we have seen positive news on vaccines (J&J, Moderna, and others) and potential drug therapeutics (Gilead).

While the current situation remains scary, many of us have settled into our new temporary reality. And, the stock market has done the same. Since the March 23 lows, the market has made up roughly half of its losses and rebounded approximately 30%. As we adjust and get a bit more comfortable with our new daily routine, some people are asking “If I have additional capital, should I invest more in stocks?” As with most questions, the answer is – it depends. Below are a few of the factors to consider if you are contemplating investing new money into the stock market:

What is the purpose of each of my accounts? 

Most people have several accounts, each with different goals, and you want to make sure your investments match your goals. For example, you may have several college savings accounts for your children or grandchildren, an emergency fund with 6 months to 2 years of living expenses and your retirement accounts. The right answer for one account likely will not be the right answer for all of your accounts. For instance, your emergency account should be held in cash or high-quality liquid investments (like US treasuries). Adding equity exposure to this type of account likely does not make sense. For college savings accounts, it depends on how soon the beneficiary will need the money and your ability to add additional funds should the need arise. If the college funding is needed in the next 1-3 years, adding equity exposure likely does not make sense. However, if the child does not need the funds for 7-10 years, adding some equity exposure might make sense. For retirement accounts, if you have 5-7+ years of living expenses in bonds and/or cash, it might make sense to consider investing any new money in stocks.

Timeline – Strategy: What is the investment timeline for this new money?

Each market correction is different. In some cases, new highs are reached after just a few months. In other cases, it can take a few years. And, occasionally, it can take longer. Only invest new money in the stock market that you don’t need for several years, preferably 5 years or more.

Timeline – Tactical: How quickly should I make new investments?

Trying to call “the bottom” is an expensive exercise in futility. Yes, you might get lucky but, more likely, you will miss your opportunity. Most investors are far better off splitting their money into 4-6 tranches and investing regularly over a period of time. For example, invest 1/6 th  of the new money on the first trading day of each month for the next 6 months. This allows you to dollar cost average into new investments. A quick side note. If you believe the market will be higher in several years than it is today, you actually want the market to continue to fall as you invest as it will give you a lower average cost basis for your new investment.

What is my personality?

For investing, it helps if you are an optimist who believes in a better tomorrow. Yes, the next few months, and possibly years, will be challenging. Some companies will miss their earnings estimates, unemployment will almost certainly continue to rise to previously unthinkable levels, new coronavirus infections and deaths will continue, some cities and states will have setbacks after reopening their economies and there will be other expected and unexpected challenges. However, there will also be unforeseen positive developments such as promising news about vaccines and drug therapies, success stories from hospitals, cities, and states, additional fiscal policy support from the state and federal government and more. The point is, can you weather the bad news and a declining stock market if it continues over many months? Remember, your timeline for any new money invested in the stock market should be 5 or more years. That can be a  very  long time in a negative or flat market.

What is my goal?

I would argue that your goal should be to make a series of good financial decisions over several years. You will not get every decision “right”. But, if the vast majority of your decisions are sound and your mistakes are modest, you will likely do very well over time.

Is now the right time to start?

As I write this note (Sunday evening 4/19/2020), the S&P500 is at 2,875 – down just 11% year-to-date and very close to levels last seen in October of 2019. Think about that. If six months ago you had perfect clairvoyance and knew a global pandemic was coming and it would halt the world’s economies (and many of the small businesses in your neighborhood) what would you have predicted the stock market would do? “Flat” would not have been my prediction. Yet here we are.

At these levels, it feels as though there is a fair amount of optimism regarding the re-opening of the economies around the world, the power of unprecedented fiscal and monetary policies from various governments and the progress on drug therapies and vaccine candidates. Yes, I am optimistic on what the world looks like in 2 years. However, I am also a realist on what the path to get through this likely entails. The reality is that we will have some tough weeks and months in front of us as well as some heartbreaking setbacks in our fight against this virus.  It is impossible to know when the market bottom will happen.

Given the fear and uncertainty, a course of action could be to wait and start your first tranche of investing should the market fall another 5-10% from these levels.  But be clear this carries two big risks; first, the market may not correct the amount you’ve defined as your entry point causing you to leave you funds on the sideline. Second, you can be certain the headlines will look dreadful if/when the downdraft occurs. Will you be willing to buy in the face of really bad news?

In summary, is now a good time to invest new money? Maybe. But it is definitely a good time to plan how you intend to add to your equity exposure regardless of what the market does over the next several months.

On a similar note, if you found your portfolios a bit too aggressive in your current asset allocation, it makes sense to reevaluate and possibly de-risk some of your investment accounts. Your aim is for your asset allocation to match the specific account’s goals. With the market down just 11% year-to-date and at levels close to those seen in as recently as October of 2019, it may be a good time to evaluate a change like this.

Our goal is to help you make good financial decisions; often this includes helping you avoid short-term thinking with long-term assets (or, conversely, long-term thinking with short-term assets). Please reach out to your Senior Wealth Adviser if you would like to discuss any of the ideas shared in this note and how they might relate to your specific situation. Also, if any of your colleagues, friends or family are struggling to make good financial decisions during this stressful time, please feel free to let them know about Albion. We would be honored to have a conversation with them to see if Albion can be of service.

Doug Wells
Partner
Albion Financial Group

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COVID-19 Letter

Thursday, March 12, 2020

In this rapidly evolving market environment we’d like to share how we perceive our role in serving families who depend on us.

Our training, experience, and commitment to the craft of being the best financial advisors we can be is about to be put to the test. The recent double whammy of COVID-19 and the apparently unrelated breakdown of OPEC has created tremendous uncertainty and fear. Eight of the last twelve trading days have seen the S&P 500 close up or down more than three percent with a nearly eight percent decline on March 9th. This is what volatility looks like.

This is our World Series and we are in game one. We’ve been here before; sliding into the abyss, staring down a sheer cliff into the fog of uncertainty. That same fog obscures the view across the chasm; while our rational selves know the other side of the canyon exists our emotional selves feel a rising doubt.

The other side exists. There is a solution to this crisis and we’ll be well on our way out of this hole before we have clarity on the path. The way will only become clear in hindsight, when we are standing in sunshine on the opposite rim. As financial advisors our challenge is to help our clients remain clear about why they are investing, clear about understanding what is possible and what is not possible, and keep them on course so they are onboard for the eventual climb out of this morass – which no one will believe is sustainable even as it is happening.

Following are some thoughts that may be helpful as we work to help our clients through the coming months.

  • Remain calm. Decisions made from a place of fear rarely work out well. Recall that markets have experienced black swan events before; events that at the time are unique and in the moment appear to have the ability to upend everything we’ve ever known about investing. Note that those events, in hindsight, always pass into history and the world moves ahead. In the depths of the financial crisis of 2008 – an event the world had never before experienced – there was no clear path out. Many hypothesized it was the end to capitalism. Yet here we are.
  • Revisit your reasons for investing. Most of us are investing in an effort to benefit from the better returns that owning part of the economy can offer. Sometimes it’s easy to stay the course. At other times, like now, it can be difficult. By revisiting your reasons for investing, and acknowledging that part of the price of benefiting from what markets offer in the long-term is accepting that sometimes it hurts in the short-term, you are more likely to be successful. Millenia of evolution has wired us to flee danger; to climb the tree when we see the lion on the savannah. While such quick reaction to perceived danger allowed us to survive as a species it has proven to be an impediment to investment success. The best time to buy stocks is when nobody wants them.
  • Recall your time frame. Your near term financial needs should already be invested in low volatility assets such as cash accounts and high quality fixed income tools. Your long-term investments can and should remain invested in spite of the volatility.
  • Hold the perspective that you invest in companies, not stocks. Is the business proposition sound? Will the business proposition still be sound when the current crisis is behind us? When we look at our portfolio companies – from Amazon to Visa, we are confident that their businesses will be bigger, better, and stronger three to five years from now than they are today.
  • Be wary of trying to anticipate the market. While the news is bleak be clear that markets will recover well before we are out of this morass. In fact it’s nearly certain the news will be even bleaker when the market begins a sustained recovery. And also be clear that no one called this selloff. Yes, there are perma-bears who can now say “Aaha, I told you so! This is a terrible market and you should be out!” Yet these same individuals have been bearish for over a decade and following their advice would have caused you to miss out on an historically strong bull market. Even a stopped clock is right twice a day.
  • Recognize the news will get worse before it gets better. And when the news is really, really bad the market will have some exceptional and unexplainable up-days. The vast majority of stock market gains over the course of a decade happen in just a handful of trading sessions. You do not want to miss those days! Unfortunately such days may occur around the same general time as the handful of historically terrible market days. To benefit from the market you have to accept the pain it dishes out from time to time. Unfortunate, but true.
  • Understand the difference between the medical issues and the political issues surrounding Coronovirus. The medical issues, while still not perfectly clear, are coming into focus. The political issues revolve around the fact that we all feel compelled to do something. Whether a federal, state, or local government, a large or small company, an individual or family, there is a strong need to do something. (see: evolutionary drive to climb the tree when lion is spotted on the savannah). Even at Albion we are doing something. We are updating and practicing our disaster mitigation plans, particularly those relating to working remotely. And we are focusing on the basics; washing hands, staying home when ill, and generally avoiding contact. Much of the impact the economy is experiencing is driven by our desire to do something. Much of it will likely turn out to be either irrelevant or counterproductive. But do something we must.
  • Your long-term goals, and likelihood of reaching them, have probably not changed. As of this writing equity markets have retreated to where they were back in the middle of 2019. If you were on track then you’re still on track now.
  • This too shall pass. We are deep into the challenge and there is no apparent way out. But there is a way out; we just don’t see it yet. The world can only end once and this isn’t it.

While we work to address and plan for potential downsides to our clients financial position in calm times it is ok to revisit such conversations in the midst of risk events. Most of the time we’ll find that the allocation is correct, the adjustments that have been made are sufficient, and we can move ahead. However there are circumstances when this is not the case. And there are actions you can be taking right now.

  • Be clear about how much risk you have – In the market meltdown of 2008-2009 no one went bankrupt just owning stocks. However many went bankrupt leveraging up to own assets with debt – primarily real estate. Low debt or no debt makes it far easier and safer to weather economic storms.
  • Prospective clients often come to us with no buffer against stock market volatility. Some balance between growth and stability in an asset allocation almost always makes sense.
  • Take advantage of the lower prices in the selloff to add to investment accounts. Regular investments in your 401(k), 529 plan, or other investment accounts mean you will continue buying when prices are lower. Will you nail the bottom? Almost certainly not. But you will be paying less than you were a few weeks ago.

We hope you can make one of our conference calls and look forward to visiting with you then. And as mentioned above please reach out to your Albion team if you have any questions or concerns about your specific situation.

Please stay healthy,

John Bird

CEO

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2020 Planning Guide: What you need to know

A quick reference for tax rates, savings and retirement contributions, college savings strategies, as well as Social Security and Medicare information.

Everyone’s financial situation is unique – the information found in the 2020 Planning Guide should only be used as a foundation for discussing your individual circumstances with a CERTIFIED FINANCIAL PLANNER™ practitioner, legal or tax professional.

The wealth advising team at Albion Financial Group understands the complexities of the current wealth management environment and would be honored to discuss your financial situation and strategies that may help you reach your personal financial goals.

Please give us a call at (801) 487-3700 or email dpope@albionfinancial.com.

We wish you a prosperous 2020.

Devin Pope, CFP®, MBA
Senior Wealth Advisor
Albion Financial Group

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2019 Planning Guide: What You Need to Know

At Albion Financial Group, we believe in the importance of quality advising where financial success is a result of a series of good decisions over time. Multi-year financial advice on investments, tax planning, retirement savings, college education, Social Security and estate planning strategies can help protect income and grow wealth.

The start of a New Year is a good time to review your financial strategies to ensure they are aligned with your goals – an expertise we bring to bear for our many client families. We aspire to be a financial resource to you and in that spirit this blog post contains our 2019 Planning Guide to assist you in making informed choices. This guide is designed to be a quick reference for tax rates, savings and retirement contributions, college savings strategies, as well as Social Security and Medicare information. We hope this infographic is a helpful resource as you navigate many of life’s financial decisions.

Everyone’s financial situation is unique – the information found in the 2019 Planning Guide should only be used as a foundation for discussing your individual circumstances with a CERTIFIED FINANCIAL PLANNER™ practitioner, legal or tax professional.

The wealth advising team at Albion Financial Group understands the complexities of the current wealth management environment and would be honored to discuss your financial situation and strategies that may help you reach your personal financial goals. Please give us a call at (801) 487-3700 or email dpope@albionfinancial.com.

We wish you a prosperous 2019.

Devin Pope, CFP®, MBA
Senior Wealth Advisor
Albion Financial Group

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Financial Literacy Building Blocks for Kids

Financial decisions were once much simpler. Let’s rewind the clock to a time when, after graduating from high school or college, individuals would begin a job at a company where they would remain for the entirety of their career. Cash inflows were simply a pay check while working, followed by a pension in the golden retirement years. Employers would fully cover the cost of health insurance, and, upon retirement, Medicare would substitute. Banking would occur at a local bank where tellers were identified by their first name, and interest was paid on cash savings. If there was excess cash in a checking account, conservative investing would take advantage of the power of compounding.

Let’s now fast forward to today where it is the responsibility of each individual to decide how much to save for retirement, where to save, how to invest, when to pay off various debts, as well as what to do about health insurance and healthcare costs. In a time where endless information can be found on the internet at the click of a button and where the choices available to consumers are infinite, individuals must have a solid financial literacy base in order to make good financial decisions.

Now, more than ever, it is essential to teach financial literacy skills to our children. Here are some financial literacy building blocks:

As a family, craft a clear set of values regarding spending, investing, and philanthropy in your home. What does it cost to run a household? What percentage of monthly pay checks are saved each month? Are donations made to charities in volunteer hours or dollar gifts? Which particular charities are supported?

Make time for family discussions about money. It’s very important to talk with children about why you do things the way that you do them in your household. As parents, practice what you preach. If you teach your children about the importance of saving, and then children see you spending all of the money entering your household, you are sending a mixed message. Children will pay attention to the action rather than the verbal message.

Young children can begin to learn about money and adopt early skills needed for a lifetime of currency use. Teach young children about different currencies. Practice counting and exchanging coins and bills with them: four quarters for a dollar bill, a five dollar bill for five one dollar bills. Simple games such as “store” or setting up a lemonade stand are fun ways for children to gain comfort with money. Help kids understand prices, purchases, and how to make change. Have your child open their own library card and explain the library trusts the child to return borrowed books or they will owe a fine. This is a way for kids to begin their first credit relationship.

Giving children a chance to practice money skills while the stakes are relatively low is critical. Using an allowance as a financial teaching tool is a great place to start a financial education. A good rule of thumb for allowance is a dollar a week for each year of age. For example, an eight-year-old would receive eight dollars paid in cash on the same day each week, and then going up to nine dollars after her next birthday, and so on.

It’s a good idea to separate allowance from household duties like making the bed, keeping the bedroom clean, and emptying the dishwasher—in other words, expected household contributions that do not warrant compensation. Create opportunities for children to earn money by doing jobs around the house that are above and beyond expected household duties. Make a chart that shows the monetary value of each of those other household jobs: mowing the lawn earns five dollars or organizing the pantry earns four. When you pair allowance with work, you show children the relationship between performing a job and earning a wage.

Be consistent and clear with when allowance will be paid and how their money can be used according to parameters decided upon as a family. Families may determine that allowance should be split into thirds: a third saved, a third given to charity, and a third to spend. Give children the freedom to spend the money that is set aside for spending. Encourage comparison shopping and thinking twice before making purchases. It is also helpful to talk about needs versus wants. Clothing is a need, while the fancy new t-shirt designed by a skateboard professional is a want.

As your children mature, begin to pay allowance in advance. By paying allowance monthly or quarterly, you allow older children to practice long term budgeting. Work with kids to create an itemized budget and track expenses. Overtime, talk about what is working in their budget as well as where they have over-spent or under-estimated. The goal is to help children shift from relying on their parents to relying on themselves.

With age, financial literacy activities can become more complex. Have your ten-year-old track a utility bill for six months. A good example is the cell phone bill. Look at how many minutes each person uses and how much data is used in a given month. How does the expense change month-over-month? What can be done to decrease the bill when the expense is high? How much of your household monthly budget is this cell phone bill?

Encourage children to think about what they would like to be when they grow up and facilitate research on the average salary for the desired profession. Let’s say they chose a circus performer. How much does one earn each year? If the circus performer had to save one third of earnings, how much is left to spend on new circus props? Have them look at different career paths and study the level of education or training needed for a particular career. Then, look for schools that specialize in this training and find the cost associated with the training. Children also love stories of entrepreneurs. Share entrepreneurial stories about professionals working in areas that your children are passionate about.

It is never too late to begin discussions about financial literacy. To be successful, we need to educate both ourselves and our children. Financial literacy skills are critical and they can also be a lot of fun.

Sarah Bird, CFP® / Senior Wealth Advisor
Albion Financial Group
sbird@albionfinancial.com
(801) 487-3700

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White Paper: Understanding the Nuances in Investment Performance

Measuring investment performance is an art, not a science. For many this notion can prompt an uncomfortable response as it repudiates what should be entirely impartial statistical information. The reality however is that there are many subjective conditions that dictate the numerical output of such analyses. Therefore, it is important to have a thorough conversation around various performance data in an effort to understand both its meaning and significance.

The first subjective gate that presented investment performance must pass through is time frame, or the specific period being measured. Take for example the following simple exercise in examining a hypothetical portfolio return versus a stated benchmark (more on benchmarks in a moment). Let’s say an investor owns a portfolio of stocks that exactly mirrors the Russell 2000 basket (“Russell”). At the time this paper was written on a year-to-date (YTD) basis this portfolio had a negative price return of approximately -2.02% through 11/23/2015. As a point of orientation the Dow Jones Industrial Average (“Dow”) is down -0.17% over this same period, resulting in this portfolio underperforming the Dow by roughly -1.85% YTD. What actionable implications can one draw from this data? Should our investor make any changes to our portfolio as a result of this information?

Now let us expand that time horizon by only one short month. Our hypothetical Russell-like portfolio return is now +0.17%, while the Dow is off -0.02%. The relative performance of this portfolio has quickly become +0.19% when studied over this second period of time! Through this lens, is this portfolio doing what is should be doing? Would it have been wise to trade out of this Russell replica portfolio and into the Dow based on our early impressions of period 1?

We are all human beings with instinctive impulses; it’s just the way we’re wired. And in this situation it wouldn’t be unusual for an investor to desire a switch based on information gleaned from the first time period. However, when adding a supplementary data point to the mix – i.e., time period 2 – this instant reaction in labeling the portfolio as an “underperformer” may have been a rush to judgement and warrants further examination.

In an effort to counter this urge an analysis of these two strategies over a longer observable period is a good place to start. Put differently, which portfolio has delivered ample and steady returns over time? In our hypothetical scenario we see the Russell basket returning +73.5%, +163.5%, and +280.8% over 10-, 15-, and 20-year periods, respectively. An investment in the Dow, meanwhile, would have delivered +64.6%, +71.1%, and +251.2%, respectively, over these same periods. How would we imagine our hypothetical investor to behave had we began our analysis with this perspective? Or perhaps even more frightening, what would have been the financial impact to one’s portfolio if they had made the decision back in, say, the year 2001 to switch from the Russell strategy to the Dow after a couple of bad months, or even bad years?

To be sure, overactive short-termism and myopic performance chasing can be damaging to an investor’s financial goals. On the other hand, long-term ownership of good businesses (stocks) and a focus on performance over extended horizons is a solid beacon in an environment fixed to 24-hour news cycles and a nearsighted measuring of returns. This rhythm affords the astute manager the latitude to administer the indispensable elements of patience and discipline.

Indeed, long-term investors are the financial market equivalent to marathon runners. Yet in today’s fast moving connected world of always-on digital information, social media, intense scrutiny on quarterly earnings results, and enormous pressure to deliver short-term results, we are often clocked every 100-meters as though we are running sprints. This does not make sense and fuels a fundamental mismatch that can lead to flawed measurements, or worse yet strategic mistakes towards an investor meeting their long-term financial goals. Quite simply, it’s the wrong tool for the wrong job – like asking for a hammer to screw in a bolt.

A more suitable and effective analysis is to observe the two portfolios over a much longer period of time in order to smooth out shorter-run dispersions and more clearly assess the consistent pace and performance of an investment portfolio. Patience and discipline are paramount to long-run investment success, much like the way we would evaluate a marathon runner.

The second subjective gate that performance must pass through is relative bench-marking. In our previous example, why did we select the Dow as our relative measure? Why not the S&P 500? Wilshire 5000? German DAX, or the Shenzhen in China? MSCI World index, anybody? How about stocks in the U.S. health care sector, or in energy? Did these perform better or worse than our portfolio? How would the presentation of this material have affected our evaluation? And more important, what can we do with all of this information? Does it make us better or worse decision makers? We belabor the point, but what’s key to appreciate is that there are almost an infinite number of options one can choose when buying stocks (or index funds), and thus scenarios for comparing actual returns against theoretical opportunities are equally as vast.

We certainly recognize that it is easy to get caught up in the media hype obsessing over the one or two most widely-cited indices. Nevertheless, we believe that this focus is an arbitrary exercise and tells us nothing about the merits of an individual investor’s portfolio needs, strategy, and financial goals.

Albion Equity Performance

With this understanding we encourage our clients to apply the same analytical framework when assessing Albion’s investment management acumen. And we are pleased to report that our marks here are emphatically positive. Our ultimate goal as holistic wealth managers is to help our client’s reach theirs. At present we currently manage assets for over 400 families, across 2,000+ accounts, each with unique situations and needs. This custom and client-centered approach does not lend itself to a one-size-fits-all performance figure. Rather, we firmly believe that the purest gauge in measuring our value and determining our performance can be seen by whether or not our clients are happy and retain our services. Indeed, it is this behavior that embodies the most conclusive vote of confidence and judgement of our ability we can think of.

Albion has been in business for 39 years, and over this time our annual client turnover rate is approximately 2%. This is a very low level for this industry; a fact that we are extremely proud of. In addition to the custom nature of our services, industry rules as they apply to fiduciary managers – the highest standard in the investment industry – makes it quite difficult for us to formally engage in traditional returns reporting conventions.

To help you understand why, a brief description of the difference between fiduciary and suitability standards is necessary. It sounds complicated, but essentially the difference between the two standards refers to the guidelines that spell out the obligations financial services professionals have to their clients.

The suitability standard gives advisers the most wiggle room: It simply requires that investment vehicles fit clients’ investing intents, time horizon, and experience. As a result the suitability standard invites conflicts of interest pertaining to compensation, which can greatly influence what financial products are pushed onto clients. Conversely, the fiduciary standard requires advisers to put their clients’ best interest ahead of their own. For instance, faced with two identical products but with different fees, an adviser under the fiduciary standard would be bound to recommend the one with the least cost to the client, even if it meant fewer dollars in the company’s coffers – and thus his or her own pocket.

We think it is clear which standard is superior, and we take very serious our adherence to these principles. Yet, this also handcuffs us when it comes to presenting official performance data to prospective clients. Meanwhile, those firms that follow the less rigorous and conflict-riddled suitability standard are permitted wide latitude in providing this data. While we argue that this is frustratingly irrational, we also recognize that we do not make the rules and therefore must follow industry regulations as they are, not as we wish them to be.

With that said, here’s what we can share with you.

While we are active managers tirelessly monitoring markets in real-time keenly attune to present information, at our core we are long-term oriented (i.e., the “marathon runner”). Consequently we are proud of the excellent results we have generated for our clients. However there are times when even the best managers will have soft spots in their returns. An example of this for us would be the year 2012 where we left some upside on the table in our equity portfolios and underperformed the broad averages in a conscious decision to protect our clients’ hard-earned nest eggs.

In 2012 the world got very scary, very quickly. The U.S. economy had turned sour in the late-spring (particularly employment data) and Europe was at the height of a potential Greek debt default and ensuing contagion. Not only was Greece looking into the abyss, but the entire European periphery (e.g., Italy, Spain, and Portugal) was fragile enough that any policy misstep would have likely held grave consequences. There were riots in the streets, sweeping anti-euro sentiment, and against this backdrop we made an active decision as active managers to raise cash to protect our client’s assets. Our calculus at the time was while a decent chance did exist that this strategy would dent short-run performance if the market moved higher; the sheer magnitude of the market downside if things collapsed necessitated a defensive posture. Indeed, if the euro had fractured during this time the ripple of global banking contagion, general fear, and economic retrenchment would have been disastrous to equity markets. The probability of such a scenario in our view was high enough to warrant more than a healthy dose of caution. As holistic wealth managers with a fiduciary responsibility we had to act in the best interest of our clients.

Despite these large macro risks the S&P 500 finished the year up +16%, while the Dow returned +10.2%. For us, our abnormally high cash level created a drag on equity returns causing us to end the year only slightly positive. And while this does skew the various short-run performance data sets, we own this decision and would do it again if the environment called for it.

We feel very strongly and take very serious our duty to protect client assets. In our view this form of cognitive, yet assertive risk management cannot be captured by traditional attribution and returns reporting methods. Please do not mistake our explanation as an excuse. Quite the contrary, we believe that it is precisely these types of active decisions and attention to downside protection that helps drive investment returns over the long-run. As such we felt it both appropriate and necessary to provide this context.

As the world chewed through some of the more terrifying moments of that year – e.g., German Supreme Court ruling declaring the euro bailout mechanisms legal; a restructuring of Greek debt from the private sector to the IMF / ECB / EC who could better absorb potential losses; euro members assembling the sound regulatory framework necessary to backstop the financial system; etc. – we scaled back into quality stocks utilizing our time tested rigorous fundamental approach.

Hindsight is always 20/20. Was this a sound decision to go to cash given the severe risks we were seeing, or should we have put our blinders on and gritted our teeth through it? In discussing this with our clients at the time, an analogy we found helpful in imparting our thinking as we made this decision is as follows.

Suppose you were offered a free flight to anywhere in the world. Rome; the pyramids of Egypt; Japan; the South Pacific; any place you’ve most wanted to visit is now at your finger-tips at no cost to you. Sounds great, right? The catch is there’s a 20% chance that the plane you’re riding on will be involved in a horrific crash. Would you accept the offer? Put differently, there’s an 80% chance you make it there just fine. And yet does that make you feel any better about accepting this deal? Probably not. Why? Because the risk – albeit far less likely relative to the odds of a gain – holds such grave consequences that it is simply not wise to chance it. This is precisely how we viewed the stock market and the potential negative impact on our clients’ portfolios during the global chaos in 2012.

Summary

Wealth management has an almost unlimited number of variables and unique situations. Unfortunately, the desire by the media and Wall Street marketing to distill down this complexity into imperfect short-term investment returns data, particularly in cohabitation with a randomly selected arbitrary benchmark, has created a distraction that few can afford to have.

Chasing short-run manager performance can be every bit as damaging to long-run portfolio returns as hopping in and out of hot and cold stocks without any attention paid to the fundamentals of the underlying companies. While we surely understand the virtue of considering market returns as a component of the overall wealth management picture there is far too great a focus placed on it, both versus stated benchmark(s) and over increasingly shorter time horizons.

This works in both directions. When a manager is crushing it with great returns above their specified benchmark over short periods of time, publicizing this as sustainable and reason to invest is every bit as imprudent as eschewing a smart, high quality manager with a laudable and principled investment philosophy demonstrating sound long-run risk-adjusted returns. Sometimes we fall into the former category, but we will always fall into the latter.

Without question, what matters most is creating the right investment portfolio to achieve your financial goals. This is challenging, and candidly it always has been and likely always will be. But, it is a worthy and important goal – one that all of us on the Albion Team are proud to devote our professional careers to helping clients attain.

Jason L. Ware, MBA / Chief Investment Officer
Albion Financial Group
jware@albionfinancial.com
(801) 487-3700

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Debt or Equity: Which is the Best Way to Raise Capital for Your Business?

My first job out of college was with a Fortune 100 company that measured success by market share and revenue. When my team saw opportunities to strengthen our market position, we simply put together a budget and submitted it for funding. Senior management either approved the project or turned it down. Money was a figure on a spreadsheet and we had a seemingly endless supply.

I look back at this experience nostalgically as one might reflect on their childhood. Fun days, but boy was I naive. If you don’t have the balance sheet of a Fortune 100 company, how do you raise money to support growth, develop new products or pursue opportunities? Company owners generally have just three sources for capital: retained earnings, debt or equity.

Retained Earnings (your company’s profits)

The cheapest source of capital is always your company’s retained earnings. Run your company profitably and each month the balance of your business bank account grows. Sometimes, however, the best long-term decision is to invest more money than your company can earn and save. For this, you will need debt or equity.

Debt (a loan from friends, family or the bank)

Debt is generally less expensive than equity but can be difficult to obtain and often comes with constraints on the business.

Owners who think they may want to pursue debt in the future are well advised to work with a knowledgeable accountant to make sure all their financial books are in order. Build relationships with banks well before you need money and periodically keep them apprised of your company’s progress. Nothing builds confidence with a banker like seeing a business meet its goals quarter after quarter and year after year—particularly when that business is not yet asking for a loan.

Perhaps the most daunting part of incurring business debt from a bank is the personal guarantee. If the business fails, the company owner could lose some or all of their personal assets. Banks always say that the personal guarantee is non-negotiable; however, the rigidity of this requirement changes over time. In other words, sometimes it is more non-negotiable than others. If a personal guarantee is a deal breaker for you, consider hiring a professional debt broker. Unfortunately, finding a good debt broker can be more difficult than finding a bank to lend you money.

Equity (selling a partial ownership stake in your company)

Equity is typically more expensive than debt, but it comes with greater flexibility. One of the most compelling features of equity is the access to advice and support that comes from a good investor. Unfortunately, the opposite is also true—a bad investor can make your life miserable. Like a marriage, you are entering into a relationship and it is worth spending time to find the right partner. Networking with other entrepreneurs and business owners is one of the best ways to find good investors.

Other resources are investor groups such as the Park City Angels or the Salt Lake City Angels. Venture investors with a focus on Utah companies include Kickstart Seed Fund (early stage) and Mercato Partners (growth capital for expansion stage companies) as well as several others.

If at all possible, you want to be introduced to the investors you would like to approach. While often overlooked, one effective way to get an introduction is simply to see what other companies the firm has invested in and meet with the founders of those companies (investment firms typically list their past and existing investments on their website). Entrepreneurs love meeting with other entrepreneurs and will often agree to help with an introduction. With LinkedIn and other tools, finding someone you know in common with the desired investor is easier than ever.

Take the time to arrange a quality introduction, as it is your first impression and is sometimes a test. The test relates to this question: If you can’t get a quality introduction, how will you get in front of customers, suppliers, etc.? That said, if you aren’t properly introduced, don’t hesitate to pick up the phone and introduce yourself.

Run your business well and maybe one day you will build the next Fortune 100 company. If you do, one last piece of advice: Don’t hire recent college graduates who naively think the essence of raising money is submitting pretty spreadsheets (like I did 25 years ago …).

Doug Wells, CFA, CFP, MBA
Principal
Albion Financial Group
(801) 487-3700; (877) 487-6200
dwells@albionfinancial.com

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Understanding Employee Stock Options

You’ve worked hard for your employer for several years and been rewarded with options on the company stock. Now stock options make up a large share of your wealth and you’re thinking it’s time to pay more attention. But what are these options worth and how should they be handled? As employers have grown more creative with compensation, questions like these no longer apply only to the executive suite. In many companies options are now available to employees of all levels and for some represent a substantial portion of their total compensation package. Understanding how stock options work, and determining how to maximize their value can be complicated. While employee stock options can be great wealth creation vehicles, understanding what they are and how they work will greatly increase the odds of a positive outcome.

Stock options grant the holder the right to purchase shares in a company at a specified price (exercise price) for a specified period of time (expiration). The aim of granting options is to incentivize employees; aligning their interest with that of the company. By doing so the company hopes to increase operational performance and thus profitability. There are two types of options awarded; incentive stock options (ISOs) and nonqualified stock options (NQSOs). The key difference between the two is how they are treated for tax purposes.

Incentive Stock Options (ISOs)
ISOs offer more favorable tax treatment than NQSO’s, taxing the gain on the sale of the underlying shares at long-term capital gains rates if the holding rules are correctly followed. There are two important holding periods to meet the holding rule requirement. The first holding period begins with the grant date of the option. The option holder must wait at least two years from the grant date prior to selling the underlying shares in order to have the gain taxed at long-term capital gains rates. The second period begins when the stock is transferred to the employee. In order to receive long-term capital gains treatment the shares must be held for at least one year following the date the stock was transferred. If the two holding periods are met then the gain will be considered long-term. Be aware that ISO’s are an alternative minimum tax (AMT) preference item and in certain circumstances can trigger AMT.

Nonqualified Stock Options (NQSOs)
NQSOs are less tax favorable, but are more commonly used as they are not subject to the same restrictions on issuance as ISO’s. When a NQSO is exercised tax is due at ordinary income rates on the difference between the exercise price and the value of the stock at the time of exercise. The exercise price becomes the cost basis for the position going forward. When the shares are eventually sold they will be subject to short-term or long-term capital gains based on the length of the holding period from the time of exercise.

Option Risks
Stock options are a great way to build wealth and over time may come to represent a large share of one’s net worth. However there are risks. First and foremost is concentration. Not only does the employee rely on the company for income but he also depends on the ongoing success of the company if his net worth is to be maintained. A failure of the company is a double whammy; the income is gone and the stock option assets on his personal balance sheet have greatly diminished in value. It is important to sensibly diversify the balance sheet from time to time to avoid having all eggs in one basket.

Exercising Options
The method used to exercise options can also have unintended consequences. In the late 1990’s many technology and internet based companies experienced substantial stock price appreciation. Employees of these companies were suddenly wealthy and exercised their stock options. Given the strength of the companies in the market many employees chose to hold the shares for further appreciation. When the bottom fell out and the share prices dropped these same employees discovered that their tax bill, based on market price at exercise, was greater than the now depressed value of the shares. There were many variations on this theme but the net result was the same; when the share prices plummeted the option value disappeared and the option owner found himself with liabilities but no assets left to cover them.

An idea often considered is to hedge the exercised shares by purchasing a corresponding put option while waiting for twelve months to pass in order to receive long-term gains treatment. Unfortunately this does not work. Such a strategy suspends the holding period in the eyes of the IRS and the holding period for capital gains purposes remains suspended as long as the put is in place. Fortunately all is not lost. With proper planning and a clear vision of what employee stock options can and cannot do an investor can design a strategy to protect against catastrophic downside loss while allowing participation in the ongoing success of the company. With a clear-eyed hard headed analysis the option owner can greatly increase the probability of meeting their long-term financial objectives.

Devin Pope, MBA, CFP / Senior Wealth Advisor
Albion Financial Group
dpope@albionfinancial.com
(801) 487-3700

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White Paper: Dollar-Weighted Versus Time-Weighted Returns – Should You Care?

Imagine; you invest $100,000 in a stock. Six months later you put another $100,000 into the same stock. Six months after that you sell all your shares for $300,000. After a few rounds of self- congratulation on your stock picking prowess you decide to calculate your return. You know you invested $200,000 and had gains of $100,000. Since your gain of $100,000 is 50% of the $200,000 invested your gain is 50%. While this is a straightforward calculation something doesn’t feel quite right. Should the fact that only half the money was invested initially with the other half invested midway through the time period cause you to adjust your calculation? In search of answers you go online and find two rate of return calculators. You enter your data and click to the answer. One says you earned 66%, even better than your own calculation had indicated. But the other says your rate of return was… Zero. Yes, zero. Something must be wrong. You recheck your data and determine that both answers are correct. Welcome to the exciting world of dollar-weighted versus time-weighted returns!

Ever since assets have appreciated people have worked hard to come up with methods to quantify their profit. At its simplest, the appreciation calculation is straightforward. Just divide the amount the investment appreciated by the initial value of the investment as in the example above where the $100,000 gain was divided by the $200,000 investment showing a rate of return of 50%.

However it starts getting a bit more complicated if during the period the performance is being measured money is added to or taken from the investment account. Dollar-weighted and time weighted return calculations are the two methods that account for cash inflows and outflows during the performance measurement period.

Let’s look at dollar-weighted returns first. While the calculation is straightforward the details are challenging. All you have to do is divide the gain by the average capital base. Gain is the amount left over after subtracting all the money put into the investment. Average capital base is a bit trickier; it is the sum of the initial investment plus or minus any funds added to or removed from the investment after the start date, adjusted for the time period the funds were in the account.

That’s a tough sentence; here is an example:

Suppose we start our investment account with $100. Six months later we add another $100. Six months after that we want to measure the performance for the previous 12 months. What is the average capital base? It is the initial $100 plus half of the second $100 added to the account, for a total of $150. Only half of the second $100 is included because it was only invested for half the period. If instead of adding funds, $50 had been removed from the account halfway through the performance period, the average capital base would have been $75; the initial $100 minus half of the $50 that was removed.

The advantage to the dollar weighted calculation compared to the basic calculation where gain is divided by the amount invested with no adjustment for cash inflows and outflows is that the dollar weighted calculation modifies the performance to reflect the gain relative to the funds actually available for investment.

Time weighted return takes dollar weighted returns one step further. In calculating time weighted returns, first you divide the performance period into smaller time periods; quarters, months, weeks and days are typical. Then for each of these smaller time periods a dollar weighted return is calculated. Finally, these smaller period returns are compounded to generate the time weighted return for the whole performance period.

Using time weighted returns further diminishes the impact of cash inflows and outflows on the actual return of the assets in the portfolio. A bit of math clarification is in order. When compounding multiple periods of return you must add 1 to each percentage number and then subtract 1 from your final result. Here is why. Suppose you are compounding quarterly and for three quarters in a row you earn 5% per quarter. Mathematically 5% is 0.05 so if we multiply 0.05 * 0.05 * 0.05 we get .0001, or one tenth of one percent. Whenever you multiply any number by a number less than 1 the product will be less than the initial number.

So here is what to do; add 1 to each percentage to be multiplied then subtract 1 from your answer:

1.05 * 1.05 * 1.05 = 1.16
1.16 – 1 = .16 = 16%.
5% per quarter compounds to a 16% total return after three quarters.

So which return calculation makes the most sense? It depends. The basic “gain divided by amount invested” calculation which does not take into account cash inflows and outflows provides the most clarity when you are trying to figure out how many more (or less) dollars you have than you did before investing. But it does not capture the impact of cash moving in and out of the investment account.

Dollar weighted returns capture more than just the return of the assets in the portfolio. They also give you a better idea of the returns earned on the money you had at risk. If your advisor helps you determine when to add funds to the account, or when it makes sense to pull money out, the dollar weighted return is more likely to highlight the impact of that advice. More typically, cash flows into or out of an account are driven by the client and are based on cash flow needs, savings strategy and other life events.

If you want to hone in exclusively on the impact of the investment decisions made within the portfolio then time weighted returns are likely the better measure. However most investors will find that investment portfolios experiencing large inflows and outflows will have time weighted performance that differs from managed portfolios that do not have such contributions and withdraws.

Of course if there are no cash inflows and outflows after the initial investment then all three performance calculation methods; gain divided by amount invested, dollar weighted, and time weighted, will show the same investment return. (great point …. Correct but not intuitively obvious).

Back to that opening problem; why did one performance method show a 66% return while the other showed a 0% return? Here are more details on the twelve months of investing. During the 12 month period the $100,000 investment lost half its value, to $50,000, in the first six months at which point an additional $100,000 was added. In the second six months the investment doubled in value so the $150,000 grew to $300,000.

First we’ll calculate the dollar weighted return which is the gain divided by the average capital base. The gain is $300,000 less the $200,000 that was invested, or $100,000. Next comes the average capital base. We had $100,000 for the full period and $100,000 for half the period for an average capital base of $150,000. $100,000 gain divided by the $150,000 average capital base is .666, or a 66.6% return. Not bad.

Next we’ll calculate the time weighted return and we’ll do it by calculating the dollar weighted return for two time periods and then compounding them. For the first six months the stock declined by $50,000 and the average capital base was $100,000 for a return of -50%. For the second six months the stock appreciated by $150,000 on an average capital base of $150,000 for a return of 100%. To compound these two periods we add 1 to each return and multiply them together:

First, add 1 to each period return;
1 – 50% = .5
1 + 100% = 2

Then multiply the adjusted return numbers together;
2 * 0.5 = 1

Finally, subtract the 1 from your result;
1 – 1 = 0 which equals 0.0%

Performance measurement should be a detailed and accurate exercise following prescribed performance calculation standards. Yet even when the calculations adhere to a standard the results can vary significantly depending on which performance calculation method is used. Next time you’re quoted an investment return you’ll know to ask a few follow-up questions to ascertain what the investment in question might have actually done for you.

John Bird, MBA, CFA, CFP / President
Albion Financial Group
jbird@albionfinancial.com
(801) 487-3700

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Averting Financial Disaster – What You Need to Know

Disaster Waiting to Happen or Disaster Averted; You Choose

Headline: “Earthquake Strikes Salt Lake City. Buildings Destroyed: Utilities Down for a Month”

What comes to mind when we think about disasters are cataclysmic events; floods, earthquakes, fires and the like. And while it is essential to plan for these dramatic possibilities there are far less newsworthy yet much more likely “disasters” that can impact us in adverse ways. So prior to confronting the daunting task of planning for an unlikely large scale disaster spend some time planning for the more likely, and far more mundane, inconveniences that could rock your world. A side benefit to this planning is that your efforts can be used as building blocks when creating a large‐scale disaster recovery plan. Disaster mitigation strategies cover a broad range of topics from planning places for your family to meet in case of an emergency to maintaining adequate supplies of food and water. While the full range of disaster mitigation topics is essential to review, this piece will be limited in scope to essential preparations you should make to avoid crippling problems with your financial affairs.

Have you ever had your purse or wallet lost or stolen?

If so you know well those moments of concern as you attempt to recall exactly what was in it and what damage the thief might do before you are able to take mitigating steps. Having your mail stolen brings the same response with the additional uncertainty of not knowing what exactly was in the mailbox that day. What about that sinking feeling when due to business volatility bank balances are too low at the end of the month to meet your living expenses? Do you have adequate liquidity outside your company if the problem persists? What about your health? Do you have a mechanism in place in the event you are unable to conduct your own affairs due to a temporary disability? Who can you turn to for help in the event of an emergency? Let’s categorize and address these issues.

Checking and Organizing your Financial Information

Begin by organizing your financial data, recording the relevant account information, and storing it in a safe place. Know where your deeds, titles, and insurance policies are located and have them stored securely in a place where you can quickly grab them on your way out the door. Document the possessions in your house; walk through your home with a video camera recording images and describing the contents of each room. If possible have copies of the relevant documents, the video of your home, and account information secured off site and accessible by a trusted friend or advisor who you can reach on short notice. This will prove invaluable should your home be damaged or destroyed and also very useful if putting a hold on your assets or cancelling credit cards or debit cards becomes necessary, particularly if you are out of town and unable to access the information on your own.

Make sure your planning documents are current. This allows for someone you trust to make decisions on your behalf should you be unable to do so. Many of the tools to do this are relatively simple to execute but may have complex repercussions. Be careful to whom you grant these powers. Make sure your health care powers accurately reflect your wishes and are properly executed. Review your estate planning documents whenever you experience a significant life change. Keep copies of critical documents (Social Security, Passport and Driver’s License).

These documents are not very useful if they are not available when needed. Be sure someone you trust knows how to access the documents in case of an emergency. This trusted individual might need to get an executed copy of your health care directive to the hospital should you be unable to do so yourself.

At least annually obtain a credit report from each of the three reporting bureaus. There are also services available that, for a fee, can keep you apprised of any credit activity under your Social Security number on a daily basis.

Maintaining Accessible Rainy Day Funds

The other day when driving to work I pulled into a gas station to fill up. As we all now do, I got out, slid my credit card through the reader, and placed the nozzle in the filler tube. When the pump then told me my card could not be accepted I went inside and was informed that their link was down, they could not accept credit cards, and if I wanted to buy gas I’d have to use cash. Fortunately I had cash that day so was able to fill my tank but while I was doing so a half dozen cashless potential customers were turned away.

We are dependent on our financial system to function each day and the example above indicates how ingrained it has become in the fabric of our lives. While we don’t advocate basing disaster mitigation exclusively around the notion that our financial system will cease functioning it is likely that there could be temporary interruptions to your ability to access funds. This could be a result of a temporary system failure as mentioned above or the result of a failure of the tools in which your funds are invested. To protect against a temporary inability to access funds or credit lines keep several days of cash on hand. These are funds that would tide you over until the financial network in your area is up and running again. It is important to separate this cash from “walking around” cash you may normally carry in your wallet. While it is not the focus of this piece you should also have adequate food and water stored at home to tide you through a temporary period of time in the event you are unable to purchase basic supplies.

Far more likely than a systemic financial failure is an event specific to you or your region of the country that interrupts your usual cash flows from employment. Have a cash reserve set up to carry you and your family through three to six months of lean times. Keep these cash reserves as safe and liquid as possible. FDIC insured bank deposits and high quality money market funds are the best options. Yes, the yields on these tools are nonexistent right now but the purpose of this piece of your financial puzzle is safety and liquidity, not return.

Be careful of investment tools that are “similar” to money market funds but may offer a slightly higher current yield. While many of these tools may function as advertised for years, failure is most likely to occur in a time of crisis; just when you need it most. Auction rate securities, for example, were very popular as a cash management tool several years ago. By trading daily liquidity for weekly liquidity investors received a higher interest rate on their money. Unfortunately many investors in these tools did not understand that these were not money market funds. In 2008 when buyers for auction rate securities dried up holders were unable to sell their positions for much needed cash.

Check your insurance coverage. A good disability policy can make a big difference for you and your family should you be rendered unable to work for a period of time. Good health insurance (and yes, we recognize this is a hot button issue) can make the difference between a health issue being a minor setback or a road to bankruptcy. As CEO you are likely the primary breadwinner in your household. What happens to your family if you pass away? Life insurance, properly used, can really help your family meet their objectives should you be unable to provide for them.

The last point about liquidity is to review whether your financial assets are adequately diversified. It is very common for CEO’s, business owners, and senior executives to have the majority of their net worth tied up in their company. While wealth is often best created through concentration it is best retained through diversification. When your paycheck, your career path, much of your net worth, and in many cases your reputation is tied to a single company it is prudent to diversify a portion of your balance sheet away from that company. There are many tangible benefits to building a substantial portion of your net worth outside your company. These include the flexibility to raise funds without impacting your firm and the ability to maintain your family should the company fall on rough times and be unable to meet your cash flow needs. It also provides a lifeboat should the unthinkable happen and the company fail.

The Benefits of a Good Team

You likely already work with an accountant, an attorney and a financial advisor. When creating your disaster mitigation plan do not hesitate to take advantage of their expertise. A solid team watching your back can not only ease the process of creating your plan but can certainly prove invaluable help should the plan ever be called into use.

Your attorney can help you correctly create legal documents, specific to you, that provide essential guidance and a framework for action in the event of a variety of disasters. He can work through asset titling issues to ensure that your assets are held in such a way that they provide the most benefit to you and your family in a variety of prospective circumstances. Your attorney can review your full slate of documents from trusts and wills to medical and financial powers to make sure they meet your current requirements and do not have conflicting passages that could cause problems in the future.

Additionally, your attorney will usually keep a copy of all documents they create giving you the benefit of off‐site storage for these critical items should your originals become lost, stolen or destroyed. In addition to advice on how best to navigate the tax and regulatory environment in which your business operates your accountant is an excellent backup location for your specific financial information. Should your financial information be lost, stolen, or destroyed your CPA will have records that can provide essential guidance as the data is reconstructed. Often your CPA firm will know your corporate information as well as your personal information and can be an excellent source of aid in the event a disaster befalls your firm.

Most CEO’s of closely held businesses keep close tabs on most if not all of the financial relationships of their company and some choose to forego an accounting relationship altogether, preferring to handle these functions on their own. While this can be effective for the individual CEO it quickly becomes a problem if the CEO is no longer able to function. It can be extremely disruptive to the business, to say nothing of the family members charged with picking up the pieces, to recreate this knowledge base in the absence of a quality, previously involved, CPA.

Often communications with your financial advisor occur with far more frequency than with the other professionals on the team. It is in your best interest to use that relationship to its fullest. Your financial advisor can serve as a trusted backstop if they know you, the pieces of your financial puzzle, and how you’d like the pieces to fall together in the coming years. They can be an excellent place to keep backup copies of your data, and if they adhere to a fiduciary standard, can give you the security of knowing there is a team out there that has a duty to look out for your best interests first. Your financial advisor can provide guidance regarding tools and techniques that are best suited to your individual circumstances whether it be a place to park an emergency reserve fund or the appropriate investment policy for financial assets with a longer time horizon. In the event of an emergency they are in a position to quickly help you implement steps to mitigate the damage to your financial situation.

Disaster recovery planning can be a daunting project but like so many endeavors it can be accomplished if divided into smaller more manageable tasks. The items outlined here are some of the steps that serve as building blocks to a comprehensive disaster mitigation plan. There are scores of resources available to help you design and build your own disaster recovery strategy. One of the most comprehensive sources is the Federal Emergency Management Agency. They have extensive guidance available online at http://www.fema.gov/plan/index.shtm. May you create an excellent plan and never have to use it.

Devin Pope, MBA, CFP
Senior Wealth Advisor
dpope@albionfinancial.com
Albion Financial Group
(801) 487-3700