A slightly different format this week. I’ve been reading investment articles, and I thought I’d highlight the parts that interested me. Here is a striking chart from a great article I got from Blackrock. The important lesson here is that very few of our clients actually have the classic 60/40 portfolio. And this chart kind of explains why.  With interest rates down around zero for the next year or two, the yield on bonds isn’t going to be anything to brag about. Our Yield model, which would benefit greatly from 14% yield in Treasury bonds, is heavy in dividend paying stocks.

There is still a place for bonds in the portfolio. They are a useful “insurance policy” when the market gets flustered.

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This is a blog I’ve wanted to have for a while now. The chart above shows average returns for various asset classes over a period of time. As you can see, the longer the time frame, the smaller the columns get. This means the range of returns narrows.

Here’s where it matters to us. Part of our job is helping clients make decisions about how to invest their money in order to reach their goals. An early conversation about investing will often include a discussion about “the market” and the potential direction of a particular part of that market. This conversation is heavily influenced by the left side of the chart. That’s where the financial press finds stories. If there is volatility in the returns, that means there may be a way to turn that into a story, “Stock A has unexpectedly gone down, or up. Stock B has done the opposite!” That’s where the drama comes from.

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The Story

Charles and Lisa had been clients for years. We had an exemplary advisor/client relationship: open, clear, and regular communication, and mutual trust. We had long maintained a plan that everyone had confidence in when we suggested taking part in a new exercise.  

As trusted stewards of others’ money, we prioritize regularly participating in professional development opportunities. We had recently completed a refresher on the Financial Life Planning program. Our relationship with Charles and Lisa pre-dated this approach, so although we felt we knew them thoroughly, we knew that going back to basics could only strengthen their financial plan. They agreed.

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In the latest episode of Transition Talks, Josh Ackerman delves into what makes Context Financial uniquely equipped to handle the complexities of family business transitions. Founded by his father in 2000, Context Financial is built on the principle of understanding the client’s context before making recommendations. This episode reveals how this approach is particularly effective for family businesses facing significant ownership changes.

Context Financial’s Origins and Philosophy

Josh shares the origins of Context Financial, highlighting how his father’s vision emphasized the importance of context. This philosophy remains central to their approach, ensuring that each client’s unique story and needs are thoroughly understood before any financial advice is given. This foundational principle has shaped their success in guiding family businesses through transitions.

Our Focus on Family Businesses

Context Financial specializes in helping family businesses prepare for transitions, whether passing ownership to the next generation or selling to external buyers. These transitions are often complex and emotionally charged, involving family dynamics and long-standing business practices. By focusing on the specific context of each business, Context Financial provides tailored strategies that address both financial and relational aspects of the transition.

The Team and Their Approach

Josh introduces his team, whose dedication and problem-solving skills are crucial to their client-focused approach. He emphasizes the importance of finding team members who prioritize the client’s goals and demonstrate a genuine commitment to resolving issues. This ethos ensures that clients receive personalized and effective support throughout their transition process.

Building Trust from the First Meeting

The first meeting with Josh Ackerman is designed to be a no-pressure, exploratory conversation. Josh explains that this initial interaction is about understanding the client’s needs and determining if there’s a mutual fit. By focusing on building trust and understanding client goals from the outset, Context Financial lays the groundwork for a successful advisory relationship.

Why Context Matters

One of the key takeaways from this episode is the importance of context in financial planning and exit strategies, especially for family businesses. Understanding the history, dynamics, and goals of a family business allows Josh to provide insights and strategies that are truly aligned with the client’s best interests. This approach not only addresses financial concerns but also helps navigate the emotional and relational challenges that come with business transitions.

Conclusion

This episode of Transition Talks underscores why Context Financial is uniquely positioned to support family businesses through transitions. Their commitment to understanding each client’s unique context and building trust from the first meeting sets them apart in the financial advisory field. Whether you’re considering passing your business to the next generation or exploring a sale, Context Financial offers the expertise and personalized approach needed to navigate these significant changes successfully.

For more information or to schedule an initial consultation or to reach out to Josh and his team directly, visit Context Financial.

Listen on your favorite podcast platform: https://bit.ly/TT_Ep2 

Watch on our YouTube channel: https://youtu.be/saGMPTm_A-I 

In this episode of Transition Talks, Josh Ackerman shares the stories and experiences that inspired him to work with business owners navigating significant transitions. These tales illustrate the challenges and unexpected hurdles that arise when preparing for a business transition and underscore the importance of asking the right questions early in the process.

The Importance of Asking the Right Questions

Josh emphasizes the crucial questions business owners often overlook before making irreversible decisions. In a story where two business partners were ready to sell their business but hadn’t considered whether the sale proceeds would sustain their current lifestyle, Josh shares, “I realized there were questions nobody was asking these business owners before they made transactions they couldn’t take back.

The Identity Challenge

Many business owners, particularly those who have spent decades building their businesses, find their identity deeply intertwined with their work. It’s crucial to contemplate who you will be once you are no longer the boss. Josh highlights the importance of exploring this aspect, focusing on the questions that need to be asked before making irreversible decisions.

A Crucial Realization

Josh recounts a story about two partners preparing to sell their business. Despite receiving a seemingly good offer, a critical question about their post-sale financial stability revealed that the proceeds wouldn’t sustain their current lifestyle. This insight, stemming from Josh’s thorough understanding of their financials, helped them rethink their decision, leading to a more strategic approach to saving and growing the business value before eventually selling it successfully.

Planning for Retirement: The Personal Impact

A former client’s retirement journey highlighted the personal adjustments required post-sale. After selling the business and completing an earn-out period, the client faced a new reality where his wife had an established social life that he was not part of. This story emphasizes the need for business owners to consider their personal lives and relationships when planning for retirement.

Aligning Values with Capital

Josh stresses the importance of aligning one’s capital – time, attention, and money – with personal values. He notes that the hardest part isn’t the financial planning but rather defining what you truly want in retirement. Insights from his mentor about this alignment advocate for purposeful and values-driven planning.

The Family Business Transition

Discussing a family business scenario, Josh illustrates the complications that arise when the business isn’t large enough to support both the retiring owner and the next generation. This underscores the need for early and thorough conversations about financial expectations and realities when planning generational transitions.

The Role of a Financial Advisor

It’s important to have someone on your side who focuses on your best interests, asking critical questions that others might overlook. Josh and his team at Context Financial take this proactive approach, ensuring that clients are not only financially prepared but also personally ready for life after selling their business.

How to Connect with Josh

If you’re considering a business transition and seeking guidance, reach out via Context Financial. Start with a no-pressure conversation to explore how Josh and his team can assist in aligning business transactions with personal goals.

Follow the podcast for updates on new episodes. If you find this podcast useful, share it with others who might benefit from these insightful discussions.

Listen on your favorite podcast platform: https://bit.ly/TT_Ep3 

Watch on our YouTube channel: https://youtu.be/nPXb89mWhR8 

Have you ever thought about what truly matters to you beyond just the numbers in your bank account? Today’s episode explores a groundbreaking concept: the True Wealth process. Josh Ackerman explains how this innovative approach emphasizes the importance of aligning your financial strategies with your personal goals and values, ensuring a fulfilling transition into the next chapter of your life. Read on to learn about how this process can transform your financial planning journey.

The True Wealth Process

Traditional financial planning often zeroes in on the numbers – how much you’ve saved, invested, and earned. But as Josh Ackerman explains, the true wealth process digs deeper, urging us to ask not just how much money we have but what our financial resources are truly for. Money Quotient has pioneered a movement known as financial life planning. This method helps clients articulate and clarify their values and visions, making it more than just about financial gains.

Clearly Defining Your Goals

Understanding and expressing your goals is harder than it may seem. Many people initially think they know what they want, but it often takes introspection to uncover deeper aspirations. Josh emphasizes the real power of the planning process is in helping the client clarify and articulate these are the things that matter the most. Context Financial’s True Wealth process is designed to facilitate and enhance this understanding, guiding clients through tailored exercises and conversations that lead to aha moments about their life goals.

A Detailed Five-Stage Planning Process

Context Financial employs a comprehensive five-step process designed to cater to individual needs and life stages.

1. Explore: The initial meeting focuses on understanding your immediate needs and ensuring a good fit. Josh likens this to solving an immediate problem while looking at longer-term goals.
2. Engage: This stage delves into your money stories and perspectives, often revealing deep-seated values and priorities.
3. Envision: Here, you create a vision of your ideal life. “What are the things that if you didn’t get a chance to do this, you’d be really disappointed?” Josh asks. This conversation integrates both emotional and financial elements.
4. Enlighten: You gain clarity on how your financial resources can support your envisioned life, incorporating any shortfalls or necessary adjustments.
5. Empower: The final step involves ongoing monitoring and adjusting plans as needed, ensuring that you remain on track with their evolving goals.

Transforming your life’s financial approach starts with understanding what true wealth means to you. Josh Ackerman and Context Financial guide clients through a meticulously structured process that emphasizes personal values and goals over mere numbers. To learn more about Context Financial’s five stages of the Money Quotient True Wealth Planning Process, listen to this week’s episode.

Listen on your favorite podcast platform: https://bit.ly/TTep04 

Watch on our YouTube channel: https://youtu.be/8kSSLannVu0 

Have you ever thought about what truly matters to you beyond just the numbers in your bank account? Today’s episode explores a groundbreaking concept: the True Wealth process. Josh Ackerman explains how this innovative approach emphasizes the importance of aligning your financial strategies with your personal goals and values, ensuring a fulfilling transition into the next chapter of your life. Read on to learn about how this process can transform your financial planning journey.

The True Wealth Process

Traditional financial planning often zeroes in on the numbers – how much you’ve saved, invested, and earned. But as Josh Ackerman explains, the true wealth process digs deeper, urging us to ask not just how much money we have but what our financial resources are truly for. Money Quotient has pioneered a movement known as financial life planning. This method helps clients articulate and clarify their values and visions, making it more than just about financial gains.

Clearly Defining Your Goals

Understanding and expressing your goals is harder than it may seem. Many people initially think they know what they want, but it often takes introspection to uncover deeper aspirations. Josh emphasizes the real power of the planning process is in helping the client clarify and articulate these are the things that matter the most. Context Financial’s True Wealth process is designed to facilitate and enhance this understanding, guiding clients through tailored exercises and conversations that lead to aha moments about their life goals.

A Detailed Five-Stage Planning Process

Context Financial employs a comprehensive five-step process designed to cater to individual needs and life stages.

1. Explore: The initial meeting focuses on understanding your immediate needs and ensuring a good fit. Josh likens this to solving an immediate problem while looking at longer-term goals.
2. Engage: This stage delves into your money stories and perspectives, often revealing deep-seated values and priorities.
3. Envision: Here, you create a vision of your ideal life. “What are the things that if you didn’t get a chance to do this, you’d be really disappointed?” Josh asks. This conversation integrates both emotional and financial elements.
4. Enlighten: You gain clarity on how your financial resources can support your envisioned life, incorporating any shortfalls or necessary adjustments.
5. Empower: The final step involves ongoing monitoring and adjusting plans as needed, ensuring that you remain on track with their evolving goals.

Transforming your life’s financial approach starts with understanding what true wealth means to you. Josh Ackerman and Context Financial guide clients through a meticulously structured process that emphasizes personal values and goals over mere numbers. To learn more about Context Financial’s five stages of the Money Quotient True Wealth Planning Process, listen to this week’s episode.

Listen on your favorite podcast platform: https://bit.ly/TTep04 

Watch on our YouTube channel: https://youtu.be/8kSSLannVu0 

Over the past six months, markets have marched higher almost uninterrupted since the lows back in March, just as the economy was thrown into the deepest recession since the Great Depression. Many investors find this disconnect between the equity market and the economy perplexing and are constantly asking us: is it justified?

The media often interchange the economy and the stock market: when the economy is booming we would expect stocks to behave similarly. This seems logical given U.S companies are based, operate and sell in the U.S. and economic growth impacts company revenue and profits. Likewise, when the economy is in a recession or recovering (as it is now) we would expect stock market movements to mirror (or at the very least be highly correlated) to that changing economic conditions. However, simply taking these assumptions at face value reflects substitution bias.

Substitution bias is the very natural and normal tendency to take mental shortcuts in trying to arrive at a complicated answer, which sometimes leaves us without a complete understanding of the problem itself. Luckily, by leveraging data, checking across sources and, most importantly, being open to a more complex discussion can help in getting around this bias.

While it is always hard to fully attribute where market gains and losses emanate from, we can point out that the economy and the stock market are not in fact 1 to 1 in the U.S. As shown, the composition of the equity market is heavily weighted to technology at 39%, which has done extremely well during this time, yet only 2% of total payroll jobs (Chart 1). Going deeper into the service sector, the industries most impacted by COVID-19 (including retail, hotels and tourism, transportation, entertainment, and restaurants) represent 20% of all payroll jobs and 19% of GDP, yet these same industries only represent about 7% of S&P 500 earnings.

In summary, while the stock market and the economy are linked, they have drastically different compositions, which can lead to the economy and markets appearing to be on different wavelengths. By yielding to substitution bias, investors may think the market rally is not justified, but a deep look under the surface suggests that in fact, it is.

Sector share of GDP, employment, S&P 500

The Story
Ginger has always been good at being thrifty. It’s who she is. Though she had significant sources of income and had saved well, it was challenging for her to feel confident that her savings were sufficient to live on for the rest of her life. This is true for a lot of people: it is difficult to interpret the implications on day-to-day life by looking at one lump sum of one’s worth.
Ginger came to us wanting to know that what she had meticulously saved throughout her life would simply be enough.

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