Negative Interest Rates: The Positives and the Negatives

By David Urovosky

You may have recently seen or read news stories about the trend overseas toward central banks attempting to stimulate their countries’ economies by reducing loan interest rates to below zero percent. The European Central Bank (ECB) has already embraced negative yields, and the Bank of Japan is the most recent entrant into this controversial phenomena.

In layman’s terms, here is what you need to know about this trend and how it may affect your financial investments in the future:

 What is a negative interest rate?

Negative interest rates are interest rates that are actually below zero. A depositor would actually have to pay money to the bank for keeping it there. In effect, the depositor is paying the bank to save their money.

This is how it theoretically works:  If you deposited $10,000 in your bank you may only receive $9,990 after a year—with no interest paid in between. That means savers won’t get all of their money back. You may ask “Why would I do that?” As long as the rates were not too low or not too negative, you may keep it there and “pay the fee” for safety or convenience.

It seems counterintuitive that people would pay a bank or financial institution to save money.  What is happening in the economy and financial markets in Europe and Japan that would make this option attractive to depositors?

This is not an attractive option for depositors. The Central Banks in Europe, Denmark, Sweden, Switzerland, and Japan are now charging commercial banks for their excess reserves. According to Bloombergview.com (January 29, 2016), negative interest rates actually punish banks that hoard cash instead of extending loans to businesses or to weaker lenders. They have not started charging retail customers (yet) for fear of losing deposits. By the end of 2015, about a third of debt issued by euro zone governments had negative yields. That means investors holding bonds to maturity won’t get all of their money back.

There are several potential explanations for the emergence of negative yields, particularly those on the short end of the yield curve. These include very low inflation, the persistence of the international savings glut and “flight to safety” toward low-risk, fixed-income assets.

In consequence, sovereign bonds of certain countries in Europe that are deemed low-risk have been in heavy demand. In addition, The ECB has exacerbated the demand for these bonds by implementing the Extended Asset Purchase Program (their version of quantitative easing — stimulating the economy by increasing funds in the monetary system).  The ECB is purchasing $60 billion of these bonds every month until at least September of 2016 for a total of $1.6 trillion euros. This and other factors have caused a shortage of these bonds, which has driven up the price and knocked down the yields into negative territory.

What is the likelihood that American banks and other financial institutions could start charging depositors to hold their money?

Most banks have not passed on this cost to their retail customers for fear of losing deposits. However, this policy does cost the banks money and hurts profits. The banks have tried to cover some of this cost by implementing various fees. Some commercial banks, such as Julius Baer and JP Morgan, have started to charge their largest corporate customers who carry tens of millions of dollars with the banks. In effect, they are telling these larger customers to take their money elsewhere!

For the average individual investor, what are the plusses and minuses of negative interest rates?

The big plus is that is that interest rates for loans of all types—mortgages, car loans etc.,— will be lower for a longer period of time. It will be a great time for borrowers. The same holds true for our government. With $19 trillion in debt, interest rates will remain low and our deficit will not increase at blinding speed. Businesses will be able to borrow at lower rates and expand. Companies will be able to borrow cheaply and either expand or buy back their stock (such as Apple and many other companies).

The minuses of negative interest rates are two-fold. It is bad for savers and that affects a lot of retired people. It may have a cost to keep money in the bank. The second is behavioral. If interest rates were only slightly negative, it may not change behavior very much. Depositors would still leave money in the bank for safety and convenience. But negative rates crossing that threshold (some analysts say at 0.5% negative) could change behavior. How?

  • People may start to make excessive tax payments to the government and earn a zero return until a refund is received from the government, thus avoiding negative rates.
  • People may start to pay their electrical bills or cable bills months or even a year in advance.
  • People may also start to hoard cash and leave it under their mattress.

None of these tactics are good for the economy. The economy is based on confidence and we need money in the system to be “out there” changing hands, and making purchases. In his February 13, 2016 article “Negative 0.5% Interest Rate: Why People are Paying to Save” in the New York Times, financial reporter Neil Irwin muses, “Might new businesses sprout up that allow people to securely store thousands of bundles of $100 bills, or could people buy physical objects as stores of value that banks can’t charge a negative interest rate on?” In Japan, where rates have been very low to non- existent and now negative for a long time, many people buy safes to keep in the house. Maybe we should start looking for companies that manufacture safes as an investment?

What are the spinoff implications of negative interest rates for other financial market sectors?

For countries that have implemented negative rates, it may help boost their exports by encouraging currency depreciation and may support lending and domestic demand by further easing credit conditions. At the same time, they could also have some adverse consequences for financial stability through an erosion of bank profitability and through excessive risk taking by investors seeking a higher yield (as mentioned in my last quarterly report).

Potential implications for developing countries include a search for yield supporting capital inflows (for example, U.S. treasury bonds would become a very attractive investment compared to the bonds in sovereign debt of Europe because the treasuries are high yielding and the dollar would increase in value as compared to the euro), which could help offset the impact of an approaching liftoff in U.S. policy interest rates.

As far as currency goes, if our interest rates are higher than Europe and Japan (which they are now), investors searching for yield will buy these bonds. They are attractive. They are priced in U.S. dollars, so theoretically the dollar will go up in value as compared to the euro and the yen. This will make U.S. products more expensive around the world and will hurt sales and earnings of the large U.S. companies that have a lot of international sales. That is one reason the stock market took a big hit when Janet Yellen announced the first interest rate hike in almost 10 years in December 2015. Much of the rest of the world is lowering rates as we have started to hike rates. That hurts our multinational companies earnings and profits and share prices.

Your key takeaways:

I don’t think we will have negative rates in the United States this year; however, negative interest policy is spreading in the rest of the world. David Kotok, the Chairman and Chief Investment Officer of Cumberland Advisors said, “Five currencies and 23 countries are now practicing some form of negative interest rate policy (NIRP). In all cases the likely outlook is for NIRP to go lower in rate and for its usage to broaden. For perspective, 24% of the world’s real output is housed in those 23 countries ranging in size from Malta (the world’s smallest economy) to Japan (the world’s third-largest economy).”

I expect interest rates in the U.S. to remain low for a long time, perhaps 3 to 5 years. Investors will continue to search for yield and, with a lack of other choices, I think money (in fits and starts) will find its way to the stock market and other risk assets and drive prices of credit-sensitive bonds and stocks higher during the next few years.

Questions or comments? Send us an email at David.Urovsky@lfg.com.

The information in this blog post has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.  Any opinions are those of David A. Urovsky, President of Wealth Advisors Group, and are not necessarily those of Lincoln Financial Advisors.  Expressions of opinion are as of this date and are subject to change without notice.  This information is not intended as a solicitation or an offer to buy or sell any security referred to herein.   Investments mentioned may not be suitable for all investors. Investing involves risk, and investors may incur a profit or loss.

David Urovsky is registered representative of Lincoln Financial Advisors Corp. Securities and investment advisory services offered through Lincoln Financial Advisors Corp., a broker/dealer, Member (SIPC) and registered investment advisor. Insurance offered through Lincoln affiliates and other fine companies. It is not our position to offer legal or tax advice.  Wealth Advisors Group is not an affiliate of Lincoln Financial Advisors Corp. CRN-1468262-041116

 

 

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Keys to Risk-Adjusted Portfolio Management

Keys to Risk-Adjusted Portfolio Management

By David Urovsky

Not every investor has the same tolerance for risk, which is why risk-adjusted portfolio management is so essential in today’s volatile market.

The risk-adjusted investment approach starts with a clear understanding of the client’s risk tolerance and investment goals. Investment recommendations are initially constructed to match the client’s unique risk level and then carefully monitored to help keep the portfolio on track toward meeting the client’s goals.

Monitoring portfolio risk level

Risk tolerance is often directly related to a person’s experience with investments. For example, somebody who experienced the tech crash of 2000 – 2002 or the financial crisis of 2008 – 2009 is going to have a different perspective on investments than somebody who is coming into the market for the first time or who only has a couple of years of experience.

Time horizon is also a factor in a client’s risk tolerance. For example, a 40-year-old saving for retirement can be more growth-oriented than somebody who is nearing retirement and is going to need their portfolio to provide income.

Takeaway: At the most fundamental level, risk-adjusted portfolio management requires continuous monitoring of the portfolio’s risk level in light of market conditions. In 2016, I don’t expect great growth in the economy. I will be looking for investments that pay dividends.

There are times to take risks and times to wait for better opportunities

Looking back to 2015, with savings accounts or money markets paying less than 1 percent, many investors reached for higher yielding investment vehicles such as high-yield bonds, master limited partnerships (MLPs) and real estate trusts (REITs). Unfortunately, these investors ended up losing a fair amount of principal. As a result, in this uncertain economic and growth environment, you have to be careful not to try to force getting higher rates of return. You have to almost take what the market is giving you. There are times to take risks, and there are times to keep the powder dry, so to speak, and wait for better opportunities.

Little movement in asset classes in 2015

Another key factor in risk-adjusted portfolio management is understanding the correlation between investment/asset classes. Every portfolio must include different asset classes so that they don’t all move up or down at the same time. For example, Treasury bonds have a low correlation with the stock market. At the same time, correlation of high yield bonds with the S&P 500 and other stock indexes is much closer.

As it turned out, 2015 was an unusual year in that asset allocation didn’t help very much. Asset allocation is a strategy focused on how to invest among broad asset classes. The purpose of asset allocation is to control risk by reducing volatility or relative fluctuations in a portfolio thereby optimizing total return (investment returns, dividends and income). Asset allocation won’t guarantee a profit or ensure that you won’t have a loss, but may help reduce volatility in your portfolio. At the same time, diversification cannot eliminate the risk of an investment loss.

In 2015, most asset classes lost value or gained very little. Does that mean asset allocation no longer works? Of course not. Asset allocation is geared to long term success, and just because it didn’t work last year is no reason to discard it altogether. Asset allocation succeeds when it is part of a consistent investment approach over a long term, as opposed to chasing what’s hot today.

Takeaway: What is the key takeaway when it comes to risk-adjusted portfolio management? There are many different types of risks that an advisor reviews when putting together an asset allocation and selecting investments for the client. After all, we are trying to make money for the client. In order to do that on a consistent basis, each portfolio must be customized to reflect the balance between risk and return that the client will accept.

An advisor’s definition of success

Ultimately, our goal is to get better rates of return than the level of risk we have taken. From an advisor’s standpoint, that is our definition of success. When it comes to the client, success is invariably defined by the degree to which their portfolio meets their financial goals.

Questions or comments? Send us an email at David.Urovsky@lfg.com.

David Urovsky is registered representative of Lincoln Financial Advisors Corp. Securities and investment advisory services offered through Lincoln Financial Advisors Corp., a broker/dealer, Member (SIPC) and registered investment advisor. Insurance offered through Lincoln affiliates and other fine companies. It is not our position to offer legal or tax advice. Wealth Advisors Group is not an affiliate of Lincoln Financial Advisors Corp.
CRN-1416922-021016

How Is Your Financial Fitness? Find Out With This 8-Point Checkup

By David Urovsky

Helping people achieve their financial goals starts with realistic and manageable planning.

In order to develop a sound financial plan, the financial advisor must determine not only the amount of wealth required to achieve your desired lifestyle but also study your entire financial situation. This includes an examination of the present or potential need for such financial tools as budgeting, tax reduction strategies, retirement planning, insurance, estate planning to avoid long-term tax issues and more. It is important to account for every aspect of your financial well-being.

A great way to start the planning process is with an 8-Point Financial Fitness Checkup, through which you and your financial advisor will come up with answers to the following key questions:

• Do you have a written, detailed and realistic monthly budget?

• How are you funding your emergency fund? How long will these funds last if you needed them to cover monthly expenses?

• How are you planning to guard against income losses from illness, disability or death?

• What tax saving strategies did you employ during the last year?

• How are you funding your retirement plan and when do you plan to retire?

• What are your goals for retirement (i.e., travel, major purchases, lifestyle changes, and so on).

• When did you last review the beneficiaries on your retirement accounts and insurance policies?

• When did you last update your will?

Following these conversations, your advisor can develop a customized plan that responds to your individual goals and gets you strategically positioned for financial health. Quarterly or semi-annual reviews in person and phone calls throughout the year will allow your advisor to respond to changes occurring in your life as well as changing market conditions.

It’s never too late to improve your financial fitness, so why not get started on your checkup today?

Coming next:  How children of baby boomers are playing an increasingly important role in financial planning for their aging parents.

David Urovsky is a registered representative of Lincoln Financial Advisors Corp. Securities and investment advisory services offered through Lincoln Financial Advisors Corp., a broker/dealer (member SIPC) and registered investment advisor. Insurance offered through Lincoln affiliates and other fine companies. Wealth Advisors Group is not an affiliate of Lincoln Financial Advisors Group. CRN-1358518-112015

Third Quarter Market Recap – Good Riddance!

By David Urovsky

For investors, it was an eventful third quarter – to put it mildly – as stock indices fell into correction territory for the first time since 2011.

Global stocks dropped during the third quarter as worries about the pace of global growth and uncertainty about the Federal Reserve’s plans to raise interest rates continued to fuel big swings in the markets. The third quarter saw the equity markets erase gains made earlier in the year and dive into negative territory. The Federal Reserve had been telegraphing that a rise in interest rates was likely, but fears that the slowdown in China and some disappointing economic news here in the U.S. caused them to pause. That uncertainty was not received well in the markets and caused a sell-off. The Standard & Poors 500 Index (S&P 500) for the quarter ending September 30, 2015 lost 6.4% while the BarClay’s Aggregate Bond Index increased 1.23%.

We’re sure you were ready to say “good riddance” to a very ugly September. Us too! But, please don’t mistake this predictable seasonal weakness for something that it’s not. This correction was not so unusual and some market participants thought it was overdue.

To us, the recent market turbulence was similar to market corrections in 1998 and 2011. This year, the main culprits were China and the never-ending “will she or won’t she” game surrounding Federal Reserve Chairperson Janet Yellen and interest rates. In 1998 and 2011, the downdrafts started in August of each year, retraced about 50% of the decline only to go down one more time to the approximate level of the previous low. At this point a lot of the selling pressure exhausts itself and historically buyers start to outnumber sellers.

The good news is that a seasonally weak September and early October could set the markets up for a year-end rally. As we know, October to December is historically the strongest period for the equity markets, especially when it comes after a correction in late September.

The corrections in 1998 and 2011 were far different from, and a lot less severe than the technology crash in 2000 and the financial crash in 2008. In the chart below, you can see that the inflection points in 1998 and 2011 were only pauses in a continuing bull market. We think this recent correction is similar.

What’s Next?

Since the market lows in 2009, the S&P 500 has increased 184% through September 30, 2015. It has been a tremendous run and some investors wonder if the market is now overvalued. Many people believe that the run up in stock market values has been due to the extraordinary stimulative measures put in place by the Federal Reserve. While that has certainly helped, keep this in mind – during this time company earnings have also accelerated to the point that the price-to-earnings ratio of 15.1 is lower than the 20-year average of 15.8.

Meanwhile, the dividend yield of the S&P 500 is 2.5% while the 10-year Treasury note is only paying 2.1%. So while many investors got nervous about the recent sell-off after looking at their September 30 statements, stocks are not over-valued based on their historical averages and they yield more than bonds. Many investors would like to receive the higher yield and profit from the growth potential stocks have during the next 10 years compared to bonds. Here is our viewpoint: With money markets paying less than one half of one percent, stocks still look relatively attractive as compared to the alternatives.

Energy Woes

The price per barrel of oil has fallen off the cliff for the second time in seven years. The recent steepening on that price slide was initiated by OPEC’s decision to produce at maximum capacity. Their decision was both political and economic. From a political standpoint, lower prices hurt their enemies: Russia, Iran and Syria. From an economic standpoint, the Saudis are sacrificing price for market share.

Domestically, expensive long-gestation projects, especially offshore U.S. developments, are being canceled or postponed. At the same time, oil derived from shale deposits here at home is presently in gradual decline. Eventually increased demand will catch up with the lower supply and push prices higher. This may not occur in the short-term, but may be more of a story in the second half of 2016.

Segment-by-Segment Market Rundown

Listed below are our opinions of certain segments of the stock and bond markets.

U.S. Large Cap Stocks:

The dollar has leveled off after significant gains; at least, temporarily. This should help earnings for large cap stocks in comparison with the previous year. Growth-oriented stocks have still out-performed valued oriented stocks to such an extent during the past twelve months that value stocks are looking attractive. There is still some sector rotation, but we believe the trend is still up. There was a stark sector rotation during the third quarter in which healthcare finally started to sell off (-10.7%) and energy (-17.4%) and materials (-16.9%) got hammered. The safe haven – utilities increased 5.4% during the quarter while consumer discretionary stocks (-2.6%), consumer staples (-0.2%) and technology (-3.7%) hung in there fairly well. As noted above, the energy sector has not performed well. We had thought it would have started to rebound by now, but it hasn’t. We are reluctant to advise clients to reduce holdings in this sector at these prices.

Small and Mid-Cap Stocks:

These companies tend to have a smaller percentage of their sales in foreign countries therefore avoiding the negative effects of a stronger dollar and benefiting from a relatively stronger U.S. economy. In my view allocations of small and mid-caps should be at a slightly below average weighting.

International Stocks:

European economic data show slower growth in recent months as do Japan’s. However, that is not necessarily bad for stock market performance. As a result of this slower growth, both regions continue to ease monetary policy aggressively. The policies of the European Central Bank (ECB) are following those taken by the U.S. a couple of years ago. We like Japanese stocks because of that nation’s current growth policies coupled with their postponement of increased sales taxes. The dollar has also stabilized in relation to these foreign currencies, which reduces the risk of being adversely affected by the sometimes volatile fluctuations.

Looking at emerging markets, many have had deteriorating economic fundamentals and a strong dollar has further hurt them. As the dollar has recently stabilized, these investments have bounced back sharply. We tend to believe that an investor assumes a lot of risk in this area. If you have an interest in emerging foreign markets, please call us to discuss it. We will not be recommending this sector to most clients.

Bonds:

In deciding whether or not to invest in bonds, and what types of bonds to invest in, it is important to understand the terms maturity and duration and how they may affect certain investments.

Maturity:

The term fixed maturity is applicable to any form of financial instrument under which the loan is due to be repaid on a fixed date. The longer the maturity, the more potential volatility the bond (or mutual fund that invests in bonds) will have. We do not favor bonds with longer maturities.

Duration:

The term duration of a bond fund that consists of fixed cash flows is the weighted average of the times until those fixed cash flows are received. Duration also measures the price sensitivity to yield, the rate of change of price with respect to yield or the percentage change in price for a parallel shift in yields. When yields rise 1% bond prices will drop approximately 1% for every year of duration. For example, if a bond fund has a duration of 6 and interest rates increase 1%, the value of that bond fund will drop approximately 6%. We saw this in May and June of 2014. Because of this, we believe a shortened average duration of fixed income investments could help reduce interest rate risk.

U.S. Treasuries:

We have not liked this segment of the market for some time. We feel this is the market segment with the most interest rate risk. We do not believe that interest rates are going to shoot up anytime soon. The velocity of money, a statistic we look at from the St. Louis Federal Reserve shows little to no threat of inflation in the short term. When the U.S. economy starts to improve at a faster rate, we believe interest rates will increase which will hurt this sector of the bond market.

Investment Grade Corporate Bonds:

It is our view that corporate bonds with longer-term maturities have too much interest rate risk and favor short-duration corporate bonds.

High Yield Corporate Bonds:

These are also referred to as junk bonds. High yield bonds are more sensitive to credit risk (default risk) than they are interest rates. They tend to be more correlated to the stock market than the bond market. These bonds had done very well since the credit crisis in 2008-2009, but got hit hard during the fourth quarter of 2014. The high-yield bonds of energy companies were crushed and that brought down the whole sector. We believed that the selling was overdone and were not surprised to see a rebound in prices during the first part of 2015.

Floating Rate Bonds:

These bonds have a relatively high yield compared to other corporate bonds and are not as sensitive to rising interest rates because the yields in the portfolio reset every 30 to 90 days. Like high-yield bonds, they are more credit-sensitive. They offer fairly good yields, but we feel they could have downside price risk with very little upside price potential. Instead we favor short term bonds or possibly dividend-paying stocks.

Foreign Bonds:

These bonds can be tricky because the manager of any foreign bond fund must also consider currency risk. The bond fund managers we tend to favor currently utilize investment grade bonds with short durations. They also have a lot of experience with currencies. However, these bonds have proven to be more volatile than we would have liked from a fixed income investment.

Municipal Bonds:

Municipal bonds have done very well in 2014 and 2015, rebounding from their poor performance in 2013. We believe they are fairly valued and still worthwhile to hold for investors in the higher tax brackets.

Gold:

We favor having a portion of the portfolio in gold as a hedge against “black swan” types of events (very bad things, such as current geo-political risks). Gold as an investment in the short term looks to have stabilized and is in a trading range. There does not seem to be a large catalyst such as increasing inflation to move these shares substantially higher in the short term.

The Takeaway

Looking ahead to the fourth quarter, uncertainty will no doubt continue to be the watchword in the equity markets. The way we see it, the best way to counter any investment uncertainty is to remain resolute in planning and decision making for the long term.

Next post: How is your financial fitness? Find out with my 8-point checkup.

Sources:
Morningstar, October, 2015
JPMorgan, Guide to the Markets, 4th Quarter, 2015
St. Louis Federal Reserve website, September 30, 2015
Dow Theory Forecasts, October 5, 2015

Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks.
The S&P 500 is an unmanaged index of 500 widely held stocks.
Investors cannot invest directly in an index. The S&P 500 is an unmanaged index of 500 widely held stocks.

Past performance does not guarantee future results. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of David A. Urovsky, President of Wealth Advisors Group, and are not necessarily those of Lincoln Financial Advisors. Expressions of opinion are as of this date and are subject to change without notice. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein. Investments mentioned may not be suitable for all investors.

Investing involves risk, and investors may incur a profit or loss.

David Urovsky is registered representative of Lincoln Financial Advisors Corp. Securities and investment advisory services offered through Lincoln Financial Advisors Corp., a broker/dealer, Member (SIPC) and registered investment advisor. Insurance offered through Lincoln affiliates and other fine companies. It is not our position to offer legal or tax advice. Wealth Advisors Group is not an affiliate of Lincoln Financial Advisors Corp. CRN-1358512-112015

Great News! Wealth Advisors Group Realigns Broker-Dealer Affiliation with Lincoln Financial Advisors

By David Urovsky

August 25, 2015 represents a major milestone for Wealth Advisors Group. On that date, we realigned our broker-dealer affiliation with Lincoln Financial Advisors (LFA), one of Lincoln Financial Network’s two broker-dealers. As a result, we now have access to Lincoln’s full U.S.-wide planning and technology capabilities.

We could not be more excited about the promise this new relationship with Lincoln Financial Advisors holds for our clients. Now we will be able to tap into all the capabilities and resources of Lincoln Financial Network so that we can serve clients even better and take our firm to the next level. This move will benefit everybody involved.

We’re delighted that we will be affiliated with LFA’s Greater Washington, D.C. Regional Planning Office, which will give our clients access to the full support that Lincoln offers to financial advisors and clients throughout the Greater D.C. marketplace. This includes a local planning department, local operations department and local technology team that provides the latest upgrades and updates in the financial services industry.

One of the most important benefits of our new alliance with Lincoln will be expanded access to research, analytics and financial planning resources.

We will be working closely with Stefan Lambert, managing principal of LFA’s Greater Washington, D.C. office. Here is what he had to say about our new affiliation: “We are delighted that David is bringing his 20+ years of experience in financial planning, investment management and wealth management to our Frederick marketplace. David and his team represent the core values that LFA advisors throughout the country embrace in assisting clients with financial matters, including comprehensive and holistic planning, as well as a risk-adjusted approach to investment management and wealth management.”

Reinforcing Lambert’s comment about risk, one of our hallmarks at Wealth Advisors Group is maintaining a strong emphasis on managing risk in a portfolio. Our number one goal is to obtain optimal returns with the least amount of risk. At the same time, we follow a fee-based approach that always puts the client’s best interests first, avoids conflicts of interest with the sale of investment products, and provides more transparency regarding what clients are being charged.

About Wealth Advisors Group

Wealth Advisors Group draws upon president David Urovsky’s 20+ years of experience in the financial services industry to provide comprehensive, holistic and risk-managed investment management and wealth management services to clients who are ready to retire or who have already retired. The firm is based in the heart of downtown Frederick, Md. David Urovsky is a registered representative of Lincoln Financial Advisors Corp., a broker/dealer (member SIPC) and registered investment advisor. Wealth Advisors Group is not an affiliate of Lincoln Financial Advisors. For more information, visit http://www.wealthadvisorsgrp.com.

About Lincoln Financial Network

Lincoln Financial Network is the marketing name for the retail sales and financial planning affiliates of Lincoln Financial Group and includes Lincoln Financial Advisors Corp. and Lincoln Financial Securities Corporation, both members of FINRA and SIPC. Consisting of approximately 8,500 representatives, agents and full-service financial planners throughout the United States, Lincoln Financial Network professionals can offer financial planning and advisory services, retirement services, life products, annuities, investments, and trust services to affluent individuals, business owners and families.

CRN-1277814-081915

Introducing a New Way to Raise Your Investment IQ

By David Urovsky

Investing the intelligent way. That’s what my new blog, David Urovsky’s Investment IQ, is all about.

For more than 20 years, I have been helping clients achieve their financial goals through comprehensive, holistic financial planning and wealth management. Through Wealth Advisors Group, the independent financial services firm I founded in 2002, I work primarily with people who are ready to retire or who have already retired.

The core values I developed over the past two decades set me apart from traditional financial planners. First and foremost, I strongly emphasize managing risk in a portfolio. My number one goal is to obtain optimal returns with the least amount of risk.

My team and I make it a point to know our clients and their objectives, while educating them about their options. Clients tell us that they appreciate our ability to explain the complexities of the financial world in ways that are meaningful, yet easy to understand.

Over time, we have watched our clients work toward achieving their financial goals through well-conceived planning and commitment. Our success is directly attributed to the close relationships we have fostered by playing an active role in the long-term success of our clients’ financial lives.

These values bring me to why I started this blog. Taking care of financial matters with confidence and optimism is a long journey, and I want this blog to be a starting point. My goal is to enlighten and empower those seeking advice about finances.

We will cover a lot of ground in this blog. We’ll deal with financial trends, market developments (both domestic and global), investment planning, tax reduction strategies and pressing public policy issues related to finance and investments. From time to time, we will go beyond financial nuts and bolts and address questions of lifestyle that pre- and post-retirees face.

Along the way, I will tap into the expanded research and financial information resources now available to us through our new broker-dealer affiliation with Lincoln Financial Advisors, one of Lincoln Financial Network’s two broker-dealers. More on that in our next post.

Stay tuned!

CRN-1337007-102715

Hallmarks of a Client-Centric Investment Approach

Hallmarks of a Client-Centric Investment Approach

By David Urovsky


Knowing the client. That is what a client-centric investment approach is all about.

An investment advisor’s work process must begin with the client. The advisor must take the time to really get to know the client as an individual. In the first meeting, the advisor should ask about the client’s current financial circumstances. Factors to review include annual income, job security and satisfaction, and financial assets set aside for retirement or other financial objectives. Then the advisor and client should discuss anticipated financial goals and the time horizon the client has in mind.

Based on a careful study of this information, the advisor is then able to develop a customized financial plan that offers several approaches to investment – all of which are clearly defined, manageable and responsive to the criteria the client has provided. After the client selects the approach that seems most appropriate, the advisor finalizes and exacts the plan, choosing carefully from the vast array of financial products available in the marketplace.

Day-to-day, the client-centric investment approach is demonstrated through attentive service that includes returning phone calls and e-mails promptly (on the same business day). And sometimes, the advisor goes above and beyond.

For example, a couple of weeks ago, I went with a client to help her buy a car because she wasn’t familiar with all of the financial terms and jargon. Next week, I’m going to sit with a client and her attorney to discuss alimony disagreements with her ex-spouse.

Client-centric portfolio management also means being proactive with regular and frequent client communication by phone, e-mail, mail and, if appropriate, in-person meetings.

Consistent portfolio review is another hallmark. Depending on the client’s preference, portfolio reviews could be quarterly, semi-annual or annual.  Whatever the frequency, these reviews must be done consistently. They can be done in-person or by phone, depending on the client’s preference. Either way, consistent portfolio reviews make it possible for the advisor to respond more effectively to changes in the client’s life or market conditions.

Perhaps the most important hallmark of the client-centric investment approach is that all investment solutions are customized and personalized.  This means strict avoidance of cookie cutter solutions or pre-packaged investment models.

In the long run, client-centric investment depends on the quality of personal relationships. As an advisor, I’m not just a stranger who manages money. I make it my business to be accessible to my clients. In that spirit, I have been known to make house calls.

David Urovsky is registered representative of Lincoln Financial Advisors Corp. Securities and investment advisory services offered through Lincoln Financial Advisors Corp., a broker/dealer, Member (SIPC) and registered investment advisor. Insurance offered through Lincoln affiliates and other fine companies. It is not our position to offer legal or tax advice. Wealth Advisors Group is not an affiliate of Lincoln Financial Advisors Corp. CRN-1408432-020216