Looking Backward, Thinking Forward
"The best fighter is not a Boxer, Karate or Judo man. The best fighter is someone who can adapt on any style.” ― Bruce Lee
Dear clients and friends: Four years ago, I announced that Fielder was entering the business of helping individuals and families manage their assets and financial affairs. Why enter this business?
The Inspiration (or Exasperation)
After the 2008 financial crisis, friends and relatives often asked me what they should do with their money. Some shared what their financial advisers were recommending. It made me cringe. Many of their strategies struck me as naïve extrapolations of the past rather than forward-thinking. It seemed like people were paying high fees for questionable advice that was riddled with conflicts of interest. Then I got mad. It made me recall what happened to my grandparents. Growing up I watched them slowly go broke. Initially, they were quite wealthy. My grandfather sold his cotton seed oil business in the 1960s and retired. He figured that he had more than enough money to live off his interest. Through a combination of poor planning and inflation, their wealth dwindled. By the time my grandmother reached her 80s, she was broke. How did this happen? What could they have done differently? These questions haunted me as a young man. After the financial crisis, I realized that many people faced a similar type of threat. Central banks were engaging in unprecedented financial repression, robbing savers of interest income and inflating asset prices. People desperately needed thoughtful, objective guidance. Rather than rise to meet this demand, many traditional firms seemed too wed to their lucrative, conflicted legacy business models. Moreover, the world was changing. I realized that if I was going to thrive – and help others thrive – I needed to change too. I could not afford to be anchored to legacy business models, cost structures, or mindsets. I needed an independent mindset, a totally flexible investment mandate, and a low-cost structure. In short, I needed to be adaptable. This is why I launched Fielder’s private wealth business four years ago. I wanted to help people in a way other firms appeared unable or unwilling to do.
What the Billionaires Do
Billionaires often hire their own Chief Investment Officer (CIO) to manage a dedicated “family office”. The family office works for the billionaire, not a bank or brokerage firm. It decides if and how to use firms like JP Morgan or Goldman Sachs (and shields the billionaire from their sales pitches). The family office also advises in other areas such as insurance, debt, and estate planning. Fielder aims to provide this type solution to families who do not have the scale or appetite to build and manage their own family office. Rather than a single family bearing the full expense of our infrastructure, it is shared among our collective client base. Over the past four years, Fielder has grown from serving one client to 37 client families. We manage over $185 million on their behalf. Our capabilities have grown significantly as well. Last year, Steve Korn joined as a Partner. Steve and I have known each other for over 20 years. He brings significant and relevant experience. Before Fielder, Steve was a CIO for two separate family offices.
Markets, economies, and politics have changed – and are changing – dramatically. Now is not the time for extrapolating the past into the future. We must adapt to a new environment. Consider …
The Past 4 Decades: Since the early 1980s, we have been blessed with favorable demographics (baby boomers and women entering the workforce), falling interest rates, falling tax rates, and rising risk appetites. This gave us the gift of rising asset prices (stock, bonds, real estate, etc.). The Present: Yesterday’s mid-teens interest rates have fallen to today’s zero bound; yesterday’s workers are today’s retirees; yesterday’s free-market politicians are today’s populists. Central banks are experimenting with more aggressive financial repression. Interest rates in Germany, Japan and other major economies are now negative. That means savers literally pay to own a bond.
Not that this necessarily foretells hardship ahead. Perhaps we are blessed with low inflation and steady growth for years to come. It is possible. But so is the opposite. Our mandate is to help clients balance their assets in a way that contemplates different potential future paths. We think about potential downside, while seeking to maximize exposure to the serendipity of human innovation and progress. The only way to thrive in a fast-changing, uncertain world is to be adaptable. We must evolve. One way we’re doing that is with Direct Indexing. We recently obtained a new software solution that enables us to tailor an index with a basket of individual stocks rather than using an ETF or fund. This lets us proactively harvest tax losses while still closely tracking the underlying index. Hypothetically, a client may be able to realize tax losses even if their index portfolio is up in a given year.* Another area in which we continue to enhance our capabilities is alternative investments. We believe that some of the best opportunities may come outside of public markets. Steve Korn has led our search for attractive opportunities off the beaten path, such as in private equity or real estate. Over the past four years, we have earned the trust of our 37 client families. This inspires us. It energizes us. We are excited to continue building on that trust in the years ahead.
Frank Byrd, CFA
*Direct indexing may not be cost effective below certain account sizes. Further, loss-harvesting might not provide any tax advantages in some account types. Thus, we do not use direct indexing for all clients or accounts.
Disclaimer: While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in the document. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Nothing herein should be construed as a recommendation to buy or sell any of these securities. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Fielder or its employees may have an economic interest in securities mentioned herein.