Lifelong learning. It’s a core belief here at our firm, and we regularly read across a variety of topics. I recently asked the team to share any of their favorite books from the past year, business or otherwise. Below is what we’d offer up as our recommendations from 2017, and if you have any good book recommendations from the last year, please let us know!
As my clients know, planning for the future eventually includes a conversation about mortality. When Breath Becomes Air by Paul Kalanithi is a powerful memoir that tackles this topic to its core. This story made me reflect on how the human spirit allows us to re-imagine a new future that includes hope, faith, love and joy – no matter what the circumstances and regardless of the uncertainty. There is so much about this story that lingers, leaving each reader a new set of ideas, and most likely questions, that will, no doubt, leave you changed.
My favorite book of 2017 was The Obsession by Nora Roberts. While Nora Roberts is probably better known as a romance writer, her last several books are more mystery/thriller types that appeal to me. This story is a mystery about woman who (as a child) discovered her dad was a serial killer. Fast forward to her adulthood and she is being stalked by a serial killer who is mimicking her father’s style. The setting is the islands of Puget Sound, and I liked the story and flow of the book.
I thought Principles by Ray Dalio was a great read not just from a business perspective (Dalio founded what is now the world’s largest hedge fund), but also life principles. Obviously, he has been vastly successful in the business world, but he also shares valuable thoughts on how he lives his own life, and I think most would take something meaningful away from this book. As Dalio writes, “Time is like a river that carries us forward into encounters with reality that require us to make decisions. We can’t stop our movement down this river and we can’t avoid those encounters. We can only approach them in the best possible way.” Good stuff!
This year, I re-read The Power of TED by David Emerald because it provides great guidance on how to best interact with others in more effective ways. It explains the undesirable roles and techniques we often find ourselves in and provides an empowering alternative. For anyone who wants to lead, manage, coach, parent or help others with greater impact and results, this book is for you.
One that caught my attention earlier this year and challenged many of my longstanding beliefs was Predictably Irrational by Dan Ariely. It’s a book about human behavior and how we consistently act irrationally. So consistent, in fact, our irrational behavior is predictable. Many of his illustrations point out the ways we repeatedly act irrationally in every day behavior and makes the reader much more conscious of these actions.
The most common question clients ask me in meetings these days is, “When will this run end, and how bad will the downturn be?” Published in 2008, “The Great Depression: A Diary” is part history and part finance that offers some perspective for today’s environment. Authored by a young attorney who was fascinated with the 1929 stock market crash, this story offers an in-the-trenches account of the ugliest recession our country has ever faced. My takeaways include not only the changes in our economy and markets since the 1930s that will help prevent another 10-year depression, but also the things that remain the same, such as fear, greed, and the folly of relying on predictions in managing one’s money.
While the S&P 500 remained near its all-time high, the recent massive selloff in the technology sector went mostly unnoticed. But for investors who follow the so-called “FANG” stocks (Facebook, Amazon, Netflix, Google) the hit was painful: About $60 billion in value was wiped out in just one afternoon, representing the largest selloff in nearly 2 years.
The wipeout was a function of just how big these companies have become and the position they are in with new tax reform looming. Tech companies are expected to receive little benefit given its already-low average tax rate of 18.5% (below the 20% proposed rate).
This has caused investors to rotate out of the tech stocks and into the financial services sector, which stands to benefit more from a corporate tax rate that would drop from the current 35% to 20%.
Interestingly, the S&P 500 was relatively unaffected while this rotation into financials and out of tech ensued. The index’s volatility actually remained low, as did correlations among the S&P 500’s member stocks.
In other words, the diversity offered by the S&P 500 Index allowed for the index too remain relatively unscathed by the trading within the tech and financial sectors, a key reminder to investors that having proper exposure across the markets continues to be important with the S&P 500 near its all-time high.
What Are Your Own Possibilities?
Sometimes, the pursuit of wealth can leave a void in our lives—a place left empty because we lacked the energy or time to pursue a dream. There is a saying: “Wealth is not an end, it is a means to an end.” The problem is that the complexity of creating wealth and the subsequent financial planning often gets in the way of seeing and pursuing an end truly aligned with your highest purpose in life.
My life’s work has been focused on this critical unmet need. I hope to help people see the possibilities that open up once you escape from the chaos and confusion that characterize so much of the wealth management field today. I absolutely know it is possible to put a large portion of wealth management on automatic; I have built the system, structure, support and discipline to achieve this; and I’ve seen how using these benefits helps people define and achieve their highest ambitions. This approach is both effective and rewarding.
Clients are surprised sometimes when I ask them about their higher purpose and possibilities. It is not that they feel I’m prying; they just don’t expect an advisor to be concerned with such matters. I tell them that these are the most important questions for them to consider when it comes to financial planning.
For the fourth year in a row Janiczek Wealth Management has been named to Barron’s Top Financial Advisor list*, now for 2017, 2016, 2015 and 2014!
Mr. Janiczek was named one of America’s top financial advisors* in the March 4th, 2017 Barron’s issue. The prestigious list of top investment advisors was also published in The Wall Street Journal by Dow Jones & Company, a division of News Corp on March 9, 2017.
The rankings are based on data provided by over 4,000 of the nation’s most productive advisors. Barron’s draws from all 50 states, plus the District of Columbia. It includes a cross-section of private-wealth advisors—from independents who own and operate their own practices to advisors from the large Wall Street firms. Barron’s states, “This special report lists the top advisors in each state, with the number of ranking spots determined by each state’s population and wealth.
The rankings are based on assets under management, revenues generated by advisors for their firms, and the quality of the advisors’ practices. In evaluating advisors, we examine regulatory records, internal company documents, and 100-plus points of data provided by the advisors themselves.”
As we have watched the 2016 Olympics in Rio, it’s truly impressive to see the athletes from all over the world compete at such a high level and demonstrate their true dedication to their chosen sport. The athletes and their families have spent years devoted to hard work, incredible amounts of focused energy to training, exhibit world class discipline and dedication in order to be the very best in the world. Their ascension to the Olympics of course has not been linear, as each of the athlete’s had to overcome many obstacles and adversity in their paths to reach the pinnacle of their respective sport. The Olympian athletes’ training efforts, focus, and discipline are primarily behind the scenes with many hours working with their coach and trainers, with never a promise to compete or let alone win an Olympic medal. Their hard work and tireless effort’s provides them the best chance to execute their lifetime goals.
When it comes to financial planning, I have found that a systematic approach is needed to make important decisions, focus on what matters most, and evaluate options. In previous posts I introduced the guiding principles of wealth management:
- Make your balance sheet, cash flow, and portfolio your friend
- Compare your finances to standards of excellence
- Stress-test your financial plan
- Know what is holding you back and spurring you forward
- Be specific and proactive to make permanent changes
In my previous four posts I introduced my guiding principles of wealth management, along with the first four principles (links to one, two, three and four). Today I will discuss the fifth and last guiding principle:
Be specific and proactive by identifying and implementing the actions that will result in the best permanent changes
Over the years, I have had the privilege of observing how clients meet challenges and tackle opportunities. Some have a knack for succeeding in any task they take on, while others seem to struggle more than they need to. Eventually, I saw a key distinction between these two groups: Successful people are usually very specific and proactive, while those who struggle tend to be vague and reactive. They set goals, but they do not follow through with a plan of specific actions aimed at meeting those goals. Consequently, instead of controlling events, they wind up responding to events. Getting stuck in reactive mode is another example of the 85% Trap.
By contrast, when successful people see a need or set a goal for themselves, they develop a specific plan of action. In keeping with the concept of the Essential 15%, they strive to find a permanent solution to every challenge, as opposed to a solution that requires ongoing effort.
In my last few posts I have discussed my first few guiding principles for wealth management: make your balance sheet your friend and compare your financial plan to standards of excellence. Today I will discuss the third principle:
Back-test and stress-test your financial plan under various scenarios to further reveal strengths, weaknesses, and possibilities.
The “Elastic Limit” is a term I’ve borrowed from engineering because it has tremendous relevance in wealth management and financial planning. It refers to the amount of stress a material can withstand before undergoing permanent deformation. For example, if you stand on a wooden bench, the wood may sag a bit and bounce back when you jump off. However, if several NFL linemen stand on the same bench, the wood will probably warp, crack, or break.
Lessons in Financial Strength
“A financially strong investor is a superior investor.” This observation, distilled from my 25 years in the field of wealth management, is simple and yet so profoundly true, I decided to make it the motto of my company. All too many investors learned this truth the hard way during the recent financial crisis: You do not become financially strong by achieving superior results; you achieve superior results by becoming financially strong.
Early in life, my family drove home the importance of strength. My family didn’t buy the home we lived in, we built it. My brothers and I helped my father pound in the nails that held the frame of the house together, and you can bet we didn’t just walk away from boards or joists that still felt rickety. My father built nuclear power plants and oil refineries, structures that must be built to last and able to weather hurricanes and earthquakes. His duties gave him a “stronger is better” way of looking at life, which rubbed off on me.