Letter to Stakeholders, May 2024

Wednesday, May 8th, 9:32 am EST. Star Wars fans and Cinco de Mayo aficionados love the beginning of May. Last Saturday you might have heard “May  the 4^th be with you” and last Sunday someone may have confidently mistaken the 5^th for Mexican Independence Day (it’s actually September 16^th). But for me, I like to think of May 1^st or “May Day.” Not necessarily the International Worker’s Day version (that we celebrate on Labor Day) nor the "Maypole dancing" version.  Instead, what sets my heart aflutter is May 1, 1975, the deadline for when the United States Securities and Exchange Commission (SEC) mandated negotiated versus fixed commissions on trades of stock.

May 1, 1975

The history of zero-dollar ($0) stock (and ETF) trading goes back nearly 50 years. But it isn’t the story of low cost (and eventually “free”) trading that holds my attention this time of year. It’s the reality that forcing the industry to allow “negotiable commissions” on trades eventually led to the advent of fiduciary advisers. Charles Schwab, the namesake of our custody platform, opened their first discount brokerage just 4 months later. “It turned the whole industry upside down and led to this great mass flourishing of services and pricing and technology,” said Schwab. Later in 1986, the Charles Schwab Corporation launched custodial services for use by independent financial advisors (like us). This allowed firms like ours to serve you directly and independently.

April 23, 2024

Much more recently, something important just happened: two weeks ago the U.S. Department of Labor (DOL) finalized an updated “Retirement Security Rule.” This rule requires advisors (by law) to act in the best interests of their clients whenever dealing with retirement dollars. The focus on retirement stems from the DOL’s retirement plan authority resulting from the Employee Retirement Income Security Act (ERISA) of 1974 (that governs retirement accounts). This updated Retirement Income Security rule extends that fiduciary responsibility to advisors who “roll over” employer sponsored plans into IRAs. Our firm has operated under fiduciary guidelines since inception, but many of the most recognized brokerage firms fight these rules and are still fighting them today. I represent Jason Howell Company on the National Association of Personal Financial Advisors (NAPFA) Public Policy Committee and along with 68 other organizations issued a statement of support to the United States Congress. In 2016 a similar rule was passed. We are hoping this time it sticks.

Earnings & Insights

Last month we explained that quarterly corporate earnings results and predictions often dictate the immediate future of the stock market. In recent years, those immediate results were tied closely to (federal funds) interest rates. So where are we and why did your statement balance dip a little in April (it’s back up a week into May)? Corporate earnings compared to last year have been pretty good. But when it comes to the stock market these days, bad news is good news.

A recent “jobs report” showed only 175,000 jobs added in April. The problem? Economists were expecting 240,000 jobs added. The good news? This could be a sign of a (slightly) slowing economy which could mean inflation will lower and if that happens, the Federal Open Market Committee (FOMC) may decide to lower interest rates to lift the economy. And lower rates typically cause higher stock prices. Did you get all that? But right now when those potential rate reductions (“cuts”) will happen, nobody knows. The stock market doesn’t like doubt. Thankfully, you have a plan that incorporates insecure markets. Questions about your plan? Just contact us.

Stakeholder Spotlight

This month’s spotlight shines on estate and trusts attorney, Catherine Schott Murray of Odin, Feldman & Pittleman, P.C.  Having worked with many of you for years, Catherine is kicking off a new “Zoominar” series of strategic partners who serve our clients. We have always been an advocate of serving you with a “team of advisors.” Our goal is to make your team more accessible and available. Catherine is a leader in her field, expert in her craft, generous in spirit and has a sharp sense of humor.

 Tomorrow morning Catherine and I will discuss how and why estate planners like her are the “ultimate” strategic partner.

Join us.

Jason J. Howell, CFP®, CPWA®, CSRIC®

President

Jason Howell Company is a family wealth management firm that strengthens families making the transition from first generation success to family wealth. We envision a world where wealthy families give, grow and govern themselves in ways that enrich their local communities. We do this by reducing the fear, isolation and guilt associated with financial success.

Jason J. Howell, CFP®, CPWA®, CSRIC® and Douglas W. Tees, MBA, CFP® CAP®, CBDA  have spent a lot of time in the Washington, DC area, and are aware that many people who are first generation wealth suffer from a kind of "financial imposter syndrome."  Successful entrepreneurs and family businesses are always looking over their shoulder; government contractors worry about the next contract; former Capitol Hill staffers privately wonder if they should "feel bad" for the money they now make. Imposter syndrome is common among people who work for the many corporate headquarters based in this area as well. These feelings get in the way of properly managing family wealth. We empower them to get organized, build a team of advisors and make decisions.

Our typical "first generation wealth" families include dual income parents who work, save and have just the right amount of fun. For long-time, family owned businesses we focus on much family preservation as we do wealth preservation. 

First generation wealth success stories and family business owners realize that they:

• Need to “do something” with the cash in their checking/savings
• Need to eventually diversify their portfolio away from the family business
• Need an investment strategy for “up” and “down” markets
• Need a plan to mitigate market, credit, inflation, and political risks
• Need to start tax planning instead of just tax paying
• Need to be sure they are choosing the right work benefits
• Need to reduce financial miscommunications between family members
• Need to separate business finances from personal finances
• Need to separate family wealth from individual wealth
• Need a plan to provide space for both family and individual philanthropy 
• Need to plan for money while alive and for what happens after death