Financially strapped community associations are always looking for new revenue sources but is a sound investment strategy a possible path to avoiding large budget increases or special assessments? In this episode, host Donna DiMaggio Berger, along with investment gurus Michael Coady, Chief Strategy and Growth Officer for Slatestone Wealth, and Kenny Polcari, Chief Market Strategist for Slatestone Wealth, discuss how investments can be utilized by both association boards and their residents personally as part of their overall fiscal management. What most association boards want to know is what kind of investment vehicles are suitable for common funds; this trio takes a deep dive into low-risk investment vehicles like US treasury bonds, bank CDs, and money market funds, and how they can offer a lifeline to HOAs and condos.
Their conversation also includes the benefits of making strategic banking choices particularly with regard to precious reserve funds. Donna, Kenny, and Mike also tackle the delicate subject of fraud and the huge losses it can cause while underscoring the role of checks and balances in safeguarding wealth.
On a personal note, they explore the art of wealth management and diversification. What's your risk tolerance? What is your current life stage and are your expectations for amassing wealth realistic enough or ambitious enough? Michael and Kenny help us unravel how multiple factors can shape your portfolio and how you can avoid common investing pitfalls.
Tune in to discover a wealth of knowledge and practical insights. We promise you, it's an investment of your time that will yield high dividends!
Conversation highlights include:
BONUS: Kenny Polcari is a media personality with a global following. Can you name the shows on which he is a regular commentator?
Financially strapped community associations are always looking for new revenue sources but is a sound investment strategy a possible path to avoiding large budget increases or special assessments? In this episode, host Donna DiMaggio Berger, along with investment gurus Michael Coady, Chief Strategy and Growth Officer for Slatestone Wealth, and Kenny Polcari, Chief Market Strategist for Slatestone Wealth, discuss how investments can be utilized by both association boards and their residents personally as part of their overall fiscal management. What most association boards want to know is what kind of investment vehicles are suitable for common funds; this trio takes a deep dive into low-risk investment vehicles like US treasury bonds, bank CDs, and money market funds, and how they can offer a lifeline to HOAs and condos.
Their conversation also includes the benefits of making strategic banking choices particularly with regard to precious reserve funds. Donna, Kenny, and Mike also tackle the delicate subject of fraud and the huge losses it can cause while underscoring the role of checks and balances in safeguarding wealth.
On a personal note, they explore the art of wealth management and diversification. What's your risk tolerance? What is your current life stage and are your expectations for amassing wealth realistic enough or ambitious enough? Michael and Kenny help us unravel how multiple factors can shape your portfolio and how you can avoid common investing pitfalls.
Tune in to discover a wealth of knowledge and practical insights. We promise you, it's an investment of your time that will yield high dividends!
Conversation highlights include:
BONUS: Kenny Polcari is a media personality with a global following. Can you name the shows on which he is a regular commentator?
Hi everyone, I'm Attorney Donna DiMaggio-Burger and this is Take it to the Board where we speak Kondo and HOA. Cash-strapped community associations are always looking for ways to offset growing expenses without having to increase the budget or, worse, pass special assessments. One strategy that has been discussed for some time now is whether a sound investment strategy for common funds, which includes reserve funds, would help. However, no investment is without risk and some states prohibit associations from investing and associations' common funds. The Florida Legislature has considered legislation over the years which would allow boards to invest funds with certain parameters in place. That legislation has not passed, but we likely will see it resurface in the future. In addition to giving us some investing options for community associations, today's guests are also going to provide some useful tips for all the individual investors who are listening.
Speaker 1:Michael Cody serves as the Chief Strategy and Growth Officer for Slate Stone Wealth. Michael has decades of experience in financial institutions such as Amaris Bank, td Bank, national City Bank, first Citizens Bank and Fidelity Federal, among others. Michael obtained a Bachelor of Arts degree in Political Science from the University of Connecticut and completed the Executive Curriculum Certificate from the MIT Sloan School of Management. Also joining me today is Kenny Polkari, the Chief Market Strategist for Slate Stone Wealth. Kenny began his career on the floor of the New York Stock Exchange in 1985. He served as a member of the exchange for nearly 40 years and is a New York Stock Exchange Governor for more than a decade. Kenny is a well-known media personality in the financial services business and is a regular contributor on the Fox Business Network. Kenny has a degree in Finance from the Boston University School of Management, so Mike and Kenny welcome to take it to the board.
Speaker 2:Well, thank you very much. It's a pleasure to be here.
Speaker 1:So happy to have you both. So, kenny, I don't know anybody who doesn't want to make their money work for them. Let's start with a broad overview of your investment philosophy and approach.
Speaker 2:Well, listen, it's about building a customized portfolio based on who you are, taking into account your age, your obligations, whether you're taking care of family. You're not taking care of family, do you have other obligations that need to come to the table and then you design, you sit down and you design a personalized solution with high-quality names, again taking into account who the investor is, where they are on the risk scale, where they are on the life cycle scale. You try to use products that are going to limit downside risk in a negative environment when the market's under pressure, and building an intelligent, diversified portfolio that takes a range of asset classes. So it could be stocks, it could be bonds, it's going to be alternative investments, with some active rebalancing Because, remember, investing is not static, it's dynamic, because the market changes, it's constantly under change and so, using active rebalancing meaning quarterly or every six months, you want to go through your portfolio with your advisor and then you want to kind of rebalance based on what stocks have done.
Speaker 1:Can people just do this themselves if they have nothing else on their plate?
Speaker 2:Can they do it themselves? A lot of people try to do it themselves and if they have a good understanding of the financial markets and understand how to use the technology that's out there to help them, they can certainly try to do it. And a lot of people do do it when they're younger and they're building. But you get to a certain point and you build a wealth of assets that suddenly it can become overwhelming and you need kind of the advice and the assistance of a wealth manager or if somebody is going to be paying attention to help you.
Speaker 1:Well, the flip side of wealth management is risk assessment. Right, so we have to talk. We can't talk about one without the other. How does your company, for instance, assess and manage risk in your investment portfolios?
Speaker 2:So, like most, you have a risk assessment questionnaire, and what's very interesting is that when you're talking to a new client, a husband and wife, each one of them gets their own questionnaire. You don't send one and let them fill it out together. Each one of them will fill out their own questionnaire and what you typically find out is that the men tend to be a little bit further out in the risk scale than the women do, and some of them will tell you that right up front. Some women will say listen, I'm much more conservative than my husband and that reflects in those risk questionnaires. You then take those, you grade them, you kind of score them on a one to 100.
Speaker 2:And then you see where everybody sits and then, based on where the couple sits, then you talk about you know, you look at their current portfolio or, if they don't have a current portfolio, you start talking about how to build a portfolio that reflects the risk of both the husband and wife, while you know, not leaning one way or the other too much, but trying to find that moderate in the middle.
Speaker 2:And then there's a conversation that's very important to have with the investors. Right, everyone's part of the conversation. Everybody gets to opine on it. Maybe, you know, maybe the wife doesn't want to own fossil fuel names, okay, great. So then you have to know that going in. So then you have to figure out, okay, how do we replace fossil fuel with something else that fits in her style of investing? And the husband, you know, maybe the same thing, maybe he doesn't want to invest in sin stocks, or, you know, liquor stocks or liquor. So you would then have those conversations and then create a portfolio based not only on their desires for the types of investments, but then where they fall on the risk scale.
Speaker 1:I wonder if you can predict how many couples are going to stay together or break up on the basis of their response to your question there.
Speaker 2:That's very interesting because we do talk about that. In a couple of weeks ago I had the same conversation with a couple and the guy the husband said I think my wife's a little bit more conservative. Well, when the risk questionnaires came back, she was way down on the risk scale and he was way up on the risk scale, and you could see that they were almost polar opposites, which was actually very funny. We ended up having that conversation and the wife said well, maybe I was a little too conservative, and so you know, then you have another conversation. But that's a very interesting question because I'm sure you probably could.
Speaker 1:You may have to go back. I'm sure some of these people you said with them for years, so maybe you need to go back and look at the initial questionnaires. But, mike, I want to ask you. You know I mentioned in the intro that the Florida legislature, for a couple of years now, has floated the idea of allowing community associations to invest their reserve funds and other funds, but mostly the reserve funds. This has become more crucial than ever because we have a whole host of new laws in Florida that are increasing these budgets and we also are still in the midst of a huge property insurance crisis in Florida. So many of our clients have seen their insurance premiums increase well beyond 50 percent, sometimes as high as 90 percent, and we're talking about the associations, these commercial residential policies. This bill, we think, is going to reemerge as boards continue to struggle to find these funds. Have you been approached, mike, by any community association boards questioning whether or not they can invest safely association funds?
Speaker 3:Yeah, sure, sure, 100%. And we saw off of, probably 12 to 18 months ago, some of the lowest historical interest rates we'd ever seen. You know, to a point where even negative interest rates were talked about. And you know at this point now the risk-free return is significantly different. And if you're not aware of that, especially in the face of you know not only the inflation pressure or the insurance pressure you mentioned there's obviously still some residual from the surfside situation which is impacting structural issues which are incredibly expensive to pay for, even on a one-time basis on an assessment. So you know all of that is happening.
Speaker 3:You know the access to, frankly, a variety of choices for an association right now is critical.
Speaker 3:Having been a board member and worked for a bank before, there's interesting dynamics that happen there because sometimes you have, for instance, a management company where they usually have, for instance, maybe four to five bank choices and that's what you're going to be relegated to.
Speaker 3:So the benefit, for instance on the RIA space, is we can look at all those choices and more be able to go ahead and resolve that issue for the client in a custodial way, so that you know the differences, for instance, maybe in a board situation or the authorities there, makes it more transparent for everybody involved in terms of like what's available.
Speaker 3:We can, for instance, shop 50 banks for a CD. We can look at different money markets or CDs treasuries, things of that nature that are, for the most part, you know, guaranteeing principle and yet not taking that much risk. So, but it's an adjustment that everybody's feeling. My mother lives in the Florida Keys. She deals with it every year but however you know, with what's happened in the last, you know, particularly two or three years it's been the headwinds for associations are significant and if you're not aware of that, I think there's always a situation where perhaps nobody's even seeing the bank statements and if they're still sitting at, you know 1% or 2%, you know they could be easily. It could easily be more significant than that and, frankly, not really have absorbed much more risk.
Speaker 1:Yeah, and with the 2025 and 2026 operating budgets for associations that are operating what are called threshold buildings those are buildings that are three stories or higher they are no longer going to be able to waive certain reserves. So reserves related to structural integrity whether it's for the painting, the roof windows, in some cases, structural columns, things like that we're looking at an influx of hundreds of millions of dollars into reserve funds throughout Florida that will no longer be waivable. Now I teach a board certification class my partner's here too as well and we always talked about checks and balances. You know, just keeping that money safe, just making sure that it's not vulnerable to fraud.
Speaker 1:But the other thing that I know people want to start talking about is can they perhaps make that money work for them? So it's sitting in there. They may not need it right now. Is there any chance that they can get more than you said, like 1%, 2% If an association and remember, guys, we don't just have Florida listeners to this podcast, so we've got associations from all over listening and in some of those states and locations and countries, they aren't allowed to invest their funds. In those instances, they still don't want to lose the money, right? What should an HOA or condo board, be looking at in terms of an investment vehicle, safe or not where they can still realize some sort of a return.
Speaker 2:So, listen, I'm going to jump in and take that one, because the world has changed, certainly over the last couple of years when rates were zero and money really wasn't working for anyone. Today, with interest rates the terminal rate at four and a quarter, four and a half percent, and interest rates now in the three month and the six month treasury bills are paying five and a half percent. If you roll them right, the two years paying just under five percent, the 10 years paying four point three percent, that is able to there you're able to have that money work for you with almost zero risk. If you're buying a US treasury, there's let's be honest, there's no risk, right, but yet you can earn if you do it. If you do short duration and just roll them every three and six months, you're going to earn better than five and a half percent on that money. Right, you're not putting at risk. You haven't invested in stocks, you haven't taken the risk of owning stocks into that portfolio.
Speaker 2:Quite honestly, I would say, as an asset manager and somebody talking to an HOA, that would be, in my mind, the only appropriate investment for that money because, to your point, you can't lose it.
Speaker 2:It's not a long-term investment that you're thinking about 10 and 15 and 20 years, and so you need it. You need that at liquid, but you need it to work for you and right now you can put them in treasuries. You can put them in bank CDs and get almost five and a quarter percent. Government money market funds are paying you five percent and they're completely liquid because that's just cashed it in the bank. That's not even invested in treasuries, that's just a money market fund. So there are more options today for HOAs to consider and, depending on the size of those funds, they may opt to put some in treasuries because maybe they want to split it up. You don't want to put it all in one place necessarily, so you might split it up amongst different lengths of the treasuries, like three months, six months, two years, stuff like that, depending on the amount of money, the association and then what the expectation is for that money.
Speaker 1:I appreciate your sensitivity to the fact that boards will get pillar if they lose this money. You both live in a HOA or a condo.
Speaker 2:I do.
Speaker 1:Do you like your board?
Speaker 2:Do you go to my new server? It's interesting. It's interesting Now that I move to Florida. I do live in a condo association, an HRA board, and quite honestly, now I've been there for a year and as I've watched it unfold, I think to myself I got to get on this board because there needs to be some change, kind of very much like what we're talking about in the current election. There needs to be some change. But you're right, they would not only get pillory. I wouldn't be surprised if people start sooner, if they lose this money because they're charged with having to take care of that money and putting it into riskless treasuries is, quite honestly, the only way to go.
Speaker 1:Well, particularly with reserve funds, because that's a mandate. That's a mandate to maintain and repair the common elements and the infrastructure. I want to get back to Mike. You mentioned you were talking about depositories and even putting the money. We're talking about a lot of money here. In some cases I've got some very large communities that have budgets that are 10 million and up 61 is 60 million and up Even depositing it in an interest-bearing account with a bank, it's not completely risk-free if the bank fails. Can you discuss for our audience how FDIC insurance works?
Speaker 3:Sure. Well, it's been the standard for the first sometime. $250,000 per entity as you can imagine in the examples you're giving it immediately, is well in excess of what the government protection is. Having been a banker in Florida, we've had many situations where banks have honestly come and gone. Thankfully, in most cases, the acquiring bank has bought the deposits. It's never really invoked the FDIC, which has been great for the depositors, but it's still obviously a top of mind issue.
Speaker 3:Many banks are going ahead and compensating either through, for instance, like a CEDARS program or an insured cash sweep program. Thereby, even if it's a smaller community bank, they could go ahead and insure much, much more insurance by going ahead and pooling the funds amongst institutions throughout the country that have capacity to go and handle it. It's almost like a consortium of banks and you're shaking your head. I'm sure you've been through it. It allows that to happen because otherwise, as a board member and I've been one before you're having to walk around town to run around 10 different banks, 10 different sets of signature cards, trying to go ahead and give ID and do your customer, which obviously needs to be done. But for board members that are working, that isn't their full-time job. That's a lot of work to do.
Speaker 3:So that's one of the benefits of, for instance, choosing an RIA is that we have that whole school of opportunities right in front of them. So it makes for almost a one-stop shop. And the other part is the yields on some of those products. Because they're shopped out. Obviously, there's got to be some margin made on the institution side. So, whether or not you'll fully appreciate what the best interest rate you can get through some of those programs, it may not be 100% there, but you will get the safety and security of it and, from a simplicity standpoint, as either a property manager or as a board member, that gives you, frankly, a convenient safety and a respectable yield, which is what you want, at least in my experience.
Speaker 2:But I would also say, can I just jump in there and add one thing to that? Sure, if we're talking about HOAs that have $40 or $50 million in their fund for reserve A, you wouldn't take all that money and go to a small bank with all that money. You might have an account there and have $250,000 or $500,000, but you're not going to take that kind of money and put it there to your point. If you're afraid or if there's any risk, you're going to take the bulk of that money and you're going to put it in things like government money, us government money, market funds or treasures, because that's completely riskless. And so, quite honestly, someone could even call you out if you had that kind of money and you were not thinking like that.
Speaker 1:So when you say you, kenny, here's the point, though some of our associations will delegate most of these decisions to their management company or their individual manager, so it's important that when you're signing those management agreements, you're addressing these type of relationships.
Speaker 2:A thousand percent.
Speaker 1:Yeah, I agree. So, kenny, let's get back to you and talk about diversification. What's your philosophy on the importance of diversification? I know you're going to tell me it's important, right?
Speaker 2:Again, yes, I am going to tell you it's important, but again, I'm also going to tell you it depends on where you are in the life cycle and where you are in the risk scale. So, for instance, a 30 year old is going to be someone that might be diversified, but it's going to be diversified further out on the risk scale. They're not going to own bonds as a 30 year old. They're not necessarily going to own utility stocks as a 30 year old. They are going to own the growth names. They're going to own tech names. They're going to own communication things. They're going to own names because they've got so much time between being 30 and being 70 that that money has to work for them.
Speaker 2:I'm the end of the baby boomers, so I'm just 62. I still don't have bonds in my portfolio. I've got money market but I don't have bonds. But I'm still very much kind of to the right of center in terms of my risk. But that's also because that's where I feel comfortable, that's where my wife and I feel comfortable, but it's also at this point in my life. Those names that I have are the big mega cap US names that you're going to know. We're not taking risk on micro caps or even a big position in small caps.
Speaker 2:So you have to understand and that's part of that conversation that goes back and forth between you and your advisor, your wealth manager, on your level of content or your level of fear but diversification by far is key and diversification just isn't diversifying amongst the different sectors in the market.
Speaker 2:But you're going to diversify with bonds, you're going to diversify with alternative assets liquid alternative assets, real estate alternative assets. But if I have a conversation with you and you come to me and you've got your own portfolio of real estate holdings, then the last thing I'm going to do is say, oh, we need to diversify with more real estate holdings. You already have real estate holdings. So therefore it's important for me to understand that. So then we don't double up. If you come in with a portfolio and you already own Apple, the last thing I want to do is buy more Apple because then you're overweight Apple. So we need to understand the advisor. That's the importance of having these conversations that the advisor understands the bigger picture and then is able to properly diversify. And a lot goes back to that whole risk questionnaire, because that also lays the groundwork for where the couple is right the husband and the wife or the partners, whatever, where they are.
Speaker 1:How comfortable are you telling a client, a customer, that their investment request is wacky? For instance, I come to you and say I want to buy a racehorse or a piece of art. I mean, we're talking, it's diverse, my portfolio is going to be diverse, but how comfortable are you just telling somebody that really is not the best idea?
Speaker 2:Well, listen once again. What's the total value of that customer's portfolio and what does that one investment? If that piece of art represents a tiny, tiny percentage of the robo portfolio and not what makes them happy and they want it, then who am I to say no? But if you come to me with $500,000 and say you want to take it on, you want to buy a horse or piece of a horse, I'm going to say not a smart idea, right, not a smart idea. In fact, I had a conversation with a client and the husband was really into these small cap stocks because they were high dividend payers, but he was getting crushed on the capital. But yet he kept saying well, I'm getting an 11% dividend, yeah, I know, but you lost 50% of your capital and so that's the completely wrong investment for you.
Speaker 1:And it was Wait, did he have an epiphany? Did he have an epiphany after you explained it to him?
Speaker 2:Well, he did. Well he did. Once we showed him, I said, listen, I can take this portfolio. And we recreated a new one and I said I reduced your risk by 30% and raised your rate of return and you had. You know, we got rid of all those small cap kind of microcap names that this guy just loved because he thought, well, I'm getting 11% dividend, okay, but you completely got crushed on your capital.
Speaker 1:How has the investment landscape changed in recent years and how should investors adapt to those changes?
Speaker 2:So the investment landscape has changed for a number of reasons. A, because the economics have changed right. So we've gone. We had you remember we had 13 years of zero interest rates because, remember, they started in the crisis of 2007, when rates went from 5% to zero. They stayed there, they started to raise them very, very, very gently and then we get hit with COVID rate went back to zero. So there's a whole generation of people asset managers as well as individual investors that only know a zero rate environment and they only know that stocks were the only alternative.
Speaker 2:So now rates have changed, the landscape has changed, technology has changed, artificial intelligence has changed, right that people can now access more information and you can get it from everywhere. You get it on Twitter, you get it on LinkedIn, you get it from the news, you get it on Bloomberg. Everywhere you turn, someone's hitting you with another piece of information. Now, some of that is noise and some of it is legitimate, and so what investors really need to understand is what's important, right? How do you eliminate the noise? How do you?
Speaker 2:Because we're all getting bombarded. So how do you eliminate the noise and focus on that longer term picture? How do you not get drawn into the latest, greatest you know meme stock that everyone's talking about right and so you have to have. That takes some discipline and it takes some real focus on understanding what the long-term game is and ultimately where you want to get to. But it's the I will say the technology that exists today, the data sources and news sources that exist today that are free to almost anybody. You know, 10 years ago a lot of people couldn't get this information. Today you can get it in so many different places.
Speaker 1:Well, that's right, you were the gatekeepers.
Speaker 1:Correct, and it's the same thing for PR. You needed a PR person as the gatekeeper. Listen Kenny. Even with the legal industry we've been this has been a running theme for the last few months about AI and whether or not it's going to have an impact. Personally, I think it's going to have a beneficial impact. For the most part, I think it's a jumping off point, but I do know that a lot of people are looking to find things in the cheapest possible manner, the easiest manner, and if they can cut you out and not pay for your services and just go ask chat GPT, what should I be investing in? They might do it. So how concerned is your industry about AI?
Speaker 2:I think there is a level of concern, but I'll have to tell you something I'm in your camp. I actually think that a lot of that artificial intelligence stuff is actually going to be a benefit versus not, because the artificial intelligence might be able to say to you you know, buy Coca-Cola at this price and sell it at that price, but if it hits the fan and suddenly there's this economic downturn or this is an event that causes chaos and disruption in the market, guess who's not talking to you, chat GPT. You can't call them up and say, listen, I'm afraid or I'm scared, or what do I do? You can't do that to Chat GPT, but you can do it to you and me. I can dial you up and have a human being on the other end.
Speaker 2:So I do think, while I think the technology is going to change the industry and it certainly already has I do think, though, that the human connection remains very important, and as people's wealth grows, they want to talk to a human being more, and more than they did when they had less. So I actually, while I will tell you, the technology destroyed the prior business I was in, which was member of the New York Stock Exchange. We could talk about that too, but from the wealth management business, I think, to your point about legal. I think it may in fact assist and then allow for the wealth manager to have more direct conversation and relationship with the client.
Speaker 1:I couldn't agree more. There's a certain amount of hand holding, and you're absolutely right. Like my husband and I, for the longest time we did our own thing. Now we have a financial planner. Am I allowed to say it's actually your company, but you're doing a great job for us and you're absolutely right. I do want to talk about mistakes, though. So, yeah, you're right. Chat, gpt, also artificial intelligence people have to understand it is garbage in, garbage out.
Speaker 1:You have to know what's being spit back at you. And also, when it hits the proverbial, you know what hits the fan. There's no liability, okay, there's nobody to go after and say, hey, you screwed this up. It's the same thing with legal If we make a mistake, we're on the hook.
Speaker 2:We can't get you to do it. You're not, but that's going to be a hard lesson for a lot of people to learn, because you know what they're not going to believe that they're going to think, though I can do this because you know what goes on and goes on the minute it hits the fan, and the minute something goes wrong, who are they going to turn to? That's going to be exactly the point, and so, in this case, if I do something wrong, you got me, you got my phone number, you know where I live, you know where I work, you can have a conversation with me. What are you going to do with Chat GPT? You're not, and so I agree with you 100%.
Speaker 1:Well, maybe that's what we'll come back in as lawyers. We'll figure out somebody to sue, we'll figure out, maybe, somebody in Silicon Valley. So let's talk about mistakes. Let's talk about the common mistakes that both new investors and veteran investors make and how they can avoid them.
Speaker 3:I would say you know there's probably three of the biggest issues that we see is staying the course, you know, with what the plan was. So you know in terms of you know an investment policy statement, sitting down and talking about what the right allocation is based on your risk, and seeing that part through. Not abandoning that, because ultimately when people abandon it, that's probably when they lose out the most. Social media, I think, is obviously driving a lot of behaviors because we're just inundated with so much news so quickly and you know you do get that hurting.
Speaker 3:I think mentality that's out there, where you know it's the next greatest thing. Or, you know, sometimes you know in some of the investment circles we'll travel in because you have it, I want it, or something like that, regardless of what the real metrics are to it. So I think being really conscious of what the fundamentals are like Kenny was talking about in some of the examples he gave earlier if you're able to go ahead and stick with those fundamentals and just be comfortable with the amount of risk that you have, you know, and if you're uncomfortable, then you're probably in the wrong product, you know, or in the wrong plan. So I think it's stick with your plan. You know, see it through and ultimately you know common stocks are the biggest hedge against inflation, so in interest rates. So you know there's certainly more upside opportunity. You know in those particular vehicles sometimes that it's going to take you to where you need to be.
Speaker 2:So I think that people, once they make their plan and they understand why they bought the stocks that they bought, they did the analysis, or the wealth manager did the analysis.
Speaker 2:They went through it. Here's the fundamental reasons why this stock is right for you. Unless the fundamentals of that investment chain, there's no reason to jump in and out. So, for instance, if the market comes under pressure, asset managers will immediately go to where they can raise money the quickest in order to meet some nervous that may be in the market. Their investors wants some money, so where are they going to go? They're going to go to Apple, they're going to go to Amazon, they're going to go to Johnson and Johnson. They're going to go to IBM. Why? Because they're big, mega cap US names that you can hit the button, you can sell stock and get a lot of money very quickly, not because the fundamentals of Apple have changed or Amazon or Johnson and Johnson or IBM, but just because they can raise money. And when they do that, it temporarily, arbitrarily, dislocates the stock. The stock may trade off 10%, okay, great.
Speaker 2:But if the reason you bought Amazon hasn't changed and the stock's under pressure and it's down 10% because there's threats of higher interest rates or no one knows what the Fed's going to do, and there's this nervousness. All that means is that larger asset managers are trading around a core position. So if you go to a place, you look at the holders, blackrock might own 20 million shares of Amazon, okay. So now they're going to own 18 million and they're going to use 2 million and they're going to trade around the core position. So they'll take some money off here. They'll put it aside. If they need it to meet redensions, they have it. If they don't, they'll put it back to work.
Speaker 2:But that's exactly why the individual investor needs to understand what they own, why they own it, and if the fundamentals haven't changed, they need to stick with it. In fact, even take advantage of the sale going on on Wall Street. And I always use this analogy when Bloomingdale's has a sale and they put the dresses on sale for 30% off, you run in and buy three of them, because how could you leave them on the rack? But yet when Amazon sells off 10%, you go oh my God, I got to sell my Amazon and you sell it. It's exactly the wrong reaction.
Speaker 1:Hold it and stick right, but are there? Anyway, that was always my husband's philosophy. I should have said my husband went to Wharton School of Business. I married my money man. I met him in law school, but I married my money man. He's done a really good job with our finances. But, like I said, we're at the point in our careers and our lives where we want professional help and it's been a really great move. But if I'm hearing you correctly, kenny, there's some people that maybe they just don't have the stomach for the stock market at all because they're too nervous and they don't know how to do what you're suggesting, which is buy it and stick with it.
Speaker 2:That's right. And if they don't, then that will reflect on their risk profile questionnaire and they will be in more conservative investments. So they'll be in treasuries or they'll be in corporate bonds or municipal whatever. They want to be in something that lets them sleep at night, because the worst thing you want to do is you want to have a portfolio and they're not sleeping at night because you're constantly worried. And so there are some people that just say you know what? I want my money to be safe, safe, safe, safe, safe. Okay, great, then put it in treasuries and be done with it.
Speaker 2:But if you understand and you start at a younger age, you start when you're in your late 20s or early 30s. And you start whether you're doing it on your own or you're having the advice of someone to help you through, because when you start, you start like everyone else. You're green. You don't really understand. The emotions can be amazing. When the market's under pressure, you go oh my God, my stomach. After a while you get used to it. It's just the way it is. Now again, unless something so fundamental has changed in the economy, in the world, in the market, that it's typically better, because you always make the wrong decision You're always selling it at the low or you're always buying it at the high, versus staying to the plan and taking advantage of dollar cost averaging the whole way through.
Speaker 1:Is there any lingering made-off effect in terms of people's expectations for return?
Speaker 2:Thank you, I don't think there is any more. I thought for a number of years, post-Maid-Off there was, and I thought a lot of people actually turned off and they thought we were all like Maid-Off. In fact, and people need to understand wealth managers are not. They're fiduciaries, right? So your money is custodied in your name at a big custodian, ie Charlie Schwab or Fidelity like that, right, and so we don't own the money. Bernie Madoff owned the money. You actually gave him, your money In this case, wealth managers certainly here you know the money is custodied at a big custody, Charlie Schwab, like I said. But it's your money, it's in your name, it's in your account. You just give us the ability to manage it, not take money out, not move money around, not, you know different. No, no, no, we just get to go in there and allocate it. But it's your account, you have access to it, you can see it. You can see everything we do. You can watch it every day. You can do whatever you want.
Speaker 1:Yeah, that's an important point because I do think some people have the perception that money is at risk with the potential, you know with the financial advisor that they select.
Speaker 2:It was with Bernie Madoff. It is not with a fiduciary and we are fiduciary. Most asset managers, you know they're all fiduciaries. Now right, they're not brokers.
Speaker 1:So that's a perfect segue, because I want to ask you about your continuing education. So as attorneys, we have CLE, we have continuing legal education. I imagine in your industry you do as well. Explain if you do have continuing education requirements and also, how do you stay informed about market trends and economic development?
Speaker 2:I do I do and it's funny, did you get yours? I just got my compli-. I just it's funny, you say, because today I just got the email from our, from our compliance officer saying you know you have to have this done by October 15th. So, yes, we do have continuing education and it's like it's probably very much like yours. You know you go, you sit through a, you sit through a course and you know they present you with different cases. You're going to answer questions and that's how you keep up with it.
Speaker 2:But new rule sets things that happen intra intra. You know your, your education. You're either going to get through your custodian, you're going to get it because you're, you're, you're in this network, you're in this industry, you're, you know you get industry data, industry information, so you're always kept up in a lot of the people and compliance, specifically, is the ones that will keep up on rule changes or any of that I'll keep up on. You know trading stuff or investment ideas or investment vehicles, but the compliance stuff from a rulemaking standpoint is really, you know, the responsibility of the compliance department and they're trust you, they're very compliant.
Speaker 1:Mike, anything to add in terms of trade journals or other things that you keep your eye on?
Speaker 3:Yeah, I mean we monitor daily media every day in terms of what's going on here in the market, particularly in South Florida. We do have a small presence in Madison, wisconsin, as well, so we're conscious of what's happening. You know the you know, as we spoke earlier, what happened with the surf side situation, monitoring that. We obviously watch your blog and try to get the best intelligence we can on a daily basis. We have an analyst team as well that backs us up of researchers that dive into every single non-market for lack of a better word product that we we market, just to make sure that we've vetted and validated everybody who's behind it. Because while we're fiduciaries, we need to make sure that everybody we're dealing with is at the same, at the same level of expectations. So we have to, we have to vet all of that and then and then and then, frankly, you know, just today I was in the market with with just local COIs and trying to find out what was happening here in a local market, because there's many things that are flying below the radar that we're not aware of that we want to be aware of before they happen. So so I think it's a multi, multi-phase approach.
Speaker 3:Kenny's obviously in New York very frequently on the national stage, you know speaking about macroeconomics, and so I suppose we're looking at both macro and micro issues at the same time. And then if there's an area of specialty that we need more help, we frankly can subcontract for some of that. If we don't have it on staff, however, we do have CFPs, cfas and JDs on our team, so we were pretty we're pretty deep in terms of depth of expertise. So if it's if it's something that's a little more straightforward than as you can imagine, it's, it's easy. If it's something that requires a deeper dive, we have folks that can do that too.
Speaker 1:We've talked about how people make money using your services. How do you guys make money? How do you charge?
Speaker 2:So a fiduciary charges a flat fee, right? So you're not charging for execution, you're not charging for commissions the way they used to do, right? Every time you wanted to buy a stock, you charge commission. No, no, no, it's a flat fee based on assets under management. So, for instance, might start at a 1%. There are some, there are some fiduciaries that might start higher. There are others that may start lower, depending on the size of the account, but typically 1% seems to be kind of where, every where the bulk of the people are, as the account grows in value, then the, then the fee drops, right.
Speaker 2:So we become aligned with you because we want you to do better, because if you do better, then the total value of the portfolio goes up until. Therefore, then the fee ultimately goes up. Even if it's a lesser fee, it's on a bigger portfolio, right? So that's how you make it. So it's one fee, that's it. There's not a whole bunch of add-ons after that. All the other stuff is included in that fee. It's conversations, it might be, you know, planning, it might be a reallocation. All that stuff is all encompassed in that one fee and so, and so it's really fairly a simple model, right?
Speaker 1:Do you guys do any sort of programming classes? I mean, you're on this podcast, so this is going to be a wonderful educational tool. What else do you do in terms of educating the general public about, you know, financial hygiene?
Speaker 3:So we, that's, that's that's handled a little bit more, probably on an intake basis. So so, you know, generally speaking, we're, we're not, we're not the place for everybody either. So so as, as we interview folks and understand where they're coming from, much of the education happens through that initial intake. It isn't, it isn't necessarily, you know, because all this, most of the folks at the firm here have over 20 years of investment banking other experience. So you know, ultimately, what we normally do in our target markets is we're familiar with them.
Speaker 3:So we, we, we spend time at, you know, trust in a state's planning. We, we spend time, you know, on a local basis, you know, looking for those opportunities. So you know, when the opportunity presents itself. We do have, I think, a young lady on our team who handles the service. She has a certified divorce, she has that designation, so so, nevertheless, there's, there's some specialties that we have, but it's it's it's more based on, probably a need basis than it is necessarily a broadcast that, however, we, you know we are looking at different marketing initiatives in 2024 to make that different.
Speaker 2:Right, so we may host. We may host an event at one of the local restaurants and invite people and at that event, maybe, maybe Jennifer is there and she's talking about divorce. And then how to? How to you know how to work your way through it, Typically for women that are left, women that are now separated, who who say you know, my husband used to do all this. I don't know what to do, so we'll host education events like that.
Speaker 2:I write in my and I laugh when you first set it because I get up every morning and I write a daily market commentary letter which talks about the markets, it talks about themes, it talks about economic data, economic trends, and then I try to tie it all together about what it all means. That goes out daily to all of our clients. It actually goes out, you know. It goes out. It's because it's for free, so it goes out of my Twitter, it goes out of my LinkedIn, and so, in terms of educating, there's a lot of that that happens every day. And then there's we participate in conferences, right, so I'll go and I'll speak at conferences about things just like this, whether it's investing, whether it's diversifying, whether it's managing risk. So we're always out there, and that's part of what Mike and I do mostly is get out there and talk to those people.
Speaker 1:So, Kenny, I am sure quite a few people listening to this episode already know your name. Okay, you're out there, You're you. You, when did you get started working with the news media on?
Speaker 2:the financial issues. So I spent, I started in New York. I was on the floor of the New York Stargazine, right. I became a member in 1985. I started working there in 1980.
Speaker 2:But it was right after the events in 911. When the media Dick Grasso, who was chairman at the New York Stargazine, he was the first one who brought CNBC and Maria Bartiromo down to the floor in like 97, 98. But he allowed her only to really report from the floor. He didn't want her talking to the different personalities on the floor, because there were a lot of personalities on the floor and they were very vibrant and robust. And so Dick was very, very, very specific. You can come on the floor, you can report, but you can't just walk up to some guy and stick the microphone in his face and have him talk to you. And so then what the exchange decided to do was they handpicked a dozen or so members and they, you know, would you like to, would you like to be one of our go-to's with the media? And if you said yes, then they put you through media training and then they let you go.
Speaker 2:So for me at the time it was just right after 911, I was a governor at the New York Stargazine. I had already been there now, for you know, I became a member. I became a member in 1985. So it was 95. So it was about 16, 17 years. I was running my own business. I was very involved in the institution. I used to go with them down to DC, to the SEC, to government officials, talk about the markets and all that stuff.
Speaker 2:So he came to me, dick Rassus, said would you like to be one of our voices? And yeah, of course I would. And so that's how I started. So they give you the media training and then they let you go, you know, and from there it just grew right, because once they put the word out to the different media sources because then they started besides CNBC then all the other news sources started to want to come down to the floor, especially on days when there was lots of dramatic action. And so they all knew here are the people you can talk to. And so they would call you up with an email. You know they'd come over and see you, can I talk to you? And so, yeah, that's how it started. And then I did a range of all the different medias that were down there CNBC, cnn, fox Business, and then even ABC, cbs, nbc, on days when it was, you know, really volatile, and so I've been doing it now for what's up in 21 years already.
Speaker 1:You should be an anchor already, but now.
Speaker 2:Listen from your lips to God's ears. But I think I missed that post. I'm 62, you know what I mean. They don't want a 62 year old anchor.
Speaker 1:Oh, don't say that. Don't say that. And this is only a podcast. We are not going to capture the video, but you look right. So, mike, I sense you're more a behind the scenes guy in some respects, certainly not out there as much as your friend Kenny here, but I understand you're a master swimmer and you're a former infantry officer with the Army National Guard, so that's a lot to be proud of. Tell us about that.
Speaker 3:Tell us about that, yeah well, you know I grew up in Central Massachusetts. Most of my family had served in the military. So, frankly, you know, you know, finished up at Yukon I worked for Lowell Weicker it's governor of the state of Connecticut for a couple of years, lobbied in Hartford on behalf of all sorts of different associations and around 1995, I went into the Army National Guard, went through kind of the airborne infantry, the whole kind of nine yards, went back, moved to Florida, actually got out of the military and went back in after 9-11. So just kind of had a high sense of purpose and fixing things because they needed to be fixed at that time. So, you know, as a result, you know they trust you very hard on your planning and execution. It has to happen. There's not kind of like that much of a degree of percent error that they allow to happen.
Speaker 3:So I try to apply that to everything and I do, you know, working here with Kenny, working with our team, taking care of them, taking care of our clients, when our clients need things, you know we're available to them 24 hours a day.
Speaker 3:So you know, I think that that expectation that you know, that was instilled in me, I carried on to our clients and you know, having been a master swimmer I did swim a Yukon on a swimming scholarship.
Speaker 3:My younger son is on a swimming scholarship at Georgia Tech right now. You know the amount of, frankly, time, effort and everything else you put into that it does parlay into what you do in your business. So you know, I put that same effort in for myself and our clients and our team every day. And you know, and ultimately that's what normally provides the best outcomes is that you're keeping yourself mentally sharp, physically in shape, ready to go, and you know just, happy to be here working with someone like Kenny that kind of has the same energy and focus, and I think that's what the strength of our firm is. It's not just the two of us there's, you know, there's 24 others that have that same kind of look. So it's, you know, thankfully those are great experiences to have and you know just, you know, happy to support others that need that kind of support.
Speaker 1:Well, we thank you so much for your service. We've had quite a few veterans on the show and it's always a pleasure to have them talk about their experience. I know we'd have to wrap up because Kenny has. Is it a date night with your wife or is it your anniversary?
Speaker 2:No, it's her birthday. Oh, it's her birthday. That's right, it's her birthday.
Speaker 1:That's right, and you told us before we started taping that she was the first Latina to become a member of the New York Stock Exchange, and you two met on the trading floor. So I have to ask you who's in charge of the finances in your portfolio?
Speaker 2:Oh yeah, so we both are. We actually both take an active role in the finances. But yes, I did meet her there. We were back in 1983. And you know it was really an incredible time, certainly for her as a female member of the New York Stock Exchange, certainly as a minority member of the New York Stock Exchange. It was really. She was one of those women that you know was hit her head in the glass ceiling and then just busted through. And she continues to do that today in other ways. Not that she's been gone from there, you know, since the kids were born, but today she does it as a director of development at a veteran's charity.
Speaker 2:You know, to Mike's point and to your point, we got involved in this veteran's charity which serves returning 9-11 vets that suffer from the hidden wounds of war, which are the mental wounds of war versus the physical wounds of war.
Speaker 2:And a lot of that was driven directly by my own 9-11 experience, because I had an office in the trade center on the 50th floor of the second tower and I'm only here today talking to you only by the grace of God. But it was that event then, when this opportunity presented itself, it was our way of giving back, and so she is now director of development at that veterans organization, where we now treat 1800 veterans in 47 states around the country. From what started out in 2012 as a you know a little New York city thing, where we were treating three veterans, we're now treating 1800, all completely bureaucracy-free, cost-free, totally anonymous for the veteran, but yet but we pick it up, and so she's now director of development of that and we both remain very active in that as well. So, yes, thank you, mike, for your service. Thank you to every veteran out there that's listening to this podcast for their service.
Speaker 1:And we're taping this on September 14th, the 9-11 anniversary, 22nd just happened right around the, just happened a few days ago. This episode probably won't air until, I'm thinking, probably November, but happy birthday to you, better half, because it's happening today. Any final thoughts for our listeners, guys.
Speaker 2:So here's what I think the listeners should really understand when they think about markets and they think about investing is it is the long game right? It's not a short game. Most people are not day traders. They're not trying to pick tops and bottoms and, quite honestly, they probably shouldn't. You should design the plan and stick to the plan. Take advantage of the dollar cost averaging, take advantage of reinvesting your dividends until such time as maybe you need them as income, but if you don't, make sure they're reinvested in the names that you originally owned, because it very quietly continues to build your portfolio and helps you reach that end goal. So it's about being focused, it's about having a strong stomach, for sure, but it's also about talking to your advisor, because your advisor is someone on the outside that can help you calm yourself if you're anxious and kind of a volatile environment. But I think listen, I've been doing this for 42 years. I love every minute of it and I don't see myself leaving it because I got way too much energy to keep doing this.
Speaker 1:I can tell Mike any final thoughts.
Speaker 3:Yeah, donna, the only advice I have is, having been on an HOA board, having been a banker, be attentive to what's going on. I think there's always a belief that, hey, the other neighbors are taking care of it or someone's on that board they're taking care of it. There's been cases when we were living in Florida where we saw decisions. We're like, how did that happen? And honestly, it was just the apathy of not being involved. So and then, frankly, as a banker, going out to clients and seeing statements that are sitting on the desk unopened for months so I've seen it.
Speaker 3:It'd be highly unfortunate that you'd have somebody, for instance, who's still sitting at 1% right now for the last 18 months and they never just opened up the envelope. So I just encourage them to get involved. I don't think you need to be necessarily a board member. I think you just need to be proactive, and if someone isn't cooperating with you, then that might not be a good sign. So it might be worth more questions there, because in the end, the financial burden will come through the assessment if it can't be done through strong reserves. So you want to protect yourself as best you can.
Speaker 2:Great advice. And, like anything, whether it's being on a board or being an investor, it's dynamic. Right, it's not static, it doesn't just stay the same, it's constantly changing. So to Mike's point apathy finds no place, whether it's there or whether it's investing. You need to remain dynamic.
Speaker 1:One time asked, when I teach classes, people to raise their hands if they'd served on the board for five years, 10 years. One woman had her hand up 40 years. That's not to say she wasn't doing a great job, but it does tell me that there were a lot of other people that didn't want that job. So, kenny, what do you think of Bitcoin? I mean, does that ever come up with your clientele?
Speaker 2:It does come up because it is kind of out there in the space, right? It's certainly something everyone's talking about. It's not going to go away. Some form of cryptocurrency is going to make its way.
Speaker 2:I think what Bitcoin does is allow the conversation to happen, right? So I think people need to understand it. It's like anything, right? So, while I don't have a big position in Bitcoin, I have some because it lets me get my feet wet so that I can feel it, I can understand it, but it's never going to be a big enough position that's going to change my life one way or the other, but it gives me the chance to say, okay, I'm involved, I understand it, I want to see how it's trading, and I would say that to most people that they should. It should not be. They shouldn't come in the door saying you know, I want to own Bitcoin because my next to a neighbor was Bitcoin. He says I have to buy Bitcoin. The wrong, that's the wrong reason.
Speaker 2:Should you know what Bitcoin is? Should you understand what cryptos are? Should you understand what the blockchain is? You should, and whether you find that out by reading a book or reading magazine articles or talking to people, but I think it's important to at least understand it. Whether or not you want to own any is another situation. And remember, you can also buy. People think you know Bitcoin trades at $25,000 a coin. You don't need $25,000 to buy Bitcoin. You can buy $50 worth of Bitcoin. You're just going to a fractional coin. But what it does is it makes you feel like you're in the game and you got your feet wet and you're kind of watching it and understanding it. So I would never tell. I would not necessarily say never, but if people want to talk about it, I think they should. I think they should understand it and I think you know having a little tiny bit of exposure, just so that you can feel it.
Speaker 1:So that you understand it. Are there funds that you could just invest in a fund that buys?
Speaker 2:Bitcoin. Well, they're in the process of trying to create them right. There's a lot of regulatory issues around the fund, and most recently, there was a you know the Gensler and the SCC. Gary Gensler and the SCC just came over the ruling right and blocked a fund that everyone thought was gonna that was gonna happen. In fact, it didn't happen yet, but at some point I do think they are gonna happen. At some point I do think they're gonna create a Bitcoin fund. But I would just say, like anybody, you know, that's way out there in the risk scale, right, that's not a conservative investment. So, again, depending on where you are and the other thing is, like us at SlateStone, we don't buy Bitcoin for clients. I would say to you, though, if you wanna buy it, here's how you do it, here's what you should think about, but I'm not doing it for you. I might say to you it's absolutely not the right thing for you, but if you're really hell bent on doing it, okay, I can't stop you, but we're not gonna do it for you.
Speaker 1:Guys, I'd love to have you back on A few more years. We'll look at the trends. What do you think?
Speaker 2:We have to wait a few more years. How?
Speaker 1:about next month. Thanks so much, guys.
Speaker 3:Take care.
Speaker 1:Thank you for joining us today. Don't forget to follow and rate us on your favorite podcast platform or visit TicketToTheBoardcom for more ways to connect. Welcome to my channel.