Why Now is the Time to Ensure That You Are Planning for a Rainy DayOctober 31, 2017
Zach Joiner, CFP® Promoted to Wealth AdvisorJanuary 5, 2018
5 Important Insights From the 2017 Schwab Impact Conference
A couple of weeks ago in Chicago, Charles Schwab held their annual Impact conference where thousands of financial advisors, asset managers, investors and the media got together to collaborate best ideas. This conference, which is the largest in our industry, provides a great opportunity to hear from industry experts, strategists and celebrities. This year I made it a point to attend. My goal in going to the conference was to stay in tune with where the industry is heading (especially in technology) and try to come back with two or three good ideas that might improve our client experience. Throughout the conference I took diligent notes. Below are five key insights that I think you should know.
1) Cyber security is certainly on the top of mind for everyone.
Keeping client data as safe as possible in today’s interconnected world is a high priority for most financial firms, as it should be. Cybercrime is on the rise and is likely here to stay. Given the successful data breaches of high profile targets in 2017 (Equifax, Deloitte, Uber, Verizon to name a few) more breaches and cyber attacks will likely only continue. Walt Bettinger, the CEO of Charles Schwab, described cyber security as a major threat to both Schwab and advisory firms. Unfortunately, according to Mr. Bettinger, guaranteeing protection against all cybercrime, is a bit like trying to time the market, it is virtually impossible. With that said, Schwab is spending many millions of dollars to help fight cybercrime and keep client data safe. In addition to Schwab, everyone at Cambridge is working hard to keep client data safe. While we may not have millions of dollars to spend on cyber security, rest assured we partner with large firms like Schwab, Citrix Sharefile and others that do and we take protecting your data very seriously.
2) A recession over the next 6-12 months does not appear likely, but we will get another recession.
The great thing about going to a large financial conference like Schwab Impact, is you typically get to hear directly from some of the greatest minds in finance and investing. This year was no different. There were multiple sessions with CEO’s and Portfolio Managers from some of the nation’s largest money management firms. Most, if not all, were quite surprised that stock markets around the world have performed as strong as they have. While some presenters made bold calls, like even larger gains in 2018 for stocks, most were cautiously optimistic on the outlook for stocks over the short to medium term. Even with that said, there was certainly a reoccurring theme that we as investors may need to reset and perhaps lower our expectations of what actual returns might be over the next 5-10 years. Some mentioned that perhaps the recent stock market strength was really just “stealing” from future potential returns. One fact mentioned over and over again is the U.S. is now in its eighth year of expansion and while “bull” markets do not die of old age, they typically will not last forever. To us, now is not the time to over extend and try to catch up to markets if you were either not invested or under invested and waiting for the next market crash. Market timing is a fool’s sport that most people are better off not playing.
3) The age of technological innovation is upon us and is not likely to go away.
A common theme at Impact this year was the extraordinary advances in what is called “FinTech” or technology for the financial firms like ours. I can attest, it is true, there have been some incredible advances. As a firm, Cambridge chooses to embrace technology rather than resist it. Ultimately, we look at technology as a way to help us enhance the Cambridge client experience. Whether it is with online secure document portals, sophisticated trading and performance reporting software or incredibly smart financial planning software, we spend a lot of time and money on FinTech. You can count on us to continue to be proactive in researching and perhaps implementing programs in the future that will help us deliver a better experience to you. We are not trying to compete against tech. We choose to leverage tech to improve the overall human experience.
4) Even professional money managers have no idea what to think about Bitcoin.
For those that may not be familiar, Bitcoin is a completely digital money (a so called “cryptocurrency”) that is not backed by a central bank or authority. Bitcoin can be purchased via digital wallets and there is even now some exchange traded funds (ETF’s) that allow you to invest in a Bitcoin proxy, or at least sort of. Given the amount of questions I have had recently about Bitcoin, I suspect that I will have a blog post with more information on how it works sometime in the near future. Nevertheless, Bitcoin is certainly all the rage in the financial media these days and there were many conversations about Bitcoin at Schwab Impact for sure. When asked about the growing popularity of Bitcoin, Walt Bettinger, the Schwab CEO, had some serious doubts about the long-term future of the currency. He believes that governments around the world are very sensitive to their own currency and it is unlikely that they would allow Bitcoin to grow to a size to challenge physical currency backed by governments. Many other Portfolio Managers spoke about Bitcoin and struggled to understand the concept and the investment reasoning behind it. Certainly, the topic made for interesting discussion indeed. My take on Bitcoin is to avoid it for now. Try not to get caught up in the hype.
5) Illinois’ financial picture is a joke.
As a resident of Illinois for the majority of my life, the best word I can use to describe the financial picture of my home state is embarrassing. To put things into context, Schwab Impact (remember it is the largest national conference for Registered Investment Advisory firms in the country) had a session named: Dysfunction and distress in Illinois, a tale of caution and opportunity. Yes, I did attend that session and let’s just say that I was not totally honest with my answer when the guy next to me asked where I was from. As an Illinois resident and follower of financial markets, I was aware of Illinois problems, but perhaps I did not appreciate just how large the problems are. Given that many of our clients are Illinois residents, here are some facts about Illinois for those interested. Illinois has the lowest credit rating of any U.S. state and is on the verge of junk status. Illinois currently has about $16 billion of unpaid bills, the largest unfunded pension liability in the nation and an economy that is growing slower than other Midwestern state since the 2008 recession. Dire to say the least.
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