Our investment approach is a bottom-up, fundamental research method that emphasizes the importance of individual stocks and companies, as opposed to a top-down approach, that focuses on larger, hard to predict themes such as the economy, politics, and market moving events. We believe this approach allows us to withstand short-term fluctuations, by avoiding the noise of short-term, volatility inducing events. Rather than begin with a theory about the direction of the economy, then develop expectations about which sectors will rise or fall, then choose a company within that sector, a process that layers broad assumption on top of broad assumption, we search out good companies across a wide swath of sectors and industries. From there we conduct due diligence on management teams and financial statements, comparing and assessing these companies based on very specific criteria. Our opinion of the economy and the stock market is then derived from our collective view of the companies we own and follow for our clients.
To be clear, we are constant students of what is happening on the domestic and world economic and political stages, but our analysis of these events plays a supplementary role. Take the election for instance. We can’t claim to know what the future holds, but there is always the potential for short-term volatility following an election. Like any other major event, we will watch eagerly, but will make our investment decisions for the long-term. In fact, history suggests, the short-term volatility following any election is a poor predictor of future stock market returns, especially for the subsequent 12-month period. According to Bloomberg, the S&P 500 index fluctuates an average of 1.5% the day after an election. While this is no small amount for a one day market move, gains and losses predict the market’s direction for the next 12 months less than 50% of the time. A few months down the road, we will likely add this presidential election to the list of recent over-hyped events which includes the Russian-Ukrainian Conflict, the Greek Debt Crisis, the Chinese GDP Slowdown, and Brexit. Following the election, stay tuned for the next big media sensation, the Fed’s December decision on interest rates.
The Social Security Administration announced that the 2017 cost of living adjustment (COLA) for Social Security will be 0.3%. While this is nothing earth shattering, something is better than last year’s nothing! Regarding Medicare Part B payments, according to an article written by Mary Beth Frankel of Investment News:
“By law, the majority of beneficiaries are protected by a “hold harmless” rule that says their Social Security benefits cannot decrease from one year to the next due to an increase in Medicare Part B premiums. In other words, the increase in their monthly Medicare Part B premiums, which pays for doctors’ visits and outpatient services, cannot exceed the dollar amount increase in their Social Security benefits.”
Also, Social Security taxes will be paid on wages up to $127,200 for 2017 up from $118,500 for 2015 and 2016. As always there remains no wage limit for Medicare taxes withholding. If you have any questions regarding either Social Security or Medicare please do not hesitate to contact us.
Those clients with an IRA (non-Roth), SIMPLE IRA, SEP IRA, or retirement plan account must generally take a withdrawal upon reaching age 70½. The amount you must withdraw is called the required minimum distribution (RMD).
Beginning in January we reach out to our clients that will have an RMD within the year to help them through the process of taking their RMD. The amount you are required to take for the current tax year is listed on the last page of your monthly account statement under the “Distribution Summary” section. You will be able to view your required gross amount, any federal and state tax that was withheld, and the net amount of the distribution. To help you with your cash flow planning, this amount will be updated throughout the year depending on how and when you take your RMD. Your distribution may be taken in a lump sum payment, monthly, or quarterly installments.
If you have questions regarding your RMD, or if you aren’t sure if you have taken your RMD this year, please give us a call and we will be happy to help you.
As your investment advisor, we are held to a fiduciary standard. Skipping the legalese and court cases which specifically define fiduciary, this means we act in your best interest in providing our investment advice. This sounds obvious but many firms/brokers/insurance agents aren’t held to this tough standard. They can, and will, sell you anything deemed suitable for you. So, a lot of what we do with you is to get to know you, your financial situation, goals, and tolerance for risk when coming up with a financial plan and implementing that plan for you. These are the proactive steps we take, the duty of care, in managing your investments. And, this is an ongoing relationship as your financial situations changes throughout the years. There is another aspect to how we manage money for you that you don’t see—and for good reason. These are the investments you won’t see in your portfolio. These investments might be entire asset classes, certain stocks, bonds, or funds, or insurance products. Why? Banks, brokers, and insurance companies have invented all manner of suitable products which are either very expensive to you or seem too good to be true (e.g., upside to the stock market with no downside), or have hidden fees. We hear these sales pitches often on your behalf. So, we wanted to take this short blog post to highlight one of those products that was recently the subject of a page one article in the Wall Street Journal, the structured Certificate of Deposit (CD):
We will provide just a short summary here, but the article is worth the time to read. With the bull market in stocks and lack of meaningful interest yields on low risk investments, Wall Street banks (i.e, Goldman, JP Morgan, Merrill Lynch, Barclays, etc.) have created structured Certificates of Deposit (CDs) to entice savers. These are CDs linked to stocks or some other commodity, combining some limited upside and some limited downside, with guaranteed hefty fees for the salesperson and product creators. The CDs have very little liquidity if you need to sell before maturity, too. The Journal’s analysis of 118 market-linked CDs issued at least three years ago by Barclays showed only a small number exceeding the returns an investor would have earned on a conventional FDIC-insured (risk free) CD. If the product being sold to you has a long fancy name like “GS Momentum Builder Multi-Asset 5 ER Index-Linked Certificate of Deposit Due 2021,” a real structured CD, and disclosure documents which run hundreds of pages (most do), alarm bells should be ringing in your head. You won’t see NWIC buying these in your portfolio.
Northwest Investment Counselors is pleased to share that we are #7 on the list of Oregon’s top Registered Investment Advisory firms as ranked by assets under management by Investment News.* “We are pleased to have made Investment News’ list,” said Mark Scarlett, Principal and Co-founder of Northwest. “I want to thank our clients for the trust they have placed in us and the hard work and dedication of our employees. As a result, we have grown by over $150 million in the last 10 years, ” he added.
Founded in 1998, Northwest now manages over $300 million for families and foundations, primarily in individual stocks and fixed income securities. Our financial guidance can be summed up by three key attributes that make Northwest’s wealth management distinct and valuable. We put our clients’ needs first rather than products or quotas. Our wealth management team draws upon a wide breadth of experience, education, and credentials to develop portfolios that fit the unique needs of our clients. And the in-house and rigorous nature of our investment process, which has produced tax-efficient investment results with below average volatility, is directed by a team of portfolio managers, all of whom have earned the Chartered Financial Analyst (CFA) designation.**
*Methodology: Investment News qualified over 1,600 firms headquartered in the United States based on data reported on Form ADV to the Securities and Exchange Commission as of May 1, 2015. To qualify, firms must have met the following criteria: (1) latest ADV filing date is either on or after January 1, 2015, (2) total AUM is at least $100M, (3) does not have employees who are registered representatives of a broker-dealer, (4) provided investment advisory services to clients during its most recently completed fiscal year, (5) no more than 50% of amount of regulatory assets under management is attributable to pooled investment vehicles (other than investment companies), (6) no more than 25% of amount of regulatory assets under management is attributable to pension and profit-sharing plans (but not the plan participants), (7) no more than 25% of amount of regulatory assets under management is attributable to corporations or other businesses, (8) does not receive commissions, (9) provides financial planning services, (10) is not actively engaged in business as a broker-dealer (registered or unregistered), (11) is not actively engaged in business as a registered representative of a broker-dealer, (12) has neither a related person who is a broker-dealer/municipal securities dealer/government securities broker or dealer (registered or unregistered) nor one who is an insurance company or agency.
**To learn more about the CFA charter, visit CFA Institute.
We founded Northwest eighteen years ago to provide personalized, institutional quality investment management to families. Because of the trust clients have placed in us and the hard work and dedication of our employees to our clients, we have grown by over $160 million in the last ten years to over $300 million in assets under management (AUM). We continue to look forward to prudently serving the investment needs of our clients so they can live well and retire better.
Thank you clients, employees, and partners for making Northwest a success.