The Old Fashioned

Introduction

Happy New Year! The content of our team’s annual letter is divided into four sections:

One: A reiteration of those fundamental philosophies we at RMB hold to be true in the world of financial planning and investing.  

Two: A recap of the year from an investment perspective. As a reminder, we are not predictors of the market, and it would be detrimental to think anybody had that skill. However, I think it’s informative to look back on where we have been as further edification of the fundamental philosophies.  

Three: An opportunity to share with you brief snippets of our lives in 2022. 

Four: A few personal learnings and guidance I have developed in the past year. A sort of fireside chat.

Lastly, the information in the first section of the letter are all my opinions based on my experiences in this business, the research I have read and my own understanding of what it takes to be successful. They are however my opinions and I’d be happy to discuss anything contained herein in more detail in our next meeting.  

Unalterable Truths of Financial Planning/Investing

A question I get with great frequency is: “With so much information available about investing is it still necessary to hire an investment advisor?” It’s a fair question. The world of investing and access to information about it has changed tremendously in the past several decades. Research is readily available, there are many online planning sites, access to the markets is readily available and costs of investing have plummeted. It’s never been easier to manage your own financial life, invest in your future or protect your present. And yet… I’m confident most families will have more success when working with an advisor.

New Year’s resolutions are extremely popular this time of year and the most frequent resolution is around physical health. I have made this resolution no less than 8 times before! Each time I took a different approach: a well-researched plan advocated by many fitness gurus, the purchase of a new piece of exercise equipment, the dedication of certain times of the day, or perhaps a mutual commitment with my wife. Success has lasted as little as two weeks and at most six months…but ultimately no lasting change!  

What is the problem? I have access to amazing information, I have the best equipment on the planet, I have the time, I have the capacity and I make it a priority. A more careful examination of my physical health routines uncover the same consistent truth. My plan works until it hits an obstacle. The list of obstacles have included a nasty cold, a vacation, a changing work schedule, momentary lack of motivation, a broken piece of equipment, and multiple different injuries. My careful plan, all the online research, my internal motivation, or even the brand-new Peloton couldn’t handle the inevitable obstacles life would put in front of my physical health journey. What was I missing? Why could I not get over these hurdles?  

I was missing a coach! A great fitness coach keeps us on our health journey regardless of the bumps in the road. In every endeavor, a coach’s role is to meet players in their adversity, lift their spirits, craft a new plan, and push forward. A coach understands there will never be a perfect game plan on day zero, but instead an ever changing panorama of options. The coach leans on their knowledge, experience and relationship to make choices in the thick of the hardest obstacles. At the heart of every coach/player relationship is trust. The player acknowledges their inability to work through obstacles and trusts the coach’s guidance in those critical moments. If I ever want a health goal to stick, I need to hire a coach!

If we want healthy financial lives, we need a coach, often called a financial advisor. You don’t need an advisor to craft your plan today, you don’t need them when things are going well, you could probably even download a fancy app that will last a few months, but when the inevitable obstacles arise (in your life or in the market) without a coach you are doomed to fail.       

The following are my truths of successful investing: 

1. Create an investment plan that is goals focused
2. Use your plan, not the market, to define your success
3. Risk is only measured as the probability of not meeting our financial goals (ie. Running out of money!)
4. Long term commitment to equities is the single greatest risk reduction tool we can utilize 
5. Owning a small amount of “risk-off” assets creates the confidence to maintain a majority position in equities 
6. All market declines are temporary and should be opportunities for the disciplined investor

These rules are battle tested year in and year out and have yet to fail me or any of you. My team’s role is to provide the steady hand at the wheel in these tests. In the event you lose your confidence, we are the coaches that push you back towards the path. We look forward to serving in that role for many decades to come, and if we keep in mind the truths above, I am confident we will succeed.

“In every endeavor, a coach’s role is to meet their players in their adversity, lift their spirits, craft a new plan, and push forward.”   

2022 Markets Synopsis

My family’s personal slogan for 2022 was “The Year of Goofball” and the market decided to participate in its own unique way. Thanks to heavy doses of inflation the Federal Reserve began raising interest rates early and didn’t stop. Their effort to slow down an overheated economy was made more difficult when Russia invaded the Ukraine. In addition to the extreme loss of life, pain, and devastation Russia is causing, it also created further inflationary pressure in most commodity markets. Risings rates and global conflict combined to create one of the most unique market situations of the past several decades. At year end, the S&P 500ⁱ finished down 19.4% and the US bond market (Baird Intermediate Index) was down 10.1%.  

There is no doubt that opening your statement in 2022 has been a continual emotional gut punch however there are silver linings. First, high quality bonds are now trading at yields between 3-5%. This is 3-5 times higher than they were 24 months ago. Americans are now getting paid a reasonable rate of return on their savings. This should prove to be great news for retirees if the Fed is effective at staving off further inflation. Second, stocks are trading much closer to their long-term valuation metrics and appear much more appropriately priced on a global scale. I said this to almost all of you at some point this year when we reviewed our 3.5 Obstacles to Successful Investing, “History has shown us quite clearly that buying stocks when they are down 20% in a calendar year is an excellent investing decision in any subsequent 5 year period.” I continue to believe that to be true and thus we have been actively rebalancing back to long term equity targets during this stock market pullback.        

Inflation remains a big topic of conversation amongst investment professionals. The debate is no longer, “Will we see inflation?” but instead “How high and how long will it last?”. Inflation is a larger threat to people no longer participating in the labor force as they don’t get to experience the positive impacts of rising wages that help offset price increases. Inflation is why unalterable truth number 4 is so important, without a strong dedication to long term equities any level of inflation will erode your purchasing power. The great news is that in periods of moderate inflation equities are the best performing asset you can own. This is why I have such great conviction that while the yield of bonds has improved they cannot and will not supplant the role equities must play in our portfolios for sustainable long term growth.

I dedicated an entire paragraph of last year’s recap to crypto-currencies and the block chain technology they run on. Clearly 2022 and the fallout from the FTX trading scandal has not been kind to crypto currencies. This is not unusual behavior for this area of the investment market and I anticipate further volatility in 2023 as crypto looks to re-establish its footing in the post FTX trading world. The events of 2022 significantly challenged RMB’s investment thesis on BTC’s unique position as an inflation fighting asset. While our thesis remains intact for much of the 2nd and 3rd world countries where monetary inflation has been in hyper mode it fell quite short of the mark in the United States and other developed countries. We are still studying the impact of this nascent investment and considering how to implement any additional recommendations in this space. 

In conclusion, 2022 was a tough year as the federal reserve fought runaway inflation and the rest of the world put hefty sanctions on Russia for their invasion of the Ukraine. Both of these came at a tremendous cost to investors and will likely continue to tamp down growth in 2023. However, and as always, I haven’t a clue what will happen in 2023, but I know we will spend the whole year coaching our families to be ready to respond confidently to anything the markets bring. The team’s long-term conviction around buying high quality stocks for the long haul is unchanged.

2022 Team Updates

Emily Van Grinsven
Client Service Administrator
evangrinsven@rmbcap.com
(414) 238-6281

Emily completed her first full calendar year with RMB. She was just promoted to the next level within our Administrator track. She will now be handling many more responsibilities like money movement, client onboarding, RMD’s and distribution requests. I’ve been so pleased to watch Emily grow and challenge herself in the role. She is getting so comfortable being uncomfortable and I know many of you have come to rely on her support. Emily leads our team’s charitable efforts in Milwaukee. She has arranged several box packing days for our team at the Milwaukee Food Pantry and donates her own time often to the causes close to her heart. In her non-working time Emily enjoys exploring downtown MKE, taking long hikes up north, attending concerts, and visiting family as often as she can.

Molly Eggert
Client Service Manager
meggert@rmbcap.com
(414) 238-6288

Perhaps nobody on the team had as busy a year as Molly! She continued to be an invaluable team member and spoke daily to many of you as she executed account transfers, payments, trust transfers, and trades. Behind the scenes Molly oversees most of our company project work and oversees the training and compliance process within our team. I am so pleased to announce her promotion to a leadership role within the team. Molly is now our team’s Client Service Manager! Molly also found time to get married in November and took a well-deserved two-week honeymoon vacation to celebrate with her husband on a tropical beach! Molly continues to love on her fur baby golden retriever Nala, attend country concerts and visit lakes up north. I am so thrilled to have Molly take on more responsibility and become a leader on our team. 

Brian Klein
Wealth Advisor
bklein@rmbcap.com
(414) 203-8064

Brian joined the team this summer after spending the previous 9 years in various other registered investment advisory practices. His thoughtful questions, tenacious curiosity and passionate energy shown through in the interview process, and I’m thrilled that it’s continued to be a core part of Brian’s early work with RMB. Brian jumped into the role with two feet and has done an outstanding job learning about RMB, working with clients, and delivering phenomenal advice and guidance. In 2023 he hopes to meet with many more client families and seek to understand them better as he brings his experience and skills to bear on each of their needs. Brian is engaged to be married this spring, has two dogs and enjoys hiking, tennis and traveling. He and his fiancée are excited to build their life together in Milwaukee. 

Trevor Isham
Partner, Sr., Wealth Advisor
tisham@rmbcap.com
(414) 238-6285

I just celebrated 10 years at RMB Capital, which mean’s I’ve earned my ten year sabbatical award. (I’m postponing it to 2024 so more on that in next year’s letter.) I continue to serve as the team’s Senior Wealth Manager and love all the interactions I get with our big roster of clients. I hosted the second annual Young Life golf outing and am already filling spots for 2023. On the family front my daughters are now 4, 6 and 8 years old. They continue to be the great joys of my world and we were blessed with another year of tears, laughter, and good health. I did two solo trips for the first time in a long while: skiing in Colorado and a golf trip to Missouri. Fortune favored upon me this summer and I reached my lowest handicap of my life while enjoying quality time with my favorite playing partner, my wife.

Conclusion

2022 proved to be an overwhelming year for me. I’ve prided myself on taking on a lot, getting it done well and then seeking out the next challenge. If I had a challenge the energy would come and this approach to life so far had worked great. “Sleep when you are dead” was a quote I often repeated to myself. In 2022, I found myself taking on new challenges, reaching into the energy tank and coming back with nothing… To say I was flummoxed was an understatement; however, I’m never one to rest on my laurels, I set out to determine the cause of my newfound listlessness.

A lifelong mild hypochondriac, my first thought was something must be wrong with my body. After a few months of Dr’s visits and tests it turns out that yes, I’m aging, yes, I have a few peculiar quirks to live with but, by and large, I’m healthier than most. This was disappointing as instead of a miracle pill or an extra Peloton ride each week, I was going to have to pursue the much harder process of untangling the web that had formed in my brain. This was a daunting task as my ego constantly fought for its own preservation. Yet, the work I did/am doing with a life coach, my wife, friends, and several books has been some of the most rewarding of my life.  

I had quite a few breakthroughs this year and please feel free to ask me about them as we get together, but I wanted to share one here. This fall, I read two books back-to-back: “The Ruthless Elimination of Hurry” by John Mark Comer and “Essentialism: The Disciplined Pursuit of Less” by Greg McKeown. The hypothesis of both can be summed up as “busyness” is a disease; its symptoms are burnout, fatigue, lack of success, feeling out of control and a lack of meaning. The causes are modern technology, a “yes man” mentality, keeping up with the Joneses, not enough solitude, and not having any priorities. I found truth poured forth from every page of these books and they encouraged me to take a new look at my personal and working life.  

In the end, I needed more times of solitude. I had created a life with a never-ending supply of inputs, but had not given myself the space, time, and energy for processing. I needed to turn down my phone notifications, my endless email reading, internet surfing, social engagements and podcast listening. In the quiet I was able to uncover my true desires, passions and interests and then from that quiet space emerge and live a more purposeful life. To be clear it’s a daily struggle to create space for contemplation and processing, but it’s become essential for me to prioritize that time and energy. My most impactful new habit is journaling each day. Most of the entries are simply stream of consciousness thoughts, but every entry must include three intentions for the day and one note of gratitude. In this manner I can unburden some of the clutter that accumulates and re-focus on the main priorities of the day. Achieving those three intentions is my daily mark of success or failure.  

I hope that each of you can find your own moments of solitude and peace that enables you to think deeply and honestly about your life’s priorities and the actions needed to execute on them. I’d highly recommend journaling as a technique that is useful in both cleaning out the unnecessary baggage we carry and offering renewed focus on the things that matter most. The team has undertaken similar training on carving out more time for contemplation and it has yielded some tremendous changes to our internal processes and procedures that you will notice leads to more time spent on the activities that create the most value for all of you. Thankfully, I am approaching 2023 with renewed vigor in my career as a wealth advisor and am so excited to spend time with all of you as we work towards the achievement of your life’s financial goals. I continue to be humbled by the awesome nature of life, honored to serve in a trusted position in your lives and confident the future holds bright promise for us all. 

Trevor Isham
Partner, Senior Wealth Manager