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End of the first quarter, how about a blog post?

I'm so glad winter is behind us, but is it really already April?!

It has been too long since many of you have availed yourselves of our wealth management capabilities. 
Check out our new tools (below) for collaborative financial planning.

 

First, a quick summary of our Risk Adjusted Portfolios (RAPs).  At quarter end, all of our Risk Adjusted Portfolio Models were close but slightly behind their benchmarks.  The constituent indices in our benchmarks ranged in return from 0.95% to 2.68% for the quarter.  As I write this letter on April 6th, all (except the Conservative NTF RAP which is 0.09% behind year-to-date) are solidly between their US Only and Global benchmarks, and the indices we base them on range from 0.92% to 3.36% as of last Friday.  I’m very pleased and believe we will continue to see improved and/or superior relative results for our portfolios so long as market volatility levels continue to increase to normal levels.  Now let’s talk about the stuff that you can control!

 

While there are lots of automated online “robo” planning and investment tools today, they are only as good as the information they get (and that isn’t very complete).  The huge thing they cannot do is actually know you, and through conversation and thinking together, figure out when the typical thing to do is perfectly wrong for you.  They also don’t do a good job of understanding how some financial tools can play multiple roles.  529 College Savings Plans are an example.  I don’t like them for college savings!  So they are a purpose built tool for college savings, and because of that they have some significant disadvantages that can be avoided with careful use of other techniques or tools which may not be specifically for college savings and may well be used to meet several planning needs.  I’ll use 529s where appropriate but they are not the best way to save for many, though they may be for some.  The web really won’t help you sort that out.  We will, for this and many other subjects.

 

Here is how we do it today.  Better, faster, more available to you and easier for you than ever before.

 

I’ll be providing several web addresses below other than our usual company address www.rfgweb.com.  They are for convenience when you are typing addresses or clicking on them in this letter in order to go directly to specific client resources, skipping intermediate links and clicks.  The same resources are all also available at www.rfgweb.com under various links. 

 

Login to your RFG Wealth Management Portal from your computer phone or tablet at www.rwealth.net or at www.rfgweb.com->Client Access, ->Wealth Management.  For most of you your username is your email address. 

 

To see a 2 minute video demonstration with sound for what it can do, watch Imagine the Future at www.rwealth.info.  

 

This site is the same one we have used for 7 or more years.  It has been massively upgraded and now does far more, far more easily.  In fact, many of you will find you don’t need our investment reporting page (MyAccounts) at all!  Your quarterly statements from your MyAccounts page are automatically copied into and stored in your Wealth Management Portal Vault, investment pages in your Wealth Management Portal pull through your actual performance calculations from MyAccounts, and many of the popular reports run from MyAccounts are run more easily from your new Wealth Management Portal.  So come to www.rwealth.net, connect the financial accounts we don’t have in there for you already, (401(k), bank, credit card, other investment, insurance, mortgage), see everything in one place, (including all your spending, automatically!) and know today and every day how ready you are for retirement or whatever is next!  Trevore, Michael, or Susan can help you to get your login -straightened out if you need, and Trevore or Michael can assist you with connecting accounts and a walk through of the system.  Call them at 847-670-8000.

 

Your Investment Reporting Portal is also much improved with a cleaner, easier interface and available for your use at www.myrfg.net, or www.rfgweb.com->Client Access->MyAccounts.  It is a much more sophisticated investment reporting system than the parts of it available at www.rwealth.net.  If you have any questions while you are there you can click on a link there where you can schedule an appointment convenient for you for a 15-30 minute call from me!  This portal is also available on your smartphone and tablet by searching the Android or Apple iOS application stores for myRFG.  Load it and login with your usual username and password and keep all of your investment information at your fingertips. 

 

Find your MyAccounts app on your phone or tablet by searching the Android or Apple iOS app stores for “myRFG”.  There are also links to the apps on our website.

 

We have changed how we build portfolios over the last year and now use 3 to 5 different applications (depending upon the portfolio model and securities) to view the same securities from different vantage points.  In addition, we have simplified the structure, vastly increased the breadth of market exposure, and reduced the underlying net expense ratio of every Risk Adjusted Portfolio model (RAP).  Net expense ratios of our RAPs have been reduced approximately 50% over the past year; a savings of more than 0.50% per year for most.  We seek to provide targeted exposures to equity and debt asset classes being cognizant of tax and expense impacts, and with the objective of reducing volatility.  Our traditional strategy of using broad diversification, tactical rebalancing, and seeking to buy asset classes that fall to very low fundamental valuations (when available) remain the cornerstones of our process.  That means the return characteristics of our RAPs are typically such that when markets drop or remain fairly flat we will often beat our benchmarks and when markets are up very strongly we will often trail them.  Recent research from Morningstar has measured the difference between the returns investors enjoy from different securities and portfolios, compared to the return of the portfolio or security itself.  It is widely known that investor returns and the returns of the securities they invest in are not the same due to cash flows and investor behavior.  This research shows that investors in lower volatility portfolios enjoy a positive return difference from their underlying securities on average.  Investors in higher volatility portfolios conversely suffer a return deficit from the securities in their portfolios on average.  Their conclusion is that, in part, lower volatility portfolios are producing greater investor return per unit of risk than higher volatility portfolios.  Hence, we continue to try to reduce unnecessary volatility. 

 

A fun thing for us, and a valuable thing for you is that we can now show you exactly what the average and “stress test” volatility levels are for your specific portfolio(s)!  We do this with you online.  On our website you will find buttons asking “What is my Risk Preference.  Click on one or go directly to www.myRFG.me and follow the graphical questionnaire through from 3 to 7 questions typically; you will be telling us your specific Risk Preference for your investments.  We will then contact you to review with you live on your computer or tablet, just how your actual portfolio risk compares to your preferred risk, alternatives that may better suit you and how the changes might affect your retirement income.  It should take no more than 15 or 20 minutes total to KNOW that your investments fit your preferences and to understand what that means for your future.  It is truly an outstanding investment!  

 

Well that is a lot for one quarter!  I hope you will come to our websites and engage us in any of the ways that suit you best.  If there was just too much here and you don’t know where to start, I have just one place for you to go!  Click on this link or type in your browser, www.mywealthadviser.com/and you will be taken to my calendar where you can select the most convenient 15-30 minute time for you.  I will contact you at that time, at the number you specify and we can talk about what your needs are and what the next step should be.  I promise you will be very pleased at how much we can do in a very short time!

 

Have a wonderful spring!





RFG 2012 Year End Letter, with a bit of a rant thrown in!

Happy New Year! Good Health and Happiness to You and Yours in the year ahead!

We are pleased to put 2012 in the books! Not to bid it good riddance however!   Rather to mark the end of a year in which we all accomplished a great deal. We expect a year ahead with far less change to endure! It will leave us time this year to introduce to you our new capabilities and streamline our delivery of them to you. RFG moved into its own new home base. Kendra and I moved our families together early in the year, sold both of our previous homes and got married December 28th. Trevore purchased a home nearby and will be settling into it. Susan’s husband’s company has gotten a new product out after many years of painstaking effort. This year we look forward to keeping our homes and RFG in place and simply living and working in them!

With one exception, markets ended the year looking very normal, even healthy. US and Foreign Equity markets were up, in general, in the mid-teens, and debt markets as measured by Barclays Capital US or Global Aggregate Bond markets were each up just more than 4% on a total return basis. How they got there didn’t feel normal, but it truly was. There was nothing extraordinary about market action this past year. Perhaps the only unusual element to the year was the last day when US equity markets were up more than a percent (S&P 500 still down 0.4% for the quarter). At this writing, the next surprise was the huge start to this year. Globally, markets jumped 2-3% or more on 2013’s first trading day. 

The exception to “normal” remains the artificially low Treasury Yield Curve, with Treasury bills held near zero interest by the Federal Reserve, as it openly fights low employment with allegedly “stimulative” ultra-low short term rates. The following was removed from our quarterly letter to clients in the interest of brevity.

Fed Chairman Bernanke is continuing “Operation Twist”; referring to the Federal Reserve initiative buying longer-term Treasuries and simultaneously selling the shorter-dated issues it already held in order to bring down long-term interest rates. The Fed is continuing to expand the balance sheet and keep and mortgage rates down via “QE3.” The Fed implements quantitative easing by creating money (exactly the same way your kids create things in their video games!) and then buying bonds or other financial assets from banks, (primarily mortgage backed securities guaranteed by Fannie Mae and Freddie Mac.) On September 13, the U.S. Federal Reserve launched its third round of quantitative easing, and officially stated - for the first time - that it would keep short-term rates low through 2015. These “operations” ARE NOT, considered spending, nor are they counted in the calculations of the federal deficit. These are “balance sheet” activities! While private debt presaged our last economic crisis; this will be our next challenge. 

The private sector, (us) used an addiction to debt to create the boom that ended so disastrously in 2008. The public sector remains more addicted than ever, but it the addiction has been obscured by shifting it to the federal methadone clinic, where expanding the balance sheet is the treatment until we figure out how to get federal spending permanently below 19% of GDP (it is currently almost 23% of GDP). Interestingly, most of the spending is still on things for individuals, including everything from unemployment paychecks, other welfare payments and social programs, Medicare, social security, college aid etc. But there is plenty of spending on businesses as well. Namely tax breaks for business activities that, while appealing from an environmental, employment, or some other popular perspective aren’t economically viable on their own. All in all, most of the spending is still on things that promote the opposite of our founding principles as a nation; that we should be self-sufficient as individuals, communities, states and a nation; that we should reap the rewards of our labors or suffer the consequences of our sloth; that we should rely on our families and communities to endure misfortune, and give back to them in good fortune. 

The point to all this is that all the talk about tax rates is simply not pertinent to achieving economic growth, which is the key to getting our nation back to work which is the only way to reduce deficits. The talk about the government of legislators reducing deficits is moot; they can only change our incentives and penalties. They have no control over revenues, only tax rates and those are inversely correlated to government revenues. Tax rates go up; revenues go down and vice versa. Our government can control the spending side of the equation, but with our encouragement they have chosen not to. The deficit will increase or decrease based upon the combined economic activities of every resident of our country, and upon the ability of our government to keep spending below 19% of the value of all of that activity. If you motivate and create more activity by more people, especially any activity by unemployed people, you create growth and revenues. The tipping point between economic growth and stagnation or worse is when spending exceeds 19% of GDP; no other economic measure has any substantial correlation to economic growth and low deficits or surpluses. 

The “fix” to the fiscal cliff legislation that we did go over for 24 hours or so, does nothing to address the serious issues that the Fed’s monetary policy can only keep from crisis levels with duct tape and bailing wire. We need legislative action and fiscal policies to place the country on the path of growth and prosperity. So the debt party continues, for how long, who knows. Income, estate and investment tax rates have at least been established however, and without “sunsets!” Finally, a little bit of certainty to plan against! 

I won’t go into the details of the “fiscal cliff” legislation here. I’ll post that to www.facebook.com/RFGIncsoon. 

We have put a great deal of work into the design, care and feeding of our Risk Adjusted Portfolios (RAPs) over the past year. In the last month we have begun trading into substantially new security allocations for each RAP. In my analysis, the new capabilities are beginning to translate into performance. While US equity markets ended down over the last quarter, at times more than 2%, only one of our RAPs (Income Balanced, -0.3%) also suffered a loss in the quarter. All of our other RAPs beat their US, or both their US and Global benchmarks for the quarter. All but Balanced, Income-Balanced, Opportunity and All-Equity beat their US, or both their US and Global benchmarks for the year as well. In a strong year for equity returns it is difficult for our “risk managed” portfolios to keep up in our Opportunity and All-Equity portfolios. I expect that our higher risk portfolios, as well as our balanced and income oriented portfolios, will see better risk adjusted and relative performance going forward than they have in the past 2 years. Our new analytical tools and processes are giving us even better information, and doing so faster, about the risk and return characteristics of the securities and managers we use and the portfolios we design for you. We are excited about the prospects going forward.

We have broadened our offering and standardized the processes for the care and feeding of our RAPs as we have never been able to before. We have added to our solutions so as to cover investment objectives from holding cash for a short to indeterminate period, to income in retirement or emergencies, to growing and maintaining assets and purchasing power for generations to come. 

*Our Risk Adjusted Portfolios and some key characteristics…

Model Name

Yield

Avg. Morningstar Rating

Debt

Equity

Institutional Income Portfolios

Cash Management

3.62%

 ««««

4.50

100%

0%

Income-Conservative

6.84%

 ««««

4.04

77%

33%

Income-Balanced

7.47%

 ««««

4.08

64%

50%

Income-Equity

7.48%

 «««

3.82

55%

61%

 

Institutional Accumulation Portfolios

Capital Preservation

5.47%

 «««

3.89

84%

19%

Conservative

5.36%

 ««««

4.03

68%

37%

Balanced

4.80%

 ««««

4.30

58%

50%

Moderate

4.54%

 ««««

4.40

49%

67%

Growth

4.06%

 ««««

4.35

30%

70%

Opportunity

3.43%

 ««««

4.39

32%

80%

All-Equity

3.18%

 ««««

4.42

22%

92%

 

No Transaction Fee (NTF) Portfolios

Cash Management NTF

3.60%

 ««««

4.50

100%

0%

Capital Preservation NTF

5.40%

 «««

3.79

81%

19%

Conservative NTF

5.28%

 ««««

4.12

69%

37%

Balanced NTF

4.55%

 ««««

4.25

57%

51%

Moderate NTF

4.40%

 ««««

4.14

44%

67%

Growth NTF

3.99%

 ««««

4.26

30%

70%

Opportunity NTF

3.39%

 ««««

4.38

20%

80%

All-Equity NTF

3.19%

 ««««

4.47

8%

92%

 

Entry Portfolios

Entry-Conservative

7.25%

 ««««

4.30

65%

35%

Entry-Balanced

6.17%

 ««««

4.18

50%

50%

Entry-Moderate

5.99%

 ««««

4.50

33%

67%

Entry-Income

6.03%

 ««««

4.33

60%

40%

*“No Transaction Fee” and “Entry” portfolios are for accounts that trade more frequently or are smaller sized accounts for children or employees.

 

  

It is an honor and a privilege to be your trusted advisor and Wealth Management team. We work diligently every day, in your best interest, to deserve that trust and retain that privilege.

Have a Lucky 13 and live every day fully exercising your “…unalienable Rights,…Life, Liberty and the pursuit of Happiness.”

 Benjamin G Baldwin III CFP®, ChFC

President





06/20/2011 - Ben featured on RIABiz
Ben was recently featured in an article that was published on RIABiz. In it, he was interviewed by Nevin Freeman regarding RFG's recent search for a better Portfolio Management system and RFG's final decision on Orion Advisor Services. You can view the article by clicking the link below:
 




10/20/2010 - New ''Client Walkthrough'' Page added!

This morning we released a new webpage on our website providing instructions and Walkthroughs for our clients on a variety of the systems we use. Titled “Client Walkthrough”, it can be found by hovering over the Client Access page in the main navigation bar at the top of our website.

Please keep in mind that this page is not intended to prevent you from calling us if you have questions. We are always happy to discuss and answer questions on how to navigate and setup services for your accounts.

This page is still in its infancy, but will continue to grow as we receive recommendations on what to provide Walkthroughs for. So if you have any suggestions or comments, please send them along to Trevore@rfgweb.com.





9/10/2010 - Entrepreneurs Can Change the World
Recently, we were shown this YouTube video about Entrepreneurs. While the economy is still tough, a video such as this does wonders for uplifting the spirit and motivation of all. Please enjoy...
 





9/2/2010 - The Three Factors of Fear
Suddenly, in the past few weeks, the markets have looked a lot scarier to a lot of nonprofessional investors. Why? The answer probably has something to do with human psychology.

An Australian company called FinaMetrica has been giving lay consumers a scientifically-designed risk profile questionnaire for the past 12 years, helping financial advisors evaluate whether their clients are natural risk-takers or the kind of people who feel more comfortable if their money is stuffed safely in their mattress. A closer look at the responses, including 2,586 individuals who took the test before and after the recent bear market, shows something surprising: people were no more risk-averse after they had been clawed by the worst bear market since the Great Depression than they had been before.

Chances are, you're less excited about taking market risk now than you were in, say, the early months of 2007, so these results seem impossible. But the FinaMetrica people offer a plausible explanation for their results. They say that there are three components to your willingness to expose yourself to the ups and downs of the market. Two of them changed after the market downturn, and one of those two has recently changed again.

The first component is what might be broadly called your bravery; your willingness to take chances. This is the part that FinaMetrica measures directly, and its results show that if you were willing to skydive or take ski jumping lessons off the 90-foot hill before the Fall of 2008, you're just as excited by the idea of putting your life at risk now. The markets don't change who you are fundamentally.

The second component is your risk capacity; that is, how much financial risk you can afford to take. The 2008-2009 bear market might have caused a lot of us to rethink how early we might be able to retire, but a reprise of it might make us wonder if we can retire at all. So we become a bit more conservative in our investment approach.

Component number three is our risk perception. If we're watching the markets go up and up and up, then we see little risk and lots of upside. This is why, during the late 1990s tech boom, even the most timid individuals were throwing money into the market like drunken sailors. When the markets deliver the opposite experience, we look at stocks and see nothing but risk.

This last piece of the risk tolerance puzzle is, today, sending out alarm bells that may be echoing deep in your own psyche. The markets have just delivered the worst market performance in the month of August since 2001--which professional investors know is a random event. But now we're in September, that very same month when Lehman Brothers went down and AIG effectively declared bankruptcy back in 2008. It also happens to be the same month that the country experienced the shock of 9/11--which, among a lot of other things, sent the global investment markets reeling. Chances are you don't remember it personally, but September is also the month when the 1929 crash occurred.

So we had a dismal August that gave back the gains that the market had created in the first seven months of the year, and we're entering that scary month that we associate with recent financial disaster. Chances are, your logical mind knows that a reprise of 2008 is unlikely, and if you've been reading the papers, you know that corporate profits have been going through the roof in the American economy. But the emotional part of your mind looks at the market and conjures up every negative statistic, and sees far more potential risk than reward, and experiences fear even as you strap on your parachute at 15,000 feet and give an enthusiastic high-five to the instructor who is looking a little nervous.

We don't know whether the month of September will bring the markets back into positive territory or not, despite a lot of long-term analysis. But if you invest based on what the markets did recently, where does that lead you? August was negative, so get out in September. September is positive, so get back in. October is down; get back out; November is up, so you get back in--and over time, whether you follow this formula for months or years, or through bear and bull markets, you end up in the market when you would have preferred to be out, and out when it was better to be in.

As professionals, we try not to let greed OR fear dictate our portfolio composition. In the long run, that gives you an edge on others who are responding without understanding what, exactly, is driving them to the sidelines whenever stocks go on sale.
 
Please send any comments regarding this post to info@rfgweb.com
 
 
 



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Responsive Financial Group, Inc. is a fee-only registered investment advisory firm in the State of Illinois. Information on this site is compiled from multiple locations and is believed to be accurate. Incorrect information may come from these outside sources. Should you notice anything please notify us immediately. Thank you!