In The Media

CNBC segments with Schatz:
 01/12/17 - Dow 20,000 will be 'a rally you can sell'

Read more Paul Schatz 2017/16 interviews & commentary with:

FOX BUSINESS segments with Schatz:
  • Schatz on FOX Business
  • Schatz on FOX Business
  • Schatz on FOX Business

  • Schatz on FOX Business
  • Schatz on FOX Business
  • Schatz on FOX Business
  • FOX Business

How to handle getting fired by a client
Author: Jeff Benjamin
Date: May 01, 2017
Publication: Investment News
Link to Article

Conduct exit interviews, stay positive and learn something when a client is just not that into you

Unlike fishermen, financial advisers don't typically boast about the one that got away. But when pressed to reflect on the times they've been fired by clients, the stories can be insightful, educational and even entertaining.

"In 28 years, I've had a few clients leave, and I'm skeptical of anyone who says they haven't had clients leave," said Leon LaBrecque, managing partner and chief executive officer at LJPR Financial Advisors.

Mr. LaBrecque recalls being blindsided a few years ago when a client for which he had gone "above and beyond the call of duty," literally used the words "you're fired" when parting ways.

"He seemed quite happy and he took me out for a drink, where he thanked me for all the good service and then said, 'You're fired,'" Mr. LaBrecque said. "I thought he was kidding, but he said, 'No, you're fired, I don't need you anymore.'"

As is often the case in service industries like financial planning, client relationships can be fragile and sometimes advisers don't recognize the breakdowns until the client is gone.

"I guess I should have known better since that particular client was an executive in charge of downsizing at a major company," Mr. LaBrecque said. "I got downsized by a downsizer."

April Rudin, founder of the RIA marketing firm Rudin Group, said being fired by a client is a reality of having clients, and that the key is learning how to benefit from the experience.

"Advisers don't usually want to talk about it or think about it because it seems like a bad experience when a client leaves. But you want to learn from it, and you shouldn't fall into the habit of blaming the client," she said.

But in some cases, blaming the client might be the easiest way of coping with what is essentially a relationship gone bad.

"Because of the nature of my business, which includes hourly consultations, I don't get so much fired as people just don't come in as often or at all, which I think in the dating world is called 'ghosting,'" said Kristi Sullivan, owner of Sullivan Financial Planning.

"It may be because they feel they've gotten what they need from me and are ready to be independent, or maybe they didn't like me, but don't want to tell me," she added. "I figure if they don't feel they need me anymore, then they don't."

Like Ms. Sullivan, Tim Holsworth, president of AHP Financial Services, takes the attitude of letting bygones be bygones when a client hits the bricks.

"I don't typically focus on the clients that have left, because I'm almost never given a reason, and it's almost always a surprise," he said.

Mr. Holsworth said he might lose a couple clients per year, but usually only one of those clients is "somebody I really don't want to leave."

"Sometimes you might be blamed for the market, but most of the time I think clients leave because of a personal matter or some other song and dance," he said. "It's human nature to feel bad when somebody leaves, and I wonder if maybe I should have seen them more often. But I don't really know because I don't have any long discussions with people who are leaving."

But, according to Ms. Rudin, discussions of some kind are among the best ways to benefit from the loss of a client.

"You should always try to do an exit interview, because there are a million lessons that can be learned from being fired," she said. "Some people will be honest and others won't, but you can certainly gather the information."

Ms. Rudin added that a pattern of clients leaving could reflect a larger practice management issue, but usually the problem is that the client was a bad fit from the start.

"There's an adviser mentality sometimes that any client, particularly one with lots of money, is a good fit," she said. "But the number one reason clients leave is because the adviser is onboarding the wrong type of client."

Ms. Rudin gives the example of a prospective client who is a business owner nearing retirement.

"That might look like a good client, but you might not have the resources or network to handle that type of account," she said. "The assets can make advisers turn themselves inside out. But the cost of the account might get too high because you end up spending too much time on it, which jeopardizes the relationship with that client, and it hurts the relationships with other clients who are being ignored."

Carolyn McClanahan, founder and director of financial planning at Life Planning Partners, recalls a client leaving due to opposing political views.

"As soon as I started saying good things about the Affordable Care Act, this particular client was having an issue with that," she said. "It's turns out she is very, very far right, and I'm a moderate."

Ms. McClanahan, who said she typically loses about one client per year, believes the key to keeping clients is frequent communications.

"One of the most important things about being a good adviser is good communication from the beginning," she said. "There will be signs that people aren't happy because they will never ask questions, or they will be hard to get in touch with."

Kashif Ahmed, president of American Private Wealth, also recalls having a client leave him for political reasons.

"They pressed me to share my political views, and I suspect that's why they left, because we didn't share the same political views," he said. "But I also suspect they're not happy where they are now because they keep emailing me with questions about their financial situation."

Mr. Ahmed said he learned not to discuss politics with clients.

Paul Schatz, president of Heritage Capital Management, said there is an endless list of reasons why clients might want to leave, and advisers should be open to the reality that some client relationships just won't work.

"I have lost clients because they didn't value the services we provide, and because we never had a strong relationship and because of a period of weak market performance," he said. "The one thing I never do is get angry or argue with the client who is leaving, because I tell my clients all along that I don't want a client who doesn't want to work with me. And if they don't trust me, don't like me or don't have confidence in me, it's unlikely to change and we should part ways."

Trump's plan to ditch AMT welcomed by advisers, but tax savings may be minimal
Author: Jeff Benjamin
Date: Apr 27, 2017
Publication: Investment News
Link to Article

Removing big deductions could nullify benefits of repealing the alternative minimum tax

The Trump administration's proposed repeal of the alternative minimum tax might remove some tax-planning headaches, but it isn't likely to reduce anybody's tax burden, according to tax-planning experts.

The AMT, which adds an extra layer of tax calculations for individuals earning more than $200,000 a year, has been put on the chopping block as part of President Donald J. Trump's tax plan.

Even though the AMT is widely viewed as a tax on the uber-wealthy and requires taxpayers to pay the higher of two separate tax-bill calculations, it actually has the biggest impact on filers earning between $200,000 and $1 million, according to Megan Gorman, managing partner at Chequers Financial Management.

"If you're in that group, you're initial reaction should be great, but you need to keep in mind that (President Trump) also wants to get rid of big itemized deductions like state taxes and property taxes," she said. "So, if you're a taxpayer subject to AMT, to some degree, your life doesn't change much."

But if you're a financial adviser, the removal of the AMT could still put a smile on your face.

"I hate anything that is so complicated you can't explain it in plain English to the clients," said Rose Swanger, president of Advise Finance, a $10 million advisory firm.

"I welcome a simpler and cleaner tax code," she added. "Getting rid of the AMT will be a first step."

Leon LaBrecque, managing partner and CEO at LJPR Financial Advisors, is also not a fan of the AMT, which he prefers to call the "mandatory maximum tax."

He manages nearly $700 million in client assets.

"It catches mostly taxpayers in the $200,000 to $500,000 range, but I have definitely seen it hit a lower income," he said. "My bigger-income folks usually don't pay AMT, since their tax bracket goes over the 28% AMT rate. "

Congress enacted the AMT in 1979, after learning that in 1966 there were 155 taxpayers with incomes above $200,000 that used deductions and other loopholes to avoid paying any federal income taxes.

By the late 1990s, the AMT was affecting about a million taxpayers a year, and currently affects about 4.5 million taxpayers.

Ms. Gorman said about 31% of those earning between $200,000 and $500,000 are now subject to the AMT. And the tax hits about 60% of those earning between $500,000 and $1 million.

"It typically hits people in high-tax states where there are significant property taxes," she said.

According to some estimates, the repeal of the AMT, without factoring in the loss of major deductions, will reduce tax revenues by $35 billion.

Not only was the AMT never indexed to inflation, but it also was not designed to target a specific slice of what are now considered upper-middle-income earners in some high-tax states like New York, New Jersey, and California.

"It really affects a limited number of people, and mostly those with incomes of between $200,000 and $500,000," Steven Rosenthal, senior fellow at the Urban-Brookings Tax Policy Center.

"Because Congress did not inflation-adjust the tax brackets, over the years the AMT has hit a wider and lower range of taxpayers," he said.

Regarding published reports of President Trump's $31 million AMT payment in 2005, Mr. Rosenthal attributed that to a $109 million net operating loss that was carried forward from prior years.

"That was a very strange and very rare situation that you would almost never see," Mr. Rosenthal said.

According to Ms. Gorman of Chequers Financial Management, the AMT does not allow deductions for state and property taxes, and the tax rate starts at 26%, then quickly climbs to the 28% bracket.

The non-AMT calculation factors in income minus deductions, with the rate starting at 10% and potentially climbing to 39.6%.

"Even though the AMT looks like a lower tax bracket, you're having more of your income taxed at a higher rate sooner," she said.

Paul Schatz, who manages $90 million as president of Heritage Capital Management, said the AMT goes against many of his fiscally conservative beliefs, but he doesn't think it should be repealed without a way to replace the tax revenue.

"The intent of the AMT was very sound, but it's application is sorely lacking," he said. "Fix the problem by making it current and indexing it to inflation, because people making seven figures a year should not be able to deduct away their fair share to zero. Wow, I sound like a Democrat."

How To Beat 90% Of Mutual Fund Managers In The Long Run
Author: Ky Trang Ho
Date: Apr 12, 2017
Publication: Forbes
Link to Article

It is the painful truth Wall Street doesn't want you to know. All that time you spent researching mutual funds and comparing star ratings in hopes of the finding a Warren Buffett was a waste. You would have been better off watching cat videos and creating memes to cyber shame United Airlines. You could have beaten 90% of mutual fund managers the past 15 years by investing in plain-vanilla index funds like SPDR S&P 500 ETF, Vanguard 500 Index Fund or Vanguard Total Stock Market Index Fund.

The SPIVA® U.S. Scorecard, issued by S&P Dow Jones Indices today, reveals the vast majority of mutual funds across the board fail to surpass their benchmarks in both the short and long term. Two-thirds of large-cap funds, 89% of mid-cap funds and 86% of small-cap funds lagged their indexes last year.

Fidelity Investments is the nation's largest mutual fund company.

The data is even worse over the past 15 years, which captures a complete market cycle. Ninety-two percent of large-cap funds, 95% of mid-cap funds and 93% of small-cap funds fell short of expectations. These data would be even worse without survivorship bias. That's because the study only counts funds that lived long enough to have 15 years of performance history.

"After 15 years, only 34% of large-cap funds remain available today ,” S&P Dow Jones Indices wrote in a statement. “For mid-cap and small-cap funds, those numbers are 49% and 52%, respectively."

The performance was just as grim for foreign funds.
  • 80% of global equity funds lost to the benchmark in 2016.
  • 83% of them fell short after 15 years.
  • 64% of emerging markets funds missed the bogie in 2016.
  • 90% of them floundered after 15 years.

Fixed-income funds also want to wither into a hole.
  • 88% of long government funds, 94% of high-yield funds and 72% of general municipal debt funds missed the mark in 2016.
  • 97% percent of long government funds, 96% of high-yield funds and 84% of general municipal debt funds trailed the benchmark after 15 years.
Fixed-income funds also have high death rates.

"After 15 years, 42% of long government funds, 51% of high-yield funds and 47% of general municipal debt funds remain available today," S&P Dow Jones Indices wrote in a statement.

The SPIVA® U.S. Scorecard was released by S&P Dow Jones Indices April 12, 2017. S&P Dow Jones Indices

Why Do Investors Buy Actively-Managed Funds?

Index funds not only do better but also charge less. Actively-managed funds on average charge 0.84% of assets annually versus 0.11% for index funds. Only 19% of assets held in defined contribution plans were invested in index funds from 2004 to 2015, according to the Investment Company Institute. Overall the U.S. mutual fund industry has nearly $16 trillion in assets as of 2015. But only $2.2 trillion is invested in index funds, according to ICI.

If the vast majority of mutual funds fail to outperform their benchmarks, why do investors cling to them like an airlines passenger who doesn't want to be "reaccommodated"?

"Most advisors won't sell an index fund because they don't pay a commission," said Andrew Denney, founder and CEO of Prosperity Financial Group in Springfield, Mo. "Also, they don't want to be perceived as someone who charges a fee when you can invest in an index for free."

Employee retirement plans, through which most people invest in the stock market, may only offer actively-managed funds because employers were wooed by their sales people.

"Additionally, and perhaps most importantly, until about 15 years ago, 401Ks were littered with actively-managed funds because they had the money to pay to play," said Paul Schatz, president of Heritage Capital in Woodbridge, Conn. "Index providers did not or it wasn't part of their business model."

People may be more familiar with active funds because they do more advertising and marketing.

"Many investors stay invested in actively-managed funds because they have not been well informed about the choices," Justin J. Kumar, senior portfolio manager at Arlington Capital Management in Arlington Heights, Ill., said in an email. "Clients are not aware of the inducements or kickbacks, although they can see the blimps, stadiums, and events sponsored by these active management firms."

Investors hellbent on beating the market naturally seek out managers with the perceived ability to do so, said Jonathan Camarda, a Certified Private Wealth Advisor® at Prosperity Capital Group in Jacksonville Beach, Fla.

Why You Might Buy Actively-Managed Funds

Should you give your mutual fund manager the bird? Not necessarily. Actively-managed funds may serve a purpose in your portfolio overall.

"Net net during times of volatility a higher percentage of active funds proved worthy if their fees, especially in the midcap and small cap spaces," said Camarda of Prosperity Capital. "Furthermore, in the rebound years of 2003 and 2009, many outperformed their benchmarks to the upside."

The stock market itself may be irrational at times.

"No doubt, indexes outperform most active managers. The issue is that a high stock market can distort this phenomenon,” said Holmes Osborne, CFA, of Osborne Global Investors in Santa Monica, Calif. “This was the case in the late 90s with the internet boom. Many great managers closed their doors because they refused to buy into the whole internet bubble."

The tide could switch in favor of active managers during bear markets, says David Hunter, chief macro strategist, at Contrarian Macro Advisors in Bedford, N.H.

"Indexes typically outperform at the end of a market cycle,” said Hunter. “I think we are at a secular top and expect the indexes to be hit very hard in the coming bear market."

“At the end of a long bull market a small number of momentum stocks account for a disproportionately large percentage of the gains,” Hunter added. “Rational, active managers typically will shy away from those stocks that appear overvalued and look for stocks that might be emerging. In the short run, that approach can lead to underperformance.”

Actively-managed funds may make more sense for investing in foreign stock markets and small caps, says Denney of Prosperity Financial.

"Most international stocks lack transparency in what the company does and makes,” said Denney. “So an active fund manager can have boots on the ground and tour the different companies they are investing in.

“Also, small-cap stocks makes sense for active management. Some of the smaller companies are thinly traded. So having a manager that can select the different companies is a benefit."

Paul Schatz has some tips for tax time
Author/Anchor: Tim Lammers/Amanda Raus
Date: Apr 5, 2017
Publication: FOX 61

Financial expert Paul Schatz from Heritage Capital, LLC talks with Fox 61's Amanda Raus to give some tax tips. Aired on Fox 61's Good Day Connecticut on April 5, 2017.

Stocks bouncing back ahead of Obamacare repeal vote
Author/Anchor: Alexis Christoforous
Date: Mar 23, 2017
Publication: Yahoo Finance
Link to Article

Stocks (^DJI, ^GSPC, ^IXIC) are edging up in midday trading, with the tech sector (XLK) lagging and financials (XLE) leading. Jonathan Corpina of Meridian Equity Partners joins us live from the New York Stock Exchange.

To discuss the other big stories of the day, Alexis Christoforous is joined by Yahoo Finance’s Nicole Sinclair and Paul Schatz, president & CIO at Heritage Capital LLC.

Stocks attempt to bounce back ahead of Obamacare repeal vote

US stocks are still rebuilding after Tuesday’s selloff, the worst of the year. Financials are springing back to life after getting beaten down the most in the sell-off. Of course we have that big vote on Obamacare repeal today. But we’ve seen stocks bounce back quickly after previous political uncertainty.

Bob Iger extends Disney Deal to July 2019

It seems like it’s pretty hard to leave the Magic Kingdom, as Bob Iger has extended his contract to lead the company through July 2019. The stock is up on the news. How big of a surprise is this?

Holding off retirement

The House will decide what’s next to the GOP’s health care bill. And people getting ready to retire are on the edge of their seats. The uncertainty of health care costs is putting their plans on hold. Many are playing it safe by working longer.

Renters are taking over the US

It looks like “renting” is back in vogue in the US. Renters now make up half the population of major US cities. Even though home ownership rose slightly in the second half of 2016, many analysts believe the trend to rent will continue as well.

Snap Most Popular Kid In Grade School, But Will It Last Throughout Life?
Author: Mark Melin
Date: Mar 06, 2017
Publication: ValueWalk
Link to Article

Investors love Snap Inc (NYSE:SNAP). After the stock price surged over 44% in its New York Stock Exchange debut Thursday, it climbed another 11% on Friday to end at $27.09 with a market value of nearly $30 billion. But is the company open for a short or is it a long-term hold?

After losing $500 million in 2016 and faced with corporate governance challenges — shareholders will generally not have voting rights and co-founder and CEO Evan Spiegel and co-founder and CTO Robert Murphy own a total of 40% of Snap's market cap and 89% of the voting rights — investors nonetheless snapped up the shares. The concept of democracy apparently isn't in vogue, but one trend — tech IPO investors having early valuations in excess of actual profits - remains.

Snap had a strong revenue generation year in 2016, improving sales 7 times to bring in $405 million. This could be one reason Snaps roadshow to institutional investors was reported to have attracted such strong interest. the Snap offering came to market with a bang amid record stock market highs, post-election optimism and little supply of IPOs coming to market.

"With the lack of recent exciting IPOs and SNAP’s IPO a constant media topic, we expect that demand for this IPO will be high," Ihor Dusaniwsky, Head of Research, S3 Partners, said in a note to clients. "There is a strong chance that the initial IPO rally will continue into a follow-up rally, which will spur even more short demand."

Investors could be eying Facebook, valued at $400 billion, or Google, at $600 billion, and think Snap has a similar long runway ahead. Those legendary tech firms could also provide a challenge by adopting Snap's technology and muting their growth.

"Clearly, the Snap (IPO) is representative of a frothy environment," Heritage Capital Chief Investment Officer Paul Schatz told the Fox Business News show "Wall Street Week," calling it "almost garbage" as he expressed concerns over potential competition to emerge and questioned their revenue path. What Schatz didn't much analize was the democracy angle.

Snap is asking investors to give up accountability rights and lock-in their relationship status.

Democracy can be messy and inefficient, no doubt. But Snap investors seem to think a company run without accountability to shareholders isn’t an issue and should be locked into a relationship that could get abusive without checks and balances.

Snap co-founders are hoping to convince investors that they not having a voice in the company isn’t a bad thing. And they want 25% of IPO buyers to agree to an extended lock-up period of one year, just to make sure they don’t get jumpy. Such efforts are designed at reduce stock selling, which impacts market liquidity.

Dusaniwsky, for his part, looks at recent tech IPOs and relates it to the Snap liquidity.

"Stock borrow availability will be tight initially and stock borrow fees should start around the 25% fee range," he wrote. He thinks if settlement issues emerge early on in the IPO process, stock availability will be limited in lending programs for short selling and borrow rates could increase. "If, as expected, SNAP's stock price rallies, short demand would increase in tandem and short interest would quickly climb to 25% of the initial offering - pushing total short interest well above the $1 billion mark, and stock borrow levels into the 30% to 50% fee range."

There are recent IPOs that Dusaniwsky thinks could point to Snap’s short interest path.

"Twilio Inc.’s IPO in June 2016 provides insight into SNAP’s preliminary short activity," he wrote. TWLO’s short interest climbed to $80 million in the first week after its IPO, which was 20% of the initial offering, and three weeks after the IPO short interest continued to increase.

Three months later short interest peaked along with the stock price. By the end of the summer, almost half of the stock was being borrowed to cover short sales, he noted.

Looking back at recent IPOs, including Twilio, Nutanix (NTNX US), Planet Fitness (PLNT US), Athene Holding (ATH US) and Shake Shack (SHAK US), to use as examples of post-IPO short interest, we see the results are binary in nature. Either short demand continues to increase in the name if the stock's price has a significant follow-up rally in the stock after the initial post-IPO run-up with borrow supply tightening and borrow rates spiking into the 20% to 50% fee range. If the secondary rally is absent or muted, which allows short interest to either decrease or stabilize, borrow availability will increase over time and borrow rates will remain within the 1% to 3% fee range For those considering short selling, Dusaniwsky has a message that speaks to the recent market run-up as well: "SNAP short sellers will certainly need conviction in their trades."

Should investors continue to buy into the Trump rally?
Author: Paul Schatz
Date: Mar 03, 2017
Publication: FOX Business
Link to Article

What Fed rate hikes mean for retirees
Author: Jeff Benjamin
Date: Feb 24, 2017
Publication: Investment News
Link to Article

With the Federal Reserve widely expected to hike interest rates in March for the first of what could be four hikes this year, financial advisers will finally have some good news for their retired clients.

As rates slowly move higher, the safest and shortest-term investments, such as certificates of deposit and money market funds, will start to pay higher yields. Finally.

That's the good news.

The bad news is, those short-term rates will likely top out at 1.75% this year, and it will probably be years before Fed policy gets them anywhere near the 4% range that most fixed-income investors crave.

"Our expectation is in a lower-growth environment we'll anticipate a lower than average yields, and lower than average return from bonds in general," said Dirk Hofschire, senior vice president of asset allocation research at Fidelity Investments. "The market is expecting a faster pace of rate hikes going forward, but still not a fast pace."

Near zero

Since pushing rates to near zero immediately following the 2008 financial crisis, the Fed hiked a quarter of a percentage point in both December 2015 and December 2016.

A Fed rate-hike cycle, even a meager one, is "potentially good news for older clients, but it depends on how old they are and what level of assets are dependent on interest rates to generate income and value," said Kashif Ahmed, president of American Private Wealth. "We will likely get back to normal in terms of interest rates, but that will take years."

While many retirees, and other investors sitting in the most Fed-dependent fixed-income investments like money market funds, will enjoy slightly higher yields in a rising rate environment, the broader fixed-income market may get more challenging for financial advisers.

Depending on a bond's duration, a rising-rate cycle could have a punishing impact on some bond portfolios.

For example, a bond with a five-year duration will decline by five percentage points in the event of a one-percentage-point rate hike.

The reality of bond math is the reason some advisers believe monetary policy has been on such a slow crawl, and will continue to be so.

"President Trump does not want the rates to go too crazy, which is why I think we will get just one hike this year," said Theodore Feight, owner of Creative Financial Design. "But with rates so low, I'm wondering at what level rates will start to have an impact on investor portfolios."

"Retired clients would get hurt badly if we got two or three rate hikes, because most retired clients have a very large amount of bonds in their portfolios," he added.

New cycle

As an illustration of how longer-term bonds often move independently of the Fed's overnight rate, consider that in the months leading up to the quarter-point hike in December 2015 the yield on the 10-year Treasury went from 1.9% to 2.3%.

But as soon as the hike took effect, the 10-year yield began falling toward 1.6%.

"Interest rates move in 30- or 40-year cycles, and we just started a new cycle, so the next 30 or 40 years rates will be going up," said Paul Schatz, president of Heritage Capital Management.

"It won't be a good time for most fixed-income investors for a while," he added. "You get better yields but your principal keeps declining, and the only way to deal with that is a basic bond ladder."

Stocks and dollar plunge, gold breaks above $1,200
Author/Anchor: Alexis Christoforous
Date: Jan 12, 2017
Publication: Yahoo Finance
Link to Article

Stocks (^DJI, ^GSPC, ^IXIC) are selling off at the midday mark, with the major indices suffering their biggest loss so far in 2017. The financial sector (XLF) is leading the way down, while consumer staples (XLP) and utilities (XLU) are the least in the red. Alan Valdes, director of floor operations at Silverbear, joins us live from the New York Stock Exchange.

To discuss the other big stories of the day, Alexis Christoforous is joined by Yahoo Finance’s Rick Newman and Paul Schatz, President & CIO at Heritage Capital.

Amazon to hire 100,000 full-time workers over next 18 months

Amazon is going on a hiring spree. Already one of the country’s top employers, with 180,000 workers, the e-commerce giant is announcing it will create 100,000 jobs over the next 18 months. These are full-time jobs with benefits and extra perks, like 95% payment for college tuition in certain fields.

AT&T chief meets with Trump about Time Warner deal

Donald Trump is meeting today at Trump Tower with Randall Stephenson, the CEO of AT&T. The topic (we assume) is AT&T’s proposed $85 billion dollar purchase of Time Warner. Back in October, Trump said he would block the merger because it “concentrated too much power in the hands of too few.”

Senate takes first step on road to repealing Obamacare

The Senate is voting early this morning to instruct committees to draft legislation to repeal the Obamacare by January 27. A big question is what repealing the Affordable Care Act will do to the US uninsured rate. It now stands at 10.9%—a record low since Gallup began tracking health coverage in 2008.

Dow 20,000 will be 'a rally you can sell,' market strategist says
Author/Anchor: Michelle Fox
Date: Jan 12, 2017
Publication: CNBC
Link to Article

Once the Dow Jones industrial average hits 20,000, don't expect momentum to power it even higher, market strategist Paul Schatz told CNBC on Thursday.

In fact, it's "a rally you can sell," the president of Heritage Capital said in an interview with "Closing Bell."

Stocks ended lower on Thursday, with the Dow Jones industrial average down about 63 points at 19,891.

The market has rallied since President-elect Donald Trump's victory in November, with investors pinning their hopes on tax cuts, less regulation and a pro-growth environment.

However, it has been going sideways for a month, Schatz pointed out.

"That shows we've got underlying strength," he said. "The rally's been on less stocks participating the last couple of weeks. We need a little bit more consolidation, digestion, maybe into halfway through earnings season."

He's confident that if Trump "stops tweeting" and let's Congress take over, a substantial conversation will occur.

"Then we can hit 21,000, maybe early second quarter," Schatz predicted.

Paul Schatz on Investing in 2017 and the Trump Effect
Author/Anchor: Tim Lammers
Date: Jan 9, 2017
Publication: FOX 61

Financial expert Paul Schatz from Heritage Capital, LLC talks with Fox 61's Tim Lammers about investing goals for 2017, and how that, and the U.S. and world economies will change from a Donald Trump presidency.
(Aired on Fox 61's Good Day Connecticut on 1/9/17)

Financial tips for 2017
Author/Anchor: Elizabeth Hess, News 8 Producer
Date: Jan 8, 2017
Publication: WTNH - NEWS 8
Link to Article

NEW HAVEN, Conn. (WTNH) — If you need help managing your money this year, we are giving you some financial tips for 2017. The president of Heritage Capitol, Paul Schatz stopped by our station to explain what we can do all year long to help manage our money.

Paul says there are several things you can do:

    1) Revisit personal risk tolerance
    2) Rebalance 401K and other investment accounts
    3) Sell winners
    4) Increase 401K contribution
    5) Create/update will
    6) Update beneficiaries
    7) Check credit report
    8) Photograph inventory of home
    9) Have plan to pay down debt, especially high interest credit card debt
  10) Understand health insurance pros and cons
  11) Organize key financial docs
  12) Create emergency fund
  13) Refinance mortgage
  14) Create a budget
  15) Travel abroad
  16) Consolidate debt
  17) Take a financial inventory

Why the end of the year is a great time to look over your finances
Author/Anchor: Tim Lammers
Date: Dec 21, 2016
Publication: FOX 61
Link to Article

HARTFORD -- We're coming up on the end of the year, and it's a good time to look at your finances. Paul Schatz, President of Heritage Capital, stopped by FOX 61's Good Day Connecticut to talk about some tips. They include:
  • Defer as much income as you can to 2017
  • Accelerate deductible expenses
  • Increase retirement plan contributions
  • Increase charitable contributions
  • Realize net investment losses of $3000
  • Harvest tax losses
  • Don`t forget about required minimum distributions (RMDS)

Must advisers manage money?
Author: Jeff Benjamin
Date: Dec 11 2016
Publication: Investment News
Link to Article

The debate over outsourcing investment management — traditionally the cornerstone of financial advisers' work — is heating up an evolving industry

When it comes to outsourcing the investment management part of their business, Jon Ten Haagen and Krzysztof Garlewicz are of different minds.

Mr. Ten Haagen, founder and principal of Ten Haagen Financial Group, believes his clients are better off because he is outsourcing their portfolios to market experts.

“My job is to educate clients and hold their hands,” he said. “And to the other advisers who say I shouldn't be outsourcing, I tell them they're full of it. They're not trained to manage portfolios.”

Mr. Garlewicz disagrees.

“I'm not a fan of [outsourcing], because I believe in full transparency and also being clear about the services being provided,” said Mr. Garlewicz, owner of Prosperifi.

“Often times you'll see an adviser charging a client a fee and then either using a model or centralized portfolio that is pretty much what the robo-platforms are doing,” he added. “Seems like the old days where you have to roll up your sleeves and work is going away. If you're just managing the relationship, you're no longer an adviser, you're a relationship manager.”

Despite a logical connection between financial planning and investment management, advisers are moving away from managing client portfolios in favor of outsourcing. The 2016 Fidelity RIA Benchmarking Study found 27% of advisers are outsourcing at least a part of their portfolio management duties. The 2016 Northern Trust Study of Investment Management Outsourcing, conducted in partnership with InvestmentNews, found that 32% of RIA firms outsourced, while a 2016 TD Ameritrade white paper, “Outsourcing: A strategy for optimizing resources,” found that 58% of advisers outsourced the investment management function.

Given the increasing complexity and regulation facing the financial advice business, such as the Department of Labor's fiduciary rule for retirement advice, more advisers are at least considering outsourcing as an option.

Outsourcing of specific investment management functions

Source: 2016 TD Ameritrade white paper, “Outsourcing: A strategy for optimizing resources,”


Mark Germain, CEO of Beacon Wealth Management, has mostly resisted the tug toward outsourcing investment management. But he admits he has done some window-shopping.

Aside from certain difficult-to-access municipal bond categories, Mr. Germain said the numbers on outsourcing haven't been attractive enough for him yet.

“My job is to educate clients and hold their hands.”
—Jon Ten Haagen, founder and principal, Ten Haagen Financial Group

“It's not as inexpensive as it sounds,” he said. “And if somebody else is managing your client portfolios, it is very difficult to make changes if something happens in the market.”

“If you are an investment professional and you're outsourcing the investment management, you lose the ability to do some things you believe are necessary,” Mr. Germain said. “The outsourcing mentality is for people who do not have an investment background or inclination to do the work involved or the research.”

There is no shortage of companies willing to take over investment management duties for advisory firms. Custodians, turnkey asset management platforms (TAMPs) and robo-advisers make it increasingly inviting to just hand the investment management keys over to someone else.

Toss in the power of a finely crafted marketing pitch, and the question suddenly becomes, why not outsource?

“It's our focus to say that the real value an adviser adds is advice, because the investments are becoming commoditized,” said John Anderson, managing director of practice management solutions with SEI Advisor Network, one of the oldest TAMPs in the industry. SEI, which has worked with advisers for 24 years, now manages $55 billion for approximately 8,000 advisory firms.

“The difference between one large-cap fund and another will be negligible over the next 20 years,” Mr. Anderson added. “What I'm seeing as the value proposition for an adviser is their ability to do exactly what advisers do.”

Robo competition

When it comes to supporting the trend toward outsourced investment management, firms like SEI clearly have a dog in the fight. With that in mind, Mr. Anderson cites the latest iteration of outsourced investment management as another reason to outsource.

“If advisers are competing with the robo-platforms, they have to be prepared for 25 basis points in fees,” he said. “But if they're competing with things like behavioral finance, goals planning, retirement planning, then you can get paid for advice and charge 100 basis points.”

“If you're just managing the relationship, you're no longer an adviser, you're a relationship manager.”
—Krzysztof Garlewicz, owner, Prosperifi SEI, like most firms looking to handle the investment management part of a financial adviser's business, has surveyed, studied and analyzed the topic to the point of being able to make a solid case for outsourcing.

The firm's data show that client managers who focus more on business-building than investment management have an annual client growth rate of 5% and an annual asset growth rate of 18%. The investment managers, meanwhile, have a 3% annual client growth rate and an 11% annual asset growth rate.

Mr. Ten Haagen outsources clients to the SEI platform. They are charged approximately 1% of their assets under management for portfolio management, on top of which Mr. Ten Haagen charges his 1% asset-based fee.

Betterment, a six-year-old robo-advice platform, manages $6.2 billion for more than 200,000 consumers and works with 400 advisory firms.

“The rise is primarily a response to advances in technology and what you can do with it, but also because RIAs are comfortable with outsourcing,” said Cara Reisman, Betterment's head of distribution and business planning.

Betterment charges advisers a platform fee of 25 basis points, which compares to its direct-consumer rate of between 15 basis points and 35 basis points.

In terms of demand from advisers, Ms. Reisman said Betterment is seeing the full gamut.

“We're definitely seeing growth coming from a combination of advisers who used to managing the money in-house and realizing this is a great way to scale their business,” she said. “We're also seeing advisers come over from other outsource relationships. [While] we see some advisers using us as a core portfolio, others are using us for just small accounts, and others are using us for all their accounts.”

Broker-dealer history

Eric Roberge, founder of Beyond Your Hammock, has been outsourcing his investment management functions since starting his advisory firm three years ago, and he doesn't see the point in doing it any other way.

“Inside broker-dealers this is what has always been done; the investment management is offloaded to the investment management department,” he said. “It gives you the ability to do other things to benefit the client, and it certainly can add fees because there's another layer, but I actually reduce my costs to cover that fee. If someone else is doing some of the work, I'm going to cut my fees.”

Then there is Paul Schatz, president of Heritage Capital Management, who describes himself as being in the “extreme minority” in still building client portfolios with individual securities. From his perspective, even allocating client assets to a mutual fund could be considered a form of outsourcing.

“You become an independent RIA because you don't want to sell products and receive a commission, but you also have to decide what your strength is in business,” he said.

Mr. Schatz will use some mutual funds and ETFs to gain exposure to certain niche markets, but he mostly relies on his own quantitative models to build and manage portfolios for clients.

Drawbacks and benefits of outsourcing investment management functions

Source: 2016 TD Ameritrade white paper, “Outsourcing: A strategy for optimizing resources,”

About a quarter of his $95 million under management is money he manages for other RIAs on an outsourced basis. So in that sense, he is benefitting from the outsourcing trend.

“For me, using another firm to manage assets would be a philosophical sea change, and I don't see myself doing that in the next 10 years,” he said. “I enjoy how my business is structured and I did it that way for a reason.”

In terms of serving the kinds of smaller clients that advisers often say are better served on outsourcing platforms, Mr. Schatz has found a simple solution.

“I just don't work with smaller clients,” he said. “But I will give smaller clients, especially younger people, a free portfolio allocation and offer to meet with them once a year.”

Stocks soar, US dollar sinks after Italian 'No' vote
Author: Alexis Christoforous
Date: Dec 5, 2016
Publication: Yahoo! Finance
Link to Article

Stocks (^DJI, ^GSPC, ^IXIC) are rallying at midday with the Dow Jones Industrial Average making a new all-time high. The energy (XLE) sector is leading, while utilities (XLU) are still in the red. Rich Barry, floor governor at the New York Stock Exchange joins us live from the New York Stock Exchange.

To discuss the other big stories of the day, Alexis Christoforous is joined by Kevin Mahn, CIO of Hennion & Walsh Asset Management and Paul Schatz, president & CIO at Heritage Capital LLC.

Taking stock of 2016 and looking ahead to 2017

Risk markets have been put through the ringer this year. Looking back on Brexit and the US presidential election, very few expected the Dow to be north of 19,000, and with the 10-year yield closing in on 2.5%.

Facebook talks with publishers on curated content feature: report

Let’s switch gears and talk about Facebook taking on Snapchat. Facebook is reportedly working on a new feature to showcase curated content from publishers directly in the News Feed. Business Insider says the feature is called “Collections” and is similar to Snapchat’s Discover section, which features news stories, videos and other content picked by media partners.

Social media ad spending to top newspapers by 2020: report

Facebook and other social media sites will take in more advertising spending than newspapers by 2020. That’s the projection in a new report out today from ad agency Zenith. It says spending on social media advertising is growing 20% a year and will top $50 billion in 2019.

View the 2016 - Media Archives

View the 2015 - Media Archives

View the 2014 - Media Archives

View the 2013 - Media Archives

View the 2012 - Media Archives

View the 2011 - Media Archives

View the 2010 - Media Archives

Home  |   Strategies  |   About  |   FAQs  |   News  |   Contact  |   Disclosures  |   Privacy Policy  |   Blog Posts  |   Become A Client
  © 2017 Heritage Capital, LLC.
All rights reserved
Site Design & Support - OTLD.NET

Heritage Capital, LLC (HC) is a state of Connecticut registered investment adviser located in Woodbridge CT. HC and its representatives are in compliance with the current filing requirements imposed upon state registered investment advisors by those states in which HC maintains clients.

HC may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. HC's web site is limited to the dissemination of general information pertaining to its investment advisory services. Accordingly, the publication of the HC's web site on the Internet should not be construed by any consumer and/or prospective client as HC's solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet.

Any subsequent, direct communication by HC with a prospective client, shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. For information pertaining to the registration status of HC, please contact the SEC and/or the state securities law administrators for those states in which HC maintains a notice filing.

A copy of HC's current written disclosure statement discussing HC's business operations, services, and fees is available from HC upon written request. HC does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to HC's web site or incorporated herein, and takes no responsibility therefore. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.