THE RETIREMENT PORTFOLIO PLAYBOOK WITH CONNER HANLON, CFA?

If you’re working with a wealth advisor, it’s important to understand how they look at the big picture and how that affects their long-term investment strategy.?Falcon Wealth Advisors?Portfolio Manager?Conner Hanlon, CFA?, joined Cory on a recent episode of?Upticks?to discuss how we plan and invest for our clients. A summary of their conversation is below.??

Cory:?To start us off, what’s the relationship between someone’s?financial plan?and their investment strategy??

Conner:?At?Falcon Wealth Advisors, the financial plan is the foundation. We want to learn about a client and their goals, their current situation and much more. Then we base the investment strategy on all of this information that’s specific to the client.??

Cory:?That’s exactly right. If we have a well-designed plan, we can use the investment portfolio to implement and power the plan. Everyone has different goals, which is why we aim to standardize our service and customize our advice. We want to get specific with each individual client.??

Once we have a financial plan in place and are investing for the client, we of course aim to buy low and sell high. Why is it so difficult for many to execute this well-known strategy???

Conner:?Well, you have to be willing to take your emotions out of your investment decisions. That’s often why clients hire?Falcon Wealth Advisors—we are an unbiased third party that can make decisions based on math and principles, not emotion. We sometimes receive questions about why we sold a particular?stock. Often, we sell because we feel that stock is priced at more than it should be worth. Therefore, we want to sell high while we can and take advantage of the opportunity to buy other stocks we feel are undervalued.??

Cory:?It’s natural for anyone to focus on the short term, especially given all the volatility we’ve seen in recent years. We’re human. It’s not uncommon for us to feel fearful or greedy. But that’s why we think it’s important to work with an unbiased?fiduciary wealth advisor. We look at the big picture and focus on your decades-long financial plan—not simply quarter-over-quarter performance. Patience and discipline are both necessary to buy low and sell high.??

Can you talk about how we rebalance client portfolios, which is a critical practice to buying low and selling high???

Conner:?We have a trading software that allows us to set every client’s target asset allocation—meaning what percentage of their portfolio is invested in stocks,?bonds, cash, etc. If that allocation ever gets more than 5% out of balance—say your financial plan calls for the portfolio to be made up of 60% bonds but due to a stock market dip, bonds suddenly make up 66% of the portfolio—we will rebalance the portfolio by selling some of those bonds and buying stocks. This allows us to naturally buy stocks when they’re low. It also helps us achieve proper portfolio diversification.??

Cory:?Diversification is critical. We have a target weighting for all the different segments of the stock and bond market—we don’t want to own too many stocks in any single sector. We’ve seen with tech stocks, for example, take investors for a wild ride in recent years.??

Most of our clients have already done the hard part, as they’ve worked and saved for decades. Rather than trying to hit home runs and chase hot stocks, we help them generate income and manage risk in retirement. Most of the folks we work with don’t need to take high levels of risk to succeed.??

How do we determine what percentage of the portfolio to allocate to each asset class???

Conner:?Each year often produces a new top asset class. But because no one can predict the future—including us—we diversify the portfolio and aim to limit risk for our clients.??

Cory:?Yes, we use historical data to determine how much we should allocate to each asset class. For example, we’ve seen historically that there’s more risk involved with investing in small companies rather than large companies. So we take that into consideration when investing for a client.??

Can you talk about how and why we equal weight the market sectors we invest in??

Conner:?We follow the S&P 500 equal weight index to ensure we don’t become overly invested in a particular sector (with that said, if we feel a certain market sector offers a unique growth opportunity, we may pursue it). We believe equal weighting our clients’ portfolios enables us to manage risk and diversify. Rather than focusing on particular sectors or only large cap stocks,for example, we want to spread out our risk.??

Cory:?Yes, and equal weighting means we don’t have to try to predict the future. We don’t want to have an outsized percentage of a client’s portfolio exposed to any one company sector. While we live in a 24 hour news cycle, at?Falcon Wealth Advisors, we don’t chase shiny objects. The market has a tendency to misprice stocks in the short term but price them more accurately in the long term. So we don’t want to get caught up in short-term performance.??

With all of that said, how often should an investment plan change???

Conner:?Not very often. Unless there is a big change in your life—marriage, a promotion, job loss, divorce—there shouldn’t be a reason to change your investment strategy and financial plan, as we build it for the long haul.??

Cory:?And market conditions shouldn’t drive you to change your investment strategy. We focus on a long-term strategy that minimizes risk. We meet with our clients at least once a year to make sure they’re still on track and that they haven’t undergone a big life change.??

We mentioned generating income for clients in retirement. How do you and the rest of the investment management team approach that goal???

Conner:?On the stock side, we don’t focus solely on growth stocks. We want to also buy stocks that pay dividends. On the bond side, we may invest clients more and more in bonds as they progress through life, becaus bonds are generally a predictable investment that offer income in the form of yields.?

Cory:?Correct, we want to help clients?live off their money?for the rest of their lives without having to worry about running out of it.??

Thanks so much for joining me, Conner. If you would like to work with a team of fiduciary wealth advisors who execute a disciplined approach to your long-term financial plan, please contact?Falcon Wealth Advisors?today. You can reach me directly at?[email protected].??

Clients choose to work with us to enhance their financial literacy and explain exactly what?their?financial plan means to?them.?

Hightower Advisors, LLC is an SEC registered investment adviser. Securities are offered through Hightower Securities, LLC member FINRA and SIPC. Hightower Advisors, LLC or any of its affiliates do not provide tax or legal advice. This material is not intended or written to provide and should not be relied upon or used as a substitute for tax or legal advice. Information contained herein does not consider an individual’s or entity’s specific circumstances or applicable governing law, which may vary from jurisdiction to jurisdiction and be subject to change. Clients are urged to consult their tax or legal advisor for related questions.?