Strategic Wealth Partners was acquired by Kovitz Investment Group Partners, LLC ("Kovitz"), a registered investment adviser with the SEC on May 1, 2024. Strategic Wealth Partners is now a division of Kovitz and its registered investment adviser. Materials created prior to this date were created by Strategic Wealth Partners and are accurate as of the time of publishing.

How I Manage My Money – David Copeland

We enjoy helping you with your financial plan. Now we want to tell you a little about ours. This is the second blog in a series about how our advisors handle their own finances.

I’ve always believed in being prepared and doing my homework, as opposed to flying by the seat of my pants. This is especially true when it comes to managing wealth. Whatever I earned, whether it was making $6.50 for caddying 18 holes or stocking shelves at the supermarket for $2.50 an hour, I wanted to have a plan, prioritize savings over spending, and make sound decisions with what I had worked hard to accumulate.

Occasionally I would stray from whatever plan I had developed and would learn lessons the hard way. Ultimately, I rationalized losing money as additional tuition payments at the “school of hard knocks,” and I always felt it was better to lose my money rather than my clients’ — so clients could learn on my dime. The strategic wealth plan that I use today is a combination of classic financial planning concepts and my own lived experiences (it’s not a coincidence that our firm is named Strategic Wealth Partners).

Objectivity is Critical

Objectivity is a critical part of determining how to invest. In order to avoid the influences of emotions, short-term thinking, and biases present in all types of media, there needs to be an initial step in the process of investing. This involves answering a number of questions that will guide our decisions regarding where and how to invest.  This is basically what we use when discussing wealth management with clients.

  • How much will I need per year and for special circumstances? Can I quantify my projected expenses?
  • How much volatility can I withstand? Will I be able to sleep with some certain dollar-sized decline? What percent of my portfolio does this represent?
  • When will my portfolio be needed to support my family and me? Am I prepared for emergencies?
  • What return is needed to get me where I want to go? Do I even know where I want to go? Do I care if I “beat the market” as opposed to merely reaching my goals?
  • What about the implication of taxes, inflation, and fees on my investments?
  • How much illiquidity am I comfortable with?

Putting the Puzzle Together

Once I’m armed with the answers to these questions, I need to have a construction process to build a portfolio. I realize this is not a jigsaw puzzle because there is only one way to fit the pieces together in a jigsaw puzzle. With an investment portfolio, there are many ways to put the pieces together. Based on the anticipated performance of investment strategies and the relationships between strategies, building a portfolio has certain pieces that make sense to include in the final product and pieces that could potentially be avoided. This is what the allocation process is all about.

For me, equities are a critical piece. Despite picking some stocks that worked out quite well, I learned early in my career that using a diversified portfolio of stocks managed objectively by others can provide the upside I would like.  This allows me to still meet the projected returns I desire, along with having some level of risk protection. The problem with this puzzle piece is the uncertainty of its value on a periodic basis, i.e., the level of volatility I see daily, monthly, or annually. And despite the quick turnaround experienced by the stock market in 2020, I vividly remember how long it took people to recover from the 1973-74 bear market decline and the implosion of the Nifty Fifty. Similarly, from the market peak in 2000, the stock market went nowhere for 12 years. Those experiences are something I want to avoid, especially as I approach the time when my portfolio will be my primary method of support.

This leads us to the bond market. This piece of the puzzle is one that I’ve chosen to downplay. Why? With after-tax and after-inflation returns at low absolute levels for many years, I have not been comfortable having a significant piece of my portfolio in the low return investment category. I wondered if there was a way to generate returns that could offer less volatility than stocks, yet greater returns than bonds. This has been a journey I’ve been on for nearly 25 years. That journey has led me to “alternative” investments like real estate, hedge funds, direct lending, structured notes, and non-traditional income-oriented investments.

Thinking Outside of the Box

A key reason I wanted to start Strategic Wealth Partners was to have the freedom to invest in and offer these “alternative” investments to clients. Personally, and as a firm, we have spent significant time and energy on this area. I’ve also been fortunate to be involved in several industry groups where this is a key discussion topic. Today, this is a large part of my overall portfolio and is the missing piece of my puzzle.

Alternatives are not an asset class, so they are difficult to pigeonhole. A very important part of the concept is to know what to expect from both a return and risk perspective. This helps me determine the appropriate size of the investment to be used in my portfolio. Since my exposure to bonds is relatively small, I have to be mindful of my overall portfolio volatility. The alternatives part of my portfolio, therefore, is skewed toward risk control as opposed to return maximization. Lastly, when using alternatives, the tax consequences are a crucial factor, and that’s why I hold many alternatives investments in tax-deferred retirement accounts.

Flexibility is Key

When building a portfolio, it’s important to be flexible as one’s needs change throughout one’s life. A portfolio is constantly evolving, with decisions to be made based on cash inflows and outflows. Knowing how to handle my changing situation as time goes on is something I am keenly aware of.

I hope this article has shed some light on how I manage my own money and has given you some things to think about as it relates to your own wealth management strategy. If you would like help forming or managing a strategic plan of action, don’t hesitate to connect with our team.

This article contains general information that is not suitable for everyone. The information contained herein should not be constructed as personalized investment advice. Past performance is no guarantee of future results. Reading or utilizing this information does not create an advisory relationship. An advisory relationship can be established only after the following two events have been completed (1) our thorough review with you of all the relevant facts pertaining to a potential engagement; and (2) the execution of a Client Advisory Agreement. There is no guarantee that the views and opinions expressed in this article will come to pass.  Investing in the stock market involves gains and losses and may not be suitable for all investors. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security.

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