Wealth Clarity Blog

About a month ago, the Wizard of Westwood, John Wooden died after a storied life of triumph.  He was arguably one of the greatest coaches and leaders of all time, indelibly influencing the game of basketball forever with his focus on basic skills, team greatness, and individual commitment.

After his death, I watched hours of ESPN programming about his life, his philosophy, his relationships, and his legacy.  I was amazed by how many people he influenced during his life, even long after he stopped coaching, and I presume for many years to come.

Over the past decade I have read several books about John and his life.  I have even used some of the elements of his Pyramid of Success approach in my own business team development and vision.  I shared some of that in a previous post on our internal strategic planning.

As a part of my own personal visioning process, I asked myself the question:  At my funeral, what do I want people to say about me?  Obviously, this really unabashedly pokes at the issue of legacy and the true meaning of my life. 

I had never done this before and decided to take a stab at it. So, one afternoon I got out my notebook and pen and started a list. 

It was interesting that it took me a while to get past the small items and performance based things like work success, awards, etc. and get to the essence of who I am and what I want to be remembered for (good father, husband, deep friendships, loyalty, compassion are a few of mine).  I plan to spend more time refining the list and processing what I wrote down over the next few months as I continue on this journey.

Some of the items are quite personal and in a recent conversation with a friend who was asking me about my list, I found myself getting very uncomfortable.  This tells me I also have some work to do on being more authentic with who I am—and who I want to become. 

What do you want your life to be about?  If you don’t know, it might be time to think about it and start moving towards it.  This exercise might come in handy, “My Life Story.”  It’s a five step exercise that helps represent expression of the “choices” you are making about your life.

If you want to know more about my experience going through this process, please feel free to reach out and I would be happy to share more of my story.

In this blog I talk a lot about the journey of significance and creating a life of meaning, alignment, and authenticity.  While writing about these important issues I want you to know that I am also going through my own personal process.  In sharing my own story and journey in real-time, I thought this might be helpful to you.

As I wrote several months ago, we went through a wonderful strategic planning process at Highland where we developed our core values, vision, mission and key strategies.  I have had several of you ask me for guidance and support in taking you and your companies through the same process.  I am very willing to talk about this and the power and energy it has generated in my company; so feel free to ask.

My focus has now shifted to my own personal values and vision for my life.  My goal is to integrate in a better way than I have done in the past the various components of my life:  financial, spiritual, work, family, legacy. 

This is requiring me to understand at a deeper level:  who I am.

To start the process I was encouraged to go back to the place I grew up and just let the memory of my life come to the surface.  In my case, this included a trip to a small beach community on Oakland Bay near the logging town of Shelton, Washington.  Our family had a cabin there for 25 years and it was a place I spent a great deal of time during my youth.  I learned to water ski, fish, clam, adventure, and build forts in that area.  I turned off my cell phone, and walked the beaches, visited our old cabin, and wrote in my journal the things that came to my mind.  I remembered paths in the woods, tree swings, special events, and memories.

It was an amazingly wonderful day to just think about my life and where I have come from and the stories that make up the collage of my life to this point.  I believe this will provide the base for me to explore further what I want my life to look like and what type of impact I want to have in this world.

If you haven’t gone to special place like that before, it might be time for you to take a day and revisit your roots.  I promise you it won’t be wasted time.  Let me know what you discover, would you?  Join us on Facebook for more discussions.

Join us for the special briefing “Preserving, Protecting, and Enhancing Wealth in The New Normal” hosted by the Highland Capital Management Investment Team of John Christianson, Dan McGilvray, and Jonathan Friedman.

July 29^th, 2010 from 12:00 to 1:00 PM (PST)

They will share with you ideas about facing “The New Normal” including:

• What is the “New Normal” and what does it mean to you?
• What is Highland doing to enhance our clients’ investments and their future?
• What might the future hold?

Please RSVP by emailing tina@HighlandCM.com by Tuesday, July 27^th.  We will then send you a link to the presentation.  If you have any specific investment questions related to this topic that you would like addressed during the webcast please feel free to send us your question(s) in advance.

We look forward to having you join us!

It’s the third Friday, which means it’s our third and last guest sports blog!

Guest post by Daniel McGilvray, vice president of investments, Highland Capital Management

During the U.S. Open at Pebble Beach a month or so ago, Dustin Johnson lost a three shot lead going into the final round on Sunday and actually ended up outside of the top 10. Justin Rose followed the week after at the Travelers Championship by blowing a three shot lead over the rest of the field and did not end up even coming in the top five. Both of them seemed to lose the strategy that got them to the top of the leader board in the first place. They went from making great shots to getting cautious to making horrible shots to try to make up for the cautious shots and losing the lead. Contrast that with what happened this past weekend with a virtual no name in golf: Louis Oosthuizen. He went into the final day of the British Open at St. Andrews leading by four strokes and actually EXTENDED his lead by a few strokes on the final day. While he adjusted his strategy to be slightly less risky, he stuck with his overall game and did not get too cautious.

It can be the same way at times in investing…we stray from our originally intended strategy because things get “too bad” or there’s a new “normal” or new “paradigm”.  At Highland, while we make tactical over weights or under weights at certain times, we work hard to come up with the right strategic targets for clients as the anchor to ensure that the underlying investments do not stray too far from target (high or low) and get too far away from the originally intended strategy. Without those “anchors” to make sure you don’t stray too far from the original strategy, you could easily end up losing all the gains you’ve made and possibly even going below what you originally had if there is no process to assure some money is taken off the table and gains are harvested (or that funds are added to those areas that underperform over an extended period of time).

In this manner, an investor can ensure that they do not lose the lead (or are unable to ever get back losses). An obvious example of this is the advisor/investor who gets conservative near the bottom of the markets or aggressive near the top of the markets. Bad timing in either account can cause losses to persist. So remember, stay anchored to your long-term strategy.

The word “wealth” gets used often and can get confused with the word “rich”.  They are not interchangeable but can be used like they are synonymous.

The point or outcome of proper “wealth” management is so you can lead a “rich” life.  Wealth connotes money, investments, assets, property, and rights of ownership.  (See my previous post on what wealth management means.)

Riches represent things like: significance, family, passions, friendships, happiness, impact, joy, compassion, and legacy.  We all want a “rich” life, don’t we?  You might say these are the softer issues associated with wealth, but in my opinion they are what matter most in my life and they aren’t impacted by how much money you have.

Here are a few things you might consider that can increase the riches in your life:

• Take the time to visualize the “rich” life you desire.  Write it down because your definition and picture is unique and different than mine. 
• Integrate your wealth management strategies into your life so that it can yield riches. That is the reason why your core values and personal vision are critical elements of a wealth strategy.  I will be talking more about how to do this in future posts.
• Inventory the results of your wealth management in light of the life you desire.  If changes need to be made in your strategy now is the time to make them.
• Evaluate the amount of time you are spending on things that don’t create riches in your life.  Commit to making one key change in this area this month. Really.  This month.

We only have only one life to live and so living it to the fullest, each day, is the only way I know how to live richly.  As I said in a recent video blog, I am evaluating my use of email and how it can control and rob me of precious time.  Join our discussion on Facebook on what areas of your life need adjustment.

I was having a wonderful conversation with one of my long-term clients about his passion for “his community” and the intentional impact he is seeking.  He wants to see his money being used in a way that can influence a better community and living experience for himself and others. 

I asked if he would share his passion here on the blog, but more importantly, share with us how to help other wealth creators impact their community and why it matters.  Our interview is scripted below.

Mark, what makes ”changing your community” so important to you?  Should it be important to all of us and if so, why?

We live in an imperfect world.  I believe that if every person goes out of their way to put other individual’s needs ahead of their own, that the world becomes a better place.  The ”community” can be defined in many different ways – neighborhood, city, planet, school, civic group, religious group, etc.  What is important to me is recognizing that I am a part of many communities and that I feel it is my responsibility to make constructive change within as many of these groups as I can. 

It seems to me clear from an ethical and common sense perspective that it is an inalienable responsibility of all humans to be a responsible and giving community member.  We have the ability to shape or own destiny as a species.  We are capable of self evaluation, of rising above selfish and individualistic concerns.  I believe that working for the general betterment of our species and our planet is simply the right thing to do.        

What would be included in “changing your community” for those of us who don’t think about it as much as you do?

Changing community is about solving problems.  Changing community is about celebrating life and allowing others to celebrate their lives.  Changing community is about allowing all people to reach their full potential. I believe in supporting organizations that provide fair and equal access to education, the arts, healthcare, a healthy planet and whatever contributes to any individual’s happiness (as long as that happiness is not acting to the detriment of others).  This could mean serving on a committee or a board of an organization.  This means acting responsibly as an individual each and every day.  It means supporting the “good work” of others with financial contributions, strategic brainstorming, and connecting like-minded individuals.  There are so many people with good will in their heart, with energy and perseverance I have found that one can achieve great things just by matching the talents and passion of the right person to the right cause. 

For me changing community is being able to take stock of one’s actions periodically – if one does that, and can say that they made life better for other people and for the planet in a way that is broadly accepted as beneficial, one has been successful.   

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It’s Friday, which means we’re bringing you part two of our three part guest blogging sports series!

Guest post by Daniel McGilvray, vice president of investments, Highland Capital Management

While watching the U.S. soccer team in the World Cup, it was interesting to note that essentially every single game (with the exception of Algeria which should have had an early goal, but their shot hit the cross bar), the U.S. got behind within the first 10-15 minutes and were playing from behind the rest of the game. I’m 100 percent sure the U.S. did not come out with a plan to get behind right away, but it did seem to me that for some reason they played MUCH better when they were behind. I’m not sure if it was just a greater sense of urgency, or what, but either way, the coach obviously did not do what he needed to do to get the team to come out ready to play from the moment the game started.

I think that it’s the same way at times in investing. Until people lose a certain amount of money in their portfolio or are really “forced” to have to do something with their money, at times, they would prefer not to think about it and just “let it ride”.  It’s important to take into account all of your investment psychology, history, thoughts, goals, dreams, needs, wants, etc. before setting up your long-term strategic asset allocation targets and work with you to determine the right set of parameters. While we also remain “in the game” after strategic targets have been determined by making tactical moves in/out of certain investments or over/underweighting certain asset classes, the overriding principle of the portfolio is the strategic asset allocation.

Do you know what your long-term strategy should be? Are you comfortable with being “in the game”? If not, maybe you don’t have the right plan, or need to collaborate more with your investment advisor to come up with the right one.

A few people have recently expressed concerns to us about market volatility and where the economy is heading. Other people have asked us what options are available to help drive portfolio returns in the midst of such low yields on bonds (the two year Treasury yield recently hit its lowest point ever at 0.6 percent and the 10 year yield is now below three percent). Alternative assets, which we have built into client portfolios over the past few years, are a natural solution for reducing portfolio volatility and boosting returns. As a firm, Highland now has approximately 20 percent invested in alternative assets and even our most conservative clients generally have 10 percent or more of their portfolio exposure in alternative asset classes. Over the past quarter in fact, most of the alternative asset classes were down ½ or less than the equity markets and some (specifically gold and certain hedge funds) were actually up.

We wrote a white paper as a primer on alternative assets, which generally help mute portfolio volatility due to their low correlations with traditional asset classes. As mentioned, they can also help bolster returns. Alternative assets do have some drawbacks: namely, they tend to have longer investment horizons, involve higher risk at times, and have less liquidity than traditional asset classes. In the past the cost of participating in alternative investments was prohibitively high, however, there are now more options that allow investors to participate at lower dollar amounts. If you’re curious about alternative asset classes and what role they play in your portfolio, the white paper is a good introduction for how these asset classes behave and a description of the mechanics for making investments.

If interested in the white paper, shoot me an email (info@highlandcm.com) and I’ll send it to you for free.

If you think getting a loan secured by your home, either a home equity or first mortgage is a piece of cake it might be time to think again.

Over the past several months I have run into several client scenarios where the assumption was that getting mortgage financing for a new home, or to refinance an older mortgage, was a no-brainer. In two recent cases loans were denied where there was significant income (i.e. north of $250,000 per year) and plenty of liquid assets (i.e. well over $2 million); one client is a senior executive at a major technology company.

You might be saying, huh?

Well, in the brave new world of banking, it is more prevalent than you might believe. To get the bottom of the story and why it is happening with increased frequency, I contacted my good friend Robert Wuflestad, who is a very experienced mortgage banker, for some answers.

So, Robert, what is going on right now in the banking world that’s causing so many wealth creators grief?

The simple answer to this question is the industry is still in recovery. The fed is propping up conforming and government loans, but the mortgage crisis virtually wiped out the secondary market for Jumbo mortgages and non-conforming mortgages. Without this secondary market, there is little choice or competition and borrowers are limited to the institutions that have money to lend. Since many of these institutions are still trying to recover from their own problems, they are only willing to lend if they are certain there is little risk AND they are going to make a profit. This gets rather silly at times especially with the big banks because they can be extremely rigid in what they will allow. Competition is emerging and there are some attractive programs available through institutions other than the big national banks, but borrowers must still be able to document income and assets, common sense has been abandoned. Credit scoring can be challenging and you must manage this prior to entering the market.

It appears to me that high levels of assets, even if they are liquid, no longer matter. Is that right?

To get the best rates, if you have the required minimum of assets, generally it doesn’t matter how much more you have. You still must meet the required income, credit and property requirements. The idea of “common sense” guidelines have died, may it RIP.

There are a few regional banks that will lend on the strength of the borrower, but rates may be a bit higher, but even they have to be concerned about new regulations designed to protect borrowers from predatory lending and putting borrowers in position where their income cannot support their debt.

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I ran across this article when I was doing some research on barefoot running. I absolutely love it and the application to live a fulfilling life, with clarity and control! (Warning: it’s a tad long but I promise that you won’t be disappointed if you read the entire thing).

These are a few points that came into focus for me as I read the article:

• I am becoming more and more aware of how important it is to live my life authentically and how often I let fear and controlling behaviors stop me from expressing my true self.
• I am also learning that it takes a great deal energy and work to protect myself from the pain of life, and by living in my authentic self, life can be lived easier and more simply. (I didn’t say pain free, however).
• By embracing the courage to truly experience the highs and the lows of life, and not living in the protected “safe” range of mediocrity, we can have the richness of life that flows naturally without having to worry about it.

What points of the article challenge you to live a fulfilling life?