Measuring the effects of increased oversight and regulation brings us to the fiduciary rule: always putting the client’s interest ahead of our own. Since this is part of the Investment Company Act of 1940, we at Woodstock have been complying with this rule for all of our registered investment company life. We plan to follow it in the future.
A number of the advantages of being at Woodstock often go overlooked. Under the Investment Company Act of 1940, your investment advisor owes you a fiduciary duty, which means putting your interest before his, hers, or the firm’s interests. Being invested in an individually managed account (“IMA”) at Woodstock means that you own the assets in your portfolio, unlike in a pooled investment vehicle where you are probably merely a creditor of the real owner.
Over the past year the American economy has confronted unprecedented challenges. We haven’t seen the likes of COVID-19 during our lifetimes, with a severe human toll of more than 559,000 deaths in the United States and 2.8 million globally, and the financial impacts it has had on all of us. As the COVID-19 pandemic began to rage early last year, individual state-mandated shutdowns across the country brought the US economy to an abrupt halt and caused a short but deep economic recession. Notably, by early April 2020, about 300 million Americans in 43 states and Washington, D.C. — over 90% of the population — were under stay-at-home or shelter-in-place directives to help contain the spread of the virus.
Understanding when news is good probably requires disregarding what’s called the “precautionary principle,” which is the rule that “strongly encourages caution among regulators working in any field with scientific uncertainty.” Throwing caution to the wind, let’s look at the state of US household wealth and income inequality. The US Federal Reserve’s March 2021 quarterly release of household net worth data showed that “the value of Americans’ total assets minus their liabilities swelled to $122.9 trillion” at the end of 2020, up from $111.4 trillion at the end of 2019. Further, when US Census Bureau data are adjusted to count all of the government’s transfer payments as “income” to recipients and when taxes paid are counted as “income lost” to taxpayers. then “income inequality” is lower than it was 50 years ago.
Part of sleeping well at night, if you are invested in the financial markets, is trying to control or set limits on those elements of the financial markets that you can control: expenses and ownership. Being invested through a separately managed account (SMA) allows the portfolio manager to essentially eliminate the fee from consideration by using the tools of asset allocation and tax loss selling that minimizes taxes from recognized capital gains, to allow almost 100% of the annual gain in a portfolio to remain in the portfolio.
What will 2021 bring? Two thousand twenty was a crazy year, and the S&P 500 Index returned 18.4%, having appreciated 31.5% in the prior year. The equity benchmark’s strong 2020 performance included the rapid, steep bear market brought about by COVID-19, followed by an equally dramatic recovery. The market started reaching new highs again by August and continued to reach new highs through year-end. If the pandemic can’t cause more lasting damage to stock prices, can anything?
Socially responsible investing (SRI). Integrating environmental, social, and governance (ESG) factors in the investment process. Applying principles for responsible investing (PRI) to investment decisions. Sustainable. Green. Ethical. Impact investing. These terms are all part of the socially conscious investment jargon getting a lot of “airtime” in the news media, particularly in financial circles. The goal for all of these investment styles is essentially the same, to produce a positive investment return and a positive impact on society and the environment.
Some tax advisers are worried that the “golden age of gifting” may be ending soon after 2020. The phrase “tax exempt gifting” refers to the different tax status of lifetime gifts (gift taxes are only based on the gift amount received) compared to inheritances (where the full value of the transfer at death is subject to the estate tax, if any, including the funds which will be used to pay the estate tax). The three tiers of tax-exempt gifting, in order of importance, begin with the $15,000 annual exclusion gift to anyone, which is always tax free and also paperwork free, if the spousal consent is not sought.
Julie Phippen, an Executive Administrative Assistant at Agawam Trust and Management Company (an affiliate providing estate and trust administration services for Woodstock), noticed a need while traveling in Zimbabwe and ended up establishing a 501(c)(3) nonprofit organization to meet that need. Sewpportive Friends began in 2016 with the mission of empowering women in Africa by providing healthy, handmade feminine care products and the education to enable women to produce their own. Just as a small pebble tossed into a pond sends out far-reaching ripples, Sewpportive Friends has expanded to touch more lives in the US and Africa.
Woodstock Corporation, a private wealth management and financial services firm based in Boston, MA, welcomes Benjamin G. Dawson as a senior vice president and portfolio manager. Dawson is rejoining Woodstock after 22 years as a co-founder and managing director of the registered investment advisory firm Alpha Windward LLC, where he led the Blue Chip Growth investment strategy, which focused on building portfolios of growth-oriented companies with sustainable growth rates, strategic competitive advantages, and leadership positions. “Ben’s approach very much echoes the Woodstock philosophy. We’re looking forward to comparing notes and working together for the benefit of all our clients,” says Adrian G. Davies, President, Woodstock Corporation.