Roll of money


It’s fair to say that no one is forgetting 2020 any time soon.

As the year turned, we heard rumors about a virus in Wuhan, China. Like previous outbreaks, most of us paid it a glancing notice and then went on about our day.

Then in March, everything started to feel like it was unraveling. Partial lock-downs, stay at home orders, rumors the National Guard was being called in, and a run on groceries and toilet paper. Standing in line to get into Costco – gloves on, mask on. Wow, it was all so uncertain.

And with that uncertainty came the wild market swings.

Markets were literally moving 1000 points in minutes…unfortunately for much of March…they were moving down. We saw one of the quickest sell-offs in the history of the market in mere weeks1.

A lot of advisors in this industry probably got on the phone and were talking to clients. And there were a lot of advisors that went and hid. At TRPG, we doubled our efforts – phone calls, text messages, emails, and video webinars.

But we also did something that we’ve been doing for years. And it was born out of something that we learned from the 2008/2009 Financial Crisis. You see 12 years ago during that crisis we were managing around $100 million for about 150 clients. The markets were moving around wildly back then and we were literally rebalancing one account at a time – manually. Back then it was manageable…but just barely. The average client had three accounts. So that was 450 accounts we were constantly and manually adjusting as fast as we could with a staff one quarter the size it is today. It was near madness.

We knew once we got through 2008/2009, something was going to have to change.

The firm would grow. And the next time an event like this came around, we owed it to our clients to develop the ability to quickly rebalance their accounts when the market is moving quickly. And if we had been any bigger in 2009, we wouldn’t have been able to keep up.

Today we take care of over 1270 households* representing 4500+ accounts and over a billion dollars. We make a substantial financial investment each year on technology that allows us to monitor each investment in each account for each client at The Retirement Planning Group. We work to make sure that each account has the right amount of cash and just the right balance of stock and bonds – which are values that are constantly changing every minute. And if that’s not a lot to keep tabs on, we monitor for tax optimization too. Yes, we use technology to help us, but a human set of eyes reviews everything before we make any move for a client.

*As of 12/1/20

We can literally rebalance all 4,500+ accounts, representing a billion dollars in hours. For some firms that could take days if not weeks.

So what did this look like for our clients in 2020? Well check this out:

Stock Fund Trades Net Flows

Provided by Kevin Jaegers, CIO of The Retirement Planning Group.

The chart above is representative of the proactive asset management decisions we were making from March through the remainder of the year. The blue line represents the S&P 500. The green areas represent the amount of securities we were buying on that day. The red areas represent the selling of securities on that day.

What you’ll hopefully notice is that in March we were buying a lot (green sections)! And before you knew it, the market came roaring back. So much so that our clients’ stock positions had gone up in value so quickly, we were then taking profits in mid-April. As the market went up and up this year, we took profit (selling stock – red sections) and redistributed it to bond investments – to help protect the values of accounts.

This isn’t market timing. It’s not some high-frequency trading system. This is having clearly defined tolerances for exactly how much money a client should have in any one investment and if that definition is violated, we make a change. We are proactive. It’s also really difficult to try and do this by yourself – not necessarily because it is physically hard to accomplish, but because of the emotional toll it can take in making those decisions (or not making them) when you are managing your own money. Oftentimes the emotional toll can lead an investor to make the wrong decision at the wrong time. For instance, most investors weren’t buying in March…they were selling. As Warren Buffett once said that it is wise for investors to be “fearful when others are greedy, and greedy when others are fearful.”

Some firms have a staunch buy and hold philosophy. We don’t disagree with that as a foundational principle to managing investments. We just layer in active rebalancing. It allows us to be proactive for our clients.

So while some advisors in 2020 were calling clients and offering up only one bit of advice: “stay the course!” – we married that same advice with action. We were busy monitoring, rebalancing, and investing accounts and doing what we could to not just help our clients stay the course, but improve the course.

Last updated: 08/25/21