The world of finance abounds with esoteric terms, hard-earned knowledge and a plethora of acronyms beyond the ken of the average Joe. Fortunately, a number of locally based professionals who have dedicated their lives to ones and zeros are eager to help clients find meaning—and value—in the figurative tea leaves.
James Cuorato, client service adviser with Retirement Planning Specialists in Willow Grove, says he is “pretty optimistic and bullish” about the financial outlook for 2014. He predicts that investments in companies tied to the U.S. energy infrastructure will be particularly popular in the year ahead. “The U.S.’s energy independence is just going to boom,” he says. “It’s already in the process of tremendous growth. … That’s where the future is, in that market.”
The natural gas industry, Cuorato believes, is at the top of the list of domestic energy producers set to grow. Christopher Sacco, a financial adviser also with Retirement Planning Specialists, believes investing in commodities such as gold and silver will be “a decent play.”
In the year ahead, well-advised investors will be looking to put their money in stocks for “companies that have a strong history of increasing dividends every year,” says Tim Flatley, president of Sterling Investment Advisers Ltd., in Berwyn.
In terms of hazards to avoid in the year ahead, Flatley advises investors to stay away from investments that come with high fees. “Strong stock market years like 2013 can hide the drag of high investment fees,” he says. “Over time and in normal markets, high fees significantly hurt return. … One should look to take gains from a strong stock market year. Many investors continue to invest aggressively at market peaks and sell indiscriminately at market bottoms.”
Flatley observes that investors can be as fickle as the markets when it comes to owning stocks. “When the markets go up, [investors] love owning stocks,” he says. “When they go down, they hate them. We try to not let our clients get too excited with a strong market and too depressed with a down market. Determining cash flow and liquidity needs [is] vital. If you do not have to sell at the wrong time, you can significantly reduce risk.”
Loretta Hutchinson, advisory associate with Harvest Group Financial Services Corp. in Langhorne, also advocates a level-headed approach. She says, “Smart investors should be taking a cold, hard look at their individual financial circumstances and make conscious, educated decisions about where they feel comfortable taking risks in their portfolio and how much they need to be saving for their financial futures. Those portfolios should look different for each investor based on age, profession, health, risk tolerance and personal financial goals.”
“With equity markets up nearly 30 percent in 2013, many investors may find their portfolio has drifted fairly significantly away from targeted allocations,” adds Roy Fairman, managing member of the Fairman Family Group Office in Berwyn. “January is always a great time to take stock of one’s portfolio and rebalance it back to targeted levels.”
Cuorato believes 2014 “will be the best year for stocks since 1995,” but he cautions investors to give careful consideration before jumping on the bandwagon with trendy stocks, such as social media, even though that sector was “big in 2013.” He cites Twitter as one example of a stock that may be subject to volatility in the year ahead. The social media site had its initial public offering in November and has since seen significant fluctuations in its stock price.
“We’re a little bit hesitant on [social media stocks],” … We’re going to kind of gear our clients towards things we’re a little more comfortable with,” Cuorato says. “If a stock can go up 20 percent, it can go down 20 percent.” He also suggests his clients utilize a “risk/reward framework” to determine how much volatility they’re willing to accept from their investments.
Social media stocks may be ideal for aggressive investors, according to Flatley, who urges caution when selecting investments, especially in areas such as cutting-edge technology. “Investors chased renewable energy ideas that did not work out very well,” he says. “We still like the oil and gas pipeline space for yield,” as well as utility stocks.
He also says that alternative investments and long/short funds, which are like hedge funds, but for those who aren’t exceedingly wealthy, are going to play a larger role in portfolios.
Retirees and those looking to retire will face new challenges in this year as well. Sacco says retirees “still need to be in the bond market,” but should also consider adding a bit of equity exposure to their portfolios to see more growth. Bonds are less susceptible to the ups and downs of the market, but Cuorato estimates “the returns are going to be poorer” in 2014.
“Unfortunately, mature investors have to increase their stock allocations,” adds Flatley. “Bonds continue to have a lot of increasing interest-rate risk.”
As baby boomers move into retirement, still reeling from to so-called “Great Recession” that began in 2008, while also dealing with the fact that their parents are living longer than expected, investors will look for ways to manage their own risk of “living too long,” according to Hutchinson. “This can be done by working to maximize their Social Security income,” she says, “as well as transferring the risk of outliving their money to an insurance company through the purchase of annuity with a guaranteed lifetime income.”
Sacco concurs, saying, “Most retirees are looking to protect what they saved but are probably also looking for income to live off of.”
Regardless of the investing environment, most financial advisers suggest investors to diversify their portfolios so they are in line with their long-term investment policy. “Within the context of that long-term strategy,” says Fairman, “we recommend investors control the duration (interest rate sensitivity) of their fixed-income portfolios to manage the impact of the potential for future interest-rate increases.”
Given financial advisers’ mix of bullishness and bearishness, the New Year appears to hold opportunities and obstacles alike. Yet with proper planning, as well as sound advice from a qualified professional, the outlook for 2014 may very well be brighter than in recent years.
Be Advised
Our region is blessed with a number of excellent financial advisers and other organizations devoted to preserving, protecting and growing their clients’ assets. The following list represents some of the most established and trusted names in the business.
Apex Financial Advisors
Yardley
215-493-1900 | afa-inc.com
Cape Bank
Multiple locations throughout South Jersey
800-694-8800 | capebanknj.com
The Capital Legacy LLC
Newtown
215-860-8400 | capitallegacy.net
Fairman Family Group Office
Berwyn
610-889-7300 | fairmangroup.com
Harvest Group Financial Services Corp.
Langhorne
215-860-6056 | harvestgroupfinancialservices.com
Innovative Wealth Partners LLC
Bala Cynwyd
610-668-1400 | philadelphiafinancialadvisor.com
Scott J. Kaminsky, CFP, Morgan Stanley
Bryn Mawr
610-542-2918 | morganstanleyfa.com/scott.j.kaminsky
Meridian Bank
Banking offices in Paoli and West Chester
866-327-9199 | meridianbanker.com
Retirement Planning Specialists Inc.
Willow Grove
215-657-8600 | retire-yes.com
Sterling Investment Advisors LLC
Berwyn
610-560-0400 | sterling-advisors.com
Dawn Wyatt, Merrill Lynch Wealth Management
Princeton, N.J.
609-243-6863 | dawn.h.wyatt@ml.com
