Announcer:
It’s time now on KROS for Financial Focus, brought to you by NelsonCorp Wealth Management. The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. Any indices mentioned are unmanaged and cannot be invested into directly. Registered representatives, securities offered through Cambridge Investment Research Incorporated, a broker-dealer, member FINRA SIPC.
Investment advisor representative, Cambridge Investment Research Advisors Incorporated, a registered investment advisor. Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. Now here’s today’s Financial Focus Program.
Gary Determan:
Well, once again, Dave Nelson joining me in studio. Unable to be here the first Wednesday in November, probably off traveling the globe,
David Nelson:
Seeing a couple clients. We’ve got clients down in Florida, pretty substantial client. We’re helping them as far as do some estate planning and what have you. We’re heading down there. So it’ll be James, myself, and Jake from the office. So yeah, it’s work related and it’ll be quick. We’ll fly in and we’ll fly back. So pretty much the extent of it. It’s a fairly new relationship as far as with some estate planning attorneys as far as down there.
Again, this is a high net worth individual and a lot of moving parts and what have you. Each one of us here that I’ve mentioned traveling down there have a role as far as in that relationship. And then as far as down there, it’s two new attorneys. We’ve never worked with them. This gal was an Iowa resident. Now they’re a Florida resident. So we’re updating documents and what have you.
And just I guess just extra sets of eyes, ears as far as to make sure that the pieces come together. A lot of times situations like this, again, no disrespect to anybody out there, but it’s important to understand that we need to speak in a language that the client can understand. And oftentimes that’s very difficult. In the estate planning arena, I’ve been tinkering with this space for 40 years, give or take.
And you find things that work as far as trying to explain concepts to people as far as what needs to take place. And oftentimes the legal people are worried about the documents and whatever. And I’m worried about trying to interpret the document so the client understands what the heck they’re going to sign. And so you put it all together. And again, it’s a nice package.
I’ve got plenty of things I’d rather be doing than getting in a plane and fighting the traffic and whatever to get down there. It’s in Fort Lauderdale, but it’s important and we want to get this done right. And again, when we’re talking about a person that it’s a net worth statement, it’s her income, she’s married with two children, but net worth statement is somewhere in the 250 range, 250 million. So anyway, we got to get down and make sure that things get taken care of.
Gary Determan:
Yeah, that would be worth the time and effort.
David Nelson:
It is. It’s primarily a privately held stock, so it’s a ownership of a company. And again, making sure that all the pieces come together. I mean, when something like that is in existence, you better have some good planning because again, this whole operation can go up in smoke as far as if good decisions aren’t made. So she’s going through the extra effort and we’re going through the extra effort.
And again, the conversations we’ve had with the legal professionals down there, we’re quite comfortable that we’ve got the right team as far as assembled, put together, and making sure that this gets done correctly. So again, that’s not something we stumble into. I think I’ve shared on this program previously, we’ve got one billionaire that we work with. She’s number two as far as net worth. And then it makes its way down to, I guess, normal human beings as far as a lot of us out there, yes, that don’t have net worth statements…
Gary Determan:
I’m raising my hand.
David Nelson:
Don’t have net worth statements like that. And most people… Again, it’s a small group of people and we want to make sure that it gets done.
Gary Determan:
Good to have them on board. No doubt about that. Visiting with Dave Nelson. Now, you’re going to be going down with a couple others. Is this typical or do you generally handle things yourself most of the time?
David Nelson:
So in a normal type situation… Again, I define normal, probably in our office a normal is going to be average, I guess, is probably a better way of wordiness. Probably somewhere in the neighborhood of a couple mill as far as net worth, home, liquid assets, et cetera, et cetera. So with that, typically it’s going to be one or two people that are going to be involved as far as in that relationship.
And if and when there has to be a know a face-to-face and they’re not in this immediate area, it would normally be one individual that’s going there. This particular situation, there’s just so much follow-up. We’ve basically created what would be defined as a family office. So there’s a lot of people involved. There’s four people that are assigned to this particular individual here, one of which can’t make the trip, but the other three of us will.
But yeah, that’s not normal. Normally would be a situation where it’s one individual. We’ve got clients, I don’t know exactly, it changes, people move here and there, but we’re in the neighborhood of I think 43 states I think that we were licensed in and have clients in. As far as the accounting side, I think it’s even higher than that as far as doing tax returns for people pretty much throughout the country.
So again, good/bad to all of this. These guys are too big, they don’t care about us. Well, we’ve got give or take 2,000 clients in our vicinity here. So between the Quad Cities, Dubuque and Clinton, I think it’s a neighborhood of about 2,000 clients. We’ve got a lot of people here and committed to this area. And periodically, people say, “How do you get people from these other locations?”
I said, “It’s real simple. It’s parents. It’s kids. It’s referrals that basically take place that you need to talk to so-and-so.” And we’ve got one that was just in a few days ago, brand new relationship. And they say, “Well, if we come together with something here, our daughter works for Abbott Labs, she’s down in Indianapolis. She needs some help too.” So it’s that type of stuff that takes place.
And again, they’re so much easier when people are close by. We’re still face-to-face type operation. I just love that versus the phone, and where now Zoom type call is getting kind of close. But yeah, nothing beats face-to-face.
Gary Determan:
Busy with Dave Nelson. Well, Mary and I got our NelsonCorp quarterly newsletter yesterday. I always enjoy reading that. I was asking you, the one you were talking about, chasing squirrels.
David Nelson:
Yes.
Gary Determan:
And maybe you can explain to our listeners what that was about and how you come up with these different subjects.
David Nelson:
So as I shared with Gary and I’ll share with everybody out there, a lot of the concepts we come up with as far as outside, it’s either Jake, myself, James, John, we pretty much put the general pieces to the puzzle in place, and then we have people that basically draft and put it together. And that’s the real talent as far as behind the scenes as far as that. So Hannah’s probably not listening right now, but if she is listening, thank you, Hannah, because she does a whole bunch of it and organize it and putting it together.
And then one of the other real… We get feedback from clients primarily on one thing, and that’s the families and what people are doing and what have you and just organizing that. There’s one that’s just… I’ll confess, I write out probably three or four bullet points as far as what we did, and then they take it from there. She does or Val does. Val does a really nice job as far as in that area. But it’s a big effort that goes into it. Most of my attention is more on the boring stuff.
We typically have one or two pieces in there to discuss markets, what we’re seeing, what we’re hearing, whatever, whatever. It’s also the weekly updates that we put out there. And that’s typically me. And probably 90% of that is typically me as far as in that regard. So it’s a big joint effort and a lot of creative people and wonderful people. And again, it’s at the end of the day something to try to… Most newsletters that are put out, as probably most people know, are so boring.
Nobody reads the darn things. And so we try to make this not only educational, but also, again, a little entertaining. My wife asked years ago when we started this as far as the family type stuff and added that to it. And she said, “I don’t really think it’s anybody’s business what we’re doing, and I don’t really want to share.” And I said, “You don’t understand as far as…
Again, I think people, I want to know about them and they want to know about us. What type of people are you?” And so when people come in today, I hate to say it, but probably at least 50% of them, “Yeah, how you doing? And okay, how you doing? How’s your team doing this year?” It’s that. It’s the volunteering and whatever that people love to see and hear about. And so anyway, it’s pretty cool.
Gary Determan:
And finally, before we take a break here for the weather, you guys work so hard, but when you get your opportunity to break away, you guys go to some very interesting places. Everybody.
David Nelson:
Yeah, yeah, it’s nice. And again, it comes back to a situation that we work hard and we play hard. And so we really encourage people to take the time off. We’re not big into… Our billionaire friend that I mentioned earlier, he said, “I’ve never worked more than 40 hours in a week,” which just is mind-boggling to me. Because again, a normal week for us is probably I’m going to say 50 to 60.
That’s normal for the owners I should say. But staff, we try to keep that very rigidly to 40 hours a week. We don’t want burnout. The closest would be come tax season and as far as it gets really crazy down there, but other than that. So yeah, yeah, it’s nice to see. I get updates too as far as through that. I read through it myself because I don’t know what everybody else in the office where they just came back from. So it’s pretty cool.
Gary Determan:
Let’s take a break for the weather. It is being brought to you by Morrison Community Hospital.
Andrew Stutzky:
Gusty winds will continue for your Wednesday, along with a good mix of clouds and some sunshine. And yeah, still going to be a cooler day as well. Temperatures will reach the mid 50s this afternoon. For tonight, patchy to widespread frost will be likely. Overnight lows settling into the low to mid 30s. With your Storm Track 8 Weather Impact Forecast, I’m meteorologist Andrew Stutzky.
Gary Determan:
Skies remain overcast, 44 degrees now, but those west winds near 20 making it feel more like 36. Dave, you’re going to need a jacket. Our update brought to you by Morrison Community Hospital.
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Well, this Wednesday, we’re going to continue to the bottom of the hour with Dave Nelson. Well, a lot going on, there’s no doubt about that, but it seems like the stock market is still doing pretty well.
David Nelson:
It’s amazing as far as you step back and you say, “Well, interest rates are bouncing around.” Interest rates are probably one of the biggest variable. Obviously we’ve got the discussions as far as trade around the globe, tariffs, what have you. And yet the market continues to move forward. What’s probably, for us at least selfishly, one of the most interesting things centers around what type of stocks.
So again, most people, when they think of the stock market as this big generic type type thing, we try to drill down in certain pockets and what have you and try to find various opportunities. Technology being one that’s really worked over the last give or take 10 years. It’s been just remarkable as far as the returns and whatever that people have enjoyed there.
But one other area, and I got to be careful in how I word it and I’m very careful as far as on this, we can’t talk commodities as far as that’s a definite no-no as far as in our industry. But what we do do is try to capitalize in precious metals as far as the companies, the mining companies. So it’s not the commodity itself, it’s the companies that are basically producing it.
And that’s been a really favorable position over the last probably year and a half, and we’ve done really, really well. Clients have enjoyed some pretty remarkable returns as far as from that particular space. But what’s been interesting, again, just the last two, three days is that there’s been massive moves as far as on the downside. And is it to the end? We don’t know exactly, but bottom line it’s probably getting a little stretched as far as in that space.
So again, when we think about investing, there’s so many variables that come in, interest rates being very important, profits as far as from the companies, but don’t forget about the almighty dollar. And so when the dollar is strong historically, that’s good as far as investing in the States. If the dollar is weaker, which it basically has come down quite a bit…
Again, define quite a bit, it’s pretty significant when you look at historical levels as far as for the dollar. When that takes place, that basically is the dollar goes down, the other currencies go up. So translation, investing outside the US can be quite profitable as far as in that type of environment. We’re somewhat neutral as far as at this point in time where we were very heavy overweights as far as in the US.
Today, it’s not as dramatic as it was, but still US is not going anywhere. If you had one place to invest, that would be it. But if you look at emerging markets as a whole, they’ve done really well. You look at Europe, it’s done really well. Canada, as far as their stock markets, outperform the US by a pretty good margin. Australia, we have discussions down there as far as some of these minerals and whatever that we’re trying to get from them as far as instead of getting it from China.
I mean, all of these items come into play as far as in making decisions. And the good news is that there’s a lot of tools out there that can help navigate as far as through that type of stuff. And again, back when I started, everybody owned Ma Bell. We remember this as far as AT&T back in the day. And you just own the stock certificate, you put it in the drawer, you got your dividend on a quarterly basis, and life was a lot simpler.
Today, that’s not the case. You have all kinds of mutual funds. You have all kinds of ETFs, individual stocks. I mean, there’s tens of thousands of different directions that people can go. And again, our job is to try to sort through all that mess, make some sense out of it, and help people make a few bucks without sticking their neck out too terribly far.
Gary Determan:
As we’ve visited through the years, it fascinates me that it’s such a global economy now. And of course, with the United States in a government shutdown, how are the other nations viewing this?
David Nelson:
I think the best way to probably try to come to the conclusion, we don’t know exactly, but I guess I’d just look at the dollar to come to that conclusion. That would be the best proxy as far as to look at. And so there’s a lot of uncertainty out there. You look at the number of US government bonds that other countries have owned, that over the last six months to a year have been selling those bonds.
Again, that’s putting pressure on interest rates, which is a fancy way of saying as there’s more sellers than buyers, you have to up the interest rate in order to attract buyers. Translation. That means the government debt becomes a bigger and bigger and bigger problem. So again, important pieces to come together. But if I had to bring it down to one thing, it’s the dollar.
And if you look at the dollar say two years ago, you look at the dollar today, it’s down considerably from where it was. And if you look at the bond holders as far as of our US government debt, the different makeup of that today is quite remarkable. Primarily, China being the big seller of government debt. They’ve diversified their holdings as far as the money that…
Their investments, I guess you would call it. And they’ve gone into commodities in a big, big way as far as that. And more specifically into these commodities that have value that historically have been around. Sorry, folks, I can’t say the word.
Gary Determan:
Be careful. You be careful.
David Nelson:
It’s in that space.
Gary Determan:
You look good in stripes.
David Nelson:
I want the right type of stripes.
Gary Determan:
Yes, yes, exactly. There you go.
David Nelson:
Yes.
Gary Determan:
So we’re not going to have you back in until December 3rd. So I mean, it’s going to be a month and a half. So what do you see happening at all? Take a look into that.
David Nelson:
It’s a tough one. I still think the strength of the market as far as the general direction is still probably trending slightly higher. So if I had to say get in or get out, it would be probably just stay the course. I don’t think there’s a strong argument either way. Getting through October, again, most people think of October as being the worst month for the market.
Reality is it’s September and then October. So if we get through this month, that’s generally a pretty good sign. We said coming into this thing that it’s going to get bumpier and it certainly has. But again, the general direction is still up. Be careful. I guess my… Again, several of my clients, they’ve kind of coined the term, last name being Nelson, they say Nervous Nellie, “How’s Nervous Nellie doing today? How’s negative Nellie doing today?”
And my response is always the same, “I’m not paid to tell you what can go right. I’m paid to tell you what can go wrong,” because the people we typically work with are older folks. Or again, define that, people that are close to retirement or in retirement is a very typical client that we work with. And with those individuals, there’s very few, maybe three to five clients that we work with that have an extra million, 2 million, 10 million sitting around that they don’t need or the possibility of needing that is about zero.
Most individuals are going to need the cash flow from that money. And when you stop and think about it, and again, I know I brought this up numerous times before, but it’s coming up more and more when I’m talking to clients, and that is a 50% drop, which people don’t think happens, and it does. Between 2000 and 2002, we had a 47% drop as far as in the S&P 500.
And again, round it to 50 for simple math. Fast-forward to ’07 through March 9th of ’09, it was a 58% drop. So these drops are real. They happen. And again, if a person is fully exposed to the market during those periods of time and you’re in retirement, oh, and by the way, you’re drawing an income, you’re cooked. You are cooked. There is no way you’re recovering from that.
The market cannot basically withstand that type of blow and have you come back. And to illustrate it, here it is, here’s the conclusion of this. Learned it from the greatest money manager of all time. He works for a big, big organization out in Boston. And the bottom line is this individual said, “Everybody needs this test,” and that is the test is you take a block of money, let’s pretend for a minute that it’s a hundred grand.
You’re up 50% the first year. So now that a hundred looks like 150,000. Fantastic. I’m excited. This is great. And then the next year it drops 50%. Where are you? Well, it sounds like you’re whole, but you’re not. You’re at 75,000. So you lost 25% of your money. So let’s keep illustrating that point. Drive home the point. If you drop 50%, you need to make 100% just to get back to where you were.
So again, don’t underestimate, folks, as far as what’s happening out there. If you look over the last, again, couple years, you can pretty much throw money anywhere and do quite well. Don’t let that money get away from you. Have a sell discipline. And when we talk to people about that, somebody new comes in the office, that’s one of the first things I ask. And I say, “When do you sell?”
And a lot of people have been led to believe you just put it in, more or less and say a prayer, and over time you’ll be okay. Well, again, when you’re in retirement, this over time stuff doesn’t get the job done. It’s one thing if you’re 30, it’s another thing if you’re 60 or 70 years old. You can’t afford that hard punch in the nose. What is it? Mike Tyson, the famous boxer. Everybody has a plan until they’re punched in the nose. And so again, have a plan and make sure that that plan is reasonable and makes sense as far as in your situation.
Gary Determan:
Got a couple minutes left and thank you so much for coming in. So we’re getting toward the holiday time period. And of course, you guys are so generous with your time and talent.
David Nelson:
It’s important. We’ve been blessed. As I shared as far as with my kids and I shared it with my basketball players, to who much has been given, much is expected. And so we’re in the category of we worked really, really hard to get here. Don’t get me wrong. I left a job, as I think I brought up on the program before, making 20 grand back in 1981 to two years later, I’m making six grand. So didn’t look like a really good decision at that point.
But we’ve worked hard, we’ve done well, and it’s important as far as to help people in the community that haven’t had the luck and the success that we’ve had. So we’ll continue to dole out money. We’ll continue to provide whatever means to collect toys and whatever those type of things that we do. But I think the green stuff is what most organizations need. And we’ll be in a position as far as to do that, write them checks, get them some cash.
And we’ve got a lot of great non-for-profits in this area that are making a real difference as far as in this world. And again, we want to support those organizations and we will, and we’ll do everything that we can. We get involved, as well have the human beings volunteer and various things. But at the core, it’s going to be writing the check and then letting the organizations do the really important stuff, and that is the interfacing with people that really need help.
Gary Determan:
And you do get a lot of help as well from your clients. I mean, they go all out sometimes in the toys and things like that.
David Nelson:
It’s amazing. We host a couple different big events and whatever. The concept is, please show up and bring a canned good, please bring a gift as far as for a kid, whatever, whatever. And people pull up and they open up a trunk and there’s six bags of stuff in there. Again, you’re exactly right. It’s just incredible. And again, most of the people we work with have been blessed as well.
They know it. And again, we tag-team this stuff to try to, again, make our area better off. Yes, we support other charities as far as outside the area, but we’ve got a lot of need in this area, and we’ll continue to do that, and our clients will continue to do that. We’ve got confidence that they’ll step up to the plate when needed.
Gary Determan:
As always, a pleasure. Thank you so much.
David Nelson:
Thanks, Gary.
Announcer:
Financial Focus is a production of NelsonCorp Wealth Management in Clinton and Davenport. The opinions voiced in the show are for general information only and are not intended to provide specific advice or recommendations for any individual. Any indices mentioned are unmanaged and cannot be invested into directly.
Registered representatives, securities offered through Cambridge Investment Research Incorporated, a broker-dealer, member FINRA SIPC. Investment advisor representative, Cambridge Investment Research Advisors Incorporated, a registered investment advisor. Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. For more information, visit our website at www.NelsonCorp.com.
Client stories and discussions of clients may not be representative of the experience of other customers that are no guarantee of future performance or success.