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Financial Peace Of Mind Is Key To Productive Relationships

Spuds Powell is Managing Director for Kayne Anderson Rudnick, a boutique wealth advisory firm providing comprehensive wealth management solutions to institutions and high-net-worth individuals. Spuds is currently ranked seventh on Barron’s “Top 100 Independent Advisors” list marking the ninth consecutive year that Powell and team have been recognized by Barron’s among the top 10.

Prince: Can you tell us a little about Kayne Anderson Rudnick Wealth Advisors?
Powell: Kayne Anderson Rudnick—KAR—is a Los Angeles-based investment and wealth advisory firm with $62 billion in assets under management as of Sept. 30, 2021. The firm began as a family office, founded in 1984 to manage capital for its founders, entrepreneurs Richard Kayne and John Anderson, a Forbes 400 billionaire. 

Today, with our services offered across the country, KAR is known for its customized investment strategies and wealth solutions. The firm manages assets for corporations, endowments, foundations, public entities and high-net-worth and ultra-high-net-worth individuals, and offers financial planning, investment advisory, executive and consulting services

Prince: What is your approach to wealth management?
Powell: More than anything else, I am laser-focused on providing clients with financial peace of mind. To do so, I work very hard to earn their trust and confidence by developing deep and strong relationships with them. For each client I create a customized investment strategy based upon their unique goals, objectives, circumstances, investment preferences, income needs, risk tolerance etc., and KAR’s outlook for the capital markets and economy. I pride myself on being an excellent financial psychologist, and, in order to help clients successfully navigate through the inevitable turbulence in the capital markets, I constantly remind them that historically the stock market has always rebounded from sell-offs and gone on to establish new record highs. 

To help clients cope with their fears, I remind them that an opportune time to invest in risky asset classes, like equities, can sometimes be when it feels the most uncomfortable to do so—the tail ends of the Great Financial Crisis in 2008 and the Covid-induced 35% sell-off in equities last March were once-in-a-decade investment opportunities. 

I am committed to educating clients about what differentiates successful investors from everyone else, and most of them have accepted my offer to provide their children and/or grandchildren with “Investing 101” advice. The more knowledgeable clients are about investing, the better they understand and appreciate what we do, and the more confidence they have in the financial strategy we have implemented on their behalf. I work hard at providing cautious expectations and clearly communicating when we expect to outperform and underperform the broader markets. 

My clients know that in exchange for “playing great defense” during challenging economic environments, we are comfortable giving up a little upside during speculative environments when there is a lot of risk-taking and they embrace that knowing we have proven to be great at minimizing financial pain during difficult times. 

Prince: What are the biggest mistakes you're seeing investors making today?
Powell: There are several common mistakes I see. One is letting emotions, either greed or fear, influence their judgement. I have found that even the most well-educated, experienced, and sophisticated investors can fall into the trap of letting fear and pessimism motivate them to “shoot from the hip” during scary temporary declines in the equity markets, which they may end up regretting. Thankfully, we have proven for almost 40 years to be excellent at “playing great defense” during bear markets and recessions, which has been instrumental in enabling me to talk clients “off the ledge” during scary times. 

Two is taking everything they hear and read to heart. Information is more abundant now than ever before and investors need to ensure they define what’s most meaningful to their portfolio and long-term goals. I am in consistent communication with clients for many reasons, including being able to serve as a voice of reason when they get spooked by the latest alarming headline. 

Three is letting their strong political feelings blind them from realizing that what happens in Washington DC is one of many factors that influences the behavior of the capital markets. Historically, politicians have had much less influence on equity performance than most people realize. 

Four is emphasizing short-term performance, whether strong or weak. Doing so often causes investors to make the mistake of being undisciplined about their asset allocation strategy. I often remind clients that yesterday’s lousy performers are often tomorrow’s star performers, and vice versa. 

Five is trying to time the markets. In my 28-year career, I have yet to come across anyone or any firm that has proven to be successful at market timing. We have all heard of stories about investors getting lucky with the timing of a sale or purchase, but I would bet that in every one of those instances, it was only a matter of time before they didn’t have the same good luck when deciding to reinvest. I point out to clients that if their fear about an investment’s outlook is motivating them to consider selling now, and they got lucky and accurately predicted a sell-off, it is highly unlikely that they would have the courage to repurchase that security after the sell-off. In this scenario, they would miss the temporary buying opportunity and potentially subject themselves to unnecessary capital gains taxes. Missing out on positive performance is often more costly than avoiding negative paper losses.

For a complimentary PDF copy of Elite Wealth Planning: Lessons from the Super Rich request the book from princeasoc@protonmail.com.

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