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Retirement Planning

One Size Doesn’t Fit All

President and Chief Investment Officer Trevor Forbes

President and Chief Investment Officer Trevor Forbes

With decades of investment experience under his belt — much of it for very large companies on an international scale — Trevor Forbes decided he preferred an approach to portfolio management that emphasizes the individual. He found that model at Renaissance Investment Group, which he joined as president in 2011. Creating a completely personalized portfolio for each client takes work, he said, but it’s worth it because it creates peace of mind — in more ways than one.

It makes sense, Trevor Forbes said, that no two people would forge an identical strategy for their financial future.

“Your financial position is going to be different than someone else’s, and your ideas about what you want when you retire will undoubtedly be different. So how you deal with that retirement will be different,” said Forbes, president and chief investment officer at Lenox-based Renaissance Investment Group.

“You may be a cautious investor; you may be able to tolerate much less in the way of volatility in your investments than someone else, and we take that into account,” he went on. “We have to balance a whole range of different requirements from our clients. A lot of organizations will claim to do that, to an extent, but in most cases, they are not really set up to do it that way — certainly not for the size of clients we typically manage money for.”

Renaissance was launched in 2000 with a vision to provide tailored investment-management and financial-planning advice to individuals who were being sidelined by the centralization of the industry.

“That’s remained very much the ethos of Renaissance ever since,” Forbes said. “I joined in 2011, having had long discussions with the original founders for about 18 months prior to that, at a time when two of the original founders were seeking to retire. They wanted somebody with a similar ethos and a similar approach to investments.”

“The mission has been to provide individualized investment management and financial planning for people who otherwise wouldn’t be getting that.”

Forbes, a native of England, had worked in London for most of his career, mainly for large financial organizations on the investment side. “For example, for most of the ’90s I was the head of global equities for Citibank, which was those days based in London. I had to coordinate the investment approach of seven different locations around the world. They got me very heavily involved in asset allocation for a whole range of different types of clients. Particularly interesting to me, at that stage, was the private client side.”

Forbes left Citibank at the end of the 1990s and went into private-client wealth management; in 2007, he set up a wealth-management business “at probably one of the most inauspicious times in market history.” But over the next several years, he and his team built that enterprise from nothing to a billion dollars under management.

Still, he and his wife were looking for something different when they relocated to the Berkshires — she to open a bed and breakfast, and he to find a wealth-management firm that fit his philosophy — which he found in Renaissance just as it was looking for a successor to run the business.

Just before he came on board, the company became a wholly owned subsidiary of Berkshire Bank, but it never fit neatly into that’s institution’s mold, he said, so in 2016, he partnered with Ohio-based Stratos Wealth Enterprises, LLC to buy out the firm.

“We’ve been able to regain our independence and maintain what has been the ethos of the company all the way through,” he explained. “The mission has been to provide individualized investment management and financial planning for people who otherwise wouldn’t be getting that. That continues today.”

In most investment-advisory firms of Renaissance’s size, said Chief Operating Officer Christopher Silipigno, “you’re not getting someone to sit down and find out exactly what your situation is, what variables are in play for you, and then looking at the specific equities that best make up a portfolio that matches that. That’s pretty special.”

One thing that attracted him to the firm, he added, is its history of bringing in senior-level talent from very large institutions who now bring that experience to clients outside the ultra-high-net-worth sphere.

“You’re getting someone with Trevor’s background to sit down with you and run through all kinds of things — your investment concerns, retirement concerns, cash flow and how much you need, as well as things like passing this wealth on in a tax-efficient manner, how the funds will go to your children, even real-estate concerns.”

As an SEC-registered investment advisory firm, Silipigno noted, Renaissance has a fiduciary responsibility to clients — a term meaning, essentially, that their interests always come first.

“Most people don’t understand that, in your large broker-dealer houses, that’s not the case. They have a suitability expectation, which means the investment has to be suitable, but it could be that they’re selling you Apple because they own Apple at one price and want to sell it at another. We’re not selling our own stock, so our advice is what’s in your best interest. We’re also not pushing products, which is unique.”

Conscientious Investors

At Renaissance, the investment team is doing all its own research on individual investments, Silipigno said. “You might think that’s the norm, but it’s further and further away from the norm. Typically, research is done somewhere else and being sent into the firm, and then that research is being used to make decisions for you.”

That in-house research, he explained, extends to both national trend tracking, but also the fundamentals of each company being considered for investment. For instance, he noted, in a growing economy, oil might be a promising investment. “But maybe we see a lot of growth coming out of West Texas, and here are the companies in West Texas best poised to grow because they have the capacity to grow.

Chris Silipigno

Chris Silipigno says Renaissance has a fiduciary responsibility to clients, meaning their interests come first, not the firm’s.

“That’s the kind of specific research that’s happening here and can be brought to a client,” he said. “Maybe someone in a $15 million account somewhere can demand that kind of answer. Here, we’re bringing that to clients in much smaller accounts.”

Sometimes, an individual investment strategy will incorporate what’s become known in the industry as social-responsibility investments (SRI), or environmental, social, and governance (ESG) preferences. Take, for example, customers who may not want their money invested in petroleum.

“A lot of those clients might not want that company in West Texas. That’s fine. It’s their wealth, and they have a role to play in how that wealth is invested,” Forbes said. “So we tailor a portfolio to either exclude certain characteristics or include some of the characteristics these individuals are interested in. Then we do research into these kinds of companies.”

In addition to fossil fuels, some customers have an aversion to military spending, guns, alcohol, gambling, pharmaceutical companies, even investment banks, and don’t want their money invested in one or more of those areas, he explained. Conversely, they might have a special interest in water resources, testing equipment for water purity, solar energy, or any number of other mission-driven businesses.

“Your view of social responsibility can be much different than someone else’s view of social responsibility. So we have to take into account a very wide range of differing views,” he added, noting that such companies must also be suitable investments from a financial perspective — otherwise, there’s not much point in investing in them.

Tailoring portfolios to match a customer’s ESG preferences, Forbes said, is really just an extension of what Renaissance is already doing for clients, which is research on a client-by-client basis — a task that has become much easier in an era of technology that makes information so readily accessible. “It’s time-consuming; there’s no doubt about that, but anything you do well is going to be time-consuming.”

Forbes first became interested in ESG investing during the 1980s, when he began directing money away from South African companies that supported apartheid. Today, a commitment to ESG investments still makes sense, especially in a socially conscious region like the Berkshires.

“It’s gone from a fringe idea, a few people saying, ‘hey, I want to invest in a way that doesn’t offend my values’ to a global movement,” Silipigno said. “Every year, the growth has been exponential.”

He said many larger firms are making ESG investments, but they’re one-size-fits-all portfolios of companies the advisory firm has decided fit the ESG mold, not crafted individually for each client. “They might decide a petroleum company is OK, because a certain amount of its revenues go back into the environment. But that might not be your decision as a client; you might say, ‘I don’t want anybody that profits from fossil fuels.’”

Indeed, Forbes added, “the way you express your social responsibility will be different than someone else’s. The way we do it is more targeted, and we have the technology to achieve that.”

For people worried that investing their conscience might cost them returns on growth, Renaissance has not found that to be the case, Silipigno added. “We’re seeing that our portfolios that are ESG and SRI are tracking with the major indices. So you don’t have to have a drag on your returns to invest in a way that meets your conscience.”

Smart Approach

Renaissance takes on clients with at least a half-million dollars to invest, although that could include a group of smaller accounts — for example, in one household.

“Our average client size is bigger than that, and basically these are people who worked very hard to get their wealth, and they want that wealth to provide them with some security, particularly as they get into later life,” Forbes said. “In some cases, it’s to provide a second generation with some wealth as well, and sometimes it includes charitable giving.”

Renaissance also manages money for foundations and endowments, he added. A large portion of its client base is in the Berkshires or surrounding regions, but the firm also has many clients on the West Coast, Florida, and other points across the U.S.

“We see ourselves as the center of a team of individuals that may include an attorney, an accountant, and a whole range of people who are important in mapping out your future — and succeeding generations as well. And it has to be done on a client-by-client basis. You have to know your clients. That’s important.”

Silipigno said potential clients will come in for a financial checkup, assessing their current financial standing and where their assets are. He often finds people at one of two extremes. Some are currently exposed to a tremendous amount of risk — with money tied up in just a few stocks that have done well, but could be vulnerable to a market downturn — while others have taken an alarmingly conservative approach to their future.

The firm boasts a broad client base in and around the Berkshires, but also across the U.S.

The firm boasts a broad client base in and around the Berkshires, but also across the U.S.

For example, he recently met with a doctor, married with five kids, who had more than a million dollars, all of it tucked away in a savings account, building almost no growth whatsoever — not exactly the most ambitious retirement plan.

Clients who come on board find there’s a happy medium, he said, a way to both grow and protect their assets through a diversified approach. Forbes was quick to note, however, that he doesn’t take the approach of some houses that clients should have a little bit of everything. For example, he shies away from international investments because they’re naturally a little more volatile.

“Some of those risks may be worth taking, but I’ve got to be satisfied that they are worth taking,” he said. “I’ve never believed that you should have a little bit of this, a little bit of that, a little bit of something else just because it adds extra diversification. All of our portfolios are very diversified. But there’s nothing in the theory that suggests you should have something in emerging markets or something in high-yield debt, for example.”

In addition, he explained, “if you look at the typical way portfolio management is run here, we build everything up from the client level. So if we decide, for example, that today is the right day to buy Google, rather than saying, ‘OK, we’re going to buy 1,000 Google, you’re 0.2% of our client base, so you’re going to get 0.2%,’ we approach it differently. We’ll look at your portfolio, then we’ll look at his portfolio, and we’ll model each individual portfolio until we’ve got an aggregation of the amount of Google we want to buy.”

That’s different from how most investment houses organize their strategy, he went on. “It forces the portfolio manager to take account of your requirements at the time we’re actually trading within the account. I think that is an important factor. It is a differentiating factor between Renaissance and a lot of the industry.”

Another selling point is the firm’s transparency in terms of its fee basis. “We don’t invest in third-party funds,” Forbes said. “When you go to one of the larger investment-management organizations, they buy a mutual fund, and that mutual fund has another layer of fees within it, on top of the investment fees you’re already being charged. So your actual level of cost starts to escalate. We don’t believe in that — all our clients are invested in individual stocks and individual bonds. That provides very transparent fees. We think that’s in our clients’ best interest.”

Getting Personal

All these facets of Renaissance’s ethos — a word Forbes used several times for emphasis — certainly creates more work for the team, especially the individualized aspect of the investment process.

“Most investment managers will probably say it’s not a very cost-effective model, but fortunately, these days, we have a lot of technology at our fingertips, and rather than using that technology to determine what we’re going to invest in, we use it to actually inform our approach to investment management, from a research point of view and also from a day-to-day management point of view.”

It’s an approach that has worked for 18 years now, he said, if only because clients know their portfolio will be personally tailored to their assets, goals, risk tolerance — and, yes, even their conscience.

Joseph Bednar can be reached at [email protected]

Retirement Planning

Separating Hype from Reality

By Ann I Weber, Esq.

Ann I Weber, Esq.

Ann I Weber, Esq.

Recent headlines read: “Estate Taxes Repealed for All But Mega Estates!” “Get Your Hot Dogs Here with a Complimentary Will and Trust!” and “Never Need Legal Work Again!”

Is all this true, hype, or misinformation?

All three, as it turns out. Yes, only ginormous estates, i.e., those in excess of $11,200,000 for an individual, will be subject to federal estate taxes. Yes, wills and trusts may become less expensive without technical drafting to minimize federal estate taxes. Hype because many people have estates that are subject to state estate taxes. In Massachusetts, any estate over $1 million is taxed from dollar one — and you can’t dodge that bullet by making deathbed gifts.

Hype also because many non-tax situations make an estate plan desirable or even crucial. Misinformation because, as noted below, changes and complications in families, businesses, and relationships are inevitable, and sometimes an estate plan can help your family to navigate through what might otherwise be turbulent times.

A estate plan is important because you still need to say where you want your property to go at your death. Without a will, absent a named beneficiary, your property will go where the Commonwealth says it will go. In many cases, that’s not what you may want. For example:

• You may want your surviving spouse to receive all of your assets. But unless you say so in a will, your estate will be divided among your spouse and your children based on formulas tied to whether some or all children are from your prior marriages, if any, and from the prior marriages, if any, of your current spouse.

• You may have individuals you wish to include who are not your ‘heirs at law.’ Under Massachusetts intestacy statutes, a parent, cousin, nephew, friend, or charity, among others, might not benefit from your estate unless specifically named.

• You may have minor children and want to delay their direct access to your estate. Many people want to defer the benefits that their minor children receive from their estate until the children reach specified ages. The Commonwealth provides only for outright distribution to estate beneficiaries age 18 or older. If such beneficiaries are under the age of 18, the court will appoint a guardian to manage these funds for the child. A will or a revocable living trust can create a trust providing for delayed distributions to the child while still allowing the trustee to use trust assets for the child’s benefit until that time.

• You may have children from a previous marriage. The Commonwealth provides formula benefits to current spouse and children whether from the current or prior marriages, and may not meet the particular needs of your family. A will or trust can tailor distributions to your children and spouse or provide that property allocated to your spouse pass to your children at such spouse’s death.

• You may have a parent you want to benefit. The intestate laws in Massachusetts do not provide benefits for a parent if a spouse or children survive you. A will or trust could include such provisions. If there is a possibility that a parent might require nursing-home care, a specially drafted trust can shelter trust assets from MassHealth claims. At the parent’s death, trust assets will pass according to your directions.

• You may have a special-needs beneficiary. If assets from your estate are distributed outright to a person who otherwise qualifies for state or federal benefits such as MassHealth, Supplemental Security Income, or VA benefits, for example, the receipt of these assets may cause an interruption in or cessation of benefits. Instead, you may want to consider directing these benefits to a special-needs trust which can hold such benefits without adversely impacting needs-based benefits.

• You may want to make gifts to charity. Massachusetts laws of intestacy do not provide for gifts to charities. Such gifts can be made via a will or trust or by naming a charity as a beneficiary of your bank, investment, or retirement account. If a charity is named as a beneficiary of your retirement fund, the gift will pass free of income taxes that would be payable by individual beneficiaries and will also pass free of estate taxes.

• You may want to consider a durable power of attorney to appoint someone to handle your financial affairs in the event of your disability. Durable powers of attorney can take effect immediately or upon your disability and, in the event of your disability, can avoid the need for a court-appointed guardian with all the attendant expense, publicity, and delays — and the choice of who handles your affairs is made by you rather than a judge.

• You may want to specify the type of medical treatment you do or do not want. The Commonwealth provides a standard-form healthcare proxy, available online, that can address these concerns about treatment and end-of-life care. If you have strong opinions regarding the administration (or lack thereof) of particular forms of treatment should you be terminally ill or injured, you may want to consider executing a living will.

Attorney Ann I. Weber is a partner with the Springfield-based law firm Shatz, Schwartz and Fentin, P.C., and concentrates her practice in the areas of estate-tax planning, estate administration, probate, and elder law. She has a particular interest in creative estate planning for authors, artists, farmers, and landowners, and she is a frequent author and speaker on issues regarding estate planning; (413) 737-1131; www.ssfpc.com

Retirement Planning

Life Lessons

Retirees say they are considerably less concerned than pre-retirees about their money lasting throughout retirement, but worry more about the financial and lifestyle implications of declining health, according to new research from MassMutual.

Retirees are confident that their retirement income will last as long as they live and that they will have enough money to meet their retirement lifestyle goals, with nine in 10 retirees saying they feel confident compared to roughly half of pre-retirees, according to the MassMutual Retirement Income Study. Pre-retirees worry most about not having enough money to enjoy themselves, four times more than retirees (28% versus 7%), who are most concerned about healthcare costs (29%).

“While we’re working, many of us think about retirement in terms of our leisure pursuits, a kind of permanent vacation that requires more disposable income,” said Tom Foster Jr., head of Retirement Plans Practice Management with MassMutual. “Retirees’ experience tells us that health concerns become increasingly prominent, especially as many retirees begin experiencing health issues and their subsequent costs.”

Overall, pre-retirees worry more than retirees about not having enough income in retirement (78% versus 51%), changes in Social Security benefits (81% versus 69%), and low interest rates hurting income (69% versus 57%), the study finds. When asked if their retirement income would last as long as they live, 91% of retirees and 56% of pre-retirees answered affirmatively.

Retirees’ confidence may stem from finding they need less income than many pre-retirees anticipate. Overall, 60% of pre-retirees expect to need at least two-thirds or more of their pre-retirement income to live comfortably in retirement, while 44% of retirees find that to be the case, according to the study. More than a third of pre-retirees believe they will need 75% or more of their pre-retirement income in retirement, while one-third of retirees report needing less than 50%.

“While many retirees can manage their expenses to lower income levels in retirement, the rising cost of care may steadily reduce their lifestyles as they age,” Foster said. “Once you’re older, it may be impossible to make up for any increasing income needs by simply tightening your belt. It’s far better to err on the side of having more rather than less income than you anticipate needing, especially as costs for care continue to escalate.”

The average 65-year-old couple could pay almost $490,000 in total health-related costs throughout retirement, according to HealthView Services, a software company that projects healthcare costs.

On the spending side of the ledger, 70% of pre-retirees anticipate spending less in retirement than they did in their working years, a proposition that does not always work out, the study finds. While half of retirees say they spend less, the rest find they spend about the same (41%) or more (8%).

Pre-retirees also are more inclined than retirees to say they wish they had started saving for retirement sooner. Eighty-four percent of pre-retirees would have started saving sooner compared to 55% of retirees, according to the study. Those sentiments were more likely to be expressed by those with assets of less than $250,000 or respondents who had siphoned money from their 401(k) or other retirement savings plan before retirement through a loan or withdrawal, or who suspended contributions.

The internet-based study was conducted on behalf of MassMutual by Greenwald & Associates and polled 801 retirees who have been retired for no more than 15 years and 804 pre-retirees within 15 years of retirement. Pre-retirees were required to have household incomes of at least $40,000, and retired respondents had at least $100,000 in investable assets and participated in making household financial decisions. The research was conducted in January 2018.