10 digital marketing tactics to grow your financial advisory firm
Taking the leap to become an independent financial advisor is an enormous decision. Because you’re now responsible for everything in your business, the onus is on you to become an expert at everything – finance, compliance, tech – and marketing. To help you with your marketing efforts, and since there are only 24 hours in […]
5 Myths About Becoming an Independent Financial Advisor
There are a lot of misconceptions about becoming an Independent Financial Advisor. For those financial advisors considering independence, we know change can be scary and uncertain. You may be asking these questions: Will my clients follow me? Will my income be as good as it is now? How will I handle all the paperwork and back-office […]
Executive Q&A: CEO Bill Sowell on Expanding into NWA
Succession Planning for Financial Advisors: Key Steps to Consider
Creating a succession plan is an essential step for a financial advisor to ensure the smooth transition of their practice and client relationships in the event of retirement, disability, or other unexpected circumstances. That said, a succession plan is more than a document spelling out who will take over the company you’ve built or grown. […]
Understanding RIA Compliance
Launching a solo advisory firm can be intimidating due to compliance management. Since you must complete many compliance tasks each year, we’ll walk through the ins and outs of creating your compliance calendar. This calendar can help you systematize and manage compliance tasks, requirements, and deadlines. As a solo Registered Investment Adviser (RIA) owner, you’ll […]
Sowell puts ‘boots on the ground’ in Northwest Arkansas
Why Financial Advisors Choose Independence – An insider’s view
Financial advisor Bill Sowell made the leap to independence more than three decades ago and he has never looked back. Since then, Sowell Management, the Registered Investment Advisor (RIA) firm he founded in North Little Rock, Arkansas, has grown exponentially. Since 2016, Sowell Management’s AUM/AUA* jumped from $525 million to $4 billion today and more […]
Electricity Tax is Around the Corner
According to Goldman Sachs Research, half of all vehicle sales are forecast to be electric vehicles by 2035, which is great for the environment and lower greenhouse gas emissions. They further forecast that global E.V. sales will reach 73 million units by 2040, with the U.S. accounting for 14 million units. Tesla’s current estimates are that a Tesla Model 3 Long Range with a 75kWh battery pack costs approximately $21 for a full charge ($0.28/kWh) at a Supercharging station – an annual savings of $700 estimated by Tesla. That is a huge cost saving relative to the price of gas, “fueling” the adoption of E.V.s even sooner. But consumers beware, “If it’s too good to be true, it probably is.” Currently, California tacks on an additional $1.40 “per gallon” in fuel taxes and fees; the $1.40 per gallon includes 54 cents in state excise tax, 18.4 cents in federal excise taxes, 23 cents for California’s cap-and-trade program to lower greenhouse gas emissions, 18 cents for the state’s low-carbon fuel programs, 2 cents for underground gas storage fees, and an average of 3.7% in state and local sales taxes. California expects to raise $7.4 billion in budget revenue from its state excise tax to pay for road infrastructure and other government infrastructure projects. As the consumption of gas declines, so will the state and federal revenue to fund our transportation system. In 2020, Statista.com reported U.S. states and local governments collected $53 billion in gas tax revenue, and some of the top states are PA, CA, WA, IL, and NJ. Where’s the shortfall in gas tax revenue going to come from? Policymakers are already spinning their wheels, but rest assured it will likely come from an increase in the cost of your annual vehicle registration, driver’s license renewal, auto insurance, and last but not least, a tax on the energy that charges your E.V. battery and home, electricity! If E.V. savings now is too good to be true, it only means you should buy an E.V. sooner rather than later to enjoy the benefits now before they disappear.
Equity Markets Ended Week Up
Equity markets ended this past week and month resiliently in positive territory as the S&P 500 gained 3.5% despite concerns over the banking industry that continued to be top-of-mind after UBS acquired Credit Suisse to prevent a catastrophe in the global capital markets. The advance was fueled by weak economic indicators favored by a hawkish Fed as fourth quarter GDP was revised down to 2.7% due to lower-than-expected consumer spending. With durable orders declining by 1%, an unexpected rise in weekly jobless claims of 198,000, and the Fed’s key inflation gauge—Personal Consumption Expenditures Price index rising less than expected, Wall Street rallied on indications of a slowing economy. This flight to quality knee-jerk reaction in a rising rate environment, at least for now, was led by the Technology and Communications stocks (including Apple, Amazon, Microsoft, Google stocks) all gaining +10.0% while Financials returned -8.2% to end the month. Bond yields inverted on fears of a recession resulting in the Bloomberg US Aggregate gaining 2.54%. While Washington’s headline news will center on President Trump’s much talked about indictment for falsifying business records, Wall Street will instead pay attention to policymakers’ ability to continue to boost confidence in the banking sector as the drama of First Republic Bank (FRC) continues. Although FRC stock rose 13.2% @ $13.99 this week, it is trading -91% below its 52-week high of $171.09. As the market takes an earnings break ahead of first-quarter corporate earnings releases starting the second week of April, attention will seek to affirm the slowdown from this week’s key jobs reports, factory orders, and construction spending.
Stock Buyback— Intrinsic Value Matters
Stock buyback has become an increasingly popular choice for companies to return money to their shareholders tax-efficiently. In a buyback, the repurchased shares will go into inventory and reduce the outstanding share count in the open market, benefiting shareholders by raising the per-share value and, potentially, the stock price. In recent years, concerns have been raised about the true beneficiaries of stock buybacks. Skeptics argue that buybacks primarily manipulate the stock price and benefit the wealthy executives, many of whom get stock-based compensation or hold options on their own stock, rather than mid-class workers who play a key role in the company’s growth. They view it as a misuse of available money for short-sighted goals while giving up the potential long-term interest by investing elsewhere to boost employee benefits, and based on that, the politicians have introduced laws to propose a tax on the process, hoping to restrict or reduce the buyback actions.
However, Warren Buffett has described such critics as ‘economic illiterate’ in the recent Berkshire Hathaway annual letter and defended that stock buybacks will benefit all owners as long as they are made at value-accretive prices. It is true that in most successful cases, such as Oracle, by the end of 2020, buyback reduces the supply and shows a signal of undervalued, thus boosting the stock price in the following period of time. But while the ‘Oracle of Omaha’ strongly supports the concept, it is critical to understand the “value-accretive price” that he’s conditional on. Actually, the man explicitly stated as early as in his 2012 letter that “value is destroyed when purchases are made above intrinsic value.” One such example can be AIG, which decided to repurchase an additional $8 million of its stocks at the end of 2007 but did not save its stock price from crashing in 2008.