Ken Van Leeuwen, CFP, CEO, founded Van Leeuwen & Company in 1997 and is responsible for the firm’s overall strategic direction with expertise in areas including equity stock compensation, restricted stock performance unit planning, and how executives can maximize the benefits they receive from their corporations.
Russ Alan Prince: What are the biggest challenges for investors in 2023, and how are you as an advisor counseling clients?
Ken Van Leeuwen: One of the biggest challenges for investors this year will be resisting the impulse to try and make up all the losses that they suffered in 2022. There are several things, however, that could help. The first is to upgrade their portfolios. Many people have taken losses on losing positions, but now it is time to get back into the market.
In client discussions, we tell them not to let last year scare them into doing nothing now, but rather to be nimble and get back their exposure to the stock market. And anyone who has been holding back should not feel as if they have missed out on the opportunity to make money by sitting on the sideline in a month when the stock market was up roughly 6%. There are still plenty of quality companies with strong upside potential available at reasonable prices.
With regard to equities, we believe that this environment strongly supports adding international exposure to client portfolios, and we have been considering positions in some type of emerging market fund, whether it is an ETF or an actively managed mutual fund. However, investors still need to be cautious and avoid taking on too much risk. We started off the year with a strong stock market performance in January, but investors should proceed with caution.
And although 2022 was the worst year for bond investors since the 1870s, we at Van Leeuwen & Company believe that this year will be different. Specifically, we believe that high-quality corporate bonds and municipal bonds look very attractive.
Overall, we think 2023 is going to be a good year for investors. Yes, we are going to have to accept volatility as the markets react to every new piece of economic data that comes out, the minutes from every Federal Reserve meeting, and every utterance from Chairman Powell. But on the whole, we are urging clients to hang in there and remain judicious and patient with their investments.
Prince: What are ways an advisor can add value beyond managing a portfolio?
Van Leeuwen: Wealth management is really about so much more than just portfolio construction and management. Tax planning is an excellent value add, and advisors should consistently identify opportunities for clients to save taxes. Other service areas include helping people maximize their retirement plan contributions, such as executing a Roth IRA conversion while values and tax rates are lower.
Those who have had some losses might want to take some tax losses because they are probably going to have some capital gains this year. Tax management is crucial, but advisors should also ensure wills and estate plans are in order and that the correct beneficiaries are listed on insurance policies and retirement plans. For advisors who work primarily with corporate executives, make sure these clients understand and know how to take advantage of the equity grants they receive from their companies.
Money is a very personal thing and finances are complicated. Clients want to know that their advisor is on their side acting as a fiduciary through good times and bad, which is exactly what we at Van Leeuwen & Company seek to provide.
Prince: What should one do if they do not trust their financial advisor?
Van Leeuwen: Quite simply, if someone does not trust their advisor, they should find a new one. A good advisor/client relationship must be built on trust, or it just will not work out over the long term.
Above all else, an advisor can build trust by being available to their clients, truly listening to client concerns, and acting in the client’s best interests. It is extremely important to speak to clients clearly and devoid of complex financial concepts. People are often intimidated by financial matters and using industry jargon could turn them off.
In my own experience, I have found that when people hire a financial advisor, they have already made the judgment that the advisor knows what he or she is doing. It is not necessary to show them how smart you are by talking over their heads. Instead, during client meetings, advisors should listen to what the clients say about their current situation, their financial picture, and their long-term goals and aspirations.
At Van Leeuwen & Company, we come into every meeting prepared with an agenda, but we start off by asking our clients what they want to talk about. I think that is the first step toward building trust. And then you always put your client’s best interests first because that is what being a fiduciary is all about.
RUSS ALAN PRINCE is the Executive Director of Private Wealth magazine (pw-mag.com) and Chief Content Officer for High-Net-Worth Genius (hnwgenius.com). He consults with family offices, the wealthy, fast-tracking entrepreneurs, and select professionals.