Opinion

By Daniel Todaro, Founder and Managing Director, Gekko

As we move toward a full re-opening of the economy there remains some uncertainty about how often we will return to offices. A leaked Whitehall document recommended the Government should not actively tell people to go back to the workplace after 19 July. While different messages have come from Ministers, it seems likely that an element of home working is to continue. Most companies seem set to operate at least a part hybrid model, between home working and coming into the office. A recent survey from Gemsatwork found that more than three-quarters (77%) of workplaces that fully closed during the most recent UK lockdown have reopened, with 47% of staff back to the office on a day-to-day basis.

Responsible employers will want to tread cautiously in how they approach the return to offices during what remains a difficult time for many people. It is important to be mindful about employees’ mental health, with many peoples’ emotional states fragile to say the least. Employees will need to adapt to make sure they take the right steps to ensure they can manage the very different challenges of hybrid working compared to solely working from home.

Daniel Todaro, Founder and Managing Director, Gekko

At Gekko we have worked with both physical and mental health experts to ensure our staff have been supported as best we can. So with the support of our practitioners, Bianca Sainty & Bep Dhaliwal, I’d like to share our best tips for looking after yourself as we mix between the real office and the home office.

1)   Embrace the outdoors every day to lift your mood

There is a great volume of research showing that spending time outdoors gives an immediate and lasting boost to mental wellbeing. A KCL Urban Mind Study in 2018 found that “Seeing trees, hearing birdsong and seeing the sky has significant immediate associations with mental wellbeing”. Meanwhile another study by the University of Michigan in 2019 revealed that taking at least twenty minutes out of your day to stroll or sit in a place that makes you feel in contact with nature will significantly lower your stress hormone levels.

To achieve this, actually diarising your walk can have a positive impact. This applies equally to being in the office and working from home. According to fitness coach Bianca Sainty a fitness and wellbeing coach and founder of Pod Fitness: ‘When you are WFH, start your day with a ‘fake’ commute. Plan a 30 minute route that starts and finishes at home and walk this every day. As you walk, you create the mental space you need to shift focus from home life to work. This will help to maintain a vital boundary between your home and work lives.’

2)   Keep a consistent sleep routine to maintain productivity

As we ease back into a hybrid situation, the changes in rhythm to our day can actually play havoc with our sleep. Setting alarms at different times is likely to confuse our bodies and impact the regularity we need to remain on top of our productivity game. According to Bianca: ‘Better to stick to the one, earlier wake-up time, every day, regardless of whether you are commuting. For optimal wellbeing, adults need between seven and nine hours sleep every night. Work out your ‘lights out’ time by using this formula: Lights Out time = Wake Up time MINUS 7 to 9 hours (insert the amount you need).’ She adds: ‘By adopting this consistent routine, you will ensure you don’t fall into sleep deficit. Plus, on the days when you work from home, you gain extra time for self-care. Win-win!’

3)  Nurture strong relationships to help make you stress-resistant

As we return to the office a real bonus is the chance to interact with colleagues and friends (those that we get on with anyway!) It may seem overwhelming at first but we are fundamentally social beings and this period of isolation has been unnatural for all of us. According to Bep Dhaliwal, Founder of Thrive365, a Resilience coach that has worked closely with the Gekko team: ‘Cultivating strong relationships will make you more resistant to stress and have a strong support network. Connection is a fundamental human need.’

For those continuing to work from home – remember your other colleagues will likely feel the same about the feelings of isolation, so that should help feeling less alone when you are working from home. Zoom or Teams meetings don’t seem to be going anywhere in a hurry – so perhaps we need a new approach to how we handle them. One strategy is to not view the screen as a block to normal social interaction. According to Bep: “We can still make time to connect before/after a video call, where you talk about things unrelated to work.”

4)   Remain curious and flexible to help you ‘lean into’ change

The Buddhist philosophy of accepting that things change has really been put to the test during this extraordinary period. Our lives have been dramatically altered and there is an increasing realisation there won’t just be a swift return to the pre-pandemic era. We all need to accept change and ‘lean into’ it. For a rapidly changing job market and new hybrid work environment a flexible, progressive approach is the best way to remain employable and also help you cope.

According to Bep: ‘Know that things change. The more you are open to this, the quicker you learn, adapt and grow from setbacks. Just because things have been done in a certain way beforehand, it doesn’t mean there isn’t a better way for them to be done now. Present the challenge to the team and invite a creative new alternative…..enjoy being curious.’

5)   Have an optimistic outlook and focus on your goals

During this time, the choppy waters of the pandemic have knocked many of us off the course in life we may have set. This might be career, health related or even your relationships. What is crucial is that we keep sight of our life goals and objectives to give us a focus for this next period. Setting goals is a crucial element in recovering from mental health challenges and this period has arguably given everyone a form of PTSD. Having a positive attitude to getting back on track can certainly help. Bep says: ‘Acknowledge what’s in your control versus what you can’t control and look for the good.  We’re used to looking for the challenges in most situations, use a bit of neuroplasticity to carve a new path.’

Old certainties about life and the future certainly don’t hold water today. A hybrid way of working looks set to dominate in the future. Perhaps it has given us all a chance to think about the best way to work ‘your way’. But also remember to not be too hard on yourself while adapting to changes you can’t control. Make the best of the situation to embed some positive new habits. Having a plan to cope is essential as we adapt to hybrid working and the return to the office which is inevitable for all.

It has been a number of months since chancellor of the exchequer, Rishi Sunak, stood up in the House of Commons to announce the Budget statement for 2021. And this year, it came as no surprise that economic recovery took precedence – outlining governmental measures that would not only help businesses to experience financial revival post-pandemic, but also protect the country’s jobs.

As part of the widely anticipated Budget agenda, Sunak introduced ‘super-deduction’ – what he described as ‘the biggest business tax cut in modern British history’. But what does it actually mean for companies and why should leaders consider it as part of their recovery-driven growth strategy – if they have not already?

David Baum, regional managing director of ABL Business’s South West office, explores how harnessing the power of thesuper-deduction tax break can not only help bolster long-term business growth and promotive productivity, but stimulate investment and drive an economic uplift – enabling members of the business community to both uphold and strengthen their future marketplace position.

David Baum, Regional Managing Director, ABL Business

At its most basic level, super-deduction enables organisations to claim 130% first-year relief on investments in qualifying main-rate plant and machinery, between 1 April 2021 and 31 March 2023. As a result, this allows firms to cut their tax bill by up to 25p for every £1 they invest.

The option for enterprises to buy asset finances and offset them against corporation tax is an entirely new concept for the UK – and one which evidently has the future at its heart.

However, to benefit from super-deduction, companies need to directly own the asset in question, meaning it is not compatible with leased equipment. But it is available with hire purchases, as firms have the option to buy the asset at the end of the agreement, subsequently owning it.

Regarding the assets that qualify for super-deduction, these include – but are not limited to – agricultural machinery, electric vehicle charge points, solar panels, office furniture, compressors, computer equipment, and more.

A financial enabler to an investment-led recovery

Throughout the pandemic, the government has implemented many support schemes for companies – from the widely adopted furlough programme to the Coronavirus Business Interruption Loan Scheme (CBILS) – in a bid to help organisations keep on trading and retain their workforces.

But regarding why the super-deduction plan should be considered by decision-makers, it ought to be seen as an enablement tool for those looking to futureproof and bolster their existing business models. It allows corporate spending plans to be brought forward – and advancing expenditure can help to pave the way for accelerated growth.

In truth, when outlining why the government is introducing the increased capital allowance scheme, it ultimately comes down to stimulating business investment – and it believes that these measures can not only foster wider economic upturn but also counteract business cycles.

The government has made it no secret that since the onset of the coronavirus, existing low levels of business investment have fallen – with a reduction of 11.6% between Q3 2019 and Q3 2020. But the truth is that business productivity has been dormant, and investment has been slowing since the economic downturn of 2008 – and this was further compounded when the UK announced it would be leaving the EU in June 2016. Therefore, companies have been dealing with uncertainty for a long time – not knowing what to prepare for and what it will mean for their firm, much like the events of the past 12-plus months.
But with government-backed support– such as super-deduction – to invest in their company, this will see corporate leaders able to reap the return on investment much quicker, as well as make the country’s capital allowance scheme a more globally competitive one.

In relation to the UK’s business investment, Oxford Economics expects this to grow at a much more rapid rate than compared to other G7 countries – owing to the two-year super- deduction tax break.

Knowledge is power that drives future change
Throughout the pandemic organisations across the board have been exposed to new challenges – all of which have required immediate attention. With continued ambiguity, there was little time and headspace for planning ahead – seeing 2020’s corporate strategies being abandoned, and unavoidable knee-jerk decisions driving companies forward.

However, while times have been tough, organisations have learnt a lot since March 2020 – and they have adapted their working practices and made their operations more agile accordingly, some have even pivoted their entire propositions. In other words, knowledge and experience have become power, and many firms – while still recovering from the economic impact – are back in the driving seat and looking ahead to the light at the end of the tunnel.

It is therefore fair to say that while there is still a long way to go until economic uplift returns to pre-pandemic levels, super-deduction can play a key role in helping to propel the UK towards an investment-led recovery. With this in mind, now is definitely the time for businesses to start thinking about the part they play – planning for the future and the financial health of not only their organisation but that of the country.

By: Morteza Maleki

Having worked in brand strategy for some of the leading brands and consultancies in the world, I’ve seen my fair-share of tactics and outcomes when using social media and influencer marketing as a growth tool. It was these experiences, which highlighted some fundamental challenges and opportunities we set out to address with the launch of House Of Influence; a full-circle social media marketing ecosystem and media-tech platform.

Social Media and influencer marketing is undoubtedly [and increasingly] becoming a leading tool for consumer engagement. With the worldwide social media marketing spend doubling to £85 billion from 2019-2020, we can see a clear reflection of confidence in the value this brings to marketers. However, despite the plethora of technology tools and platforms, Influencer Marketing is still evolving and is far from its peak; there are still lessons to be learnt and opportunities to leverage.

To understand these opportunities better, I like to contextualise Influencer Marketing within 2 worlds that we are probably more familiar with: a) the world of magazine publishing and b) the world of recruitment. These two segments present strong comparables; they allow for a slightly different perspective on Influencer Marketing, and all the associated decisions.

Media fragmentation gave way to a huge spectrum of magazine categories, each specialising in a highly targeted audience, specific topics and all with clearly defined circulation-reach numbers. This allowed brands to be far more efficient in their customer engagement through placing adverts within editorial titles that spoke directly to their target audience. In many ways influencers are an evolution of magazines; each with a content specialism and audience insights, selling promotional advertising space within their content feed.

Influencer ‘insights’ are the key drivers of decisions around influencer marketing budgets. On the other hand, as a brand looking to advertise within magazine titles, it isn’t just audience insights we look for. We make cost comparisons of the advertising real-estate to other similar titles, we look at the quality of the content, the design, the layout, the tone of voice of the editor, we ask of article lists to review, the various advertising space option we could have, we even look into the other brand advertisers within the magazine. Only then do we commit to the purchase of an ad within the title… not before bartering for a cheeky discount off the rate-card too. For some strange reason, when it comes to placing promotions with Influencers, we forget all these hugely valuable questions.

My other recommended comparable [Recruitment] also highlights processes, which can further help brands make better influencer marketing decisions. As a brand, when we look to recruit a new client-facing member of the team, there are numerous criteria we put in place as a filtering mechanism, to ensure everything from the team dynamics and our brands positioning is positively impacted by the new recruit. We leverage processes such as psychoanalytical test, interviews and even presentations. After all, anyone who acts on behalf of the brand is perceived as an extension of the brand, and so it’s only right for there to be a clear alignment.

And once again when we make this comparison to Influencer Marketing, and ‘lending’ our brands to an individual to publicly associate to and represent, we take far less precautions, and are far more laissez-faire about our selection.

With this all in-mind, I believe there are 3. ‘Value-gaps’ that present huge opportunities for brands to leverage Influencer Marketing for growth, outside of influencer insights: 1. Selection 2. Social Impact 3. Support; all of which are based around establishing a long-term partnership, rather than one off promotions.

1. SELECTION:

The above parallels should have demonstrated how currently there is minimal emphasis on the selection processes we go through in creating these strategic alliances with social media leaders. With either basic reach and engagement numbers defining our decisions, or the somewhat bias sell of a representative agent; we need to delve far deeper in understanding strategic fit and “brand alignment” in order to see growth.

There are three simple steps you can take in ensuring your selection process is optimised: 1. Create a shortlist of 4-8 candidates, with the intention to committing to 1-2. Most brands commit to 1-2 influencers, with little comparison between other prospective collaborators 2. Develop a list of short open-ended questions around your brand values and positioning, for the influencers to provide their thoughts on. This will help gather a better understanding of their characteristic traits, and how these will reflect on your brand. 3. Arrange a virtual meeting/video call to run through both the long-term objectives of the collaboration and to learn more about the content direction of the influencer. This filters any fake accounts not ran by the person posing as the account holder. This also creates an open communications-line, which will be used for idea sharing, problem-solutions, guide, and additional content opportunities.

At House Of Influence, we have worked with psychologists and behaviourists to developed a proprietary set of psychoanalytical tests and questionnaires for both brands and influencers to use in creating synergistic partnerships, which present commercial value. Similar to advanced dating platform analytics, the process looks to pair you with the most viable brand/influencer partner, that would add value to the goals you are hoping to achieve on social media.

2. SOCIAL IMPACT:

As we watch the proliferation of influencers, we also see the clear divisions of their content narratives. At House of Influence we divide content creators into 3 main categories: 1: Trend setters & reflectors: Those who are always on top of the latest social trends and topics. 2: Content specialists: Those who focus on a specific genre of content. 3. GI Creators: Those who use their content to create ‘Good Influence’ and positive social impact; acting as ‘social media agents of change.’ We have found that GI Creators, have the highest engagement rates and are the most ‘influential’ due to the level of invested trust they have from their followers, and their recognised authenticity of content. This category of influencers, present the biggest collaborative opportunities for brands to harness for growth.

3. SUPPORT:

Advertising and paid promotion has always been a tough nut to crack, when it comes to staying authentic and avoiding a ‘hard-sell’. Audiences are far more aware of these paid-for-messages from influencers, which rarely feel genuine. They often sway the influencer from their [genuine] narrative, to cover a message, which intrinsically feels at times, forced. And do you blame the influencers..? Just like the rest of us, they need to pay the bills.

Our philosophy at House Of Influence, (and recommended approach) to paid promotions via influencers, is to “Support their narrative, not lead it”. In other words, allow them the space to create and maintain the narrative and messaging they believe in, and support them in delivering that message to their audience. This method is not only authentic and resonating to the audience, but also hugely impacts the positive development of brands equity.

In summary we can see that influencer engagement data, is not enough to make commercial partnership decisions with influencers; additional layers are required to paint a better picture of the prospective collaboration. By first looking at influencers through a ‘recruitment-lens’ and establishing a more holistic selection process, you create a stronger foundation for the collaboration. In that process, identify the ‘Gi Creators’ who are championing positive social impact; a voice sought-after and proactively supported by the audience. Once you have committed to that partnership, support the content creator’s message, the same way their audience do. At that point, you’re brands will begin to experience the full potential of Influencer Marketing.

PROFILE:

Morteza Maleki spent 18 years as a brand strategist for world leading agencies, working on major international campaigns for some of the most renowned brands. Having seen the shifts in emphasis from traditional marketing into influencer driven campaigns, he saw an opportunity in the market for an influencer-centric platform, which would provide social media leader with the same media, and commercial opportunities as traditional celebrities; and thus was born House of Influence.

Having started with a team of 3 in December 2019, and launching the site in October 2020, the business has grown to a team of 20 during lockdown, with continues growth in the site users and signups. With many offers of funding on the table and phase 2 of the business launching in July, brands and influencers globally are jumping on board with HOI and the company’s vision to find, share and create  ‘Good Influence’.

By Scott Donnelly, Director of Board at CapitalBox

Ever since Boris Johnson announced his roadmap to easing lockdown restrictions earlier this year, businesses have been eager to reopen their doors to customers. Yet, delay after delay has dampened hopes on the return to complete normality. This isn’t just bad news for people across the country who are unable to enjoy the unrestricted social gatherings, plan holidays abroad or go clubbing, it has also struck small businesses hard.

Many small businesses in the hospitality and retail sectors enjoyed the taste of freedom, that others were only hoping to enjoy in just a few months’ time. In fact, in the first week of pubs, restaurants and non-essential retail being able to open their doors to the public it was estimated that spending was above pre-pandemic levels. Over the course of the pandemic Britons’ have amassed savings of £180 billion in their bank accounts, ready for the grand opening to splurge the cash! However, this optimism quickly turned sour.

With rising COVID-19 infections throwing the lockdown easing roadmap into disarray, the economy remains under pressure and SME’s road to recovery is delayed further. The brief sense of euphoria that businesses felt has turned into realism as costs continue to mount and revenues remain limited.

Removing the obstacles in the road to recovery
Since the easing of restrictions, the rapid vaccine rollout and continued support from the government, there has certainly been an increase in consumer confidence. In fact, the UK consumer confidence index rose to its highest levels since lockdown this March and was recorded as the largest monthly jump in almost a decade.

However, this was all before issues around the vaccine shortage and fears of a third wave this summer hit the headlines. Additionally, the end of June will call for businesses to end their reliance on the furlough scheme, business rates relief, and the suspension of wrongful trading liability. This is where small businesses need our help. From consumer spending, to continued support from government and the right loans to get them through what may feel like darker times still to come.

Financial lifeline during pandemic
Governments spotted early on the need to step in with immediate effect to help businesses through the national lockdowns. In a recent CapitalBox survey, we found that 31% of European SMEs applied for government support schemes, with the likes of the Coronavirus Business Interruption Loan Scheme in the UK and the ‘Corona Soforthilfen’ in Germany, being some of the most attractive choices.

The most popular source of funding, however, was retail financing, a form of loan set up to pay back in instalments to those with good credit ratings, which was the number one choice for more than half (55%) of small and medium businesses in Europe.

However, research also showed that one size didn’t fit all. One in five SMEs relied on credit cards (21%) and 11% turned to online loan providers, while a quarter of SMEs (24%) had to turn to the most traditional of funding, asking family or friends for financial support. This shows that when it comes to loans and schemes, variety of sources is key.

Bridge the cashflow crisis
As certain scheme such as furlough look to come to an end in a few months’ time, and as businesses emerge from the crisis, access to finance and cash flow will be just two of the many financial and operational challenges that will be important to navigate. It’s clear that with 65% of UK SMEs having benefitted from the government’s furlough scheme they will be looking at alternative ways to get further support.

Alternative lending has been the SMEs go-to substitute for finance for numerous years and has provided a finance lifeline in many difficult times. This avenue of funding differs from traditional banks and is typically more flexible, faster and has a higher approval rate – which is ideal for helping businesses stay afloat in the weeks up until July 19^th!

To truly support the specific needs of SMEs, financing needs to come from providers who can understand their challenges. Therefore, looking at a flexible approach, quick turnaround times, and the ability to leverage technology and machine learning will enable these businesses to make better decisions. This is the time for alternative lenders to shine and be the catalyst for economic recovery once again.

The road to recovery for SMEs
Uncertainty has eclipsed the road to recovery for SMEs. With no clear support from economic packages or government schemes to bridge the short-term cash flow issues – businesses are looking for ways to stay afloat. The effects of the pandemic will be here to stay, with businesses having to deal with further delays and fears of a third wave in the summer, it is clear leaders will be looking at ways to be more resilient.

With the road to recovery scattered with obstacles, businesses must be wary and identify alternative ways for further support. No matter which avenue is chosen, from government support to alternative lending, they need to feel confident in their recovery. The right financing will be critical in the next few months, which will help to provide small and medium businesses guidance and opportunities to grow – after all they are the backbone of economies.

By: Eric Lochtefeld

As a successful entrepreneur for twenty-five years, I often get asked what it takes to become wealthy at one’s craft. My answer is always the same. You must believe that you can make money at your chosen craft, or the journey is already over before it begins.

If in the beginning you do not believe this, its best to borrow it from someone else. There are no shortage of examples around the globe, so I like to ask non-believers to research for someone that is making gobs of money doing something they clearly love and is a bit of a surprise that they got so wealthy doing it.

Do you have somebody you admire that is fabulously wealthy doing what they love? I do. My choice’s journey started when his parents took him to watch the Ringling Brothers and Barnum & Bailey Circus as a young child. This experience led him to read the biography of P. T. Barnum and he dreamed of becoming just like him.

While he was still in school, he produced several performing arts events. After school, he became a street performer, playing the harmonica and accordion on the streets of Quebec. He joined a performing troupe of mostly homeless artists, which included fire-breathers, jugglers, and acrobats who hitchhiked around the country to shows. He later returned to Quebec, where he obtained a full-time job at a hydroelectric dam. He hated this job and the Universe had other plans because soon after his employment began, the company’s employees went on strike. So, he quit!

He took this opportunity to return to his life as a street performer, and this is when he had a clever idea that would send him on one of the greatest Bliss Journeys of all time! He recognized and cultivated the talents of the buskers.

Do you know what a busker is? I didn’t when I first heard it. I had to look it up. A busker is a person who performs music or other entertainment in the street for monetary donations. If you are thinking, who could make a living from that? Well…..

Meet Guy Laliberté, the Founder of Cirque du Soleil. In January 2018, Laliberté was ranked by Forbes as a Billionaire and the 11th wealthiest Canadian. Cirque du Soleil has become a sprawling international operation, as much in terms of its makeup as in the scope of its activities and influence. The organization now has activities on five continents. Its shows employ approximately 4,000 people from over 40 countries and generate an estimated annual revenue exceeding US$810 million. Not bad for a Busker!

The purpose of sharing this story is to get you to see that if you fail to monetize your idea, it will not be because you chose something that brings you great joy as your idea for a business. Because ANYTHING can be monetized. Guy proved this by monetizing buskers to a tune of over a billion dollars and I can give you thousands of other examples that would blow your mind!

Heck, some cursory research on Google will prove this to you beyond debate. If you fail to monetize your chosen craft, it will be because you either fail to become a Pro at your craft, or you fail at being an Entrepreneur capable of monetizing a product or service idea.

These are the top two reasons why businesses fail. Yes, you are going to need courage and grit to make it as an Entrepreneur but lack of belief is the real reason businesses never launch properly or continue to soar.

If you are going to succeed as an Entrepreneur, you will need to squash the limiting belief that you cannot make money at your dream or bliss and come to terms with the fact that you don’t know how to make money period. Don’t blame it on your dream or bliss! Blame it on not doing the work to become an Entrepreneur.

If you think you can, you can! If you think you can’t, well, you know the rest of this saying….

I work with Entrepreneurs who want to transform into BlissPreneurs. I ask them to memorize and commit to the following pledge. Perhaps you will consider doing the same. It goes like this:

“I will not blame my choice of craft for any shortcomings as an Entrepreneur. I pledge to work very hard to shore up my weaknesses and learn to become both a Pro at my craft and an expert at monetizing it. I pledge to become a Blisspreneur!”

About the author:

By: Anthony Watson, Founder Thrive Retirement Specialists

No matter your generation, retirement is a reality we all will face. Following are strategy tips to consider at every stage of life to improve your potential retirement outcomes.

Strategies for Gen Z and Millennials:

• While you are young and early in your career, try to fund a Roth IRA while you are most likely earning and being taxed less.  The ability to contribute to a Roth IRA gets phased out at an Adjusted Gross Income of $125,000 if single and $198,000 for couples.  Placing high-growth assets like stocks in a Roth IRA earlier in life can put retirement savers in a great position later in life by giving them a sizeable tax-free income source to fund retirement.  This tax-free source of income can be combined with qualified retirement account income from your 401(k) and 403(b) in retirement to craft an optimized tax-efficient withdrawal coordination strategy, which can add tremendous value to your retirement situation.  Ideally, you should first seek to max out your employer’s matching provision in your 401(k) or 403(b). The priority should then switch to maxing out your Roth IRA funding (up to $6,000).  After maxing out your Roth IRA funding, your priority can shift back to maxing out the rest of your 401(k) contribution.
• Generally speaking, you should hold more stock and less bonds in your portfolio.  Young people often chose to hold bonds in their portfolio because they think it provides them with needed diversification.  This is not so when you have a lifetime of “human capital”to put to work.  Your human capital is the present value of your lifetime of wage earnings, which is steady &”bond-like” income.  The ability to work for steady pay and make steady contributions to an investment portfolio over time more than serves the role bonds would play in the portfolio.  It is not until later in life that when one’s Human Capital’s value starts to diminish, bonds need to beconsidered.

Strategies for Gen X:

• As gen Xr’s are progressing through their careers and their portfolios become larger, the management of those portfolios become more important as they start thinking about retirement.  Diversification becomes more important, as does avoiding concentrated bets as there is less time to recover from any mistakes at this stage.  Diversification is an often misunderstood concept.  Someone with just a single index fund could be more diversified than someone with 100 individual holdings.  Diversification is not about the number of holdings but rather the asset class exposures each holding represents.  I believe there are nine distinct asset classes a person should have exposure to in order to be maximally diversified: 1). U.S. Total Stock Market, 2). U.S. REITS, 3). Developed Markets Europe, 4). Developed Markets Asia-Pacific, 5). Emerging Markets, 6). U.S. Total Bond Market (investment grade), 7). Total International Bond Market (investment grade and U.S. dollar hedged), 8). U.S. TIPs, and 9). U.s High Yield Corporate Bonds (non-investment grade).
• Some Gen Xers may make enough money to meet the requirements necessary to be deemed an Accredited Investor. Being an Accredited Investor gives you access to complex investments like hedge funds and other alternative asset investments.  The wealth management industry makes a boatload of money off these investment products.  Just because you have access to these “exclusive” and &”impressive” sounding investment opportunities doesn’t mean you should seek to invest.  Alternative assets such as hedge funds and private equity are complex, loosely regulated, opaque, and expensive investments that most often fail to yield a return commensurate with their true risk and are best to be avoided.

• Consider employing a strategy known as Asset Location.  Asset location is a strategy whereby you hold certain types of assets in certain accounts to maximize each account type’ s taxbenefits.  Rather than creating a balanced portfolio in every account, you can view all of your assets and accounts as one giant portfolio.  Place capital growth assets, like stocks, in taxable accounts because they will grow fastest, and when they get taxed, it will be at the lower capital gains rates.  Holding stocks in a Roth account is even better, where there is no tax period on the growth.  Holding bonds in a Roth account would be a waste of that account type’s advantage.  Income-producing assets, like bonds and REITs, are best held in retirement accounts, so their income distribution can grow tax-deferred rather than becoming immediately taxable as they would if held in a taxable account.

Strategies for Gen Y (assuming retired):

• Don’t blindly follow rules of thumb like the &”Rule”, which is an overly conservative rule of thumb based on a set of rigid and simplistic assumptions that often leads an individual to sacrifice quality of life while living, only to leave a larger than planned legacy at passing. Following the &”rule” in all periods but the one starting in 1966 would have led to a lot of money remaining on the table upon passing beyond what was planned.  That is money that could have been used to maximize happiness and contentment while living.  As a rule of thumb, the biggest flaw is it presumes that retirees cannot make adjustments, and this is just not true.  The level and degree to which a retiree can make adjustments will differ given each retiree’s unique circumstance, but most times, there is at least a little room for adjustments.
• Consider adopting dynamic withdrawal rules (aka flexible spending rules).  Dynamic withdrawal rules are highly customizable and allow a retiree to adjust their spending levels higher over time if they are willing to decrease their spending by some amount temporarily during periods of poor market returns.  Flexible spending rules can actually increase the amount of money you can take from portfolios while also lowering the risk of the plan failing.
• Manage your taxable income by strategically coordinating account withdrawals that optimize the realizing (or not realizing) of specific categories of income in an attempt to minimize your tax situation in any given year.  Managing taxable income is complicated stuff, is uniquely personal, and there aren’t any hard and fast rules to follow.  Strategies will vary from person to person and even year to year for the same person.  The trick is to build a habit of projecting taxes and looking for tax opportunities before the end of each year to make it work.  Most financial advisors have software that helps them to model and do this.

Strategies for all generations:

• Minimize your total cost of investing.  There are two components to your total cost of investing:1). Your portfolio’s weighted average expense ratio and 2). Your financial advisor’s management fee (if you use one).  Every mutual fund or exchange-traded fund charges what’s known as an expense ratio.  A fund’s expense ratio is not a fee you have to pay; rather, it is the amount of your return the fund company needs to hold back to pay their expenses.  Expense ratios can be as low as 0.02% or as high as 3.00% or more in some cases. Expense ratios can end up taking a massive bite out of your return if they are not watched and managed.  To figure out your weighted average expense ratio, you will need to look up each holding you have in your portfolio and the weight of that holding within your portfolio to calculate your weighted average.  The second component of your total cost of investing is your financial advisor’s management fee (if applicable).  I believe advisors add value to their clients in many ways, but the price you pay for that value can vary greatly.  Taking the time to understand how your  advisor is compensated, if you don’t already know, will help you determine this component. Some advisors charge commissions, some charge a % of assets under management, and some a flat fee.
• Investment expenses act as a drag on your returns and take away from your portfolio’s compounding power. Adding 1.0% of return to your portfolio per year by cutting costs means a great deal to your portfolio’s value as the savings is continuously compounded over many years.

You only get one retirement, so be sure to make the most of it!

By: Anthony Watson, Founder Thrive Retirement Specialists 

Your investment portfolio is likely one of the primary assets you plan to rely upon to fund your retirement. As such, your investment portfolio must be structured and managed properly. No longer can you take the cavalier approach you once could when you were younger and saving for a time way off in the distant future.

An investment portfolio should begin to look differently heading into retirement for several reasons. First, volatility becomes much more of a risk factor as sequence-of-returns-risk is highest early in retirement when the portfolio is largest. The key to minimizing volatility and reducing sequence-of- returns risk is to ensure your portfolio is well constructed and diversified. Second, you cannot afford to take concentrated risks to try and hit home runs anymore because there is less time to rebound from mistakes now. Lastly, since you can’t swing for the stars when it comes to returns anymore, keeping as much of the return as you can becomes more critical. This means paying attention to fees that can eat away at your returns.

Portfolio Diversification

Diversification is an often misunderstood concept.  Someone with just a single index fund could be more diversified than someone with 100 individual stock holdings.  Diversification has nothing to do with the absolute number of holdings but rather the asset class exposures each holding represents.  I believe there are nine distinct asset classes a person should have exposure to be maximally diversified: 1). U.S. Total Stock Market, 2). U.S. REITS, 3). Developed Markets Europe, 4). Developed Markets Asia-Pacific, 5). Emerging Markets, 6). U.S. Total Bond Market (investment grade), 7). Total International Bond Market (investment grade and U.S. dollar hedged), 8). U.S. TIPs, and 9). U.S High Yield Corporate Bonds (non- investment grade).

Noticeably absent from this list are alternative investments, commodities, and cryptocurrencies.  Alternative assets are non-traditional investments like hedge funds and private equity. Alternative assets are complex, loosely regulated, opaque, and expensive investments that seldom yield a return commensurate with their true risk. Commodities are hard assets that do not produce a stream of income. As such, commodities are not worth including in a portfolio because they can’t be expected to provide the portfolio with a positive return above the inflation rate. Cryptocurrencies aren’t even an asset. Not only do they not generate income, but they also can’t even be used as raw material to build something of value.

Nine asset classes may not sound like a lot, but incredible diversification can be achieved through the right vehicles.  For instance, using broadly defined index funds to represent each of the nine asset classes, one can build a maximally diversified portfolio giving them exposure to over 36,000 individual securities across all investable 44 countries.

Adopt a Passive Investment Philosophy

There is a reason professional investors from Warren Buffet to the late John Bogle champion the benefits of passive investing. There are many tangible and intangible benefits to reap from adopting a passive investment philosophy. First, individuals can often save more than 1.00% alone based on the average expense ratios of the funds being held in a portfolio. Based on the average expense ratios listed in the Investment Company Institute’s® 2020 Factbook, a 50% stock and 50% bond portfolio would carry an average expense ratio of 1.18%. Using only low-cost index funds, you can build an efficient, diversified portfolio like the one previously discussed for a weighted average expense ratio of less than 0.10%. This 0.90% difference drops right to the bottom line of your return. Second, a passive investment strategy requires less trading than an active investment strategy, leading to lower transaction costs and greater tax efficiency. Lastly, a passive investment strategy is easier to understand and implement, eliminating much investor stress and anxiety.

No one has a crystal ball to predict what will happen in the short term.  But over a longer time period, investment returns tend to behave much more predictably as the risk-return relationship plays out. All investments have a specific risk and return profile that they eventually follow.  This concept is known as reversion to the mean.  The problem is it is very difficult to time this reversion, so it does not make economic sense to pay extra money in the form of a higher expense ratio to bet on active managers. Even if you could predict what could happen, you would have to predict when it will happen and how markets would react to the event. You can see where the probability of success shrinks with each active bet.

Minimize Your Total Cost of Investing
There are two components to your total cost of investing.  The first component is your portfolio’s weighted average expense ratio.  The second component is your financial advisor’s management fee (assuming you use one).  Every mutual fund or exchange-traded fund (ETF) charges what’s known as an expense ratio.  A fund’s expense ratio is not an explicit charge you pay; instead, it is a portion of the return held back by the fund company to pay their expenses.  Fund expense ratios can be as low as 0.02% or as high as 3.00% or more in some cases, and these fees can end up taking a massive bite out of your return.  To figure out your weighted average expense ratio, you will need to look up each holding you have in your portfolio and the weight of that holding within your portfolio.  You can then calculate your weighted average.  The next component is your financial advisor’s management fee (if you use one).  Now, let me say that I believe advisors add value to their clients in many ways, but the price you pay for that value can vary greatly.  Taking the time to understand how your advisor is compensated, if you don’t already know, will help you determine this component.  Some advisors charge commissions, some charge a % of assets under management, and some a flat fee.

These tried-and-true strategies may not be “fun and exciting,” but there is less time to recover from mistakes now. It can be hard giving up that Apple, Tesla, or Amazon stock, but a large permanent drop in a single security that represents a material portion of your portfolio can cause irreparable damage to the sustainability of your retirement plan once you retire. Who would have thought it possible that General Motors, once the largest company in the U.S., could go bankrupt? But they did. Remember Enron? They looked like an excellent investment until the accounting scandal. Stay away from company-specific risk that can be diversified away using a low-cost, diversified index fund portfolio.