Client Login
Contact Us
Call Us

Understanding Custodial Relationships Amidst the Silicon Valley Bank Collapse

When working with a Registered Investment Advisor (RIA), investors may have heard the term “custodial relationship.” This refers to a partnership between the RIA and a financial institution that acts as the custodian of the client’s investment assets. For example, Ballast Advisors uses Charles Schwab as custodian for client investment assets. However, recent events involving … Read more

The Bull Is Back… Will It Keep Charging?

On August 18, 2020, the S&P 500 set a record high for the first time since COVID-19 ushered in a bear market on February 19. The cycle from peak to peak was just 126 trading days, the fastest recovery in the history of the index, erasing losses from an equally historic plunge of almost 34% in February and March.1

Based on the traditional definition of market cycles, the new record confirms that a bull market began on March 23 when the index closed at its official low point. This also confirms that the February-March bear market was the shortest on record, lasting just 33 days.2

Although the strong comeback is good news for investors, there is a striking disconnect between the buoyant market and an economy still struggling with high unemployment and a public health crisis. The market is not the economy, but the economy certainly affects the market. So it may seem puzzling that the market could reach a record high not long after the largest quarterly decline in gross domestic product

(GDP) in U.S. history.3

Optimism vs. exuberance

Whereas GDP measures current economic activity, the stock market is forward looking. The rapid bounceback suggests that investors believe the pandemic will be controlled in the not-too-distant future and that business activity will return to normal. Whether this optimism is warranted remains to be seen. The current economic situation remains tenuous, but there are hopeful signs. A vaccine could be available in early 2021, later than anticipated but offering light at the end of the tunnel.4 In the meantime, the virus continues to suppress business activity. The 10.2% July unemployment rate represented a big improvement over the previous three months, but it was still higher than at any time during the Great Recession.5 Recent projections of corporate earnings suggest they will not contract as much as expected, but they will still contract.6 GDP is projected to make up ground in the third and fourth quarters but remain negative for the year.7 The extreme of market optimism is irrational exuberance, and there may be some of that at work in the current situation. The proliferation of low-cost trading apps has encouraged less-experienced investors to trade aggressively, which might be driving some of the market surge.8

Economic stimulus

The single, most important factor behind the market recovery is the deep commitment from the Federal Reserve to provide unlimited support through low interest rates and bondbuying programs. For some investors, the fact that the economy is still struggling has a strangely positive effect in guaranteeing that the Fed will keep the money flowing.9

Further support from the federal government is more uncertain, but the strong market suggests that investors may be counting on a second stimulus package.10

Nowhere else to go

Low interest rates make it easier for businesses and individuals to borrow, but they have reduced bond yields to the point that many investors are willing to take on greater risk in equities in order to generate income. Money that might normally be invested in the bond market has poured into stocks, driving prices higher. This situation has its own acronym: TINA, There Is No Alternative to Stocks.11

Big tech at the wheel

While the S&P 500 is generally considered representative of the U.S. stock market as a whole, the recovery has centered around technology companies, which have helped provide goods and services throughout the pandemic. The Big Six tech stocks — Apple, Facebook, Amazon, Netflix, Microsoft, and Alphabet (Google’s parent) — were up collectively by more than 43% for the year through August 18. By contrast, the rest of the companies in the S&P 500 were down collectively by about 4%. The Big Six tech companies now represent more than one-fourth of the total market capitalization of the S&P 500 and thus have an outsized effect on index performance.12 One question facing investors is whether to chase the winners or look to stocks and sectors that still lag their previous highs and may have greater growth potential. Chasing performance is seldom a good idea, but there are solid reasons why certain stocks have been so successful in the current environment.

Are stocks overvalued?

The most common measure of stock value is price/earnings (P/E) ratio, which represents the stock price divided by corporate earnings over the previous 12 months or by projected earnings over the next 12 months. The projected P/E ratio for the S&P 500 on August 18 was 22.6, the highest since March 2000 at the peak of the dot-com bubble. Big tech stocks were even higher, trading at 26 times their projected earnings, and the Big Six were higher still at more than 40 times projected earnings.13-14

A different measure of stock value compares the total market capitalization of all U.S. stocks with GDP. By this measure, the market was 77.6% overvalued on August 18, by far the highest valuation ever recorded. The previous highs were 49.3% in January 2018 and 49.0% in March 2000. This extreme ratio illustrates the current disconnect between the stock market and GDP, but a significant GDP increase during the third quarter could bring it down.15

In considering these valuations, keep in mind that these are extraordinary times, and traditional expectations and measures of value may not tell the whole story. If nothing else, the extreme volatility and rapid market cycles of 2020 have illustrated the importance of maintaining a diversified all-weather portfolio and the danger of overreacting to market movements. While new records are exciting, they are only signposts along the road to achieving your long-term goals. The return and principal value of stocks and bonds fluctuate with changes in market conditions. Shares, when sold, and bonds redeemed prior to maturity may be worth more or less than their original cost. Investments seeking to achieve higher yields also involve a higher degree of risk. Diversification is a method used to help manage investment risk; it does not guarantee a profit or protect against investment loss.

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2020

The performance of an unmanaged index such as the S&P 500 is not indicative of the performance of any specific investment. Individuals cannot invest directly in an index. Past performance is not a guarantee of future results. Actual results will vary.

1, 3, 6, 8, 11, 13) The Wall Street Journal, August 18, 2020

2) CNBC, August 18, 2020

4, 9) The New York Times, August 18, 2020

5) U.S. Bureau of Labor Statistics, 2020

7) The Wall Street Journal Economic Forecasting Survey, August 2020

10) CNBC, August 14, 2020

12, 14) The Washington Post, August 20, 2020

15) Forbes, August 18, 2020

IMPORTANT DISCLOSURES The opinions expressed herein are those of Ballast Advisors, LLC and are subject to change without notice. The third-party material presented is derived from sources Ballast Advisors consider to be reliable, but the accuracy and completeness cannot be guaranteed. Past performance is not indicative of future results. Nothing contained herein is an offer to purchase or sell any product. This material is for informational purposes only and should not be considered investment advice. Ballast Advisors reserve the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice. Ballast Advisors, LLC is a registered investment advisor under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about the firm, including its services, strategies, and fees can be found in our ADV Part 2, which is available without charge upon request.

Financial Planner vs Financial Advisor?

Making sense of  these titles and other tips on choosing a financial professional

Professionals at Ballast Advisors, LLC delineate differences between financial professional terms and designations to help empower your choices around personal financial planning, retirement planning, and more.

Originally Published Dec 2018.

What is the difference between a financial planner and financial advisor? What about a wealth advisor? Is this just semantics on a business card, or are there actual certification differences? If you’ve wondered about these questions, you’re not alone. In the top Google searches that include terms such as  “financial advisor,” these are the questions that consistently come to the top.

We asked Richard Juckel, Vice President, Advice and Wealth Management CFP®, CRPC® at Ballast Advisors, LLC to help break down the differences between financial professional terms and designations to help you feel more empowered and confident when it comes to choosing a financial professional.

So what is the difference between Financial Planner, Financial Advisor and Wealth Advisor?

When you see a title on a financial professional’s business card, think about it like a specialty.

“Generally speaking, a Financial Planner may be saying they prefer to work with clients to develop a strategy to help meet their long term goals,” explains Richard Juckel, CFP®, CRPC® in Woodbury, Minn.  “A Financial Advisor, on the other hand, is a fairly broad term that you might associate with someone who helps you manage money related matters.  A Wealth Advisor may focus more specifically on helping clients preserve, grow, and protect accumulated wealth.”

Regardless, one should not rely solely on a financial professional’s business card to determine whether the financial professional has the expertise you need.  Instead, consider whether the financial professional is a registered representative, investment adviser representative, insurance agent, or some combination of the three.

It’s also important to understand these designations because it impacts what and how you will pay for services. Investment professionals are typically paid in one (or more than one) of the following ways: An hourly fee; A flat fee; A commission on the investment products they sell you; A percentage of the value of the assets they manage for you;  Or a combination of fees and commissions.

“Generally registered representatives and insurance agents may earn commission for products sold while an investment adviser representative is only paid directly by the client for advice services rendered,” adds Juckel.

Financial Professionals claiming a “Fee-Based” compensation model  are generally a registered investment adviser or investment adviser representative and may collect fees directly from the consumer or in the form of commissions.    

“For example,  Ballast Advisors generally collects fees from clients for advice services rendered such as creating a financial plan, managing an investment portfolio,  but may also collect commissions if a client elects to implement on insurance product recommendations (such as life insurance, long term care insurance, or disability insurance),” explains Juckel.  “For this reason, Ballast Advisors should be considered a Fee-Based Advisor and any of the Investment Advisors Representatives associated with the firm would also be considered to have a fee-based compensation model.”

Making Sense of Financial Professional Designations

Next, consider what designations the professional holds.  

“The Certified Financial Planner™ designation, for example, is only available to those who have fulfilled CFP Board’s requirements to call themselves a CFP® professional,” says Juckel.

The “Chartered Retirement Planning CounselorSM (CRPC®) is a professional financial planning designation awarded by the College for Financial Planning®. Individuals may earn the CRPC® designation by completing a study program and passing a final multiple-choice examination.

And there are more… CFA® (Chartered Financial Analyst® ), PFS (Personal Financial Specialist), CIMA (Certified Investment Management AnalystSM …) it’s no wonder the landscape gets confusing.

One helpful online resource to navigate the difference is found on the Financial Industry Regulatory Authority (FINRA) website that allows you to search and compare multiple accredited designations. You can also see whether the issuing organization requires continuing education, takes complaints or has a way for you to confirm who holds the credential. It’s also important to visit the website of the organization that issued an advisor’s credential to verify that the advisor is a member in good standing.

See Related Link:  FINRA Professional Designations 

What does Fiduciary mean?

Lastly, consider whether or not your financial professional is acting as a Fiduciary on your behalf.

The fiduciary standard of care as defined by the CFP Board is “One who acts in utmost good faith, in a manner he or she reasonably believes to be in the best interest of the client.”

Here’s a great video explaining the Fiduciary Standard

If Video doesn’t load, CLICK HERE

How do I choose the right Financial Professional?

Because the financial services industry regulations prohibit advertising traditional testimonials from past and current clients, it’s important to do your own research, ask questions, and interview potential advisors to find the right fit.

“First and foremost, you should consider your personal needs. Are you looking for specific investment advice? Evaluating insurance? Trying to accumulate wealth or protect the wealth you’ve already created?” says Juckel.

Consider a firm that offers comprehensive services.  

“Many financial decisions may have unintended consequences if acted on in a vacuum.  For example, converting money from a Traditional IRA has immediate tax implications with potential future tax cost savings.  It’s not enough to simply say a Roth Conversion is or is not a good idea.  It’s a matter of each individual’s personal circumstance,” he adds. “Ballast Advisors maintains a list of other professionals and regularly makes recommendations for clients to work with these outside professionals to help with tax preparation, estate planning, and home financing.  As a general rule, we would advise a client to check with us first for any and all things related to their personal finances.”

If you need more guidance, check out this brochure that can help you select the professional that is right for you.

If you’re interested in receiving additional financial advice as a business owner, contact Ballast Advisors for a complimentary consultation at a location near you:

Ballast Advisors – Woodbury Area
683 Bielenberg Dr., Suite 208
Woodbury, MN  55125-1705
Tel: 651.478.4644
Ballast Advisors – Arden Hills Area
3820 Cleveland Ave. N, Ste. 500
Arden Hills, MN  55112-3298
Tel: 651.200.3100
Ballast Advisors – Punta Gorda & Port Charlotte County Area
6210 Scott St., Suite 117
Punta Gorda, FL  33950-3901
Tel: 941.621.4015 

See related resources:



Ballast Advisors, LLC is a registered investment advisor under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about the firm, including its services, strategies, and fees can be found in our ADV Part 2, which is available without charge upon request. The opinions expressed herein are those of Ballast Advisors, LLC and are subject to change without notice.