Written by David Young, President & Founder of Paragon Wealth Management
The markets have been strong the past few years — and they have been exceptionally strong since Donald Trump was elected. Most of the strength was based on investor expectations. Specifically, that Trump’s free market policies and tax reform would benefit stock prices. As a result, last year the markets were up 10 to 20 percent depending on the market. Volatility was almost nonexistent.
The broad market hit a peak on Jan. 26, 2018. Since then, volatility has picked up significantly and the market has been acting more like its old self. Three issues are currently pushing it around.
First, valuations have been at the upper end of fair value for some time. Whenever valuations get this high, investors start looking for reasons to sell rather than buy. They tend to look at everything through a negative lens.
Second, Trump has been pushing a protectionist trade agenda and recently announced tariffs against China. Investors do not like tariffs. Throughout history, tariffs have always caused more harm than good. Every time tariff news comes out, the market sells off.
Third, tech stocks (specifically the FANG stocks, i.e. Facebook, Apple, Netflix, Google and Amazon) have been leading the market up for the last 18 months. But recently, they have had more than their share of bad news, which is causing them to put a downward pressure on the market.
Overall, excellent market fundamentals are still in place, which forces us to stay invested. However, with interest rates slowly rising, we are on “high alert” more than we have been in some time.
CHANGES AT PARAGON
If When I founded Paragon 32 years ago, it was because I couldn’t find a fiduciary firm that managed my money the way I wanted.
I had sold several businesses and needed a place to invest my hard-earned money. I met with Shearson Lehman, Smith Barney, Merrill Lynch and Northwestern Mutual, to name just a few. None fit the bill.
I wanted them to invest my money as if it were their own. I wanted to cut unnecessary investment costs wherever possible. I wanted a proactive investment manager who would adjust my account depending on whether the markets were going up, down, or sideways. I didn’t want them to passively buy an investment, hold it forever, and pray it worked out.
When I started Paragon, I was trading through Fidelity Investments. Each of my clients had to sign a limited power of attorney so I could trade their accounts. We called in our trades on land phone lines, one by one, because there was no internet.
After a few years, Charles Schwab became the leader in the newly developed RIA industry. They were at the cutting edge. We moved from Fidelity to Charles Schwab, because Schwab allowed us to provide the best technology and lowest costs to our clients.
We have been at Charles Schwab for almost 25 years and have enjoyed that working relationship. However, after an in-depth review, it is time for a change. Looking to the future, we believe making some significant changes will provide our clients with a better technology platform, lower transaction costs and outstanding client service.
We did not make this decision lightly. Moving 330+ accounts and upgrading multiple technology platforms is not my idea of a good time.
But change is always painful … in the short term. We are doing this because it will allow us to better serve you and provide you with the best technology available to trade and monitor your accounts.
TD Ameritrade is at the forefront of technology in the Registered Investment Advisor space. TD Ameritrade is a leader in trade execution. We have negotiated trade pricing that is either the same or one-fourth the cost of what we were paying, depending on the account. Better trade execution and lower costs ultimately lead to better investment results.
Safety and security of the accounts is of the utmost importance. TD Ameritrade is committed to delivering one of the highest levels of security in the industry and carries FDIC, SIPC and additional insurance against fraud up to $152 million per client.
In conjunction with moving to TD Ameritrade, we will also be implementing a new portfolio administration package from the industry leader, Orion. The Orion platform will cost Paragon five times more annually than our current provider, but that cost will not be passed on to our clients. Your costs will go down while ours go up. We believe you are worth it.
In addition to enhanced trade order management, cost basis, tax reporting, compliance, and RMD distributions, this state-of-the-art Orion platform will provide you with an incredible array of tools.
Each client will have an online portal, which will provide them with immediate access to accounts and performance across multiple timeframes. We will build these reports for you, as simple or as complicated as you desire. We will use an aggregator, which will allow you to view any of your bank accounts, or other financial accounts that are outside of Paragon. You will have immediate access to your accounts and a variety of reports via your smartphone, computer or through the mail — whichever you prefer.
In an effort to provide you with the best client service, we will also be upgrading our client contact software. This industry-leading client software, known as “Wealthbox,” will allow our staff to take your already excellent service experience to the next level.
Finally, we are significantly upgrading our Financial Planning Software. The state-of-the-art software will make it easier to build and update your plan online. Your plans will be updated daily since they pull in the data data directly from your investment accounts. They will also be available online through your portal. Whether it is a Retirement Income plan, a tax estimate, a Roth Conversion, or Social Security Optimization, our hope is to make it easy for you to understand your plan, access it and update it as needed.
Our ultimate goal is to provide you with the VERY BEST in the Investment Advisor space. We are excited with these enhancements, and over the coming months, we will reach out to you as we get everything put in place.
Disclaimer: 1. Investment performance reflects time-weighted, size-weighted geometric composite returns of actual client accounts. 2. Investment returns are net of all management fees and transaction costs, and reflect the reinvestment of all dividends and distributions. 3. The S&P Index is a market-value weighted index comprised of 500 stocks selected for market size, liquidity, and industry group representation The Barclays Aggregate Bond Index is a benchmark index made up of the Barclays Government/Corporate Bond Index. 4. Benchmarks are used for comparative purposes only. The Paragon Top Flight Portfolio is not designed to track the S&P Index and will have results different from the benchmark. The Paragon Managed Income Portfolio is not designed to track the Barclays Bond Aggregate Index. 5. Past performance is no guarantee of future results. Investments in securities involve the risk of loss. Paragon Wealth Management is a provider of managed portfolios for individuals and institutions. Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy. All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Past performance is not a guarantee of future results.