IAP™ is what helps protect your lifestyle now and, in the future, through asset dedication

In our last two blogs we discussed the well-known topic of Asset Allocation and the lesser-known topic of Asset Location in our Investment Allocation Process™.  Today, we will talk about Asset Dedication as it relates to IAP™.

Asset Dedication is the practice of matching liabilities with suitable assets.  More granularly, it is the practice of providing for known liabilities by setting aside a matching amount of liquid assets which will mature in conjunction with the known liability need. 

Example:  If you know you have a Real Estate Tax Bill of $5,000 in December, you might put $5,000 into either a Certificate of Deposit, Cash or Short-Term Investment-Grade Bonds with a maturity date of December. 

Looked at through a bigger lens, and specifically thinking about retirement, one might consider setting aside a sufficient amount of safe liquid assets to fund known lifestyle liabilities/needs for a decade or longer. 

To some folks this sounds too conservative.  Other folks may like the security of this approach.  What do you think about Asset Dedication?  We would love to discuss it with you. 

Coronavirus and the Market

What is the impact of Coronavirus on my investments?

The term “novel coronavirus” is so new, some people have apparently wondered whether it is related to Corona beer. (It is not; it’s named after its crown-shaped particles.) And yet, how quickly it has grabbed global headlines. As the viral news has spread, so too has financial uncertainty. What’s going to happen next? Will it further infect our domestic or global economies? In case it does, should you try to shift your investments to remain one step ahead?

Our advice is simple: Do try to avoid this or
any other health risk through good hygiene. Wash your hands. Cover your mouth
when you cough. Eat well, exercise, and get plenty of sleep.

But do not let the
breaking news directly impact your investment strategy.

The keys to following an evidence-based investment strategy
are …

  • Having a globally diversified investment
  • Structuring your portfolio to capture a measure
    of the market’s expected long-term returns.
  • Tolerating a measure of this sort of risk to
    earn those expected long-term returns.
  • Identifying how much market risk you must expect
    to endure to achieve your personal financial goals and allocating your
    investments accordingly.

In other words, it may feel counterintuitive, but if you
have done the above you have planned for this type of contingency already. In
investing, there are things that you can control, and there are things that you
cannot. The impact of coronavirus to the market is something that we can’t
control; sticking to your plan is.

Admittedly, that’s often easier said than done. Here are a
few reminders on why sticking with an evidence-based investment plan remains
your best financial “treatment.”

“I’m assuming there will be no
apocalypse. And that’s almost always, if not quite always, a good assumption.” —
C. Bogle

If you’re not invested, your investments can’t recover. Few
of us make it through our days without enduring the occasional moderate to
severe ailment. Once we recover, it feels so good to be “normal” again, we
often experience a surge of energy. Similarly, markets are going to take a hit
now and then. But with historical evidence as our guide, they’ll also often
recover dramatically and without warning. If you exit the market to avoid the
pain, you’re also quite likely to miss out on portions of the expected gain.

Markets endure. We by no means wish to downplay the
socioeconomic suffering coronavirus has created. But even in relatively recent
memory, we’ve endured similar events – from SARS, to Zika, to Ebola. Each is
terrible, tragic, and frightening as it plays out. But each time, markets have
moved on. Whether coronavirus spreads further or we can quickly tamp it down, overwhelming
historical evidence
suggests capital markets will once again endure.

The risk is already priced in. The latest news on
coronavirus is unfolding far too fast for any one investor to react to it … but
not nearly fast enough to keep up with highly efficient markets. As each new
piece of news is released, markets nearly instantly reflect it in new prices. So,
if you decide to sell your holdings in response to bad news, you’ll do so at a
price already discounted to reflect it. In short, you’ll lock in a loss,
rather than ride out the storm.

Bottom line, market risks come in all shapes and sizes. This
includes the financial and economic repercussions of a widespread virus, be it
real or virtual. While it’s never fun to hunker down and tolerate risks as they
play out, it likely remains your best course of action. Please let us know if
we can help you maintain your investment plan at this time, or judiciously
adjust your plan if you feel it no longer reflects your greater financial

ABS – Always Be Saving

So, a buddy comes in. This buddy is an outrageously frugal 36-year-old single woman who, amazingly, Manages to Save 30% Of Her Gross Compensation! I asked her how she did this and she said she had a motto – ABS – Always Be Saving!  (Kinda reminds me of the ABC motto – Always Be Closing – from the movie Glengary Glen Ross…but…that’s a whole different story.)

We embarked on a discussion about Saving/Investing in the current market environment and discovered common ground as regards our perspective on Market Forecasters.

As a market observer for over 45 years I’ve observed that every January the same thing happens. Lots of folks – many are so-called ‘experts’– look back at last year’s performance to draw comparisons and conclusions they can use to predict what markets will do in the year to come.

At Warburton Capital we don’t make predictions, however, let’s answer this question:

  • ‘What lesson from 2019 can we apply to 2020?’

Wind back the clock to twelve months ago. The words running across CNBC’s home page were, “US stocks post worst year in a decade as the S&P 500 falls more than 6% in 2018.” The Wall Street Journal summarized the
state of market affairs with this headline: “U.S. Indexes Close with Worst Yearly Losses Since 2008.” Depression and Gloomy Predictions proliferated.

Some folks decided to ‘time the market’, sell to cash and wait for prices to go down. They thought that after 11 years, the bull market was finally on its way out.  So how did those gloomy predictions and rainy-day forecasts work out:

  • Global equity markets finished 2019 up more than 25% – MSCI World Index
  • Fixed income gained more than 8% – Bloomberg Barclays Global Agg Bond Index

Let’s now answer the question about ‘What lesson from 2019 can we apply to 2020’?

  • It’s blindingly obvious: Don’t Bet on Forecasts and Predictions.

We need to remember that missing out on growth does as much damage to a portfolio as losing that amount. How long does it take to make any loss back? How does someone who got out know when to get back in? Market
Timing is seductive, however, to be effective one is required to be right twice– at the top and at the bottom – over and over again.  In the words of Warren Buffett, “I’ve never observed a Market Timer to be right more than once in a row!”

Forget the Forecasters. Don’t time the market in 2020 or ever. Don’t gamble on getting in and getting out. Rather, figure out how much of your portfolio you need allocated to Safe Assets and allocate the remainder to Risky Assets so you can capture the ups and ride out the downs.

At Warburton Capital we work with our clients to achieve the foregoing by engaging in Top Down Planning to derive a Purposeful Strategy for current holdings, incremental saving or even withdrawals. Not enough “experts” subscribe to our point of view. They’re still trying to time the markets by predicting short-term market movements…risk on…risk off…blah blah.

You’ve heard the conventional wisdom, “The definition of insanity is doing the same thing over and over again and expecting a different result.” I see Jim Cramer and his brethren speculators demonstrating this market timing insanity daily as part of the Financial Pornography on CNBC – which I so love simply for the entertainment value!

It seems impossible to know when the best time to get into the market is because we can’t predict the future. And if you think about it, that makes sense. If the market’s doing its job, prices ought to be set at a level where you experience anxiety. It’s unrealistic to think the market would ever offer an obvious time to “get in.” If it did, there would be no risk and no reward.

So, what should you do in 2020?  Keep in mind 2019’s most important lesson (which is the same lesson from every year before): Don’t bet on Forecasts or Predictions. Be a long-term investor in a well-reasoned broadly diversified Purposeful portfolio. Reduce your anxiety by having a Purposeful amount of ‘Safe Assets,’ Make sure the people advising you align with your perspective. Never attempt to time the markets. You’ll have more time to enjoy life!

Closing by returning to the beginning of this missive – in case you worried that our ‘Always Saving’ buddy is so frugal that she is a miser, not to worry.  She travels the world routinely and recently paid cash for a brand-new Tesla. I observe and applaud substantial life/ work balance!

Trusting this will find you well, enjoying the New Year and practicing the ‘Always Be Saving’ habit of our ultra-frugal buddy, we remain

Yours Truly,

Warburton Capital Management

Before you invest know 4 things

Rarely a day goes by without somebody asking us ‘what should I invest in’?  We believe there are at least 4 fundamental things that we need to know and you need to know before you invest.

  1. Do you have debt?  It might or might not make sense to pay off debt before you invest?  The key words are ‘it might or might not’.  If a prospective investor has debt with a very low interest rate – an example would be a home mortgage with a fixed rate for 15-30 years at a rate less than 4% – then that prospective investor might decide to keep that debt as the ‘cost of capital’ is lower than the expected return of stocks.  On the other hand, if a prospective investor has debt with a very high interest rate – an example would be Credit Card Debt at 14% or possibly higher – then that investor might decide to pay that debt of before investing as the ‘cost of this capital’ is higher than the expected return of stocks.
  2. Do you have an emergency fund?  Depending on a variety of uniquely personal information, it might make sense for you to build-up an emergency fund equal to somewhere between 3 to 6 months of spending.  We would work with our clients to determine the amount of cash they have tied up in checking and savings accounts.  If the magnitude of this cash is insufficient to cover that prospective investors known expenses for a minimum of 90 days, then, we might recommend that this investor create an emergency fund – a safety net – for spending in the event of contingencies either known or unknown.
  3. What is your emotional risk profile?  We know the stock market is volatile, so you have to be ready to ride the rollercoaster. We need to know how you would respond if your investments declined by 50% in value? Thinking through this question is vital and will determine how we invest.
  4. What are your investing goals?  Are you investing to buy a home? To pay for a child’s college?  To pay for a vacation?  To provide for a comfortable retirement?  All of the above?  Different goals require different allocations. Our IAP™ (Investment Allocation Process) is designed to determine where your investments should be allocated with intention and focus on the end goal.

These 4 questions are how we figure out how to invest, when to invest and what to invest in.  The process of creating a Purposeful Financial Plan is very tedious, however, not particularly difficult.

We would be pleased to assist you in creating a Purposeful Plan and invite you to call or email us to get started.

Josh Jakubovitz ready to serve Warburton Capital

Jonathan Hall, President of Warburton Capital, announced that Mr. Josh Jakubovitz has joined the firm as a Client Service Specialist.

Josh graduated from The University of Oklahoma with a Bachelor of Science degree in Economics and a Bachelor of Arts degree in Chinese Language and Culture. He is currently pursuing his Master of Business Administration degree at the University of Tulsa.

During his tenure at OU, Josh developed a passion for exploring and learning about global cultures which led to his acceptance of a full scholarship to live and study in Beijing, China, for a year following completion of his undergraduate studies. In China, he worked with young children to help them develop their English capabilities while furthering his mastery of Mandarin.

Prior to joining Warburton Capital, Josh worked for a Fortune 100 company focused on providing payroll services to some of our country’s largest corporations. He also worked in the aerospace and higher education industries and led numerous international training initiatives for young pilots.

Josh is a strong advocate of lifelong learning and volunteers with the Mizel Jewish Community Day School, where he helps coordinate fundraising and local events, and with Zarrow Pointe and their residents to help connect them with distant family by assisting with new technology.

When he is not volunteering, Josh can be found hunched over a chess board with friends or outside playing disc golf with his family.

Serving as a Client Service Specialist with Warburton Capital, Josh is on our front-line of client contact. He responds to client requests, develops/implements solutions to improve operational efficiencies and assists in onboarding new clients.

Josh currently resides in Tulsa with his beautiful wife Madison and their Yorkie, Tipper.

Hall commented, “Josh’s wealth of client facing experience, his commitment to excellence, and servants’ heart make him an ideal fit for Warburton.  I’m confident Josh will be an excellent addition to our team. He will help increase our capacity to fulfill our firm’s mission of Helping People and providing White Glove Service!  Please join me in welcoming Josh to our Team!”

Founded in Tulsa in 2006, Warburton Capital Management provides a Family Office Experience to their clients.  We advise business owners, professionals, corporate executives, individuals, families, retirees, endowments and foundations on a multitude of Wealth Management matters including Portfolio Management, Tax Planning, Estate Planning, Insurance Coverage, Charitable Intent and Trust Representative Services.  The Firm offices in First Place Tower at 15 East Fifth Street, Suite 3675, Tulsa, Oklahoma, 74103.


In 2021 Warburton Capital received a Trademark for our Investment Allocation Process – IAP™.

You may wonder what makes the Warburton Capital process different from the processes of other investment advisory firms. According to an objective, statistically significant academic study, asset allocation is the primary determinant of a portfolio’s growth and volatility with active management (security selection and market timing) playing a minor role1.

We determined that the most productive way for us to help our clients is by utilizing an evidence-based process to create a purposeful investment allocation that increases the odds of our clients having a good investment experience and achieving their financial goals.

Our Investment Allocation Process is a dynamic process which involves combining safer assets (Short-Term Investment-Grade bonds) with risky assets (Small Cap, Large Cap, Value and Growth Stocks both Domestic and Foreign). 

Having derived the investment allocation, we are not simply ‘buying and holding’ we are ‘buying’ and looking for strategic opportunities to ‘rebalance’ the safer and riskier assets back to the target allocation when the variance has exceeded permitted tolerance.  Additionally, we monitor client portfolios looking for ‘tax-loss harvesting’ opportunities to create tax benefits for our clients.

What makes our IAP™ Special is that the discipline of our IAP™ should result in us engaging in fewer futile activities than traditional investment advisors.  We believe that investing is a statistical exercise and the discipline of our IAP™ stands on a foundation of statistical evidence in an effort to increase the odds of investors having a good investment experience and achieving their financial goals.

Does this make sense to you or does it sound like industry jargon?  We would be happy to chat at length if you desire.

1 Gary P. Brinson, CFA, Randolph Hood, and Gilbert L. Beebower (known collectively as BHB) in their seminal paper, “Determinants of Portfolio Performance,” published in 1986 in the Financial Analysts Journal.  BHB examined the quarterly returns of 91 large U.S. pension funds over the 1974 to 1983 period, comparing the returns to those of a hypothetical fund holding the same average asset allocation in indexed investments. A linear time-series regression yielded an average R-squared of 93.6%, leading BHB to conclude that asset allocation explained 93.6% of the variation in a portfolio’s quarterly returns.

Making Important Family Decisions

Planning for a family’s transfer of their wealth, plans for incapacity, and executing on those plans can be a significant challenge for both clients and their trusted advisor(s). Clients look to their trusted advisors for guidance when it comes to defining and executing their estate plans for future generations. It is critical that a trustee or directed fiduciary understand each of these variables, including family dynamics, and how they align with one another. What’s even more difficult is that there no clear, repeatable rule when developing an estate plan. Trusted advisors must rely on broad, guiding principles to accomplish one’s most important family responsibilities. After all, each family member is unique and has unique life circumstances.

Why is estate planning so important?

While it is hoped that families will work together to make sure one’s wishes are carried out, more often than not families don’t agree with one another. And, what’s intended to happen and what actually happens are rarely the same. There are many horror stories of families being torn apart by fights over money, property, and possessions after the death of a family member. None of us like to believe that our family could behave so badly but when money and emotions collide, hurtful, irreparable comments can tear a family apart. Estate planning can help mitigate you don’t put your family in a position where they are at risk of ruining relationships.

Anyone can write a will, but a skilled estate planner also understands family dynamics. From the parent who enables a financially irresponsible child to the daughter who wants to tell her mother what to say in her will, family members can make estate planning complicated.

And these dynamics may be so ingrained that the client isn’t even aware of them. Take, for example, the client who wants to leave the family business to a pair of siblings that are barely on speaking terms. The client may be so intent on being fair and keeping the business in the family that he doesn’t see that the plan can never work. A good estate planner must be able to spot these sorts of problems and offer the client more appropriate options.

Another common issue is dealing with blended families. A simple estate plan may lack the foresight to provide for children from a previous marriage. For example, if one’s assets are left to his or her spouse, he or she may not want to leave those assets to their deceased spouse’s children from another marriage. This, in essence, leaves these children disinherited. Therefore, individuals who are in this position need to ensure that their wills and trusts clearly provide protection for these children.

Who will administer your estate when you are gone? People often don’t give much critical thought to this decision. That can be a big mistake. It is recommended that you don’t just choose the eldest child or the child that is living closest to you. Using such arbitrary criteria isn’t in anyone’s best interest. Naming multiple family members as executors because you are afraid someone’s feelings will be hurt is also not a good idea.

Estate Planning Issues to Consider…

  • Make realistic plans. In their eagerness to distribute assets equally among their children, some people devise plans that will never work in practice. A couple might, for example, want to leave the family vacation home to their three children without considering whether all of the children want the home or can cooperate in its use and care.
  • When is a Trust Necessary? Many people don’t think through the consequences of leaving money or property to someone outright. But a small inheritance can cause big problems for a person who receives disability payments. Or, someone who isn’t financially responsible may spend their way through their parent’s money in a short amount of time. By asking questions about the client’s heirs, an estate planner can spot situations where a trust may be a good idea.
  • Disinherited children. Many estate planners caution that disinheriting a child is an invitation to contest a will. To spare the remaining children the turmoil and expense, many professionals recommend leaving some money or property to the child, with a stipulation that the child will forfeit that inheritance if she contests the will.
  • Undue Influence and Competency. Most estate planners are aware of these issues and know how to spot red flags. Among them are the child or caregiver who brings an elderly person in for a significant change to a will. Professionals should take care to establish that the testator, and not his or her family, is the client. They should also meet separately with the testator to make sure the person is competent and not under any duress or undue influence.
  • Family meetings. Many people prepare wills and other estate planning documents and never discuss their assets or their estate plan with their children. The children may be shocked to find out their parents were deeply in debt or left the family home to Johnny when Jenny was the one who wanted it. This can lead to bitterness, resentment, and sometimes even litigation. Professionals can encourage a better outcome by urging their clients to discuss their estate plans with their children.
  • Choosing administrators and powers of attorney. Many people think it’s an honor to be named administrator or executor of an estate, but it’s a difficult responsibility. Make sure your clients choose someone mature, responsible, and able to get along with other family members. Don’t let them pick someone as a reward. The same goes for financial and healthcare powers of attorney. Encourage clients to think carefully about who is most honest, reliable, available, and willing to carry out their wishes.

Minor’s Trusts

Another option to transfer money to a child is through a §2503(c) irrevocable minor’s trust. The primary advantage of a minor’s trust is that contributions qualify for the annual gift tax exclusion even though they are gifts of a future interest. Contributions will also be exempt from the generation-skipping transfer tax. Generally, only gifts of a present interest, where the child receives the gift immediately, qualify for the gift tax exclusion. However, contributions to trusts that conform to IRC §2503(c) rules qualify for the

If the grantor serves as trustee, then the trust may be included in the grantor’s estate if the grantor should die before the child reaches 21. Therefore, neither the grantor nor a spouse should serve as sole trustee. However, they can serve as co-trustees. Trust assets will also be used to determine educational financial aid for the child.

Final Thoughts

It all comes back to the fact that you just can’t know how people will behave. If you have two children and make them co-executors, but one of them has financial problems, a strong personality, or a spouse that calls the shots in their family, you may be setting your children up for hurt feelings and arguments, a lifetime of resentments, or even a permanently shattered relationship.

If your family dynamics are complicated, as so many of ours are these days, it is even more important to make your wishes regarding inheritance known. There is a lot to consider. Is this your second marriage? How will your assets be distributed to your spouse’s children from a previous marriage, to your children from multiple marriages? These issues can be difficult to discuss, even with your spouse. Don’t neglect to have the discussion. An experienced estate attorney can help mediate these discussions and ensure that assets are distributed according to your wishes.

Work with trusted professionals to make these important family decisions. They can help you understand the role your executor plays, the skills they need, and any possible conflicts of interest that may impact their decision-making. If you don’t have a family member who is a suitable executor, a corporate trustee with no financial or emotional attachment to your estate may be the best choice.

This publication contains general information only, and National Advisors Trust Company is not, by this publication, rendering accounting, financial, investment, legal, tax or other professional advice or services.

The Risk Investors Fear

When investors seek to earn a return in the market, they put their capital at risk. What is the risk investors fear and what are, perhaps, the bigger risks investors seem to be overlooking? 

You may be spending time stressing about the volatility of stock market investing, but inflation may be a bigger worry. 

The concerns over the stock market have been triggered by recent sharp, but not apocalyptic, declines in the S&P 500 and Nasdaq. The S&P traded as low as 4199.85 on March 7th which was -12.8% from its all-time high.  The Nasdaq traded as low as 12,555.35 on March 14th which was down 22.6% from its all-time high. 

While we understand why those numbers raise eyebrows, could money that isn’t in the stock market see a larger decline in value over the long-haul? 

The Risk of Inflation: Trailing 12 month inflation was announced for February at 7.9%1. That means if you keep your money in a bank account, your spending power has been reduced by 7.9%. 

The Risk Of Market Declines:  On the other hand, the equity markets have been volatile and frequently declined -10% (a correction), -20% (a bear market) and sometimes more.  That said, historically the stock markets have always recovered after a correction or a bear market for patient investors. 

So, on the one hand we have inflation; on the other hand, we have an equity market correction that is emotionally stressful but historically, if you stayed in your seat, the equity markets recovered and went on to set new highs. 

Which Should You Fear? 

Behavioral Finance attempts to answer the question “Why do people fear equity market corrections more than inflation?”.  Humans are hard-wired to pay more attention to moving objects. The inflation rate only gets reported once a month. Equity market movements are being reported literally every second throughout the trading day.  Put into scientific terms, equity market information is more salient than inflation information, and people tend to mistake more salient information as more important.  

How is an investor supposed to manage those risks they fear and the, perhaps, bigger risks they may be overlooking? 

The answer to this seems to lie in holding a diversified and purposeful portfolio. 

ONE – ‘Trust the Evidence’ and keep some of your money in the market.  Throughout history, the Equity Markets have outpaced inflation over statistically significant periods of time. 

TWO – ‘Trust the Evidence” and keep a purposeful quantity of money in Short-Term Investment-Grade Fixed Income along with an allocation to TIPS – Treasury Inflation Protected Securities. 

A professional wealth manager should be willing and able to collaborate with you toward constructing a well-reasoned all-weather wealth management plan that assists you in market declines, defends you in the event of inflation, improves the chances that you grow wealth for later and enables you to sleep at night. 

1 – The Bureau of Labor Statistics (BLS) announced on March 10th, 2022, that “The all items index rose 7.9 percent for the 12 months ending February. The 12-month increase has been steadily rising and is now the largest since the period ending January 1982. The all items less food and energy index rose 6.4 percent, the largest 12-month change since the period ending August 1982.”