Brian McGann of Beacon Trust: “Realize that your own financial situation”

Realize that your own financial situation, time horizon, and goals differs from others. Following a crowd mentality may not be the best solution for you. It’s not a good reason to invest in something for fear of missing out. As a part of my series about “Investing During The Pandemic”, I had the pleasure of interviewing […]

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Realize that your own financial situation, time horizon, and goals differs from others. Following a crowd mentality may not be the best solution for you. It’s not a good reason to invest in something for fear of missing out.

As a part of my series about “Investing During The Pandemic”, I had the pleasure of interviewing Brian McGann, CFA.

Brian is the Head of Investment Strategy at Beacon Trust, a full service wealth management firm based in Morristown, New Jersey. Beacon has in excess of 3 billion dollars in assets under administration and its full suite of financial services includes investment management, sophisticated financial planning, tax advisory and preparation, trust and estate fiduciary, and private banking. Prior to joining Beacon in 2017, Brian spent almost 30 years in investment management at global banking institutions including UBS, JP Morgan and HSBC.

Thank you for doing this with us! Before we dig in, our readers would like to learn a bit more about you. Can you tell us the “backstory” about what brought you to the finance industry?

My interest in the financial services industry started to gain momentum while in college in the late 1980’s. Like other college kids at the time, I was searching for experience to build my resume and began working as a research assistant for one of my finance professors. I worked on an interesting project for him, gathering data on how certain events effected stock prices in the time leading up to announcements and subsequent weeks after announcements. I was only gathering data, loading it into his database, and attempting on my own to decipher the results. This experience taught me that the investing environment data- flow was so dynamic, every day, week, or month, could be different from the next. That is what drew me to the industry!

Can you share with our readers the most interesting or amusing story that occurred to you in your career so far? Can you share the lesson or take away you took out of that story?

In my career, I have been predominantly involved in managing money for individuals. I have met some of the most interesting people over the course of time and have always enjoyed their stories of how they or their families have amassed their wealth and some of the mistakes that they had made along the way. I have invested through a number of market crises and counselled people through. If I could go back in time to college and do it all over again, I would have paid more attention in my human psychology classes! Dealing with individuals rarely comes down to performance versus benchmarks. Successful advisors have great, deep relationships with their clients that extend beyond short term performance and is more long term goals based.

Are you working on any exciting new projects now? How do you think that will help people?

At Beacon, we have intensified our efforts in helping clients in the many facets of their financial lives. Our firm is unique in that we do many things under the same roof, with financial planning, tax advisory and fiduciary services that all complement the investment management services. The COVID 19 pandemic has created a situation where clients are more interested in planning, preservation, preparedness, and opportunity as it relates to their finances. In the long run, this will allow us as advisors to provide for better outcomes in meeting our client’s financial goals and objectives.

Let’s shift a bit to what is happening today in the broader world. Many people have become anxious from the dramatic jolts of the news cycle. The fears related to the coronavirus pandemic have understandably heightened a sense of uncertainty and loneliness. From your experience, what are a few ideas that we can use to effectively offer support to our families and loved ones who are feeling anxious? Can you explain?

That is an excellent question! This crisis is much different than any other in recent history because of the genuine fear for ones health above and beyond the turmoil in the financial markets. Having the economy shut down, being forced to work remotely, and being isolated from friends and colleagues all take a toll. The best thing we found is to take a step back, breathe, and attempt to stick to a routine. Unfortunately the news tends to focus on the negative headlines as opposed to leading with the positives. Therefore, a best practice for us was to find the positives and focus on that. With clients, be the objective voice and try to take emotions out of the decision making process. Emotional decisions in finance, usually are not the best decisions.

Ok. Thanks for all that. Let’s now jump to the main core of our interview. As you know the stock market and the economy in general have become extremely volatile and uncertain. Many people “dollar cost average” and put aside a monthly sum into a long term savings plan for retirement, college, or a home purchase. If a loved one or a client came to you and said, “I have been saving and investing 500 dollars every month in an S&P 500 index fund. Over the next few months until the dust settles, should I be doing something else with my money?”, what would you say to them?

First I would commend them for having a disciplined plan and recommend continuing with the plan if they had sufficient liquidity for unforeseen expenses or events. It truly is impossible to time the financial markets and there is no reason to believe this time is different. Having goals is a good thing and I would remind them of the power of compounding over time. Next would be to re-examine the time horizon and start thinking about overall allocation. While the S&P 500 index is what everyone thinks about, it is just a subset of the investible equity universe. Have a conversation about small and mid-cap stocks, along with international opportunities. How about alternative asset classes such as precious metals, real assets, or real estate. Is the horizon shorter where we might want to talk about some principal safety or liquidity? At Beacon Trust, we fully advocate a diversified portfolio for clients as the best way to minimize risk.

Eventually the economy will recover and rebound. Certain sectors, like travel and hospitality might be hurting for a while. But other sectors, like technology and healthcare, might do very well. If someone wanted to prepare today to take advantage of the future recovery, what would you suggest they do?

Yes, I agree that the economy will re-open and certain sectors that have underperformed quite a bit may experience a strong rebound. I am not sure the day that will happen and healthcare advances are coming quick. Keeping with a diversified portfolio is your best bet to capture those gains when they happen. For industries like travel and hospitality, if investors wait for the concrete data to tell them the industry is recovering, usually the stocks have already experienced a good part of their price recovery.

Are there sectors that provide exciting and lucrative investment opportunities today, specifically because of the volatility and uncertainty?

The obvious examples of sectors that are attracting investors today are healthcare and technology. Even before the pandemic, there were exciting opportunities here. We must be careful to avoid overloading one part of the portfolio chasing these trends. At some point, the economy will fully reopen creating opportunities in sectors people are not focusing on. We always want to have our clients in a diversified portfolio.

Are there alternative investments that you think more people should look more deeply at?

When you mention alternative investments people generally tend to think about hedge funds. We tend to think of alternatives as asset classes that have a low or no correlation to traditional stocks and bonds. Gold has been an outperforming asset class in 2020, driven higher by a number of factors. Where appropriate, we have introduced mutual funds that invest in real assets such as real estate, farmland, and timberland. It is necessary to evaluate specific client situations as some of these investments have liquidity constraints.

If a person in their thirties and forties came to you today and said that they have 10,000 dollars that they want to put away today for a long term investment what would you advise them to do with it?

First, I would make sure they really meant “long-term” and try to pin down a certain event or expense that they were investing for. With that information, we would recommend a diversified ETF or two with the initial 10,000 dollars. I would then advise them to go about their normal lives and try as best to leave the funds alone, barring an emergency. Over time, with compounding, our investor should be pleasantly surprised at how the funds have grown from their initial investment.

Ok, thank you! Here is a more general finance question. You are a “finance insider”. If you had to advise your adult child about 5 non intuitive essentials for smart investing, what would you say? Can you please give a story or an example for each?

When employed, maximize every benefit you are afforded from an investment standpoint. Maximize your 401K contributions and if your company matches, make sure you contribute to maximize the match. Contribute to your HSA account if your benefits include a high deductible plan. Not only do both of these provide a tax benefit, the theme of compounding applies here too.

Always be diversified with your investment portfolio. Concentration risk can work to the positive, but odds are it will be negative. The business environment changes over time and sector leadership changes. There are plenty of examples of “great” companies in history that have been left behind as times evolved. Think of the buggy whips!

Emotional times usually are never a good time to make major financial decisions in your portfolio. Timing the moves in financial markets is probably the hardest task to accomplish. Find a trusted advisor who works for you in a fiduciary capacity and rely on their advice.

Periodically re-examine your overall asset allocation and financial goals. Even if you have a long time horizon, re-balancing every so often back to strategic targets is prudent.

Realize that your own financial situation, time horizon, and goals differs from others. Following a crowd mentality may not be the best solution for you. It’s not a good reason to invest in something for fear of missing out.

Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?

The late Jack Bogle, the founder of Vanguard, years ago said, “Learn every day, but especially from the experiences of others.”

Learning is not just from textbooks. Listening and learning from the experiences of mentors, colleagues, clients, friends and family is invaluable, especially in a year like 2020. So many different things are happening around us that it is difficult to keep most things in perspective. Experience is what helps us as financial advisors and fiduciaries, guide clients through difficult times.

You are a person of enormous influence. If you could inspire a movement that would bring the most amount of good to the greatest amount of people, what would that be? You never know what your idea can trigger. 🙂

As with the recent crisis years 2008 & 2020, we can never quite predict when the next shoe will drop. Financial education is paramount to fall back on in times like this. A movement to bring as much knowledge, advice, and experience to people in dealing with times like this from a financial standpoint would most likely help the greatest amount of people in the long run, regardless of the size of their portfolios. We feel the more overall wealth can be accumulated by making the least amount of mistakes.

At a former employer, we were always taught that every client relationship must start with a plan. However, plans are only as good as their input. If most clients had enough financial education to articulate their needs and goals, our job as advisors in keeping clients on their path would lead to much greater successful outcomes.

Thank you for the interview. We wish you only continued success!

Thank you for the opportunity!

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