Nov 17, 2022

Schwab IMPACT Conference Recap

Schwab IMPACT Conference Recap

Schwab IMPACT Recap:

Earlier this month, some of our Narwhal team flew out to Denver, CO to attend the Schwab IMPACT Conference. The goal of IMPACT is to advance the RIA industry by ensuring that the latest knowledge and insights for operating a successful practice are shared throughout the community. With that being said, the content varies widely as you will see in the writeup that follows. Presentation topics ranged from Q&A’s on the state of the market to doctors speaking on how to prolong life through healthy eating. Below is a recap of what we learned, along with some photos of the trip!

Table of Content:

  1. CFP Ethics
  2. Market Perspective
  3. The Future of Business Technology
  4. Housing Market Update
  5. Detecting Fraud and Cyber Crimes
  6. Telling Your Firm’s Story
  7. Estate Planning
  8. Global Risks and Opportunities
  9. Killing Complexity
  10. Financial Psychology
  11. Eating Habits for a Healthier and Longer Life
  12. Fixed Income Investing
  13. Bob Iger's Journey

1. Educational Session- CFP Ethics (Melissa):

The first session was an educational material focused on reminding financial planners of their fiduciary responsibility to clients. This included a review of the CFP Code of Ethics and the newest additions to the code book. It is important for planners to understand the procedures and expectations around the planning process, compliance, and acting in the best interest of the client. Being updated on these rules of conduct ensures planners remain relevant and trustworthy.

2. Expert Perspectives on the Markets with Liz Ann Sonders & Jeffrey Kleintop (Melissa, John, & Andrew):

Two of Schwab’s top economic strategists did an open Q&A with the audience about market conditions. Perhaps obviously, much of the discussion focused on interest rates and an impending recession. Perhaps most noteworthy, Sonders suggested that a “soft” landing for the economy was unlikely, but a “rolling” recession in which various sectors of the economy (both domestically and abroad) cycle through various down turns. The outcome of such a scenario would be muted economic growth for a period of a few years but not necessarily a uniform, steep decline.

3. The Future of Business and Technology with Scott Galloway (Melissa & John):

Man down, Andrew got the flu this morning and had to call it early. We missed him!

Scott Galloway talked about new technology that we are seeing and attempted to sift through what he thought was garnering too much attention and too little attention within this new age technology space. Here were some of the high points:



One interesting note:

Scott ended his presentation talking about the impact new technology is having on society, pointing to loneliness as the biggest downside. Galloway emphasized that loneliness is becoming a more significant issue in this day and age, and he challenged the audience to consider three questions in their own lives to ensure that the listener isn’t falling into this trap unknowingly:

  1. When should you become a caregiver for someone older than you?
  2. Do you have the relationships you want with your siblings?
  3. Have you invested in meaningful friendships?

He claimed that happiness is directly correlated to the number of meaningful relationships that you have, and these questions are helpful when thinking through those relationships that are most important.

4. Educational Session- Housing Market Update with Douglas Duncan, Chief Economist for Fannie Mae (John & Melissa):

Douglas Duncan started the presentation by offering up some insight into the process that Fannie Mae uses when trying to make projections about the economy and the housing market. He first mentioned three questions that his team uses to frame the discussion. These questions are simplified, but offer a great jumping off point for analyzing this kind of topic:

1. What are people doing?

2. What are businesses doing?

3. What policies are in place?

Considering these questions is a great way to begin the process of trying to predict such nuanced outcomes. Duncan provided additional insight on how he and his team operate. When producing forecasts, he explained that his team conducts all their work without any outside influence or reference. Once they are comfortable with their predictions, they compare their findings with the consensus. If they are in line with the consensus, they are confident in their findings, if they are outside of the consensus, they review their findings and examine their logic. If they stand by their logic then they stick to their findings, if not they re-run their forecasts.

Duncan offered one more consideration before jumping into the meat of the presentation. He explained that we are now operating in a landscape that should be considered uncharted territory for most individuals. We have operated in a falling rate environment essentially since the 80s, but that environment has shifted dramatically with the recent action from the Fed. He claimed that our current perspective and understanding of how things work will be challenged by the changing environment and encouraged us (as advisors) to consider that as we move forward.

The meat of Duncan’s presentation was focused on the housing market and how he expected things to play out. They believe mortgage rates will level out to 4.5-6% over the next decade, but this outcome is clearly dependent on the Fed’s goals. They believe that if the Fed is trying to get to a 2% inflation rate, then unemployment will rise more dramatically, and prices will continue to decrease. Duncan and his team are predicting a 1.5% decline in the national average home value for 2023, and a 5% decline in the worst-case scenario. When it comes to inflation specifically, he thinks that the Fed will have trouble getting inflation under control because many of the factors are things they can’t directly influence. One example of that would be supply chain bottlenecks. He also pushed back against the idea of a “soft landing” that has been discussed at length. The Fed has only achieved a soft landing 3 times in its history, and all three times occurred when the Fed preemptively raised rates, before inflation growth was well underway. Every time they have been reactionary with their rate hikes, we have not had a soft landing, and the Fed was very much reactionary in this most recent instance.

Duncan shared a chart on the topic of home prices that we found interesting. This chart tracked the ratio of median home prices to median household income over time. He said that, historically, the ratio of those two numbers has been very stable, hovering between the 3.25 to 3.5 range for most of recent history. That ratio rose substantially during the period leading up to the financial crisis and has become wildly elevated to 5.25 (June 2022). The most recent blow out of this ratio is a result of stimulus, low expenses, and the near zero rate environment that we saw from covid. Those factors afforded individuals the ability to buy a home way above what the traditional ratio would suggest was possible. Duncan predicts that the ratio should move back towards that historical range. The only way that happens is if home prices decrease or wages increase.

He concluded by saying he believes the trend of homes being difficult to find will continue. He stated that 95% of outstanding mortgages have a rate that is 200 basis points lower than the current rate, which means people aren’t likely to move, essentially “freezing” existing homes. This is limiting first-time home buyers (millennials), forcing many new buyers to build their first home. Builders aren’t used to this and don’t tend to build well in this space, as they typically build for buyers that are “building up” and these first-time home buyers are wanting something simple. On top of all this, Boomers are staying in their homes instead of moving to retirement communities, which is adding to the issue. Another consideration mentioned by Duncan was how Boomers will need to figure out how to optimize the equity in home to fuel the declining years. He said this will be a common talking point for advisors moving forward.

Here is a copy of the slides.

5. Educational Session- Detecting Fraud & Cyber Crime (Melissa):

Although it is not the most positive topic to discuss, it is one of the most crucial topics. Cyber Security Ventures projects $10.5T lost from individuals in 2025 due to cybercrime. It is more profitable than the global drug trade.

So where does it matter?

1. Email compromise

2. Scams

3. Data incidents

At Narwhal, we go through training with our compliance officer, Jonathan Hicks. All the things mentioned during this session we are doing as a firm to decrease the chances of fraud or cybercrime occurring to our clients.

How can clients avoid scams?

1. Educate yourself on common scams so you know what to look out for

2. Don’t share personal information online

3. Use VPNs, anti-virus software, & avoid public networks

4. Don’t click on links from strangers in emails/text messages

5. Don’t act urgently, independently verify

6. Know who to contact if you think someone is trying to scam you

6. Educational Session- How to Tell Your Firm’s Story (John):

The overarching theme of this presentation centered on the idea that the client should be the main character of the story. The advisor, though we often see ourselves as the main character, is simply a guide to help the main character achieve their goals. When we remove ourselves from the center of the story, we can provide more value for the client. In more practical terms, this would mean that advisors approach client conversations with a mindset more focused on the client’s wants and needs letting them drive the conversation and less focused on all the services the advisor can provide.

When communicating with clients, it is important to actively listen. Focus on the following:

The speaker made it clear that approaching clients from this perspective will lead to the most authentic client relationship. It will build trust and allow you to understand them at a deeper level, which serves to strengthen the relationship.

7. Educational Session- What the Cool Kids are Doing in Estate Planning with Samuel Donaldson (Melissa):

We reviewed current tax rates, gift tax exclusion amounts, and the 2023 wealth transfer exclusion amount: $12.92 million. This is the biggest increase we’ve ever seen from the impact of inflation.

He discussed gifting strategies that are relevant before interest rates increase much higher, ways to avoid the cap on the $10,000 State and Local Income Tax (for those who have a high state tax). I was disappointed when he couldn’t finish his presentation due to time because I thoroughly enjoyed listening to him discuss estate planning strategies.

8. Navigating Today’s Global Risks and Opportunities with Ian Bremmer and Rana Foroohar (John & Melissa):

Ian and Rana offered perspective on the complexed geopolitical environment that we are facing and how they think this environment will continue to evolve moving forward. One topic that was emphasized was deglobalization and why they think this trend will continue. Rana Foroohar pointed to four factors that are driving this trend:

The war in Ukraine and the potential for conflict in Taiwan were topics that the speakers spent some time discussing. Regarding the war in Ukraine, Ian Bremmer said multiple times that we are in a dangerous spot in the narrative. He said that the Ukrainian counter offensive that we are seeing could lead to more desperation from Russia as the Ukrainian military approaches redline territory. This will increase the likelihood of more devastating bombings of Ukrainian infrastructure as well as the potential for a more significant response from Russia such as a tactical nuke (although he said the odds were still very low that we would see that.)

On the topic of Taiwan, both speakers viewed the odds of a Chinese invasion as very unlikely. They mentioned a few reasons as to why the likelihood was so low in their minds:

9. Killing Complexity: Why Simple Wins (Melissa & John):

This session was presented by Lisa Bodell, CEO of FutureThink. Bodell explained that not only are we naturally complex people, but we set up our environment in such a way that makes our situations more complicated. This can be seen in the organizations where we work. Simplification is a strategic imperative that can provide massive benefit to organizations struggling with the issues of complexity. Something else that Bodell pointed out was that people are naturally overachievers and multi-taskers. We are motivated by the volume of things we get done. We continue to add more volume to our plate which, in turn, creates a more complexed environment. The hard truth is that it is difficult for us to focus when operating under complexity, we have less agility, and we spend less time thinking which leads to lower quality work. Bodell mentioned that people are pattern thinkers and need more time to think through things so we don’t make a silly errors which can be so common in a complexed environment. The last point that the speaker highlighted was one that really stuck us. She mentioned that people often don’t view thinking as working, even though it provides huge benefits to our work and we crave time to do it. Bodell mentioned how thinking time is not something regularly set aside in most organizations, which can have negative impacts on work quality. Complexity is self-imposed and Bodell presented ways that we can simplify our practice and increase productivity.

10. Educational Session- Financial Psychology: The Importance in a Changing World (Melissa & John):

Dr. Travis Sholin walked us through the meaning of financial psychology which he defined as the study of why we do what we do with our money. He drove home why it is important for planners to incorporate this into their practice. He discussed some cross-cultural research and how these findings can help us understand clients and prospects. Depending on where you are from geographically, you may behave in a certain way when it comes to money and as advisors and planners, we need to educate and learn about these differences. Doing so can strengthen relationships, attract new clients, and increase the services we offer.

11. Educational Session- No One Dies of Old Age (Melissa):

This was more of a science class for advisors, and it motivated me to make some changes to my own lifestyle to increase my longevity. We wanted to share the research and findings by Dr. David Leonardi, but we are not your doctor, so please seek medical professional help before trying any of these.

Causes & Solutions for Aging:

1. Glycation: Process of glucose bonding to protein. Don’t spike your blood sugar! Be careful of foods high in sugar and make sure to exercise to lower glucose levels.

2. Normal Calorie Intake. He suggests a caloric restriction of 33% fewer calories which would lead to a 20% increase in longevity. We have some follow up questions on this one, but the main reasoning he stated was that it increases NAD+, which helps maintain the strength of the cell’s powerhouse, the mitochondria. He mentioned a caloric restriction mimic, Nicotinamide Riboside (NR) as a way to combat age-related disease.

3. Activate AMPK by caloric restriction. This will fuel the mitochondria and activate ATP. Other solutions for activating AMPK: Curcumin (turmeric, curry) 65 mg twice daily, Quercetin (onions, apples, grapes), 375 mg twice daily, Pterostilbene (capers, cilantro, onions) 25 mg twice daily.

4. Purge Senescent Cells using senolytic compounds. Discuss these with your doctor. Senescent immune system cells are potentially among the most harmful of all senescent cells because they spread tissue damage and rapid aging across other body organs and systems.

5. Reduce Inflammation. Common illnesses associated with inflammation are pulmonary diseases, cancer, cardiovascular diseases, neurological diseases, autoimmune diseases, Alzheimer, arthritis, and diabetes II. A decline in NAD+, suppression of AMPK, glycation, oxidative stress (glutathione depletion), senescent cells, and mTOR activation all increase inflammation. We can reduce inflammation by restoring NAD+, activating AMPK, avoiding spikes in blood sugar, and restoring glutathione.

6. Limit Oxidative Stress. Oxidative stress can break down cell tissue and cause DNA damage. He suggested that we avoid pollution by drinking reverse osmosis water, eating organic produce, and exercising regularly.

He went on to discuss some research he has done on patients and the short-term and long-term differences he has seen when making some of these lifestyle changes and adding in the suggested supplements. He also mentioned tests that we can order from our doctor that are not typically part of an annual exam. These supplemental tests can determine levels that are associated with strokes, coronary artery disease, dementia, liver disease, and cancer just to name a few. With a few lifestyle adjustments and state-of-the-art proactive health care, you can restore and maintain youthful vigor and prevent degenerative disease.

Here is a copy of the presentation slides.

12. Educational Session- Investing in Fixed Income in a Bear Market by Kathy Jones (John):

Kathy had perspective on fixed income that broadly aligned with our own convictions at Narwhal. Kathy said that she is avoiding credit risk and taking on duration risk instead. Her focus is on the investment grade corporate space and the municipal bond space. She said that both are valuable for clients, but the proportion of corporates to munis bought for a client would be dependent on the client’s tax status, being that individuals in higher tax brackets can benefit more from tax advantaged munis. Kathy also mentioned preferreds as a way to add some extra juice to a bond portfolio if the client can tolerate some of the volatility that accompany these instruments.

Kathy had an interesting view on inflation that differed from our own view. She made it clear that inflation, in her mind, is a policy choice. If the Fed wants to bring inflation down quickly, they can, but that will result in significant pain across the economy. Kathy said that she believes that the much of this pain has already been inflicted through rate hikes, but will not be fully realized for another 6 – 9 months. Her view is that, because this pain has been inflicted, inflation will fall faster than people expect.

13. Bob Iger Former CEO of Disney (Melissa & John):

During this interview with Bob, he discussed his accomplishments while at Disney, along with some of the troubling times he had serving as their CEO. He discussed lessons learned while serving as the CEO which can be found in his book, The Ride of a Lifetime.

Bob also spent a large chunk of his time discussing his relationship with Steve Jobs while Jobs was at Pixar. He recalled a number of fascinating encounters with Steve. He explained how Steve had strongly disliked the previous management at Disney and how it took time and effort to repair that relationship. This effort ultimately led to the acquisition of Pixar by Disney and a deep friendship between Iger and Jobs.

Iger finished by talking about why he thought it was time for him to move on from Disney along with some of the key traits that great leaders must possess.

Why did Bob step down:

Some common attributes of great leaders:

After the last keynote, we walked out of the convention center to a pleasant snowfall (it was 70 degrees the day before), then hopped on the bus to the IMPACT reception dinner and a Darius Rucker concert hosted by Schwab! All in all it was a fun and informative trip!

Melissa Dotson, CFP®, CSLP®

Financial Planning Associate

Melissa came to Narwhal in the summer of 2018 following the completion of her master’s degree in financial planning from the University of Georgia, where she also earned her bachelor’s degree in consumer economics. Her interest in the field started with learning about consumer behavior, specifically its relation with complex moneymaking decisions. Melissa recently received her CFP® Certification in January 2021. Working with a CFP® professional can help you find the path to achieving your financial goals. Your goals may evolve over the years as a result of shifts in your lifestyle or circumstances such as an inheritance, career change, marriage, house purchase , or a growing family. Melissa is here to help you through that process. When she’s not working, Melissa enjoys cycling, cooking, and spending time with her beagle and two nieces.

Let’s start the conversation.

At Narwhal Capital Management, you’re more than just a portfolio, and it’s not all about the numbers. Let’s start with a meeting about your needs and future goals.