Jim Lowell and Liz Kesselman: Insights From Three Generations of Money Managers - Adviser Investments

Jim Lowell and Liz Kesselman: Insights From Three Generations of Money Managers

May 27, 2020

Episode Description
FEATURING Jim Lowell and Liz Kesselman

Dinner discussion varies from family to family, be it sports, politics, religion or neighborhood gossip. For Chief Investment Officer Jim Lowell, those conversations centered around stocks, bonds, cash and savings accounts—and the insights gleaned from generations of money managers who persevered and thrived through both tough times and those of plenty.

In this episode of The Adviser You Can Talk To Podcast, Vice President Liz Kesselman speaks with Jim about the foundational values gleaned from the money managers in their lives and how those valuable lessons have helped in navigating turbulent markets past and present.

In this warm and insightful conversation, Jim and Liz discuss:

  • Using times of plenty to prepare for unforeseen downturns
  • Debates between the most conservative and most go-go investors
  • The transgenerational benefit of thinking in 50-year time periods
  • The role of cash in a well-diversified portfolio
  • …and much more!

Information may be flowing exponentially faster than it was for our forebears, but the lessons learned stand the test of time. For this engaging perspective on what the past teaches us about managing today’s markets wisely and well, click play to listen now!

Episode Transcript

Liz Kesselman:

In this The Adviser You Can Talk To podcast, Chief Investment Officer Jim Lowell and vice-president Liz Kesselman discuss investment lessons learned at the dinner table, offering insights gleaned from three generations of money managers. Hello, I’m Liz Kesselman and I’m a vice president at Adviser Investments. I’m here with another The Adviser You Can Talk To podcast. Today I’m joined by Jim Lowell, Adviser Investments’ Chief Investment Officer. Welcome, Jim.

Jim Lowell:

Hey Liz.

Liz Kesselman:

Hey, so today we’re going to talk about investment lessons that have been learned at the dinner table. Should be great. Before we start though, on a more serious note, I wanted to send out our heartfelt and healthful wishes from all of us here at Adviser Investments. The past two months have been dramatic on both a human and economic scale, and we know there’s still difficulties ahead for all of us in the economy. Well, we also know that we are well prepared to manage such difficulties, as has been the case since the outbreak of the coronavirus. Please know that we remain fully operational and committed to helping you to manage current events wisely and well so that you can better secure your financial future. So, Jim, you had a unique exposure to the world of business and finance and investments in your home as a child. Could you introduce us to the roots of your family tree?

Jim Lowell:

The roots of my family tree go fairly deep in American soil Liz, but growing up, I grew up, I guess you can call it almost a compound. I had five sets of aunts and uncles, more than a dozen first cousins, and my father’s mother and father. And my grandfather was now the president of Boston Safe Deposit and Trust, a big bank, also helped launch WGBH Public Broadcasting station here in Boston. And every week we’d get together as a whole family around a very large dinner table and discuss not sports, not news, not politics, but stocks, bonds, and cash. That was not just the bread and butter of our family savings accounts. It was also deemed to be the most interesting topic at the dinner table and all of my uncles were in the business as well. One was a bond manager. Another was a go-go growth stock picker who worked at Fidelity, then went on to nearly drive the Yale endowment into the ground.

Jim Lowell:

And then we had a sort of a cabal of investment advisers who were taking clients on, in a very selective manner, to try and steward typically significant family wealth, where the biggest issue was of course safeguarding that wealth first, and then figuring out how to slowly and reasonably grow it. So I literally grew up talking stocks, bonds, cash. And just as a side note, Liz, when I went to college, the drinking age was 18. I went to Vassar, which was founded by a brewer, and the first night there, there was a drinking game that involved nothing but sports statistics. I remember that night, both fondly and with trepidation. [inaudible 00:00:03:31].

Liz Kesselman:

I am sure your knowledge of the Red Sox and the Patriots was probably not up to snuff.

Jim Lowell:

No. Had it been about IBM and its most recent corporate offerings, I could have played. Yeah.

Liz Kesselman:

Okay. So do you remember times when there was tension and stress[ful] environments, I mean that sort of lodge in your memory kind of akin to what we’re going through now?

Jim Lowell:

Absolutely. Look, I grew up with both sets of grandparents who of course had lived through the Depression. So “waste not, want not,” “use it up, wear it out or do without,” [were] sort of the principles that framed every conversation about money, every conversation about spending. But it was done not out of a sense of fear or paranoia, but more out of the sense that they were imparting a fundamental lesson of ensuring that everyone in the family understood that in successful times, that’s the smartest time to start really setting aside buckets of assets to defend against what inevitably we will be downturns. And I can clearly remember the heated discussions in the Vietnam war era and then heading into the 1970s, the hyperinflation, those discussions around the dinner table created some divides between those who were pounding the table to invest more in growth-related stocks. And those who were desperately trying to figure out ways to safeguard savings against the ravages of inflation.

Liz Kesselman:

Right. I know it’s, we always feel that the current crisis, like this time is different, but you know, I’ve known you a long time. You have a great memory. You definitely look back on past experiences and use them.

Jim Lowell:

Yeah. Well, Liz, I mean, first of all, I should have started this whole conversation by congratulating you on being named one of Forbes’ 2020 Top Women Wealth Advisors—

Liz Kesselman:

Oh, thank you Jim.

Jim Lowell:

You know more about wealth advisory than I do, but there’s no doubt that when I think of investing, I don’t just think in terms of 10 years, or 20 years, or 30 years, I’m thinking in sort of rolling 50 year time periods. Because as wealth advisers, we’re very focused on not just our current clients needs, but the transgenerational needs as well. And I definitely think that the roots of my childhood helped me understand that the howling gales that can topple some shallow rooted trees won’t uproot the whole forest. But you certainly have to pay attention to both the storms, and the fair weather spells that we’re always thankful for.

Liz Kesselman:

So that kind of dovetails nicely into a theme in client portfolios right now, where we have found the merits of a modest cash position. Cash, as being in the family banking business —cash, for some, it’s a friend, some it’s a foe. We feel that it’s a very important part of balanced, diversified portfolios. And we’re putting that to practice. Can you talk a little bit about sort of the myth around cash and why you view it on equal footing? You said earlier, stocks, bonds, cash. Why do you think it’s an important asset class?

Jim Lowell:

Well, it is the key leg on your overall assets stool that will not wobble when the hurricane winds are blowing. And having set aside a certain portion of your assets in cash to meet near term income needs— which during this coronavirus crisis could last as long as, say, 18 months to two years of needing those income needs set aside—is one role that cash plays. But another role that it clearly plays is that it keeps our powder dry, so that when we can see the whites of a recession’s eyes, we can begin to take aim on the growth that inevitably occurs on the flip side of a recession.

Jim Lowell:

So cash has both a dual function in terms of providing income needs, but also creating dry powder for pursuing longer term opportunities. But maybe its biggest benefit is it creates peace of mind. One of the things that always happens in dramatic market downturns is that the levels of panic—and it’s expressed in the market in terms of the volatile day-to-day gyrations of prices—sweeps not just the marketplace but Main Street as well. And so having a good cash buffer typically enables people to retain not just peace of mind, but a rational mindset in what can often be very unnerving times.

Liz Kesselman:

Right? No, I agree completely. I mean, I think a huge part of our role here is to help clients to stay the course and to sort of navigate these times from an emotional side. And we need to keep that in mind too, where, if we were robots, investing would be easier, but the emotional component obviously makes it a little bit more challenging. So actually—

Jim Lowell:

Liz, if we were robots, it wouldn’t be any fun.

Liz Kesselman:

I know you’re right. You’re right. It wouldn’t be fun. That’s true. [Laughter.] It wouldn’t be fun. So a big difference I see, harking back to your childhood, between sort of back then and today, is the flow and the ease of information. So, I mean when I came in the industry in the late nineties, the paper Wall Street Journal was must read every morning. That’s where you got your information on stocks and mutual funds. Today, obviously, that’s really changed. So I’m kind of curious if you could talk a little bit about how the investment team, which you lead at Adviser, how are we adding value to client portfolios when information is so easy to come by?

Jim Lowell:

So you’re absolutely right Liz. I would say it’s not a flow, it’s a flood, it’s an overwhelming flood of information. And just to harken back to where we began the conversation, my earliest childhood memories with my grandfather was being given the privileged position of using his Dictaphone to record board meeting notes from the various boards that he served on. And then another early memory is going to my father’s first office. He’s an investment adviser, and he had my grandfather’s ticker tape machine hooked up into his, right next to his desk. So yes, we’ve come a long way in the 60 years that I have been on this planet.

Jim Lowell:

Look, our investment research team at Adviser Investments is second to none. They all have different skill sets, whether it’s focused on stocks, bonds, mutual funds, exchange, traded funds, but our collective wisdom enables us to sort through all the wheat and chaff of information and data that is out there. And it is absolutely overwhelming for, I think even smaller shops or individual investors. There is no question in my mind that the headline foments have become so vociferous that it is very hard for an individual, I think, to ever be able to actually even believe in what are supposed to be the facts on the ground. That’s a very new thing, for me. I never had to contend with things like fake news on the one hand, but then markets being driven by fake news.

Jim Lowell:

So our investment research team scours, not just the data, but also the headlines, the news, and we sort it through our fact-finding ways. And of course we’re focused on active managers who are among the best informed, best able to execute, members of the professional investment class. And they are also, play a big role in companies that are rock solid. In times of duress, I don’t have to think twice about whether Vanguard or Fidelity are going to be even shaken in terms of their pillars. Whereas smaller fund families, we definitely pay some attention to the what could potentially be liquidity issues. So we cover, we run the gamut, Liz, in terms of the responsibilities for our investment research team. And the good news for our clients is they get to see the results. They don’t have to see how that sausage is made.

Liz Kesselman:

I appreciate your insight. I think before I let you get back to work, I wanted to bring you back, sort of connect your childhood dinner table with what’s going on now in all of our lives. We are working remotely. We are doing our work in front of our families. In my case, my teenagers are absorbing it all. And it kind of got me thinking you were in a very, very unique situation in that money was even talked about at all in your family. Because I find that dinner table conversations really don’t cover money. And I’m just kind of curious what you think about that and why you think that things have really shaped out that way.

Jim Lowell:

Well, money remains a taboo topic, no question about it. But I know you and your team are doing a great job in terms of breaking down that barrier. There’s a big difference between talking about investing and talking about financial planning and wealth building and so on. I would definitely say that I grew up well versed in thinking and talking and articulating positions about what made good investment sense. I still defer to your wisdom, Liz, when it comes to wealth building and planning. And I think for our clients and for their friends, a conversation with us, either by Zoom or on the phone, that can enable them to even bring in their own family members, just to have preliminary discussions about what it means to have a financial plan, would be an absolutely wonderful thing to do.

Jim Lowell:

And there’s no time like the present. This crisis, while it certainly has isolated us, it has also brought us together, thanks to technology. So I can honestly say I’m having more conversations with more family members than ever. I’m actually kind of looking forward to the day where Zoom isn’t as great a gateway to those conversations. It’s getting a little bit exhausting.

Liz Kesselman:

Yeah. Zoom fatigue is real. But it’s actually, I like that you found a silver lining, because that is a real silver lining right now. So thank you. Thank you for the positive viewpoint. And thanks for joining me. This has been Liz Kesselman and Jim Lowell from Adviser Investments. And thanks to all of you for joining us in the The Adviser You Can Talk To podcast today.

If you enjoyed this conversation, please subscribe and review our show. You can also check us out at adviserinvestments.com/podcasts. Feedback really is always welcome. And if there’s any questions or topics that you’d like us to explore, please send us an email to info@adviserinvestments.com. And thanks again for listening.

 

Podcast released on May 27, 2020. This podcast is for informational purposes only. It is not intended as financial, legal, tax or insurance advice even though these topics may be discussed. Information and events addressed in this podcast, as well as the job titles, job functions and employment of the podcast’s participants with respect to Adviser Investments, LLC may have changed since this podcast was released. For more information on each individual featured in this podcast, see the Our People section of our website.

The Adviser You Can Talk To Podcast is a trademark of Adviser Investments, LLC. Registration pending.

© 2020 Adviser Investments, LLC. All Rights Reserved.

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As wealth advisers, we’re very focused not just on our current clients’ needs, but the transgenerational needs as well.


Jim Lowell

Chief Investment Officer

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