Sax Wealth Advisors Acquires The GM Financial Group and Brings Assets Under Management to Over $1 Billion

Clifton, NJ, December 15, 2017 – Sax Wealth Advisors (SWA), an independent registered investment advisory firm with offices in northern New Jersey, central New Jersey and New York City, has announced the acquisition of The GM Financial Group, LLC based in Pennington, NJ.

The addition of The GM Financial Group’s approximately $140 million of assets under management (AUM) brings Sax Wealth Advisors’ AUM over $1 billion. The combined fee-only firm will continue their mutual tradition of academic, research-based investment philosophy and client-focused approach to the accumulation and preservation of wealth and estate planning.

“Finding a firm that shares our same investment philosophies and commitment to personal financial planning along with a strong presence in Central Jersey was an essential component of this selection process,” said Kyle Stawicki, Partner-in-Charge of Sax Wealth Advisors. “GM’s 30-plus years of experience will lend itself to enhancing our strong foundation of individual and corporate wealth management solutions.”

Sax Wealth Advisors will maintain a Mercer County presence, led by The GM Financial Group Founder Guy McPhail, CFP®, CPA, PFS. The newly expanded firm will now include 3 Partners, 3 Wealth Advisors, 3 Portfolio Advisors, and 3 members of the Client Service Team. SWA will continue to offer individual wealth management, financial and estate planning, retirement planning and corporate benefit plan oversight, built on the principles of broad global diversification.

“As GM looks to the future, we wish to ensure our customized programs and emphasis on client relations remains intact. We believe teaming with Sax Wealth Advisors will only strengthen our inherent objectives,” said Guy McPhail, President and Founder of The GM Financial Group. “A firm that emphasizes fee-only independent financial planning advice, coupled with a strong CPA background was the perfect match for us. These two crucial strengths will ensure our clients continue to receive the most comprehensive guidance and solutions to meet their needs and goals”.

About Sax Wealth Advisors LLC
Sax Wealth Advisors is an independent registered investment advisor offering financial services built on integrity and meaningful client relationships. With offices in Clifton, NJ, Pennington, NJ, and New York City, the firm provides customized investment and financial solutions for individual wealth management and employer retirement plans. Sax Wealth Advisors is a wholly owned subsidiary of accounting and consultancy firm Sax LLP.

Sax Wealth Advisors Approved to Join the National Association of Personal Financial Advisors (NAPFA)

Clifton, NJ, October 27, 2017 – Sax Wealth Advisors (SWA), an independent registered investment advisory firm with offices in northern New Jersey and New York City, has been approved to join the National Association of Personal Financial Advisors (NAPFA). This is one of the country’s leading professional associations of Fee-Only advisors that provide support and education to their 3,000 members country-wide, in addition to implementing strict guidelines for professional competency, comprehensive financial planning and Fee-Only compensation.

A NAPFA-Registered Financial Advisor applicant requires broad-based advanced education in financial planning. The application is a 4-6 week process, and calls for the demonstration of a comprehensive approach to financial planning that displays a superior level of competence. According to NAPFA, members live by three important values: “Be the beacon for independent, objective financial advice for individuals and families; Be the champion of financial services delivered in the public interest; Be the standard bearer for the emerging profession of financial planning.”

“As a fee-only financial advisory firm, we appreciate NAPFA’s high ethical and educational standards in the field and the standards they set for each advisor,” said Marie DeCaprio, Partner Wealth Advisor at Sax Wealth Advisors. “We are very much in line with NAPFA’s primary objective to always act in the best interest of our clients while providing full transparency and the most comprehensive financial advice geared at helping them achieve their goals. We are thrilled to have several of our own advisors approved for membership in an organization with this steadfast mindset and approach.”

About Sax Wealth Advisors LLC

Sax Wealth Advisors is an independent registered investment advisor offering financial services built on integrity and meaningful client relationships. With offices in Clifton, NJ and New York City, the firm provides customized investment and financial solutions for individual wealth management and employer retirement plans. Sax Wealth Advisors is a wholly owned subsidiary of accounting and consultancy firm Sax LLP.

About The National Association of Personal Financial Advisors

The National Association of Personal Financial Advisors began in 1983 and has since provided Fee-Only financial planners across the country with strict guidelines for professional competency, comprehensive financial planning, and Fee-Only compensation. NAPFA has become the leading professional association in the United States dedicated to the advancement of Fee-Only financial planning and fiduciary principles. The association provides support and education for their 3,000 practitioners and is governed by the NAPFA Board of Directors and supported by four Region Boards. For more information, visit www.napfa.org.

Withdraw Wisely From Your Retirement Nest Egg

Written by:  Marie DeCaprio, Partner with Sax Wealth Advisors

Studies have shown that a great majority of people nearing retirement overestimate how much they can withdraw, or simply do not know how much they should withdraw from their nest egg once retired. This is a serious concern, but isn’t surprising.  For the majority of our adult life, we are making investments, sacrifices and decisions to ensure we are set up for our future, and may give little thought to what happens after that.

Retirement planning aims to prepare individuals for retirement spend-down – meaning, when we stop earning a pay check and begin relying on our accumulated assets to fund our lifestyle. It is important to plan accordingly for priority expenses, like grocery shopping and your mortgage, in addition to lifestyle expenses, like birthday gifts and a family vacation.  Just as important, however, is the rainy day fund needed for unforeseen expenses, like storm damage or unexpected medical costs.

Sax Wealth Advisors help make the shift from accumulating to de-cumulating assets a well thought-out strategy for your long years ahead. At SWA, you can look forward to:

  1. A detailed plan for your ideal retirement lifestyle and how to achieve it.
  2. Total guidance from saving for retirement to tapping into those savings when necessary
  3. Advisors who understand the relevant tax implications of your specific spend-down strategy, and assurance that you are locked into an appropriate tax bracket
  4. A charitable giving plan to ensure your wealth continues to support the causes that mean the most to you for future generations
  5. A strategy that encompasses the unforeseen in the event that life deviates from what is expected.

We understand everyone’s financial situation is different, as are our lifestyles, needs and futures. SWA’s in-depth expertise arms us with the knowledge and capabilities to ensure you maximize your wealth and decrease your tax costs in your retirement years.  Our seasoned advisors walk side-by-side with you as we determine an effective and efficient retirement plan that suits your needs and accounts for the unseen.  You should get out all you’ve worked so hard to put in – and more.

Issuing Securities and Its Impact on Returns

IPOs involve a great deal of uncertainty, which makes them riskier. As a result, investors should demand higher expected returns as compensation for that greater risk.

However, a large body of evidence demonstrates that, unless you are sufficiently well-connected (specifically, to a broker-dealer who is part of the issuing syndicate) to receive an allocation at the IPO price, IPOs have underperformed the overall market.

The poor risk-adjusted performance of IPOs raises the related question of how well the stocks of frequent issuers (both of stocks and bonds) perform.

Recent Research

Rongbing Huang and Jay Ritter contribute to the literature on this subject with their March 2017 study, “The Puzzle of Frequent and Large Issues of Debt and Equity.”

Using U.S. firms’ equity and debt issuance information for the prior three fiscal years from 1974 through 2014, Huang and Ritter documented the importance of the number of issues, issue size, how recently issues occurred, type of security issued and number of types of securities issued in explaining stock returns in the subsequent year.

Following is a summary of their key findings:

  • An economically important proportion of firms engage in substantial external financing activity during the prior three years. More than 10% of all firm-years are preceded by at least three issues of debt or equity, with a firm classified as an issuer in a year if the equity or debt issue exceeds 5% of assets and 3% of market cap at the beginning of the year. Almost 6% of all firm-years are preceded by at least three large issues, with a large issue defined as more than 10% of assets and 3% of market cap.
  • For firms with zero, one, two and three equity issues in the prior three years, the mean buy-and-hold returns in the following year are 20.1%, 13.8%, 7.1% and -8.3%, respectively. That’s a spread of 28.4 percentage points between nonissuers and three-time issuers of equity.
  • The mean market-adjusted, three-year buy-and-hold return for three-time equity issuers is -37.0%.
  • For firms with zero, one, two and three debt issues in the prior three years, the mean raw returns in the following year are 19.7%, 17.7%, 12.1% and 8.1%, respectively.
  • Firms with no debt or equity issues over the previous three years have an average raw return of 21.1% in the following year. In contrast, firms with six issues have a negative mean raw return of -9.2% in the subsequent year. The spread in the mean subsequent one-year raw returns between firms with zero and six issues is 30.3 percentage points.
  • The average return for a value-weighted (VW) portfolio of firms with at least three issues in the prior three years is -0.43% per month in the subsequent year, and for firms with at least three large issues, -0.64% per month.
  • More recent issues are followed by lower average stock returns. A VW portfolio of firms that made two equity issues in the previous two fiscal years, with no issues in the fiscal year three years prior, had a five-factor (beta, size, value, investment and profitability) alpha of -0.52% per month in the subsequent year. A VW portfolio of firms that didn’t issue equity in the most recent year, but did twice in the two years prior to that, had a five-factor alpha of -0.28% per month.
  • The five-factor (beta, size, value, investment and profitability) model and the q-factor (beta, size, investment and profitability) model generally improve the description of the portfolio returns. After controlling for the factors, firms with one, two, three or at least four issues in the prior three years underperform those with no issues by 0.11%, 0.37%, 0.58% and 1.15% per month, respectively, in the subsequent year.
  • Equity issues on average are followed by lower raw returns than debt issues. Firms with one, two and three debt issues in the prior three years underperform nonissuers in the subsequent year by 0.09%, 0.30% and 0.62% per month, respectively, while firms with one, two and three equity issues underperform nonissuers by 0.30%, 0.64% and 1.25% per month, respectively. This suggests that firms issue equity rather than debt when the cost of equity is low—they are successful market timers.
  • Controlling for the Fama-French investment and profitability factors, frequent issuers of debt and equity had negative abnormal returns, with abnormal returns being even lower for firms conducting large issues.
  • Equity issuers tend to have low profitability and heavy investment, characteristics that are associated with low average returns.
  • There was strong evidence that more frequent and larger issues, especially equity issues, are associated with lower stock returns around earnings announcements made in the subsequent year. In other words, earnings fail to meet expectations.
  • Equity issuers are less profitable than debt issuers. Intuitively, profitable firms find it easier to borrow than money-losing firms.
  • The underperformance of frequent and large issuers did not weaken over time.

‘Abnormal Negative Returns’

Huang and Ritter note their evidence is consistent with the market-timing theory that firms issue a security when the expected return on that security is low, possibly due to market mispricing.

And it’s also consistent with the theory behind the q-model (proposed by Kewei Hou, Chen Xue and Lu Zhang), as subsequent returns following heavy investment should be lower, because required returns are lower.

The authors added that “frequent and large issuers have negative abnormal returns after controlling for these characteristics. Furthermore, the abnormal returns are lower the more recent the external financing has been. These findings are consistent with successful market timing but not with the q-theory.”

The evidence presented in Huang and Ritter’s study makes the case that screening for large issuers is a way to add smart beta to a fund’s construction rules.

This commentary originally appeared July 31 on ETF.com

By clicking on any of the links above, you acknowledge that they are solely for your convenience, and do not necessarily imply any affiliations, sponsorships, endorsements or representations whatsoever by us regarding third-party Web sites. We are not responsible for the content, availability or privacy policies of these sites, and shall not be responsible or liable for any information, opinions, advice, products or services available on or through them.

The opinions expressed by featured authors are their own and may not accurately reflect those of the BAM ALLIANCE. This article is for general information only and is not intended to serve as specific financial, accounting or tax advice.

© 2017, The BAM ALLIANCE

More Evidence on the Persistent Underperformance of Active Funds

Each year, Dimensional Fund Advisors (DFA) analyzes the returns from a large sample of U.S.-based mutual funds. And each year, the results are basically the same, with the evidence showing a large majority of fund managers in the sample failed to deliver benchmark-beating returns after costs. 2017’s report is no different.

The DFA “2017 Mutual Fund Landscape” covered more than 4,000 funds—1,050 U.S. fixed-income funds, 1,056 international equity funds and 1,889 U.S. equity funds—and almost $7 trillion of assets under management.

The following table shows the number of funds at the start of each period, the percentage of funds failing to survive the full period in question, and the percentage of funds that outperformed their Morningstar category benchmark for that respective period ending December 2016.

As you can see, active management is clearly a loser’s game, with the large majority of funds underperforming their respective Morningstar fund categories. And these figures are all based on pretax returns. Because taxes are typically the greatest expense for taxable investors (greater than the expense ratio or trading costs), the percentage of winners would be much lower for funds held in taxable accounts.

Perhaps even more shocking are the high failure rates. At the 15-year horizon, more than half the equity funds had disappeared and more than 40% of the bond funds had also. You’ll also note that as the horizon lengthens, the compounding effect of active management’s higher costs increases the hurdles to outperformance—failure rates rise and the percentage of winners falls.

Problem Of Persistence

DFA also showed that, over the prior 10 years, odds that a top-quartile fund from the prior five-year period would repeat its performance in the next year were just 23%—less than the 25% one would randomly expect.

For bond funds, the odds were slightly better than randomly expected, at 27%. Again, these are all before taxes are considered. Such a lack of persistence makes it difficult to conclude that active managers can persistently gain an informational advantage, or at least gain one that can be exploited after considering costs.

In addition, DFA showed there was a strong negative correlation between the percentage of winners and both fund expenses and turnover (reflecting trading costs). Said another way, the higher fund expenses, and the higher the turnover, the lower the odds of outperforming became. That’s Vanguard Group founder John Bogle’s “Costs Matter Hypothesis” at work.

Clearly, the deck is stacked against investors who attempt to outperform by selecting managers that will beat their respective risk-adjusted benchmarks.

Summary

One of the great anomalies in finance is that, while the literature is filled with an overwhelming body of evidence demonstrating both that the vast majority of actively managed mutual funds fail to outperform their risk-adjusted benchmarks and that any persistence of outperformance is less than randomly expected, the best part of individual investor assets are held in active funds. This failure demonstrates the power of free markets to set prices, and thus allocate capital, in a highly—though not perfectly—efficient manner.

The bottom line is that investors are not well-served by selecting mutual funds based on past performance.

Instead, they should focus their attention on other characteristics, such as the fund’s underlying market philosophy, portfolio construction rules, exposure to (or loading on) well-documented factors, trading strategy, total costs and, for taxable investors, tax management strategies—all of which are important to providing investors with the best odds of achieving their financial goals.

This commentary originally appeared June 19 on ETF.com

By clicking on any of the links above, you acknowledge that they are solely for your convenience, and do not necessarily imply any affiliations, sponsorships, endorsements or representations whatsoever by us regarding third-party Web sites. We are not responsible for the content, availability or privacy policies of these sites, and shall not be responsible or liable for any information, opinions, advice, products or services available on or through them.

The opinions expressed by featured authors are their own and may not accurately reflect those of the BAM ALLIANCE. This article is for general information only and is not intended to serve as specific financial, accounting or tax advice.

© 2017, The BAM ALLIANCE