Ain’t nobody got time for that!

Experts have been warning us about a recession for over a year, but maybe we’re too busy to notice. As  Kimberly “Sweet Brown” Wilkins of viral YouTube fame would say: “Ain’t nobody got time for that.”

The unemployment rate of about 3.7% was at or near a 50-year low. Not only is the job market  healthy, but wages are growing, the quit rate remains at historically high levels, Americans are spending and GDP has recovered strongly from a slow first half of 2022. Business is also good: Companies are largely beating revenue expectations and reporting positive earnings results. And sky-high inflation and gas prices are coming down big time.

We’ll see if this week’s CPI numbers change the mood, but chances are we’re moving in a cautiously optimistic direction.

I know we have an inverted yield curve (again), which many believe is confirmation that a recession is imminent. Yes, it’s true that an inverted yield curve has preceded every U.S. recession since World War II, but about one-third of the time we have an inverted yield curve, a recession DOES NOT follow, as was the case in 2020.

The old saying goes: “Economists have predicted nine of the last five recessions” and maybe all this angst and paranoia about the looming recession is just another “miss.”

“The reason we’re not in a recession is that the labor market still is performing very well in the US economy,” Ken Kim, a senior economist at KPMG, told Insider. “So, people are still finding jobs and getting a paycheck and spending it on goods and services.”

Real personal income excluding payments from the government has been increasing, with four straight months of gains after falling earlier this year. And retail sales during the 2022 Holidays were up a healthy 7.6% despite substantially higher prices.

“Gains in employment, gains in industrial production, gains in income levels, strong nominal sales figures — none of that stuff sounds particularly recessionary to me,” observed Jack Manley, a global market strategist at JPMorgan Asset Management, in a recent Insider interview.

Not your grandfather’s recession

According to the general definition—two consecutive quarters of negative real gross domestic product (GDP) growth —the U.S. entered a very mild recession in the summer of 2022 after recording minus 1.6% GDP growth in Q1 of last year and minus 0.6% in Q2. If it was a technical recession it was arguably short-lived as GDP rebounded +3.2% in Q3 and an estimated +4.1 in Q4.

But we don’t use that recession benchmark anymore. Now it’s the National Bureau of Economic Research (NBER), whose definition of recession—means a significant decline in economic activity across an entire economy — and that lasts more than a few months. So by this gauge as well, were not in a recession in the summer of 2022. Nor are we now.

Reasons for optimism

Yields on U.S. government bonds, which largely reflect investors’ expectations for short-term interest rates set by the Fed, reached their peak last October. Back then, data had yet to show a drop in core goods prices, even as it was showing an acceleration in services inflation. Yields have since come well off their highs, with PCE core goods inflation over the past three recorded months running at an annualized rate of minus 1.9%. Also, last Friday’s strong jobs report included a double dose of good news for investors. While jobs were plentiful, average hourly earnings rose less than expected in December, and also included significant downward revisions to the gains from previous months. That means most people are still working, but wage gains are less likely to trigger crippling inflation.

Conclusion

Bottom line: If you think things are still good and/or trending upward, don’t be afraid to invest, spend, hire and expand. Don’t let the Fed dissuade you from growing your business, pursuing your goals and enjoying life to the fullest. But if you’re convinced the sky is falling – or about to fall–go ahead and hunker down, lay off staff, hoard cash and wait for the recession storm clouds to pass. Just don’t ruin it for the rest of us.

Six months from now, you may enjoy the schadenfreude of telling optimists: “I told you so.” But chances are you’ll be in our rearview mirror, wishing you had taken action when things were still cheap way back in early 2023.

What’s your take? I’d love to hear from you.

#recession, #aintnobodygottimeforthat, #economy, #yieldcurveinversion

As we prepare to release our 5th annual CPA/Wealth Advisor Confidence Survey  to the media and general public, this much is clear. Financial advisors of all stripes have never been busier. But tons of billable hours and ample referrals don’t necessarily translate into satisfaction.

First the good news: Four in five survey respondents (81%) told us they expect their firms to have positive revenue grow in 2021. That’s up from 75 percent who felt this buoyant at this time a year ago. Further, nearly two in five respondents (37%) expect to see double-digit revenue growth in 2021 (i.e. 10% or greater)–up from just one in four firms (28%) before the onset of the pandemic.

But when you start looking at the types of practices each of the 300-plus respondents run, the differences in growth expectations are striking. For instance, nearly all (98%) CFP/Wealth advisors survey expect to see topline revenue growth in 2021, compared to just 75 percent of CPAs and 71 percent of Estate Attorneys and Planned Giving Officers.

Further, Wealth Advisors were far more likely than other types of advisors to anticipate double-digit revenue growth over the next 12 months.

Our data indicates three in five Wealth Advisors (60%) expect to grow by 10-percent or more in 2021, compared to two in five (40%) Estate Attorneys/Planned Giving officers and less than one in four (23%) CPAs.

Expecting Double-Digit Revenue Growth in 2021

Source: CPA Trendlines, HB Publishing & Marketing Company, LLC; Investments & Wealth Institute, and The Financial Awareness Foundation, 2021. All rights reserved

“Wealth Managers, by their very nature, tend to be more optimistic than attorneys and CPAs,” observed Randy Hubschmidt, Partner, Fortis Family Wealth (Valley Forge, PA). “Attorneys are largely trained how to keep others (counterparties to contracts) from doing things. Similarly, CPAs tend to be backwards looking – they report history whether that is financial statement history or tax reporting history.” By contrast, Hubschmidt said wealth managers tend to be trained in finance, which is a forward-looking discipline and “less worried about the past.”

To a certain extent, CPA Karen Koch, Senior Director, Source Advisors (Louisville, KY) agreed. “Whether a CPA, wealth advisor, or attorney, we all struggle with how to grow the business even though our clients continually ask for more services.  We are uncertain how to incorporate client needs to a revenue stream.” According to Koch, the future growth of accounting firms is likely going to include strategic relationships with vendors that can offer expertise not typically found within a professional services firm. “We need to assure our clients we are the trusted advisor that knows how to deliver fully defensible services with a team approach,” Koch added.

While wealth advisors have been the most confident advisors throughout the five-year history of our survey, estate planners showed the largest uptick in optimism over the past year. Two in five estate planners/giving officers (40%) expect to grow their revenue by double-digits in 2021 To put that into perspective, less than three in 10 estate planners (29%) expected double-digit growth at this time a year ago.

Wakeup Call

Estate Planner Randy Fox, Founder, Two Hawks Consulting (Skokie, IL) told me recently that potential tax upheaval and likely lowering of the estate tax exemption is driving more clients to planners’ doors. Fox also said COVID-19 woke up a lot of people to the fragility of life. “When we see 40-year-old friends and 30-year-old coworkers dying in the hospital, there’s a heightened sense of one’s own mortality,” related Fox. “Everyone knows someone who died unexpectedly or was in crisis mode during the darkest days of the pandemic. It’s especially sad to see young and middle-aged adults gravely ill in the hospital without having health care powers of attorney identified. Talk about a huge wakeup call.”

Estate planner Hyman Darling, Partner, Bacon Wilson, PC (Springfield, MA) noted that more people than ever are aging in place and are concerned about their future financial situations. He also said parents are taking the initiative to plan for long term care, estate taxes and addressing the issue of possibly “outliving” their savings. “Financial planning companies are adding staff and developing new products to assist with these issues, thus more planners will be marketing these strategies to the clients.”

Kyle Walters, CIMA has the unique perspective of a wealth advisor who has merge with several regional accounting firms to form Dallas-based L&H CPAs. According to Walters, most CPAs are analytical numbers people who have been drawn to their profession because they like the sense of balance, order and control it demands (i.e., Debits = Credits).

However, with that mindset, Walters said it’s harder for CPAs than others to get inside their heads and modify their habits or behaviors. “There’s no standard, reg or best practice to follow when it comes to navigating the ‘gray areas’ in a client’s financial life. Instead of one or two tax deadlines per year, it’s an ongoing process in which they clients need their CPA all year round. Their expert advice—not their ability to fill out rows and columns for the government—is what clients increasingly value,” added Walters.

That’s something that wealth advisors and estate planners long ago figured out.

*** Ping me any time if you’d like a copy of the 2021 survey findings or would like us to present the findings to your firm or professional organization.

Conclusion

Our 2021 survey is a joint initiative of CPA Trendlines, Elite Resource Team, The Financial Awareness Foundation, the Investments & Wealth Institute and HB Publishing & Marketing Company. A total of 309 financial advisors from throughout North America took part in a 25-question online survey during the first quarter of 2021. Respondents received no financial or in-kind incentives to complete the survey other than a promise to receive a pre-publication copy of the results. Sincere thanks to my co-authors Rick Telberg (CPA Trendlines) and Valentino Sabuco (The Financial Awareness Foundation).

What’s your take? I’d like to hear from you.

#practicemanagement, #wealthmanagement, #investorconfidence, #economy, #cpafuture

Reasons for optimism may surprise you

Preliminary results of our 5th annual CPA/Wealth Advisor Confidence Survey  show the vast majority of U.S. financial advisory firms (92%) expect to grow in 2021. In fact, nearly two in five (39%) are expecting to grow by double digits or more this year—comparable to pre-COVID levels.

While more than half of advisors (52%) expect to see at least one sharp market correction in 2021, less than one in five (19%) expect to see a continued recession this year (i.e. two consecutive quarters of negative GDP growth).

*** NOTE: We’re keeping the survey open for another week. Give us five minutes of your time and we’ll send you a 20-page pre-publication summary of the findings. See how you stack up to your peers.

What’s keeping affluent Americans up at night?

In addition to the pandemic, nearly three in four respondents (74%) cited “turbulence in Washington DC” and an equal amount (73%) cited “changes in tax laws.”  Nearly two-thirds (62%) pointed to “concerns about the federal budget deficit” and nearly half (45%) cited “lifestyle changes post COVID.”

The young generation and financial literacy

As has been the case since we launched the survey in 2016, Millennials (42%) where overwhelmingly cited as the generation most pessimistic about its financial future. Generation Y (age 36-52) was the next most pessimistic cohort (23%) followed by seniors (19%) and Boomers (16%).

Less than half of respondents (45%) felt America’s financial literacy has improved over the past year. About one third (35%) believe our nation’s financial literacy has remained the same and nearly one in five (19%) worry that it has fallen behind.

*** Please share this survey link with professional colleagues who might be able to benefit from our findings https://www.surveymonkey.com/r/3T836CB

Conclusion

Our 2021 survey is a joint initiative of CPA Trendlines, Elite Resource Team, The Financial Awareness Foundation, the Investments & Wealth Institute and HB Publishing & Marketing Company. We don’t make money from the survey or share email addresses or individual responses of participants. We’re just trying to give back to the profession.

What’s your take? I’d like to hear from you.

#practicemanagement, #wealthmanagement #investorconfidence #economy