LENOX — There's a pandemic on: Your family is safe; the cupboards are full; and you have enough fuel to keep your generator running for weeks. You're prepared for a catastrophe that's going to keep you at home for a while.
But who's watching your investments? Moreover, why isn't your iPhone ringing with a FaceTime call or your inbox lighting up with a status report from your portfolio adviser?
Some firms are founded on quantity of clients and quotas. That's not Renaissance Investment Group, a Securities and Exchange Commission-registered investment advisory firm on Pittsfield Road.
Chief Operating Officer Christopher Silipigno and President Trevor Forbes say it's the close relationships with clients and access to in-house financial experts that define their client-centric agency and bring peace of mind during volatile times.
Classical approach with modern reach
Renaissance, as the 20-year-old firm's name implies, is built on the classical way of conducting business, with an ongoing regimen of personal interactions. It's the opposite with many large firms, which can often respond with silence and frequently distance senior talent from client relationships. Nevermore was that more apparent than during the 2008 recession, the firm's directors say.
“Clients were left at their most vulnerable during this most concerning time, without a link to someone who can answer some very important questions,” says Silipigno, who has served in multiple senior-level leadership positions within the financial services industry. From the time we begin working with clients, we become partners with them, their families, other professionals in their lives, and we work closely to find out what the entire financial picture is, as well as what their life circumstances are.”
And when it comes to investment communications at Renaissance, clients go right to the top: Forbes is also the firm's Chief Investment Officer and one of the seasoned portfolio managers to whom clients have direct access.
Talk to portfolio managers personally
“I don't think there's anything quite like being able to talk to somebody who is actually managing your investments,” says Forbes, a 40-year investment veteran who's held executive posts with Citibank Global Asset Management and the former Credit Suisse Private Bank.
Clients choose frequency of contact, from once a year to weekly check-ins, he says, whatever suits them best.
Such communication is great when the markets are normal, and even more critical during times of flux, as with the pandemic. “When something like this hit, given the fact that we already had deep relationships, immediately we were able to speak with our clients about what’s affecting them. All that effort building relationships really pays off in the time of crises … when it’s time to act,” says Silipigno.
Many methods of communication were used by the firm prior to the pandemic, such as email updates and quarterly newsletters to its client base. Since the COVID-19 outbreak began, in-person meetings — the lifeblood of Renaissance business relationships — have been replaced with phone calls, FaceTime talks and web-based video meetings, the firm's managers say.
Given social distancing restrictions and for the sake of efficiency, Silipigno says video calls have proved to be indispensable, with the ability to share screens to show charts, graphs, economic factors, data and client portfolios.
Financial planning during the coronavirus
Whether investing to preserve funds or prospecting to take advantage of low stock prices, either is possible with Renaissance. The firm looks at each individual client on a very specific basis, blends its investment management and financial planning services to serve the whole client and constructs its portfolios accordingly.
“It's all the same investment process, it's all the same analysis, but we're applying it in a slightly different way depending on our clients’ individual needs and circumstances,” says Forbes.
With COVID-19, many retired clients began adjusting their yearly budgets and withdrawals to accommodate reductions in market returns … if cash flow allows, staying invested during a market downturn is often ideal, says Silipigno.
Likewise, younger clients, too, have stepped forward to take more market risk, Forbes and Silipigno say.
“They're very keen to take the opportunities provided by a fallback in the market, on a longer-term basis, to build up their portfolios. And that's exactly the way they should be looking at it,” says Forbes.
Silipigno says a lot of client plans — projects and trips — for March or April were upended by the coronavirus, which resulted in unspent money. Some clients will need the money, while others will want to reinvest: It all depends on their individual situation, says Silipigno.
Well-positioned going into the pandemic
Over the past few years, Renaissance has been conducting specific research into worldwide debt, looking at the S&P 500 companies refinancing requirements for the coming decade.
“We were concerned that the level of company indebtedness was getting greater and greater. If we ever went into a period where the level of government financing had to increase, then there was a danger of recreating an environment that we had in the U.K. in the '70s, which was called 'crowding out.'”
This is an economic situation in which public spending has risen dramatically, often to prop up existing or create new social welfare programs during times of hardship, not unlike the coronavirus pandemic, where businesses are shuttered for public safety. As governments increase borrowing to fund these programs, heavily indebted companies might find it difficult or very expensive to find investors to purchase their debt.
This already had started to happen with some high-profile companies having to pay substantially higher interest payments to persuade investors to lend them money.
“COVID was the ‘Black Swan’ moment that created this,” says Forbes. “We knew there would be some increase in government indebtedness, but obviously nothing quite like the amount of debt that is going to be taken on by the U.S. government, and by all developed nations globally. That's a real concern, for companies who are heavily indebted. That's one aspect our research highlighted early on.”
Because of the research before the pandemic, the firm was already on a track to being more risk averse.
“Alongside the equities in our clients’ portfolios, we were building up some very low risk investments in short-dated U.S. Treasury bonds,” says Forbes. “So, we entered this period with our clients having more cash and cash-like bonds than they normally would.”
Individual bonds and stocks versus index and bond funds
These days, Renaissance has important reasons behind buying individual stocks and bonds.
“We want to have control in a swiftly moving environment, and we can do that much more readily with individual stocks and bonds. We can't do this if we're buying a mutual fund And you certainly can't do that with an exchange-traded fund (ETF),” says Forbes.
Renaissance buys individual bonds close to expected value at maturity. As long as the company or government doesn’t default, explains Forbes,” we look at this as a way of preserving capital while being paid income, however small, in the meantime.”
If bond yields go up during ownership, it won't affect the value at maturity. Bond funds, which have no maturity, will lose capital value if interest rates and bond yield rise, so although income generation might increase, capital will not be preserved. All mutual funds carry often significant investment management charges and so Renaissance chooses not to burden clients with additional costs for no added benefit.
Renaissance acknowledges that the economic environment has changed significantly and rapidly, but it's a place that the market and the leaders at Renaissance have been before. Positioning bonds alongside a stock portfolio that's geared toward growth helps offset equity volatility; this has worked for Renaissance’s clients as it aims to help preserve capital by reducing volatility during difficult market environments just like the present.
Buying and selling homes in this environment
Just as Renaissance portfolio managers move funds to market areas that will rebound more quickly, they also assist with property assets for clients purchasing or selling their homes.
“We walk through all the implications in this new economy. Because of the nature of the relationships with our clients, we're looking at all of those assets,” says Silipigno. “We have clients who own homes in the suburbs near major U.S. cities. There are amazing new levels of demand from people moving out of inner-city areas. It may make a lot of sense to make the needed alterations and upgrades, and speed that along to get the house on the market. This just might be the ideal time to sell. We provide the analysis needed to help make that decision.”
In addition to aiding in decisions for clients to sell or stay, Renaissance also advises on refinancing, keeping an eye on dropping or rising finance rates. “With access to our client’s entire financial situation and knowledge of their personal preferences, we have all the variables needed to provide key insights into whether refinancing makes sense,” explains Silipigno. “By knowing our clients, we can offer guidance on tax, insurance, mortgage and other key areas of concern.”
What's often on the backs of people's minds — estate planning — has emerged as a much more immediate concern for clients, says Silipigno. Suddenly, it feels like death is being discussed nonstop.
“This is a topic you're always talking around. But the constant barrage of mortality and mortality rates, and stories of people falling ill and within two weeks being on a ventilator, incapacitated and passing, brought the whole notion of estate planning and how to handle assets and medical decisions right to the fore,” says Silipigno.
Especially for older clients, it really hit home as to whether they had their affairs in order; Silipigno says he has been working closely with estate planning attorneys, beneficiaries and clients to help coordinate it all, with Renaissance acting as quarterback in these transactions. “We pull those professionals together, ensuring that goals and objectives are met, so the clients are getting the most out of their services and covering all the necessary elements,” says Silipigno.
He says that second-generation clients are a natural part of Renaissance's structure, as clients' adult children find themselves coming into a lot of wealth, are unaccustomed to it and need a little — or in some cases, a lot of — guidance.
From the beginning of their financial relationships with clients, as often as possible it includes these relatives and beneficiaries, as it aids with the transference of wealth by reducing delays and providing continuity with investments and planning concerns.
Changes in IRA rules from the CARES Act
The recent Coronavirus Aid, Relief and Economic Security Act (CARES), designed to keep the U.S. economy afloat during the pandemic, also created opportunity for clients with regular disbursements from their IRA accounts. “This created a substantial tax savings for several of our clients,” notes Silipigno.
Federal law requires that certain IRA account holders meet an annual required minimum distribution (RMD) amount, but the CARES Act waived it for 2020.
“Immediately, it's a huge deal, as we handle our client’s RMDs. Fast and feverishly, we contacted our clients and went through their options. We saved some clients a significant amount of money, just by letting them know and adjusting where funds are being withdrawn from this year,” says Silipigno. That's the “advantage of building and cultivating close relationships before crises, especially when it comes to the complex realities of financial planning.”
What is most beneficial for Renaissance clients, is the team of seasoned professionals with considerable experience in investing and managing client wealth during other crises. The firm provides very valuable context to the discussion during these difficult times, say the company’s managing directors.
“Even though we may not have all the answers, and even though this situation has created specific areas of concern, there are certain patterns, and there is an ability to let clients know, 'Look, this is scary, this is concerning, but we've seen these things before. Here's a trajectory you can expect.'”
There have been previous recessions and hard times like this. Recovery eventually will take hold.
“Take a certain amount of comfort that we can get through this,” says Silipigno.
This commentary is limited to the dissemination of general information pertaining to Renaissance’s investment advisory services. It is for informational purposes only and should not be construed by a consumer and/or prospective client as a solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation. Renaissance’s specific advice is given only within the context of our contractual agreements with each client. Advice may only be rendered after delivery of Form ADV Part 2 and the execution of an agreement by the client and Renaissance.