What does it mean to have your money managed?

ALEX ROCA: Hello, and thank you for joining Women Talk Money. My name is Alex Roca, and I will be your host for today's episode. What does it mean to have your money managed? A lot of you have been asking questions around managed accounts at Fidelity, what they are, how they work, and what will the experience be like if you have one? We'll be talking through quite a few things, as you can see.

 

Today with me joining the conversation are Ryan Viktorin, Vice President, Financial Consultant. She works with clients every day to help them create and maintain their financial plans. And Hannah Commoss, an Institutional Portfolio Manager from Strategic Advisors, LLC, which is the group that manages money professionally for clients of Fidelity. Now, don't worry. We're going to learn a lot more about the ins and outs of her role and the behind-the-scenes of managing money throughout our discussion today.

 

Now for today's discussion, we're going a little deeper than usual. So for any first-time watchers, I want to set the stage a bit. So Ryan, I'm going to come to you first with my first few questions, and then Hannah, I'll come to you so that we can, like I said, set the stage. So Ryan, where in the planning process could managed accounts come into play?

 

RYAN VIKTORIN: Yeah, it's really such an important point. And I really need to make this distinction, because we often confuse terms like financial planning and investment strategy or even professional management. And they're obviously linked, but they are distinctly different. So let me just separate that right at the start, OK?

 

So first of all, a financial plan is your overall vision of really what you want to accomplish in life. And then of course, the financial actions that you're going to take to help support or fund that vision. And the plan has some really key, important components that we talk about a lot in many other Women Talk Money sessions, so I'm going to hit them really, really quick so I can level-set where we are in the process, like you said, Alex, so that we can start to think about the investment strategy.

 

So what have we done up until this point to get to this moment? We've gotten a sense of what your expenses are, OK? We've gotten a sense of what your cash flow looks like and what your income sources are. We've established an emergency fund. We've established a savings strategy into 401(k)s, 403(b)s, or HSAs. And we've started to save into IRAs or brokerage accounts, tied to different goals that we may have, obviously, like buying a house or retirement, or things like that.

 

And it's once you start to accumulate some money into those accounts, it is at this moment that we start thinking about what the investment strategy is really going to be, just generally speaking. And it's right here when we start to ask ourselves some questions about how we want to set up that strategy. So that's the moment in the planning process we're at.

 

ALEX ROCA: OK. Well, thank you for that, Ryan. I think it's super helpful to know where in the planning process this conversation could come in. So I want to get into it a bit more. What are those questions that you mentioned, Ryan? Like, when are we starting to think about building an investment strategy?

 

RYAN VIKTORIN: Yeah. So I'll definitely get to the questions, but just really quickly, I have to say, before you get to the questions, I want everybody to approach this in a totally judgment-free but honest way, right? So hold up a mirror, and there's no right or wrong answer to these questions, OK? And there's really three that I focus on.

 

One is, do I know how to invest, right? Am I comfortable in this space? Do I have the knowledge base? Like, that is the first general area. Do I know how to do this, and am I willing to learn and spend the time doing it, OK? That's the first general area. Do I know what I'm doing?

 

Second is, do I want to do this? Do I have an interest in this? Do I want to spend time on monitoring my investments? And do I have a desire to learn about how to do that more? Some people really do, and some people don't, and that's completely fine. So that's the second one is, do I really want to do this?

 

And then lastly, this is the one that I hear the most, is, do I have time to do this? And we're all just so unbelievably busy, particularly as women, that it's like adding one other thing to the plate of learning how is really-- sometimes gets in the way. For some it doesn't, but for some it does, right?

 

So if your answer to any of these questions or even a couple of these questions is no or even like a, ooh, I don't know, then we might start to think about, do I want to have some help, OK? And there's lots of different ways to get help at Fidelity. And of course, you can do it on your own.

 

But like I said, if you start to answer those questions in a way that you say, ooh, maybe I don't have the time, or, mm, I don't know if I have the knowledge, then you can also start to drift into these other types of categories you see on the screen. Sometimes we want to start with a single fund that does it for us.

 

Sometimes there's a digital option, which is a really great place to start for people who are just beginning to save and they don't really want human intervention. They just want to input information on a computer, and they get it spit out back, and it's done for them. That's easy, and like I said, a great place to start.

 

And then you can obviously go to the other end of the spectrum. And the other thing that's really important to know in this whole process is, I'm here to sit with clients to help them build out a financial plan, understand their goals, get to know them, and work with any of the clients that you see on the screen here, from the people who do it themselves to the people who want some help. I am here to try to help you figure that out.

 

And when I say I, we all know that I mean the me's across the country, OK? I love you all. I can't help you all. You know what I mean? But there's thousands of us that really can. So please don't hesitate to reach out, whether it's to me or my team or across the country, no matter what type of investor you feel like you are.

 

ALEX ROCA: That's fantastic. And thank you for making that so clear, because it depends on where you are in that journey. So on that note, Ryan, I want to add one more general question, and then I want to hear from you, Hannah. So at a high level, what type of help with managed accounts can someone get at Fidelity?

 

RYAN VIKTORIN: Yeah. So I'll go a little bit deeper like we said before when I talked about that sort of spectrum. And I'm going to now focus on, we're going past the people who've said it's really not for them. And there's two broad sort of categories that we're looking at.

 

One I already sort of mentioned, which is a digital approach. Like I said, another term for that you hear in the industry is called a robo advisor. Like I said before, it's very digital. You're saying, I don't want to deal with people. I just want a computer to do this for me. And then there's professional management, which, of course, is where Hannah's team is going to-- we're going to talk about more of that in a second.

 

But in general, what you're going to hear and what that's going to feel like is building out a financial plan first and then having an investment portfolio where someone is taking the-- I guess you could probably call it a burden if you can think about it, if you think of it in your head. It's like, oh my god, this is a burden that I have to do this.

 

They're taking that off of your shoulders for the day-to-day of what investments to choose, how to change them, when to change them, why to change them. And again, Hannah's going to go through all of this for how they do it, but they're going to actually execute it for you.

 

It's going to be married to the financial plan you have that's going to support the way that they're going to invest. So it's important to create a bit of a distinction, and the type of experience that you want is going to guide you as to where you want to go.

 

ALEX ROCA: Thank you for that, Ryan. I think it's so important to frame the conversation and give everybody an idea of what it is that you do day-to-day as a financial consultant versus what Hannah does day-to-day. So Hannah, I'm coming to you. Let's start here. Your title is Institutional Portfolio Manager for Strategic Advisors LLC. So first things first, what does that mean? What is or who are Strategic Advisors LLC, and what is your role within that group?

 

HANNAH COMMOSS: Yeah. So think about Strategic Advisors as the investment team within Fidelity that professionally manages money for clients. We have a really long pedigree of providing risk-managed, multi-asset class solutions, and it goes all the way back to the late '80s.

 

And we have exceptional size and scale, over $1 trillion in assets under management. And so what we do is provide discretionary money management, which essentially means that we make the investment decisions on behalf of our managed account clients. Sort of building off of what Ryan said, there's a number of other solutions, but this is where we focus, is making decisions for our clients.

 

And the foundation of our investment process is research and strategic asset allocation. And that really sets the roadmap for both asset classes like stocks and bonds, as well as the level of risk. So how much stock do we want, or how much bond, or how much of a combination?

 

And our mission is really to help our clients achieve their financial goals through personalized, scalable investment management. And we use all the information that Ryan and her colleagues gather in their front end conversations, like she was describing, to do this.

 

And you may be thinking, wow, this seems like a pretty big task. And it is, but we have tremendous resources that we leverage to bring our service to life. We have over 170 investment professionals within Strategic Advisors, many of whom are focused on fundamental or quantitative research.

 

We partner with Fidelity's Asset Allocation Research Team for valuable macro and microeconomic insights. We have a dedicated team of portfolio engineers who help trade and execute on initiatives. And Strategic Advisors has nearly 300 technology professionals.

 

And you're probably thinking, technology professionals? I thought we were talking about investments. And we are, but delivering that unparalleled value to our clients at scale requires significant efforts in cutting-edge solutions and innovation.

 

So I'm really lucky. I get to wear two hats. I sit on the investment team within Strategic Advisors, and then I have the privilege of joining conversations like this to bring our investment thinking and our views and our positioning to life for a whole host of different groups.

 

ALEX ROCA: Thank you for that, Hannah. And I just want to recap quickly so that we're all on the same page. So Ryan, this is the part that you do. A customer walks in, talks to you, and then you create a financial plan that outlines their goals, their risk tolerance, and their timeline. And then if the conversation leads them to wanting professional management, that's where Strategic Advisors comes in to build the portfolio based on the customer's preferences. Am I understanding that correctly?

 

RYAN VIKTORIN: Nailed it. That's exactly what it's-- that's exactly what it is, right? And the other thing is-- important to understand-- and this is why we separate it here, particularly at Fidelity, is that I'm in conversations, of course, like this, but also one-on-one with my clients all day long versus Strategic Advisors, and Hannah's a representative of Strategic Advisors. They're making the investments and watching the money. They have eyes on all day long, versus I'm talking one-on-one with just that one client.

 

So we separate the financial planners that are agnostic to the investment strategy that you've got. Again, I have some who do it themselves and some who do have Strategic Advisors manage their money. And they manage their money in lots of different ways that we'll go into as well.

 

But there's no one way that you have to do it, and so you need somebody like me to help you figure out, what is the way that you want to do it? And that's exactly why there's a distinction.

 

ALEX ROCA: And just to be absolutely clear, as a customer, I'm not reaching out to Hannah, right? I'm reaching out to you.

 

RYAN VIKTORIN: Right. Exactly. No, again, they've got eyes on the money. They can't talk to all of our millions of clients all the time, right?

 

So that's why people like me exist, to make sure that that team knows the plan that's built, and you also have somebody who's helped you build it, and knows you, and can help ask questions you may not know to ask, and understand how you're feeling, or understand how-- let's say there's a partnership with someone-- how both people are feeling and making sure that we're managing money that addresses both sides of a partnership as well.

 

ALEX ROCA: I appreciate that clarification. It feels like it's an important one. So Hannah, I'm coming back to you. What are some of the potential benefits of that professional management?

 

HANNAH COMMOSS: Yeah. So we think about-- and the way I would frame it is that we provide end-to-end service that seeks to really address a lot of the questions that Ryan has raised regarding financial goals and objectives. And so if you've established that you don't have the time or the skill or the willingness to manage your investments, then a managed account service might be right for you.

 

And I've talked a little bit about the depth of resources that we bring to bear. But you wouldn't hire a general contractor to cut your hair or a hairstylist to build your house, so you really want that deep team with demonstrated experience when it comes to managing your critical assets.

 

And so if we dig in to what we do, depending on the account you choose, we personalize, right? As we've talked about. So within the managed account service, you have access to an investment strategy that can fit your goals and your needs and your risk level, and it can also take into account some outside assets or accounts that you may have.

 

We have that investment expertise, which we've talked about, the deep pool of experience that delivers that professional portfolio management and personalized trading. And we do that in an ongoing and active way, right? Constantly reviewing accounts, thinking about positioning.

 

And again, we can incorporate some tax-smart sensitivities. And again, depending on the account, we apply a range of techniques. And we'll touch on those a little bit further as we go along, but that's really designed to reduce the impact of taxes and has the potential to enhance after-tax returns.

 

RYAN VIKTORIN: Alex, if I could jump in for one minute too, as the person who observes this in real life with clients who have their money managed versus maybe clients who don't, what I will say is there's definitely the quantitative value that Hannah has just talked about, right? The personalization, the expertise, that is all hugely important.

 

But I have to say, the emotional part of investing is really difficult. And you kind of have to have ice in your veins, especially a year like this year that's gone up and down and up and down. The managers are there to keep you invested, which is why we have to match it to your plan and how you feel about risk.

 

But also, keeping that steady hand throughout this volatility or just all the time I think takes some of that pressure off of the, should I do this? Shouldn't I do this? What should I do?

 

So there's an emotional aspect of this. Kind of outsourcing that feeling of saying, oh my god, should I be doing something different given what's going on in the world or just generally speaking, I think is actually really valuable as well.

 

HANNAH COMMOSS: Yeah. Helps you sleep at night a little bit. 

 

RYAN VIKTORIN: Yeah.

 

ALEX ROCA: I couldn't agree more. I always described it to my customers as the little plastic around the red panic button.

 

ALEX ROCA: You're going to have to get through us before you can panic, and so I completely agree with that. And actually, Ryan, you helped me segue perfectly to the next question, because I want to come back to you and talk about the planning process for one more second. Once you and your clients do determine that professional management is in their best interest, what comes next?

 

RYAN VIKTORIN: Yeah. So then it's a really kind of open and collaborative chat about the way that they feel about-- like I just said before, how they feel about risk. So the numbers have to work, right? So we want to make sure that you can try to achieve your goals, that we still have a growth component, that we can outpace inflation, things like that.

 

But you have to be comfortable with the way that Strategic Advisors is going to do this for you, because if you're not, you're not going to stick to it. So you're probably going to hear a question on-- the classic question you might, whether you've seen it online or you've talked to somebody like me before of, hey, what's your risk tolerance on a scale of 1 to 10?

 

And the way that I always describe that is 1 would be, stick it in the mattress. 10 would be, put it in the market and let her rip and just do its thing, right? And so somebody might feel really strongly in one direction or somewhere in the middle.

 

And so the point of that gauge is to figure out how you feel about, again, just the ups and the downs of how this portfolio might do and how able you are to tolerate, like I said, those ups and downs. Tolerate being the most important part of risk tolerance, you know? It's really, what can you stomach, like Hannah said. So that's a really important one.

 

But the other thing we want to look at is, what is the goal that we're investing for? That Strategic Advisors' investing for, the plan that we're building. And how far away is that goal?

 

So are we planning to invest for retirement, which is something you have to take your money to and through a very long time period? And we start to think, is retirement five years away or 30 years away? Do we have time to tolerate some of the ups and downs in the markets, or is it a lot closer and we might want to be a little bit more cautious in that case?

 

The other thing is once you get to that goal, how much of your money are you going to need for that goal, and when? And so let me try to bring an example to life, OK?

 

Let's say somebody's nearing retirement, and they have a ton of predictable income. They have Social Security and they're fortunate enough to have a pension, which not all of us have anymore. But at the same time, maybe they are lucky enough to have a pension, or they have an annuity to cover a lot of their expenses.

 

And so because they have a lot of predictable income, they don't have a lot of withdrawals. Their withdrawals are like, I want to go like this for a small withdrawal on the portfolio. And therefore, Strategic Advisors may recommend that they could have a little bit more risk, a little bit more stock in their portfolio, because they're taking out so little that they can afford the ups and downs.

 

And then the reverse is also true. Let's say that somebody's coming into retirement, and they don't have a ton of predictable income, which is totally OK, by the way. Everybody's got a different situation. But we just need to know these things heading into it.

 

And they say, OK, I need a little bit more of my portfolio every single year. And therefore, Strategic Advisors might say, OK, well, we don't want to take as much risk, or we want to be a little bit more cautious, and we want to generate some more income for that client.

 

So it's this big, like, math equation that somebody like me is going to be helping gather that information on the front end. It's why we spend so much time trying to get to know you and trying to get a lot of the detail about your financial picture so that when we can--if we get to this point and when we bring this information to Strategic Advisors, they have everything that they need so that they can, of course, in a technologically efficient way, like Hannah said, bring these portfolios so that we can get this going for you.

 

One thing I do also want to articulate in what this process looks like, sometimes my clients and I come to the conclusion that they really do want professional management. But Strategic Advisors can't manage everything for-- it could be particular reasons.

 

Like, let's say my clients's 401(k) is held at another institution. Strategic Advisors can't manage that account specifically, but we can give some guidance as to how it should be managed, or we can work around the way that it is managed.

 

And another quick example, and then I'll hand the floor back to you. Some of my clients have stock options and stock plans through their employer. Employer stock plans, I should say. So it could be restricted stock, stock options, things like that where they really can't touch it. And we have to work around it.

 

But we need to say, uh-oh. There's a lot of risk. So maybe Strategic Advisors has to kind of-- I say-- I use my hands a lot, I apologize-- to sort of work around what that position may be. And that also may be a very large part, because sometimes the company just keeps giving you stock.

 

So all of these things are working together so that they can build that customized, personalized plan, like Hannah has said, which is why it's so important to do the planning ahead of time. And then we put together the investment portfolio, and not the other way around.

 

ALEX ROCA: I love the way you explain things, Ryan, because you make them so clear. And what I gathered from what you just said, it's about that holistic planning. It's about making sure that we're complementing what you may already have in place. And so I think you made such fantastic points, because a lot of people have multiple accounts. They don't have just the one, so thank you for that.

 

Now Hannah, I want to come back to you because I want to get into a little bit more about the considerations. So what are some of the considerations when you are designing an account and the positions within that account?

 

HANNAH COMMOSS: Yeah, so there's a variety of inputs that we use when we're thinking about how to select investments and how to size investments to best meet the needs and preferences of our clients. We've talked a lot about personalization. Another example would be where we are in the business cycle, and how that impacts positioning.

 

And so before I get too far ahead of myself, let me just level-set on what I mean on what the business cycle is. And it's really the progression of economic activity and growth, and it can influence the performance of asset classes over time. And we really seek to nowcast, right? We think about what's happening in the economy, try and understand what might be priced into markets, and position accounts accordingly.

 

This year is a great example. How people feel and what's actually happening don't always correlate. And so by nowcasting, we're thinking and we're acknowledging that while markets aren't the same from cycle to cycle, they do tend to rhyme, right? And so we analyze key indicators such as corporate earnings and jobs, and we use that to get a better understanding of that larger economic picture.

 

Are we in early cycle? Are we in mid-cycle? Are we a late cycle or a recession? And that's what you see laid out on the top portion of the chart that was just pulled up.

 

And what I hope stands out, if you look at that top part, is that each phase of the business cycle, the early and mid and late and recession, they're not uniform lengths. Mid-cycle's almost always the longest. And while recessions can feel really trying and painful in the moment, they're generally pretty short and swift.

 

And so where are we now? You see the green circle there represents the US economy, and it's in late cycle. And late cycle is a period of continued growth, but just at a slower pace.

 

So in late cycle, inflation and interest rates can move higher. It can lead to higher prices for consumer goods. Stock markets may experience more volatility due to uncertainty around corporate profitability and economic growth. Does all of this feel pretty familiar, right? It probably does, because it's typical late cycle.

 

And so if you shift your eyes to the bottom of the slide, our research has identified a number of US economic cycles going back to 1950. And then we looked at the asset class performance within each of those phases, and you can see those asset classes represented by the different colored bars at the bottom of the slide.

 

And we use that history as a starting point to determine the size of allocations and what to lean into and out of in a given phase of the business cycle like, how much stock do we want to have? How much bond?

 

And I just want to-- I want to stress that point, leaning, right? Because it's really important. We're looking for singles and doubles in our service. We are not taking huge bets and swinging for the fences with our clients' critical assets.

 

Remember what we were talking about a few minutes ago. We want you to feel comfortable, to stay invested. And so of course, we don't make decisions blindly. The business cycle is one indicator, but we integrate what's happening in real time as well, like valuations and market sentiment and exogenous events.

 

And an example to bring this to life might be that we look at market indicators focused on the consumer as an example, because the consumer drives about 70% of the economy. And so a healthy consumer is really an important driver of that prolonged expansion.

 

And so while they've both shown a little bit of signs of softening, both consumer spending and employment are holding steady, Alex. And that's really giving us some of that support for the prolonged expansion.

 

ALEX ROCA: Thank you for that explanation, Hannah. I think my biggest takeaway is that a lot goes into this process. And it kind ties back beautifully to Ryan's initial question to ask yourself, do you know what you want? Do you know when to do it? And do you even know how' to do it? And more importantly, do you want to do it? Do you have the time to do it?

 

So Ryan, logistics time. When someone decides that professional management is for them, I assume they need to maybe physically open an account that Strategic Advisors is going to manage for them. How do they do that?

 

RYAN VIKTORIN: Yes. You know, it's Fidelity, so you know the answer's going to be, you do it online. That's what we do, OK? Because we want to make it as easy as possible.

 

So once you meet with somebody like me, once we have-- we build a plan, we have a collaborative conversation, we land on the risk that you're comfortable with, the portfolio you're comfortable with, we go through all of that stuff, yes, then we have to physically open an account that Strategic Advisors would manage. They don't just manage what you have. They don't just add themselves to your account. It's a new one, OK?

 

And then most of them, like I said, can be done online. There's some that might not be able to. Usually, it's tied to something like an irrevocable trust or something really complex. But the vast majority of them can be done online, and it's fairly easy. And again, this is what we're here to-- we'll walk you through that whole process.

 

ALEX ROCA: When would someone-- or how often should someone meet with their advisor or team to review that account?

 

RYAN VIKTORIN: I love that you're asking this question. I've actually seen that a lot in the chat that I've seen-- looking at is to say, wow, I just had my accounts managed. Or I think one of them said, turning over the keys to the kingdom is the easiest thing I've ever done. Now what questions should I be asking, right? I love that. And so it's really important to say, OK, well, now what? Now I handed it over.

 

So remember, first of all, you don't have to go too nuts with the detail. You totally can. We give you every piece of information about what Strategic Advisors is doing, why they're doing it, when they did it from that perspective.

 

They're held to what's called a fiduciary responsibility. I saw that question in here too. From an investment perspective and from a money management perspective, that's where that discretionary management comes in. That means they do it for you. They are a fiduciary, OK?

 

But remember, that's what you're hiring them to do, is worry about all the detail. So some of my clients say, OK, stop sending me information. That's what I'm paying you for. Like, you do it. You know? From this perspective.

 

But we produce videos or content or articles, or especially if there's something really timely in the market, we push a lot of information to you so that you can always know what's going on. But baseline, we want to at least review your whole financial plan, and of course your investment strategy that we're managing annually, at least, OK? So even if you say, go away, this is what you're doing for me now, you need to talk to us once a year so that we can make sure that we're doing this all for you.

 

But also, any sort of life change that happens-- it could be retirement, or again, I saw a question that's like, what if I lose my job? And what if I-- unfortunately, a death of a spouse. What if I get sick, or what if something changes?

 

That's where you reach back out to somebody like me to say, my life has changed. Let's re-look at this whole picture. So at least annually, and then, of course, if there's any sort of life event where we really need to do that.

 

And then also, if you're feeling really nervous, I've had, as you can imagine, a lot of these conversations this year, based on the volatility of saying, whoa. Lots of stuff is happening outside of my life that I feel like I can't control.

 

What does Fidelity think about this? What does Strategic Advisors think about this? And what are you doing about this, right? So those types of questions can start to come up. I've also seen-- I know I'm just, like, pulling in questions from the chat. Alex, I hope it's OK.

 

ALEX ROCA: Please do.

 

RYAN VIKTORIN: But I'm also seeing things like, how often are they looking at this? How often are they making changes? Maybe from a tax perspective, maybe from a re-balancing perspective. So that means, do they need to make some changes in the portfolios? And they're constantly looking. Are they constantly taking action? Not necessarily. It depends on what's going on in the markets, in the world, in the economy, in your accounts from a tax perspective. So constant, constant monitoring. And then, of course, action happens throughout the year, depending.

 

ALEX ROCA: I appreciate that. Please.

 

HANNAH COMMOSS: One thing really quickly, just to tack on to that. Just remember that an active decision not to do anything is also active management. And I think that this environment really has people thinking, like, oh, I need to be making all of these changes.

 

But thinking about some of those indicators like we talked about is really critical, right? Because how you feel and what's happening in the market are not always the same. And I know we talked about that a couple minutes ago, but I just wanted to double down on that, Ryan and Alex. Sorry.

 

ALEX ROCA: No. Please, Hannah, I actually appreciate it. And I agree, because you can be as active as you want to be, but you can't just set it and forget it.

 

Now Ryan, you mentioned the volatility, so I want to go back to that. Because I've heard a lot of people say that what's happening in the markets lately is different than other historical instances of volatility. So Hannah, how does your team think about that and volatility in general when it comes to professional management?

 

HANNAH COMMOSS: Whew! How much time do you guys have? We could probably dedicate an entire session to this topic, Alex. And certainly, we know that the extreme market moves we've experienced this calendar year have people feeling a little bit unsettled. But we have a chart that's coming up, which I think will-- it's a powerful one, but I think it's really important.

 

And let me just break down what you're looking at, because there is a lot going on. The bars represent the annual total return in each of the calendar years, and then those little orange triangles highlight the max intra-year decline in each calendar year. So think about this as the biggest drawdown of the market. So how far did it fall in a given year? And first and foremost, I think what this shows really clearly is that volatility is extremely normal, if not the norm. So there are reasons that we think that this time may be different, or other periods were different. But look at all of the oscillation. Look at all of the movement in those little orange triangles. And look at how normal a 20% decline or so suddenly becomes.

 

And so if you just train to the right-hand side of the illustration, in 2022 the markets were down about 28% intra-year. The one before that in 2020, the markets were down about 35% intra-year. The one before that, 2018, the markets, again, were down about 20%. I'm like a quarter of the way across the slide.

 

So if you go back to 1980, which is the starting point for this illustration, the average annual return was about 13.3%. But how many times did the market actually give you that? Almost never, right? It's a little bit higher. It's a little bit lower.

 

But maybe what is surprising to folks is that the market has actually averaged a 13.5% intra-year decline each year, right? So let me give you a really concrete example maybe just to bring this to life.

 

If you fell asleep on January 1, 2020, and you woke up on January 1, 2021, you would say, wow. Oh my gosh. That was an amazing year. The market was up, like, 20%.

 

But of course, we all know what happened through that year, and COVID and everything that followed. But you only got that 20% return because you stayed invested, right? You stuck to your plan. You didn't let your behavior and emotion decide your investment decision making.

 

And I think that's really important. I think Ryan has also touched on that, that emotional side of things, right? And just to remember that professional management can help you just stay the course and stay invested, and that is what gets you to your financial goals.

 

ALEX ROCA: Got it. Thank you for that. Actually, Hannah, I want to go right back to you, because when we talk about the volatility, one of the things you mentioned was people wanting to make changes within their account, right? Sometimes we refer to this as re-balancing. Can you tell us a little bit more about what that means? What do those changes mean?

 

HANNAH COMMOSS: Yeah. So Strategic Advisors uses the business cycle as an indicator. And we talked about how we lean in and out of different asset classes at different points in time. And re-balancing helps us do that, right? Re-balancing is absolutely critical to a disciplined investment process, and it can be instrumental in both managing risks and preventing emotion from driving that investment process.

 

So simplistically, re-balancing is really just the action you take within accounts to move them back to their strategic targets. And now, of course, everyone's account and re-balancing will be a little bit different. Ryan's highlighted some of the account differences. But we're actively thinking about the positioning in our client's accounts and taking action on their behalf.

 

ALEX ROCA: Thank you for that, Hannah. I think it definitely helps clarify what we mean when we talk about that re-balancing. Now Ryan, you mentioned the chat earlier, so I know that you have your eyes on the chat as well. And I'm sure that you're seeing as many questions as I am seeing on fees. Can you give me the two-minute version on what those fees could look like, where and when someone would see them, and more specifically, how they're paid?

 

RYAN VIKTORIN: Yeah. Like with many professional services, there are fees in this case. They are called investment advisory fees, OK? Now, I have to say-- I have to say this part. I am specifically talking about how this works at Fidelity now. I can't speak to how other firms do this. If you have your firm managing your money, you have to ask them these questions, OK? This is specifically how Fidelity does this, OK?

 

And again, I have to reiterate, because this is where confusion comes. Because every time I have this conversation with someone, it's like they don't believe me. Working with someone like me, building a plan, figuring out what the investment strategy is and what the risk is from a financial planning perspective does not cost anything, OK? If you manage your own money, the only cost come in when you buy something-- there might be a cost to a mutual fund, but there's no investment advisory fee.

 

Advisory fees come in if you want your money managed, OK? That is separate from what I do on a day-to-day basis. It's free to work with somebody like me. I can't say it enough, Alex, because I feel like when I talk to clients, they don't believe me that it's true. OK.

 

Now, when it comes to the investment advisory fees, it's important to know they are only assessed on what Strategic Advisors is actually managing. So remember my example before, whether it could be a stock plan or a 401(k) that they can't manage. The advisory fee that they're applying is not going to be on any account that they can't manage, OK? So it's not on all your money at Fidelity. It's only what Strategic Advisors is managing, OK?

 

And it's a percentage of your assets that they are managing. It'll be quoted in an annual fee, but it's billed quarterly. And it's going to come right out of your account.

 

And you're actually going to see it as a line item right on your Performance page, actually. And it's going to be listed as investment advisory fees. It's not hidden anywhere. It's going to be actually very clear to find it and see it. But it's not like a bill you have to go and pay and remember to go and pay. It comes right out, and it is shown, like I said. It's in your activity, but it's also on your Performance page as well.

 

ALEX ROCA: Thank you for going through those with us, because I absolutely have gotten the question as well. Now again, with the chat, I'm seeing a lot of tax questions. And Hannah, you mentioned this earlier, that there are tax sensitivities. So how does your team think about portfolio construction from a tax point of view?

 

HANNAH COMMOSS: Yeah. And again, we could probably dedicate an entire session to this topic, so I'll just maybe hit a couple highlights. But first and foremost, tax-smart management is designed to help you keep more of what you earn. I've said that before, and I'll continue to say it again, because it's really important. And there's a number of different ways that we consider taxes in our investment solutions.

 

But just to be clear, not all tax techniques apply to all account types. For example, they wouldn't apply to retirement or tax-deferred accounts necessarily. So much of what I'm discussing right now applies to taxable accounts, right?

 

So tax loss harvesting may be something that people have heard. So tax loss harvesting can help reduce taxes while maintaining an expected level of risk. So selling investments at a loss can allow an investor to offset realized capital gains, reducing their total tax obligation.

 

Another way that we-- or another technique we might use is to use municipal bonds. And why is that? Well, municipal bonds are generally exempt from federal taxes, and in some cases, state taxes. And depending on your tax bracket, your after-tax total return may be greater if you invest in exempt securities rather than taxable, again, helping you keep more of what you earn. But the thing to remember is it's Ryan and her colleagues that can really help you find the right account and solution that meets your goals and needs.

 

ALEX ROCA: Thank you for that, Hannah. And I know that we're coming up on time. I'm looking at the clock. So Ryan, I'm going to ask you kind of a twofer here very quickly.

 

How can someone evaluate their account to make sure that it's working the way that they want it to? And also, because I see it come through the chat, so I feel like we need to address it. Is there a certain amount of money that you need in order to have a managed account with Fidelity?

 

RYAN VIKTORIN: Oh, those are really good both-- two totally different but yet really important questions. So really quickly, one, like I said, right on where you can see your fees is on your Performance page, there's a whole page dedicated to your performance. Whether it's us, the accounts we're managing, your performance, both, it's always there. There's always going to be the numbers-based performance of, how am I doing versus benchmarks? But I always try to say, let's zoom out and say, is this strategy still supporting the goals that we were going for in the first place? Are we still on track?

 

Again, with the minute we have left, I think it's a condensed version. But it's always going to be really transparent, and that's why people like me are here so we can help you understand how it's going and how it's working.

 

But the second part of this, do you need a certain amount of money? I would say it depends on really how complex that you want it. You can get that digital option that we talked about at a very low minimum. I think it's something like $10. It's really, really low. So there's really no-- you can't be too big or too small for the types of accounts that we've got. But again, that's what we're here for, is to help you figure out given where you are, given what stage you're at, given your assets and the complexity of your situation, what's the best for you? So you don't have to figure it out by yourself.

 

ALEX ROCA: Thank you. That was a beautiful wrap-up for us, Ryan. Thank you for doing that so quickly. Ryan, Hannah, this was wonderful. Thank you so much for chatting with me and for all the great information that you've shared today.

 

We'll have a slide that we're going to pull up in just a second. There it is. It has all of our upcoming events and a reminder on how to get help. And to all of you watching, thank you for joining. We'll hopefully see you again next month. Have a great day.