Planning for rough financial waters

With inflation rising, growth sinking and the Trump tax cuts due to sunset in three years, it’s more important than ever to chart a long, diversified financial course, say Ben Soccodato and Chris Kampitsis of The SKG Team at Barnum Financial Group.

The annualized U.S. inflation rate hit 6.8% in November, the highest since 1982. As year-end approached, economic analysts such as The Conference Board downgraded growth forecasts to indicate the U.S. economy will slip from annualized gross domestic product growth of 5.5% in 2021 to 3.5% in 2022 and 2.9% in 2023. At the same time, the stock market has been maintaining historically high levels while interest rates remain so low that ordinary savers continue to lose ground if they’ve parked their money in traditional bank savings accounts. 

While some financial prognosticators develop gloom-and-doom outlooks from trying to gaze into crystal balls that have fogged over, people who want to ensure their fiscal comfort and not sacrifice solvency have learned that it pays to be proactive.

“Inflation for sure has impacted all of us over the course of this year,” says Ben Soccodato, financial planner with The SKG Team at Barnum Financial Group in Elmsford.  “I think looking at the Social Security wage increase for 2022, which is the highest of all time at 5.9%, gives us a sense of what real inflation is in our economy, but that doesn’t take into account things like housing prices. In Westchester, we know how great the housing market has been, maybe if you’re selling a home but not if you’re buying one over the last year or so. I think where we feel it the most is at the gas pump. Although electric vehicles are a thing of the future and that’s where we’re headed, for most of us we’re still filling up our vehicles at $3.50 and $4 a gallon.”

Adds Chris Kampitsis, another financial planner at The SKG Team (which stands for The Soccodato Kampitsis Group):  “We’re seeing clients who want to have a better understanding of the changes that we’re seeing in the economy and how that might impact their financial lives and their portfolios. I would not say it’s a nervousness. “

Kampitsis adds that as we get further and further away from the financial distress of 2008 and the market drop in 2020, people are becoming more conditioned to accept short-term volatility and maintain a long-term focus.

“That’s our mission as financial advisers and wealth managers, to communicate the importance of having a long-term vision related to your portfolio, and I do think the message is being heard by more and more investors,” Kampitsis says.

Soccodato notes that everybody is in a different financial position. 

“This market right now is a very difficult market in which to be super-conservative,” Soccodato says. “If your money is sitting in the bank and we just lost 6% of purchasing power and if we do the same thing next year and inflation runs at 4% or 5%, well, in a two-year span on a conservative investment we’ve just lost 10% in real purchasing power.”

The other end of the spectrum, being super-speculative, might bring big paydays as claimed by some who put money into things such as cryptocurrency and penny stocks, but the downside can be quite steep.

“As financial planners, we still have to be very cautious about how we approach less-regulated investments like cryptocurrency,” Kampitsis says. “That being said, Ben and I and our team are big believers in taking a ‘bucketed’ approach to your portfolio. That involves having a portion of your assets extremely focused on capital preservation and safety, having a portion of your assets focused on your intermediate-time horizon goals with your priority being consistency of return and having a portion of your assets reserved for long-term growth and even potentially a portion reserved for speculation. So, if someone is looking to invest in this sort of new frontier of cryptocurrency, we certainly can have a conversation about it. But it’s important that they not let any one concept or idea overwhelm their portfolio.”

Soccodato, who is in his 17th year with the firm, says that they welcome clients as if they’re family and learn as much about them personally as they’re willing to share.

“It’s years and years of building a relationship and trust that I think separates us most from the approach at some other firms,” he adds. “This is a serious role. We’re not only assisting people with their money, but in many cases they’re entrusting us with their life savings. Our role as a fiduciary where we’re guiding them as if we’re in their shoes is really the most important thing to Chris and myself and the other members of the team.”  

Soccodato explains that The SKG Team has added more than 12 members over the past year and totals about 34 inside of Barnum’s firm of 700. 

“We have found people have less time than ever before, so more and more they want to rely on a single trusted resource that understands their holistic situation,” Kampitsis says. “Initially it was really about meeting their needs and more and more it’s now getting ahead of their needs and understanding as they age, as their families change, as they transition to different stages of their life, what they will need so we’ll be better prepared to assist them from a thought leadership standpoint.”

Soccodato says that tax planning is becoming more important than ever.

“We know definitively that in 2026 tax rates change. The Trump tax cuts expire in 2025 so we know we’ll have a new set of circumstances at that point, which brings all the brackets up, if not sooner, and the likelihood that it could happen sooner is a pretty good one,” Soccodato says. “We also believe in diversification from a tax perspective. I want to have money that is going to be subject to tax later, money that I’m diverting tax on until later like a 401k. I also want to have money that I’ve paid tax on now and will be tax-free for me later so in the event that taxes rise I have a ‘bucket’ that I can pull from that’s already been taxed.”

Kampitsis sums up by saying, “None of us knows what we don’t know. The reality is we don’t have a crystal ball. The most important thing clients can do is actually plan for different scenarios.”

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