Exchange: An ETF Experience is coming February 5th – February 8th, so Evan Harp is sitting down and chatting with some of the advisors who will be there. Today’s edition is focused on Jake Rue of Shore Point Advisors.
Evan Harp: When and how did your practice begin?
Jake Rue: Our practice began at the broker/dealer arm of an insurance company. We recognized that life insurance is a critical component of a sound financial plan, but it shouldn’t be the “be all and end all” solution. We started out on our own as we wanted the fiduciary responsibilities of putting our clients’ interests first and foremost by offering objective, well-reasoned alternatives incorporating all aspects of wealth management.
Evan Harp: What is your investment philosophy?
Jake Rue: Our investment philosophy draws upon the long-standing academic research of factor-based investing. We know the five factors we employ will cycle through under and outperformance periods. We don’t want to lean into only one factor when we know there can be prolonged periods of underperformance. However, with an appropriate time horizon, we believe our multi-factor approach enhances the opportunity to grow our clients’ wealth more than the market itself offers. We strive to provide our clients with a quality investment experience, sound financial planning, low-cost portfolio management, tax sensitivity, and coaching to help them stay with the plan during challenging environments.
Evan Harp: What is the biggest obstacle you had to overcome, and how did you do it?
Jake Rue: Our firm’s biggest challenge, which we grapple with every day, is the Pareto Principle: 80% of our revenue comes from ~20% of our clients. We want to continue to provide outstanding service to all our clients, but it becomes increasingly difficult as the firm grows. How do we improve upon that ratio? How do we become more efficient as a firm?
The so-called death of the 60/40 Portfolio begs the question – what alternative investments will be additive to the returns of a portfolio while dampening overall volatility? The four decades-long rally in fixed income got us accustomed to getting paid to have bonds on-board. Should we now think that we have to pay for that non-correlated portfolio “insurance”? What ETF products have a proven track record and serve that function?
Evan Harp: Exchange is slated for February 5th – 8th. What do you think the biggest story in the market will be at that time?
Jake Rue: I think the story in early February will be that the Fed has reached/neared the terminal Fed Funds rate; bonds, in a steeply inverted yield curve, face headwinds from a “higher for longer” environment, yet equities begin to rally in anticipation of economic recovery later in the year. The risk hanging over the market is that headline inflation remains stubbornly high: this is due largely to bottleneck constraints amongst energy and food supplies over which the Fed has no control.
Evan Harp: Who is another financial advisor that inspires you and why?
Jake Rue: Larry Swedroe of Buckingham Wealth Strategies. He practices evidence-based investing and shares his knowledge and experience with the many articles and books that he writes. He makes Factor Investing accessible and understandable.
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