Generation to Generation

Kevin T. Smith, CFP®, CTFA, RICP®, CDFA™ 

Discussing the generational transfer of your wealth with your adult children may feel as uncomfortable as talking politics at a dinner party. There is no question that the Greatest Generation — and those that came before — kept their financial information much closer to the vest, while Boomers have been more apt to discuss these affairs with their children. It is obviously a personal decision if you want this discussion to take place.

Here are some considerations when deciding whether or not, or how to broach this sensitive topic with your children:

  • Will the relationship change dramatically if beneficiaries are made aware of their future inheritance or lack thereof? Of course, this can be difficult to predict.
  • Will it be advantageous to begin gifting assets during your lifetime?
  • Are you anticipating that your children will be involved in your finances as, for example, a trustee or POA (Power of Attorney) while you are alive?
  • Is there family pressure to disclose your financial affairs? If so, this can be a sign to proceed with caution.
  • Is your next generation financially sound enough not to need or want the inheritance? If the answer is yes, you may be able to do multi-generation planning such as college funding, generation-skipping trusts, or “stretching” IRAs.

Provide a Roadmap
If the decision is made not to include the next generation in your planning, it is still wise to provide your spouse and/or children with the names and contact information of your professional advisors in case of an emergency. These commonly include:

  • Attorney (legal and estate planning documents)
  • Accountant (copies of previous years’ tax returns which can identify where accounts are held)
  • Financial Advisors (statements on investment accounts, IRAs)

I recommend that you review the list annually with those who would be involved so that when the time comes, your family knows who to alert. Some honest, and admittedly morbid, questions to ask yourself are: How will my affairs be handled if I don’t wake up tomorrow? Will my spouse/children know who to contact? Will they have access to cash immediately from non-probate assets to cover short-term expenses?

It’s Your Decision and Yours Alone
As a client advisor, I advocate for the discussion among family on the transfer of assets whenever possible and encourage clients to include the second and, when appropriate, even third generations in our meetings. This approach can help provide for a smoother, more tax-efficient transfer of wealth to your loved ones. It can also create opportunities to educate about the successful moves or missteps that you made with your finances. Remember — you are the one who worked and saved for your assets and no one will appreciate the hard work and effort as much as you!

Please see Fenimore disclosure.

Berkshire Hathaway’s Annual Meeting – Key Takeaways

For decades, our Investment Research Analysts have journeyed to Omaha for this distinct gathering that Warren Buffett and Charlie Munger host. It’s an opportunity to hear astute insights and, as usual, this year’s event did not disappoint.

Here are some highlights from our perspective:

  1. Berkshire is repurchasing its own shares and they think the stock is selling below its intrinsic value.
  2. Mr. Buffett and Mr. Munger believe that their insurance business is one of the most valuable in the world. For example:
    • The growth and success of GEICO were highlighted.*
    • Berkshire’s insurance operations are unmatched in financial strength.
  3. The company has an immense cash supply that gives them the flexibility to make a large acquisition or buy back more stock.

This annual trek always reaffirms our passion for what we do and why we do it.

When FAM Funds assesses investments, we don’t make macroeconomic predictions. We adhere to a rigorous, systematic, disciplined investment approach. Our team identifies quality businesses that we believe are positioned to increase their intrinsic value over time and then purchases shares in them at what we deem to be discounted prices.

Charlie Munger stated this at a previous meeting, “Microeconomics is what we do, macro is what we have to put up with.” We think this quote exemplifies our process very well. While we are acutely aware of macro events, we take a business-first, bottom-up approach to investing.


*Past performance does not indicate future results.

Please see Fenimore disclosure.

5 Stars for FAM Equity-Income Fund

The FAM Equity-Income Fund (FAMEX) received a 5-Star Overall Morningstar RatingTM (as of April 30, 2019) due to performance and risk-adjusted returns.

The Fund focuses on mid-cap companies that pay dividends and seeks dividend growth, not simply high current dividends.

Read an Insightful Paper on “Dividend Growth For The Long Term”

FAM Equity-Income Fund Performance & Expense Information – Click Here

Morningstar, an independent investment research firm, currently follows 379 mutual funds in its Mid-Cap Blend Category. The Morningstar RatingTM is a quantitative assessment of a fund’s past performance — both return and risk — as measured from 1 to 5 stars. It uses focused comparison groups to better measure fund manager skill. As always, the Morningstar RatingTM is intended for use as the first step in the fund evaluation process. A high rating alone is not a sufficient basis for investment decisions.

The Morningstar RatingTM for funds, or “star rating”, is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product’s monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods.

The FAM Equity-Income Fund received a 5-Star Overall Morningstar RatingTM for the 3-Year, 5-Star Overall Morningstar RatingTM for the 5-Year, and 4-Star Overall Morningstar RatingTM for the 10-Year periods ending 4/30/2019 among 379, 334, and 233 Mid-Cap Blend funds, respectively. 

© 2019 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.

Please consider a fund’s investment objectives, risks, charges and expenses carefully before investing. For informational purposes only and not otherwise intended as an offer to sell, or the solicitation of an offer to purchase. The FAM Funds prospectus or summary prospectus contains this and other important information about the FAM Equity-Income Fund and should be read carefully before you invest or send money. To obtain a prospectus or summary prospectus and performance data that is current to the most recent month-end for each fund as well as other information on the FAM Equity-Income Fund, please go to famfunds.com or call (800) 932-3271.

Please see Fenimore disclosure.

Fenimore’s Kevin Smith Earns RICP® Designation

Kevin Smith, Senior Client Relationship Manager at Fenimore Asset Management, earned the Retirement Income Certified Professional® (RICP®) designation from The American College of Financial Services.

According to the college, “The RICP® educational curricula is the most complete and comprehensive program available to professional financial advisors looking to help their clients create sustainable retirement income.”

“With the RICP® designation, Kevin can provide an even higher level of financial insight for our investors,” said Fenimore President and Chief Operating Officer Debra Pollard. “Retirement income planning is more important than ever so this added knowledge is key to our service offerings.”

Kevin also holds the CFP® (CERTIFIED FINANCIAL PLANNER™), CTFA, and CDFA™ designations. He earned a BA from SUNY New Paltz.

Please see Fenimore disclosure.

Letter from Cobleskill – Spring 2019

“The university’s storied history centers around coaching legend John Wooden who won 10 championships, including a remarkable seven in a row. Mr. Wooden has a library of timeless quotes. One quote epitomizes the extensive research we conduct on your behalf, ‘You can’t have confidence unless you are prepared. Failure to prepare is preparing to fail.’ Our fieldwork equips us to make purchases even during times of adversity.” Letter from Cobleskill Spring 2019

Please see Fenimore disclosure.

Consumer Perspective from CAGNY Conference

FAM Funds Research Analyst Kevin Gioia, CFA

FAM recently attended the CAGNY (Consumer Analyst Group of New York) 2019 Conference where some noteworthy trends in the consumer-packaged goods space were identified:

  • Competitive Landscape: More educated consumers are demanding higher nutrition and more natural food products, along with increased convenience. Smaller companies, as well as private label (store brands), have been able to innovate much faster to meet these demands.
  • Industry Response: Legacy competitors have sought to reposition products with innovations in health & wellness and packaging, while also looking to acquire smaller, faster-growing companies.
  • Cost Management: Packaged good manufacturers are evaluating every step of the supply chain to identify waste with a goal of investing savings into growth initiatives.
  • Marketing Innovation: There are innovations in packaged goods marketing including tying products to a social cause (e.g., environmental sustainability or public health). In addition, companies are shifting spending to digital channels with many now allocating more than half of their marketing budget to e-commerce.
  • FAM Perspective: Trends aside, people want good tasting food. Our holdings in the space include a spice manufacturer that is innovating in sustainable production practices, supply chain transparency, and recyclable packaging. Another position is in a snack food provider that has deployed an asset-light approach to free up capital for innovation.

4Q18 earnings for both companies reflected the success of these innovation efforts, which should support attainment of our longer-term performance objectives for growth in market share and/or same-store  sales.

Please see Fenimore disclosure.

Bank Insights from KBW

FAM Funds CIO John Fox & FAM Small-Cap Fund Co-Manager Andrew Boord

FAM recently attended KBW’s Winter Financial Services Conference. Here are some key trends from the meeting that reinforce our investment thesis within our small regional bank positions.

  • Geographic Shift: The movement of people from high tax states to low tax states appears to be accelerating, benefiting places like Nashville, Dallas, Charlotte, and Florida, while making it harder to grow banks in other areas.
  • Industry Consolidation: The merger of SunTrust and BB&T may benefit a number of our bank holdings as impacted bankers and customers migrate to other institutions. More broadly, “merger of equals” may become a trend as there are few smaller banks in attractive urban markets left to acquire on a “bolt-on” basis.
  • Loan Growth & Quality: The outlook is for moderate loan growth in 2019. There are no systemic concerns around credit quality. Banks are being a little more careful given how long the upcycle has continued and shrinking exposure in certain areas such as hotel construction.
  • Net Interest Margins: Pressure from competition for deposits is easing and margins should be roughly flat or only slightly lower relative to 2018. Stable margins plus high loan quality support our favorable outlook for banks.
  • Culture is Key: Spending time with bank CEOs reinforces our view that leadership and culture are paramount because every bank has essentially the same opportunity set.

Please see Fenimore disclosure.