2018 June Newsletter

Paul Sutherland, CFP®
By: Paul Sutherland, CFP®

How Is Progress Defined?

My boys love to build. They stack yoga blocks, couch pillows, blocks, Legos, and even the food on their plate till it collapses under the weight or the awkward physics of their creation. They are enthusiastic as they build and are “Look, Dad!” oriented as the structures get higher and sometimes a bit danger­ous with the goal of standing on top. They naturally enjoy falling with the collapsing structure and go back at it again and again. 

Investors often seem to follow this same path, not realizing that companies do not grow to own everything, and that there are only so many people who are going to eat Grey Poupon mustard or continue to buy gas-guzzling vehicles. Everything is cyclical. And every cycle has in it, on average, 2,300 counter cycles. Oil prices go up and people think that hybrid or electric vehicles look attractive as the price of filling up the car stings. This view favors their switch­ing to solar, wind, and more efficient gas and hydro energy sources. However, habits change slowly, and most humans are not early adopters, not ready to embrace new realities until there is often significant discomfort or even pain. Thankfully, we humans are somewhat rational in our behavior and will hear the drum roll of progress if things seem cheaper, better or more convenient. 

Progress always involves risks. You can't steal second base and keep your foot on first.

— Frederick B. Wilcox

This “cheaper, better, or more con­venient” march is often called progress. Some progress is reactive, such as burning wood and other stuff used to be in cities for food, light, and heat, though it was not very good for the quality of life. And progress toward more urban-oriented heating, cooling, and lighting systems is in some cases mostly a reaction to problems and side effects of the things that used to work. 

I say all this because it seems that a wave has been building for quite some time that affects how people “see” investing. Thus, making investments is getting to the point where it might follow the path of my three little boys as the blocks, pillows, and stuffed animal mountains collapse when the physics can no longer support 110 pounds of bouncy boys. They will walk away laughing or crying, “He pushed me” or “You broke my mountain!” They will have experienced little harm and maybe even learned that unstable, unsustainable structures eventually collapse. As they mature, with luck they will anchor on this learning as they study life topics such as personal relationships, investments, business, physics, politics, chemistry, economics, and more. 

As I have discussed the current unstable and unsustainable trend of oversim­plified index or passive investing (as in “just own the latest ETF idea and give up!”), I will not rehash the silliness that is seducing old and new alike. 


I am finally back in the USA and enjoying clean air, being with nice and happy people, drinking water from the tap, and taking showers in water that doesn’t smell. Recently I was preparing for my first meeting with a client who asked me to review his portfolio’s performance. A friend had suggested indexing and promoted its remarkable risk (less benefits) and said that the client could have earned a lot more in the past few years through that strategy. 

We have a program for all clients who use our portal (see sidebar) that shows their portfolio’s future scenario, based on a series of assumptions. So I did a number of scenarios of that client’s portfolio, using many assumptions. I used the client’s longer-term perfor­mance and took a 10-year view. I won’t get into the specifics of this client’s goals, constraints, hopes, and dreams, but I will say it felt good knowing that we did our job. The job, in this case, was having the client’s kids be educated, pay off debts, own a second home, and reach an income goal; we found that all aspects of that mandate were tracking ahead of schedule. Yes, the past few years’ results “coulda shoulda” been better, but we as a team decided the risks were high enough that we would not join the index or ETF mania and instead would stick to our client-centered, values-driven, risk-adjusted, bargain-hunting approach (which in today’s climate might be called a “more conservative” or “traditional” approach).

Our Job

I felt a bit proud as I reviewed the client’s performance and financial situation. The client had been a client of ours for many years; their portfolio values were 1.5x what they had invested, so every ~$2.00 net investment we had managed had become nearly $5.00. But, and most important, the client’s goals had been articulated and revised over the years. And were tracking was way ahead of schedule on being the goal of retire­ment. This is not an isolated client experience, as most of our clients know. If you are worried about whether you’re tracking and on schedule to retire, or stay retired, or have enough income, or educate your kids, then  reach out for us to run some scenarios and discuss. We  ae always happy to sit down with you and go over your portfolio, review your goals, and see how things are tracking. It should be comforting for you to know that your portfolio and its management are on track, are sustainable, and are doing their job, without your speculating or making any assumptions.

Have you signed up into our online client portal?

Go to

Click on the orange button at top of the page that says “Client Login.”

If you have an account set up, enter in your user name and password.

If you DO NOT have an account, fill out the form and our team will coordinate and contact you.

What the FIM Group client portal will provide:

  • A complete portfolio(s) summary up to date
  • The current market value of your portfolio(s)
  • A breakdown of all your FIM Group accounts.
    • Net contributions/Withdrawals
    • Interest/Dividends
    • Realized/Unrealized gains and losses
    • Time-weighted rate of return
  • A detailed listing of all holdings in your account.
  • Reports dating back to 2012.
  • And many more options.

We are happy to walk you through how best to utilize the portal – please contact us with any questions.

Lucas Schwaller, CTFA®, CES®
By: Lucas Schwaller, CTFA®, CES®

The Sun, the Moon, and Your Family Legacy

When I was a toddler, my father died in a car accident. I spent much of my childhood wondering what he might have chosen to teach me, what pieces of himself he would have felt worthy of passing on to his son. I’m 34 now, and I have two children of my own, a 3-year-old daughter named Margot and a 1-year-old son named Remi. I’m also a wealth manager specializing in estate planning and trust services, which, when coupled with the early loss of a parent, means I have an unusually logical approach to my own mortality. I know for whom the bell tolls, in other words (spoiler alert: it’s everyone). 

With this in mind, it’s only natural that I find myself considering my eventual legacy – the inheritance I will pass to my children, even at such a young age. Occasionally, these ponderings surround the material or the practical. Do I have enough life insurance coverage? Did we name the right guardians? Have we digitized and backed up all of our family photographs on seven different cloud servers and at least two external hard drives that could survive a nuclear missile strike? More often than not, though, I’m concerned with the things they can’t own or hold in their hands. The moon and the sun, if you will. Am I demonstrating kindness? Are my words and actions instilling in them the values I myself strive to embody? Once they’re older, I’ll be asking whether I’ve effectively prepared them, financially or otherwise. Have we taught them responsible money management skills? Did we model what it means to be truly charitable? Are we continuing to work with them, even as adults, encouraging and supporting them in a way that enables their success?

I had an inheritance from my father, It was the moon and the sun. And though I roam all over the world, The spending of it’s never done.

— Ernest Hemingway, For Whom the Bell Tolls

I imagine I’m not alone in feeling this way. I suspect most parents hope to instill in their children both integrity and a skill set that fosters financial independence. Most parents, I suspect, know the comforts and safety nets that material assets provide, yet they intuitively feel that their love for their children is about far, far more. It’s about the moon and the sun, right?

You may be asking yourself why I’m philosophizing on the merits of material versus immaterial legacy in a newsletter for a wealth management company. Well, because I believe the two aren’t mutually exclusive. Rather, they inform and even support one another. Like it or not, we live in a world governed by purchasing power. Money may not be able to buy happiness, but it is an intrinsic part of our everyday lives. Yet we continue to avoid discussing it openly with our children. According to T. Rowe Price’s 9th annual “Parents, Kids & Money Survey,” 69% of parents have some reluctance discussing financial matters with their children. That same survey indicated that parents are more comfortable discussing terrorism and politics with their children than family finances.1 Both parents and their adult children consider financial conversations to be important, though only 11% of parents and 37% of their adult children are likely to have them, according to TIAA’s “2017 Family Money Matters Survey.”2 Why the reluctance? After all, according to a 2012 study by economist Jay Zagorsky, half of all inheritances are spent or lost through poor investment choices in the first generation.3 Other studies, namely by U.S. Trust, have found that 70% of affluent families lose their wealth by the second generation, 90% by the third.

There has to be a better way, which is why I’ve spent far more time researching this topic than I imagine any normal person might. In addition to this research, I’ve worked with numerous families that have found a way to make it work, and I’ve pestered them to share their methods, to explain why their adult children are more grounded, centered, and prepared than most. The following is a distillation of the top strategies or tips I’ve come across. Largely, they all stem from one unifying train of thought: By accepting the inevitability of mortality while keeping in mind that it’s in our children’s best interest to pass along what we’ve learned from our mistakes, in addition to the values we hold dearest, we can perhaps reverse the trend. We are what they grow beyond, after all. So, without further preamble, here are my top four: 

Model and Impart Family Values When Teaching Money Management 

Children are never too young, or too old, really, to learn about budgeting and prioritizing expenditures. Make an effort to familiarize them with money. Teach them what you value and why, then model for them how you exercise those values in your spending and saving habits, in addition to your investing and philanthropic practices. 

In regard to adult children, ask yourself why you work with FIM Group. Is it our client-centered approach to investment management? Our holistic financial planning? Do you believe, as we do, in the intrinsic merit of fee-only advising? Or is it something else entirely? Introduce your older children to your wealth management team. You likely wouldn’t be reading this if you didn’t find benefit in working with us, after all. Share this with your children. 

Explore Shared Family Values

Discuss with your children the family tenets that were passed down to you. If honesty, responsibility, and humility are virtues you learned from your grand­parents or parents, examine how you might better demonstrate them for your children, particularly in regard to money. As you share these values with them, don’t forget to ask them what they cherish, both financially and philosophically. Find common ground between what you believe and what they believe.

In addition, be vulnerable and honest about your mistakes and missteps. While many values are ingrained, unchanging from generation to generation, the vast majority are learned through experience. Pass along that experience to your children and let them grow beyond you. 

Foster Shared Family Giving

Philanthropy can be an excellent way to initiate a conversation about shared family values. By creating a legacy of shared family giving, you can help demonstrate that wealth is not solely about personal gratification, but that it carries the responsibility of advancing the common good. Try to pay forward the gift of your time and efforts, in addition to money. When you and your children decide to make a substantial charitable gift, schedule an appointment with your advisor and take your children to the discussion. Not all gifts are created equal, and your advisor can assist you in determining the most effective vehicle to support both the charity’s best interest and your own.  

Work as a Team

Encourage authenticity, vulnerability, accountability, and gratitude. Cultivate an open environment in which problem solving and learning can flourish. It’s vital that we allow our children to find a voice of their own. We won’t be around forever, and our children need the tools and confidence not simply to survive without their parents, but to thrive. 

In my young career, I’ve already seen how open communication and preparation within families helps pass along more than material assets. Many of you reading this article may feel it doesn’t apply to you directly. Perhaps your children are grown and on their own (as much as our children are ever truly “on their own” while we’re still in the picture, that is). It’s not too late to have an open dialogue as a family unit, to make an effort at ensuring that your legacy is more than the sum of your balance sheet. And if you ever need help, or a more structured environment to foster productive and focused conver­sation, we are here to serve you and your family.

FIM Group Staff
By: FIM Group Staff

Gramercy Property Trust

Summary Snapshot
(Ticker: GPT ebsite:
Share Price/Market Capitalization: $27.50/US$4.4b

Investment thesis: Gramercy Property Trust (GPT) is a leading global investor and asset manager of commercial real estate. Shares trade at a meaningful discount to the private market value of its properties. We believe this discount persists because of the hybrid nature of its portfolio (a mix of office and industrial real estate) and the prospects for limited dividend growth in the near-term. Both factors can be addressed over time, which should provide a catalyst for the stock. In the meantime, the stock pays a sustainable 6.5% dividend yield while we wait.

GPT is structured as a real estate investment trust (REIT) and owns a portfolio of high-quality, single-tenant commercial properties in both the United States and Europe. Compared to just two years ago, when GPT’s property portfolio was a roughly even mix of industrial and office properties, GPT’s wholly owned portfolio of 365 properties today is nearly 80% industrial. Occupancy is over 96%, and the portfolio is broadly diversified across industries and geographies. FedEx is its largest tenant (approximately 5% of total rent), while Chicago makes up its largest market (approximately 11%). 

In terms of property quality, GPT’s portfolio ranks among the highest relative to industrial REIT peers. The average age of its industrial facilities is 14 years (industry average is around 18 years), with an average clear height of 31' (v. 29') and building size of 275k sq. ft. (v. 194k). These characteristics attract tenants needing modern warehouse and distribution facilities to service the rapidly growing world of e-commerce. And unlike most of GPT’s industrial REIT peers, which tend to have a heavy development focus, management has chosen a more conservative strategy. This strategy emphasizes the purchase of mostly stabilized properties with long leases, low capital expenditure requirements, and strong tenant credit quality. Management believes that such a focus will better serve investors throughout an entire economic cycle, even if it foregoes sexier investment returns when industry conditions are strong (as they’ve been for industrial real estate over the last few years).

Despite a high-quality portfolio – nearly 80% industrial, and well-aligned with strong secular e-commerce trends – GPT’s stock has performed poorly for most of the last year. As a result, a significant discount both to the estimated private market value of its property portfolio and to the market values of its industrial REIT peers materialized earlier this year. We believe that many investors still perceive GPT as a “hybrid” REIT, with office property exposure that increasingly specialized investors want no part of. In addition, we suspect that the prospect of a flat dividend for the next year has turned off certain investors demanding steady dividend growth year-in and year-out from their REIT investments. 

Having previously bought and sold GPT’s common stock and still owning the preferred, we felt confident that management would continue its efforts to shift toward a “pure” industrial REIT and eventually resume the growth of its dividend. As such, we reestablished a position for many of our client accounts in March as the trading discount was just too big to pass up. Months later, in early May, the Blackstone Group, a global investment firm, acted on a likely similar view, and announced its plans to buy GPT in an all-cash offer. We believe that the deal, which represented a 15% premium to GPT’s May 4 share price, means a decent price for shareholders. We expect completion of the deal in the next few months.


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