Fireside Chat – Q&A with the Verde Team!

Verde Capital Management, Inc. is a federally registered investment adviser. The information, statements and opinions expressed in this material are provided for general information only, are based on data we believe to be accurate at the time of writing, and are subject to change without notice. This material does not take into account your particular investment objectives, financial situation or needs, is not intended as a recommendation to purchase or sell any security, and is not intended as individual or specific advice. Investing involves risk and possible loss of principal capital. Diversification does not ensure a profit or protect against a loss. Past performance is not indicative of future returns. Advisory services are only offered to clients or prospective clients where Verde Capital Management, Inc.  and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Verde Capital Management, Inc. unless a client service agreement is in place.

Fireside Chat w/ Tommi Harris on Unclaimed Funds

This Fireside Chat was recorded in August 2020; information and details may have changed since that time.  Please contact your Verde Advisor for more up to date information.

 

Have you ever heard of Escheatment? You may have heard of ‘unclaimed funds.’ Either way, through understanding what this is, we could help you to find extra money that’s been lost to the universe! On August 19th 2020, we had Verde’s Investment Advisor Tommi Harris discuss this topic, and the fascinating (and exciting!) implications of what this could mean for the money that our investors have. Included in this post are a video recording with time stamps, as well as a general transcription of the chat.

2:38- Fireside Chat Explanation

Cindy Lundberg(CL): Some of you may be wondering why we call these Monthly Webinars the Fireside Chat. The name came about as a nostalgic reference to Franklin D. Roosevelt who used this medium to present his programs and ideas directly to the public originally in response to the banking crisis and recession. For us, this came about earlier this year as our response to the market volatility and pandemic.

 

Our mission is to Educate, Guide, and Grow, and it’s our privilege to bring these Fireside Chats to you on an ongoing basis.

 

3:08- Introductory Story: Walter and His Unclaimed Funds

During today’s presentation you’ll hear from Tommi Harris, one of Verde Capital Management’s investment advisors. There will also be a Q&A session at the end of the presentation, so please submit you questions using the chat feature or by responding to our invite email. Now without further delay, I’ll turn it over to Tommi Harris(TH).

 

TH: Thank you, Cindy. Good Morning, everyone. Thanks for joining us today. Today we’re actually going to be talking about Escheat or Unclaimed Property. And earlier this year I listened to a story on a podcast about a guy who had a small fortune taken from him. His name was Walter. 

 

CL: Oh no! How did that happen!?

 

TH: Funny you should ask Cindy, here’s how it happened. A little background on Walter first. Walter was Italian, and in the late 90s, he had an idea to start a company selling Italian specialty products online. Largely to Americans, like coffee machines, ect. At first things were going really well, except for that, around the same time, another online retailer launched named Amazon. They were bigger and seemed to have endless money, and at that point were not worried about turning a profit.

 

CL: Something tells me this is not where things go south for Walter. It was unfortunate for sure, but how did he lose a small fortune?

 

TH: You’re right. Walter had a brilliant idea, and he said, “If I can’t compete with Amazon, I should invest in them.” And that’s what he did. He set up an E-Trade account and bought a few thousand dollars worth of Amazon stock. Now mind you if you just joined [the fireside chat], this was in the mid-90s.

 

CL: He saw another great investment opportunity.

 

TH: He sure did. Walter followed the buy-and-hold strategy for a very long time. Buy the stock and just let it sit was his philosophy. He made a point not to log into the E-Trade account that held his Amazon stock.

 

CL: And if you believe in a company, you buy the stock and you hold it, similar to what Warren Buffet does. So what went wrong?

 

TH: Well, he did just that. He waited until 2015, around 20 years, to finally cash in that Amazon stock, but during those 20 years, he never logged into his E-Trade account. Not once. He just set it and forgot it. At that point, the stock he’d bought for around $5,000 dollars, should be worth around $100,000. And so after years and years of not looking, he finally logged back into his E-Trade account. 

 

He’s quoted saying, “When i logged in, I saw nothing. The account was empty.” So it was a big shock. Imagine that, logging in and seeing nothing, he was shocked to say the least. So he called E-Trade and E-Trade told him, “yeah you’re going to need to speak to someone at the State of Delaware.” Walter said “Delaware?” and that’s where E-Trade was incorporated, and they also told him, specifically, “you should ask for the Delaware unclaimed property office.”

 

So, Walter calls them, and they explain to him some terrible technical term, Escheat or Escheatment. So today, during this fireside chat, we’ll discuss what this means, how the government ends up with a stunning amount of our assets, or how you (or Walter), can get that money back.

 

6:360- Ever wonder if you have money out in the universe you don’t know about?

-Have you ever washed a pair of jeans, only to find that when they came out of the drier, you found some cash in the pockets? Remember that feeling of excitement, when you realize you have money that you didn’t know you had?

 

Do you know that there could be free money out there in the universe somewhere, that is yours, that you don’t even know about? So, let’s find out.

 

7:03- What is Escheatment?

It’s most commonly called unclaimed property. It’s essentially the act of the state taking control over property on behalf of its citizens. The concept is not new, it’s been around for hundreds of years and has been updated in more recent times, and is now employed throughout the United States.

 

So think of it as a large, state-run lost and found. What’s interesting is that 1 in 10 Americans have unclaimed property. So the point is that one of you listening today has unclaimed property yourself. So hopefully by the end of this, you should look yourself up. You may have left behind an asset somewhere along the way. But don’t worry, your state is holding that money for you. There’s an estimated $50 Billion outstanding across the states.

 

8:04- Case Study, State of Delaware

As for Walter, he had to file a claim in the state of Delaware, and Delaware was arguably the worst abuser of unclaimed property statues last year. The state escheated over $500 million, it’s third largest source of revenue, and returned less than 4% of all property collected. So good luck to Walter in getting his stock back.

 

8:30- Common Causes of Escheatment

So, you might be wondering, what causes assets to be Escheated? Some of the most common, these 4 specifically listed here, are: 

1)When an individual dies and they don’t have a will or an heir, 

 

2)When an individual leaves or retires from an employer and leaves their financial accounts in the hands of that employer. So we encounter two things in this scenario. First, as time goes on the individual may lose track of the old accounts with the previous employer, and second, the individual doesn’t properly maintain these accounts by making sure there’s a beneficiary listed, and that the personal information listed on the profile is up to date,

 

3)When an individual moves without properly updating their address. So an example, same thing, if an individual changes jobs and moves to a new state, when moving it is common to update our address or our drivers license, but we may not think to contact our previous employer and update our address with them. So think of an example, when you move and you leave an employer, what if you received a profit-sharing check at the end of the year and they didn’t have your address as to where to mail that. And then lastly,

 

4)A common cause of assets to be escheated, is an individual having a dormant account, such as Walter. A dormant account is a period of time where there is no activity in an account. Think of an investment or brokerage account, and in most states, the dormant period is between 3-5 years. Good news: just logging into your account online counts as activity. 

 

10:15- Most Commonly Unclaimed Assets

TH: So here are the most commonly unclaimed assets: 1)Checking & Savings Accounts, 2) Investment Accounts, 3) Real Estate, 4) Uncashed Dividend Checks, 5)Belonging in Safety Deposit Boxes, 6) Payroll Checks, 7)Pension Fund Accounts, and 8) Federal and State Tax Returns.

 

What’s interesting, is that at one point, there was a safety deposit that was escheated to the state of Massechusets. It was told that they found guns and blueprints to a bank in that safety deposit box.

 

CL: What could that person have possibly been planning?

 

TH: I’ve no idea! But we do see some of these common assets being Escheated all the time. So after hearing the story of Walter and being locked in quarantine in early Spring, my husband Bruce and I decided to see if we had any property that was Escheated in any of the states that we had resided in. So, being a financial advisor, and my husband being financially astute, we typically have pretty good track of our accounts. 

 

However, we had unclaimed property. Bruce had a big check escheated from a company he worked at in his early 20s in the state of Indiana, where he lived for a short period of time during a work semester when he was in his undergrad program. So he filed a claim with the state of Indiana, and in just a few weeks, he received unclaimed property of $1,040. So we talked about the real value of the $1,040 that he received, and we wanted to know, what if he didn’t receive it? Or what if it just sat with the state of Indaian for 20 years, what would happen to that? 

 

So we assumed three different outcomes, one) that he didn’t claim it, it just stayed with the government, or state. You can see that during that time, those 20 years, it wouldn’t have accrued anything, he essentially just leant that money to the state of Indiana and didn’t charge interest. The second scenario is, what if he were to claim that money when he should have and saved it, maybe in a savings account. Well, we can assume that over the last 20 years, savings accounts averaged a 3% rate of return. So 20 years later he would have had $1800. And lastly, if he had invested it, if he had claimed it 20 years ago and invested it in a brokerage account, we can assume from his risk tolerance, that his average rate of return would be 10%, he’d have $6,300, which is why it is best to claim your property as soon as you can.

 

13:20- How do I avoid having unclaimed property?

CL: So how do I, or anyone else, any of our clients, avoid having unclaimed property?

 

TH: Great question. So first, last take a look at retirement plans, or financial accounts, and how to avoid the possibility of unclaimed property. Keep your email address, and phone numbers up to date with financial institutions, current and past employers. Use your financial institutions’ websites to check account balances. When possible, consolidate your financial accounts. Deposit checks that you receive, no matter how small they may be. If you get that $1 dividend check every once in a while that’s not being invested for some reason, you want to make sure you cash it, or deposit it. Respond to company notices regarding your assets. List and update your beneficiaries on your financial accounts. And, if you do have a safety deposit box, we suggest that you have the fee automatically debited from your checking or savings account.

 

14:25- How to avoid the possibility of unclaimed property?- Estate Planning

When it comes to estate planning, it’s part of the financial plan. We also want to make sure that we can avoid unclaimed property. As part of your estate, maybe if you own a home, making sure that your home is deeded properly. Have an estate plan, make sure that it’s up to date and stored somewhere prosperity. Make sure that the beneficiaries on all of your accounts are listed properly and up to date as well. And decide if a trust is necessary. Not sure what a trust is or if you need one? Contact you Verde Advisor and collaborate with an estate planning attorney and they can see if that’s necessary. And possibly designate an executor or a responsible party to manage your assets.

 

15:15- How to avoid the possibility of unclaimed property?- Tax Planning

And when it involves your tax plan, on how to avoid the possibility of unclaimed property, we suggest that you consider selecting electronic deposits for state and federal tax returns. And make sure that your address is up to date when you move. Don’t leave people guessing, make sure to update your address with financial, professional, and other organizations directly after you move. And if you think we’ve missed something, or are not sure if you’ve missed one, ask us for a check list, we have it readily available for you.

 

15:51- How to find out if you have unclaimed funds

CL: So this is really good information, how would i search for myself or family members?

 

TH: So we’ve provided a list of specific sites that you can go to, but if you do have assets out in the universe, we want to help you claim them, and we’ll show you where to get started. [Resource Links Listed Below]

 

17:30: Will there be tax consequences if I find some assets?

 

TH: Great question, it depends on the asset, and if it’s income, you do have to report it as income.

 

18:30: Do I have to restate my income for a year the asset of property was earned, for example a check from 2018?

 

TH: It is best to contact your accountant or CPA, they may need to do an amendment depending on your income, depending on what the dollar amount was.

Links to Escheatment Resources-

 

IRS TIPS:

https://www.usa.gov/unclaimed-money

 

National Association of Unclaimed Property Administrators:

https://unclaimed.org/search-for-your-unclaimed-

property-its-free/

 

Michigan- Unclaimed Funds Site:

https://unclaimedproperty.michigan.gov/

 

Florida- Unclaimed Funds Site:

https://www.fltreasurehunt.gov/

 

Ohio- Unclaimed Funds Site:

http://treasurer.ohio.gov/unclaimedfunds

 

California- Unclaimed Funds Site:

https://www.sco.ca.gov/

 

Illinois- Unclaimed Funds Site:

https://icash.illinoistreasurer.gov/

 

Indiana- Unclaimed Funds Site:

https://www.indianaunclaimed.gov/

 

Verde Capital Management, Inc. is a federally registered investment adviser. The information, statements and opinions expressed in this material are provided for general information only, are based on data we believe to be accurate at the time of writing, and are subject to change without notice. This material does not take into account your particular investment objectives, financial situation or needs, is not intended as a recommendation to purchase or sell any security, and is not intended as individual or specific advice. Investing involves risk and possible loss of principal capital. Diversification does not ensure a profit or protect against a loss. Past performance is not indicative of future returns. Advisory services are only offered to clients or prospective clients where Verde Capital Management, Inc.  and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Verde Capital Management, Inc. unless a client service agreement is in place.

Fireside Chat w/ Eric Tomaszewski on Negativity Bias & Market Opportunities

We all know COVID-19 has impacted our lives immensely, changing our economy just as much as our social lives. On June 25th 2020, we invited Verde’s own investment advisor Eric Tomaszewski, to lead a discussion in Verde’s second fireside chat, on the impact of the global pandemic, as well as the implications this has on the world of finance and beyond. 

 

This fireside chat covers a wide range of topics, spanning from data available on the length that the crisis and economic downturn could last, all the way through discussion on behavioral finance and the counterintuitive ways we should be viewing our money. Included with this post are time stamps and a transcription of the discussion with corresponding figures from the chat.

 

7:03- Opening Remarks (Video Begins)

Cindy Lundberg(CL)- Moderator: Our presentation today will recap our last fireside chat, talk about the ‘negativity bias,’ opportunities and risks in the market today, and a personal experience from one of our investment advisors, Eric Tomaszewski(ET), regarding Verde’s performance and communication during the Covid-19 economic crisis, versus what he experienced during the 2008 financial crisis. 

 

8:13- Eric Tomaszewski Introduction

ET: I’m one of three investment advisors at Verde Capital Management. I’m going to start with a recap of our last fireside chat. During this webinar, Carl discusses the state of the oil market and the three different kinds of bear markets that we’ve seen throughout history. I’ll also update you on what we’ve seen since our last chat. We will be discussing the negativity bias and I will go over why this recovery is so unloved, and why so many investors, including the supposed experts, had it wrong. After that, Cindy will join me for a pulling question today. You’ll have a chance to tell us what you think about a possible COVID-19 vaccine, and whether you would actually take it. We will then discuss opportunities and threats that our investment committee sees ahead, and how we are positioning client portfolios for the future. Last, I will share my personal experience in what I saw during the 2008 financial crisis at Merrill Lynch, and compare that to what I see today during the COVID-19 pandemic at Verde.

 

9:35- How long do Americans see the COVID-19 disruption lasting?

ET: During our last fireside chat, Carl spoke about a statistical poll we looked at. We were struggling to figure out how long the COVID-19 disruptions would last. When talking to epidemiologists, and other infectious disease experts, they often contradicted themselves with predicting the pandemic would keep us quarantined for a few weeks, while others said quarentein would be the new normal for several years. This obviously made it nearly impossible for us to form an investment thesis. We decided to harvest the ‘wisdom of crowds’ and conduct a survey to see how long Americans believed the level of disruption would last before things started to improve. The survey was conducted on march 13-22nd, as you can see from the results, the median result was a few more months[see Figure 1.]. This ended up being incredibly accurate since we’ve seen the economy all over the United States start to open up again.

 

Figure 1: How Long Do Americans See COVID-19 Disruptions Lasting?

 

10:43- S&P 500 Bear Market Decline: 1937-2019

ET: We also discussed different kinds of bear markets, and compared and contrasted them. As a quick refresher, the worst type of bear markets are structural(depicted with the dark blue line[see Figure 2]). They’re the deepest, and they also last the longest. They are caused by structural problems in the economy such as banking crises. The Great Depression and the financial crisis of 2008 are prime examples of structural bear markets. The second type of bear markets are cyclical bear markets, those are depicted with the gray line[Figure 2]. They happen due to the swinging pendulum of fear and greed. Cyclical bear markets are less severe than structural bear markets, and come about due to changes in the business cycle. Last are event driven bear markets. These are often caused by unexpected events such as wars, plagues, and abrupt political policy changes. Black Monday, during October of 1987 was the last event driven bear market that we’ve experienced. We also believe the COVID-19 bear market is an example of an event driven bear market. They are often characterized by sharp downturns followed by a sharp recovery. Although we can’t know for sure how this market will play out so far, the sharp drop and sharp recovery have made this look very similar and very much like an event driven bear market.

 

Figure 2: S&P 500 Average Bear Market Decline: 1937-2019

 

12:11- Pessimistic Professionals Missed the Big Rally, and so did Many Americans

ET: While this recovery seemed surprising to many, it shouldn’t have been. Pessimistic professional investors ignored historical data, and missed the big rally. There’s a rueful thing amongst traders that markets will move in whatever direction will cause them the most pain. Pros who distrusted the rally have performed worst since the March low, and the so called ‘down money buy and hold investors’ who rode the market down and right back up. The people who hate the rally are people who are market gurus because it makes it seem like their expertise is useless. And guess what, it is useless! Keep in mind that even for many of our clients, this rally is hard to love. It happened as thousands died, it doesn’t reflect economic pain, the fed gave the market a lot of help, bargains disappeared quickly, people that exited the market hoping to get back in at a lower price did not get the opportunity to do so[see Figure 3]. In addition big rallies benefit the top earners most. Most of those hardest hit by the pandemic did not have the resources to take advantage of the dip. I’ll consider one additional paint. The stocks that the pros picked to do the worst, have performed better than the market averages. Goldman Sachs Group Incorporated, maintains a basket of the 50 companies with more than $1 Billion each in market value, that have the most short interest. What that means is that it expects that it will fall as share of their value. Now, the basket’s membership changes once a month, and each stock is given the same weight. Not only did this basket of stocks not fall as wes predicted, but it’s value has risen 73% since March 23rd, nearly double the rise of the S&P 500 over the same period.

 

Figure 3: Reasons Why This Rally Is So Unloved

 

14:27- Poll Question: If scientists developed a COVID-19 vaccine, would you take it?

CL: As part of this fireside chat, we would like to get your perspective on the following questions. If scientists developed a COVID-19 vaccine, would you take it? Assume the vaccine is effective and works as intended to prevent COVID-19 in 99.9% of cases, with no side effects. In 1/1000 cases, the vaccine wouldn’t work, and could have the unintended consequence of infecting the person taking it with COVID-19. Please take a moment to respond in the chat feature at the bottom of the screen. Type yes if you’d like to take this vaccine, type no if you would not. We will be tallying up your responses and will let you know the result at the end of the presentation.

 

15:23- US Adult Opinion on the Time for Economic Recovery from COVID-19

ET: Moving ahead to what we are looking at today, as with before, we at Verde are trying to figure out now, how long it will take the economy to recover from COVID-19. To be clear we are not looking into how long it will take to beat the disease, and how we could have 0 cases, but rather how long it will take to recover. Again we turn to our partner, Statista. In a survey of 1,491 adults conducted between May 10-12th, we asked, how long do Americans think it will take the US economy to recover? The median response was at least one year [see Figure 4]. This tells us that even though the stock market has gone up a lot, we aren’t out of the woods just yet, and should stay vigilant. There will be some companies that will undoubtedly benefit from changes caused by COVID, while others could be significantly hurt. Over the last few weeks, our investment committee has been looking into areas of life that will see life return back to normal the quickest. 

 

Figure 4: US Adults’ Opinion On The Time For Economic Recovery From COVID-19

 

16:33- Industries and Activities, Rebound From COVID-19

ET: From battles on the front lines and social distancing from friends and family, COVID-19 has caused a massive shake up from our normal daily lives. After second guessing everything from hugging our loved ones, to delaying travel, there is one big question that everyone is likely thinking about: will we ever get back to the status quo? And truth be told, the answer may not be very clear cut. The graphic on the left uses data from an NYT interview of 511 epidemiologists and infectious disease specialists from the US and Canada, and visualizes their opinions on when they might expect to resume a range of typical activities. Specifically, this group of specialists was asked when they might personally begin engaging in 20 common daily activities again. The response is based on the latest publicly available and scientifically backed data, varied based on assumption around local pandemic response plans. The experts also noted that their answers would change depending on potential treatments and testing rates in their local areas[see Figure 6]. 

 

Here are the activities that a majority of professionals see starting up as soon as this summer, or at least within a year’s time: hopes to be outdoors is pretty clear, with 56% of those surveyed hoping to take a road trip before the summer is over. Meanwhile 31% felt that they would be able to go hiking or have a picnic with friends this summer, saying the need for fresh air, sun, socialization, and healthy activity to help keep them on top of their physical and mental health during this time. Public transportation, transportation of any form, I would say is one aspect that’s been put on hold, whether it’s by train, plane, or even automobile. Many of the surveyed specialists lamented the strain the pandemic has had on relationships as evidence by the social situations they hope to restart sooner rather than later. On the other hand, there are certain activities that they considered to be too risky to engage in for the time being. A large share are putting off attending celebrations such as weddings or concerts for at least a year or more out of perceived social responsibility. Perhaps, I would say the most surprising finding, is that 6% of specialists do not expect to ever hug or shake hands as a post-pandemic greeting. On top of this only half consider making this necessary for at least the next year[Figure 6].

 

Figure 6: How Long Do Experts Think It WIll Take To Return To The Status Quo?

 

19:24- International Responses to the Pandemic

ET: Moving onto the visual on the right[see Figure 7]. COVID-19 has brought the world to a halt but after months of uncertainty, it seems the situation has slowly taken a turn for the better. Today’s chart measures the extent to which 41 major economies are reopening, by polluting two metrics for each country: the mobility rate, as well as the COVID-19 recovery rate. The mobility index refers to the change in activity around the workplace. Tracking activity around residences  measured as a percentage deviation from the baseline. COVID-19 recovery rate is the number of recovered cases in a country being measured as a total percentage of total cases. Data from the first measure comes from Google’s COVID-19 community mobility report, which relies on aggregated anonymous location history data from individuals. Note that China does not show up on this graphic as the government bans Google’s services. In general, the higher the mobility rate, the more economic activity this signifies. In most cases, mobility rate also correlates with a higher rate of recovered people in the population. Here’s how these countries fared based on the above metrics:

 

#1: High Mobility, High Recovery- High recovery rates are resulting in lifting restrictions for people in this quadrant, and people slowly are returning back to work. New Zealand has earned praise for its early and effective pandemic response, allowing it to curtail the number of total cases. This has resulted in a 98% recovery rate- the highest of all countries. After almost 50 days of lockdown, the government is recommending a flexible 4 day work week to boost the economy back up[Figure 7].

 

#2: High Mobility, Low Recovery- Despite low COVID-19 related recoveries, mobility rates of countries in this range remain higher than average. Some countries have loosened their lockdown measures, while others didn’t have strict lockdown measures to begin with. Brazil is an interesting case study to consider here. After deferring lockdown decisions to state and local levels, the country is now averaging the highest number of daily cases of any country. On May 28th for example the country had 24,151 new cases and 1,067 new deaths[Figure 7]. 

 

#3: Low Mobility, High Recovery- Countries in this quadrant are playing it safe and holding off on reopening their economies until the population is fully recovered. Italy, once the epicenter for the crisis in Europe, is understandably where you have cases rising back up to critical levels. As a result it has opted to keep it’s activity to a minimum to try and boost the 65% recovery rate. Even as it slowly emerges from more than 10 weeks of lockdown[Figure 7]. 

 

#4: Low mobility, low recovery- Last but not least, people in these countries are cautiously remaining indoors as their governments continue to work on crisis response, with a low 0.05% recovery rate, the UK has no immediate plans to reopen. A 2 week lag time in reported discharged patients from NHS services may also be contributing to this low number. And although new cases are leveling off, the country has the highest coronavirus caused death toll across all of Europe. The US also sits in this quadrant with, as of writing this, 1.3 million cases in counting, now well in excess of 2 million cases. Recently some states have opted to ease restrictions on social and distant activity, which could potentially result in cases climbing back up. Over in Sweden, a controversial herd immunity strategy meant that the country continued business as usual amid the rest of Europe’s heightened regulations. Sweden’s COVID-19 recovery rate since is 13.9% of the country, 93% mobility rate suggests that people have been taking their own precautions[Figure 7].

 

Figure 7: Mobility Rate vs Recovery Rate: COVID-19 International Response

 

24:04- Zoom Communications

ET: With the COVID-19 pandemic, many people have transitioned to working and socializing from home. If these trends become the new normal, certain companies may be in for a big payout. Popular video conferencing company Zoom Communications is a prime example of an organization benefiting from this transition. Today’s graphic inspired by Lennard Dobrovsky at Lufthansa Innovation Hub is a dramatic look at how much Zoom’s valuation has shot up during this unusual period in history[see Figure 8]. May 15, 2020 Zoom’s market capitalization has skyrocketed to $48.8 Billion, despite posting revenues of only $623 Million over the past year. But separate Zoom from it’s competition, and what’s led to this massive surge in mainstream business culture? You might be asking yourself the same question. The reality is industry analysts say that business users have been drawn to the app because of it’s easy to use interface, and user experience, as well as the ability to support up to 100 participants at a time. The app has also grown amongst educators for use in online learning, after their CEO took extra steps to ensure that k-12 schools could use the platform for free. Zoom meeting participants have skyrocketed in past months, going from 10 billion in December of 2019, to a whopping 300 million people as of April 2020. 

 

25:45- Airline Industry

ET: The airline industry has been on the opposite end of this, they’ve been suffering unprecedented unemployment, as international restrictions have shuttered airports. The world’s top airlines by revenue have fallen in total value by 62% since the end of January[Figure 8]. With countries scrambling to contain the spread of COVID-19, many airlines have cut travel capacity, laid off workers, and even chopped executive pay to try and stay afloat. If and when regular air travel returns, remains a major question mark for all of us. And even patient investors such as Warren Buffet have pulled out of airline stocks.

 

Figure 8: Zoom Is Now Worth More Than The Top 7 Airlines Combined

 

26:23- Toward a Meatless Future

ET: This visual looks at the future of meat consumption [see Figure 9]. The way people choose and consume their food is changing. It’s encouraging a sweeping shift from animal based to plant based food products. Whether it’s from the perspective of environmental impact, cruelty to animals, or health benefits, meatless diets are quickly becoming a new normal for people around the world. But where did it all begin?

 

Today’s infographic on earthly origins of vegetarianism, explores how the industry erupted into a lucrative web of subcategories that are wetting the appetite of investors the world over[Figure 9]. Taking a holistic view of vegetarianism, there are several different diets that people typically adhere to. A vegetarian for example, doesn’t eat meat, but still consumes animal products such as dairy and eggs. On the other hand, a vegan eats a strictly plant based diet. 70% of the global population are now reducing their meat intake. Veganism has become a lifestyle choice for many. By 2026, the global market is projected to be worth well in excess of $24 Billion. Now, while this seems like a relatively new phenomenon, the meatless revolution has been quietly building for almost two centuries. 

 

Figure 9: How The World Is Embracing A Meatless Future

 

27:55- Merrill vs. Verde

ET: What I’d like to do now, is switch gears and talk about my personal experiences during the financial crisis of 2008. And for all of you, compare and contrast that to what I see during the COVID-19 pandemic that we’re currently living in. As many of you know I started my career at Merrill Lynch, in 2008 I was an intern at Merrill just as the global economy was beginning to implode. And what I saw in the office was a company very much in total chaos. Situations where brokers are reluctant to take client phone calls, interns were answering phones as well, I was one of those interns at one point. I heard from clients that were crying on the phone at times, even showing a range of other emotions. The company had to be bailed out obviously by rival banks or rival bank, Bank of America due to the toxic mortgage backed securities it had purchased during that time frame. In addition there was a ‘hunker down’ mentality that caused investors, I would argue, to be fearful, when in retrospect they should have been more opportunistic.

 

29:10- The Flip Side at Verde

ET: Here’s the flip side of that. Compare that to what I see today at Verde. As an investment advisor, I see a company that is very much ready for battle. As a firm, we have anticipated a possible recession and have prepared clients using our recession risk forecast tools. Although Verde did not predict the COVID-19 crisis, clients were very much prepared for the market turmoil. Communications during the crisis increased substantially, we had many more phone calls, additional video meetings, client wide emails, a new blog that we created, daily social media posts, and even this webinar that you are experiencing today. The company continues to grow verde, where even recently, we have hired 3 new full time employees. We also hired three new summer interns. We have a new office that has expanded, which is arguably 3x larger than the space we had before. Throughout the downturn, portfolios were being rebalanced to take advantage of investment opportunities. All of this makes me confident that you as clients are going to be well taken care of as we continue to navigate this market. 

 

30:36- Survey Results (From Earlier in the Chat)

CL: Thank you Eric, and thank you to everyone that submitted a response to our question. Again, we wanted to know if there was a COVID-19 vaccine, would you take it?

 

Based on your response, 78% said that they would take the vaccine, while the rest of you chose not to. I’m going to turn it over to Carl Szasz(CS), Verde’s CEO and Chief Compliance Officer, for an explanation of the results and what we can learn from them. Carl, over to you.

 

CS: Thank you Cindy. You may have wondered why we chose to ask this question. The first reason is that we’re just naturally curious. There are many vaccines in development currently, for COVID-19, and we wanted to know, if a vaccine became available, would people actually take it? The way we posed the question, gave additional information that you could use to make your decision. When we told you that it would be at least 99.9% effective, we did this on purpose to give you some numbers so that you didn’t have to speculate as to the effectiveness. We also planted a negative seed, telling you that 1 of 1000 cases would actually get side effects, including also possibly COVID-19 itself. While we know that nothing is 100% safe, it’s interesting to see that only 78% of you chose to take the vaccine. The results show a negativity bias that exists in all humans.

 

If you were acting completely rationally, and looking strictly at probabilities, as a machine would: 99.9% would have taken this vaccine. The fact that less than that chose to take the vaccine, shows how our emotions and preconceptions derail us from making mathematically sound decisions. We’ve been researching this phenomenon, and it explains why some investors are skittish about getting into the market even now, despite a known probability that markets go up 80% of the time. Choosing to stay out of the market is a bad bet. 

 

I’ll leave you with just one quote before we open it up for questions and answers: “Forgive the negative people, they’ve learned too many lies.”

What this quote means to us, is that we should embrace data, question and test conventional wisdom, and make the best decisions we can, knowing that the worst case scenario is often not the most likely scenario.

 

33:10 Question and Answer

 

33:50

CL: How long do you, or does Verde, see the COVID-19 disruptions lasting, and why?

 

CS: We don’t try to make predictions about how long we think things are going to last. The reason why you really shouldn’t care about our prediction, is that it will be no better than anyone else’s. Not only that, but it’s most likely going to be way off. We’re not infectious disease experts, we’re not epidemiologists. The best way for us to try to get to that question is really to harness something we call the wisdom of crowds. The wisdom of crowds is a concept we use here to poll large numbers of people, to get to the answer of something that perhaps 1 or 2 of us would not be able to get to. The best example I can give for this would be: imagine if one of you was a jeopardy guru, and you just knew how to play jeopardy really well, if we tried to play against you 1 vs. 1, we would stand almost no chance of beating you. But if, let’s say for example, I could bring 1000 of my friends to play against you, the chances of you beating the collective wisdom of 1000 people is slim to none. Which is why, today, the best jeopardy player in the world is not a human, but rather a Machine: Watson, owned by IVM computer company.

 

In our estimation, when we’re thinking about when the COVID-19 disruptions will last, we use the wisdom of crowds concept to figure that out, and as this presentation pointed out, we believe that that’s going to be within about a year, or maybe slightly over a year. When we surveyed about 1,400 adults, the predominant answer, the median response, was that it would take the economy at least a year to recover from COVID-19 economically. Now, we don’t know if that’s going to mean the disease will be completely dead by that point, but economically we should be recovering at that point. This gives us an indication for how we’re going to invest money, and shows us that this will be something that we can recover from relatively quickly.

 

36:30

CL: What do you think about the market’s behavior during the pandemic? Do you think the market is accurately reflecting what’s happening in the larger American or global economy?

 

CS: I think the market is reflecting the future. Maybe not quite what things are today, but rather where we’re going. The stock market is itself a crowd, if you think about it. It’s a bunch of investors that are self interested, making independent decisions on their own, based on their own personal circumstances. I think what the market reflects is optimism that the future is going to be better than the past. Consider for a second, that even though we’re not past the crisis, we know a lot more about the disease today than we did in the past. We know how it spreads, we know how you can get it, we know how to stop it. We’ve seen some countries like this presentation pointed out, like New Zealand that have beaten the disease. We’ve also seen other countries like the United States and maybe Brazil, that are continuing to struggle with it. There’s a multitude of different approaches that we can look to, and I think the stock market reflects the optimism that the entire human race is focused on this singular problem. And if I was a betting person, and I was to try to make a bet, humans vs covid: I would never bet COVID, I think humans are incredibly resilient as a species, incredibly ingenious when it comes to our medical capabilities. I do think that we’re working on several fronts to defeat the disease, whether it’s social distancing, face masks, quarantines, more testing, even on the medical front: some of the therapies that have been incredibly effective at fighting COVID, we’re seeing mortality rates drop even when someone does get it. Eminently we’re going to have a vaccine, hence the question that we asked.

 

We hope and are encouraged by the fact that 78% said you would take the vaccine, we think that that would be a good thing, otherwise why are we building the vaccine, if a larger percentage of the population wouldn’t take it? We think again, the stock market reflects, not where we currently are, but where we’re going. And in that sense, I think it has it right.

 

39:33

CL: Big drops in the market make me super nervous. I’ve worked hard for my savings and investments, and I don’t want to lose them. How do you feel when the market drops, and what words of wisdom do you share with your clients to help address their fears?

 

ET: When it comes to what’s happening in the market, it is normal for any of us to have raw emotions. Remember, we’re humans, this is how we’ve been created. We’re going to have visceral reactions when we see things that go against us or make us feel uncomfortable. So, the realization that things can be irrational within the market, also understanding that you have to flip things on its head and look at it from a different perspective I think is also crucial. So, specifically what I do: I have emotions, I have that same visceral reaction when the market moves down or moves against me in my own portfolio, let alone clients. 

 

At the end of the day, I remind myself that there’s this normal, typical, course that emotions will take throughout a normal cycle. Case and point, when the markets typically go down, we automatically have this feeling of fear or apprehension that we’re entering ourselves that makes us feel uncomfortable, when in reality we should flip those emotions upside down on their head, and at that point, look at things from an opportunistic standpoint. And as I’ve alluded to in meetings, it’s where you literally have to look at the fire and when everyone is running away from the fire in the other direction, you have to look at me and I’ve gotta lock eyes with you, grab each others hands, even though we’re sweating together, and say “nope, we’re not going to go with the crowd and a bunch of the idiots. Instead we’re going to go towards it because this is our best opportunity to take advantage and capitalize moving forward.” And for many of you that we’ve had these conversations with, over this time frame, especially into the end of February, March, April, even into May, that is what we did, deploying cash to be opportunistic. Rebalancing when it was effective. Holding your hand and saying it’s going to be okay and just trust that this is a normal course of action with the market. That is how I deal through these normal instances. Understanding again, being visceral, having this feeling is typical, but also remind yourself of what we’ve talked about in meetings where you have to flip it on it’s head. Understand that the smart money is typically taking the other side of that. 

 

42:35

CL: Have you tried plant based meat replacement products like beyond meat or impossible burgers? Do you like it? Do you think this is a passing pandemic fad? Or a new permanent staple of today’s life?

 

CS: Yes, I’ve tried both the Beyond Burger, the Impossible Burger as well. I like the Beyond Burger because it’s the one I can buy stock in (haha) but actually, the Impossible Burger is delicious as well. I’ve challenged many of you, I think, that are clients, to consider going on a date and instead of getting a normal burger, in this case (COVID-19) you might get carry out, but instead of getting a normal burger, consider getting a plant based burger. Whether it’s the Beyond Burger or Impossible Burger, I think that there’s several restaurants that serve these, and they can also be purchased, I believe, at Kroger and Costco. 

 

These are not your typical bean burgers. They taste almost identical to meat. They have no meat and some of you may know this, but my wife is a vegan at this point. She became a vegan maybe 2-3 years ago. I’m not, but I do eat less meat now than I have in the past. To me, it’s indistinguishable, I can’t really tell the difference. I think when it comes to ‘The Meatless Revolution’ as we call it in this presentation, there’s lots of reason why this is becoming a long term trend. But I think that in order for it to happen, because again, we’ve had vegetarianism for 200+ years, the reason why it’s becoming more prevalent now, is because the taste is there, and we have the technology today to do plant based foods that are virtually identical. 

 

My kids joke around now whenever we get something, they’ll cleverly ask the question, “Is this real or is it fake?” My wife says, “everything real.” But chicken nuggets, burgers, meatballs, spaghetti, all of that now can be made to be completely plant based. We see economic benefits in the sense that plant based foods are less harmful to the environment. They’re nutritionally, in many cases, better now. They include protein, which is the major thing that everybody has complained about, “you need protein.” These things have as much protein if not more than the meat alternatives. And most importantly they can feed the world sustainably. If everyone ate like the average American all over the world, we don’t have enough land mass to have that many cows, and that many pigs, and that many chickens. The plant based alternatives that we’re talking about use 95% less land, 95% less water, 85% fewer carbon emissions, and so they’re how we can feed the world in 2050, in 2100. At Verde we’re always thinking about where we’re going next, not where we are now. If you’re skeptical like I was, do yourself a favor, try it once, and come tell me I’m wrong.

 

ET: Let me add something to that Cindy and Carl. This is a much bigger theme outside of just something that’s edible, or what’s being put on our plate. I would argue this ties into, and think of yourselves and think of how your own mood and your approach toward buying things has changed, think of your kids or grandkids and how they approach buying things. This ties very much into this whole topic of ESG: Environmental, Social, and Governance factors. Everyone wants to be more conscious about not only how they’re taking care of their mind, but also how they’re taking care of their body, but also from the nourishment standpoint. And if you look at that market specifically, it is expected to reach up to $52 Trillion over the next two decades. Massive. And it’s not just big institutions, I think it’s also people within each one of our families. And that’s where the biggest shift is, it’s very much larger than just a meat replacement or a meat substitute. 

 

And to give you an example more directly, there’s a specific company ( and if anyone is curious, please reach out to me) that’s based in the US, and they pride themselves on being able to have radical transparency. This is a clothing company, and what they do is they have radical transparency when it comes to their price, their products, and specifically how much they’re actually paying workers for working in other countries. And by the way, it will not say that it is made in lets say “Taiwan” hypothetically, but it will actually specify that specific region. And at times, give you even more clarity to know where your linens are coming from, to know where that product is produced. Understand who was involved with every step of that process from start to finish. They have made me a raving fan, and if I look at other aspects of my life, from Beyond Meat to many other areas, I am even becoming more conscious with some of these things. So know that there will be meetings that we’ll have where we’ll dive into this on a much greater scale, but know that that is very much the future. And I pose another question or test to all of you, outside of trying meatless burger vs a meaty burger. In this case, ask family or friends if they have different ways to approach buying clothes, or being more health conscious, and you might be pleasantly surprised.

 

49:29

CL: [Follow up question and commnet]- What about the gas mileage, as far as the output goes for producing meatless options? Unfortunately the beyond meat at Whole Foods adds a lot of additives, so it’s not as healthy as you might think. Do you have any response to that?

 

CS: I do. So, nutritionally speaking, a burger is not going to be that great for you. Nobody is saying that if you eat a plant based burger, it’s like eating broccoli. It’s not. It’s still a burger, right? There’s plenty of salt, there’s plenty of additives, as there is with meat as well. The main argument behind having a plant based alternative like impossible foods, or beyond meat, is not that it will just all the sudden make you healthier. It’s that you can essentially eat it guilt free, and not just that, but eventually you’ll see that the cost to produce these things will be significantly cheaper as well. In my estimation when you look at that and say, “okay, it’s going to taste virtually the same, it might not be that much better for me, it’s maybe a little bit, or maybe about the same, they’re both burgers. Shouldn’t have one every day, breakfast lunch and dinner, maybe once in a little while” I think that there is a market for it, and interestingly enough, the people that are pushing these are not your traditional vegan/vegetarian that’s been vegan for 20 years. 

 

The people that are essentially trying these are people like me, meat eaters, that just say, hey, I’d love to reduce my meat intake, but I don’t want to give up taste. That’s really what stopped me from making a transition like that is because until now, a lot of the options were just really really bad and didn’t taste great. For me, taste is paramount, because I eat for pleasure, not just substinane. This is something that we’ve seen in the past, when you ask car buyers, why do you buy a car? People will list what they think you want to hear: safety, gas mileage, those kinds of things. What statistics often show is that that’s not really why people buy cars. They buy cars for things such as the styling, the 0-60 mph capability, how fast is the car, how sexy is it, how good does it look? I think food is very personal, and that people are going to not choose to eat something like this because you guilt them into it. If you say “look at that baby goat, or that cow. Don’t you feel terrible for slaughtering it?” I may feel terrible, but I’m not going to want to talk to you after you make me feel guilty for eating it. What it will take to convince people to do this, is telling them, listen: you can have it both ways. You can enjoy the taste, and you can know that you’re not slaughtering that baby goat or that cow. I think that’s the catalyst this time around, is for the first time around we’ve got both.

 

53:29

CL: Eric, what’s the single biggest reason for the differences in your experience at Merrily in 2008, and Verde during the pandemic? What have you learned from both?

 

ET: Good question. Off the cuff, the things that stand out most vividly is culture. There’s a family oriented culture that we have here at Verde that I never had the ability to see on the other side. It was more cut throat, not communal. Here, as much of our team has seen, we care about each other, we are a family. In addition, we treat our clients with the same level of dignity and respect, and I’d say that says something about who we are as a firm but also as people. 

 

So culture is what sticks out vividly, and as a close second, it’s innovation. I know no one has had an opportunity -unfortunately- to see our new office space, which even by my wildest imagination couldn’t have thought of a space that’s 3x larger than where we were before. It is massive, and we have an incredible experience that people can have from one room to the next room, to even our outdoor deck. We change up not just how you have a meeting, but to revolutionize what’s been done in this industry arguably has not been done up to this point. I find us to be quite innovative to where you are at a brokerage house, very much drinking the kool aid. I will admit when I was there I drank the kool aid, and didn’t know what else was out there until I saw the light. It sounds crazy but that’s the reality check. You are told what to do and what to sell, while here we’re able to use our minds and be creative. So culture and innovation, those are the biggest things that I take away.

 

Verde Capital Management, Inc. is a federally registered investment adviser. The information, statements and opinions expressed in this material are provided for general information only, are based on data we believe to be accurate at the time of writing, and are subject to change without notice. This material does not take into account your particular investment objectives, financial situation or needs, is not intended as a recommendation to purchase or sell any security, and is not intended as individual or specific advice. Investing involves risk and possible loss of principal capital. Diversification does not ensure a profit or protect against a loss. Past performance is not indicative of future returns. Advisory services are only offered to clients or prospective clients where Verde Capital Management, Inc.  and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Verde Capital Management, Inc. unless a client service agreement is in place.

Fireside Chat – PIP Reform in Michigan

On July 2nd of 2020, Michigan put in place it’s no-fault auto insurance reform law. This law changed much of what we currently know about Personal Injury Protection(PIP), giving drivers a variety of auto insurance coverage options to choose from.

 

In order to understand these changes better, as well as understand how these changes might impact our clients at Verde, on July 16th the Verde team invited Corey Wilson to come talk on the topic in one of our series of fireside chats. Corey is the Vice President of Business Development at Oakland Insurance. In addition to giving insight on what these changes truly mean, Corey was able to discuss a number of questions from the audience.

 

In order to keep our clients informed and in the loop, we’ve attached the fireside chat to this post as well as time tags and a general transcription of topics covered in the chat. We hope you find the information informative!

 

1:24- “What is PIP?”

-Personal Injury Protection (PIP): Coverage under the current law, passed in Michigan to provide unlimited lifetime benefits for any type of injury sustained in an auto accident in the state of Michigan.

-Covers medical, replacement service costs, attendant care, modifications to home/vehicle as needed, as well as work loss.

-A lot of people attribute PIP to higher car insurance rates in Michigan.

-Most people don’t know it’s not 100% covered by the auto insurance carrier.

 

3:59- MCCA: Michigan Catastrophic Claims Association

-Provides unlimited coverage. Auto insurers are only responsible for the first $580,000 of medical coverage on the auto policy. After that, the insurance policy is reimbursed for the remaining costs.

-Founded in 1973, the cost currently stands at $220/year per vehicle in the state of Michigan.

 

4:17-No-Fault Insurance Reform & PIP: 

-New MCCA Rate will change to $100/year per vehicle (large savings)

-New PIP Limits and Reductions for 2020-2021:

1: $50,000- reduced by minimum of 45% (only available to those on Medicaid, with proof)

2: 250,000- reduced by minimum of 35%

3: 500,000- reduced by minimum of 20% 

4: Unlimited as we have it today- reduced by minimum of 10%

5: Opt out available to those who are on medicare or those with qualifying health coverage, must be verified through a letter stating 

1)that they don’t exclude auto accidents, 

2)the deductible on the plan may not be more than $6,000

3)those with medicare parts a and b can opt out of the coverage, eliminating the entire MCCA fee as well as all benefits associated with PIP coverages. True for the $250k and $500k options. This just means you will not have access to MCCA funds.

 

9:03- How much of a difference in savings is there going to be from unlimited to 500k and 250k?

There isn’t a very big difference when looking at the size of the reduction. There’s roughly a $106 dollar decrease. The savings isn’t necessarily justifying the lost coverage. If a policy holder has 10 vehicles for example there may be a bigger discount.

 

11:13- Interesting Changes on the PIP Reform:

-The old PIP benefited literally everyone, even the individual who may have stole your vehicle if the individual was injured from wrecking your vehicle: your auto policy was covering their medical costs. This has changed however. There is also a change stating that the passengers in a vehicle are not covered on your policy. Injured passengers are now covered up to $250k by the state and they must sue the other party in order to receive the rest of the money. 

 

13:12- How did PIP work before?

Order of Succession:

  1. Collecting under the named policy holder, policy
  2. Falls to the resident relative policy in the household
  3. The owner of the vehicle
  4. Insurer of the driver of the accident involved vehicle
  5. The signed claims plan (with unlimited benefits provided by MCCA fund)

 

14:15- How has PIP changed now?

New Order of Succession:

  1. Insurer of the named insured
  2. Insurer of a spouse or resident-relative
  3. The assigned claims plan (with unlimited benefits)

**The individual who owns the car and the driver of the accident motor vehicle are removed from the order.

 

15:25- Out of State Drivers

The state now specifies that only the driver benefits as an in-state driver. Any other situation would go to the provision of the state that that individual was from.

-If an individual wrecks your vehicle by wrecking property, there is no longer afforded cost coverage. The owner of the vehicle assumes the liability. Insurance policy doesn’t cover the cost with an out of state driver.

 

17:15- What does PIP cover?

A lot more than just medical.

-Funeral and burial expenses (ranging rom $1750-5000 depending on policy)

-Work Loss: pay up to 85% of lost wages (up to 5718/month) for a three year period.

-Replacement Services: laundry, lawn care, household maintenance (up to $20/day)

-Survivor Benefits: survivor spouse and children payments

-Medical expenses covered by PIP including doctors visits, hospitalization, surgeries, MRIs and diagnostic tests, physical therapy, rehab, prescription medications, and attendant care.

-Vehicle Modifications: things such as wheelchair lifts, or special modifications you may need on the vehicle

-Home modifications: elevator lift, wheelchair lifts, walk in showers eat.

-Medical Mileage: any time you drive to and from a medical appointment

 

21:26- Liability Claims

-Before Reform: 

-Minimum liability limits were $20,000/person and $40,000/accident

-Mini-Tort: The previous maximum recovery for damage to a motor vehicle by a negligent driver was $1000

-New Required Liability Limits as of July 2, 2020:

-Minimum liability limits: $50,000/person $100,000/accident

-Default liability limits of $250,000/ and $500,000/accident. Automatically done unless you sign a waiver form reducing your limit down.

-Combine Single Limits: $510,000 with signed form, $500,000 bodily damage/$10,000 property damage

-Mini-Tort: New maximum recovery is $3,000 for damage to a motor vehicle by negligent driver

 

23:58- Potential exposure for your family

-Under Old Law

-An injured person could seek damages for pain and suffering (non-economic damages), and damages in excess of PIP coverage (economic damages including wage loss and survivors benefits extending beyond three years after the accident) from negligent drivers and owners.

-The injured person must have had experienced a serious impairment of bodily function, ie. loss of limb, scarring, etc.

-Under New Law

-An individual can be held responsible for the medical injuries and the work loss of the other individual. 

-Rear-ending someone with no insurance for example: if you injure that person, they would have max $250,000 and you would be held responsible for anything above that.

 

25:57- Coverage Option Guide

 

 

26:47- Options to chat with your insurance agent about

-Umbrella Policy: Specific personal umbrella policy for liability that will extend over your auto policy (your home policy, your boat ect), to give you an extra liability blanket. Discounts could come for buying this policy. Under the new law, it’s potentially scary to think about what you could be sued for for injuring someone as compared to what it was before.

-Review underlying limits on bodily injury liability

-Review whether

 

28:38- Question and Answer 

 

28:47- At verde, we discuss the idea of ‘Accept/Transfer/Combo’ as far as deciding whether to accept risk, push it to the insurance company, or a combination of taking a risk up to a certain point. Does this new law allow for people to accept more risk if they want?

 

-If you’re a Verde client, and you have very generous benefits, this policy could potentially be a very good thing because they might not have to pay for as much coverage if their medical insurance pays for things. Could be a good thing as far as the reduction of cost and the duplication of benefits?

-It could be but there’s also a caveat. Insurance companies in reality are going to be raising the rate of the other provisions of the policy (liability, umbrella rates ect), because there is a greater exposure for lawsuits. Even if you chose to lower your benefit down, you may experience overall cost savings because liability exposure is going up.

 

31:04- Are you seeing most rates go down or rates go up?

-We’re seeing an average of about 2% reduction overall. We’re honestly seeing more increase because we’re recommending higher coverages now. Raising their liability for better asset protection.

 

31:46- Do you anticipate because the law changed, there might be more competition with new insurance companies coming to the market?

-Under current law, hospitals/doctors don’t have any set rates for their services, they can charge the insurance anything they want. Cost predictability is void. Once the market becomes a little more predictable in the future, we might see more insurance carriers coming to the market. 

 

33:33- Given the fact that we live in the ‘automotive state,’ and the biggest trend in driving is autonomous driving… If you get into an autonomous vehicle, no matter the stage of development, and you get into an accident with a vehicles, how will this impact things? How do you gage risk when it comes to something like autonomous vehicles?

-Currently a black box for insurance companies, we don’t have a great answer, however this is on the auto policy so you should be given the same level of coverage. 

 

37:50- Did I understand correctly that I should receive the 120 dollar reduction for the MCCA portion automatically from my insurance?

-Yes you will, that is state law. The thing to be aware of, we had only one insurance carrier that automatically did that effective July 2nd, regardless of the renewal date. However, when the policy renews, it will automatically be reduced. If you’d like the reduction sooner, you’d have to call and request. 

 

38:57- If my auto insurance is up for renewal within the next 2 months, should I wait or consider making the change now?

-It depends, if it’s that close, I would wait. You should get all your forms in the mail roughly 60 days before renewing. They do a mid term endorsement, to see if you’re subject to any other rate provisions/modifications. Sometimes we have clients who want to do it midterm right away, however when we did the change, the cost of liability was also impacted and didn’t save them a whole lot. Depends on your current circumstance.

 

40:00- Will my insurer, who is currently State Farm, contact me to discuss changed options to the law, or will I automatically be placed into the coverage that most closely mimics what I was placed into previously?

-All insurance companies do need to notify you in writing in advance (about 60 days) via mail to make the selection. Some companies are calling, it depends. All agencies right now are being flooded with calls and questions. Your coverage will automatically be placed into what closely mimics yours, yes. When you get your packet in the mail, if you have less than $250,000 in auto liability, that will go up automatically. If you have unlimited benefits, your policy will remain on unlimited benefits unless you choose something else. To change, you would need to sign the pages they send you, as well as choosing the option you want, and mailing that back in to them.

 

41:37- With all these changes, what coverage does someone with young teenage drivers take? Unlimited? Your suggestions please.

-First, I would recommend higher liability protection. Young drivers are the most high risk drivers. In terms of medical benefits, it’s specific to your circumstance. I would recommend the unlimited just because it does give you the lifetime benefit. 

 

43:58- For those individuals who after this fireside, would like to dive into additional details, what would you say are the top items that they should review, almost like a checklist of sorts that they should go though?  

-First, start with your medial insurance provider. Understand what your provisions and contracts are. Do they cover auto accidents? Better educate yourself on what your policy is. What we’ve seen, is that a lot of carriers have preemptively started excluding auto accidents and gearing up for this law, because they know that passing these costs onto your employers group plan, is going to drive up the cost for their benefits packages. You also need to monitor this if you choose to go for lower limits on the auto policy. 

-Second, look at your liability part on the policy. Look at what your limits are, talk to the verde team about your assets and your risk, and what you should have for proper liability protection, and then the rest of the policy won’t change until your renewal, so you’ll have the ability/time to evaluate this information before the time comes.

 

47:46

-As part of the Verde client portal, we do provide an area where you can enter in your insurance information: home, auto, medical, disability, life. As part of a comprehensive financial plan, we do a review periodically, at least once a year. If you provide us with your information, we can go through that and leverage partners that we have in order to say, “given your specific circumstances, and your tolerance for risk, what we would recommend.” What we’ve been able to do with these reviews, is going to someone like Corey or whoever you work with, we go through your policies, and look at the gaps. We look at things like you living in a flood zone and you don’t have flood coverage. Or, you’re sitting on 200k but you’re on the unlimited policy, maybe there are some changes to be made. Our goal is to get you to pay the minimum amount necessary to get the coverage that you want. We want you to leverage us for 100% of what we offer.

 

Verde Capital Management, Inc. is a federally registered investment adviser. The information, statements and opinions expressed in this material are provided for general information only, are based on data we believe to be accurate at the time of writing, and are subject to change without notice. This material does not take into account your particular investment objectives, financial situation or needs, is not intended as a recommendation to purchase or sell any security, and is not intended as individual or specific advice. Investing involves risk and possible loss of principal capital. Diversification does not ensure a profit or protect against a loss. Past performance is not indicative of future returns. Advisory services are only offered to clients or prospective clients where Verde Capital Management, Inc.  and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Verde Capital Management, Inc. unless a client service agreement is in place.

Understanding Bear Marketings

Verde Capital Management, Inc. is a federally registered investment adviser. The information, statements and opinions expressed in this material are provided for general information only, are based on data we believe to be accurate at the time of writing, and are subject to change without notice. This material does not take into account your particular investment objectives, financial situation or needs, is not intended as a recommendation to purchase or sell any security, and is not intended as individual or specific advice. Investing involves risk and possible loss of principal capital. Diversification does not ensure a profit or protect against a loss. Past performance is not indicative of future returns. Advisory services are only offered to clients or prospective clients where Verde Capital Management, Inc.  and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Verde Capital Management, Inc. unless a client service agreement is in place.

The Mind

Verde Capital Management, Inc. is a federally registered investment adviser. The information, statements and opinions expressed in this material are provided for general information only, are based on data we believe to be accurate at the time of writing, and are subject to change without notice. This material does not take into account your particular investment objectives, financial situation or needs, is not intended as a recommendation to purchase or sell any security, and is not intended as individual or specific advice. Investing involves risk and possible loss of principal capital. Diversification does not ensure a profit or protect against a loss. Past performance is not indicative of future returns. Advisory services are only offered to clients or prospective clients where Verde Capital Management, Inc.  and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Verde Capital Management, Inc. unless a client service agreement is in place.