Business Innovators Radio - Interview with Pasquale Sacchetta President of CFIG Wealth Management Discussing Market Risk

Episode Date: June 28, 2024

Mr. Sacchetta is president of Westport based CFIG Wealth Management, LLC. He is president and an investment adviser representative of Continental Five Investment Group, LLC. He is a CERTIFIED FINANCIAL PLANNER® practitioner, an Accredited Estate Planner professional, and a Chartered Life Underwriter designee. He specializes in retirement planning, estate planning, and business planning.Mr. Sacchetta is a member of the Estate Planning Council of Lower Fairfield County and the National Association of Estate Planners & Councils (NAEPC). He is a qualifying member of the Million Dollar Round Table, the Premier Association of Financial Professionals®.Mr. Sacchetta was born and raised in Connecticut. He graduated magna cum laude from Connecticut State University in New Britain, received his MBA from Fordham University in New York City, and his Chartered Life Underwriter (CLU) designation from the American College in Bryn Mawr, Pennsylvania. He is a life member of the U.S. Tennis Association and a member of the U.S. Golf Association. He is fluent in Italian.Mr. Sacchetta was recently named in the newly released editions and has been named in multiple previous editions, of the Marquis Who’s Who in Finance and Business, the Marquis Who’s Who in the East, the Marquis Who’s Who in America and in the Marquis Who’s Who in the World. He has earned numerous industry awards and distinctions. He has been quoted in local and national media.Learn More: https://www.cfig-wealth.com/Investment advisory services are offered through Continental Five Investment Group, LLC, a Registered Investment Adviser, 1555 Post Road East, Suite 206, Westport, Connecticut 06880.Influential Entrepreneurs with Mike Saundershttps://businessinnovatorsradio.com/influential-entrepreneurs-with-mike-saunders/Source: https://businessinnovatorsradio.com/interview-with-pasquale-sacchetta-president-of-cfig-wealth-management-discussing-market-risk

Welcome to influential entrepreneurs, bringing you interviews with elite business leaders and experts, sharing tips and strategies for elevating your business to the next level. Here's your host, Mike Saunders. Hello and welcome to this episode of influential entrepreneurs. This is Mike Saunders, the authority positioning coach. Today we have with us, Pasquale Saquetta, who's the president of CFIG wealth management, and we'll be talking about market risk. Pasquale, welcome to the program. Thank you, Mike. Hey, so I'm looking forward to talking with you because I think a lot of times people recognize that there's risks out there.

And if you know about them, then you can address them. So I want to dive into market risk. But first, give us a little bit of your story and your background. And how did you get into the financial services industry? Well, thanks for having me. I started while I was still in college, and it was a choice between two jobs. One was investment related where you needed a security license, and the other one was an insurance company, because it was outside Hartford.

And Hartford at the time, being an insurance capital of the world. So I applied for both, and I got the one with the securities license. And so while I was still in school, we began working with mutual funds back at a time when not a lot of people knew what a mutual fund even was. And from there, I started my own firm. And there's been some periods of evolution ever since where things, you know, change and you have to grow with it. And the state planner, we have a registered investment advisory firm as well as an insurance. agency that is under our CFIG wealth management umbrella, so to speak. And we are completely independent, not affiliated with any banker or insurer. And we completely focus on our clients' long-term

planning. You know, before we dive into, you know, how to mitigate market risk and what it is and all of that, something jumped out at me that you just said about independent, completely independent. And so I want you to go a little bit deeper on that because I think that sometimes people don't realize the full value of that, whereas I used to be back in the late 90s in the mortgage industry, and I know if you worked for where I worked for JPMorgan Chase Bank, all you could offer is their products. And it was limited. Sometimes you wish you could do a different product, but you didn't have it. So talk a little bit about the flexibility that provides you to your give to your clients being an independent advisor.

Well, the best example I have really is for clients to understand what true independence means. And a lot of times financial advisors will use certain words to describe certain things that are just generic in nature. But I use an example if my client and their IRA would like to own sheep in New Zealand, we can make that happen. If that's a good investment, then we can make it. it can happen, huh? Right. And so it's, it's the independence is we, we don't have any kind of list that tells our advisors, you know, you can only work with these products because we have a deal in the back end or something like that. We are completely independence. We can choose any mutual fund we want to work with. We can choose any portfolio we want to work with. But our core portfolio,

we manage in-house for our clients on a truly independent basis. So our goal is to have the most diversified portfolio with the least amount of risk and volatility with the lowest internal costs. That's what our primary goal is. And our clients benefit other ways by having that kind of independence, namely in the tax area where it becomes very tax advantage to control. what you have. So let's dive into a little bit of, oh, go ahead.

What I generally tell people is most financial advisors will claim to be independent if they don't work in house for a particular firm or one firm. But being independent means that you should be able to represent your client and use whatever product or services available to help them meet their needs. That's what true independence is. So we do not have any kind of proprietary lists or products or anything that would preclude us from using whatever products or services we need to help our clients achieve their goals. And that's what we focus on. Yeah, I think that is so important is it's not what's in it for you like, oh, here's the flavor of the month, this product we need to push to clients.

It is what is the client need? And then we've got a whole suite of opportunities out there that we can pull from here, pull from there, and put together a safe retirement plan. So talk a little bit about this market risk we started off thinking about. We all know what the market is. So how would a major market downturn impact retirement savings other than the obvious? Like downturn is bad. that affects retirement savings.

But what are some of the nuances that go into that? Well, Warren Buffett has a lot of interesting sayings when it comes to market risk and how he invests. And everything that he does is primarily for the long term. I have never known nor have I heard or read anywhere that he bought and sold something the same day or in a short period of time. from the beginning of his career, he's been very long-term focused. And what that means is that you believe whatever asset you're investing in today to be of value so that over time, the value of that asset,

if you're buying it at a good value today over time, it should become more and more valuable and become, you know, an investment that in your situation is, going to provide you with whatever it is for your goals. So to think about is in a portfolio, when you look at market risk in a simplistic basis, is you look at whatever price you pay for something, and if that price is higher, that means you made money. If the price is lower than you paid for it, you lost money.

In very simplistic terms, that's market risk. The way that it affects people in retirement or a person's retirement savings is that, for example, if you have a million dollars, say for retirement and you have a diversified portfolio, and let's say that it's market oriented, so the market goes down 20%. Now your million dollar retirement portfolio is worth $800,000. But the key is not so much that it's worth $800 because hopefully it'll come back to a million. million and then keep growing there going forward. We're going to have up and down years no matter what happens. No market will continually go up and no market will continually go down, at least if we plan to be here. So the main focus is, or the way that market risk or market downturn will affect retirees, is that if they need income from this portfolio,

they will be selling more shares during or after a market downturn than they would have if the market was relatively stable or increasing. And what happens is when you have to sell more shares, those are shares you do not have that will go up and value in the next upturn. And that's how it affects retirement savings more than any other way is from the cash flow standpoint. And you feel like you, like for instance, you don't have a choice. If you need that amount of money to live because that's part of your retirement plan, it's not like, oh, I just want to buy a rowboat.

You know, if you need that money, you need that money. And so if you're in a market downturn and you need to pull money out, now you're pulling money out. and it's in a losing sector, losing position. So it kind of amplifies upon itself, right? Yeah, and that's what happens to the market in general. The more people sell, the more the market will go down. It just, it's a self-fulfilling prophecy. It's a self-feeding frenzy.

The thing to the way that we try to do that is we try to put our clients in a situation where they never, and I really, one of my sayings is never say never or always, but our goal is to never have a situation where a client has to sell anything because we have planned for that in advance. So we, in our core portfolio, you know, right now we're, on an average basis, we're more than 20% in cash in a really solid market. because number one, we're waiting for opportunities and those opportunities will come. But number two, for cash flow purposes, we try not to put our clients in a situation where

anything has to be sold prematurely. And also, I would suspect that people feel like they're, you know, chasing, catching up. If you did have to sell a position or pull money out while the market's down, now all of a sudden, and you feel like, oh, I got to catch up. So let's make some different moves and maybe increase risk. And then all of a sudden it just becomes compounding the other way. So managing that risk, I would venture to say is something that is really, really powerful from a psychological standpoint. True.

So how do you make sure that your clients are aware of and comfortable with the level of risk that they're setting up? because you can put, you can put together a plan that's as risky as can be, and you can put together a plan that's all cash. So how do you assess that level of risk so that they understand it and can set it up the way they feel comfortable with? And in that situation, generally speaking, from the beginning, by having a relationship with the client and knowing, you know, their current total assets and establishing what their goals are, short term and long term, right from the start, we get a pretty good idea of what clients are all about. And it just, the more we know about the client, the more it just becomes inevitable that we have to put together a total package that will meet the client's needs. So, for example, most people are familiar with a 60-40 portfolio where, you know, 60% stocks, 40% bonds. And, you know, you pull out a

certain amount over time if you need income. But it's very difficult to make that work anymore. So what we do is based on what those clients' goals are, we sort of back in the level of risk that's needed. So if there are certain things that we can do to mitigate the risk, then we can have more of a portfolio that's aggressive. If we can't because of a client's age, for example, if we can't do certain things to mitigate the risk, then it would be more of a balanced portfolio from a security standpoint. And certain clients can take advantage of certain, for example,

insurance products that carry certain guarantees. But when you get to a certain age, some of those products are not available. So it all really depends on the goals of the client, and then it depends on what we can do to back into the risk tolerance that they're okay with, but also that helps achieve their short and long-term goals. Yeah, I think that's a huge piece because a lot of times people put off planning for retirement until the last minute kind of a thing, and they don't give enough runway. but yet they want the most perfect well-performing returns possible, but sometimes it's like, that's just we don't have the time for that.

Because to get that level of return, we would need to have high level of risk and that's not smart. So being able to advise your clients to start planning as early as possible and take the appropriate level of risk is huge. It's kind of like don't ever go grocery shopping when you're really, really, really hungry. You're just going to buy everything in sight. So don't try to put together a financial plan. when you're under the gun.

So having that timeframe available, I would suspect, is really a huge piece to put together sane recommendations. Absolutely. And when you're shopping, you know, they give you free samples for a reason. Yep. The thing that we, you know, reinforce with our clients, every opportunity that we get is our goal is we keep. can't control down markets. Markets are going to go down every so often and certain events will make them go down even more different periods of time. So when that happens, most investments will

go down in a big down market. It's just there you can't fight that, that the downward pressure. Our goal is always to outperform on the upside. And that's what distinguishes us from most other investment are financial advisors. You know, when you think about, you know, mitigating or spreading out the risk, we hear the phrase diversification. Talk a little bit about diversification and can you be too diversified? Can you be, can you get spread too thin? So what is your approach to advice and your clients on diversifying their portfolio?

Absolutely. I mean, if you have too many positions, not one position will be able to really provide any meaningful results. So, you know, if you have 100 positions and one does well, it's not going to affect the other 99 very much. So it's very difficult. So the thing is that you want to have certain core holdings that if those core holdings do well as you hope that they will and you plan that they will hopefully, you're going to have a situation where, you know, it's a meaningful return to the portfolio. And the example now is with everyone talking about AI,

one of our core holdings is Navidia. It's been very popular, and it just has gone through a split recently of their share price. So if you didn't, in this market, if you didn't have Navidia in your portfolio, you know, you would notice that because of the large, or the large and increasing return from the NVIDIA stock. So it is important to have a diversified portfolio,

but it's also important not to have it overly diversified because then you won't really benefit from the results. So what is the, in other words, when you start talking to a client about sectors and diversification, And do you get into like, well, hey, maybe what is some of your personal passions and like AI that might not mean anything to one person, but they might really appreciate a different sector. So are you able to put together some things where they can kind of get behind those sectors and or is it just a bunch of numbers? No, actually, most of this kind of information never comes up with clients. the focus is usually on their goals and their cash flow needs or if they're looking to buy something or it's really more needs driven than anything.

So most of our clients don't care what we invest in as long as we know what we're doing and as long as there's not excessive risk or the costs. But we focus on all those things that are important. And so the clients know they're a goal for a core portfolio is to have the lowest internal costs. You know, we emphasize that. So they know that and they understand that. Because the clients have access to their accounts 24-7, they can see exactly what we hold. So that transparency is what clients like. it's more so the transparency than having a say in exactly what's owned in that portfolio.

They just basically, you know, kind of can see everything come together. They can see how the sausage is made, so to speak. And then do you recommend reviewing like quarterly or annually or what's the frequency that you would relook at something? Well, that depends on the client. Some it's very frequent. Some it's once a year, maybe like a client dinner once a year. So, you know, and some kind of in between. But there is information being exchanged on a regular basis.

So the review is not as important as it might otherwise be because, you know, clients are always getting information, especially when it's timely, when they need to know something. So also we have described. discretionary authority with our clients. So we can do whatever it is that we believe that's in the best interests of our clients. So I don't go calling clients and say, hey, we're thinking about investing in, you know, GM, what do you think about that? You know, we don't ever do anything like that. It's our job to research and to have a buy list.

And if we want to take on a position that we feel is right for the client portfolio, then, you know, We have the authority to do that on behalf of our clients. Yeah, that's really smart. So I think that a lot of these things we've been talking about here really are highlighting the fact that there is risk, but sometimes calculated risk, is just fine if it is dialed in the right way for your needs and your retirement needs. So I think so many of these things are really, really helpful to be keeping in mind. And it's not something you can just, you know, Google and do on your own. So I think that that is something that clients need to remember as well. So if someone is listening to this thinking maybe I need to get a second opinion or a second look at what I'm doing, what's the best way they can learn more and then also reach out and connect with you?

Well, our website address is www.cfig-wealth.com. and our phone number is 203, 22100. We're in Westport, Connecticut. Excellent. Well, Pasquale, thank you so much for coming on. It's been a real pleasure talking with you today. You too, Mike. Thank you for your time.

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