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The Concinnus Financial Philosophy on Modern Financial Services

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Here at Concinnus Financial, we believe in the power of business ownership. Our goal is to put that power into the hands of our clients, help them clarify their financial status, and put many of the common fears about money to rest. We pair our battle tested investment methodology with tax, insurance, and financial planning services. Part of the beauty of our strategy is the ability to be flexible when the need arises, not constrained by the traditional trappings of the financial industry.


Let’s start with a few basic definitions. An asset class is any one of the following: Equities (stocks), bonds, real assets, derivatives, and cash. Equities or stocks, are portions of a company’s value that are sold individually. Bonds are a company’s debt that people can buy, so they can gain interest on it as time goes on. Real assets are physical assets that get their value from their characteristics and materials. These include precious metals, commodities, real estate, land, machinery, oil, and even your baseball cards! Derivatives are unimaginatively named as they derive their value from another underlying asset, like a stock. They include things like futures and options contracts. Finally, cash is considered an asset class and is mainly used for liquidity and capital preservation, which helps with the ability to get value out of your portfolio in a quick manner.


Within the equity and bond asset classes are sectors, which essentially consists of groupings of companies based on the characteristics and industries of those companies that make up a sector. Currently, the 11 official sectors are financials, utilities, consumer discretionary, consumer staples, energy, healthcare, industrials, technology, telecommunications, materials, and real estate. Each sector provides different risk-reward ratios which change every day, although there is a pattern to the madness.


We believe that investors are business owners, and with that ownership comes a responsibility not just to read the headlines, but to dig deeper into the company itself. We actively manage our accounts across all aforementioned asset classes and 11 sectors to ensure diversification — which is the ultimate driver for long term growth — and risk management. Diversification is the concept of making sure that you don’t put all your eggs in one basket (e.g., sector or asset class). The charts below are sobering graphic representations of the historical losses in individual sectors, both in the dot-com and subprime mortgage bubbles, and highlights the importance of mitigating your losses by diversification.


When making investment selections, we utilize a process we call “forward looking due diligence.” In the world of business, what happens in the future is much more important than what happened in the past. Thus, we analyze long-term trends and pair that with a process of selecting ownership stakes in individual quality companies whenever possible. Our process begins with macroeconomics, individual industry and geographic trends, and then company specific characteristics.


We look at a variety of factors at the individual stock level before taking on ownership of a business, focusing mainly on reasonable expected growth, free cash flow, and dividend yield at a fair price. Free cash flow is the money that a company has after spending all the money required to maintain and expand the business. A dividend is a sum of money that is paid to shareholders regularly, usually on a quarterly basis, that is taken from the company’s profits. The dividend yield is the annual dividend divided by the stock price. The metrics that we use are helpful in determining that the price paid for a company we buy is appropriate for the level of expected growth, dividends, free cash flow, etc.


Some sector specific indicators we look at include the trailing and expected earnings (profits) per share, both globally and domestically, for that specific sector. Additionally, we look at certain commodities that tend to have an inverse relationship with each other to determine the sentiment of the market. We also analyze interest rate expectations, which affects the cost of loans, which then affects how cheaply companies can finance new factories, inventory, or inputs in general (things companies need to pay for to run their business). Furthermore, we analyze other trends like domestic company profits, consumer spending, manufacturing activity, and global and country specific growth rates.


Some of our key differentiators include our philosophy on risk, our focus on customization within a portfolio (where we tailor your portfolio for your specific goals and life stage), our relatively concentrated positions in individual businesses versus owning an index, minimizing conflicts of interest by eliminating sales of financial “product,” and the combination of investment management with other services like tax preparation, business and personal financial consulting, insurance needs and health care consulting, etc.




We work with you to develop a plan based on your age, life stage, and goals, among other factors. Simple “risk tolerance” questionnaires don’t cut it for us. For example, traditional thinking says that younger people have a longer time horizon to recover from potential losses and should therefore take on more risk. Thus, the older you become, the more risk averse you should be in your investments. Index funds have arisen as a cost-effective answer to this methodology, as simple “risk tolerance” minimizes the concept of being an investor and over-emphasizes what we believe are other less-important factors.


While we do believe in diversification to minimize “risk,” we try to not rely on index funds, which are aggregates of numerous stock selections. We believe in minimizing index exposure because we are avid believers in extensive research in each individual company, management team, business outlook, industry, and investment opportunity that we engage in, and matching our findings to our client’s specific objectives.


In other words, while we do use them sparingly, indices don’t carry that same level of intentionality that should be held when dealing with our client’s financial futures.




While we are advent collectors and analyzers of data, we are not completely dependent on it. In other words, we love data but not too much. We believe markets and the economy is unwieldy and often inefficient, and what worked yesterday may not work today. For example, if your models have too many variables, you won’t be able to determine if an actual pattern is taking place due to all of the overlapping information. Simplifying the process allows for decision making based on individual context specific to your situation.


Here is an example: in 2017 the restaurant industry as a whole suffered (see our blog for more details). However, McDonald’s has been getting more and more consumer interest since people still like eating out. This factor, mixed with rising costs in other areas (rising costs of living, rent, healthcare, and various competing interests for your extra income) led to people eating at cheaper places, resulting in a positive for the fast-food chain in an otherwise downward trending industry. (Other examples abound, and are constantly being created every day. Exceptions to the trend are another reason we like to avoid indexing!)




There’s also a psychological component to our methodology. We’re all wired the same. We hate losing twice as much as we like winning. Psychological studies have shown that the average person, if given a fifty-fifty chance of making $100 or losing $200, wouldn’t take the bet. Even if the potential gain and loss were the same, most would probably not take the wager.


How does that correlate to investing and managing your money? While a benchmark may soar on certain years, investors tend to only see the return, which is obvious in hindsight, and don’t look at the risk that was taken to get there. Some other psychological maladies that both new and veteran investors fall for include the sunk cost, relativity, and confirmation traps.


The sunk cost fallacy consists of doubling down on a position just because you don’t want to realize the losses once you officially sell the stock at a lower price than what you bought it for. We’ve all heard investors say “I’m just waiting to break even”, waiting for a day that may never come.


The relativity trap consists of what it sounds like, being trapped by your psychological perceptions of what you should be making relative to someone else: your peers, the talking heads on television, and that guy you heard about who bought Amazon when it was an online book peddler two decades ago.


Finally, the confirmation trap. It consists of only listening to news, analysts, and people who confirm your opinions and refusing to see objective information and adjust your viewpoint (and investments) accordingly. In short, being an investor is just as much about psychology as it is about numbers.


The reason avoiding these “traps” is important is that it helps minimize losses during a company specific or broader market downturn. The chart below highlights the extra gains that must be experienced to make up for certain amounts of losses, illustrating not just the emotional toll, but the cumulative financial toll of holding a losing position.




At Concinnus Financial, we also believe in the power of technology to make business more efficient, and pass that cost savings on to our clients. We are constantly looking for new ways to automate processes to keep costs low, and put technological advancement to work to improve everything we do.


Part of that advancement means we are able to put together a national team of professionals from various backgrounds in the financial industry to serve client needs. Long gone are the days where location is a limiting factor in acquiring talent. Gone also is the need to meet with your financial professional face-to-face, obtain a referral for specialized advice, or question whether recommendations are being made because it’s what is right for you versus what is right for the “advisor.”


To that end, we have built relationships with other financial professional partners to expand the breadth of what we can offer, improve the quality and usability of advice, and leverage that scale to keep costs low for you.




We do not sell financial product. We believe in “pure” finance. Thus, we do not make money off of commissions, kickbacks from product partners (such as mutual funds and annuities), or any other hidden fees. We believe that what consumers pay should be completely transparent, and that our pay should be solely derived from our individual clients.


Every family or business we work with gets a customized contract to ensure that what you get from our team is what you actually need. Contracts include hourly rates, pre-arranged fees for service, or a maximum 1% annual fee for investment assets under management.




We believe that modern financial services should be different from the way it worked in the past. If that makes sense to you, let’s chat. Get in touch to schedule a time with us to talk about how the power of business ownership can benefit you.

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