Dear Client,

“People vote not out of love, but fear.”

-Philip Anthony Hopkins as Richard M. Nixon in “Nixon”

With the first Presidential debate having occurred this week, election season has officially arrived.  Based on the client conversations we’re having, the upcoming election assumed the driver’s seat in voters’ minds weeks ago.  Elections are important events that do have wide ranging implications, and therefore it is encouraging to us to hear how seriously you, our clients, are taking the decision.  But we are a divided nation and few issues of significant impact appear open to compromise.  This reality is what leads to the conversations we have been having with you, and the most frequently asked question of: “What happens if my candidate loses?”

Buttonwood Partners is officially apolitical.  That is not because we don’t have opinions, or that we believe blindly agreeing with every client position makes good business sense.  Believe me, we have fascinating, far-reaching and occasionally intense conversations within our office walls.  We are apolitical because it is not our job to talk about who we like, or think will do a better job, or who we want to win.  It is our job to be a good ship captain for your finances – to objectively assess the current situation, to pay attention to the forecast, to steer your portfolios towards calm waters, take advantage of a wind at our back whenever possible and, when necessary, to navigate safely through unavoidable storms. 

This navigational duty remains our primary responsibility no matter who resides in the White House or which political party is in power.  And it is a challenge we are determined to succeed at.  In order to do that, we look at the data, continue to think long-term and adjust course as needed.  The key phrase being “as needed,” for the captain who changes course too frequently typically pulls into harbor well behind the one with a steady hand.  In the coming weeks and months, we will strive to remain that steady hand when it comes to charting your financial course.

This quarter’s featured article offers a perspective on past presidential elections and their impact on the market, while also sharing insights on the possible outcomes in 2020 and what the potential investment implications might be.  Take a look and call us to discuss further.

As we reviewed the piece, we found it helpful to remind ourselves of the “looming storm clouds” that have gathered ahead of each of the elections we’ve experienced professionally.  If we’re being honest, the conversations have followed a fairly similar pattern every four years for as long as we can remember (and certainly since I joined Buttonwood in 1997), with at least one side of the political aisle – if not both – predicting catastrophe if the other side won.  As illustrated within the article, the long-term market impact of those fears tends to be much more muted than generally anticipated in the lead-up to the election. 

Over the past 20 years we have experienced control by both political parties, tax increases and decreases, interest rates rising and falling, regulations becoming more restrictive as well as being eased.  We have seen war, a housing crisis, the loss of the AAA-rating on our national debt and now a global pandemic.  And yet the American economy has proven incredibly resilient, and the companies that make up the U.S. stock market have proven adept at adjusting to these ever-changing conditions.  It is important not to lose sight of that fact during the runup to this current election cycle.   

Whatever the outcome of the election, we know that we will face new challenges in the coming four years.  There will be periods of strength as well as weakness in the stock market.  But we remain confident that charting the proper course will find you docking safely at your destination...and on schedule. 

While there are many issues that divide us, we hope one that can unite us is the importance of our democracy.  Whether one votes Republican or Democrat, out of love or out of fear, it simply makes us happy when Americans participate in the process.  Please take advantage of your opportunity to vote in 2020 – and in every election from here on out.

Stay Well,

Greg, Jodie and Chris

Trust Beneficiaries and the SECURE Act

In our newsletter from the first quarter of 2020 we covered some important provisions of the SECURE Act, the congressional measure passed in December 2019 that altered the way IRA’s receive contributions and require distributions.  For instance, the Act raised the beginning age for required minimum distributions (from 70 ½ to 72) and removed the age limit for contributing to an IRA (as long as you are still working). 

One of the aspects of the SECURE Act that didn’t garner as much attention as it should have was the altering of the distribution rules for IRA beneficiaries.  With all that 2020 has served up since, that oversight has only been exacerbated.  However, given the significant estate planning implications for many IRA owners, we want to take this opportunity to give the provisions their due.

Prior to the SECURE Act, beneficiaries could “stretch” distributions out over their remaining life expectancy, as long as they took an annual minimum distribution.  The new rules substantially alter the playing field, requiring beneficiaries to withdraw the inherited funds at a much faster rate.  Specifically, inherited retirement accounts must be fully distributed to the beneficiaries by the end of the 10th year following the account owner’s death, with limited exceptions for spouses, minor or disabled dependents and beneficiaries not more than 10 years younger than the account owner.

One of the more common beneficiary designations is to name a Trust as the receiving entity.  You may choose to name a Trust as your beneficiary for a number of reasons, including protecting the funds from creditors, divorce, a financially unreliable heir and/or bankruptcy.  These reasons remain valid, but the new rules surrounding Trust beneficiaries create a handful of potential pitfalls depending on the specific language used.

The rules are complex, and estate planning attorneys have been working diligently to review the standard language used in documents to avoid these unintended consequences.  If you have named a Trust as your beneficiary, we strongly encourage you to speak with your estate planning professional to confirm that your document is compatible with the SECURE Act and will still accomplish your wishes.

Even in the absence of a major piece of new legislation, it is good practice to review your beneficiary designations on a regular basis.  If you have any questions about your current beneficiary designations on your Buttonwood accounts and/or would like to make changes to your designations, please contact us and we’ll be happy to review/update your account(s).

Happy Anniversary Buttonwood!

Celebrating 30 Years

We are very proud that 2020 marks the 30th anniversary of Buttonwood Partners – and grateful to be celebrating it with you.  We invite you to learn more about the firm’s history (on pages 7-8) and how Chris and I became a part of it for the past 23 years, but want to take this opportunity to thank the members of our team that have helped make it happen: Shelby (since Day 1), Tami (23 years), Jodie (16), Andrea (13), Linda (9), Whitney (2) and Katie (almost 1!).  We wouldn’t be writing you today without their invaluable contributions toward making Buttonwood Partners what it is today. 
  
Last but certainly not least, we want to thank you, our clients, for your trust and support over however many of those 30 years we have worked together. You have played a vital role in allowing us to design a practice we are extremely proud of, and that we hope has played a valuable role in allowing you to take pride in your financial journey. We will never stop striving to provide (and even improve upon) that high level of support that you expect from us.

  With much appreciation,
  Greg, Jodie and Chris
 

Work in the Time of Covid

Daily Schedules

When we transitioned to work-from-home back in March, we all thought we’d be back to the usual routine by the end of April – May at the absolute latest!  Six months in and a few schedule variations later, we’ve finally found the hybrid approach that appears to work best.  Now that we’ve settled into the “current normal” – and that it looks likely to remain in place for at least the near future – we wanted to share where you can find each of us on a daily basis.

• Greg—Work from home on Monday and Friday; in office Tuesday, Wednesday and Thursday.

• Jodie—Work from home on Tuesday and Thursday; in office Monday, Wednesday and Friday.

• Linda—Work from home daily 8 am—12 pm and all day Thursday; in office Monday, Tuesday, Wednesday, and Friday 12 pm—4:30 pm.

• Andrea—Work from home Monday, Wednesday and Friday; in office Tuesday and Thursday.

• Katie—Work from home Monday, Thursday and Friday; in office Tuesday and Thursday.

We find that this schedule is allowing us to interact with each other and our clients most efficiently while also limiting the amount of people in our office on a daily basis.

We will keep you informed as our daily schedules change, either due to the ability to increase our in-office presence or need to limit exposures and work from home.  Thank you for your understanding! 

Appointments

The bright side of COVID is that we’ve learned some new tricks when it comes to discussing your portfolios.  We are offering in person appointments here in the office.  We do require masks and we do our best to be socially distant.  We also clean like crazy before you come in and after you leave to make sure that our office is a safe environment.   If you are not comfortable coming inside our office, we are also able to have outdoor appointments for as long as the weather allows us.

For those of you who live far away or aren’t ready to meet in person, we do offer Zoom or Skype calls.  We’re happy to meet face to face remotely.

When working from home we have the usual access to e-mail and our direct phone lines are being forwarded, so you should barely notice the difference!  However, if you leave a voicemail message the caller ID on the return call will likely show our cell phone number.  If you’re expecting a call back from one of us, take a chance on that “unknown number” and then add us to your contact list!

30 Years Later - Buttonwood Partners Origin Story

In the midst of everything 2020, Buttonwood Partners quietly turned 30 back on July 1st. As the “elder statesman” of the team, I was nominated as the official historian and asked to share my version of our origin story.  Andrea asked for “something brief,” but there is a lot of good stuff to share after 30 years!  I’ll do my best to stick to the highlights…

When I started at the Milwaukee Company in 1983, 2 of the newest brokers in the Madison office were Al Jacobsen and Phil Dybdahl, who had both recently moved over from E.F. Hutton. As Hutton dug itself into deeper and deeper trouble (look at Wikipedia, it’s fascinating!), Bob Anderson and Jerry Gunnelson also left Hutton to join the firm. Then came Monday, October 19, 1987, perhaps better known as “Black Monday,” which caused The Milwaukee Company to have money troubles of its own.  Within a year (1988), we arranged to be purchased by Dain Bosworth of Minneapolis, which had a “similar culture” to ours. They flew us to the Twin Cities, introduced us to the major players, and served us coffee and cookies at each meeting.

I was very excited. “Resources!” I said to the older guys. “No,” said Jerry Gunnelson. “Not resources, Vice Presidents. We’ve seen all this at Hutton.” I don’t think the merger had been completed before “The Norwegians” – Anderson, Gunnelson, Jacobsen and Dybdahl – had begun plans to start their own firm. On Sunday, July 1, 1990 those 4, along with Bruce Krueger, a colleague they had all worked with at Hutton, formed Buttonwood Partners.  They adopted the name from The Buttonwood Agreement, signed under the Buttonwood Tree at the corner of Wall Street and Broad Street just after the Revolutionary War. From the get-go the founders recognized the importance of a strong team and recruited another Hutton employee to join them - Shelby Mulcahy. Today, she and Bruce are the only 2 “original founders” that remain active with the firm.

Bruce was the youngster in the group, but the Norwegians were all about 50 when they started the journey. By 1996 they realized that if something happened to any one of them, they might need help paying the rent. So Al contacted me. I was (and remain to this day) terribly flattered. Al said they wanted someone who would pay his bills, would stay out of trouble, and was easy to get along with. Sounds like me. And, through an incredible stroke of luck, I had recently hired a 20-year-old UW sophomore from the Green Bay area named Greg. He and I (along with Don and Mary) walked in the door and were greeted by Shelby and the others on Monday, July 7, 1997.

Over time, the original founders have moved on, leaving Bruce and me as the old guys. Bruce heads his own team, while I couldn’t be prouder of my group.  Greg and Jodie keep an eye on the day-to-day with an incredible crew taking care of the behind the scenes action.  As hard as it is to start stepping away, knowing how capable the team is makes it easier.

We learned our history lessons well and are vigilant not to repeat the mistakes of Hutton and The Milwaukee Company. We’ve enjoyed periods of smooth seas as well as our share of rough waters, but have successfully navigated through 2000-02, 2008-09 and now 2020. And I fully expect Greg to be the MC of a BIG party in the parking lot on our 50th Anniversary.  I sure hope to be there - and to see many of you as well.  Thank you for sharing the journey!

The Buttonwood Agreement and the Start of the American Stock Market

In 1790, the nation's first Secretary of the Treasury, Alexander Hamilton, issued $80 million in government war bonds to help pay the costs of the Revolutionary War. Shares were sold to the public at $100 each. The first stock was introduced a few years later when Hamilton established the first Bank of the United States. Other banks and insurance company stocks were soon added to the available list of securities. Trading of this government stock, as well as stock in banks and insurance companies, was carried on in various coffeehouses, auction rooms and offices within the city of New York.

In March 1792, twenty-four of New York's leading merchants met secretly at Corre's Hotel to discuss ways to bring order to the securities business. Two months later, on May 17, 1792, these men signed a document called the Buttonwood Agreement, named after their traditional meeting place under a buttonwood tree. The agreement stated that they would only trade securities among themselves, that they would adhere to set commissions and that they would not participate in auctions.

By 1793 there were too many brokers involved to meet under a tree. So they took space in an elaborate structure on the corner of Wall and Water streets, called the Tontine Coffee House. Their new venture was to become the nation's principal securities marketplace - the New York Stock Exchange, which today is only a few blocks from where the old buttonwood tree once grew.

Below is the original text of the agreement:

We the Subscribers, Brokers for the Purchase and Sale of the Public Stock, do hereby solemnly promise and pledge ourselves to each other, that we will not buy or sell from this day for any person whatsoever, any kind of Public Stock, at a less rate than one quarter percent Commission on the Specie value and that we will give preference to each other in our Negotiations. In Testimony whereof we have set our hands this 17th day of May at New York, 1792