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Charles Schwab IMPACT Conference 2015

Covington had the pleasure of attending the Charles Schwab Impact Conference held in Boston, MA this year. This marks the 25th year of the conference with around 1,800 advisors from all over the country in attendance. Each year Schwab strives to provide best in class speakers from various backgrounds who offer their unique perspectives on their field of expertise. This year’s keynote speakers ranged from cellist Yo-Yo Ma to Alan Mulally, former CEO of Ford Motor Company.

In addition to the in-depth educational sessions we attended, highlights of the general sessions were the following:

  • Bernie Clark – Executive Vice President of Charles Schwab & Co., Inc. and head of Schwab Advisor Services:

    • Over the past 10 years, the Registered Investment Adviser (RIA) industry has grown from $1.6 trillion to $4 trillion.
    • There are over 14,000 RIA firms today.
    • RIA’s employ over 32,000 people.
    • There’s $23 trillion in untapped opportunities for Advisors.


  • Walt Bettinger – President and CEO of Charles Schwab Corporation:

    • Schwab has $1 trillion in custodied client assets within the RIA channel.

    • There is growing demand for automated investing or the robo-adviser model. Schwab has launched Institutional Intelligent Portfolios in order to be a contender in that space. This platform allows RIA’s to combine their wealth management expertise with an automated investment management platform to help scale their businesses.

    • They are currently working on launching new services to help open up the 401K space to RIA’s.


  • Alan Mulally – Former CEO of Ford Motor Company:

    • Mr. Mulally described his experience during a turbulent time at Ford during the financial crisis and methods he used to turn the company and culture around. He explained four lessons he learned along the way:

      1. Have a compelling vision that everyone can get behind.

      2. Deploy a clear and comprehensive strategy to get the team involved.

      3. Create a disciplined process to make sure team members are working towards implementing the goals.

      4. Employ talented people who can work together.

    • Teamwork, high accountability, and high performance were the most important contributors to Ford’s turnaround.


  • Jeffrey Kleintop – Chief Global Investment Strategist and Senior Vice President of Charles Schwab & Co., Inc.

    • Investing is an act of hope. Looking at financial data, investors have reason to be hopeful. However, most investors still have cash on the sidelines and are pessimistic if equity fund flows have any bearing on investor sentiment which has shown six consecutive months of outflows.

    • Globally, consensus estimates are predicting that 2016 will show robust economic growth.

    • “When the yield curve is below zero, don’t be a hero”. An inverted yield curve has been an accurate indicator of oncoming recessionary periods. Currently, yield curves are not signaling a recession but short-term rates will start to rise in 2016 so this is one indicator to keep an eye on.

    • Mr. Kleintop felt there is opportunity in investing in Japanese equities given low valuations and an accommodative central bank.  The equity market in Japan is heavily weighted towards the Financial and Technology sectors which Schwab already has a favorable view on.


  • Liz Ann Sonders – Chief Investment Strategist and Senior Vice President, Charles Schwab & Co., Inc.

    • 2015 has been a difficult year for individual investors as we approach a more mature phase in the secular bull market.

    • There is low risk of a recession in the US as the jobs data continues to show strength. We are just starting to see signs of wage growth. The current demographics are contributing to slacking wage growth as baby boomers leave the workforce and are replaced by lower paid millennials.

    • Since the recession ended, we have gained 13.2 million jobs which surpasses the 8.8 million jobs we lost during the recession. However, there is a skills gap problem in the labor force. Companies are having a hard time finding qualified workers to fill positions.

    • Slow tightening cycles are more favorable for equity markets versus a more aggressive tightening cycle.

    • Market is moderately priced but earnings are starting to wane. We are probably in an earnings recession which is different than an economic recession.

    • Expect continued volatility ahead.

    • Ms. Sonders is cautious about the equity markets but has a bias towards the upside but not nearly as bullish as she otherwise has been in recent years.


  • Greg Valliere – Chief Political Strategist, Horizon Investments

    • The deficit continues to be contained not due to lack of spending but because of receipts/taxes. A major reduction in the deficit would have to come from further tax hikes and cuts to entitlements like social security.

    • A new tax proposal is the repatriation of US corporate earnings which are currently held outside the US. The receipts of this proposal could be directed to help pay for much needed infrastructure projects. Mr. Valliere thinks Paul Ryan can create a better environment for tax reform in the next couple of years.

    • The Fed continues to be the most dovish in our lifetime. He felt that rates will rise slowly in 2016 but still stay low for a couple more years.

    • Election: Mr. Valliere felt that Hillary Clinton will be the democratic nominee. On the republican side, he felt that it’s going to play out in two acts. Act 1 is the “scream phase” where attention goes towards the candidates that are angry and like to vent. Act 2 is the more “moderate phase” which will focus on the real candidates and to determine who has the temperament for the presidency. His opinion was that Marco Rubio could win the Republican nomination.

    • Mr. Valliere’s biggest worries are the unfunded liabilities which continue to go on un-scathed. Chicago is a prime example of this. His other concern is the geopolitical environment and concerns about China’s fading economic growth and the constant restlessness in the Middle East.


  • Fareed Zakaria – Author, Journalist, and Columnist

    • We have reason to be optimistic about where we and much of the world is headed.

    • Middle East is not a key player in the global economy. The world has discounted the Middle East. Everyone knows it is volatile and unstable.

    • There is greater democracy and stability nearly everywhere compared to 30 years ago. Compare Latin America, Africa, and Asia and Europe. Most of the countries on these continents have adopted their version of a democracy.

    • The biggest trend Mr. Zakaria sees is global expansion. We are in the beginning stages of a technological explosion. He gave the example that our cell phone is 100 times more powerful than the computers used by NASA to put a man on the moon.

    • Mr. Zakaria is very bullish on the US. He felt that we have the most dynamic economy and society in the world and we will continue to be demographically vibrant for years to come because we take in immigrants and assimilate them well. What the US has accomplished in the energy sector with fracking is a testament to the ingenuity of our people and how technologically advanced we are as a country.


  • Abby Wombach – 2015 Women’s World Cup Champion:
    • Ms. Wombach is a soccer icon and an Olympic gold medalist. Her discussion highlighted her views on competition and leadership while learning along the way.
    • She explained her view on how she learned to be great leader which includes holding yourself accountable, being humble, and relying on your teammates.


  • Yo-Yo Ma & Friends – Cellist and Cultural Ambassador

    • Yo-Yo Ma has compiled more than 90 albums, of which 18 are Grammy Award winners. His newest project Silkroad is his attempt to intertwine cross-cultural musical performances.


  • David Brooks – Author, Commentator, and Op-Ed Columnist:
    • Mr. Brooks expanded upon his latest book The Road To Character which explores the essence of a meaningful life.


The education sessions we attended included topics on Dynamic Asset Allocation, Behavioral Finance, Fixed Income Outlook, Equities Outlook, Cybersecurity, Retirement Planning, Tax Planning, and Technology Initiatives that Schwab will be implementing in the future. Next year’s conference will be held in San Diego, CA.  


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Covington Investment Advisors, Inc.
301 E. Main Street
Ligonier, PA 15658
Phone: 724-238-0151
Fax: 724-238-0148