When Fred Dawson speaks to his core clients—most of whom have accumulated substantial wealth—he doesn’t often get a true sense of what’s happening throughout Delaware and the region on financial matters. When those folks introduce Dawson to their children and ask him to provide counsel about money, however, he deals with some real-world challenges. First step: He gets them to create monthly budgets, the better to understand where they are and where they need to go.

“As logical as that sounds, not all of us do it,” Dawson says. “What I’m trying to instill in my clients’ children is that if you don’t control your money, it will control you.”

Dawson is executive vice president of Bassett, Dawson & Foy in Wilmington. In his 35 years at the firm, he has seen a lot—including proof of a few fundamental truths. Dawson tries to impart those truths to clients of all income brackets.

He and other financial advisors adhere to the standards of diversified portfolios and planning based on a client’s specific goals. But in an economy that has been colored by a rollicking stock market, rising health care costs, low interest rates and job numbers that can be read as artificial, there are decisions investors have to make in order to protect and grow their money. Ability to stick to the plan often determines success.

“For me, it’s about goal-based planning,” says Peter Gaertner, a financial planner for Affinity Wealth Management in Wilmington. “We’re looking to customize a plan for each client and then monitor and update it at least once a year.”

There are several issues at work in today’s financial world, so planners still have plenty to do for their clients. Here are some of the areas of interest in the state and the a broader context.

The local outlook

When Kimberlee Orth looks at the local economy, she sees plenty of reasons for optimism. A private wealth advisor at Orth Financial Group in Wilmington, she is encouraged by several factors that have helped Delawareans remain in good shape.

“There are jobs. People are working, and if people don’t like the jobs they have, they can find other jobs,” Orth says. “The housing market is picking up. It’s a good sign that people are spending money. Retail is picking up, and the stores and malls are packed.”

Though the state’s unemployment rate ticked up slightly over the summer—the Bureau of Labor Statistics reported 4.8 percent in July—there are still a few reasons for concern. In Wilmington, the number was 7.5 percent. Delaware’s rate is slightly above Maryland’s 4 percent and New Jersey’s 4.2 percent and a bit higher than the national average of 4.3 percent—though it was lower than Pennsylvania’s 5 percent.

A bigger concern is whether or not existing jobs pay enough to cover the costs of living comfortably. Dawson cites, for example, a client’s child who works two jobs to cover the cost of health care. Further, while Dawson does acknowledge that there are jobs to be had, he doesn’t consider them all the type that will help families remain in good financial condition.

“It’s not as good a climate as it is nationally,” Dawson says. “The unemployment rate isn’t bad, but the state is suffering from underemployment. People are working for lesser salaries.”

Jie Huang, an investment advisor at Investment Management and Planning in Greenville, is a more upbeat. “Things are pretty good right now,” she says. “The employment rate is going up, and I do see that more people are positive about their futures.”

Taking stock

It’s hard to believe that on March 16, 2009, the Dow Jones Industrial Average sat at 7,216.97, but had skyrocketed to 23,430.33 on Nov. 20. It has been a wild ride, and though it’s hard to imagine anything cataclysmic happening to the stock market, there is always potential for a corrective event that could significantly knock down the values of portfolios and cause clients to worry about whether they should be invested even moderately in equities.

Huang remembers well the 2008 crash and its aftermath. Investors who had solid plans and long-range goals and stayed with their advisors continued forward. Those who panicked got out of the market. They never benefited from the rise over the past decade. “You always should be careful and cautious,” Huang says. “Since we have been in a bull market for nine or 10 years, we should be more cautious than usual.”

Gaertner agrees. He knows the market can’t keep soaring forever, so tying a portfolio exclusively to equities is a bad idea. That doesn’t mean investors should jump out of stocks It’s just that people must understand their goals, where they are on their financial journeys and what to do if things get a bit shaky.

Orth agrees. She sees the coming step back as a precursor to bigger things down the road. “I am cautiously optimistic about the market, but I feel we are closer to a correction,” she says. “I feel like this market still has legs, and these horses can still run, but every day we are closer to a natural market correction that will take heat off the market so that it can go up even faster in the future.”

If investors worry that the interruption is close at hand, it may be time to look elsewhere. Rising interest rates could make some fixed-income opportunities attractive, but Gaertner says looking at overseas companies could be wise.

“Historically speaking, international equities have been more volatile, but they are important to achieve diversification,” Gaertner says. “In the past year, there has been a catch up by other countries to the U.S. There is more of a potential value because values of many overseas companies and industries have been lagging, as compared to the U.S. the past couple years.”

If investors want stronger positions on companies abroad, Gaertner recommends mutual funds instead of individual securities for greater security and to take advantage of fund managers who truly know the sectors and the overseas market structures.

Diversity training

There isn’t a financial planner on the planet who won’t encourage clients to diversify their investments. No matter how good a given sector or approach may look, it won’t be a winner forever. The trick is figuring out how to assemble the most effective collection of portfolio items, the better to foster growth and prevent vulnerability.

“You need a mix of cash, fixed income, equities, commodities and alternatives—even real estate,” Orth says. “We like gold, silver, copper and oil, but everything has to be in moderation. We want to find the right asset allocation and level of risk for each client. And we have to be careful not to have too much concentration of people’s net worths in one or two single stocks.” Huang also likes the idea of real estate, but she prefers real estate investment trusts, which spread assets across a portfolio of properties instead of focusing on one.

Dawson suggests putting about 20 percent of a portfolio into bonds to create a short-term and intermediate bond portfolio. But don’t think bonds are as safe as cash. Dawson tells the story of a money manager who told him that if someone invested $10,000 in a 30-year bond at 5 percent, and interest rates went up 1 percent over the next year, the face value of the bond would drop by 17 percent.

“People forget that bonds lose money, too, especially when interest rates start to rise,” he says. “Guess what rates are starting to rise now?”

Tax talk

It was no secret that both houses of Congress and President Trump wanted to overhaul the tax code. But no matter the reform, some advice remains true.

Dawson believes it imperative to shelter money from taxes in the forms of IRAs and 401(k) plans. For young investors, sheltering money from taxes is especially important, as is saving. Gaertner predicts that there won’t be any pensions available for young people who are entering the workforce now, so saving for retirement will be critical.

He also believes corporate tax cuts would have a positive impact on earnings, making it important for investors to retain strong positions in the equities market. Picking where to put one’s money could be as simple as paying attention to one indicator.

“One of the many indicators we look at is the profit-to-earnings ratio,” he says. “If taxes go down, earnings should go up, and stock prices could be justified.”

Back to the future

Since Dawson is a past president of the Optimist Club, he can’t help but think in a positive way about the coming years, and he encourages his clients to have a similar outlook. After the market crashed in 2008, all but three of his 250 clients stuck it out. One of the three put his money into certificates of deposit—and gained about a half-percent of interest—while another took 50 percent of his money out of the account Dawson was managing. The third was ready to bail out entirely. Though Dawson tried to convince him to ride out the downturn, the client was adamant. The man took his money away, but he called back 30 days later.

“He said, ‘I’m ready to get back in,’” Dawson says. “I said, ‘Nope. We don’t do that. We don’t time the market.’ He said, ‘I promise I will stay in this time.’ So I let him come back, and a year or two ago, when the market was bouncing around, he casually mentioned that if the market went down to 14,000, he was getting out. I said, ‘Nope, you’re getting out now. Take your business and leave.’”

Dawson’s optimism carries over to his outlook for the near future. There will always be a roller coaster aspect to the market, so he and other advisors insist that those who are patient, disciplined and committed will be successful.

Not that there aren’t keys to avoiding risk. Dawson recommends tying assets to high-quality stock mutual funds and professional portfolio managers who understand the market sectors they invest in and are able to anticipate variables.

There is also a time issue. Orth says younger investors should play for the long term. “The enemy is not the stock market,” she says. “The enemy is inflation. Inflation will erode purchasing power, and the stock market is the one vehicle that has kept up best with inflation.”

Huang is similarly optimistic. She thinks the economy at every level, from Delaware to the world, is in good shape. She asserts that the key is for investors to remain on whatever courses they have charted and to avoid “running with the herd” in pursuit of quick fixes or the latest investment fad.

That’s not to say the rollicking times are guaranteed. As Orth says, a drop in market value is probably coming, so investors will need some steel in their spines to handle the loss of portfolio value. But just as things rebounded over the past 10 years, an upward move is likely in the event of a drop in the near future. One area that is important to consider for the future is healthcare, since the large number of baby boomers who are retiring will be in need of medical attention for a long time.

“Even if there is a correction, investors should think twice about selling,” Gaertner says. “They should be disciplined enough to weather the storm, based on long-term asset allocation. Retirees should have sufficient liquid funds set aside to cover one to two years of living expenses and to avoid having to sell anything for a significant loss. You need to have a long-term investment approach and written strategy to follow in order to accomplish your financial goals.”

Late bloomers

Though Americans have been encouraged to save for retirement and its expenses—most notably healthcare—some never heeded the warnings. They are facing their 50s (and beyond) with nothing in place but Social Security, which is hardly a failsafe strategy.

In their defense, they have been paying off their houses, putting kids through college and just plain paying the bills. Now it’s time to get busy—and quickly.

“It’s definitely not too late,” Orth insists. “If you are 50 years old and have one or two kids in college, you feel the pressure to pay tuition bills, but a large portion of your brain should still be thinking about retirement. Education can be financed. Retirement cannot be financed.

“Maybe people who start late will have to work longer or dial back on their spending in order to save more,” Orth says. “You can also take more risks in order to get bigger returns.”

Huang agrees that there still is time for 50-somethings, but they had better sit down with a professional quickly and develop a plan. And there is some good news for those who are late out of the starting block.

“People who are older have more discretionary income,” Dawson says. “But you need discipline to put it away.”

And to watch it grow.