Melissa Trapp serves as senior vice president and investment manager for Bank Rhode Island and oversees the bank’s investment services program.
PBN: What are the major trends impacting the investment market today and what do you see as driving factors in the near future?
TRAPP: I think it’s fair to say that passive investing has been a popular trend over the past few years and one that worked well for investors in 2019 and should continue in 2020. My concern is that I’m not sure most people realize that just five large companies – Apple, Microsoft, Amazon, Facebook, and Alphabet – now make up more than 17% of the S&P 500. Advancements in technology are happening very quickly and can have a tremendous impact on our economy, particularly the health care industry.
Those advancements can come from companies of all sizes, so being diversified as technology continues to be a focus will be very important. Any period with strong returns like we’ve seen is a great time to take the pulse of your portfolio and ensure that you’re not overexposed in any one area or stock.
PBN: Investment services differ greatly, considering the varied needs of individuals, and also small and large businesses. What are the indicators you look for when working with clients?
TRAPP: Everyone’s financial life is unique. We all have different challenges, opportunities and goals. If a business owner feels they take a lot of risk in their daily work lives, they may tend to be more conservative in their own personal investment strategies.
It’s the investment professional’s job to ask the right questions through every phase of the relationship to ensure the client’s objectives are clear. Their willingness to set aside the time to discuss their full financial picture and goals is the key to a successful adviser-client partnership. At BankRI, we find this is best achieved with face-to-face interactions.
PBN: Although we’re hitting the heart of tax season, there’s still time to make a retirement contribution for 2019 tax purposes. What do people need to understand before they file?
TRAPP: Tax time offers a great opportunity to review your retirement account(s). First, you still have until the filing deadline of April 15 to make an IRA contribution into a qualified plan for the 2019 tax year. People, especially those who turn 50 this year, should also consider if it makes sense to utilize catch-up contributions for their IRA or 401(k) plan.
Consumers should gather all of their statements and tax forms and have them handy before filing. It’s important to utilize these documents to consult with an adviser and find out if there are any strategies that can be taken advantage of for future tax savings.
Also, for anyone turning 70 this year, be sure to ask your financial adviser about the Secure Act. It was pushed through Congress at year-end and one of the changes allows those who had to take their required minimum distribution in 2020 the option to delay withdrawal until age 72. This is very helpful for people still earning income and who wouldn’t need their distribution.
PBN: Taking into account today’s market, what should people be considering for retirement based on age markers?
TRAPP: The economy is strong, as are corporate profits. Interest rates and unemployment numbers are low. These indicators, along with the advancements in technology I touched upon earlier, make saving now for retirement a priority, no matter your age. At the same time, you must take age into account to make sure you’re saving enough and are strategically allocated.
When you’re younger, for example, it’s reasonable to be more aggressive with your portfolio. But as you move through life’s different phases, you may benefit from a more balanced approach as you get closer to utilizing your retirement account(s) as income. This is why it’s important to work with an investment professional you trust and who truly understands your complete individual financial picture and goals.
PBN: Locally, what has BankRI been seeing with investment and retirement options?
TRAPP: As certified investment consultants, BankRI has a significant number of retirement accounts under management, from individual IRAs, Simplified Employee Pension plans, and Roth to small and large businesses, 401(k) administration and company contributions.
Locally, we’ve seen people move to an advisory model of more managed fund accounts where they gain that personalized consultation and added investment versatility. A phone call just doesn’t cut it when you’re talking about someone’s life savings and financial future.
There are so many moving parts with investment and retirement options that it’s nearly impossible for the average consumer to keep pace. It’s also why, increasingly, people want to sit down face to face and have their questions answered in person. And that’s always where we start.
Nancy Lavin is a staff writer for the PBN. Contact her at Lavin@PBN.com.