A Letter from Thomas Connelly and Elizabeth Shabaker

April 25, 2020

Tom and LizDear Friends,

Our heartfelt thanks go out to you for entrusting us with the privilege of going down life’s road with you during one of the most challenging economic and investing periods in recent memory.The wellbeing of you, your family, your charitable endeavors, and your community are at the center of everything we do at Versant. Access to your team of professionals during this time is our top priority – and we stand ready to provide perspective in any area of planning or concern on a moment’s notice.

We are most certainly in a challenging time, facing an evolving coronavirus situation and its effects on how we work and live. The global economy and investment markets have taken substantial hits in the short-term, and health concerns are top of mind. The monetary and fiscal responses of governments around the world are unprecedented in terms of speed and magnitude. Though new cases of infection appear to be declining, there is no concrete answer as to when life will start normalizing again. China’s experience suggests the manufacturing and transport sectors will begin to recover quickly, but service sectors are coming back more slowly. This set of circumstances doesn’t make it easy for investors to stay in their seats.

Despite the sharp contraction in economic activity we are experiencing due to the pandemic and the oil market dislocation, we believe that the cause is a finite set of circumstances that will be trending back towards normal within the next two years or so. Most of the developed world has endured depressions, wars, political meltdowns, and natural disasters over the preceding decades and have recovered economically in a matter of years in most cases. Most stock markets are already priced for a negative economic outcome that will persist for some time, and in our opinion, are attractively priced versus returns available from cash or government bonds.

We believe the best thing to do is to stay on course with your plan with possible minor adjustments. That’s what the plan is there for. In the short term, markets are going to fluctuate with new and unexpected developments, and it’s important to stick to a long-term investing approach and not let fear or euphoria dictate your plan’s outcomes.

In some cases, volatility and fear can work to your benefit. Versant’s view is that when there are periods of market volatility, it can be a time to increase long-term investments rather than sell them. This can be done via periodic rebalancing (described below), or by incrementally increasing exposure to opportunities. One of our core investment beliefs, stated in the investment section of our website,

is “Our clients stand ready to provide market liquidity in times of distress with long-term funds.” In other words, when fear is rampant and other investors are selling indiscriminately, and asset valuations are relatively low, it may be time to take advantage of others’ excessive fears by providing liquidity (by buying) to markets starved for liquidity (fear-based or forced selling). You don’t get good prices with good news, but you might get good prices with bad news. This is where we are now with some markets:  long-term risk assets priced attractively because of short-term news and fear.

In addition to executing our long-term investment strategy, here are some of the ways Versant is working behind the scenes to manage the situation and to provide advice, information, and comfort:


You’ve probably heard from Versant more during this pandemic than you have during normal times. Through frequent one-on-one calls, Zoom meetings, videos, town halls, webinars, symposia, social media postings, and email news, we’re striving to keep you updated with useful and reliable information about the markets, your financial situation, and the importance of revisiting your wealth management foundation already in place.

We’ve been thinking about the straightforward language we developed several years ago to describe Versant’s guiding principles. It’s called 10 Things to Know About Versant, and two of the tenets are particularly applicable today:

#5 We don’t go in for fads: Making financial decisions based upon emotion, ideology, politics, commercials you see while watching the news, market fads and crazes, or other similar reasons, is a fast route to long-term frustration and poor, long-term results. What we care about is quality depth of analysis and reaching your goals.

#6 Bringing order to your financial life through a rational, disciplined, and evidence-based investment approach: Our investment process is done in partnership with an informed, educated, and engaged client. The economic and emotional interests of all parties are aligned toward accomplishing your goals and objectives. We operate in an environment of mutual trust and respect, where constructive questioning and creative thinking are encouraged. Feedback to you is transparent and available on a timely basis.

Our specific financial management, personal, wealth, and family goals and objectives are clearly defined. By making adjustments as necessary, as personal, regulatory, and economic climates change, we create solutions-oriented to your circumstances and are not influenced by financial products or other factors not in your best interest.

Calming fears

We’ve been through tough times before. Just about everyone remembers the 2008-2009 global financial crisis, even if they weren’t old enough to be in the workforce at the time. We have principals who also experienced the 1987 crash, the collapse of the colossal Japan bubble in 1989-90, the S&L crisis, the Mexican, Thai, and Russian crises of the late 1990s, and the tech bubble crash.

Many of you have been quite calm during the coronavirus pandemic, having been steeled by the 2008 crisis. Our senior staff helped clients navigate the markets during those times, talking with people often daily for nearly two years in some cases. Today, like then, we are staying in close contact with you to listen, answer questions, and provide assurance about the planning work we’ve done together.

We discuss that volatile market events are considered in much of the internal analysis that we do, particularly when it comes to long-term goals. These conversations often center around state-of-mind, priorities, and what matters most to you and your family. In some ways, it’s business as usual by making sure that you are where you need to be with a financial plan that’s at work for you and your family, in good times and in challenging times.

Investing opportunities

Warren Buffett says that he likes his stocks the way he likes his socks: on sale. Often market volatility means lower prices. We are always looking for opportunities, whether the market is up, down, or sideways. That means we structure portfolios to contain investments that will work in all sorts of economic and market environments — whether we expect them or not — so you have resources to draw on in the future.

Some economic environments are less favorable to some types of investments, which can create opportunities. One area of opportunity is the energy space. It was appealing earlier in the year and has become increasingly more attractive as the pandemic and the game of chicken between the Saudis and the Russians has continued to unfold. The drastic short-term slowdown in economic activity has significantly reduced demand in various pockets of the energy space. It’s something we anticipate rebounding as economic activity resumes later this year and, have been increasing exposure to this opportunity in some portfolios.

Tax-loss harvesting

When the markets go down, it’s easy to get frustrated. But there is a positive: tax-loss harvesting.

Tax-loss harvesting allows the ability to sell investments that are down, replace them with reasonably similar investments, and then offset realized investment gains with those losses. The result is that less of your money goes to taxes and more stays invested and working for you.

We continue to review portfolios and rebalance, both to make sure cash remains at the right levels in accounts and to maintain the desired asset allocation. Our goal is to continue to buy at low prices to add to these asset classes. This strategy works for the long-term because it is a disciplined approach that forces us to buy low and sell high. So, even if the financial markets go down more in the short-term, they will recover, and those who have continued to rebalance will do well.

Roth conversions

One way to turn lemons into lemonade is to reduce future tax liability through tax-deferred accounts like IRAs, by converting a traditional IRA that has declined in value to a Roth IRA. The general Roth conversion rationale is to convert and pay tax now if you think your top marginal tax rate in retirement will be higher than it currently is. Market volatility provides an opportunity to convert, while valuations are off their all-time highs, reducing the conversion’s tax cost.

For example, rather than waiting until year-end to evaluate this strategy, today could be an opportune time to consider a conversion. The dollars that would be converted into the Roth account could be invested in stocks. When the market recovers, that growth would then be captured inside the Roth account, allowing for tax-free withdrawals in the future, as opposed to a Traditional IRA, which taxes withdrawals as ordinary income. As always, it is recommended that you speak with your tax professional about tax strategies that are right for you.

529, IRA and 401(k) plan contributions

Making contributions to plans at the current sale prices can help to achieve long term goals. For example, current gift tax rules allow individuals to fund five years of 529 contributions without using the lifetime gift exemption. Each spouse can contribute up to $75,000 per child into a 529 plan right now. In a long-term view, today’s low values could provide a good opportunity to maximize 529 plan contributions. Please talk with your tax professional for more information.

Mortgage refinancing

Today’s mortgage rates are extremely competitive, which means it may be a good time to reduce expenses by refinancing existing mortgages and loans, despite the general economic turmoil. Versant is evaluating these opportunities and recommending options where appropriate.


The CARES (Coronavirus Aid, Relief, and Economic Security) Act doubles the maximum amount that can be borrowed from a 401(k) from the lesser of $50,000, or 50 percent of the plan participant’s account balance, to the lessor of $100,000 or 100 percent of the participant’s balance. These limits extend through the end of 2020. Those with an outstanding loan balance from their plan and whose repayment is due between March 27, 2020, and December 31, 2020, can extend their repayment period for one year.

The CARES Act also allows individuals to withdraw up to $100,000 from retirement accounts without having to pay a 10 percent penalty if they are under 59½. To qualify, you must fall into one of two categories:

  1. You, your spouse, or a dependent is diagnosed with COVID-19
  2. You have suffered financial consequences as a result of the pandemic

These issues could include a loss of income due to being quarantined or furloughed, being unable to work due to childcare issues, or other challenges beyond your control arising out of this situation. The distribution itself is subject to taxes (as with any retirement account distribution), but it can be spread out over the next three years. Additionally, you could be able to re-contribute the money back into the account over the next three years to avoid some or all of the taxes. Not all retirement plans will allow these COVID-19 withdrawals, so check with your plan administrator of an employer-sponsored retirement plan like a 401(k) to learn if this is an option.

Finally, the CARES Act waives the requirement to take minimum distributions from all retirement plans for 2020.

Focusing on goals

The recent decline has much the same feel as past crises, with elevated fear and anxiety. Scrolling through the news, it’s understandable to think the volatility is worse and longer-lasting than anything before.

The truth is, there are things we can’t control and things we can control. We can control our emotions and our behaviors. We can take actions that will keep us calm and make sure our financial picture remains stable. Over time, Versant has thoughtfully collaborated with our clients to create financial plans that provide a foundation based on their goals and timetable, as opposed to emotions or panic. Navigating through rocky markets can be difficult and following proven investing principles can help you stay the course.






Thomas J. Connelly, CFA, CFP
President & Chief Investment Officer

Elizabeth Shabaker, CFP
Chief Executive Officer

Lisa Greve, Brian Poe, and Larissa Grantham contributed to this letter.

Disclosure: Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Versant Capital Management, Inc.), or any non-investment related content, made reference to directly or indirectly in this article will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this article serves as the receipt of, or as a substitute for, personalized investment advice from Versant Capital Management, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Versant Capital Management, Inc. is neither a law firm nor a certified public accounting firm and no portion of the article content should be construed as legal or accounting advice. If you are a Versant Capital Management, Inc. client, please remember to contact Versant Capital Management, Inc., in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. A copy of the Versant Capital Management, Inc.’s current written disclosure statement discussing our advisory services and fees is available upon request.