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Are We Still in a Bull Market? What Bonds, the Fed, and the Midterms Mean for Your Money

Introduction
Natalie Picha 0:15

Welcome back to RHP Market Talk. I'm Natalie Picha, partner and Chief Experience Officer at RHP Wealth Management. Joining me today is our Chief Investment Officer and partner, Glenn Royal. Glenn, good to see you.

Glenn Royal 0:28

You too, Natalie.

Natalie Picha 0:30

Always a great conversation because there's always plenty happening in these markets and plenty of headlines competing for our attention. Our goal with RHP Market Talk is to step back from the daily noise, take some of the emotion out of the conversation, and focus on what the data, history, and our experience tells us really matters for long-term investors. So let's jump right in. I I mentioned to Glenn just before we we started this month's podcast, and I said, I feel like we're always talking about the bond market, right? But the bond market is telling us something right now. And I think we all need to listen. So we've seen a sell-off really accelerate over the summer, pushing real long-term yields to the highest level since 2010. And I have to ask, this is such a different financial landscape, really, from the environment investors have experienced during much of the 50 years leading up to 2007. How do you really talk about where we are today if you just look at the history of the last 50, 60 years?

Glenn Royal 1:39

Yeah, no kidding. Uh it's been an interesting history, hasn't it?

Natalie Picha 1:43

It has.

Glenn Royal 1:46

I think the biggest uh way you have to look at it is that coming out of 2008, we had the great financial crisis, the Fed artificially pushed yields down to economic recovery. Right. Um, and so we're used to this kind of zero interest, low interest rate world. And now uh a few years ago, we had COVID, we had COVID-induced inflation with all that money that was going around the world, and that caused a spike been seen in really a couple of decades, and that ended up driving yields higher. So we saw the bond reset back during that 22 period when the Fed raised rates so aggressively. What's happened, I think, for most investors, and what we need to think about, what's kind of different in this 50-year environment, is in our typical 60-40 balance portfolio, 60% stocks, 40% bonds, kind of the holy grail of investing, it hasn't worked for you the last few years. So I think the most important thing is to understand why it is not working in that 40% of the bond portfolio. And that really comes down to knowing what you own. Uh, and that's probably the biggest takeaway. I really would like the listeners of this podcast to understand is the bond market is,

Why The 60 40 Struggles
Glenn Royal 3:05

you know, it's baskin robins. It has 31 flavors of ice cream. You can get whatever you want. Yep. And it can be longer maturities, it can be shorter everywhere in between. And so you have to kind of know what you're investing in. And that part of the portfolio today, with the level of interest rates that we see, just the absolute level, almost 5% on a 10-year, that's a very attractive long-term entry rate to get into the bond market. So I think the big takeaway, the bond market's driving the bus. We're always talking about bonds, but for good reason because it hasn't delivered the traditional 60-40 performance that people thought. And that's because you own the longest maturities and the nature of those portfolios. Um, the way investing works is we're going to own a little bit of uh more of that longer bond. We can talk a little bit about that.

Natalie Picha 3:59

Yeah. So so do what do you think has um attributed to the the bond market sell-off that we saw over the summer?

Glenn Royal 4:07

Well, it it's several factors. The the biggest factor, I think, is just the strength of this economy. The U.S. economy and and globally is very, very strong. You're seeing it in earnings across the board. Earnings are estimated to grow at some 28% this year in the SP 500. By comparison, 10-year average is about 12 times, 12% earnings growth. Right. It's almost double that. So I think coming in with the strong earnings growth that's telling you how strong the economy is, then you throw in AI capex. All this uh they are sucking all the oxygen out of the room as they are price insensitive as they go to build out these data centers. Uh, and so that's causing a little, and they're also coming to the bond market for the first time, a lot of these big companies. And so now I have a crowding effect. I have more investors seeking money in the bond market. So that also puts a little pressure on you. Then we're going to go back a little bit further and we'll talk about the fiscal pressures. We all know about our government deficits. We saw that 40 trillion figure the other day, right? Right. That into the mix, and then on top of it, the cherry on top is energy inflation coming out of the straight of board moves, the Iranian war. So those are the those are the key things driving yields higher. But against that, we got an interesting twist. And that's a treasury secretary that cans from the hedge fund world, uh, Scott Besson. And so he's out there trying all kinds of different things right now to really control yields, the lower rates. And one of the things is this bond buyback. You may be hearing about hit the city.

Natalie Picha 5:47

Yeah, they've doubled, yeah, doubled what they can buy back at this point. And we even triggered it. Yeah, we haven't seen we haven't seen them use that since really the COVID days. We were in that place again during COVID and the financial crisis as well. It was one of the levers they were using.

Glenn Royal 6:03

Yeah, they it in 2008, they had a printing press, and they were that printing press was running 24-7, and they would take that new money and buy debt with it. This time, we're not running the printing press, so it's a little structurally different. It's just normal operations of the Fed when they have securities mature, they tend to roll them in the shorter maturities and a shorter, you know, three month to year. This time, what Vesant's doing, and it's it's not there's no coincidence, it's yield curve control in front of the election. It starts September 9th, which is today, and it goes right up to November 3rd or the 4th. And all he's doing is he's taking those proceeds where he bought shorter maturities, and now he's buying 10 to 30 year bonds. So, what you're trying to do by and there's nobody bigger checkbook than the Fed, right? So when they come into the marketplace and they're sending a messaging signal, but let me let me tell you, let's get a little deeper on this bond discussion, right? Yeah, because it it's creating uh an interesting flop. When I say the flip-flop, uh, we are flip-flopping from a bond market that's been controlled by the government, what they want the rates to be, to new Fed chair, Kevin Warsh, and a hedge fund manager, Scott Besson, running treasury, that basically want the market to dictate what rates should be. You're seeing the move into the Fed to even now talking about meeting on a less frequently basis, the FMC. Right. So all things remove that communication. So we go back to the style of Alan Greenspan, the who, if you understood what I said, then I I felt at my job, right? His job was not to say a bunch of words and we had to go to the dictionary and try to figure it out. Well, what happens is that flip-flop is now you go from the government controlling interest rates to the market, the so-called bond vigilantes. Remember that term? We're back out there. And so what we want is that the investors are controlling the bond market rather than the government. I want more yield. Give me that little turn premium, give me that extra juice for taking the risk of not really knowing what the Fed's doing. We're going to go back to the old school playbook of money supply, weekly money supplies, cash, is there more money in the system or less? We'll look at the overnight Fed operations and the Federal Reserve out of New York, what they're doing. And we'll have the whole growth of Fed watchers that are reading the tea leaves to try to tell you, did the Fed just raise or lower rates? So it opens up with a bug in.

Natalie Picha 8:39

Yeah, it has to beg the question of we we have this really strong economy right now under, you know, being underpinned by the AI and productivity and all these things. We're we're seeing really gains in the market year over, I mean month over month, continuing to hit highs.

What Drove Yields Higher
Natalie Picha 8:55

What does that flop, as you called it, really mean for equities?

Glenn Royal 9:02

So it's competition. Very simple. It's just competition. If I can gift you a real yield, a yield above inflation that's north of 2%, which I can get in the bond market right now, that's competitive to uh equities. It also factors into the formula that we use to value equities. Uh it's a we it's a higher discount rate that reduces the value of the stock. So assets go down. Um, and just you know, crowding out effect in that nature. You start getting institutional investors that have long-run mandates for pension obligations. Right. When they see that stocks-bond ratios start to kind of flip where bonds are attracted vis-a-vis stocks, you'll see them reduce equities and buy bonds. So that's kind of the trade that starts to happen with higher yields. You get a lot of movement in the market as a result of that.

Natalie Picha 9:58

It's hard to compete with a market that just keeps running higher. And about that, we talk about the deficits, right? And I think there's a sense of we're going to have to pay the piper someday, right? We're we keep kicking the can down the road. We're now at the 40 trillion mark, right? We're up there. Now what? And how does that really play into the overall economy? Because the economy seems to not care. The market seems to not care.

Glenn Royal 10:25

Yeah, I I wish I knew the answer. I really, really do. I know every bond investor would like to know at what point is too much. You know, what when is that needle that breaks the camel's back? I don't know. Every time we seem to get close to where we feel uncomfortable about it, six percent of GDP or whatever the number is, right? Now, Treasury Secretary Besant wants 3% you know debt to GDP. He's trying to get that figure down. You know, so one or three percent tenure yields and three million barrels of oil a day. None of those are happening, which makes me wonder, I gotta ask myself, this is a question for everybody. If Scott Besant was going back to his days as a hedge fund trader for George Soros, uh would he be trading against Scott Besant, the Treasury Secretary? Yeah.

Natalie Picha 11:15

Or by the Fed, yeah.

Glenn Royal 11:17

Yeah, yeah. It's just he's he's anyways playing the games there. But um just the way it is. I think the Fed and and he's also trying to intervene in the currency markets, the Japanese yen. Anything that he's done so far, uh in some cases, I say don't fight. You can't fight the Fed, you can't fight the the checkbook. But the reality is in the bond market, you might be able to, because a lot of these moves they're doing have already unwound. Like the yen went back to 160, intervened by selling euros, which I'm telling Europeans is going to sell their currency that we had in our vault. All central banks have the other you know, countries' currency in their vault. We sold euros to kind of you know message that you want you don't want too strong of the yen, but also just see him he's messaging a number of things that playing with fire a little bit here, and we've got to watch that. So it's something I'm going to be watching closely. So what's Glenn looking at every night? What's Scott Besson's doing? Yeah, I want to know what he's up to, right? So he he's probably the the key right now to everything and this market. Um I also talking about the scare rates and all this, but I I do want to point out we were 480 something, a 42 on the tenure this morning. In October 23, we got to 499, 4.99, just under 5%. That was the high mark in yields. At that level, we talked about the pensions and all these guys, right? They all started coming in buying those attractive yields.

Natalie Picha 12:56

Yeah.

Glenn Royal 12:56

Uh so what we have to focus on right now is the inflation, what they're going to look at that inflation print coming out on Friday, the CPI, consumer price index. If that core rate comes in, it's only expected to be up two tenths. We're getting, you know, really, really minute here. If it's a quarter of a point higher, I think the Fed will probably hike rates in September. And that's what's being priced in the market. Uh that Fed's on that, you've got that dual mandate, full employment prices. Um we're good on employment. You know, that's not an issue right now. Last Friday's payroll showed you that. So the Fed can't focus on on the inflation side

Buybacks And Yield Curve Control
Glenn Royal 13:40

of the mandate, and that's why this Friday CPI number is so important. We're we're back to trading on one data point in reduction to the bond market.

Natalie Picha 13:50

Well, we know that this administration continues to promise that inflation is going to come down. But we've also got a war in Iran and a hundred dollar barrel of oil again, you know, this week. We're we're pushing that number this week. That's got to play into this story as well. Because the the consumer, the consumer at the gas pump is this is this is real for them every day. They're feeling it.

Glenn Royal 14:20

The thing that I'm I'm aware of is it gets exponentially worse. So I did see some talk uh this morning last or yesterday that China's actually back in buying oil. So when this thing first hit, oil prices didn't spike and came back down pretty quickly because China managed their oil reserves quite well. They had a lot of it, they used it judiciously, plus EVs, all these other things. Uh, but they don't have that. You know, they've they've used that. Um, we're looking at diesel prices. And if anybody's got an F350, yeah, my heart goes out to you, right? I know you're paying a lot of money to fill that thing up. Right. But we're we're scratching six bucks a gallon on diesel. Now, there's the bleed through is through the economy is that inflationary impulse. I am seeing some signs that um uh Chewy's announced this morning, the pet care product. Um people are still spending on basics. They're still, you know, the pet food and the medical veterinary care, but they weren't buying the extras. So that extra little lanyat, that little 20 bucks, they aren't doing that. The also the consumer generally has spent all the federal money that's been sent their way from post you know COVID recovery. So the savings are gone, you're just meeting basic needs, but you're still you're not seeing a general broadback like Airbnbs, VRBOs, all that. Their basic service is fine, uh, but you're not it's just at that top, that extra. I'm starting to see the pullback. So the consumers feeling this, and if they have it if it continues, that's why I think it's important that the Fed does raise rates in order to stop this. But the for every point increase by the Fed, there's job losses related to that. And the Fed models that they know that. So they're cautious.

Natalie Picha 16:15

Well, and and it and it does seem that even with these moves, the inflation is not, it's been very sticky. It has not come down. And I I've I've had conversations with clients in the past that for a lot of everyday consumers, the thought process is if inflation comes down, then the prices at the grocery store go down, which is actually not the case. The price is already there. It's just the rate of the increase over time that we're looking to slow. It's not like those eggs that we've talked about before are going to go all the way back to where they were pre-2020. Yeah.

Glenn Royal 16:52

You know, it's I would think that I mean, you'll have competitive pressures where people have to lower prices to be competitive if their costs go down. But they still have a healthy margin. They can do that. But it's uh it's you know, just get used to it. Uh it's it's not normal for people to reduce prices.

Natalie Picha 17:13

No.

Glenn Royal 17:13

And a lot of people will raise prices under the cover inflation, whether they impacted them or not, right? It's just the way it is. We saw that a few years back.

Natalie Picha 17:21

Um, I want to circle a little bit back to the strength of this market too, and some of the record profit margins that we're seeing with some of these companies. I know you've pointed out that could be a source of tax revenue that could offset some of those deficits, maybe.

Glenn Royal 17:38

Sure not. I mean, and if you, you know, profit margins have gone from historically an earlier part of my career, five, six percent, eight to, you know, we're getting 16% now on some of these profit margins. A lot of it has to do too with the technology companies that dominate the market. They're they're high profit margin companies, that sort of thing. But you you're you're just seeing that that nature of that play out. Um I think that um profitability, when I see that in a I put on my political hat, which isn't very good. But when I put that on, I just see that as a place where tax cuts that have come through these corporations have benefited businesses and it's benefited equity prices. But when you see, you know, they're talking about cutting entitlement programs and things like that, this deficits, that's when I start to see blowback. And when you look at those corporate profits, as strong as they are, it's going to be enticing, particularly

Higher Yields Meet Stock Valuations
Glenn Royal 18:40

if there's a flip in politics, uh party control. So that's something just it's on the radar, be aware of it. You know, it's out there, nobody's talking about it politically. It's just me from my own observations. And uh, we're just watching that close. But uh, you know, if I start getting tax increases or anything that starts to remove profits, we are going to just a natural arc, AI demand is great. That that's still got two more years. It's got a runway, but there's a natural arc of that slowing down. So as our earnings growth goes from 28% or so expected this year to 18, 19 next year, that's still very strong versus that 12 average, 10-year average. But that rate of change starts to shift. And that's some of the biggest drivers of markets is rates of change. If it's interest rates moving one way or earnings moving, the faster, more abrupt can give us the more violent reactions in the market. If it's more of a smoother slowdown, the rate of change will still be there and we'll fill it. So it kind of gets us where you're looking forward. Everything we talked about, got earnings, they're still growing strong, but it's going to come down a little bit. I've got a bond market that may see some Fed increases, but I don't think we're in the beginning of a new big cycle, just more kind of fine-tuning in here. It just kind of sets you up where after four years of really strong returns, you know, you get something well, you can expect things to be a little bit more moderate. The uh the forces of cost of capital, you know, different things, we just start meeting those as a market. So still expect kind of positives because the generally strong economy, to expect double digit returns year after year after year, it's that's more.

Natalie Picha 20:29

Well, and I think that's interesting too, is what we have even seen, you've pointed out, is the average investor is younger and younger and younger. Parents opening investment accounts for children, and we just see a lot more activity in terms of just the the tip the retail investor jumping into this market with an expectation that it generally always goes up.

Glenn Royal 20:52

Uh yeah, it does until you get a 2008 or a dot-com or an 87 or you know, things like that, 98. We we've had a lot of periods. It's generally recessions that are going to be the biggest pullback of equity prices. Right. Good for bonds, great for stocks. And we don't see that in the cards. But I think the younger folks, uh, you know, we voice age appropriate. You tend to take more risk the younger you are. Uh so we tend to have those equity oriented. Uh, but I don't think they, you know, bonds have not been good to that, to that cohort. They don't understand fixed income. So they won't see the bond market like I'm talking about it, they won't see the value. Understandable. And perhaps, you know, if I'm 20 or under 30, I probably don't need to know what a bond is right now unless I have an obligation to match and I want to, you know, short term. But um what I've seen with markets Natalie, uh kind of in this for me here is that whenever you have years of really explosive growth induced by the Fed, just pumping money in, lower. Rates or government cut and checks. Uh this is easy. It really is. The market just goes up. Um, but eventually reality comes into play, the recessions or the Fed hikes or different things. And you get a few years where you're making 3% in the S P, you know, losing a little bit of money in S P, the interest peters out. People start finding other things to do, other things that are more attractive into them. So I I think in the best of all worlds right now, we would just have that kind of petering out of the next few years

Oil Inflation And The Consumer Squeeze
Glenn Royal 22:40

and let the Fed does what it does. But uh I I don't want anybody, you know, that saying pessimists sound, what is it? Optimists make money, pessimists sound smart, right? Oh I'm a little bit pessimistic in some ways, the way I'm talking about, but I am constructive on the markets going forward. I feel pretty good about it, only because the market shares my pessimism at the current moment. Right. And that's actually a good thing. Valuations aren't rich, fee multiples have come down because earnings have been so strong. And I have bond yields that the Fed doesn't want to raise rates. It'd rather cut rates, but it's having to just respond to market conditions. So it's being prudent in that lie. So I feel pretty good about everything. More volatility is a result of it, probably through the end of the year.

Natalie Picha 23:30

So we're going to be moving here into midterm elections in November.

Glenn Royal 23:35

Yes.

Natalie Picha 23:36

That's setting up a stage here for potentially a lot more volatility through the end of the year. Yeah. You know, like you said, a strong economy, inflation's high, but we've got a great jobs market, margins are good. What do you see uh for the last half of this year? And, you know, should we get a change in the political arena, what will that do?

Glenn Royal 24:00

Yeah, the the thing that I I'm looking for in the headlines is that if there is a change, will there be impeachment, things like that, disruptions to the way our government operates. I'm not seeing that. Uh not that there won't be investigations and stuff, I'm sure of that. But if if we kind of I'm not hearing any attempts to disrupt the operations of the government, they may not increase in the ways it's going if the other party wins. That's the nature of it. So I'm not too concerned at this moment. I don't see the far left side coming up to take over control. Generally is more moderate center kind of driving a bus. As long as we kind of have that right now, I'm not I'm not too worried about the political risk. I mean, if we wake up, you know, the day after the election and it's a blue wave uh by leaps and bounds, and that's going to get your attention. Um, but it doesn't, again, I don't, I'm not hearing out of that group uh anything that sets alarms uh for the economy right now. A takeaway from politics is they get it. It's about jobs, it's about uh taking care of the working class, the population, uh, and that's who votes. And uh they're going to carry their angst. And you know, people vote their pocketbook. And so it won't be a great surprise if there's a blue wave, but it depends on how much it is. You know, it's just we'll see. If if Texas elects a Democrat as a state senator, first Democrat statewide office and San Richards, Richardson. I I you know 40 years. So that would be a C change. You know, that that's sending messages that people aren't happy with the way the country's going.

Natalie Picha 25:49

Yeah.

Glenn Royal 25:50

So that's that would be my takeaway. And we'll we'll see how she goes. Let's do this podcast. I think you've got one coming up, right?

Natalie Picha 25:58

We do. We're going to be hosting uh Apollo Lopescu again in October to do a midterm election um special podcast release, um, which I'm really looking forward to that conversation. I'm sure we'll get into more detail around, you know, what could happen at this upcoming election and what will that will mean for markets. As we're kind of wrapping everything up here, I did have one more question for you because I just thought this was a really interesting headline uh that came across uh this morning. Are we still in a bull market?

Glenn Royal 26:31

Yeah, I think so. I mean, I I mean what's your definition of a bull? I guess positive returns. Uh I think we're just going through the turns, twists and turns of a bull market. The fact that earnings are so strong. Inflation, I mean, core rate, CPI running 2.4% year over year. Uh

Elections Volatility And Bull Market Check
Glenn Royal 26:55

headline is you know, three and three, excuse me, uh 3.4. I mean, we're we're fighting over you know pennies and nickels in a in a way or making a really big deal about it. So I don't think the bull market's over.

Natalie Picha 27:10

All right. Well, I think that is a great signal to our listeners. So as always, uh we always invite you to continue this conversation uh with us. Thank you, Glenn, so much for your insights. And to all of our listeners, we want to just thank you for joining us on our HP Market Talk. Markets will always give us something to worry about. They react quickly to uncertainty, headlines, politics, economic data, and unexpected events. But history continues to remind us that successful long-term investing is rarely about predicting a return. It's about having a disciplined plan, managing risk, staying diversified, and making thoughtful decisions as conditions change. If you found today's conversation valuable, please subscribe. Please share this episode with someone who could benefit from greater financial clarity and confidence. And to learn more about what we do and how we help clients, please visit our website at RoyalHarborPartners.com. Until next time, thank you so much for listening to RHP Market Talk.

Disclaimer
Disclaimer 28:17

Royal Harbor Partners is a registered investment advisor, and the opinions expressed by Royal Harbor Partners on this show are their own. Registration as an investment advisor does not imply a certain level of skill or training. All statements and opinions expressed are based upon information considered reliable, although it should not be relied upon as such. Any statements or opinions are subject to change without notice. The information presented is for educational purposes only and does not intend to make any offer or solicitation to the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk, and unless otherwise stated, are not guaranteed. The information expressed does not take into account your specific situations or objectives and is not intended as recommendations appropriate for any individual. Listeners are encouraged to seek advice from a qualified tax, legal, or investment advisor to determine whether any information presented may be suitable for their specific situation. Past performance is not indicative of future performance.

Market Talk Episode 60: Know Your Numbers — Financial Clarity for Business Owners with Mark Andersen

Market Talk Episode 60: Know Your Numbers — Financial Clarity for Business Owners with Mark Andersen

Host: Natalie Picha, Chief Experience Officer and Partner, Royal Harbor Partners Wealth Management
Guest: Mark Andersen, CPA and Founder, Know Your Numbers Accounting
Topic: Financial literacy for business owners, key metrics, cash flow management, CFO-level services, and building a business with long-term value


Guest Bio

Mark Andersen is a CPA and the founder of Know Your Numbers Accounting, where he serves as an incremental controller and CFO for small business owners. His firm helps entrepreneurs move beyond simply tracking numbers to understanding what those numbers mean — using financial analysis, business advisory services, and practical coaching to help owners gain the clarity and confidence they need to make better decisions and build more profitable organizations. Mark also hosts the podcast Business on the Run, where he shares practical financial insights for business owners.


Mark’s Background: From Golf Pro to CPA

Mark began his career as a golf professional, spending about seven years in Florida teaching golf, running tournaments, and working in the golf industry. After returning to Texas, he made the decision to go back to college — starting at Alvin Community College on academic probation with a GPA closer to 1.0 than 2.0. He turned it around decisively, earning straight A’s in a 19-hour semester, going on to get his CPA, and landing an internship at accounting firm UHY.

After UHY was acquired by BDO in 2014, the culture shifted in a way that made serving clients effectively much harder. Issues that previously could be resolved with a walk down the hall to a partner’s office now had to be escalated nationally, sometimes taking weeks. Mark left after nine months and moved into contract accounting, providing interim CFO-level work for businesses that needed full-time financial leadership without the full-time cost.

A relationship with a contract CEO he met during one of those engagements became the spark for Know Your Numbers. That CEO left his role and asked Mark to do accounting for the businesses he was starting. Mark took on two clients, then more, and realized that building a firm of many small ongoing clients was a more stable and scalable model than waiting between large contract engagements. Know Your Numbers was born.


Key Topics Covered

The Financial Fitness Framework

Know Your Numbers uses what Mark calls the Financial Fitness Framework to progress clients through several stages. It begins with basic accounting — because most new clients have books that are inaccurate or disorganized — and advances toward financial statement analysis, identifying key metrics, and most importantly, taking operational action based on what the numbers reveal.

Mark describes the difference from his audit background this way: in audit, you can point to problems but cannot cross the independence line to help fix them. In his current work, he can roll up his sleeves and fix things directly. That ability to connect financial diagnosis to business action is at the heart of what the firm does.

“We use the financial statements as a source to diagnose issues, and then we ask: what do we do with the business to improve these numbers?”
— Mark Andersen


Which Numbers Actually Matter?

The right metrics vary by business, but the starting point is always the three core financial statements: the balance sheet, the income statement, and the cash flow statement. From there, Mark focuses on financial ratios — such as gross margins, the current ratio, and operating profit — and benchmarks them against industry standards to identify where a business is underperforming relative to its peers.

When clients complete their monthly books, Know Your Numbers sends an email outlining areas worth examining, along with an invitation to book a call for deeper discussion. The clients who take those calls, Mark notes, tend to be the most engaged — and the most profitable — because they are willing to act on what they learn.

He uses a golf analogy to explain why context matters: a golfer’s average number of putts per round looks impressive until you realize they are missing every green and chipping close each time. The stat is misleading without understanding what’s driving it. Business metrics work the same way — a strong current ratio is great, but not if operating margins are quietly collapsing.


Fix the Books Before You Analyze Anything

Know Your Numbers works exclusively with clients using QuickBooks Online. That is intentional: it allows the team to access accounting records directly and correct them before any analysis begins.

If the accounting records are wrong, every decision made from them is based on bad data. Mark compares it to opening Google Maps when the blue dot showing your location is somewhere else — you can try to navigate, but the GPS is going to send you somewhere you should not go. Correcting the books is always step one.


CFO-Level Services: Cash Flow and Forecasting

CFO-level work at Know Your Numbers centers primarily on ratio analysis, key metrics, and cash flow management. Forecasting is also offered, though most small business clients only need it when preparing to seek a loan or sell the business.

One of Mark’s most instructive client stories involves an oil field services company that was factoring its accounts receivable — essentially borrowing against invoices — without fully understanding the cost. The company was paying employees within five days of performing services but waiting 90 to 120 days to get paid by clients like Baker Hughes and Apache. The cash flow mismatch was enormous.

Over the course of about a year, Mark helped them shift their focus to accumulating cash reserves sufficient to cover that long lead time between service and payment. Where possible, they also renegotiated payment terms with smaller clients to accelerate collections. The result: the company eliminated its dependence on factoring entirely, saving significant money in fees — money that had been quietly draining the business without showing up as an obvious line item.

“People don’t really realize, especially those trying to do DIY accounting, that they’ve got this big cash flow mismatch. That’s one of the most important things we help clients see.”
— Mark Andersen


Why Business Owners Avoid Their Financials

The most common reason business owners avoid looking at their financial statements: they know the books are wrong, or they are intimidated by what they might find. Too many owners dismiss the responsibility entirely by saying “I’m not a numbers person” — and Mark views that as one of the most dangerous habits a business owner can have.

Whether they like it or not, every business owner is the de facto CFO of their company. They are also the chief marketing officer, head of HR, IT manager, and head of every other function that larger companies staff with dedicated teams. That does not mean they should do the accounting themselves — it means they need a reporting cadence that keeps them informed at a meaningful level.

Mark recommends starting with monthly financial statements — balance sheet, income statement, and cash flow statement — as the foundation. Consistency builds familiarity, and familiarity builds confidence. Owners who commit to that cadence start to see patterns, ask better questions, and make better decisions.

To support broader financial education for small business owners, Mark also runs a community called Numbers Nation on the platform Skool, designed to help entrepreneurs learn to read and interpret their financial statements and have more informed conversations with their accountants.


Profitability Is Not the Same as Cash Flow

Two of the most common misconceptions Mark encounters:

First, that a profitable business is automatically a healthy one. A business can be profitable on paper while being cash poor — a reality that catches many owners off guard. Profit is an accounting concept; cash is what actually pays the bills. Slow collections, poor invoicing processes, and mismatched payment terms can create a cash crisis even when the income statement looks fine.

Second, that revenue is the number that matters most. Mark recalls a construction business owner who was thrilled to have crossed one million dollars in annual revenue — until the analysis revealed his net profit was $10,000. A business doing $200,000 in revenue with the same $10,000 profit is far easier to run and far less stressful to manage. Revenue without margin is activity, not success.


Three Financial Metrics Every Business Owner Should Track Monthly

Mark acknowledges that the right metrics vary by industry and business model, but names three that apply most broadly:

Gross Margins (from the Income Statement)
The most important number on the income statement. Gross margin reflects the core profitability of operations before fixed costs. It also allows an owner to calculate a break-even point — exactly how much revenue the business needs to generate each month to cover its costs at the current margin level. Without sufficient gross margins, everything else becomes a struggle.

Current Ratio (from the Balance Sheet)
Current assets divided by current liabilities. A ratio below 1.0 means the business has more short-term obligations than it has resources to cover them — a warning sign. Mark targets a current ratio of at least 2.0 for his own business, and recommends higher for project-based businesses where cash flow is less predictable and more needs to be held in reserve.

Debt-to-Assets or Debt-to-Equity Ratio (from the Balance Sheet)
A measure of financial leverage and balance sheet health. Lenders look at this ratio closely when evaluating loan applications. Owners who repeatedly pull cash out of the business — a common pattern — can end up with negative equity, which makes borrowing extremely difficult when the need arises. Managing this ratio proactively is part of positioning a business for future capital access.


The Most Costly Mistake: Bad Hires

When asked about the single most costly mistake business owners make because they don’t understand their numbers, Mark’s answer is immediate: a bad hire.

The visible cost — salary and benefits — is only part of the picture. The hidden cost is in the hours invested by the owner and team members to onboard, train, and support a new employee who ultimately does not work out. Those hours represent real money, and they will never appear as a loss on the income statement. They simply disappear.

Mark’s operating philosophy on hiring comes from Jim Collins’ book Good to Great: hire slow, fire fast. If it becomes clear that someone is not the right fit, the kindest and most financially sound thing to do is address it quickly. Delay compounds the cost.


Building a Business Worth Selling

One of the most consistent gaps Mark sees among small business owners: they never position their business for sale, and when the time comes to exit, they simply close the doors and walk away from the value they spent years building.

The other critical factor in a sellable business: the owner must be able to get out of the day-to-day operations. A business where the owner is still rolling up their sleeves doing the core work is not really a business — it is a job. Buyers purchase systems, teams, and recurring revenue. They do not purchase a job. An owner who cannot step back from operations will struggle to sell the business at a meaningful valuation, regardless of how profitable it appears on paper.

“If you’re going to sell the business and you’re still participating in the business, you’re not selling a business — you’re selling a job. And nobody wants to buy a job.”
— Mark Andersen

From a financial planning perspective, Royal Harbor Partners works with business owners on this transition as well — including tax strategy and wealth planning that ideally begins two to three years before a liquidity event, when there is still time to meaningfully affect the outcome.


AI in Accounting: Helpful, But Not a Replacement for Judgment

Mark uses AI regularly in his work but is clear-eyed about its limitations in accounting specifically. The challenge is not routine data entry — it is judgment calls that require context the AI cannot access.

He uses the example of an HVAC contractor purchasing a large air compressor. Depending on the company’s size and the nature of the purchase, that transaction might be capitalized as a fixed asset and depreciated over time, expensed immediately as repair and maintenance, or classified as a cost of sales if it is part of a specific project. Three different treatments, three different effects on the financial statements — and the right answer requires knowing details about the business that live in the owner’s head, not in the transaction record.

Until AI can extract that context reliably, human judgment remains essential in accounting, just as it does in financial planning. AI will continue to be a powerful aid, but it will not replace the need for people who understand a client’s full situation.


Key Takeaways for Listeners

  1. “I’m not a numbers person” is not a strategy. Every business owner is the de facto CFO of their company. You do not need to do the accounting yourself, but you do need to understand what your financial statements are telling you.
  2. If your accounting records are wrong, every decision you make from them is based on bad data. Fix the books first, then analyze.
  3. Revenue is not the goal — margin is. A million-dollar business earning $10,000 in profit is not a success story. Know what your gross margins are and what they should be for your industry.
  4. Profitable and cash-rich are not the same thing. Understand your cash flow cycle, your collection timelines, and where mismatches are draining money you cannot see on the income statement.
  5. Track at minimum three metrics monthly: gross margins, current ratio, and debt-to-equity ratio. Build a reporting cadence and stick to it.
  6. Position your business to run without you. A business that depends on the owner is a job, not an asset — and it will not sell for what it is worth.
  7. Start planning for your exit two to three years before you intend to sell. The decisions made in that window — financial, legal, and tax-related — have an outsized impact on the outcome.

Resources

  • Know Your Numbers Accounting: knowyournumbersaccounting.com
  • Business on the Run Podcast: Hosted by Mark Andersen
  • Numbers Nation Community: Available on Skool (skool.com) — financial education for small business owners
  • Royal Harbor Partners Wealth Management: royalharborpartners.com

Disclaimer

Royal Harbor Partners is a registered investment advisor. The opinions expressed on this show are their own. Registration of an investment advisor does not imply a certain level of skill or training. All statements and opinions expressed are based upon information considered reliable, although it should not be relied upon as such. Any statements or opinions are subject to change without notice. The information presented is for educational purposes only and does not constitute an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated are not guaranteed. The information expressed does not take into account your specific situation or objectives and is not intended as recommendations appropriate for any individual. Listeners are encouraged to seek advice from a qualified tax, legal, or investment advisor to determine whether any information presented may be suitable for their specific situation. Past performance is not indicative of future performance.

Market Talk Podcast Episode 59: Protecting Your Legacy - Estate Planning with Kim Hegwood

Market Talk Podcast Episode 59: Protecting Your Legacy — Estate Planning with Kim Hegwood

Host: Natalie Picha, Chief Experience Officer and Partner, Royal Harbor Partners Wealth Management
Guest: Kim Hegwood, Managing Attorney, Your Legacy Legal Care; Host, Life Happens Podcast
Topic: Estate planning, wills, trusts, guardianship, incapacity planning, and Medicaid crisis planning


Guest Bio

Kim Hegwood is an elder law and estate planning attorney based in Houston, Texas. She has been practicing since graduating from South Texas College of Law in 1996. After watching her grandparents struggle to maintain their independence as they aged — navigating legal, financial, and emotional challenges — Kim dedicated her career to educating and helping families preserve their dignity and protect their assets.

Her practice focuses exclusively on:

  • Elder law
  • Asset protection
  • Estate planning
  • Medicaid crisis planning
  • Probate
  • Guardianship

Kim is a Certified Dementia Practitioner and a member of the National Academy of Elder Law Attorneys.


Kim’s Background and Path to Elder Law

Kim practiced litigation for approximately the first eight years of her career, alongside wills, probate, and guardianship work. Around 2004, her grandparents began to decline. Her grandfather stopped working to care for her grandmother, neglected his own health, and suffered a stroke. Kim stepped in to hire caregivers, manage finances, and coordinate medical appointments.

Her grandparents had only wills — no powers of attorney or other incapacity documents. When Kim drafted power of attorney documents for them, her grandfather refused to sign, partly because their longtime attorney had never told them they needed such documents. This experience underscored a critical gap in estate planning: documents that address incapacity, not just death.

After her grandparents passed in 2005 and 2006, Kim recognized she needed a change. In 2008 she left litigation and transitioned into dedicated estate planning and elder law — a shift she credits to both personal burnout and a timely opportunity to receive advanced training in trust planning, Medicaid crisis planning, and elder law.


Key Topics Covered

Why a Will Is Not Enough

A will only addresses what happens after death. Planning for incapacity — the period when a person is still alive but unable to manage their own affairs — requires a separate set of documents:

  • Statutory Durable Power of Attorney (Financial POA): Authorizes a designated agent to manage finances. Without it, no one has legal authority to pay bills, access accounts, or manage assets, even a family member.
  • Medical Power of Attorney: Designates who makes healthcare decisions if the person cannot.
  • HIPAA Authorization: Allows the agent to access medical records.
  • Directive to Physicians (Living Will/Advance Directive): Specifies end-of-life care preferences if the person is terminal or incapacitated.
  • Designation of Guardian: Names a preferred guardian for the person themselves (not just minor children) to prevent family disputes over caregiving.

“We plan for incapacity way more than we plan for death. Death is easy. It’s that incapacitated state that you have to plan for.”
— Kim Hegwood

When to Sign Documents

Documents should be signed while the person is still mentally competent. Waiting until a crisis makes signing difficult or impossible. Key considerations:

  • Doctors are often reluctant to put incapacity determinations in writing, making “springing” powers of attorney (those that only activate upon incapacity) slow and impractical.
  • Clients diagnosed with early-stage dementia should sign and update their documents annually for as long as they remain competent.
  • Older financial powers of attorney may be rejected by financial institutions; having them drafted and on file in advance helps avoid delays.
  • Only put someone on a power of attorney document if you trust them implicitly.

Privacy and Control Concerns

Some clients are reluctant to add agents to their accounts due to privacy concerns. Options include:

  • Powers of attorney that activate immediately (providing access when needed without delays)
  • Powers of attorney that activate only upon incapacity (more private but slower to implement)
  • Working with financial institutions that have their own POA forms

Wills vs. Trusts

Will-based planning:

  • Assets passing through a will go through probate, which is public record
  • Creditors are notified and paid through probate
  • Beneficiary designations on accounts, retirement plans, and insurance typically override wills
  • Making “the estate” the beneficiary of financial accounts is a common mistake — it routes everything through probate unnecessarily

Trust-based planning:

  • Private — not part of the public record
  • Avoids probate for assets properly titled in the trust
  • Allows detailed instructions for how and when beneficiaries receive assets
  • Highly recommended for blended families, large estates, children with spending issues, and clients with long-term care concerns

Blended families: Will-based planning can inadvertently disinherit children from a prior relationship. If a surviving spouse inherits everything outright, they can change beneficiaries to favor their own children. Trust planning prevents this by setting defined distributions for all parties.

Remarriage provisions in trusts: A trust can require a prenuptial agreement before a surviving spouse remarries, protecting the deceased spouse’s share of the estate for the children.


Revocable vs. Irrevocable Trusts

Revocable (Living) Trust:

  • Can be changed or revoked during the grantor’s lifetime
  • Uses the grantor’s Social Security number (no separate tax return required while both spouses are living)
  • Provides privacy and avoids probate
  • Becomes irrevocable (or splits into separate shares) when one spouse passes

Irrevocable Trust:

  • Cannot be easily changed once executed
  • Removes assets from the grantor’s taxable/countable estate
  • Provides asset protection from creditors and long-term care costs
  • Used for Medicaid planning (must be established at least five years before applying, due to the look-back period)

Income-Only Irrevocable Trust (a frequently used tool at Kim’s firm):

  • Grantor retains only the income from the trust assets
  • Principal is protected from Medicaid and creditors
  • Still uses the grantor’s Social Security number (treated as a “grantor trust” for tax purposes — intentionally “defective”)
  • Allows limited flexibility: changing trustees, modifying how beneficiaries receive distributions, adjusting the disability panel
  • No separate tax return required

Retirement Trust:

  • Particularly useful for second marriages
  • Names the surviving spouse as primary beneficiary, entitled only to required minimum distributions (RMDs)
  • Children receive the remainder after the spouse’s death
  • Protects children’s inheritance while still providing for the surviving spouse

Guardianship

Guardianship is a court-supervised process used when a person lacks capacity and has no valid power of attorney in place. It is:

  • Expensive: Initial costs of $4,000–$5,000, with total first-year costs of $7,500–$10,000 or more
  • Burdensome: Guardian of the estate must file annual accountings with the court, request a monthly allowance, and obtain court approval for expenditures
  • Slow: Harris County probate courts are currently 3–4 months behind on approving annual accountings
  • Avoidable: A properly drafted power of attorney eliminates the need for guardianship in most cases

“You might spend a thousand dollars doing power of attorneys, but you walk in to do a guardianship and you’re going to pay anywhere from four to five thousand dollars right off the front.”
— Kim Hegwood

Common situations that lead to guardianship:

  • A person who never had capacity (e.g., a child with a disability who turns 18)
  • A person who had capacity but declined without signing any legal documents

Special Needs Trusts

Special needs trusts allow families to set aside money for a child or dependent with a disability without disqualifying them from government benefits such as Medicaid and Supplemental Security Income (SSI).

Key features:

  • Assets inside the trust do not count against benefit eligibility thresholds
  • The trust pays for supplemental needs not covered by government programs
  • Care manager provisions can require someone to visit and check on the beneficiary regularly
  • Can include a trustee handbook with instructions for the trustee

Important planning tip: If grandparents or other relatives have estate plans that leave assets directly to a person with a disability, those plans need to be updated to direct the inheritance to the special needs trust instead. Direct inheritance can disqualify the beneficiary from benefits.

Setting up the trust early allows family members, friends, and others to name the trust as a beneficiary of life insurance policies or inheritances — even before significant assets are contributed.


Starting the Conversation

Many families avoid estate planning conversations. Strategies that help:

  • Share your own positive experience getting a plan done to encourage aging parents
  • Approach the conversation casually and over time — it doesn’t need to happen all at once
  • Remember that procrastination has real costs: outdated plans, missing documents, and family conflict

Advisors should also note: estate plans that are created but never updated become obsolete. Plans should be reviewed regularly and updated after major life events (marriage, divorce, death of a named person, change in assets, new laws).


Key Takeaways for Listeners

  1. A will alone is not a complete estate plan. Powers of attorney, medical directives, and HIPAA authorizations are equally important.
  2. Plan for incapacity before you need to — it is harder, slower, and more expensive to act during a crisis.
  3. Trust planning offers privacy, flexibility, and protection that will-based planning cannot.
  4. Blended families and families with special needs members have specific planning needs that require customized strategies.
  5. Guardianship is costly and burdensome — proper advance planning almost always avoids it.
  6. Estate plans must be funded and kept current to be effective.

Resources


Disclaimer

Royal Harbor Partners is a registered investment advisor. The opinions expressed on this show are their own. Registration of an investment advisor does not imply a certain level of skill or training. All statements and opinions expressed are based upon information considered reliable, although it should not be relied upon as such. Any statements or opinions are subject to change without notice. Information presented is for educational purposes only and does not constitute an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated are not guaranteed. Information expressed does not take into account your specific situation or objectives and is not intended as recommendations appropriate for any individual. Listeners are encouraged to seek advice from a qualified tax, legal, or investment advisor to determine whether any information presented may be suitable for their specific situation. Past performance is not indicative of future performance.

Market Talk Episode 55: Texas Residential Real Estate — Local Insights with Britney Waterman and Ashley Graves

Market Talk Episode 55: Texas Residential Real Estate — Local Insights with Britney Waterman and Ashley Graves

Host: Natalie Picha, Chief Experience Officer and Partner, Royal Harbor Partners Wealth Management
Guests: Britney Waterman and Ashley Graves, Steel Door Group at Martha Turner Sotheby’s International Realty
Topic: Houston and Texas residential real estate market, interest rates, housing affordability, inventory, migration trends, and outlook for 2026


Guest Bios

Britney Waterman

Britney Waterman is a native Houstonian and a Realtor since 2010. A consistent top producer, she holds the CNE and ABR designations and is a graduate of the University of Houston. Real estate has always been in her blood — her family owned a property management company. Britney is actively involved in the Houston Livestock Show and Rodeo, the Junior League of Houston, and serves as a Nativity Academy board member. She lives in Houston with her husband, three children, and their dogs.

Ashley Graves

Ashley Graves is a sixth-generation Texan with over two decades of experience buying, selling, leasing, and investing in the Houston area. A graduate of the Texas Realtor Leadership Program and a consistent top producer, Ashley has served on the board of directors for the Bay Area Transportation Partnership, the Bay Area Houston Economic Partnership, and the Community Association for Nassau Bay Enhancement, and has served on the Nassau Bay City Council and the Executive Board for the Harris County Mayors and Councils Association. She is a proud mother of two.


Firm Update: Steel Door Group Joins Martha Turner Sotheby’s International Realty

In April 2025, Steel Door Realty transitioned to Martha Turner Sotheby’s International Realty. The move provides agents with expanded resources, global brand backing, and a relocation department — allowing the team to serve clients not only throughout the Houston metro area but also connect them with top agents worldwide.


Key Topics Covered

Institutional Investor Ban on Single-Family Home Purchases

President Trump announced a ban on institutional investors purchasing single-family homes. To put this in context: investors of all sizes account for approximately 30% of single-family home purchases, but small investors make up more than 90% of investor-owners, and larger institutional investors represent only about 2% of single-family rental housing stock.

What Britney and Ashley are seeing on the ground:

  • Small individual investors — people looking to add a property or two to a personal portfolio — are the primary investor activity they are seeing, not large institutional buyers.
  • A separate and open question exists around master-planned communities where entire sections are being built specifically as rental homes. Whether new construction built for rental purposes falls under the ban is unclear and could have downstream effects on the buyer pool.
  • In Houston specifically, the percentage of institutional investment is very low. Cities like St. Louis, Missouri, where institutional buyers account for roughly 25% of purchases, would feel a much more dramatic impact.
  • The bottom line for most Houston-area buyers and sellers: this headline is unlikely to have a significant local effect.

$200 Billion in Mortgage Bond Purchases (Quantitative Easing)

The federal government announced $200 billion in mortgage bond purchases — effectively a form of quantitative easing aimed at bringing mortgage rates down and improving housing affordability.

  • This move will not dramatically shift affordability on its own. Rates have already drifted down from the mid-7% range and recently dipped below 6%.
  • The more likely effect: buyers who were on the fence may take it as a signal to move forward. It eases hesitation rather than opening the market to an entirely new pool of buyers.
  • Interest rates are only one piece of the affordability picture. Insurance costs — which continue to rise significantly — and Municipal Utility District (MUD) taxes on many new Texas construction homes add substantial ongoing costs that an interest rate improvement alone cannot offset.
  • The 40-year historical average for mortgage rates is approximately 5%. Rates today are near that historical norm, not the anomaly — the near-zero rates of the post-2008 and COVID era were the anomaly.

Inventory: Is the “Locked-In” Seller Psychology Changing?

For several years, homeowners with 2–3% mortgage rates were reluctant to sell and give up their low rate. That psychology is slowly shifting:

  • In 2025, many sellers tested the market with unrealistic prices and did not sell. In 2026, those same sellers are expected to re-list at more realistic price points.
  • Sellers are gradually accepting that today’s rates are the new normal. The psychological barrier is loosening.
  • Overall inventory has increased substantially, particularly in suburban markets, contributing to the shift toward a buyer’s market.

First-Time Home Buyers: Buying Later, Spending More

  • The average age of first-time home buyers has risen. Life milestones — marriage, career stability, desire to put down roots — are happening later, and home buying follows those milestones.
  • Generational wealth transfer is playing a significant role: 70–80% of first-time buyers are receiving financial gifts from family members, particularly grandparents, to help fund their purchase.
  • Younger generations are prioritizing lifestyle, travel, and flexibility over homeownership. The “digital nomad” mindset and desire for mobility are delaying the decision to buy.
  • When first-time buyers do purchase, they are often buying at higher price points than previous generations — in some cases purchasing a first home well above $1 million in the Houston market, where more affordable options exist.
  • Inner-loop Houston apartment rents have risen sharply, making the rent-versus-buy calculation more favorable for ownership than many renters realize.

Pricing and Market Conditions: Are We in a Buyer’s Market?

The short answer: yes, for most of the Houston market.

  • Suburban markets: Sellers are seeing price reductions of 8–15% before a home sells. Homes are sitting on the market for three to six months or longer. Inventory is well above the three-month threshold that defines a neutral market. Buyer-favorable contract terms are becoming standard.
  • Inner-city and highly desirable pocket neighborhoods: Some hyper-local areas remain competitive, with buyers routinely offering $100,000 or more over asking price. These pockets operate independently of broader market trends.
  • Price appreciation outlook for 2026: Houston is expected to see 1–5% appreciation, a significant moderation from the 13–15% annual gains seen during the post-COVID peak, but still positive. Buying still makes financial sense even in a normalized market.
  • The goal for 2026: Normalization — a balanced market where sellers price realistically, buyers negotiate fairly, and agents can do their jobs without extraordinary circumstances on either side.

Migration Trends and Houston’s Diverse Housing Market

  • Texas and Houston continue to attract residents from across the country, driven primarily by business relocation and affordability — not a single influx from any one state or region.
  • Houston’s size and diversity of housing stock — from high-rise urban living to rural outskirts — means the market can absorb a wide range of buyer preferences simultaneously.
  • Industry diversification is a key stabilizing factor. Houston is no longer solely dependent on oil and gas or the Texas Medical Center. The growth of the commercial space industry — including Ellington Field’s designation as the 14th recognized spaceport and new NASA-related development — is bringing new employers and residents to the region.
  • Commute time and school access remain the two primary factors driving suburban versus urban purchase decisions for relocating families.
  • No single dominant migration trend — urban versus suburban, minimalist versus large home — defines the current market. Intentional lifestyle choices are driving individual decisions in all directions.

Real Estate as an Economic Indicator and Wealth-Building Tool

  • Home equity remains one of the most significant components of household wealth. Even at 1–5% annual appreciation, homeownership builds equity in a way that renting cannot.
  • Homeownership connects buyers to community, which in turn supports business growth, personal networks, and long-term financial stability.
  • Generational wealth transfer through real estate is accelerating, with families using gifts to help younger buyers enter the market and using trust structures and estate planning to ensure homes pass effectively to the next generation.
  • Economic uncertainty in 2025 — driven by headlines around tariffs, policy changes, and market volatility — suppressed buyer and seller activity. In 2026, fatigue from waiting is expected to motivate more people to move forward with purchases and sales they had been delaying.

Pro Tips from Britney and Ashley

One Myth Buyers Should Stop Believing

You do not need to start looking months and months in advance. In a market with strong inventory, buyers who start too early often fall in love with a home they cannot yet buy, or miss out when the right home comes along later. A typical transaction closes in approximately 30 days. The optimal window to begin seriously looking is 60–90 days before your target move date — not sooner. When you’re ready to buy, the inventory is there. Start looking when you’re ready to act.

One Thing Sellers Should Rethink

Pricing. Sellers who enter the market overpriced quickly become stale listings, inviting buyer speculation about what might be wrong with the home. Once a listing sits, it loses momentum that is very difficult to recover. Sellers should:

  • Listen to their agent’s pricing guidance — agents have a fiduciary duty to get sellers the best result, and overpricing works against that goal.
  • Consider a pre-listing inspection to identify and address issues proactively, giving buyers confidence and sellers a stronger negotiating position.
  • Separate emotional attachment to the home from its market value. Personal significance — reclaimed wood from a childhood home, custom finishes — rarely translates to a higher sale price.
  • Price right from day one and use professional marketing to differentiate the listing.

One Trend That May Surprise People in 2026

Smaller homes. The average square footage of newly built homes has already declined from 2,189 sq ft in 2020 to approximately 2,073 sq ft in 2025 — nearly 120 square feet smaller. Affordability concerns, intentional lifestyle choices, and a broader cultural shift toward minimalism are driving buyers toward smaller, more manageable spaces. This mirrors a larger trend: younger generations are prioritizing experiences and flexibility over square footage and possessions.


Key Takeaways for Listeners

  1. National real estate headlines often do not reflect local market conditions. Houston’s market dynamics are distinct from the national picture — work with a local expert who knows the specific neighborhood, not just the metro area.
  2. Interest rates are near their 40-year historical average. Waiting for rates to return to 3% is not a sound strategy. If the numbers work today, buy today — and refinance later if rates fall further.
  3. Houston is broadly in a buyer’s market, but highly desirable pocket neighborhoods remain competitive. Know which type of market you are buying or selling in.
  4. Affordability is about more than the interest rate. Insurance costs and MUD taxes are significant ongoing expenses that buyers must factor into their total housing budget.
  5. Generational wealth transfer is actively shaping the first-time buyer market. If you are helping a family member buy a home, coordinate with both your financial advisor and estate planning attorney to structure the gift correctly.
  6. If you have been waiting to buy or sell, 2026 may be the year to stop waiting. Economic uncertainty fatigue is real — and so is the cost of inaction.

Resources


Disclaimer

Royal Harbor Partners is a registered investment advisor. The opinions expressed on this show are their own. Registration as an investment advisor does not imply a certain level of skill or training. All statements and opinions expressed are based upon information considered reliable, although it should not be relied upon as such. Any statements or opinions are subject to change without notice. The information presented is for educational purposes only and does not constitute an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated are not guaranteed. The information expressed does not take into account your specific situation or objectives and is not intended as recommendations appropriate for any individual. Listeners are encouraged to seek advice from a qualified tax, legal, or investment advisor to determine whether any information presented may be suitable for their specific situation. Past performance is not indicative of future performance.

Market Talk Episode 47: Understanding Medicare — A Guide to Your Options with Brian Hickey

Market Talk Episode 47: Understanding Medicare — A Guide to Your Options with Brian Hickey

Host: Natalie Picha, Chief Experience Officer and Partner, Royal Harbor Partners Wealth Management
Guest: Brian Hickey, Vice President, Medicare Back Office
Topic: Medicare enrollment windows, plan options, common mistakes, prescription drug coverage, and the Medicare tax surcharge


Guest Bio

Brian Hickey is Vice President of Medicare Back Office and has been in the insurance industry since 1997 — nearly 30 years. He began his career at Mutual of Omaha after graduating from college and quickly discovered how much guidance people needed navigating the complexity of insurance, particularly Medicare. He has spent the majority of his career focused exclusively on Medicare planning, helping individuals understand and actively manage one of the most confusing aspects of retirement.


Key Topics Covered

“I’m Still Working and I Love My Insurance — Do I Have to Switch to Medicare at 65?”

This is one of the most common questions people approaching 65 ask. The short answer: it depends on your situation, and you should compare your options before assuming your employer coverage is better or cheaper.

  • Medicare Part A (hospital insurance) is automatic at 65 if you are already receiving Social Security benefits, and it is typically premium-free if you have worked at least 10 years (40 quarters). You should generally enroll in Part A even if you continue working.
  • Medicare Part B (doctor’s insurance) can be delayed without penalty if you are still working and covered by an employer group plan. However, do not automatically assume your employer coverage is better or less expensive than Medicare — compare them side by side before deciding.
  • If you are not yet receiving Social Security, you must actively apply for Medicare Part A through Social Security.

Health Insurance Options at Age 65

When you become eligible for Medicare, you have several paths:

  1. Stay on employer group coverage (if still working and eligible)
  2. Original Medicare only (Parts A and B) — not recommended. While you have paid into Medicare through payroll taxes, Original Medicare alone leaves significant gaps: deductibles, co-pays, co-insurance, and no out-of-pocket maximum. A catastrophic health event could be financially devastating.
  3. Original Medicare plus a supplemental plan — either a Medicare Supplement (Medigap) or a Medicare Advantage plan, plus separate coverage for dental, vision, hearing, and prescription drugs as needed.

Medicare Supplement (Medigap) vs. Medicare Advantage

Medicare Supplement (Medigap)

  • Think of it as paying up front for your healthcare. Monthly premiums are higher — typically $100–$300 per month depending on age, plan, and location.
  • In exchange, there are no co-pays, no co-insurance, and no provider networks. As long as your provider accepts Medicare, you can see them regardless of location.
  • Standardized benefits: Plan G from Mutual of Omaha has the exact same benefits as Plan G from UnitedHealthcare. The difference between carriers is price and rate history, not benefits.
  • Does not cover dental, vision, hearing, or prescription drugs — those require separate policies.
  • Premiums vary by zip code. Insurance companies pool insureds by zip code, so claims experience in your area affects your rate.
  • Rate history matters: some carriers enter the Medicare market with very low premiums, attract large enrollment, then raise rates 20–30% annually because they underestimated claims. Research a carrier’s rate history before enrolling.
  • Can typically be changed any time of year — not limited to open enrollment.

Medicare Advantage

  • Think of it as paying as you go. Premiums are typically lower — sometimes $0 — but you pay co-pays and co-insurance when you use services.
  • Structured similarly to employer group coverage: provider networks, co-pays, co-insurance, and a maximum out-of-pocket limit.
  • Plan availability and pricing are determined by county, not zip code. Carriers may enter or exit a county from one year to the next based on their claims experience.
  • No medical underwriting: you can enroll regardless of your current health status.
  • Currently, approximately 53–54% of Medicare-eligible individuals are enrolled in a Medicare Advantage plan — up from the minority five years ago.
  • Must be actively reviewed each year, as benefits, networks, and costs change annually.

“One size doesn’t fit all, especially in the Medicare marketplace. We hear constantly, ‘my neighbor has X, Y, and Z and I think that’s what I should have’ — and quite often that’s not the case.”
— Brian Hickey


Medicare Enrollment Windows and Deadlines

Initial Enrollment Period (IEP)

A seven-month window surrounding your 65th birthday:

  • 3 months before your birth month
  • Your birth month
  • 3 months after your birth month

Example: If your birthday is August 15th, your Initial Enrollment Period runs from May 1st through November 30th. You can enroll in Medicare as early as May 1st with no penalties.

General Enrollment Period (GEP)

If you miss your Initial Enrollment Period, you can enroll January 1st through March 31st each year. Coverage begins February 1st. Penalties may apply if no qualifying exception exists.

Annual Open Enrollment Period

  • Runs October 15th through December 7th each year.
  • Applies to Medicare Advantage and Medicare Part D (prescription drug) plans only.
  • This is when plans for the following calendar year are reviewed and changes can be made.
  • Plan details are typically not available until early October, creating a compressed decision-making window.
  • Does not apply to Medicare Supplement plans — those can be changed at any time of year. This is a common source of confusion, partly driven by TV advertising during open enrollment season.

The Six-Month Medigap Open Enrollment Window

This is one of the most important and least understood deadlines in Medicare:

  • Within the first six months after enrolling in Medicare Part B, insurance carriers cannot ask health questions or deny you a Medicare Supplement plan for any reason.
  • After that six-month window closes, carriers can medically underwrite you and may deny coverage based on your health history.
  • Medicare Advantage plans do not have this restriction — you can enroll regardless of health status.
  • If you have health issues and miss this window, you may be temporarily or permanently ineligible for Medicare Supplement coverage.

Medicare Part D: Prescription Drug Coverage

  • Part D plans change every year. Premiums, formularies (covered drugs), and cost-sharing for specific medications are all subject to change on January 1st.
  • Every fall, carriers send an Annual Notice of Change (ANOC) outlining what is different about your plan for the coming year. Read this notice carefully.
  • A medication that cost $5 as a generic co-pay one year may move to preferred brand-name status the next year, costing significantly more.
  • Failing to review and update your Part D plan annually can result in being locked into a plan with substantially higher drug costs for the entire calendar year.

Critical warning about skipping Part D: If you turn 65, are healthy, take no medications, and choose not to enroll in a Part D plan, you are taking a significant financial risk:

  • If you are later diagnosed with a condition requiring expensive medication, you must pay out of pocket until December 31st and cannot enroll in a new Part D plan until the next open enrollment period.
  • A $30–$35 monthly Part D premium is a small cost compared to the potential out-of-pocket exposure of a high-cost prescription drug without coverage.
  • Delaying Part D enrollment without a qualifying exception results in a permanent late enrollment penalty added to your monthly premium for as long as you have Part D coverage.

Common Medicare Mistakes

  1. Delaying Part B when you should not, or failing to delay it when you should. This decision is highly individual and depends on your employment status, employer plan quality, and long-term plans. Getting it wrong has lasting financial and coverage consequences.
  2. Enrolling in Part B without realizing the Medigap six-month window has started. If you enroll in Part B unintentionally and have health issues, you may lose your guaranteed-issue right to a Medicare Supplement plan.
  3. Taking a neighbor’s or friend’s advice about which plan to choose. Every person’s health, medications, providers, and financial situation are different. What works for someone else may be the wrong choice for you.
  4. Generalizing from a bad experience with one carrier to an entire plan type. A negative experience with one Medicare Advantage carrier does not mean all Medicare Advantage plans are poor. Evaluate each plan on its own merits.
  5. Failing to review your plan annually. Both Medicare Advantage and Part D plans change every year. Not reviewing during open enrollment can result in significantly higher costs or loss of coverage for your medications or providers.
  6. Skipping Part D because you are currently healthy. The late enrollment penalty is permanent, and the financial risk of being uninsured for a high-cost prescription is substantial.

The Medicare Tax Surcharge (IRMAA)

Higher-income Medicare enrollees pay more for Parts B and D through a surcharge known as IRMAA (Income-Related Monthly Adjustment Amount). The more you earn, the higher your premium.

  • Surcharge amounts are determined by your adjusted gross income (AGI) from two years prior and vary based on your tax filing status (individual vs. married filing jointly).
  • The intent is to help sustain Medicare’s long-term financial viability as healthcare costs rise.
  • This is a factor worth planning around: significant income events — Roth conversions, asset sales, required minimum distributions — can push income into a higher IRMAA bracket in a given year. Coordinate with your financial advisor before triggering large income events.

When Should You Start the Medicare Conversation?

The traditional guidance was to start three months before your 65th birthday — the beginning of your Initial Enrollment Period. That timeline has shifted:

  • Medicare Back Office is now seeing people reach out at age 64 — a full year before eligibility — simply to understand their options and begin planning.
  • Prices and plan details will change by the time you turn 65, but having a general understanding of the landscape well in advance reduces stress and improves decision-making.
  • The earlier you engage with a Medicare specialist, the better positioned you are to avoid the costly mistakes outlined above.

Key Takeaways for Listeners

  1. Original Medicare alone is not sufficient coverage for most people. Supplement it with either a Medigap plan or a Medicare Advantage plan.
  2. The decision between Medicare Supplement and Medicare Advantage is highly individual — driven by your health, medications, preferred providers, financial situation, and risk tolerance. Do not let a neighbor’s plan make the decision for you.
  3. The six-month Medigap open enrollment window after Part B enrollment is one of the most important deadlines in Medicare. Missing it can permanently affect your ability to get Medicare Supplement coverage.
  4. Medicare must be actively managed every year — it is not a set-it-and-forget-it decision. Review your Part D and Medicare Advantage plans every open enrollment season.
  5. Never skip Part D because you are currently healthy. The late enrollment penalty is permanent, and one expensive diagnosis can create enormous out-of-pocket costs.
  6. Higher earners should coordinate Medicare planning with their financial advisor to anticipate and manage IRMAA surcharges.
  7. Start the Medicare conversation earlier than you think you need to — ideally a full year before your 65th birthday.

Resources

  • Medicare Back Office: Contact for a personalized Medicare review and plan comparison
  • Royal Harbor Partners Wealth Management: royalharborpartners.com

Disclaimer

Royal Harbor Partners is a registered investment advisor. The opinions expressed on this show are their own. Registration of an investment advisor does not imply a certain level of skill or training. All statements and opinions expressed are based upon information considered reliable, although it should not be relied upon as such. Any statements or opinions are subject to change without notice. The information presented is for educational purposes only and does not constitute an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated are not guaranteed. The information expressed does not take into account your specific situation or objectives and is not intended as recommendations appropriate for any individual. Listeners are encouraged to seek advice from a qualified tax, legal, or investment advisor to determine whether any information presented may be suitable for their specific situation. Past performance is not indicative of future performance.