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Please note by using any of the links provided for your convenience you will be leaving Fidelis Wealth Advisors website. The hyperlinks are to websites and servers maintained by third parties. We do not control, evaluate, endorse or guarantee content found in those sites. Your use of such sites is at your own risk.

“Only when the tide goes out do you discover who’s been swimming naked.” Warren Buffett

By: Sam Tenney, CFP, AIF

We are actively monitoring the news regarding Silicon Valley Bank (SVB) and other current economic events.  

Why does this matter to you?

Rising interest rates and new banking regulations impact all investments. Could recent events with SVB, Signature Bank and others cause the Federal Reserve to pause raising interest rates? These are topics that will influence our investment positioning as we gather more clear information.  

The closure of SVB is a big financial domino that has fallen, partially, as a result of the recent rapid increase in the Federal Reserve’s interest rate policy. SVB will not be the last domino to fall. This letter provides some insight into the recent events we are monitoring.

What happened?

Silicon Valley Bank (SVB) was the 16th largest bank in the US. SVB was the financing and banking partner of approximately half of all tech startup companies in Silicon Valley. SVB underwent a run on the bank (which means withdrawal requests exceeded cash on hand), late last week. The bank was shut down by the FDIC on Friday.  

SVB was more unique than most banks, in that 97% of deposits held with the bank were over the $250,000 amount that the Federal Deposit Insurance Corporation (FDIC) insures. Thus, most deposits were uninsured and at risk of at least a partial loss. On Sunday, the FDIC in connection with the US Treasury department and Federal Reserve created a backstop for all deposits at this bank and others that have been shut down.  

Why did it happen?

SVB tripled in size from 2019 to 2022 increasing from approximately $60 billion in assets to around $200 billion. As a result, the bank invested large amounts of cash in government bonds and mortgage-backed bonds at historical low interest rates. Then, the Fed Reserve raised rates at a historically fast pace last year, which led to the banks bond investments falling in value. In addition, SVB’s business niche of venture capital was slowing rapidly in 2022 into 2023. The bank sought to firm up their financial balance sheet, so they sold some investments, and then tried to raise more capital from investors. The timing of both, and the previously disclosed losses on their investment portfolio spooked investors and depositors, which sparked a rapid run on the bank. The FDIC took over the bank on Friday. Just three days earlier, Moody’s rating agency had listed SVB with an A credit rating.  

Bottom line, SVB grew too fast without proper planning or risk management by their executives. Poor timing exposed SVB lack of preparation, thus when the Federal Reserve’s policy turned to aggressively raising interest rates, combined with a business slowdown, SVB’s management mishandled these hurdles and accelerated their own financial crisis. As the tide of low interest rates went out, SVB got caught without their clothing, as Warren Buffett famously stated in a previous financial collapse.  

What did the government do?

Government (FDIC, Federal Reserve & US Treasury) decided on Sunday to back all depositors, not stock, or bond holders of SVB.  

Why did the government do what they did?

The government is trying to prevent a run on other banks and to prevent a full scale financial crisis. To do this, they provided an implied guarantee (backstop) to SVB depositors. What this means is that all deposits (even those held above the $250k FDIC limit) will be protected. The government also wanted the customers of the bank to have access to their deposits, to minimize the disruption SVB closure had on its many business customers. Businesses relying on SVB would have experienced severe operational disruptions, and potential insolvency (which would have led to a large increase in unemployment), to prevent this, the government stepped in.  

Doing so, it appears that the Federal Government has taken the risk out of having deposits over $250k at a bank (we are still trying to determine if this will become an explicit guarantee from the FDIC). It seems likely at this time that this change will apply to Signature Bank and any others going forward.  

What does this mean for you?

It means more investment volatility as uncertainty continues. It means that we all have to better understand what rules we are playing by as investors, savers, and depositors.  

I believe in human innovation, human ingenuity, and a growth mindset, as such, I believe we must continue investing for the long-term even with the all the noisiness of politics, greed, and headlines dominating the news each day.  

Please call us if you have any questions.

This blog is general communication being provided for informational purposes only.  This information is in no way a solicitation or offer to sell securities or investment advisory services.  It is educational in nature and not to be taken as advice or a recommendation for any specific investment product or investment strategy.  This does not contain sufficient information to support an investment decision.  Any investment or investment strategy mentioned may not be suitable for all investors or in their best interest.   Statistical information, quotes, charts, references to articles or any other quoted statement or statements regarding market or other financial information is obtained from sources which we believe reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. All rights are reserved.  No part of this blog including text, graphics, et al, may be reproduced or copied in any format, electronic, print, et al, without written consent from Fidelis Wealth Advisors, LLC. Fidelis Wealth Advisors does not provide legal or tax advice.  Please be advised to consult with your investment advisor, attorney or tax professional before making any investment decisions.

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Brandon is new to the wealth management business, however, he brings many skills useful to the profession because of his prior experience. Brandon has worked in the accounting world auditing hedge funds, venture capital firms, and low-income housing organizations. Assessing business risk and financial GAAP accounting has been his primary focus. He is passionate about the world of finance and helping individuals accomplish their financial dreams.

Brandon graduated from Brigham Young University- Idaho with a bachelor’s degree in accounting. Additionally, he holds two professional designations, Certified Public Accountant (CPA) and Certified Fraud Examiner (CFE).

 

PERSONAL

He lives in Castle Rock with his wife Emily, and their three daughters. Most of his free time consists of taking his daughters to the park, enjoying all types of sports, and watching movies.

Bailey Marudas-Jones

Bailey Marudas-Jones joined Fidelis Wealth Advisors in 2024, where she supports the back office by managing client onboarding and ensuring compliance. She also helps alleviate the team’s workload by handling various administrative tasks and processes. With a deep commitment to efficiency and excellence, Bailey is excited to contribute to the team’s success and help clients navigate their financial journeys at Fidelis Wealth Advisors.
Bailey grew up in Littleton, Colorado, where she still lives. In her free time, she enjoys watching old movies, reading, and learning to sew. She also loves spending time with her family and friends

Karley Winder

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Before joining the firm in 2022, Karley ran several local businesses, selling products in the Castle Rock area and online. Her passion for business inspired her to earn a degree in Financial Management from the University of Colorado Denver. At Fidelis, she has specialized in 401(k) plans and has also developed expertise in client-facing roles as a paraplanner. She holds a Series 65 license and plans to earn her Certified Financial Planner® designation. She is committed to providing a valuable experience that brings clients peace of mind.

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Karley is a Colorado native and grew up here in Castle Rock. She enjoys riding her horse, Dante, hiking and mountain biking the beautiful state of Colorado, and playing electric guitar.

Rilee Erickson

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Rilee began working in the financial services industry in 2017 as an associate specializing in property and casualty insurance, as well as life insurance.  Since joining Fidelis Wealth Advisors she has taken on a paraplanner roll, providing life insurance support, as well as client and operations support. She also hopes to obtain her own Certified Financial Planner® designation in the years to come. Rilee’s passion in the industry is helping people protect their family and their future.

 

PERSONAL

Rilee graduated from the University of Wyoming with a Bachelor of Science in Agribusiness and Horticulture Science. She is a Wyoming native, growing up on the family cattle ranch in Lander, Wyoming, and now resides in Green River, Wyoming with her husband and two boys. Rilee enjoys spending a lot of time outdoors and exploring the beautiful and rugged Wind River Range.

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Skye grew up in Tecumseh, Michigan and currently resides in Castle Rock, Colorado with her family. Skye loves art history, playing golf, and spending time with her family and friends.

RIA Innovations

Fidelis Wealth Advisors has a strategic partnership with RIA Innovations, a Division of NWAM, LLC. RIA Innovations provides administrative support services for registered investment advisors nationwide. This service is under the direction of Nelly Mubashi, the Chief Operating Officer.

 

NWAM, LLC, dba Northwest Asset Management & RIA Innovations is an SEC registered investment adviser. NWAM, LLC dba Northwest Asset Management & RIA Innovations and Fidelis Wealth Advisors, LLC are not affiliated companies.

Gabriel Jones

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Gabe started with Fidelis Wealth Advisors as an Investment Research Assistant in 2018, and has an intense passion for investment research.


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Jeff Bullock

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Jeff joined Fidelis Wealth Advisors after spending nearly 10 years working at J.P. Morgan Wealth Management in their Private Bank. As Chief Investment Officer, he is responsible for the overall investment strategy, portfolio construction, and market insights for clients.

 

Jeff held various roles during his decade at J.P. Morgan, including working as an investment specialist on their trading desk, where he was responsible for managing and trading investment portfolios for High Net-Worth families and non-profit foundations throughout the Rocky Mountain region. Jeff helped co-manage over $4.0 billion of investment assets and gained broad experience in portfolio construction and investment strategy, as well as in-depth knowledge in a variety of asset classes and markets. In recent years, Jeff was part of the leadership team that trained new advisors and established an expansion office in Utah.

 

Jeff loves helping people with their money-related questions and management. Very simply, his goal is to help others continuously improve their financial situation, regardless of the current condition. His framework centers around sound advice and proper decision-making by engaging in honest discussion and taking a long-term approach.

 

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Lorie enjoys the challenges presented by financial planning and is rewarded by helping clients thoroughly understand the complexities of finance so they can be better informed and in control of their planning.

 

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