Summer and Fall 2024 Newsletter

Hi everyone, Jenson here!

Summer Internship at Coldstream:

This summer, I had the privilege of interning at Coldstream Wealth Management. It was a great experience to get a glimpse into the complicated and comprehensive world of Wealth Management. Special thanks to Heather Kessler, CFP, and Kyle Larson, CFP, for helping me get the most out of this internship! 

Throughout my time at Coldstream, I took notes on everything I did each day so that by the time the nine weeks were up, I could look back and better understand what I had learned. Here is a shortened version of this list: 

• Became familiar with important terminology such as 401(k)'s and 401(k) rollovers (pre-tax and after-tax), 403(b), Traditional IRAs, Roth IRAs, Roth conversions, backdoor Roth Conversions, tax-loss harvesting, tax-loss carry forward, capital gains tax, margin loans, municipal bonds, HSAs, RMD, etc.

• Contributed to a variety of projects, such as uploading over 300 households’ tax documents to Holistiplan (tax planning software), and worked on building sample client portfolios based on real client data in financial planning software (eMoney and MoneyGuide Pro) for new-hire training. 

• Analyzed client portfolios in Tamarac and used MoneyGuide Pro to see what changes could be made to their portfolio and personal life to increase the chances of reaching their goals.

• Analyzed clients’ Social Security plans to determine whether it was best to go on the spousal plan or personal plan, created a Restricted Stock Unit (RSU) vesting schedule for clients’ stock grant accounts, and compiled and simplified client data for a team project using Excel’s xlookup function to pull data from a larger database.

• Presented as part of the Coldstream Wealth Strategy Group on different personal finance apps in front of 60 Coldstream team members.

• Researched and helped update articles on 529 plans and HSAs (Health Savings Account) based on 2024 data.

• I met with experienced team members and asked questions about their careers, job-specific questions, and feedback about my work as an intern.

• Shadowed a few of these professionals to understand the day-to-day work of wealth managers as they prepare for client meetings, attend meetings, and carry out tasks such as portfolio work and tax planning. 

Overall, this experience was incredibly valuable, and I could not be more thankful to the Coldstream team and especially their Mercer Island office for giving me the opportunity to learn so much about the Wealth Management Industry. 

Study Abroad in Paris:

• This fall semester, I spent 15 weeks studying abroad in Paris, France, 🇫🇷 made some amazing memories and friends, and improved my French. It was an incredibly valuable experience and one that I do not take for granted. 

• This experience was especially important for my personal development. I became more independent and trusting in myself as I navigated through many countries, a few of which spoke little English. 

• Throughout my 3.5 months abroad, I was very fortunate to travel to 8 different countries: France 🇫🇷, Germany 🇩🇪, Poland 🇵🇱, Monaco 🇲🇨, Denmark 🇩🇰, Hungary 🇭🇺, Spain 🇪🇸, and the United Kingdom 🇬🇧. I also made trips in France to Normandy and Nice for a total of ten weekends spent traveling. Studying abroad has always been a goal of mine, and I am glad that I was able to visit so many amazing countries. 

• Visiting these different countries (most of which I had never been to before) allowed me to appreciate different cultures and have a greater respect and understanding of international culture and history. 

• When I wasn’t traveling, I spent the weekends exploring Paris. I can now officially say that Paris is my favorite city. It has an incredibly rich history, amazing cuisine, museums,  and overall culture. I look forward to visiting again. 

• I am incredibly fortunate to have been able to spend my fall abroad, and I strongly recommend it to anyone who has the opportunity to go.

What’s Next:

• In early January, I will be returning to Santa Clara University for my winter and spring quarters. 

• After my spring quarter ends, I will spend summer 2025 interning at J.P. Morgan in their Seattle office as a summer analyst for their Middle Market Banking and Specialized Industries (MMBSI) program. This internship program will give me great exposure to the commercial banking industry as MMBSI works with companies, municipalities, and nonprofits that generate between $20 million and $500 million in annual revenue.

• I will also continue to schedule meetings to learn from experienced professionals.

Recommendation: 

Matt Levine’s “Money Stuff” Newsletter from Bloomberg

A weekly newsletter that I have been trying to read more of is Matt Levine’s “Money Stuff.” He sends out a weekly email about interesting things happening in finance. I found his recent mail from December 19 to be particularly interesting as he talked about the rise of “narrow banking,” which I had never heard of before. For those unfamiliar with narrow banking, it is a form of banking that does not make loans to minimize risk. Instead, banks focus solely on holding deposits and investing them in risk-free assets like government securities or central bank reserves. Banks still take people’s money, of course, but rather than lending out that capital to other people, they keep it somewhere very safe to ensure that if depositors ask for all of their money back, it is available right away for them. This protects against a run on the bank. Narrow Banking doesn’t issue zero loans, however, Matt Levine highlights the importance of these banks still setting up a separate “loan fund” where an ambitious entrepreneur, for example, can raise a pool of money from investors, and these investors would have to lock up their money for a long time, and they knowingly take on risk. 

Matt Levine also mentions something very interesting about banking in general which was about the shift towards using private credit for loans instead of banks, as private credit has become a “substitute for every possible form of bank lending” (Paula Seligson). Because of this growth in private credit, some estimates believe private credit AUM (assets under management) could eventually be as large as $40 trillion, which would be a staggering growth from its current $1.6 trillion AUM.   

This rise in the popularity of narrow banking interests me because it signals a large shift in focus in the banking industry to a more sustainable form of capital collection. This shift is likely influenced by the recent crash of SVB and First Republic Bank, as people saw what could happen if lenders were not hedging their loans strongly enough. Levine seems to agree, as he mentioned, that narrow banking practices became more popular after the financial crises. It also seems like many people now want to take on less risk than in the past, which I have mentioned in previous newsletters. Even massive banks like Barclays and JPMorgan are entering the private credit industry. Levine argues this is because there has been a shift in the model of banks from “lending to earn a return to lending to make fees.” Banks are less interested in holding these risky loans themselves and are offloading the funding and risk to these private credit firms. It will be interesting to see where this new style of banking will lead us in the future, but for the time being, it might not be a bad idea to look more into the development of private credit.

It is important to briefly mention, however, some of the risks of private credit. First and most importantly, there are significantly fewer governmental regulations on the private credit industry. Because of this lack of regulation, there is a lot more risk involved with private credit. Interestingly, JPMorgan CEO, Jamie Dimon, has been a stark critic of private credit because many private credit firms finance riskier investments with the hopes of a high return. Although Dimon thinks private credit is risky, he still wants in as it is a fast-growing banking trend. He still argues, however, that there could be a massive financial crisis if some of these investments turn sour. So, while banks are starting to turn to private credit to finance certain loans, there are hidden dangers to look out for. If you are interested in reading more about this, the New York Times wrote an article titled “Wall St. Is Minting Easy Money From Risky Loans. What Could Go Wrong?” that details more about the risks and development of private credit.  

If you have any other book recommendations, podcasts, etc., please send them to me!

Best wishes in the new year!

Jenson Hart