We're back and better than ever.
See what's happening at Prospero Wealth and in global equity markets.
", "url": "https://prosperowealth.com/blog/q2-2026-prospero-wealth-newsletter", "title": "Q2 2026 Prospero Wealth Newsletter", "summary": "We resume our normally scheduled newsletter service...", "date_modified": "2026-07-16T00:00:00.000Z", "author": { "name": "Eric Franklin" } }, { "id": "urn:sha256:ea2b655eb61ceb227767172ad15e60247a3b6e80fb89583139cff8e021a8ab0b", "content_html": "InvestmentNews's Leo Almazora reached out to a few advisors (including yours truly) to discuss what investment advisory businesses should take away from Anthropic's Claude recent code leak.
I have been to enough advisory conferences to see a lot of very unqualified people on stages talking about AI and how they are implementing it in their practices.
Frankly, a lot of what I have heard is either boring platitudes or scary as hell.
I like that this piece lands in the middle.
You can believe in AI as a transformative technology, while also being a responsible business owner who assesses and navigates the risks associated with being a steward of your clients' PII.
It's not sexy to plan for this stuff, but it is our responsibility.
Check out the article here.
", "url": "https://prosperowealth.com/blog/investmentnews-anthropic-s-claude-code-leak-should-ria-firms-and-advisors-be-worried", "title": "InvestmentNews: Anthropic's Claude code leak: Should RIA firms and advisors be worried?", "summary": "Caution is warranted for advisors who act as stewards of client data.", "date_modified": "2026-04-07T00:00:00.000Z", "author": { "name": "Eric Franklin" } }, { "id": "urn:sha256:fc5bd3be8b44fc750e9179985b50e87947087d5af5b15e2dd5950a14cce4a2cb", "content_html": "The amazing folks at TradePMR (the investment professional side of Robinhood) recently started a podcast called Synergize. It's a podcast for financial advisors but it's high-level enough that anybody can really listen and enjoy it.
I'm lucky enough to be the focus of episode 9, which is all about finding and developing your niche.
", "url": "https://prosperowealth.com/blog/synergize-podcast-narrowing-your-scope-leveraging-his-tech-career-to-build-a-client-niche", "title": "Synergize Podcast: Narrowing Your Scope: Leveraging His Tech Career To Build A Client Niche", "summary": "Eric Franklin on a podcast discussing the Prospero Wealth Niche and how it develops.", "date_modified": "2026-03-13T00:00:00.000Z", "author": { "name": "Eric Franklin" } }, { "id": "urn:sha256:a1e9664f1b67bbb79dc7bce43c7af203edf04b7918abaffa53df0d6cf9968442", "content_html": "![\"CapitalWe](\"https://framerusercontent.com/images/5PBmrDYPjEc87SxBi7scdAtLuQ.png\")
Today, I’m excited to announce that we have extended the Prospero Wealth family by adding Vrishin Subramaniam and his company, CapitalWe. This is the first time we have brought an advisor, with his own pre-existing brand, practice, and clients into Prospero Wealth.
So what makes this such a great fit?
Suhas and I first met Vrishin at a conference in Huntington Beach almost 3 years ago. We loved that he was an electrical engineering major with a job history including software engineering and technical product management. We also thought the niche was complementary and interesting—Vrishin was serving H-1B visa holders working in the US, largely in technical fields. Since that initial meetup, we have been chatting with him a few times a year and sharing our practice learnings with each other. It eventually became clear that we could all go “further together” and this plan to collaborate more directly was hatched.
Vrishin brings the second official CFP® credential to our roster as well as something that nobody else here has—an expertise in more holistic financial planning obtained through work with the Kinder Institute of Life Planning. The curriculum at the Kinder Institute uses their proprietary EVOKE® process to get clients to think about designing their ideal life by asking three things:
If money was not an issue, what would your life look like?
What are the most important things to you in life?
What could possibly get in the way of living this life?
We have seen first hand that money only solves money problems, and this process is all about understanding the “deeper values and aspirations” of clients. It’s an area that all of us are excited to incorporate more into our practice. (Reach out if you’re an existing client and are curious about this process!)
Let’s hear from Vrishin himself:
I’m excited to be joining Prospero!
A little bit about me: I was born and raised in New Delhi, India, Vrishin moved to the United States at the age of 17 to pursue undergrad at the University of Illinois at Urbana-Champaign. After graduating in 2014, I faced the stark realities of the Bay Area job market—high living costs and financial uncertainty, even with a tech role in hand.
This experience sparked my passion for financial optimization and the FIRE (Financial Independence, Retire Early) movement.
After realizing that many young immigrants had the same financial questions, I launched CapitalWe to help others alleviate financial stress and make confident money decisions.
After many years of doing this, I’ve also realized that the most powerful financial advice doesn't start with money, it starts with listening to your inner voice and getting clear on your ideal life. (Ask me more about it!)
I’m based in Thousand Oaks, CA, with my wife Sharanya and daughter Sahasra, where I’m trying to do more adventurous stuff like scuba diving and hand gliding.
I hope to serve more immigrant families and make a bigger impact by helping clients design their ideal financial lives .
Vrishin brings our total registered adviser count to 7. We’re all west coast based, with 2 in California, 1 in Oregon, and 4 in Washington.
Onwards and upwards.
", "url": "https://prosperowealth.com/blog/vrishin-subramaniam-and-capitalwe-join-prospero-wealth", "title": "Vrishin Subramaniam and CapitalWe Join Prospero Wealth", "date_modified": "2026-03-12T00:00:00.000Z", "author": { "name": "Eric Franklin" } }, { "id": "urn:sha256:2aa47b647c47c72c653296a1150c62c199f8810a924a45e92d212eac28819362", "content_html": "There's a chart going around that might make US-only investors uncomfortable, and that's probably a good thing.
For the better part of 15 years, owning international developed market stocks (MSCI EAFE — think Europe, Japan, Australia) felt like a drag on your portfolio. The S&P 500 dominated so thoroughly that \"just buy the S&P\" became conventional wisdom.
But more recently, international – and especially emerging markets – are getting more attention.
Per the graph below, from 2010 through most of 2025, EAFE trailed the S&P 500 in nearly every rolling one-year period — often by 10 to 20 percentage points. The green area almost never pokes above zero. US exceptionalism was relentless, and emerging markets underperformed as a result.
![\"\"](\"https://framerusercontent.com/images/FkPXt1OlWiS8IIPzt9UgOiyBM.png\")
But looking at the right edge of the graph, that may be beginning to change.
That spike? EAFE just posted roughly 15 percentage points of outperformance over the S&P on a rolling one-year basis. That's the biggest positive swing in over a decade.
Now — is this just a blip? A one-off reversion that fades by summer?
Let’s zoom out.
![\"\"](\"https://framerusercontent.com/images/oZsF9kwGCIpQIYvzMdcXB2TJA.png\")
The longer view tells a different story. International developed markets led the US by wide margins in the early-to-mid 1990s and again in the mid-2000s. And these weren't one-year flashes — they were multi-year runs. The post-2010 era of US dominance was historically long and historically extreme.
Nobody can call a regime shift in real time. That's not what this post is about. But the pattern is worth paying attention to: when international outperformance shows up, it may stick around for a while.
Here's the part that I think matters most for tech professionals specifically: if you're holding a portfolio that's heavily weighted toward US large cap — and you also hold a meaningful amount of your employer's stock on top of that — you may be more concentrated in one geography and one market regime than you realize. You may be okay with that at the moment, but would you feel the same way if we see another period like 2001 to 2008?
Diversification has felt like a losing strategy for a long time. The periods where it looks the most pointless tend to be the periods right before it matters the most.
2025 was an amazing year with all index segments showing significant, and above average returns. Our core thesis of leaning into International and Emerging Markets exposures drove additional returns and is an area we continue to overweight in 2026.
", "url": "https://prosperowealth.com/blog/full-year-2025-market-review", "title": "Full-year 2025 Market Review", "date_modified": "2026-02-25T00:00:00.000Z", "author": { "name": "Eric Franklin" } }, { "id": "urn:sha256:3ca7ae299c5283c79909ff55795fba11da176d2f723397cecb3c5dfd29cebb08", "content_html": "Not since John Henry and Garry Kasparov has there been a human vs. machine story so compelling...
OK, maybe that's a touch hyperbolic, but I still think this is really cool. A few weeks back, Dawn Allcot at GOBankingRates gave me an incredible and blind assignment. She brought me a retirement plan generated by ChatGPT and asked me to review it to see how well it holds up. Was it correct? Was it something that the \"client\" could pursue and possibly achieve?
Challenge accepted. Check it out here.
", "url": "https://prosperowealth.com/blog/me-vs.-chatgpt", "title": "GoBankingRates.com: Me vs. ChatGPT", "summary": "How good is a savings plan from ChatGPT? Turns out, not great...", "date_modified": "2026-02-25T00:00:00.000Z", "author": { "name": "Eric Franklin" } }, { "id": "urn:sha256:d9ca84be0f8088eee13be1d56eef3355f4eaed7d5fe2314b2e300930313b6b20", "content_html": "Hi everyone. We live in extraordinary times.
As I have attended conferences the last couple of years, I have spoken with vendors offering various cyber-security solutions for both advisors and clients.
These seem so easy to dismiss. After all, our advisors largely came out of tech positions, as do our clients.
While it is somewhat easy to picture “grandma” getting bamboozled by a smooth-talker on the phone, surely our clients wouldn’t be susceptible, right?
Wrong.
One of our most sophisticated clients was recently the victim of a highly-targeted and sophisticated attack that has taken weeks to recover from. We are incredibly lucky that Fidelity, our custodian, threw a flag that allowed us to stop assets that were attempted to be moved via wire from their accounts.
While the financial fallout was contained, that client has had to change their authentication credentials (their entire password file was obtained in the hack), had their accounts frozen for weeks, been issued new account numbers at Fidelity (requiring reconfiguration of asset strategies), and additionally responded to a long list of security requirements to get things back up and running. This client happens to be in retirement, so the assets being frozen and unavailable has created significant challenges to their monthly living expenses.
As many of these things do, this started with a socially engineered attack. The client received an email from a former colleague indicating that there was going to be a surprise party for a mutual friend they hadn't seen in a while and to expect that invitation.
Soon thereafter, an invitation from a well-known online event site did arrive. While something looked “off” in that email, our client chalked it up to the lack of sophistication of their former colleagues. After all, these former colleagues were from a non-profit volunteer organization, not from tech.
One errant click was all it took to get this started. Our client saw a terminal window launch and execute something on their laptop.
Our client knew they’d misstepped immediately. They ran virus checks on their machine. If malware was installed, they were going to find it.
The virus checks came back all clean.
The problem here was that the program that had been installed was not malware. It was a legitimate piece of remote management software. Our client mistakenly gave full access for their computer to a remote unknown person and that person got to work immediately accessing the password program file (which was temporarily unlocked on the client’s machine) on the client's computer and searching for entry points into key financial services.
When the client saw the mouse on their computer moving without their input, that’s when they knew someone was in there. They erased the machine and started fresh, cutting off access.
The intruder, however, immediately went to Fidelity, logged in as the client, and submitted two small wire transfers that they probably thought would fall under a threshold that would not raise alarms. Luckily for all of us, I’m guessing that Fidelity saw a new destination and a new IP address as being a warning flag, regardless of transfer size, and reached out to validate the transfers. (Incidentally, if the client had not realized this, it is possible that the hackers might have been able to request these transfers from the client’s own IP address and been successful. That’s scary.)
Of course, the client indicated that these transfers did not belong to them, and so Fidelity shut it down and we have a relatively happy ending to this story.
AI.
Seriously.
Even in the financial advisory space, some of the tech that’s available as commercial software is pretty frightening. I recently received a demo of “prospecting software” where I can define what sorts of clients I am looking for and the software can go and sift through tens of millions of fully built-out US consumer profiles to find matches. These profiles are built from your public social data, but in many cases, it also includes cookie data (e.g. data you would expect to be private) that shows sites visited and even search queries.
From there, this software can then craft personal campaigns finding commonalities in your social graph, work history, etc. and create targeted personalized outreach without you having to do it yourself. Eek!
So if that’s what can be done with commercial software, imagine what hackers with no scruples are creating. You may think that your data is distributed all over the web and nobody will put all those bits together to target you.
You are wrong. You are not anonymous and you are not invisible. You are a target.
Full disclosure. None of this is fail-safe. These are just some best practices that can help.
Be vigilant. The whole purpose of writing this post is to increase your “spidey-sense” of what is possible and what is happening to people. If you take 1 or 2 seconds to “think before you click,” that will be a huge help.
Enable 2-factor authentication everywhere you can. It may seem like a hassle but it’s 100% necessary. Our internal policies at Prospero Wealth require every advisor to use 2FA wherever available. Use non-SMS 2-factor authentication when possible. SMS can still be SIM card spoofed by a determined party. Can you imagine somebody having your cell phone and password file?
Use a password program. You CANNOT use the same password across sites, or small variations of your password. Use a program like 1Password or LastPass. While this does not protect against the entry point experienced by our client, it protects against poor security practices at the companies you work with and minimizes the impact of data that may be on the dark web.
Scrutinize the domain names of emails. If the domain of the mail is not a DIRECT match to the company purporting to send it, do not click. Sometimes you might need to expand the email headers to see where it actually comes from (hackers like to to make the reply-to email legitimate but the actual domain it was sent from be fraudulent).
When in doubt, go directly to the source site rather than liking on email or SMS messages. I promise you, if Coinbase has a problem with your account, you’re better off going to Coinbase.com to check things out rather than replying to a weird text or email.
We already have a full cybersecurity policy that we review and update annually. We are also required to have all of our advisors educated on the policies annually. We don’t use full account numbers in our correspondence and we request all of our clients use secure file share when sharing documents with us (as opposed to using email or SMS).
We will be continuing to investigate new cybersecurity offerings in the advisory space for both our advisors and clients.
Emerging Markets Stocks led Q3 performance showing a 10.64% gain, followed by US Stock Market at 8.18% and International Developed Stocks at 5.33%.
The big callout this quarter is on page 15, regarding the continued march of AI through global markets. If you're looking to get exposure to this investment theme, rest easy, you probably have plenty of it in your portfolio already.
", "url": "https://prosperowealth.com/blog/2025-q3-market-review", "title": "2025 Q3 Market Review", "summary": "Navigate market volatility with Prospero Wealth's Q3 2025 Market Review. Discover how US stocks outperformed international markets, analyze global trends across stocks, bonds, and commodities, and learn why consumer sentiment metrics may not predict future returns. Download our comprehensive report for tech professionals seeking evidence-based financial clarity.", "date_modified": "2025-10-21T00:00:00.000Z", "author": { "name": "Eric Franklin" } }, { "id": "urn:sha256:01354f3e5ce0f3032802e73168187aa67b5c69dc50b64f03a34460c9801673db", "content_html": "Financial Planning just released a feature on Prospero Wealth related to our expertise in the tech executive space. The piece is part of a broader series from Brian Wallheimer, the editor-in-chief, called \"Know Your Niche.\"
We greatly appreciate the opportunity to be featured and hope you find it to be thought-provoking.
Read the feature here: Financial Advising for Tech Executives
", "url": "https://prosperowealth.com/blog/financial-planning-know-your-niche-tailoring-services-to-tech-executives", "title": "Financial Planning: Know Your Niche: Tailoring Services to Tech Executives", "summary": "Undrestanding how advising tech execs is different than other clients.", "date_modified": "2025-09-30T00:00:00.000Z" }, { "id": "urn:sha256:ae9ef76cc8fafbff3e51c31296900df3a3d6a3c5da932f2913fe07fc718558bc", "content_html": "I tell everyone that they have to be wired backwards to make money. There's this huge temptation when the chips are down, as they are now, to feel like you should protect the downside. But as Charlie Munger would tell you, \"Invert, always invert.\" A much more valuable thought would be, \"How do I take advantage of what the market is giving me?\" There are far more market opportunities for the long-term investor today than there were even a week ago, and the upside belongs to those people who can see those opportunities and move with purpose while everybody else freaks out.
First of all, let's start with the fact that things are not actually that crazy. Check out the diagram below. It's from the Vanguard Investment Advisory Research Center and it shows that since 1980, the market has been in correction territory ~30% of the time.
![\"\"](\"https://framerusercontent.com/images/jnbDDJRtYUAG5g2GqqQxQ7pq5CA.png\")
Or take a look at the next one, which shows the variability you can expect in differing levels of asset allocation. A bad year for a 100% stock allocation has been as bad as -43.1%!
![\"\"](\"https://framerusercontent.com/images/IQcSQOmslLSUvYgWnLDd0YKkegM.webp\")
I struggle to find things to say when markets behave like they have in the last week. That's not because there's nothing to say. It's because I feel like I'm repeating myself. I guess some people just need to hear it again with different words:
Individual financial plans are built to accept this volatility. Risk is a feature we utilize to access higher long-term gains. Nobody should accept full market risk on assets that are needed as cash inside of 7 years. If your time horizon is longer than 7 years, check back and see how things look at that point; today's panic will have likely subsided.
If your plan calls for you to be saving, you especially need to do that while the markets are down. If you fail to buy the market while it is on sale, you are overpaying and will experience lower overall returns.
In fact, if you are wired correctly, you should do what you said you'd do on your risk tolerance questionnaire. Remember that thing you filled out where you said that your response to a massive market correction would be to buy more? It's time to make good on that promise. You didn't invest more during the housing collapse or COVID. What will you do with tariffs?
I want to quote the ending of a piece I read today from Vanguard, because I think they nailed it:
", "url": "https://prosperowealth.com/blog/success-happens-now", "title": "Success happens now", "summary": "Embrace market volatility as opportunity, not threat. Learn why successful investors are 'wired backwards,' how market corrections are normal (occurring ~30% of the time since 1980), and why discipline during downturns creates wealth. Success doesn't wait for calm markets—it happens now.", "date_modified": "2025-04-08T00:00:00.000Z", "author": { "name": "Eric Franklin" } }, { "id": "urn:sha256:877158bcc3f1f9356932ccd26a5f50eb0a52b3ed1d1dae63adb4c9aa767004da", "content_html": "Long-term investing success happens now
We knew such a day was coming. Sharp market downturns are a surprise only in their timing, not in their mere occurrence. This day was coming because it always comes. How we’ve prepared and what happens next is of the utmost importance. Don’t chase the markets; in times like these, they’re wild and unpredictable. Now is the time to call on that discipline you signed up for if you’ve adopted our Principles for Investing Success.
Eventually, and not necessarily in this order, volatility subsides, markets bottom, and dances end.
Thanks to Alec Rich and Citywire for making the decision to cover career switchers into the financial planning and advisory business. I'm super happy to be the first featured in their \"Past Lives\" series.
Citywire RIA: How early Amazon employee Eric Franklin went from running retail to running an RIA
", "url": "https://prosperowealth.com/blog/citywire-ria-how-early-amazon-employee-eric-franklin-went-from-running-retail-to-running-an-ria", "title": "Citywire RIA: How early Amazon employee Eric Franklin went from running retail to running an RIA", "summary": "Eric Franklin shows how tech professionals can make the transition from tech firms to becoming successful financial advisors.", "date_modified": "2025-02-05T00:00:00.000Z", "author": { "name": "Eric Franklin" } }, { "id": "urn:sha256:d5c86bd9f5d5a2ca01dbe5bc58157234bcf613d9734417e74633d96026b867b1", "content_html": "I'm excited to have been used as one of two CFP® resources for an article in Business Insider (my first time!) written by Sophia Acevedo on \"3 ways you can save more without budgeting, even as inflation rises.\"
My favorite money quote is here:
Taking the added step of contributing to your savings each month is also a wise decision.
\"What happens is behaviorally, you become addicted to seeing that grow, and that is a very positive shift for most people. By the time you're in three months, four months, six months, that is not something you want to let go, because it generally starts to accumulate, and you start to see some interest on the account,\" says Eric Franklin, CFP® professional, managing principal at Prospero Wealth.
Business Insider is pretty aggressively pay-walled, so if you have access to Apple News, you can also find the article here.
", "url": "https://prosperowealth.com/blog/business-insider-3-ways-you-can-save-more-without-having-to-make-a-budget-even-as-inflation-ticks-up", "title": "Business Insider: 3 ways you can save more without having to make a budget, even as inflation ticks up", "summary": "Discover three practical strategies to build wealth despite rising inflation—no complex budgeting required. Eric Franklin, founder of Prospero Wealth, reveals 3 behavior-based approaches that make saving effortless and sustainable, even as consumer prices climb in 2025.", "date_modified": "2025-01-25T00:00:00.000Z", "author": { "name": "Eric Franklin" } }, { "id": "urn:sha256:2ea9c3482cf00928c9b59df3053636be9e1b638a1d27715c3f6357d46a374595", "content_html": "Quarterly market performance update.
In Q4, only US equities and bonds were positive. International and Emerging equities, along with real estate and global bonds, were all negative.
Zooming out for the full year, however, all markets and assets were positive.
The report included important headlines for the year, market performance updates, and a short article on consumer sentiment and how how unreliable it has been historically.
", "url": "https://prosperowealth.com/blog/2024-q4-market-review", "title": "2024 Q4 Market Review", "summary": "Navigate market volatility with Prospero Wealth's Q4 2024 Market Review. Discover how US stocks outperformed international markets, analyze global trends across stocks, bonds, and commodities, and learn why consumer sentiment metrics may not predict future returns. Download our comprehensive report for tech professionals seeking evidence-based financial clarity.", "date_modified": "2025-01-17T00:00:00.000Z", "author": { "name": "Eric Franklin" } }, { "id": "urn:sha256:214c6ac584ca22fe305b3d87f058e75a57629ebd268440e8cfee491b80ad873c", "content_html": "GoBankingRates.com asked me for some insights on how people might destroy their finances in 2025. This is what I gave them.
", "url": "https://prosperowealth.com/blog/gobankingrates-com-i-m-a-financial-advisor-5-worst-things-you-can-do-for-your-finances-in-2025", "title": "GoBankingRates.com: I’m a Financial Advisor: 5 Worst Things You Can Do for Your Finances in 2025", "summary": "Discover five money mistakes to avoid in 2025 according to CFP Eric Franklin of Prospero Wealth. Learn why not to let politics influencer your investing, why emergency funds should be 'out of sight,' and how accountability partners can transform your financial outcomes even when professional help is needed.", "date_modified": "2025-01-09T00:00:00.000Z", "author": { "name": "Eric Franklin" } }, { "id": "urn:sha256:ec49b013476c027271108e28f067c1fb3f9f1454f77a19564db11b3f8e8fb874", "content_html": "Prospero Wealth welcomes our new advisor, Phil de la Motte.
A new High Yield Savings account through Flourish
CFP® Exam Update
In the News...
Michael Kitces is the most recognizable advisor in the world (the GOAT). I was more than stoked to spend 2 hours talking to him (edited down to 90 minutes) about Prospero Wealth and what makes us so unique in the advisory space. While the target listeners of his podcast are advisors, not clients, the shop-talk is useful for clients trying to understand the differences between how we operate versus other firms.
(There is also a transcript and article over here if that's easier for you.)
", "url": "https://prosperowealth.com/blog/kitces-advisor-success-414", "title": "Podcast: Financial Advisor Success with Michael Kitces Ep 414: Narrowing Down the Focus to Byte-Sized Planning for Tech Employees ", "summary": "\"Learn how Eric Franklin of Prospero Wealth grew his firm by tailoring financial planning for tech professionals. Discover his 'byte-sized' approach that increased client implementation rates, content marketing strategies that resonated with tech employees, and insights on transitioning from tech to financial advising.", "date_modified": "2024-12-03T00:00:00.000Z", "author": { "name": "Eric Franklin" } }, { "id": "urn:sha256:520472ca7673307482b292626d6ca5de547df0f03d662aa931520f70ef52a751", "content_html": "I had the pleasure of being on Adam Sarhan's \"Smart Money Circle\" podcast. Adam's niche is interviewing the \"smart money\" (large money managers and CEOs) regarding timeless advice. While the beginning starts with a focus on business, the format opens up into broader advice about life, and that's what I find separates it from others in the space.
Here's the YouTube version of our talk:
And here's a link to all the podcast versions.
", "url": "https://prosperowealth.com/blog/smart-money-circle-podcast", "title": "Smart Money Circle Podcast: Timeless Lessons From A Money Manager That Helps Tech Employees Invest Their Money", "summary": "Discover the unique journey of Eric Franklin, co-founder of Prospero Wealth, from a 23-year tech career at Amazon and startups to becoming a financial advisor. Learn how his tech background shapes his wealth management approach.", "date_modified": "2024-11-13T00:00:00.000Z", "author": { "name": "Eric Franklin" } }, { "id": "urn:sha256:b9ddee73f0ac65945603e397a20d5cf87e38ae85781a2da49b110a339c961b66", "content_html": "A concentrated position is any individual equity investment that gives you pause, keeps you awake at night, or that will cause additional problems (e.g. excessive capital gains) if you try to diversify it.
If you are defaulting to doing nothing with a large position solely because it has “worked for you so far,” or you hate the thought of paying taxes on the proceeds, you’ve got a concentrated position problem.
Concentrated positions are a lot like the proverbial “frog in the pot.” You feel fine as your exposure slowly grows…until you realize you’ve been cooked. You’ll know you have a concentrated stock position when the position has become golden handcuffs, something that keeps you from doing what you know you should.
Many of our clients have benefited from doing nothing with their concentrated positions over a long period of time—but approaching retirement dates, and an increase in financial demands eventually necessitates that the risk of these positions be dealt with explicitly.
There’s a Buffett quote I love (from his 2002 letter to Berkshire Hathaway Shareholders): “To make money they didn't have and didn't need, they risked what they did have and did need.”
A well implemented strategy around a concentrated position immediately protects what you have and moves you towards a more desired outcome over time.
For some additional context, our planning software defaults to saying any position above 5% is concentrated. We find that a bit “over-the-top” and typically advocate that employees have “skin in the game” with their employers. For people early in careers, in growing companies, we don’t tend to get too concerned until we see that position above 20%. The more obligations you have, the lower that number is likely to be.
It’s important to remember that your employment is already tied to your company. If you’re also holding a concentrated equity position in the same company, you’re facing “double jeopardy” if and when the company experiences headwinds. Nothing like being concerned for your job while also watching your paper value get torched.
At Prospero Wealth, we serve tech professionals at many of the leading tech companies and startups, so we see a lot of concentrated positions. As mentioned, the hard behavioral challenge at play here is that most of these clients have experienced extraordinary success precisely by doing nothing.
It’s important to note that no matter how high-flying your company might be, there’s always an opportunity for it to experience a “Crowdstrike moment.”
Leading companies don’t stay leaders forever and it’s hard to pinpoint the exact right time to exit. Large market losses eventually accrue to people who do nothing with a large position (typically in an attempt to defer taxation). 50 years ago, IBM, Exxon, GM, and AT&T were in the top 10 companies by market cap. Where are they now?
You do not want to be the last person at the party. Staying at a card table (even one that has favorable odds) with larger and larger amounts of money will eventually accrue to the house.
My grandfather was an amazing entrepreneur and a terrible investor. He spent his entire life building and running a successful auto parts chain in Southern California. After retirement, in a bid to cement his family legacy, he took the proceeds from the sale of that business and put most of it in a land development deal with a very successful developer. I bet you figured out where this is going.
That project went bust and my grandfather spent the rest of his life feeling guilty about not leaving things the way he wanted to leave them for his heirs. He was retired and out of moves. I never want this to happen to anyone, especially one of our clients.
Being highly concentrated can make you rich. Being appropriately diversified is what keeps you rich.
The goal of any concentrated position strategy should be to manage risk while diversifying the position as tax efficiently as possible.
We use three basic strategies (tailored to each client’s unique needs and profile) to manage concentrated positions:
Hedging (derivative overlays) - immediately reduce the risk of the position without a tax bill through use of derivatives (puts, collars, and/or covered calls). Basically, we use options to provide insurance on the position while employing the additional strategies below.
Direct (Custom) Indexing - using technology, we can create a custom list of equities closely tracking a diversified benchmark while also creating some additional tax benefits through automated tax loss harvesting. These tax losses create a bank that can be used to chip away at the concentrated position or for use against other capital gains.
Exchange Funds - instantly diversify your most highly appreciated shares while tracking a benchmark like the Nasdaq 100 or the S&P 500. NOTE: Requires 7 years for full tax benefits to be portable.
![\"\"](\"https://framerusercontent.com/images/9nbju7TNfyWlld1NaLjxG11AMc.jpg\")
Our clients tend to be successful, highly educated, technology professionals, so the answer is “yes, you could probably figure out how to do some (or maybe even all) of this yourself” and save yourself asset management fees. The problem, of course, lies in the risk of getting these pieces wrong and not managing them correctly over time. These are not “set it and forget it” types of strategies. They require frequent re-alignment and re-allocation (this is what the management part of professional money management includes). Implementation and operations here can be advanced and can easily cost you more on the performance side than the fee side.
Where most people injure themselves implementing hedging on their own, for example, is letting their position get called away. Not fully understanding the math behind early calls means you can wake up and find large chunks of your position called, all while triggering a large tax bill—the opposite of the outcome we are seeking.
These things are specialized enough that we (Prospero Wealth) don’t do this all on our own. We work with service and technology leaders in each of these strategies. We have identified what we feel are the best partners in each category, many of which are solely available to institutional investors.
Let’s use a common example and assume you have a concentrated position in shares you acquired from your employer over a sustained period of time where the market price has generally gone “up and to the right.” Your accumulated position will probably look a bit like a ladder.
![\"The](\"https://framerusercontent.com/images/bsEGP1SuanpQBMJtQLdxOwoFOI.jpg\")
As you can see, we will generally start to apply direct indexing on the lowest appreciated shares, using any tax losses that are harvested to offset gains from your concentrated position. Any gains we make on the hedging side can also be utilized to add your direct indexing account to chip away at your concentrated position.
For the highly appreciated shares on the other end of the ladder, the more appropriate tool is an exchange fund. On day 1 of your participation in an exchange fund, your contributed shares are exchanged for shares in the exchange fund, which will track a more diversified portfolio (e.g. the Nasdaq 100 or the S&P 500). At the end of 7 years, you can receive those diversified shares back into your brokerage account at your original cost basis. Voila. Diversification without taxation.
Everything not contributed initially into a direct indexing strategy or exchange fund, is hedged using derivatives. Typically, this is the majority of the assets at the outset.
Most of the management we do is about reducing the risk of your large position as tax efficiently (and fee efficiently) as possible. We do, however, sometimes see a need to access the equity from a large position without taking the tax hit associated with selling it. In those cases, we work with providers of Variable Pre-Paid Forwards.
A Variable Pre-Paid Forward is a custom financial contract that allows a shareholder to defer the sale of stock and the associated capital gains tax. The shareholder enters into a contract to receive a payment upfront (typically 75 -90% of the contracted shares value) based on the price of the stock (without actually selling the stock). The shareholder agrees to deliver shares at a future date. The exact number of shares that will need to be delivered is variable based on the price at that time (typically dictated by a collar outlined in the contract). Since the shareholder has not sold the stock at the time of entering the contract, they defer capital gains. They may even retain upside if its value increases. The collar can also be used to protect downside risk.
The amount you end up paying for these services is highly dependent on your specific planning needs and the proportion of the services being utilized. Broadly speaking, however, Prospero Wealth charges our standard asset management fees on the hedging and direct indexing. We charge asset advising fees on the exchange fund. Our partners in these areas charge their own fees, just as any mutual fund or ETF would.
![\"\"](\"https://framerusercontent.com/images/zOYtAk2YcSBr5WgS9NHNpI0nmq4.png\")
The techniques outlined in this document are specialized and not something that every advisory knows how to provide.
Prospero Wealth is not a standard advisory. Our lead advisors come from multi-decade careers as tech professionals prior to becoming advisors.
We do this because we love it, not because we have to, and we are fully dedicated to helping tech professionals get the most out of the unique opportunities and challenges their careers represent.
Talk with us. Schedule a brief introductory video chat so we can help you figure out if we can help with your concentrated position.
", "url": "https://prosperowealth.com/blog/concentrated", "title": "The Prospero Wealth Concentrated Position Playbook", "summary": "Do you have a concentrated stock or concentrated investment position? A helpful guide to understand how to identify and manage concentrated positions.", "date_modified": "2024-10-03T00:00:00.000Z", "author": { "name": "Eric Franklin" } }, { "id": "urn:sha256:88a4675a33ea3a666e6ad81ed7789264d706c1a591168faf67dc1c0d381dfab5", "content_html": "Our Q2 letter talks about what's on the other side of \"enough\" and some updates to our exposure in the media.
", "url": "https://prosperowealth.com/blog/q2-2024-prospero-wealth-newsletter", "title": "Q2 2024 Prospero Wealth Newsletter", "summary": "Prospero Wealth's Q2 2024 Newsletter examines 'quality problems' faced by tech professionals. Discover insights on defining 'enough' for career transitions, recommended reading on 'The Pathless Path,' and company updates including media features in WealthManagement.com and InvestmentNews.", "date_modified": "2024-08-30T00:00:00.000Z", "author": { "name": "Eric Franklin" } }, { "id": "urn:sha256:85f50231cfd5534b636f26fb1aa5b53f2d88bd58e3cb61e426d64edeb763c8f7", "content_html": "![\"\"](\"https://framerusercontent.com/images/ZB7fxXVKwIblSb6MPvbjpnIQQ.webp\")
Did you know I nearly left my Amazon career in 2001 after being part of the Amazon Customer Service layoffs? I had two job offers to become a financial advisor back then but I ultimately accepted another Amazon position (I'm a glutton for punishment).
Rob Burgess, at Financial Planning magazine, dove into this pivotal career moment and figured out why that decision became the basis of Prospero Wealth.
\"Waiting allowed me to create the kind of the firm I wanted to create from day one,\" Franklin said, \"as opposed to coming up inside of a financial services firm and then having to look for an opportunity to step away.\"
Check out the article here.
", "url": "https://prosperowealth.com/blog/financial-planning-the-ladder-how-patience-paid-off-for-the-founder-of-an-ria-that-serves-tech-professionals", "title": "Financial Planning: The Ladder: How patience paid off for the founder of an RIA that serves tech professionals", "summary": "Discover how Eric Franklin's 20-year Amazon journey prepared him to launch Prospero Wealth, an RIA serving tech professionals. Learn why patience proved vital as he built skills, connections, and industry expertise before making his career leap from project management to financial advising in Seattle.", "date_modified": "2024-08-26T00:00:00.000Z", "author": { "name": "Eric Franklin" } }, { "id": "urn:sha256:d2fe08e7d84c9515fd9837a09b4717f7bf9243df9b98daa999c99f914ce6c353", "content_html": "![\"\"](\"https://framerusercontent.com/images/rc3PjQlxYTD8nArN31eSZatJiI.jpeg\")
I was recently featured in \"ETF.com's Advisor Views\" about Prospero Wealth's usage of an intentionally global allocation for our core portfolios and why I believe that it makes \"even more sense\" for our tech professional clientele.
My favorite quote in here was this one:
We’re not contrarian or controversial as a business strategy, so if things start to look more normal, then we will too. We take probabilistic bets when we think they’re in our favor. This happens to be one of those.
Check it out here.
", "url": "https://prosperowealth.com/blog/etf-com-advisor-views-are-u-s-investors-missing-international-opportunities", "title": "ETF.com: Advisor Views: Are U.S. Investors Missing International Opportunities?", "summary": "From ETF.com, dive into Prospero Wealth's global investment strategy with founder Eric Franklin as he explains why his tech-focused firm allocates 50% to non-US markets despite client bias. Discover his evidence-based approach to international diversification, ETF preferences, and how he benchmarks performance for Seattle's tech professionals.", "date_modified": "2024-08-21T00:00:00.000Z", "author": { "name": "Eric Franklin" } }, { "id": "urn:sha256:5454beffed088ae5a9da491afb167a82638172cadc816e342677c38f473ec43b", "content_html": "Friday was interesting, right?
Many of you are concerned about the computer outage that affected everything from travel to doctor’s offices to bank and investment accounts.
It was a bit of a relief when cybersecurity firm CrowdStrike’s CEO George Kurtz reassured us early in the day by saying, “this is not a security incident or cyber attack. The issue has been identified, isolated and a fix has been deployed.”
Still, it’s upsetting to log into accounts and see a warning message. Here’s what Charles Schwab had on its customer portal for most of the day.
“Due to a third-party, global and industry-wide issue, certain functionality may be intermittently slow or unavailable. We’re monitoring the issue. Phone services may be disrupted and hold times may be longer than usual.”
![\"\"](\"https://framerusercontent.com/images/yhKlDmwhXKSevpKzTJt7cIkLj6A.jpg\")
CNBC.com, July 19, 2024. “Microsoft-CrowdStike issue causes ‘largest IT outage in history.’”
What should be done?
For some of our clients, CrowdStrike was a top performer in one of our active investment sleeves (Caliban). After a quick consult with Suhas on Friday, we sold out of our entire position, as we assessed the mid-term reputational and business risks to be substantially beyond the initial negative response. For long-term Caliban investors, we were able to preserve a pretty large gain responding quickly. The trading activity on CrowdStrike today seems to have validated that approach, dropping by a further 13%.
Beyond that action, however , there’s not too much that can be done, or even should be done in an event like this—especially when you do not have direct exposure to the key players in a market-shaking event. For the vast majority of these issues, a coll head and patience prevail.
For most of you, the best you can do is use this as a reminder to stay proactive with personal security, like updating passwords. Also, that certain accounts have limitations regarding financial protections.
Remember, with bank accounts, FDIC provides depositors with an insurance payout of up to $250,000 per depositor, institution, or ownership category. If you have more than $250,000 at a bank, we might want to take a look.
(As you may recall, when Silicon Valley Bank and Signature Bank had issues in March 2023, there were concerns about the treatment of depositors. Fortunately, the FDIC stepped in quickly and guaranteed all deposits, even the uninsured money. )
Please let me know if you're struggling to get updated information on any of your financial accounts. While we are seeing things at Schwab back to normal, it may be several days before all services are back to normal.
", "url": "https://prosperowealth.com/blog/the-crowdstrike-outage", "title": "The Crowdstrike Outage", "summary": "See how Prospero Wealth managed the CrowdStrike outage of July 2024. Learn how we quickly sold some positions to protect client gains, why cool heads prevail during tech disruptions, and essential FDIC protection reminders.", "date_modified": "2024-07-22T00:00:00.000Z", "author": { "name": "Eric Franklin" } }, { "id": "urn:sha256:2455a07373ffd3e4026a9e68849f1011eb6ff05bb2724f57146fcc9401da0889", "content_html": "I am beyond excited to introduce the new website and brand identity for Prospero Wealth.
Why rebrand?
In short, we think we know who we are and who we serve with more clarity than at any time in the past. People should discover us and intuit that identity quickly.
When Prospero Wealth initially formed in 2016, we had no clue about the clients we’d come to serve and the specialties we’d develop to serve them well. We grabbed a piece of clip art, selected a font, and paid a designer to lay them out and chop some images, that was it.
As time has gone by though, we found our services trending more towards serving a tech clientele. This makes sense, given that’s where we came from too, but we want to honor and communicate that shared history more quickly.
Career tech professionals will be joining Prospero Wealth as advisors and we owe it to them to have a unique brand that they can use to communicate with their clients. We think this brand does that.
Can I see it?
Sure thing.
![\"\"](\"https://framerusercontent.com/images/XyU1wcWXrpCHtcmc18Uz44gCfc.png\")
The bow of the key (the part you would hold while turning in a lock) is composed of boxes connected by lines. These are meant to symbolize connected data (you might have to squint harder to get that). They also produce a cool little negative “x” right there in the middle. We like to think of that as the multiplier as the “x”-ponential value Prospero Wealth brings to its clients.
But my favorite little bit of the key is the bit (the part that would press tumblers in the locking mechanism). That’s a little binary. A stylized 101 indicating our tech roots.
Why the key in the first place?
Honestly, that’s just me (Eric Franklin). The key has been a symbol utilized by 4 generations of auto parts store owners in my family. For them, it comes from the literal reference to autos, as well as harkening back to the story of Benjamin Franklin flying his kite in a lightning storm (incidentally, my grandfather on my mother’s side of the family owned an electric company when I was a kid) so the reference might be even more appropriate.
I am proud to pick up the key, change it for my purposes, and to carry it forward.
What now?
Honestly, we’d love for you to click over to our website and see everything working together in its full glory. That’s where it all comes together.
For clients of ours, you may have already seen us starting to work the new brand and colors into our various client facing interfaces (our client portal and financial planning tools). You will also see these changes reflected in our quarterly performance reporting and fee statements.
In closing…
We would be completely remiss if we did not shout out the folks that helped us on this project.
For the brand and identity work, Josh Passler, AKA thefinartist, brought enthusiasm and creativity from day one. He ran a clear and tight design process and at all times honored and heightened what makes Prospero Wealth unique and special.
For the website, we give a ton of gratitude to Colton Etherton, AKA slices.design. Colton works seamlessly with Josh to express the design and brand, but also with me to ensure that I know how to update and maintain the site going forward. Colton pushed into new territory with this site, giving us a level of fit and finish I am super proud to share with the world.
Thanks to both of those guys. If you need to discover what makes your company tick and bottle it up so that others can see it too, you need to work with these talented professionals.
", "url": "https://prosperowealth.com/blog/the-rebranding-of-prospero-wealth", "title": "The Rebranding of Prospero Wealth", "summary": "Explore Prospero Wealth's new brand identity designed specifically for tech professionals. Learn the meaning behind our distinctive key logo with its binary code bit and connected data elements, and see how our evolution reflects our specialized focus.", "date_modified": "2024-06-20T00:00:00.000Z", "author": { "name": "Eric Franklin" } }, { "id": "urn:sha256:effc6bd5994af2d9296c628f10c4a9c9a3d74a2804f6724da89a813be5492c4d", "content_html": "Heather Altamirano at GoBankingRates.com featured quotes from me related to RIA technology in her article on stock-picking. It was kind of surprise to see almost everything I mentioned get used!
", "url": "https://prosperowealth.com/blog/gobankingrates-com-i-m-a-financial-advisor-here-are-5-key-factors-to-consider-when-picking-stocks", "title": "GoBankingRates.com: I’m a Financial Advisor: Here Are 5 Key Factors To Consider When Picking Stocks", "date_modified": "2024-05-27T00:00:00.000Z", "author": { "name": "Eric Franklin" } } ] }