Shareholders in real estate investment trusts have enjoyed five years of market-beating gains,but many are starting to wonder whether higher rates could whisk away that outperformance, and bring thosewho competed in the race for yield to a screeching halt.

Ignited by soaring demand for commercial real estate, REITs produced among the highest returns of any asset class in 2014, and nearly tripled in value since 2009. Although looming interest rate hikes are sparking skittishness among investors, who often treat the income-producing stocks as juiced-up bonds, the real estate rebound that propelled REITs in 2014 will continue next year - and will more than make up for higher rates, analysts say.

That doesn't mean investors should consider REITs a safe substitute for fixed income, say financial advisers. The biggest risk facing REIT investors isn't the Federal Reserve; it's the danger of using a stock - as volatile as any other equity - to replace tried and true fixed income.

"I consider REITs [for clients] because they are a good diversifier," says Joseph Alfonso of Aegis Financial Advisory. "But I would never recommend them as a bond replacement."

After earning returns of more than 200% since 2009, talk of impending Federal Reserve rate hikes prompted investors to second guess REITs in September, yanking out more than $1 billion as the asset class tumbled about 6%. The fears proved misguided: REITs snapped back in October, eventually accruing returns of about 29% in the year to date.

As September's swoon suggests, REIT investors' anxieties about rising rates are often overdone. While the stability of REITs' dividends - they are required to pay out 90% of earnings - causes the asset class to resemble fixed income, REITs are still stocks, and fluctuate in value based on earnings. In general, REIT's correlation with bonds is minimal, typically around 10%. When a rate rise is triggered by a stronger economy, as would be the case for any hikes in 2015, that correlation is often negative, as higher expected earnings offset headwinds from rising rates, says Todd Canter, an investment manager at LaSalle Investment Management Securities

The current economic recovery, in particular, is "a goldilocks scenario" for REITS, says Christopher Lucas, lead equity research analyst for Capital One Private Bank. The 2009 crisis dramatically crimped supply of commercial real estate, docking construction by more than 60%, according to data from NAREIT. As the economy rebounds, the scarcity of commercial space has boosted REITs' pricing power, poising the asset class for earnings growth of about 16% in 2015, according to FactSet. For investors, that could mean a total return as high as 10% next year, although higher rates could dock returns to the mid to high single digits, Canter says.

I was recently reading an article in the Montgomery Advertiser one morning and came upon some very interesting information that shows that we Alabamians are very giving. The article stated that Alabamians donate a larger slice of their income than those in almost any other state, and the typical Alabama donation is bigger. Alabama ranks No. 3 in highest percentage of donated income the study found. Only Mississippi and Utah ranked ahead of us.

The National Financial Advisory site also ranked Alabama as the second poorest state. Talk about having a heart, we have the least and give the most. Maybe the rest of the nation needs to take a look and follow our example.

Now I know that y'all are reading this and going what does this have to do with hunting and fishing? Well I'm going to tell you, deer hunting has become a way for many schools and charitable organizations to give back to their community or organization. One such organization that has taken deer hunting on as a way to raise funds is the Montgomery Lions Club.

Back in 2003, the Montgomery Lions Club was looking for a way to raise money for their charitable causes, and they came up with the Montgomery Lions Club Charity Deer Hunt.

The deer hunt this season will be hosted by the Montgomery Lions on Jan. 15-17. You can come join hunters from all over the United States and Canada and hunt over 50,000 acres of private land during the prime rut in the famous Alabama Black Belt, home of the South's finest trophy whitetail deer. The Black Belt of Alabama is considered one of the best if not the best locations in the country to hunt the elusive whitetail deer.

The hunt registration begins on at 9 am Jan. 15. Hunting will begin that Thursday afternoon and go through Jan. 17. During the hunts, you will be hunting private land and personally guided, and don't forget, you will also be treated to great southern food and of course southern hospitality. On that Friday night, there will be a banquet and raffle packed with firearms and outdoor gear available for the lucky winners.

Now let's talk pricing, you're not going to believe this. The standard hunt package, which is three days, four hunts (one buck and two does) is only $900. They also have a father/child package (17-and under)-$1,200 (both hunting-two bucks and four does). If you want Mama to tag along, she is only $50 a day and can shop and explore while you and junior hunt.

I know there is a lot of land owners out there who are particular about hunting on their land, but if you would like to be a part of a great organization that is raising money for a good cause, the Lions Club is looking for additional property to hunt. This hunt has been so good in years past that the demand is growing every year, so additional land is greatly needed. If you have land and are possibly interested in donating for the hunt, call the Lions Club office at 334-356-1180.

The Montgomery Lions Club has generously turned over $4 million to charities over the years and will continue to keep working and raising funds with great events such as the Lions Club Charity Deer Hunt. My hats off to you guys and gals for all the hard work and time that y'all give to help others in need.

(Rob Newman and Steve Long can be heard on their Cast amp; Blast radio show from 7-9 am on Sports radio 740-AM. Please send any comments or ideas about their column to This email address is being protected from spambots. You need JavaScript enabled to view it.).

Wells Fargo (NYSE:WFC)s Wealth, Brokerage and Retirement (WBR) operating segment is one the largest wealth managers within the United States. It includes Wells Fargo Private Bank, which serves HNWI and their families, Wells Fargo Advisors, the brokerage arm, which is the third-largest in the country, and Wells Fargo Retirement, which manages employer-sponsored retirement plan assets for millions of Americans.

Operating results

(click to enlarge)

Source: SEC Filings

In the companys most recent quarter, the WBR segment reported an increase in revenue of 7% from 3rd quarter 2013, from $3.3bn to $3.5bn, and an increase of 8% on a 9-month basis, from $9.7bn to $10.5bn over the same period in 2013. The company posted $550m in net income, up 22% over the same period in 2013. On a 9-month basis, net income was $1.6bn, up 29% compared with the same period in 2013. Net income margins experienced an expansion from 12.5% to 14.8% for the 9 months ended September 30, from 2013 to 2014.

Considering the growth in revenue was dwarfed by the growth in net income is indicative that the segment is benefiting hugely from economies of scale. Since the segment operates on an advisor-client model, I expect Wells Fargos WBR business line to continue benefiting from operating leverage in the future. Furthermore, Wells Fargo is known to be the best in the business of cross-selling financial products; the WBR segment cross-sell was 10.44 products per household in Aug 2014, up from 10.41 in Aug 2013. Due to this, I expect further margin expansion to occur within the WBR segment in the following quarters. Average assets have also increased from $179bn to $189bn on a 9-month basis, which represents the continued increase in demand for the banks WBR services. With many baby boomers nearing retirement or have already retired, I expect this demand to not only increase in the future, but also be sustained due to the high switching costs that clients face were they to switch financial advisers. Wells Fargos client base on average already have approximately 10.44 products and services per household; it would be too much of a hassle to switch to another bank, hence discouraging clients from leaving to competitors.

Growth Opportunities

According to a PR NewsWire report, the number of US HNWIs is forecast to grow by 12.1% to reach approximately 6m by 2018, while HNWI wealth is expected to grow 28.7% to reach $28.8tr by 2018. Bearing in mind that Wells Fargo is one of the largest wealth managers in the US with $1.6tr in client assets, and that the bank offers a full suite of every wealth management product one can think of, it is not a stretch to say that the bank is in a prime position to capitalize on this trend. In addition, the bank has also made investments to beef up the WBR segment, evident from its recent launch of Wells Fargo Investment Institute, which brings together investment research, strategy, manager research and publication teams from WBRs lines of business to create a single group tasked with the objective of providing world-class advice to the banks wealth advisers. Simply speaking, the WFII is a support team for the banks financial advisers. With this initiative, I anticipate that financial advisers will be able to focus more of the attention on attaining new clients and bringing in more assets, while the WFII maintains relationships with existing clients.

A recent CNBC survey in December revealed that American millionaires are becoming increasingly confident in the US economy, where 50% of wealthy investors believe the economy will be stronger in 2015, up 9% from 6 months ago. With increased investor confidence, wealthy individuals are more likely to park their assets with wealth managers such as Wells Fargos team of financial advisers. Given the banks popularity and position as one of the Big Four US banks, I expect average assets managed by the WBR segment to continue increasing in the following quarters.


Though Wells Fargo can be considered a much-loved bank within the US, it barely has any international presence at all, a fact that could hamper long-term growth for the WBR division. With China recently managing to surpass America as the worlds largest economy, it is clear that the US bank is missing out on a lot of potential revenue within the international financial markets. Many predict that the US will grow at a slower pace compared to the many countries in Asia, and Wells Fargos choice to not expand internationally could damper the companys long-term prospects. Financial advisory, at its core is a relationship business after all. If and when the US bank decides to enter the international market, it may already be too late; its competitors may have already established their presence and gained the trust of the consumers, leaving little opportunity for Wells Fargo.


Wells Fargos WBR division has delivered spectacular performance in the companys third quarter, and considering the factors mentioned above, I expect the division to continue expanding its profit margins, with net income growth dwarfing revenue growth in the following quarters. Prospects for the US wealth advisory market are bright, and given the banks position within the industry, I expect it to be able to take advantage of the growth opportunities listed above. In the long-term, I expect the bank to experience difficulties in growing its revenue, due to its dependence on a mature market like the U.S, and its current minimal presence within fast-growing economies in Asia-Pacific.

When John Steele wanted to sell his chain of neighborhood convenience stores in Gloucester and Middlesex counties, he worked with Matrix Capital Markets Group Inc.

"They did a great job of identifying prospective purchasers and making the information available to them," he said. "They are skillful in managing the entire process."

Steele sold his Little Sue stores to 7-Eleven in a 2008 deal. He said Matrix worked with his attorney and other key players on the deal.

"They worked closely with him to make sure things went right," Steele said.

An independent, privately held investment bank, Matrix provides merger and acquisition and financial advisory services that include company sales, corporate valuations, management buyouts and recapitalizations (selling a portion of a business while still maintaining a significant stake in ownership).

"We assist businesses with the sale of their company as well as raising capital for the growth of their business," said Mike Morrison, one of the firm's managing directors and principals.

The company works with privately held, private-equity owned and publicly traded companies.

"We define (our) client base in terms of revenues from $20 million to $500 million," Morrison said.

Investment banker Jeff Moore and several partners founded the company in Richmond in 1988. Moore will retire from the firm at the end of this month. He sold Matrix to New York-based MONY Group Inc. in 2001, which was subsequently purchased by AXA Financial Inc. in 2004. Moore and Matrix's current owners repurchased the company from AXA in 2005.

"As the firm has matured, we have become much more focused on industry sectors," Morrison said. "Our spectrum of services has broadened. In 1988, we were just selling companies."

The company has clients in a variety of industries, including building products, business services, consumer products, downstream energy and retail, health care, industrial products and lumber, as well as media communications.

"Media could be anything from cable television to outdoor advertising. It's a broad bucket," Morrison said.

The company opened an office in Baltimore in 1996 and one in Chicago in 2013. The investment bank has a variety of specialized industry teams that include business services, building products, industrial products and hardwood and softwood lumber. Its two newest teams, both formed this year, focus on health care and media and communications.

The company's downstream energy and retail group was formed in 1997.

"We seek to be an industry leader in our groups, and we have achieved that level," said Tom Kelso, one of the managing directors and principals. "Anything that revolves around energy products can be large in terms of revenues."

The company has a different set of competitors in each of its service offerings.

"There are firms that might focus on one or two industries -- some that focus on the Mid-Atlantic or the state of Virginia, for example. We are doing deals across the whole country, in each geographic location and each industry. We tend to be broader than many of our competitors," Morrison said.

The company seeks to recruit the best talent for each of its specialized teams.

"We try to find topflight investment banking people," Kelso said.

Over the years, the company has developed relationships groups looking to take businesses private.

"Private-equity firms have become prolific buyers of businesses of varying sizes," Morrison said.

The current marketplace is very robust, Morrison said.

Over the past 36 months, the company has completed 36 deals.

"We have never been busier. We are averaging a deal a month. That is a pretty high standard," he said.

In the past five years, the number of transactions handled by Matrix has doubled.

"Over that same five-year period, our number of employees has almost doubled," Kelso said.

Larry Giaimo, president of Butler Woodcrafters Inc. in Chesterfield County, worked with Matrix when he sold his company this year to Sauder Manufacturing in Ohio.

"I had owned it for 15 years and wanted to look for an exit strategy," he said. "They did a fantastic job of matching a good buyer with what we were looking for. They did a great job of getting a good value for our company."