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Welcome to the series finale! After more than six years, we are concluding the Unfiltered Finance podcast. It has been our sincere pleasure to inform both our investors, and financial advisors with this offering. Joining our host Tom Romano, for this proverbial curtain call, is Casey Dylan, Consultant from Story Market Services & the original host of Unfiltered Finance. We’ll be recalling some of our favorite memories, and discussing what this podcast has meant to the progression of our respective careers.
If you have any questions or would like more information, reach out to us at https://symmetrypartners.com/contact-us/
You can also find us on LinkedIn, Facebook, YouTube, and Instagram. As always, we remain invested in your goals.
Symmetry Partners, LLC, is an investment advisory firm registered with the Securities and Exchange Commission. The firm only transacts business in states where it is properly registered, excluded or exempted from registration requirements. Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. No one should assume that future performance of any specific investment, investment strategy, product or non-investment related content made reference to directly or indirectly in this material will be profitable. As with any investment strategy, there is the possibility of profitability as well as loss. Due to various factors, including changing market conditions and/or applicable laws, the content may not be reflective of current opinions or positions. Please note the material is provided for educational and background use only. Moreover, you should not assume that any discussion or information contained in this material serves as the receipt of, or as a substitute for, personalized investment advice. -
Welcome to part two of our podcast episode - "Navigating Global Markets". Many investment professionals believe it is imperative for investors to globally diversify their portfolios, and not put all of their proverbial eggs into one basket. We are joined by Symmetry's Brendan Kruh, Investment Associate, to conclude our discussion on the necessity of global diversification in your investments.
If you have any questions or would like more information, reach out to us at https://symmetrypartners.com/contact-us/
You can also find us on LinkedIn, Facebook, YouTube, and Instagram. As always, we remain invested in your goals.
Symmetry Partners, LLC, is an investment advisory firm registered with the Securities and Exchange Commission. The firm only transacts business in states where it is properly registered, excluded or exempted from registration requirements. Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. No one should assume that future performance of any specific investment, investment strategy, product or non-investment related content made reference to directly or indirectly in this material will be profitable. As with any investment strategy, there is the possibility of profitability as well as loss. Due to various factors, including changing market conditions and/or applicable laws, the content may not be reflective of current opinions or positions. Please note the material is provided for educational and background use only. Moreover, you should not assume that any discussion or information contained in this material serves as the receipt of, or as a substitute for, personalized investment advice.Opinions and views expressed on this podcast were current on the date recorded. Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice, including any forward-looking estimates or statements which are based on certain expectations and assumptions. Although information and opinions given have been obtained from or based on sources believed to be reliable, no warranty or representation is made as to their correctness, completeness, or accuracy. The views and strategies described may not be suitable for everyone. This podcast does not identify all the risks (direct or indirect) or other considerations which might be material to you when entering any financial transaction. Please visit the Symmetry Partners website for important disclosure related to performance of any specific index quoted in this podcast.
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With recent turmoil in the Middle East, the continued war in Ukraine, and global inflation, investors want their portfolios to feature more U.S. stocks. After all, domestic investments have performed well as of late. In this episode of Unfiltered Finance we are joined once again, by Symmetry's Brendan Kruh, Investment Associate, for a discussion on the need for global diversification, even during the most tumultuous times.
If you have any questions or would like more information, reach out to us at https://symmetrypartners.com/contact-us/
You can also find us on LinkedIn, Facebook, YouTube, and Instagram. As always, we remain invested in your goals.
Symmetry Partners, LLC, is an investment advisory firm registered with the Securities and Exchange Commission. The firm only transacts business in states where it is properly registered, excluded or exempted from registration requirements. Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. No one should assume that future performance of any specific investment, investment strategy, product or non-investment related content made reference to directly or indirectly in this material will be profitable. As with any investment strategy, there is the possibility of profitability as well as loss. Due to various factors, including changing market conditions and/or applicable laws, the content may not be reflective of current opinions or positions. Please note the material is provided for educational and background use only. Moreover, you should not assume that any discussion or information contained in this material serves as the receipt of, or as a substitute for, personalized investment advice.Opinions and views expressed on this podcast were current on the date recorded. Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice, including any forward-looking estimates or statements which are based on certain expectations and assumptions. Although information and opinions given have been obtained from or based on sources believed to be reliable, no warranty or representation is made as to their correctness, completeness, or accuracy. The views and strategies described may not be suitable for everyone. This podcast does not identify all the risks (direct or indirect) or other considerations which might be material to you when entering any financial transaction. Please visit the Symmetry Partners website for important disclosure related to performance of any specific index quoted in this podcast.
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Rising oil prices have animated market participant’s fears of reinvigorated inflation pressures, increasing the chances that the Federal Reserve will impose more interest rate hikes. Join Casey Dylan, CIMA®, Investment Communications Strategist (Consultant), and Tom Romano our Head of Strategic Relationships & Product Development, for a detailed recap of some notable market events from Q3 of this year.
If you have any questions or would like more information, reach out to us at https://symmetrypartners.com/contact-us/
You can also find us on LinkedIn, Facebook, YouTube, and Instagram. As always, we remain invested in your goals.
Symmetry Partners, LLC, is an investment advisory firm registered with the Securities and Exchange Commission. The firm only transacts business in states where it is properly registered, excluded or exempted from registration requirements. Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. No one should assume that future performance of any specific investment, investment strategy, product or non-investment related content made reference to directly or indirectly in this material will be profitable. As with any investment strategy, there is the possibility of profitability as well as loss. Due to various factors, including changing market conditions and/or applicable laws, the content may not be reflective of current opinions or positions. Please note the material is provided for educational and background use only. Moreover, you should not assume that any discussion or information contained in this material serves as the receipt of, or as a substitute for, personalized investment advice. -
Markets were off to one of the best start in decades during the first half of 2023—then came the third quarter. The Federal Reserve resumed increasing rates, bringing them to a 22-year high at the Federal Open Market Committee (FOMC) meeting at the end of July. This led to ongoing elevated interest rates through August, pushing bond yields higher and challenging lofty equity valuations. In this episode, Casey Dylan, CIMA®, Investment Communications Strategist (Consultant), and Tom Romano our Head of Strategic Relationships & Product Development, will provide timely insights, and analysis, on market activity from around the world this financial quarter. We will also discuss what this could mean for long-term term investors.
If you have any questions or would like more information, reach out to us at https://symmetrypartners.com/contact-us/
You can also find us on LinkedIn, Facebook, YouTube, and Instagram. As always, we remain invested in your goals.
Symmetry Partners, LLC, is an investment advisory firm registered with the Securities and Exchange Commission. The firm only transacts business in states where it is properly registered, excluded or exempted from registration requirements. Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. No one should assume that future performance of any specific investment, investment strategy, product or non-investment related content made reference to directly or indirectly in this material will be profitable. As with any investment strategy, there is the possibility of profitability as well as loss. Due to various factors, including changing market conditions and/or applicable laws, the content may not be reflective of current opinions or positions. Please note the material is provided for educational and background use only. Moreover, you should not assume that any discussion or information contained in this material serves as the receipt of, or as a substitute for, personalized investment advice. -
"KEEP CALM AND CARRY ON." Not only is this a beloved motto, it's also a great rule of thumb for maintaining your portfolio allocations. Once again, we are joined by Symmetry's Brendan Kruh, Investment Associate, and Eide Bailly Wealth’s Brett Myer, CFA, CIMA®, Investment Strategy Director. In this second of two episodes, we'll be discussing why you should maintain growth and value positions during periods of market instability.
If you have any questions or would like more information, reach out to us at https://symmetrypartners.com/contact-us/
You can also find us on LinkedIn, Facebook, YouTube, and Instagram. As always, we remain invested in your goals.
Symmetry Partners, LLC, is an investment advisory firm registered with the Securities and Exchange Commission. The firm only transacts business in states where it is properly registered, excluded or exempted from registration requirements. Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. No one should assume that future performance of any specific investment, investment strategy, product or non-investment related content made reference to directly or indirectly in this material will be profitable. As with any investment strategy, there is the possibility of profitability as well as loss. Due to various factors, including changing market conditions and/or applicable laws, the content may not be reflective of current opinions or positions. Please note the material is provided for educational and background use only. Moreover, you should not assume that any discussion or information contained in this material serves as the receipt of, or as a substitute for, personalized investment advice. -
Once again, investors are faced with the same debate. Should I invest my money in large scale growth companies (e.g. Apple, Google), or, should I keep faith in the little guy and invest in some smaller companies (that seem poised to grow over time)? In this episode of Unfiltered Finance, we are thrilled to host not just one, but two special guests; our very own Brendan Kruh, Investment Associate, and Eide Bailly Wealth’s Brett Myer, CFA, CIMA®, Investment Strategy Director. Together, we’ll discuss present trends around both value stocks and growth stocks. Spoiler alert, it’s a more complex topic than you might think.
If you have any questions or would like more information, reach out to us at https://symmetrypartners.com/contact-us/
You can also find us on LinkedIn, Facebook, YouTube, and Instagram. As always, we remain invested in your goals.
Symmetry Partners, LLC, is an investment advisory firm registered with the Securities and Exchange Commission. The firm only transacts business in states where it is properly registered, excluded or exempted from registration requirements. Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. No one should assume that future performance of any specific investment, investment strategy, product or non-investment related content made reference to directly or indirectly in this material will be profitable. As with any investment strategy, there is the possibility of profitability as well as loss. Due to various factors, including changing market conditions and/or applicable laws, the content may not be reflective of current opinions or positions. Please note the material is provided for educational and background use only. Moreover, you should not assume that any discussion or information contained in this material serves as the receipt of, or as a substitute for, personalized investment advice. -
There is risk involved in trying to time markets. We believe it's best to apply multiple decades of research when making investment decisions. Today we are joined by Symmetry's Dr. John B. McDermott, Executive Director of Investments, to conclude our discussion about Evidence-Based investing. This episode will feature a detailed overview of the resources available to investors (who are curious to learn more) and the academic professionals who have helped to develop this investment strategy over decades of time.
If you have any questions or would like more information, reach out to us at https://symmetrypartners.com/contact-us/
You can also find us on LinkedIn, Facebook, YouTube, and Instagram. As always, we remain invested in your goals.
Symmetry Partners, LLC, is an investment advisory firm registered with the Securities and Exchange Commission. The firm only transacts business in states where it is properly registered, excluded or exempted from registration requirements. Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. No one should assume that future performance of any specific investment, investment strategy, product or non-investment related content made reference to directly or indirectly in this material will be profitable. As with any investment strategy, there is the possibility of profitability as well as loss. Due to various factors, including changing market conditions and/or applicable laws, the content may not be reflective of current opinions or positions. Please note the material is provided for educational and background use only. Moreover, you should not assume that any discussion or information contained in this material serves as the receipt of, or as a substitute for, personalized investment advice. -
This week, we work to define evidence-based investing, and explain some of the potential benefits of using this strategy. In part one of this two-part episode, our own Tom Romano, Head of Strategic Relationships and Product Development, is joined by Dr. John B. McDermott, Executive Director of Investments, for a historical retrospective on this fastidious investment approach.
If you have any questions or would like more information, reach out to us at https://symmetrypartners.com/contact-us/
You can also find us on LinkedIn, Facebook, YouTube, and Instagram. As always, we remain invested in your goals.
Symmetry Partners, LLC, is an investment advisory firm registered with the Securities and Exchange Commission. The firm only transacts business in states where it is properly registered, excluded or exempted from registration requirements. Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. No one should assume that future performance of any specific investment, investment strategy, product or non-investment related content made reference to directly or indirectly in this material will be profitable. As with any investment strategy, there is the possibility of profitability as well as loss. Due to various factors, including changing market conditions and/or applicable laws, the content may not be reflective of current opinions or positions. Please note the material is provided for educational and background use only. Moreover, you should not assume that any discussion or information contained in this material serves as the receipt of, or as a substitute for, personalized investment advice. -
In this final installment discussing Q2 of 2023, we dive into current events, and their potential effects on the Stock Market. Our hosts, Tom Romano, Head of Strategic Relationships & Product Development and Casey Dylan, CIMA®, Consultant sit down for a discussion of the "magnificent seven" growth stock winners, the current state of inflation, interest rates, heavily tilted tech stocks, changes among international markets, and the recent repeal of the Black Sea grain deal by Russia.
Click here to watch the full Quarter-in-Perspective on YouTube.
If you have any questions or would like more information, reach out to us at https://symmetrypartners.com/contact-us/
You can also find us on Facebook, YouTube, Twitter, and LinkedIn. As always, we remain invested in your goals.
Symmetry Partners, LLC, is an investment advisory firm registered with the Securities and Exchange Commission. The firm only transacts business in states where it is properly registered, excluded or exempted from registration requirements. Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. No one should assume that future performance of any specific investment, investment strategy, product or non-investment related content made reference to directly or indirectly in this material will be profitable. As with any investment strategy, there is the possibility of profitability as well as loss. Due to various factors, including changing market conditions and/or applicable laws, the content may not be reflective of current opinions or positions. Please note the material is provided for educational and background use only. Moreover, you should not assume that any discussion or information contained in this material serves as the receipt of, or as a substitute for, personalized investment advice. -
Despite a somewhat lackluster April and May, equities markets ended one of the better first halves of a year in quite some time by the end of June. The Nasdaq, S&P 500, and Dow were up 32.32%, 16.89%, and 4.94% for the year, respectively. It was the Nasdaq’s best first half of a year since 1983, primarily due to growth in tech stocks driven by the surge in artificial intelligence. In this first of two parts, we discuss quarterly returns for Q2 2023. Casey Dylan, CIMA®, Consultant, and Tom Romano, Head of Strategic Relationships and Product Development, will provide timely insights and analysis on what happened in markets and economies around the world in the second quarter and what this means for long-term term investors.
Click here to watch the full Quarter-in-Perspective on YouTube.
If you have any questions or would like more information, reach out to us at https://symmetrypartners.com/contact-us/
You can also find us on Facebook, YouTube, Twitter, and LinkedIn. As always, we remain invested in your goals.
Symmetry Partners, LLC, is an investment advisory firm registered with the Securities and Exchange Commission. The firm only transacts business in states where it is properly registered, excluded or exempted from registration requirements. Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. No one should assume that future performance of any specific investment, investment strategy, product or non-investment related content made reference to directly or indirectly in this material will be profitable. As with any investment strategy, there is the possibility of profitability as well as loss. Due to various factors, including changing market conditions and/or applicable laws, the content may not be reflective of current opinions or positions. Please note the material is provided for educational and background use only. Moreover, you should not assume that any discussion or information contained in this material serves as the receipt of, or as a substitute for, personalized investment advice. -
Two weeks ago, we held another successful week of AdvisorFest - an annual, week-long live-streaming event where we cover some of the most pressing issues Financial Advisors are presently facing. This year, we decided to host a live panel discussion about the experiences women have when creating long-term financial plans, and asserting an equal amount of authority in the handling of their household finances.
Our very own Andrea Loin, Associate Director of Marketing, led a discussion along with financial advisors Diana Bacon, CFP®, CDFA®, MBA, and Joyce Bloomquist, CDFA®, of Apella Wealth. You’ll find some genuinely moving stories of challenges faced, and overcome by women investors here. We hope you find this episode to be insightful. Enjoy.
If you have any questions or would like more information, reach out to us at https://symmetrypartners.com/contact-us/
You can also find us on Facebook, YouTube, Twitter, and LinkedIn. As always, we remain invested in your goals.
Symmetry Partners, LLC, is an investment advisory firm registered with the Securities and Exchange Commission. The firm only transacts business in states where it is properly registered, excluded or exempted from registration requirements. Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. No one should assume that future performance of any specific investment, investment strategy, product or non-investment related content made reference to directly or indirectly in this material will be profitable. As with any investment strategy, there is the possibility of profitability as well as loss. Due to various factors, including changing market conditions and/or applicable laws, the content may not be reflective of current opinions or positions. Please note the material is provided for educational and background use only. Moreover, you should not assume that any discussion or information contained in this material serves as the receipt of, or as a substitute for, personalized investment advice. Transcript:00:00:07:01 - 00:00:37:17
Speaker 1
Hello and welcome back to Unfiltered Finance. I'm your host, Tom Romano. Two weeks ago, we held another successful week of Advisor Fest, an annual week long live streaming event where we cover some of the most pressing issues financial advisors are facing today. In part one of this special episode on Women investors, our very own Andrea Loin associate director of marketing, leads a discussion along with financial advisers Diana Bacon and Joyce Blomquist of Apollo Wealth will discuss some cautionary tales that can help investors learn which mistakes to avoid on their financial journey.00:00:37:19 - 00:00:41:09
Speaker 1
We hope you find this episode to be insightful. Enjoy.00:00:41:11 - 00:01:06:15
Speaker 2
Welcome everyone to the final session of our third Annual Advisor fest. Empowering Women Investors Navigating Financial Success Together. We're thrilled to have you here today as we embark on a journey to explore empowerment of women in the world of investing. During this webinar, we want to shed light on the unique perspectives and experiences of women investors and provide practical insights on how to effectively engage and support this growing demographic.00:01:06:16 - 00:01:30:05
Speaker 2
Graphic It's important that we promote awareness and understanding of the specific challenges and opportunities faced by women investors in doing this, we hope to foster an inclusive environment and equip advisors like yourselves with the knowledge and tools to better serve women investors, which will ultimately lead to their financial success and empowerment. I have with me two financial advisors that work with Capella wealth, one of our sister firms.00:01:30:05 - 00:01:44:08
Speaker 2
We have Diana Bacon. She's a CFP and a CDPHE and she has years of experience working in this very wonderful demographic. And we've Joyce Bloomquist, who is a cafe as well, also an advisor with Pell Wealth. Welcome.00:01:44:09 - 00:01:47:00
Speaker 3
Thank you. Glad to be here today.00:01:47:01 - 00:02:07:21
Speaker 2
Thank you for joining us. I read a statistic in doing research for this whole thing that really it surprised me because I'm a woman. I work in an investment firm. So I just assume I know all there is to know, but I don't. So about 39% of women have no retirement strategy. That seems like a very high number to me.00:02:07:21 - 00:02:29:11
Speaker 2
So I looked it up and I was like, So what percentage of men don't have a retirement strategy? And it's only 25%. So there's a big gap there. It was shocking to me. And then I just assumed, right, we're in the 2023. Things should be the same for everybody, but they're not. And so coming together to discuss how do we to we do we grow that number or actually shrink that number down to be less.00:02:29:11 - 00:02:46:17
Speaker 2
We want more women to have a plan for retirement. So, Diana, what are some strategies that you have that you use when addressing women investors with the challenges that are faced by them? How do you give them tools and tips and tricks to help them close that gap?00:02:46:21 - 00:03:19:05
Speaker 3
Women in general, and you know, this is not some little niche. This is a huge market segment. We are 51% of the population To say women are all like X is very decent, enormous. However, we do see continuing themes over and over. The first is women. And we were raised this way, especially in the Western world. Well, actually, I would say while we're global globally, we never put ourselves first.00:03:19:05 - 00:03:42:02
Speaker 3
And when I hear the statistic of the number of women who don't have a retirement plan, what do you have to do to have a retirement plan? You have to save. You have to invest. You have to be thoughtful of yourself. Make sure you either have that income stream or the assets to support you. And so the first thing that I work with a client is to change their money mindset.00:03:42:04 - 00:03:48:22
Speaker 3
They need to put themselves first. I'm going to use the S-word. We got to be selfish.00:03:49:00 - 00:03:53:12
Speaker 2
And that's really hard. Especially especially for me. I would have a hard time doing that.00:03:53:14 - 00:04:12:17
Speaker 3
And it is. Yeah, yeah. I mean, think about it. Like having to say, I'm going to give my adult kids less as they're launching in life, but I want to do all this for them. I love them. You know, I have nurtured them, but I'm going to do less for them because I have to do for me for that.00:04:12:17 - 00:04:32:05
Speaker 3
You know, I want to save for their college so they don't have to go through the things I did. All those things are prioritizing yourself. That is extremely difficult for women. So they got to start in that word, start to be selfish, and then get away with the H word shame.00:04:32:10 - 00:04:46:18
Speaker 4
That is such a good point. I love it because I'm in this open space now. My kids are 20 and 22 and they see when do we let them go and be adults and when do we start saving like we should for.00:04:46:18 - 00:05:01:11
Speaker 3
Ourselves that say And so many women start off because we have some credit card debt or paid too much on our car loan or, you know, just all these things that come up and we just put that shame on ourselves and then we don't deal with our finances.00:05:01:13 - 00:05:19:10
Speaker 2
I like that you put the shame part of that and getting rid of the shame because I think being selfish is hard enough. But then you start to feel bad when you start to look at things. For me, it was matching my 41k, right? I'm like, Well, that takes away from money coming into the family. And and then I started realizing, No, it doesn't.00:05:19:12 - 00:05:27:00
Speaker 2
It helps the long run. I'm doing it for me. I have to watch out for myself. So taking the shame out of it, that's probably harder than being selfish, to be honest.00:05:27:02 - 00:05:32:18
Speaker 4
Yeah, We're caregivers, right? That's where we're moms, first and foremost. And it's hard to let that go. Yep.00:05:32:21 - 00:05:51:13
Speaker 2
Caregivers is a good thing. Diana, your you did a webinar recently on closing that career, the career change and how to approach that career change. And I thought it was a great webinar. Not a lot of women think about that when they're leaving the workforce. I left for a couple of years, went back and not a lot of women think about what happens when you go back.00:05:51:13 - 00:06:04:12
Speaker 2
And I think your webinar really opened up, you know, how to get back into the game and then how to be, again, selfish, how to focus on you to put yourself in a better space in life, in a better spot when you're trying to get back into the game.00:06:04:14 - 00:06:32:12
Speaker 3
That's another area to that employment because so many women are underemployed to better support the family. Mm hmm. And the shame of saying, No, I want to do this. I want to have more of my earnings, particularly if, say, maybe your marriage or partnership isn't as steady and strong. The first thing when people are like, oh, I'm taking it, or when women are thinking about getting divorced, I'm like, Get a job or get a better job right now.00:06:32:14 - 00:06:33:15
Speaker 4
Don't wait.00:06:33:17 - 00:06:36:02
Speaker 3
Don't wait. Do it right now.00:06:36:04 - 00:06:53:06
Speaker 2
See how that goes back to that, that shame and that self. Right. And be something I would find hard to do. But my husband is that I am what he calls the breadwinner of the family. And he tells all of his friends about it. And for me, that when I started to take on more, I felt like I was letting my family down.00:06:53:12 - 00:07:09:06
Speaker 2
Right. You have to make that choice. And I realized I wasn't financially. I was helping my family, my 41k is growing, our family's growing, his 41k is growing. We're all working together. But I had to focus on me and make sure that I did that side of it, too. You actually hit on a great topic, Diana, and Joyce.00:07:09:06 - 00:07:33:08
Speaker 2
I'm going to I'm going to start with you on this one. But a lot of the marriages might not be as solid, right? So I was divorced young and didn't even know that there was an option for me as far as financial planning goes. But can you explain how you would approach addressing the potential impact of divorce or even what would a heart a change in a lot of part of a big part of your life on a woman's financial situation?00:07:33:10 - 00:07:48:12
Speaker 2
What makes it unique and different for that? Because I didn't even know what a CDF was until about five years ago and realizing that as someone who went through divorce, I could have had someone helping me too because I didn't realize what I was going through was unique.00:07:48:14 - 00:08:09:02
Speaker 4
Right. And I have some input on that. You know, I've been through a divorce, too, and I think some of the things that are hard to wrap your arms around are when you're starting, you're kind of going from being with a partner to being by yourself. I mean, I think Diana's first point out of, you know, get back to work if you can and if it's possible, you know, we we want that to be the ultimate goal for the person.00:08:09:04 - 00:08:26:07
Speaker 4
Why? It might not seem like you're making much at the time. I mean, maybe you got daycare costs and all that and maybe a lot of that money's going to their daycare costs and there's things in your mind or maybe you're saying, why am I even doing this? I mean, when I'm actually take it home isn't much after I pay all these people, but you're participating in Social Security.00:08:26:07 - 00:08:53:19
Speaker 4
So that's important. You probably get your own health care. That's important, and that might make all the difference in the world by stepping into the workforce. At that point, you got to start accumulating those things for yourself. At this point when you go from where to me. And so that's something to really consider. Might not seem like you're bringing home that much, but you are benefiting from the benefits from the workplace, maybe for one K, maybe some free matching as little as you can contribute to the plan.00:08:54:00 - 00:09:01:20
Speaker 4
There might be some pre matching that you need to consider as all these things are so important to get started back to you when you're going through that process.00:09:01:23 - 00:09:24:07
Speaker 2
Makes perfect sense. And as an advisor, how do you educate not just women going through these these life changes, but how do you educate women on things that they need to know about their financial, about their finances, about that for one K, about going back to work? And though you think you're not making an impact with what you're making because it may be less than you want to at the time, how do you educate them?00:09:24:07 - 00:09:35:01
Speaker 2
What are their tools and resources out there for them? Are there ways that you approach it that are different than you would, you know, approach a normal planning client? Are there tools of resources for them?00:09:35:03 - 00:09:59:21
Speaker 3
I found that women are not educated when we're growing up on money matters the same way that men are. So first is getting the basics and we have the Internet now. So Internet and podcasts are wonderful. So it's like learning a new language. You have to just start jump in. There's a certain lingo to it, so you need to pick that up.00:10:00:03 - 00:10:31:07
Speaker 3
So starting to listen to podcasts, you might not understand much. The first few try a bunch of them buying a new pair of jeans. You got to make sure it's a fit, you know, try ones. Once you hear things over and over again, will start to click, go on financial websites, read, you know, nerdwallet, Wikipedia, you know, all of these things where you can just start to learn the lingo and then talk to your friends.00:10:31:09 - 00:11:13:21
Speaker 3
Men are talking to each other about money. We need, again, a sage word shame. Women don't want to talk about money. They don't want to make. They don't want to feel bad that they don't know something. But many women have found that financial services providers can be a little condescending. And that and that's a real struggle. And once you've been spoken down to getting that courage up again, to put yourself out there and ask questions and feel like someone's going to think you're you're not intelligent because you don't know, but how would you know if you never learned it or or.00:11:13:21 - 00:11:27:23
Speaker 4
If you weren't married? And maybe the husband had it with his responsibility to take care of the finances. And maybe now you're by yourself, You're maybe you're divorced, or maybe you're widowed, and now it's all on you. So where do I start over with all this?00:11:28:01 - 00:11:48:16
Speaker 3
Yeah. I've sat down with widows who are like, I don't even know where our checkbook is. I don't know how the, like, bill gets paid. I mean, all of these things where they really put it off on someone else, I will say, being involved in your finances, looking at your tax return, a lot of people don't even look at that.00:11:48:16 - 00:12:10:17
Speaker 3
Look at your tax return. And I am absolutely biased. I will admit it. I'm a financial advisor. I am a certified financial planner. And I think working with a planner as early as you find one that suits you is really a big step in that.00:12:10:19 - 00:12:28:00
Speaker 1
Thank you very much for joining us today. If you're a financial professional and you'd like to learn more, check the link in this episode's description to view all of the presentations from Advisor Fest 2023. As always, you can listen to all of our past episodes anywhere you get your podcasts. Thank you very much and we'll see you soon.00:12:28:01 - 00:12:52:19
Speaker 5
Cemetery Partners LLC is an investment advisor firm registered with the Securities and Exchange Commission. The firm only transacts business in states where it is properly registered or excluded or exempted from registration requirements. Registration of an investment advisor does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission.00:12:52:21 - 00:13:22:18
Speaker 5
No one should assume that future performance of any specific investment, investment strategy, product or non investment related content made reference to directly or indirectly in this material will be profitable. As with any investment strategy, there is the possibility of profitability as well as loss due to various factors, including changing market conditions and or applicable laws. The content may not be reflective of current opinions or positions.00:13:22:20 - 00:13:38:13
Speaker 5
Please note the material is provided for educational and background use only. Moreover, you should not assume that any discussion or information contained in this material serves as the receipt of or is a substitute for personalized investment advice. -
Today we conclude our discussion on women investors from AdvisorFest 2023. Symmetry's Andrea Loin, Associate Director of Marketing, leads a discussion along with financial advisors Diana Bacon, CFP®, CDFA®, MBA, and Joyce Bloomquist, CDFA® of Apella Wealth, on some of the critical factors, and life experiences, that should be incorporated into a woman's financial plan.
If you have any questions or would like more information, reach out to us at https://symmetrypartners.com/contact-us/
You can also find us on Facebook, YouTube, Twitter, and LinkedIn. As always, we remain invested in your goals.
Symmetry Partners, LLC, is an investment advisory firm registered with the Securities and Exchange Commission. The firm only transacts business in states where it is properly registered, excluded or exempted from registration requirements. Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. No one should assume that future performance of any specific investment, investment strategy, product or non-investment related content made reference to directly or indirectly in this material will be profitable. As with any investment strategy, there is the possibility of profitability as well as loss. Due to various factors, including changing market conditions and/or applicable laws, the content may not be reflective of current opinions or positions. Please note the material is provided for educational and background use only. Moreover, you should not assume that any discussion or information contained in this material serves as the receipt of, or as a substitute for, personalized investment advice. Symmetry Partners and Apella Wealth are affiliated entities. Transcript:00;00;00;00 - 00;00;37;05
Unknown
Hello and welcome back to Unfiltered Finance. I'm Tom Romano. Your host today, Andrea Line, assistant director of marketing, concludes our discussion on women investors with Dianna Bacon and Joyce Blomquist Financial Advisors with a paella wealth. You'll find some sage advice here for women who are working to assert their financial independence and plan for the future. Enjoy. If I'm an advisor working with several women investors, what are some tips that you could give them to starting that initial and being that that advisor?00;00;37;05 - 00;01;00;06
Unknown
You set it right there. Don't be condescending. What kind of tips would you give to an advisor working with this demographic, say, you know, joint? I mean, it's hard, right? Because you could be a male advisor trying to reach out to the women's group. Absolutely. So but you're probably less likely to join the women's community groups. That might be awkward, but definitely if you're a female advisor, get involved in the community with some of the community groups.00;01;00;06 - 00;01;16;28
Unknown
Even if you're a male advisor and you want to reach out to the women's group and help out, you know, it doesn't have to necessarily be all women's group. There's going to be women who are participating in these community groups. I say branch out in your community and see what kind of groups are related to investments, and maybe that's a good start.00;01;16;29 - 00;01;37;16
Unknown
Webinars. I mean, we have our webinar that we've been doing periodically, and I think we've gotten a really great group of people and they're not all women. We have a lot of men that join our groups too. So I think if you're you're spreading the word out there, you might be casting a wide net too to both groups, but you know, everyone's listening.00;01;37;16 - 00;01;58;19
Unknown
And so maybe it's not just a niche of just women, but they're part of that group can see that there is some understanding and they don't feel intimidated to come in and talk to you. And I think that's what's most important is that making them feel comfortable, because I know that even when I see married couples come in to our offices, you can tell right away the women's fair, the woman is very quiet.00;01;58;20 - 00;02;17;13
Unknown
Maybe the man's taking over the whole meeting. You can tell immediately really who has been doing the finances there. So really try to communicate with that spouse in that meeting and say, hey, you're part of this. What do you have? What's your input on this? But and then, you know, sometimes they're surprised and they they look at me like, oh, gosh, I really don't participate in this.00;02;17;13 - 00;02;42;21
Unknown
I'm just here to listen. But making them feel part of the conversation is so key. And pulling on one of the threads that Joyce touched on. One of the best things to do, particularly if you want to go into this, you're worried about sounding condescending because we know most advisors are men. Depending on what portion of the industry you're looking at, it's either, you know, 23% are women, 18% are women.00;02;42;23 - 00;03;09;14
Unknown
CFP, CFA. So make sure you're talking with them and not to them. Don't talk at them, pull them into the conversation. The best way to find out what their knowledge level is is to be having the conversation going through the accounts. They're going through a tax return, walking them through some of it. They might know, some of it they might not.00;03;09;16 - 00;03;31;05
Unknown
But if you're in a real true conversation, you're using your listening skills, you're keeping your mouth shut a good bit and letting them speak, that that's the first way to get into this area. I couldn't agree more. And people love stories, right? They love to know that you've been through the same things that maybe they have. It makes you real.00;03;31;05 - 00;03;47;20
Unknown
They mentioned a divorce. Hey, you know, I went through a divorce. Sorry to hear that. You did, too. Immediately they connect with you. Maybe that's a story that can relate to them. They know you've had that real life experience. And so they can really relate to that situation and and maybe open up a little bit more towards you.00;03;47;22 - 00;04;07;11
Unknown
Yeah, women are emotional. We make decisions on emotions. And I personally, when I picked my financial advisor, it was a connection I had. It wasn't, you know, they, they listened to me, Diana, They, they heard me. And I was not educated before. I didn't always work in this industry and I wasn't educated, but they didn't make me feel uneducated.00;04;07;12 - 00;04;25;24
Unknown
I don't know everything, so I don't want you to make me feel bad for not knowing everything. So when I met with a financial advisor the first time, that was exactly what it was. It was emotional connection. You know, this is somebody you're telling things you may not tell anyone else in your life. You know, monetary stuff is still taboo, you know, And I wanted a connection.00;04;25;24 - 00;04;53;24
Unknown
So you're totally right there. One of the things there's a lot of inequalities, right, that are still out there. How do you address those? There's gender specific issues, the pay gap, the career breaks, the caregiving responsibilities in that financial plan. So how do you take that? Because there was a stat that I read, it kind of made me sick to my stomach, but it was on average women experience an $80,000 lifetime pay gap when compared to men.00;04;53;25 - 00;05;18;03
Unknown
That's various factors that are, you know, controlled by controlling that. But there is a huge gap. How do you account for that in your financial plan for them? Do you account for that or do we just go by their plan and specific to them? Anyone working with women, if you're working with any marginalized group and in some areas women are marginalized, you need to address those specific issues with that group.00;05;18;03 - 00;05;45;23
Unknown
I am a strong believer that an advisor you have to not deal with gender generalities, but that client. So and I'm going to stay on that marginalize. If you are working with a woman of queer woman. Now that pay group gap has just expanded to women of color. Again, that gap has expanded less opportunities. We can we can put on our rose colored glasses and pretend like that doesn't happen, but it absolutely does.00;05;45;23 - 00;06;10;13
Unknown
And we know because we hear it from our friends, we see it with our clients, it's happening in real time. So not only do you want to look at that decreased salary, likely decrease raises, you want to adjust for that in any long term cash flow. Also increase spending. Mothers are more likely to help their adult children financially.00;06;10;15 - 00;06;40;19
Unknown
They're more likely to be burdened with. Not that it's a burden, but it is on time and resources with caring for parents, which means less time to work, less flexibility. And sometimes you cost on them, especially with the mother, because we know that aging women retire with less assets. I mean, all these statistics are so disheartening. I mean, I get to an area when you're like, I want to read anymore, I want to stick my head in the sand.00;06;40;22 - 00;07;04;18
Unknown
Yeah, you're right, Diane. At 95% of women at some point will be their families. Primary financial decision maker. We have we live longer. Our longevity is there. Many times we will outlive our husbands and be alone. These aren't just divorces. These are. This is widowhood. Later in life, many reasons why at some point in our lives we will be the primary financial decision maker.00;07;04;20 - 00;07;26;17
Unknown
These are important things to talk about. And in the long term plan, I have children health care costs that go along with having children. Your body changes and your health care costs increase. Do you do you incorporate that into the plan? Woman is going to have a family. I know it's not necessarily as big of an issue as you know before, but health care costs are going to be huge for for females.00;07;26;18 - 00;07;52;21
Unknown
Yeah, there's going to be an extra health care cost. Do you include that? Do you think of that in the plan? One thing I do in it is that a personal hard subject, but when I am working with a younger professional single woman, I ask what her fertility plans are. Oh, cause I am seeing a great deal of women.00;07;52;21 - 00;08;26;06
Unknown
Now you say I make great money. I don't. I don't need a partner. You're absolutely right. There have been single mothers since the beginning of time, and a will always happen. But that means you have to have a plan, adoption, you know, whatever they're going to do. Financial. Now you are the only caregiver for that child. So now we have more stress on life insurance.00;08;26;09 - 00;08;59;21
Unknown
You know, estate planning, guardianship. So it's not just the, you know, the increased costs. I have teenagers. Yes, I know that. Braces and broken ankles and broken wrist and yeah, all of that. So we do have those increased cost, but it's also I see more single women than men deciding on their parenthood as single people in the financial side of that is huge.00;08;59;21 - 00;09;25;16
Unknown
And that is an area where we're not only affecting the lives and providing value for that woman, but also for her future children and ensuring their security. Yeah, that makes perfect sense. Any other? I appreciate you both jumping on. And couple of times we've referenced the series that Diana and Joyce are both a part of at Capella. It's the Financial Independence for Women series.00;09;25;16 - 00;09;45;12
Unknown
You can find it on our Web site at Palo Health.com if you're interested. You know, take a listen. They have some great topics on there that are not just for women, but that will definitely help drive home some some great points. So take a look and take a listen. And I do appreciate you both jumping on as we conclude.00;09;45;12 - 00;10;08;05
Unknown
We hope that you as advisors have gain valuable insights into working with women investors by recognizing their unique perspectives, addressing their specific needs, and fostering that inclusive environment that we talked about. You can create a future where women investors thrive and they contribute to the growth and stability of the global economy and hopefully shrink some of those statistics that we started out with in the beginning of this, this webinar.00;10;08;05 - 00;10;31;10
Unknown
So if you have any questions, we can take a few questions for Joyce and Diana right now. I wanted to make one quick comment. Andrea. You had said that women make decisions emotionally. That's actually not been my experience. Oh, women do cling on to their fear much more than men, so that might stop them from taking first steps.00;10;31;17 - 00;10;57;18
Unknown
But I find women to be very pragmatic. And for advisors who are going to be working with women, expect the why? Why am I doing this? Why is that? V There I find that as women become educated and on their finances, they're happy to dig in, but they want to know why and they want every pass to be explained to them so that they know they're getting value for that dollar.00;10;57;19 - 00;11;28;06
Unknown
I've always found women extremely pragmatic. Yeah, that makes sense. I'm detail oriented. I want to know the down in the weeds information. Yeah, that makes perfect sense. So yeah. So make sure make sure you're ready to answer those questions, especially the single moms. Yep. And they know how to balance time and and figure out every little loophole they can to do their time and manage it well.00;11;28;06 - 00;11;51;11
Unknown
So while I do appreciate both Diana and Joyce joining us today and look forward to working with you all more in the future, thank you very much for joining us today. If you're a financial professional and you'd like to learn more, check the link in this episode's description to view all of the presentation from Advisor Fest 2023. As always, you can listen to all of our past episodes anywhere you get your podcasts.00;11;51;18 - 00;12;18;15
Unknown
Thank you very much and we'll see you soon. Cemetery Partners LLC is an investment advisor firm registered with the Securities and Exchange Commission. The firm only transacts business in states where it is properly registered or excluded or exempted from registration requirements. Registration of an investment advisor does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission.00;12;18;17 - 00;12;48;14
Unknown
No one should assume that future performance of any specific investment investment strategy, product or non investment related content made reference to directly or indirectly in this material will be profitable. As with any investment strategy, there is the possibility of profitability as well as loss due to various factors, including changing market conditions and or applicable laws. The content may not be reflective of current opinions or positions.00;12;48;16 - 00;13;10;06
Unknown
Please note the material is provided for educational and background use only. Moreover, you should not assume that any discussion or information contained in this material serves as the receipt of or is a substitute for personalized investment advice. Symmetry Partners and APL Wealth are affiliated entities. -
Financial Advisors don't work for free. Depending on how their practice is structured, investors will be charged an assortment of fees for a financial advisor's services. In this episode of Unfiltered Finance, we are joined by JT Lavery, Symmetry's Associate Director of National Sales, to discuss how fees are structured and how advisors can work to be transparent with their clientele.
If you have any questions or would like more information, reach out to us at https://symmetrypartners.com/contact-us/
You can also find us on Facebook, YouTube, Twitter, and LinkedIn. As always, we remain invested in your goals.
Symmetry Partners, LLC, is an investment advisory firm registered with the Securities and Exchange Commission. The firm only transacts business in states where it is properly registered, excluded or exempted from registration requirements. Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. No one should assume that future performance of any specific investment, investment strategy, product or non-investment related content made reference to directly or indirectly in this material will be profitable. As with any investment strategy, there is the possibility of profitability as well as loss. Due to various factors, including changing market conditions and/or applicable laws, the content may not be reflective of current opinions or positions. Please note the material is provided for educational and background use only. Moreover, you should not assume that any discussion or information contained in this material serves as the receipt of, or as a substitute for, personalized investment advice.0
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Hello and welcome to Unfiltered Finance. This is your host, Tom Romano.1
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And thank you all for joining us for, uh, this edition.2
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Today we're gonna talk about something that I think, uh,3
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weighs on a lot of investors' minds. Um, there, there tends to be, uh,4
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somewhat of a lack of transparency on this topic in the industry.5
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And the topic is, is fees and all fees associated with investing.6
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We have the perfect guest for us here today. Uh, JT Lavery, uh,7
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longtime coworker and friend of mine.8
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He's the Associate Director of National Sales at Symmetry Partners. Jt,9
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thanks for joining us here,10
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Tom. Thanks for having me. Appreciate it. So,11
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Jt, tell us a little bit about, about your background, um,12
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working with advisors.13
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I've been working with advisors, Tom, for about 23 years now, kind of in,14
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in different facets. Uh, I started off on the service side of things at a, at a,15
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at a major mutual fund company up in Boston, answering phones and, and,16
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you know, trying to solve problems. And I, you know,17
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transitioned over to the sales side, uh, a few years after that. So I have a,18
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you know, pretty good background working with advisors that were more on the,19
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uh, commission side of things,20
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as well as advisors that are on the fee-based side of things. For21
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Our listeners, um, describe the difference between the two because I,22
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I think a lot of folks out there don't know if they're paying fees or23
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commissions, and,24
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and I've heard many times talking to investors that they don't think they pay25
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anything. Mm-hmm.26
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Yeah. So, uh, you know, commissions are paid out, uh, by,27
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let's say a mutual fund company.28
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They will pay out a commission to the advisor who sells that particular mutual29
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fund to, uh, to their client.30
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And it's could be paid out in a very various of different ways. Um, you know,31
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if it's a shares, it'll be an upfront sales charge, B shares,32
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which don't even think is even a thing anymore.33
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It was a contingent deferred sales charge. There was no upfront sales charge,34
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but it was a declining sales charge As time goes on and you,35
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and you were to sell that particular holding, you know, the,36
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the sales charge would be reduced. And then you also had c shares that were,37
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you know, about a 1%, you know, uh, uh, trail that would, uh,38
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that would pay out to the advisors.39
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And those are paid through various fees that are within the mutual funds that40
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the mutual fund companies, uh, structure around, you know,41
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marketing of their particular products as well as, um,42
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as selling those particular products,43
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verse the fee side of things where it's advisors are just simply charging a fee44
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for their advice. They're advising their clients on what they should be doing.45
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Um, there's often, there's more than just, um, more advice,46
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more than just advice that goes into it. It's, you know, financial planning,47
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holistic planning and things like that. But it's generally a,48
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a fee that's fully disclosed that they, that they pay.49
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And the way most advisors will structure their fees,50
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they'll structure 'em in such a manner that the more money you have, uh,51
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you'll start to see those fees actually go down. So52
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What I'm hearing you say, it sounds like, and I think the,53
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you said contingent deferred sales charge, right?54
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If if you're earning a commission, that is a, it's a sales charge, correct?55
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Right. Whereas, uh, fee for advice is exactly that,56
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right? It's a fee for, for giving advice so that it's not necessarily a,57
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a sales charge. Um,58
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why do you think it's important for investors to know the difference between the59
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two? Well,60
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It's important for them to know the difference. It's,61
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I think it's just important for them to know what they're, what they're getting.62
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First of all, commissions. You can say that there's, you know,63
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conflicts of interest perhaps. Are they getting sold something that,64
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that has a higher commission that, that, you know,65
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the advisor's gonna get paid more money on, you know, verse, you know,66
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they always say, you know,67
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a fee-based advisor usually will generally sort of align themselves with the68
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client, let's say, on the, on the same side of the table, so to speak. They're,69
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they're, they're going in as a team, we're here to, you know, you got your,70
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you want to get from point A to point B,71
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let's figure out the best way to do that,72
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and then we'll put you in the appropriate investments. And, you know,73
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because they're not, you know, getting any commissions, you know,74
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generally speaking, there's a, I think,75
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a certain comfort level knowing that the investment solution's gonna be right76
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for them.77
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No, that, that's a really great explanation. And you know, this,78
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this podcast where, where our advocates of,79
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of financial advisors and financial advice,80
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I've said many times before that I always get asked, you know, what's a,81
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what's a great stock tip? What's a great tip? What's some advice for investing?82
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And my advice is always work with a, a fee advisor,83
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because that advice is extremely valuable.84
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What are you seeing the average on the fee based side average advisory fees in85
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the industry? What should investors, what should they know about advisory fees?86
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Um, just generally? Yeah, generally,87
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Generally speaking, I would, I would say that the, you know,88
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the average fee probably comes in around 1%. Um, you know, we see, you know,89
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just on our, on ourt here at Symmetry,90
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I think the average advisory fee is somewhere around 97 basis points,91
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if I'm not mistaken.92
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And so we'll see advisors charge as little as maybe 60 or 50 basis points,93
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and we'll see advisors charge, you know, as, as high as 125 basis points.94
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It's hard to say what's right. It's, what it comes down to is, you know,95
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your comfort level and what you're getting for those services.96
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Some advisors will, uh, will charge, let's say lower basis points,97
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but they'll also charge on top of that for other services, like, let's say,98
00:04:47.120 --> 00:04:48.320
financial planning. Okay.99
00:04:48.320 --> 00:04:52.680
Whereas some advisors will charge 125 basis points and let's say maybe financial100
00:04:52.840 --> 00:04:56.040
planning's included in that. And so it's always good to know, you know,101
00:04:56.260 --> 00:04:57.520
you know, not only what you're paying,102
00:04:57.540 --> 00:05:00.960
but also what you're getting for that particular price or that fee that you're103
00:05:00.960 --> 00:05:01.360
paying. Okay.104
00:05:01.360 --> 00:05:03.920
So these are a couple things that I kind of want to dive into a little bit.105
00:05:03.920 --> 00:05:05.840
First and foremost, I think, you know,106
00:05:05.840 --> 00:05:10.360
it's not fair to talk about price and fees without talking about value, right?107
00:05:10.360 --> 00:05:10.740
Right.108
00:05:10.740 --> 00:05:15.600
And so I think that you are going to see varying degrees of fees across the109
00:05:15.600 --> 00:05:18.600
board, depending on, on, on the advisor's value proposition,110
00:05:19.180 --> 00:05:23.000
1% that we've seen that fee, that that really hasn't changed. Mm-hmm. Right?111
00:05:23.000 --> 00:05:27.880
Mm-hmm. Um, we, we do hear a lot about price compression in the industry, but I,112
00:05:27.880 --> 00:05:30.880
I think when it comes to the, the financial advisor's compensation,113
00:05:30.940 --> 00:05:33.560
and I would argue that the financial advisor is the, uh,114
00:05:33.560 --> 00:05:37.040
most valuable person in the value chain. Mm-hmm. That fee hasn't changed,115
00:05:37.260 --> 00:05:40.800
but investors are looking more for, from their advisors. So there's some,116
00:05:40.800 --> 00:05:42.520
there's some margin compression there, right?117
00:05:42.790 --> 00:05:44.000
Yeah. The advisor, you know, uh,118
00:05:44.000 --> 00:05:47.360
clients are becoming more savvy conversation around fees. It's,119
00:05:47.360 --> 00:05:49.680
it's out in the open, right? You see 'em on commercials all the time,120
00:05:49.870 --> 00:05:53.480
whether it's Schwab or Fidelity or Vanguard, you know, talking about, you know,121
00:05:53.500 --> 00:05:57.720
low fees. So, uh, it's out there and clients are well aware of that.122
00:05:58.180 --> 00:05:59.760
And so they're starting to ask questions,123
00:05:59.760 --> 00:06:02.760
they're starting to ask what they're getting for, for that particular fee.124
00:06:03.140 --> 00:06:05.040
But at the end of the day, you know, you know, it's,125
00:06:05.040 --> 00:06:07.280
it's only an issue in the absence of value, you know,126
00:06:07.280 --> 00:06:11.000
so if the advisor's providing value and they see that and they know that, then,127
00:06:11.020 --> 00:06:12.000
you know, generally speaking,128
00:06:12.000 --> 00:06:13.680
clients tend to be comfortable with what they're paying.129
00:06:13.750 --> 00:06:17.800
Certainly, certainly. What are you, you know, the advisors that are charging 1%,130
00:06:17.800 --> 00:06:21.960
what are the typical types of services that you see advisors performing for,131
00:06:22.060 --> 00:06:24.120
for that fee to add value to the equation?132
00:06:24.380 --> 00:06:26.560
That's a great question. You know, we, we kind of see,133
00:06:26.980 --> 00:06:30.320
we see a lot of advisors that are rolling financial planning into their fee.134
00:06:30.460 --> 00:06:32.600
You know, we, we, we see that there's, um,135
00:06:32.600 --> 00:06:36.440
there's a lot of advisors that actually have a, a, um, what I would say,136
00:06:36.480 --> 00:06:40.320
a very big financial planning focus. So they'll charge for financial plans,137
00:06:40.540 --> 00:06:43.760
and they may do some advisory business along the way, uh,138
00:06:43.760 --> 00:06:45.720
just to help out clients. And so they'll, you know,139
00:06:45.720 --> 00:06:48.760
they may charge maybe a little less, maybe around 80 basis points,140
00:06:48.760 --> 00:06:51.080
80 to 90 basis points, kind of what we're seeing there.141
00:06:51.470 --> 00:06:53.040
Okay. That makes a lot of sense. I, I,142
00:06:53.080 --> 00:06:56.120
I think that the value proposition for the advisors actually shifted quite a bit143
00:06:56.120 --> 00:07:00.720
over the years. You know, you and I have talked, um, a lot about this and,144
00:07:00.720 --> 00:07:01.000
you know,145
00:07:01.000 --> 00:07:05.960
there was a time where the value proposition was thought to be returned. Mm-hmm.146
00:07:06.470 --> 00:07:10.520
I'll pay you a higher fee for higher rates of return. And is that the case? No,147
00:07:10.520 --> 00:07:10.720
because148
00:07:10.720 --> 00:07:15.440
It's, you know, I, I think the, the juries, you know, come in, in terms of,149
00:07:15.580 --> 00:07:19.160
of returns and in terms of what types of investments you should be in. I mean,150
00:07:19.160 --> 00:07:19.720
right now, I mean,151
00:07:19.720 --> 00:07:23.080
you're seeing huge outflows from going from what I would say traditional active152
00:07:23.860 --> 00:07:28.080
to more traditional passive types of investing. And so I think the, the,153
00:07:28.080 --> 00:07:32.000
the main role for the advisor is just really being that behavioral coach. Uh,154
00:07:32.000 --> 00:07:33.880
when we're left to our own devices, we don't make,155
00:07:33.900 --> 00:07:36.960
we necessarily don't make the best decisions, uh, when it comes to investing.156
00:07:36.960 --> 00:07:41.040
We, we get very emotional about our, our money and when, when markets are down,157
00:07:41.140 --> 00:07:43.600
we, we tend to hit, you know, hit the panic button and sell,158
00:07:43.600 --> 00:07:46.760
and that's the wrong time to sell. And so, um, you know, when you look at the,159
00:07:46.910 --> 00:07:51.000
like, industry studies that are out there, I mean, the vanguard's out, you know,160
00:07:51.000 --> 00:07:53.440
advisor Alpha is a big one, shows that, you know,161
00:07:53.440 --> 00:07:56.280
working with a financial advisor, you can, um, you know,162
00:07:56.280 --> 00:08:00.840
capture about 300 basis points extra just by working with a financial advisor.163
00:08:01.260 --> 00:08:02.760
And they actually attribute most of that to,164
00:08:02.760 --> 00:08:04.920
but I think about half of that to behavioral coaching. Sure.165
00:08:04.920 --> 00:08:07.160
And the, um, just for our listeners out there,166
00:08:07.180 --> 00:08:10.480
the advisors Alpha study that was done by, uh, Vanguard,167
00:08:10.560 --> 00:08:13.880
I believe it's a paper that they put out in conjunction with,168
00:08:13.880 --> 00:08:15.120
with the Spectrum group. And,169
00:08:15.120 --> 00:08:19.320
and it does show that investors who tend to work with financial advisors tend to170
00:08:19.320 --> 00:08:20.400
have better performance,171
00:08:20.460 --> 00:08:23.400
but it doesn't necessarily mean that the advisors tinkering with the portfolio.172
00:08:23.500 --> 00:08:27.920
The value proposition, to your point, is coaching. It's competent,173
00:08:27.920 --> 00:08:32.400
it's communication. It, it's, it's these things that help the investor, uh,174
00:08:32.400 --> 00:08:34.520
whether the good times and the bad. And, and,175
00:08:34.580 --> 00:08:37.240
and providing that sort of foundation,176
00:08:37.270 --> 00:08:41.840
helping the investor stay the course really is the, the secret to,177
00:08:41.900 --> 00:08:44.240
to having a successful investment experience. I178
00:08:44.480 --> 00:08:47.240
Think it's also important to add that I think a lot of advisors now, you know,179
00:08:47.240 --> 00:08:48.920
there is sort of a, a paradigm shift.180
00:08:48.920 --> 00:08:52.720
It's not necessarily the returns that I can generate for you. Um, it's,181
00:08:52.750 --> 00:08:55.240
it's the other things that I can do for you, um,182
00:08:55.240 --> 00:08:58.360
because they know that they're not portfolio manager. Mm-hmm. You know, they're,183
00:08:58.420 --> 00:08:59.040
you know, they're,184
00:08:59.040 --> 00:09:01.840
they're running their own business and that business is helping people.185
00:09:01.900 --> 00:09:04.560
And if they're spending all their time trying to figure out what the best stock186
00:09:04.580 --> 00:09:07.320
is, they're, they're probably gonna miss the boat on, you know,187
00:09:07.320 --> 00:09:09.600
helping their clients, you know, with their financial planning and,188
00:09:09.600 --> 00:09:12.720
and meeting their, you know, their financial goals over time. Sure,189
00:09:12.870 --> 00:09:16.000
Sure. So, you know, we talked a lot about the advisor compensation,190
00:09:16.300 --> 00:09:19.720
and I kind of wanna revert back because, you know, the topic today is fees.191
00:09:19.720 --> 00:09:21.520
Mm-hmm. It's not just advisory fees.192
00:09:21.520 --> 00:09:24.040
There are a number of other fees associated with investing.193
00:09:24.220 --> 00:09:27.040
You talked a little bit about the ahas, B shares and CS shares,194
00:09:27.040 --> 00:09:29.520
which are typically sales charges for mutual funds,195
00:09:29.520 --> 00:09:33.360
but there are no load mutual funds out there. There are. Correct. And, uh,196
00:09:33.390 --> 00:09:36.680
what that means is there, there isn't a, a sales charge per se,197
00:09:36.700 --> 00:09:39.080
but that doesn't mean that they're for free. Correct. Correct.198
00:09:39.080 --> 00:09:40.000
Nothing's for free.199
00:09:40.050 --> 00:09:40.860
Right.200
00:09:40.860 --> 00:09:43.680
So talk to us a little bit about the costs that are associated with investing in201
00:09:43.680 --> 00:09:47.160
something that, that, that no load or doesn't have a, a sales charge. Sure.202
00:09:47.160 --> 00:09:47.280
Yeah.203
00:09:47.280 --> 00:09:50.200
There's a couple costs to think about. You know, there's, I always refer to it,204
00:09:50.200 --> 00:09:53.600
you know, the cost of investing, right? There's, there's gonna be, you know,205
00:09:53.600 --> 00:09:56.280
some cost to, you know, running a portfolio. I mean,206
00:09:56.280 --> 00:09:59.760
that's where your expense ratios come in, which is the really, it's the,207
00:09:59.780 --> 00:10:02.760
the cost of running that particular, let's say, mutual fund if,208
00:10:02.760 --> 00:10:05.680
whether it's a no load or, or a loaded mutual fund. I mean,209
00:10:05.680 --> 00:10:09.040
those are things like, you know, trading costs, management fees, um,210
00:10:09.040 --> 00:10:11.960
things of that nature. There's also, um, you know,211
00:10:11.960 --> 00:10:14.760
custody fees that you have to think about, you know, what, uh,212
00:10:14.760 --> 00:10:17.920
what custodian is gonna be housing those, those, um,213
00:10:17.920 --> 00:10:21.160
those assets for you and what that pay structure looks like. I mean, we see,214
00:10:21.620 --> 00:10:25.040
you know, uh, some custodians that'll do a flat, you know, flat rate fee,215
00:10:25.260 --> 00:10:27.440
and we see some that'll have more of a tiered structure.216
00:10:27.440 --> 00:10:30.720
So the more that you give them the, the lower that fee will come down. Again,217
00:10:30.720 --> 00:10:32.320
there's, you know, certain services that are,218
00:10:32.320 --> 00:10:35.640
that are provided by the custodian that you may seem are valuable.219
00:10:35.700 --> 00:10:37.960
So maybe paying 15 basis points is worth it,220
00:10:38.340 --> 00:10:41.760
and you may not see any value in that. And, and paying something like, you know,221
00:10:41.760 --> 00:10:44.040
five or seven basis points maybe more, more suited.222
00:10:44.040 --> 00:10:48.600
But those are all sort of what I would say in the category of just the cost of223
00:10:48.600 --> 00:10:49.430
investing.224
00:10:49.430 --> 00:10:52.600
Sure. Sure. And, and when you're looking at investment vehicles,225
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mutual funds mm-hmm. ETFs,226
00:10:54.770 --> 00:10:58.280
those expense ratios that comprise some of those costs,227
00:10:58.750 --> 00:11:02.400
what are you seeing on average out there, and are those fees coming down? Uh,228
00:11:02.400 --> 00:11:05.400
They are coming down, I pulled some numbers, you know, looking at just on,229
00:11:05.420 --> 00:11:06.920
on averages, the, you know,230
00:11:06.920 --> 00:11:09.440
the average expense ratio for a large cap mutual fund,231
00:11:09.440 --> 00:11:13.640
about 86 basis points on the small cap side, it's averaging around, you know,232
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1.4%. You know, so again, those are the averages. So you,233
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you do see some mutual funds that can be as high as a, you know,234
00:11:20.050 --> 00:11:22.600
north of a hundred and twenty five hundred thirty basis points.235
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And then you can see some that are just a couple of basis points, you know,236
00:11:25.880 --> 00:11:29.360
two basis points, five basis points for, you know, just a simple, uh,237
00:11:29.490 --> 00:11:31.440
index tracking strategy. Okay. So238
00:11:31.440 --> 00:11:34.160
You said a couple things there that I find interesting. First and foremost, uh,239
00:11:34.500 --> 00:11:38.120
the asset class matters, right? Mm-hmm. Large cap versus small cap.240
00:11:38.340 --> 00:11:41.680
And I think it would make sense that smaller cap stocks,241
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smaller stocks are probably more costly to, to manage and maintain.242
00:11:46.200 --> 00:11:47.240
So you'd expect higher expense243
00:11:47.240 --> 00:11:49.880
Ratio, right? Yeah. And to trade 'em, it's harder to get access to 'em.244
00:11:49.880 --> 00:11:52.120
Yeah. And we see the same thing in, in liquid alternatives.245
00:11:52.120 --> 00:11:55.680
Like those alternative strategies tend to be a little pricey. Um,246
00:11:57.340 --> 00:12:01.480
so the asset class matters. We are believers of global diversification,247
00:12:01.540 --> 00:12:05.000
so having a little bit of all of those asset classes I think makes a lot of248
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sense. Correct. Um,249
00:12:06.260 --> 00:12:09.080
but you also mentioned something that I kind of want to dive into a little bit.250
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You know, 86 basis points on average for large cap mutual fund.251
00:12:15.300 --> 00:12:19.080
But you said you can get asset class exposures with index funds for just a252
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couple of basis points, correct? Or hundredth of a percent. Mm-hmm. Why is that?253
00:12:23.780 --> 00:12:25.480
Uh, I think it comes down to, you know, activity.254
00:12:25.540 --> 00:12:28.480
The more active a strategy is you're, you're gonna see, you know, more turnover,255
00:12:28.480 --> 00:12:30.520
that's more trading, and that's gonna, you know,256
00:12:30.520 --> 00:12:33.840
cause the expense ratios to be a little bit higher than a more passive257
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portfolio. Let's just, let's, let's just say tracking the s and p 500.258
00:12:37.710 --> 00:12:38.100
Sure.259
00:12:38.100 --> 00:12:42.960
So someone who is trying to attempt to outperform the s and p260
00:12:42.960 --> 00:12:47.600
500 will do so by buying and selling Correct. Creating activity,261
00:12:48.070 --> 00:12:51.400
raising costs, also taxes. Mm-hmm.262
00:12:52.270 --> 00:12:56.280
Whereas simply buying and holding an index of the s and p 500,263
00:12:56.310 --> 00:12:59.960
obviously is going to not only be less costly, but also more tax efficient.264
00:12:59.960 --> 00:13:00.460
Correct.265
00:13:00.460 --> 00:13:02.400
And it's also important to know what you're, what you're buying.266
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There's a lot of people out there who, who believe in active management.267
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They think that that,268
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that there is alpha out there that a portfolio manager can provide,269
00:13:10.500 --> 00:13:12.040
and in order to capture that alpha,270
00:13:12.040 --> 00:13:15.240
they're willing to pay the extra expenses for that. So if you,271
00:13:15.240 --> 00:13:18.520
if you know that going into it, then knowledge is king. Right? So,272
00:13:18.660 --> 00:13:21.800
so you're okay with that. It's the people that don't understand that,273
00:13:21.830 --> 00:13:24.760
that are in a portfolio, let's say a 401K plan, for example,274
00:13:24.780 --> 00:13:26.360
you go into the menu, you,275
00:13:26.510 --> 00:13:29.240
most people are probably gonna look at what their historical returns are,276
00:13:29.240 --> 00:13:32.680
and they're gonna probably make a decision based off of past performance not277
00:13:32.680 --> 00:13:35.320
knowing what, what's under the underlying securities or,278
00:13:35.320 --> 00:13:38.240
or what the strategy is behind the individual mutual fund.279
00:13:38.240 --> 00:13:39.320
And they could be paying, you know,280
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higher fees and not knowing really what they're paying or why they're paying it.281
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Yeah.282
00:13:42.840 --> 00:13:44.880
And it, and it's important, right? At the end of the day,283
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what you pay in fees comes off the top of what your return is. And over time,284
00:13:49.160 --> 00:13:52.600
that can be substantial. We say lot on this podcast, you know, we,285
00:13:52.620 --> 00:13:55.600
we can't control the markets, we can't control asset allocation,286
00:13:55.740 --> 00:14:00.120
we can't control costs, and we can't control taxes. And we, we,287
00:14:00.260 --> 00:14:04.600
we educate our listeners that, hey, focus on things you can control. Mm-hmm.288
00:14:04.680 --> 00:14:08.120
Right? And so fees do matter at the end of the day.289
00:14:08.380 --> 00:14:11.400
And I think there's been a lot of studies out there, if I'm not mistaken,290
00:14:11.510 --> 00:14:13.880
Morningstar had one not too long ago that says,291
00:14:14.060 --> 00:14:17.680
one of the key indicators of a mutual fund's performance is the expense ratio.292
00:14:17.700 --> 00:14:20.640
The lower the fee, the greater likelihood it's gonna perform well. Yeah. Well293
00:14:20.640 --> 00:14:22.800
Think about this. So in, in keeping with that,294
00:14:22.900 --> 00:14:27.520
if you are in a mutual fund that has a 1% expense ratio and that mutual fund295
00:14:27.520 --> 00:14:28.520
returned 5%,296
00:14:28.580 --> 00:14:31.720
you're automatically giving up 20% and you're giving that back to the,297
00:14:31.720 --> 00:14:32.840
to the fund company, right?298
00:14:33.190 --> 00:14:34.720
501 is four. Exactly.299
00:14:34.830 --> 00:14:37.400
Just, you know, basic math right there. Mm-hmm. So there, there, there is,300
00:14:37.740 --> 00:14:40.040
you know, fees do matter and they do erode, you know,301
00:14:40.040 --> 00:14:42.120
performance particularly over time. Uh,302
00:14:42.120 --> 00:14:44.800
I got a couple other examples here I can share with you. You know, please just,303
00:14:45.180 --> 00:14:46.600
you know, keeping things simple, you know,304
00:14:46.600 --> 00:14:49.600
a hundred thousand dollars investment over 20 years, um,305
00:14:49.880 --> 00:14:54.320
assuming a 6% rate of return in a mutual fund that has a 1% expense ratio,306
00:14:54.340 --> 00:14:55.600
forget about, you know, custody,307
00:14:55.780 --> 00:14:58.120
forget about advisory fees and all that other stuff,308
00:14:58.150 --> 00:15:01.720
just straight up just investing in a one per, in a mutual fund that's, uh, 1%,309
00:15:02.020 --> 00:15:04.200
uh, at the end of that 20 years, you know, you'll end up with a,310
00:15:04.240 --> 00:15:08.680
a gross return of $320,713 and 55 cents.311
00:15:08.830 --> 00:15:10.800
Take a look at the cost of fees.312
00:15:10.800 --> 00:15:14.880
The cost of fees of that are actually $55 $383 and 78 cents.313
00:15:14.880 --> 00:15:17.680
So you're gonna end up, uh, at the, in your account at the end of the day,314
00:15:17.680 --> 00:15:18.640
after 20 years with, uh,315
00:15:18.640 --> 00:15:23.120
$265,329 and 77 cents.316
00:15:23.420 --> 00:15:26.240
And that's if you're invested in a, a, a mutual fund that has, you know,317
00:15:26.240 --> 00:15:29.960
expense ratio 1%. And some people look at that and they say, that's great.318
00:15:29.960 --> 00:15:32.680
That's that, that's a good return over 20 years. I'll take that.319
00:15:32.870 --> 00:15:36.320
When you compare that, everything else being equal, but it's invested. Now in a,320
00:15:36.320 --> 00:15:40.720
in a mutual fund that has an expense ratio of, uh, 25 basis points, again,321
00:15:40.760 --> 00:15:44.640
a hundred thousand dollars over 20 years, 6% rate of return. The end of that,322
00:15:44.640 --> 00:15:45.060
you, you,323
00:15:45.060 --> 00:15:49.800
you still end up with the $320,713 55 cents,324
00:15:49.900 --> 00:15:51.920
uh, on the gross end. But on the net,325
00:15:51.920 --> 00:15:56.720
what you end up with is $305,919 and 75 cents.326
00:15:57.420 --> 00:16:00.600
And so that's a cost, cost of fees there of 14,327
00:16:00.620 --> 00:16:03.480
do $14,793 and 80 cents.328
00:16:03.740 --> 00:16:07.000
So that's a significant difference ends up in your pocket. That's,329
00:16:07.000 --> 00:16:08.440
That's, that's, that's massive. And we,330
00:16:08.440 --> 00:16:12.120
we told our listeners there wouldn't be any math, but, uh, no, that, that,331
00:16:12.120 --> 00:16:13.800
that is very true. But the thing is fees,332
00:16:14.070 --> 00:16:16.480
it's part of investing like anything else. Mm-hmm. Right. They're,333
00:16:16.480 --> 00:16:18.480
they're there. And I think it's important for investors to know,334
00:16:18.820 --> 00:16:21.160
one of the things, uh, I read an article many years ago,335
00:16:21.300 --> 00:16:25.720
and I think it's still prevalent and it's the notion of transparency, right?336
00:16:25.780 --> 00:16:28.200
And, and, and what this article did, it was from,337
00:16:28.310 --> 00:16:32.240
from State Street Global Advisors partnering with, uh, Wharton.338
00:16:32.860 --> 00:16:37.120
And they interviewed a number of investors, um, about fees and,339
00:16:37.140 --> 00:16:39.120
and their sentiments around fees.340
00:16:40.100 --> 00:16:44.680
And what that study showed us was, it's not so much the,341
00:16:44.700 --> 00:16:47.400
the level of the fee as they just wanted to know what it is.342
00:16:48.300 --> 00:16:50.960
And why do you think there's such a lack of transparency with,343
00:16:51.350 --> 00:16:53.200
with costs in this industry?344
00:16:53.560 --> 00:16:55.960
I just think it's easy to, it's easy to bury. That's345
00:16:55.960 --> 00:16:56.460
Unfortunate.346
00:16:56.460 --> 00:16:58.360
You know, I think, and, and I think that's, that's,347
00:16:58.380 --> 00:17:01.200
that's starting to change a little bit. I know we see it in our business,348
00:17:01.420 --> 00:17:02.760
you know, and one of the things that,349
00:17:02.760 --> 00:17:05.760
that we always kind of pride ourselves on are full transparency on fees,350
00:17:06.260 --> 00:17:07.400
you know? But if you can look,351
00:17:07.620 --> 00:17:09.760
if you can look less expensive than your competitor,352
00:17:10.190 --> 00:17:13.680
then you feel that's gonna give you a competitive advantage. And so, you know,353
00:17:13.740 --> 00:17:14.400
so it's,354
00:17:14.400 --> 00:17:18.040
it's unfortunately I would say it's not uncommon for investment companies or355
00:17:18.090 --> 00:17:20.080
other providers to, you know, kind of, you know,356
00:17:20.280 --> 00:17:24.440
bury their fees or sort of hide them within, you know, the structure of their,357
00:17:24.620 --> 00:17:26.320
of their, um, of their costs.358
00:17:26.830 --> 00:17:30.360
Well, I think you, you said it best, right? In in, if there's value,359
00:17:30.460 --> 00:17:33.560
the fees don't matter. Correct. Right. If you're getting what you're paying for.360
00:17:34.020 --> 00:17:38.320
And so I think that there's a notion of a lot of advisors out there not wanting361
00:17:38.320 --> 00:17:39.200
to talk about fees,362
00:17:39.300 --> 00:17:42.800
cuz they might not be confident in their own value proposition. However,363
00:17:43.130 --> 00:17:47.960
there are a lot of advisors that you and I work with on a daily basis that364
00:17:48.190 --> 00:17:50.640
they're very upfront with what their cost structure is.365
00:17:50.640 --> 00:17:53.800
They're very upfront with the fees are of the underlying investments,366
00:17:54.300 --> 00:17:58.400
and they bring that transparent to the table because they have a very strong367
00:17:58.400 --> 00:17:59.520
value proposition of their368
00:17:59.520 --> 00:18:01.320
Clients. Yep. Yeah. They'll have it on their website, they'll have their,369
00:18:01.320 --> 00:18:04.520
their fee, you know, their fee schedule on there along with, you know, the,370
00:18:04.660 --> 00:18:07.240
the various services that they charge and, you know,371
00:18:07.480 --> 00:18:10.320
whether you feel it's high or whether you feel it's low, at the end of the day,372
00:18:10.320 --> 00:18:13.280
it's up to you to decide what's best for you. But at least you know,373
00:18:13.280 --> 00:18:15.880
you have that full disclosure. Um, so you can make the,374
00:18:15.880 --> 00:18:17.800
the best decision possible. Certainly,375
00:18:17.800 --> 00:18:20.800
Certainly. So if, if our listeners are out there looking for a,376
00:18:20.840 --> 00:18:22.080
a financial advisor, you know,377
00:18:22.080 --> 00:18:24.680
some of the things that I'm hearing you say that they should be looking for is,378
00:18:24.780 --> 00:18:29.480
is the advisor using a commission-based mo a commission-based model or a379
00:18:29.480 --> 00:18:32.120
fee-based model? Mm-hmm. Are they, uh,380
00:18:32.510 --> 00:18:36.080
transparent with their compensation and uh,381
00:18:36.080 --> 00:18:38.560
are they transparent with their value proposition? Correct. Is,382
00:18:38.560 --> 00:18:40.480
is there anything else that, that you would add to that?383
00:18:40.740 --> 00:18:43.720
Um, just knowing what services you're gonna get. You know, I think, you know,384
00:18:43.720 --> 00:18:45.120
time and time again, we, he,385
00:18:45.180 --> 00:18:49.520
we hear stories that client felt that they were gonna get something from an386
00:18:49.520 --> 00:18:50.200
advisor that they're,387
00:18:50.200 --> 00:18:53.240
they're just not getting and they end up firing that advisor. You know,388
00:18:53.260 --> 00:18:56.000
so knowing what you're gonna get from that advisor, and, and some advisors,389
00:18:56.000 --> 00:18:58.720
again, they'll have this right on their website or they'll have it on that first390
00:18:58.720 --> 00:19:01.720
consultation that they talk to. They'll tell you, Hey, look, you're gonna get,391
00:19:01.720 --> 00:19:04.000
you know, four, you know, four meetings a year.392
00:19:04.000 --> 00:19:07.120
You're gonna get six phone calls, you know, from me a year and,393
00:19:07.120 --> 00:19:09.960
and here's my cell phone number. If there's ever an emergency for something,394
00:19:09.960 --> 00:19:13.160
you know, give me a call. And then there's other advisors that'll say, you know,395
00:19:13.160 --> 00:19:16.840
I'll meet you with you twice a year and we'll review your portfolio and if396
00:19:16.840 --> 00:19:19.040
everything looks good, then we'll, I'll talk to you in six months.397
00:19:19.540 --> 00:19:20.600
And if you're okay with that,398
00:19:20.860 --> 00:19:24.080
and you at least you know that going into the relationship, I think where,399
00:19:24.080 --> 00:19:25.360
where people get burned is they,400
00:19:25.360 --> 00:19:28.440
they think they're gonna get more outta the relationship than they're getting.401
00:19:28.700 --> 00:19:31.840
And a lot of times it's just slimy cuz of lack of transparency.402
00:19:32.290 --> 00:19:34.120
Right. And I think that transparency is a,403
00:19:34.360 --> 00:19:36.400
a tremendous way for advisors to build trust.404
00:19:36.400 --> 00:19:38.440
Cause it's all based on trust at the beginning of the Absolutely.405
00:19:38.440 --> 00:19:39.640
At the end of the day anyway, so Absolutely.406
00:19:40.340 --> 00:19:41.800
And it's also important, Tom,407
00:19:41.800 --> 00:19:44.720
to remember that as you're looking for a financial advisor, it's a,408
00:19:45.100 --> 00:19:48.680
you think of it as a, a mutual interview. It's, it's, you know, they're,409
00:19:48.680 --> 00:19:51.000
they're looking to see if you're gonna be a good client for them,410
00:19:51.510 --> 00:19:54.000
just like you're looking to see if they're gonna be a good advisor for you.411
00:19:54.340 --> 00:19:57.480
And so it's important that, that, uh, that a, your values are aligned.412
00:19:57.550 --> 00:19:59.520
It's important to look for that full transparency,413
00:19:59.700 --> 00:20:02.440
but it's also important that it's, you know, somebody that you can connect with.414
00:20:02.810 --> 00:20:06.600
Absolutely. Absolutely. And, um, every investor's unique. Mm-hmm.415
00:20:06.700 --> 00:20:09.640
And every advisor's unique in, in trying to find that match,416
00:20:09.720 --> 00:20:12.800
I think is very important. So for our listeners out there, uh,417
00:20:12.800 --> 00:20:14.720
those that might be looking for financial advisor,418
00:20:14.720 --> 00:20:17.360
make sure that you're getting, uh, transparency into costs.419
00:20:17.870 --> 00:20:20.400
Make sure you're getting transparency into value proposition.420
00:20:20.790 --> 00:20:25.560
Make sure that you're using someone who is maybe not necessarily earning sales,421
00:20:26.300 --> 00:20:30.880
uh, charges or sales commissions, uh, but actually giving fee for advice,422
00:20:30.970 --> 00:20:34.840
which eliminates conflicts of interest. Um, and so I think that's, there's a,423
00:20:34.840 --> 00:20:39.040
there's a lot there for our listeners to digest. JT, I want to thank you for,424
00:20:39.100 --> 00:20:41.560
for joining us here today. It's been a pleasure talking to425
00:20:41.560 --> 00:20:43.200
You. This has been a great time. We gotta do this more often.426
00:20:43.250 --> 00:20:46.920
Absolutely. We'd love to have you back on the show. Uh, so in closing,427
00:20:47.040 --> 00:20:50.800
I wanna thank the listeners for, for chiming into this, uh, podcast. And, uh,428
00:20:50.800 --> 00:20:52.840
we'll get you at the next one. And, uh,429
00:20:52.860 --> 00:20:56.480
for those of you who are looking for our, some of our previous episodes, uh,430
00:20:56.480 --> 00:20:58.720
you can find them wherever you're currently finding your podcast.431
00:20:58.940 --> 00:21:01.840
So thank you so much for your time and, uh, I'll see you at the next one.432
00:21:01.960 --> 00:21:03.600
Symmetry Partners llc,433
00:21:03.830 --> 00:21:07.760
it's an investment advisor firm registered with the Securities and Exchange434
00:21:07.760 --> 00:21:08.580
Commission.435
00:21:08.580 --> 00:21:13.280
The firm only transacts business in states where it is properly registered or436
00:21:13.720 --> 00:21:16.760
excluded or exempted from registration requirements.437
00:21:17.160 --> 00:21:21.720
Registration of an investment advisor does not imply any specific level of skill438
00:21:21.740 --> 00:21:26.240
or training and does not constitute an endorsement of the firm by the439
00:21:26.240 --> 00:21:26.940
commission.440
00:21:26.940 --> 00:21:30.080
No one should assume that future performance of any specific investment,441
00:21:30.290 --> 00:21:32.560
investment strategy, product,442
00:21:33.060 --> 00:21:37.320
or non-investment related content made reference to directly or indirectly in443
00:21:37.320 --> 00:21:41.670
this material will be profitable. As with any investment strategy,444
00:21:41.920 --> 00:21:46.910
there is the possibility of profitability as well as loss due to various445
00:21:46.910 --> 00:21:51.390
factors including changing market conditions and or applicable laws.446
00:21:52.090 --> 00:21:56.430
The content may not be reflective of current opinions or positions.447
00:21:56.770 --> 00:22:00.790
Please note the material is provided for educational and background use only.448
00:22:01.110 --> 00:22:01.850
Moreover,449
00:22:01.850 --> 00:22:05.790
you should not assume that any discussion or information contained in this450
00:22:05.990 --> 00:22:09.990
material serves as the receipt of or as a substitute for451
00:22:10.350 --> 00:22:12.390
personalized investment advice. -
Alternative Investments are not just "cool" or intriguing products to own. In truth, they have the potential to help you endure tumultuous markets. In this episode, we are joined once again by Philip McDonald, CFA, CAIA, Managing Director of Research Investments & Portfolio Manager, to discuss how Alternative Investments can mitigate risk in your portfolio.
If you have any questions or would like more information, reach out to us at https://symmetrypartners.com/contact-us/
You can also find us on Facebook, YouTube, Twitter, and LinkedIn. As always, we remain invested in your goals.
Symmetry Partners, LLC, is an investment advisory firm registered with the Securities and Exchange Commission. The firm only transacts business in states where it is properly registered, excluded or exempted from registration requirements. Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. No one should assume that future performance of any specific investment, investment strategy, product or non-investment related content made reference to directly or indirectly in this material will be profitable. As with any investment strategy, there is the possibility of profitability as well as loss. Due to various factors, including changing market conditions and/or applicable laws, the content may not be reflective of current opinions or positions. Please note the material is provided for educational and background use only. Moreover, you should not assume that any discussion or information contained in this material serves as the receipt of, or as a substitute for, personalized investment advice.0
00:00:06.890 --> 00:00:09.120
Hello, this is Tom Romano with Unfiltered Finance.1
00:00:09.270 --> 00:00:13.400
Welcome back to part two on our discussion of alternative investments here with2
00:00:13.400 --> 00:00:14.360
us as Phil McDonald,3
00:00:14.430 --> 00:00:18.720
portfolio Manager and managing Director of Investments at Symmetry Partners.4
00:00:18.720 --> 00:00:19.760
Phil, welcome back.5
00:00:20.020 --> 00:00:21.400
Thanks for having me back. Tom,6
00:00:21.880 --> 00:00:24.880
I think we're getting a lot of questions from investors and and advisors because7
00:00:24.880 --> 00:00:28.000
of the fact that you look at the performance of some of these alternative asset8
00:00:28.000 --> 00:00:30.920
classes in a year like 2022. However,9
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I think we would caution our listeners to, to not chase returns,10
00:00:35.860 --> 00:00:40.040
and it's more of a strategic allocation that you wanna hold in your portfolio11
00:00:40.140 --> 00:00:41.120
for a long duration.12
00:00:41.600 --> 00:00:44.920
I would totally agree with that. And, and you have other considerations here,13
00:00:44.920 --> 00:00:48.280
like broadly speaking, the expectation of the 60 40 portfolio,14
00:00:48.300 --> 00:00:49.920
the return on the so-called 60 port,15
00:00:49.930 --> 00:00:54.680
40 portfolio is likely going to be below average for in, in the near future.16
00:00:54.780 --> 00:00:56.320
So you start to think about like, okay,17
00:00:56.320 --> 00:01:00.200
my traditional portfolio isn't gonna return, you know, the 40 year average,18
00:01:00.350 --> 00:01:03.080
what we saw decades ago. So where else might I be,19
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might be able to go for returns and diversification? So you,20
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you have that inflation surprises, you have increased correlation of,21
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of traditional asset classes in the recent past. You know,22
00:01:12.920 --> 00:01:16.360
of all these things kind of pointing to the benefit of having a diversified23
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alternative strategy. And I would agree with you,24
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I think you were alluding to the strength of 2022. It was,25
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it was a very good year for certain alternative strategies.26
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I would encourage people to think of that as an outlier year like that.27
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That's not a year that can necessarily happen again unless all the bad things28
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that happen in the equity and fixed income markets and with inflation kind of29
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recur. So I, I would encourage people to almost think in terms of sharp ratio,30
00:01:40.770 --> 00:01:43.600
right? So an excess return for a given volatility,31
00:01:43.920 --> 00:01:47.320
a sharp ratio above 0.5, getting to maybe a 0.8, is,32
00:01:47.340 --> 00:01:50.320
is the type of realm I think you should think of for,33
00:01:50.380 --> 00:01:53.000
for a diversified alternative strategy. And,34
00:01:53.180 --> 00:01:55.160
and to kind of put specifics on that,35
00:01:55.380 --> 00:02:00.360
so something that has is managed to a 10% volatility or standard deviation that36
00:02:00.360 --> 00:02:05.240
would be a five to 8% excess return on the risk-free rate. So,37
00:02:05.660 --> 00:02:10.080
so you know, you're talking single digit excess returns for, uh,38
00:02:10.200 --> 00:02:14.040
a strategy that's scaled to a 10% volatility. So, you know,39
00:02:14.100 --> 00:02:16.480
to take people out of this expectation of,40
00:02:16.780 --> 00:02:21.640
of a home run year kind of happening again, it's less likely to happen again.41
00:02:21.660 --> 00:02:22.493
Gotcha.42
00:02:22.900 --> 00:02:25.560
Um, just to clarify some of that, because I think that's some,43
00:02:25.670 --> 00:02:28.880
some very important advice there. When we talk sharp ratio,44
00:02:28.880 --> 00:02:32.000
the way I look at that is bang for your buck. Are you,45
00:02:32.020 --> 00:02:35.960
are you getting the return for the risk that you are taking?46
00:02:36.300 --> 00:02:37.720
And the higher the sharp ratio,47
00:02:37.740 --> 00:02:39.800
the greater the return is for the risk that you're taking.48
00:02:40.540 --> 00:02:44.800
And so when we're talking about, you know, years like 2022, which is an outlier,49
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which I would agree, you know,50
00:02:46.640 --> 00:02:51.640
investors could have alternatives in their portfolio for years with a trade off51
00:02:51.640 --> 00:02:51.880
being,52
00:02:51.880 --> 00:02:55.720
you might be getting single digit returns while the markets may be producing53
00:02:55.720 --> 00:02:59.930
double digit returns. We don't know when the next 20, 22, 2 is gonna happen.54
00:03:00.420 --> 00:03:05.280
But having an allocation of those alts will certainly help weather that storm.55
00:03:05.820 --> 00:03:07.280
Uh, uh, totally agree. Yes.56
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So I think a misconception here, and this is just from my conversations with,57
00:03:11.160 --> 00:03:13.600
with advisors, investors alike, they think alternative strategies,58
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they think returns. Mm-hmm.59
00:03:15.080 --> 00:03:18.440
They think even tactical shifts into and hour. Exactly. Yeah.60
00:03:18.460 --> 00:03:22.000
But what I'm hearing you say that this is more of a risk mitigating strategy61
00:03:22.190 --> 00:03:24.000
than a return reaching strategy.62
00:03:24.520 --> 00:03:28.080
I think it's, it's strongly risk mitigating from a diversification standpoint,63
00:03:28.260 --> 00:03:30.320
but I'm not quite sure how64
00:03:31.990 --> 00:03:34.760
Much you have to give up in returns. Okay. I mean, it,65
00:03:34.880 --> 00:03:38.640
I I wouldn't necessarily say it, it's gonna hurt you over the long term.66
00:03:38.760 --> 00:03:42.240
I think you need to think about the right portfolio you, you want to be in. And,67
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you know, I dunno if you had a question here, but, uh, you know, there,68
00:03:46.000 --> 00:03:50.200
there are some very specific use cases that I think make sense and that would be69
00:03:50.520 --> 00:03:52.960
managing just the life cycle,70
00:03:53.380 --> 00:03:58.280
how financial plans and asset allocations change as a person ages. Again,71
00:03:58.380 --> 00:04:03.080
we, we have a finite kinda life here where we're earning and spending and maybe72
00:04:03.080 --> 00:04:08.080
bequeathing and then preferences. So theoretically, as someone ages,73
00:04:08.080 --> 00:04:11.640
they're the, the risk of their portfolio should, should come down over time.74
00:04:11.640 --> 00:04:13.680
They're converting their human capital,75
00:04:13.690 --> 00:04:17.200
their potential for earning during their career into financial capital.76
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They're investing that hopefully they're being thoughtful about the77
00:04:20.160 --> 00:04:23.760
diversification of, of, of those kind of two buckets and say,78
00:04:23.760 --> 00:04:25.680
equity beta should come down as you age.79
00:04:25.930 --> 00:04:28.080
Where do you go with that allocation in your portfolio?80
00:04:28.640 --> 00:04:32.240
Historically and traditionally, someone would say, oh, fixed, fixed income,81
00:04:32.240 --> 00:04:35.880
of course. But we've been seeing for a decade, you and I right,82
00:04:35.930 --> 00:04:37.680
we're we're both nodding and smiling.83
00:04:38.250 --> 00:04:43.120
There have been times when people were strongly opposed to increasing the fixed84
00:04:43.120 --> 00:04:47.120
income allocation in their portfolio. So if it's just, you know, gas and break,85
00:04:47.180 --> 00:04:49.360
you know, what do you do? You, you know,86
00:04:49.360 --> 00:04:52.720
we've seen investors and advisors kind of freeze and, and say, oh,87
00:04:52.720 --> 00:04:56.080
there's no solution here. But this third or fourth, right,88
00:04:56.080 --> 00:05:00.560
with cash in the consideration bucket of allocation really opens things up.89
00:05:00.620 --> 00:05:04.480
You can take down beta risk, uh, equity beta,90
00:05:04.500 --> 00:05:09.000
and you can allocate and diversify not only into fixed income.91
00:05:09.300 --> 00:05:10.100
Gotcha.92
00:05:10.100 --> 00:05:13.640
And you, you know, we, I joke around saying it depends, right? We,93
00:05:13.660 --> 00:05:18.080
we say that a lot here, um, because I also think it's a perfect portfolio.94
00:05:18.340 --> 00:05:21.200
You know, we, we look at portfolios as being a series of trade offs.95
00:05:21.580 --> 00:05:23.360
And so I immediately think, well gosh, you know,96
00:05:23.360 --> 00:05:25.000
if you don't really give up any of the return,97
00:05:25.000 --> 00:05:29.480
but you can definitely mitigate some of the risks through sharp ratio,98
00:05:29.480 --> 00:05:32.920
as you said, like looking at that particular statistic, who,99
00:05:32.920 --> 00:05:35.960
what are the trade-offs of, of investing in alternatives? And,100
00:05:35.960 --> 00:05:38.920
and immediately I think, well, well, you're still, there's still cost,101
00:05:39.030 --> 00:05:42.840
even though you can get lower cost alternative exposures,102
00:05:42.840 --> 00:05:47.400
there's still a cost element to that. Um, and also, you know,103
00:05:47.400 --> 00:05:50.320
we talk a lot about tracking error on the behavioral side, right?104
00:05:50.380 --> 00:05:53.680
If you're gonna add an alternative asset class to your portfolio,105
00:05:54.660 --> 00:05:58.080
but you're honed in on the s and p 500, you're,106
00:05:58.080 --> 00:06:00.040
you're not gonna be tracking that index.107
00:06:00.690 --> 00:06:01.220
Right?108
00:06:01.220 --> 00:06:03.120
Is that, is that a correct way of thinking about it?109
00:06:03.370 --> 00:06:04.040
Absolutely.110
00:06:04.040 --> 00:06:07.600
And I'm glad you brought that up because not only are alternatives difficult to111
00:06:07.600 --> 00:06:11.720
benchmark, there are some indices that I think, um, are,112
00:06:11.740 --> 00:06:16.320
are relevant to a diversified, you know, conservative strategy. We, we,113
00:06:17.220 --> 00:06:19.880
you know, we run an alternative strategy, uh,114
00:06:19.880 --> 00:06:24.120
in different forms that is not seeking to, to be very volatile, right?115
00:06:24.180 --> 00:06:28.040
So sub under that 10% volatility that I gave as,116
00:06:28.180 --> 00:06:32.680
as the example to conceptualize a sharp ratio. So we, we,117
00:06:32.740 --> 00:06:34.560
we don't even believe in a, uh,118
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that high level of volatility in an alternative strategy. Um,119
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but you raise a very good point.120
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So not only are alternatives difficult to benchmark,121
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but if you have alternatives in your portfolio,122
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the appropriate benchmark for your portfolio should reflect123
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the allocation you have. If it's 50% diversified equity,124
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40% diversified fixed income, and 10% alts,125
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you should probably benchmark yourself to a blended benchmark of a126
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50, 40 10 mix of relevant indices.127
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Not just look to the s and p 500, because again,128
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you probably have a 0.5 beta in that portfolio.129
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You don't want to compare yourself to something that is a 1.0 beta.130
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Sure, sure. Absolutely. And you know, we, we talk a lot about, on this podcast,131
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a lot of folks look at benchmarks to look at the performance, their portfolio,132
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and I think that makes a lot of sense. But the true one,133
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true benchmark is are you hitting your goals from a financial planning134
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standpoint? Right? And so I think that's a better way to, to,135
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to look at it versus just making sure that you may or may not be136
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outperforming the s and p,137
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which is a very visible benchmark out in the world today.138
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And we can think the media outlets for that certainly. Right.139
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So let's talk a little about, uh, allocation to alts, right?140
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Let's say you have an investor, let's say it's 60% stock, 40% bond,141
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maybe a small cash position in there. How should that investor consider adding,142
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uh, alternatives to the portfolio? Is there a maximum amount you would put in?143
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Is there a minimum amount? Would you take it from the stock side?144
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Would you take it from the bond side? How does that work? And how should our,145
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our listeners be conceptualizing adding that asset146
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Class? So we, we have some opinions here, but I think in the end, it's,147
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it's gonna be what is acceptable to the investor and what their financial148
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advisors would recommend start the starting point matters.149
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So if you're exceptionally conservative to start, say you're,150
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you know, 10% equity in 90% fixed income,151
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I think taking it ha having a a higher allocation alt might152
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make more sense than if you were starting from the other end. So, uh,153
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in terms of the distribution of returns and, and you know,154
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the level of volatility of a diversified AL strategy,155
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it's a little bit more similar to fixed income. It's, it's,156
00:08:51.260 --> 00:08:54.540
I like to say those returns are fueled by different things. You know, it's not,157
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you know, duration and credit risk and illiquidity type of stuff.158
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It's other drivers that, that give you returns and alternatives.159
00:09:02.860 --> 00:09:06.480
But our rules of thumb, which, you know, are for people to take or leave,160
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would be maybe up to about 25% if you're starting from a very conservative, uh,161
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portfolio. And if you're starting from a very aggressive portfolio,162
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just say someone's a hundred percent equity invested in says, ah,163
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I want to add malts to this portfolio, but I don't like fixed income. Um,164
00:09:22.360 --> 00:09:23.480
I know a few of those, maybe,165
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Maybe something more in the realm of 15%,166
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I think lower than 10% allocation of anything to the portfolio is gonna have a,167
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a, a limited effect on, on the outcome, right?168
00:09:35.940 --> 00:09:40.200
So 10 percent's probably our general starting point to add something and, and,169
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and see, uh, beneficial effect to the portfolio and,170
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and where we've landed on where to fund it from.171
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So I didn't forget that part of your question,172
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where believers in prorata from the,173
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the asset allocation,174
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so if you're a 60 40 investor and you put say,175
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20% alternatives,176
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60% of that should be probably funded from a reduction in inequity177
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and 40% from a reduction in fixed. And they go, again,178
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these are starting rules of thumbs. I I am very familiar with people who,179
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because that returns distribution to alts, you know, the volatility and the,180
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and kind of the average return to the distribution to alts is a little181
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more similar to fixed income than it is to equity.182
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I know folks who want to take 100% on a fixed income, that is an approach,183
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but if you think about that, you've done nothing to reduce your equity risk.184
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So if someone is, again, aging life cycle is a consideration here,185
00:10:38.760 --> 00:10:41.840
diversifying both systematic, traditional,186
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systematic exposures of equity and fixed,187
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we think taking from both makes a lot of sense to fund that ALT's position.188
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There are exceptions, you know, there, there are, you know,189
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there are people who have different savings or different, you know,190
00:10:54.560 --> 00:10:58.880
sources of income, maybe people with three pensions, you know, like who, uh,191
00:10:58.980 --> 00:11:02.280
who look a little different from an average investor. So again,192
00:11:02.280 --> 00:11:04.840
individual specifics need to come into play, but those,193
00:11:04.840 --> 00:11:07.720
those are my starting rules of thumb in a vacuum.194
00:11:08.070 --> 00:11:09.160
Well, that makes a lot of sense,195
00:11:09.160 --> 00:11:13.640
especially if you're looking at alternatives as a third leg to the stool, right.196
00:11:13.660 --> 00:11:14.600
Stocks and bonds.197
00:11:14.740 --> 00:11:18.160
And if the third category is going to be alternative asset classes or198
00:11:18.160 --> 00:11:20.760
alternative strategies, it should come out prorata.199
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It's not that the ALS are taking the place of equities or fixed income,200
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it's something completely, completely different in the portfolio.201
00:11:27.300 --> 00:11:28.133
Yep.202
00:11:28.230 --> 00:11:32.480
Fantastic. So, um, Phil, I wanna thank you so much for your time. This is, uh,203
00:11:32.500 --> 00:11:36.440
uh, super enlightening and just to kind of recap what we discussed, uh,204
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for our listeners, um,205
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alternative investments are a great way to diversify a portfolio beyond stocks,206
00:11:42.280 --> 00:11:43.113
bonds, and cash.207
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There are ways to get exposures to liquid alternative strategies through208
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ETFs and mutual funds. With that should,209
00:11:51.020 --> 00:11:54.920
you should expect a level of transparency to make sure you are getting those210
00:11:54.920 --> 00:11:59.720
diversification benefits and, uh, certainly, uh, liquidity being a,211
00:11:59.980 --> 00:12:04.240
uh, a factor there as well. And you know, whether or not alternatives are,212
00:12:04.240 --> 00:12:07.560
are suitable for you, as we always say and unfiltered finance. You know,213
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the best advice we can give is to always work with a financial advisor or214
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financial professional that can take a look at your own personal situation,215
00:12:15.060 --> 00:12:18.880
assess that situation, and, uh, make sure that they recommend, uh,216
00:12:18.880 --> 00:12:21.520
an asset allocation, uh, that's suitable for you.217
00:12:21.810 --> 00:12:24.520
Thank you listeners for joining us today. Uh, Phil, once again,218
00:12:24.870 --> 00:12:27.760
it's always fun having you on the show. We'll certainly have you back. Great.219
00:12:27.760 --> 00:12:28.593
Thanks for having me.220
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For those of you who are looking for additional information,221
00:12:31.160 --> 00:12:35.920
you can always visit our [email protected]. Feel free to,222
00:12:36.340 --> 00:12:38.080
uh, listen to this podcast, uh,223
00:12:38.090 --> 00:12:42.200
again or access any of our previous podcasts to the, uh,224
00:12:42.330 --> 00:12:44.120
venue in which you get your podcasts.225
00:12:44.460 --> 00:12:46.440
So thanks for listening and we'll catch you next time.226
00:12:46.720 --> 00:12:48.360
Symmetry Partners, llc,227
00:12:49.080 --> 00:12:52.600
an investment advisor firm registered with the Securities and Exchange228
00:12:52.600 --> 00:12:53.420
Commission.229
00:12:53.420 --> 00:12:58.120
The firm only transacts business in states where it is properly registered or230
00:12:58.560 --> 00:13:01.600
excluded or exempted from registration requirements.231
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Registration of an investment advisor does not imply any specific level of skill232
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or training,233
00:13:07.660 --> 00:13:11.480
and does not constitute an endorsement of the firm by the commission.234
00:13:11.780 --> 00:13:14.920
No one should assume that future performance of any specific investment,235
00:13:15.130 --> 00:13:17.400
investment strategy, product,236
00:13:17.900 --> 00:13:22.120
or non-investment related content made reference to directly or indirectly in237
00:13:22.120 --> 00:13:26.710
this material will be profitable. As with any investment strategy,238
00:13:26.960 --> 00:13:31.750
there is the possibility of profitability as well as loss due to various239
00:13:31.750 --> 00:13:36.230
factors including changing market conditions and or applicable laws.240
00:13:36.930 --> 00:13:41.230
The content may not be reflective of current opinions or positions.241
00:13:41.490 --> 00:13:45.870
Please note the material is provided for educational and background use only.242
00:13:45.950 --> 00:13:46.690
Moreover,243
00:13:46.690 --> 00:13:50.590
you should not assume that any discussion or information contained in this244
00:13:50.830 --> 00:13:54.830
material serves as the receipt of or as a substitute for245
00:13:55.190 --> 00:13:57.190
personalized investment advice. -
Today, we talk about an area of the market that many people have heard of, but haven’t chosen to invest in as of yet. Specifically, we’re talking about “Alternative Investments” - investment strategies that are different from and diversifying to, traditional asset classes. In this first half of this two-part episode, our own Tom Romano is joined by Symmetry’s Phil McDonald, CFA, CAIA, Managing Director of Research Investments & Portfolio Manager, to further define what “Alternative Investments” are, and why you may want to consider their potential benefits.
If you have any questions or would like more information, reach out to us at https://symmetrypartners.com/contact-us/
You can also find us on Facebook, YouTube, Twitter, and LinkedIn. As always, we remain invested in your goals.
Symmetry Partners, LLC, is an investment advisory firm registered with the Securities and Exchange Commission. The firm only transacts business in states where it is properly registered, excluded or exempted from registration requirements. Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. No one should assume that future performance of any specific investment, investment strategy, product or non-investment related content made reference to directly or indirectly in this material will be profitable. As with any investment strategy, there is the possibility of profitability as well as loss. Due to various factors, including changing market conditions and/or applicable laws, the content may not be reflective of current opinions or positions. Please note the material is provided for educational and background use only. Moreover, you should not assume that any discussion or information contained in this material serves as the receipt of, or as a substitute for, personalized investment advice. Transcript0
00:00:06.730 --> 00:00:10.400
Hello and welcome to Unfiltered Finance. This is your host, Tom Romano.1
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Thank you for joining us. Uh,2
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we have a special episode today where we want to talk about, uh,3
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an area of the market that, uh, a lot of investors have probably heard of, uh,4
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and probably most investors don't have a lot of exposure to.5
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And that is alternative investments.6
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And I have the perfect guest for us here today. Uh, Phil McDonald,7
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who is a portfolio manager and the managing director of investments at Symmetry8
00:00:33.040 --> 00:00:35.360
Partners, and is the resident expert on,9
00:00:35.580 --> 00:00:39.360
on alternative investing here at Symmetry. So Phil, thanks for joining us today.10
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Thanks for having me. I'm happy to be here.11
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So I kinda wanna start very high level, Phil, um,12
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because I think alternative investments is a, is a very, very broad topic.13
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I mean, it can cover things, uh,14
00:00:51.760 --> 00:00:55.760
such as precious metals to hedge fund strategies, um,15
00:00:55.780 --> 00:00:59.760
all the way down to things like NFTs, right? Or, or even, you know,16
00:00:59.760 --> 00:01:04.240
card collecting to an extent, right? So if you could just very high level give,17
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give us a very broad definition, uh, on your view on alternative investing,18
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please.19
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And thank you that,20
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that is a highly relevant question because alternatives is one of those labels21
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and investing that doesn't have, uh,22
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a perfectly agreed upon definition. I think, you know,23
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certain people hear it and they think different things. Um,24
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I think a useful definition to keep in mind is really, uh,25
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the starting point is anything that is an investment strategy that is different26
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from or diversifying to traditional asset classes that is27
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equity and fixed income, right? Um,28
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but I think you can't really stop there because, you know,29
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you called attention to, to certain ideas that, you know,30
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people might think of if, you know, you mentioned alternative investing,31
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you know, baseball cards or, you know,32
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a lot of interesting different artwork choices. Yeah. We've talked about,33
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talked about34
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That before.35
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Cars, uh, timber farmland, you know, these are all, some,36
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a lot of people think real estate, right? Which I think we could,37
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we could debate that one,38
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but I think not only should the investment strategy be different, but there,39
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there should be kind of an economic rationale for why you might40
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earn a return on that different strategy. And, and more specifically,41
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where's the premium coming from? Right? So I think very quickly for me,42
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that collapses down more to specific liquid,43
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uh, investment in trading strategies.44
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Sometimes based on themes we're al already familiar with in,45
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in asset classes we're already familiar with.46
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You don't necessarily have to go really far a field to find an47
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addition to a portfolio that will, will make a difference in terms of, you know,48
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adding an alternative, uh, investment exposure.49
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Sure. Thank you for that. And, um, you know,50
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I think it is that broad of a definition, right? I mean, uh,51
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just to sort of clarify for, for our listeners, um,52
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the word alternative means alternative, you said traditional asset classes,53
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stocks, bonds.54
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There is a correlation benefit to owning both stocks and bonds in a portfolio55
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Most years. Most years. Yeah. We'll get to that. We will get to that. Um,56
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however, um, you know, alternatives, to me it is a,57
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it's a correlation story in, in all of those investments, if you will,58
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whether it's cars, stamps, baseball cards, commodities,59
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they are going to have or should have some sort of diversification benefit.60
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And that's the purpose of it, right?61
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Totally. You, you nailed it.62
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The diversification benefit of an alternative strategy performing alternatively,63
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right? So if you wanna get a little bit geeky, you know,64
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you can think about something whose return stream looks different. So, you know,65
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low correlation and expected return from that, you know, economic logic,66
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that underlying fundamental theme as to if I do this trading strategy,67
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I should expect a return, hopefully lower volatility than, than say,68
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a equity market. So right there, you, you can talk about high sharp ratios or,69
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you know, high excess returns relative to the volatility you're talking about.70
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And, and absolutely diversification is the benefit. Very often, I, I, you know,71
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use the, um, analogy of, you know, a third bucket of diversification.72
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All you thought really all you had was two, well,73
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there's this third bucket you might want to consider for some clients. And,74
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and one, one thing I want to clarify here on, on this topic while we're here,75
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most of these strategies are not a hedge,76
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diversification is not a hedge.77
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So if you're diversified with regard to, you know,78
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equity markets and volatility, it doesn't mean when equities go down 10%,79
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you go up 10%. It's not that directly, you know,80
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inverse of a relationship. It's unrelated, you know,81
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it's not sensitive to what the equity or fixed income market hopefully is doing.82
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That's really what diversification is.83
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So it's not the taking the, the counterpoint, if you will, right?84
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Like something zigs this must zag, so to speak. Right? And so the idea is, it,85
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it's not going to behave from a return standpoint like any other,86
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it shouldn't behave like any other asset classes you currently have in your87
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portfolio. And I really like the way you put that sort of a, a third bucket,88
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right? I I maybe even a fourth, right? Because I think of cash. Yeah, exactly.89
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So, so most investors have cash, bonds and stocks,90
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most of their 401ks. And so what you're saying,91
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there's this whole other realm of alternatives that can have92
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diversification benefits because of the fact that they don't behave like stocks,93
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bonds, and cash. Correct.94
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So let's talk a little bit because I think alternatives sometimes get a bad95
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rap. Um, I think a lot of it has to do with the,96
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so maybe the broad definition has something to do with it,97
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but let's just kind of pick it apart with some of the,98
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the arguments I've heard from, uh, investors and financial advisors alike.99
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And the first one that comes to mind is cost, right? You know,100
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you think hedge funds,101
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you think two 20 or three and 30 where you're the managers earning, you know,102
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2%, 3% plus a,103
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a large portion of the profits talk to us a little bit about cost with104
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alternatives,105
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Right? And that I think is a fair critique of,106
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I dunno if I wanna call it a traditional model of alternative investing,107
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maybe older model where some of this, these strategies started mm-hmm.108
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Which really only offered in limited partnerships,109
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which tend to have high minimums, you know,110
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so only high net worth folks can qualify for them. They're illiquid.111
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So capital could be tied up for something even up to 10 years opaque,112
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you're not really sure what the manager is doing and, and expensive, you know,113
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even, you know,114
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sometimes you have like fund to funds and feeder funds and you have layers of115
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fees, and then obviously those, those performance fees come into play as well.116
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Um, so the good news is that that's not the only way to access alternative117
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strategies. Now, you,118
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the investor is able to invest in mutual funds and even ETFs that offer119
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alternative strategies for the most part, liquid, transparent, you know,120
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you get all the benefits of, you know, the regulatory requirements of,121
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of being a fund in these structures.122
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Not all strategies live well in that liquid structure.123
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So, you know, you don't have quite literally that list of, you know,124
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that funny list of all the things we could think of that someone might think of125
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as, as a good investment. So you, you are more constrained,126
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but still there's quite a bit to, to choose from. And then, you know,127
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to your point,128
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most of those strategies are just gonna have a very straightforward expense129
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ratio on the fund. It'll be very clear what the investor has to pay on average.130
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You typically see higher fees than, you know, a traditional say,131
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index fund for equity or, or, or fixed income. But you,132
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you're getting something different in, in a well-managed alternative strategy,133
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Right? And you hit on a couple of of points there, right?134
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Cost is something that always comes up. And uh,135
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I understand that even in some of these ETF or mutual fund type vehicles,136
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that there, there could be a higher layer of cost,137
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but there are ways to get exposures to these asset classes without paying138
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two and 20. Mm-hmm. Right. Um, you also mentioned liquidity, right?139
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I think that gets solved for,140
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if you're not using a limited partnership sort of vehicle.141
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If you're using an etf, they're very, very liquid.142
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So you can get your money whenever you may need it.143
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But you also hit on something that I think is, I think,144
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important to investors and it's transparency, right?145
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The opacity of a hedge fund, traditional,146
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if I can use the word traditional hedge fund tends to be a little bit, uh,147
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black boxy, if you will, right? Right. And maybe investors are thinking of,148
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you know, things like Bernie Madoff or things like that, right?149
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Where you don't know what's going on under the hood,150
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but an ETF or a mutual fund,151
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an ETF specifically, you're gonna get a a lot of transparency in that. Correct?152
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Yeah,153
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Absolutely.154
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So you know exactly what you're holding.155
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Absolutely. And, and, uh, you've touched upon a point,156
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which I think is very relevant,157
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and thankfully there's been an evolution in the industry to kind of bring158
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attention to some of that. So the,159
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the idea of a global macro go anywhere,160
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hedge fund a star manager who, you know, returned a thousand percent last year,161
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you know, raising funds, just like in telling investors, I'm really smart.162
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I'm smarter than all the rest. Invest with me.163
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I'll find whatever the opportunity is globally, you know,164
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regardless of country or region or asset class. Like,165
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I will go find that opportunity and I will achieve a higher return. That,166
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that's certainly something to probably be very careful of, right? He,167
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he might wanna shy away from that. So over the last, I don't know,168
00:09:44.920 --> 00:09:47.040
I'll say 25 years or so, there,169
00:09:47.040 --> 00:09:49.840
there's been light kind of shown upon this idea that, you know,170
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hedge funds don't hedge, you know, some hedge funds have a lot of beta,171
00:09:52.990 --> 00:09:53.880
some hedge funds are,172
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are implementing strategies you can get with liquid strategies. You know,173
00:09:57.240 --> 00:10:00.920
this idea of hedge fund replication was, was an interesting arm of, uh,174
00:10:00.920 --> 00:10:03.120
quantitative research. So I, I think for,175
00:10:03.180 --> 00:10:07.000
for those who are interested and have the time as an alternative investor, you,176
00:10:07.020 --> 00:10:10.880
you should be able to get from your manager a very specific explanation of177
00:10:11.070 --> 00:10:13.800
exactly what's happening in the strategy,178
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why it's an alternative strategy,179
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why the fee being charged on that strategy makes sense,180
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how it's diversifying to traditional asset classes. And really, I think at a,181
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on a very basic level,182
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confirm you're not paying alternative investment fees for183
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just call it equity beta, right?184
00:10:32.120 --> 00:10:36.080
Because we know equity beta is available in really high quality ETFs from185
00:10:36.120 --> 00:10:38.840
Vanguard for probably three basis points. Yeah.186
00:10:38.840 --> 00:10:42.880
I think that's a very important point, right? And, and we're firm believers on,187
00:10:42.940 --> 00:10:47.440
on, on transparency. And if you're using alternatives correctly,188
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if I'm understanding what you're saying,189
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and it is a diversification play to ensure that you're getting that190
00:10:52.240 --> 00:10:55.960
diversification, you need that level of transparency. And a lot of times, and,191
00:10:55.960 --> 00:10:58.400
and we've read about this and talked about this in the past,192
00:10:58.470 --> 00:11:02.200
sometimes these more opaque type strategies, you know,193
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if equities are doing really, really well,194
00:11:04.070 --> 00:11:07.920
they might be very correlated to equities at that very given point in time.195
00:11:07.920 --> 00:11:12.400
And then the whole story of diversification kind of goes out the window,196
00:11:12.400 --> 00:11:13.233
doesn't it?197
00:11:13.240 --> 00:11:14.073
A hundred percent.198
00:11:14.260 --> 00:11:19.200
And I think financial media hasn't helped in that education, right?199
00:11:19.500 --> 00:11:23.920
So there's been stretches of time when equity markets were doing very well,200
00:11:24.100 --> 00:11:27.800
and hedge funds haven't been, and, and you know, the storyline there is,201
00:11:27.800 --> 00:11:31.280
you know, hedge funds failed. And well, if hedge fund,202
00:11:31.500 --> 00:11:35.600
if a real alternative strategy has zero beta to the equity market and the equity203
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equity market's doing well,204
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I wouldn't necessarily expect to see those hedge funds up just because,205
00:11:42.450 --> 00:11:43.640
Right? If, if the,206
00:11:43.780 --> 00:11:47.480
if the alternative investment that you're using for diversification is zigging,207
00:11:47.480 --> 00:11:49.240
while your equities are zigging, you208
00:11:49.240 --> 00:11:50.280
Should ask questions. You should ask209
00:11:50.440 --> 00:11:53.200
Questions. Absolutely. Absolutely. Well, let,210
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let's talk a little bit about the performance, uh, of,211
00:11:56.900 --> 00:11:59.720
of alternative investing in relation to portfolio.212
00:11:59.860 --> 00:12:03.120
And you alluded to this in the beginning when, uh, you mentioned that, you know,213
00:12:03.120 --> 00:12:07.880
sometimes stocks and bonds do behave alike. Mm-hmm. And we saw that in 2022,214
00:12:07.880 --> 00:12:11.840
right? Yeah. Both had, uh, extremely volatile tough year,215
00:12:12.350 --> 00:12:15.200
both ended up in, in the red. Um,216
00:12:16.380 --> 00:12:18.360
how did alternatives do, or what,217
00:12:18.360 --> 00:12:21.360
how did alternative asset classes perform during that timeframe?218
00:12:21.860 --> 00:12:25.680
Uh, certain of them did reasonably well. So, uh, I'll,219
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I'll maybe run through a few examples of, uh,220
00:12:28.480 --> 00:12:31.900
strategies that are alternative. Uh,221
00:12:31.900 --> 00:12:35.060
our diversified alternative investment approach would include.222
00:12:35.280 --> 00:12:39.420
One of those is something called, uh, manage futures or trend following, or,223
00:12:39.880 --> 00:12:43.500
you know, if you want to think about, you know, quantitative factor investing,224
00:12:43.500 --> 00:12:48.020
which you know, is what we think about a lot, you can, you can consider that,225
00:12:48.640 --> 00:12:51.660
um, longitudinal momentum or momentum over time.226
00:12:51.920 --> 00:12:56.900
And this is really just a strategy that takes advantage of investing in futures227
00:12:56.900 --> 00:13:00.660
and forwards. So derivatives that'll cover, you know, commodities,228
00:13:00.760 --> 00:13:05.460
equity markets, fixed income markets. Uh, and in the simplest sense,229
00:13:06.200 --> 00:13:10.100
if a trend in an asset class is up,230
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especially over, you know, short, medium, and long-term time periods,231
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the managed future strategy would essentially be long that exposure.232
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And if a trend is down over, you know,233
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short and long horizon managed future strategy would be short, uh,234
00:13:27.500 --> 00:13:30.780
that asset class or commodity. So in 2022,235
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when everything felt like it was going down and continuing down,236
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the managed future strategy was able to reposition and be short,237
00:13:40.290 --> 00:13:45.220
many of those strategies that were showing persistent negative price signals.238
00:13:45.840 --> 00:13:49.580
So in 2022 a year when both equity and fixed income markets globally,239
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generally speaking on a diversified basis,240
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were down and very positively correlated,241
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something like a managed future strategy was up, uh, strongly and,242
00:13:59.460 --> 00:14:01.260
and very diversifying. That's243
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Really interesting.244
00:14:01.740 --> 00:14:06.740
And so would you'd have the same expectation if both stocks and bonds were245
00:14:06.740 --> 00:14:09.580
up, that the mayor's future strategy might be down, or does it depend?246
00:14:10.160 --> 00:14:10.993
It depends.247
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So it depends on the strength of those signals and the persistence of those248
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trends. So in, in certain stable, neutral, slow,249
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generally up markets, those signals may be too choppy to, to make use of.250
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And maybe if there's conflicting signals, say, you know,251
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up in the short term, down strongly in the medium term,252
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up slightly in the long term, you know,253
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you can't always make sense of those quantitative signals and,254
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and you might have no exposure in that type of underlying market or commodity or255
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asset class.256
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So that'll conclude part one of our, uh, conversation alternative investments.257
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Phil, thanks for joining us. And for our listeners, uh,258
00:14:49.300 --> 00:14:50.900
if you're looking for additional information,259
00:14:51.160 --> 00:14:54.920
please feel free to visit our website, www.symmetrypartners.com,260
00:14:55.260 --> 00:14:58.400
and to access more of the Unfiltered Finance podcasts.261
00:14:58.580 --> 00:15:01.800
Please feel free to find us wherever you're getting your podcast today.262
00:15:02.020 --> 00:15:03.480
Be sure to stay tuned for part two.263
00:15:03.840 --> 00:15:08.320
Symmetry Partners LLC is an investment advisor firm registered with the264
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Securities and Exchange Commission.265
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The firm only transacts business in states where it is properly registered or266
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excluded or exempted from registration requirements.267
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Registration of an investment advisor does not imply any specific level of skill268
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or training,269
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No one should assume that future performance of any specific investment,271
00:15:32.210 --> 00:15:34.480
investment strategy, product,272
00:15:34.980 --> 00:15:39.240
or non-investment related content made reference to directly or indirectly in273
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this material will be profitable. As with any investment strategy,274
00:15:43.940 --> 00:15:48.890
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factors including changing market conditions and or applicable laws.276
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The content may not be reflective of current opinions or positions.277
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Please note the material is provided for educational and background use only.278
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you should not assume that any discussion or information contained in this280
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material serves as the receipt of or as a substitute for281
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personalized investment advice. -
Stories of historically atypical interest rate hikes, and multiple bank failures, concerned many advisors in the early days of 2023. Join us for the second (and final) part of our discussion with Casey Dylan, CIMA®, Consultant, and the host of Unfiltered Finance, Tom Romano, Head of Strategic Relationships, as we discuss some of the more prominent news events, and their effects, during Q1 of this year.
If you have any questions or would like more information, reach out to us at https://symmetrypartners.com/contact-us/
You can also find us on Facebook, YouTube, Twitter, and LinkedIn. As always, we remain invested in your goals.
Symmetry Partners, LLC, is an investment advisory firm registered with the Securities and Exchange Commission. The firm only transacts business in states where it is properly registered, excluded or exempted from registration requirements. Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. No one should assume that future performance of any specific investment, investment strategy, product or non-investment related content made reference to directly or indirectly in this material will be profitable. As with any investment strategy, there is the possibility of profitability as well as loss. Due to various factors, including changing market conditions and/or applicable laws, the content may not be reflective of current opinions or positions. Please note the material is provided for educational and background use only. Moreover, you should not assume that any discussion or information contained in this material serves as the receipt of, or as a substitute for, personalized investment advice.Transcript:
0
00:00:01.900 --> 00:00:07.800
Let's let's1
00:00:07.600 --> 00:00:10.600
shift a little bit to some of the headlines that we saw because there was2
00:00:10.600 --> 00:00:15.100
there's quite a bit. It felt like it was a very long quarter. Yeah, and you3
00:00:14.200 --> 00:00:17.700
know as we did see some positive results, but can we4
00:00:17.600 --> 00:00:21.300
talk a little bit about just in general some of the headlines that we saw and5
00:00:20.600 --> 00:00:25.000
then specifically I want to take a dive into inflation6
00:00:23.600 --> 00:00:26.700
and then the banks because that was7
00:00:26.700 --> 00:00:30.200
a really big headline. We got a lot of a lot of calls regarding that look8
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there there were9
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Striking headlines around things like10
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shocks to sort of economic surprises on11
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job numbers to what was going on with the FED12
00:00:45.100 --> 00:00:48.400
to Banks not just near the United States but13
00:00:48.100 --> 00:00:51.600
internationally and yet what you see is kind14
00:00:51.400 --> 00:00:55.000
of, you know markets do what they do in in any given day. They respond15
00:00:54.600 --> 00:00:57.900
to that but they are quick to incorporate the news16
00:00:57.600 --> 00:01:01.300
and get back to pricing on other kinds of things. And17
00:01:00.600 --> 00:01:05.200
so I would say as a micro dosage of18
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what the ride is for investors. It's19
00:01:07.800 --> 00:01:11.000
this it's if you can sort of20
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take in stride that there are going to be lots of headlines and21
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that there may be short-term Market reactions headlines over the22
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longer term that kind of gets filtered out on23
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the upside and downside right and what you get back24
00:01:23.400 --> 00:01:26.600
to is. Hey one of my paying for right I'm paying for some kind25
00:01:26.500 --> 00:01:30.100
of future earnings or I'm lending with some expectation that26
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I'm going to get paid and income stream based on that and that tends27
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to drown out the short term noise and now28
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you're back to factors of how much did I pay did I29
00:01:40.100 --> 00:01:41.700
get my earnings did I not is30
00:01:42.000 --> 00:01:45.600
We're upside to that right and markets are kind of a weighing machine31
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in that sense. Right? They're weighing those earnings. They're weighing those32
00:01:48.900 --> 00:01:52.200
cash flows in the future. Right? So I would say33
00:01:52.000 --> 00:01:55.900
lots of lots of news lots of scurrying34
00:01:55.000 --> 00:01:56.300
around the news.35
00:01:57.100 --> 00:02:01.000
You know at the end of the day we're sort of where we started one36
00:02:00.100 --> 00:02:03.200
of the headlines and one of the things that we've been getting a lot37
00:02:03.200 --> 00:02:06.300
of questions about I'm talking about is is inflation. I know we've spent some time38
00:02:06.200 --> 00:02:09.600
already today talking about that. We did39
00:02:09.400 --> 00:02:13.500
see US inflation ease a little bit but there40
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might be some pressures coming up. So if you don't mind commenting on that, that41
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would be great. Yeah, you bet. I think it's helpful to kind of42
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take a step back and look at43
00:02:22.200 --> 00:02:25.700
With the onset of the pandemic right everything kind44
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of shut down and then when we went to reopen things back up45
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factories didn't necessarily open up, especially in46
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places like China right for some time. Right and the the47
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supply chain was suddenly48
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constrained and so we49
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had a hard time getting Goods, right but there was a lot50
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of demand because we were at home, you know person stuff and so51
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as you have demand shoot up but supplies constrained52
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price shoots up, right? That's just sort of Economics 10153
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and we saw that and at the time, you know, the Fed was quick54
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to say, hey, look we think this is transitory think eventually things55
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settle down we get manufacturing back online. We work56
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out the bugaboos associated with the supply chain57
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and those the price pressure doesn't inflationary pressure should come back58
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down over time and in large respect59
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this seems to have proven that out right?60
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I think what really got the fed's61
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attention and started them down the path.62
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Of really dramatically raising rates was63
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the fact that well while goods were64
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sort of starting to come back down. It was65
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inflation associated with services that was going up. And66
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in fact, what we've seen is good coming down67
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the the overall inflation of68
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the CPI number or that PC number coming down from its69
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highs last summer, but while that's been happening underneath70
00:03:48.900 --> 00:03:52.300
Inflation associated with Services has continued to71
00:03:52.100 --> 00:03:52.600
go up.72
00:03:53.200 --> 00:03:56.500
And so even if we're at a point now where the latest inflationary readings73
00:03:56.200 --> 00:03:58.100
are half of what they were.74
00:03:58.900 --> 00:04:00.400
Just a year ago this time.75
00:04:01.600 --> 00:04:05.500
Services inflation is up and continuing to go the wrong direction. Right? And76
00:04:05.200 --> 00:04:08.400
so the the FED has said hey, look77
00:04:08.200 --> 00:04:11.400
first of all, we don't look at kind of the overall CPI number. We don't78
00:04:11.300 --> 00:04:15.500
that's not how we measure it. We're looking at these underlying statuents and79
00:04:14.900 --> 00:04:18.600
they prefer the the pce as80
00:04:18.200 --> 00:04:21.300
opposed to CPI, but they're all just kind of ways of measuring, you know81
00:04:21.300 --> 00:04:24.900
inflation in the economy. And so82
00:04:24.400 --> 00:04:27.400
one of the ways that we've looked at83
00:04:27.400 --> 00:04:30.600
this for a very long time is core CPI, right? We're stripping out the84
00:04:30.400 --> 00:04:34.100
volatility of energy and food because those tend to move around so much and then85
00:04:33.900 --> 00:04:37.300
you know, we've been introduced to this concept that not86
00:04:37.000 --> 00:04:40.500
only is it core CPI, but it's core Goods CPI and87
00:04:40.200 --> 00:04:44.100
course Services CPI. And so the FED now is very focused88
00:04:43.600 --> 00:04:48.000
on core Services looking at Services minus89
00:04:47.000 --> 00:04:50.400
services for energy and food and what90
00:04:50.100 --> 00:04:54.000
we see are again our sort of troubling Trends91
00:04:53.100 --> 00:04:56.500
around services and housing92
00:04:56.100 --> 00:04:59.400
in terms of the impact that that93
00:04:59.200 --> 00:05:01.400
has now pushing.94
00:05:01.600 --> 00:05:04.700
Up or holding up those inflation numbers and if they95
00:05:04.600 --> 00:05:08.100
continue on the wrong direction, that's what the fed's concern about and the96
00:05:07.600 --> 00:05:11.500
the whammy that potentially comes97
00:05:10.600 --> 00:05:13.900
from if Services costs go98
00:05:13.700 --> 00:05:16.800
up at some point that starts to impact Goods costs as99
00:05:16.700 --> 00:05:20.600
well. Right? And so if you look at this where the the white100
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bars are coming down, right the the concern101
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is that Services cost the cost of producing goods102
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and delivering them right is going to impact the the cost103
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that gets passed through and goods start to come back up and there's sort104
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of a double double impact of inflation if105
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you will and that's what I think the FED is incredibly concerned about106
00:05:38.500 --> 00:05:41.600
and and why they say look we're gonna ratchet rates up107
00:05:41.600 --> 00:05:45.700
and we're gonna keep them up there long enough until we're convinced that we've we've108
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stamped this out and brought it back down to a level that's109
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livable because the last thing you want to do is take your foot off the pedal.110
00:05:51.800 --> 00:05:55.300
And then suddenly have a Resurgence of these111
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inflation Air Forces which that we've saw112
00:05:58.000 --> 00:06:01.400
in the 70s, right if you think about what we've we've113
00:06:01.200 --> 00:06:04.800
seen this show before the early 70s the FED raising114
00:06:04.500 --> 00:06:08.400
rates taking their their foot off the brake, I guess and then115
00:06:08.000 --> 00:06:11.900
Resurgence of inflation in the late 70s stagflationary116
00:06:11.200 --> 00:06:14.500
environment and it took the volcker FED in the 80s117
00:06:14.200 --> 00:06:17.800
taken rates to places. We'd never seen until recently right to118
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to stamp that out. And so I think the FED119
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is taking a lesson from history and said we don't want to repeat those mistakes.120
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We're gonna stay on this until we're sure right absolutely and121
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speaking of the fed and it says been a very fast pace122
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in terms of Ray hikes. Yeah123
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historically exactly exactly so124
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they they have meant business and I125
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think Market participants repeatedly made126
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the mistake of not taking127
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the FED at its word.128
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Right and and equities markets have129
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definitely gotten well ahead of the FED particularly at130
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the end of last year and maybe potentially the beginning of this year bond markets131
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now are pricing that the FED132
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will pull back and yet the FED is saying no. No, we're we're133
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gonna raise rates and we're gonna keep them there longer and that's134
00:07:07.600 --> 00:07:10.900
you know, we have no expectation that we would135
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pull back from that anytime this year. Right? So the market136
00:07:13.800 --> 00:07:17.000
participants are our forward looking forward pricing, but137
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they seem to not be taking the FED at its word. I think that's pulled138
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back a little bit in February and March we started to139
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see Market participants kind of get their arms around.140
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Actually be coming and we see you know141
00:07:29.400 --> 00:07:33.400
investors like hedge funds really sort of looking at volatility142
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Bets with the expectation that hey this143
00:07:35.600 --> 00:07:39.300
may get a little more turbulent before it gets better. Right? So144
00:07:39.000 --> 00:07:44.200
there's a lot of sort of now Market positioning145
00:07:43.200 --> 00:07:46.500
for the fed me146
00:07:46.300 --> 00:07:49.800
actually do this and we may see an economic pullback,147
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but that may not necessarily mean the FED response to148
00:07:52.800 --> 00:07:56.500
it. Right? I think again as we look forward the149
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the way that I would think about this as an investor as a the150
00:07:59.200 --> 00:08:03.000
stock market is not the economy, right? The151
00:08:02.400 --> 00:08:06.200
markets are definitely driven by152
00:08:05.700 --> 00:08:09.400
interest rates and fed movement153
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and yet154
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Much like headlines the markets take that155
00:08:16.200 --> 00:08:20.200
news and stride it gets built into prices and there156
00:08:19.800 --> 00:08:23.000
may be short-term volatility associated with this but if you look out over157
00:08:22.800 --> 00:08:26.300
time, you know, what what do we see going back to158
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you know, as long as we have records 1926 and Beyond159
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right Imperial heads when interest rates160
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go up interest rates go down inflationary environments disinflationary environments161
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recessionary environments across all of those things markets162
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tend to produce a return163
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of you know, seven to ten percent average annual164
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you don't get that every year but you get on average over time and it's165
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paying you for those cash flows so much like,166
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you know, the all the comments that we've had prior to167
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this.168
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As investors, it's important to sort of take in its Stride169
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Right put some blinders on there may be volatility associated with170
00:09:02.800 --> 00:09:06.400
this ride. You will get wet on this ride. Right but we171
00:09:05.800 --> 00:09:08.900
promise you'll come out in the other side, right and when you do,172
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you know, the markets will get back to doing what they173
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do, which is you know, paying you for putting Capital to work174
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in there. So so that I would say again we watch these175
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things. We we sort of especially working176
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in the industry. It's a incumbent upon177
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us to have some product prognostication about where this could178
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be headed at the end of the day what we think matters very little it's179
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what actually happens and we build portfolios to180
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be as robust as we can because Anything Could Happen. Yeah, that's that's fantastic.181
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And that's a really good way of putting it. We don't know what's182
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happening, but we're183
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We're invested in a way to endure what's to come? Right? Exactly. So184
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one of the headlines that we we spent185
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a lot of time talking to advisors and investors alike is the186
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the notion of the banks and we saw from Silicon Valley187
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and First Republic and a few others.188
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I think it's a it's a risk reward story. But I also think189
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this is the diversification story there. I'd love to hear your thoughts. Yeah. Well, yes,190
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I think191
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the the situation with the banks192
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has a lot to do with other stuff, right? Yes, the193
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the banks were quick to come out and say well this194
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is a consequence of how rapidly the FED is195
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raised interest rates. And this is potentially impaired the196
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asset base of these Banks and there's no question right over the197
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course of 2022. You saw the asset base198
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drop significantly across banks in199
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general because right so, you know first principles,200
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what is a bank do they take money in when they201
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take that money in as a deposit? It's a liability to them. Right?202
00:10:40.500 --> 00:10:43.600
So they take that liability and they got to go match it up203
00:10:43.500 --> 00:10:47.000
with an asset and they do that either by making loans and if204
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they can't make enough loans, then they got to go buy bonds treasuries.205
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For instance, right? Yes. That's the old against the206
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liabilities. So if you if you've got a bank that207
00:10:56.300 --> 00:10:59.600
has a bunch of bonds that they're holding as an asset208
00:10:59.300 --> 00:11:03.000
and the value of those bonds dramatically drop. They've lost209
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a lot of money against the liabilities that210
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are still where they are, right and211
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So that's that's the the challenge for212
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the financial.213
00:11:15.800 --> 00:11:19.200
sector and it no surprise the financial sector214
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was sort of the worst performing sector for the first quarter in large215
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part because of these Dynamics216
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It was a part of what happened at svb. It was a catalyst217
00:11:27.800 --> 00:11:31.300
for the bank run that followed but the bank218
00:11:31.000 --> 00:11:34.500
run followed because of the unique dynamics of219
00:11:34.400 --> 00:11:38.100
svb, correct? Right and the the failure220
00:11:37.500 --> 00:11:40.900
of silvergate was221
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function of crypto and had as222
00:11:43.800 --> 00:11:47.500
much to do with FTX the failure of FTX, which223
00:11:47.200 --> 00:11:50.300
was a Ponzi scheme, right? So you have224
00:11:50.200 --> 00:11:54.300
a lot of kind of very unique situations Signature Bank,225
00:11:54.100 --> 00:11:58.000
very crypto focused right First Republic the226
00:11:57.100 --> 00:12:00.900
very very heavily on227
00:12:00.200 --> 00:12:04.200
the asset side writing interest only mortgages228
00:12:03.400 --> 00:12:06.700
right in to a degree that other229
00:12:06.500 --> 00:12:10.500
Banks didn't have some unique characteristics of these Banks which cause230
00:12:09.900 --> 00:12:13.600
them to be sort of the canary in the coal mine if you will right231
00:12:12.900 --> 00:12:16.100
and Credit Suisse just232
00:12:18.000 --> 00:12:21.100
Has struggled for years, right? And this was233
00:12:21.000 --> 00:12:24.500
just the nail in the coffin form. The concern is are they234
00:12:24.200 --> 00:12:27.600
the canary in the coal mine or are they just being punished because235
00:12:27.400 --> 00:12:29.900
the malfeasance and poor management?236
00:12:31.000 --> 00:12:34.700
And I think the answer is a bit of both, right? So the the237
00:12:34.400 --> 00:12:38.400
fed and other institutions got238
00:12:38.000 --> 00:12:41.900
together and said, hey, we got a backstop this thing to keep any contagion239
00:12:41.300 --> 00:12:45.300
from spreading and assure depositors that240
00:12:45.200 --> 00:12:48.600
they're deposits are safe, even if the value of the bond the assets241
00:12:48.200 --> 00:12:51.600
that these banks are holding have dropped down. We the the government242
00:12:51.200 --> 00:12:54.300
are going to step in and and backstop not just243
00:12:54.200 --> 00:12:57.300
your 250,000 but everything right that was244
00:12:57.300 --> 00:13:00.500
the strong message that they sent and that sort of seem to245
00:13:00.300 --> 00:13:03.600
work, right it calm markets. Thanks for still being sort of reviewed and246
00:13:03.500 --> 00:13:06.500
I would say look there's there could be more to this story. There could be247
00:13:06.500 --> 00:13:09.800
other shoes to drop in time. Right? So you'll continue248
00:13:09.500 --> 00:13:12.600
to watch it. I think as in as a person249
00:13:12.500 --> 00:13:15.600
who has money at a bank, right am I rushing to pull my money250
00:13:15.500 --> 00:13:18.800
out? No, I'm fairly confident that you know,251
00:13:18.800 --> 00:13:21.500
we're we're gonna survive this right now.252
00:13:22.400 --> 00:13:26.100
Did I say the same thing in 2008 when when I253
00:13:25.700 --> 00:13:28.900
really thought hey, man, the whole financial system could go down.254
00:13:28.800 --> 00:13:32.300
These Banks had collapse in Mass. I don't think we're anywhere255
00:13:31.900 --> 00:13:35.300
near that I think banks are much healthier than than they256
00:13:35.100 --> 00:13:39.900
were then and I think the issues that they have have to do with treasuries and257
00:13:39.800 --> 00:13:43.200
the FED has said look, we're gonna step in and provide as much liquidity258
00:13:42.800 --> 00:13:46.400
as necessary for the banks. So this becomes259
00:13:45.900 --> 00:13:49.700
a potential issue down the down the pike, right? If260
00:13:49.200 --> 00:13:52.700
in fact the FED has to step in and provide the261
00:13:52.300 --> 00:13:55.700
Surplus liquidity to the treasury market,262
00:13:55.500 --> 00:13:56.800
why might they have to do that?263
00:13:57.800 --> 00:14:01.000
Well, if for some reason we default on the debt ceiling for instance,264
00:14:00.800 --> 00:14:04.200
right that could be very problematic and the FED265
00:14:04.000 --> 00:14:07.200
might have to take aggressive steps in a way that we've266
00:14:07.100 --> 00:14:11.300
never seen before to step in and try and provide Surplus liquidity267
00:14:10.700 --> 00:14:14.000
specifically to the treasury market. That would268
00:14:13.800 --> 00:14:17.300
be a complete roll reversal of where we've been right? That's that's269
00:14:17.000 --> 00:14:20.900
taking the quantitative tightening off the table and now we're back to quantities, right270
00:14:20.400 --> 00:14:23.600
so so could things come down the bike that271
00:14:23.500 --> 00:14:26.900
would cause a, you know, real dislocation to272
00:14:26.500 --> 00:14:29.900
banking to markets sure it could happen273
00:14:29.700 --> 00:14:32.900
again. Who knows right? Everybody's got a crystal274
00:14:32.800 --> 00:14:33.100
ball.275
00:14:34.100 --> 00:14:37.700
Nobody's usually right spot on about what's gonna happen, but276
00:14:37.200 --> 00:14:40.400
it's a potential risk that you want. Hey, look this might happen, but277
00:14:40.300 --> 00:14:41.000
we'll survive.278
00:14:41.600 --> 00:14:45.200
Yeah, no, absolutely. And as you said before, I mean, it seems like the markets279
00:14:44.600 --> 00:14:45.300
have.280
00:14:46.100 --> 00:14:49.600
sort of shrugged off those headlines because we've seen some pretty decent returns281
00:14:49.100 --> 00:14:52.000
and in q1, but I think you know in282
00:14:53.200 --> 00:14:56.500
Let's let's go back to the text docs, right? I mean that's what's really283
00:14:56.300 --> 00:14:57.800
leading the charge here, isn't it?284
00:14:58.800 --> 00:14:59.000
well285
00:15:00.000 --> 00:15:01.800
I think there are a lot of Dynamics at play.286
00:15:02.400 --> 00:15:06.000
But underpinning all of that is risk and reward right?287
00:15:05.500 --> 00:15:08.800
I mean that at the end of the day, it's that simple288
00:15:08.600 --> 00:15:11.700
what are the risks and what are the rewards and how much am I289
00:15:11.600 --> 00:15:15.400
willing to pay for those rewards? And am I underestimating those290
00:15:15.200 --> 00:15:18.800
risks? Right? So everything is sort of a function of those things291
00:15:18.600 --> 00:15:22.000
and so I would say look in equities. The the292
00:15:21.600 --> 00:15:25.200
tech stocks is a risk, right? There's there's certainly reward293
00:15:25.000 --> 00:15:28.400
there's upside there. We're seeing it in terms of markets, but I think there's risk294
00:15:28.100 --> 00:15:31.800
right in fixed income. There's potential295
00:15:31.200 --> 00:15:34.600
risk associated with the yield curve296
00:15:34.400 --> 00:15:39.000
and what happens with the fed and raising rates in areas,297
00:15:38.100 --> 00:15:41.600
like financials. There's risks298
00:15:41.200 --> 00:15:44.800
right associated with that. I think the key299
00:15:44.500 --> 00:15:47.800
takeaway for that for anybody looking at300
00:15:47.600 --> 00:15:48.300
it is301
00:15:49.200 --> 00:15:52.500
Broad diversification not just in302
00:15:52.200 --> 00:15:55.600
one geography not just inequities not just in fixed income303
00:15:55.300 --> 00:15:58.300
across factors as much as you304
00:15:58.300 --> 00:16:01.800
can broadly diversify the more robust your portfolio is to305
00:16:01.300 --> 00:16:04.200
stand up to any of those unique risks.306
00:16:04.900 --> 00:16:06.800
And so I would I would say.307
00:16:08.200 --> 00:16:12.100
That that would be where I would encourage investors to308
00:16:11.700 --> 00:16:13.100
sort of keep their heads.309
00:16:14.100 --> 00:16:17.400
I it's always challenging when you have tech stocks doing310
00:16:17.300 --> 00:16:20.800
as well as they are because they drive311
00:16:20.400 --> 00:16:23.700
markets you want to be there. You want to participate in it.312
00:16:23.500 --> 00:16:27.400
There's a a benefit socially to313
00:16:26.700 --> 00:16:30.100
holding names that people are familiar314
00:16:29.700 --> 00:16:33.000
with and talk about right if you think about the315
00:16:32.700 --> 00:16:36.000
fomo experience that people have316
00:16:35.700 --> 00:16:38.900
missing if you're missing out, right? Yeah, my next317
00:16:38.900 --> 00:16:41.900
door neighbor. He's he's got Google and apple and they're tear on318
00:16:41.900 --> 00:16:45.800
the cover off the ball. Never mind. What happened last year right now, I gotta you319
00:16:45.100 --> 00:16:48.500
know, keep up with the Joneses on that water cooler. Alpha320
00:16:48.100 --> 00:16:51.600
is what I call that. Yeah water cooler Alpha and I would just321
00:16:51.300 --> 00:16:54.900
say hey look at the end of the day. We're people right if we322
00:16:54.600 --> 00:16:57.800
were autonomous, you know Vulcans. This would just be323
00:16:57.700 --> 00:17:01.000
economics and math and we can figure it all out reality is324
00:17:00.900 --> 00:17:04.700
we're people and you got to build a portfolio you can live with right as325
00:17:04.200 --> 00:17:07.300
our as our good friend Phil Henry says, you326
00:17:07.200 --> 00:17:10.700
got to build a portfolio you can live with and then live with it, right? I think327
00:17:10.700 --> 00:17:13.400
that's absolutely true. And so you have to take into account.328
00:17:14.000 --> 00:17:17.700
The the investor psychology associated with this that's329
00:17:17.000 --> 00:17:20.200
why I think momentum is such a330
00:17:20.000 --> 00:17:23.500
powerful factor to build into your portfolios331
00:17:23.000 --> 00:17:26.200
because momentum picks up332
00:17:26.000 --> 00:17:29.400
these like when tech stocks going to run you end up333
00:17:29.400 --> 00:17:33.400
owning things like Apple and Google and because they334
00:17:32.900 --> 00:17:37.100
are demonstrating positive momentum, right? So you you're picking335
00:17:36.400 --> 00:17:39.800
up some of that you're participating in that upside and I336
00:17:39.800 --> 00:17:42.900
think as a as an investor, that's that would probably be enough for337
00:17:42.800 --> 00:17:46.400
me, right? It's a modicum of the things that I everybody else338
00:17:46.200 --> 00:17:49.400
is holding that that's working but it's also stuff that's not working339
00:17:49.300 --> 00:17:52.400
because eventually that circles around and that becomes the thing340
00:17:52.300 --> 00:17:55.600
that's worth. I don't have to try and time it. I'm just holding it and I'm341
00:17:55.400 --> 00:17:58.600
waiting keeping my powder dry in that area so that when it342
00:17:58.400 --> 00:18:02.100
does I benefit that that's how I would think about it look again343
00:18:01.700 --> 00:18:03.100
tech stocks are344
00:18:04.300 --> 00:18:08.300
The amazing thing about markets is they run longer than you think they should right. They're345
00:18:07.900 --> 00:18:12.100
fueled by stuff. Sometimes you don't understand and and346
00:18:11.600 --> 00:18:15.100
in many cases, I think the347
00:18:14.700 --> 00:18:18.500
tech stock Dynamic is is part348
00:18:17.800 --> 00:18:21.300
fairy dust, right and you know,349
00:18:21.200 --> 00:18:24.500
we watched it run for a decade and drive markets, you know350
00:18:24.500 --> 00:18:28.800
for you know, double digit returns for years because351
00:18:27.800 --> 00:18:31.900
that happen again, of course, it could right. I'm not352
00:18:31.900 --> 00:18:35.700
gonna tell you again. I am cautious about the353
00:18:35.200 --> 00:18:38.600
dynamic being set up looking very similar to354
00:18:38.500 --> 00:18:42.200
the dynamic that we saw at you know, 2019 2020.355
00:18:41.700 --> 00:18:45.000
Yeah. No, absolutely and you know that seems like that tech356
00:18:44.700 --> 00:18:47.900
store keeps popping up. I started my career in the late 90s and that was the357
00:18:47.800 --> 00:18:50.600
whole story and then I saw a lot of portfolios.358
00:18:51.300 --> 00:18:55.100
A lot of people see their portfolios blow up but because of overexposure to359
00:18:55.000 --> 00:18:58.500
to technology and they having a360
00:18:58.400 --> 00:19:02.400
balanced portfolio Diversified across multiple asset classes regions geographies.361
00:19:01.900 --> 00:19:05.000
That's that's the best course of action at the362
00:19:04.900 --> 00:19:10.100
end of the day. So yeah, I think I go back to the the E-Trade363
00:19:09.300 --> 00:19:12.600
baby, right if you remember the E-Trade baby so easy364
00:19:12.500 --> 00:19:15.800
baby. Yeah that was born right on the text actually and then365
00:19:15.600 --> 00:19:18.700
they they put the baby away for a while baby's back right now. I was366
00:19:18.600 --> 00:19:21.800
a little bit older now, he's out of the wedding, you know hanging out367
00:19:21.700 --> 00:19:25.200
with this guys and gals but to368
00:19:24.800 --> 00:19:28.200
me that a Hallmark of a caution, right because369
00:19:27.900 --> 00:19:32.000
the reality is it's it's easy but370
00:19:31.600 --> 00:19:34.900
hard right it's not you know, it's not371
00:19:34.700 --> 00:19:38.500
difficult to say. Hey look broadly based diversification sit still it's372
00:19:37.700 --> 00:19:41.000
incredibly difficult to do. Yeah, right and that's where373
00:19:40.900 --> 00:19:45.100
the real benefit of working with financial professionals comes in because everybody374
00:19:44.300 --> 00:19:47.900
thinks they can do it everybody. They're gonna be Spock375
00:19:47.300 --> 00:19:50.600
and devoid of emotion, but then the moment of truth comes376
00:19:51.200 --> 00:19:54.200
The market drops 40% and you're looking at like am I gonna377
00:19:54.200 --> 00:19:57.400
be able to retire? Right and the fear grips hold and it's378
00:19:57.200 --> 00:20:00.900
2 am and you're thinking what do I do? Right. That's379
00:20:00.300 --> 00:20:03.400
when you need to have that dispassionate third party380
00:20:03.300 --> 00:20:07.700
to pick up the phone and say I want to sell everything. They whoa. Let's381
00:20:07.100 --> 00:20:11.000
revisit right like is anything changed? Oh the382
00:20:10.400 --> 00:20:13.700
market drop 40% right has anything in your life changed right?383
00:20:13.400 --> 00:20:16.800
Maybe that's not the best course of action. Let's take a beat having that384
00:20:16.600 --> 00:20:20.000
dispassionate a third party to keep you from blowing yourself up385
00:20:19.700 --> 00:20:23.000
at that exact moment is invaluable. Yeah386
00:20:22.700 --> 00:20:26.400
and making sure you have the right mix between stocks bonds387
00:20:26.000 --> 00:20:29.900
and maybe even Alternatives depending on the investor and if someone388
00:20:29.500 --> 00:20:33.000
can't sleep at night, it's not necessarily that they should take action,389
00:20:32.600 --> 00:20:35.800
but they might be in the wrong asset allocation for390
00:20:35.600 --> 00:20:36.200
their391
00:20:37.300 --> 00:20:41.000
The risk, you know their ability to accept right? Yeah,392
00:20:40.600 --> 00:20:45.800
it could be that often. What I've393
00:20:45.500 --> 00:20:48.800
experienced is when it's that it's because the client wanted394
00:20:48.500 --> 00:20:52.000
more Tech right in their portfolios or more of what's395
00:20:51.700 --> 00:20:55.100
working, right? And then when that's no longer working, they396
00:20:54.700 --> 00:20:57.700
can't sleep at night, but cautionary Tale the other397
00:20:57.700 --> 00:21:01.900
piece of that is we're surrounded by the news 24/7398
00:21:01.000 --> 00:21:04.600
right? It's just and it's always the whatever399
00:21:04.100 --> 00:21:07.700
bleeds leads right? And so it's this constant400
00:21:07.100 --> 00:21:12.200
drum beat of kind of negative stuff. And I think that investors401
00:21:10.400 --> 00:21:13.700
need a voice.402
00:21:14.600 --> 00:21:18.000
That that they trust to say. Hey, yeah. No I403
00:21:17.800 --> 00:21:21.600
saw that too. Yes, that bank went out of business. Here's404
00:21:20.800 --> 00:21:24.600
why we shouldn't Panic here, right? Yep. We405
00:21:24.500 --> 00:21:28.300
see all that. Here's why we're gonna stay the course. Here's why we're not gonna Panic. Here's406
00:21:27.800 --> 00:21:31.200
what let's you know, our long-term goals are and we're in good407
00:21:31.100 --> 00:21:35.000
shape to hit those. I think that sort of calming reassurance408
00:21:34.500 --> 00:21:37.700
helps people get back to sleeping at night. Yeah. No,409
00:21:37.500 --> 00:21:40.800
I agree Casey as always. It's a pleasure talking to you.410
00:21:40.700 --> 00:21:43.800
Thanks for joining us great having you here and I want to thank all of411
00:21:43.700 --> 00:21:47.400
our listeners and these feel free to access other podcasts412
00:21:46.800 --> 00:21:49.800
that we have done and they can be413
00:21:49.800 --> 00:21:53.300
accessed anywhere you get your podcast. So thanks everyone and we414
00:21:53.000 --> 00:21:56.800
will see you next time symmetry Partners LLC.415
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the Security and Exchange Commission The Firm only transacts417
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advice. -
The sudden failure of Silicon Valley Bank in March jostled investors' confidence in the market. But, the overall performance of various tech stocks in Q1, such as Tesla, Meta, Alphabet, Amazon, Salesforce, AMD, and Broadcom, served to revive optimism for the stock market's near future. Join Casey Dylan, CIMA®, Consultant, and our host Tom Romano, Head of Strategic Relationships and Product Development, in this first half of of our Q1 recap, as we discuss both market, and factor performance, in the first few months of 2023.
If you have any questions or would like more information, reach out to us at https://symmetrypartners.com/contact-us/
You can also find us on Facebook, YouTube, Twitter, and LinkedIn. As always, we remain invested in your goals.
Symmetry Partners, LLC, is an investment advisory firm registered with the Securities and Exchange Commission. The firm only transacts business in states where it is properly registered, excluded or exempted from registration requirements. Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. No one should assume that future performance of any specific investment, investment strategy, product or non-investment related content made reference to directly or indirectly in this material will be profitable. As with any investment strategy, there is the possibility of profitability as well as loss. Due to various factors, including changing market conditions and/or applicable laws, the content may not be reflective of current opinions or positions. Please note the material is provided for educational and background use only. Moreover, you should not assume that any discussion or information contained in this material serves as the receipt of, or as a substitute for, personalized investment advice.Transcript:
0
00:00:01.900 --> 00:00:07.400
Good afternoon,1
00:00:07.400 --> 00:00:10.700
everyone. This is Tom Romano head of strategic relationships at2
00:00:10.700 --> 00:00:14.200
symmetry partners and joined with me. Today is Casey Dillon3
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a long time friend of symmetry and our4
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internal communication strategist. Thank you Casey for5
00:00:19.500 --> 00:00:22.400
joining us today. Tom is excellent to be here with you live in6
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person. Yeah, fantastic. Fantastic So today, we're gonna go7
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through our q1 2023 quarter in8
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perspective. It's been quite the9
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interesting quarter to say the least we've had10
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some volatile markets. Although11
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I'll be at some positive results. We've seen things12
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like banking collapses in the headlines. There's still of13
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course the concerns about inflation. And so14
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Casey thank you for joining us to give us some perspective15
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of what's going on in the market. So in a16
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nutshell what happened in q1 of 2023, yeah17
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in a nutshell, I'll be brief if I18
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can so if you recall19
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The fourth quarter of last year, right? The20
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last year was a brutal year across a number of metrics, but21
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the fourth quarter we started to see some respite22
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from that and the first two months of the fourth quarter,23
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right? We saw markets actually rebound pretty24
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significantly in October and November and much of25
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that was driven by the sense across26
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the markets Market participants that maybe27
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the Fed was done raising interest rates, maybe28
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that the inflationary pressures that29
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we had seen in the spring of 2022. We're30
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starting to Abate and the market is31
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a forward-looking forward pricing mechanism. And so32
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In the fourth quarter, that's what it did. It looked forward.33
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It started to anticipate a period when the the34
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Fed was not raising interest rates and inflation would be tamed.35
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And of course what happened in December was36
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a bit of a comeuppance for37
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those Market participants who got a little bit ahead of38
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the fed and we saw a pullback in39
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December.40
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And markets responding to the fact that the FED said well, no,41
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we're pretty set on continuing to raise rates.42
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And and we think we're gonna keep them higher longer.43
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As we rolled into the first quarter of this year. We saw44
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a replay of a lot of those Dynamics coming into45
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January Market participants46
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again. It's sort of47
00:02:25.400 --> 00:02:28.200
Determined that this was the year the Fed was48
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going to stop rate and Market participants started to49
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look forward and price as if the not only50
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with the FED stop racing rates, but they would start to pull rates51
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back by the end of the year given where people52
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reading the tea leaves assumed the53
00:02:45.300 --> 00:02:47.500
economy would be by mid-year.54
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And so you saw a really robust Rebound in55
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January for a lot of the names that have been56
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really beat up in 2022 specifically the57
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large cab growth and Tech names and58
00:03:00.300 --> 00:03:03.200
so there was something of a reversion to59
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the mean in terms of those names really60
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leading the charge in January. Those are61
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the names that were most beaten up in 2022. Those are the62
00:03:12.200 --> 00:03:15.500
names that snap back fastest in the63
00:03:15.500 --> 00:03:18.500
first quarter. And so January where we64
00:03:18.500 --> 00:03:22.900
saw for instance the S&P down 20% for65
00:03:22.900 --> 00:03:25.200
2022. We saw66
00:03:25.200 --> 00:03:28.100
a Resurgence just in the month of January the SP was up67
00:03:28.100 --> 00:03:31.400
like eight percent and the NASDAQ double that right just on the68
00:03:31.400 --> 00:03:34.400
strength of kind of those large cap Tech names and of course what happened69
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as we rolled into February the news that70
00:03:37.100 --> 00:03:40.400
came out on the sort of71
00:03:40.400 --> 00:03:43.400
economic underpinnings specifically job data for72
00:03:43.400 --> 00:03:47.100
January really surprised Market73
00:03:46.100 --> 00:03:48.100
participants because74
00:03:48.200 --> 00:03:52.400
It was so robust. So strong it exceeded expectations. It75
00:03:51.400 --> 00:03:54.800
served as a really Stark reminder that we're76
00:03:54.800 --> 00:03:55.500
not out of the woods yet.77
00:03:56.200 --> 00:03:59.500
And and it sent shock waves78
00:03:59.500 --> 00:04:02.400
across the market in the sense that everyone who79
00:04:02.400 --> 00:04:06.000
had said. Okay. Well now the FED is gonna have to wind this down all80
00:04:05.200 --> 00:04:08.400
the sudden the the realized maybe not81
00:04:08.400 --> 00:04:11.400
right not only is the fed maybe not gonna wind this82
00:04:11.400 --> 00:04:14.700
down because the economy is hotter than we thought it was but we potentially83
00:04:14.700 --> 00:04:17.600
risk sort of a flare-up of inflation84
00:04:17.600 --> 00:04:20.100
just as it was coming down and the FED may have85
00:04:20.100 --> 00:04:23.500
to get more aggressive in in tackling that and86
00:04:23.500 --> 00:04:27.000
so February saw sort of a revisitation of87
00:04:26.400 --> 00:04:29.500
those expectations that market participants88
00:04:29.500 --> 00:04:33.100
had and as we rolled into March then all89
00:04:32.100 --> 00:04:35.800
eyes were on the Senate90
00:04:35.800 --> 00:04:38.700
hearings with the the chairman91
00:04:38.700 --> 00:04:41.200
of the fed and based on his92
00:04:41.200 --> 00:04:44.700
comments Futures skyrocketed for an expectation93
00:04:44.700 --> 00:04:47.200
of a 50 basis point raise at94
00:04:47.200 --> 00:04:50.500
the end of March the Futures went up to like a 70% chance that95
00:04:50.500 --> 00:04:53.300
the Fed was gonna raise 50 basis points, and96
00:04:53.300 --> 00:04:55.500
of course what happened then you know days later.97
00:04:56.100 --> 00:05:00.000
Started imploding right and that sort98
00:04:59.100 --> 00:05:03.000
of Royal financial markets and99
00:05:02.500 --> 00:05:05.200
the FED did end up raising rates. But100
00:05:05.200 --> 00:05:08.200
only by 25 basis points after they had worked to101
00:05:08.200 --> 00:05:11.200
sort of rescue. I don't know rescues the102
00:05:11.200 --> 00:05:15.500
right term but step in aggressively and calm markets103
00:05:14.500 --> 00:05:17.200
particularly folks who104
00:05:17.200 --> 00:05:20.600
had cash on deposited Banks to keep sort105
00:05:20.600 --> 00:05:23.200
of a contagion effect and a larger Bank Run taking place.106
00:05:23.200 --> 00:05:26.800
Right? So we end the first quarter with a really107
00:05:26.800 --> 00:05:29.900
sort of wild trip of markets shooting108
00:05:29.900 --> 00:05:32.500
up coming back down a lot of volatility a lot109
00:05:32.500 --> 00:05:35.400
of fear injected in markets in March with the110
00:05:35.400 --> 00:05:38.300
headlines and yet at the end of the quarter you finished up111
00:05:38.300 --> 00:05:41.900
pretty again pretty solidly across112
00:05:41.900 --> 00:05:45.000
us markets International Development markets emerging113
00:05:44.400 --> 00:05:47.700
markets in fixed income inequities, right?114
00:05:47.700 --> 00:05:50.400
We it was a it was a pretty decent first115
00:05:50.400 --> 00:05:53.800
quarter from a return perspective despite all of that. Yeah sure.116
00:05:53.800 --> 00:05:56.000
It was like it's a very interesting quarter.117
00:05:56.100 --> 00:05:59.200
And I'd like the way you put it on the things the kind of the Resurgence of118
00:05:59.200 --> 00:06:03.100
these tech companies that didn't have a great year last year, but you're119
00:06:02.100 --> 00:06:05.500
seeing asset classes such as the energy120
00:06:05.500 --> 00:06:08.600
sector right who had a great year last year is to121
00:06:08.600 --> 00:06:11.300
use your your term of aversion to the mean right? They had122
00:06:11.300 --> 00:06:14.500
a tough time in the first quarter, right? Yeah. Yeah and and frankly123
00:06:14.500 --> 00:06:18.200
prices have been coming down in oil and gas pretty124
00:06:17.200 --> 00:06:18.800
consistently.125
00:06:19.200 --> 00:06:22.800
Since last fall so we did see a continuation of that. I126
00:06:22.800 --> 00:06:27.300
do think and likely there's127
00:06:26.300 --> 00:06:29.200
more conversation to be had128
00:06:29.200 --> 00:06:32.900
around this but the concern that I have or129
00:06:32.900 --> 00:06:35.500
or would have based on130
00:06:35.500 --> 00:06:38.600
how markets performed in the first quarter is that131
00:06:38.600 --> 00:06:41.900
it was so dominated by a132
00:06:41.900 --> 00:06:44.100
handful of names, right? We we've seen133
00:06:44.100 --> 00:06:47.300
this Dynamic before where we're134
00:06:47.300 --> 00:06:51.000
sort of the top largest growth Tech135
00:06:50.300 --> 00:06:53.800
names sort of dominate performance136
00:06:53.800 --> 00:06:56.500
of the market and we and we saw that again in137
00:06:56.500 --> 00:07:01.500
the first quarter right? You think about Facebook alphabet138
00:07:00.500 --> 00:07:04.700
Apple Google Netflix, right?139
00:07:03.700 --> 00:07:06.500
All of those firms were140
00:07:06.500 --> 00:07:09.500
really been challenged in 2022 had a141
00:07:09.500 --> 00:07:12.300
nice Resurgence across the first quarter, but when142
00:07:12.300 --> 00:07:16.000
you dig deeper into the performance particularly here domestically what143
00:07:15.200 --> 00:07:18.900
you see is they were the lion144
00:07:19.100 --> 00:07:22.400
Care of that return that we saw the market it was once again145
00:07:22.400 --> 00:07:27.100
the fact that these top handful of names represent twenty146
00:07:25.100 --> 00:07:28.600
plus percent of the overall147
00:07:28.600 --> 00:07:32.000
market, right? So think S&P 500 has got ostensibly 500148
00:07:31.500 --> 00:07:34.700
names in it the top 10 names149
00:07:34.700 --> 00:07:38.000
accounted for all at150
00:07:37.100 --> 00:07:40.400
least 80% of that return right the151
00:07:40.400 --> 00:07:43.300
top top five names half of it, right? So so152
00:07:43.300 --> 00:07:46.400
again, you're getting a lot of that return concentrated in153
00:07:46.400 --> 00:07:47.000
these names.154
00:07:47.900 --> 00:07:51.600
Because they're so large disproportionately to155
00:07:50.600 --> 00:07:55.200
the other names in those indices156
00:07:54.200 --> 00:07:57.300
and it lit. It's the rising tide lifting157
00:07:57.300 --> 00:08:00.200
all boats, but the concern that you158
00:08:00.200 --> 00:08:03.100
have with that and we saw that in 2022 when the159
00:08:03.100 --> 00:08:06.600
air goes out of the balloon to a degree. Well that160
00:08:06.600 --> 00:08:09.500
can be a double-edged sword. Right if those names start161
00:08:09.500 --> 00:08:13.000
to pull back in valuations, you162
00:08:12.300 --> 00:08:15.400
could see that turn around and become an anchor pulling163
00:08:15.400 --> 00:08:19.000
markets down, right and that can happen very quickly just based164
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on the fact that it's so concentrated in a165
00:08:21.600 --> 00:08:24.000
handful of names that are all sort of in the166
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same kind of economic Waters right in terms of kind of167
00:08:27.100 --> 00:08:30.600
this large growth Tech, you know richly valued.168
00:08:30.600 --> 00:08:33.100
Yeah. It sounds a lot like me, you know, I've169
00:08:33.100 --> 00:08:37.200
had these conversations over the years even going back before 2022170
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coming out of the pandemic171
00:08:39.700 --> 00:08:42.300
and those tech stocks. They were the story they were leading172
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the charge and what I'm hearing you say, is that sort173
00:08:45.400 --> 00:08:47.800
of the casing q1, but that double-ed174
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word is just going back 2022 would175
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be an example of if you're not well Diversified176
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that could be a painful experience it can and I'm177
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I'm reminded of178
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The experience that we had coming out of the tech bubble,179
00:09:02.400 --> 00:09:05.300
right? So if you think about if in fact180
00:09:05.300 --> 00:09:08.300
the run-up invaluations in this sort of handful of181
00:09:08.300 --> 00:09:11.400
techniques is analogous to what we saw in182
00:09:11.400 --> 00:09:12.000
the late 90s.183
00:09:14.200 --> 00:09:17.300
They were so richly valued that when the184
00:09:17.300 --> 00:09:20.600
tech Bubble Burst it took a decade the Lost185
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decade right of just you know, subpar returns186
00:09:23.200 --> 00:09:26.300
for the valuations to get187
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back to a place where markets could then start188
00:09:29.500 --> 00:09:32.400
to take off again. And so the concern that189
00:09:32.400 --> 00:09:36.200
that one might have is valuations are190
00:09:35.200 --> 00:09:40.400
still Rich, right? Even after 2022 on191
00:09:39.400 --> 00:09:43.200
a Price to Book basis very192
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expensive on a price to193
00:09:45.600 --> 00:09:50.500
forward earnings basis. It's expensive and194
00:09:48.500 --> 00:09:51.600
so it's not195
00:09:51.600 --> 00:09:54.600
as if these are our Bargains to196
00:09:54.600 --> 00:09:57.800
be had in a Marketplace that that's discounting197
00:09:57.800 --> 00:10:00.700
them. They are still incredibly expensive. And so198
00:10:00.700 --> 00:10:03.400
anything that goes wrong right if the199
00:10:03.400 --> 00:10:06.300
if in fact the economy runs into turbulence at200
00:10:06.300 --> 00:10:09.700
some point or the expectations for growth, I mean,201
00:10:09.700 --> 00:10:12.600
you know, we're in earning season and Netflix had sort202
00:10:12.600 --> 00:10:14.100
of positive numbers, but203
00:10:14.100 --> 00:10:17.700
They sort of gave lackluster guidance for next quarters204
00:10:17.700 --> 00:10:20.400
growth. Right? So all you need is for for Market205
00:10:20.400 --> 00:10:23.400
participants to to a once again sour on the206
00:10:23.400 --> 00:10:27.400
prospects of these names and you're right back to it's207
00:10:26.400 --> 00:10:29.300
too too rich like I'm paying208
00:10:29.300 --> 00:10:32.500
too much today for for earnings in209
00:10:32.500 --> 00:10:35.100
the future that may or may not materialize right? And so210
00:10:35.100 --> 00:10:38.700
I've got to pay less and so the price has to come down. Yeah, right. And211
00:10:38.700 --> 00:10:41.300
again, I'm not suggesting that we have a lost decade212
00:10:41.300 --> 00:10:44.200
in front of us, but this potentially room to run213
00:10:44.200 --> 00:10:48.300
if markets turn and I think that's the the concern that214
00:10:47.300 --> 00:10:50.100
I would share with investors. That's what I215
00:10:50.100 --> 00:10:53.500
prepare them for. Hey, we'll take what we get. Right? We're happy216
00:10:53.500 --> 00:10:54.700
to get those returns, but217
00:10:56.200 --> 00:10:59.500
This could still be valve this this, you know, we're in the third inning potentially218
00:10:59.500 --> 00:11:02.900
look or fourth ending. There's a lot of game left and we're219
00:11:02.900 --> 00:11:05.000
just gonna buckle up and be ready for it. Yeah, and what is220
00:11:05.300 --> 00:11:09.200
interesting what this quarter and you detect upon that I'd love to get your thoughts developed International221
00:11:08.200 --> 00:11:11.300
to having a very good quarter.222
00:11:11.300 --> 00:11:14.400
I mean when we saw these large Tech223
00:11:14.400 --> 00:11:17.600
names and in the past when they had their run prior to 2022, it224
00:11:17.600 --> 00:11:20.600
was a pretty much us dominated run up.225
00:11:21.800 --> 00:11:24.500
Give us some commentary on what we're saying in the developed International226
00:11:24.500 --> 00:11:27.100
Space. Yeah, I think some of227
00:11:27.100 --> 00:11:31.600
it is the Resurgence of the228
00:11:32.900 --> 00:11:35.700
strength of the sort229
00:11:35.700 --> 00:11:38.200
of the the companies that are there that have230
00:11:38.200 --> 00:11:42.000
sort of suffered through a decade of kind of sub-par performance231
00:11:41.300 --> 00:11:45.400
and they were in a much stronger financial232
00:11:44.400 --> 00:11:47.300
position. Then they233
00:11:47.300 --> 00:11:51.300
were for instance going into the global financial crisis, right and they234
00:11:50.300 --> 00:11:53.700
weren't super expensive. Right?235
00:11:53.700 --> 00:11:58.100
So from a perspective of they were kind of relatively cheaply236
00:11:56.100 --> 00:11:59.100
priced compared to237
00:11:59.100 --> 00:12:02.500
US stocks. And so if we look at just the performance238
00:12:02.500 --> 00:12:06.100
the they don't have to have that much right239
00:12:05.100 --> 00:12:09.300
surprise upside.240
00:12:10.300 --> 00:12:14.300
To have nice performance right across the board or241
00:12:13.300 --> 00:12:16.200
relatively decent performs.242
00:12:16.700 --> 00:12:19.800
So I think people were pleasantly surprised by243
00:12:19.800 --> 00:12:23.500
some of the financial resilience in244
00:12:22.500 --> 00:12:25.200
Europe particularly coming out of245
00:12:25.200 --> 00:12:28.900
the effects of the the Russian Ukraine246
00:12:28.900 --> 00:12:31.600
conflict and looking at the impact that247
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for instance the the price of gas price248
00:12:34.500 --> 00:12:37.100
of oil I had in places like Germany and the fact249
00:12:37.100 --> 00:12:40.300
that they sort of got through that not unscathed but250
00:12:40.300 --> 00:12:43.700
you know, the the avoided the apocalypse251
00:12:43.700 --> 00:12:47.000
right the gasoline apocalypse over the course of the252
00:12:46.600 --> 00:12:49.300
winter right that it was relatively mild. So253
00:12:49.300 --> 00:12:52.600
I think that from that perspective markets sort254
00:12:52.600 --> 00:12:55.600
of said rewarded International developed255
00:12:55.600 --> 00:12:58.900
businesses with valuations that256
00:12:58.900 --> 00:13:01.400
seemed a little more reasonable than the257
00:13:01.400 --> 00:13:04.000
valuations in the US. Yeah, that makes a lot of sense and thank you258
00:13:04.200 --> 00:13:07.900
for that. Yeah, and and I would call I would suggest that259
00:13:07.900 --> 00:13:10.200
Emerging Markets are in a similar but260
00:13:10.200 --> 00:13:14.300
different position right again a little more financially261
00:13:13.300 --> 00:13:16.300
robust in terms of the underpinnings.262
00:13:17.300 --> 00:13:20.100
Of those companies relative to where we've seen Cycles where people263
00:13:20.100 --> 00:13:23.100
are risk off and and sort of beating down264
00:13:23.100 --> 00:13:26.200
in price. I think anytime you have a lot of volatility people are265
00:13:26.200 --> 00:13:29.700
hesitant to take a bunch of risk. So Emerging Markets266
00:13:29.700 --> 00:13:32.800
could be a little more volatile as you would expect but267
00:13:32.800 --> 00:13:35.100
I think from evaluation standpoint there's room to run268
00:13:35.100 --> 00:13:38.600
as well over time relative to the US let's let's269
00:13:38.600 --> 00:13:41.300
look at the other side of the coin and talk a270
00:13:41.300 --> 00:13:44.500
little bit about bonds because that's been quite the Hot Topic lately. We've been271
00:13:44.500 --> 00:13:47.900
getting a lot of inquiries from advisors and investors alike272
00:13:47.900 --> 00:13:50.700
about the fixed income market. So give us273
00:13:50.700 --> 00:13:52.300
a little perspective of what's happening in.274
00:13:53.500 --> 00:13:57.300
Global fixed income right? Well, if you recall 2022275
00:13:56.300 --> 00:13:59.500
was a historically bad year276
00:13:59.500 --> 00:14:02.900
for Boston certainly, right as as fed as277
00:14:02.900 --> 00:14:05.500
the FED raised interest rates are not just the FED but central banks278
00:14:05.500 --> 00:14:08.500
essentially around the world except for the Asian279
00:14:08.500 --> 00:14:11.100
China and Japan those central banks not quite280
00:14:11.100 --> 00:14:14.600
as much but globally central banks at the281
00:14:14.600 --> 00:14:17.600
impact of course of challenging the yield right282
00:14:17.600 --> 00:14:20.900
and as we know yield in price or are sort of inverse Lee283
00:14:20.900 --> 00:14:23.300
related and so as yield was pushed up by raising284
00:14:23.300 --> 00:14:26.900
rates price came down and and it had a pretty dramatic285
00:14:26.900 --> 00:14:29.900
impact across the yield curve286
00:14:29.900 --> 00:14:32.400
and that was globally as well the United287
00:14:32.400 --> 00:14:32.400
States.288
00:14:33.200 --> 00:14:36.400
2022 pretty much a very bad. No good year for289
00:14:36.400 --> 00:14:39.400
Bond holders rolling into the first quarter290
00:14:39.400 --> 00:14:42.400
a lot of those same sort of macro dynamics that291
00:14:42.400 --> 00:14:45.400
we talked about with equities was292
00:14:45.400 --> 00:14:48.500
true to fix income as well the expectation the bond293
00:14:48.500 --> 00:14:51.800
market pricing that they think the FED will essentially294
00:14:51.800 --> 00:14:54.600
be done at some point this year raising rates295
00:14:54.600 --> 00:14:58.100
had the impact of markets rallying296
00:14:57.100 --> 00:15:01.300
to a degree and then of course when there297
00:15:00.300 --> 00:15:04.100
was volatility injected because of banking issues298
00:15:03.100 --> 00:15:07.300
you continued to see a pullback299
00:15:06.300 --> 00:15:09.700
on the the yield300
00:15:09.700 --> 00:15:13.000
right? So at at some points we saw for instance301
00:15:12.200 --> 00:15:15.400
the the 10 year get up over four and we302
00:15:15.400 --> 00:15:18.500
saw a pullback as yields come down then of course prices go303
00:15:18.500 --> 00:15:21.400
up. And so you saw a nice robust kind of response over304
00:15:21.400 --> 00:15:24.500
the first quarter of prices coming up for bonds that had305
00:15:24.500 --> 00:15:27.500
the impact and that was true for treasuries and corporates306
00:15:27.500 --> 00:15:30.400
and international bonds, right? So across the307
00:15:30.400 --> 00:15:32.900
Spectrum you had sort of a nice performance.308
00:15:33.300 --> 00:15:37.100
For bonds for the first quarter. And again, it's unusual309
00:15:36.100 --> 00:15:39.400
for fixed income and Equity to look and310
00:15:39.400 --> 00:15:42.100
behave very similarly. That was one of311
00:15:42.100 --> 00:15:45.700
the things that was so unusual about 2022, but there's still312
00:15:45.700 --> 00:15:48.500
sort of Behaving the same way based on the same Outlook313
00:15:48.500 --> 00:15:51.500
that at some point interest rates stop going up314
00:15:51.500 --> 00:15:54.500
or stop getting ratcheted up by central banks.315
00:15:54.500 --> 00:15:57.100
And so that Dynamic is is kind of316
00:15:57.100 --> 00:16:00.700
floating all the boats to this degree and so317
00:16:00.700 --> 00:16:03.500
fixed income has had a robust first quarter.318
00:16:04.400 --> 00:16:07.700
Remains to be seen how the rest of the year plays319
00:16:07.700 --> 00:16:10.400
out and and you know, frankly we320
00:16:10.400 --> 00:16:13.200
continued to see the a deep321
00:16:13.200 --> 00:16:16.200
inversion in the yield curve, especially at the322
00:16:16.200 --> 00:16:19.100
very shortest end of the O curve relative to the323
00:16:19.100 --> 00:16:22.700
10 year. And as you know that has historically sort324
00:16:22.700 --> 00:16:25.300
of been a warning sign of325
00:16:25.300 --> 00:16:28.600
potential economic stress recessions right326
00:16:28.600 --> 00:16:32.100
as an indicator and it has remained it327
00:16:31.100 --> 00:16:34.100
inverted for some time now328
00:16:34.100 --> 00:16:37.900
and that inversion has only gotten deeper on the shortest end. So,329
00:16:37.900 --> 00:16:40.200
you know again you would want to continue330
00:16:40.200 --> 00:16:43.700
to watch that and be cognizant of it. I think the takeaway331
00:16:43.700 --> 00:16:46.500
from this is much like with equities. It's best332
00:16:46.500 --> 00:16:49.200
to be sort of broad based Diversified. You never333
00:16:49.200 --> 00:16:53.000
know what part of the Yoke curve is gonna move relative to this and334
00:16:52.900 --> 00:16:56.800
it's good to have exposure335
00:16:55.800 --> 00:16:58.600
not just us treasuries, but336
00:16:58.600 --> 00:17:01.200
the corporates and not just us bonds, but the international337
00:17:01.200 --> 00:17:04.300
bonds that there are benefits built into the pricing of all338
00:17:04.900 --> 00:17:08.400
And as we start to see a decoupling of Central339
00:17:07.400 --> 00:17:10.400
Bank activity, yes, they've been340
00:17:10.400 --> 00:17:13.700
acting pretty much in concert, but at some point central banks341
00:17:13.700 --> 00:17:16.800
start to peel off right and they get back to focusing on342
00:17:16.800 --> 00:17:19.100
the handling kind of343
00:17:19.100 --> 00:17:22.300
their domestic concerns. And as they do that it will344
00:17:22.300 --> 00:17:25.600
have varying diversification impacts for bonds345
00:17:25.600 --> 00:17:28.500
around the globe the way stocks and bonds behaves346
00:17:28.500 --> 00:17:31.300
in 2022 with similar and then into this quarter. We're347
00:17:31.300 --> 00:17:34.500
seeing some decent returns globally across those two348
00:17:34.500 --> 00:17:37.800
macro asset classes. We're seeing349
00:17:37.800 --> 00:17:40.300
some of a mixed bag that last Factor investors350
00:17:40.300 --> 00:17:43.400
from a factor perspective, right? But let's351
00:17:43.400 --> 00:17:46.200
shift a little bit and talk about factors for a moment.352
00:17:46.200 --> 00:17:49.300
We're a factor investors are listeners The Avengers that353
00:17:49.300 --> 00:17:52.300
we work with our have clients invested in354
00:17:52.300 --> 00:17:55.500
these Factor portfolios. What did we see from a factor standpoint355
00:17:55.500 --> 00:17:58.800
in the first quarter of 2023 if356
00:17:58.800 --> 00:18:01.400
you think about the factor of value, it's just the the357
00:18:01.400 --> 00:18:04.300
cheaper stocks outperform the more expensive stocks over time and as358
00:18:04.300 --> 00:18:04.500
you know,359
00:18:04.800 --> 00:18:07.800
We had a long run where that wasn't true. Right we're360
00:18:07.800 --> 00:18:10.300
growth stocks were just outperforming value to the361
00:18:10.300 --> 00:18:13.200
point that everybody was sort of Naval gazing wondering his value362
00:18:13.200 --> 00:18:16.800
dead. Does this even make sense anymore? And and what363
00:18:16.800 --> 00:18:19.400
we sort of looking at it determined was364
00:18:19.400 --> 00:18:22.400
no actually values kind of in line with what it's always done. It's365
00:18:22.400 --> 00:18:25.300
growth. That's so unusual. Yeah, right and that we're366
00:18:25.300 --> 00:18:28.300
back to the story about the large tech stocks and get over evaluation. Right?367
00:18:28.300 --> 00:18:31.900
And so last year was a great year for Value, right? Even368
00:18:31.900 --> 00:18:34.500
though it was down right value outperform growth369
00:18:34.500 --> 00:18:37.800
by a good 20% Oh, yeah, absolutely and it370
00:18:37.800 --> 00:18:40.700
was sort of that Snapback to recognition of371
00:18:40.700 --> 00:18:43.300
hey one of my paying for right and and these things372
00:18:43.300 --> 00:18:46.200
have gotten incredibly overvalued on the373
00:18:46.200 --> 00:18:46.600
growth side.374
00:18:47.300 --> 00:18:50.500
And so it shouldn't come as a surprise then if there's a reversal of375
00:18:50.500 --> 00:18:53.600
that Dynamic that value might underperform growth376
00:18:53.600 --> 00:18:56.500
over the first quarter. And of course, that's what we observed right377
00:18:56.500 --> 00:18:59.300
that value underperformed growth. It was378
00:18:59.300 --> 00:19:02.300
those large kind of growthy names that took off and and so that379
00:19:02.300 --> 00:19:05.700
that factor shows up and demonstrates380
00:19:05.700 --> 00:19:08.300
that thighs right. So again kind of381
00:19:08.300 --> 00:19:11.600
the academic research that smaller cap382
00:19:11.600 --> 00:19:14.400
names tend to outperform larger cab383
00:19:14.400 --> 00:19:17.800
names over time rolling into the first quarter large384
00:19:17.800 --> 00:19:20.500
caps outperform small caps, right again being led385
00:19:20.500 --> 00:19:23.500
by that large growthy and so small caps386
00:19:23.500 --> 00:19:26.800
tended to underperform in general. What's interesting387
00:19:26.800 --> 00:19:29.300
is across factor is388
00:19:29.300 --> 00:19:32.300
one of the reasons you want to hold small caps isn't necessarily the size389
00:19:32.300 --> 00:19:35.300
Factor premium associated with that because390
00:19:35.300 --> 00:19:38.700
that's come under some scrutiny of391
00:19:38.700 --> 00:19:41.400
Lee as academics kind of look at that. Say what392
00:19:41.400 --> 00:19:42.200
do we actually getting here?393
00:19:42.900 --> 00:19:46.000
But what really expresses itself394
00:19:45.300 --> 00:19:48.500
in small camp names or all the other factors, right? So395
00:19:48.500 --> 00:19:51.100
the reason you'd want to hold a small cap is not just396
00:19:51.100 --> 00:19:54.200
because you get a benefit versus large caps, but because you get397
00:19:54.200 --> 00:19:57.600
a really strong value signal a really strong momentum really398
00:19:57.600 --> 00:20:00.200
strong quality, right all of these things. And so if we399
00:20:00.200 --> 00:20:03.300
look at small caps the performance of small caps for400
00:20:03.300 --> 00:20:06.700
the first quarter, you actually got to really strong quality signal401
00:20:06.700 --> 00:20:09.700
in small caps. So again a reason402
00:20:09.700 --> 00:20:12.400
why you want to have a multiple exposures for your403
00:20:12.400 --> 00:20:15.400
factors not just pick any one of these right so small404
00:20:15.400 --> 00:20:18.400
caps under form large caps, but quality did really well inside405
00:20:18.400 --> 00:20:21.300
small camps that makes up the next category is406
00:20:21.300 --> 00:20:24.400
momentum. And what's interesting about markets that are sort of407
00:20:24.400 --> 00:20:27.500
whipsawing one way or the other that momentum tends to408
00:20:27.500 --> 00:20:30.400
have a tougher time in markets where the signal is really409
00:20:30.400 --> 00:20:33.100
hard to pick up where there's a lot of whipsawing effect up and down on the410
00:20:33.100 --> 00:20:37.000
other way momentum tends to kind of get whipped around with that.411
00:20:37.700 --> 00:20:40.200
Eventually when markets start to pick412
00:20:40.200 --> 00:20:43.300
up Trend whether that's down for a significant period of413
00:20:43.300 --> 00:20:46.500
time like in 2022 momentum does well or up right414
00:20:46.500 --> 00:20:50.000
for a significant period of time and so you415
00:20:49.200 --> 00:20:52.400
would expect momentum to kind416
00:20:52.400 --> 00:20:55.400
of settle down as markets kind of settle down417
00:20:55.400 --> 00:20:59.600
and we see less whipsawing and more directionality. However, and418
00:20:59.600 --> 00:21:03.300
I mentioned it earlier with small caps quality this idea419
00:21:02.300 --> 00:21:05.000
that there may be420
00:21:05.200 --> 00:21:08.800
a flight to Quality in times when the421
00:21:08.800 --> 00:21:11.100
there's a lot of volatility. Well one of the422
00:21:11.100 --> 00:21:14.800
reasons you see that is because higher quality earnings tend to423
00:21:14.800 --> 00:21:17.400
hold up better in downturns. They have a premium424
00:21:17.400 --> 00:21:21.300
associated with them and we saw that very clearly quality425
00:21:20.300 --> 00:21:23.200
was one of the areas that outperformed the market426
00:21:23.200 --> 00:21:26.200
over the first quarter and that was true not just in the427
00:21:26.200 --> 00:21:30.200
US but internationally as well interestingly in428
00:21:29.200 --> 00:21:33.500
Emerging Markets value quality429
00:21:32.500 --> 00:21:35.600
and low volatility did quite430
00:21:35.600 --> 00:21:37.600
well so value was still doing well in emerging.431
00:21:37.700 --> 00:21:40.700
Markets again a reason why you'd want to diversify432
00:21:40.700 --> 00:21:43.400
your Factor exposures not just in the US but433
00:21:43.400 --> 00:21:46.900
internationally as well and minimum volatility was434
00:21:46.900 --> 00:21:49.800
a contributor in us but lagged Market435
00:21:49.800 --> 00:21:52.500
beta on the whole a broadly436
00:21:52.500 --> 00:21:55.900
Diversified Factor exposure was I'd437
00:21:55.900 --> 00:21:58.700
say depending on what your tilts are helpful on438
00:21:58.700 --> 00:22:02.200
the downside when Market was volatile, but lagged439
00:22:01.200 --> 00:22:04.900
Market beta to a degree for the440
00:22:04.900 --> 00:22:07.500
first quarter where it outperformed in441
00:22:07.500 --> 00:22:10.400
2022. So again factors are a442
00:22:10.400 --> 00:22:13.500
long term investment. You wouldn't do it on based443
00:22:13.500 --> 00:22:16.700
on one quarter, but we we watch the horse race, right? Yeah.444
00:22:16.700 --> 00:22:19.200
Absolutely and I think a point that you445
00:22:19.200 --> 00:22:22.400
you said that really resonated with me is the notion of how these factors work446
00:22:22.400 --> 00:22:25.800
together right size and quality you mentioned447
00:22:25.800 --> 00:22:29.200
and so having a diverse portfolio448
00:22:28.200 --> 00:22:30.700
of integrated factors.449
00:22:31.500 --> 00:22:32.800
maintaining that for the long term450
00:22:34.200 --> 00:22:37.400
Should reward you over the long term. Yeah, and that's the451
00:22:37.400 --> 00:22:40.800
expectation. There are lots of factors out452
00:22:40.800 --> 00:22:43.800
there that have been identified in the academic literature when you453
00:22:43.800 --> 00:22:46.400
selectively go out and pick a handful of454
00:22:46.400 --> 00:22:49.500
those factors. The expectation is every single455
00:22:49.500 --> 00:22:52.500
one of those is going to be a positive contributor to456
00:22:52.500 --> 00:22:55.400
your portfolio over time, right you you457
00:22:55.400 --> 00:22:58.300
wouldn't necessarily pick one that you thought. Well, it's gonna be a loser but we're gonna hold on458
00:22:58.300 --> 00:23:01.100
to it, right you're picking all of these different factors of the459
00:23:01.100 --> 00:23:04.700
expectation that each one of those is going to be a460
00:23:04.700 --> 00:23:07.300
positive contributor over a period of time when you461
00:23:07.300 --> 00:23:10.400
weave them together you sort of iron out462
00:23:10.400 --> 00:23:13.400
the highs and lows of any one particular factor and463
00:23:13.400 --> 00:23:17.100
you get that very nice steady stream of464
00:23:16.100 --> 00:23:19.500
return into your465
00:23:19.500 --> 00:23:22.300
portfolio. That's generated by those Factor exposures. Yeah.466
00:23:22.300 --> 00:23:25.400
It's the old the old adage we're going for singles and doubles467
00:23:25.400 --> 00:23:28.200
not home runs, right? Yeah. Yeah exactly. So let's468
00:23:28.200 --> 00:23:31.200
talk a little bit about factors and fixed income and then469
00:23:31.200 --> 00:23:34.100
we can take a look at some of the the factors overseas.470
00:23:34.100 --> 00:23:37.800
As well, but I do want to spend some time on some of471
00:23:37.800 --> 00:23:40.100
the headlines. So why don't we472
00:23:40.100 --> 00:23:44.000
talk a little bit about us fixed income factors? Sure. So473
00:23:43.600 --> 00:23:46.200
as you know, right fat factors are474
00:23:46.200 --> 00:23:49.800
not an equity only thing. In fact, we see factors across475
00:23:49.800 --> 00:23:53.600
all different kinds of assets fixed income Commodities476
00:23:52.600 --> 00:23:55.400
housing real477
00:23:55.400 --> 00:23:58.400
estate, right all these I the concept of value for478
00:23:58.400 --> 00:24:01.500
instance and the concept of momentum right anything that has a price associated479
00:24:01.500 --> 00:24:04.400
with it stores can demonstrate these sort of480
00:24:04.400 --> 00:24:07.200
factors. And that's true. In fact fixed income the way we481
00:24:07.200 --> 00:24:10.400
think about factors and fixed incomes specifically is is kind482
00:24:10.400 --> 00:24:13.400
of interest rate risk, which is time, right? So think483
00:24:13.400 --> 00:24:17.300
about what we talked about with the yield curve inversion484
00:24:16.300 --> 00:24:19.400
and what was going on on the short end versus the485
00:24:19.400 --> 00:24:23.500
long end what we've observed in the486
00:24:23.500 --> 00:24:26.200
past. Let's call year was a really487
00:24:26.200 --> 00:24:29.800
strong interest rate risk lack488
00:24:29.800 --> 00:24:32.600
of benefit that you got for sort of being paid489
00:24:32.600 --> 00:24:34.000
over time, right?490
00:24:34.100 --> 00:24:38.300
And in theory, right you should get paid to hold491
00:24:37.300 --> 00:24:41.100
over time because there's less certainty492
00:24:40.100 --> 00:24:43.500
about what the future holds so you demand a493
00:24:43.500 --> 00:24:46.800
premium to hold something over time to lend over time. And494
00:24:46.800 --> 00:24:49.200
so when you have the short end495
00:24:49.200 --> 00:24:52.500
of the curve come up that tends to impact that interest496
00:24:52.500 --> 00:24:55.500
rate sets that risk that sensitivity because you're497
00:24:55.500 --> 00:24:58.800
not getting paid over time. You're getting paid actually on the498
00:24:58.800 --> 00:25:01.700
the shorter end potentially. So when you499
00:25:01.700 --> 00:25:04.800
see a pullback of rates,500
00:25:04.800 --> 00:25:07.700
right and price is going up you're seeing501
00:25:07.700 --> 00:25:10.800
that benefit playing out through the first quarter as well credit risk502
00:25:10.800 --> 00:25:13.300
is just the difference the buildup over503
00:25:13.300 --> 00:25:16.300
the risk free rate treasuries to account504
00:25:16.300 --> 00:25:19.200
for hey, you know a corporation has more risk than a government505
00:25:19.200 --> 00:25:22.500
and I should be paid that difference. And so you're investing506
00:25:22.500 --> 00:25:25.200
up and down the various yield curves that507
00:25:25.200 --> 00:25:28.900
build up on that and in this case credit risk really as508
00:25:28.900 --> 00:25:31.900
a factor wasn't a very solid contributor509
00:25:31.900 --> 00:25:33.200
for the first quarter slightly positive.510
00:25:34.100 --> 00:25:37.200
The the show really has been frankly for the511
00:25:37.200 --> 00:25:40.500
past 18 months were interest rate risk is in512
00:25:40.500 --> 00:25:43.500
terms of factor Premia in your portfolios.513
00:25:43.500 --> 00:25:46.500
And then Market is is again just Market514
00:25:46.500 --> 00:25:49.800
beta which is a buildup of all these different factors expressing themselves.515
00:25:49.800 --> 00:25:53.200
So on the whole positive Bond performance516
00:25:52.200 --> 00:25:55.500
being driven by changes to517
00:25:55.500 --> 00:25:59.500
the the yield curve in many cases and some518
00:25:58.500 --> 00:26:01.400
expectation that Bond markets are looking ahead519
00:26:01.400 --> 00:26:04.600
and pricing for a cessation of rate raises520
00:26:04.600 --> 00:26:07.500
by central banks. So so my expectation would521
00:26:07.500 --> 00:26:10.200
be for for fixed income investors again much like522
00:26:10.200 --> 00:26:13.400
Equity potentially more volatility here, right? The523
00:26:13.400 --> 00:26:16.400
the rodeo is not over the big bull riding524
00:26:16.400 --> 00:26:18.200
could yet be to come so525
00:26:19.200 --> 00:26:22.400
You know stay patient the the benefit here is526
00:26:22.400 --> 00:26:25.400
there's return associated with fixed income527
00:26:25.400 --> 00:26:29.500
to a degree. We haven't seen in 15 years. And so528
00:26:29.500 --> 00:26:32.700
let this play out. And again, these Factor529
00:26:32.700 --> 00:26:35.600
exposures are the expectation is over time. These are530
00:26:35.600 --> 00:26:38.100
going to be a additive to the returns that you531
00:26:38.100 --> 00:26:40.700
get from the bond market you had mentioned this in some of your previous comments.532
00:26:42.500 --> 00:26:45.400
Factors perform differently geographically too533
00:26:45.400 --> 00:26:48.500
right like value in the US might give you a different return534
00:26:48.500 --> 00:26:51.300
versus value and the international develop during the535
00:26:51.300 --> 00:26:54.500
Emerging Markets Arenas. So I think there's diversification story536
00:26:54.500 --> 00:26:57.600
there. Can you comment on that, please? Yeah. Well, yes, of537
00:26:57.600 --> 00:27:00.100
course and and I sort of made a comment538
00:27:00.100 --> 00:27:01.300
about as539
00:27:02.300 --> 00:27:05.500
central banks become decoupled and start to operate a540
00:27:05.500 --> 00:27:09.000
little more independently that it has an impact on the541
00:27:11.300 --> 00:27:14.600
local economies in all of these different markets as542
00:27:14.600 --> 00:27:17.200
an impact on their currencies. And so543
00:27:17.200 --> 00:27:20.600
when you think about fixed income the benefit that you get from544
00:27:20.600 --> 00:27:23.300
not only where you hold on545
00:27:23.300 --> 00:27:26.500
the curve and and the amount of credit that you're willing but that546
00:27:26.500 --> 00:27:29.900
you're going to diversify the various curves547
00:27:29.900 --> 00:27:32.300
that you hold and the where you548
00:27:32.300 --> 00:27:35.900
are on that across geographies and549
00:27:35.900 --> 00:27:38.200
then take into account the impact that550
00:27:38.200 --> 00:27:42.200
currencies might have right and so we know for equities551
00:27:41.200 --> 00:27:45.100
the the volatility signature552
00:27:44.100 --> 00:27:47.100
of equity is is so robust that553
00:27:47.100 --> 00:27:50.600
you're you tend to be willing to hold the volatility of554
00:27:50.600 --> 00:27:53.900
fluctuations and currency in in555
00:27:53.900 --> 00:27:56.000
fixed income. It tends not to pay you to do556
00:27:56.200 --> 00:27:59.400
that. And so I know for instance557
00:27:59.400 --> 00:28:03.100
that here at Cemetery you folks hedge back558
00:28:03.100 --> 00:28:07.000
to the dollar sure and that takes some of that volatility out,559
00:28:06.600 --> 00:28:09.400
right? And again, I think that's a benefit560
00:28:09.400 --> 00:28:11.000
for Factor investors because what you're561
00:28:11.200 --> 00:28:14.300
Is less volatility associated with fluctuations currency and562
00:28:14.300 --> 00:28:18.000
you're getting maybe stronger signal from these these563
00:28:17.200 --> 00:28:20.900
different sources of return across564
00:28:20.900 --> 00:28:23.400
different markets and they're all going to be hitting at565
00:28:23.400 --> 00:28:26.700
different times. Once the sort of the global economy566
00:28:26.700 --> 00:28:29.200
comes unpegged to what's going567
00:28:29.200 --> 00:28:33.100
on fighting inflation. Yeah until I think it's a perfect diversification story568
00:28:32.100 --> 00:28:33.300
and569
00:28:34.100 --> 00:28:37.600
we have a saying here that the only free lunch and investing is diversification. And570
00:28:37.600 --> 00:28:40.900
so we tout that investor should be embracing that Casey.571
00:28:40.900 --> 00:28:43.400
Thank you so much for joining us that concludes part one.572
00:28:43.400 --> 00:28:46.600
Please feel free to access other podcasts573
00:28:46.600 --> 00:28:49.000
that we have done and they can be574
00:28:49.400 --> 00:28:52.600
accessed anywhere you get your podcast. So please join Casey and575
00:28:52.600 --> 00:28:56.000
I for part two and our next series symmetry Partners576
00:28:55.700 --> 00:28:58.800
LLC is an investment advisor firm577
00:28:58.800 --> 00:29:01.700
registered with the Securities and Exchange Commission The578
00:29:01.700 --> 00:29:04.600
Firm only transacts business in states where it579
00:29:04.600 --> 00:29:07.500
is properly registered or excluded or580
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Exempted from registration requirements registration of581
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an investment advisor does not imply any582
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specific level of skill or training and does583
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not constitute an endorsement of the firm by the584
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commission. No one should assume that future performance of any585
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specific investment investment strategy product or586
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non-investment related content made587
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reference to directly or indirectly in this material will be588
00:29:31.800 --> 00:29:32.400
profitable.589
00:29:33.400 --> 00:29:36.500
As with any investment strategy there is the possibility of590
00:29:36.500 --> 00:29:39.500
profitability as well as loss due591
00:29:39.500 --> 00:29:42.300
to various factors including changing market592
00:29:42.300 --> 00:29:44.700
conditions and/or applicable laws.593
00:29:45.300 --> 00:29:48.900
The content may not be reflective of current opinions or594
00:29:48.900 --> 00:29:51.600
positions. Please note the material595
00:29:51.600 --> 00:29:54.300
is provided for educational and background use only596
00:29:54.300 --> 00:29:58.000
moreover. You should not assume that any discussion or information597
00:29:57.800 --> 00:30:00.800
contained in this material Services the598
00:30:00.800 --> 00:30:04.400
receipt of or as a substitute for personalized599
00:30:03.400 --> 00:30:05.700
investment advice. -
Not all financial advisors are created equally. Some have certified credentials, some charge their clients fees, and others may get paid on commission (if they offer investment products). In part two of this podcast episode, our own Tom Romano, Head of Strategic Relationships and Product Development, is joined by Symmetry’s Michael Storer, Senior Regional Director, and a financial advisor from our sister firm, Apella Wealth, Peter Leppones, CFP®, to discuss the important credentials of, and differences between, financial advisors.
If you have any questions or would like more information, reach out to us at https://symmetrypartners.com/contact-us/
You can also find us on Facebook, YouTube, Twitter, and LinkedIn. As always, we remain invested in your goals.
Symmetry Partners, LLC, is an investment advisory firm registered with the Securities and Exchange Commission. The firm only transacts business in states where it is properly registered, excluded or exempted from registration requirements. Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. No one should assume that future performance of any specific investment, investment strategy, product or non-investment related content made reference to directly or indirectly in this material will be profitable. As with any investment strategy, there is the possibility of profitability as well as loss. Due to various factors, including changing market conditions and/or applicable laws, the content may not be reflective of current opinions or positions. Please note the material is provided for educational and background use only. Moreover, you should not assume that any discussion or information contained in this material serves as the receipt of, or as a substitute for, personalized investment advice.Transcript:
0
00:00:01.900 --> 00:00:07.500
Welcome back1
00:00:07.500 --> 00:00:10.500
to part 2 of choosing the right financial advisor. This2
00:00:10.500 --> 00:00:13.100
is Tom Romano with unfiltered finance and I'm back3
00:00:13.100 --> 00:00:16.200
here with my guests. Mike store senior Regional director at4
00:00:16.200 --> 00:00:20.000
symmetry partners and Peter laponis financial advisor5
00:00:19.200 --> 00:00:22.200
and cfp at Apollo wealth. Thank you for joining us6
00:00:22.200 --> 00:00:25.400
gentlemen, so go Peter certified financial7
00:00:25.400 --> 00:00:28.400
planner see FP Mike. I'm8
00:00:28.400 --> 00:00:31.800
asked this question to you because Peter is a cfp. What9
00:00:31.800 --> 00:00:34.700
are the credential what other credentials that investors should10
00:00:34.700 --> 00:00:37.200
be looking for as they're going through this process of choosing a11
00:00:37.200 --> 00:00:40.500
financial advisor. I mean cfp certainly is one of them sure. There's12
00:00:40.500 --> 00:00:43.200
you know, I mean I come across a wide variety13
00:00:43.200 --> 00:00:47.500
of different advisors and that have different different designations14
00:00:46.500 --> 00:00:49.300
and it and sometimes it15
00:00:49.300 --> 00:00:52.400
depends on it depends on you know, what type16
00:00:52.400 --> 00:00:56.400
of work they're doing for the client. It may not always be, you know17
00:00:56.400 --> 00:00:59.400
cfp, but most of the advisors that I'm working with their18
00:00:59.400 --> 00:01:01.500
certified financial planners, but there's19
00:01:01.900 --> 00:01:05.000
there's SEMA, you know, which is a certified Investment20
00:01:04.500 --> 00:01:07.800
Management associate, I21
00:01:07.800 --> 00:01:10.500
believe and that I look22
00:01:10.500 --> 00:01:13.500
at CFA and see Sima as kind of two different23
00:01:13.500 --> 00:01:14.300
designations that24
00:01:15.500 --> 00:01:18.200
Are are very strong. I mean these people are incredibly smart.25
00:01:18.200 --> 00:01:21.700
They pass a lot of tests to get where they are. But I26
00:01:21.700 --> 00:01:24.500
look at the see the SEMA and the27
00:01:24.500 --> 00:01:27.300
the CFA which is a chartered financial28
00:01:27.300 --> 00:01:31.100
analyst as more geared towards Investments to29
00:01:30.100 --> 00:01:33.300
a certain extent. So they're if you've30
00:01:33.300 --> 00:01:37.000
got an advisor that is more seamors or CFA oriented.31
00:01:36.500 --> 00:01:40.300
I think you're probably you could and Peter32
00:01:39.300 --> 00:01:42.900
you can correct me if I'm wrong lean more33
00:01:42.900 --> 00:01:45.800
towards them probably approaching it from an investment perspective.34
00:01:45.800 --> 00:01:49.100
Whereas I think a cfp is35
00:01:48.100 --> 00:01:52.100
going to approach the relationship from everything36
00:01:51.100 --> 00:01:54.400
that Peter just talked about in terms of how they37
00:01:54.400 --> 00:01:57.200
want to how they want to work with you moving38
00:01:57.200 --> 00:02:00.300
forward Investments are important no doubt, but I think from39
00:02:00.300 --> 00:02:03.700
the standpoint of the approach if40
00:02:03.700 --> 00:02:06.200
you're looking for a planner, you know a cfp is41
00:02:06.200 --> 00:02:10.000
where you want to be if you want someone that's more focused on. Okay, I'll construct42
00:02:09.300 --> 00:02:12.800
a portfolio for you, but I think Sima and43
00:02:12.800 --> 00:02:15.300
CFA tend to lose tend to44
00:02:15.400 --> 00:02:18.200
Themselves more towards investment only to a certain45
00:02:18.200 --> 00:02:21.400
extent now that's not every single or CFA but I think from that46
00:02:21.400 --> 00:02:24.400
perspective those types of designations. Those are the ones that I come across47
00:02:24.400 --> 00:02:27.700
primarily obviously, there's other designations with48
00:02:27.700 --> 00:02:30.400
the insurance realm that you know, you like a49
00:02:30.400 --> 00:02:33.200
chfc that would be which I50
00:02:33.200 --> 00:02:36.400
I don't even remember that. It's a chartered leave its chartered Financial51
00:02:36.400 --> 00:02:39.700
consult consultant, right which is different than a chartered financial analyst52
00:02:39.700 --> 00:02:42.400
which is kind of interesting but you know, they'd be focused more on53
00:02:42.400 --> 00:02:45.500
and probably the insurance side of the investment process.54
00:02:45.500 --> 00:02:48.200
So I come across a lot but I would say55
00:02:48.200 --> 00:02:51.900
that I feel comfortable saying it that the56
00:02:51.900 --> 00:02:55.400
cfp is the designation where you know, mostly you're57
00:02:55.400 --> 00:02:58.600
going to be getting more of a planning approach. Whereas I58
00:02:58.600 --> 00:03:02.200
think the other designations might lean towards something else within59
00:03:01.200 --> 00:03:04.700
the whole scope of planning but more,60
00:03:04.700 --> 00:03:07.100
you know designated or specific on that61
00:03:07.100 --> 00:03:11.000
side sure. I think it's important, you know, individuals professionals62
00:03:10.500 --> 00:03:14.000
regardless of the industry having credentials after63
00:03:13.400 --> 00:03:15.400
their name shows that they're64
00:03:15.400 --> 00:03:18.600
to the business. They're probably lifelong Learners,65
00:03:18.600 --> 00:03:23.000
which is something you probably want to look for in a financial advisor. And66
00:03:21.200 --> 00:03:25.300
I would agree with you a cfp67
00:03:24.300 --> 00:03:27.600
is probably the starting point. However, the68
00:03:27.600 --> 00:03:31.000
the SEMA the Cima in the CFA,69
00:03:30.200 --> 00:03:33.900
which I would agree are more investment driven.70
00:03:35.700 --> 00:03:38.100
Um working with a firm who has a cfp has the point71
00:03:38.100 --> 00:03:41.300
of contact Peter, but that doesn't mean you don't have access to72
00:03:41.300 --> 00:03:44.500
cfa's and seamas as well. Right, correct. And73
00:03:44.500 --> 00:03:47.500
that's that's part of the teamwork approach here that you74
00:03:47.500 --> 00:03:51.200
know behind the scenes. I know that there's cfas working on our portfolios.75
00:03:50.200 --> 00:03:53.100
So so I think76
00:03:53.100 --> 00:03:57.500
you could see someone with another non-cfp designation77
00:03:57.500 --> 00:04:00.200
but is what's their firm like do they have a team behind78
00:04:00.200 --> 00:04:04.100
them is maybe they have a a young hire79
00:04:03.100 --> 00:04:06.700
a new hire coming out of college who's studying80
00:04:06.700 --> 00:04:09.200
for his or her cfp and that's their parent plan81
00:04:09.200 --> 00:04:12.600
who works on the financial plan. So I mean to I think82
00:04:12.600 --> 00:04:15.300
you might be doing a disservice just because83
00:04:15.300 --> 00:04:18.400
someone doesn't have cfp understand more about what's84
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what's going on at the firm and not just85
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the designation. But I do agree having a designation and you86
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made you reminded me. My continuing87
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ed is coming up and it's it's comprehensive. I've88
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got I've got a lot to do several hours to to89
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keep90
00:04:34.600 --> 00:04:37.500
Cfp designation current I've91
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got to do some continuing education requirements online. Yeah, me92
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too. Thanks for the reminder. I would say I didn't93
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mean to say that, you know, the cfp is definitely starting point. But Peter94
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brings up a great point that you when you visit with these cfps. They95
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do have those other.96
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People in their organizations that cover those parts97
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of the planning process for them from that standpoint98
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So and I've met many cfps that have their SEMA or have their CFA as99
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well. So depends on who I'm speaking with, but there's there's a100
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wide variety of different designations and some have won101
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some have many or some have, you know, more than one right? So something102
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that you would recommend investors look for as they're gonna103
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go through absolutely. Absolutely. Absolutely. Yeah Mike we104
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for all the cfps out there yet. We're definitely the top105
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designation. No doubt about no doubt about it. We can106
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leave it at that. Very good very good. So I107
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have a few more questions and this has been great gentlemen, but108
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What are some of the resources online resources109
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right, you know, I don't think people use phone books110
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anymore to find Financial professionals. What are111
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some of the things my gear you're working112
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with thousands of advisors. Like how do you how do you113
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go about and find an advisor that that you would want to work with114
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a professional level but not only professional of115
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us person maybe from even personal standpoint where can116
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investors go? Well they can they can you117
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know go online and you know, there's a couple of different organizations that118
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are out there that you could look at like the Financial Planning Association is119
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a great place to start that's that's a120
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big one National Association of121
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personal financial advisors is another great site122
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as well the certified financial planner123
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board. You can go that route as well. I mean,124
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that's probably the best place to start you can find someone in your general area125
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that could help you there. There's another firm out there126
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XY Planning Network which is which127
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is a pretty good tool for to search for fee only.128
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Financial advisors you mentioned, you know129
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word of mouth or referrals from from your friends130
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or family that may be working with a financial advisor. So all of131
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them are great great ways to to identify some of132
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that you might want to work with at least get the opportunity to interview them to see133
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if they would be a good fit for you. Yeah. I think there's a lot of great resources online,134
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you know, one of the things that Peter and135
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I talk about quite a bit is you know working with someone136
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who understands you someone who's working with137
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other investors like me.138
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Right in a lot of times if someone has a very specific need or139
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specific sort of outcome. They're140
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looking for they can identify the right Financial professional141
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by not only looking at those websites, but142
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LinkedIn Facebook. Look, who are these?143
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Look who at the who these advisors are look at144
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the circles that they're in right? You know it a funny story my parents145
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who are not great investors. They were146
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both School teachers had a pension but when they were looking for147
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financial advisor, they didn't look any148
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further than you know, the Connecticut Teachers Retirement Financial149
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advisory. It was a really long name like150
00:07:36.400 --> 00:07:39.500
that. I know I'm butchering it and talking it right but they will151
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work Connecticut Teachers that must be the guy that we work with without even152
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thinking twice about it, but they knew they felt comfortable and153
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they trusted that the this particular individuals working154
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with other, Connecticut Teachers.155
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Here to add to any of that Peter. I mean, I think that156
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you know, I've had done. Oh my157
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second cap. We have pulled that one back.158
00:07:58.300 --> 00:07:59.300
I won't ask that question better.159
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All right.160
00:08:04.500 --> 00:08:05.500
so Peter161
00:08:06.900 --> 00:08:09.200
You know, I've talked about this it it's a mutual162
00:08:09.200 --> 00:08:12.400
interview between an advisor and an investor the investors making163
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a choice, but the advisors making a choice as well. So talk164
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a little bit about that process if you will.165
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Yeah, I think that's that's a great question. And I definitely166
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encourage people to come up with a167
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list of questions and interview multiple168
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advisors definitely. But yeah, when when169
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I'm meeting with with a New Prospect, I'm interviewing170
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them as well. And there's things I'm I'm looking171
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for I want to make sure that number172
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one there. They're gonna be happy working with us. I've173
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told people who I refer to174
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them as Gunslingers. They want to pick stocks. They want to175
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be in and out of the market they want they want action and I've told176
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people I go I don't think we're gonna be a good fit. I'm a177
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nice person. You seem like a nice person you seem to get along but178
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we're going to have different philosophies and and I want179
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you to be happy and I don't want to waste your time and I180
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don't want to have my time wasted and so I've had to tell people I just don't think181
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that this is necessarily going to work. Um, also there's182
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when I start to hear people talk and I say this183
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to clients184
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and Prospects I start to get a gut feeling about what's185
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going on. And when I start to hear about things like186
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well a lot of debt, you know, you've got187
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and not good. You don't have good financial habits.188
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You're spending all your money. You've got189
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a lot of debt a lot of bad debt. It's one thing to have a mortgage your car190
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payments. Those are those are necessary. We'll call those191
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good debt necessary debt. We start talking about large student192
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loans. We start talking about large credit193
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card balances.194
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I may not be able to work with you. I you may be better off going195
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and having credit counseling done first because I196
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can maybe give you some pointers but I've197
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had to unfortunately tell people that we may198
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not be a good fit. There wasn't a whole lot I could do because they199
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just they just didn't have the assets. They needed to get really the200
00:10:00.700 --> 00:10:03.400
basics of their budgeting or spending plan201
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down and start to work on that debt. And that's not something we're202
00:10:06.600 --> 00:10:07.000
necessarily.203
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Working on it'd be more of sort of a credit agency204
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helping them to kind of get that square away. Absolutely. You205
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mentioned working with, you know, other sort of206
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financial professionals that you you work with207
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other.208
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Financial professionals as well. I mean maybe not direct financial209
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advisors, but tax advisors and things like that. Oh, definitely.210
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I like to say that the analogy is I'm211
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I'm sort of the quarterback or I'm your212
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your primary care physician if we need to bring in a specialist,213
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you know cardiologists so forth214
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weekologists.215
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So but I'm working with.216
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I'll work with the client's attorney to talk about their state plan217
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work with a client's accountant or CPA to218
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talk about if we need to do some rebalancing in the portfolio before219
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I do any of that.220
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And start triggering capital gains. I want to make sure that the accountant is221
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on board with it and we understand what the222
00:11:06.400 --> 00:11:09.500
ramifications are of those actions or in223
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actions because the last thing a client wants is a224
00:11:12.800 --> 00:11:15.800
surprise attack time. There's something psychological about225
00:11:15.800 --> 00:11:18.700
a big tax bill staring you in the face and it's226
00:11:18.700 --> 00:11:21.100
one thing to not know about it and have to227
00:11:21.100 --> 00:11:24.200
pay it. It's another thing. All right, you know what we knew about this, but we know why we228
00:11:24.200 --> 00:11:27.300
did it. So I'm constantly working with229
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with other Professionals in helping clients230
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with taxes and in legal issues.231
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That's fantastic. Yeah, so that's another thing that investors should232
00:11:36.300 --> 00:11:39.100
be looking for. Is there a true team approach? Maybe not even under the233
00:11:39.100 --> 00:11:42.700
same roof under the same corporate umbrella if you will but making234
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sure that the advisors acting in that quarterback capacity235
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and has the right Specialists for236
00:11:48.700 --> 00:11:51.200
those needs that might be outside of the scope of237
00:11:51.200 --> 00:11:54.700
what the advisors doing on a day-to-day and that could be another point238
00:11:54.700 --> 00:11:57.300
of reference for a client. If you have an accountant who239
00:11:57.300 --> 00:12:00.400
you've been working with for a long time and you happen to like him240
00:12:00.400 --> 00:12:03.800
or her in the way that they work maybe they could be a place241
00:12:03.800 --> 00:12:05.100
where you could go to get a referral.242
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Because I'm in all likelihood that that CPA243
00:12:08.800 --> 00:12:11.600
or that attorney is has some244
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type of relationship with a financial advisor and could give245
00:12:14.400 --> 00:12:17.100
you a couple of places to go. Yeah, I think that's a great246
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great piece of advice there. All right.247
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I want one more topic here because this comes up a248
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lot and it's the notion of compensation for financial advisors.249
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I've heard individuals say250
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that I don't pay my financial advisor or anything. He does251
00:12:32.200 --> 00:12:35.100
it for free sure right there is252
00:12:35.100 --> 00:12:38.200
there's a problem this industry, I think with transparency at times and253
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there's a number of different ways financial advisors are254
00:12:41.500 --> 00:12:44.100
being compensated. I didn't like frankly I think advisors should255
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be fairly compensated. They're doing really good work, right?256
00:12:49.100 --> 00:12:52.300
Depending on the advisor. Of course, Mike tell us257
00:12:52.300 --> 00:12:54.500
a little bit about the couple of different.258
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Fee structures or compensation structures there are for financial advisors.259
00:12:58.600 --> 00:13:01.800
And if there's one that you would recommend over260
00:13:01.800 --> 00:13:04.300
another I'll rattle them off because it's a261
00:13:04.300 --> 00:13:07.100
lot of different ones. There's feel only which we've talked a little262
00:13:07.100 --> 00:13:09.400
bit about there's fee-based. There's Commission263
00:13:10.100 --> 00:13:10.900
There's retainer.264
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There's subscription. There's265
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another one I've heard that I know is out there not as266
00:13:17.400 --> 00:13:20.600
popular but it's there and there's flat fee.267
00:13:20.600 --> 00:13:23.600
So there's a number of different ways that advisors are268
00:13:23.600 --> 00:13:26.700
compensated and the one269
00:13:26.700 --> 00:13:29.300
of course in my line of work and in terms270
00:13:29.300 --> 00:13:32.400
of what I do on a daily basis working with us, I come across primarily271
00:13:32.400 --> 00:13:35.100
not always I would say fee only272
00:13:35.100 --> 00:13:38.100
in fee based or the two that that primarily I work with273
00:13:38.100 --> 00:13:41.300
although there are there are others that are274
00:13:41.300 --> 00:13:44.100
less. So like a retainer I've seen I've come across that275
00:13:44.100 --> 00:13:47.400
but I say primarily it's fee only and fee-based that276
00:13:47.400 --> 00:13:50.000
I typically work with advisors and you know,277
00:13:50.300 --> 00:13:53.100
I'll let Peter elaborate but I'll just say generally that fee only would be278
00:13:53.100 --> 00:13:56.100
just be be charging, you know,279
00:13:56.100 --> 00:13:59.300
a fee for services. It could280
00:13:59.300 --> 00:14:02.100
be it could be a flat fee or could be a fee based281
00:14:02.100 --> 00:14:05.400
on assets under management that the investor might have with that advisor282
00:14:05.400 --> 00:14:08.000
fee base is is kind of283
00:14:08.300 --> 00:14:11.600
a combination of the only and commission if you will it has284
00:14:12.100 --> 00:14:16.600
The concept of building on assets but also the advisor285
00:14:15.600 --> 00:14:19.300
has the ability to offer commission-based286
00:14:18.300 --> 00:14:22.300
products that would follow outside of the fiduciary scope.287
00:14:21.300 --> 00:14:24.800
I believe Peter and so those are the two that primarily288
00:14:24.800 --> 00:14:27.500
I see in my kind of interactions with289
00:14:27.500 --> 00:14:30.400
advisors around the country. Yeah, I think most of our listeners are290
00:14:30.400 --> 00:14:33.800
probably falling into the fee only fee-based camp291
00:14:33.800 --> 00:14:36.500
or the commission side right there. There292
00:14:36.500 --> 00:14:39.600
are a number of different fee models out there in compensation models293
00:14:39.600 --> 00:14:42.800
and I think they all have their pros and cons but you294
00:14:42.800 --> 00:14:45.100
just said something that I'm gonna ask Peter O'Brien on295
00:14:45.100 --> 00:14:45.300
right?296
00:14:46.100 --> 00:14:47.600
We talked about fiduciary.297
00:14:48.500 --> 00:14:50.800
If you are paying a commission.298
00:14:51.900 --> 00:14:55.200
Is your advisor acting as a fiduciary necessarily? Yeah,299
00:14:54.200 --> 00:14:57.500
if you've your your fee only your300
00:14:57.500 --> 00:15:00.200
being charged in a fee for your advice and301
00:15:00.200 --> 00:15:04.700
and whatever the the Investments would be. Where's fee-based302
00:15:03.700 --> 00:15:06.400
you could be receiving commissions.303
00:15:07.400 --> 00:15:10.100
On investment products. It's sort of304
00:15:10.100 --> 00:15:15.800
I guess I'll use the term hybrid approach. So it's305
00:15:14.800 --> 00:15:17.800
a gray area. They I don't306
00:15:17.800 --> 00:15:20.100
know if because we don't do that here, you know,307
00:15:20.100 --> 00:15:23.600
we don't have commission based investment products. It's strictly308
00:15:23.600 --> 00:15:26.300
putting people into no load low cost309
00:15:26.300 --> 00:15:29.100
mutual funds and ETFs and we are being310
00:15:29.100 --> 00:15:32.300
paid a fee based upon those assets under management. We don't311
00:15:32.300 --> 00:15:35.500
have commissionable investment products to sell and if312
00:15:35.500 --> 00:15:38.100
you're if an advisor is doing that.313
00:15:39.300 --> 00:15:42.200
I don't think they can put themselves out there as314
00:15:42.200 --> 00:15:43.700
as a fiduciary necessarily.315
00:15:44.500 --> 00:15:47.800
Yeah, I think that the commission side I'm not316
00:15:47.800 --> 00:15:50.500
knocking it. Just calling it317
00:15:50.500 --> 00:15:53.100
what it is. It's it's rot with conflicts of interest and318
00:15:53.100 --> 00:15:56.500
you just said something that I think would would mean319
00:15:56.500 --> 00:15:57.500
a lot to our listeners, right?320
00:15:58.500 --> 00:15:58.800
these321
00:16:00.600 --> 00:16:03.600
percentage of assets fees paying fees you're paying322
00:16:03.600 --> 00:16:06.200
for advice in that fee stays the323
00:16:06.200 --> 00:16:09.900
same regardless of the investment product. It's a324
00:16:09.900 --> 00:16:12.500
with your charging 1% regardless of325
00:16:12.500 --> 00:16:15.400
the advice you give you earn five you earn that one percent rather.326
00:16:16.100 --> 00:16:16.900
commissions327
00:16:17.800 --> 00:16:20.700
Is in compensation for advice it's compensation328
00:16:20.700 --> 00:16:23.300
for selling a product and that product329
00:16:23.300 --> 00:16:26.100
has to be suitable not necessarily best interest.330
00:16:27.700 --> 00:16:30.500
Okay, so that I think that's something that people331
00:16:30.500 --> 00:16:34.000
don't understand outside of this industry. You332
00:16:33.400 --> 00:16:36.300
know, there's two ways two major ways333
00:16:36.300 --> 00:16:39.200
that advisers get compensated fees versus commissions and334
00:16:39.200 --> 00:16:42.500
one other point that I'll make about fees and correct335
00:16:42.500 --> 00:16:45.400
me if I'm wrong gentlemen if you're charging fees on assets.336
00:16:46.300 --> 00:16:49.600
If the asset level goes up the advisor337
00:16:49.600 --> 00:16:52.900
gets paid more the asset level goes down. I338
00:16:52.900 --> 00:16:55.800
mean the percentage stays the same but the actual dollars change, so339
00:16:55.800 --> 00:16:58.500
I think that it actually aligns the interests.340
00:16:59.400 --> 00:17:02.500
Of the investor and the advisor using a fee model341
00:17:02.500 --> 00:17:05.400
for Susan commission model where someone might342
00:17:05.400 --> 00:17:08.600
be asking you to buy a product that you may not necessarily343
00:17:08.600 --> 00:17:08.900
need.344
00:17:10.500 --> 00:17:13.800
Correct. And that's that's the thing. We you345
00:17:13.800 --> 00:17:14.800
start talking about different.346
00:17:16.100 --> 00:17:19.700
Whether it's Insurance products investment products that have commissions on347
00:17:19.700 --> 00:17:20.000
them.348
00:17:20.700 --> 00:17:23.500
Now all of a sudden it could be suitable. But if product349
00:17:23.500 --> 00:17:24.600
a May pay350
00:17:25.300 --> 00:17:28.900
X percentage products B may pay X351
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percentage plus something on top of352
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it.353
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A non-fiduciary advisor is probably354
00:17:35.400 --> 00:17:38.400
going to go to product B because it's going to pay him355
00:17:38.400 --> 00:17:41.000
or her more and it's a perceived conflict of356
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interest. I'm not saying that every person out there who's earning a commission is357
00:17:45.100 --> 00:17:48.500
Is not acting in good faith, but there358
00:17:48.500 --> 00:17:51.600
is there's a potential for that conflict to be there. Sure. It's359
00:17:51.600 --> 00:17:54.900
it's all things being equal right? It's they're gonna pick if it's360
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if it doesn't necessarily hurt the361
00:17:57.500 --> 00:18:00.500
client and all and the Investments are relatively the362
00:18:00.500 --> 00:18:04.100
same they're going to gravitate probably towards the higher commission product.363
00:18:03.100 --> 00:18:06.400
Not that it's a bad thing. But that's the conflict of364
00:18:06.400 --> 00:18:09.000
interest that we talk about right isn't necessarily in the best365
00:18:09.300 --> 00:18:12.600
interest of the client. Yeah, and I think investors don't need products as366
00:18:12.600 --> 00:18:15.600
much as they need advice. Yeah agreed. I totally agree.367
00:18:15.600 --> 00:18:18.700
We were talking the the other368
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day just that the the meetings we were we were at and369
00:18:21.800 --> 00:18:24.300
and the model the way it was is you370
00:18:24.300 --> 00:18:27.700
had insurance companies or investment firms sort of371
00:18:27.700 --> 00:18:30.900
sitting at the top designing product and starting372
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to push that product down to advisors who would373
00:18:33.400 --> 00:18:36.300
then push it to clients down at the bottom and really our374
00:18:36.300 --> 00:18:37.800
model is where we flip the script.375
00:18:38.600 --> 00:18:41.600
The client is at the top and the client comes to the advisor.376
00:18:42.200 --> 00:18:45.400
And we then go out to the product manufacturers to377
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find the the best product the best solution for378
00:18:48.400 --> 00:18:51.000
for the client to make as part of379
00:18:51.500 --> 00:18:54.300
their financial plan. So I think that's that's a big difference there.380
00:18:54.300 --> 00:18:57.600
We have nothing proprietary and we are acting in the best interests381
00:18:57.600 --> 00:19:00.500
of the client looking for a best of breed approach. And382
00:19:00.500 --> 00:19:03.600
again, usually it comes down to well, what383
00:19:03.600 --> 00:19:06.100
are the fees associated with that and that's another great piece of384
00:19:06.100 --> 00:19:07.000
advice for clients.385
00:19:08.400 --> 00:19:11.300
Understand who you're paying and what you're paying386
00:19:11.300 --> 00:19:12.100
them and what for?387
00:19:12.900 --> 00:19:16.000
Whether it's mutual funds inside your 401k or388
00:19:15.400 --> 00:19:18.800
something inside if you have an IRA through your bank389
00:19:18.800 --> 00:19:21.500
understand what it what it is and and390
00:19:21.500 --> 00:19:24.500
how it works. You're the one paying it and and understand how391
00:19:24.500 --> 00:19:27.400
all of that works and a lot of times people don't realize392
00:19:27.400 --> 00:19:30.500
that because a lot of times things are are not393
00:19:30.500 --> 00:19:33.300
apparent you got to do a got to do a little bit of digging to understand394
00:19:33.300 --> 00:19:36.500
what those those fees are inside of certain products.395
00:19:36.500 --> 00:19:39.300
Yeah. Absolutely. No, no what you're paying and I think396
00:19:39.300 --> 00:19:42.200
that there are some compensation models for397
00:19:42.200 --> 00:19:45.700
advisor out that they're a little bit opaque if398
00:19:45.700 --> 00:19:48.600
you will but as an investor399
00:19:48.600 --> 00:19:51.600
working with the financial professional transparency matters,400
00:19:51.600 --> 00:19:54.200
and if someone's not being transparent, then there's401
00:19:54.200 --> 00:19:57.000
probably not a lot of trust there in this business is built on trust.402
00:19:58.100 --> 00:20:01.300
So yeah, I have to disclose everything to everybody up403
00:20:01.300 --> 00:20:01.700
front because404
00:20:03.300 --> 00:20:06.300
It's coming out. It's coming out of the account and they'll see it right on the statement as405
00:20:06.300 --> 00:20:09.600
a line item to the penny. Yeah, exactly, except a406
00:20:09.600 --> 00:20:09.700
penny.407
00:20:10.200 --> 00:20:13.700
Absolutely. Well gentlemen, thank you so much for your time. So I408
00:20:13.700 --> 00:20:16.400
just want to kind of recap because there was so much great information409
00:20:16.400 --> 00:20:19.500
that the two of you shared if you're an investor410
00:20:19.500 --> 00:20:22.300
out there if you're one of our listeners and you're looking to work with a financial411
00:20:22.300 --> 00:20:25.500
professional or if you're looking for maybe a second opinion a couple412
00:20:25.500 --> 00:20:28.100
of things that that Peter and Michael had talked to us413
00:20:28.100 --> 00:20:31.400
about today. Make sure you ask the question. Are you acting414
00:20:31.400 --> 00:20:34.600
in a fiduciary capacity? Probably the most important question to415
00:20:34.600 --> 00:20:35.700
ask a financial professional.416
00:20:36.300 --> 00:20:40.100
Number two. What is your financial planning process? Right417
00:20:39.100 --> 00:20:42.200
the value proposition of a418
00:20:42.200 --> 00:20:46.200
financial advisor should be based on that planning process. And419
00:20:45.200 --> 00:20:48.500
since you are paying for advice, I think a great420
00:20:48.500 --> 00:20:51.300
question is what is your investment philosophy? How do you see the421
00:20:51.300 --> 00:20:54.400
world work? How are you going to advise me based on that investment422
00:20:54.400 --> 00:20:55.200
philosophy423
00:20:55.900 --> 00:20:58.300
When it comes to credentials, I think looking for any credential424
00:20:58.300 --> 00:21:01.100
makes a lot of sense after a person's name. But if you're425
00:21:01.100 --> 00:21:04.100
looking for a true financial planner, the cfp designation is the426
00:21:04.100 --> 00:21:05.900
one that that our guests recommend.427
00:21:06.600 --> 00:21:09.400
Look for people that work with people like428
00:21:09.400 --> 00:21:12.600
you look for advisors that are working with people like yourself429
00:21:12.600 --> 00:21:15.900
and there's a lot of resources out there. Mike mentioned430
00:21:15.900 --> 00:21:18.600
Napa. There's the advisor's website. Of431
00:21:18.600 --> 00:21:21.300
course Facebook LinkedIn are great ways to look at how432
00:21:21.300 --> 00:21:24.200
these advisors are working with433
00:21:24.200 --> 00:21:28.200
people that may or may not be like you and let me throw another resource434
00:21:27.200 --> 00:21:31.200
out there. A lot of investors don't realize that you435
00:21:30.200 --> 00:21:34.300
can Google broker check broker check436
00:21:34.300 --> 00:21:38.000
is a government website where tracks the history437
00:21:37.100 --> 00:21:41.000
of every single Financial professional whether they're SEC438
00:21:40.600 --> 00:21:43.900
registered or member of finra and you'll439
00:21:43.900 --> 00:21:46.400
see if there's any disclosures or anything like that440
00:21:46.400 --> 00:21:49.400
so broker checks are great way to see if441
00:21:49.400 --> 00:21:52.200
if there's any dings on the record of442
00:21:52.200 --> 00:21:55.100
the person that you're speaking to and then in terms443
00:21:55.100 --> 00:21:58.700
of compensation look for fees versus commissions not444
00:21:58.700 --> 00:22:01.200
to say that commissions are necessarily bad, but they445
00:22:01.200 --> 00:22:04.100
there could be some conflicts of446
00:22:04.100 --> 00:22:06.500
interest in there and a fee-based advisor.447
00:22:06.600 --> 00:22:09.200
Even a fee only advisor is going to sit in the same side of448
00:22:09.200 --> 00:22:12.700
the table as you the investor. So Michael, thank449
00:22:12.700 --> 00:22:15.200
you so much for your time. Thanks Tom Peter. So thank you450
00:22:15.200 --> 00:22:19.100
for joining us here today. This has been a great conversation and so451
00:22:18.100 --> 00:22:21.300
for our listeners out there. Thank you for joining us.452
00:22:21.300 --> 00:22:24.200
We'll get you on the next one. And if you453
00:22:24.200 --> 00:22:28.400
want to look at any of our previous unfiltered Finance podcasts, they're454
00:22:27.400 --> 00:22:30.600
available wherever you might be getting your podcast today.455
00:22:30.600 --> 00:22:34.200
So thank you till next time. Bye Cemetery Partners.456
00:22:33.200 --> 00:22:36.600
LLC is an investment advisor457
00:22:36.600 --> 00:22:39.300
firm registered with the Security and Exchange Commission458
00:22:39.300 --> 00:22:42.500
The Firm only transacts business in states where459
00:22:42.500 --> 00:22:45.600
it is properly registered or excluded or460
00:22:45.600 --> 00:22:49.200
Exempted from registration requirements registration of461
00:22:48.200 --> 00:22:51.400
an investment advisor does not imply462
00:22:51.400 --> 00:22:54.500
any specific level of skill or training and does463
00:22:54.500 --> 00:22:57.300
not constitute an endorsement of the firm by the464
00:22:57.300 --> 00:23:00.300
commission. No one should assume that future performance of any465
00:23:00.300 --> 00:23:04.400
specific investment investment strategy product or466
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non-investment related content.467
00:23:06.600 --> 00:23:10.000
Reference to directly or indirectly in this material will be468
00:23:09.000 --> 00:23:10.500
profitable.469
00:23:11.400 --> 00:23:14.300
As with any investment strategy there is the possibility470
00:23:14.300 --> 00:23:17.500
of profitability as well as loss due471
00:23:17.500 --> 00:23:20.200
to various factors including changing market472
00:23:20.200 --> 00:23:22.600
conditions and/or applicable laws.473
00:23:23.400 --> 00:23:27.000
Content may not be reflective of current opinions or474
00:23:26.600 --> 00:23:29.600
positions. Please note the material475
00:23:29.600 --> 00:23:32.300
is provided for educational and background use only476
00:23:32.300 --> 00:23:36.000
moreover. You should not assume that any discussion or information477
00:23:35.700 --> 00:23:38.600
contained in this material serves as478
00:23:38.600 --> 00:23:42.400
the receipt of or as a substitute for personalized479
00:23:41.400 --> 00:23:43.700
investment advice. -
As financial professionals, we’re often asked one simple question: “do you know what I should buy right now?” In truth, we don’t believe it’s possible to successfully predict market behaviors most of the time. But, we do believe that a qualified financial advisor can help you devise a plan for long-term success. In this episode of Unfiltered Finance, our own Tom Romano, Head of Strategic Relationships and Product Development, is joined by Symmetry’s Michael Storer, Senior Regional Director, and a financial advisor from our sister firm, Apella Wealth, Peter Leppones, CFP®, to answer a more important question: “what should you consider when choosing a financial advisor?”
If you have any questions or would like more information, reach out to us at https://symmetrypartners.com/contact-us/
You can also find us on Facebook, YouTube, Twitter, and LinkedIn. As always, we remain invested in your goals.
Symmetry Partners, LLC, is an investment advisory firm registered with the Securities and Exchange Commission. The firm only transacts business in states where it is properly registered, excluded or exempted from registration requirements. Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. No one should assume that future performance of any specific investment, investment strategy, product or non-investment related content made reference to directly or indirectly in this material will be profitable. As with any investment strategy, there is the possibility of profitability as well as loss. Due to various factors, including changing market conditions and/or applicable laws, the content may not be reflective of current opinions or positions. Please note the material is provided for educational and background use only. Moreover, you should not assume that any discussion or information contained in this material serves as the receipt of, or as a substitute for, personalized investment advice. Transcript:00:00:01.900 --> 00:00:07.400
Hello and1
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welcome to unfiltered Finance. I'm your host Tom romano.2
00:00:10.700 --> 00:00:13.300
And thank you for joining us this episode today. We3
00:00:13.300 --> 00:00:17.000
are talking about choosing the right financial advisor and4
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I have the perfect guests for this topic5
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joining us here today first and foremost Mike6
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store who is a senior Regional director7
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at symmetry Partners. I asked Mike to be8
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on the podcast because he works with thousands of financial advisors across9
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the country. He knows which ones10
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are doing the appropriate job and due diligence and11
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planning for their clients and the others who might be dare. I12
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say fake it Mike faking it and of13
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course a long time friend of mine Mr. Peter loponis14
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who's a certified financial planner and financial advisor15
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with Apollo wealth and happens to be16
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my personal financial planner. So gentlemen, thank you both for joining17
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us here today. You're welcome, Tom. Thanks Tom. Great to be here. I thought18
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this was appropriate topic for us to discuss.19
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you know coming out of the pandemic I travel a20
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lot for business and I've been on many planes21
00:01:07.400 --> 00:01:10.400
over the last few months and you know, whether it's an22
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airport or23
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Are sitting next to someone on a plane and just bring24
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up some small talk and people understand25
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that I'm working in the financial services a business.26
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And the first question. I always get is got any27
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tips. What should I be buying? What28
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should I be selling? Right? It's a very common question and for29
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years, my response has always been and I'm30
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a firm believer of this is the best advice I can give anyone in31
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that moment is to work with32
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someone you trust financial planner financial33
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advisor that's working in a fiduciary capacity. I34
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have a number of reasons why I say that but35
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Mike I'd love to hear it from your perspective. Why should36
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investors people planning for37
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retirement or for any other Financial need be working38
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with a financial professional? That's a great question.39
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I think you hit on it at the in your opening40
00:02:03.100 --> 00:02:04.100
remarks Tom is that41
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You know.42
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Having traveled the country for many43
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years working with a number of different types of advisors and meeting44
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with clients at the same time, you know clients have45
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different desperate needs in terms of when it46
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comes to financial Financial advice so they can47
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certainly learn about it on on a website if they48
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want to but I found that especially the49
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best advisors are working working with50
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clients and from that51
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perspective. I know who these advisors are.52
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And I know they're doing a great job for their clients. And for me,53
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the one thing that comes to mind besides everything54
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else at a financial advisor does because I think about it in55
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my own world is comfort and peace of mind, right? There's lots56
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of different moving Parts when it comes to planning.57
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And and what you're going to do with your money for the long term and even myself58
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being in this business, I worry about am I making59
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the right decisions? So I think a lot of it comes down60
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to peace of mind and comfort. I think that that's high61
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level. There's a lot of you can drill down from there62
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but I think for most clients if you think about it, it's getting that63
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pressure off of you and bringing a64
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professional and to make sure that you're meeting your life goals, whatever those might65
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be sure. No, absolutely. I think what I'm hearing you say, I66
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hear things like planning and long-term and Peter67
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I'll shift over to you. So68
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what I'm hearing Mike say and I loved for you to plan69
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on this when someone asks me got any tips,70
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why is that the wrong question?71
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well, I think72
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the answer they're looking for everyone wants something73
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that's exciting and and sexy that74
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they can tell.75
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Their friends. I think you've used the term water cooler alpha or76
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Golf Course Alpha everyone thinks somehow because we're77
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sitting here on the inside. We're insiders. We've78
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got more information than than they do79
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as as retail investors, but80
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that's just not the case and and it's not about81
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hitting that home run with the stock because82
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if you're gonna be picking individual stocks, there's gonna83
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be some home runs in there, but there's got to be some singles and84
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doubles there's gonna be some losers too. It just85
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it's gonna happen statistically, but when86
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we talk about a plan and what87
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it can do for you long term the sense of confidence88
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that it's going to give you. That's what you really need. Hey, it's89
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great to be able to say Jesus I bought in at this stock when when it90
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was at 10 and it went to a hundred and in two years. It's a91
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great story, but92
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Is better to have a sense of confidence and comfort with your93
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plan and with your financial outcomes, and that's why94
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sitting down and taking the time to go through a plan with a95
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cfp with someone who's a fiduciary is really in your96
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best interest versus getting that that hot stock tip.97
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Yeah, I would agree. The one thing that98
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I always comes to mind when someone says got any tips the first99
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thing I'm thinking well if I had some I wouldn't tell you I'd keep100
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it all for myself, right? There's wildly more Capital101
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to be to be earned when you keep those secrets to yourself right quick102
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short story. Tom and103
00:05:08.100 --> 00:05:11.400
Peter. My son is out in gainfully employed104
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in the Working World now and he has a little bit of money and he105
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asked me about a year ago a year and a half ago to Dad what106
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stocks should I pick? And so I immediately opened107
00:05:20.700 --> 00:05:24.300
up the Barron's journal and108
00:05:24.300 --> 00:05:27.200
I just looked at the stocks to pick now I said, hey, you109
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know, if you want to buy some technology, here's a bunch of Technology names. I said,110
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you know, the market has been involved, but if you want to buy stocks, here's a111
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couple of names that you can just112
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Your portfolio. So of course he did that on my advice and113
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then about a year later. He114
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was blaming me because I'm the one that picked the stocks from in the115
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stocks were Downs.116
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I just thought that was kind of interesting because it I did117
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exactly the opposite of what I should have said to him right in terms118
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of how we should be approaching these but you know, this was play119
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money for him. So I let him learn a little bit about what it120
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really means to invest in those types of questions of the wrong questions,121
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right as you just mentioned Peter and so I thought it was122
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a really good it was a it was a learning moment for him to understand that123
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you don't just pick stocks and they go up. Oh, absolutely and like124
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I I actually I do that with with clients. I'll125
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say to them.126
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If you want to open up a small account and I127
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use the term your Casino money. Hey, you got to go to128
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the casino and sit there and maybe go out to dinner have a drink play the129
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slot sit at a table if you lose a hundred or 200130
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or $300.131
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It was a night of entertainment you had a good time.132
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I see take your Casino money and put it into an account and133
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buy a couple of stocks and just it's it's134
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good education for you. You might learn some valuable135
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lessons, but you're gonna pay really close attention. Even136
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if it's only five or 10 shares of a137
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company and you'll you'll learn a lot for it. So I think there is certainly a138
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value in that but with large sums of Money Retirement accounts139
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brokerage accounts. Absolutely not none of140
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this stock picking. It's got to be a low cost. Well Diversified portfolio.141
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So I'm hearing you say it's okay to sit in a142
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little bit.143
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Any bit tiny bit? Absolutely. No, I didn't. You144
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know, I like to play the market myself, but I'm only doing145
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that with my my entertainment dollars not my146
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long-term assets that that my family147
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and I are going to need at some point in time. Right? So Peter148
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you've been talking a lot about planning right and and149
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I've been in this business for a long time as with you150
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you and I've worked together for many many years. I've noticed151
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the value proposition of financial advisor152
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has changed right at one point. It was that153
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stock picker many many years ago. So this154
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day and age what what do155
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you see as the value proposition to a financial advisor?156
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In my opinion, it has to be the plan because that's157
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where we've had success as a firm. I've158
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had success as an advisor clients have had success159
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following that advice and and really160
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it's about the planning and that's the most161
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valuable advice. I give to my clients. Hey, we're with162
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a low cost. Well Diversified portfolio. We're going163
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to get a market return the market for us164
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taking risk. We will get a market return and my165
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return will be no different than my clients because we invest in very similar166
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similarly constructed portfolios, but167
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really168
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Whether we get an 8% return 9% 10%169
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return long-term. It's really170
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the plan.171
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That is is going to drive all that and just because172
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their portfolio is up a certain year that that's173
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great and they like to see that.174
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But again, the plan is going to say well geez, I175
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know now I can retire at age 62. I'm176
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going to take Social Security at 67 when177
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I retire at 62.178
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I'm going to be able to pay for my own health insurance until179
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I hit MediCare at age 65. I mean, those are questions180
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that aren't even related to a rate181
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of return or a stock pick or any of that. They're planning182
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questions, but they're extremely important to people the very183
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comprehensive list of questions versus should you be in a184
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60% stock 40% bomb for far beyond that185
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correct? Correct, but it's it's about the the layers and186
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the investment management risk reward asset187
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allocation being allocated appropriately.188
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According to your risk tolerance that's all part of it. But you189
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do when I sit down with clients we talk about the190
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performance we talk about what the markets have been doing and we really start191
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to get into those those items Healthcare Medicare long192
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term care gifting money to people grandchildren193
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setting up a 529194
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accounts. All those types of things. These195
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are the goals and the things that are important to clients and they come196
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through the planning process. Yeah, that's extremely valuable right life197
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comes at you fast, and there's a number of instances in198
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my personal life where I've leaned on you for things that199
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are fun far beyond investable assets.200
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So that's that's good. So what so far listeners out there.201
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I mean you're looking for a financial professional that202
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is planning focused.203
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But also from a very comprehensive standpoint Beyond204
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stocks bonds mutual funds Exchange Trade205
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funds Etc.206
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So let's one of the things that's a207
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change gears a little bit.208
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You know, there's over 300,000 financial advisors in209
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the United States, right? The term210
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fiduciary comes up quite a bit and I'm211
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always surprised maybe I'm not as surprised212
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as I once was that investors are don't213
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necessarily understand that sometimes advisors are214
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acting any fiduciary capacity and sometimes215
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they are not before we216
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jump into that.217
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Explain to us Peter. What is a fiduciary? Well, it's218
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it's the highest standard of care in in219
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our industry. And I've sort of I've been on both220
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sides of it. So I have to act in my221
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clients best interest not only being affiliated with with a222
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palette but also being a cfp and really223
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what that comes down to at the end of the day224
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is the type of225
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Investment product. I'm going to refer to226
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everything as a product that we put our clients into and227
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I've got a really focus on the cost the level228
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of care below a fiduciary. It's229
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referred to as the suitability standard. Does that mean if I'm230
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not a fiduciary? I'm doing something unethical absolutely not231
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the last thing I want to do because I again I was there I've worked232
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with clients where I was just doing by this suitability standard. I233
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was not a fiduciary at the end of the234
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day. I'm putting my clients into something that is putting more money back235
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into their pocket meaning the fees236
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and the costs associated with those products are237
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much lower. We have238
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no Front End Sales charges. We have no backend sales charges.239
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So I said to clients that are that are coming on board.240
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I will bend over backwards to make sure that you are happy but at some241
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point if you don't realize the value242
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of our services or you chose to go elsewhere, you243
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can do that. You're going to be able to take what you have here and244
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move that elsewhere. You're not going to be tied up for three or245
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five or ten years. No surrender charges or big246
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fees to go acting in their best interest and that helps247
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to protect them. And I think it's extremely important that people248
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need to ask249
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Are you a fiduciary is your firm of fiduciary? And how250
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do you work? So when?251
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Investors are looking for a financial252
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professional to work with right what I'm253
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hearing someone the first things I should look for and they should ask about it potentially254
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even get it in writing. Are you acting any fiduciary255
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capacity? Are you acting in my best interest? Correct? They256
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absolutely should and and interview multiple257
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people Tom has258
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been not only a great client. But I've worked259
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with many of Tom's family members. Why because they come to Tom. Jeez260
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Tom. I've got some questions. Who should I work with? Well talk261
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to Peter. So if you have a friend or family member who you262
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know works with an advisor ask for that that person's name.263
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And if they will if you have a friend or family member they'll264
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refer them over if they enjoy working with them. So I think that's a265
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good place to start but interview them there's many checklists266
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online and I think one of the things you want to ask about are267
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you a fiduciary understand what that means and it's268
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it's something important because there's269
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plenty of us out. There aren't as many as probably there should270
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be but there's plenty fiduc.271
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He's out there for you to work with.272
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Absolutely. You made a really good point. I was doing a little research.273
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Knowing that we were going to have this.274
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Talk today the three of us and you know,275
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the number one way investors find their financial advisors through276
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through referrals. Right number two is through277
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you know online searches and things like that. So278
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I think that's that's really important279
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when you're looking for financial audience advisor talk to your family280
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your friends people who have or may have similar Financial281
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situations as you do but I282
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think you know, the important thing. Is that the very good question. Are283
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you acting and a fiduciary capacity at all times, right?284
00:14:11.300 --> 00:14:14.100
We talked about the planning process one of the things I want to285
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touch upon and Mike will turn to you is that sometimes giving286
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good advice means saying no not giving287
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the client what they're looking for. Right and288
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I've seen advisors who act289
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as more of a facilitator290
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very high service level but whatever the client291
00:14:32.400 --> 00:14:35.400
wants they they get what are some of the Perils of292
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that?293
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The Perils are that you become all294
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things to all people and as I think295
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Thomas you have famously said if everything's296
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important nothing's important and297
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I think from the perspective of advice that we work with298
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it's it's you know299
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when you when you think about that kind of cafeteria style300
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service.301
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It becomes very difficult to.302
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Address clients needs concerns or303
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fears because you know304
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in terms of of investment investment advice,305
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if you're if you've got clients that are in individual stocks306
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and you have clients in Diversified portfolios, or they're in a more passive307
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investment or they're in a tactical investment. You're constantly308
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pivoting to try to answer questions to309
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all these different constituencies within your practice what we310
00:15:26.300 --> 00:15:29.700
find in our in our work is that you know advisors that311
00:15:29.700 --> 00:15:32.400
have a philosophy advisors have a way that312
00:15:32.400 --> 00:15:36.000
they approach the capital markets and how they construct portfolios I313
00:15:35.500 --> 00:15:39.000
tend to do the best because their clients are like-minded and314
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it keeps them in their seats even when markets are315
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difficult. So having a316
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Kind of a carte blanche or317
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I like to say cafeteria style investment or at318
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least offering makes it more difficult for you to keep your319
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clients in line. I think over time and I think what I320
00:15:56.200 --> 00:15:59.600
like like best about being at symmetries, we do have that investment philosophy. That's321
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straightforward. It doesn't deviate and most322
00:16:02.700 --> 00:16:05.000
of the advice that work with us tend to have323
00:16:05.100 --> 00:16:08.300
that same philosophy. The interesting thing about that too is you notice324
00:16:08.300 --> 00:16:11.300
when markets are fairly volatile which where this is really important325
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is that you know investors that326
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kind of adhere to similar investment327
00:16:17.400 --> 00:16:20.700
strategy like symmetries is that they tend328
00:16:20.700 --> 00:16:23.800
to have less gap between What markets are doing and what329
00:16:23.800 --> 00:16:26.300
their Investments are doing because they tend to stay in their seats. They're not330
00:16:26.300 --> 00:16:29.800
moving around behaviorally moving in and out of the market or moving in and331
00:16:29.800 --> 00:16:31.600
out of Investments. And I think that's sometimes can be the332
00:16:32.400 --> 00:16:35.700
the offshoot of having a strategy where333
00:16:35.700 --> 00:16:37.200
you're just trying to be everything to everybody.334
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I'm going to unpack use it a lot of really yeah, I get335
00:16:41.200 --> 00:16:44.100
there. Sorry, but no. No, I just want to make sure our listeners get it to get336
00:16:44.100 --> 00:16:47.700
some really really good insight there Mike. So first337
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and foremost you talk about an investment philosophy338
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and what I'm hearing you say is that we're talking339
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about advice, right and if someone wants to340
00:16:56.100 --> 00:16:58.200
give advice you have to have a stake in the ground.341
00:16:59.400 --> 00:17:02.300
You have to have that place where your your view on342
00:17:02.300 --> 00:17:04.200
how Capital markets work?343
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And if you don't have that view you might fall into that344
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facilitator capacity.345
00:17:10.300 --> 00:17:13.300
The other thing that she said I'm glad you346
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said it as you talked a lot about behavior and what I'm hearing you347
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say is the study we've used many times the dial348
00:17:19.500 --> 00:17:22.500
bar study for our listeners. Could you talk a little bit about what that dial bar349
00:17:22.500 --> 00:17:26.000
research shows us sure is that it shows that the the investor350
00:17:25.200 --> 00:17:26.600
over, you know?351
00:17:27.600 --> 00:17:30.100
Many time periods. I mean they updated every year but it goes352
00:17:30.100 --> 00:17:33.600
back a number of years and it looks at what investors353
00:17:33.600 --> 00:17:36.200
do in terms of investing in354
00:17:36.200 --> 00:17:39.600
the let's say the S&P 500 as an index versus what the355
00:17:39.600 --> 00:17:43.300
index does and we find year in and year out that investors356
00:17:42.300 --> 00:17:45.200
tend to underperform the357
00:17:45.200 --> 00:17:48.500
index and the question always is Peter and you know this why358
00:17:48.500 --> 00:17:51.500
and it's because they're holding period is359
00:17:51.500 --> 00:17:54.600
tends to be I think it's less it used to be in the old days three360
00:17:54.600 --> 00:17:57.300
three plus years now. It's three minus here. It's less361
00:17:57.300 --> 00:18:00.200
than three years of holding period of time, which means they're362
00:18:00.900 --> 00:18:03.500
Behaviorally trying to in some363
00:18:03.500 --> 00:18:06.400
ways time the market and so what we364
00:18:06.400 --> 00:18:09.000
try to do at least in as I talk365
00:18:09.100 --> 00:18:12.300
to advisors is to try to educate them and educate clients as366
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well that you know, we want to close that Gap we367
00:18:15.300 --> 00:18:18.200
call that the the performance Gap right?368
00:18:18.200 --> 00:18:22.000
There's a gap between what investments do and what the investor369
00:18:21.300 --> 00:18:24.300
does right? We know this plenty of Dad out370
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there to show that so how do we do that? Peter had talked about a little371
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bit earlier is we look at things like, okay, what's important? How do372
00:18:30.300 --> 00:18:33.600
we close that Gap? It comes from financial planning. It comes373
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from portfolio selection, not necessarily portfolio374
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management, but portfolio selection in terms375
00:18:39.400 --> 00:18:42.600
of picking the right model of the right strategy for for clients376
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education and communication with clients. I377
00:18:45.100 --> 00:18:48.900
think those are great ways that we see that behavioral Gap378
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closing through time and that and379
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ends up being a an experience380
00:18:54.900 --> 00:18:57.000
that clients will be with their advisors for a long time381
00:18:57.300 --> 00:19:00.400
because you focus on the things that matter not the investment382
00:19:00.400 --> 00:19:00.700
itself.383
00:19:01.800 --> 00:19:02.700
a great computer384
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You're the the man in the seat here. So talk385
00:19:06.800 --> 00:19:09.200
to us a little about that. Right? I mean that dial bar study is386
00:19:09.200 --> 00:19:11.600
pretty telling every year investors are underperforming.387
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You focus on planning. How does planning help with the388
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long-term thinking that is required for389
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successful experience. It comes into390
00:19:21.800 --> 00:19:24.500
Not only the planning but educating clients and391
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communication and the example I'll use and we were392
00:19:27.600 --> 00:19:27.800
all.393
00:19:28.500 --> 00:19:32.200
working from back home during the the pandemic and394
00:19:33.900 --> 00:19:36.200
the markets dropped about a395
00:19:36.200 --> 00:19:36.800
third396
00:19:37.800 --> 00:19:40.700
so about 33% in about a month's time thinking397
00:19:40.700 --> 00:19:43.600
the numbers are 33% over 34 days 1/3.398
00:19:44.300 --> 00:19:47.300
And we're sitting here stuck at home. We think the world is going399
00:19:47.300 --> 00:19:50.400
to end and my message to my clients because400
00:19:50.400 --> 00:19:54.000
it's the message of our firm message that I truly believe.401
00:19:55.300 --> 00:19:55.700
And it wasn't easy.402
00:19:56.400 --> 00:19:59.600
No, we're not doing anything this too shall403
00:19:59.600 --> 00:19:59.700
pass.404
00:20:00.600 --> 00:20:03.600
You know, this is the.com bubble. This405
00:20:03.600 --> 00:20:06.600
is 911. This is the406
00:20:06.600 --> 00:20:09.900
great financial crisis of 2008.407
00:20:10.600 --> 00:20:13.400
It doesn't necessarily matter what the event408
00:20:13.400 --> 00:20:16.500
is because everyone know Peter is a pandemic. It's different like you're409
00:20:16.500 --> 00:20:20.100
right, but you're not it's the uncertainty and what410
00:20:19.100 --> 00:20:22.700
lo and behold what happens after the411
00:20:22.700 --> 00:20:23.900
market drops a third.412
00:20:24.800 --> 00:20:27.800
In March February and to March it413
00:20:27.800 --> 00:20:30.700
shoots back up. It comes roaring back why we414
00:20:30.700 --> 00:20:34.100
had no vaccine. We still were unemployment had415
00:20:33.100 --> 00:20:36.200
still not hit its peak because of416
00:20:36.200 --> 00:20:39.900
all the you know, retail and entertainment losses417
00:20:39.900 --> 00:20:42.200
that that took place in in this country and around the418
00:20:42.200 --> 00:20:45.000
world. We still have this crazy election in front419
00:20:45.100 --> 00:20:48.800
of us. There was still uncertainty but why why did it happen and I420
00:20:48.800 --> 00:20:51.500
don't think there's necessarily an answer but the lesson learned421
00:20:51.500 --> 00:20:54.800
is we stay in our seats regardless of what's going on because422
00:20:54.800 --> 00:20:57.500
the markets have they've always come back and I423
00:20:57.500 --> 00:20:59.500
believe any time we hit something.424
00:21:00.700 --> 00:21:03.300
They'll come back again. We just don't know when so that425
00:21:03.300 --> 00:21:06.100
experience because I I think426
00:21:06.100 --> 00:21:09.200
you use the term staking in the stand or stake in the ground. That was my427
00:21:09.200 --> 00:21:12.200
stake in the ground. And now as we went through all of this in428
00:21:12.200 --> 00:21:15.500
2022 with all of the uncertainty and inflation and429
00:21:15.500 --> 00:21:18.700
gas prices and all of that impacting430
00:21:18.700 --> 00:21:20.700
the markets interest rates being increased.431
00:21:22.200 --> 00:21:25.200
People said yeah, I remember what you said back during the432
00:21:25.200 --> 00:21:28.200
pandemic. So yeah, okay that that makes sense. It's the433
00:21:28.200 --> 00:21:30.300
messaging my messages consistent.434
00:21:31.200 --> 00:21:34.000
And when people hear that, there's a sense of confidence like, you know what he was435
00:21:34.200 --> 00:21:36.400
right last time. He'll probably be right this time, too.436
00:21:37.400 --> 00:21:40.200
Fantastic, and I remember that Panda right that437
00:21:40.200 --> 00:21:43.500
first quarter of 2020 was one of the top 10 worst438
00:21:43.500 --> 00:21:48.100
quarters in the United States history going back to 1926. The439
00:21:47.100 --> 00:21:50.200
second quarter of 2020 was one of the top 10440
00:21:50.200 --> 00:21:53.400
best quarters the United States ever experienced going441
00:21:53.400 --> 00:21:56.200
back. And and the funny thing is if we had442
00:21:56.200 --> 00:21:59.200
been if we had moved our money out of we did443
00:21:59.200 --> 00:22:02.500
not stay calm and we moved money out444
00:22:02.500 --> 00:22:05.300
of the market in March. What would445
00:22:05.300 --> 00:22:08.700
we have missed? When do we get back in? It's it's446
00:22:08.700 --> 00:22:11.200
difficult. It's difficult to sit there447
00:22:11.200 --> 00:22:14.100
when the market is dropping and say my gosh we have to do448
00:22:14.100 --> 00:22:17.600
something but you're also playing the same game when you get out. It's like449
00:22:17.600 --> 00:22:20.200
well if you get out, okay well, but then the market will eventually450
00:22:20.200 --> 00:22:21.700
come back. Well, when do you get back in?451
00:22:22.600 --> 00:22:25.300
And and and we just see long-term what the452
00:22:25.300 --> 00:22:26.600
results are you're better off.453
00:22:27.400 --> 00:22:30.500
Staying going dealing with the rollercoaster ride454
00:22:30.500 --> 00:22:33.500
staying in your seat versus making rash decisions based455
00:22:33.500 --> 00:22:36.100
upon fear and emotion Peter Michael. Thank you so much456
00:22:36.100 --> 00:22:39.400
for joining us here today that concludes part one of our discussion457
00:22:39.400 --> 00:22:42.200
on choosing the right financial advisor. I look458
00:22:42.200 --> 00:22:45.200
forward to continuing the conversation at part two, and if you want to459
00:22:45.200 --> 00:22:48.800
look at any of our previous unfiltered Finance podcasts, they're460
00:22:48.800 --> 00:22:51.700
available wherever you might be getting your podcast today. So,461
00:22:51.700 --> 00:22:53.400
thank you till next time bye-bye.462
00:22:53.900 --> 00:22:56.500
Symmetry Partners LLC is an463
00:22:56.500 --> 00:22:59.500
investment advisor firm registered with the Securities and464
00:22:59.500 --> 00:23:02.200
Exchange Commission The Firm only transacts business465
00:23:02.200 --> 00:23:06.200
in states where it is properly registered or excluded466
00:23:05.200 --> 00:23:10.000
or Exempted from registration requirements registration467
00:23:08.100 --> 00:23:11.700
of an investment advisor does468
00:23:11.700 --> 00:23:14.900
not imply any specific level of skill or training and469
00:23:14.900 --> 00:23:17.400
does not constitute an endorsement of the firm470
00:23:17.400 --> 00:23:20.500
by the commission. No one should assume that future performance471
00:23:20.500 --> 00:23:23.600
of any specific investment investment strategy472
00:23:23.600 --> 00:23:26.900
product or non-investment related content473
00:23:26.900 --> 00:23:29.200
made reference to directly or indirectly in474
00:23:29.200 --> 00:23:31.400
this material will be profitable.475
00:23:32.400 --> 00:23:35.400
As with any investment strategy there is the possibility of476
00:23:35.400 --> 00:23:38.600
profitability as well as loss due to477
00:23:38.600 --> 00:23:41.600
various factors including changing market conditions.478
00:23:41.600 --> 00:23:44.800
And/or applicable laws the content479
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may not be reflective of current opinions or480
00:23:47.800 --> 00:23:50.500
positions. Please note the material481
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is provided for educational and background use only moreover.482
00:23:53.800 --> 00:23:57.000
You should not assume that any discussion or information483
00:23:56.700 --> 00:23:59.700
contained in this material Services the484
00:23:59.700 --> 00:24:03.300
receipt of or as a substitute for personalized485
00:24:02.300 --> 00:24:04.500
investment advice. - Visa fler
