Why don’t all Financial Advisors utilize Tactical Asset Allocation with their clients?
They have been taught by the Investment Industry that Market Timing is impossible and that Advisors are better off using Strategic Asset Allocation and riding the ups and downs of the stock market. The answer to the question “When is it the best time to buy” is always “Whenever you have the money”. It doesn’t matter if the NASDAQ is at 5,000 points and then drops 70%. You should have bought stocks at 5,000 and after it dropped by 70%, you should have bought more. Why? “Stocks are on sale if they fall 70%. If you like them when they cost $100 per share, you should love them when they are only $30 per share.” As ridiculous as it sounds, this is an Investment industry belief and marketing tactic.
Does the Investment Industry have any proof to back up their “Stay Invested” Philosophy?
Yes. They produce charts which show investors how low a rate of return they would earn if they missed the “best” 40 days of the market over a 10-20 year period. They say that market timing doesn’t work because if you miss the best days of the market, your rate of return will suffer. They are correct of course that if you managed to miss only the best days of the market, your return would be lower than if you had stayed invested. What they fail to illustrate is, how much higher your rate of return would have been if you had missed the “worst” 40 days of the market over a 10-20 year period. In other words, data can be manipulated to serve the investment industry’s purpose.
Does the Investment Industry have an incentive to keep investors in the market?
Absolutely! Remember, nobody makes money when your money isn’t invested. Mutual Fund managers can’t earn management fees and financial advisors don’t earn valuable service fees. This creates a huge incentive to encourage investors to “Stay Invested for the Long Term”.
How are our advisors different?
“Staying Invested” and earning higher service fees may seem like a good idea to most Advisors. However, we believe that it is better to earn less money in the short term to ensure that we establish a life-long client relationship that will be mutually rewarding. By protecting and preserving capital during bad times, we are able to earn a higher rate of return when market conditions become favourable. It is a simple philosophy that most Financial Advisors reject because:
1. they may not have the confidence in their abilities to look at the “big picture”
2. they are not allowed by their firm to make macro recommendations
3. they don’t want to invest the necessary research time required to make macro recommendations
4. they would rather use a “buy and hold” strategy because it is easier
Our advisors offer specialized level of financial planning to Canadians that are tired of not making money and tired of the excuses offered by their Advisors.
Discover your true potential with the help of your advisor.