The other day, while going through a routine portfolio review for one of my clients, they wanted to change investments, just so that I would be earning my fee.
I had to laugh! I don’t get paid to change investments; I get paid to tell my clients what I most sincerely believe is best for them given their situation, and to do so with utmost professionalism and moral weight so that they believe me — even when they don’t understand me.
I get paid by my clients to do nothing, when nothing is the appropriate thing for them to do. I spend a lot of time and energy to completely understand my clients’ financial and emotional situation. I comprehend and empathize with their hopes, fears and dreams.
I design diversified portfolios of professionally managed investments that are most appropriate for my clients’ long-term goals.
If I have done my job right in the first place, then it should be steady as she goes.
So, I would like you all to consider making a resolution for 2001: DO NOT CHANGE ANY OF YOUR PORTFOLIOS ALL YEAR! Of course, unless your manager dies or goes to another firm, why would you even consider it?
Did you not hire disciplined money managers? Are their investment styles complementary so that investment goals are met while being diversified out of some of the bumps and the humps? Is there anything in the market and/or the economy in the upcoming year that would invalidate one of your current positions? If so, it was an inappropriate long-term investment in the first place.
Furthermore, look at all the time and energy this resolution will free up. No more time required to read mutual fund research reports, attend seminars, peruse charts and scattergrams, massage asset allocation models or watch the markets.
Learn and practise higher levels of patience, discipline and a truly long-term focus.
While you’re making New Year’s resolutions, a second one to consider would be: DO NOT TRUMPET IMMEDIATE PAST PERFORMANCE!
Even after the recent downturn in the equity markets, the three-year and five-year performance numbers for most mutual funds are still misleading. Investors still have unrealistic expectations and many are blind to the historical savagery of typical bear markets. Additionally, impatient money that leaves a cyclically cold manager almost always goes to a manager who’s been hot lately — and most likely is about to go cold.
All the best-selling financial publications and ads tout great “performance” numbers, with the shorter-term, the better.
Unfortunately, the purpose of a financial publication is to get you to buy more of that publication, not to make its audience wealthy. If you stuck with your adviser’s plan and stopped looking for answers in financial publications, nobody would buy the publications. However, by following sound professional advice, we can stop worrying about variables that we can never really control (ie.markets) and focus that energy into variables we can almost control (ie. discipline and patience).
These may be a couple of rather simple resolutions, but by following them this year (and every year), you will find that you have more time for yourself, more self-esteem and, surprisingly, probably a better-performing portfolio. Remember, a financial adviser can balance returns with your tolerance for volatility and help you through those anxiety attacks of greed and fear.
(Anthony Tobias is branch manager with Great Western Financial Corporation in Calgary. These ideas are those of Anthony Tobias and do not necessarily reflect those ideas of Great Western Financial Corporation.)
