More on Related Themes
2015-02-03 Facing Reality by Questioning Some Common Beliefs by Ron Surz (Article)
I've decided to do something different in this quarterly commentary. I begin as usual with a review of first quarter market performance. Then I turn my attention to some commonly held beliefs that I regard as mistaken, as shown in the figure below.
2015-01-06 Hurts So Good: When Exactly Are Falling Prices Bad? by Peter Schiff of Euro Pacific Capital
The sudden fall in the price of oil provides a unique opportunity to examine the widely held belief that deflation is economic poison. As many governments and central banks have vowed to fight deflation at all costs in 2015, the question could hardly be more significant. While falling prices may strike the layman as cause for celebration, economists believe that it can kick off a nasty, and often inescapable, negative cycle, which many believe leads inevitably to a prolonged recession, or even a depression.
2014-12-09 Stocks: Going with the Flows by Milton Ezrati of Lord Abbett
Mutual-fund data show that retail investors remain reluctant to commit money to equities. That actually could help extend the rally in the months ahead.
2014-10-28 The Individual Investor's Edge by Patrick O'Shaughnessy (Article)
Even if the sophistication of professional managers makes it seem as though individual investors do not have an edge, they do. Without a job to worry about, individual investors can tolerate short-term underperformance on the path to long-term outperformance.
2014-10-28 Will the Ebola Scare Haunt the Stock Market? by Kristina Hooper of Allianz Global Investors
Kristina Hooper prescribes four key takeaways from the Ebola epidemic and what it means for investors.
2014-08-19 Do Moving Average Strategies Really Work? by Paul Allen (Article)
Moving-average-crossover strategies have worked out very well in recent years. They prevented their followers from being invested in equities during the tech bubble and the financial crisis. Nevertheless, most of those strategies have underperformed the broad equity market since 2009. In this article, I will analyze all possible moving-average-crossover signals for the S&P 500 since 1928, to see if these strategies provide any value for investors.
2014-06-24 A Mosaic Approach to Raising the Fed Funds Rate by Kristina Hooper of Allianz Global Investors
The Federal Reserve is using a wide swath of economic data and anecdotal evidence to determine when to raise its benchmark interest rate. While prudent, it may stir up anxiety and volatility for equity investors, writes Kristina Hooper.
2014-05-13 Equity Markets Remain Mixed as Fundamentals Slowly Improve by Robert Doll of Nuveen Asset Management
U.S. equities finished mixed last week as the Dow Jones Industrial Average was the only major index to end in positive territory. The overall macro narrative appears favorable despite the lack of market direction. Scrutiny of beaten-down momentum stocks resurfaced, although broader market spillover remained muted.
2014-05-06 Weekly Market Update by Team of Castleton Partners
US Treasury yields declined across the entire maturity spectrum last week, as renewed geopolitical risk more than outweighed a strong employment report. With inflation remaining well below the Fed?s target rate of 2%, long dated Treasury yields continued to decline at a faster rate than shorter dated yields, further flattening the yield curve.
2014-05-06 The U.S. Economy Reached a Turning Point in April by Robert Doll of Nuveen Asset Management
U.S. equities finished higher last week with the S&P 500 advancing nearly 1.0%. Positive sentiment has been supported by growing traction for the economic recovery, key economic data and corporate commentary. Although the upbeat dynamics were mentioned in the latest FOMC statement, policy normalization expectations have not changed. Another widely discussed tailwind was M&A headlines. Although tensions continue in Ukraine, geopolitical risks were mostly on the back burner.
2014-03-25 Low Rates for a Long Time & Preparing for the Eventual Rise by Sponsored Content from OppenheimerFunds (Article)
Interest rates, in a slow growth and only modest inflation world, are likely to remain low for the foreseeable future. Still, the fears of rising rates persist. We believe these fears may be overstated, and this Q&A covers our views on generating income in a low rate world and protecting portfolios in the event of an unexpected rise in rates.
2014-02-20 February Flash Update by Clyde Kendzierski of Financial Solutions Group
It's too early to mean much, but so far out 2014 forecast is falling nicely into place. The market highs on Dec 31st have held, bonds are outperforming stocks, gold is outperforming both stocks and bonds, while gold mining shares are soaring! The anticipated volatility in emerging markets and Japan as well as the wild card of the Chinese economy continue to unfold, while bad weather has postponed the evidence of strong 2014 US growth.
2014-01-17 Continuing a Winning Formula for 2014 by Frank Holmes of U.S. Global Investors
In any competition, sports or investment management, there are lessons to learn to improve and better results.
2014-01-13 Equity Bubble? No. by Richard Bernstein of Richard Bernstein Advisors
The US stock market performed very well during 2013. The S&P 500s total return of nearly 33% far outpaced the returns of most asset classes. A growing contingent of market observers is fearful that the US equity market is in some sort of a bubble. We disagree completely with this notion. A strong market rally that many investors have missed is hardly sufficient grounds for a financial bubble.
2013-12-31 The Ten Best Articles You Probably Missed by Robert Huebscher (Article)
Great articles don’t always get the readership they deserve. We’ve posted the 10 most-widely read articles for the past year. Below are another 10 that you might have missed, but I believe merit reading.
2013-12-24 Calming an Uptight Partner by Beverly Flaxington (Article)
My partner is always anxious and upset about something and everything is urgent. He is a good friend and I respect his intelligence, but he gives me heartburn. Are there strategies I could employ to get him to calm down?
2013-12-17 Optimizing Asset Location: Is It Worth the Effort? by Joe Tomlinson (Article)
Asset location - the choice of whether to hold stocks and bonds in taxable or sheltered accounts - is receiving increased attention as advisors seek more ways to add value. New research has challenged long-held beliefs. I’ll examine that research and answer a question that should concern every advisor and client: Does the value provided by asset-location advice justify the fees for the work involved?
2013-12-12 Payment Industry - Follow the Money by Team of Baird Investment Management
The substantial growth in credit and debit card usage is a multi-decade trend driven by increased global consumer activity and a shift in behavior to less transactions completed by cash or check. As the buzz of the holiday season takes hold, consumers wouldnt think twice about leaving home with just a debit or credit card in hand. The simple act of a purchase followed by swiping a plastic card occurs a staggering several hundred million times each day, with a step up in activity during the holiday season.
2013-11-22 Dividend Season Scorecard by Don Taylor of Franklin Templeton
As consumers gear up for the upcoming holiday shopping season, many investors in individual equities are eagerly anticipating another season that, instead of draining their wallets, might actually fatten them-dividend season. Don Taylor, portfolio manager of Franklin Rising Dividends Fund, is on the lookout for companies which not only have a track record of paying regular dividends, but increasing them. Here are some of Taylors thoughts on the early dividend season scorecard.
2013-11-19 Asset Class Allocation and Portfolios: Critique and Complication by Adam Jared Apt (Article)
In Part 1 of this essay, I explained that for asset class allocation to become an investment practice, it required a foundation of theory. And Modern Portfolio Theory was that foundation. But today, most financial journalists and investment advisors who proffer advice centered on asset class allocation are?if I may judge from their writings?oblivious of this. And why shouldn’t they be? Theory is abstract and difficult to apprehend.
2013-11-12 What Twitter’s New Millionaires Can Learn From Google by Dougal Williams (Article)
In what was one of the biggest launches this year for a technology company, social media giant Twitter had its IPO last week. The deal raised approximately $2.1 billion for Twitter, minting the biggest wave of Bay Area millionaires since 2012, when Facebook went public. Those whose bank accounts swelled as a result of Twitter’s IPO should heed the lessons learned by Google’s millionaires.
2013-11-08 Weekly Economic Commentary by Team of Northern Trust
The ECBs rate cut signals concerns about deflation. The U.S. job numbers provide an upside surprise. How reliable are the U.S. employment data?
2013-11-05 The Key Issues in Today’s Muni Bond Market by Hildy Richelson and Stan Richelson (Article)
Investing in high quality municipal bonds paying a predictable cash flow and returning your principal at the end of the investment is a well-trodden system for lifetime economic success. In this article we discuss some key issues in purchasing municipal bonds to help you make wise choices for your investing system.
2013-10-29 Defining the EM Corporate Bond Opportunity by Sponsored Content from Loomis Sayles (Article)
Finance is a numbers business. Investors study prices, yields, rates of return. However, when it comes to sizing up emerging markets, we think they should also pay attention to semantics. In the past, terming a country “emerging” made it synonymous with low credit quality and higher risk. But today, many emerging markets boast strong credit profiles while parts of the developed world buckle under heavy debt loads.
2013-10-22 How Many Monkeys Does it Take to Find a Successful Strategy? by Michael Edesess and Kwok L. Tsui (Article)
Give a monkey enough darts and she will eventually hit the bulls-eye on a dartboard. We wouldn’t dare consider that monkey an expert dart thrower, but investment professionals have been using essentially that same logic to assert that their strategies ? often called “smart betas” ? will outperform the market. New research exposes the faulty mathematics upon which such claims are based.
2013-10-08 The Futility of the Endowment Model by Robert Huebscher (Article)
In the past two decades, the so-called endowment model has been adopted by hundreds of endowments, foundations and advisors ? particularly those serving ultra-high-net-worth clients. By aggressively allocating to illiquid alternative asset classes, those investors hoped to duplicate the results of Yale and other top-tier institutions. New research exposes the futility of those efforts.
2013-10-08 Is Your Website Like a Toothbrush? by Wendy Cook (Article)
Like your website, a toothbrush is essential and comes in a range of sizes and options. Just as you should regularly replace your toothbrush well before its bristles have frayed, you should treat your website to a regular refresh to keep it relevant in the face of ever-advancing technology.
2013-10-01 The Looming Threat to China’s Economy by Marianne Brunet (Article)
The debate over China’s economic prospects centers on its real-estate bubble, excessive leverage and rising labor costs. But regardless of its short-term fate, China’s economic growth will ultimately be limited by the availability of a key resource. China ranks second lowest in the world for water availability per capita. Water-scarcity poses a threat to its future growth. The challenge is determining how severe this will be.
2013-09-27 Illinois and California: Similar Challenges, Different Approaches by Joseph Rosenblum, Neene Jenkins, John Ceffalio of AllianceBernstein
Every state faces challenges when it comes to balancing the books, but not every state is equally effective at tackling them. The responses of California and Illinois to post-2008 difficulties show how different the approaches can beand how much is at stake.
2013-09-21 Rich City, Poor City by John Mauldin of Millennium Wave Advisors
This week we will conclude our look at pension plans for the nonce with a 30,000-foot overview of the states and then take a deeper dive into one city: mine. This will give you at least one version of how to do your own homework about your own hometown. But fair warning, depending on your locale, you may need medical help or significant quantities of an adult beverage after you finish your research.
2013-09-17 Investing for Real People by Sponsored content by Oppenheimer Funds (Article)
Investor goals are the same, but solutions have changed. Today, aiming to meet basic needs requires new solutions. Laser focus on investor goals will help uncover appropriate investment opportunities. Expanding the opportunity set beyond the usual suspects will be critical to long-term success.
2013-08-16 Investing Rationally if Markets Get Erratic by Russ Koesterich of iShares Blog
It can be hard to invest rationally when markets are volatile, but Russ is expecting markets to be just that come September. Knowing that market volatility can lead to bad investing behaviors, Russ highlights three behaviors to avoid during the potentially rocky road ahead.
2013-08-01 July 2013 Market Commentary by Andrew Clinton of Clinton Investment Management
Fixed income investors have enjoyed a steady move higher in bond prices over the past five years. Given the consistency with which bond values have increased, it is understandable if bond investors were surprised by the just over 0.60%, or 60 basis point rise in ten year Treasury yields and corresponding movement down in bond prices during the second quarter.
2013-07-16 Letters to the Editor by Advisor Perspectives (Article)
A reader responds to the ongoing exchange of letters regarding socially responsible investing, and a reader responds to Joe Tomlinson’s article, Retirement Portfolios: Fears over Rising Rates are Overblown, which appeared last week.
2013-07-02 The Practical Application of Behavioral Finance by Mitchell D. Eichen and John M. Longo (Article)
From the Dot-Com bubble onward, traditional investment models have repeatedly disappointed those who relied on them. When compared to mathematically based models, behavioral finance provides a superior foundation. Here is an alternative investment paradigm, grounded in behavioral finance, that is practical and effective over time periods that are relevant for a significant portion of investors.
2013-06-18 Retirement Income Designations ? Which Should You Choose? by Wade Pfau (Article)
With more than 50 certification programs based on the withdrawal phase of the planning lifecycle, advisors are faced with a paralyzing choice about which designation provides the most valuable curriculum. Here’s some guidance on choosing the right program for advisors.
2013-06-11 Letters to the Editor by Various (Article)
A number of readers responded to Adam Kanzer’s article, Exposing False Claims about Socially Responsible Investing, which appeared last week. Kanzer’s article was in response to Adam Apt’s article, Measuring the Cost of Socially Responsible Investing, which appeared the week before. Several readers responded to other articles as well.
2013-06-07 Affordable Care Act Roll-Out: Are “Train Wreck” Fears Justified? by Harlan Sonderling of Columbia Management
Expect to see a large U.S. Department of Health and Human Services (HHS) advertising and public relations program this summer ahead of the October 1 federal and state health insurance exchanges open enrollment, one of the key features of the Affordable Care Act (ACA). The Administration, Congress and the nation have much riding on successful implementation of the law and the participation of newly-insured individuals.
2013-05-09 The Effect of Negative Interest Rates in Europe by Zach Pandl of Columbia Management
In his press conference last week, European Central Bank (ECB) President Mario Draghi signaled that policymakers may be more open to a cut in the central banks deposit rate. Although Mr. Draghi acknowledged this move could have negative side effects, he added we will be able to deal with the negative consequences we will look at this with an open mind. Several major central banks considered negative deposit facility rates during and after the financial crisis, but so far, all have determined that the idea did not pass the cost/benefit test.
2013-04-30 The Best Solution for Protecting Retirement Portfolios: Put and Call Options versus GLWBs by Joe Tomlinson (Article)
Retirees cannot be exposed to severe ? or even modest ? market losses. They need to protect their savings in a cost-effective manner. I will compare the projected outcomes for two types of strategies: options, which can reduce volatility, and products that guarantee lifetime income, such as variable annuities with guaranteed lifetime withdrawal benefits.
2013-04-30 Implementing Behavioral Portfolio Management by C. Thomas Howard, PhD (Article)
Behavioral portfolio management is based on the notion that if the advisor can redirect his or her emotions and mitigate the impact of client emotions, it is possible to build superior portfolios by harnessing market emotions. This article describes how this can be done and presents evidence of the superiority of focusing on investor behavior when constructing and managing portfolios.
2013-04-16 Letter to the Editor by Various (Article)
A reader responds to Robert Huebschers article, The Downside to Socially Responsible Investing, which appeared on November 13, 2012.
2013-04-09 Four Bold Innovations that will Revolutionize Financial Planning by Bob Veres (Article)
What it would be like for an advisor in the 1980s to be magically transported to our 21st century? The changes would be dazzling: the Internet and social media, exchange-traded funds and Morningstar data, Skype conferences and the virtual cloud, plus a few million mobile device apps that do everything but vacuum your house.
2013-04-09 Tips for Building a Compelling Web Site by Wendy Cook (Article)
Is your current website still living in the “online brochure” days or even non-existent? Don’t dwell on what’s been holding you up. Let’s move your site ? and you along with it ? into the 21st century.
2013-04-02 Choosing an Actively Managed Fund: What Works and What Doesn’t by Joe Tomlinson (Article)
Few topics have been studied as closely as selecting actively managed funds that will outperform the market. Advisors who use such funds need to be confident in their choices ? and justify their methodology to clients. Here’s what the latest academic research says on this highly contentious issue.
2013-03-26 How to Invest Like Buffett by Robert Huebscher (Article)
Listen to Jim Cramer or his cohorts on CNBC and you’ll hear statements like, “Don’t settle for the mediocre returns of a market index!” and “It’s not that hard for investors to pick stocks that will beat the market!” Unless you possess the skills of Warren Buffett, that’s not true. But in the book Think, Act and Invest Like Warren Buffett, Larry Swedroe says you indeed can invest like Buffett ? just not by stock-picking.
2013-03-26 How to Communicate Your Account Minimum by Dan Richards (Article)
Over the past decade, there’s been increasing pressure on advisors to establish a minimum account size for new clients. The challenge is how to communicate that ? should you be direct and upfront, or subtle and indirect?
2013-03-19 Understanding the Role of SPIAs in a Retirement Portfolio by David B. Loeper (Article)
Wade Pfau’s recent article, Breaking Free from the Safe Withdrawal Paradigm, was well researched. Its goal was to accurately calculate the benefits of using SPIAs based on certain assumptions. I fear, however, that many readers may have not fully grasped the impact of a few key assumptions that drive his results.
2013-03-12 America?s Criminal Crony Capitalism by Michael Edesess (Article)
Charles Ferguson believes that every prosecutorial tool at our disposal should be used to indict, fine severely, and imprison those whose transgressions contributed to the recent financial crisis ? not just their companies, but the executives as individuals.
2013-03-05 Selecting Truly Active Equity Funds by C. Thomas Howard, PhD (Article)
In a recent Advisor Perspectives article, Joe Tomlinson reported evidence showing that 401(k) plan sponsors add value in selecting funds, but their risk-adjusted alpha is not enough to beat a comparable index portfolio. Tomlinson then pointed out the need for additional research to help advisors improve upon the fund selection process. As a step in this direction, I will report on research conducted by my firm and other academics.
2013-02-26 Can Advisors Add Value Through Fund Selection? by Joe Tomlinson (Article)
Low-cost index funds will beat the average actively managed fund after expenses. But can advisors identify superior active funds to overcome this disadvantage? Advisors who believe they can choose those funds will be challenged by the results of two studies from the defined-contribution industry.
2013-02-26 What a 29-Year Old Can Teach You about Referrals by Dan Richards (Article)
It all started with a simple request that, as it turned out, was not so simple. The resulting encounter with a 29-year old account manager at a leading bank provided important lessons for advisors.
2013-02-05 How Much Should the US Spend on Healthcare? by Michael Edesess (Article)
How much of GDP should be devoted to healthcare? And how high should the government-provided safety net be? Only after those questions are answered can the issue of how to change government policy be addressed ? if indeed it needs to be changed at all.
2013-02-05 When Is a Small-Cap Fund Too Big? by Bruce Aronow of AllianceBernstein
Asset managers of all types frequently grapple with capacity issues. These questions are even more acute for a small-cap growth manager. Since small-cap stocks are seldom widely held and are thinly traded, it can be tricky to trade quickly when you need to. And growth managers tend to be bigger "consumers" of liquidity, because they're often competing with others to buy companies that are in favor by virtue of their strong fundamental momentum.
2013-01-29 Letter to the Investment Committee by Emilio Vargas (Article)
The following is a thousand words on investing that will irritate most every investment professional. Most forms of active portfolio management incur fees, transaction costs and taxes. Whole industries exist due to these costs, and their proponents will argue that they are adding value. In aggregate they cannot; they are all costs. That I am proposing an investment that could take food from the mouths of the children of an army of accountants, brokers and investment professionals will, no doubt, cause them to find flaws in what follows.
2013-01-14 Bond Market Review & Outlook by Thomas Fahey of Loomis Sayles
The ?nal quarter of 2012 was the icing on the cake of an exceptional year for the credit sectors. Fourth quarter credit gains stemmed in part from uncommonly aggressive monetary policy responses in the third quarter. As economic growth continued to undershoot expectations, major central banks made clear that they were dissatis?ed with the status quo of tepid economic growth and high unemployment. The Federal Reserve went so far as to tie its monetary policy to the level of the unemployment rate.
2013-01-03 Beyond the Fiscal Cliff by Richard Bernstein of Richard Bernstein Advisors
Politicians love the spotlight, but it is very unfortunate that investors watch the show. The drama of the so-called "fiscal cliff" has scared investors, and led them to miss a very good year in the equity market (the S&P 500's total return was 16.0% during 2012 versus the long-term annual average of 11.8%). It appears as though Washington wants to continue to dominate the headlines, which means that it may be more important than ever for investors to downplay Washington's theatrics.
2012-12-26 The Ten Key Benefits of Investment Committees by Bob Veres (Article)
In this first part of a two-part report, I'll identify ten core purposes that investment committees serve in different types of firms, ranking them in order of the number of responses I received. If your investment committee is serving all ten purposes, based on the survey, you're among a select minority - which means that many advisors may find new ways to use this versatile new tool in their RIA practices.
2012-12-26 Lessons from the Downfall of Lance Armstrong by Charlotte Beyer (Article)
The private wealth industry - where teams of elite advisors are trusted to safeguard the wealth of individuals and families and hold themselves to a fiduciary standard - can take several lessons from what happened at the Tour de France.
2012-12-11 Shared Sacrifice by David Rosenberg (Article)
Now that everyone is focused like a laser beam on Fiscal Armageddon, it may be more appropriate to look at what is happening on Main Street rather than Washington. Looking ahead, it is going to be more about the economy, and taking it a step further, at times like these, it is important to understand where the real economic power resides, and this is with the people.
2012-12-11 The Next Generation of Income Guarantee Riders: Part 3 (The Income Phase) by Wade Pfau (Article)
In this third and final installment in my series on guarantee riders, I'll focus on the post-retirement income supported by income guarantee riders for variable annuities (VA/GLWBs), stand-alone living benefit riders (SALBs), and an unguaranteed portfolio of mutual funds. I'll highlight how differences among these products affect their end results, while also investigating what roles guarantees can most appropriately play in a retirement portfolio.
2012-12-04 Nate Silver's Message for Financial Advisors by Ben Huebscher and Michael Edesess (Article)
By now you are likely aware that Nate Silver of the New York Times correctly predicted the results for all 50 states (plus DC) in this year's presidential election and all but two Senate races. Silver's predictive capabilities across a range of disciplines have made him a near-deity among those whose livelihood depends on accurate forecasting - from poker players to counter-terrorism units. It's clear why: His methods work - at least in some cases. And their strengths and limitations carry important lessons for financial advisors.
2012-11-20 Are Inflation-Adjusted Annuities Right for Clients? The Product and Its Prospects by Joe Tomlinson (Article)
Many economists and retirement experts favor inflation-adjusted SPIAs, but advisors and the investing public have never shared their enthusiasm. Detractors contend that the product is fundamentally flawed and will never gain broad acceptance. My own view is more optimistic, but significant obstacles will, nonetheless, continue to impede wider adoption.
2012-11-20 Letters to the Editor by Various (Article)
Readers respond to our articles, The Downside to Socially Responsible Investing, which appeared last week, and, Lacy Hunt on Our Economic Future, which appeared on November 6.
2012-11-13 How Well Does the Next Generation of Guarantee Riders Protect Your Income? Part 2 - Starting the Inc by Wade Pfau (Article)
Unlike traditional VA/GLWBs, the future payments from stand-alone income riders are tied to 10-year Treasury rates. That's bad news for retirees, who may find their future benefits compromised if interest rates remain at historically low levels - regardless of how the stock market performs.
2012-11-13 The Downside to Socially Responsible Investing by Robert Huebscher (Article)
Who wouldn't want a cleaner environment or a more just society? We can all agree these are worthy goals. But it's an established fact that pursuing them through one's investing is costly; environmental-, social- and governance-based investing (ESG) does fine on a gross basis, but loses money net of fees. Now, a recently published paper argues that that ESG is basically a waste of time.
2012-11-13 Harvard's #1 Strategy Guru on the Key Decision for Your Business by Dan Richards (Article)
Competition has brought many once-dominant names to the brink of survival - General Motors, Kodak, Sears and Xerox. Michael Porter, Harvard's top expert on strategy, explains why advisors ignoring the important lesson here do so at their peril.
2012-10-30 The Next Generation of Income Guarantee Riders: Part 1 - The Deferral Phase by Wade Pfau (Article)
Clients no longer need to move their assets to a variable annuity with a rider to guarantee lifetime withdrawal benefits, thanks to the RetireOne stand-alone living benefit (SALB) rider from Aria Retirement Solutions, which can be applied to a portfolio of mutual funds and ETFs. Despite this enticing promise, however, the SALB may not offer as much downside protection as advisors and clients expect.
2012-10-23 How to Change the Regulatory Debate - Before it's Too Late by Bob Veres (Article)
After almost a decade of lobbying, arguing, and posturing, the long fight on Capitol Hill over who will regulate RIAs and how to define 'fiduciary' is approaching a close. Within the next six months, there will no longer be any real excuse to put off a decision, and new players, both in Congress and at the SEC, will be eager to start fresh.
2012-10-09 We Need a Bold Solution to Fix the Retirement System by Joe Tomlinson (Article)
Our retirement system is broken. The average American isn't saving enough to comfortably retire, and the fault lies in our reliance on defined-contribution (DC) plans, such as 401(k)s. Tinkering with DC plans won't solve the problem, and the other extreme - a federally mandated guarantee - isn't likely to gain support. But a number of compromises that lie between those approaches offer a better way forward for future generations.
2012-10-09 The Yin and Yang of 2012 Stock Markets Through September by Ron Surz (Article)
Despite investor concerns about the economy, stock markets delivered substantial returns in the year-to-date, with the S&P 500 returning more than 16% and Europe, Australasia, Far East (the EAFE index) delivering more than 10%. This growth has been in the face of investor withdrawals from equity mutual funds. So if mutual fund investors are selling, who is buying?
2012-10-02 Letters to the Editor by Various (Article)
Two readers respond to Rob Arnott's commentary, The Glidepath Illusion, which was published on September 25. A reader responds to Adam Apt's article, How to Build a Portfolio, which appeared last week.
2012-09-25 Value Investing in a Macro-Driven Environment by Robert Huebscher (Article)
The GoodHaven Fund (GOODX) is managed by Larry Pitkowsky and Keith Trauner. For most of the previous decade, Larry and Keith held research, portfolio management, and executive positions with the Fairholme Fund. I spoke with them last week.
2012-09-25 How to Build a Portfolio by Adams Jared Apt (Article)
This is the first of a set of three articles intended for the educated layman, in which I will combine the core ideas presented in my preceding articles into a comprehensive description of how to put together a portfolio. In this one, I'll explain what is often called Modern Portfolio Theory.
2012-09-18 The Trend is Your Friend by Keith C. Goddard, CFA (Article)
John Hussman's recent market commentary, The Trend is Your Fickle Friend, highlighted the limitations of trend-following investment strategies that rely on moving-average crossover rules as a primary filter. But an extensive study conducted by our firm demonstrated that a simple moving-average crossover system outperforms buy-and-hold, while reducing drawdown risk and volatility.
2012-09-18 Your Clients' Toughest Retirement Decision by Wade Pfau (Article)
Want to trigger an impassioned debate? Ask a group of advisors about the choice between systematic withdrawal plans and single-premium immediate annuities. Fee-only advisors are loath to cede control of client assets to an insurance company that might someday default, while annuity advocates fire back that only their strategies provide a lifetime income guarantee.
2012-09-18 Recognize the Relative Advantages of Natural Resource Equities vs. Commodities by RS Investments (Article)
This RS Investments research brief examines how shifts in commodity fundamentals presents the case for employing natural resource equities as a means to benefit from favorable long-term secular trends, while achieving superior risk-adjusted returns, similar diversification benefits, and more reliable inflation protection relative to commodities.
2012-09-11 Can Our Retirement System be Fixed? by Robert Huebscher (Article)
Google 'Teresa Ghilarducci' and you'll find countless references to her as the most dangerous woman in America. That dubious distinction stems from her 2008 book, When I'm Sixty-Four, in which she advocated replacing voluntary 401(k) plans with government-mandated savings accounts. Ghilarducci was attempting to address a problem that thus far has eluded solution, so it's important to consider her arguments, which have drawn praise from some quarters, too.
2012-09-11 A Lesson in Damage Control (Ron Rhoades, This One's for You) by Wendy J. Cook (Article)
Mistakes. Bigger or smaller, sooner or later, we all make them. With meteoric speed, one goof-up can leave a gaping crater in a firm's otherwise stellar reputation. Ron Rhoades provided a case in point when he recently withdrew from becoming the next NAPFA chairperson after becoming entangled in a minor regulatory problem. Ron's actions provide a lesson for dealing with a situation where your judgment lapsed and the damage is done.
2012-08-28 Who Benefits from High-Speed Trading? by Michael Edesess (Article)
Speed is a virtue in most competitive pursuits; the combination of speed and accuracy is almost always the ultimate advantage. No one knows this better than the purveyors of high-speed trading technology, who have profited mightily -not only by executing rapid-fire algorithmic trades, but also by exploiting the arcane rules that govern the stock exchanges. But at whose expense are they profiting, and how long is their advantage likely to persist?
2012-08-14 Blind Faith by Michael Lewitt (Article)
Central banks are facing political and practical obstacles that will render it very difficult for them to deliver anything more than anodyne words and actions as summer moves into the always dangerous August holiday season. IPhones should be kept on alert at the beach through Labor Day.
2012-08-14 Advisor Website Calls to Action: Going the Extra Mile by Wendy J. Cook (Article)
To quote Ricky Minor's clever book title, "There's No Traffic on the Extra Mile." One way you can go that extra mile is by using your website as more than just a calling card, incorporating creative calls to action to more proactively invite site visitors to be in touch with you.
2012-08-14 Letters to the Editor - Bob Veres on AUM-based Fees by Various (Article)
Several readers respond to Bob Veres' article, The Alternative to AUM-Based Fees: The Total Profitability Retainer Formula, which appeared on July 31.
2012-08-07 Why Hedge Funds Destroy Investor Wealth by Michael Edesess (Article)
If all the money that's ever been invested in hedge funds had been put in Treasury bills instead, the results would have been twice as good. So claims Simon Lack - a former JPMorgan executive whose job was once to help steer billions into hedge funds - in his recent book, The Hedge Fund Mirage: The Illusion of Big Money and Why It's Too Good to Be True. You'd think hedge fund advocates would immediately pounce on this and refute it; but it's irrefutable.
2012-08-07 Robert Shiller on the Social Benefits of Finance by Laurence B. Siegel (Article)
It's a bad sign for the finance industry that one of its leading minds - the distinguished Yale economist Robert Shiller - has felt compelled to write a book in order to defend the idea that finance itself is a constructive pursuit, worthwhile to modern society. Have things really gotten that bad?
2012-08-07 Letter to the Editor by Various (Article)
A reader responds to Bob Veres' article, The Alternative to AUM-Based Fees: The Total Profitability Retainer Formula , which was published last week.
2012-07-31 The Alternative to AUM-Based Fees: The Total Profitability Retainer Formula by Bob Veres (Article)
Many - perhaps most - advisors are overcharging a few of their clients and undercharging the rest. In other words, a small number of investment advisor clients are subsidizing the services that the others are receiving. Here's a way to address that.
2012-07-31 Beyond the Ultimate Death Cross by Georg Vrba, P.E. (Article)
Last week, I showed why the 'ultimate death cross' is not a bearish signal. But the methodology behind that signal - what's known as a 'golden-cross trigger' - can indeed offer a reliable guide to investors. And one can do even better with a simple improvement to the trigger that I have devised.
2012-07-31 Letter to the Editor by Various (Article)
A reader responds to Bob Veres' article, Why Are Advisory Fees Lower Than They Have To Be?, which was published on July 10.
2012-07-24 High Yield and Low Risk: Finding the Best Closed-End Funds by Geoff Considine (Article)
Yield-starved investors have ventured into exotic - and often risky - assets, including hedge funds, non-traded REITs and private placements. But an asset class that has been around since 1893 offers a compelling combination of low risk and high income. A carefully selected portfolio of closed-end funds (CEFs) will yield 8% with less volatility than the S&P 500.
2012-07-24 How to Tell If You're Not Charging Enough by Dan Richards (Article)
Delivering strong value is only half the equation when it comes to optimizing the profitability in the business you run - the other half relates to charging a fair price for that value. Here's a simple test to determine if you're not charging enough.
2012-07-17 Can you Beat SPIAs with Long-Term Bonds? by Michael Edesess (Article)
While single-premium income annuities (SPIAs) guarantee a specific income as long as the purchaser lives, their rates of return generally compare unfavorably with long-term bonds over normal life expectancies. This makes SPIAs look like the inferior investment, notwithstanding their value as longevity insurance. But considering the low level of interest rates and the potential for future volatility, SPIAs are still a good choice for many retirees.
2012-07-17 Breaking Bad by Michael Lewitt (Article)
With our largest business and government institutions committing every conceivable act of legal or moral anomie, we have every right to ask who is going to protect the rest of us from those who have been entrusted with so much power and influence. The institutions that were supposed to be the lifeblood of our economy are the same institutions that inflicted the greatest harm on society. When the family has to be protected from the man who is supposed to protect the family, the family is in serious trouble.
2012-07-17 Letters to the Editor by Various (Article)
Two readers respond to Bob Veres' article, Why Are Advisory Fees Lower Than They Have To Be?, which appeared last week, and a reader responds to Larry Siegel's article, Benchmarking Your Retirement Portfolio With a Risk-Free Strategy, which also appeared last week.
2012-07-10 Letters to the Editor by Various (Article)
Several readers respond to Bob Veres' article, The Profession's Faulty Assumptions: A Top Ten List, which appeared last week. Also, a reader responds to Joe Tomlinson's article, How Safe are Annuities?, which appeared on August 14, and a reader responds to Beverly Flaxington's column, Dealing with Gossip in a Small Firm, which appeared last week.
2012-07-10 Why Are Advisory Fees Lower Than They Have To Be? by Bob Veres (Article)
How much should you charge for your services? Is there any way to objectively calculate a fair price? Doctors, lawyers and accountants all charge relatively similar prices for their services. Why does the financial planning profession have fees that are all over the map?
2012-07-03 Bond Funds: You Get What You Don't Pay For by Michael Edesess (Article)
Innumerable studies have shown that it's well-nigh impossible to beat the averages consistently investing in equity funds. But what about bonds? Bonds, after all, have more structure - perhaps there are ways an expert fund manager could exploit that structure and gain an edge over other investors. Is it possible to predict how well a bond fund will perform relative to other funds?
2012-07-03 The Value of Planning by Bob Veres (Article)
How much do you charge for your services? When you look hard at the value you provide, the answer may be: 'not enough.'
2012-06-26 Ensuring That Clients Feel Valued by Dan Richards (Article)
Ask advisors whether they value their clients - especially top clients - and care about their future success, and you'll get a funny look wondering what you've been smoking. The answer is so obvious that the question isn't worth asking. But ask clients the corresponding question and the response is often quite different.
2012-06-05 Finding the Best Dividend Fund by Geoff Considine (Article)
Assets are flowing into dividend-stock funds. But many experts are warning that those investors are setting themselves up for significant losses. Using an objective methodology that assesses tradeoff between yield and risk, we can determine those funds that investors should prefer - and a few they should avoid.
2012-06-05 The Father of Efficient Markets: Is Warren Buffett Smart or Lucky? by Dan Richards (Article)
Eugene Fama is generally regarded the father of modern finance. His research has expanded upon the capital asset pricing model to identify the value and small-capitalization contributions to risk. Dan Richards spoke with him on May 1, the day before his guest talk at the CFA Institute annual meeting. This is the transcript of the interview.
2012-05-29 A Way to Save for College by Robert Huebscher (Article)
Funding your child's education is perhaps the most important investment you will make, but unfortunately, the investment industry offers few helpful options. Conventional 529 plans are saddled with high fees and force participants to take on an inappropriate degree of risk, as I've written in the past. But a good alternative is now available for funding a private college education.
2012-05-15 Dividends: A Timeless Component of Equity Return by Loomis Sayles & Company, L.P. (Article)
With interest rates at historic lows and many dividend-paying stocks boasting yields comparable to or higher than US Treasurys, it is no wonder that dividends have recently been at the forefront of many investors' minds. But dividends have a long history as a significant component of total return, and today's buzz is just the most recent chapter.
2012-05-15 James Montier on the Failures of Modern Finance by Robert Huebscher (Article)
The seeds of the next crisis have already been sown, according to James Montier - and they are fundamental flaws buried deep within the current theory and practice of finance. Bad models were the root of the financial crisis, Montier said, and a slew of behavioral biases are reinforcing financial instability.
2012-05-08 Annuities versus Systematic Withdrawals: Understanding Tax Effects by Joe Tomlinson (Article)
Given the complexity of most annuities, analysis of them typically only considers pre-tax results. But taxes matter. As we will see, tax impacts vary by the specific type of annuity you're considering, and will make the difference between annuities being cost effective or a drain on cash flow.
2012-05-08 Letter to the Editor by Various (Article)
A reader responds to Bob Veres' article, How to Respond to the Bachus-McCarthy Bill, which appeared last week.
2012-05-01 How to Respond to the Bachus-McCarthy Bill by Bob Veres (Article)
I recommend that everybody contact your elected representatives and tell them that the proposed Bachus-McCarthy legislation would be detrimental to the small businesses in their district or state. Below is a sample letter for you to send to your elected representatives, and a press release for you to send to your local paper and press contacts.
2012-04-24 65+5+Dividends: The case for quality dividend stocks in the first five years of retirement by Legg Mason ClearBridge Advisors (Article)
Retirees are living longer than ever before, and for many, outliving their money is a real concern. A good reason to consider quality large-cap dividend stocks in the early years of retirement - which have historically offered higher returns than fixed income with lower volatility than equities overall.
2012-04-17 Rethinking Safe Withdrawal Rates: The Meaning of Failure by Wade Pfau (Article)
Merely knowing the probability that an investor's wealth will be depleted at some point is not enough to build a retirement strategy. That is the traditional measure of failure in safe withdrawal studies, and it's time to move beyond it.
2012-04-17 Muppet Capers by Michael Lewitt (Article)
Investors enjoyed strong stock market and credit market gains during the first quarter of the year, but storm clouds may be forming on the horizon. Corporate profits have likely peaked. Stocks may be the best house in a bad neighborhood, but houses in that neighborhood appear to be fully priced for now. There are also some troubling signs in the bond markets, particularly the long end.
2012-04-10 Flexible Strategies for Longevity Protection: Comparing Two Products by Joe Tomlinson (Article)
Products that guarantee income for life can be useful for retirement planning, but many clients also want flexibility and control over their investments. Two products that can meet these objectives are variable annuities with guaranteed lifetime withdrawal benefits (VA/GLWBs) and deferred income annuities (DIAs).
2012-03-27 Jack Bogle: The Triumph of the Index Fund by Robert Huebscher (Article)
Jack Bogle has spent his career selling investors on virtues of index funds. In a talk last week, he spoke triumphantly, as if the battle is all but over.
2012-03-20 Hot Buttons that Motivate Prospects by Dan Richards (Article)
If you spend $12,000 to promote an event for prospects, you should expect results. That didn't happen for an advisor whose recent prospecting events failed. Here's how he could have created a successful event - by focusing on the hot buttons that motivate prospects.
2012-03-20 The Wages of Denial by Michael Lewitt (Article)
Europe is insolvent, and hopelessly so. Her procurer - the European Central Bank (ECB) - can front her some money for a while, but in the end she is either going to have to repay him or suffer a very rough consequence. In the meantime, however, she can continue to entertain her customers, in this case those willing to extend her credit in one form or another. Sooner rather than later, however, these creditors are going to grow tired of her tricks and turn their attention otherwise. At that point, she will be left to deal with the ECB because nobody else will have her.
2012-03-13 Concentrated Equity Triple Play Higher Returns, Lower Risk, Lower Correlations by C. Thomas Howard, Ph.D. (Article)
Concentrating a portfolio on a few choice assets dramatically increases an investor's chance of superior performance. Nonetheless, most advisors and investors shun portfolio concentration as unacceptably risky. To a great extent, this is driven by the myth that adequate diversification is impossible unless one holds many stocks - a myth I will debunk.
2012-03-06 Why Invest? - Part 2 by Adam Jared Apt (Article)
Risk tolerance is a quality inherent in an individual or an institution. Whether quantified or not, risk tolerance is the amount of return the investor requires as compensation for the extra risk that comes with investing. It's a concept that is essential for making investment decisions, yet it is elusive and maddeningly difficult to specify. Even so, many investment advisors like to give the public the impression that they're proficient at determining it.
2012-02-28 The Problem with Target-Date Fund Glide Paths by James A. Colon, CFA (Article)
The attack on target-date funds (TDFs) continues to gain steam, and for good reason. Virtually all TDFs offer a mechanical approach to glide-path management, unnecessarily exposing investors to risk - most noticeably when they are on the verge of retirement. A superior approach would keep the long- and short-term volatility of an investor's portfolio within appropriate ranges by actively managing the glide path.
2012-01-31 Why Target-Date Funds Fail by Robert Huebscher (Article)
New research explains why target-date funds have failed to meet investors' objectives. While most of the criticism has been directed to overly aggressive glide paths, that is merely a symptom of the underlying problem - the misalignment of incentives between investors and fund companies.
2012-01-24 Beyond Reinhart and Rogoff by Robert Huebscher (Article)
My article two weeks ago, The Misreading of Reinhart and Rogoff, elicited a number of challenges, both from those who argued that excessive debt imperils our economic growth and from those who claimed that my proposed solution was unworkable. Among those challengers was Lacy Hunt, who raised several valid concerns. I will explain why I disagree with Hunt and others, and why the dollar's position as the reserve currency increases our borrowing capacity. But our ability to borrow cannot be a license to spend unwisely, and I will conclude by expanding on the policy choices the US must pursue.
2012-01-17 Income Annuities versus GLWBs: A Product Comparison by Joe Tomlinson (Article)
The variable annuity with a guaranteed lifetime withdrawal benefit (VA/GLWB) has become the most popular form of annuity, as retirees seek income protection and equity-market participation. But VA/GLWBs are often costly, and the typical purchaser has few tools with which to assess the costs. Investors need a straightforward way to gauge the fees for VA/GLWBs versus other retirement income alternatives.
2012-01-17 GMO: Something's Fishy in China by Robert Huebscher (Article)
A wide gulf separates the two most prominent views regarding China's future. Faced with slowing economic growth, one side says its leaders will deftly navigate a soft landing, while the other claims it will face an implosion similar to those that befell Japan 20 years ago and the US in 2008. Count GMO, a firm that has built its reputation on its ability to identify a bubble about to pop, in the latter camp.
2012-01-17 Letter to the Editor - GLWBs by Various (Article)
A reader responds to Wade Pfau's article, GLWBs: Retiree Protection or Money Illusion?, which appeared on December 13, 2011.
2012-01-10 2011: The Famine That Followed the Feast That Followed the Fiasco by Ron Surz (Article)
Ron Surz provides his award-winning commentary on the US and global markets.
2012-01-03 How Top Execs Game Retirement Plans by Michael Edesess (Article)
Corporate executives and employee-benefits consultants have engineered a cascade of arcane methods to deprive ordinary retirees of benefits they thought they were promised, in order to fatten corporate profits and the benefit packages of top executives. That is the harsh message of Wall Street Journal reporter Ellen E. Schultz's meticulously-researched book, Retirement Heist.
2012-01-03 Ghosts of Christmas Past by Michael Lewitt (Article)
While Europe desperately needs the liquidity that the latest bailout scheme provides, nobody should mistake liquidity for solvency and think for a moment that the crisis is over. Much more work is needed to heal the wounds that European policy makers and business leaders have inflicted on their societies since the European Union was formed.
2011-12-20 Do-It-Yourself Equity-Indexed Annuities by Geoff Considine, Ph.D. (Article)
Equity indexed annuities offer retirees a compelling combination of guaranteed income and participation in the market?s upside. But EIAs are exceedingly complex and have been the subject of numerous regulatory challenges. For those who seek a simpler alternative with a comparable return profile, a combination of fixed-income securities and options is viable choice.
2011-12-20 Letters to the Editor by Various (Article)
Readers respond to several articles: GLWBs: Retiree Protection or Money Illusion?, Did Congress Cash In on Insider Stock Trading?, and Can this be Serious?, all which appeared last week, and to John Mauldin's commentary, The Center Cannot Hold, which appeared on Saturday.
2011-12-13 GLWBs: Retiree Protection or Money Illusion? by Wade Pfau (Article)
One of the most popular variable annuity riders is the guaranteed lifetime withdrawal benefit (GLWB), which offers downside protection through lifetime income, upside potential with step-ups based on market performance, and minimal surrender penalties. But, examining historical data, I have found that those riders carry a cost that will not be readily apparent to retirees: their cash flows rapidly decrease on an inflation-adjusted basis.
2011-12-13 Did Congress Cash In on Insider Stock Trading? by Michael Edesess (Article)
Are members of Congress profiting from insider information on companies their legislation affects, or is something more complicated - and less nefarious - going on? Those who watched the November 13 segment on 60 Minutes that accused members of Congress of insider trading are outraged at these public servants' behavior. But that outrage should be aimed at 60 Minutes itself, along with Peter Schweizer, whose new book, Throw Them All Out, provided the misleading data that was the basis for the broadcast.
2011-12-06 The Unspoken Truth about Hedge Funds by Michael Edesess (Article)
The popularity of the endowment model among advisors has been driven by the belief that hedge funds have produced positive risk-adjusted returns. But the basis for that notion has been statistics gleaned from hedge fund databases, and new research shows returns from those databases are even more upwardly biased than previously thought; the supposed alpha never really existed.
2011-12-06 Two Simple Questions to Motivate Your Assistant by Dan Richards (Article)
High on the list of holiday wishes for many advisors would be a cheerful, motivated, efficient team, united in the common goal of moving your business forward. And while you have no control over many things, you have a great deal of influence over how well your team operates.
2011-11-08 An International Perspective on Safe Withdrawal Rates by Wade Pfau (Article)
Prospective retirees must consider whether they are comfortable basing retirement decisions on the impressive but perhaps anomalous numbers found in historical US data. What has been safe for US retirees in the past has been far less secure for their foreign counterparts.
2011-11-08 A Unique Way to Help Clients Close the Retirement Gap by Dan Richards (Article)
Clients facing a shortfall in retirement savings can bridge that gap in many ways. But one technique is often neglected: spending reductions - even small ones - in their everyday lives. A new web site gives clients the tools to quantify and manage those reductions.
2011-11-01 The Small Cap Falsehood by Michael Edesess (Article)
The supposed outperformance of small cap stocks is a foundational precept on which many respected asset managers have staked their expertise over the years ? foremost among them, Dimensional Fund Advisors. A growing body of research, however, shows no such advantage for the last 30 years and, now, a new study seems to have proven that the supposed small-cap advantage may have never existed in the first place.
2011-11-01 A Better Way to do Financial Planning by Robert Huebscher (Article)
Simplicity is dangerous when it comes to financial planning. Easy-to-use tools that project your retirement savings based on minimal inputs such as your income and savings rate amount to a ?bait-and-switch,? according to Larry Kotlikoff, a Boston University professor of economics. To properly prepare for retirement, one should focus on maintaining a constant standard of living throughout their life ? what economists call consumption smoothing.
2011-11-01 The Questions to Ask about Non-Traded REITs by Robert P. Seawright (Article)
The attraction of high yields comes at the expense of higher risk, a time-worn lesson that should be an ongoing focus for investors in non-traded REITs.
2011-11-01 Regulatory Armageddon by Bob Veres (Article)
Suppose you were somehow able to convince 40 advisors, who are all well-known thought leaders in the profession, to gather in the same room for a six-hour brainstorming session. The goal: to identify the single most important thing that the financial planning profession should be thinking about now. What do you think they'd come up with? Fasten your seat belts, because this may be the most important report you'll read all year.
2011-11-01 Why Invest? by Adam Jared Apt (Article)
Investing has its rational justifications, but like any human activity, it's contingent upon history. American society has come to regard investing in stocks and bonds as a matter of personal responsibility and even an obligation, which in part explains why we invest.
2011-10-04 Moneyball Investing by F. Sean Bonner (Article)
In capital markets, emotions often rule the day, to the benefit of those who best remain well grounded in theory and math. The same holds true in baseball, as the new movie Moneyball reminds us.
2011-09-27 Do Low Correlations Favor Active Managers? by FundQuest Investment Management & Research Group (Article)
There has been much debate regarding the challenges for active managers in market environments with persistently high correlations. Some argue that high correlations hinder active managers seeking to generate alpha through security selection. Indeed, in a recent study, we found that active managers were more likely to succeed in low-correlation environments.
2011-09-13 The Handicap of Experienced Investors by J.J. Abodeely, CFA, CAIA (Article)
In the investment business, assets under management are concentrated with the largest and most established firms. Understandably, investors tend to allocate capital to managers after they've established a good track record. Unfortunately, for many, the analysis stops there. By failing to separate good results from identification of what makes a great investment manager, investors are primed for disappointment.
2011-09-13 An Uncritical Glorification of Hedge Funds by Michael Edesess (Article)
Sebastian Mallaby's book, More Money than God, sheds some light on interesting events in hedge fund history and is strewn with a few valuable insights. Mostly, though, it is a work of serial hagiography. It seems designed to attract worshipers like those who drive by celebrity homes in Beverly Hills.
2011-08-30 Errata and Letters to the Editor by Various (Article)
We correct a couple of errors which appeared in our article last week, The Simplest, Safest Withdrawal Strategy. A reader also responds to that article, and two readers respond to other recent articles.
2011-08-23 The Simplest, Safest Withdrawal Strategy by Robert Huebscher (Article)
Few financial planning topics have garnered as much attention as safe withdrawal rates, but a key question remains unanswered: Can retirees sustain a 4% withdrawal rate with minimal risk? With the recent introduction of 30-year TIPS, the answer is now yes.
2011-07-19 Sorting Out the Annuity Puzzle by Joseph A. Tomlinson (Article)
Why do so few people buy annuities? Economic theory would predict robust demand for this financial product, especially as the workforce ages, but the reality is quite the reverse. Most efforts to explain this have focused on buyer behavior. But to better understand the annuity puzzle, we need to study the sellers.
2011-07-19 A New Approach for Forecasting Market Returns by C. Thomas Howard (Article)
I propose a method for predicting future market movements, which I call the strategy market barometer (SMB). The SMB is calculated by measuring the extent to which investors are rewarding specific investment strategies being pursued by active equity managers. My research reveals that equity strategy performance ranking is a useful predictor of future market returns, and tests confirm that market returns vary in line with SMB measurements.
2011-07-12 Profiting from the Steep Yield Curve by Georg Vrba, P.E. (Article)
The yield curve, as measured by the spreads between the yields of the 10-year note and the 2-year note, has now steepened to levels seen only twice before since 1965. This is only the third time in the last 45 years that investors can take advantage of a flattening of the yield curve this extreme, an opportunity that should not be missed.
2011-07-05 Momentum Investing Can Achieve Market-Beating Returns by Matthew Tuttle, CFP (Article)
In 2002 and 2008 the investment tide went out. And as Warren Buffett famously predicted, we learned who was swimming naked. Both times, it was the practitioners of Modern Portfolio Theory (MPT).
2011-06-28 The Diversified Portfolio Index by Charles Fahy, Sr. (Article)
Investment rates of return that are average but consistent are the products of exceptional performance. Over longer time horizons, these returns become increasingly difficult to outperform. One such example is the Diversified Portfolio Index - a buy-and-hold strategy deployed across all major asset classes.
2011-06-21 The Toughest Question from Clients And How to Answer It by Dan Richards (Article)
Many existing and prospective clients wonder whether they're getting their money's worth on the fees they pay. They may not say it out loud - but it's often there, casting a cloud of doubt about the advisor they work with.
2011-06-14 Bruce Berkowitz - Ignoring the Crowd on Financials by Sam Parl (Article)
Bruce Berkowitz has said that his deep value and contrarian investing style will not guarantee short-term results, but he promises his shareholders will be rewarded for their patience over the long term. Last week, he explained why some of his positions - especially those in the financial services sector - are among the best opportunities in the market.
2011-06-14 Letter to the Editor - Equity-Indexed Annuities, et al. by Various (Article)
A reader responds to our article about equity-indexed annuities. Guy Cumbie provides the latest installment in his exchange with Michael Edesess, which concerned Edesess' article three weeks ago, On the Wikileaks of the Economics Profession.
2011-06-07 New Challenges for the Endowment Model by Robert Huebscher (Article)
The multi-billion dollar endowments of elite institutions like Harvard, Yale, and Princeton are supposed to never be strapped for cash, but that's not how things played out during the financial crisis, when all those schools and many others were forced to raise liquidity under adverse market conditions. The endowment model, despite those failures, is still basically sound, according to Luis Viceira, but it needs several key improvements before institutions and individuals can rely on it.
2011-05-31 Fantasy-world Returns for Equity Indexed Annuities by Robert Huebscher (Article)
When research fails to meet the basic standards of academic rigor, its conclusions should be questioned. One such case is a recent paper, Real-World Index Annuity Returns, whose conclusions you should trust at your own risk.
2011-04-26 Ethics Among Thieves by Michael Edesess (Article)
'Inside Job' is a thoroughgoing indictment of the financial industry that has its virtues but relies on some unsavory vices. On the one hand, through interviews, congressional testimony, and other video, the film exposes cronyism, corrupt ethics, and excessive power at the core of the financial industry. On the other, the movie at times unfortunately feels more like a polemic than a hard-hitting, fact-finding investigative reporting piece.
2011-04-26 How to Take Advantage of the CFP Awareness Campaign by Kristen Luke (Article)
If you are a CFP, you will be directly affected by the Let's Make a Plan campaign, even if you take a passive role. Those who take a more active role can use the toolkit provided by the CFP Board to promote themselves in local markets. Here's what's entailed and what you can personally do to take advantage of the campaign.
2011-04-12 Ten Trends that will Reshape the Fund Industry by Robert Huebscher (Article)
For advisors scouring among thousands of mutual funds, bargains and inefficiencies will be harder to find in coming years. Intense competition among funds for shelf space will not translate to lower fees, and the new class of broad asset allocation funds is unlikely to live up to its marketing promises. Those were among the surprising forecasts from Geoff Bobroff, with whom I met last week.
2011-04-12 A Top Value Manager Looks Outside the US by Robert Huebscher (Article)
David Winters, manager of the Wintergreen Fund, began his career working for Max Heine, where Seth Klarman and Michael Price also worked. In this interview, Winter discusses the why he believes many of today's best opportunities are outside the US and how he is hedging against the threat of inflation.
2011-04-05 A Close Look at the PIMCO-Met Life Retirement Strategy A Marriage Made in Investment Heaven? by Michael Edesess (Article)
If you embrace their recently announced co-marketing strategy, when you're relatively young you use PIMCO's Real Income Funds for stable income in the near term. When you're older Met Life's Longevity Income Guarantee kicks in and takes it from there. You're set with secure income for life. We examine these products more closely and analyze whether they are good deals, either separately or together.
2011-04-05 Fiduciary Focus: The New 408(b)(2) Fee Disclosure Rule Under ERISA by RidgeWorth Investments (Article)
The U.S. Department of Labor (DOL) has now published the long-awaited rule on ERISA Section 408(b)(2). Read the article below from RidgeWorth Investments so that you can be equipped to answer questions and recommend solutions.
2011-04-05 The Future of Investment Manager Due Diligence (and a Look Back at Q1 Performance) by Ron Surz (Article)
Despite the continuing global financial crisis, the uprisings in the Middle East and the Japanese disaster, global stock markets delivered positive results in the first quarter of 2011, as described in this capital market review. In the second part of the article, you'll discover what due diligence procedures need to change and why.
2011-04-05 Letters to the Editor: GMWBs and the Permanent Portfolio by Various (Article)
A reader responds to our article, Understanding Variable Annuities with GMWBs, which appeared on March 1 and another reader responds to Geoff Considine's article, What Investors Should Fear in the Permanent Portfolio, which appeared on March 22.
2011-03-29 Fiduciary Focus: What You Know About the New Fee Disclosure Rule Under ERISA by RidgeWorth Investments (Article)
RidgeWorth Investments discusses what the new rule about Fee Disclosures encompasses and how it affects advisors. Their complimentary white paper is available for download through the link above.
2011-03-15 How to Get the Best Photo for Your Web Site by Wendy J. Cook (Article)
If your photo is missing or misused on your website, social media profiles, brochures, and other introductory materials, then consider this your call to action. A few simple suggestions can help you literally put your best face forward in your corporate communications.
2011-03-08 Letters to the Editor and a Final Thought on VAs with GMWBs by Various (Article)
We received a record number of letters in response to Robert Huebscher?s article, Understanding Variable Annuities with GMWBs, and to Peng Chen?s response, The Real Flaws ? A response to 'Understanding Variable Annuities with GMWBs,' which were published last week. We also provide a final thought on this subject.
2011-03-01 Understanding Variable Annuities with GMWBs by Robert Huebscher (Article)
It's very tempting: a variable annuity with minimum lifetime payout that can increase - but never decrease - based on market performance. That temptation comes in the form of an increasingly popular variable annuity rider known as a guaranteed minimum withdrawal benefit. We explain the flaws in a widely publicized study by Morningstar/Ibbotson, and provide our own analysis of the product.
2011-03-01 The Real Flaws ? A response to 'Understanding Variable Annuities with GMWBs' by Peng Chen (Article)
Peng Chen challenges our analysis of variable annuities with guaranteed minimum withdrawal benefits.
2011-02-22 Bruce Berkowitz on the Exceptional Value in the Financial Sector by Robert Huebscher (Article)
Fairholme's Bruce Berkowtiz, US stock-fund manager of the decade, discusses his large position in the financial sector and why he believes the big bets he is making do not amount to Russian roulette. He also comments on his recent nomination of former Florida Governor Charlie Crist to the board of St. Joes.
2011-02-15 When Clients Make You Livid by Dan Richards (Article)
A client complained to his advisor about his account performance. The advisor said he didn't like to have his professionalism questioned and they began yelling at each other over the phone. Ultimately they fired each other. Over the years, I've found that several principles are key to breaking the tension before situations like this become catastrophes.
2011-02-15 The Stuxnet Paradigm by Michael Lewitt (Article)
Michael Lewitt discusses the situation in Egypt, the economy, rising risk appetites in the market, sovereign debt and municipal bonds. 'It might be very easy,' he writes, 'to be impressed by the 'two years and thousands of man hours' that Ms. Whitney spent researching the fiscal condition of the 15 largest states. What in the world required so much time and effort? It shouldn't have taken nearly so long to determine that these states are in severe financial trouble and that their options for dealing with it are limited.
2011-02-15 David Laibson on the Hidden Challenges of Aging Clients by Dan Richards (Article)
In this interview, Harvard economist David Laibson discusses his research into the challenges of helping elderly clients with their financial planning. He also discusses how to overcome the procrastination and laziness that often result in inferior investment decisions. This is a transcript of the interview.
2011-01-25 Ten Resolutions for Greater Prosperity in 'The Year of the Fiduciary' by Jeffrey Briskin (Article)
If you think selling and servicing 401(k) plans isn't easy today, ERISA is about to make it even harder. The good news is that firms that adjust to these challenges can use them to their competitive advantage Here are ten steps your firm can take to prepare for The Year of the Fiduciary.
2011-01-11 The Key to Scaling Your Practice by Bob Oros (Article)
Independent advisors who are ill-equipped to handle a large influx of business from retiring baby boomers will struggle to harness the swelling demand. To capitalize on this new wave of assets, advisors need an edge. Many forward-thinking advisors have already discovered such an advantage in model portfolios.
2011-01-11 2010: A Truth Odyssey by Ron Surz (Article)
I review some of the lessons learned in the last two years. I review the last year, discuss 2008's lessons, and conclude with my traditional review of the longer-term history of U.S. markets over the past 85 years.
2011-01-04 Letters to the Editor by Various (Article)
A reader responds to our article, Debunking Ken Fisher, which appeared two weeks ago. Another reader responds to the article, Return Distributions and the Shiller P/E Ratio, by Keith C. Goddard, which originally appeared on February 2, 2010.
2010-12-21 Debunking Ken Fisher by Robert Huebscher (Article)
In his latest book, Debunkery, Ken Fisher achieves his goal of dispelling many common investment myths and, in doing so, offers his philosophy on how individuals should manage their money. While most of the advice he offers is unequivocally correct, he also makes egregious errors on some serious matters.
2010-11-30 QE2: Beware the Perils of its Success by Vitaliy Katsenelson (Article)
QE2 is like a drug prescription that comes with a list of side effects that are often worse than the disease it was supposed to cure. It is difficult to know the unintended consequences of QE2, but it may result in a substantial decline in the dollar, stagflation, lower economic growth and much higher interest rates.
2010-11-23 The Kings of Cash Flow: Investing in Tomorrow's Potential Winners Today by David Vincent and Kevin Collins (Article)
Companies generating a lot of free cash flow generally represent attractive investment opportunities over time. The 'Kings' - companies with the highest free cash flow yields - have historically outperformed companies with lower free cash flow yields and are currently experiencing what may be one of their longest and most drastic periods of underperformance in the last 50 years.
2010-11-09 New Strategies in Alternative Investments by Robert Huebscher (Article)
Alternative investments, broadly speaking, and hedge funds, more specifically, have performed as intended over the last 20 years, modestly increasing returns and significantly reducing risk when added to a traditional stock-bond portfolio. Selecting the appropriate vehicle is the challenge, and that task has been made easier by the introduction of new exchange-traded strategies.
2010-11-02 The SEC?s 12b-1 Proposal is Based on Misguided History, Flawed Economics by John H. Robinson (Article)
The SEC's stated aims of its proposed Rule 12b-1 reform are laudable: increasing transparency, reducing investor fees, and increasing competition among mutual funds. However, John Robinson's review of its 278-page proposal found major flaws, including a misinformed historical pretext and naïve economic analysis.
2010-10-12 The Perfect Storm: Threat or Opportunity by Dinesh Sharma and Michelle Goldstein (Article)
Our primary client base, baby-boomers, is quickly sliding into retirement, leaving us to question where our growth will come from. And now we have the uncertainty surrounding the Dodd-Frank Wall Street Reform and Consumer Protection Act and the anxiety that comes with it. Financial advisors can choose to see the convergence of these factors as a threat to their well-being or as an opportunity to prosper.
2010-10-05 The Misguided Promise of 529 Plans by Robert Huebscher (Article)
Along with the overall market, 529 plans suffered disastrous returns in 2008, leaving many families with insufficient funds to pay their tuition costs. The real problem, though, is not with the past performance of 529s. A misguided promise underlies the vast majority of 529 plans - that their heavy allocation to equities will provide acceptable risk-adjusted returns for the time horizons over which most parents invest.
2010-09-28 Lessons in Ethics: The Incredible Story of Patrick Kuhse by Charlie Curnow (Article)
Patrick Kuhse is the last person you'd expect to give a lecture on business ethics. As a deputy bond trader for Oklahoma's $9 billion general fund during the early 1990s, Kuhse arranged kickbacks for his superiors in the state Treasurer's office. In return, he received an increase in his commissions which, over time, netted him $3.89 million more than he would normally earn, according to court estimates. But today, business ethics are his specialty.
2010-09-28 Unraveling the 12b-1 Debate by Robert Huebscher (Article)
The SEC has proposed sweeping changes to the way commission-based advisors will be compensated for the services they provide. Those changes will rename and modify the 12b-1 fees that many mutual funds now charge. To understand their impact, we spoke with Avi Nachmany of NY-based Strategic Insight, whose clients include the largest mutual funds.
2010-09-14 Identifying Opportunities in the Municipal Bond Market by RidgeWorth Investments (Article)
Ridgeworth Investments shares its perspective on the muni bond market in a recent white paper entitled "Identifying Opportunities in the Municipal Bond Market" which outlines the historical benefits of municipal bonds, the changing market dynamics in 2009 as well as RidgeWorth's outlook for municipal bonds in 2010 and potentially beyond. RidgeWorth concludes that despite a challenging market environment, munis still offer attractive investment opportunities. We thank them for their sponsorship.
2010-09-14 The Centre Cannot Hold by Michael Lewitt (Article)
"A refusal to shed discredited monetary and fiscal policies and embrace creative and politically bold solutions is keeping our economy mired in high levels of structural unemployment and below-trend growth," writes Michael Lewitt in the latest edition of the HCM Market Letter. He also believes that "misguided faith in Keynesian solutions to debt crises, a near-religious belief that mild deflation must be avoided... and uninformed media hype about the alleged benefits of mergers and acquisitions" should be added to the list of bad ideas that lead economic policy and markets astray.
2010-09-07 A Modest Proposal to the SEC by Michael Edesess (Article)
The SEC is now considering reforming how 12b-1 fees are currently charged, how they would be set in the future, and how they will be disclosed to fund purchasers. In this guest contribution, Michael Edesess offers an alternative, radical proposal, should the SEC's reforms not be adopted.
2010-08-31 The Alternative to Big Bonuses by Charlie Curnow (Article)
Do bankers deserve big bonuses? Economists will tell you that bonuses improve employee productivity by rewarding good work. But did the large performance-based payments given to Wall Street securities traders, for example, really steer them to better choices during the run-up to the recent financial crisis? What about financial advisors who base their fees on a percentage of the assets they manage? We take a critical look at Dan Ariely's latest research and the insights it provides.
2010-08-24 This is No Way to Run a Railroad by Michael Lewitt (Article)
In the latest edition of the HCM Market Letter, This is No Way to Run a Railroad, Michael Lewitt says the railroad known as the United States economy is chasing its own tail these days. Driven by misbegotten fiscal and monetary policies that ignore the lessons of history in favor of discredited financial and economic theories, the economy is trapped in a cycle of boom and bust. Lewitt also comments on the bond market, the European stress tests, GM, and the private equity industry.
2010-08-17 A Proven Path to Gaining Client Assets by Dan Richards (Article)
When Dan Richards talks to successful advisors about their business objectives, for most increasing assets is at the top of their list. Some advisors mistakenly believe, though, that winning a greater share of assets from existing clients is driven by performance.
2010-08-10 When Active Management Matters by Kenneth R. Solow, CFP and Michael E. Kitces, MSFS, MTAX, CFP (Article)
Financial planners have eagerly awaited any research that could finally, definitively prove - or disprove - the pesky notion that active management is effective. Though no one has yet risen to that challenge, past academic studies have been improperly interpreted to show that portfolio policy, or asset allocation affects portfolio returns far more than active management. As Ken Solow and Michael Kitces write in this guest contribution, the most recent study to tackle the active management debate, by Yale professor Roger Ibbotson, shares two weaknesses with previous research.
2010-08-03 'Fiduciary': Much Ado about Nothing! by John Lohr (Article)
The most overused, misused and misunderstood word in the investment industry is 'fiduciary.' Independent advisors, trade organizations and self-styled 'expert' groups have called for stockbrokers to adopt the 'fiduciary' standard to achieve a grand leveling of the playing field for those who provide investment advice. This is nothing more than unnecessary marketing hype, says securities lawyer John Lohr in this guest contribution.
2010-08-03 Letter to the Editor by Various (Article)
In a letter to the editor, a reader responds to Dave Loeper's article, Fake Diversification Exposed: Does Asset Allocation Work?, which appeared on July 13.
2010-07-27 Why Immediate Annuities Make Sense by Geoff Considine, Ph.D. (Article)
As they approach retirement, baby boomers are increasingly concerned about how best to manage their portfolios during the decumulation phase of their lives. One of the challenges for advisors and investors is understanding what role annuities should play, if any. Geoff Considine shows that immediate annuities should be an important part of a decumulation strategy.
2010-07-27 Active Managers Add More Value in Bull than Bear Markets by Jane Li, CFA, CAIA (Article)
In this guest contribution, Jane Li of FundQuest argues that both active and passive investing have their strengths and weaknesses; it depends on the market segment in question and on the economic climate. Active managers tend to add value in bull markets, but their value is shakier in bear markets.
2010-07-20 Martin Leibowitz? Failed Defense of the Endowment Model by Michael Edesess (Article)
The latest book from Martin Leibowitz, one of the most respected thinkers in the investment industry, attempts to justify the endowment model of investing. As Michael Edesess writes in this review, Leibowitz's defense is highly problematic, and that should concern any advisor utilizing a Yale-like strategy.
2010-07-20 Beyond The Stars: Improving Active Fund Selection Based On Manager Skill by Michael Ervolini (Article)
After a brief review of known shortcomings of common fund evaluation methodologies, Mike Ervolini introduces a new approach based upon analytics that his firm has developed. Rather than relying on non-predictive metrics such as past performance, his approach looks at investment processes in relation to deeper skills that managers possess regarding buying, selling, and position-sizing.
2010-07-13 Nouriel Roubini on Crisis Economics by Michael Edesess (Article)
There's good reason why Nouriel Roubini has been dubbed Dr. Doom. After reading his book co-authored with Stephen Mihm, Crisis Economics, one might despair for our economic system. Roubini makes the recent crisis seem inevitable, hard to stop, and very hard to keep from happening again.
2010-07-13 Fake Diversification Exposed: Does Asset Allocation Work? by David B. Loeper, CIMA, CIMC (Article)
Domestic equities are down roughly 14.5% from their April 23rd high. Many advisors tout sophisticated (and very expensive) asset diversification strategies, supposedly to protect their clients against precisely these circumstances. So, with this recent decline, Dave Loeper asks whether all of those supposed diversifiers protected portfolios?
2010-07-13 Deficits Monetary and Moral by Michael Lewitt (Article)
"The word 'deficit' has come to epitomize not only our economic dilemmas but also our moral and intellectual failures to address them in an era that should be boasting of new breakthroughs in the social and physical sciences," writes Michael Lewitt in the latest installment of his HCM Market Letter, Deficits Monetary and Moral. "Instead, our ability to solve complex problems is weighed down by flawed and corrupted government processes and the lack of courage to forthrightly change them."
2010-07-13 A Marketing Guide for RIAs: Part 3 ? Build a Website by Kristen Luke (Article)
Kristen Luke discusses the steps to take to build your website.
2010-06-22 Improving on Morningstar's Ratings: Moving Beyond Past Performance by C. Thomas Howard, PhD (Article)
Past returns provide little or no help in choosing the best fund going forward, and Morningstar's stars are the best known example of this failure. In this guest contribution, Tom Howard presents new evidence of the failure of past performance to predict future returns, and shows how his strategy-based rating methodology offers measurably better predictive power.
2010-06-15 Strategy Advice from Apple and Google by Dan Richards (Article)
Last week Dan Richards conducted a webinar focused on the key decision that will drive advisors' long term success. Richards talks about what advisors can learn from the success of Apple, Google, Coke and Walmart.
2010-06-15 Asset Allocation Matters, But Not as Much as You Think by Robert Huebscher (Article)
The market downturn has caused a rethinking of many core principles underpinning investment advice, chief among them the role of asset allocation. We talk with Yale's Roger Ibbotson about the impact of market returns and active management in explaining return variance and the role of asset allocation going forward.
2010-06-08 Why Wall Street Won't be Reformed by Robert Huebscher (Article)
Michael Lewitt, author of the highly respected HCM Market Letter, has just released a new book, The Death of Capital. In this interview, he identifies the challenges facing those who seek to regulate Wall Street, and why most of the proposed reforms are likely to fail.
2010-06-08 The First Thing We Do, Let?s Kill All the Quants by Michael Lewitt (Article)
In the latest issue of the HCM Market Letter, Michael Lewitt draws the parallels between the Gulf of Mexico oil spill and financial reform - both, he says, demonstrate our inability to learn from our mistakes. Lewitt also comments on quantitative trading strategies, economic recovery and the capital markets.
2010-05-25 Seth Klarman is More Worried than at Any Time in his Career by Robert Huebscher (Article)
The concern that the dollars he earns for his clients will lose their purchasing power is always on hedge fund manager Seth Klarman's mind. The possibility that the government will continue to print money to solve our economic problems has left him more worried than at any time in his career. We report on Klarman's remarks at last week's CFA conference.
2010-05-11 God Is Dead: The Implications of the Goldman Sachs Case by Michael Lewitt (Article)
Michael Lewitt provides us with the most recent issue of the HCM Market Letter, where his discusses the implications of the Goldman Sachs case. Lewitt says Goldman faces a terrible dilemma, and should heed the lessons of the downfall of Drexel Burnham two decades ago. Lewitt also comments on the private equity industry, public pension funds, and bank capital requirements and the ratings agencies.
2010-05-11 Inspire Client Trust by Delivering Clear, Insightful Investment Communications by Ani Yessaillian (Article)
One of the best ways to build trust with your clients is to consistently deliver clear, insightful investment communications. In this guest contribution, consultant Ani Yessaillian tells you how to make the most of your quarterly performance report and your off-cycle investment communications.
2010-05-04 The Quants by Michael Edesess (Article)
In his review of the new book, The Quants, Michael Edesess says its author, Scott Patterson, mistakenly glorifies the accomplishments of the supposed quantitative "geniuses" on Wall Street. Those quantitative analysts are not disciplined for their lack of rigor and, as a result, produce results that are not justified by the underlying mathematics or by common sense.
2010-05-04 The Future of Consumer Financial Protection by Charlie Curnow (Article)
Among the items that headline the proposed financial reform legislation is a new Consumer Financial Protection Agency (CFPA) that would consolidate regulatory responsibilities for consumer financial products, currently handled by four separate agencies, in one central office. Charlie Curnow looks that the goals of the CFPA and its implications for consumers.
2010-04-27 Paul McCulley?s Design for Financial Regulation by Robert Huebscher (Article)
PIMCO's Paul McCulley parents his 20-year-old son with an overarching principle: If you want access to the "Bank of Dad," then you must comply with the regulations of the "Bank of Dad." Wall Street abandoned similar tenets with in the run-up to the credit crisis, and now McCulley says that core principle - to play the game, you must accept regulation - needs to be restored before another crisis unfolds.
2010-04-27 Gary Shilling: America?s Lost Decade by Robert Huebscher (Article)
The US faces 10 years of slow growth and deflation that could rival Japan's "lost decade" - two words which Gary Shilling did not utter but which unmistakably characterize his forecast. Shilling is founder and President of the New Jersey-based economic consulting firm A. Gary Shilling & Co.
2010-04-06 A Review of "The Big Short" by Michael Lewis by Michael Edesess (Article)
"The Big Short" tackles the financial meltdown as seen by four relatively minor, but colorful players. (Minor means running only hundreds of millions, not billions.) All of them were voices in the wilderness, writes Michael Edesess, our reviewer. All of them bet heavily against the subprime real estate bubble that, for a while, fueled huge gains.
2010-04-06 Follow-up to the Folly of Peer Group Analysis by Various (Article)
In response to a recent commentary by Research Affiliates, The Folly of Peer Group Analysis, a reader offers his own research on the performance of indices against peer groups, once impurities have been eliminated from those peer groups. John West and Ryan Larson of Research Affiliates provide additional analysis.
2010-03-30 Seven Tips for a Successful Family Foundation by Nancy Opiela (Article)
Managing a foundation's assetswins you the cachet of being seen as helping your clients fulfill their philanthropic goals, and it is extremely lucrative work that can create a practice-building bridge to the next generation.The administrative aspects, as Nancy Opiela writes, can be daunting and she offers seven tips for a successful family foundation.
2010-03-30 Not a Lost Decade for Diversified, Balanced Portfolios by Joni L. Clark, CFA, CFP (Article)
Did the last ten years really demolish the foundations of Modern Portfolio Theory and classic investing principles? How did portfolios that stuck to the principles of effective diversification and buy-and-hold investing actually perform during the so-called "Lost Decade?" The answers to both questions is an unqualified "no," writes Joni Clark of Loring Ward in this guest contribution, based on her analysis of a DFA-based strategy.
2010-03-22 Health Care Fallout by Brian S. Wesbury and Robert Stein of First Trust Advisors
The health care bill is no reason to run for the hills. In the short term, there are no policy changes that will derail or noticeably slow the V-shaped economic recovery slowly underway. There are harmful policy shifts, including extra fees on health insurers and the makers of medical devices, but these are sector and not macroeconomic issues, at least in the short term. The biggest macroeconomic effects will stem from tax hikes scheduled to go into effect in 2013. In the meantime, however, Wesbury and Stein retain their bullish stance.
2010-03-02 The Elusiveness of Persistence by Michael Nairne (Article)
In this guest contribution, Michael Nairne examines a manager's track record, and highlights the critical question of persistence in performance - whether a manager's past performance is predictive of future performance. Certainly, he says, considering the avalanche of media articles on top winning funds and the endless sales pitches to investors trumpeting "best in class" managers, one would assume that there is some reasonable level of persistence in performance...
2010-03-02 It?s No Shell Game by Roger Schreiner (Article)
Last week, Wealthcare Capital Management's David Loeper accused Roger Schreiner, of Schreiner Capital Management, of "playing a shell game" and "stacking the deck," in regard to Schreiner's $100,000 challenge to passive managers. Schreiner responds, and says that passive advocates miss the point that relying only on diversification is insufficient to protect against downside risk.
2010-03-02 Robert Pozen on the Financial Crisis, Social Security, and the Mutual Fund Industry by Dan Richards (Article)
Robert Pozen is the chairman of MFS Investment Management and a senior lecturer at the Harvard Business School. In this interview with Dan Richards, he discusses the financial crisis, Social Security, and the mutual fund Industry. We provide a transcript and a video replay of the interview.
2010-02-23 Rethinking the Fundamentals of Client Communication by Dan Richards (Article)
Dan Richards says advisors need to fundamentally rethink both the information they communicate and - just as importantly - how they communicate. Changing these two key dimensions of your communication strategy - what you send clients and how you send it - will be critical to future success.
2010-02-23 An Analysis of the Risk and Return of Small/Mid-Cap Growth by David Vincent (Article)
In this guest contribution, David Vincent of Fred Alger says investors interested in gaining exposure to the small-capitalization growth equity style should consider the small/mid ("SMid") capitalization style as a way to capture the benefits of small-cap growth.
2010-02-09 Overconfidence and Excessive Trading Harm Investor Returns by Dan Richards (Article)
The question Terrance Odean asks is if someone sells a stock and then buys another stock, on average does the stock they bought outperform the one they sold by enough to cover their trading costs? Odean, a professor at Berkeley, has researched this question and the role of excessive trading and overconfidence in investor decisions.
2010-02-05 The Internet and Self-Control: An App to the Rescue by Dan Ariely of Predictably Irrational
We are victims of temptation - that's why our resolutions to start dieting or saving or to stop procrastinating often fail. One source of temptation that detracts from productive work is random web surfing. Ariely discusses a new web application that controls the desire to browse "non-productive" sites.
2010-02-02 Stiglitz: U.S. Economy Will Falter without More Stimulus by Susan B. Weiner, CFA (Article)
The U.S. government has botched its handling of the economy over the last eight years, according to Nobel Prize-winning economist Joseph Stiglitz. He explained how the U.S. created the global recession - and how we can get out of it - in a public presentation on his new book, Freefall: America, Free Markets, and the Sinking of the World Economy.
2009-12-15 The Next Black Swan? Underfunded Public Pensions by Robert Huebscher (Article)
The plights of California and other states reveal an ominous threat our economy faces: underfunded public pension liabilities. We examine the size and scope of this problem, focusing on whether the underlying assumptions used to calculate liabilities are realistic.
2009-12-08 The 529 Dilemma by Mary Ann Lambert (Article)
The recent market decline coupled with, tax, custodial, management fees and estate planning issues make the decision to use a 529 plan less than straightforward. In this guest contribution, advisor Mary Ann Lambert briefly reviews the history of college savings plans and shows how the current landscape favors 529s for some clients but not for others.
2009-12-01 Hidden Cost of Active Management by Mark Kritzman (Article)
There is a hidden cost associated with most active funds, writes Mark Kritzman of Windham Capital Management in this guest contribution. The typical active fund is more than 90% correlated with the market. Yet their relatively high active management fee is applied not just to the fund's active component but to its market component as well.
2009-11-24 Gary Shilling's Version of the New Normal by Robert Huebscher (Article)
A dramatic reduction in consumer spending has doomed the US economy to slow growth and deflation, according to Gary Shilling. America's 25-year spree of profligate spending is over, and it will be supplanted by a decade-long retrenchment that will ultimately bring the consumer savings rate from 4% to double-digits, where it has not been since the mid-1980s, he said.
2009-11-24 Get Personal with your Clients and Prospects by Kristen Luke (Article)
Financial advisors are, or at least should be, in the relationship business. So what better way to build a relationship than to interact with your clients and prospects outside the sphere of your business? Kristen Luke offers her suggestions.
2009-11-24 Buy Bonds and Not Bond Funds by Hildy and Stan Richelson (Article)
Record inflows into longer-term bond funds in the last six months have provided investors purported relief from the near-zero returns in money market funds. Do not mistake those inflows or rising prices for an endorsement of bond funds, write Stan and Hildy Richelson in this guest contribution. Bond funds are inferior to individual bonds, as those who are now buying bond funds may soon discover.
2009-11-17 Bruce Greenwald on Positioning First Eagle?s Funds by Robert Huebscher (Article)
Bruce Greenwald is a professor of finance at Columbia, the Director of Research at First Eagle Funds, and a leading expert on value investing. Last week we published part one of our interview, where he discussed the structural problems in the economy and his forecast for higher unemployment. This week he discusses the positioning of First Eagle's investments, and why Warren Buffett's purchase of Burlington Northern was a mistake.
2009-11-17 Our Steroidally Challenged Economy by Vitaliy Katsenelson (Article)
Vitaliy Katsenelson writes that the US economy is like a marathon runner who, after suffering an injury, takes steroids in order to return to racing. His performance is fine, but what don't see are the risks, just as our economy is now "steroidally challenged."
2009-11-17 Client Gifts that Stand Out by Dan Richards (Article)
Having trouble with ideas for holiday gifts for your clients? Dan Richards offers four strategies for selecting a gift with a meaningful impact.
2009-11-17 Letters to the Editor by Various (Article)
We have two letters to the Editor - one responds to last week's interview with Bruce Greenwald and the other responds to two recent articles which argued that advisors should avoid active management.
2009-11-03 Absolutely ? Maybe by Robert Huebscher (Article)
Since Putnam introduced its absolute return funds earlier this year, over 4,200 advisors and $650 million in assets have flocked to the new financial products. Putnam's four funds seek to beat inflation by 100, 300, 500 and 700 basis points, and their performance over their first nine months (3.1%, 6.4%, 8.4% and 12.2%, respectively) was encouraging for their investors. Impressive as those results may be, the question is whether they are sustainable.
2009-11-03 I am a Fiduciary Financial Advisor by Ron A. Rhoades, J.D., CFP (Article)
The fiduciary standard of conduct is necessary to properly align investors' interests with those of the advisors who serve them, says Ron Rhoades in this guest contribution. Moreover, the fiduciary standard of conduct is not onerous and should not be feared. Advisors who embrace a fiduciary standard of conduct must simply follow the guidelines he sets forth.
2009-11-03 The Expense Paradox by John F. Doyle (Article)
A convenient reason to eliminate a fund from consideration is high expenses. While that criterion alone is often a good guideline, blindly relying on it can cause you to overlook otherwise attractive funds, says consultant Jack Doyle in this guest contribution.
2009-10-27 Leveraged Index Mutual Funds Evolve to Meet Market Needs by Direxion Funds (Article)
Until recently, leveraged index funds had daily objectives, rebalancing their leverage at the end of each trading day in order to match their stated exposure rate. This characteristic made it necessary for investors to monitor them daily in order to both track and manage the exposure rates applied to their investments in the funds. Direxion Funds has released the first monthly-rebalanced leveraged funds, and they explain how they operate. We thank them for their sponsorship.
2009-10-27 Letters to the Editor ? Fama-French and the Active-Passive Debate Redux by Various (Article)
Last week, two active management proponents responded to our article, Luck vs. Skill in Mutual Fund Alpha Estimates, on the latest research from Ken French and Gene Fama. This week, a reader takes on one of those responses and Michael Edesess, author of our article, says the debate between active and passive management is really a sidelight to the real issue - which is excessive fees.
2009-10-20 Letters to the Editor - Fama-French and the Active-Passive Debate by Various (Article)
Last week's article, Luck vs. Skill in Mutual Fund Alpha Estimates, on the latest research from Ken French and Gene Fama drew plenty of responses. We publish two of them, both in support of active management.
2009-10-20 Life in and after the NBA Financial Planning for Professional Athletes by Robert Huebscher (Article)
During a 13-year career that began in 1987, Chris Dudley was called on to defend some of the greatest centers in NBA history - among them Shaquille O'Neal, Robert Parish, and David Robinson. While developing a reputation as an exceptional shot-blocker and rebounder, Dudley also devoted time to preparing for his post-basketball career - as a financial advisor - and he shares with us his thoughts about financial planning for the professional athlete.
2009-10-20 Finance After Auschwitz by Michael Lewitt (Article)
We are again privileged to provide an excerpt from Michael Lewitt's HCM Market Letter. In this installment, Finance After Auschwitz, Lewitt examines the dangers posed by Iran, whether the market is overvalued, the future of securitization, and what should be done about the private equity industry.
2009-10-13 Luck vs. Skill in Mutual Fund Alpha Estimates by Michael Edesess (Article)
A long-standing research thread has shown that professionally-managed portfolio returns strongly resemble a random walk about the market average. This is interpreted to mean that professional money managers cannot predictably beat the market. A new study by Eugene Fama and Kenneth French uses a novel statistical approach to add evidence to that record- but with an important caveat.
2009-10-13 In Defense of Leveraged and Inverse ETFs by Tom Lydon (Article)
Leveraged and inverse exchange traded funds (ETFs) have been a lightning rod for controversy. Reasonable concerns underpin criticism of them, but these funds are largely misunderstood. Tom Lydon sets the record straight and identifies those investors for whom leveraged and inverse funds are appropriate.
2009-10-06 Ten Tips from Advisors Down Under by Terry Bell (Article)
The question for advisors is what's going to happen to their role and how they can best adapt to a changing world. Irrespective of the details, change will continue. Perhaps the Australian experience can provide a few pointers for US advisors.
2009-09-29 A Tale of Two Investors by Brian Murphy (Article)
Just as Dickens contrasted the fortunes and misfortunes in England and France in his classic novel, A Tale of Two Cities, today the divergence is painfully apparent in those who plan to accumulate wealth for their retirement and those who seek excess returns in their portfolios. In this guest contribution, advisor Brian Murphy tells the tale of two clients - one who aggressively sought alpha and the other who passively built retirement wealth.
2009-09-15 Five Reasons to Avoid the Gold Rush (Updated) by Vitaliy Katsenelson (Article)
The reasons why one should sell the cat, pawn the mother-in-law, and use the proceeds to buy gold are well known. However, in this guest contribution, Vitaliy Katsenelson offers arguments why one should think twice before jumping in bed with the gold bugs, or at least remain sober while determining gold's weight in the portfolio.
2009-09-08 Infrastructure Investing by Michael D. Underhill (Article)
With global markets improving, liquidity returning to the credit markets, and valuations improving, the infrastructure market looks promising. In this guest contribution, Michael Underhill argues that infrastructure assets,when chosen correctly, can diversify an investor's portfolio because of their low correlation with other asset groups, their consistent returns coupled with lowered levels of risk, and their potential for inflation-linked returns.
2009-09-01 Dougal Williams Responds: The Failure of Asset Allocation Funds by Dougal Williams, CFA (Article)
Dougal Williams' article two weeks, A Crash Course in Investing: Six Lessons from the Market Meltdown, also drew comments from a reader, who challenged the methodology Williams used when he argued that asset allocation funds have failed to deliver out-performance. Williams responds to those criticisms and offers new evidence of the failure in that fund category.
2009-09-01 Actively Managed TIPS ? A Correction by Robert Huebscher (Article)
Our August 18 article, Actively Managed TIPS?, contained a glaring factual error that we need to correct. In addition, a reader has challenged some of the assertions in that article, and we respond to those challenges.
2009-08-25 Building a Practice in America?s Fastest Dying City by Robert Huebscher (Article)
While many - perhaps most - advisors use client appreciation programs as part of their marketing efforts, Mo Young has embraced this idea and made it his sole marketing focus. Young's practice is based in Youngstown, Ohio - which has the distinction of losing population more rapidly than any other city in the US - yet Young has added several hundred new clients over the last four years with his strategy.
2009-08-25 The New Normal and Asset Allocation Merriman?s Response by Larry Katz, CFA (Article)
Larry Katz, Director of Research at Merriman, Inc., responds to Geoff Considine's article two weeks ago, What the New Normal Means for Asset Allocation. He has multiple objections concerning much of Considine's logic, and would not recommend his alternative portfolio to their clients.
2009-08-25 Letters to the Editor by Various (Article)
In our letters to the Editor, a reader responds to Dougal Williams' article last week, A Crash Course in Investing: Six Lessons from the Market Meltdown, and other readers respond to our article on Actively Managed TIPS and to an Advisor Market Commentary on healthcare policy.
2009-08-18 Actively Managed TIPS? by Robert Huebscher (Article)
When PIMCO talks, the market listens. But we mustn't forget that the bulk of PIMCO's revenue comes from actively managing bond portfolios so, when they claim that alpha can be earned by actively managing TIPS, a healthy dose of scrutiny is warranted. Our article shows why that scrutiny is justified.
2009-08-11 The Business You Don?t Want: 401(k) Plans by Robert Huebscher (Article)
Wealth managers who are considering managing 401(k) plans need to re-think those plans, according to Brian Murphy. Murphy, who runs Pathways Financial Partners, a Tucson, AZ-based investment advisory firm, says the 401(k) business has become a highly commoditized industry that makes it easy for clients to switch to an alternative, lower-cost provider.
2009-08-04 A Wakeup Call for Advisors: Turmoil at the Top of the Market by Dan Richards (Article)
Recent articles in Business Week, the New York Times and the Wall Street Journal describe turmoil among high-net worth investors and have profound implications for financial advisors. Dan Richards offers a five-point response for advisors to counteract investor disillusionment with their current relationship.
2009-07-28 Letter to the Editor - Beyond Grantham: Politics and Investment Strategy by Various (Article)
In a letter to the Editor, a reader challenges the thesis of Jerry Minton's article two weeks ago, Beyond Grantham: Politics and Investment Strategy.
2009-07-21 SIFMA?s Proposed by Ron Rhoades (Article)
On July 17, 2009, the Securities Industry and Financial Markets Association ("SIFMA") announced that its Private Client Group Steering Committee unanimously supports a new federal fiduciary standard for broker-dealers and investment advisors, embracing a proposal advanced by the Obama administration a week earlier in a draft of the "Investor Protection Act of 2009." Ron Rhoades looks at whether this shift in direction by SIFMA poses a radical change in business models, or whether the "new federal fiduciary standard" is something else in disguise.
2009-06-23 Compelling Evidence That Active Management Really Works by Ken Solow (Article)
The majority of academic studies conclude that active management does not add value for investors. However, a closer look at how many studies were conducted reveals several flaws in their methodology that are not as well-known as the accepted conclusion about active versus passive management. Guest contributor Ken Solow revisits work by two Yale researchers showing the value added through active management.
2009-06-23 New Rules for Growing Your Book of Business: Reach Clients and Prospects Through Their In-Boxes by Dan Sommer (Article)
E-mail marketing is no longer a new marketing channel, but if used effectively it can become a powerful marketing and relationship building tool for financial advisors. In this guest contribution, Dan Sommer explains the benefits of e-mail-based marketing and provides tips to get started down this path.
2009-06-16 Seth Klarman: Why Most Investment Managers Have It Backwards by Robert Huebscher (Article)
In his keynote speech last week to the Boston Security Analysts Society, Seth Klarman discussed how he repositioned his portfolio last fall to capture opportunities created in the wake of the financial crisis. Klarman is the lead editor of the sixth edition of Graham and Dodd's Securities Analysis, and his fund, The Baupost Group, is among the top performing hedge funds over its 27 year history.
2009-06-16 Moving Average: Holy Grail or Fairy Tale - Part 1 by Theodore Wang (Article)
Buying and holding a diversified portfolio works well during good times, but falls short when supposedly uncorrelated asset classes drop in unison in bear markets. Are there alternative investment strategies that work for all seasons? Ted Wong evaluates strategies using moving averages to determine their effectiveness.
2009-06-16 Tackling Today?s Number One Client Challenge by Dan Richards (Article)
Talk to advisors about the challenges they face today and you'll get a lengthy list - often headed by unhappy clients, reduced income and a struggle to stay positive and productive. While these are all serious issues, says Dan Richards, for most advisors they are dwarfed by the number one obstacle to getting business back on track - rebuilding investor confidence in our trust and integrity.
2009-06-09 Bill Gross and the New Normal by Robert Huebscher (Article)
Nearly a half-century of global economic prosperity has ended, and investors must gird themselves for muted returns from the capital markets, according to Bill Gross, a Managing Director at PIMCO. Gross shared his outlook at the Morningstar Investor Conference.
2009-06-02 Helping Advisors Grow by Susan Weiner (Article)
George Tamer, Director of Institutional Sales at TD AMERITRADE Institutional, discusses the innovative strategies advisors are using to add clients and improve profitability. Tamer is also seeing an upturn in merger activities, and describes how advisors looking to buy or sell a firm can best position themselves. We thank them for their sponsorship.
2009-05-26 The Importance of Being Active by C. Thomas Howard, PhD (Article)
New research from Tom Howard of Athenainvest shows buying and holding the typical active US equity fund is a recipe for underperformance. On the other hand, Howard shows that funds actively placing stock selection bets and enjoying recent return success earn increasingly superior returns and experience an improved likelihood of beating the market as the fund ages. Howard argues for the importance of being truly active as a fund manager.
2009-05-26 The Big Issues Facing the Hedge Fund Industry by Robert Huebscher (Article)
Last week, the Argyle Executive Forum hosted its 2009 Hedge Fund Leadership Forum in New York. This event attracted more than 200 leaders from the hedge fund industry, with a series of panel discussions centered on the key issues managers now face. Although the sessions were "off the record," we have summarized the key themes from the discussions.