May 18, 2009

An Uncommon Value

What does it take for an advisor to be of uncommon value their clients?

Here is what every thoughtful advisor and investment manager should aspire to do:  we should aspire to be of uncommon value to every person who comes to us with trust by helping them keep their faith in the future when most others around them cannot. 

This most recent bear market should remind all of us why so few individuals--professionals and non-professionals alike--are successful stock investors.  The reason is because it is time and not timing that creates success.  It should not be lost on any of us that Mr. Market will periodically induce us to sell when prices are low.  Picture Jim Cramer, that paragon of wisdom and confidence, crumbling in front of the TV cameras on the Today Show, panicking and telling the TV audience to sell near the bottom!  Now let’s consider Warren Buffett.  We should ask ourselves, “What has allowed this sensible, bright, older gentleman who sits in his office in Omaha without a computer to become the most successful stock market investor in history?  How is it that he is able to do what most humans have never been able to do?”  Hint…it isn’t because he times markets, asset allocates, diversifies by asset class, engages in frequent rebalancing or employs complicated strategies or products. It is because he has had the ability to hold his investments in good businesses intact over long periods of time.

This is what we at Golub Group are most proud of:  throughout the recent brutal period, 97 percent of our three year and longer clients and 90 percent of our more recent clients were able to do what few investors are able to do; that is, to hold on to their investments in the face of Mr. Market acting brutally.  Our clients did not have access to Warren Buffett for his sensible words of wisdom, but they did have access to Golub Group, and what we were able to give them was the courage to not sell their stocks when they were cheap. 

How did Golub Group help its clients do the right thing during the recent bear market?

We’ll share with you how we did it.  We did it by frequent in-person meetings and reaching out regularly with telephone calls and written communications.  We were there with nine well-trained, experienced Client Relationship Managers answering the telephone by the second ring, returning all emails within minutes of receipt, and being there for our clients when they really needed hand-holding.  Most importantly, we did it through our style of money management.  We were able to say to every client who called, racked with fear, the following:  “You won’t find any business in your portfolio where there is any question about its ability to be around for many years to come. Furthermore, you are being paid handsomely to be patient because of the generous cash flow being produced by your portfolio in the form of dividends and interest.”  This is why we stick with the biggest, strongest, most dividend-generous businesses in existence.   

What should we as advisors have learned from this bear market?

This bear market should have taught all of us that there are two things required to be a truly valuable partner to our clients.  The first thing is to always have our clients invested in rock-solid businesses that can be believed in during the most trying periods.  The second thing is to provide a well-trained, experienced human being who is always available to give emotional support when called upon by a client.  According to the most recent Dalbar analysis of individual investors’ experiences, over the past twenty years through 2008, the S&P 500 returned 8.35 percent annually, while the average common stock mutual fund investor earned a 1.87 percent annual return over the same period.  We all know why.  Because they repeatedly sold themselves out at market low points!

In summary, the most valuable thing we advisors provide to our clients is that we give them the courage to never lose faith in the future.  We would not be able to help them have that courage they need for the tough times if we were managing their money using fuzzy asset allocation schemes, asset class diversification, market timing promises, gimmicky devices to limit downside or produce stop losses, or packaged products that they don’t fully understand. 

What do human beings need the most when times get tough?

As human beings, times come when we need a strong and wise shoulder to lean on.  This is what Golub Group has been to our clients.    

With my very best wishes,

Mike

Mike Golub

Golub Group, LLC

2929 Campus Drive, Suite 145

San Mateo, CA 94403

(650) 212-2240 (phone)

(650) 212-2249 (fax)

(c) The Golub Group, LLC

www.golubgroup.com