Monday, May 5, 2014

Rebalance Our Investments? How Often? (Part I)

Sell In May
Few advisors will ever tell us to "Sell in May, and go away".  While I believe in the affects of seasonality, the argument has been made that abandoning the stock markets every May, may not be as reliable as some studies would indicate.  For one, the cost of getting in, and out, again, can amount to something large.

Part I
If not abandon, should we, at least, rebalance our portfolio?  How often should we rebalance, anyway?  In this, and the following post, I would like to examine these questions.  First, Part I presents a concept necessary to understanding Part II which I will post later.


Wednesday, February 19, 2014

The Value Of Professional Financial Advice

Mr. Greg Pollock, President and CEO of Advocis
 on Lang and O'Leary

Where To Find It
After seeing the President of Advocis on the Lang and O'Leary Exchange, I couldn't refrain from posting this.  I have not connected the link to the image because CBC requires you to watch 10 minutes of commercials to see a couple minutes of programming.  I don't want to waste your time, so will give you an overview, but if you really want to see the clip, be forewarned.  The segment starts around 28:50 in the clip.

Concerning Fees...
Mr. Pollock doesn’t want to see choice in how advisors are regulated, which I can understand, but he does want choice in how they are compensated.  He says eliminating advisor commissions on mutual funds would result in less advice for Canadians.  To me, the irony is that  advisors are the reason Canadians are so deep into mutual funds in the first place.  In Canada, we can buy better investments than mutual funds, but rarely can we pay more than we do for mutual funds.  Apparently, that is not one of Mr. Pollock’s concerns.

Regardless, Mr. Pollock and his Advocis organization need to get their facts straight.  Advocis likes to claim financial advisors are the reason that clients have more financial assets than people who don’t get the advice of an advisor.  The truth is, the study, “New Evidence on the Value of Financial Advice” by Dr. Jon Cockerline, only included people who were happy with the advice they were getting (those who were, obviously, making money) over periods of time, in the “advised“ group.  Their results were compared to another group (anyone not currently dealing with a financial advisor) which included anybody who left their advisor because they were not making any money, or worse, were losing money even at the advice of their advisor!  Guess which group came out ahead?

Good Advice?!?
In actual fact, the report states, “The large difference in assets that is observed may be the result of other variables besides advice.”  Since advice, alone, failed to account for the gap in performance, the report goes on to explain how an increase in the rate of savings for advised accounts could explain the difference.  It is not surprising to think people would direct additional money to advisors they were happy with, while others don’t, particularly after being unsuccessful in the past (even with the “help” of an advisor).  

What the study actually proves is that people who find a good advisor should take their advice!  While Advocis may not be lying to us, they sure as hell aren’t telling us the truth when it comes to the true value of  professional financial advice.

Has your financial advisor made you money?  Any idea how much that advice cost you?