An investment strategy should be tailored to the individual’s money personality - not to a firm's investment models. Money is not the client; people are.
Entrepreneurs and investors must both understand the critical aspects of valuation for pre-revenue
and startup entrepreneurial ventures. By aligning expectations, such understanding fosters positive,
productive relationships between funders and founders. In addition, investors and entrepreneurs
benefit separately when they know the answers to essential questions. What are the most important
factors angel investors should consider in determining a company’s value? How can entrepreneurs
better present their companies to attract early-stage investors and build effective relationships?
“Investment Valuations of Seed- (Startup) and Early-Stage Ventures” by Luis Villalobos, founder of Tech
Coast Angels, defines perspectives from which investors and entrepreneurs view valuation and provides
insights that can reduce the natural contentiousness of negotiating valuation.
Entrepreneurs and investors must both understand the critical aspects of valuation for pre-revenue
and startup entrepreneurial ventures. By aligning expectations, such understanding fosters positive,
productive relationships between funders and founders. In addition, investors and entrepreneurs
benefit separately when they know the answers to essential questions. What are the most important
factors angel investors should consider in determining a company’s value? How can entrepreneurs
better present their companies to attract early-stage investors and build effective relationships?
“Investment Valuations of Seed- (Startup) and Early-Stage Ventures” by Luis Villalobos, founder of Tech
Coast Angels, defines perspectives from which investors and entrepreneurs view valuation and provides
insights that can reduce the natural contentiousness of negotiating valuation.
Regardless of how much money one has, it seems that everyone wants even greater wealth. One way to accomplish this is through investment strategies to grow your assets.
Steve Redelsperger • Cadaret, Grant & Co., Inc.
- Risky business: How to create a better investor behavioral profile by Kellye Whitney
- October lives up to volatility reputation
- Creating tax-advantaged financial strategies (Gary Strawn, Transamerica Financial Advisors, Inc.)
Authors John Paglia and Robert Slee offer an alternative to using methodology designed for privately-trade companies as a means to valuate privately-traded companies. The article was originally published in the May/June 2011 issue of The Value Examiner. It is provided courtesy of The National Association of Certified Valuators and Analysts (http://www.nacva.com)
Chuck Bigbie • Geneos Wealth Management
- Investor confusion about passive investing: three common misconceptions about passive investing by Jerry Wagner
- Second quarter earnings in focus
- Simple is better for client reviews (Kimble Johnson, LPL Financial)
the choice of financial professionals
Print
Digital
Websites
Creative
Marketing
Personalised Client Marketing Factsheets
You may also be interested in
Financial adviser newsletters
Financial adviser client magazines
Personalised marketing factsheets
Financial adviser Corporate brochures
Personalised 2014/15 Tax Data card
Bespoke publishing services
Financial adviser client marketing factsheets
Goldmine Media's professional financial adviser factsheets will enable your business to extend client communication, raise brand awareness, improve marketing efficiency, enhance client retention and increase sales.
Generate further repeat business opportunities
This service has been designed to generate further repeat business opportunities and referrals from your clients. Besides educating and informing clients, you're also achieving greater brand and name recognition, which is a very beneficial way to build lasting relationships.
Nurture relationships as part of your ongoing service proposition
In a post-RDR environment, there has never been a more important time to communicate with your clients on a regular basis, and each factsheet will ensure that you're able to nurture relationships as part of your ongoing client service proposition.
Each factsheet used as part of a direct mail campaign provides an unrivalled way of maintaining client contact and providing information that your clients know to be impartial, relevant and timely.
Daniel Namey • H. Beck, Inc.
- The (not so) indomitable investor: 9 reasons most investors lack the discipline to succeed by David Wismer
- Can gold maintain momentum?
- Setting client expectations around active management (Carla Zevnik-Seufzer, The Strategic Financial Alliance)
Regardless of how much money one has, it seems that everyone wants even greater wealth. One way to accomplish this is through investment strategies to grow your assets.
Steve Redelsperger • Cadaret, Grant & Co., Inc.
- Risky business: How to create a better investor behavioral profile by Kellye Whitney
- October lives up to volatility reputation
- Creating tax-advantaged financial strategies (Gary Strawn, Transamerica Financial Advisors, Inc.)
Authors John Paglia and Robert Slee offer an alternative to using methodology designed for privately-trade companies as a means to valuate privately-traded companies. The article was originally published in the May/June 2011 issue of The Value Examiner. It is provided courtesy of The National Association of Certified Valuators and Analysts (http://www.nacva.com)
Chuck Bigbie • Geneos Wealth Management
- Investor confusion about passive investing: three common misconceptions about passive investing by Jerry Wagner
- Second quarter earnings in focus
- Simple is better for client reviews (Kimble Johnson, LPL Financial)
the choice of financial professionals
Print
Digital
Websites
Creative
Marketing
Personalised Client Marketing Factsheets
You may also be interested in
Financial adviser newsletters
Financial adviser client magazines
Personalised marketing factsheets
Financial adviser Corporate brochures
Personalised 2014/15 Tax Data card
Bespoke publishing services
Financial adviser client marketing factsheets
Goldmine Media's professional financial adviser factsheets will enable your business to extend client communication, raise brand awareness, improve marketing efficiency, enhance client retention and increase sales.
Generate further repeat business opportunities
This service has been designed to generate further repeat business opportunities and referrals from your clients. Besides educating and informing clients, you're also achieving greater brand and name recognition, which is a very beneficial way to build lasting relationships.
Nurture relationships as part of your ongoing service proposition
In a post-RDR environment, there has never been a more important time to communicate with your clients on a regular basis, and each factsheet will ensure that you're able to nurture relationships as part of your ongoing client service proposition.
Each factsheet used as part of a direct mail campaign provides an unrivalled way of maintaining client contact and providing information that your clients know to be impartial, relevant and timely.
Daniel Namey • H. Beck, Inc.
- The (not so) indomitable investor: 9 reasons most investors lack the discipline to succeed by David Wismer
- Can gold maintain momentum?
- Setting client expectations around active management (Carla Zevnik-Seufzer, The Strategic Financial Alliance)
An easy to understand guide to investing in securities like stocks, bonds and mutual funds for your financial future. This is material taken from chapter two of my book, "Figuring Out Wall Street".
4 active vs passive advisor insert funds flows dfa (advisor present) p. 1-3, ...Weydert Wealth Management
This excellent article contains three key graphics illustrating how average investors flow into and out of investments at the wrong times and contrasts this with the average DFA investor who remains much more consistent and disciplined.
Individual financial advisory with respect to individual clients has occupied center stage especially due to the attendant effects of the global COVID-19 pandemic. Clients as well as advisors have had to react to these changes.
This is the first part of a two part presentation that will assist advisors/ individual wealth managers anticipate and react/address client management in a customised manner.
Sociology in Motion_ Interactive Exploration of Society's Dynamics and Patter...Do My Assignment
Envision traveling this route with a trustworthy guide by your side. Now let's examine the domain of portfolio management. Additionally, discover how using assignment help services may aid in understanding and managing investment portfolios.
Week One material for Wealth Management course.
The information contained in this presentation is for illustrative and informational purposes only and should not be considered investment advice.
If this book were a fairy tale, perhaps it would have a happier en.docxwilcockiris
If this book were a fairy tale, perhaps it would have a happier ending. The unfortunate fact is that the individual investor has few, if any, attractive investment alternatives. Investing, it should be clear by now, is a full-time job. Given the vast amount of information available for review and analysis and the complexity of the investment task, a part-time or sporadic effort by an individual investor has little chance of achieving long-term success. It is not necessary, or even desirable, to be a professional investor, but a significant, ongoing commitment of time is a prerequisite. Individuals who cannot devote substantial time to their own investment activities have three alternatives: mutual funds, discretionary stockbrokers, or money managers.
Mutual Funds
Mutual funds are, in theory, an attractive alternative for the individual investor, combining professional management, low transaction costs, immediate liquidity, and reasonable diversification. In practice, they mostly do a mediocre job of managing money. There are, however, a few exceptions to this rule.
For one thing, investors should certainly prefer no-load over load funds; the latter charge a sizable up-front fee, which is used to pay commissions to salespeople. Unlike closed-end funds, which have a fixed number of shares that fluctuate in price according to supply and demand, open-end funds issue new shares and redeem shares in response to investor interest. The share price of open-end funds is always equal to net asset value, which is based on the current market prices of the underlying holdings. Because of the redemption feature that ensures both liquidity and the ability to realize current net asset value, open-end funds are generally more attractive for investors than closed-end funds.1
Unfortunately for their shareholders, because open-end mutual funds attract and lose assets in accordance with recent results, many fund managers are participants in the short-term relative-performance derby. Like other institutional investors, mutual fund organizations profit from management fees charged as a percentage of the assets under management; their fees are not based directly on results. Consequently, the fear of asset outflows resulting from poor relative performance generates considerable pressure to go along with the investment crowd.
Another problem is that open-end mutual funds have in recent years attracted (and even encouraged) "hot" money from speculators looking to earn quick profits without the risk or bother of direct stock ownership. Many highly specialized mutual funds (e.g., biotechnology, environmental, Third World)
have been established in order to exploit investors' interests in the latest market fad. Mutual-fund-marketing organizations have gone out of their way to encourage and even incite investor enthusiasm, setting up retail mutual fund stores, providing hourly fund pricing, and authorizing switching among their funds by telephone. They do not discourage the .
“The \'cult of equities\' is the notion that stocks are special and should, bonds,globalization,
be the centerpiece of a global asset allocation, no matter the price.” Blind support for stocks represents
an “equity cult,” “a group of people who believe something that is
based on faith, not based on fact and supporting evidence”.
(Robert Arnott)
Earning Enough A Rational Approach To Investing 052010
1. Earning “Enough”:
A Rational Approach to Investing
A recurring theme in our profession relates to how
investors might variously express their
expectations for portfolio growth, or rate of
return.
Behavioral finance, a relatively new science of
human behavior, has identified a number of
money personality types. While there is some
overlap between the types, and an investor may
exhibit behaviors attributable to more than one
Joel Framson & Eric Bruck, type, we can find enough common ground to
Principals
divide the money personalities into two camps.
"Mastering the • The “I’ll never have enough” camp. For
complexity this group of investors, expectations are
of wealth
always high and you can never earn
to create and sustain
enough. Behavioral finance professors tell
a better life
us that money is a status symbol for this
Silver Oak Wealth Advisors, LLC type – it is discussed at cocktail parties and
~~~ clubs; it is a lifelong pursuit and a quest
that may never be completely satisfied.
• The “my money has a purpose” camp.
Click here to learn These investors are generally family
more... stewards for whom money translates into a
means for taking care of oneself and loved
ones. Certainly there is a desire to
accumulate more, but there is a tempering
factor of not risking a prudent level of
security. This group generally is amenable
to defining reasonably attainable goals and
calculating a rate of return that will be
sufficient to realize those goals.
These two camps display fairly bright line
distinctions in their expectations. From our
2. perspective in our roles as wealth advisor and
money manager, it is critical that we know which
camp our clients fall into. Only with an
understanding of each client’s money
expectations can we establish a strategy to help
them succeed. Yet a fantastic strategy for one
camp may almost by definition be an ineffective
strategy for the other camp.
One size never fits all
As we meet with new clients, we have the
opportunity to explore their money personality.
By analyzing their existing portfolio, we can
determine whether their prior advisor attempted
to match their money personality with their
money type. Too often, we find that the two
have been out of sync. Large national money
managers (and some local independents) have a
one-size-fits-all approach to constructing portfolio
models. They believe that four or five static
models cover all the risk/return options required.
Similarly, other advisors might primarily utilize
only a single mutual fund family or investment
house, which they require all clients to use. In
each case, these money managers tout award-
winning stock research or Nobel Prize winning
theories to justify their asset allocation.
However, from our analysis of those portfolios and
getting to know the client, we have found that
the advisor typically has failed to individualize
the portfolio based on a true understanding of the
client’s expectations.
There might be any number of reasons to explain
why this is true. Often, it is the lack of using a
financial planning approach as a starting point to
identify the goals. Risk “tolerance” is cursorily
examined, but risk “capacity” is ignored. Another
explanation might involve the typical asset
allocation approach of large brokerage firms who
assume that all investors will be better off with
the ubiquitous definition of risk and return based
on textbook concepts, without regard for the
money personality of the client.
3. So let’s distinguish between what the textbooks
teach about risk and return and what behavioral
finance reveals.
Are markets really rational? More art than
science
First, here are the basic tenets of Modern
Portfolio Theory (MPT), a Nobel Prize winning
theory premised on the “efficient markets
hypothesis.” Risk and return are considered to be
both static and predictable, based on history.
Premises include:
• Investors behave rationally
• Investors seek to optimize their returns
• Investors are the market
• Investment returns follow a statistical
“normal” (predictable) distribution (bell-
shaped curve)
• (Historical) standard deviation and
correlation primarily define portfolio risk
• Markets are efficient and will always return
to equilibrium
However, behavioral finance studies stand in
contrast to these tenets, having concluded that
either many of these tenets are not true or they
are not particularly applicable to individual
investors. In contrast, behavioral finance tells us
the following:
• Investors, at least as often as not, behave
irrationally, acting on emotion.
• Investor’s perception of their own risk
tolerance changes over time, especially under
different market conditions
• Investors do not view upside and downside risk
in the same way. On the downside, they are
focused on losing out on specific objectives.
Perception of risk is viewed in the context of
goal attainment
• Market returns are often not “normally”
distributed. They exhibit skew and/or “fat
4. tails” (extreme events) which greatly impact
investor goal attainment and perception of
risk.
Extreme market behaviors occur more frequently
than is statistically predicted. Historical inputs
that are used to calculate MPT (standard
deviation, expected returns, correlations) are not
static, fluctuate over time and are not predictive
of the future.
For individuals, risk is much more than a
historically based statistical measurement
(standard deviation). Risk for individuals is an
emotional condition and includes fear of a bad
outcome, fear of loss, fear of underperforming. It
is likely that the biggest fear people have is the
fear of failing to achieve a financial goal – not
being able to retire, not being able to remain
retired, not being able to assist their children or
parents, and fear of running out of money.
MPT holds that (statistical) risk dissipates over
time; that any period of bad market returns will
eventually be restored to equilibrium over
(enough) time. Herein lays the key. Individuals
typically do not have enough time for their
portfolios to recover during a particularly steep
market decline.
Minimum Acceptable Return (MAR)
Individuals should focus on a minimum
acceptable return (MAR) which is required to
accomplish their goals. This is not a new concept
for those of us who provide financial planning for
clients. The financial planning process is an
essential tool for us in helping to define one or
more MARs as we assist clients to reach their
goals. The MAR is a concept that is perfectly
suited to the group of investors who fall into the
second camp defined above - the “my money has
a purpose” camp.
The clients of Silver Oak Wealth Advisors, LLC
typically fall into this camp. During our Discovery
5. meeting process, we uncover a client’s money
personality. We carry out our wealth
management process to enable us to create
portfolios that would succeed in delivering the
MAR based on our understanding of each client’s
risk comfort level, capacity for carrying financial
risk, and personal definition of what it is about
money that is important to them and their family.
Through this financial planning process, we are
able to determine “how much is enough” for each
client – in other words, when we understand a
client’s MAR, we simultaneously understand the
maximum level of risk a client’s portfolio must
assume to achieve it.
This is a rather unique orientation, but one that
we truly believe captures the essence of our
firm’s effectiveness in managing and protecting
the wealth of the clients we serve.
Best personal regards,
Joel H. Framson, President
Eric D. Bruck, Principal