Blog Entries of Fame (Week of May 12-19)

Some of the more captivating blog entries to hit my blogosphere radar last week are:

1) 'Thicken My Wallet' writes of how, with oil prices skyrocketing, wind energy is the next big thing.

http://www.thickenmywallet.com/

2) Our man on the 'Million Dollar Journey' tells of his experience with the Nortel's litigation settlement on the class action lawsuit put forth by some of its shareholders.

http://www.milliondollarjourney.com/

3) Freakonomics author and New York Times blogger, Steven D. Levitt, presents the argument of two University of Chicago economists, Christian Broda and John Romalis, that, contrary to popular belief, inequality has not grown very much over the last decade. Explaining globalization has lowered costs of goods consumed by the poor and middle class, while bought by the rich have gone higher.

http://freakonomics.blogs.nytimes.com/

Hope everyone had a great Victoria Day!

Steadyhand coming to Toronto

When Phillips, Hager & North was bought out by RBC in late February, their diehard supporters and some industry pundits were speculating the death of an era. Forgoing marketing expenses and requiring a higher than usual minimum investment requirement, they practically invented the no-load industry in Canada. When mutual fund fees were deregulated in the early 1980s, PH&N didn't touch their mutual fund fees, while most mutual fund firms raised theirs. Considered mavericks by some, they commanded a fierce loyalty.


In the same month as the RBC/PH&N deal (February), Steadyhand Investment Funds was celebrating its first year anniversary of filing their prospectus. President and CEO, Tom Bradley, spent 14 years at PH&N eventually taking the top job. Steadyhand is his very own project, and I'm eager to see the results. As a new entrant to an incredibly saturated industry, I am keenly following their progress. Their size is small, which makes their possibilities endless. However, it also means the jury is still out on them. Furthermore, they are (I believe, anyway....correct me somebody) the only mutual fund firm with a blog!


There are a slew of differences between PH&N and Steadyhand, which I'll get into in another blog entry. The question, though, isn't in the differences.... but the potential of a key similarity: Can they win a loyal following close to that of PH&N?


Tom Bradley will be hosting a lunch next Tuesday, May 21 at the Intercontinental for his small cap manager, Wil Wutherich. Check back for a review of the event and my thoughts on Steadyhand.


To RSVP:
Email: info@steadyhand.com
Phone: 1-888-888-3147

Blog Entries of Fame (Week of May 5-11)

Some of the more captivating blog entries to hit my blogosphere radar last week are:

1) Juggling Dynamite author, Danielle Park, delivers Fitzgerald-like prose in a feature entitled "All in this together." A money manager, who can write, will definitely be one to remember. Best opening line for a blog that I can remember: "Reality is always evolving but we humans are reactionary, backward looking creatures. Perhaps to cope with the stress of change, we commonly exert mental gymnastics to justify and bootstrap the status quo." Keep reading.... http://www.jugglingdynamite.com/blog/_archives/2008/5/7/3679755.html

2) The Globe and Mail came out with their "Best of the Blogs." A top-5 ranking of the top investment blogs ranked by our favorite writers at the Globe and Mail. In case our fans are wondering, we didn't get a mention. One day, Horatio. One day.
www.reportonbusiness.com/


3) Steadyhand's Tom Bradley answers a common question which will soon be asked by baby boomers: What advice do you have for retired people who do not have a 20-year time horizon?
http://tom.steadyhand.com/default.asp?item=2200561

Why aren't returns posted on your financial statements?

In his Thursday blog entry, Dan Richards spoke of clients wanting to get a "...an easily comprehensible reading on how they've done over the past year and since they began working with their advisor." The President of Strategic Imperatives, a consulting firm that works on marketing strategies for financial advisors, was describing the public's increasing consciousness of needing to be accurately updated of their returns every year as a means to assess their portfolio's performance. I, genuinely, hope this is the case. Intuitively, people that don't have relationships with a full-service brokerage might believe this would just go without saying. Why wouldn't a client's returns be posted on their financial statements?

Contrary to Richards, my personal experiences have shown that the public generally is quite ignorant that their returns aren't published, generally accepting approximate numbers given to them by their advisors. Even if the lack of information is regarded with healthy disdain, it is accepted with a strained reservation that we have no choice but to follow the status quo.

By Mr. Richards so eloquently pointing this out as a concern for clients, it will help advisors begin to take heed. Well...the ones that follow him anyway, which are some of the better ones....or aspire to be better (you get the point). Therefore, I appreciate his insight and the blog post.

How much an issue this is to clients is tough to say. Posting returns and other performance measurement statistics on clients' statements was a suggestion put forth in the Fair Dealing Model, a report put out by a committtee of the OSC a few years ago. The conclusion of the report were suggestions and never really gained much traction. Warren MacKenzie, President of Second Opinion Investor Services, and other fee-only advisors founded a petition at http://www.showmethereturn.com/ in order to illustrate to the good people at the OSC the importance the general public places in having this sort of transparency. When I talked to Warren a couple months ago, this petition had only collected a couple thousand signatures. I, myself, rose at the Investors' Forum this past October and asked David Wilson (President of the OSC) and Susan Wolburgh Jenah (President of the Investment Dealers' Association) why it wasn't mandatory for firms to publish their clients' returns on their statements, while at the same time drawing attention to this particular petition. Their respons was that it was too cumbersome a process to actually implement, and they had bigger things on their mind. It's hard to argue they don't have bigger problems. However, the only logical response is for us, at the grassroots level, to hold financial advisors accountable for displaying such a level of transparency. If it's a mainstream expectatation, financial advisors will have no choice but to yield to the demands of their client base.....Or risk losing a great client. As Richards described it, doing this will allow a financial advisor to be "competitive." Obviously, he, too, is aware of how saturated this industry is.

Read the blog (http://www.strategicimperatives.ca/blog/?p=56). Put in a request to your advisor to implement some sort of portfolio tracking template. It'll help immensely with reaching your personal finance goals. You deserve it.

It's okay that Certified Financial Planners don't always give full financial plans?

The Investment Executive, Canada's newspaper for financial advisors, published interesting results completed recently for the Financial Planners Standards Council. The Financial Planners Standards Council administer and enforce the ethical standards of the Certified Financial Planner designation. I thought I'd share some of the results (my commentary is in italics below):

Of those surveyed:

• 70% have used a financial planner
• Less than 10% used the services beyond investments that a planner can provide (ie estate planning, insurance, tax advice, etc.), although a majority of them are aware that these services exist.
• In 2006, 59% of CFPs provide financial planning to over half of their clients, which was a drop from 71% in 2004.
• 97% of CFPs do full financial plans for at least some of their clients, while only 40% do so for "most"(that number was 13% higher four years ago).

The conclusions presented today by Cary List, president and CEO of the FPSC, at the annual conference for the Canadian Institute of Financial Planners (CIFPs):

Financial planners are still in the sales profession, as far as people are concerned. Furthermore, comprehensive financial planning is not so much a priority of the Canadian public, and it's the perceived lack of need [not lack of trust] that is the reason for this. Therefore, there has been a significant downward trend in CFPs administering financial plans to their client base.

The article actually presented 8% as the percentage of those surveyed that don't pursue comprehensive financial planning due to a lack of trust. Instead, it has been concluded that it is the "perceived" lack of need that clients don't get this service done for them. The question I feel that should have been broached at the conference is what can be done to change this.

Obviously, comprehensive financial planning is far better than hiring somebody to just sell investments. Are CFPs doing enough to present the full package? Intuitively, you go to a doctor, and they set the dynamics of the check-up. You go to a lawyer, and they give you their take of how your case should be pursued. It just seems natural to me that you go to a CERTIFIED Financial Planner, and you'll just be provided with a full financial plan. If for no other reason, then because it's the service. It's the profession and the professional that should dictate the standards, not an 'out-of-the-loop' public. Is it wrong to believe that it's up to the Certified Financial Planner to set the pace for their service? Who is it to correct this perceived "lack of need?"

"Maybe that's not such an awful thing," List concludes, as people have come to respect the CFP for other reasons.

The article, itself, ends with "...so List suggests perhaps it's 'okay' that CFPs are not planning as much." Now, this wasn't a direct quote of Cary List, but the author's interpretation of his remarks. That being said, quite frankly, I am a little concerned that Mr. List didn't present this as a problem, commenting instead "Can we do something to reverse this trend or do we want to? Do we care?" and "...is this a trend that we just have to live with? Perhaps, maybe to some extent." I would, intuitively, think that he should believe that 100% of CFPs should be providing "full financial planning" and not be relegated to a role of just selling investments.

It is the standard that I've held the CFP to. As Onus Consulting Group has been indexing the advisor community and filtering out ones according to our stringent standards, it does disconcert me as we have held advisors with a CFP designation with a higher regard. This has a great deal to do with the great work of the Financial Planners Standards Council. To hear Mr. List speak in such a manner, I am a little concerned.

I always felt if I heard such statistics being concluded in a survey, I'd be hearing this remark from the President of the FPSC, but here it is coming out of my fingertips:

A downward trend in financial plans for the clients of CFPs? I think we can fix that.

Source: Ray, Regan. "Financial Planners caught in a Catch-22." Investment Executive 5 May 2008: http://www.investmentexecutive.com/