In 2011, the SEC approved two new modifications to existing rules on client suitability for investment. The new rules were proposed by FINRA who’s stated purpose is to dedicate itself to “investor protection and market integrity”. FINRA was and is concerned about sales practice abuses...
Now and again I like to rummage into the academic tomes of finance. Today I give you a paper by Philip Maymin and Greg Fisher. It looks into how the "performance of the average investor in an asset class lags the average performance of the...
September’s Journal of Financial Planning has a controversial article about emergency cash funds. Titled “Is an All Cash Emergency Fund Strategy Appropriate for All Investors?” the paper argues that a 6-month cash emergency fund comes with an “exorbitant opportunity cost” resulting in lower levels of...
Yesterday I came across this excellent video by Ray Dalio of Bridgewater Associates. For those of you who don't know, Ray Dalio runs the largest Hedge Fund in the world with $122 billion AUM. He breaks down the economy into three parts...
Modern Portfolio Theory (MPT) needs little introduction. Developed by Nobel Prize winning economist Harry Markowitz in 1952, the theory forms the basis of portfolio construction for large swathes of the money management industry. MPT is an approach to how you can optimize returns for a...
I just spent the last 10 weeks interviewing 76 financial advisors across the U.S. I asked them about their risk tolerance process. Specifically, how they discover the right level of investment risk for their clients. The results were varied but the challenges were the same. Firstly,...
Understanding financial risk can be a complex subject mostly because everyone seems to have a different definition. Traditionally risk has been defined by a dry and mathematical term called volatility. Volatility being a measure of the dispersion of returns for an investment. Essentially, the amount...
Do you know why potential clients consider you too expensive?
As the dust continues to settle post-RDR consumers are adapting to a fee-only landscape. Though your existing clients are comfortable with this model, refugees from the land of commissioned sales don’t feel the same way. Even for those who have never had a financial advisor the costs often seem high. Why is this?
As the hype around Bitcoin recedes and the price finds a base at $108 from highs of $234 it’s time to take a measured look at the crypto-currency. Bitcoin exists as a reaction to the problems surrounding government issued currencies. Namely, that central banks can...
This week I wrote an article for the Institute of Financial Planning's Training and Development newsletter. I got a few emails from financial planners thanking me for the advice. Read more here....
