Our Difference: What's In It For You

Saturday, April 11, 2015

 by Sheila & Rich Jamison 


We’ve recently asked a random sampling of people (both clients and others) what would they like to see on our website.* We’ve gotten lots of good feedback. We appreciate that as it is how we can make things better for everyone.

One notable surprise was the number of people who said, “I need to know better what you do. I understand your InSights’ analysis/articles when I read them … while I have them in front of me. But then I tell a friend or colleague about you and they ask “what makes investing with you different?,” I get all muddled. I want to know what you do well enough to explain it to others when I tell them about you.”

Second, it was particularly concerning to Rich. He has a reputation for being a problem-solver who can make complicated issues seem simple, whether they concern clinical diagnostics, biotechnology, business management or financial concepts. He writes the first draft for most of our technical discussions – then runs them by Sheila for comment. Perhaps we’ve both been at this so long that industry jargon seems too much like everydayEnglish to us.

With that in mind, we’re taking another run at what we do and what makes us different from most others in our business. But we’re doing it in the plainest language we can muster. And we’re sticking to just the whats. It’s the mechanics of the hows that get more technical. So we won’t be delving into discussion of tactical allocation via relative strength, momentum, asset class and sector rotation. Sounds better already, doesn’t it?

In a Nutshell

Our difference can be summed up succinctly in four points:

  1. Plan your investments based on your unique situation.
  2. Invest in strong market areas; avoid weak ones.
  3. Make investment changes with changes in the market and in your situation.
  4. Do it with discipline and diligence.

Explained … In English

The first thing we do is learn about you. What are your unique goals, needs and lifestyle? How do you feel about risk; that is, what level of risk will keep you up nights?** These are the inputs we need in order to do our best for you.

It’s Not Unusual (Tom Jones was almost English)

Asking you about your goals is not unique. Many advisors start with questions about you. It’s what we do with the answers that sets us apart.

Notice the word “unique” in the second sentence two paragraphs earlier? That’s the key! Adhering to our goal of crystal clarity, let’s look at the typical process in most financial firms. Here’s how it’s earned the term “cookie-cutter” approach.

Investing for Most Financial Advisors***

Typically, they use five defined investment buckets, ranging from aggressive investing at one end to conservative investing at the other. Each bucket has predetermined ranges for the types and amounts of investments in it, although different firms may have slightly different bucket ranges and amounts.

You get dropped into the closest matching bucket based on your answers to the questions they’ve asked you. That bucket is the basic design of how you’ll invest. See where the “cookie-cutter” title comes from?

Our Difference

We use your unique situation to create a unique investment strategy for you based on and aligned with what you’ve told us. Your investment distribution may not match any other client at the Jamison Financial Group.

Like Clockwork

Typically, the buckets are checked by time. That is, once every X months (normally quarterly or annually), what’s in the bucket is checked against the currently prescribed ranges. If everything is within its prescribed range, nothing is done. If any are now above or below the prescribed range, the account is “rebalanced” … meaning brought back to the midpoint of their ranges. This is done by selling those that have increased (the “winners”) and buying more of those that have decreased (the “losers”). The hope is the losers will become winners by the next time the bucket is checked. It’s called “reversion to the mean” … which seems to always happen but can take several years.****

Our Difference

We invest in the parts of the market that are growing most rapidly. We avoid those that are doing poorly. When something changes – a hot area cools or a cold area heats up – we change with it to stay in the strong parts of the market and out of the weak ones. We make changes when market changes occur or when you have a change in your situation. The calendar is irrelevant.

What’s In It for You?

We can hear you thinking, “That list is fine for describing what you do, but what’s in it for me?” Staying with our plain English and brevity goals, here’s your list.

  1. You retain full control over your investing journey.
  2. You have a process in place to handle whatever comes your way.
  3. Adjusting your portfolio by what is happening instead of by calendar page turns generally earns you better returns.

Your Points Expanded

The few paragraphs below expand on these three points.

#1 The Final Say

First, you remain in ultimate control of your money and your investments. We’re the guides do all the heavy lifting and point the way. When something needs to be done (irrespective of the calendar), we reach outto apprise you of what we’re seeing. We will recommend what we think you should do and explain why we feel that way. But you get to make the final decision about our recommendations.

What If I Don’t Agree?

At first, it might seem like declining a recommendation could interfere with or negate our process. It doesn’t …. but hold that thought a moment.

There are reasons you may not like a recommendation. For example, if we said Philip Morris looked like agood stock or had an attractive bond but your conscious said no tobacco companies, well, that’s a good reason.

And it doesn’t negate the process. Philip Morris would be a way to get there, not the only way to get there. There are always others coming down the line.

#2 The Process

You get the comfort of knowing that there is a process at work to put all the pieces together. This makes it easier to tune out the volatility inducing daily headlines and act on market events and trends instead. It can give you the confidence to disregard the boisterous pundits and gurus, each telling you that his/her way is the way. They contradict each other regularly because none of these experts KNOW what markets will do.

#3 Hold Winners; Avoid Losers

Because markets are event and trend driven, your investing is determined by our interpreting objective parameters. Our focus is squarely on reading but not “reacting” to market changes. Our process is designed to assess market changes, how they could impact your portfolio and what steps you can take defensively or offensively to maximize your returns in a variety of market trends. This strategy typically produces better individual portfolio returns as a result.

Is Our Process Always Right?

That sounds great, but does it work every day? Nothing is foolproof in the investing world. All methods get things wrong from time to time. That includes us.

But unlike the most common form of investing, our process is self correcting. When it is wrong, it doesn’t stay wrong. Instead it adds in the new or changing events and trends and it evolves. (See the fourth footnote for what could happen when you don’t.)

History cannot guarantee future results. But save for occasional short-term lagging periods due to volatility, this process has produced better intermediate and long-term results historically.

Further Questions?

That was the English version. If you want more detail and depth, we’ve got it. Give us a call to talk. Or if you want to know how this concept can make your money work harder for you, give us a call to talk about that too.

Closing Comment

We’re not typical of most financial advisors. We’d bet that few of your family, friends and colleagues have been exposed to this information. Please share it with them. They have a right to know what’s going on with their money.

* We’re planning a new, “triple-duty” website to work on computers, tablets and phones. You can access it wherever you are with whatever you have at your fingertips.

**Risk sometimes needs an additional degree of tuning. Some people are more comfortable with risk than they should be; it is simply imprudent for the financial situation they’re in. In our eyes, prudent investing is not akin to going to the race track!

***The term “most” here applies to the 87% of advisors who still invest according to the principles of Modern Portfolio Theory as of April 2013. That number was 93% before the financial crisis. The other way to look at this is that 7% did not ascribe to MPT before the crisis and now – 5 1/2 years post crisis – 13% have disowned MPT. Yet another way to view it is that only 6%, despite how poorly MPT performed during the crisis, learned the lesson the crisis taught.

**** For example, the aggregate bond category was the worst performing group in 2003, 2004, 2005 and 2006. They were in the middle of the range performance-wise in 2007 but did come in at number 1 in 2008. They then dropped back to the worst in 2009 and 2010. This meant replacing securities that were working with those that weren’t for several years. You can find the Callan Chart (the periodic table for finance) at Callan.com.

Financial Advisors Cling To Failed Strategies, Says Report. Jim McConville. FA-Mag.com. December 3, 2012.Financial advisors still adhering to MPT despite its failures. Staff. InvestmentNews.com. April 8, 2013.
Is Modern Portfolio Theory Obsolete? Interview with Peng Chen, president of Morningstar’s Ibbotson Associates. Morningstar.com.. January 15, 2010.
Modern Portfolio Theory 2.0 – The Most Diversified Portfolio. Paul Allen. Seekingalpha.com. November 28, 2012.
Modern Portfolio Theory criticisms. Travis Morien. Travismorien.com. February 1, 2011.
The New Modern Portfolio Theory. Stephen Blumenthal. FA-Mag.com.. June 14, 2013.
Why I Am Clinging to Failed Investment Strategies: Long- term data continues to support modern portfolio theory. Daniel Solin. Money.usnews.com. December 13, 2012.

The data above were taken from sources deemed reliable. However no guarantee can be made as to their completeness and accuracy.
Interpretations of the data, views and/or opinions expressed are those of the Jamison Financial Group based on market and economic conditions as of the date of publication and are subject to change. They do not necessarily reflect the opinions of any other individual, group or organization.
Nothing in the above is meant to be, nor should it be construed as, investment advice or recommendations to buy or sell any security. Individual securities whenever mentioned are for illustrative purposes only and may not be relied upon as investment advice.
Tax and/or legal information contained herein is general in nature and for informational purposes only.
It should not be relied upon as advice. Consult your tax professional or attorney regarding your unique situation.
All indices are unmanaged and are not illustrative of any particular investment. A direct investment cannot be made in any index.
The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks.
The NASDAQ Composite is a market-weighted index of all the over-the-counter common stocks traded on the NASDAQ system.
The S&P 500® is a market-capitalization-weighted index of common stocks.
Past performance is no guarantee of future results.

© 2015 Jamison Financial Group. Please feel free to distribute copies to individuals you feel may benefit from the information presented. Commercial use is prohibited.