Enjoy the current installment of “weekend reading for financial planners” – highlights this week include a number of articles on new investment vehicles coming down the pike, some interesting investment discussions from two of my favorite investment writers, John Hussman and John Mauldin, an interesting article suggesting perhaps we need to give clients MORE performance reporting information instead of less, and a white paper on implementing internships. Happy reading!
Beat the Market – With Less Risk: This article from the Wall Street Journal earlier in October highlights so-called “low volatility” investing – where you invest in lower volatility stocks in the index. As some of the research is showing, though, the low volatility stocks are producing better returns – whether you look at recent bear markets, or over the past 20 years. There’s a new index to track it, and funds and ETFs are emerging to invest it. Expect to hear more about this in the coming years.
Black Swan Manager Returning 23% Anticipating Bear Market – This article, another discussing interesting investment trends, comes from Financial Advisor magazine, and highlights hedge fund Universa Investments, LP, which focuses on so-called “black swan investing” – investment strategies that may lose a little money from year to year when nothing happens, but have incredible, out-sized returns when something dramatic does happen. As interest in this form of “alternative investment” grows, expect to start seeing a rise in mutual funds that engage in these types of strategies as well; hedge funds with this style of investing have jumped from $0.5 billion to $38 billion in the past 3 years alone.
Talking Points for the “Occupy Wall Street” Protesters – This article published by John Hussman of Hussman Funds on the Advisor Perspectives website gives an interesting discussion of some of the issues that the Occupy Wall Street movement is protesting, along with policy recommendations about how we could right the ship. Hussman is one of my favorite writers, and this column does not disappoint in its insightful translation of complex economic concepts into understandable policy issues and concerns.
Can ‘It’ Happen Here? – This article by John Mauldin on the Advisor Perspectives website discusses the debate of whether ‘It’ – hyperinflation – could happen here in the US, especially given that we “could” print our own currency (i.e., we are not on a gold standard), and given our incredible on- and off-balance-sheet government deficits. The “good” news is that Mauldin makes the case it won’t happen here, for a number of well-articulated reasons. The caveat, though, is that if we have to deal with our debt the old-fashioned way – by leveraging and paying it down – we will have some other challenges to deal with in the years and decades to come.
The CNBC Effect – This challenge-the-conventional-wisdom article by Blueleaf CEO John Prendergast makes the interesting case that perhaps what our clients need most to make them calm down about the markets is not less frequent reporting, but more frequent reporting. John makes the case that lack of information makes people more fearful, and that despite our ‘information overload’ world, what we currently receive is so fragmented and/or irrelevant that we can’t pick out the useful information to be comforted – what he calls the “CNBC effect.” In other words, while the advisor’s advice “don’t listen to the noise” may be good, following it up with “[and] just look at our annual or quarterly reports and ignore everything in between” is not. In the real world, questions come to us more frequently than that, and require information; withholding it when desired does not not calm people by taking their minds off it, but instead creates more fear of the unknown. To be fair, part of John’s message acknowledges that advisors generally lack a solution to efficiently deliver this kind of information to clients – which lo and behold, his company conveniently provides! – but that doesn’t take away from the relevance of the idea he’s putting forth.
Implementing Internships – This white paper released by financial planning firm Fox, Joss, and Yankee provides a very hands-on discussion about how to implement internships in your practice. Guidance includes so great tips on how to find interns (some of the most active CFP programs like Texas Tech, Virginia Tech, Kansas State, and more are great options), tips on selecting an intern (have a written job description, interview them like you would other prospective employees with phone interviews followed by an in-person meeting), and how to keep them busy (support a paraplanner/associate advisor, not just administrative tasks). Lots of examples are included. Notably, the white paper recommends that you should financially compensate your interns; it helps them take the job more seriously, and you can demand a higher quality of work and secure better talent.
I hope you enjoy the reading! Let me know what you think, and if there are any articles you think I should highlight in a future column!