Let me save you some time...
August 2016
Citywire Wealth Manager Retreat
mostly bots and day-drinkers
The Books! Backstage Wall Street
Clash of the Financial Pundits
McGraw-Hill, 2012
McGraw-Hill, 2014
An inside look at the brokerage industry and how investors are sold products and services.
An inside look at the financial media and the experts whose opinions it’s built around.
Handsome
Referee
???
Needs to use the men's room
Hungover
Sleeping
Angry
NYSE Mascot
Also sleeping
Possibly British
My Firm Ritholtz Wealth Management
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Established New York City, Sept 2013
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Registered Investment Advisor (RIA)
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$425 million AUM, 14 employees
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4 CFPs, 2 CFAs on staff
Blogs @ RWM ●
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Ben Carlson - A Wealth of Common Sense Michael Batnick - The Irrelevant Investor Barry Ritholtz - The Big Picture Josh Brown - The Reformed Broker Tony Isola - A Teachable Moment
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Bullet points
The 6th Fastest Growing RIA in America
A Great Time to be an Advisor
The US Advisor Industry at a Glance ●
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301,126 financial advisors in the industry, across all channels (down from 338,909 in 2005) 10.6 million managed accounts, up 65% since 2009 Wirehouse advisors have largest AUM per advisor, but overall market share slipped below 50%. Fee-based advisors by custodian: Schwab: 7000, TD: 4700, Fidelity: 3300 Over 10,000 firms offering independent advice
Source: Tiburon Research
Client Fit is Everything The wrong investment clients ●
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are looking for strategies that work well in all market environments (spoiler alert: no such thing) are more concerned with alpha and sharpe ratios than they are about reaching tangible life and spending goals fixate on daily and weekly market movements obsess over what they perceive to be the superior returns of others Are more concerned over what’s working now instead of what works typically, over time
Our Beliefs ●
Risk is the most misunderstood word in all of finance.
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Asset management without goals is like construction without blueprints.
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How can we know what the right investment portfolio is for a person if we don’t know what they’re investing for, how much they’ll need to accumulate and when they’ll use the money? Less is more, taxes and costs matter, forecasts are not reliable, performance is mean-reverting. In a perfect world, everyone can sit back and let asset prices do their thing. It’s probably not a perfect world. How can we incorporate academic evidence with real-life experience?
Strategic Asset Allocation Strategic asset allocation will succeed in generating the necessary returns with relatively high efficiency and low maintenance, but.... ●
It will look stupid or careless from time to time
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It will be gut-wrenching during extreme market scenarios
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It will test the limits of investors’ patience and mental fortitude
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If it is given up on at the wrong time, it will be indistinguishable from a failed, losing strategy
Marrying Tactical with Strategic By adding tactical alongside strategic asset allocation, we prevent the worst aspects of strategic from destroying the whole portfolio... ●
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Investors require a “release valve” during periods of market stress Having a rules-based tactical solution in place eliminates the risk of making poor decisions in the heat of the moment Most tactical approaches are seeking to beat the market, ours is seeking to encourage good behavior
The Fama / Shiller Paradox
Tactical: Stuff We Threw Out Analyst Recommendations Wall Street Strategists’ Targets Mutual Fund Inflows / Outflows Polling and Sentiment Surveys Discounted Cash Flow Analysis Relative Strength (RSI) Stochastics Venture Capital Valuations Advance/Decline Line Correlations Dispersion The Lightning Round Initial Jobless Claims Labor Force Participation Rate The Vix Crude-Oil-to-Gold Ratio
The Beige Book Industrial Production ISM Manufacturing Fed Minutes Global PMIs Monthly Auto Sales Credit Ratings LIBOR Golden / Death Crosses GDP Forecasts Earnings Estimates PE Ratios CAPE Ratios Discounted Cash Flow 13F Filings On Balance Volume
McClellan Oscillator The ARMS Index Magazine Covers Hi-Lo Index Inflation Expectations IPO Bubbles Fibonacci Levels Pattern Recognition Yield Curve Consumer Confidence Case-Shiller Home Prices US Unemployment Futures Markets ADP Private Payrolls Presidential Cycle Seasonal Cycle
Energy prices Currencies Buyback Totals Commitment of Traders Report Market Cap-to-GNP Ratio Barron’s Roundtable Margin Debt Totals FOMC Meetings ECB / Bank of England Meetings New Home Starts High Yield Spreads Insider Selling / Buying The Hemline Indicator Sector Rotations M&A Bubbles MACD
Worth Considering ●
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Long-term investing is nice to talk about, but life is not lived in the long-term The recent popularity of indexing and passive investing is producing short-term calm, will lead to explosive volatility eventually. Asset allocation is all an investor needs, so long as that investor is in a coma or on a desert island without wifi.
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The wrong question is “What’s the best investing strategy?” The right question is “What is the best investing strategy for me?” Finding what works for you is Step One. Steps Two through Infinity are accepting the drawbacks of your chosen strategy.
Q&A (I’m all ears)
