Posts filed under 'Investment Philosophy'
Our Comment by J. David Lewis – Several days ago, a Board Member for National Association of Personal Financial Advisors and a colleague I respect a great deal, asked me to help with a definition for the term “financial planning.” Having taken the time to consolidate my thoughts, I decided to make the exchange public.
Hi David,
I am working on developing a definition of financial planning. Short and sweet. I am asking some colleagues whom I respect to take a stab at it. You wanna give it a try?
Thanks, Mary
——
Hello Mary,
Thank you for the compliment. Coming from someone with your history, the request is humbling. You said “Short and Sweet,” which I must leave to you in crafting a definition from a variety of contributors. I have written a few words I consider worthy of consideration as a building block for a definition that will resonate with me – hopefully others. I write so much to give these few words my context for them. I am using a different color font for the words I consider most significant.
My vision for financial planning goes all the way back to one event in my memory. As a banker, about 1981, a “financial planner” who was affiliated with an arm of that bank did his sales pitch to a group in the bank lobby one evening. He opened the meeting by saying that a financial planner was someone with extensive knowledge of many aspects of personal finance, from deposits and loans through estate planning, investments and insurance. My experiences from my family’s bank before that job told me immediately there were many people who needed that service. Being young – and drinking from the company cool-aid – I believed this guy brought our bank customers a great service. Of course, he proceeded to sell life and disability insurance - then limited partnerships. If they had any money left, they got mutual funds. I was severely disappointed, but never lost that definition, which was later refined when I discovered the existence of NAPFA in 1984. I founded Resource Advisory Services in 1985 and joined NAPFA in 1986.
The Resource Advisory Services Mission Statement is:
“Developing relationships that help people build AND enjoy wealth, through our commitment to excellence in comprehensive financial planning services, where we gladly accept fiduciary responsibility for understanding and serving each client with an exceptional level of ethical integrity.”
While this statement uses “financial planning” without defining it, the first item of our Vision Statement sheds light on the essence of what the term means to me (us):
“I want Resource Advisory Services to be known as a place where clients can trust us with every detail of their personal financial affairs, not only because of our high level of ethical integrity, but also because we have the ability to understand their personal and financial needs, and arrange for efficient and effective services that will help them enjoy their wealth.”
There is More to Money than Money® comes right out of these two foundation sentences. The concepts of relationships and enjoying wealth have a great deal of importance to me in financial planning. It is not all about building. It has more to do with helping clients have a clear and realistic understanding of how strong they are financially and whether they are making progress at a rate that is likely to eventually help them feel they are secure in their financial needs. Is there reasonable evidence for the client to feel secure at the level of wealth they have now? Making it clear that some clients do not need more wealth for their stated goals seems to have been our greatest contributions for more than a few clients. As they see unfolding evidence this is true, their liberation gradually blossoms. It is beautiful. When they need more, helping them see progress adds to their feelings of security and enjoyment, even if they are far from their goals. In some cases, it seems to have been an exceptional service when they saw that a stated goal was just not feasible without sacrifices they were not willing to make or just completely impossible no matter what they did. Some of these seem to take pressure off themselves, adjust to the disappointment and feel better in time. Of course, a few didn’t want to see the circumstances and decided not to be clients. The various segments of CFP® philosophy are tools, not the essence of building and enjoying wealth. I think the idea of helping clients balance building and enjoying is at the essence of financial planning.
I hope this helps you and others as you choose the words that eventually become the NAPFA definition for financial planning. Thank you for working on this. It is important. If you have drafts you want me to comment on, I will be glad to tell you what I think. I have opinions on many things. Apparently I am genetically incapable of being embarrassed about expressing them.
David
Contact J. David Lewis directly with david.lewis@resourceadv.com or share your thoughts on this topic below. He founded Resource Advisory Services in 1985. National Association of Personal Financial Advisors (NAPFA) was formed only a few years before. Lewis became a NAPFA-Registered Financial Advisor in 1986. He is a passionate advocate for fiduciary, fee-only financial planning and has been associated with financial services since childhood in a banking family. 52877
April 23rd, 2011
I have more or less given our readers a rest since January. When I began these newsletters several years ago, I resolved to avoid offering them unless I felt I had something meaningful to say. In 2008 and 2009, they were sometimes more often than monthly. Readers seemed to appreciate my words during a very confusing time. In 2010, with the economy improving, I wrote less and shared more from published articles I read.
As 2011 began, “More than Money Resource” expressed our philosophy on building and enjoying wealth as opposed to just managing a portfolio. Until very recently, I have not seen a great deal that warranted adding another email to your day. Near the beginning of February, I considered describing a list of the mutual funds we used in the mid-1990 versus those we use now. I aborted that writing when I realized I could cover the subject with a short paragraph:
It is remarkable that these two lists are so similar. We have dropped a few choices. Remembering the reasons is educational for Resource Advisory Services. Several have been added, which is testimony to Bryan Hankla’s capacity for studying the corporate personalities of mutual funds and their managers. Although I enjoyed that work for years, I am glad someone with his excitement is doing the “grunt work.” The collaboration we share is much more rewarding.
Near the beginning of March, I considered “The Second Anniversary of The Bear Market’s Bottom.” I think most people are weary of thinking about those six months of incredible stress. While I understand it is important to know there will be future market crisis, as well as other very disturbing events, anyone who reads “my stuff” knows my philosophy. I will encourage sticking it out through the next shocking bear market. We tell our clients this is what they can expect from us. The most troubling feelings from the past three years are those times we could not help more people stay invested to experience the last two years of recovery.
All-in-all, the first calendar quarter of 2011 has been pretty uneventful with respect to the kinds of things I might write for “More than Money Resource.” The S&P 500 Index return was 5.92% for three months. For twelve months, from April 1, 2010 to March 31, 2011, it was 15.65%. In history, these are rather humdrum results. As always, there are storm clouds all around. When there are not issues that cast doubt on the economic future, and the most discussed fear is missing opportunities everyone else seems to be enjoying, those are precisely the times we should be very concerned. So, the lack of a significant writing project for three months is probably a good thing. The January issue of our newsletter, Smart Advice for 2011, may have been about as good as we could have shared. Let’s hope the rest of 2011 is as relaxed as it has been so far.
Contact J. David Lewis directly with david.lewis@resourceadv.com or share your thoughts on this topic below. He founded Resource Advisory Services in 1985. National Association of Personal Financial Advisors (NAPFA) was formed only a few years before. Lewis became a NAPFA-Registered Financial Advisor in 1986. He is a passionate advocate for fiduciary, fee-only financial planning and has been associated with financial services since childhood in a banking family. 52450
April 5th, 2011
ADV FORM
Twenty-six years ago, one of my disappointments with financial services regulation was the incomprehensible form regulators prescribed for informing clientele about Registered Investment Advisers’ capabilities and methods. I resolved to write a Plain English version that included all the issues the Securities and Exchange Commission considers important disclosure topics. Although my presentation was a permissible substitute, a compliance attorney advised me that the SEC was not prepared to review it for completeness without giving me a great deal of grief.
For what seems like six or seven years, the SEC has been struggling with various consumer and financial services groups to develop a Plain English format that can be regulated. I am thrilled that the old form is now gone. When prepared in the spirit of the new regulations, readable disclosure is now the law of the land. Our version is available at Resource Advisory Services Form ADV Part 2A. Anyone can read a Plain English version for any U.S. investment adviser by clicking here United States Securities and Exchange Commission – Investment Adviser Public Disclosure. If you read one – even ours – that does not cause you to believe the adviser can truly comprehend issues for improving your financial life, keep looking. A very good place to explore for firms with published Forms ADV Part 2A is National Association of Personal Financial Advisors. There are plenty of choices.
J. David Lewis, Founder
NAPFA-Registered Financial Advisor
52450
April 4th, 2011
We have a logo sign installed in our new offices. Much of the space’s design incorporates concepts that are important to our culture at Resource Advisory Services, as a very important indication of who we are. Colors were taken from our graphics and heavily influenced by “Duality of the Bull and Bear,” by Chris Navarro. The sculpture became a feature of our work environment very near the beginning of the recent bear market. It has served us well. We really like to see the bull attack the bear, although we know the bear plays a critical role in the ways free economies work.
Reading from the top left:
The boxes illustrate interconnected relationships.
Or, they may be viewed as growth with each larger than the last one before.
Or, some may see growth in an arrowhead pointing to the upper right.
Or, the larger box may be net worth, holding investment assets and liabilities the small square.
What do you see that we do not?
RESOURCE is the largest word. Its font is clearly institutional.
Our clients have resources that we help manage.
We are a knowledgeable resource for our clients.
We have resources for research, education and streamlining tasks for clients.
Our relationships with other organizations and professionals are a resource for us and our clients.
Advisory Services are what we do.
We provide advice.
Services implement advice.
Advisory sets atop Service because service supports advice.
The lowercase “advisory services font” implies friendly, personal relationships.
There is more to money than money.® It is the root of evil and the sum of our blessings, at the same time. It touches the things we can do and the things we cannot do, in many profound ways. Our attitudes about it are heavily influenced by the amount and source of money in our heritage, going back for several generations. We have a relationship with money that can be either healthy or unhealthy. There are many references to money in the Bible and the writings of other religions. Most forms of currency are inscribed with a reference to religion. Money and the way we view it are very important concepts. There is more to money than money.®
Duality of the Bull and Bear – For us, this is a visual symbol that distills the classic struggle between bulls and bears. With it we can often use a simple phrase – “it is the bull and bear struggle” – to explain some aspects of money and our philosophy. The price of almost everything we use in a free market economy comes from this constant struggle – from the beef and wheat for our food to the stocks that determine the values of massive companies. Energy prices are determined by bulls and bears negotiating.
This constant struggle makes it all work – sometimes not the way we want, but always moving toward the balance that it never reaches for enough time to notice that a market is in balance. Moments later, there is new information, which changes everyone’s perceptions again. Yes, whenever the market for a commodity or stock is falling, someone is still buying, with the belief they have a bargain. Very soon, the bull and the bear will both know who was right – at least for a moment or two. We believe strongly that we must help as many as we can resist temptation to chase exuberance or flee when the struggles between the bulls and bears create feelings of chaos. It is always chaos to some degree. Markets behave like markets because bulls and bears behave like bulls and bears.
Our Office, where these symbols reside, is designed so virtually every place in it has at least some view through a window to the outside world. We strive to keep our relationships with our clients and others just as open and transparent. Those who trust us in business transactions deserve to know the things that influence our opinions and recommendations. This is a key concept in living up to our FIDUCIARY responsibilities to our clients and others who depend on us.
Contact J. David Lewis directly with david.lewis@resourceadv.com or share your thoughts on this topic below. He founded Resource Advisory Services in 1985. National Association of Personal Financial Advisors (NAPFA) was formed only a few years before. Lewis became a NAPFA-Registered Financial Advisor in 1986. He is a passionate advocate for fiduciary, fee-only financial planning and has been associated with financial services since childhood in a banking family. 51250
January 6th, 2011
Our Comment by J. David Lewis – This is another interesting column by Jason Zweig. For a very long time, I think I have understood many of the virtues of EFTs. Yes, their expense ratios are extremely low and they seem bound to hold exactly what they say they will hold. So far I have not been very interested in using them for client portfolios. Zweig calls our attention to an issue that may or may not influence our future usage.
If one chooses to build a well diversified portfolio from ETFs, they can, with sufficient knowledge, create relatively precise allocations. In my experience, most consumer-level investors do not seem to really understand the intricacies of managing portfolio allocations. If the fund implies it is an ETF, they might buy it without understanding the role it could or should play in their portfolio, other that being inexpensive. The missing piece is a clearly defined portfolio philosophy. Having and keeping a clearly defined portfolio philosophy is the first and most important issue.
So, with a portfolio philosophy defined, we believe we can effectively and prudently build the allocations for that philosophy with actively managed mutual funds. For 25 years, we have built an evolving list of actively mutual funds that demonstrate their ability to perform better than their peers in unique categories. Then, we build asset allocations with mutual funds that represent the better performers of the categories, generally based on at least five years of impressive results. It is the active managers who make the indexes work as a reasonable representation of the markets they represent. The indexes values depend on a robust community of analysts searching for situations where the markets have not recognized value.
I think I agree with Zweig’s conclusion that the Kauffman Foundation report may not be relevant to the individual EFT investor. Yet, I am not sure what this means for the markets in general. The report is probably worth reading, no matter where one investor stands on using EFTs. We should avoid closing their mind to information that challenges their beliefs. I will put this on my reading list and see if I get to it. Thanks again Jason.
Are ETFs a Menace—or Just Misunderstood? By Jason Zweig
“Could exchange-traded funds blow up and take the markets down with them?
A report released this week argues that ETFs are “radically changing the markets,” raising the prospect of a “panic-driven market meltdown.” ETFs are funds that hold all the securities in an index and themselves trade like a stock.” http://online.wsj.com/article/SB10001424052748704865704575610833659564558.html
Contact J. David Lewis directly with david.lewis@resourceadv.com or share your thoughts on this topic below. He founded Resource Advisory Services in 1985. National Association of Personal Financial Advisors (NAPFA) was formed only a few years before. Lewis became a NAPFA-Registered Financial Advisor in 1986. He is a passionate advocate for fiduciary, fee-only financial planning and has been associated with financial services since childhood in a banking family. 50508
November 14th, 2010
by J. David Lewis
With all that has happened since the market peak in the fall of 2007, the recent three months are pretty mundane. July 31, 2010 was the end of a strong month, which now seems to have ended two volatile months (May and June). The S&P 500 Index return from July 31 to October 31 was 7.97%, which is a good quarter. This recovery, like most, produced at least one period of volatility, along with widespread fears of a “double-dip recession.” Depending on the person interpreting the history of “double-dips,” they never, or almost never, materialize.
The response to “this time is different” should be; “Yes, this time it is different, except for all the ways it is the same as every other bear market and recovery. And, ‘this time is different’ is a way they are all the same.” The “double-dip recession fear” is another way bear markets are almost always the same. This time, we heard that the pre-election uncertainty would cause a double-dip. If it does, it will have to be after the election instead of before.
There is more to money than money.® The bulls and bears will create another bear market someday. No one can know when. Someone should have a list of these “adages” available to review the next time we are going through one of these, as a tool to help us stay grounded.
For now, there just doesn’t seem there is more to say about our Economic Prospective. The economy is improving slowly, which is what we have heard for at least 18 months. I will follow the advice of an old cowboy saying – “When there’s nothing more to say, don’t be saying it” (Cowboy Ethics by James P. Owen and David R. Stoecklein).
Contact J. David Lewis directly with david.lewis@resourceadv.com or share your thoughts on this topic below. He founded Resource Advisory Services in 1985. National Association of Personal Financial Advisors (NAPFA) was formed only a few years before. Lewis became a NAPFA-Registered Financial Advisor in 1986. He is a passionate advocate for fiduciary, fee-only financial planning and has been associated with financial services since childhood in a banking family.
50186
November 4th, 2010
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Our Comment by J. David Lewis – Several days ago, a Board Member for National Association of Personal Financial Advisors and a colleague I respect a great deal, asked me to help with a definition for the term “financial planning.” Having taken the time to consolidate my thoughts, I decided to make the exchange public. 
