What's The Point?
Published by Terry McIntyre on Dec 31, 2014
What's the Point?
Over the last several years I have been finding an incredible sameness growing over the investment industry. It reminds me of a children’s movie – The Point. In it the original narrator (Ringo Starr) brings us through this Harry Nilsson storey about a boy (Oblio) and his dog banished to the Pointless Forest. From his adventures, Oblio finds that even though he does not have a pointed head like the others, he can have a point. He also notes that the obvious pointed head people don’t necessarily have a point themselves.
In this world of marketing and promotion, I am finding that the sameness has taken over, yet it is marketed better as individuality. It has to be difficult for the consumer (investor) to see through this marketing to find true individuality.
No Stock Training
At least One firm that has a training program has not taught their rookie advisors how to buy stocks for the last several years. They are supposedly full service advisors, and do have an IIROC license yet they have no stock training. Yet they set up fee based accounts, trade for their clients and have no base training, let alone advanced training. Pointless made to look as a very pointed and distinct skill.
There are less and less of us who know how to tear apart a balance sheet, know how to properly chart and read trends in the economy and sectors of the investment world. Those at these firms he ones who trade stock each day are gathering around their morning call, believing the Head Office push of the day and they start to buy. No understanding of the stock, and therefore have no idea how this fits each client’s portfolio. It’s simply the storey that matters, not the point of the storey.
What is even more frightening is that on average a brokerage house only puts a sell call on less than 5% of the equities they follow. Who is looking out for you? - thumping the table on a buy, not telling you when to sell and then ‘the old favourite’ comes out by dropping coverage of a stock or out of favour sector – leaving you with another lame duck stock in your portfolio. You eventually sell and don’t know really do so with any conviction.
Separately Managed Accounts are Mutual Funds
The second way is the so called separately managed accounts. While there are some good managers in these, you can never count on the head office choices of separate managers as the best choices. They are picking the best they can for the amount they are willing to pay and then picking on a set of criteria that can not suit each and every investor. On top of that, the lack of choice makes sure the 19 year old and the 90 hear old have basically the same portfolio. Sad; except it is sold as an upbeat product that is built just for you. I do tire of these sales and marketing tactics.
Forced Proprietary Selling
The third way is a firm building portfolios in which 80% or more of the managed products must be theirs. I truly believe throwing darts at a page of mutual funds will do better long term. The more we have the ability to diversify and craft individual portfolios, the more the massive institutions force their advisors to homogenize the choices to the client and thus the industry.
Don’t let them homogenize your investments and call it individualized.