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Is This The Next Advisor

Robo-Advisors are a class of financial advisor that provides portfolio management services online with a minimal amount of human intervention. Wikipedia contends, that "It's the financial equivalent of booking an Uber on your phone versus standing in the cab line at the hotel." 

In reality though, the Wikipedia comparison fails at a couple of things. First, it's the notion that I could be sitting at a sidewalk table in the afternoon sun sipping a beverage of my choosing whilst I Uber up a ride from my iPhone vs. standing in the summer heat, sweating out the lineage waiting for the under-air conditioned cab to arrive.  I get it, that doesn't sound like a better deal than Uber'ing up my cab. 

But, here's the analogy reality.....the difference between your Robo-choice and an actual advisor is really more like using Uber to get your cab or just asking the Ritz Carlton Concierge to get a cab for you isn't it? If it isn't, then the problems not that Uber'ing up your cab is better, its that you've got get a better Concierge. 

The contention is that Robo-Advisors provide some real advantages to Consumers; 

1. They use essentially the same tools that Real-Advisors use, and; 

2. They can serve the underserved masses who either [a] don't meet the account minimums of Real-Advisors or, [b] can't afford the typically high fee structures of Real-Advisors

So, let's look at those two things. 

First, they don't come close to using the same tools are Real-Advisors any more than neurosurgeons use the same tools as auto mechanics. (You know, that tool that "removes something.") At point of fact, they might use the same "analytical tools" as Real-Advisors, but not the same tools. Making the contention that the same tools are used is inaccurate at best, lest we consider that "conversation", "goal setting" or "understanding your risk tolerance",  or "your feelings about money" or "your past behaviors and your predilections and behavioral biases" can simply be ignored. Reduced to it's simplest component parts,  an interior designer is going to use the same tools no matter who you pick right? It's more or less going to come down to, paint, rugs, curtains or window coverings and furniture isn't it?  Why muddy the waters by asking you how you feel about a certain style of furniture or paint color? 

Removing personal bias isn't good work, it's just simpler work. 

Secondarily, real-advice is expensive at really-expensive advisors, not at all advisors. Not at this advisor. And, not every advisor has an account minimum. The notion that only high-priced services result in effective outcomes is bogus, but that's in essence what you're doing when your contention is that there's only two flavors of advisors, Robo and High Priced.  If the price of things was the sole determinant of much of anything, then every golfer out there would be swinging the most expensive clubs they could find and they'd all be on the PGA tour, because of course price and success are inexorably tied to each other. Bottom line is that you're either good at what you do or you're not. Your fee schedule (while often way too high) is a marketing decision in response to market factors, not an indicator of intelligence or ability. 

There are many things surrounding the birth of the Robo-Advisor that I do agree with. I do think that as a rule, investment management fees in most instances are way too high, non-transparent and a bit over the top.  I also agree that account minimums are problematic. 

At Barry Capital we've solved the conundrum of pricing advice.  And we can prove that "Robo" is a "no-no" for most people, and clearly not your only viable pricing or advice option. 

The Intermediate Guide to Change

At times it can feel like life is just one big adjustment period.  One thing after another requires our attention and energy. And, most times, it seems that all we're ever doing is adapting and adjusting, rethinking and reconsidering.  You know why? Because we are. 

Because all life is, is change.  Change is all there ever was and it's all that there ever will be. 

But why is change for many of us such a "pain point?"

Mainly because change opens us to a state of "not being in control" and of things not meeting our expectations. 

Taking that on faith then there's really an immutably simple way to manage the "pain point" of change. 

First, realize that not being in control isn't necessarily bad and that not being in control is probably the most normal state of things.  If we can learn to accept the fact that we're not always going to be in control, maybe not being in control would be less painful. Reconciling in our minds that control is a shared resource would help us all a lot. Sometimes we have it and sometimes you don't. 

Second, why don't we give up on expectations?  Expectations are a story that we've told ourselves. It's how we've planned "it" out in our minds.  You know it's true, you've done it, I've done it, we probably did it today. We "walk" through in our mind how our day is going to go, or how the conversation with your boss will play out or,  what our child would tell us about how they see their future playing out.  We had it figured out in advance, we knew exactly how it was "supposed" to go. Only problem is, it didn't go that way did it? It seldom ever does. Deviations from our story are just that. Our story was in the end, only one possible outcome, not the only one. 

If we could learn to view change as opportunity, we might be farther down the road on our own solution. 

So here's the thing.......

Look at change as opportunity and get comfortable with not being in control and not knowing. Learning to live with uncertainty is a necessary part of life. 

 If all there's ever going to be is change, our adaptation to it is central to building toward a stronger future. 

The Bad Thing About Good Advice

Good advice is seldom understood or appreciated.

And, I think that there's a good reason for that. The reason is that what makes for good advice is often viewed as a "bad" thing. 

Seth Godin recently wrote about the attributes of good advice. 

I was drawn to the posting I guess, because "good advice" is what I envision that I do.  And, because I am naturally inclined to learn and I can always benefit from good advice, so I read the posting to see what the takeaway would be. 

No matter what you do, be it advisor, parent, teacher, mentor or leader, I think that this piece has in it, a few "gems" I think we can all benefit from;

  • Good advice is not what you want to hear but what you need to hear
  • It is not imaginary, but practical
  • Not based on fear, but on possibility
  • Not designed to make you feel better, designed to make you better

Those points resonated with me. 

The problem however, remains this 

  • People are prone to want to hear what they want to hear, not what they need to
  • Absent a degree of "social" or other proof, fallacy masquerades pretty well as "fact" allowing for the imaginary to crowd out the practical
  • Avoiding fear prevents a relationship with the possible
  • Feeling better is usually going to be preferred over "making you better"

I see it all the time. 

If the original blog were the reality, there'd be more people planning their lives based on what needs to done, what's practical, what's possible and what will make them better. 

There just isn't much of that going on. 

There needs to be more. 





Why We Love Goals and You Should Too!

Everyone loves setting goals, it's one of the reasons that productivity and to-do apps are among the most downloaded by smartphone and tablet users alike. 

Problem is while we all love having goals we're not clear on how to best achieve them. Most folks think that the goal, that seemingly elusive "end state" is what we should put our focus on. I beg to differ. 

Reality is that the best way to achieve any goal remains to focus your attention on the processes that get you there. (As an example, read this Fast Company blog by Dilbert creator Scott Adams) Let's take an example, let's say you decide you want to be in awesome physical shape.  Are you better off focusing on a combination of [a] your desired weight and [b] specific body measurements or are you better off focusing on [a] getting to the gym just three days every week and [b] eliminating all the "bad food" you eat?

If we operate on the premise that your ideal weight (175 pounds in my case; I'm currently 188 but was 227 lbs. two years ago) is 200 lbs. I might be crazy, but hoping that your ultimate weight will remain a long-standing motivator seems improbable, weight loss is a slow and tedious process isn't it? I mean, is watching a drop in quarter or half pound increments really gonna do it?  And, it's so easy to "stop" and be content when the first ten come off, afterall, dieting is hard and ten pounds is probably gonna make your clothes fit better. 

But you can get energized by ending a day knowing that you got to the gym and did a workout, any workout, on your way to your goal. (P.S., "any workout" is also a better "process" than expecting yourself to be a gym maniac every time you show up there...) And, you can pat yourself on the back knowing that you got through another day without Dunkin' Donuts or fast food.  Focusing on the process allows for every day to be a win, instead of the notion that you're killing yourself and still have 25 pounds more of killing yourself to go. 

See, if you focus on the "steps" and not the "end" things look a lot different. There are lots of people who yearn to connect more with their kids and is hard and takes more time than we think.  But rather than "forcing" the matter, how about this.  [1] Get home early two nights a week and be around on Saturday, [2] turn off your smartphone and tablet when you get in and leave it off till the kids are in bed (It'd be better for you if you just left it off, but that's your call). I bet if you can do those things, you'll feel better along the way because the process is key to the goal, not the other way around, and getting the small steps right is more of a determinant of long-term progress. 

Bottom line is this; if your goal is to eat an elephant, one bite at a time really is the correct answer and not because it's too big to get down in one gulp. 

What's your first bite gonna be and what of.....?


4 Lessons About Collaboration

Dan Sullivan, owner and founder of The Strategic Coach calls it, "rugged individualisum."

It's the notion that we can go it alone, we're relying only on ourselves, our talents, our tenacity and our creativity.  All good traits to be sure, but is "rugged individualisum" a wise business choice?

In this article from Fast Company Magazine, Jeff Havens talks about why you specifically shouldn't try to do everything yourself. 

Kick the Losers To The Curb

No doubt that as the capital markets start out 2014 either moving down or barely managing to tread water, our thoughts normally turn to "what do I own right now that I probably shouldn't?" I can hear the trades taking place even as I write this blog. 

But venting out the old in favor of the new may not be the best option that you have at your disposal. 

We always tend to pay and invest too much credibility in short term data.  And, that disconnect is off at more than one level.  If we have "long-term" goals then why wouldn't we match that with a view based on long-term data instead. 


In a recent blog post, Behavior Gap expert Carl Richards formulates a cogent argument for continued diversification based on the principal that what was once performing well, will one day not be and likewise, what was once not performing well, will one day be doing just that. 

In a seminal book on Asset Allocation, portfolio manager and financial advisor Roger Gibson noted that on average, your portfolio should at least be aligned in a manner consistent with overall global asset distribution. So, whether your emerging market stock or bond funds are performing well or not, they deserve a place among a well diversified portfolio and that level of representation in your portfolio should match your risk propensity and tolerance. While I don't think that emerging markets should dominate, surely they should be represented in your holdings and at a level consistent with your risk tolerance. 

My best bet would be this; if we look at past successful "investors" or "portfolios" or "Clients" we're going to find two things that really account for much of their long-term success; 

1. They tend to stay the course and invest more in a sound process than short-term data, and; 

2. They do the things that most people are not willing to do, they put money in when markets are declining and frankly, that means your betting on your losers, not getting rid of them

It's hard to argue that for many 401k plans are viewed as their most successful investment.  But can we tell why that's the case?

For many, it's their only savings plan, I get that, but that's not necessarily what makes it the most successful. I'll offer a counter claim to the success; 

1. Because contributions are made out of each payroll period, money goes in no matter what, and; 

2. Because investment options are so damn hard to discern for the average investor they're more likely to just stick with the allocation that they chose when they started and not monkey around with it all that much

That captures two important initiatives; 

1. Doing what most people won't do (making contributions to investments in declining markets) and; 

2. Staying the course

As an advisor I understand more than most the desire to avoid market declines and feel that we can side step adversity and it's easy to be fooled that we can.  Let me give you a real story to support that. 

A few years ago, we had a Client that demanded that they go to all cash during the very end of the 2008 decline. No matter what we did we couldn't convince them that staying the course was their best option. So, we agreed in the end that we'd move them to cash. That was the easy part; getting out is always the easy part. 

What we struggled with was getting them back in.  It never, to their way of thinking, seemed like the right time to put the money back in the market. They missed the first 11% of the run up that followed the rebound that started in 2009.  When we finally were able to convince them to get back to fully invested, we asked the following question?

"If, by getting out of the market we prevented a 3% decline and missed an 11% run up on the other side, didn't we effectively make avoiding a 3% loss into an 8% loss?"

We did. But you can't believe how hard it was for us to convince our Client of that fact. To their way of thinking, they avoided a loss.  Math would indicate that exactly the opposite occurred, they created a larger one. 

If the value of diversification is real, which it is, then one other factor remains immutably true about your winners, your losers and investing in general; 

"If they don't ring a bell to tell you when to get out, they sure as hell don't ring one to tell you to get back in....."

Change your way of thinking...your losers aren't your losers, they're your "just not making money now" assets.