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New era of financial advice Dollars & T Sense here is a structural change emerging with the type of advice investors need from their investment advisers. Some clients and advisers have transitioned, while most have not. Sometimes the process of change is slow, while the evidence to change is compelling. That is the case in the world of nance even though nanGuest Contributor cial decisions and success is one of the most sigrities pricing and allow you to gain from that exni cant in uencers to your quality of life. Some of the facts for this column come from pertise has disappeared. The next era of nancial an article in the July/August 2014 edition of Fi- advice has arrived. It is based on the values of a nancial Analysts Journal titled, The Rise and Fall of client. What is your life plan and what cash ow is necessary to support your lifestyle? Performance Investing. The investment world is now all about you, Simply put, the business model of providing advice to clients is obsolete. The old model your values, what you want to achieve and how revolved around the price of a security. Find a the investing process will help you attain that goal. money manager who can nd mistakes on how This value-based advice is available but as I've the market has priced a security and then buy or said, few advisers/clients have made that switch. There are plenty of obstacles blocking the change. sell that security to your own nancial gain. The rst is money: an adviser picking a manThe investment business has and will continue to evolve. Fifty years ago, money management ager from the hundreds available is pro table. One-on-one coaching is less lucrative than was generally very conservative and dominated by large insurance companies and bank-owned the one size ts all model of picking an investtrust departments. Preservation of capital was ment manager. The world of investing and the order of the day. Then there was a shift from nancial planning has changed for the better. The preservation of capital to performance investing focus is on you and not chasing illusive superior and the birth of many new investment rms. The investments. -- Submitted by Peter Watson, MBA, CFP , investment fees were low and the money managR.F .P ., CIM, FCSI., Certi ed Financial Planner ers were purists. Investment returns were good, This saTurday money owed into these rms and the investment management fees started to climb sharply. All of a sudden, the world of pure money management was replaced by the "big business" of managing money. Managers began making huge salaries. The best and the brightest ocked to the investment business to make their fortune. featuring Slowly the skill advantage of a great manager of many decades ago declined. The managers are better now WITH RUDY AND THE due to enhanced tools and technology, ANGELS SHOWBAND but so is the competition. Today, a great manager is just a commodity with very few qualities that differentiate them from others. The value MILTON, ONTARIO provided by investment managers has disappeared but the high investment MATTAMY THEATRE management fees have remained. Now, you have an obsolete invest1010 MAIN ST. E. ment environment that doesn't make sense. There are several questions you should ask if you could interview your money manager. FOR TICKETS CALL Do managers often beat the underlying market in which they invest? Do they generally cover their high investment management fees with supeOR VISIT rior returns other than the returns that were a result of the market appreciatMILTONCENTREFORTHEARTS.CA ing in value? Does it make investment sense to remain a client of an active money manager or would it be prudent to look for alternative investing options that are signi cantly less expensive? The answers to all of these questions is `no'. The glory days of investment management have long passed. PETE HAS THE LOOK, THE CHARISMA, THE VOICE, AND The notion of investing with a manTHE MOVES REPRESENTING ELVIS IN HIS PRIME! ager who will discover errors in secu- 19 | Thursday, October 2, 2014 | OAKVILLE BEAVER | www.insideHALTON.com Peter Watson PETE PAQUETTE OCTOBER 4, 2014 8:00PM 905.878.6000 DYNAMIC SPECTACULAR ENTERTAINING A MUST SEE SHOW!