Unfiltered Finance

Welcome to the series finale! After more than six years, we are concluding the Unfiltered Finance podcast. It has been our sincere pleasure to inform both our investors, and financial advisors with this offering. Joining our host Tom Romano, for this proverbial curtain call, is Casey Dylan, Consultant from Story Market Services & the original host of Unfiltered Finance. We’ll be recalling some of our favorite memories, and discussing what this podcast has meant to the progression of our respective careers.

If you have any questions or would like more information, reach out to us at https://symmetrypartners.com/contact-us/

You can also find us on LinkedIn, Facebook, YouTube, and Instagram. As always, we remain invested in your goals.

Welcome to part two of our podcast episode - "Navigating Global Markets". Many investment professionals believe it is imperative for investors to globally diversify their portfolios, and not put all of their proverbial eggs into one basket. We are joined by Symmetry's Brendan Kruh, Investment Associate, to conclude our discussion on the necessity of global diversification in your investments.

If you have any questions or would like more information, reach out to us at https://symmetrypartners.com/contact-us/

You can also find us on LinkedIn, Facebook, YouTube, and Instagram. As always, we remain invested in your goals.

With recent turmoil in the Middle East, the continued war in Ukraine, and global inflation, investors want their portfolios to feature more U.S. stocks. After all, domestic investments have performed well as of late. In this episode of Unfiltered Finance we are joined once again,  by Symmetry's Brendan Kruh, Investment Associate, for a discussion on the need for global diversification, even during the most tumultuous times.

If you have any questions or would like more information, reach out to us at https://symmetrypartners.com/contact-us/

You can also find us on LinkedIn, Facebook, YouTube, and Instagram. As always, we remain invested in your goals.

Rising oil prices have animated market participant’s fears of reinvigorated inflation pressures, increasing the chances that the Federal Reserve will impose more interest rate hikes. Join Casey Dylan, CIMA®, Investment Communications Strategist (Consultant), and Tom Romano our Head of Strategic Relationships & Product Development, for a detailed recap of some notable market events from Q3 of this year.

If you have any questions or would like more information, reach out to us at https://symmetrypartners.com/contact-us/

You can also find us on LinkedIn, Facebook, YouTube, and Instagram. As always, we remain invested in your goals.

Markets were off to one of the best start in decades during the first half of 2023—then came the third quarter. The Federal Reserve resumed increasing rates, bringing them to a 22-year high at the Federal Open Market Committee (FOMC) meeting at the end of July. This led to ongoing elevated interest rates through August, pushing bond yields higher and challenging lofty equity valuations. In this episode, Casey Dylan, CIMA®, Investment Communications Strategist (Consultant), and Tom Romano our Head of Strategic Relationships & Product Development, will provide timely insights, and analysis, on market activity from around the world this financial quarter. We will also discuss what this could mean for long-term term investors.

If you have any questions or would like more information, reach out to us at https://symmetrypartners.com/contact-us/

You can also find us on LinkedIn, Facebook, YouTube, and Instagram. As always, we remain invested in your goals.

"KEEP CALM AND CARRY ON." Not only is this a beloved motto, it's also a great rule of thumb for maintaining your portfolio allocations. Once again, we are joined by Symmetry's Brendan Kruh, Investment Associate, and Eide Bailly Wealth’s Brett Myer, CFA, CIMA®, Investment Strategy Director. In this second of two episodes, we'll be discussing why you should maintain growth and value positions during periods of market instability.

If you have any questions or would like more information, reach out to us at https://symmetrypartners.com/contact-us/

You can also find us on LinkedIn, Facebook, YouTube, and Instagram. As always, we remain invested in your goals.

Once again, investors are faced with the same debate. Should I invest my money in large scale growth companies (e.g. Apple, Google), or, should I keep faith in the little guy and invest in some smaller companies (that seem poised to grow over time)? In this episode of Unfiltered Finance, we are thrilled to host not just one, but two special guests; our very own Brendan Kruh, Investment Associate, and Eide Bailly Wealth’s Brett Myer, CFA, CIMA®, Investment Strategy Director. Together, we’ll discuss present trends around both value stocks and growth stocks. Spoiler alert, it’s a more complex topic than you might think.

If you have any questions or would like more information, reach out to us at https://symmetrypartners.com/contact-us/

You can also find us on LinkedIn, Facebook, YouTube, and Instagram. As always, we remain invested in your goals.

There is risk involved in trying to time markets. We believe it's best to apply multiple decades of research when making investment decisions. Today we are joined by Symmetry's Dr. John B. McDermott, Executive Director of Investments, to conclude our discussion about Evidence-Based investing. This episode will feature a detailed overview of the resources available to investors (who are curious to learn more) and the academic professionals who have helped to develop this investment strategy over decades of time.

If you have any questions or would like more information, reach out to us at https://symmetrypartners.com/contact-us/

You can also find us on LinkedIn, Facebook, YouTube, and Instagram. As always, we remain invested in your goals.

This week, we work to define evidence-based investing, and explain some of the potential benefits of using this strategy. In part one of this two-part episode, our own Tom Romano, Head of Strategic Relationships and Product Development, is joined by Dr. John B. McDermott, Executive Director of Investments, for a historical retrospective on this fastidious investment approach.

If you have any questions or would like more information, reach out to us at https://symmetrypartners.com/contact-us/

You can also find us on LinkedIn, Facebook, YouTube, and Instagram. As always, we remain invested in your goals.

In this final installment discussing Q2 of 2023, we dive into current events, and their potential effects on the Stock Market. Our hosts, Tom Romano, Head of Strategic Relationships & Product Development and Casey Dylan, CIMA®, Consultant sit down for a discussion of the "magnificent seven" growth stock winners, the current state of inflation, interest rates, heavily tilted tech stocks, changes among international markets, and the recent repeal of the Black Sea grain deal by Russia. 

Click here to watch the full Quarter-in-Perspective on YouTube.

If you have any questions or would like more information, reach out to us at https://symmetrypartners.com/contact-us/

You can also find us on Facebook, YouTube, Twitter, and LinkedIn. As always, we remain invested in your goals.

Despite a somewhat lackluster April and May, equities markets ended one of the better first halves of a year in quite some time by the end of June. The Nasdaq, S&P 500, and Dow were up 32.32%, 16.89%, and 4.94% for the year, respectively. It was the Nasdaq’s best first half of a year since 1983, primarily due to growth in tech stocks driven by the surge in artificial intelligence. In this first of two parts, we discuss quarterly returns for Q2 2023. Casey Dylan, CIMA®, Consultant, and Tom Romano, Head of Strategic Relationships and Product Development, will provide timely insights and analysis on what happened in markets and economies around the world in the second quarter and what this means for long-term term investors.

Click here to watch the full Quarter-in-Perspective on YouTube.

If you have any questions or would like more information, reach out to us at https://symmetrypartners.com/contact-us/

You can also find us on Facebook, YouTube, Twitter, and LinkedIn. As always, we remain invested in your goals.

Two weeks ago, we held another successful week of AdvisorFest - an annual, week-long live-streaming event where we cover some of the most pressing issues Financial Advisors are presently facing. This year, we decided to host a live panel discussion about the experiences women have when creating long-term financial plans, and asserting an equal amount of authority in the handling of their household finances. 

Our very own Andrea Loin, Associate Director of Marketing, led a discussion along with financial advisors Diana Bacon, CFP®, CDFA®, MBA, and Joyce Bloomquist, CDFA®, of Apella Wealth. You’ll find some genuinely moving stories of challenges faced, and overcome by women investors here. We hope you find this episode to be insightful. Enjoy.

If you have any questions or would like more information, reach out to us at https://symmetrypartners.com/contact-us/

You can also find us on Facebook, YouTube, Twitter, and LinkedIn. As always, we remain invested in your goals.

00:00:07:01 - 00:00:37:17
Speaker 1
Hello and welcome back to Unfiltered Finance. I'm your host, Tom Romano. Two weeks ago, we held another successful week of Advisor Fest, an annual week long live streaming event where we cover some of the most pressing issues financial advisors are facing today. In part one of this special episode on Women investors, our very own Andrea Loin associate director of marketing, leads a discussion along with financial advisers Diana Bacon and Joyce Blomquist of Apollo Wealth will discuss some cautionary tales that can help investors learn which mistakes to avoid on their financial journey.

00:00:37:19 - 00:00:41:09
Speaker 1
We hope you find this episode to be insightful. Enjoy.

00:00:41:11 - 00:01:06:15
Speaker 2
Welcome everyone to the final session of our third Annual Advisor fest. Empowering Women Investors Navigating Financial Success Together. We're thrilled to have you here today as we embark on a journey to explore empowerment of women in the world of investing. During this webinar, we want to shed light on the unique perspectives and experiences of women investors and provide practical insights on how to effectively engage and support this growing demographic.

00:01:06:16 - 00:01:30:05
Speaker 2
Graphic It's important that we promote awareness and understanding of the specific challenges and opportunities faced by women investors in doing this, we hope to foster an inclusive environment and equip advisors like yourselves with the knowledge and tools to better serve women investors, which will ultimately lead to their financial success and empowerment. I have with me two financial advisors that work with Capella wealth, one of our sister firms.

00:01:30:05 - 00:01:44:08
Speaker 2
We have Diana Bacon. She's a CFP and a CDPHE and she has years of experience working in this very wonderful demographic. And we've Joyce Bloomquist, who is a cafe as well, also an advisor with Pell Wealth. Welcome.

00:01:44:09 - 00:01:47:00
Speaker 3
Thank you. Glad to be here today.

00:01:47:01 - 00:02:07:21
Speaker 2
Thank you for joining us. I read a statistic in doing research for this whole thing that really it surprised me because I'm a woman. I work in an investment firm. So I just assume I know all there is to know, but I don't. So about 39% of women have no retirement strategy. That seems like a very high number to me.

00:02:07:21 - 00:02:29:11
Speaker 2
So I looked it up and I was like, So what percentage of men don't have a retirement strategy? And it's only 25%. So there's a big gap there. It was shocking to me. And then I just assumed, right, we're in the 2023. Things should be the same for everybody, but they're not. And so coming together to discuss how do we to we do we grow that number or actually shrink that number down to be less.

00:02:29:11 - 00:02:46:17
Speaker 2
We want more women to have a plan for retirement. So, Diana, what are some strategies that you have that you use when addressing women investors with the challenges that are faced by them? How do you give them tools and tips and tricks to help them close that gap?

00:02:46:21 - 00:03:19:05
Speaker 3
Women in general, and you know, this is not some little niche. This is a huge market segment. We are 51% of the population To say women are all like X is very decent, enormous. However, we do see continuing themes over and over. The first is women. And we were raised this way, especially in the Western world. Well, actually, I would say while we're global globally, we never put ourselves first.

00:03:19:05 - 00:03:42:02
Speaker 3
And when I hear the statistic of the number of women who don't have a retirement plan, what do you have to do to have a retirement plan? You have to save. You have to invest. You have to be thoughtful of yourself. Make sure you either have that income stream or the assets to support you. And so the first thing that I work with a client is to change their money mindset.

00:03:42:04 - 00:03:48:22
Speaker 3
They need to put themselves first. I'm going to use the S-word. We got to be selfish.

00:03:49:00 - 00:03:53:12
Speaker 2
And that's really hard. Especially especially for me. I would have a hard time doing that.

00:03:53:14 - 00:04:12:17
Speaker 3
And it is. Yeah, yeah. I mean, think about it. Like having to say, I'm going to give my adult kids less as they're launching in life, but I want to do all this for them. I love them. You know, I have nurtured them, but I'm going to do less for them because I have to do for me for that.

00:04:12:17 - 00:04:32:05
Speaker 3
You know, I want to save for their college so they don't have to go through the things I did. All those things are prioritizing yourself. That is extremely difficult for women. So they got to start in that word, start to be selfish, and then get away with the H word shame.

00:04:32:10 - 00:04:46:18
Speaker 4
That is such a good point. I love it because I'm in this open space now. My kids are 20 and 22 and they see when do we let them go and be adults and when do we start saving like we should for.

00:04:46:18 - 00:05:01:11
Speaker 3
Ourselves that say And so many women start off because we have some credit card debt or paid too much on our car loan or, you know, just all these things that come up and we just put that shame on ourselves and then we don't deal with our finances.

00:05:01:13 - 00:05:19:10
Speaker 2
I like that you put the shame part of that and getting rid of the shame because I think being selfish is hard enough. But then you start to feel bad when you start to look at things. For me, it was matching my 41k, right? I'm like, Well, that takes away from money coming into the family. And and then I started realizing, No, it doesn't.

00:05:19:12 - 00:05:27:00
Speaker 2
It helps the long run. I'm doing it for me. I have to watch out for myself. So taking the shame out of it, that's probably harder than being selfish, to be honest.

00:05:27:02 - 00:05:32:18
Speaker 4
Yeah, We're caregivers, right? That's where we're moms, first and foremost. And it's hard to let that go. Yep.

00:05:32:21 - 00:05:51:13
Speaker 2
Caregivers is a good thing. Diana, your you did a webinar recently on closing that career, the career change and how to approach that career change. And I thought it was a great webinar. Not a lot of women think about that when they're leaving the workforce. I left for a couple of years, went back and not a lot of women think about what happens when you go back.

00:05:51:13 - 00:06:04:12
Speaker 2
And I think your webinar really opened up, you know, how to get back into the game and then how to be, again, selfish, how to focus on you to put yourself in a better space in life, in a better spot when you're trying to get back into the game.

00:06:04:14 - 00:06:32:12
Speaker 3
That's another area to that employment because so many women are underemployed to better support the family. Mm hmm. And the shame of saying, No, I want to do this. I want to have more of my earnings, particularly if, say, maybe your marriage or partnership isn't as steady and strong. The first thing when people are like, oh, I'm taking it, or when women are thinking about getting divorced, I'm like, Get a job or get a better job right now.

00:06:32:14 - 00:06:33:15
Speaker 4
Don't wait.

00:06:33:17 - 00:06:36:02
Speaker 3
Don't wait. Do it right now.

00:06:36:04 - 00:06:53:06
Speaker 2
See how that goes back to that, that shame and that self. Right. And be something I would find hard to do. But my husband is that I am what he calls the breadwinner of the family. And he tells all of his friends about it. And for me, that when I started to take on more, I felt like I was letting my family down.

00:06:53:12 - 00:07:09:06
Speaker 2
Right. You have to make that choice. And I realized I wasn't financially. I was helping my family, my 41k is growing, our family's growing, his 41k is growing. We're all working together. But I had to focus on me and make sure that I did that side of it, too. You actually hit on a great topic, Diana, and Joyce.

00:07:09:06 - 00:07:33:08
Speaker 2
I'm going to I'm going to start with you on this one. But a lot of the marriages might not be as solid, right? So I was divorced young and didn't even know that there was an option for me as far as financial planning goes. But can you explain how you would approach addressing the potential impact of divorce or even what would a heart a change in a lot of part of a big part of your life on a woman's financial situation?

00:07:33:10 - 00:07:48:12
Speaker 2
What makes it unique and different for that? Because I didn't even know what a CDF was until about five years ago and realizing that as someone who went through divorce, I could have had someone helping me too because I didn't realize what I was going through was unique.

00:07:48:14 - 00:08:09:02
Speaker 4
Right. And I have some input on that. You know, I've been through a divorce, too, and I think some of the things that are hard to wrap your arms around are when you're starting, you're kind of going from being with a partner to being by yourself. I mean, I think Diana's first point out of, you know, get back to work if you can and if it's possible, you know, we we want that to be the ultimate goal for the person.

00:08:09:04 - 00:08:26:07
Speaker 4
Why? It might not seem like you're making much at the time. I mean, maybe you got daycare costs and all that and maybe a lot of that money's going to their daycare costs and there's things in your mind or maybe you're saying, why am I even doing this? I mean, when I'm actually take it home isn't much after I pay all these people, but you're participating in Social Security.

00:08:26:07 - 00:08:53:19
Speaker 4
So that's important. You probably get your own health care. That's important, and that might make all the difference in the world by stepping into the workforce. At that point, you got to start accumulating those things for yourself. At this point when you go from where to me. And so that's something to really consider. Might not seem like you're bringing home that much, but you are benefiting from the benefits from the workplace, maybe for one K, maybe some free matching as little as you can contribute to the plan.

00:08:54:00 - 00:09:01:20
Speaker 4
There might be some pre matching that you need to consider as all these things are so important to get started back to you when you're going through that process.

00:09:01:23 - 00:09:24:07
Speaker 2
Makes perfect sense. And as an advisor, how do you educate not just women going through these these life changes, but how do you educate women on things that they need to know about their financial, about their finances, about that for one K, about going back to work? And though you think you're not making an impact with what you're making because it may be less than you want to at the time, how do you educate them?

00:09:24:07 - 00:09:35:01
Speaker 2
What are their tools and resources out there for them? Are there ways that you approach it that are different than you would, you know, approach a normal planning client? Are there tools of resources for them?

00:09:35:03 - 00:09:59:21
Speaker 3
I found that women are not educated when we're growing up on money matters the same way that men are. So first is getting the basics and we have the Internet now. So Internet and podcasts are wonderful. So it's like learning a new language. You have to just start jump in. There's a certain lingo to it, so you need to pick that up.

00:10:00:03 - 00:10:31:07
Speaker 3
So starting to listen to podcasts, you might not understand much. The first few try a bunch of them buying a new pair of jeans. You got to make sure it's a fit, you know, try ones. Once you hear things over and over again, will start to click, go on financial websites, read, you know, nerdwallet, Wikipedia, you know, all of these things where you can just start to learn the lingo and then talk to your friends.

00:10:31:09 - 00:11:13:21
Speaker 3
Men are talking to each other about money. We need, again, a sage word shame. Women don't want to talk about money. They don't want to make. They don't want to feel bad that they don't know something. But many women have found that financial services providers can be a little condescending. And that and that's a real struggle. And once you've been spoken down to getting that courage up again, to put yourself out there and ask questions and feel like someone's going to think you're you're not intelligent because you don't know, but how would you know if you never learned it or or.

00:11:13:21 - 00:11:27:23
Speaker 4
If you weren't married? And maybe the husband had it with his responsibility to take care of the finances. And maybe now you're by yourself, You're maybe you're divorced, or maybe you're widowed, and now it's all on you. So where do I start over with all this?

00:11:28:01 - 00:11:48:16
Speaker 3
Yeah. I've sat down with widows who are like, I don't even know where our checkbook is. I don't know how the, like, bill gets paid. I mean, all of these things where they really put it off on someone else, I will say, being involved in your finances, looking at your tax return, a lot of people don't even look at that.

00:11:48:16 - 00:12:10:17
Speaker 3
Look at your tax return. And I am absolutely biased. I will admit it. I'm a financial advisor. I am a certified financial planner. And I think working with a planner as early as you find one that suits you is really a big step in that.

00:12:10:19 - 00:12:28:00
Speaker 1
Thank you very much for joining us today. If you're a financial professional and you'd like to learn more, check the link in this episode's description to view all of the presentations from Advisor Fest 2023. As always, you can listen to all of our past episodes anywhere you get your podcasts. Thank you very much and we'll see you soon.

00:12:28:01 - 00:12:52:19
Speaker 5
Cemetery Partners LLC is an investment advisor firm registered with the Securities and Exchange Commission. The firm only transacts business in states where it is properly registered or excluded or exempted from registration requirements. Registration of an investment advisor does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission.

00:12:52:21 - 00:13:22:18
Speaker 5
No one should assume that future performance of any specific investment, investment strategy, product or non investment related content made reference to directly or indirectly in this material will be profitable. As with any investment strategy, there is the possibility of profitability as well as loss due to various factors, including changing market conditions and or applicable laws. The content may not be reflective of current opinions or positions.

00:13:22:20 - 00:13:38:13
Speaker 5
Please note the material is provided for educational and background use only. Moreover, you should not assume that any discussion or information contained in this material serves as the receipt of or is a substitute for personalized investment advice.

Today we conclude our discussion on women investors from AdvisorFest 2023. Symmetry's Andrea Loin, Associate Director of Marketing, leads a discussion along with financial advisors Diana Bacon, CFP®, CDFA®, MBA, and Joyce Bloomquist, CDFA® of Apella Wealth, on some of the critical factors, and life experiences, that should be incorporated into a woman's financial plan.

If you have any questions or would like more information, reach out to us at https://symmetrypartners.com/contact-us/

You can also find us on Facebook, YouTube, Twitter, and LinkedIn. As always, we remain invested in your goals.

Financial Advisors don't work for free. Depending on how their practice is structured, investors will be charged an assortment of fees for a financial advisor's services. In this episode of Unfiltered Finance, we are joined by JT Lavery, Symmetry's Associate Director of National Sales, to discuss how fees are structured and how advisors can work to be transparent with their clientele.

If you have any questions or would like more information, reach out to us at https://symmetrypartners.com/contact-us/

You can also find us on Facebook, YouTube, Twitter, and LinkedIn. As always, we remain invested in your goals.

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Hello and welcome to Unfiltered Finance. This is your host, Tom Romano.

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And thank you all for joining us for, uh, this edition.

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Today we're gonna talk about something that I think, uh,

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weighs on a lot of investors' minds. Um, there, there tends to be, uh,

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somewhat of a lack of transparency on this topic in the industry.

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And the topic is, is fees and all fees associated with investing.

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We have the perfect guest for us here today. Uh, JT Lavery, uh,

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longtime coworker and friend of mine.

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He's the Associate Director of National Sales at Symmetry Partners. Jt,

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thanks for joining us here,

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Tom. Thanks for having me. Appreciate it. So,

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Jt, tell us a little bit about, about your background, um,

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working with advisors.

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I've been working with advisors, Tom, for about 23 years now, kind of in,

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in different facets. Uh, I started off on the service side of things at a, at a,

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at a major mutual fund company up in Boston, answering phones and, and,

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you know, trying to solve problems. And I, you know,

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transitioned over to the sales side, uh, a few years after that. So I have a,

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you know, pretty good background working with advisors that were more on the,

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uh, commission side of things,

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as well as advisors that are on the fee-based side of things. For

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Our listeners, um, describe the difference between the two because I,

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I think a lot of folks out there don't know if they're paying fees or

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commissions, and,

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and I've heard many times talking to investors that they don't think they pay

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anything. Mm-hmm.

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Yeah. So, uh, you know, commissions are paid out, uh, by,

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let's say a mutual fund company.

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They will pay out a commission to the advisor who sells that particular mutual

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fund to, uh, to their client.

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And it's could be paid out in a very various of different ways. Um, you know,

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if it's a shares, it'll be an upfront sales charge, B shares,

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which don't even think is even a thing anymore.

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It was a contingent deferred sales charge. There was no upfront sales charge,

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but it was a declining sales charge As time goes on and you,

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and you were to sell that particular holding, you know, the,

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the sales charge would be reduced. And then you also had c shares that were,

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you know, about a 1%, you know, uh, uh, trail that would, uh,

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that would pay out to the advisors.

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And those are paid through various fees that are within the mutual funds that

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the mutual fund companies, uh, structure around, you know,

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marketing of their particular products as well as, um,

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as selling those particular products,

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verse the fee side of things where it's advisors are just simply charging a fee

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for their advice. They're advising their clients on what they should be doing.

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Um, there's often, there's more than just, um, more advice,

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more than just advice that goes into it. It's, you know, financial planning,

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holistic planning and things like that. But it's generally a,

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a fee that's fully disclosed that they, that they pay.

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And the way most advisors will structure their fees,

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they'll structure 'em in such a manner that the more money you have, uh,

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you'll start to see those fees actually go down. So

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What I'm hearing you say, it sounds like, and I think the,

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you said contingent deferred sales charge, right?

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If if you're earning a commission, that is a, it's a sales charge, correct?

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Right. Whereas, uh, fee for advice is exactly that,

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right? It's a fee for, for giving advice so that it's not necessarily a,

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a sales charge. Um,

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why do you think it's important for investors to know the difference between the

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two? Well,

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It's important for them to know the difference. It's,

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I think it's just important for them to know what they're, what they're getting.

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First of all, commissions. You can say that there's, you know,

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conflicts of interest perhaps. Are they getting sold something that,

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that has a higher commission that, that, you know,

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the advisor's gonna get paid more money on, you know, verse, you know,

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they always say, you know,

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a fee-based advisor usually will generally sort of align themselves with the

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client, let's say, on the, on the same side of the table, so to speak. They're,

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they're, they're going in as a team, we're here to, you know, you got your,

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you want to get from point A to point B,

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let's figure out the best way to do that,

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and then we'll put you in the appropriate investments. And, you know,

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because they're not, you know, getting any commissions, you know,

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generally speaking, there's a, I think,

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a certain comfort level knowing that the investment solution's gonna be right

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for them.

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No, that, that's a really great explanation. And you know, this,

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this podcast where, where our advocates of,

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of financial advisors and financial advice,

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I've said many times before that I always get asked, you know, what's a,

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what's a great stock tip? What's a great tip? What's some advice for investing?

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And my advice is always work with a, a fee advisor,

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because that advice is extremely valuable.

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What are you seeing the average on the fee based side average advisory fees in

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the industry? What should investors, what should they know about advisory fees?

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Um, just generally? Yeah, generally,

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Generally speaking, I would, I would say that the, you know,

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the average fee probably comes in around 1%. Um, you know, we see, you know,

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just on our, on ourt here at Symmetry,

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I think the average advisory fee is somewhere around 97 basis points,

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if I'm not mistaken.

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And so we'll see advisors charge as little as maybe 60 or 50 basis points,

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and we'll see advisors charge, you know, as, as high as 125 basis points.

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It's hard to say what's right. It's, what it comes down to is, you know,

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your comfort level and what you're getting for those services.

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Some advisors will, uh, will charge, let's say lower basis points,

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but they'll also charge on top of that for other services, like, let's say,

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financial planning. Okay.

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Whereas some advisors will charge 125 basis points and let's say maybe financial

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planning's included in that. And so it's always good to know, you know,

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you know, not only what you're paying,

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but also what you're getting for that particular price or that fee that you're

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paying. Okay.

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So these are a couple things that I kind of want to dive into a little bit.

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First and foremost, I think, you know,

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it's not fair to talk about price and fees without talking about value, right?

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Right.

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And so I think that you are going to see varying degrees of fees across the

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board, depending on, on, on the advisor's value proposition,

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1% that we've seen that fee, that that really hasn't changed. Mm-hmm. Right?

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Mm-hmm. Um, we, we do hear a lot about price compression in the industry, but I,

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I think when it comes to the, the financial advisor's compensation,

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and I would argue that the financial advisor is the, uh,

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most valuable person in the value chain. Mm-hmm. That fee hasn't changed,

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but investors are looking more for, from their advisors. So there's some,

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there's some margin compression there, right?

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Yeah. The advisor, you know, uh,

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clients are becoming more savvy conversation around fees. It's,

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it's out in the open, right? You see 'em on commercials all the time,

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whether it's Schwab or Fidelity or Vanguard, you know, talking about, you know,

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low fees. So, uh, it's out there and clients are well aware of that.

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And so they're starting to ask questions,

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they're starting to ask what they're getting for, for that particular fee.

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But at the end of the day, you know, you know, it's,

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it's only an issue in the absence of value, you know,

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so if the advisor's providing value and they see that and they know that, then,

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you know, generally speaking,

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clients tend to be comfortable with what they're paying.

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Certainly, certainly. What are you, you know, the advisors that are charging 1%,

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what are the typical types of services that you see advisors performing for,

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for that fee to add value to the equation?

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That's a great question. You know, we, we kind of see,

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we see a lot of advisors that are rolling financial planning into their fee.

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You know, we, we, we see that there's, um,

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there's a lot of advisors that actually have a, a, um, what I would say,

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a very big financial planning focus. So they'll charge for financial plans,

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and they may do some advisory business along the way, uh,

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just to help out clients. And so they'll, you know,

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they may charge maybe a little less, maybe around 80 basis points,

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80 to 90 basis points, kind of what we're seeing there.

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Okay. That makes a lot of sense. I, I,

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I think that the value proposition for the advisors actually shifted quite a bit

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over the years. You know, you and I have talked, um, a lot about this and,

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you know,

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there was a time where the value proposition was thought to be returned. Mm-hmm.

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I'll pay you a higher fee for higher rates of return. And is that the case? No,

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because

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It's, you know, I, I think the, the juries, you know, come in, in terms of,

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of returns and in terms of what types of investments you should be in. I mean,

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right now, I mean,

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you're seeing huge outflows from going from what I would say traditional active

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to more traditional passive types of investing. And so I think the, the,

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the main role for the advisor is just really being that behavioral coach. Uh,

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when we're left to our own devices, we don't make,

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we necessarily don't make the best decisions, uh, when it comes to investing.

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We, we get very emotional about our, our money and when, when markets are down,

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we, we tend to hit, you know, hit the panic button and sell,

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and that's the wrong time to sell. And so, um, you know, when you look at the,

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like, industry studies that are out there, I mean, the vanguard's out, you know,

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advisor Alpha is a big one, shows that, you know,

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working with a financial advisor, you can, um, you know,

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capture about 300 basis points extra just by working with a financial advisor.

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And they actually attribute most of that to,

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but I think about half of that to behavioral coaching. Sure.

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And the, um, just for our listeners out there,

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the advisors Alpha study that was done by, uh, Vanguard,

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I believe it's a paper that they put out in conjunction with,

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with the Spectrum group. And,

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and it does show that investors who tend to work with financial advisors tend to

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have better performance,

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but it doesn't necessarily mean that the advisors tinkering with the portfolio.

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The value proposition, to your point, is coaching. It's competent,

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it's communication. It, it's, it's these things that help the investor, uh,

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whether the good times and the bad. And, and,

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and providing that sort of foundation,

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helping the investor stay the course really is the, the secret to,

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to having a successful investment experience. I

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Think it's also important to add that I think a lot of advisors now, you know,

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there is sort of a, a paradigm shift.

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It's not necessarily the returns that I can generate for you. Um, it's,

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it's the other things that I can do for you, um,

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because they know that they're not portfolio manager. Mm-hmm. You know, they're,

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you know, they're,

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they're running their own business and that business is helping people.

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And if they're spending all their time trying to figure out what the best stock

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is, they're, they're probably gonna miss the boat on, you know,

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helping their clients, you know, with their financial planning and,

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and meeting their, you know, their financial goals over time. Sure,

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Sure. So, you know, we talked a lot about the advisor compensation,

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and I kind of wanna revert back because, you know, the topic today is fees.

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Mm-hmm. It's not just advisory fees.

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There are a number of other fees associated with investing.

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You talked a little bit about the ahas, B shares and CS shares,

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which are typically sales charges for mutual funds,

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but there are no load mutual funds out there. There are. Correct. And, uh,

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what that means is there, there isn't a, a sales charge per se,

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but that doesn't mean that they're for free. Correct. Correct.

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Nothing's for free.

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Right.

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So talk to us a little bit about the costs that are associated with investing in

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something that, that, that no load or doesn't have a, a sales charge. Sure.

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Yeah.

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There's a couple costs to think about. You know, there's, I always refer to it,

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you know, the cost of investing, right? There's, there's gonna be, you know,

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some cost to, you know, running a portfolio. I mean,

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that's where your expense ratios come in, which is the really, it's the,

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the cost of running that particular, let's say, mutual fund if,

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whether it's a no load or, or a loaded mutual fund. I mean,

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those are things like, you know, trading costs, management fees, um,

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things of that nature. There's also, um, you know,

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custody fees that you have to think about, you know, what, uh,

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what custodian is gonna be housing those, those, um,

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those assets for you and what that pay structure looks like. I mean, we see,

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you know, uh, some custodians that'll do a flat, you know, flat rate fee,

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and we see some that'll have more of a tiered structure.

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So the more that you give them the, the lower that fee will come down. Again,

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there's, you know, certain services that are,

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that are provided by the custodian that you may seem are valuable.

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So maybe paying 15 basis points is worth it,

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and you may not see any value in that. And, and paying something like, you know,

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five or seven basis points maybe more, more suited.

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But those are all sort of what I would say in the category of just the cost of

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investing.

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Sure. Sure. And, and when you're looking at investment vehicles,

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mutual funds mm-hmm. ETFs,

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those expense ratios that comprise some of those costs,

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what are you seeing on average out there, and are those fees coming down? Uh,

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They are coming down, I pulled some numbers, you know, looking at just on,

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on averages, the, you know,

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the average expense ratio for a large cap mutual fund,

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about 86 basis points on the small cap side, it's averaging around, you know,

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1.4%. You know, so again, those are the averages. So you,

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you do see some mutual funds that can be as high as a, you know,

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north of a hundred and twenty five hundred thirty basis points.

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And then you can see some that are just a couple of basis points, you know,

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two basis points, five basis points for, you know, just a simple, uh,

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index tracking strategy. Okay. So

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You said a couple things there that I find interesting. First and foremost, uh,

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the asset class matters, right? Mm-hmm. Large cap versus small cap.

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And I think it would make sense that smaller cap stocks,

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smaller stocks are probably more costly to, to manage and maintain.

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So you'd expect higher expense

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Ratio, right? Yeah. And to trade 'em, it's harder to get access to 'em.

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Yeah. And we see the same thing in, in liquid alternatives.

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Like those alternative strategies tend to be a little pricey. Um,

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so the asset class matters. We are believers of global diversification,

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so having a little bit of all of those asset classes I think makes a lot of

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sense. Correct. Um,

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but you also mentioned something that I kind of want to dive into a little bit.

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You know, 86 basis points on average for large cap mutual fund.

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But you said you can get asset class exposures with index funds for just a

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couple of basis points, correct? Or hundredth of a percent. Mm-hmm. Why is that?

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Uh, I think it comes down to, you know, activity.

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The more active a strategy is you're, you're gonna see, you know, more turnover,

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that's more trading, and that's gonna, you know,

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cause the expense ratios to be a little bit higher than a more passive

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portfolio. Let's just, let's, let's just say tracking the s and p 500.

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Sure.

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So someone who is trying to attempt to outperform the s and p

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500 will do so by buying and selling Correct. Creating activity,

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raising costs, also taxes. Mm-hmm.

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Whereas simply buying and holding an index of the s and p 500,

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obviously is going to not only be less costly, but also more tax efficient.

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Correct.

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And it's also important to know what you're, what you're buying.

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There's a lot of people out there who, who believe in active management.

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They think that that,

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that there is alpha out there that a portfolio manager can provide,

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and in order to capture that alpha,

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they're willing to pay the extra expenses for that. So if you,

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if you know that going into it, then knowledge is king. Right? So,

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so you're okay with that. It's the people that don't understand that,

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that are in a portfolio, let's say a 401K plan, for example,

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you go into the menu, you,

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most people are probably gonna look at what their historical returns are,

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and they're gonna probably make a decision based off of past performance not

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knowing what, what's under the underlying securities or,

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or what the strategy is behind the individual mutual fund.

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And they could be paying, you know,

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higher fees and not knowing really what they're paying or why they're paying it.

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Yeah.

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And it, and it's important, right? At the end of the day,

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what you pay in fees comes off the top of what your return is. And over time,

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that can be substantial. We say lot on this podcast, you know, we,

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we can't control the markets, we can't control asset allocation,

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we can't control costs, and we can't control taxes. And we, we,

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we educate our listeners that, hey, focus on things you can control. Mm-hmm.

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Right? And so fees do matter at the end of the day.

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And I think there's been a lot of studies out there, if I'm not mistaken,

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Morningstar had one not too long ago that says,

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one of the key indicators of a mutual fund's performance is the expense ratio.

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The lower the fee, the greater likelihood it's gonna perform well. Yeah. Well

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Think about this. So in, in keeping with that,

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if you are in a mutual fund that has a 1% expense ratio and that mutual fund

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returned 5%,

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you're automatically giving up 20% and you're giving that back to the,

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to the fund company, right?

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501 is four. Exactly.

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Just, you know, basic math right there. Mm-hmm. So there, there, there is,

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you know, fees do matter and they do erode, you know,

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performance particularly over time. Uh,

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I got a couple other examples here I can share with you. You know, please just,

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you know, keeping things simple, you know,

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a hundred thousand dollars investment over 20 years, um,

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assuming a 6% rate of return in a mutual fund that has a 1% expense ratio,

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forget about, you know, custody,

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forget about advisory fees and all that other stuff,

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just straight up just investing in a one per, in a mutual fund that's, uh, 1%,

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uh, at the end of that 20 years, you know, you'll end up with a,

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a gross return of $320,713 and 55 cents.

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Take a look at the cost of fees.

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The cost of fees of that are actually $55 $383 and 78 cents.

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So you're gonna end up, uh, at the, in your account at the end of the day,

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after 20 years with, uh,

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$265,329 and 77 cents.

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And that's if you're invested in a, a, a mutual fund that has, you know,

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expense ratio 1%. And some people look at that and they say, that's great.

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That's that, that's a good return over 20 years. I'll take that.

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When you compare that, everything else being equal, but it's invested. Now in a,

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in a mutual fund that has an expense ratio of, uh, 25 basis points, again,

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a hundred thousand dollars over 20 years, 6% rate of return. The end of that,

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you, you,

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you still end up with the $320,713 55 cents,

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uh, on the gross end. But on the net,

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what you end up with is $305,919 and 75 cents.

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And so that's a cost, cost of fees there of 14,

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do $14,793 and 80 cents.

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So that's a significant difference ends up in your pocket. That's,

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That's, that's, that's massive. And we,

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we told our listeners there wouldn't be any math, but, uh, no, that, that,

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that is very true. But the thing is fees,

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it's part of investing like anything else. Mm-hmm. Right. They're,

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they're there. And I think it's important for investors to know,

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one of the things, uh, I read an article many years ago,

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and I think it's still prevalent and it's the notion of transparency, right?

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And, and, and what this article did, it was from,

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from State Street Global Advisors partnering with, uh, Wharton.

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And they interviewed a number of investors, um, about fees and,

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and their sentiments around fees.

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And what that study showed us was, it's not so much the,

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the level of the fee as they just wanted to know what it is.

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And why do you think there's such a lack of transparency with,

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with costs in this industry?

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I just think it's easy to, it's easy to bury. That's

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Unfortunate.

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You know, I think, and, and I think that's, that's,

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that's starting to change a little bit. I know we see it in our business,

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you know, and one of the things that,

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that we always kind of pride ourselves on are full transparency on fees,

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you know? But if you can look,

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if you can look less expensive than your competitor,

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then you feel that's gonna give you a competitive advantage. And so, you know,

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so it's,

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it's unfortunately I would say it's not uncommon for investment companies or

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other providers to, you know, kind of, you know,

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bury their fees or sort of hide them within, you know, the structure of their,

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of their, um, of their costs.

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Well, I think you, you said it best, right? In in, if there's value,

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the fees don't matter. Correct. Right. If you're getting what you're paying for.

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And so I think that there's a notion of a lot of advisors out there not wanting

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to talk about fees,

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cuz they might not be confident in their own value proposition. However,

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there are a lot of advisors that you and I work with on a daily basis that

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they're very upfront with what their cost structure is.

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They're very upfront with the fees are of the underlying investments,

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and they bring that transparent to the table because they have a very strong

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value proposition of their

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Clients. Yep. Yeah. They'll have it on their website, they'll have their,

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their fee, you know, their fee schedule on there along with, you know, the,

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the various services that they charge and, you know,

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whether you feel it's high or whether you feel it's low, at the end of the day,

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it's up to you to decide what's best for you. But at least you know,

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you have that full disclosure. Um, so you can make the,

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the best decision possible. Certainly,

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Certainly. So if, if our listeners are out there looking for a,

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a financial advisor, you know,

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some of the things that I'm hearing you say that they should be looking for is,

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is the advisor using a commission-based mo a commission-based model or a

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fee-based model? Mm-hmm. Are they, uh,

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transparent with their compensation and uh,

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are they transparent with their value proposition? Correct. Is,

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is there anything else that, that you would add to that?

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Um, just knowing what services you're gonna get. You know, I think, you know,

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time and time again, we, he,

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we hear stories that client felt that they were gonna get something from an

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advisor that they're,

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they're just not getting and they end up firing that advisor. You know,

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so knowing what you're gonna get from that advisor, and, and some advisors,

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again, they'll have this right on their website or they'll have it on that first

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consultation that they talk to. They'll tell you, Hey, look, you're gonna get,

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you know, four, you know, four meetings a year.

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You're gonna get six phone calls, you know, from me a year and,

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and here's my cell phone number. If there's ever an emergency for something,

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you know, give me a call. And then there's other advisors that'll say, you know,

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I'll meet you with you twice a year and we'll review your portfolio and if

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everything looks good, then we'll, I'll talk to you in six months.

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And if you're okay with that,

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and you at least you know that going into the relationship, I think where,

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where people get burned is they,

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they think they're gonna get more outta the relationship than they're getting.

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And a lot of times it's just slimy cuz of lack of transparency.

402
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Right. And I think that transparency is a,

403
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a tremendous way for advisors to build trust.

404
00:19:36.400 --> 00:19:38.440
Cause it's all based on trust at the beginning of the Absolutely.

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At the end of the day anyway, so Absolutely.

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And it's also important, Tom,

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to remember that as you're looking for a financial advisor, it's a,

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you think of it as a, a mutual interview. It's, it's, you know, they're,

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they're looking to see if you're gonna be a good client for them,

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just like you're looking to see if they're gonna be a good advisor for you.

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And so it's important that, that, uh, that a, your values are aligned.

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It's important to look for that full transparency,

413
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but it's also important that it's, you know, somebody that you can connect with.

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Absolutely. Absolutely. And, um, every investor's unique. Mm-hmm.

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And every advisor's unique in, in trying to find that match,

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I think is very important. So for our listeners out there, uh,

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those that might be looking for financial advisor,

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make sure that you're getting, uh, transparency into costs.

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Make sure you're getting transparency into value proposition.

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Make sure that you're using someone who is maybe not necessarily earning sales,

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uh, charges or sales commissions, uh, but actually giving fee for advice,

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which eliminates conflicts of interest. Um, and so I think that's, there's a,

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there's a lot there for our listeners to digest. JT, I want to thank you for,

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for joining us here today. It's been a pleasure talking to

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You. This has been a great time. We gotta do this more often.

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Absolutely. We'd love to have you back on the show. Uh, so in closing,

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I wanna thank the listeners for, for chiming into this, uh, podcast. And, uh,

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we'll get you at the next one. And, uh,

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for those of you who are looking for our, some of our previous episodes, uh,

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you can find them wherever you're currently finding your podcast.

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00:20:58.940 --> 00:21:01.840
So thank you so much for your time and, uh, I'll see you at the next one.

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Symmetry Partners llc,

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it's an investment advisor firm registered with the Securities and Exchange

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00:21:07.760 --> 00:21:08.580
Commission.

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00:21:08.580 --> 00:21:13.280
The firm only transacts business in states where it is properly registered or

436
00:21:13.720 --> 00:21:16.760
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437
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Registration of an investment advisor does not imply any specific level of skill

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or training and does not constitute an endorsement of the firm by the

439
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No one should assume that future performance of any specific investment,

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investment strategy, product,

442
00:21:33.060 --> 00:21:37.320
or non-investment related content made reference to directly or indirectly in

443
00:21:37.320 --> 00:21:41.670
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444
00:21:41.920 --> 00:21:46.910
there is the possibility of profitability as well as loss due to various

445
00:21:46.910 --> 00:21:51.390
factors including changing market conditions and or applicable laws.

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00:21:52.090 --> 00:21:56.430
The content may not be reflective of current opinions or positions.

447
00:21:56.770 --> 00:22:00.790
Please note the material is provided for educational and background use only.

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00:22:01.110 --> 00:22:01.850
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00:22:01.850 --> 00:22:05.790
you should not assume that any discussion or information contained in this

450
00:22:05.990 --> 00:22:09.990
material serves as the receipt of or as a substitute for

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00:22:10.350 --> 00:22:12.390
personalized investment advice.

Alternative Investments are not just "cool" or intriguing products to own. In truth, they have the potential to help you endure tumultuous markets. In this episode, we are joined once again by Philip McDonald, CFA, CAIA, Managing Director of Research Investments & Portfolio Manager, to discuss how Alternative Investments can mitigate risk in your portfolio.

If you have any questions or would like more information, reach out to us at https://symmetrypartners.com/contact-us/

You can also find us on Facebook, YouTube, Twitter, and LinkedIn. As always, we remain invested in your goals.

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Hello, this is Tom Romano with Unfiltered Finance.

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Welcome back to part two on our discussion of alternative investments here with

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us as Phil McDonald,

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portfolio Manager and managing Director of Investments at Symmetry Partners.

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Phil, welcome back.

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Thanks for having me back. Tom,

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I think we're getting a lot of questions from investors and and advisors because

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of the fact that you look at the performance of some of these alternative asset

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classes in a year like 2022. However,

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I think we would caution our listeners to, to not chase returns,

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and it's more of a strategic allocation that you wanna hold in your portfolio

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for a long duration.

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I would totally agree with that. And, and you have other considerations here,

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like broadly speaking, the expectation of the 60 40 portfolio,

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the return on the so-called 60 port,

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40 portfolio is likely going to be below average for in, in the near future.

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So you start to think about like, okay,

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my traditional portfolio isn't gonna return, you know, the 40 year average,

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what we saw decades ago. So where else might I be,

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might be able to go for returns and diversification? So you,

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you have that inflation surprises, you have increased correlation of,

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of traditional asset classes in the recent past. You know,

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of all these things kind of pointing to the benefit of having a diversified

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alternative strategy. And I would agree with you,

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I think you were alluding to the strength of 2022. It was,

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it was a very good year for certain alternative strategies.

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I would encourage people to think of that as an outlier year like that.

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That's not a year that can necessarily happen again unless all the bad things

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that happen in the equity and fixed income markets and with inflation kind of

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recur. So I, I would encourage people to almost think in terms of sharp ratio,

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right? So an excess return for a given volatility,

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a sharp ratio above 0.5, getting to maybe a 0.8, is,

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is the type of realm I think you should think of for,

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for a diversified alternative strategy. And,

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and to kind of put specifics on that,

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so something that has is managed to a 10% volatility or standard deviation that

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would be a five to 8% excess return on the risk-free rate. So,

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so you know, you're talking single digit excess returns for, uh,

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a strategy that's scaled to a 10% volatility. So, you know,

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to take people out of this expectation of,

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of a home run year kind of happening again, it's less likely to happen again.

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Gotcha.

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Um, just to clarify some of that, because I think that's some,

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some very important advice there. When we talk sharp ratio,

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the way I look at that is bang for your buck. Are you,

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are you getting the return for the risk that you are taking?

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And the higher the sharp ratio,

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the greater the return is for the risk that you're taking.

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And so when we're talking about, you know, years like 2022, which is an outlier,

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which I would agree, you know,

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investors could have alternatives in their portfolio for years with a trade off

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being,

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you might be getting single digit returns while the markets may be producing

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double digit returns. We don't know when the next 20, 22, 2 is gonna happen.

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But having an allocation of those alts will certainly help weather that storm.

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Uh, uh, totally agree. Yes.

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So I think a misconception here, and this is just from my conversations with,

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with advisors, investors alike, they think alternative strategies,

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they think returns. Mm-hmm.

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They think even tactical shifts into and hour. Exactly. Yeah.

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But what I'm hearing you say that this is more of a risk mitigating strategy

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than a return reaching strategy.

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I think it's, it's strongly risk mitigating from a diversification standpoint,

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but I'm not quite sure how

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Much you have to give up in returns. Okay. I mean, it,

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I I wouldn't necessarily say it, it's gonna hurt you over the long term.

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I think you need to think about the right portfolio you, you want to be in. And,

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you know, I dunno if you had a question here, but, uh, you know, there,

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there are some very specific use cases that I think make sense and that would be

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managing just the life cycle,

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how financial plans and asset allocations change as a person ages. Again,

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we, we have a finite kinda life here where we're earning and spending and maybe

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bequeathing and then preferences. So theoretically, as someone ages,

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they're the, the risk of their portfolio should, should come down over time.

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They're converting their human capital,

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their potential for earning during their career into financial capital.

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They're investing that hopefully they're being thoughtful about the

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diversification of, of, of those kind of two buckets and say,

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equity beta should come down as you age.

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Where do you go with that allocation in your portfolio?

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Historically and traditionally, someone would say, oh, fixed, fixed income,

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of course. But we've been seeing for a decade, you and I right,

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we're we're both nodding and smiling.

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There have been times when people were strongly opposed to increasing the fixed

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income allocation in their portfolio. So if it's just, you know, gas and break,

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you know, what do you do? You, you know,

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we've seen investors and advisors kind of freeze and, and say, oh,

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there's no solution here. But this third or fourth, right,

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with cash in the consideration bucket of allocation really opens things up.

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You can take down beta risk, uh, equity beta,

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and you can allocate and diversify not only into fixed income.

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Gotcha.

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And you, you know, we, I joke around saying it depends, right? We,

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we say that a lot here, um, because I also think it's a perfect portfolio.

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You know, we, we look at portfolios as being a series of trade offs.

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And so I immediately think, well gosh, you know,

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if you don't really give up any of the return,

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but you can definitely mitigate some of the risks through sharp ratio,

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as you said, like looking at that particular statistic, who,

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what are the trade-offs of, of investing in alternatives? And,

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and immediately I think, well, well, you're still, there's still cost,

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even though you can get lower cost alternative exposures,

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there's still a cost element to that. Um, and also, you know,

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we talk a lot about tracking error on the behavioral side, right?

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If you're gonna add an alternative asset class to your portfolio,

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but you're honed in on the s and p 500, you're,

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you're not gonna be tracking that index.

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Right?

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Is that, is that a correct way of thinking about it?

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Absolutely.

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And I'm glad you brought that up because not only are alternatives difficult to

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benchmark, there are some indices that I think, um, are,

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are relevant to a diversified, you know, conservative strategy. We, we,

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you know, we run an alternative strategy, uh,

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in different forms that is not seeking to, to be very volatile, right?

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So sub under that 10% volatility that I gave as,

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as the example to conceptualize a sharp ratio. So we, we,

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we don't even believe in a, uh,

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that high level of volatility in an alternative strategy. Um,

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but you raise a very good point.

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So not only are alternatives difficult to benchmark,

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but if you have alternatives in your portfolio,

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the appropriate benchmark for your portfolio should reflect

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the allocation you have. If it's 50% diversified equity,

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40% diversified fixed income, and 10% alts,

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you should probably benchmark yourself to a blended benchmark of a

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50, 40 10 mix of relevant indices.

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Not just look to the s and p 500, because again,

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you probably have a 0.5 beta in that portfolio.

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You don't want to compare yourself to something that is a 1.0 beta.

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Sure, sure. Absolutely. And you know, we, we talk a lot about, on this podcast,

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a lot of folks look at benchmarks to look at the performance, their portfolio,

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and I think that makes a lot of sense. But the true one,

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true benchmark is are you hitting your goals from a financial planning

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standpoint? Right? And so I think that's a better way to, to,

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to look at it versus just making sure that you may or may not be

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outperforming the s and p,

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which is a very visible benchmark out in the world today.

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And we can think the media outlets for that certainly. Right.

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So let's talk a little about, uh, allocation to alts, right?

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Let's say you have an investor, let's say it's 60% stock, 40% bond,

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maybe a small cash position in there. How should that investor consider adding,

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uh, alternatives to the portfolio? Is there a maximum amount you would put in?

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Is there a minimum amount? Would you take it from the stock side?

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Would you take it from the bond side? How does that work? And how should our,

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our listeners be conceptualizing adding that asset

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Class? So we, we have some opinions here, but I think in the end, it's,

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it's gonna be what is acceptable to the investor and what their financial

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advisors would recommend start the starting point matters.

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So if you're exceptionally conservative to start, say you're,

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you know, 10% equity in 90% fixed income,

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I think taking it ha having a a higher allocation alt might

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make more sense than if you were starting from the other end. So, uh,

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in terms of the distribution of returns and, and you know,

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the level of volatility of a diversified AL strategy,

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it's a little bit more similar to fixed income. It's, it's,

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I like to say those returns are fueled by different things. You know, it's not,

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you know, duration and credit risk and illiquidity type of stuff.

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It's other drivers that, that give you returns and alternatives.

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But our rules of thumb, which, you know, are for people to take or leave,

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would be maybe up to about 25% if you're starting from a very conservative, uh,

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portfolio. And if you're starting from a very aggressive portfolio,

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just say someone's a hundred percent equity invested in says, ah,

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I want to add malts to this portfolio, but I don't like fixed income. Um,

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I know a few of those, maybe,

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Maybe something more in the realm of 15%,

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I think lower than 10% allocation of anything to the portfolio is gonna have a,

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a, a limited effect on, on the outcome, right?

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So 10 percent's probably our general starting point to add something and, and,

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and see, uh, beneficial effect to the portfolio and,

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and where we've landed on where to fund it from.

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So I didn't forget that part of your question,

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where believers in prorata from the,

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the asset allocation,

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so if you're a 60 40 investor and you put say,

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20% alternatives,

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60% of that should be probably funded from a reduction in inequity

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and 40% from a reduction in fixed. And they go, again,

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these are starting rules of thumbs. I I am very familiar with people who,

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because that returns distribution to alts, you know, the volatility and the,

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and kind of the average return to the distribution to alts is a little

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more similar to fixed income than it is to equity.

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I know folks who want to take 100% on a fixed income, that is an approach,

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but if you think about that, you've done nothing to reduce your equity risk.

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So if someone is, again, aging life cycle is a consideration here,

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diversifying both systematic, traditional,

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systematic exposures of equity and fixed,

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we think taking from both makes a lot of sense to fund that ALT's position.

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There are exceptions, you know, there, there are, you know,

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there are people who have different savings or different, you know,

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sources of income, maybe people with three pensions, you know, like who, uh,

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who look a little different from an average investor. So again,

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individual specifics need to come into play, but those,

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those are my starting rules of thumb in a vacuum.

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Well, that makes a lot of sense,

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especially if you're looking at alternatives as a third leg to the stool, right.

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Stocks and bonds.

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And if the third category is going to be alternative asset classes or

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alternative strategies, it should come out prorata.

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It's not that the ALS are taking the place of equities or fixed income,

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it's something completely, completely different in the portfolio.

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Yep.

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Fantastic. So, um, Phil, I wanna thank you so much for your time. This is, uh,

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uh, super enlightening and just to kind of recap what we discussed, uh,

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for our listeners, um,

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alternative investments are a great way to diversify a portfolio beyond stocks,

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bonds, and cash.

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There are ways to get exposures to liquid alternative strategies through

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ETFs and mutual funds. With that should,

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you should expect a level of transparency to make sure you are getting those

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diversification benefits and, uh, certainly, uh, liquidity being a,

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uh, a factor there as well. And you know, whether or not alternatives are,

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are suitable for you, as we always say and unfiltered finance. You know,

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the best advice we can give is to always work with a financial advisor or

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financial professional that can take a look at your own personal situation,

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assess that situation, and, uh, make sure that they recommend, uh,

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an asset allocation, uh, that's suitable for you.

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Thank you listeners for joining us today. Uh, Phil, once again,

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it's always fun having you on the show. We'll certainly have you back. Great.

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Thanks for having me.

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For those of you who are looking for additional information,

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you can always visit our website@www.symmetrypartners.com. Feel free to,

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uh, listen to this podcast, uh,

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again or access any of our previous podcasts to the, uh,

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venue in which you get your podcasts.

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So thanks for listening and we'll catch you next time.

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personalized investment advice.

Today, we talk about an area of the market that many people have heard of, but haven’t chosen to invest in as of yet. Specifically, we’re talking about “Alternative Investments” - investment strategies that are different from and diversifying to, traditional asset classes. In this first half of this two-part episode, our own Tom Romano is joined by Symmetry’s Phil McDonald, CFA, CAIA, Managing Director of Research Investments & Portfolio Manager, to further define what “Alternative Investments” are, and why you may want to consider their potential benefits.

If you have any questions or would like more information, reach out to us at https://symmetrypartners.com/contact-us/

You can also find us on Facebook, YouTube, Twitter, and LinkedIn. As always, we remain invested in your goals.

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Hello and welcome to Unfiltered Finance. This is your host, Tom Romano.

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Thank you for joining us. Uh,

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we have a special episode today where we want to talk about, uh,

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an area of the market that, uh, a lot of investors have probably heard of, uh,

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and probably most investors don't have a lot of exposure to.

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And that is alternative investments.

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And I have the perfect guest for us here today. Uh, Phil McDonald,

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who is a portfolio manager and the managing director of investments at Symmetry

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Partners, and is the resident expert on,

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on alternative investing here at Symmetry. So Phil, thanks for joining us today.

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Thanks for having me. I'm happy to be here.

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So I kinda wanna start very high level, Phil, um,

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because I think alternative investments is a, is a very, very broad topic.

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I mean, it can cover things, uh,

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such as precious metals to hedge fund strategies, um,

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all the way down to things like NFTs, right? Or, or even, you know,

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card collecting to an extent, right? So if you could just very high level give,

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give us a very broad definition, uh, on your view on alternative investing,

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please.

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And thank you that,

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that is a highly relevant question because alternatives is one of those labels

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and investing that doesn't have, uh,

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a perfectly agreed upon definition. I think, you know,

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certain people hear it and they think different things. Um,

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I think a useful definition to keep in mind is really, uh,

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the starting point is anything that is an investment strategy that is different

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from or diversifying to traditional asset classes that is

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equity and fixed income, right? Um,

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but I think you can't really stop there because, you know,

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you called attention to, to certain ideas that, you know,

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people might think of if, you know, you mentioned alternative investing,

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you know, baseball cards or, you know,

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a lot of interesting different artwork choices. Yeah. We've talked about,

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talked about

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That before.

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Cars, uh, timber farmland, you know, these are all, some,

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a lot of people think real estate, right? Which I think we could,

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we could debate that one,

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but I think not only should the investment strategy be different, but there,

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there should be kind of an economic rationale for why you might

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earn a return on that different strategy. And, and more specifically,

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where's the premium coming from? Right? So I think very quickly for me,

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that collapses down more to specific liquid,

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uh, investment in trading strategies.

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Sometimes based on themes we're al already familiar with in,

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in asset classes we're already familiar with.

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You don't necessarily have to go really far a field to find an

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addition to a portfolio that will, will make a difference in terms of, you know,

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adding an alternative, uh, investment exposure.

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Sure. Thank you for that. And, um, you know,

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I think it is that broad of a definition, right? I mean, uh,

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just to sort of clarify for, for our listeners, um,

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the word alternative means alternative, you said traditional asset classes,

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stocks, bonds.

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There is a correlation benefit to owning both stocks and bonds in a portfolio

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Most years. Most years. Yeah. We'll get to that. We will get to that. Um,

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however, um, you know, alternatives, to me it is a,

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it's a correlation story in, in all of those investments, if you will,

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whether it's cars, stamps, baseball cards, commodities,

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they are going to have or should have some sort of diversification benefit.

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And that's the purpose of it, right?

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Totally. You, you nailed it.

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The diversification benefit of an alternative strategy performing alternatively,

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right? So if you wanna get a little bit geeky, you know,

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you can think about something whose return stream looks different. So, you know,

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low correlation and expected return from that, you know, economic logic,

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that underlying fundamental theme as to if I do this trading strategy,

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I should expect a return, hopefully lower volatility than, than say,

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a equity market. So right there, you, you can talk about high sharp ratios or,

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you know, high excess returns relative to the volatility you're talking about.

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And, and absolutely diversification is the benefit. Very often, I, I, you know,

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use the, um, analogy of, you know, a third bucket of diversification.

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All you thought really all you had was two, well,

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there's this third bucket you might want to consider for some clients. And,

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and one, one thing I want to clarify here on, on this topic while we're here,

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most of these strategies are not a hedge,

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diversification is not a hedge.

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So if you're diversified with regard to, you know,

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equity markets and volatility, it doesn't mean when equities go down 10%,

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you go up 10%. It's not that directly, you know,

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inverse of a relationship. It's unrelated, you know,

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it's not sensitive to what the equity or fixed income market hopefully is doing.

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That's really what diversification is.

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So it's not the taking the, the counterpoint, if you will, right?

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Like something zigs this must zag, so to speak. Right? And so the idea is, it,

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it's not going to behave from a return standpoint like any other,

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it shouldn't behave like any other asset classes you currently have in your

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portfolio. And I really like the way you put that sort of a, a third bucket,

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right? I I maybe even a fourth, right? Because I think of cash. Yeah, exactly.

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So, so most investors have cash, bonds and stocks,

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most of their 401ks. And so what you're saying,

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there's this whole other realm of alternatives that can have

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diversification benefits because of the fact that they don't behave like stocks,

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bonds, and cash. Correct.

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So let's talk a little bit because I think alternatives sometimes get a bad

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rap. Um, I think a lot of it has to do with the,

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so maybe the broad definition has something to do with it,

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but let's just kind of pick it apart with some of the,

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the arguments I've heard from, uh, investors and financial advisors alike.

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And the first one that comes to mind is cost, right? You know,

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you think hedge funds,

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you think two 20 or three and 30 where you're the managers earning, you know,

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2%, 3% plus a,

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a large portion of the profits talk to us a little bit about cost with

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alternatives,

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Right? And that I think is a fair critique of,

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I dunno if I wanna call it a traditional model of alternative investing,

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maybe older model where some of this, these strategies started mm-hmm.

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Which really only offered in limited partnerships,

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which tend to have high minimums, you know,

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so only high net worth folks can qualify for them. They're illiquid.

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So capital could be tied up for something even up to 10 years opaque,

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you're not really sure what the manager is doing and, and expensive, you know,

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even, you know,

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sometimes you have like fund to funds and feeder funds and you have layers of

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fees, and then obviously those, those performance fees come into play as well.

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Um, so the good news is that that's not the only way to access alternative

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strategies. Now, you,

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the investor is able to invest in mutual funds and even ETFs that offer

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alternative strategies for the most part, liquid, transparent, you know,

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you get all the benefits of, you know, the regulatory requirements of,

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of being a fund in these structures.

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Not all strategies live well in that liquid structure.

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So, you know, you don't have quite literally that list of, you know,

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that funny list of all the things we could think of that someone might think of

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as, as a good investment. So you, you are more constrained,

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but still there's quite a bit to, to choose from. And then, you know,

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to your point,

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most of those strategies are just gonna have a very straightforward expense

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ratio on the fund. It'll be very clear what the investor has to pay on average.

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You typically see higher fees than, you know, a traditional say,

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index fund for equity or, or, or fixed income. But you,

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you're getting something different in, in a well-managed alternative strategy,

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Right? And you hit on a couple of of points there, right?

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Cost is something that always comes up. And uh,

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I understand that even in some of these ETF or mutual fund type vehicles,

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that there, there could be a higher layer of cost,

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but there are ways to get exposures to these asset classes without paying

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two and 20. Mm-hmm. Right. Um, you also mentioned liquidity, right?

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I think that gets solved for,

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if you're not using a limited partnership sort of vehicle.

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If you're using an etf, they're very, very liquid.

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So you can get your money whenever you may need it.

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But you also hit on something that I think is, I think,

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important to investors and it's transparency, right?

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The opacity of a hedge fund, traditional,

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if I can use the word traditional hedge fund tends to be a little bit, uh,

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black boxy, if you will, right? Right. And maybe investors are thinking of,

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you know, things like Bernie Madoff or things like that, right?

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Where you don't know what's going on under the hood,

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but an ETF or a mutual fund,

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an ETF specifically, you're gonna get a a lot of transparency in that. Correct?

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Yeah,

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Absolutely.

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So you know exactly what you're holding.

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Absolutely. And, and, uh, you've touched upon a point,

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which I think is very relevant,

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and thankfully there's been an evolution in the industry to kind of bring

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attention to some of that. So the,

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the idea of a global macro go anywhere,

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hedge fund a star manager who, you know, returned a thousand percent last year,

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you know, raising funds, just like in telling investors, I'm really smart.

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I'm smarter than all the rest. Invest with me.

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I'll find whatever the opportunity is globally, you know,

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regardless of country or region or asset class. Like,

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I will go find that opportunity and I will achieve a higher return. That,

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that's certainly something to probably be very careful of, right? He,

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he might wanna shy away from that. So over the last, I don't know,

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I'll say 25 years or so, there,

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there's been light kind of shown upon this idea that, you know,

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hedge funds don't hedge, you know, some hedge funds have a lot of beta,

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some hedge funds are,

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are implementing strategies you can get with liquid strategies. You know,

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this idea of hedge fund replication was, was an interesting arm of, uh,

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quantitative research. So I, I think for,

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for those who are interested and have the time as an alternative investor, you,

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you should be able to get from your manager a very specific explanation of

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exactly what's happening in the strategy,

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why it's an alternative strategy,

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why the fee being charged on that strategy makes sense,

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how it's diversifying to traditional asset classes. And really, I think at a,

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on a very basic level,

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confirm you're not paying alternative investment fees for

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just call it equity beta, right?

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Because we know equity beta is available in really high quality ETFs from

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Vanguard for probably three basis points. Yeah.

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I think that's a very important point, right? And, and we're firm believers on,

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on, on transparency. And if you're using alternatives correctly,

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if I'm understanding what you're saying,

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and it is a diversification play to ensure that you're getting that

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diversification, you need that level of transparency. And a lot of times, and,

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and we've read about this and talked about this in the past,

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sometimes these more opaque type strategies, you know,

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if equities are doing really, really well,

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they might be very correlated to equities at that very given point in time.

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And then the whole story of diversification kind of goes out the window,

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doesn't it?

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A hundred percent.

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And I think financial media hasn't helped in that education, right?

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So there's been stretches of time when equity markets were doing very well,

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and hedge funds haven't been, and, and you know, the storyline there is,

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you know, hedge funds failed. And well, if hedge fund,

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if a real alternative strategy has zero beta to the equity market and the equity

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equity market's doing well,

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I wouldn't necessarily expect to see those hedge funds up just because,

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Right? If, if the,

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if the alternative investment that you're using for diversification is zigging,

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while your equities are zigging, you

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Should ask questions. You should ask

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Questions. Absolutely. Absolutely. Well, let,

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let's talk a little bit about the performance, uh, of,

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of alternative investing in relation to portfolio.

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And you alluded to this in the beginning when, uh, you mentioned that, you know,

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sometimes stocks and bonds do behave alike. Mm-hmm. And we saw that in 2022,

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right? Yeah. Both had, uh, extremely volatile tough year,

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both ended up in, in the red. Um,

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how did alternatives do, or what,

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how did alternative asset classes perform during that timeframe?

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Uh, certain of them did reasonably well. So, uh, I'll,

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I'll maybe run through a few examples of, uh,

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strategies that are alternative. Uh,

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our diversified alternative investment approach would include.

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One of those is something called, uh, manage futures or trend following, or,

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you know, if you want to think about, you know, quantitative factor investing,

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which you know, is what we think about a lot, you can, you can consider that,

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um, longitudinal momentum or momentum over time.

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And this is really just a strategy that takes advantage of investing in futures

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and forwards. So derivatives that'll cover, you know, commodities,

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equity markets, fixed income markets. Uh, and in the simplest sense,

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if a trend in an asset class is up,

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especially over, you know, short, medium, and long-term time periods,

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the managed future strategy would essentially be long that exposure.

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And if a trend is down over, you know,

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short and long horizon managed future strategy would be short, uh,

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that asset class or commodity. So in 2022,

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when everything felt like it was going down and continuing down,

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the managed future strategy was able to reposition and be short,

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many of those strategies that were showing persistent negative price signals.

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So in 2022 a year when both equity and fixed income markets globally,

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generally speaking on a diversified basis,

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were down and very positively correlated,

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something like a managed future strategy was up, uh, strongly and,

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and very diversifying. That's

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Really interesting.

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And so would you'd have the same expectation if both stocks and bonds were

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up, that the mayor's future strategy might be down, or does it depend?

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It depends.

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So it depends on the strength of those signals and the persistence of those

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trends. So in, in certain stable, neutral, slow,

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generally up markets, those signals may be too choppy to, to make use of.

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And maybe if there's conflicting signals, say, you know,

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up in the short term, down strongly in the medium term,

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up slightly in the long term, you know,

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you can't always make sense of those quantitative signals and,

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and you might have no exposure in that type of underlying market or commodity or

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asset class.

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So that'll conclude part one of our, uh, conversation alternative investments.

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Phil, thanks for joining us. And for our listeners, uh,

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if you're looking for additional information,

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please feel free to visit our website, www.symmetrypartners.com,

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and to access more of the Unfiltered Finance podcasts.

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Please feel free to find us wherever you're getting your podcast today.

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Stories of historically atypical interest rate hikes, and multiple bank failures, concerned many advisors in the early days of 2023. Join us for the second (and final) part of our discussion with Casey Dylan, CIMA®, Consultant, and the host of Unfiltered Finance, Tom Romano, Head of Strategic Relationships, as we discuss some of the more prominent news events, and their effects, during Q1 of this year.

If you have any questions or would like more information, reach out to us at https://symmetrypartners.com/contact-us/

You can also find us on Facebook, YouTube, Twitter, and LinkedIn. As always, we remain invested in your goals.

Transcript:

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Let's let's

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shift a little bit to some of the headlines that we saw because there was

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there's quite a bit. It felt like it was a very long quarter. Yeah, and you

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know as we did see some positive results, but can we

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talk a little bit about just in general some of the headlines that we saw and

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then specifically I want to take a dive into inflation

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and then the banks because that was

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a really big headline. We got a lot of a lot of calls regarding that look

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there there were

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Striking headlines around things like

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shocks to sort of economic surprises on

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job numbers to what was going on with the FED

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to Banks not just near the United States but

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internationally and yet what you see is kind

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of, you know markets do what they do in in any given day. They respond

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to that but they are quick to incorporate the news

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and get back to pricing on other kinds of things. And

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so I would say as a micro dosage of

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what the ride is for investors. It's

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this it's if you can sort of

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take in stride that there are going to be lots of headlines and

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that there may be short-term Market reactions headlines over the

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longer term that kind of gets filtered out on

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the upside and downside right and what you get back

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to is. Hey one of my paying for right I'm paying for some kind

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of future earnings or I'm lending with some expectation that

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I'm going to get paid and income stream based on that and that tends

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to drown out the short term noise and now

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you're back to factors of how much did I pay did I

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get my earnings did I not is

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We're upside to that right and markets are kind of a weighing machine

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in that sense. Right? They're weighing those earnings. They're weighing those

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cash flows in the future. Right? So I would say

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lots of lots of news lots of scurrying

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around the news.

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You know at the end of the day we're sort of where we started one

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of the headlines and one of the things that we've been getting a lot

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of questions about I'm talking about is is inflation. I know we've spent some time

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already today talking about that. We did

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see US inflation ease a little bit but there

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might be some pressures coming up. So if you don't mind commenting on that, that

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would be great. Yeah, you bet. I think it's helpful to kind of

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take a step back and look at

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With the onset of the pandemic right everything kind

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of shut down and then when we went to reopen things back up

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factories didn't necessarily open up, especially in

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places like China right for some time. Right and the the

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supply chain was suddenly

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constrained and so we

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had a hard time getting Goods, right but there was a lot

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of demand because we were at home, you know person stuff and so

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as you have demand shoot up but supplies constrained

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price shoots up, right? That's just sort of Economics 101

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and we saw that and at the time, you know, the Fed was quick

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to say, hey, look we think this is transitory think eventually things

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settle down we get manufacturing back online. We work

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out the bugaboos associated with the supply chain

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and those the price pressure doesn't inflationary pressure should come back

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down over time and in large respect

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this seems to have proven that out right?

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I think what really got the fed's

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attention and started them down the path.

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Of really dramatically raising rates was

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the fact that well while goods were

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sort of starting to come back down. It was

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inflation associated with services that was going up. And

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in fact, what we've seen is good coming down

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the the overall inflation of

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the CPI number or that PC number coming down from its

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highs last summer, but while that's been happening underneath

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Inflation associated with Services has continued to

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go up.

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And so even if we're at a point now where the latest inflationary readings

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are half of what they were.

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Just a year ago this time.

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Services inflation is up and continuing to go the wrong direction. Right? And

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so the the FED has said hey, look

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first of all, we don't look at kind of the overall CPI number. We don't

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that's not how we measure it. We're looking at these underlying statuents and

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they prefer the the pce as

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opposed to CPI, but they're all just kind of ways of measuring, you know

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inflation in the economy. And so

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one of the ways that we've looked at

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this for a very long time is core CPI, right? We're stripping out the

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volatility of energy and food because those tend to move around so much and then

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you know, we've been introduced to this concept that not

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only is it core CPI, but it's core Goods CPI and

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course Services CPI. And so the FED now is very focused

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on core Services looking at Services minus

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services for energy and food and what

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we see are again our sort of troubling Trends

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around services and housing

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in terms of the impact that that

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has now pushing.

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Up or holding up those inflation numbers and if they

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continue on the wrong direction, that's what the fed's concern about and the

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the whammy that potentially comes

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from if Services costs go

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up at some point that starts to impact Goods costs as

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well. Right? And so if you look at this where the the white

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bars are coming down, right the the concern

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is that Services cost the cost of producing goods

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and delivering them right is going to impact the the cost

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that gets passed through and goods start to come back up and there's sort

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of a double double impact of inflation if

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you will and that's what I think the FED is incredibly concerned about

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and and why they say look we're gonna ratchet rates up

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and we're gonna keep them up there long enough until we're convinced that we've we've

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stamped this out and brought it back down to a level that's

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livable because the last thing you want to do is take your foot off the pedal.

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And then suddenly have a Resurgence of these

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inflation Air Forces which that we've saw

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in the 70s, right if you think about what we've we've

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seen this show before the early 70s the FED raising

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rates taking their their foot off the brake, I guess and then

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Resurgence of inflation in the late 70s stagflationary

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environment and it took the volcker FED in the 80s

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taken rates to places. We'd never seen until recently right to

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to stamp that out. And so I think the FED

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is taking a lesson from history and said we don't want to repeat those mistakes.

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We're gonna stay on this until we're sure right absolutely and

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speaking of the fed and it says been a very fast pace

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in terms of Ray hikes. Yeah

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historically exactly exactly so

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they they have meant business and I

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think Market participants repeatedly made

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the mistake of not taking

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the FED at its word.

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Right and and equities markets have

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definitely gotten well ahead of the FED particularly at

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the end of last year and maybe potentially the beginning of this year bond markets

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now are pricing that the FED

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will pull back and yet the FED is saying no. No, we're we're

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gonna raise rates and we're gonna keep them there longer and that's

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you know, we have no expectation that we would

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pull back from that anytime this year. Right? So the market

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participants are our forward looking forward pricing, but

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they seem to not be taking the FED at its word. I think that's pulled

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back a little bit in February and March we started to

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see Market participants kind of get their arms around.

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Actually be coming and we see you know

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investors like hedge funds really sort of looking at volatility

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Bets with the expectation that hey this

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may get a little more turbulent before it gets better. Right? So

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there's a lot of sort of now Market positioning

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for the fed me

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actually do this and we may see an economic pullback,

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but that may not necessarily mean the FED response to

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it. Right? I think again as we look forward the

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the way that I would think about this as an investor as a the

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stock market is not the economy, right? The

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markets are definitely driven by

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interest rates and fed movement

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and yet

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Much like headlines the markets take that

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news and stride it gets built into prices and there

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may be short-term volatility associated with this but if you look out over

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time, you know, what what do we see going back to

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you know, as long as we have records 1926 and Beyond

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right Imperial heads when interest rates

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go up interest rates go down inflationary environments disinflationary environments

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recessionary environments across all of those things markets

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tend to produce a return

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of you know, seven to ten percent average annual

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you don't get that every year but you get on average over time and it's

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paying you for those cash flows so much like,

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you know, the all the comments that we've had prior to

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this.

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As investors, it's important to sort of take in its Stride

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Right put some blinders on there may be volatility associated with

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this ride. You will get wet on this ride. Right but we

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promise you'll come out in the other side, right and when you do,

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you know, the markets will get back to doing what they

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do, which is you know, paying you for putting Capital to work

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in there. So so that I would say again we watch these

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things. We we sort of especially working

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in the industry. It's a incumbent upon

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us to have some product prognostication about where this could

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be headed at the end of the day what we think matters very little it's

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what actually happens and we build portfolios to

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be as robust as we can because Anything Could Happen. Yeah, that's that's fantastic.

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And that's a really good way of putting it. We don't know what's

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happening, but we're

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We're invested in a way to endure what's to come? Right? Exactly. So

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one of the headlines that we we spent

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a lot of time talking to advisors and investors alike is the

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the notion of the banks and we saw from Silicon Valley

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and First Republic and a few others.

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I think it's a it's a risk reward story. But I also think

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this is the diversification story there. I'd love to hear your thoughts. Yeah. Well, yes,

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I think

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the the situation with the banks

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has a lot to do with other stuff, right? Yes, the

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the banks were quick to come out and say well this

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is a consequence of how rapidly the FED is

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raised interest rates. And this is potentially impaired the

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asset base of these Banks and there's no question right over the

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course of 2022. You saw the asset base

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drop significantly across banks in

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general because right so, you know first principles,

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what is a bank do they take money in when they

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take that money in as a deposit? It's a liability to them. Right?

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So they take that liability and they got to go match it up

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with an asset and they do that either by making loans and if

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they can't make enough loans, then they got to go buy bonds treasuries.

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For instance, right? Yes. That's the old against the

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liabilities. So if you if you've got a bank that

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has a bunch of bonds that they're holding as an asset

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and the value of those bonds dramatically drop. They've lost

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a lot of money against the liabilities that

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are still where they are, right and

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So that's that's the the challenge for

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the financial.

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sector and it no surprise the financial sector

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was sort of the worst performing sector for the first quarter in large

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part because of these Dynamics

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It was a part of what happened at svb. It was a catalyst

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for the bank run that followed but the bank

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run followed because of the unique dynamics of

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svb, correct? Right and the the failure

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of silvergate was

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function of crypto and had as

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much to do with FTX the failure of FTX, which

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was a Ponzi scheme, right? So you have

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a lot of kind of very unique situations Signature Bank,

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very crypto focused right First Republic the

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very very heavily on

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the asset side writing interest only mortgages

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right in to a degree that other

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Banks didn't have some unique characteristics of these Banks which cause

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them to be sort of the canary in the coal mine if you will right

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and Credit Suisse just

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Has struggled for years, right? And this was

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just the nail in the coffin form. The concern is are they

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the canary in the coal mine or are they just being punished because

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the malfeasance and poor management?

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And I think the answer is a bit of both, right? So the the

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fed and other institutions got

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together and said, hey, we got a backstop this thing to keep any contagion

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from spreading and assure depositors that

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they're deposits are safe, even if the value of the bond the assets

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that these banks are holding have dropped down. We the the government

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are going to step in and and backstop not just

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your 250,000 but everything right that was

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the strong message that they sent and that sort of seem to

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work, right it calm markets. Thanks for still being sort of reviewed and

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I would say look there's there could be more to this story. There could be

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other shoes to drop in time. Right? So you'll continue

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to watch it. I think as in as a person

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who has money at a bank, right am I rushing to pull my money

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out? No, I'm fairly confident that you know,

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we're we're gonna survive this right now.

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Did I say the same thing in 2008 when when I

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really thought hey, man, the whole financial system could go down.

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These Banks had collapse in Mass. I don't think we're anywhere

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near that I think banks are much healthier than than they

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were then and I think the issues that they have have to do with treasuries and

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the FED has said look, we're gonna step in and provide as much liquidity

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as necessary for the banks. So this becomes

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a potential issue down the down the pike, right? If

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in fact the FED has to step in and provide the

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Surplus liquidity to the treasury market,

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why might they have to do that?

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Well, if for some reason we default on the debt ceiling for instance,

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right that could be very problematic and the FED

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might have to take aggressive steps in a way that we've

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never seen before to step in and try and provide Surplus liquidity

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specifically to the treasury market. That would

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be a complete roll reversal of where we've been right? That's that's

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taking the quantitative tightening off the table and now we're back to quantities, right

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so so could things come down the bike that

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would cause a, you know, real dislocation to

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banking to markets sure it could happen

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again. Who knows right? Everybody's got a crystal

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ball.

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Nobody's usually right spot on about what's gonna happen, but

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it's a potential risk that you want. Hey, look this might happen, but

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we'll survive.

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Yeah, no, absolutely. And as you said before, I mean, it seems like the markets

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have.

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sort of shrugged off those headlines because we've seen some pretty decent returns

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and in q1, but I think you know in

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Let's let's go back to the text docs, right? I mean that's what's really

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leading the charge here, isn't it?

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well

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I think there are a lot of Dynamics at play.

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But underpinning all of that is risk and reward right?

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I mean that at the end of the day, it's that simple

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what are the risks and what are the rewards and how much am I

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willing to pay for those rewards? And am I underestimating those

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risks? Right? So everything is sort of a function of those things

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and so I would say look in equities. The the

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tech stocks is a risk, right? There's there's certainly reward

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there's upside there. We're seeing it in terms of markets, but I think there's risk

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right in fixed income. There's potential

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risk associated with the yield curve

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and what happens with the fed and raising rates in areas,

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like financials. There's risks

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right associated with that. I think the key

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takeaway for that for anybody looking at

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it is

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Broad diversification not just in

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one geography not just inequities not just in fixed income

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across factors as much as you

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can broadly diversify the more robust your portfolio is to

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stand up to any of those unique risks.

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And so I would I would say.

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That that would be where I would encourage investors to

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sort of keep their heads.

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I it's always challenging when you have tech stocks doing

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as well as they are because they drive

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markets you want to be there. You want to participate in it.

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There's a a benefit socially to

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holding names that people are familiar

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with and talk about right if you think about the

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fomo experience that people have

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missing if you're missing out, right? Yeah, my next

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door neighbor. He's he's got Google and apple and they're tear on

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the cover off the ball. Never mind. What happened last year right now, I gotta you

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know, keep up with the Joneses on that water cooler. Alpha

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is what I call that. Yeah water cooler Alpha and I would just

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say hey look at the end of the day. We're people right if we

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were autonomous, you know Vulcans. This would just be

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economics and math and we can figure it all out reality is

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we're people and you got to build a portfolio you can live with right as

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our as our good friend Phil Henry says, you

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got to build a portfolio you can live with and then live with it, right? I think

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that's absolutely true. And so you have to take into account.

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The the investor psychology associated with this that's

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why I think momentum is such a

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powerful factor to build into your portfolios

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because momentum picks up

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these like when tech stocks going to run you end up

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owning things like Apple and Google and because they

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are demonstrating positive momentum, right? So you you're picking

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up some of that you're participating in that upside and I

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think as a as an investor, that's that would probably be enough for

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me, right? It's a modicum of the things that I everybody else

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is holding that that's working but it's also stuff that's not working

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because eventually that circles around and that becomes the thing

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that's worth. I don't have to try and time it. I'm just holding it and I'm

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waiting keeping my powder dry in that area so that when it

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does I benefit that that's how I would think about it look again

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tech stocks are

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The amazing thing about markets is they run longer than you think they should right. They're

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fueled by stuff. Sometimes you don't understand and and

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in many cases, I think the

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tech stock Dynamic is is part

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fairy dust, right and you know,

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we watched it run for a decade and drive markets, you know

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for you know, double digit returns for years because

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that happen again, of course, it could right. I'm not

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gonna tell you again. I am cautious about the

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dynamic being set up looking very similar to

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the dynamic that we saw at you know, 2019 2020.

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Yeah. No, absolutely and you know that seems like that tech

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store keeps popping up. I started my career in the late 90s and that was the

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whole story and then I saw a lot of portfolios.

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A lot of people see their portfolios blow up but because of overexposure to

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to technology and they having a

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balanced portfolio Diversified across multiple asset classes regions geographies.

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That's that's the best course of action at the

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end of the day. So yeah, I think I go back to the the E-Trade

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baby, right if you remember the E-Trade baby so easy

364
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baby. Yeah that was born right on the text actually and then

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they they put the baby away for a while baby's back right now. I was

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a little bit older now, he's out of the wedding, you know hanging out

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with this guys and gals but to

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me that a Hallmark of a caution, right because

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the reality is it's it's easy but

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hard right it's not you know, it's not

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difficult to say. Hey look broadly based diversification sit still it's

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incredibly difficult to do. Yeah, right and that's where

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the real benefit of working with financial professionals comes in because everybody

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thinks they can do it everybody. They're gonna be Spock

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and devoid of emotion, but then the moment of truth comes

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The market drops 40% and you're looking at like am I gonna

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be able to retire? Right and the fear grips hold and it's

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2 am and you're thinking what do I do? Right. That's

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when you need to have that dispassionate third party

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to pick up the phone and say I want to sell everything. They whoa. Let's

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revisit right like is anything changed? Oh the

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market drop 40% right has anything in your life changed right?

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Maybe that's not the best course of action. Let's take a beat having that

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dispassionate a third party to keep you from blowing yourself up

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at that exact moment is invaluable. Yeah

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and making sure you have the right mix between stocks bonds

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and maybe even Alternatives depending on the investor and if someone

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can't sleep at night, it's not necessarily that they should take action,

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but they might be in the wrong asset allocation for

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their

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The risk, you know their ability to accept right? Yeah,

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it could be that often. What I've

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experienced is when it's that it's because the client wanted

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more Tech right in their portfolios or more of what's

395
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working, right? And then when that's no longer working, they

396
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can't sleep at night, but cautionary Tale the other

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piece of that is we're surrounded by the news 24/7

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right? It's just and it's always the whatever

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bleeds leads right? And so it's this constant

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drum beat of kind of negative stuff. And I think that investors

401
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need a voice.

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That that they trust to say. Hey, yeah. No I

403
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saw that too. Yes, that bank went out of business. Here's

404
00:21:20.800 --> 00:21:24.600
why we shouldn't Panic here, right? Yep. We

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see all that. Here's why we're gonna stay the course. Here's why we're not gonna Panic. Here's

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what let's you know, our long-term goals are and we're in good

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shape to hit those. I think that sort of calming reassurance

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helps people get back to sleeping at night. Yeah. No,

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I agree Casey as always. It's a pleasure talking to you.

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Thanks for joining us great having you here and I want to thank all of

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our listeners and these feel free to access other podcasts

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that we have done and they can be

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accessed anywhere you get your podcast. So thanks everyone and we

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will see you next time symmetry Partners LLC.

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The sudden failure of Silicon Valley Bank in March jostled investors' confidence in the market. But, the overall performance of various tech stocks in Q1, such as Tesla, Meta, Alphabet, Amazon, Salesforce, AMD, and Broadcom, served to revive optimism for the stock market's near future. Join Casey Dylan, CIMA®, Consultant, and our host Tom Romano, Head of Strategic Relationships and Product Development, in this first half of of our Q1 recap, as we discuss both market, and factor performance, in the first few months of 2023.

If you have any questions or would like more information, reach out to us at https://symmetrypartners.com/contact-us/

You can also find us on Facebook, YouTube, Twitter, and LinkedIn. As always, we remain invested in your goals.

Transcript:

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00:00:01.900 --> 00:00:07.400
Good afternoon,

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00:00:07.400 --> 00:00:10.700
 everyone. This is Tom Romano head of strategic relationships at

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00:00:10.700 --> 00:00:14.200
 symmetry partners and joined with me. Today is Casey Dillon

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 a long time friend of symmetry and our

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 internal communication strategist. Thank you Casey for

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 joining us today. Tom is excellent to be here with you live in

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 person. Yeah, fantastic. Fantastic So today, we're gonna go

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 through our q1 2023 quarter in

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 perspective. It's been quite the

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 interesting quarter to say the least we've had

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 some volatile markets. Although

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 I'll be at some positive results. We've seen things

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 like banking collapses in the headlines. There's still of

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 course the concerns about inflation. And so

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 Casey thank you for joining us to give us some perspective

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 of what's going on in the market. So in a

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 nutshell what happened in q1 of 2023, yeah

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 in a nutshell, I'll be brief if I

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 can so if you recall

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The fourth quarter of last year, right? The

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 last year was a brutal year across a number of metrics, but

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 the fourth quarter we started to see some respite

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 from that and the first two months of the fourth quarter,

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 right? We saw markets actually rebound pretty

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 significantly in October and November and much of

25
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 that was driven by the sense across

26
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 the markets Market participants that maybe

27
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 the Fed was done raising interest rates, maybe

28
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 that the inflationary pressures that

29
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 we had seen in the spring of 2022. We're

30
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 starting to Abate and the market is

31
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 a forward-looking forward pricing mechanism. And so

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In the fourth quarter, that's what it did. It looked forward.

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 It started to anticipate a period when the the

34
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 Fed was not raising interest rates and inflation would be tamed.

35
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 And of course what happened in December was

36
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 a bit of a comeuppance for

37
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 those Market participants who got a little bit ahead of

38
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 the fed and we saw a pullback in

39
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 December.

40
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And markets responding to the fact that the FED said well, no,

41
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 we're pretty set on continuing to raise rates.

42
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 And and we think we're gonna keep them higher longer.

43
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As we rolled into the first quarter of this year. We saw

44
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 a replay of a lot of those Dynamics coming into

45
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 January Market participants

46
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 again. It's sort of

47
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Determined that this was the year the Fed was

48
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 going to stop rate and Market participants started to

49
00:02:31.100 --> 00:02:34.200
 look forward and price as if the not only

50
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 with the FED stop racing rates, but they would start to pull rates

51
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 back by the end of the year given where people

52
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 reading the tea leaves assumed the

53
00:02:45.300 --> 00:02:47.500
 economy would be by mid-year.

54
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And so you saw a really robust Rebound in

55
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 January for a lot of the names that have been

56
00:02:54.200 --> 00:02:57.900
 really beat up in 2022 specifically the

57
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 large cab growth and Tech names and

58
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 so there was something of a reversion to

59
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 the mean in terms of those names really

60
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 leading the charge in January. Those are

61
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 the names that were most beaten up in 2022. Those are the

62
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 names that snap back fastest in the

63
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 first quarter. And so January where we

64
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 saw for instance the S&P down 20% for

65
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 2022. We saw

66
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 a Resurgence just in the month of January the SP was up

67
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 like eight percent and the NASDAQ double that right just on the

68
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 strength of kind of those large cap Tech names and of course what happened

69
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 as we rolled into February the news that

70
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 came out on the sort of

71
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 economic underpinnings specifically job data for

72
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 January really surprised Market

73
00:03:46.100 --> 00:03:48.100
 participants because

74
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It was so robust. So strong it exceeded expectations. It

75
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 served as a really Stark reminder that we're

76
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 not out of the woods yet.

77
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And and it sent shock waves

78
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 across the market in the sense that everyone who

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 had said. Okay. Well now the FED is gonna have to wind this down all

80
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 the sudden the the realized maybe not

81
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 right not only is the fed maybe not gonna wind this

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 down because the economy is hotter than we thought it was but we potentially

83
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 risk sort of a flare-up of inflation

84
00:04:17.600 --> 00:04:20.100
 just as it was coming down and the FED may have

85
00:04:20.100 --> 00:04:23.500
 to get more aggressive in in tackling that and

86
00:04:23.500 --> 00:04:27.000
 so February saw sort of a revisitation of

87
00:04:26.400 --> 00:04:29.500
 those expectations that market participants

88
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 had and as we rolled into March then all

89
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 eyes were on the Senate

90
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 hearings with the the chairman

91
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 of the fed and based on his

92
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 comments Futures skyrocketed for an expectation

93
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 of a 50 basis point raise at

94
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 the end of March the Futures went up to like a 70% chance that

95
00:04:50.500 --> 00:04:53.300
 the Fed was gonna raise 50 basis points, and

96
00:04:53.300 --> 00:04:55.500
 of course what happened then you know days later.

97
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Started imploding right and that sort

98
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 of Royal financial markets and

99
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 the FED did end up raising rates. But

100
00:05:05.200 --> 00:05:08.200
 only by 25 basis points after they had worked to

101
00:05:08.200 --> 00:05:11.200
 sort of rescue. I don't know rescues the

102
00:05:11.200 --> 00:05:15.500
 right term but step in aggressively and calm markets

103
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 particularly folks who

104
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 had cash on deposited Banks to keep sort

105
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 of a contagion effect and a larger Bank Run taking place.

106
00:05:23.200 --> 00:05:26.800
 Right? So we end the first quarter with a really

107
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 sort of wild trip of markets shooting

108
00:05:29.900 --> 00:05:32.500
 up coming back down a lot of volatility a lot

109
00:05:32.500 --> 00:05:35.400
 of fear injected in markets in March with the

110
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 headlines and yet at the end of the quarter you finished up

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 pretty again pretty solidly across

112
00:05:41.900 --> 00:05:45.000
 us markets International Development markets emerging

113
00:05:44.400 --> 00:05:47.700
 markets in fixed income inequities, right?

114
00:05:47.700 --> 00:05:50.400
 We it was a it was a pretty decent first

115
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 quarter from a return perspective despite all of that. Yeah sure.

116
00:05:53.800 --> 00:05:56.000
 It was like it's a very interesting quarter.

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00:05:56.100 --> 00:05:59.200
And I'd like the way you put it on the things the kind of the Resurgence of

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 these tech companies that didn't have a great year last year, but you're

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 seeing asset classes such as the energy

120
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 sector right who had a great year last year is to

121
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 use your your term of aversion to the mean right? They had

122
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 a tough time in the first quarter, right? Yeah. Yeah and and frankly

123
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 prices have been coming down in oil and gas pretty

124
00:06:17.200 --> 00:06:18.800
 consistently.

125
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Since last fall so we did see a continuation of that. I

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 do think and likely there's

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 more conversation to be had

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 around this but the concern that I have or

129
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 or would have based on

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 how markets performed in the first quarter is that

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 it was so dominated by a

132
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 handful of names, right? We we've seen

133
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 this Dynamic before where we're

134
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 sort of the top largest growth Tech

135
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 names sort of dominate performance

136
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 of the market and we and we saw that again in

137
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 the first quarter right? You think about Facebook alphabet

138
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 Apple Google Netflix, right?

139
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 All of those firms were

140
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 really been challenged in 2022 had a

141
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 nice Resurgence across the first quarter, but when

142
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 you dig deeper into the performance particularly here domestically what

143
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 you see is they were the lion

144
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Care of that return that we saw the market it was once again

145
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 the fact that these top handful of names represent twenty

146
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 plus percent of the overall

147
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 market, right? So think S&P 500 has got ostensibly 500

148
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 names in it the top 10 names

149
00:07:34.700 --> 00:07:38.000
 accounted for all at

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 least 80% of that return right the

151
00:07:40.400 --> 00:07:43.300
 top top five names half of it, right? So so

152
00:07:43.300 --> 00:07:46.400
 again, you're getting a lot of that return concentrated in

153
00:07:46.400 --> 00:07:47.000
 these names.

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Because they're so large disproportionately to

155
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 the other names in those indices

156
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 and it lit. It's the rising tide lifting

157
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 all boats, but the concern that you

158
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 have with that and we saw that in 2022 when the

159
00:08:03.100 --> 00:08:06.600
 air goes out of the balloon to a degree. Well that

160
00:08:06.600 --> 00:08:09.500
 can be a double-edged sword. Right if those names start

161
00:08:09.500 --> 00:08:13.000
 to pull back in valuations, you

162
00:08:12.300 --> 00:08:15.400
 could see that turn around and become an anchor pulling

163
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 markets down, right and that can happen very quickly just based

164
00:08:18.100 --> 00:08:21.600
 on the fact that it's so concentrated in a

165
00:08:21.600 --> 00:08:24.000
 handful of names that are all sort of in the

166
00:08:24.300 --> 00:08:27.100
 same kind of economic Waters right in terms of kind of

167
00:08:27.100 --> 00:08:30.600
 this large growth Tech, you know richly valued.

168
00:08:30.600 --> 00:08:33.100
 Yeah. It sounds a lot like me, you know, I've

169
00:08:33.100 --> 00:08:37.200
 had these conversations over the years even going back before 2022

170
00:08:36.200 --> 00:08:39.700
 coming out of the pandemic

171
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 and those tech stocks. They were the story they were leading

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 the charge and what I'm hearing you say, is that sort

173
00:08:45.400 --> 00:08:47.800
 of the casing q1, but that double-ed

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word is just going back 2022 would

175
00:08:50.700 --> 00:08:53.700
 be an example of if you're not well Diversified

176
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 that could be a painful experience it can and I'm

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 I'm reminded of

178
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The experience that we had coming out of the tech bubble,

179
00:09:02.400 --> 00:09:05.300
 right? So if you think about if in fact

180
00:09:05.300 --> 00:09:08.300
 the run-up invaluations in this sort of handful of

181
00:09:08.300 --> 00:09:11.400
 techniques is analogous to what we saw in

182
00:09:11.400 --> 00:09:12.000
 the late 90s.

183
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They were so richly valued that when the

184
00:09:17.300 --> 00:09:20.600
 tech Bubble Burst it took a decade the Lost

185
00:09:20.600 --> 00:09:24.200
 decade right of just you know, subpar returns

186
00:09:23.200 --> 00:09:26.300
 for the valuations to get

187
00:09:26.300 --> 00:09:29.500
 back to a place where markets could then start

188
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 to take off again. And so the concern that

189
00:09:32.400 --> 00:09:36.200
 that one might have is valuations are

190
00:09:35.200 --> 00:09:40.400
 still Rich, right? Even after 2022 on

191
00:09:39.400 --> 00:09:43.200
 a Price to Book basis very

192
00:09:42.200 --> 00:09:45.600
 expensive on a price to

193
00:09:45.600 --> 00:09:50.500
 forward earnings basis. It's expensive and

194
00:09:48.500 --> 00:09:51.600
 so it's not

195
00:09:51.600 --> 00:09:54.600
 as if these are our Bargains to

196
00:09:54.600 --> 00:09:57.800
 be had in a Marketplace that that's discounting

197
00:09:57.800 --> 00:10:00.700
 them. They are still incredibly expensive. And so

198
00:10:00.700 --> 00:10:03.400
 anything that goes wrong right if the

199
00:10:03.400 --> 00:10:06.300
 if in fact the economy runs into turbulence at

200
00:10:06.300 --> 00:10:09.700
 some point or the expectations for growth, I mean,

201
00:10:09.700 --> 00:10:12.600
 you know, we're in earning season and Netflix had sort

202
00:10:12.600 --> 00:10:14.100
 of positive numbers, but

203
00:10:14.100 --> 00:10:17.700
They sort of gave lackluster guidance for next quarters

204
00:10:17.700 --> 00:10:20.400
 growth. Right? So all you need is for for Market

205
00:10:20.400 --> 00:10:23.400
 participants to to a once again sour on the

206
00:10:23.400 --> 00:10:27.400
 prospects of these names and you're right back to it's

207
00:10:26.400 --> 00:10:29.300
 too too rich like I'm paying

208
00:10:29.300 --> 00:10:32.500
 too much today for for earnings in

209
00:10:32.500 --> 00:10:35.100
 the future that may or may not materialize right? And so

210
00:10:35.100 --> 00:10:38.700
 I've got to pay less and so the price has to come down. Yeah, right. And

211
00:10:38.700 --> 00:10:41.300
 again, I'm not suggesting that we have a lost decade

212
00:10:41.300 --> 00:10:44.200
 in front of us, but this potentially room to run

213
00:10:44.200 --> 00:10:48.300
 if markets turn and I think that's the the concern that

214
00:10:47.300 --> 00:10:50.100
 I would share with investors. That's what I

215
00:10:50.100 --> 00:10:53.500
 prepare them for. Hey, we'll take what we get. Right? We're happy

216
00:10:53.500 --> 00:10:54.700
 to get those returns, but

217
00:10:56.200 --> 00:10:59.500
This could still be valve this this, you know, we're in the third inning potentially

218
00:10:59.500 --> 00:11:02.900
 look or fourth ending. There's a lot of game left and we're

219
00:11:02.900 --> 00:11:05.000
 just gonna buckle up and be ready for it. Yeah, and what is

220
00:11:05.300 --> 00:11:09.200
 interesting what this quarter and you detect upon that I'd love to get your thoughts developed International

221
00:11:08.200 --> 00:11:11.300
 to having a very good quarter.

222
00:11:11.300 --> 00:11:14.400
 I mean when we saw these large Tech

223
00:11:14.400 --> 00:11:17.600
 names and in the past when they had their run prior to 2022, it

224
00:11:17.600 --> 00:11:20.600
 was a pretty much us dominated run up.

225
00:11:21.800 --> 00:11:24.500
Give us some commentary on what we're saying in the developed International

226
00:11:24.500 --> 00:11:27.100
 Space. Yeah, I think some of

227
00:11:27.100 --> 00:11:31.600
 it is the Resurgence of the

228
00:11:32.900 --> 00:11:35.700
strength of the sort

229
00:11:35.700 --> 00:11:38.200
 of the the companies that are there that have

230
00:11:38.200 --> 00:11:42.000
 sort of suffered through a decade of kind of sub-par performance

231
00:11:41.300 --> 00:11:45.400
 and they were in a much stronger financial

232
00:11:44.400 --> 00:11:47.300
 position. Then they

233
00:11:47.300 --> 00:11:51.300
 were for instance going into the global financial crisis, right and they

234
00:11:50.300 --> 00:11:53.700
 weren't super expensive. Right?

235
00:11:53.700 --> 00:11:58.100
 So from a perspective of they were kind of relatively cheaply

236
00:11:56.100 --> 00:11:59.100
 priced compared to

237
00:11:59.100 --> 00:12:02.500
 US stocks. And so if we look at just the performance

238
00:12:02.500 --> 00:12:06.100
 the they don't have to have that much right

239
00:12:05.100 --> 00:12:09.300
 surprise upside.

240
00:12:10.300 --> 00:12:14.300
To have nice performance right across the board or

241
00:12:13.300 --> 00:12:16.200
 relatively decent performs.

242
00:12:16.700 --> 00:12:19.800
So I think people were pleasantly surprised by

243
00:12:19.800 --> 00:12:23.500
 some of the financial resilience in

244
00:12:22.500 --> 00:12:25.200
 Europe particularly coming out of

245
00:12:25.200 --> 00:12:28.900
 the effects of the the Russian Ukraine

246
00:12:28.900 --> 00:12:31.600
 conflict and looking at the impact that

247
00:12:31.600 --> 00:12:34.500
 for instance the the price of gas price

248
00:12:34.500 --> 00:12:37.100
 of oil I had in places like Germany and the fact

249
00:12:37.100 --> 00:12:40.300
 that they sort of got through that not unscathed but

250
00:12:40.300 --> 00:12:43.700
 you know, the the avoided the apocalypse

251
00:12:43.700 --> 00:12:47.000
 right the gasoline apocalypse over the course of the

252
00:12:46.600 --> 00:12:49.300
 winter right that it was relatively mild. So

253
00:12:49.300 --> 00:12:52.600
 I think that from that perspective markets sort

254
00:12:52.600 --> 00:12:55.600
 of said rewarded International developed

255
00:12:55.600 --> 00:12:58.900
 businesses with valuations that

256
00:12:58.900 --> 00:13:01.400
 seemed a little more reasonable than the

257
00:13:01.400 --> 00:13:04.000
 valuations in the US. Yeah, that makes a lot of sense and thank you

258
00:13:04.200 --> 00:13:07.900
 for that. Yeah, and and I would call I would suggest that

259
00:13:07.900 --> 00:13:10.200
 Emerging Markets are in a similar but

260
00:13:10.200 --> 00:13:14.300
 different position right again a little more financially

261
00:13:13.300 --> 00:13:16.300
 robust in terms of the underpinnings.

262
00:13:17.300 --> 00:13:20.100
Of those companies relative to where we've seen Cycles where people

263
00:13:20.100 --> 00:13:23.100
 are risk off and and sort of beating down

264
00:13:23.100 --> 00:13:26.200
 in price. I think anytime you have a lot of volatility people are

265
00:13:26.200 --> 00:13:29.700
 hesitant to take a bunch of risk. So Emerging Markets

266
00:13:29.700 --> 00:13:32.800
 could be a little more volatile as you would expect but

267
00:13:32.800 --> 00:13:35.100
 I think from evaluation standpoint there's room to run

268
00:13:35.100 --> 00:13:38.600
 as well over time relative to the US let's let's

269
00:13:38.600 --> 00:13:41.300
 look at the other side of the coin and talk a

270
00:13:41.300 --> 00:13:44.500
 little bit about bonds because that's been quite the Hot Topic lately. We've been

271
00:13:44.500 --> 00:13:47.900
 getting a lot of inquiries from advisors and investors alike

272
00:13:47.900 --> 00:13:50.700
 about the fixed income market. So give us

273
00:13:50.700 --> 00:13:52.300
 a little perspective of what's happening in.

274
00:13:53.500 --> 00:13:57.300
Global fixed income right? Well, if you recall 2022

275
00:13:56.300 --> 00:13:59.500
 was a historically bad year

276
00:13:59.500 --> 00:14:02.900
 for Boston certainly, right as as fed as

277
00:14:02.900 --> 00:14:05.500
 the FED raised interest rates are not just the FED but central banks

278
00:14:05.500 --> 00:14:08.500
 essentially around the world except for the Asian

279
00:14:08.500 --> 00:14:11.100
 China and Japan those central banks not quite

280
00:14:11.100 --> 00:14:14.600
 as much but globally central banks at the

281
00:14:14.600 --> 00:14:17.600
 impact of course of challenging the yield right

282
00:14:17.600 --> 00:14:20.900
 and as we know yield in price or are sort of inverse Lee

283
00:14:20.900 --> 00:14:23.300
 related and so as yield was pushed up by raising

284
00:14:23.300 --> 00:14:26.900
 rates price came down and and it had a pretty dramatic

285
00:14:26.900 --> 00:14:29.900
 impact across the yield curve

286
00:14:29.900 --> 00:14:32.400
 and that was globally as well the United

287
00:14:32.400 --> 00:14:32.400
 States.

288
00:14:33.200 --> 00:14:36.400
2022 pretty much a very bad. No good year for

289
00:14:36.400 --> 00:14:39.400
 Bond holders rolling into the first quarter

290
00:14:39.400 --> 00:14:42.400
 a lot of those same sort of macro dynamics that

291
00:14:42.400 --> 00:14:45.400
 we talked about with equities was

292
00:14:45.400 --> 00:14:48.500
 true to fix income as well the expectation the bond

293
00:14:48.500 --> 00:14:51.800
 market pricing that they think the FED will essentially

294
00:14:51.800 --> 00:14:54.600
 be done at some point this year raising rates

295
00:14:54.600 --> 00:14:58.100
 had the impact of markets rallying

296
00:14:57.100 --> 00:15:01.300
 to a degree and then of course when there

297
00:15:00.300 --> 00:15:04.100
 was volatility injected because of banking issues

298
00:15:03.100 --> 00:15:07.300
 you continued to see a pullback

299
00:15:06.300 --> 00:15:09.700
 on the the yield

300
00:15:09.700 --> 00:15:13.000
 right? So at at some points we saw for instance

301
00:15:12.200 --> 00:15:15.400
 the the 10 year get up over four and we

302
00:15:15.400 --> 00:15:18.500
 saw a pullback as yields come down then of course prices go

303
00:15:18.500 --> 00:15:21.400
 up. And so you saw a nice robust kind of response over

304
00:15:21.400 --> 00:15:24.500
 the first quarter of prices coming up for bonds that had

305
00:15:24.500 --> 00:15:27.500
 the impact and that was true for treasuries and corporates

306
00:15:27.500 --> 00:15:30.400
 and international bonds, right? So across the

307
00:15:30.400 --> 00:15:32.900
 Spectrum you had sort of a nice performance.

308
00:15:33.300 --> 00:15:37.100
For bonds for the first quarter. And again, it's unusual

309
00:15:36.100 --> 00:15:39.400
 for fixed income and Equity to look and

310
00:15:39.400 --> 00:15:42.100
 behave very similarly. That was one of

311
00:15:42.100 --> 00:15:45.700
 the things that was so unusual about 2022, but there's still

312
00:15:45.700 --> 00:15:48.500
 sort of Behaving the same way based on the same Outlook

313
00:15:48.500 --> 00:15:51.500
 that at some point interest rates stop going up

314
00:15:51.500 --> 00:15:54.500
 or stop getting ratcheted up by central banks.

315
00:15:54.500 --> 00:15:57.100
 And so that Dynamic is is kind of

316
00:15:57.100 --> 00:16:00.700
 floating all the boats to this degree and so

317
00:16:00.700 --> 00:16:03.500
 fixed income has had a robust first quarter.

318
00:16:04.400 --> 00:16:07.700
Remains to be seen how the rest of the year plays

319
00:16:07.700 --> 00:16:10.400
 out and and you know, frankly we

320
00:16:10.400 --> 00:16:13.200
 continued to see the a deep

321
00:16:13.200 --> 00:16:16.200
 inversion in the yield curve, especially at the

322
00:16:16.200 --> 00:16:19.100
 very shortest end of the O curve relative to the

323
00:16:19.100 --> 00:16:22.700
 10 year. And as you know that has historically sort

324
00:16:22.700 --> 00:16:25.300
 of been a warning sign of

325
00:16:25.300 --> 00:16:28.600
 potential economic stress recessions right

326
00:16:28.600 --> 00:16:32.100
 as an indicator and it has remained it

327
00:16:31.100 --> 00:16:34.100
 inverted for some time now

328
00:16:34.100 --> 00:16:37.900
 and that inversion has only gotten deeper on the shortest end. So,

329
00:16:37.900 --> 00:16:40.200
 you know again you would want to continue

330
00:16:40.200 --> 00:16:43.700
 to watch that and be cognizant of it. I think the takeaway

331
00:16:43.700 --> 00:16:46.500
 from this is much like with equities. It's best

332
00:16:46.500 --> 00:16:49.200
 to be sort of broad based Diversified. You never

333
00:16:49.200 --> 00:16:53.000
 know what part of the Yoke curve is gonna move relative to this and

334
00:16:52.900 --> 00:16:56.800
 it's good to have exposure

335
00:16:55.800 --> 00:16:58.600
 not just us treasuries, but

336
00:16:58.600 --> 00:17:01.200
 the corporates and not just us bonds, but the international

337
00:17:01.200 --> 00:17:04.300
 bonds that there are benefits built into the pricing of all

338
00:17:04.900 --> 00:17:08.400
And as we start to see a decoupling of Central

339
00:17:07.400 --> 00:17:10.400
 Bank activity, yes, they've been

340
00:17:10.400 --> 00:17:13.700
 acting pretty much in concert, but at some point central banks

341
00:17:13.700 --> 00:17:16.800
 start to peel off right and they get back to focusing on

342
00:17:16.800 --> 00:17:19.100
 the handling kind of

343
00:17:19.100 --> 00:17:22.300
 their domestic concerns. And as they do that it will

344
00:17:22.300 --> 00:17:25.600
 have varying diversification impacts for bonds

345
00:17:25.600 --> 00:17:28.500
 around the globe the way stocks and bonds behaves

346
00:17:28.500 --> 00:17:31.300
 in 2022 with similar and then into this quarter. We're

347
00:17:31.300 --> 00:17:34.500
 seeing some decent returns globally across those two

348
00:17:34.500 --> 00:17:37.800
 macro asset classes. We're seeing

349
00:17:37.800 --> 00:17:40.300
 some of a mixed bag that last Factor investors

350
00:17:40.300 --> 00:17:43.400
 from a factor perspective, right? But let's

351
00:17:43.400 --> 00:17:46.200
 shift a little bit and talk about factors for a moment.

352
00:17:46.200 --> 00:17:49.300
 We're a factor investors are listeners The Avengers that

353
00:17:49.300 --> 00:17:52.300
 we work with our have clients invested in

354
00:17:52.300 --> 00:17:55.500
 these Factor portfolios. What did we see from a factor standpoint

355
00:17:55.500 --> 00:17:58.800
 in the first quarter of 2023 if

356
00:17:58.800 --> 00:18:01.400
 you think about the factor of value, it's just the the

357
00:18:01.400 --> 00:18:04.300
 cheaper stocks outperform the more expensive stocks over time and as

358
00:18:04.300 --> 00:18:04.500
 you know,

359
00:18:04.800 --> 00:18:07.800
We had a long run where that wasn't true. Right we're

360
00:18:07.800 --> 00:18:10.300
 growth stocks were just outperforming value to the

361
00:18:10.300 --> 00:18:13.200
 point that everybody was sort of Naval gazing wondering his value

362
00:18:13.200 --> 00:18:16.800
 dead. Does this even make sense anymore? And and what

363
00:18:16.800 --> 00:18:19.400
 we sort of looking at it determined was

364
00:18:19.400 --> 00:18:22.400
 no actually values kind of in line with what it's always done. It's

365
00:18:22.400 --> 00:18:25.300
 growth. That's so unusual. Yeah, right and that we're

366
00:18:25.300 --> 00:18:28.300
 back to the story about the large tech stocks and get over evaluation. Right?

367
00:18:28.300 --> 00:18:31.900
 And so last year was a great year for Value, right? Even

368
00:18:31.900 --> 00:18:34.500
 though it was down right value outperform growth

369
00:18:34.500 --> 00:18:37.800
 by a good 20% Oh, yeah, absolutely and it

370
00:18:37.800 --> 00:18:40.700
 was sort of that Snapback to recognition of

371
00:18:40.700 --> 00:18:43.300
 hey one of my paying for right and and these things

372
00:18:43.300 --> 00:18:46.200
 have gotten incredibly overvalued on the

373
00:18:46.200 --> 00:18:46.600
 growth side.

374
00:18:47.300 --> 00:18:50.500
And so it shouldn't come as a surprise then if there's a reversal of

375
00:18:50.500 --> 00:18:53.600
 that Dynamic that value might underperform growth

376
00:18:53.600 --> 00:18:56.500
 over the first quarter. And of course, that's what we observed right

377
00:18:56.500 --> 00:18:59.300
 that value underperformed growth. It was

378
00:18:59.300 --> 00:19:02.300
 those large kind of growthy names that took off and and so that

379
00:19:02.300 --> 00:19:05.700
 that factor shows up and demonstrates

380
00:19:05.700 --> 00:19:08.300
 that thighs right. So again kind of

381
00:19:08.300 --> 00:19:11.600
 the academic research that smaller cap

382
00:19:11.600 --> 00:19:14.400
 names tend to outperform larger cab

383
00:19:14.400 --> 00:19:17.800
 names over time rolling into the first quarter large

384
00:19:17.800 --> 00:19:20.500
 caps outperform small caps, right again being led

385
00:19:20.500 --> 00:19:23.500
 by that large growthy and so small caps

386
00:19:23.500 --> 00:19:26.800
 tended to underperform in general. What's interesting

387
00:19:26.800 --> 00:19:29.300
 is across factor is

388
00:19:29.300 --> 00:19:32.300
 one of the reasons you want to hold small caps isn't necessarily the size

389
00:19:32.300 --> 00:19:35.300
 Factor premium associated with that because

390
00:19:35.300 --> 00:19:38.700
 that's come under some scrutiny of

391
00:19:38.700 --> 00:19:41.400
 Lee as academics kind of look at that. Say what

392
00:19:41.400 --> 00:19:42.200
 do we actually getting here?

393
00:19:42.900 --> 00:19:46.000
But what really expresses itself

394
00:19:45.300 --> 00:19:48.500
 in small camp names or all the other factors, right? So

395
00:19:48.500 --> 00:19:51.100
 the reason you'd want to hold a small cap is not just

396
00:19:51.100 --> 00:19:54.200
 because you get a benefit versus large caps, but because you get

397
00:19:54.200 --> 00:19:57.600
 a really strong value signal a really strong momentum really

398
00:19:57.600 --> 00:20:00.200
 strong quality, right all of these things. And so if we

399
00:20:00.200 --> 00:20:03.300
 look at small caps the performance of small caps for

400
00:20:03.300 --> 00:20:06.700
 the first quarter, you actually got to really strong quality signal

401
00:20:06.700 --> 00:20:09.700
 in small caps. So again a reason

402
00:20:09.700 --> 00:20:12.400
 why you want to have a multiple exposures for your

403
00:20:12.400 --> 00:20:15.400
 factors not just pick any one of these right so small

404
00:20:15.400 --> 00:20:18.400
 caps under form large caps, but quality did really well inside

405
00:20:18.400 --> 00:20:21.300
 small camps that makes up the next category is

406
00:20:21.300 --> 00:20:24.400
 momentum. And what's interesting about markets that are sort of

407
00:20:24.400 --> 00:20:27.500
 whipsawing one way or the other that momentum tends to

408
00:20:27.500 --> 00:20:30.400
 have a tougher time in markets where the signal is really

409
00:20:30.400 --> 00:20:33.100
 hard to pick up where there's a lot of whipsawing effect up and down on the

410
00:20:33.100 --> 00:20:37.000
 other way momentum tends to kind of get whipped around with that.

411
00:20:37.700 --> 00:20:40.200
Eventually when markets start to pick

412
00:20:40.200 --> 00:20:43.300
 up Trend whether that's down for a significant period of

413
00:20:43.300 --> 00:20:46.500
 time like in 2022 momentum does well or up right

414
00:20:46.500 --> 00:20:50.000
 for a significant period of time and so you

415
00:20:49.200 --> 00:20:52.400
 would expect momentum to kind

416
00:20:52.400 --> 00:20:55.400
 of settle down as markets kind of settle down

417
00:20:55.400 --> 00:20:59.600
 and we see less whipsawing and more directionality. However, and

418
00:20:59.600 --> 00:21:03.300
 I mentioned it earlier with small caps quality this idea

419
00:21:02.300 --> 00:21:05.000
 that there may be

420
00:21:05.200 --> 00:21:08.800
 a flight to Quality in times when the

421
00:21:08.800 --> 00:21:11.100
 there's a lot of volatility. Well one of the

422
00:21:11.100 --> 00:21:14.800
 reasons you see that is because higher quality earnings tend to

423
00:21:14.800 --> 00:21:17.400
 hold up better in downturns. They have a premium

424
00:21:17.400 --> 00:21:21.300
 associated with them and we saw that very clearly quality

425
00:21:20.300 --> 00:21:23.200
 was one of the areas that outperformed the market

426
00:21:23.200 --> 00:21:26.200
 over the first quarter and that was true not just in the

427
00:21:26.200 --> 00:21:30.200
 US but internationally as well interestingly in

428
00:21:29.200 --> 00:21:33.500
 Emerging Markets value quality

429
00:21:32.500 --> 00:21:35.600
 and low volatility did quite

430
00:21:35.600 --> 00:21:37.600
 well so value was still doing well in emerging.

431
00:21:37.700 --> 00:21:40.700
Markets again a reason why you'd want to diversify

432
00:21:40.700 --> 00:21:43.400
 your Factor exposures not just in the US but

433
00:21:43.400 --> 00:21:46.900
 internationally as well and minimum volatility was

434
00:21:46.900 --> 00:21:49.800
 a contributor in us but lagged Market

435
00:21:49.800 --> 00:21:52.500
 beta on the whole a broadly

436
00:21:52.500 --> 00:21:55.900
 Diversified Factor exposure was I'd

437
00:21:55.900 --> 00:21:58.700
 say depending on what your tilts are helpful on

438
00:21:58.700 --> 00:22:02.200
 the downside when Market was volatile, but lagged

439
00:22:01.200 --> 00:22:04.900
 Market beta to a degree for the

440
00:22:04.900 --> 00:22:07.500
 first quarter where it outperformed in

441
00:22:07.500 --> 00:22:10.400
 2022. So again factors are a

442
00:22:10.400 --> 00:22:13.500
 long term investment. You wouldn't do it on based

443
00:22:13.500 --> 00:22:16.700
 on one quarter, but we we watch the horse race, right? Yeah.

444
00:22:16.700 --> 00:22:19.200
 Absolutely and I think a point that you

445
00:22:19.200 --> 00:22:22.400
 you said that really resonated with me is the notion of how these factors work

446
00:22:22.400 --> 00:22:25.800
 together right size and quality you mentioned

447
00:22:25.800 --> 00:22:29.200
 and so having a diverse portfolio

448
00:22:28.200 --> 00:22:30.700
 of integrated factors.

449
00:22:31.500 --> 00:22:32.800
maintaining that for the long term

450
00:22:34.200 --> 00:22:37.400
Should reward you over the long term. Yeah, and that's the

451
00:22:37.400 --> 00:22:40.800
 expectation. There are lots of factors out

452
00:22:40.800 --> 00:22:43.800
 there that have been identified in the academic literature when you

453
00:22:43.800 --> 00:22:46.400
 selectively go out and pick a handful of

454
00:22:46.400 --> 00:22:49.500
 those factors. The expectation is every single

455
00:22:49.500 --> 00:22:52.500
 one of those is going to be a positive contributor to

456
00:22:52.500 --> 00:22:55.400
 your portfolio over time, right you you

457
00:22:55.400 --> 00:22:58.300
 wouldn't necessarily pick one that you thought. Well, it's gonna be a loser but we're gonna hold on

458
00:22:58.300 --> 00:23:01.100
 to it, right you're picking all of these different factors of the

459
00:23:01.100 --> 00:23:04.700
 expectation that each one of those is going to be a

460
00:23:04.700 --> 00:23:07.300
 positive contributor over a period of time when you

461
00:23:07.300 --> 00:23:10.400
 weave them together you sort of iron out

462
00:23:10.400 --> 00:23:13.400
 the highs and lows of any one particular factor and

463
00:23:13.400 --> 00:23:17.100
 you get that very nice steady stream of

464
00:23:16.100 --> 00:23:19.500
 return into your

465
00:23:19.500 --> 00:23:22.300
 portfolio. That's generated by those Factor exposures. Yeah.

466
00:23:22.300 --> 00:23:25.400
 It's the old the old adage we're going for singles and doubles

467
00:23:25.400 --> 00:23:28.200
 not home runs, right? Yeah. Yeah exactly. So let's

468
00:23:28.200 --> 00:23:31.200
 talk a little bit about factors and fixed income and then

469
00:23:31.200 --> 00:23:34.100
 we can take a look at some of the the factors overseas.

470
00:23:34.100 --> 00:23:37.800
As well, but I do want to spend some time on some of

471
00:23:37.800 --> 00:23:40.100
 the headlines. So why don't we

472
00:23:40.100 --> 00:23:44.000
 talk a little bit about us fixed income factors? Sure. So

473
00:23:43.600 --> 00:23:46.200
 as you know, right fat factors are

474
00:23:46.200 --> 00:23:49.800
 not an equity only thing. In fact, we see factors across

475
00:23:49.800 --> 00:23:53.600
 all different kinds of assets fixed income Commodities

476
00:23:52.600 --> 00:23:55.400
 housing real

477
00:23:55.400 --> 00:23:58.400
 estate, right all these I the concept of value for

478
00:23:58.400 --> 00:24:01.500
 instance and the concept of momentum right anything that has a price associated

479
00:24:01.500 --> 00:24:04.400
 with it stores can demonstrate these sort of

480
00:24:04.400 --> 00:24:07.200
 factors. And that's true. In fact fixed income the way we

481
00:24:07.200 --> 00:24:10.400
 think about factors and fixed incomes specifically is is kind

482
00:24:10.400 --> 00:24:13.400
 of interest rate risk, which is time, right? So think

483
00:24:13.400 --> 00:24:17.300
 about what we talked about with the yield curve inversion

484
00:24:16.300 --> 00:24:19.400
 and what was going on on the short end versus the

485
00:24:19.400 --> 00:24:23.500
 long end what we've observed in the

486
00:24:23.500 --> 00:24:26.200
 past. Let's call year was a really

487
00:24:26.200 --> 00:24:29.800
 strong interest rate risk lack

488
00:24:29.800 --> 00:24:32.600
 of benefit that you got for sort of being paid

489
00:24:32.600 --> 00:24:34.000
 over time, right?

490
00:24:34.100 --> 00:24:38.300
And in theory, right you should get paid to hold

491
00:24:37.300 --> 00:24:41.100
 over time because there's less certainty

492
00:24:40.100 --> 00:24:43.500
 about what the future holds so you demand a

493
00:24:43.500 --> 00:24:46.800
 premium to hold something over time to lend over time. And

494
00:24:46.800 --> 00:24:49.200
 so when you have the short end

495
00:24:49.200 --> 00:24:52.500
 of the curve come up that tends to impact that interest

496
00:24:52.500 --> 00:24:55.500
 rate sets that risk that sensitivity because you're

497
00:24:55.500 --> 00:24:58.800
 not getting paid over time. You're getting paid actually on the

498
00:24:58.800 --> 00:25:01.700
 the shorter end potentially. So when you

499
00:25:01.700 --> 00:25:04.800
 see a pullback of rates,

500
00:25:04.800 --> 00:25:07.700
 right and price is going up you're seeing

501
00:25:07.700 --> 00:25:10.800
 that benefit playing out through the first quarter as well credit risk

502
00:25:10.800 --> 00:25:13.300
 is just the difference the buildup over

503
00:25:13.300 --> 00:25:16.300
 the risk free rate treasuries to account

504
00:25:16.300 --> 00:25:19.200
 for hey, you know a corporation has more risk than a government

505
00:25:19.200 --> 00:25:22.500
 and I should be paid that difference. And so you're investing

506
00:25:22.500 --> 00:25:25.200
 up and down the various yield curves that

507
00:25:25.200 --> 00:25:28.900
 build up on that and in this case credit risk really as

508
00:25:28.900 --> 00:25:31.900
 a factor wasn't a very solid contributor

509
00:25:31.900 --> 00:25:33.200
 for the first quarter slightly positive.

510
00:25:34.100 --> 00:25:37.200
The the show really has been frankly for the

511
00:25:37.200 --> 00:25:40.500
 past 18 months were interest rate risk is in

512
00:25:40.500 --> 00:25:43.500
 terms of factor Premia in your portfolios.

513
00:25:43.500 --> 00:25:46.500
 And then Market is is again just Market

514
00:25:46.500 --> 00:25:49.800
 beta which is a buildup of all these different factors expressing themselves.

515
00:25:49.800 --> 00:25:53.200
 So on the whole positive Bond performance

516
00:25:52.200 --> 00:25:55.500
 being driven by changes to

517
00:25:55.500 --> 00:25:59.500
 the the yield curve in many cases and some

518
00:25:58.500 --> 00:26:01.400
 expectation that Bond markets are looking ahead

519
00:26:01.400 --> 00:26:04.600
 and pricing for a cessation of rate raises

520
00:26:04.600 --> 00:26:07.500
 by central banks. So so my expectation would

521
00:26:07.500 --> 00:26:10.200
 be for for fixed income investors again much like

522
00:26:10.200 --> 00:26:13.400
 Equity potentially more volatility here, right? The

523
00:26:13.400 --> 00:26:16.400
 the rodeo is not over the big bull riding

524
00:26:16.400 --> 00:26:18.200
 could yet be to come so

525
00:26:19.200 --> 00:26:22.400
You know stay patient the the benefit here is

526
00:26:22.400 --> 00:26:25.400
 there's return associated with fixed income

527
00:26:25.400 --> 00:26:29.500
 to a degree. We haven't seen in 15 years. And so

528
00:26:29.500 --> 00:26:32.700
 let this play out. And again, these Factor

529
00:26:32.700 --> 00:26:35.600
 exposures are the expectation is over time. These are

530
00:26:35.600 --> 00:26:38.100
 going to be a additive to the returns that you

531
00:26:38.100 --> 00:26:40.700
 get from the bond market you had mentioned this in some of your previous comments.

532
00:26:42.500 --> 00:26:45.400
Factors perform differently geographically too

533
00:26:45.400 --> 00:26:48.500
 right like value in the US might give you a different return

534
00:26:48.500 --> 00:26:51.300
 versus value and the international develop during the

535
00:26:51.300 --> 00:26:54.500
 Emerging Markets Arenas. So I think there's diversification story

536
00:26:54.500 --> 00:26:57.600
 there. Can you comment on that, please? Yeah. Well, yes, of

537
00:26:57.600 --> 00:27:00.100
 course and and I sort of made a comment

538
00:27:00.100 --> 00:27:01.300
 about as

539
00:27:02.300 --> 00:27:05.500
central banks become decoupled and start to operate a

540
00:27:05.500 --> 00:27:09.000
 little more independently that it has an impact on the

541
00:27:11.300 --> 00:27:14.600
local economies in all of these different markets as

542
00:27:14.600 --> 00:27:17.200
 an impact on their currencies. And so

543
00:27:17.200 --> 00:27:20.600
 when you think about fixed income the benefit that you get from

544
00:27:20.600 --> 00:27:23.300
 not only where you hold on

545
00:27:23.300 --> 00:27:26.500
 the curve and and the amount of credit that you're willing but that

546
00:27:26.500 --> 00:27:29.900
 you're going to diversify the various curves

547
00:27:29.900 --> 00:27:32.300
 that you hold and the where you

548
00:27:32.300 --> 00:27:35.900
 are on that across geographies and

549
00:27:35.900 --> 00:27:38.200
 then take into account the impact that

550
00:27:38.200 --> 00:27:42.200
 currencies might have right and so we know for equities

551
00:27:41.200 --> 00:27:45.100
 the the volatility signature

552
00:27:44.100 --> 00:27:47.100
 of equity is is so robust that

553
00:27:47.100 --> 00:27:50.600
 you're you tend to be willing to hold the volatility of

554
00:27:50.600 --> 00:27:53.900
 fluctuations and currency in in

555
00:27:53.900 --> 00:27:56.000
 fixed income. It tends not to pay you to do

556
00:27:56.200 --> 00:27:59.400
 that. And so I know for instance

557
00:27:59.400 --> 00:28:03.100
 that here at Cemetery you folks hedge back

558
00:28:03.100 --> 00:28:07.000
 to the dollar sure and that takes some of that volatility out,

559
00:28:06.600 --> 00:28:09.400
 right? And again, I think that's a benefit

560
00:28:09.400 --> 00:28:11.000
 for Factor investors because what you're

561
00:28:11.200 --> 00:28:14.300
Is less volatility associated with fluctuations currency and

562
00:28:14.300 --> 00:28:18.000
 you're getting maybe stronger signal from these these

563
00:28:17.200 --> 00:28:20.900
 different sources of return across

564
00:28:20.900 --> 00:28:23.400
 different markets and they're all going to be hitting at

565
00:28:23.400 --> 00:28:26.700
 different times. Once the sort of the global economy

566
00:28:26.700 --> 00:28:29.200
 comes unpegged to what's going

567
00:28:29.200 --> 00:28:33.100
 on fighting inflation. Yeah until I think it's a perfect diversification story

568
00:28:32.100 --> 00:28:33.300
 and

569
00:28:34.100 --> 00:28:37.600
we have a saying here that the only free lunch and investing is diversification. And

570
00:28:37.600 --> 00:28:40.900
 so we tout that investor should be embracing that Casey.

571
00:28:40.900 --> 00:28:43.400
 Thank you so much for joining us that concludes part one.

572
00:28:43.400 --> 00:28:46.600
 Please feel free to access other podcasts

573
00:28:46.600 --> 00:28:49.000
 that we have done and they can be

574
00:28:49.400 --> 00:28:52.600
 accessed anywhere you get your podcast. So please join Casey and

575
00:28:52.600 --> 00:28:56.000
 I for part two and our next series symmetry Partners

576
00:28:55.700 --> 00:28:58.800
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577
00:28:58.800 --> 00:29:01.700
 registered with the Securities and Exchange Commission The

578
00:29:01.700 --> 00:29:04.600
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579
00:29:04.600 --> 00:29:07.500
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580
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581
00:29:10.200 --> 00:29:13.600
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 commission. No one should assume that future performance of any

585
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586
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 reference to directly or indirectly in this material will be

588
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589
00:29:33.400 --> 00:29:36.500
As with any investment strategy there is the possibility of

590
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591
00:29:39.500 --> 00:29:42.300
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592
00:29:42.300 --> 00:29:44.700
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596
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599
00:30:03.400 --> 00:30:05.700
 investment advice.

Not all financial advisors are created equally. Some have certified credentials, some charge their clients fees, and others may get paid on commission (if they offer investment products). In part two of this podcast episode, our own Tom Romano, Head of Strategic Relationships and Product Development, is joined by Symmetry’s Michael Storer, Senior Regional Director, and a financial advisor from our sister firm, Apella Wealth, Peter Leppones, CFP®, to discuss the important credentials of, and differences between, financial advisors. 

If you have any questions or would like more information, reach out to us at https://symmetrypartners.com/contact-us/

You can also find us on Facebook, YouTube, Twitter, and LinkedIn. As always, we remain invested in your goals.

Transcript:

0
00:00:01.900 --> 00:00:07.500
Welcome back

1
00:00:07.500 --> 00:00:10.500
 to part 2 of choosing the right financial advisor. This

2
00:00:10.500 --> 00:00:13.100
 is Tom Romano with unfiltered finance and I'm back

3
00:00:13.100 --> 00:00:16.200
 here with my guests. Mike store senior Regional director at

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00:00:16.200 --> 00:00:20.000
 symmetry partners and Peter laponis financial advisor

5
00:00:19.200 --> 00:00:22.200
 and cfp at Apollo wealth. Thank you for joining us

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00:00:22.200 --> 00:00:25.400
 gentlemen, so go Peter certified financial

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00:00:25.400 --> 00:00:28.400
 planner see FP Mike. I'm

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00:00:28.400 --> 00:00:31.800
 asked this question to you because Peter is a cfp. What

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00:00:31.800 --> 00:00:34.700
 are the credential what other credentials that investors should

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00:00:34.700 --> 00:00:37.200
 be looking for as they're going through this process of choosing a

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 financial advisor. I mean cfp certainly is one of them sure. There's

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00:00:40.500 --> 00:00:43.200
 you know, I mean I come across a wide variety

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 of different advisors and that have different different designations

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 and it and sometimes it

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00:00:49.300 --> 00:00:52.400
 depends on it depends on you know, what type

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00:00:52.400 --> 00:00:56.400
 of work they're doing for the client. It may not always be, you know

17
00:00:56.400 --> 00:00:59.400
 cfp, but most of the advisors that I'm working with their

18
00:00:59.400 --> 00:01:01.500
 certified financial planners, but there's

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00:01:01.900 --> 00:01:05.000
there's SEMA, you know, which is a certified Investment

20
00:01:04.500 --> 00:01:07.800
 Management associate, I

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00:01:07.800 --> 00:01:10.500
 believe and that I look

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00:01:10.500 --> 00:01:13.500
 at CFA and see Sima as kind of two different

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00:01:13.500 --> 00:01:14.300
 designations that

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Are are very strong. I mean these people are incredibly smart.

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00:01:18.200 --> 00:01:21.700
 They pass a lot of tests to get where they are. But I

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00:01:21.700 --> 00:01:24.500
 look at the see the SEMA and the

27
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 the CFA which is a chartered financial

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00:01:27.300 --> 00:01:31.100
 analyst as more geared towards Investments to

29
00:01:30.100 --> 00:01:33.300
 a certain extent. So they're if you've

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00:01:33.300 --> 00:01:37.000
 got an advisor that is more seamors or CFA oriented.

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00:01:36.500 --> 00:01:40.300
 I think you're probably you could and Peter

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00:01:39.300 --> 00:01:42.900
 you can correct me if I'm wrong lean more

33
00:01:42.900 --> 00:01:45.800
 towards them probably approaching it from an investment perspective.

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00:01:45.800 --> 00:01:49.100
 Whereas I think a cfp is

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00:01:48.100 --> 00:01:52.100
 going to approach the relationship from everything

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00:01:51.100 --> 00:01:54.400
 that Peter just talked about in terms of how they

37
00:01:54.400 --> 00:01:57.200
 want to how they want to work with you moving

38
00:01:57.200 --> 00:02:00.300
 forward Investments are important no doubt, but I think from

39
00:02:00.300 --> 00:02:03.700
 the standpoint of the approach if

40
00:02:03.700 --> 00:02:06.200
 you're looking for a planner, you know a cfp is

41
00:02:06.200 --> 00:02:10.000
 where you want to be if you want someone that's more focused on. Okay, I'll construct

42
00:02:09.300 --> 00:02:12.800
 a portfolio for you, but I think Sima and

43
00:02:12.800 --> 00:02:15.300
 CFA tend to lose tend to

44
00:02:15.400 --> 00:02:18.200
Themselves more towards investment only to a certain

45
00:02:18.200 --> 00:02:21.400
 extent now that's not every single or CFA but I think from that

46
00:02:21.400 --> 00:02:24.400
 perspective those types of designations. Those are the ones that I come across

47
00:02:24.400 --> 00:02:27.700
 primarily obviously, there's other designations with

48
00:02:27.700 --> 00:02:30.400
 the insurance realm that you know, you like a

49
00:02:30.400 --> 00:02:33.200
 chfc that would be which I

50
00:02:33.200 --> 00:02:36.400
 I don't even remember that. It's a chartered leave its chartered Financial

51
00:02:36.400 --> 00:02:39.700
 consult consultant, right which is different than a chartered financial analyst

52
00:02:39.700 --> 00:02:42.400
 which is kind of interesting but you know, they'd be focused more on

53
00:02:42.400 --> 00:02:45.500
 and probably the insurance side of the investment process.

54
00:02:45.500 --> 00:02:48.200
 So I come across a lot but I would say

55
00:02:48.200 --> 00:02:51.900
 that I feel comfortable saying it that the

56
00:02:51.900 --> 00:02:55.400
 cfp is the designation where you know, mostly you're

57
00:02:55.400 --> 00:02:58.600
 going to be getting more of a planning approach. Whereas I

58
00:02:58.600 --> 00:03:02.200
 think the other designations might lean towards something else within

59
00:03:01.200 --> 00:03:04.700
 the whole scope of planning but more,

60
00:03:04.700 --> 00:03:07.100
 you know designated or specific on that

61
00:03:07.100 --> 00:03:11.000
 side sure. I think it's important, you know, individuals professionals

62
00:03:10.500 --> 00:03:14.000
 regardless of the industry having credentials after

63
00:03:13.400 --> 00:03:15.400
 their name shows that they're

64
00:03:15.400 --> 00:03:18.600
to the business. They're probably lifelong Learners,

65
00:03:18.600 --> 00:03:23.000
 which is something you probably want to look for in a financial advisor. And

66
00:03:21.200 --> 00:03:25.300
 I would agree with you a cfp

67
00:03:24.300 --> 00:03:27.600
 is probably the starting point. However, the

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00:03:27.600 --> 00:03:31.000
 the SEMA the Cima in the CFA,

69
00:03:30.200 --> 00:03:33.900
 which I would agree are more investment driven.

70
00:03:35.700 --> 00:03:38.100
Um working with a firm who has a cfp has the point

71
00:03:38.100 --> 00:03:41.300
 of contact Peter, but that doesn't mean you don't have access to

72
00:03:41.300 --> 00:03:44.500
 cfa's and seamas as well. Right, correct. And

73
00:03:44.500 --> 00:03:47.500
 that's that's part of the teamwork approach here that you

74
00:03:47.500 --> 00:03:51.200
 know behind the scenes. I know that there's cfas working on our portfolios.

75
00:03:50.200 --> 00:03:53.100
 So so I think

76
00:03:53.100 --> 00:03:57.500
 you could see someone with another non-cfp designation

77
00:03:57.500 --> 00:04:00.200
 but is what's their firm like do they have a team behind

78
00:04:00.200 --> 00:04:04.100
 them is maybe they have a a young hire

79
00:04:03.100 --> 00:04:06.700
 a new hire coming out of college who's studying

80
00:04:06.700 --> 00:04:09.200
 for his or her cfp and that's their parent plan

81
00:04:09.200 --> 00:04:12.600
 who works on the financial plan. So I mean to I think

82
00:04:12.600 --> 00:04:15.300
 you might be doing a disservice just because

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00:04:15.300 --> 00:04:18.400
 someone doesn't have cfp understand more about what's

84
00:04:18.400 --> 00:04:21.200
 what's going on at the firm and not just

85
00:04:21.200 --> 00:04:25.100
 the designation. But I do agree having a designation and you

86
00:04:24.100 --> 00:04:28.400
 made you reminded me. My continuing

87
00:04:27.400 --> 00:04:30.500
 ed is coming up and it's it's comprehensive. I've

88
00:04:30.500 --> 00:04:34.000
 got I've got a lot to do several hours to to

89
00:04:33.000 --> 00:04:34.100
 keep

90
00:04:34.600 --> 00:04:37.500
Cfp designation current I've

91
00:04:37.500 --> 00:04:40.800
 got to do some continuing education requirements online. Yeah, me

92
00:04:40.800 --> 00:04:43.100
 too. Thanks for the reminder. I would say I didn't

93
00:04:43.100 --> 00:04:46.300
 mean to say that, you know, the cfp is definitely starting point. But Peter

94
00:04:46.300 --> 00:04:49.800
 brings up a great point that you when you visit with these cfps. They

95
00:04:49.800 --> 00:04:50.800
 do have those other.

96
00:04:51.600 --> 00:04:54.400
People in their organizations that cover those parts

97
00:04:54.400 --> 00:04:57.200
 of the planning process for them from that standpoint

98
00:04:57.200 --> 00:05:00.200
 So and I've met many cfps that have their SEMA or have their CFA as

99
00:05:00.200 --> 00:05:03.400
 well. So depends on who I'm speaking with, but there's there's a

100
00:05:03.400 --> 00:05:06.400
 wide variety of different designations and some have won

101
00:05:06.400 --> 00:05:10.000
 some have many or some have, you know, more than one right? So something

102
00:05:09.200 --> 00:05:12.400
 that you would recommend investors look for as they're gonna

103
00:05:12.400 --> 00:05:15.200
 go through absolutely. Absolutely. Absolutely. Yeah Mike we

104
00:05:15.200 --> 00:05:18.100
 for all the cfps out there yet. We're definitely the top

105
00:05:18.100 --> 00:05:21.200
 designation. No doubt about no doubt about it. We can

106
00:05:21.200 --> 00:05:25.900
 leave it at that. Very good very good. So I

107
00:05:25.900 --> 00:05:28.500
 have a few more questions and this has been great gentlemen, but

108
00:05:29.700 --> 00:05:32.800
What are some of the resources online resources

109
00:05:32.800 --> 00:05:35.400
 right, you know, I don't think people use phone books

110
00:05:35.400 --> 00:05:39.100
 anymore to find Financial professionals. What are

111
00:05:38.100 --> 00:05:41.100
 some of the things my gear you're working

112
00:05:41.100 --> 00:05:44.000
 with thousands of advisors. Like how do you how do you

113
00:05:44.100 --> 00:05:47.200
 go about and find an advisor that that you would want to work with

114
00:05:47.200 --> 00:05:50.600
 a professional level but not only professional of

115
00:05:50.600 --> 00:05:53.900
 us person maybe from even personal standpoint where can

116
00:05:53.900 --> 00:05:56.300
 investors go? Well they can they can you

117
00:05:56.300 --> 00:05:59.800
 know go online and you know, there's a couple of different organizations that

118
00:05:59.800 --> 00:06:02.700
 are out there that you could look at like the Financial Planning Association is

119
00:06:02.700 --> 00:06:05.600
 a great place to start that's that's a

120
00:06:05.600 --> 00:06:08.600
 big one National Association of

121
00:06:08.600 --> 00:06:11.800
 personal financial advisors is another great site

122
00:06:11.800 --> 00:06:14.600
 as well the certified financial planner

123
00:06:14.600 --> 00:06:17.100
 board. You can go that route as well. I mean,

124
00:06:17.100 --> 00:06:20.400
 that's probably the best place to start you can find someone in your general area

125
00:06:20.400 --> 00:06:23.100
 that could help you there. There's another firm out there

126
00:06:23.100 --> 00:06:26.600
 XY Planning Network which is which

127
00:06:26.600 --> 00:06:29.300
 is a pretty good tool for to search for fee only.

128
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Financial advisors you mentioned, you know

129
00:06:32.200 --> 00:06:35.200
 word of mouth or referrals from from your friends

130
00:06:35.200 --> 00:06:38.200
 or family that may be working with a financial advisor. So all of

131
00:06:38.200 --> 00:06:41.100
 them are great great ways to to identify some of

132
00:06:41.100 --> 00:06:44.300
 that you might want to work with at least get the opportunity to interview them to see

133
00:06:44.300 --> 00:06:47.700
 if they would be a good fit for you. Yeah. I think there's a lot of great resources online,

134
00:06:47.700 --> 00:06:50.500
 you know, one of the things that Peter and

135
00:06:50.500 --> 00:06:53.500
 I talk about quite a bit is you know working with someone

136
00:06:53.500 --> 00:06:56.200
 who understands you someone who's working with

137
00:06:56.200 --> 00:06:58.600
 other investors like me.

138
00:06:59.300 --> 00:07:02.900
Right in a lot of times if someone has a very specific need or

139
00:07:02.900 --> 00:07:05.500
 specific sort of outcome. They're

140
00:07:05.500 --> 00:07:08.800
 looking for they can identify the right Financial professional

141
00:07:08.800 --> 00:07:11.200
 by not only looking at those websites, but

142
00:07:12.200 --> 00:07:15.100
LinkedIn Facebook. Look, who are these?

143
00:07:15.100 --> 00:07:18.300
 Look who at the who these advisors are look at

144
00:07:18.300 --> 00:07:21.500
 the circles that they're in right? You know it a funny story my parents

145
00:07:21.500 --> 00:07:24.200
 who are not great investors. They were

146
00:07:24.200 --> 00:07:27.400
 both School teachers had a pension but when they were looking for

147
00:07:27.400 --> 00:07:30.400
 financial advisor, they didn't look any

148
00:07:30.400 --> 00:07:33.700
 further than you know, the Connecticut Teachers Retirement Financial

149
00:07:33.700 --> 00:07:36.400
 advisory. It was a really long name like

150
00:07:36.400 --> 00:07:39.500
 that. I know I'm butchering it and talking it right but they will

151
00:07:39.500 --> 00:07:42.600
 work Connecticut Teachers that must be the guy that we work with without even

152
00:07:42.600 --> 00:07:45.800
 thinking twice about it, but they knew they felt comfortable and

153
00:07:45.800 --> 00:07:48.500
 they trusted that the this particular individuals working

154
00:07:48.500 --> 00:07:49.900
 with other, Connecticut Teachers.

155
00:07:50.800 --> 00:07:53.400
Here to add to any of that Peter. I mean, I think that

156
00:07:53.400 --> 00:07:56.400
 you know, I've had done. Oh my

157
00:07:56.400 --> 00:07:57.600
 second cap. We have pulled that one back.

158
00:07:58.300 --> 00:07:59.300
I won't ask that question better.

159
00:08:00.300 --> 00:08:00.300
All right.

160
00:08:04.500 --> 00:08:05.500
so Peter

161
00:08:06.900 --> 00:08:09.200
You know, I've talked about this it it's a mutual

162
00:08:09.200 --> 00:08:12.400
 interview between an advisor and an investor the investors making

163
00:08:12.400 --> 00:08:16.000
 a choice, but the advisors making a choice as well. So talk

164
00:08:15.200 --> 00:08:17.800
 a little bit about that process if you will.

165
00:08:18.400 --> 00:08:21.700
Yeah, I think that's that's a great question. And I definitely

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 encourage people to come up with a

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 list of questions and interview multiple

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 advisors definitely. But yeah, when when

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 I'm meeting with with a New Prospect, I'm interviewing

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 them as well. And there's things I'm I'm looking

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 for I want to make sure that number

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 one there. They're gonna be happy working with us. I've

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 told people who I refer to

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 them as Gunslingers. They want to pick stocks. They want to

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 be in and out of the market they want they want action and I've told

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 people I go I don't think we're gonna be a good fit. I'm a

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 nice person. You seem like a nice person you seem to get along but

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we're going to have different philosophies and and I want

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 you to be happy and I don't want to waste your time and I

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 don't want to have my time wasted and so I've had to tell people I just don't think

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 that this is necessarily going to work. Um, also there's

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 when I start to hear people talk and I say this

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 to clients

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and Prospects I start to get a gut feeling about what's

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 going on. And when I start to hear about things like

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 well a lot of debt, you know, you've got

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 and not good. You don't have good financial habits.

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 You're spending all your money. You've got

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 a lot of debt a lot of bad debt. It's one thing to have a mortgage your car

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 payments. Those are those are necessary. We'll call those

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 good debt necessary debt. We start talking about large student

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 loans. We start talking about large credit

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 card balances.

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I may not be able to work with you. I you may be better off going

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 and having credit counseling done first because I

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 can maybe give you some pointers but I've

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 had to unfortunately tell people that we may

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 not be a good fit. There wasn't a whole lot I could do because they

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 just they just didn't have the assets. They needed to get really the

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 basics of their budgeting or spending plan

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 down and start to work on that debt. And that's not something we're

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 necessarily.

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Working on it'd be more of sort of a credit agency

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 helping them to kind of get that square away. Absolutely. You

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 mentioned working with, you know, other sort of

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 financial professionals that you you work with

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 other.

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Financial professionals as well. I mean maybe not direct financial

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 advisors, but tax advisors and things like that. Oh, definitely.

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 I like to say that the analogy is I'm

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 I'm sort of the quarterback or I'm your

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 your primary care physician if we need to bring in a specialist,

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 you know cardiologists so forth

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 weekologists.

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So but I'm working with.

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I'll work with the client's attorney to talk about their state plan

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 work with a client's accountant or CPA to

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 talk about if we need to do some rebalancing in the portfolio before

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 I do any of that.

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And start triggering capital gains. I want to make sure that the accountant is

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 on board with it and we understand what the

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 ramifications are of those actions or in

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 actions because the last thing a client wants is a

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 surprise attack time. There's something psychological about

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 a big tax bill staring you in the face and it's

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 one thing to not know about it and have to

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 pay it. It's another thing. All right, you know what we knew about this, but we know why we

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 did it. So I'm constantly working with

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 with other Professionals in helping clients

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 with taxes and in legal issues.

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That's fantastic. Yeah, so that's another thing that investors should

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 be looking for. Is there a true team approach? Maybe not even under the

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 same roof under the same corporate umbrella if you will but making

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 sure that the advisors acting in that quarterback capacity

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 and has the right Specialists for

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 those needs that might be outside of the scope of

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 what the advisors doing on a day-to-day and that could be another point

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 of reference for a client. If you have an accountant who

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 you've been working with for a long time and you happen to like him

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 or her in the way that they work maybe they could be a place

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 where you could go to get a referral.

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Because I'm in all likelihood that that CPA

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 or that attorney is has some

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 type of relationship with a financial advisor and could give

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 you a couple of places to go. Yeah, I think that's a great

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 great piece of advice there. All right.

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 I want one more topic here because this comes up a

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 lot and it's the notion of compensation for financial advisors.

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 I've heard individuals say

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 that I don't pay my financial advisor or anything. He does

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 it for free sure right there is

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 there's a problem this industry, I think with transparency at times and

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 there's a number of different ways financial advisors are

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 being compensated. I didn't like frankly I think advisors should

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 be fairly compensated. They're doing really good work, right?

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Depending on the advisor. Of course, Mike tell us

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 a little bit about the couple of different.