The top conversations on APViewpoint last week were started by Scott MacKillop, Dan diBartolomeo, and Dave Yeske. They generated thoughtful discussion with wide ranging opinions on: the limits to our investment knowledge; tax evasion, the Panama Papers and global wealth management; and the history of the financial planning profession.
Scott MacKillop’s Value, Growth and the Limits of Our Investment Knowledge Taming the Uncertainty Monster received seven comments. Advisors widely agreed with MacKillop’s argument that there is far too much over-confidence in the investment industry, and commended him for “reminding everyone that if you invest in any risky asset you must accept the risk that the ‘expected’ will not occur.” However, advisors called into question MacKillop’s arguments contradicting the notion that value stocks outperform growth stocks, and argued that there is a broad body of evidence supporting value. They claimed that advisors should not define value and growth in a mutually exclusive fashion, and explained that “while value has become somewhat of an abstraction, its definition allows for multiple incarnations (e.g., different value metrics) that tend to lead to similar results.” Members ultimately agreed that, while statements from credible sources generally don’t claim that value always beats growth, investors should be weary of subtle and implicit attempts to overstate the benefits of investment strategies such as factor tilts. Advisors urged their peers to be wary of the tendency to simplify complicated situations into simple rules that clients may interpret as facts, and emphasized the importance of educating investors about the risks of underperformance.
APViewpoint hosted another well-attended webinar on August 30, Tax Evasion, the Panama Papers and Global Wealth Management, presented by president and founder of Northfield Information Services Dan diBartolomeo. In this presentation, Dan explained how the release of the so-called “Panama Papers” raised the veil on secretive tax evasion practices, and discussed the mysterious world of offshore corporations and hedge funds. He explained that, given the current legislative environment, international financial transactions come under a great deal of scrutiny from regulators and law enforcement, irrespective of the motivation. As a result, he added, global wealth management firms will have no choice but to become tax aware in their investing practices. Dan introduced tax-management strategies that can help advisors optimize performance given the global tax environment, and discussed the benefits of using after-tax multi-manager products. Dan also answered questions about his presentation in this follow up conversation. He shared insights with advisors about tax-loss harvesting, and provided advice for RIAs about the tax efficiency of constructing portfolios using ETFs and for diversifying a large concentrated holding. If you missed the live event, you can view a replay of the webinar here.
David Yeske’s A Concise History of the Financial Planning Profession received two comments from thought leaders commending Yeske for his article in the Journal of Financial Planning on the institutions that gave rise to, or arose from, the financial planning profession over its history. Yeske’s article traces the roots of financial planning as a concept back to 1862, and discusses how the professional practice of financial planning has evolved since its inception. APViewpoint members found Yeske’s overview of the split of the Financial Services Institute from the FPA to be insightful, and found it to be helpful in understanding the institutional developments of the profession. They added that, when discussing the development of the financial planning industry, advisors should also include the “differences between the '34 and '40 act that differentiated advisors by compensation and regulation” as an important historical moment.
APViewpoint will be hosting its next CE eligible webinar, The Next Generation of ESG Investing, on Tuesday, September 13, at 1:00 pm ET. In this presentation, FlexShares senior investment strategist Abdur Nimeri will review portfolio management strategies that can help advisors construct environmental, social and governance (ESG) investment strategies for their clients. You can register for the upcoming webinar here.
