Where is the investment world headed?

May 10, 2016

A fresh bottle of maple syrup is a sure sign you're in

Bon jour!  Greetings from Montreal, where Jason and I are attending the 69th CFA Annual Conference, the gathering of investment analysts around the globe.  #CFAInvest

During the conference’s first day, a theme I heard throughout was that change is underway.

The financial crisis of 2008 was a catalyst for this change, as clients and consumers of investment advice realized that an alignment of interests with their advisor is critical.  We’ve heard the stories, read the articles, and watched The Big Short, so we all know that the large investment firms put their own interests ahead of their clients.  The packaging of subprime mortgages into secondary securities is just one example.

Why should a client trust someone who owes no fiduciary duty to them?  They shouldn’t!  As stated by President Obama, “It’s a very simple idea: you want to give financial advice, you’ve got to put your client’s interest first.” (2/23/2015)  At Sherpa, we couldn’t agree more!  As a Registered Investment Adviser (RIA), we owe a fiduciary duty to our clients, and hold this tenet so dear that it’s our motto: we only work for you.

One of our speakers today, Jon Stein, CFA, spoke about providing financial advice that is aligned, intelligent, and accessible.  As financial advice has become more complex over time, customers and clients desire peace of mind brought about by simplicity.  This is our duty and challenge as investment managers.  We need to take complex scenarios in the financial landscape and guide clients to the best path.

Another speaker, Rupal Bhanasali, made the case for contrarian value investing.  This is an approach that we, at Sherpa, rely upon.  The idea behind value investing is that a manager should seek investments that are contrary to where the rest of the crowd says to invest, but doing so is difficult.  Being a contrarian investor is difficult; as you wait for your thesis to prove correct, ridicule comes if short-term results suffer and patience is in short supply.  The proof comes later and the key is to stick with one’s high conviction contrarian picks.

It may be difficult to go against the crowd, but persistence could pay.  As our team is often heard saying, sometimes the best offense is a good defense.

The Sherpa team will continue to provide the best investment guidance for a client’s personal situation – that is our fiduciary duty – and we will do so even if it requires going against the grain.

- Lance Gunkel, CFA, CFP®