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The Value of Investment Advice

“It takes a great man to give sound advice tactfully, but a greater to accept it graciously.” - Logan Pearsall Smith

Life is full of surprises. If you don’t have a crystal ball, you can’t predict what comes next. This is why it is important to be prepared as life unfolds.


Some paths in life are more predictable: we navigate careers, relationships, and major financial events (such as having children or buying a home), until we hit retirement age. Of course, we will all face obstacles along the way and the inevitable bumps down the road, which for most of us count as experience and accumulated wisdom.


It is a different story in financial markets. Although equities tend to go higher over time, the path to wealth is not always clear and there are a number of events which can either be ambiguous or have a negative effect on investors long term success. Consider over the past few years’ investors navigated through a global pandemic, wars, a regional banking crisis, inflation, and the beginning stages of artificial intelligence.


Given uncertainty surrounding the upcoming presidential election and the potential challenging investment landscape that could develop as the year progresses, I thought it made sense to reintroduce the below content I put out on the value of investment advice and how working with a competent investment adviser, particularly during periods of high uncertainty can save time, balance emotional distress, and maximize returns.


Executing an investment management strategy should be seen as a marathon rather than a sprint and tends to be an endeavor one plays against oneself rather than outside opponents.



Over the years, the reputation and integrity of the investment management industry has received a fair amount of criticism. From outright fraudulent operators who steal from clients to commission/fee hungry brokers/investment advisers motivated by greed, some of the people employed in our profession appear only interested in their own bottom line. However, I hope to highlight below the value and good work many of us in the industry do on behalf of our clients, which at times can get lost in the shuffle.


Vanguard, the mutual fund company best known for their belief in low cost, passive style index investing periodically publishes a research report entitled “Advisor’s Alpha.” Based on their research, they found that the value added by working with a competent financial adviser could add up to 3% annually averaged over a long time horizon. However as noted in their research, the benefits of working with an adviser is “likely to be intermittent, as some of the most significant opportunities to add value occur during periods of market duress or euphoria when clients are tempted to abandon their well-thought-out investment plan.”


What may surprise some investors is that half of the value added in their study was attributed to adviser “behavioral coaching” rather than asset management. According to the authors of the study, “Left alone, investors often make choices that impair their returns and jeopardize their ability to fund their long-term objectives… Advisors, as behavioral coaches, can act as emotional circuit breakers in bull or bear markets by circumventing their clients’ tendencies to chase returns or run for cover in emotionally charged markets.”


Helping support the idea of adviser value compared to the average investor experience, J.P. Morgan Asset Management produced the chart below in their “Guide to the Markets” publication. The chart shows 20-year annualized returns by asset class, as well as how an average investor would have done over the same time period. What stands out to me is how poor the average investors’ returns were over this period +2.1% which lagged every other category on the chart including inflation 2.2%, homes 3.4%, bonds 5.3%, and the S&P 500 8.2%. As Walt Kelly exclaimed in his 1960’s comic strip Pogo, “We have met the enemy and he is us.”


Let’s face it; investing in financial markets is not rocket science, as many people can acquire the skills and knowledge necessary to manage their own portfolios. However, the cumulative effect of receiving sound investment counsel is significant from both a quantitative and qualitative standpoint. Not only does the investor stand to gain from better financial returns when compared to not working with a professional adviser, but he/she may also receive a quality of life improvement, as additional time is captured to pursue more desirable endeavors. Furthermore, think of your financial adviser as both an independent third party and coach attempting to bring out the best in you. Good investment management and financial advice not only helps to build wealth but also leaves many people with increased confidence and peace of mind.


When I decided to make the switch into wealth management, after a career as an institutional government bond and interest rate derivatives trader, I found the opportunity to build an investment management and advisory business very appealing from a professional perspective. But more than that, I also realized that working directly with clients to help them achieve their financial objectives and secure their futures was also very fulfilling on a personal level. After all, I get to do what I enjoy for a living and help people in the process. This is what motivates me daily and is the reason I do what I do.



My views on financial markets have not changed. Overall, I am cautiously optimistic but on the lookout for cracks should they develop. Inflation, growth, and employment are all decelerating to some degree. I guess the best way to describe my position right now is reactionary rather than anticipatory.


As mentioned in past commentaries, equity portfolio positioning is modestly below strategic targets while concentrated in large capitalization technology, housing related industries and utilities – all interest rate sensitive sectors. Portfolios are overweight money market instruments such as US treasury bills which are still yielding north of 5% on an annualized basis, while portfolio hedges sit in intermediate and long-term treasuries, as their higher duration provides greater price sensitivity to changes in interest rates.


Justin Kobe, CFA

Founder, Portfolio Manager & Adviser

Pacificus Capital Management

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Advisory services through Cambridge Investment Research Advisors, Inc., a Registered Investment Adviser. Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a broker-dealer, member FINRA/SIPC. Cambridge and Pacificus Capital Management are not affiliated. Material discussed is meant for general illustration and/or informational purposes only, and it is not to be construed as investment, tax, or legal advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary. Therefore, the information should be relied upon when coordinated with individual professional advice. These are the opinions of Justin Kobe and not necessarily those of Cambridge Investment Research, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. Investing in the bond market is subject to risks, including market, interest rate, issuer credit, inflation risk, and liquidity risk. The value of most bonds and bond strategies is impacted by changes in interest rates. Bonds and bond strategies with longer durations tend to be more sensitive and volatile than those with shorter durations; bond prices generally fall as interest rates rise, and the current low interest rate environment increases this risk. Current reductions in bond counter-party capacity may contribute to decreased market liquidity and increased price volatility. Bond investments may be worth more or less than the original cost when redeemed. Diversification and asset allocation strategies do not assure profit or protect against loss.

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