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I read the following article this morning and while it supports what I have always said, Strategic Asset Allocation provides more return over the long run than Tactical Asset Allocation it dawned upon me that for many clients they probably don’t even know the difference between the two.

One of the things we make very clear in our business is that we provide the strategic direction for our clients and then we involve specialists to make the final tactical decisions, most practices do not work this way though as far as I have seen.

The article below even goes on to question if the advisers even know if they are adding value to the strategy by incorporating TAA.

It is a great article and about time someone else other than me started to question some of the practices planners use to generate income.

Remember if you want to know more about the Financial Planning business, Professional Investment Services then click the link and explore our site.

The article starts here……………

Advisers hungry for TAA amid GFC
Strategy provides little value-add: Zenith

By Victoria Papandrea
Mon 29 Jun 2009
The global financial crisis triggers a massive rise in the demand for tactical asset allocation services from financial advisers.

With many investors experiencing significant negative returns over the past 18 months, there has been a substantial increase in the demand for tactical asset allocation (TAA) services from financial advisers and their clients, according to Zenith Investment Partners.

While this is a common reaction to any bear market, very few practitioners consistently add value from TAA over the longer term because of the unpredictable nature of investment markets, Zenith national research provider David Wright said.

“Most practitioners of TAA actually detract value by making asset allocation adjustments away from strategic asset allocation weights over the longer term,” he said.

Some financial advisers believe they add value from TAA in the management of client portfolios, however the reality is most don’t actually know, Wright said.

“The reason for this is that many advisers don’t actually look back and measure the value their decisions have made against strategic asset allocation benchmarks. As the old adage goes, ‘you can’t assess what you don’t measure,’” he said.

“This issue is magnified by the fact that the clients generally, with all due respect, don’t know any better and so think the TAA advice being provided is part of what financial advisers do and is adding value to their portfolio.”

Most financial planning practices with a medium to large number of clients are not adequately resourced from an administration perspective to pursue TAA within clients’ portfolios, Wright said.

“Unless administration is highly efficient and transaction processing times are instantaneous, there is significant risk that client moneys will be out of the market on days where the market provides a strong return,” he said.

In the last week we have seen the reserve bank leave interest rates where they were which as you are probably aware did not go down well with me.

The banks have pretty well refused to lower interest rates and have announced significant profits in a time when the rest of the world is suffering from the actions that they took (i.e poor lending practices).

In my opinion as a borrower this is inappropriate however as an owner of their shares I am pleased.

I am working on new products for my Professional Investment Services (powered by Financial Gain) office and will hopefully be able to release these products in the near future.

Remember my focus is on developing strategies and systems that will allow our clients to have a prosperous retirement.

The first step in this process is completing a needs analysis questionnaire which is then analysed and used to create a strategy for you so that you can go out and implement this strategy using your chosen professionals, i.e mortgage broker, real estate agent, fund manager etc etc.

At the moment I am looking for 5 people who would like to help beta test my new questionnaire and have a strategy created for them.

If you would like to be a part of this process please contact me at either my Professional Investment Services office or via email.

betatest@nzpis.com

This article came across my desk earlier this week and I thought it was particularly interesting.
The discussion is a good one and highlights the very uncertain nature of the financial planning process. I hope you enjoy it as much as I did.
Professional Investment Services (powered by Financial Gain) can help you make sense of what when and how to do what needs to be done so that you can live the lifestyle you want in retirement.

Casting no stonesby Bob Veres |  Monday, 8 June 2009

I’ve been having the same discussion lately with a variety of advisers, and sometimes the conversation gets heated. So I’d like to lay out my position here for all to see, and maybe this will start a useful dialogue.

The discussion usually starts when I am approached by an adviser who jumped out of the market sometime before November, and in some cases before September of last year – and when I mean “jumped,” I mean took client equity positions down to 20% or less. These advisers are still sitting on losses, but they aren’t nearly as significant as what most of us are looking at in our retirement portfolios. And now, when I ask them how they’re doing, they immediately, sometimes eagerly, tell me that they paid attention to the economic signals and avoided most of the wreckage, and how (they ask me) can other advisers call themselves financial planners when they were too ignorant to see this train wreck coming?

This always starts the argument. On my side, I point out that a few others missed these obvious signals too – people like Hank Paulsen and Ben Bernanke and Warren Buffett and, oh, maybe a few hundred million others, and on their side they say that most financial planners are brainwashed zombies who would buy and hold even if we declared nuclear war on China, and that advisers, if they are REAL advisers, need to pay more attention to the economy and valuations and everything else so they can protect their clients.

Inevitably, I agree that, yes, more investment sophistication is needed. But I also ask them when the upturn will begin, and I have yet to get a consistent answer.

My sense is that there is some truth to what these people are saying. The financial planning community has been gliding on a kind of investment auto-pilot for way too long, and that planners of the future will either delegate their investment management activities, either through actively-managed mutual funds that have a broad mandate to shift their allocations if they think valuations are out of whack, or to some of these financial advisers who live and breathe market and economic statistics and who incorporate valuation measures into modern portfolio theory. (Is the market safer with a PE of 8 than it is when PEs are running into the 30s? If you answer ‘yes’ then you should probably be paying attention to these valuations and structuring client portfolios accordingly – though, frankly, I still have no idea what the precise recommendations should be.)

I also, however, think that this is not exactly a perfect time to be switching investment philosophies. Even if you are a convert to what these sage or lucky advises are now preaching, does that mean you should switch allocations to something more conservative now, when valuations are low?

I think there are four kinds of investors roaming the streets these days.

First, there are the investors who were lucky enough to work with an adviser who sidestepped this mess, and we will see if their advisers are skillful enough to get them back into the market when it gets bullish – and that probably means navigating around who knows how many sucker rallies before we hit the real thing.

Second, there are the clients of advisrs who maintained their investment allocations and rode the roller coaster all the way down, but who are going to stick it out and give their clients the benefit of riding it back up – and I have yet to talk to anybody who thinks the market will stay down forever, so we seem to agree that there will be a recovery that will eventually make everyone whole.

In third place in this race are the consumers who panicked last September or October and fled the market, and who are probably boasting to their friends that stocks are just too risky. They’ll watch a sucker’s rally go by and enjoy the subsequent downturn, feeling safe in their cash position. They’ll watch another one, and then they’ll smugly watch the bull roar upward until, somewhere near its peak, there is so much frenzy and excitement, and so much regret at how much upside they have already missed, that they’ll put their money in near the top and end up far worse off than they were before.

Finally, there are the clients of advisers who will lose their nerve, who gave their clients the full brunt of the downside in a buy-and-hold posture, and then will decided to give up and take an ultra-conservative position. They will lock in losses, and be caught by surprise by the sudden, unexpected bull run, either mistaking it for another sucker’s rally or simply not having cash in the market in time to catch most of the updraft. The clients of those advisers will have suffered most of all.

Like it or not – even if you now believe there are ways to evaluate the future returns of this or that asset class, even if you think you learned something from this bear market and that there is something to what these sophisticated advisers are saying about sidestepping the worst of the bear – you’re really trapped into offering your clients the second best of four alternatives. And, if those advisers casting stones fail to recognise the next bull, you may actually wind up with the best of the four.

I may be wrong, but I believe that the only sensible time to make dramatic changes in your investment philosophy is toward the end of a bull market, when high valuations are making you uncomfortable and your reading of the economic tea leaves leads to disturbing conclusions.

I think when that day comes, many of the advisers who are being castigated and dismissed by their peers will actually have a better solution than they did this time around.

Moreover, I agree with the successful sidesteppers that it will become accepted wisdom throughout the profession that correlation coefficients, mean variance calculations AND valuations need to be taken into consideration when assessing the opportunity set offered by the markets.

But that day isn’t here yet.

I readily congratulate the advisers who managed to sidestep the worst bear market since the 1930s, and I am happy for their clients.

But I’m not ready to throw the other advisers under the bus for sticking to their principles when the alternatives look like they do today. In my own portfolio, I have no idea when the next bull market will come, but I intend to ride it up from the very first moment it appears, and I know only one way to do that – grit my teeth, maybe wish I had been smarter, and hold on to the handlebars of the roller coaster to wherever it takes me next.

Bob Veres is Editor of Inside Information, and one of the most respected and influential financial services commentators in the US. In NZ, financialalert has exclusive access to and distribution rights for Inside Information. www.bobveres.com

© 2009 financialalert Limited.

So a week away in Australia surfing and enjoying the warmth has me fired up to get ready for the next trip over there in about a month.

I saw Michael Hill receive great honors at the world entrepreneur awards and it was interesting listening to him talk about what he would like to do next.

Our share market was off to a flying start this morning in the wake of rallies in stock markets around the world on improved global factory activity.

Our dollar powered to highs not seen for many months against major currencies, boosted with other commodity-related currencies because of a jump in oil prices and a rise in United States stocks.

The property market has received mixed commentary and in my opinion the worst is yet to come.

One of the biggest concerns I have with the current markets and the mixed talk that is about is the fact that people will forget or become “too scared” to invest for their retirement.

For many years I have been passionate about helping people create wealth for their retirement and it is times like now where you really need to stick to your plan. That is if you have a plan.

One of the scariest things facing our aging population is the fact that in a short space of time there will be more people who are eligible for government assistance than there are people working. Do you really think our tax system can continue to pay for these pensions? Think about it….we have a deficit now when we have more people working than are on pensions so how could the system work when this particular statistic changes. The only thing that can happen is that the government will either remove the pension system altogether or they will reduce the amount or they will increase the eligibility age.

Do you really want to be working when you are 75?

At Professional Investment Services (powered by Financial Gain) we make it easy for you to create wealth, save tax , reduce debt and minimise risk using the Lifestyle Builder program (c).

Drop in and check us out at the main site. It costs you nothing to look around and it costs you nothing to book a meeting with one of our Wealth Coaches. If we can not help you we will let you know. If we can help you we will also let you know how we can help and then we will put our recommendations in writing. You can then decide if you like what we are recommending and join our very happy group of clients or say no… that’s OK too, at least you will be making an informed decision.

Fisher & Paykel Appliances’ shares have been placed in a trading halt until Wednesday as the whiteware maker continues working on a rescue plan with its banks. This is a big one for us here in NZ and may come as a surprise to many who don’t really believe we are in a recession or even understand what that means.

The New Zealand dollar reached a seven-month high against the greenback, as the United States currency capitulated after heavy offshore selling. This is not so much about us doing well but the Americans struggling with getting their economy back on the straight and narrow.

Not learning from the global credit crisis Options dealers in Tokyo said hedge funds have been buying dollar call options as far out as seven years in recent weeks with strike levels above 120 or 130 yen. SEVEN YEARS.

So the wheel continues to turn very slowly, the  mistakes pre credit crunch seem to have been forgotten and people every where are still wondering how they are going to fund themselves in retirement.

The Lifestyle Builder (c) is my way of helping people reach retirement without having to change their lifestyle dramatically now and without having to compromise on their standard of living in retirement. You can get a free consultation with a Wealth Coach at Professional Investment Services (powered by Financial Gain) to see if the Lifestyle Builder (c) will work for you.

Visit us at Professional Investment Services (powered by Financial Gain) to find out more.

News today that the Bank of New Zealand is hoping to raise at least $150 million from New Zealand retail and wholesale investors, for general corporate purposes. It will be interesting to see what rate they go after and how quickly they fill the offering after the success of other raisings this year.

The ING Property Trust slid to an annual after-tax loss of $63.1 million, reversing the previous year’s $72 million profit, as the slowing economy hit property values. This illustrates just how deep the property crash has gone but it also makes me wonder why this loss is only just coming through to the news now, we are after all at least 18 months past the peak.

The New Zealand dollar peaked at its highest level against the greenback in nearly a week as the United States currency weakened on growing optimism the global recession is moderating. Amazingly our memories of 2008 are being eroded and the good news spin merchants are gradually making the financial world look like a wonderful place. I guess that depends on whether your just getting into the market or if you were in before the crash.

Professional Investment Services (powered by Financial Gain) is based in Emily place in Auckland CBD, you can contact us for a free consultation by visiting our main website NZPIS

Part of my daily routine with Professional Investment Services is to read the variety of news that is being produced in the various markets, lending, shares, property, managed funds , kiwi saver etc etc.

To give you an idea the snippet o news below is from the New Zealand Stock Exchange and is a great resource.

Enjoy.

May 19 – OPEN: The New Zealand dollar gained nearly a cent against the greenback overnight, on a healthy ongoing appetite for risk.

The New Zealand dollar rose to US59.53c at 8am, from US58.60c at 5pm yesterday.

BNZ Capital currency analyst Danica Hampton said Indian election results, Japanese consumer confidence and British housing statistics spurred gains for the NZ dollar on the coat-tails of firmer Australian and US currencies.

ANZ said just as the kiwi looked vulnerable, it was able to move higher on the back of Asian, European and US equities, and risk appetites were back with a vengeance.

In other currencies, the NZ dollar hit a fortnight low early today against the Australian dollar, and by 8am was trading at A77.63c, from A78.30c at 5pm.

The NZ dollar rose slightly to 0.4391 from 0.4360 against the euro, while trading at 57.36 yen, up from 55.55.

Against the pound, the dollar gained slightly to 38.79p, from 38.66p. The trade weighted index rose to 57.60 at 8am from 57.05 at 5pm.

In overseas markets, the US dollar rose against the yen after comments by a top official in Japan spurred speculation of intervention by authorities to curb further strength in the Japanese currency.

A rally in US stocks encouraged investors to take on riskier investments, reducing the safe-haven demand for the Japanese currency.

Longtime technical analyst Robert Prechter, who forecast the 1987 stock market crash, predicted this week that US equities may plunge to half their lows hit in March as a deflationary depression bites.

Now that is a mighty big call. What can one say about that other than get ready to buy buy buy the amazing bargains that will be around.

Hang on though. If the market crashes to half it’s low in March that means that many companies, and some of those will be large ones will actually no longer be around.

So what do you do? try and pick the stocks that will survive? How will you do that? As we have seen even some of the biggest companies in the world have collapsed in this credit crisis.

In my opinion if the above does happen I will be looking extremely hard at a portfolio that is made up of indexes. After all a major company can collapse but the underlying market is still there.

It’s not a sexy strategy but I bet you will appreciate the slow and steady approach in 5 or 10 years time when the market is in it’s next boom.

At Professional Investment Services (powered by Financial Gain) we prefer to take the long term approach and develop strategies that are not only appropriate to you but have been proven time and time again.

Finance Minister Bill English has told banks to lower their profits, after the four big Australian-owned lenders reported total profits in excess of $4.5 billion.

It always amazes me when the Banks make statements about how tough it is yet unlike many other businesses that are actually loseing money they are merely not making as much as before.

Now that would be ok in normal circumstances to not be happy about making as much money as before however we are in a recession, we are in a recession that was bought on by the practices that many of these banks adopted and yet they are not happy because they are not making as much money as they did in the good ole days, give me a break.

At Professional Investment Services powered by Financial Gain