What is an investment management consultant and how is Canterbury different?
Investment management consultants are generally associated with brokerage firms or are financial planners. They utilize several investment managers or mutual funds of varying styles in order to develop a portfolio for each of their clients. They have limited interaction and contact with these style-specific managers, and over time they switch managers to maintain an optimal blend of different styles.
The problems with such an approach are many:
- Few investment management consultants have ever acted as portfolio managers, so they're making recommendations in a discipline they've never practiced.
- They typically base their recommendations on past performance and correlation among the managers over too short a period of time. Unfortunately, today's best-performing style-specific managers are often the worst-performing managers in the future (because their specific styles go in and out of favor).
- They choose style-specific institutional money managers who tend to carry many stocks. The result: The client ends up with hundreds (and in the case of mutual funds, thousands) of individual stock positions. The managers do not communicate with each other, so the client gets cross-ownership (three different managers buying IBM for example) and uncoordinated changes in asset allocation and weighting.
- Because they own so many stocks, the managers' stock-picking ability is watered down. Their performance tends to be highly correlated with the style or index they use as a benchmark (such as large-cap growth, mid-cap value, contrarian, etc.).
- When a consultant changes an investment manager, it's usually due to underperformance—which normally results not from the manager's decision-making process but because his style has gone out of favor. Many times, by the time the manager is changed, his style comes back into favor.
- Buying and selling style-specific managers can be very expensive. Liquidating your entire portfolio and buying new securities from a new manager can lead to significant tax consequences and shifts in allocation.
- When you add all the transaction costs, the impact costs of trades in the market, the consultant's fee, and the manager's fee, you can see why it becomes difficult for the client to receive true value.
Tom Hardin, Canterbury's Chief Investment Officer, has more than 30 years of experience and one of the top designations in investment consulting from the firm that originated the concept. "I've been through all of this," he says. "I know many of the top investment management consultants, and only a handful have focused a great deal of energy and training in this area. They're very competent from a quantitative standpoint. In most cases, however, the stockbrokers or financial planners who offer such services have very little training and no meaningful credentials. With them, "˜managing the managers' has more to do with generating an additional fee than adding real value. Either way—whether you're talking about the best in the field or the least trained professionals—academic studies strongly question the value added by such approaches, based on their overdiversification, layers of fees, taxes, impact costs, soft dollars and commissions."
At Canterbury, there's no middleman and no unnecessary fees—only excellent service and clear communication. You work directly with Tom Hardin, who manages your portfolio based on your objectives and risk tolerance. He knows and cares about you, your financial goals and objectives, and how your assets affect your future life vision.
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