Nearly 1,000 advisors and other financial services professionals gathered in Las Vegas on April 16 to attend the 4th Annual Spring Financial Advisor Symposium. The conference was themed around two basic topics, the changing nature of investing in an increasingly global world and client acquisition.
The event opened on April 16 with three keynote speakers-Van Hoisington, president of Hoisington Investment Management Co.; Hannah Shaw Grove, principal of HS Grove Private Wealth Consultancy and editor of Private Wealth magazine; and Nick Murray, author of Simple Wealth, Inevitable Wealth and nine other books.

Hoisington opened the conference on a somewhat downbeat note with a presentation entitled "Hard Times," as he outlined his view that the U.S. economy would experience a prolonged slowdown for the next three years, with GDP rates vacillating between 1% and -1%. Hoisington justified his subdued outlook for the U.S. economy by citing the combination of the collapse in housing prices and the explosion in both household and mortgage debt.
Specifically, between the fourth quarter of 1999 and the fourth quarter of 2007, the ratio of total household and mortgage debt to disposable personal income climbed from 93.7% to 133.7%. Moreover, homeowners' equity, which represented more than 80% of total home values in the 1950s, just fell below 50% of total home values last year, while lender financing just topped 50%. When considering that only 34.6% of households have 100% equity, it reveals just how bleak things are for many folks with mortgages.

Central to Hoisington's thesis is his conviction that declining household wealth could reduce personal consumption expenditures by about 1.8% between 2008 and 2010. Whether he's right remains to be seen. But Hoisington, whose Wasatch-Hoisington US Treasury Fund has been a stellar performer, made a compelling case for his gloomy view.

He was immediately followed by Grove with a session on working with centers of influence and finding strategic partners. She told attendees that a strategic partner should be "treated like a top client." This means that when an advisor explores developing a strategic relationship with an attorney or accountant, he should gather information with serious detail.

"Do they have biases about your profession or products?" Grove noted that these were important issues to investigate. "If they have had a bad experience with SMAs [separately managed accounts], and you do mostly SMAs, my advice is to move on."
Strategic partners have to believe the value you add "is definitely valuable," she said. "You have to operate with integrity so they can trust you and know their clients can trust you."

It's important to remember that there is a high probability that, at some point, they've had a bad experience with another allied professional. But even more important, Grove said, is that "they want you to understand their role, to have your own technical expertise and to have respect for theirs." In conclusion, Grove said that establishing strategic alliances with allied professionals takes "a lot of work, but you only need three of these relationships, and no more than five."

Then came Nick Murray, who first turned his attention to the conference's theme, global investing. While noting that increased global diversification in an increasingly global world was sensible, he warned that "If you are seeking global diversification because you are extrapolating the last five years into the next few years," it's a dumb move. The "surest way to guarantee your clients will underperform is to extrapolate the last five years into the next five years-or any five years."

Murray went on to voice his contempt for performance-chasing of all stripes-and in all asset classes. "As they say in the commodity pits, the cure for high commodity prices is high commodity prices," he explained. "In the spring of 1973, the price of oil was $3 a barrel, which is roughly where it was in 1920." After climbing to about $41 a barrel in the spring of 1981, the price of oil fell nearly 90% in real terms and 75% in nominal terms over the next two decades. Murray also predicted that the world would figure ways to replace oil before it ever ran out of the commodity.

"Much of international outperformance [in recent years] is based on the dollar's fall," he said, adding many large-cap domestic companies derive more and more of their business from overseas each year. "Too many people are putting too much money overseas for the wrong reasons."

At a time when some segments of the advisory profession are becoming increasingly technical, Murray reminded attendees that most of the biggest mistakes investors make are "behavioral, and you won't solve it" intellectually. Noting that a psychologist, Daniel Kahneman, won a Nobel Prize in economics several years ago, he implied even the economics' profession was becoming increasingly aware of this.

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