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NOV 22, 2018

A portfolio is not a plan


For this month’s “Wealth with Wisdom” I draw once again on the insights of Josh Brown. I must confess that after decades in the financial planning business I feel most of the clients whom I have had the privilege of working with did not fully appreciate that positive behaviour “management” (my management of their behaviour!) was 80% of the value that I brought to the table. In retrospect, much of their long term financial success was grounded in a customized wealth plan that positively informed their behaviour. A virtuous cycle if there ever was one!

For more on this critical concept regarding the creation and maintenance of your wealth, I encourage you to read the below.


Portfolios are now free.

Trading stocks is now free. Robinhood took it there, amassing 4 million customers with absolutely no intention of making money. The venture backers and Snoop Dogg (true story) understood the value of building a user base first. And this morning JPMorgan followed. Why not? Equity trades have been a commodity for a decade. What’s changed is that now they’re a worthless commodity, a loss leader. Come for the free trades, stay while we get you to trade options, use margin or as we lend your shares to the short-sellers. In JPMorgan’s case, here’s a hundred free stock trades, and here’s a credit card offer every two weeks. Big deal.

Asset allocation is now free. Here are five ETFs, rebalance a few times a year and mumble something about tax-loss harvesting. Big deal.

Mutual funds are now free. Fidelity Free is the Boston-based giant’s answer to the Valley Forge, PA leviathan. Someone is coming out with the mutual fund that pays you, it’s gotta be right around the corner. Maybe an ETF that also washes your car. Or an index fund that adds an additional dividend payout to shareholders who give up enough personal information about themselves and agree to be marketed to. Who’s the most desperate for market share these days? Do it. Come on. Big deal.

The race to the bottom has concluded.

The war is over.

But your war is just beginning.

The difference between a portfolio that costs 1.5 percent and zero percent is negligible in the grand scheme of things if you have no idea how to act, implement, and react to varying conditions. If you can’t control yourself in the presence of news, data, opinion, regulatory changes and volatility – and know what’s important and what isn’t – then it really doesn’t matter how many basis points you’re paying for your portfolio, does it?

The data suggests that people are on their absolute worst behavior at the absolute worst moments. This cycle is inexorable. It is why markets function to begin with – people have to lose and the masses have to lose massively at major turning points. And they do. The dollar-weighted returns of even the best performing funds prove this every year. The free-ness of a portfolio thus becomes irrelevant, a triviality in the shadow of our colossal inability to act professionally.

Of what consequence are a handful of basis points when we can barely maintain an awareness of our elemental cognitive deficiencies?

When people obsess about the costs of a fund or of a particular investing strategy, I sometimes have to bite my tongue. Absent the context of a plan, it is a meaningless conversation.

Because the true cost – that of an aimless, lawless course of investment, replete with emotional leniency and non-descript, nebulous objectives – is probably going to bury them anyway. Everyone’s rational, calm and self-directed until the economy blows up and takes the investment markets down with it.

As Nick Murray writes in his fifth edition of Simple Wealth, Inevitable Wealth:

A portfolio is not, in and of itself, a plan. And a portfolio that isn’t in service to a plan is just a form of speculation; it can have no other goal than to beat most other people’s portfolios.

But “outperformance” isn’t a financial goal. An income you don’t outlive – to cite one critical example – is a financial goal. If your portfolio “outperforms” mine, such that I run out of money when I’m 76, and you don’t run out of money until you’re 82, it isn’t going to matter much when we’re both 85, sitting on a park bench without two nickels to rub together between us.

A plan involves a portfolio that is calibrated to deliver what the plan calls for as an acceptable outcome over time. It involves calculations and assumptions. It utilizes statistical fact and educated guesswork. It creates scenarios and populates them with probabilities. It involves decision making with trusted advisors – on taxes, inheritance, cash flows, debts, philanthropy, insurance, health care. A plan is not a product, it’s an ongoing service. It’s alive. It doesn’t just exist. It requires revision.

What it does do is demand rational, deliberate behavior on the part of the investor and his or her trusted advisor.

What it doesn’t do is fixate on basis points.

Focusing on the performance or cost of a portfolio relative to something other than a plan is like decorating a house that has no foundation.

Making poor decisions – even if at a low cost or even no cost – won’t do anyone any good.

Everything in the investment business is free now. Nothing has any value.

But a financial plan, well-executed and tenaciously adhered to…well that’s priceless.


Just to give you idea of how long this trend has been in force, a version of this post originally ran in 2014


A cynic is a man who knows the price of everything but the value of nothing
Oscar Wilde


OCT 31, 2018

The cost of litigation… try not to take it personally


Did you hear about the Ontario Superior Court case where three siblings spent close to $500,000 in litigation costs over their deceased father’s painting worth $30,000? If not please read on: Estate Trustees and Costs of Litigation: Try not to take it personally?

How do you make sure this sorry state of affairs never happens to your family? In a word … communication.


I have been involved in a number of family meetings when, in great detail, the adult children are shown how their parents estate will be divided up when they die. In this way any and all family issues can be discussed and resolved before they become, well, issues. From my over 30 years in managing wealth for high net worth Canadians this kind of family communication is critically important.

Have you had this conversation with your family?

These monthly blog posts are sent with my hope to provide context and content around “Wealth with Wisdom”.


SEP 25, 2018

There's no such thing as mosquito week


What would you guess if I asked you what is the longest running cable TV event in history? Congratulations if you answered “Shark Week” which first was televised way back in 1988. Not surprisingly many of us are scared of sharks. Even I, somewhat sheepishly, admit that the thought of becoming a tasty treat crosses my mind every time I dip my toes into salt water. Which of course is rather ridiculous when you think of the odds of actually dying from a shark attack (See chart below for details).


So what do sharks have to do with Wealth with Wisdom? Well, it would seem we humans are really quite terrible at calculating risk. In much the same way most of us massively overestimate the risk of us becoming an appetizer for Jaws. So it is when it comes to the stock market.

For more on this I encourage you to click thru to Ben Carlson’s excellent (and short!) post on the subject.


Headlines, in a way, are what mislead you because bad news is a headline, and gradual improvement is not
Bill Gates


JUN 27, 2018

Execution is (almost) everything


Derek Sivers is one of my favourite sources of wisdom because of his uncanny ability to communicate complex concepts in easy to understand words and numbers. So it is with his explanation that the importance of ideas is valuable only if they are coupled with proper execution. Although this is especially true for business or investment opportunities, I believe it is an excellent concept to have in mind when thoughtfully considering any idea.


It’s so funny when I hear people being so protective of ideas. People who want me to sign an NDA (non-disclosure agreement) to tell me the simplest idea.

To me, ideas are worth nothing unless executed. They are just a multiplier. Execution is worth millions.



To make a business, you need to multiply the two.

The most brilliant idea, with no execution, is worth $20.

The most brilliant idea takes great execution to be worth $20,000,000.

That’s why I don’t want to hear people’s ideas.

I’m not interested until I see their execution.


If more information was the answer, we would all be billionaires with perfect abs!
Derek Sivers


APR 24, 2018

10 things investors can expect in 2018


Admittedly, referencing the title of this post and the date of this missive, perhaps I am writing a bit later in the year then I should. Then again, the title could refer to any year, or any month, when it comes to your portfolio.  Hopefully, you will agree when you click through to read Ben Carlson’s excellent article.


My personal number 11 for “Things Investors Can Expect in 2018” … count on the majority of the financial media to promote hysteria when it comes to the stock market!

These monthly blog posts are sent with my hope to provide context and content around “Wealth with Wisdom”.


MAR 7, 2018

The wealth of sapiens


What is wealth?

For each of us it can mean many different things.

I came across this thoughtful blog in which the author suggests that the true definition of wealth is when you have, ” … the option to buy what you truly need”.


What is wealth? For many of us it is the ability to move our (or a) child from the left frame of this picture to the right.

The author concludes, and I believe most of us reading this would agree, that the benchmark for wealth is simply, “… my family and I are alive, safe, and fed. The rest is luxury.”



The most important money we spend is not the Lambo (the car) money. It’s avoiding-misery money.
Daniel P. Egan


FEB 13, 2018

The return of normal


Welcome to the “new normal” in regard to volatility (to the downside) when it comes to the stock market. Coincidentally, it bears a striking resemblance to the “old normal”. The steady increase in markets around the world, with no significant corrections over the last couple of years, is most definitely not how stock markets usually work. Welcome to reality where late last week the S&P 500 was off  from its highs by approximately 10%. Frankly, I have no idea (nor does anybody else!) if this correction will run its course quickly or will turn into a longer drawn out bear market.

Everything you need to know about market “crashes” on one easy to read recipe card.


Strongly encourage you to click through to James Osborne’s excellent blog which puts these crazy, but very normal, markets into context:

Frankly, My Dear


In bear markets, stocks return to their rightful owners.
J. P. Morgan


JAN 25, 2018

Why 2017 was the best year in human history?


It has been my tradition with these monthly missives to begin every year with a brief commentary on how our world is making tremendous progress on just about any metric you care to focus on. Unfortunately, it does seem many of us truly believe the planet is quite literally going to hell in a hand basket!

This perspective is understandable, given that we are continually bombarded 24/7 with news reports and article such as this one from The Globe and Mail with the cheery title “Expect more war, hunger and extremism in 2018”.

Edwards Deming once wrote, “In God we trust, all others bring data”. An intelligent, data driven friend of mine forwarded me this remarkably positive (and rare) article from the New York Times, the subject line being “Every Year It’s The Same Damn Story!”. What he was pointing out was the fact that our media overwhelmingly highlights the “bad” while at the same time de-emphasizing the “good”.


Please click on the graph for a bigger image.

If you lived 200 years ago there would have been an over 90% chance that you would have been born into poverty. Today, the worldwide poverty rate is less than 10%.

May I suggest, as we begin 2018, to appreciate and be thankful for how much better the world and our lives are compared to 25 years ago (1993), 50 years ago (1968), 100 years ago (1918) and most certainly 200 years ago (1818).


The more perspective you have, the better everything looks. And the less… the worse!
Nick Murray

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