An example of our portfolio strategy for clients
Tuesday Oct 4 2016
The BOND or Fixed Income Allocation:

Take your investment account statement and look at that pie chart representing your current allocations, the portion allocated to BONDS/Fixed Income specifically. This allocation is allegedly the SAFE portion of the allocation, and although my firm uses bonds too, I hesitate calling them safe....

Prior to the 2008-09 economic crisis, bonds yielded (yield & safety are what bonds are all about) approximately 2% annually. Going into 2009 bond fund values went down about 16%, and since have yielded approximately 1.7% annually. The standard fee Advisors charge is 1.5% annually, although several trade publications are encouraging Financial Advisors, that due to the shortage of experienced Financial Advisors, fees could be going up to 2.0+% in the near future. Now if the BOND allocation portion of your total portfolio is yielding 1.7%, and the Advisor is charging 1.5%, you're only making .25% per YEAR on this portion! Is this really safe in the true context of the word "SAFE"? Remember that allocation also got hit 16% during the downturn. And yes, the bonds recovered quickly, but so did the equity market.

I also use a bond allocation, but in a strong market most of the allocation is in equities, and when the market hits highs, I take a block of the equity position and put into bonds, thus locking in that portions gains. If the market goes higher, I add more to the bond allocation. And when the market takes a 10% downturn, I take half of that bond allocation and buy back into equities. If the market goes down further, I will take more of the bond allocation into equities. This strategy turbo charges the account performance as the market comes back up, and lessens the account losses during downturns.

Keep in mind, no one can predict the TIMING of when the highs and lows will occur. When certain indicators start to flag, TRULY experienced analysts NOT salespeople, will implement changes based upon this information. If you're driving and a Deer jumps out in front of you, don't you try to avoid it if possible?

When I meet with prospective clients I see the poor performance of their accounts. In every instance I see accounts that were placed in an allocation at the start, maybe a feeble attempt at 'rebalancing' occurred, but for the most part, any management of the assets was tasked to mutual funds.

Steve J. Casull, CEO

Stupid Advice Financial and Investment Advisors act on
Tuesday Mar 22 2016

For the past 20 years as a Financial / Investment Advisor I have received advice on many different things, from FEE intensive portfolio analytics to building a strong Investment Firm. Some of it has been great advice from mentors with the utmost genuine integrity, and some has been from self proclaimed geniuses that have that sneaky “if its legal, its ok to do” attitude which is part of the “Stupid advice” category.

One of the biggest hurdles in owning an investment firm is separating your firm from the sleaziness associated with Wall Street and the investment industry. We have all seen the many instances that fuel this attitude. Those of us that pride ourselves in having a truly honorable firm have to fight this reputation daily. We can expound how honest and different we are, but this only adds to the skepticism.

Wisdom and common sense is key to conveying integrity.

When Financial/Investment Advisors change firms they usually have to go to the new firms training class. Most of this class pertains to SALES. Many sales tactics are presented. One in particular is “Dont sell against yourself”. If a prospective client walks into your office wanting a certain investment vehicle or strategy, dont risk the sale by suggesting something else. Sell the client what they want. This may be legal, but it doesnt make it right. Large sales production requirements for Financial Advisors can induce those Advisors to abide by this advice. We’ve all heard the addage, “The customer is always right”...well, not always. The truly good Financial Advisor isn’t afraid to lose the sale by giving the best advice. Sometimes advising that single Mother renting the seedy apartment to buy a home with the inheritance she just got, is the BEST advice, But as I was told, that advice doesnt help with my sales quota. Thus, another resignation.

I’ve been advised by various industry consultants wanting my business to have minimum account size requirements for new clients. Do smaller accounts really take that much time to manage? NO. For those of us that actually manage the accounts, rather than hand out mutual fund and annuity brochures, most of our analysis is valid for all account sizes, smaller accounts just have less to allocate in the model. And how do you know this small client won’t come into money in the future? Hey, if you’re a good Financial Advisor that gives more than just investments, maybe your input can help your client make a lot of money. And at the risk of sounding crazy to my former bosses, what about the good feeling it gives to just help people? I love that feeling.

Another example of stupid advice from the alleged experts is, “Discounting fees conveys you’re not confident in your services”. After over 20 years, I’m plenty confident in the services my firm provides, and my fees are half of the standard 1.5% per year. I met with an affluent person a few months ago that told me they don’t mind paying higher fees for excellent service. It was like they wanted to pay high fees in order to ‘feel’ like they were getting the best performance. This is the same psychology Large Wall Street firms use when they lease expensive offices with lavish entry ways and furnishings. Clients of these firms should realize that, not only are they paying for the opulence, but high fees are NOT an indicator of better performance or safety, and neither is expensive office space. Ironically, it shows how financially inept these firms are. How many of them were involved in the 2008 Financial crisis, and had to be bailed out? Stupidity

The average Investment Firm client changes Financial Advisors 3-4 times, costing them thousands of dollars before finding a good one for their situation. Take the time to interview as many as it takes from the start. Money saved is better than ANY investment return!

Steve J. Casull, CEO & Founder

Captain Kirk versus The ROBO Advisor
Tuesday Aug 25 2015
What would Captain Kirk of the Star Ship Enterprise have to say about algorithm managed asset allocation investment accounts, otherwise known as “ROBO Advisors, or ROBO’s?" If you watched much Star Trek, you would know that human emotion played a big part in how Kirk saved the day in many episodes. Human emotions also play a key role in the various markets. Let’s take a look at the facts.

ROBO advisors are non-human Internet Financial Advisors that utilize a computer algorithm to manage the assets held inside of client investment accounts for alleged low fees. The prospective client goes to the website of the ROBO Advisor and before opening an account, each client is required to fill out a brief,  benign questionnaire, most have 10 questions. The questions are designed to allegedly convey the client’s financial experience, goals, expectations, and risk tolerance. This useless questionnaire is basically an attempt by these ROBO Advisors to cover their butts in conforming to Regulation 2090 that mandates a Financial Advisor must know their clients financial situation, goals, etc. Can a computer "know" a person?

Being an independent Financial Advisor, one would expect me to have a gripe against the ROBO firms, And I sure do. It's not that I consider them to be competition, ANd I'm not the stereotypica middle aged guy that resists change. In my opinion, ROBO firms are selling a product to a clientele that is ignorant as to how the markets work, with the expectation of low fees and "comparable" performance. ROBO Advisory fees are as high as .75% assessed on the account balance per year. Our Fees are the same.

As I said before, the ROBO advisors are mathematical algorithm computers programmed to place the buy and sell orders of the holdings inside of the accounts based on the risk tolerance score of that aforementioned questionnaire. Let’s say that the market today showed signs that Europe’s market was going downward. The computer would make an adjustment, likely reducing the European holding inside of that account. But how much of the European holding should the computer sell? All of it? WAIT! What if the numbers change tomorrow, and the European market actually rebounds with strength because a new treaty with a tyrannical country has been forged? This revelation is an emotional one. A computer wouldn't know that this is a good thing by itself, computers don't understand what is good or bad, instead the program would wait for the new market prices, and make further adjustment, thus "reacting" to that which has already happened. If the European holding has all been sold, that part of the account will suffer greatly by not taking advantage of the rise to come that the GOOD "EMOTION" NEWS would likely cause. So basically the account gets hit twice. This scenario has revealed the two major gripes I have with ROBO advisors, Emotion irrelevence, and reactive, NOT proactive, management. As conveyed in many episodes of Star Trek, human emotion usually won out over computer logic. All market analysts know that the market runs on emotional ques. "Consumer confidence" is one of the most widely used indexes in determining market strength. "Confidence" is an emotion. Would a computer know to make adjustments to expect a huge market downturn if terrorists flew a jet into a building? No. The computer is only looking at the current prices to make decisions. The computer would only make adjustments AFTER the market dropped, and in this scenario, the market would drop considerably in a very short time. Isn’t that, “locking the barn door after the horses run out”?

"Target Date Funds" should be mentioned here, as well. There is a trend by many Financial Advisors to utilize investment products called "Target Date Funds". These are funds that are managed by computer algorithms, and have the same mechanics found in ROBO Advisor management. Naturally, I have the same reservations about them too. They are "marekting" them to inexperienced investors and Advisors that just want to "set it, and forget it". 

Do you want your investment/retirement accounts "SET and FORGOTTEN"?

Steve J. Casull, CEO & Founder

GOLD Mythology, If Gold keeps rising it may be worth a pair of Goats someday!
Monday Jul 6 2015
Whether it be a Goose that lays Golden Eggs, Golden magical harps, or Black Beard the Pirate's Treasure, Gold has been a popular symbol in mythology throughout time, But is this reason enough for such a high value being placed on it? There is a lot of jewelry around the world made out of Gold, but at $1200 an ounce, all of the jewelry in the world would only make up a fraction of that price. So what determines most of the value? Psychology…emotion. 

Gold is the safety favorite of about 90% of the Investment Advisors I interact with. They all devote a chunk of the typical allocation of client investment/retirement accounts to Gold as alleged safety. These people are well-known, well-educated advisors. We’ve all read the articles, and seen the television commercials telling of Gold hitting $10,000 or even $20,000 an ounce! It has been warned for years by well-known advisors!

Lets say Gold reached $20,000 an ounce. What would have to happen in our economy to warrant this price? Total collapse. I’m going to risk an out lash from Gold enthusiasts here, but frankly, I am sick of hearing only 'one side of the “equation” on Gold. Gold can never be valued at $20,000 an ounce based on the value of today's dollar, unless of course, the United States went back to the GOLD STANDARD, or some technological advancement used Gold for some miraculous device like Time Travel. I don't see any likelihood of a Gold breakthrough technology though.  If Gold went from the present $1200 an ounce to $20,000 an ounce, the economic forces causing that dramatic rise would have already taken their toll on the economy and more importantly society. Frankly, there would be no economy left. People would be bartering bullets, grain, and farm produce etc. The Mad Max movies would be a close facsimile. Facts are facts, people. Time travel yourself to a dark future where society and the economy has shattered to the point that made Gold rise to $20,000 an ounce in value. In this dark age wouldn't a breeding pair of Cows, Sheep, or Goats still be worth more than an ounce of Gold?

So why don't the experts tell us to invest in a herd of goats rather than Gold?

Steve Casull, CEO Casull Financial Advisory

No Surprise Ameriprise
Friday Jan 23 2015
According to an article written by Emily Flitter, Reuters, at least 3 times in the past two years, Ameriprise Financial Inc. asked issuers of private real estate investment funds to change the structure of their deals so it could sell more of the securities to their vast client lists, according to interviews with multiple sources with direct knowledge of Ameriprise's practices and a review of testimoney in an arbitration hearing involving Ameriprise. Private placements generate higher commissions than most other products, securities brokers/financial advisers at firms like Ameriprise sell. Private placements are not liquid, meaning they are not traded in the open stock market which make it nearly impossible to get out of the investment should it become desirous, especially if the investment's value is falling. We used to call this scenario, "Catching a falling piano".  According to several experts, myself included, The company to whom the investment is being made in, should base their offering size (money gained from the offering) on the money they need, NOT on how much money the investment firm selling the offering to their clients wants to make.

Steve J. Casull, CEO & Founder