How advisors can really help investors

About a year ago I wrote a post about how the investment industry got it wrong when, in the years of double-digit returns, performance was the way in which we chose to measure and distinguish ourselves — rather than on the real value we provide — actually counseling clients.

Recently I came across an article — The Winners’ Game — written in 2011 by Charlie Ellis. It’s as relevant today as it was then.

Ellis, for those of you who might not be familiar with him, is an American investment consultant known

for his philosophy of passive investing. He’s also the author of dozens of other articles, 16 books, was twice appointed to the faculty of the Harvard Business School, was appointed to the faculty of Yale and also served as a successor trustee of Yale University.

Interestingly, in the article he also calls out the investment industry for placing too much emphasis on performance, only he’s more specific than I was, saying that “beating the market” is extremely difficult and isn’t sensible or realistic. Obviously performance is important, but it shouldn’t be the primary objective — instead advisors should concentrate on the most valuable part of what we do, which is investment counseling.

He goes on to discuss the three problems, or errors, he believes we have created for ourselves. I agree with him, and also with his conclusion — which is that the best way we can help our clients become successful investors is when we “use our skill, knowledge and time helping clients recognize market realities, understand themselves as investors, clarify their realistic objectives and then stay the course that’s best for each of them.”

You can read the article here, and I highly recommend it. It’s informative and he has some important things to say.

Alan Friedman is an Investment Advisor with CIBC Wood Gundy in Toronto. The views of Alan Friedman do not necessarily reflect those of CIBC World Markets Inc. CIBC Wood Gundy is a division of CIBC World Markets Inc. a subsidiary of CIBC and a Member of the Canadian Investor Protection Fund and Investment Industry Regulatory Organization of Canada. If you are currently a CIBC Wood Gundy client, please contact your Investment Advisor.

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