There is something about food that creates a love close to everyone’s heart. It is not just the food alone, but the preparation of the food that makes it so special. At its most elemental level, the art of cooking is about chemistry. The chef develops the art form in which ordinary ingredients are combined to create an extraordinary dish, and experience, for those being served.
The management of money is very similar to the chef cooking in the kitchen. Stocks, bonds, and other asset classes are the ingredients used in portfolio construction. The way in which these asset classes react to one another and react to their environment is the chemistry of the business. Further, determining how this science mixes with the client’s goals, constraints, experiences, and personality creates an art form impossible to replicate with a machine.
There has been recent buzz about robo advisors and their impact on the investment advisory industry. From a very high level, these appear to be low cost, pre-packaged online investment options for the do-it-yourself investor. The frameworks to these offerings encompass the investment science with the necessary ingredients and mixes for portfolio construction. Ultimately, they have removed the cook from the kitchen.
History will provide the proof and confidence in these offerings based on their ability to retain assets during time tested market downturns. If they are able to accomplish this, they will be a fine competitor. Based on the history of the common investor, it seems unlikely. According to the DALBAR study of investor behavior, the common equity mutual fund investor over the past 20 years has underperformed the S&P 500 index by 4.2% per year.
Based on experience, it often takes the human element of an advisor to help the investor manage the fear and greed tendencies the market creates.
When it comes to money, it only takes one bad kitchen fire and an investor’s livelihood could forever be changed. With the unpredictability of the markets, the chef provides the peace of mind to reach financial success. It is our goal to create an extraordinary dish seasoned to your particular taste buds.
All comments and suggestions are welcome.
Tony Basalla