3 years ago, I brought on a new client and asked them to help me with a little experiment. At the time, Robo-Advisors were all the rage and I wanted to see how they measured up to Professional Financial Advice (ie ME). If you are not familiar with the story, here are the posts for you to get caught up. (Set-up, Round1, Round 2, Round 3, Final Round, 2-year check-in)
TL;DR - Our client is a 28-year-old professional poker player who lives for risk. He went through Mr. Robot's risk assessment questions and they decided he was a balanced investor. I took him through our behaviour-based assessment and found he was (shocker) a growth investor. Based on that, we put together an aggressive portfolio for long-term growth.
In 2021, our robot friends got beat up a little. A large portion of their portfolio is in fixed income, which did not have a great 2021. Their year-end return was 3.94% as reported on their website. Their 3-year average return number, taking into account all fund changes, dividends, and purchase timing is 8.27%.
Mr. Poker's account, managed by real-life humans who have experience, years of continuous education, and, most importantly, empathy, had a great 2021. Our account closed out last year at 11%. The 3-year average return number is 10.43%. (For all of those concerned, here are the disclaimers that I am required to post after the mention of returns.)
This once again goes to show that:
- Not everyone fits into one of three molds
- Understanding you as a person, rather than a line in an algorithm, creates a two-way relationship
- Garbage in, garbage out. Without asking the right questions, you can't give the right answers
This is not a typical case so don't think that we can get returns like this for everyone. If, however, you want to compare your current portfolio to one that is engineered to your financial behaviour (like Mr. Poker's) contact our office. #ChallengeAccepted
Kenneth Coombs CFP CHS RRC
Ken has worked in the financial services industry since 2005, is a Registered Retirement Consultant, and is a Certified Financial Planner. Ken has written financial planning columns and has been a guest on financial radio and podcast programs.