January 2019 Edition

In search for Alpha – Why having an advisor is your best bet for better performance

Alpha – Larry Swedroe, the famed author and financial advisor, called it the “Holy Grail of investing.” The relentless pursuit of Alpha, those magical gains over and above the markets returns, has been proven as perilous and futile a quest for investors as the pursuit of the Grail was to many Arthurian legends characters.
With the broader adoption of index – or evidence-based – investing, the cornerstone of PWL’s investment philosophy, is the quest for Alpha all but over? What then can cater to the thrill of the hunt for investors; this intrinsic need to do better and try to get more out of every dollar invested?

Vanguard, the behemoth that now manages more than $5 trillion in assets, reframed the concept of Alpha in a 2015 research paper, refining the definition further and further since then. The real Alpha, they posit, is the advisor Alpha, meaning that the real observable performance gains stem from the trust relationship one establishes with a qualified advisor. Their analysis identifies 3 dimensions where advisors can bring extra value: Portfolio construction, Wealth Management and Behavioural Coaching. They go so far as quantifying the actual value of advice to “about 3%” of returns.

That number represents the sum of all the benefits a great advisor can bring, through cost-effective portfolio construction and the efficient management of wealth through rebalancing, withdrawal and contribution strategies and tax efficiencies. The value of these two prongs, while significant, are easily surpassed by the benefits provided by what’s at the heart of the actual relationship with your advisor: the behavioural guidance that your trusted advisor will provide. Investor behaviour, in bad times, but also in good times is disproportionately responsible for the overall outcome of any investment strategy. Behaviour detrimental to performance often find their roots in biases that we all share. For example, the bias for action common to most investors, will uncite us to buy or sell when market movements occur, often hurting our long-time prospects through increased transaction fees, and tax inefficiencies. The role of the advisor, as the name implies is to offer perspective and act as a trusted sounding board when life’s many forks in the road come into view.

Staying the course – or not – does not require blind faith. To the contrary, working with an advisor demonstrates the discipline that is required to analyze, course-correct if necessary and seize opportunities where they really are to be found.

Believing in “Passive Investing” only means using the real levers of wealth management, not the tall tales of treasure hunters. Focusing on what you can actually control, in life and in wealth, offers the clearest path to achieve peace of mind.

While we can all appreciate a great story, our PWL advisors are there to make sure yours contains the words “happily ever after”.

Thank you for the confidence and trust you place in us. We wish everyone a healthy and happy 2019.


Brenda Bartlett
CEO, President & Member of the Board

Anthony S. Layton
Portfolio Manager & Chairman of the Board

James Parkyn
Portfolio Manager & Vice-Chairman of the Board

Cameron Passmore
Portfolio Manager &  Member of the Board


Download the Perspective Newsletter

+ January 2019 Edition