One City Built to Last

ing into the current situation
thinking that they have a high
degree of certainty, when the
fact is, they don’t,” Philbrick
added.
“Traditional portfolio management
techniques are based
on flawed assumptions and
behavioral traps that invalidate
widely used planning
tools, and the lessons from
Wade’s article highlight one
example of how this can put
retirement dreams in jeopardy,”
he concluded.
It is precisely this type of
research and hard evidence
tracking that, according to
Philbrick, is what sets his team
apart for clients, who range
from non-pensioned professionals
needing an income
stream to maintain an accustomed
lifestyle, to more
sophisticated wealthy
families looking for asymmetric
returns, as well as
small- to mid-sized endowment
funds. The firm
also works with advisors
who rely on their expertise.
Basing their assumptions
on evidence as opposed
to theory, as well
as systematic investment
programs and proprietary retirement
planning techniques adopted
from the pension industry,
Philbrick said, “We tell clients the
truth even if it’s hard to hear. I
think this allows clients to build
thoughtful plans based on solid
foundations. This is one of the
key advantages we have as both a
group and a firm.”
Gestalt Architecture is a process designed
by Philbrick’s team to avoid
behavioral traps that people fall into
when it comes to long-term financial
planning. The approach has four legs,
including a long-term investment
policy informed by true fiduciary
standards; a disciplined investment
process for delivering strong, stable
returns in most markets; use of advanced
retirement technology; and
providing strong customer service
that includes regular contact, transparency
and ongoing education.
“The key to achieving Gestalt success
is diversification,” Philbrick explained.
While there was a subtle
shift away from the traditional goal
of achieving returns higher than the
index after the 2008 Global Financial
Crisis, as the S&P has soared higher,
investors have re-embraced their traditional
performance chasing roots.
As strong returns have boosted confidence
in stocks, these same investors
have move to ever more concentrated
equity allocations. Apparently investors
have short memories about how
this story always ends.
Quoting Peter Bernstein, Philbrick
“Diversification is an explicit
recognition of our ignorance.’
We don’t know what’s going
to happen. You should own
a number of different assets.
Having many stocks, even
from different countries,
doesn’t diversify you,” he
added. “Having a portfolio
that includes stocks and real
estate, US Treasuries, gold,
commodities – that will get you
a lot closer.”
said,
Philbrick said that despite the market
volatility over the last 15 years,
he is surprised to see people are still
selecting managers based on recent
performance. He noted that selecting
managers on the basis of performance
over the past 3 to 5 years is “ a
near-perfect recipe for substantial longterm
under-performance,”
He suggested that active management
is almost entirely explained by
three factors: seeking value, seeking
momentum and lowering volatility.
“An advisor should be able to explain
how he or she is leveraging these factors.”
These are the realities that Philbrick
and his team seek to bring to their clients
when looking at long-term retirement.
He said the most important
concept in wealth management is that
risk is measured as the probability that
clients won’t meet their financial goals.
Investing should have the exclusive objective
of minimizing that risk.
“Most prospective clients that we
meet with don’t understand the sequence
of return risk,” he said. “The
five years right before retirement and
the five years after retirement – how
you do in that 10-year period is a
strong indicator of how you will do
over your entire retirement. It’s volatility
risk that threatens their portfolios,
and thus their long-term financial
outcomes. For many people,
it’s better to get 7% in a lower volatility
portfolio than 9% in a higher
volatility portfolio when you start to
make withdrawals.”
Philbrick added that this lack of
understanding can undermine clients’
long-term goals. Once you educate
investors on the types of issues
that they should focus on, it's
easier to help them recognize and
address those risks along the way.
“We take the management of risk
very, very seriously.”
1 Adelaide Street East
Suite 2100
Toronto, ON M5C 2V9
Telephone: 416.350.3388
www.dundeegoodmanprivatewealth.com
BUTLER | PHILBRICK | GORDILLO & ASSOCIATES
THE SUIT MAGAZINE p.55