Brinker Capital Crystal Strategies Suite Wins Advisory Solutions Product of the Year

BeamanNoreen Beaman, Chief Executive Officer, Brinker Capital

It is with great pleasure that I am able to announce that our Crystal Strategies Suite of absolute return portfolios has been awarded the Money Management Institute’s Advisory Solutions Product of the Year!

The Money Management Institute (MMI) is the national organization for the advisory solutions industry.  They represent portfolio manager firms and sponsors of investment consulting programs. MMI serves as the leading forum for the industry’s leaders to address common concerns, discuss industry issues, and ultimately, work together to better serve investors.

MMI Award WinnerAt Brinker Capital, our goal is to provide financial advisors with innovative products and solutions so that they can best serve their clients. With this award, I am proud to see that we are getting it right.

Please click here for the official press release

Reading The Fine Print – Part One

Jeff RauppJeff Raupp, CFA, Senior Investment Manager

While at a carnival a few months back, our ten-year-old daughter entered my wife into a “contest” to win a free ocean cruise, unbeknownst to us. A few weeks and many soliciting phone calls later, we realized we had an opportunity for a teaching point on reading the fine print. While the picture on the entry box for the contest certainly looked appealing, with a handsome couple sunbathing by clear, blue Caribbean waters, the reality was that “winning” the contest gave you one free cruise—while accompanied by another adult paying full price, meals and transportation to point of departure not included, other fees may apply. And, if that wasn’t the kicker enough, your entry meant that you agreed to be solicited by the sponsoring firm. Oh, and you had to sit through a presentation while on the cruise.

The lesson? Often when something seems too good to be true, it is. Before buying/entering/joining something, make sure that you know what you’re getting into. In other words, read the fine print!4.26.13_Raupp_FinePrint

This is advice I’ve found extremely valuable in the investment management industry when selecting investment managers. Things are not always what they seem, and by doing a little bit of digging, you can unearth some red flags that hopefully help you make a more educated decision, or at least ask the right questions. Disclosures, often ignored, are invaluable when analyzing the performance of a strategy you’re considering.

Here are a few situations I’ve run into:

  • Backtested Numbers
  • Seed Accounts
  • Merged Track Records

Look out for my second post next week as I go deeper into these scenarios!

Classic Indexes Are Hurting Retirees

Personal Benchmark InvestingEngrained in most retirees is that as the markets go, so do their savings—up markets are good, down markets are bad. It’s not that it’s inherently wrong to think that way, it’s just that there’s a better way of looking at your savings in action. Historical benchmarks do a disservice to investors at indicating how successful they can be in creating real purchasing power.

Chuck Widger, Executive Chairman of Brinker Capital, was brought on to, a leading financial news website, to discuss this new line of thought, and how the industry needs to redefine its value proposition.

Check it out here: Classic Indexes Are Hurting Retirees

*Please note that references to specific holdings in the video are for illustrative purposes only and not necessarily owned by Brinker Capital.

Japan: The Sun Also Rises?

QuintStuart P. Quint, CFA, Brinker Capital

This is part two of a two-part blog series. Click here to view part one.

What are the signposts?

Japan also might be recognizing its opportunity for major change out of years of frustration with both voters and the political establishment.  Current Prime Minister Shinzo Abe assumed office in December 2012 on a platform of promoting economic growth with the use of “three arrows”: monetary, fiscal, and structural economic reform.  So far, he has won positive reviews on the “first arrow”.   Naming a new head of the Bank of Japan with support from both ruling and opposition parties has resulted in an aggressive acceleration of quantitative easing in Japan.  The goal is to change price expectations from deflation to inflation, and thus improve prospects for savings, investment, and economic growth.  Major companies also gave employees small positive wage increases for the first time in many years.  Consumer sentiment and financial markets thus far have responded positively.

Monetary policy is not enough to solve Japan’s woes.  Structural reform must be tackled, though it will not be easy and could take more time.  On the political front, the government must undertake electoral reform in accordance with a ruling from the Supreme Court that could potentially rebalance voting power to younger, urban voters who benefit from more reform.  The question is whether leaders on both sides have the political will to implement a real reform.  If not, Prime Minister Abe could lose approval and momentum to reform.

shutterstock_17785696Additional structural reforms include trade, energy, tax, health care, and agriculture.  Agriculture is key not only to the economy, but also to national security.  As an example, the average age of the Japanese farmer is around the mid-sixties.  Very few large farms with economies of scale exist.  The acreage of farmland in Japan is also declining.  Japan is vulnerable to rising food prices, particularly if other countries restrict exports, such as what occurred several years ago when rice prices spiked.

Doodles: Subtle Reminders of Your Expertise

Sue BerginSue Bergin

Some advisors remember the days when personal assistants used to sit in client meetings to take notes or record minutes. The purpose was primarily for practice management. The advisor had a tangible artifact from the meeting to remind him or her of what transpired and all outstanding items that needed attention. Clients typically did not see the documents.

Since roles in advisory firms have evolved, that practice has gone by the wayside. The artifacts we have now are primarily the plans, process documents, and recommendations prepared in advance of the meeting.

A recent article by FastCompany entitled, Google Venture’s Secret Mantra for Super-Productive Meetings, suggested that a way to increase the value of meetings is to “always be capturing”.

The article encourages readers to “Write or sketch anything that is important.  …  That way you’re not only engaging your conceptual sense, but your spatial thinking, too.”

The take-away from this article for advisors is to create artifacts for clients during the meeting, not just pre-meeting. Capture dialogue, strategies and concepts that come up and give clients something to take away with them.

One way to do this is to give yourself permission to constructively doodle. With the increasing popularity of whiteboard style videos – like this one for the Absolute Return Mixer App that helps advisors navigate the complexities of determining just how much of each clients’ portfolio should be allocated to absolute return investments – doodling is getting its due.

Doodling is a natural reaction that is hammered out of most of us in grade school. Successful financial advisors, however, have found that a constructive doodle helps keep the tone of a meeting light while advancing clients’ understanding of complex concepts.

shutterstock_91178330 [Converted]So, feel free to doodle away, and generously give your artwork to clients as a meeting artifact. If you are uncomfortable handing over a napkin, just click a picture of the napkin with your mobile device and e-mail it to clients as part of your routine follow-up.

Whether or not your client keeps the napkin or digital replica isn’t the point. The point is to facilitate learning, demonstrate your value and remind clients of your expertise.

Japan: The Sun Also Rises?

QuintStuart P. Quint, CFA, Brinker Capital

This is part one of a two-part blog series.

2013 has started out with a bang for the S&P 500, which has outpaced virtually all major developed world markets.  Yet there is one major developed market that has kept pace: the Japanese Nikkei.  As of April 9, the Nikkei has risen +11% in U.S. Dollar terms.  Is the sun also rising in Japan, or are we seeing yet another false dawn?

Why does it matter?

Japan is the third largest economy in the world.  It has been mired in decades of stagnation: tepid economic growth, deflation, aging population, and high fiscal debt and deficits.  These challenges are compounded by a historically strong currency, which has pressured corporate profit margins, and a dysfunctional political system.  As an example, Japan has had seven prime ministers in the last seven years.  Yet in spite of its problems, Japan still retains some strengths, including world class companies and high wealth.  Additionally, the Japanese banking system held up well in the midst of the 2008 crisis.

Japan is the banker to the rest of the world.  If Japan suffers further problems, the rest of us eventually suffer.  For example, Japan is the second largest foreign holder of U.S. Treasury bonds.  Japanese companies continue to buy assets overseas.  If Japan were to curb its interest in foreign diversification, that could have negative ripple effects not just in Japan but even in our market and elsewhere.

JapanFinally, Japan poses a fascinating and relevant case study for the rest of the developed world.  How does a mature economy with an aging demographic and indebted economy solve its problems?  Or is it doomed to ultimate decay and/or default?  Japan has more experience than the U.S. and Europe in dealing with these problems.  For decades, Japan has experienced several decades of stagnation, a burst real estate bubble, and deflation.  Expectations have risen that Japan is making serious efforts to begin resolving these issues with the election of Prime Minister Shinzo Abe.  If progress is made, it could be a blueprint for how we in the U.S. might deal with our issues.  If Japan fails, it could mean that our issues will be difficult to resolve without a major economic shock.

Look for Part Two of this blog next week!

Do it in 30: Why Shorter Elevator Pitches Have Staying Power

Sue BerginSue Bergin

How long is your elevator pitch?  If you don’t have it down to 30 seconds, you may want to shut your door, turn off your phone, and whittle away until you can get there.

The elevator pitch is a high-level summary of your services, differentiators and value proposition.  It got its name because it should be delivered in the time it takes to ride an elevator, 30 seconds to two minutes.

shutterstock_54057646Recent studies of the brain suggest that you should think of it as an elevator ride to the fourth floor with no stops.  30 seconds tops.

We learn from Andrew Newberg, M.D. and Mark Robert Waldman, authors of Words Can Change Your Brain: 12 Conversation Strategies to Build Trust, Resolve Conflicts, and Increase Intimacy, that the brain can only hang on to about four to six chunks of information in a 20-30 second period.

Even if you make fantastic points throughout an engaging five-minute conversation, the prospect will only retain 30 seconds of information.  The brain processes every word as chunk of information.  Waldman uses a very simple statement to illustrate this point:

If I simply say, “I love this apple pie that you made,” we can hang onto that. There is “I” as one chunk, “love,” “apple” and “pie.” Each one of these forms a little picture in your mind, identifies the person, and when you’re saying “you made,” we already have 7 chunks of information.  That’s almost more than that person can grapple with. They have to think about the fact that you love the thing they made, what do you mean by love, your mind might be comparing apple pie to chocolate cake.[1]

When reviewing your elevator pitch, think not only about what you are saying, but how the prospect instinctively processes the information.  Brevity and simplicity help retention.

As a mentor once told me, “Be Brief.  Be Smart.  Be Gone.”

Make sure every word conveys something about you and the benefits enjoyed when working with you.

[1] Click here to read more of Waldman’s interview.

Ten Reasons Why You Should Not Rely on Year-End Statements for Tax Reporting Purposes

Sue BerginSue Bergin

Many investors are confused by discrepancies between year-end figures and those that appear on 1099 tax reporting documents from fund companies. Typically, these discoveries come to light around midnight when it is most difficult to get someone on the phone that can explain the discrepancies.

If you come upon a discrepancy, resist the temptation to jump to the conclusion that there is a problem. Instead, know that discrepancies sometimes happen, which is why experts advise against using year-end reports for tax reporting purposes.

10 Reasons Year-End Statements Should Not Be Used for Tax Reporting

  1. Fund companies explicitly caution against using the figures provided in year-end reports for tax reporting purposes. There is a reason that it has become industry standard to include such disclaimers. The industry is trying to prevent tax preparers from a commonly made mistake.
  2. The gross proceeds amount on the 1099 will rarely match the proceeds amounts show on a year-end statement’s realized gain/loss statement.
  3. Reclassifications often occur after year-end.
  4. RICs or spillover payments aren’t made until January of the next year, but have to be reported for the prior year. These occur with mutual funds, Real Estate Investment Trusts and Unit Investment Trusts that post distributions with record dates in October, November and/or December of the prior year, but make payment in January of the next year.
  5. Payments described as dividends on monthly statements, but paid on shares selected in the substitute payment lottery process are reported as miscellaneous income on Form 1099-MISC.
  6. Income payments on certain preferred securities must be reported as interest, even though they are often shown as payments and dividends on the monthly statement.
  7. Original issue discount (OID) accruals may be identified and processed after year-end.
  8. Reporting on short-term discount securities (like Treasury Bills).
  9. Shares received as part of an optional stock dividend offering are valued and reported as income on the 1099-DIV.
  10. Corporate reorganizations, recapitalization, mergers and spin-offs creating stock or cash distributions are considered taxable events reportable on Form 1099-B.

Your year-end statements provide valuable information, however for tax reporting purposes, your best bet is to use the information contained on your 1099s.

This information represents our understanding of federal income tax laws and regulations, but does not constitute legal or tax advice. Please consult your tax advisor, attorney or financial professional for personalized assistance.

Economic Headwinds and Tailwinds

Magnotta @AmyMagnotta, CFA, Brinker Capital

We continue to approach our macro view as a balance between headwinds and tailwinds. The scale tipped slightly in favor of tailwinds to start the year as we saw a slight pickup in the U.S. economy, some resolution on fiscal policy, and even more accommodative monetary policy globally. However, we continue to face global macro risks, especially in Europe, which could result in bouts of market volatility. The strong market move in the first quarter, combined with higher levels of sentiment, and a potentially disappointing earnings season, may leave us susceptible to a pull-back in the near term, but our longer-term view remains constructive. While the second quarter may bring weaker growth in the U.S., consensus is for economic activity to pick up in the second half of the year.

Accommodative monetary policy: The Fed continues with their Quantitative Easing Program and will keep short-term rates on hold until they see a sustained pickup in employment. The European Central Bank has also pledged support to defend the Euro and has committed to sovereign bond purchases of countries who apply for aid. Now the Bank of Japan is embracing an aggressive monetary easing program in an attempt to boost growth and inflation. The markets remain awash in liquidity.

U.S. companies remain in solid shape: U.S. companies have solid balance sheets that are flush with cash that could be put to work through M&A, capital expenditures or hiring, or returned to shareholders in the form of  dividends or share buybacks. While estimates are coming down, profits are still at high levels.

Housing market improvement: The housing market is showing signs of improvement. Home prices are  increasing, helped by tight supply. The S&P/Case-Shiller 20-City Home Price Index gained +8.1% for the 12-month period ending January 2013. Sales activity is picking up and affordability remains at high levels. An improvement in housing, typically a consumer’s largest asset, is a boost to confidence.

Equity Fund Flows Turn Positive:  After experiencing years of significant outflows, investors have begun to reallocate to equity mutual funds. Investors have added over $67 billion to equity funds so far in 2013 (ICI, as of  3/27/13), compared to outflows of $153 billion in 2012. Investors continue to add money to fixed income funds as
well ($70 billion so far this year).

European sovereign debt crisis and recession: The promise of bond purchases by the ECB has driven down borrowing costs for problem countries and bought policymakers time, but it cannot solve the underlying  problems in Europe. Austerity measures are serving only to weaken growth further and cause higher unemployment and social unrest. After how it dealt with Cyprus, there is again risk of policy error in Europe.  We are also closely watching the Italian elections in June after February’s elections were inconclusive.

U.S. policy uncertainty continues: After passing the fiscal cliff compromise to start the year, Washington passed a short-term extension of the debt ceiling and more recently agreed on a continuing resolution to avoid a government shutdown. The sequester, which was temporarily delayed as part of the fiscal cliff deal, went into effect on March 1. The automatic spending cuts have not yet been felt by most, but it will soon start to show  up in the second quarter and will shave an estimated 0.5% from GDP. In addition, the debt ceiling will need to be addressed again this summer.

Geopolitical Risks:
Recent events in North Korea are cause for concern.

This commentary is intended to provide opinions and analysis of the market and economy, but is not intended to provide personalized  investment advice. Statements referring to future actions or events, such as the future financial performance of certain asset classes, market segments, economic trends, or the market as a whole are based on the current expectations and projections about future events provided by various sources, including Brinker Capital’s Investment Management Group. These statements are not guarantees of future performance, and actual events may differ materially from those discussed. Diversification does not ensure a profit or protect against a loss in a declining market, including possible loss of principal. This commentary includes information obtained from third-party sources. Brinker Capital believes those sources to be accurate and reliable; however, we are not responsible for errors by third-party sources on which we reasonably rely.

What to Do With All Those Receipts?

Sue BerginSue Bergin

There are many little annoyances that an advisor must deal with as a cost of doing business. Tracking expenses is a prime example. Out of necessity, advisors have developed systems for tracking expenses that vary in sophistication. Ranking high on the list is the empty-the-pockets-on-the-assistant’s-desk-and-let-her-deal-with-it system and the stack-the-receipts-in-a-pile-for-a-slow-day-project approach.

While these systems are second nature, the beauty of living in the digital era is that annoying tasks have spawned clever digital solutions.

Such is the case with tracking business expenses. For those who have embraced mobile devices, the days of the crinkled and barely legible receipts can be gone forever. Shoeboxed, Lemon Wallet and ABUKAI Expenses are some of the apps available that make managing receipts painless and efficient. You can download these apps on your Apple, Blackberry or Android device(s), and then simply take photos of your receipts. The expenses are digitally categorized and stored, and in many cases, the data can be imported into a spreadsheet or an accounting program like Quickbooks. With Shoeboxed, you can mail in old receipts and they will make digital copies for you. You can even get multiple “seats” on an ABUKAI account, allowing staff members in your office to contribute to the expense report. Other expenses management software programs, like Expensify and Xpenser, also have mobile applications that result in efficiency gains.

shutterstock_111610157Neat Receipts takes a slightly different approach. They offer a mobile scanner and digital filing system that allows you to scan receipts, business cares and documents. The Neat Receipts software system then identifies, extracts and organizes key information. While these applications might help you to make your practice more efficient, they could also help clients who own businesses. Clients often look to their advisor for tips on how to gain more control over their financial world.

With tax deadlines rapidly approaching, the inefficiencies of traditional approaches are top of mind. Take this opportunity to suggest this small way to remove one of the little annoyances in their lives. You may find that they are quite receptive and appreciative of your efforts.