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Love & Investments
The month of February arrives, and thoughts of relationships, passion, and love are inevitable. My wife and daughter are the loves of my life, and as I think about other passions outside of my family, there are none greater than my career – investments – and relationships are investments. On the surface, one may be unable to see the correlation or similarities, but if you evaluate the key elements, you will find they overlap in many ways.

We have all heard the adage when dating that there are plenty of fish in the sea. The same can be applied with investments. What are you seeking? Sometimes we don’t know ourselves, which is why the advice of a “matchmaker” aka investment professional is vital. Are you willing to take a risk or do you want to play it safe? Do you want something attractive? Strong and stable? How about something fairly predictable or underappreciated? Once you’ve found your match, you now have to build trust to foster a strong relationship, particularly when focusing on the long-term.

The bedrock of any relationship is trust. The same premise should be applied to investments, because clients entrust their capital to investment professionals in the same way we entrust our hearts to loved ones. Many advisors study and work hard to perfect their craft, and while schooling and certifications do wonders in teaching practical application, it is a combination of real-life, on-the-job-experience combined with practical knowledge that allows us to make optimal decisions and build trust. As an investment manager, I have to trust my analysis and thesis, and remove bias and emotion from the decision-making process. But advisors are still human, and while removing emotion is easy in theory, it is often harder to practice, especially when the market is acting irrational and selling off for unexplainable reasons. Conviction to our process and trust in our analysis is necessary to avoid giving into emotions, overreacting and panic selling. Like personal relationships, cool heads prevail. Take a step back, relax, and ask yourself: what has changed?

Open and honest dialog should be a part of every healthy relationship, predominantly when picking an investment advisor and/or life partner. It is important to connect, not just verbally, but to ensure everyone’s needs and expectations are met. Communication also sets the tone for the future, whether that’s creating a source of conflict or building a foundation for a strong and happy relationship. Ask yourself a few key questions:

  • Does your advisor overpromise yet “under deliver” after you sign up?
  • Is your advisor only talking to you about the upside potential and not the downside risk?
  • Are you being offered products and services that may not be in your best interest?
  • Do you clearly understand what you have invested in and how you’re invested?

To build a strong relationship, it is paramount to ask questions and build a basic knowledge base.

Barring a structural or sustainable change, it is imperative to block out short-term noise, not to overreact and focus on the long-term. Do clients always agree with their advisors? Do I always agree with how the market reacts to news and information? Do I always agree with my wife (or her with me for that matter)? Absolutely not!

Do I agree with a key assumption in Modern Portfolio Theory that investors are rational? In the short-term no, but over the long-term I believe investors as a whole revert to the mean, and migrate closer to rational. How we react to information today may have long-lasting impacts we never foresee or imagine. Many studies show that overreacting to the short-term market volatility and sell-offs typically has negative long-term results, relative to sticking to your mandate and keeping your long-term goals in mind. We all desire a degree of certainty and want to feel secure with our investments and advisors. Sometimes we want to take a gamble, but in the end, we want the comfort of feeling that our commitment to this relationship is beneficial.

Learn from Mistakes
To become a better investor and better in relationships, it is crucial to learn from mistakes. Continuously doing the same thing over and over and expecting a different outcome by definition is insanity. I wish I could say as an investment professional that I never made a mistake, but frankly, that’s not the case. It is the past mistakes I have made that catapulted my career to where it is today and allow me to refine my process, approach and decision making. It is important when we invest that we trust the processes and stay committed to the long-term. Like trust, emotion can often get the best of us, wherein love, emotion is mandatory; in investments it can be your worst enemy. When identifying mistakes, own and learn from them. Figure out why the error was made and come up with an actionable solution to replace past behavior and mitigate risk, so that the future can be brighter. Experience helps surmount obstacles – seek the advice of an experienced professional when making any type of investment, and Happy Valentine’s Day to all the lovers out there.

About the Author
Chris Osmond, CFA®, CFP® is the Chief Investment Officer at Prime Capital Investment Advisors. Bringing 15 years of experience to his role, Chris has won numerous awards for his work in wealth management and financial services. Chris received his Bachelor of Science from the University of Arizona, and is a Certified Financial Planner, as well as a Chartered Financial Analyst.

About Prime Capital Investment Advisors
Prime Capital Investment Advisors provides a client-centric team approach to full-service financial planning, including fee-based asset management and wealth management through its Prime Capital Wealth Management brand. Through its Qualified Plan Advisors brand, the firm also provides retirement plan advisory services, as well as plan participant education. PCIA currently has 16 locations throughout the United States, with investment advisor representatives serving clients across the nation.

Advisory services offered through Prime Capital Investment Advisors, LLC. (“PCIA”), a Registered Investment Adviser. PCIA: 6201 College Blvd., 7th Floor, Overland Park, KS 66211. PCIA doing business as Qualified Plan Advisors (“QPA”) and Prime Capital Wealth Management (“PCWM”).

Chris Osmond
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