Investors seek liquidity, asset growth, and a high degree of stability.

With my background in tax and estate matters, I have developed an expertise in several areas, including multi-generational wealth planning, tax issues related to investment planning, and the needs of the elderly. My practice is much broader than that, however, and I work with clients on all types of financial planning and investment needs. No matter how you want to define it, when you talk about retirement planning, estate planning, and life planning, that will cover a pretty broad group of people at some point in their lives!

Two old schools of thought are really not working well today: (1) within this interest rate environment, chasing “safe” yield is not an attractive proposition, and (2) the days of buy-and-hold pure mutual fund investing have really gone out the window with the drastic declines we have seen twice in the last fifteen years.

I frequently attend financial conferences and, frankly, you tend to meet the same type of people there—very nice and professional, but more or less all saying the same thing, focused on sales, and not bringing a lot of new investment thinking to the table.

Then I went to one specific conference and happened to sit at a table with—what I will politely call—some different types of people, who were obviously very intellectual and not salespeople at all. They talked about their models and algorithms, and a different approach to money management based on trend following and taking emotion out of investment decision-making.

Given my father’s engineering background and my quantitative orientation—I am a numbers geek—I could not wait to learn more. I was fascinated with the theory, software, and models behind this form of active money management.

I like to fully educate clients as to the theory behind active money management, without getting overly technical. It has been a successful process since just about all of the long-term growth assets of my clients are in managed money strategies.

I explain that this is a quantitative approach, not dependent upon a manager’s personal beliefs about the markets or economy. I like to say that this kind of software can crunch more numbers on more market factors in minutes than a room full of humans can do in a month. And this is not some high-frequency trading approach—the managed portfolios might trade, on average, somewhere between 10 and 30 times a year.

The algorithms can do any number of things, but to keep it simple for clients, I explain that the analysis is continuous, covers asset classes around the globe, and determines what the trends are for various asset classes, sectors, and sub-sectors. Then, it will determine the appropriate allocations based on what is happening in the market: strategies can shift weightings in sectors, move in and out of asset classes and sectors, go to cash or higher or lower overall exposure, and even use leveraged products or inverse strategies when trends are going south.

But the key point is what I was saying originally about liquidity, growth, and stability. These strategies use very liquid investments and have a high degree of risk management built in. And on the asset growth front, I like to provide clients with an analysis of how a managed strategy may have performed over the past 15 or 20 years versus a buy-and-hold S&P 500-type strategy. Of course, there are all the caveats on past performance, but clients understand that by trying to minimize the effect of big market down years, the overall approach should work far better for them over the long haul.

The key here is the client education. I have built my business on the ability to communicate effectively. That is a two-way street in terms of really trying to listen to clients, understanding their needs, and then in providing the solutions that are appropriate for their situation. I think active money management can play an important role for many clients, and I work hard to give clients the understanding to make their own informed investment decisions.