Items from the Fall Meeting

I thought I would share with the group more about what was talked about during our meeting on Tuesday, September 18th and provide resources for further education.

The first area we spoke about was fundamental indexing. This seems to be a fairly new concept and Schwab is the first company to market to investors with mutual funds that use fundamental indexing. Rob Arnott and his company, Research Affiliates, created the methodology of the RAFI (Research Affiliates Fundamental Index).

On the Schwab website, they say the benefits of fundamental indexing are:

• Access to an indexing approach that can potentially help investors avoid overexposure to overvalued companies
• Reduced market risk through diversification
• Long-term growth potential by tracking the market

The group thought the concept was interesting, and some were looking into using it as a opportunity for their clients depending on the needs of the investor's situation.

There were a couple of items passed out during the meeting on this very topic, namely Efficient Indexing for an Inefficient Market by Research Affiliates (provided by Jared) and New Frontiers in Index Investing by Jason C. Hsu and Carmen Campollo (provided by Joe). A contrarian article is available here from the WSJ with John Bogle and Burton Malkiel entitled Turn on a Paradigm.

The next topic concerned fee/ low-load/ no-load insurance. This is drastically different from how insurance was structured in the past. The field has been commission-based and many independent fee-only advisors shied away from offering insurance because of this. A structure has been established to allow fee-only advisors to place insurance for their clients, all the while aligning the fiduciary responsibility of the registered investment advisor toward the client's best interests. There are several advisors who have created businesses out of being the insurance expert as part of the wealth management model for a client and set up the compensation to be fee-based as opposed to commission-based. An article that sparked an interest in discussing this topic was by one of the major proponent's of fee-only financial planning, Bob Veres. He writes columns and articles in various financial publications, and the one that caught my eye was New Life for Life Insurance in the September issue of Financial Planning magazine (click here for the article).

We as a group also discussed mentorship experiences within our firms and in our lives. The Cone of Learning by Edgar Dale (below) shows that we retain most of what we are exposed to by actually doing as opposed to reading or listening to a lecture.

(Click on Dale's Cone for larger view)

Mentorships are tremendously valuable because it is rare to find opportunities that allow you to learn more quickly, especially when you are in connection with someone who has "been there, done it". We agreed that we have had these experiences within each of our firms, but it was more of an informal structure and a learn-as-you-go model.

Toward the end of the meeting, we agreed it would be beneficial to have bi-monthly meetings as opposed to quarterly meetings. The participants thought it would be a better chance to develop relationships with other members.

Our next meeting will be scheduled for Mid-November. Details will follow within a month of the actual meeting (mid to late October).