GCM HELPING YOU FROM EVERY DIRECTION 
{My comments are between the lines of this recent article in bold. Before reading further, I suggest that you review the CAMS performance record for this same time period by returning to the Home Page and clicking on that tab. After that, you will get the full impact of what follows here.}
Hard-Hit Advisors Look for New Solutions
June 12, 2009
Many financial advisors are feeling extremely guilty for failing to protect their customers from the 30% equity drop in 2008, but it will take more than remorse to earn clients' forgiveness.
{Guilt and sorrow never has put a dime back into a mangled account. In this case, the guilt is "true guilt" because all advisors have the same tools available with which to manage assets. When they saw the trend change, they were not smart enough to assess the "why" and chose to stick with the antiquated "buy and hold" approach rather than switch to the strategy that made money.}
As stocks tumbled off a cliff in early October, advisers reassured worried investors to stay in the market and to invest for the long term, while reminding them that selling at the bottom meant locking in losses. They repeated this widely held mantra again in January, February and March as stocks continued to search for a new bottom.
{Like a bunch of neophites trapped in their losses and controlled by blindness and fear, they chose to "stay the course" and pray for a rally for vindication and recovery. Unbelievable.}
Even though the huge, unexpected market drop was not their fault, advisors feel they've let their customers down, and many are uncertain about how to move forward.
{Now that "guilt" is established, let's look at "fault." Fault for the actual market decline has been correctly imputed to negative national economics, exacerbated by greed and fraud at the highest corporate levels. That isn't the "fault" of advisors, but what about the decline in individual account values? That is always the fault of whoever controls the account. All of the tools of investment management are available to everyone without discrimination. But only the "discriminating" will use the right tools at the right time. That was the deadly advisor omission.
"A lot of advisors are questioning what they've been doing for the last 40 years," Misty Ford, director of business technology at Russell Investments, said at a session last week on financial advisors in transition, hosted by AccessData. "They are feeling guilty that they haven't kept their clients safe from risk.
{Even the insider commentators don't get it. It's impossible to keep market participants "safe from risk." Stepping out of the market and into cash positions would create "safety," but if advisors had been smart enough to even do that, the same reasoning should have led them into assorted "short" strategies that would have kept account values rising during the falling stock markets of 08 and into 09.
If you are going to be IN the markets, risk can only be managed, not avoided. Following the trend and managing the risk is the correct posture.}
This guilt has taken on many manifestations. Some advisors are too ashamed to call investors to explain what happened. Investors, in turn, are feeling rejected and ignored.
My clients: 
Most advisor clients:
Most advisors: 
"Eighty-two percent of investors say they are not satisfied with their advisors," Ford said. "They are questioning their advisor's every move, and now advisors are questioning their own moves."
{Advisors are questioning themselves because they have been seduced into thinking that one approach fits all investors and all market conditions. But now, without changing their approach to investing, they are seeing that it will take many years of positive market performance just to get back to 2007 account values.}
This cycle of loss, hurt and rejection has started a game of advisor musical chairs, with a large number of investors switching advisors and a corresponding number of advisors switching firms. The fact that nearly everyone got it wrong is not as important as eliminating the stigma of broken trust.
{Investors switching to other advisors who lost money (99%) isn't very smart, either. They'll get the same results, but under different "leadership." And advisors switching firms sucks as well. It's merely a shell game with moves designed to present the image of a "fresh start." As they follow the same investment philosophies, they will create similar results eventually. Remember the old saying about "insanity?" It's expressed by doing what you have always done but in a new vehicle at a faster speed. Moving the players around the board won't do a thing unless those players have a new and effective plan to manage what happens rather than follow a rigid path.
Eliminating the stigma still leaves the cancer to eat away at account values.}
"There is a dramatic amount of movement going on in this space," said Nicholas Stuller, president and CEO of financial information provider Discovery. Stuller said that from November 2008 to the end of April, 5,901 registered representatives left their companies, and nearly two-thirds of them (3,845) went to another wirehouse.
But simply creating new relationships just to put the trauma of the past behind them won't solve the industry's or investors' problems, particularly if they don't learn from their mistakes, Stuller said. Advisors and wholesalers will have to change the way they do business if they want to succeed in the post-recession aftermath.
{I agree, but they won't. They will ride the path of least resistance, which will continue to be doing business as usual with more vigor about the wisdom of the past. "Wholesalers" are mutual fund employees who "sugar up" to stock brokers and registered advisors to persuade them to sell the funds of their employer. The tricks of wholesalers have led to devastating recommendations by brokers and advisors who accepted their favors, from donuts every Friday to lavish incentive trips. And just who do you think pays for all of that? You do through higher mutual fund management fees allocated to "marketing costs." There are very good reasons why you are called a "retail investor."}
{Keep reading through the rest of this commentary and then concentrate on my closing remarks.)
Most asset managers are waiting for the financial storm to pass by anchoring in safe harbors, said Steven Miyao, CEO of kasina. They are cutting costs, holding off on long-term investment projects and fighting off bad press, he said.
"Once the storm has passed, they are hoping to go back into the same waters," Miyao said. "The storm will pass, but the water, winds and currents will be very different. Firms will have to build a new vessel to succeed."
For one thing, assets are not going to recover quickly. Even at an 18% annual rate of return, it would take stocks at least five years to return to 2007 levels, Miyao said.
{I agree with this, as well.
"Most firms are still on the same path as before," he said. "Profitability will stay low for a long time unless we change how we do business."
The large consolidations and mergers of giant companies such as Morgan Stanley Smith Barney, Bank of America Merrill Lynch and Wells Fargo Wachovia have resulted in a lot of double exposure, Miyao said. These super firms are interested in maximizing their own profits and will use centralized investment decision making to decide which products will stay on their platforms.
"There will be a huge overhaul of all product offerings, and a lot of firms will lose assets," he said.
Large distributors will be looking for a combination of small, boutique firms that provide high alpha, even while charging high fees, as well as global players that offer plain-vanilla, utility products at lower fees, Miyao said.
"Only large providers will have the scale to provide those services," he said.
When the dust finally settles from the financial fallout, the landscape will have changed so much that everyone will need to reassess the way they do things.
"In this environment, where the money's not flowing in, it's a huge problem," Stuller said.
Wholesalers and advisors have been trained to do things a certain way, but they will all have to be retrained, he said.
"It's all about execution," said Mary Anne Doggett, co-founder and managing partner of the New York-based sales consulting firm Interactive Communications. "If wholesaling doesn't find a new way to do execution, they're going to be left behind. Wholesalers will have to reprogram."
There is a general feeling that wholesalers should instinctively know how to adapt, and some of the really good ones already have, Doggett said, but the rest will need help. A lot of wholesalers are too concerned with making the sale of the day to look at the bigger picture.
"Wholesalers need to ask their customers, 'What is your business problem or issue?'" Doggett said. "In many cases, it's probably different than it was six months ago."
Large data providers continue to gather new intelligence, but all that data is useless unless it can be turned into relevant, actionable information, Ford said. One of the biggest challenges with having access to so much information is making sure the right people get the relevant data when they need it.
"What do people want to know?" she asked. "The whole business strategy has changed. Businesses are downsizing." A year ago, the emphasis was on breadth and growth, but now it's shifted to focus and retention strategies, she said.
"We need to help advisors have those hard conversations with clients," Ford said.
"Wholesalers need to have better conversations and more face-to-face meetings with clients," Doggett said. "They need to figure out what's changed and how they can continue to provide value. The handful of firms that really get it will take off like wildfire."
