For Fairfield wealth adviser, a major change in investment strategy

FAIRFIELD — He’d been a wealth adviser for nearly 30 years, guiding people toward their financial goals, and connecting them with the brokers and businesses needed to create financial security. But by March 2009, Christopher Neubert was re-evaluating everything he knew about the markets.

The tech bubble had burst in the early 2000s, which had really troubled him. Now, the SP 500 had dropped 50 percent in just seven months, leaving Neubert and many of his 300 clients at Moneco Advisors “unbelievably gun-shy” about getting back into the market, he says. When stocks finally began their long and steady rebound, Neubert, whose firm oversees $250 million, found himself struggling with a thorny question.

“We had just gone through the worst experience many people had probably had since the Great Depression,” he says.

So he wondered: Was he accessing all the tools he needed to do the best job?

Two schools

For decades, the world of investing has been split into two schools: Those who practice “fundamental analysis,” poring over companies’ balance sheets, visiting their factories and getting to know their CEOs; and then there are those who say all of that information is already imbedded in the price of the asset.

The latter are called “technical analysts,” and they believe their methods take the emotion and bias out of investing. Their software is designed to pick up on positive or negative trends in the market — offering up-to-the-minute guidance on whether to buy, sell or hold a stock faster than others can calculate a price-to-earnings ratio.

There’s no shortage of criticism leveled against the latter camp, sometimes known as “chartists.”

In the most recent edition of his best-selling book, “A Random Walk Down Wall Street,” Princeton economist Burton Malkiel shares a five-sentence explanation of an investment decision from an enthusiastic chartist that includes clunking phrases like “reaccumulation is a bullish sign,” “fulcrum characteristics” and “continuation of the intermediate term downtrend.”

Weatherman `can do better’

“If you ask me what this means, I cannot tell you,” Malkiel quips, “but I think the technician probably had the following in mind: `If the market does not go up or go down, it will remain unchanged.’ Even the weather forecaster can do better than that.”

Others note that the method looks backwards, that it can’t foresee events that have never before taken place — like when Russia defaulted on its debt in 1998, cratering Greenwich-based hedge fund firm Long-Term Capital Management.

Then there’s the opinion of legendary investor Warren Buffett, who once said his family loves hamburgers, and would rejoice if their price dropped. If you really know an asset’s value, Buffet argued, then you won’t sell your stake in it simply because the price is dropping.

You’ll stock up on inexpensive burgers.

Southwestern Connecticut is filled with wealth advisers, and nearly all of them will tell you their primary job is work through your specific needs and build a portfolio that gets you there. Are you looking for rapid growth? For protecting what you already have? For building a framework that will leave certain amounts to your kids?

An adviser who comes up with a different answer to those questions can gain a marketing edge.

Saturated market

“Is it competitive around here? I would use the word `saturated,’ ” says Eric Johnson, director of business development at Rocco Associates Wealth Management in Fairfield.

How wealth advisers approach the fundamental-versus-technical question is one way they can set themselves apart — especially in the age of 24-hour business TV and easily accessible financial advice and data on the Internet. Neubert guesses that less than half of Fairfield County’s wealth advisers have decided to employ the methods of technical analysis. And most of those who do haven’t subscribed to the system completely.

One such wealth manager is Ron Weiner, of RDM Financial Group in Westport, which oversees about $670 million in clients’ assets. Weiner’s biggest holding is a mutual fund steeped in technical analysis, he says, but even he blends the two schools — with a primary focus on studying fundamentals.

“Human beings have an amazing predilection to buy high and sell low,” he says, citing a common argument for technical analysis. “But (technical analysis) doesn’t deserve to be half of a portfolio, no matter how well it’s done.”

Embracing the practice

For Neubert, the decision to explore technical analysis came in 2009. He spent two years reading up on the field and talking to experts before deciding to fully embrace the practice.

In 2011, he hired a Newtown company that helped him build software that fit his needs. The convincing step, he says, was running the program back through the financial crisis. The program told him to get out of the market before the worst of the ’08 bloodbath,’ and to get back in relatively early in the rally that started in April `09.

Ultimately, he launched his system earlier this year, getting a trademark for the name “Growth Protection Strategy,” or GPS.

Neubert likes to call technical analysis “just another arrow in his quiver.” He works hard with clients to find out what exactly they’re looking for, and still conducts the fundamental analysis before deciding if an asset should be used to populate someone’s portfolio. But now, he always puts his clients’ assets through the technical analysis system to determine if something should be bought, held onto or sold.

It can sound like a perfectly balanced marriage between the schools of thought, but it isn’t entirely.

Asked which arrow he’d reach for in his quiver if the Buffet family dream takes place, he’s quick to the draw.

“If the price of burgers is really going down, we’re going to sell,” he says. “When you live as an adviser through ’02, through `08, what you learn, which is critically important for an adviser, is that the pain of losing money is far, far worse than the joy or euphoria of making it.”;


Saturday, November 30th, 2013 EN

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