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fundamentally improving the science of investing
The Markets Monthly Review

Investors celebrated a month in which several indexes posted their best January performance in three decades. A strong labor market, low inflation, and a more “patient” Federal Reserve Board all sent encouraging messages to investors who were hungry for good news after last December’s precipitous plunge. The Russell 2000 led the charge, closing the month more than 11% higher than its 2018 close, followed by a nearly 10% gain in the Nasdaq, while the S&P 500, Dow, and Global Dow all topped 7%.

By the close of trading on January 31, the price of crude oil (WTI) was $53.95 per barrel, up from the December 31 price of $45.81 per barrel. The national average retail regular gasoline price was $2.256 per gallon on January 28, down slightly from the December 31 selling price of $2.266 and $0.351 lower than a year ago. The price of gold rose by the end of January, reaching $1,325.70 by close of business on the 31st, up from $1,284.70 at the end of December.

did you know?

Trust is an advisor’s most valuable asset. A report by Vanguard found that “trust is the cornerstone” of the advisor-client relationship. To gain that trust, according to the report, advisors must be transparent, take an individual versus a cookie-cutter approach, and let clients know they are always acting in their best interest. Some important findings from the study include:

  • 53% of investors say that the emotional component is the most important aspect of building trust with their advisor
  • 94% of clients who highly trust their advisor are extremely likely or likely to refer them to a friend, family member or colleague
  • 83% of clients who have low or medium trust with an advisor are likely to switch their assets to another financial professional

Source: Investopedia, Vanguard

bright ideas
Transform Your Business
Why Advisors Should Move from an Advice-first to an Education-first Practice

The equity markets went haywire last year between December 14 and December 24. On Christmas Eve alone, the market dropped nearly 1,000 points, and we heard from one group of advisors who were having their holiday plans completely ruined because their clients were calling them and freaking out.

The cause of the pain? That group of advisors lives by an “advice-first” philosophy, an outdated model that thrives (and hopes to survive) on an emotional rollercoaster that often has clients smiling, but other times has them living in a panic over the state of their investments.

Emoji Rollercoaster

In this traditional model, success is judged by performance. The advisor and the client keep vigilant watch over an investment’s performance as its teeters from euphoric highs to depressing lows. At Beacon, we understand the risks of building an advice-first practice, and that’s why we guide our advisors to transform their practice by switching to an education-first model.

A Bond of Trust
In our experience, we’ve seen that most advisors, whether they are advice-first or education-first, use some type of diagnostic tool when working with clients. With that tool, the advisor gathers critical information, creates a financial plan, then presents that plan to the client. However, in many cases, the client never truly understands why they are getting this particular plan. They see projected returns, and they hear about growth over a lifetime of investing, but the advisor fails to fundamentally educate them on why these decisions are being made to their portfolio.

At Beacon, we work with an advisor who has an impressive client retention rate that he credits to the importance of educating his clients. When he walks his clients through their financial plan, he’s very clear on explaining the Rule of 72 and the power of losses to them. But then he does something unique, and something we recommend all advisors do—he has his clients teach those two concepts back to him! Helping the client become the teacher works on multiple levels:

  • It gives the client an understanding of how things work;
  • Through that understanding, the client gains confidence in their investments; and,
  • This education-first process helps grow a bond of trust between client and advisor.

The Tortoise and the Hare: A Tale of Two Portfolios
The accompanying example of the tortoise and the hare portfolios helps investors understand market volatility and how the average rate of return does not equate to the ending value of an investment. Here, both portfolios begin with $100,000. The tortoise portfolio has a 0% average return, and the hare has a 10% average return, yet the tortoise has a higher ending value. Why? Because losses are more powerful than gains! If you have a 50% gain followed by a 50% loss, you are not break even—you are down 25%!

At Beacon, we believe in the math of losses and the reality of returns, and to help clients understand these concepts, we encourage you to walk them through this chart to provide them with a visual illustration of how powerful losses can be to their portfolio. For more information on how you can teach your clients these simple concepts, contact your wholesaler today!

beacon news

On February 19, the mechanical buyback process was initiated for the Vantage 2.0 portfolios following the stop-loss trigger on December 17, 2018. Download our Stop-Loss Strategy one-pager to help explain the mechanical buying and selling process to your clients and prospects used to help eliminate emotional decision making and extreme volatility.


For Advisor Use Only, Not to Be Used With Clients

The GIPS Compliant Presentations for our Vantage portfolios can be obtained by clicking on the below link.  If you would like the Compliant Presentations to be emailed directly via PDF file or if you would like to receive a copy of Beacon’s Composite Descriptions; please respond to this email or contact Beacon at 937-439-9093.

BCM 2017 Compliant Presentations

Beacon Capital Management, Inc. is a registered investment adviser with the Securities and Exchange Commission. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Past performance is not indicative of future performance.

Additional information about Beacon Capital Management is also available on the SEC’s website at under CRD number 120641. Beacon Capital Management only transacts business in states where it is properly registered, notice filed, or excluded or exempted from registration or notice filing requirements.

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