How does that saying go? Something about how the more things change, the more they stay the same?

Within financial advisory practices, this sentiment rings abundantly true in the area of portfolio construction/management.

So much has changed in the past few years. For one, the pandemic altered how investors interact with their advisors. Potentially more importantly, due to the prolonged bull market and relative outperformance of passive strategies, advisors have increasingly focused their attention on generating alpha from tax and financial planning.

And yet, nothing has changed at all: this same up-up-up trajectory in stocks shields many advisors from having to face the critical decision on whether to outsource the investment function of their business.

The last time an asset manager told you about their buy/sell process, did the conversation sound a lot like what’s depicted in this pie chart?

It’s bewildering, considering building and maintaining an investment portfolio requires decisions about what to buy and sell. Yet, even elite institutional portfolio managers disproportionately focus on the first half of that equation.

It turns out that’s a quantifiably costly mistake.

A few weeks ago my family spent a week at the beach. There’s this arcade on the boardwalk. I’m sure you know the kind: Drop a $20 in the change machine, hope your 8 year old can keep the Skee-Ball in her own lane, and then trade your tickets for some plastic toy that inevitably will provoke several sibling squabbles until it snaps in half a few days later.

Good ol’ American family fun!

As we dropped quarters in the machines, I noticed something interesting about my daughter’s approach to choosing which game to play that I thought had parallels to investing. She raced from game to game, chasing the ones she thought would give her the most tickets per play. When we made it to the prize counter, surprisingly, she ended with fewer total tickets than my son, who mainly just knocked over clowns with an air gun.

Doesn’t it seem like Wall Street can monetize a movement like nobody else? Perhaps that’s what makes it so interesting when one of The Street’s own blows the whistle to question authenticity.

Perhaps you’ve heard this saying: “There are old pilots; and there are bold pilots; but there are no old, bold pilots.”

The same applies to investing because at the end of the day – for both pilots and investors – it’s about their respect and tolerance for risk.

Said another way, the key to longevity is survival.