The Investment Process
Risk-Adjusted...Not Risk Averse
At GCI Wealth Advisors we do not attempt to avoid risk. Without accepting some form of risk, there is no net return. However, most investors do not understand the degree of risk to which they are exposed - they simply focus on the return. Our primary focus is risk-adjusted returns. Specifically, it is our objective to provide an equity-like rate of return without exposing our client's assets to the same level of risk associated with a pure equity portfolio.
Financial markets are ever changing. We believe that markets are adaptive, and that investment strategies, therefore, go in and out of favor. We also believe that coincidentally risk/reward relationships change over time. Accordingly, we believe that effective investment management requires flexibility.
We acknowledge that you cannot know everything. A simple statement, but powerful as a fundamental tenet of our philosophy. In essence, as Warren Buffet is often credited as saying, we stay with what we know. While we engaged in individual security selection, we will utilize mutual funds and/or ETFs for exposure to industries, sectors and countries where our ability to conduct thorough research is limited.
We believe that markets have previously shown to be efficient in the long term. In the short term, however, we believe that pricing inefficiencies exist due to the fact that investors do not always act "rationally." We believe that investors tend to misgauge both the positive and negative news flow surrounding companies/industries resulting in exaggerated price movements. We believe that this uncertainty (or volatility) presents the opportunity to make money.
We believe that a sound investment philosophy is only the first step in the investment management process. The second step is to make certain assumptions about the economy and markets, and to derive logical conclusions that follow from these hypotheses. The third step is to make investment decisions based on these conclusions with conviction. The fourth, and final, step is to go back to our investment philosophy and recognize that we cannot know everything. Accordingly, this fourth step is the continual reevaluation of our postulates for validity and to determine what additional actions, if any, should be taken.
A fiduciary is someone who has undertaken to act for, and on behalf of, another in a particular matter of circumstances which give rise to a relationship of trust and confidence. A fiduciary duty is the highest standard of care at either equity or law. The word itself comes from the Latin fides, meaning faith, and fiducia, meaning trust.
GCI Financial Group, Inc. and our representatives embrace a fiduciary role for our clients.
What does this mean for our clients? While it is harder and harder to differentiate these days, there is a meaningful difference between a fiduciary and a financial advisor. Many in our industry call themselves Financial Advisors, Wealth Managers, Financial Planners or some other moniker that invokes a sense of prestige and experience. In reality, the vast majority of financial advisors ("brokers") are commissioned salespeople.
This is not to cast a dark cloud over the brokerage industry or its members, but the stark reality is that a stockbroker at a large wirehouse has a responsibility to the firm first and foremost. They are salespeople, and it is their job to sell. They are held to a "suitability" standard which means that they are supposed to reasonably believe that the products that they sell are appropriate (or suitable) for their respective client's/customer's particular situation.
At GCI Financial Group, Inc. our representatives must place the interests of our clients first. We must act solely in the best interest of our clients, even if that is in direct conflict with our own financial interest. This is not a marketing statement, but a legal requirement which we uphold with the firmest of ethical standards.
All Investing involves risk, including the potential for loss. No investment strategy can provide guaranteed returns, and past performance is no guarantee of future results. Please note that individual situations can vary. Therefore, the information presented here should only be relied upon when coordinated with individual professional advice.