A Long Term Investment Philosophy Works

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Here is a great article on Investment from QV Investors that will offer insight into why long-term philosophy works.

Take Some Time: For many, the Labour Day long weekend marks the final days of summer before kids head back to school. For some parents, it is a sentimental time to watch children grow and enter their next level of study. While time can sometimes seem to pass at a snail’s pace, it sure seems to fly in hindsight. As long-term investors, time is a tremendous asset that allows for a number of benefits.

Compounding: The power of compounding is arguably the most powerful concept in investing. Investment returns that are repeatedly reinvested will ultimately take on an exponential rate of growth. For example, a $100 investment that earns a 6.0% return for thirty years can compound into $574 if the returns are reinvested. This is more than twice what a similar investment would earn if returns were not reinvested. Similarly, a management team that can consistently reinvest surplus cash flow into profitable projects can also compound shareholder wealth. It works, but it requires patience.

Smoothing: Market volatility can be frustrating to follow on a daily basis. Headlines are meant to elicit emotion and at times compel us to act when we shouldn’t. Don’t get us wrong, we are not downplaying the important ramifications of certain events. However, more often than not, swings in short-term sentiment turn into market noise over the long run. In effect, volatility is smoothed over time. For example, take a hypothetical 10-year Government of Canada bond issued on December 31st, 2013 at a 2.8% yield. We estimate that 60% of the total return achieved in the 3.7 years to August 2017 would be attributable to interest income alone. That’s more than double the contribution of interest in the first year. For bonds held to maturity, any price changes over its term are simply noise.

Similarly, price volatility in equity investing can seem daunting over short periods, but is dampened over a longer time horizon. According to JP Morgan Asset Management, the average 1-year return dispersion of the S&P 500 was 86% (-39% to 47%) from 1950 to June 2017. Using a 20-year rolling average over the same time period, the annual total return range smooths out to a much more tolerable 10% (7% to 17%).

Revelation: We have discussed how time can grow an investment and smooth volatility. As long-term investors, we also have to pay close attention to valuations as markets move in cycles rather than in a straight line. In our previous bond example, the starting yield (annual rate of interest earned) was an important source of return over the bond’s life. With valuations in both the stock and bond markets at above-average levels, we are reluctant to deploy clients’ capital into investments that may pose more downside risk than upside opportunity. Higher valuations are typically associated with a lower return profile going forward. We must be aware of the environment we are investing in to avoid the pitfalls that could jeopardize capital. This has ultimately led to a defensive asset mix across balanced strategies.

With a higher cash weight and defensive bond portfolio, balanced strategies are prepared to deploy capital during more opportune times. If we can maintain enough patience and discipline, we will be able to take advantage of opportunities as they develop. We recognize that it may be early in holding this defensive posture. In investing, we have found it is better to be cautious early rather than late. We use time as an ally, knowing the many benefits it provides.

Keys to a successful family business succession

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Below is a lecture excerpt from EDex Family Enterprise Succession Program by Wendy Sage-Hayword and David Bental, The Family Business Consulting Group

A number of years ago, Kennesaw State University looked at succession planning across the United States. In fact, they did a research project that encompassed 18,000 family enterprises.  The question they wanted to explore was whether having a written succession plan would assist families to be successful in continuity. In other words, if they wrote down their plan, would they be more successful in navigating the turbulent waters of succession? They were astonished to find out that there was absolutely no correlation between a successful succession and having a written succession plan. This so troubled them that they had to re-examine the results to see if there was anything they could learn from the experience. Happily, they learned that there were three things that did correlate with successful family business succession.

  • They learned having a formalized strategic planning process would help.
  • They learned that having a board of directors with outside independent members would help.
  • They learned having regular family meetings would also be of help.

Why would having regular family meetings be helpful? Regular family meetings provides a forum for discussion, so that family members can communicate, develop an understanding, and also deal with the concerns and problems they have before they become unmanageable.

Why would having a board of directors with outside independent members be helpful? One is to help bridge the gap between the two generations, and secondly, to ensure that good decisions are made based on rational decision making rather than family emotion.

If you have independent business people around the table, they can assist the family to focus on the business matters and not let their personalities or emotions run away.

The third, the idea of having a formalized strategic planning process, is important not only to get the family members on the same page, but also to get the board and management are pulling in the same direction. It also lets members of the next generation know how they can fit in. If the company's planning to grow by expanding into a new market, the members of the next generation might be interested in leading that initiative.

These are the three things that research show. If you have a family enterprise, and you want to be successful in moving across generations, you want to be thinking about having a board of directors with outside independent members, you want to be thinking about having regular family meetings, and you want to be thinking about investing in a formalized strategic planning process.

Do I really need an exit strategy for my business?

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A few years ago I co-founded a company. I’m putting all my energies into expanding the business and we are doing well so far. People tell me I should already have an exit strategy in mind, but is it really necessary, given I have no immediate plans to sell?


Every owner needs an exit strategy. Eventually you will leave your business. When you do, you will want the most money for your company that you can get. It’s really that simple.

Some entrepreneurs build to sell as soon as the value reaches their threshold to sell, some build to accommodate family succession, others to accommodate their lifestyle needs and maybe you will have an opportunity to go public.

An exit opportunity might present itself unexpectedly. You should be ready for that.

Whatever the reason and however it happens, you should always run your company to maximize its value.

Here are a few key areas that you should pay attention to as you operate and expand the business to ensure that you maximize the value when you exit:

Team strength

The ability of an organization to continue to expand profitably is critically important to a buyer. In most cases, the continuity of key management will influence the price positively. With that in mind you need to consider the expected tenure and capability of key people on your team. If you want to exit and leave new owners with a strong CEO, you might focus on acquiring such a person so that your departure does not interfere with the operation. If family succession is important, you should start grooming successors early. Take inventory of their strengths and weaknesses and get to work building their leadership capabilities. The same is true with all key personnel. The stronger they are, the more assured potential new owners will be.

Capital investment

Investing in current manufacturing technologies, software and possibly real estate can make your company more attractive to potential purchasers. When valuing your company, the amount of investment that they will have to put in these areas can influence the purchase price.

Operating capital such as machinery or software that is current can help ensure that the company is competitive in the marketplace as well as minimizing necessary investments for a new owner.

Building a customer base

Reliance on a single or small number of customers can reduce the value of your company unless they are strategic for the buyer. Generally, a buyer wants to see a diversity of customers in your company. For them, it reduces the risk of ongoing operation of the company.

Ensuring that you are not reliant on a few customers is a good business practice. Try to diversify your customer base as much as possible while ensuring that you are growing with profitable customers.

It is impressive to see that customers are good quality, meaning that they pay on time with a minimum of disputes and are profitable to deal with.

It is a reflection on how well your company is managed.

Life after your exit

There is nothing worse than having nothing to do, especially if you have no plan. Many people say that they just want to kick back and relax, enjoy their new wealth, etc. This is rarely what happens, especially with entrepreneurs. You really need to think about hobbies, investing or philanthropic initiatives or maybe another startup or purchase of a company that you feel you can expand.

Whatever the activity might be, it is important to do something.

Having a vision of where you want to end up with your company will ensure that it stays healthy and profitable until it is time for you to move to your next venture.

Brian Brennan is a senior partner at MAX Potential, an organization committed to assisting clients with the successful growth of their businesses. He coaches small- and medium-sized business owners in all aspects of their expanding companies. He is also a chair at TEC Canada.

Nearly half of all Canadians will develop cancer in their lifetime. Let us help ease the financial burden should it happen to you – Critical Illness Insurance – so you don’t have to worry about money when you are focused on recovering!

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Business Succession

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Succession is enviable,  a business owner can either plan for or it will plan for them. In a recent study, only 40% of business owners were found to have a transition plan in place. This is quite remarkable considering the vast amount of business owners are baby boomers, and are getting to that stage in life that won’t be able to keep the pace that owning a business requires. Further, one who plans for their transition will have not only an easier time in the next phase of life, they will have planned to meet their personal goals, as well as hopefully a legacy transition in keeping the business (that they worked so hard for) going if that’s the strategy they chose.

In our seminar, The Enterprise Transition Plan – A Strategic Approach to Successful Business Exits – we discuss a three-part process of planning for transition: Situation Assessment, Review and Selection, and Plan and Implementation. The information provided is based on best practices worldwide in transitioning a very important asset and achieving a successful business transition. It isn’t easy, and does require a lot of work, but it is strategic as starting or growing the business in the first place..

Call Vern today to learn more about the 3-stage transition plan.

We recommend the following article: High Net Worth by National Post.

Active vs. Passive Investing

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There is a lot of talk about which investment strategy is better in achieving your goals. We believe in active management, and have supporting studies to show it will outperform passive investing over the long run. Why is this?  It is based on two major premises:

    1. The first is the active manager can’t be closeting the index, meaning their stock selection is merely following along with the index, as active managers will have higher fees than their passive counterparts, (well not always), fees have to reasonable – fees that are too high will rob the investor of performance gain.
    2.  Secondly, to be invested with a passive strategy and to be effective is that one needs to use the lowest cost account vehicle as by definition one is always going to under-perform the index, since passive management is merely a stock portfolio that tracks an index less a fee. This means that one either uses a self directed account with a small trading fee or a robo advisor which will pick an index for you, however most investors are emotional and will generally do the wrong thing at the wrong time, (buy high and sell low), an advisor’s hardest work is during these times; if the investor stays with a properly structured program they will achieve their goals in the long run.

This is not to say passive investments don’t have their place, a portfolio manager will use them where warranted i.e.: foreign income strategy, or a particular market index strategy but the investment choice will fit with the investors overall asset mix and risk tolerance.

Here is a great article for you  on the topic.

Fischer Financial Services Implements a New Online Insurance Application Process

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Fischer Financial Services is pleased to announce its implementation of a new 3-step seamless online process that takes just 90 minutes from needs analysis to the submission of application.

Step 1: Needs analysis is performed with professional licensed insurance advisor using an online guide on our tablet computer. This includes reviewing of all clients’ needs: life, disability, critical illness insurance for both adults and children.

Step 2: The application is filled out online instantly.

Step 3: Signatures are gathered: utilizing pen technology with the tablet and/or electronic signature with email verification. (If the clients are in good health, under 40 and applying for less than $1M of Life Insurance, or up to $500,000 of Critical Illness Insurance. In some cases the approval can be obtained within a few minutes of the applications being submitted online.)

And that’s it!

The whole process is about 90 minutes long and can be done in the first meeting.

Fischer Financial Services team works hard to build a lifelong relationship with all clients so this isn’t a one-time transaction. We are here to look after all of our clients’ financial needs, including their family members and/or their businesses if applicable.

This is a VERY personal story about the importance of health and protecting yourself with insurance.

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