Harris Willner, our senior portfolio manager and firm founder, was interviewed for Advisors Magazine – the article can be viewed at Advisors Magazine or continue reading to view it on our website below.
Young investors often find themselves drawn to low cost lackluster index funds that track the market, often leading them to fail in ever getting ahead of it. These investors watch their portfolios grow slowly and steadily, but without the gains toward which a strong, value-added wealth manager could guide them.
Marrying the market simply does not work for investors who both are able to accept a higher risk profile and want to maximize their future returns.
“We recommend strongly at a young age that the client should not diversify into basically an alphabet soup of investments where all they are is a proxy for the market,” said Harris W. Willner, MBA, founder, chief executive officer, and senior portfolio manager at TTP Investments, Inc. “We’re not interested in simply marrying the market … I tell clients that if that’s what they want, they should simply put their money into an index fund and they can ride the waves, the highs and the lows.”
TTP Investments, Inc., based in California, offers boutique wealth management services to high net worth investors. The firm currently serves 250 investment clients and 450 tax clients, specializing in handling the complex tax and wealth planning issues faced by high-worth investors.
TTP Investments, Inc., takes an active role in developing clients’ financial plans. The goal, Willner told Advisors Magazine during a recent interview, is to demonstrate his value by striving to outperform the market – a feat wealth managers across the industry frequently fail to do, as described in articles lambasting the profession from major media outlets such as The Wall Street Journal. Notably, Warren Buffett also discouraged active investing in a 2016 newsletter.
Active vs. passive
The popularity of active management has declined in recent years, as major financial media outlets have routinely reported that more aggressive methods fall short when compared to cheaper index funds. A cursory read of The Economist and similar publications reveals frequent claims that active management is dead, does not deliver, or consumes the additional gains it generates in high advisor fees.
A Morningstar analysis earlier this year also noted that investors pulled $600 billion from actively managed funds and invested $1 trillion into passive options between 2015 and 2017.
Does that mean active management is actually dead? No, says Willner, who maintains that TTP Investments, Inc.’s, momentum-based strategies are designed to outperform the market and can yield added value to clients by doing so. Outpacing the market is hard, but TTP Investments, Inc. remains committed to doing just that, putting its investors ahead of the market-tracking indexes that, by definition, deliver average returns.
“That’s where we believe we stand out, we provide more than just transaction services. Our goal is to grow the clients’ portfolio,” Willner said. “We’re not just interested in today and tomorrow, but in next year and 10 years from now.”
Willner notes, however, that active management suits a certain type of investor, and finding the right fit between wealth management and prospective clients remains key to meeting financial goals.
“We don’t promise something that we can’t deliver. Clients are very comfortable and at ease with that approach,” he said.
Active management benefits not just young investors, but anyone with the right financial picture to take advantage of the increased returns with an understanding of the risks involved. Many prospective investors can feel overwhelmed by the market’s complexity, and often neglect financial decision-making as a result. It takes an experienced financial counselor to advise clients on their options, translate legalese into accessible language, and lend investors the confidence they need to make informed decisions. Willner often takes on the counseling role, during which he works with clients to take advantage of market highs or exploit financial downturns.
“I would say, if I look at our practice as a whole, that maybe 30 to 40 percent of the client-base is intimidated by the market; they don’t trust the system, if you will, they think it’s rigged,” Willner said. “They prefer to hand off that complexity to us. They appreciate our sincerity … If there’s something not so appealing to the client, at least I’ll be upfront with them. There’s nothing worse than having somebody tell you that the grass is always going to get greener when it’s not.”
Willner’s financial planning forms the core of TTP Investments, Inc.’s, working relationship with clients. Additionally, his personalized plans do not remain static and instead change with market fluctuations and varying economic conditions.
“We try to put together a financial plan that runs the gamut of someone in their 20s or 30s all the way up to what their retirement age will look like,” Willner said. “We build financial plans that are a working document. They become even more important to the client as they age into their 40s and 50s. The plan becomes even more meaningful at that point. They begin to appreciate the hands-on quarter-to-quarter comparison between their plan and how we’re performing so that we’re ensuring that they meet their objectives.”
And if the economy throws TTP Investments, Inc., a curveball, Willner is ready with alternative approaches to help insulate investors against market chaos.
Adopting a counselor mentality also helps Willner steer clients clear of making emotional decisions during market upheavals. The slew of financial headlines and sensational advice offered by telegenic money managers can drive investors to panic, prompting reckless, ill-advised investment decisions. Helping clients stay level-headed through market highs and lows is paramount to maintaining progress toward their individual financial futures.
“There’s a sense of calm or ease that they feel when they walk out of here, regardless of what the economy is doing at the time,” Willner said.
New approaches to financial security
Investors formerly concerned with retiring at 65 are now increasingly finding that impossible. Most clients face a retirement age in their early 70s, Willner said, adding that TTP Investments, Inc., has taken steps to meet the financial challenges posed by investor longevity.
Life insurance, annuity, and long-term care products often come laden with conditions, meaning many plans fail to fit investors’ specific needs. Instead, Willner developed an alternative to the traditional life or long-term care plan by purchasing clients a term life policy and investing the differential.
“We’re taking the differential that’s paid for the whole life policy and investing that in a brokerage account,” he said.
The goal of this approach is that after 25 years, the brokerage account amounts to potentially twice the face value of the whole life policy, Willner said. Taking this route could leave clients with a brokerage account that can be used to fund retirement or shoulder assisted living and long-term care needs as well as a cash resource for projects without a tax burden. The alternative arrangement also suits TTP Investments’ preference to avoid condition- and commission-heavy products that promise “guaranteed” results.
“There’s always a burden with every benefit, so if a product is said to be guaranteed then the return is going to be limited,” Willner said, adding that he believes TTP Investments’ alternative may be the “ideal solution for meeting clients’ needs, the generation that we have today who are living until 90 or 100.”
Performance trumps fees
Active management costs more than investing in a passive index. Still, the added costs can be outweighed by added values brought by the right manager , Willner said. Many large Wall Street firms trumpet their reduced fees and easy investments in indexes, but their marketing neglects to mention the lackluster end results, he added.
“A lot of firms will spend billions of dollars promoting that they’re the lowest cost house on Wall Street but they don’t reveal what their net performance is after the fee is withdrawn,” Willner said, adding that investors need to remind themselves of the bigger picture too. “Many people would rather retain control for poor results than give it up to get better ones. It’s not about control, it’s about your future.”
For more information see www.ttp-investments.com