From the September 2004 issue of Investment Advisor • Subscribe!

September 1, 2004

A Tough Sell

Your editor's note in the July 2004 issue, entitled "Location, Location," pointed to an issue that is so subtle, most don't even realize it's an issue. "Professionals" don't sell because they don't know what selling is. Selling, when done by a master, is "the asking of appropriate questions so that the prospect sees the solutions for themselves." If professionals want to educate their clients and find that a worthy goal, they must learn to be master salespeople. It's the extreme power of inquiry that allows another human being to discover solutions on their own--solutions that without the professional's questioning would remain hidden from view. Our clients won't learn much from our telling them things (Americans don't like to be told), but when we use the power of an appropriate question, we have the power to turn on floodlights of understanding. The issue I address is mirrored in Mark Tibergien's July column regarding the lack of CPAs' success in financial services. The root of this is CPAs' inability to truly sell. They have no knowledge of the powerful emotional questions to ask so that their prospects see a new opening for action. Marketing and sales create value for all when done by a true professional--and, like anything, get tainted when done by a hack.

True selling can be taught to anyone in 30 minutes--but they first need to overcome their narrow-minded position that "I don't sell."

Larry Klein

Walnut Creek, California

Cautious Optimizm

Let me see if I understand Mark Kritzman's case for optimizers ("Optimizing Optimizers," July Gluck Report). Regarding his approach to inputs, Kritzman says his approach is based on "theory and history." He goes on to explain his return predictions: "I estimate the returns of the individual asset classes. . . . Then I estimate a premium for the broad market. . . . I assume in all of this that the market is perfectly integrated, that everything is fairly priced, that equilibrium prevails." Geez, there's an awful lot of theory, history, estimating, and assuming going on here. Optimizers provide a framework for your starting point in building an asset allocation, but I wouldn't bet the farm on the accuracy of the results.

Alan Aiello

Evergreen Wealth Management

La Jolla, California

In Praise of Simplicity

Great job by Dan Wheeler in August describing an investment in the Wilshire 5000 Index ("Problem Solvers"). For the domestic equity portion of a diversified portfolio, this is it for many clients. There is elegance in its simplicity that clients will appreciate if trained--yes, trained--properly.

Andy Nardone

QB Capital Management

Livingston, New Jersey

. . . and One More Thing

Thanks for your August 2004 article, "Tightrope Act," about investing strategies appropriate for an environment of rising interest rates. You make some great points and show that there's more to investing than long-only, stock/bond/cash portfolios.

One investment strategy you didn't include was the one my firm follows: Municipal Bond Relative Value Arbitrage. Still, it's no surprise that you didn't include it: While Blue River is the oldest and biggest fund engaged solely in this strategy, we're only 40 months old and manage only $600 million. We offer 9.5% in current, consistent, distributed tax-free income, net of fees; AAA credit risk; no interest-rate risk; a negative 82% correlation to the 20-year Treasury bond; and a negative 6% correlation to the S&P 500.

Keith Pagan

Blue River Asset Management, LLC

Belvedere, California


In "Central Office" (August 2004), Scott Hanson was mistakenly quoted as saying that "the only time that [the asset management] fee can be deducted is if it amounts to at least 2% of the taxpayer's miscellaneous itemized deductions." In fact, such expenses can be deducted only to the extent they are exceed 2% of AGI.

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