The benefits of exclusivity
There are plenty of fish in the sea, but not every one of them is a catch. We have been lucky to meet a select group of like-minded advisors who share the same values and goals, such as the importance of partnerships and a willingness to look wrong in the short term in order to be right over the long term. We felt like we found excellent matches and made mutual commitments, but we know that every relationship gets tested. The good times of the past can be overshadowed by recent events (especially if you're locked down and start looking for flaws). With the extra free time to window shop other seemingly attractive options, some started asking, "Is EdgePoint the one for me?"
There were some exotic choices promising you the (virtual) world. Friends might have met someone similar and told you about how great and exciting things were going. Or maybe you went after someone who felt safe and guaranteed to grow no matter how much those first dates cost. Temptation may have been too much to resist for some and they chased a new match that they thought would be a better fit. New romances can go hot and heavy early on, but there are going to be some ugly mornings after. Eventually you have to ask the question if they're in it for the same reasons you are. Chasing performance is like most first dates – you hope for the best, but expectations rarely meet reality.
Absence might make the heart grow fonder, but it also gives time to reflect. Those who left might look back at us wistfully for real partnership…and we can’t blame them. Our investing horizons might be long, but our time is too short to spend on people who don’t appreciate what we have to offer.
Knowing the value of what you have
Luckily, we’ve built relationships with a group of partners who have the same level of commitment. A select group of advisors have historically accounted for the majority of our business. The last couple of years allowed us to refocus our efforts on this group and those that shared our values to make this select company feel as special as we think they are. It’s our way of showing our appreciation for the advisors helping their clients build their wealth.
Why does this matter? Because we measure success with long-term investment performance, not asset growth. If we wanted to be all things to all people, we’d be a match for everyone. A pleasing long-term track record is one thing, however having clients that don’t capture our performance because of an ill-timed decision would keep us up at night.
The best advisors are the ones who can help their clients manage their expectations. Investors who think they can time the market often end up making decisions based on recent events. A fund does well? Buy it so you don’t miss out. A fund does poorly? Sell out of it so you don’t lose more money. The result is that investors often don’t get the results of the fund. Instead, they mute potential gains by buying high or solidify their losses by selling low. It’s why there can be such a big difference between a fund’s return and an investor’s personal return also known as a behaviour gap. Thanks to great advisors and their coaching, almost 40,000 investor accounts across Canada are participating in our 10-Year Partner Program which rewards them with a fee discount thanks to their long-term focus.i This is a distinguished group of investors who have achieved the most challenging feat in investing – taking a long-term view.
The last few years have been more difficult than anyone would have wanted, but we know that those tests are what make us stronger in the end. That itch will come, whether it's seven (or one, three, five or 10) years. We can't promise everything will be smooth sailing, but we can promise we will match our advisor partners’ commitment on the long road to Point B (every day of the year and not just Valentine’s Day).
If poems aren’t your thing and you’re looking for some romantic candle-lit reading material, you can check out our previous Valentine’s Day letters here and here.