Eleven years ago, advisor Doug Dahmer saw advice moving beyond pure investment management. He tells WP how he pulled off the move to a holistic model by establishing a winning partnership with Forstrong Global Asset Management
When Doug Dahmer started as a financial advisor 28 years ago, the industry was a very different place. Advisors were ‘money managers’ – stock pickers who justified their fees by selecting the best investments for their clients. Tax and estate planning and client service took a back seat to finding the right stocks. After 2008, though, Dahmer decided to take a different path.
In the wake of the financial crisis, Dahmer, the CEO and founder of Retirement Navigator, saw the advisor’s old role as a stock picker falling by the wayside. He decided to use his skills in tax and estate planning – aspects of the job he enjoyed more to begin with – to fill a unique niche, managing retirement incomes of a baby boomer generation that was shouldering the responsibility of the pensions their parents enjoyed.
In essence, Dahmer eschewed stock picking to become a holistic financial planner. What that involved, though, was outsourcing the investment management work that was once the core job of an advisor. After a year of searching, Dahmer chose to partner with Forstrong Global Asset Management, and he hasn’t looked back.
“I had picked Forstrong because they already had established a strong track record of being able to protect on the downside,” Dahmer says. “My clients are far more interested in protection of principal than they are in top-end performance, and Forstrong demonstrated that they had a very strong track record of doing that.”
Dahmer cites Forstrong’s performance in 2008, when markets were down 30%, and Forstrong was down only 5%. By 2009, when most advisors and managers were still trying to trade themselves out of a very deep hole, Forstrong was already above water. For a retirement income planner like Dahmer, that’s the kind of partner he needed.
However, Dahmer still needed to convince Forstrong that the partnership was worthwhile. At the time, Forstrong focused on high-net-worth clients and advisors with far more assets than Dahmer held in his book. Dahmer sat down with Forstrong founder Wilfred Hahn and explained the sort of work he was doing and that his clients needed pension-like discipline in their asset management. Hahn realized this wasn’t an investment group that would see money flowing in and out at random. There was a strategy, a timeframe and a baseline plan behind what Dahmer was doing. That was enough to cement the partnership.
For Dahmer’s client base of retirees, Forstrong developed a sleeved system to ensure cash flow. Dahmer used his strong relationships with clients to provide his partners with expected spending numbers, which could be built into each of the investment accounts and ensure that the clients’ spending needs would be met. Dahmer did what he did best: planning his clients’ retirement and maintaining his relationships with them. Forstrong likewise did what it does best: using smart tactical asset management solutions to deliver for advisors.
“This has been a symbiotic relationship, where they've been able to take the information that we provide them and do a better job of money management than we could,” Dahmer says. “Because they are discretionary money managers, we have eliminated much of the consumer misbehaviour on the investment side, because if anybody starts asking me if their money is being invested properly, I tell them that neither my nor their investment expertise comes anywhere close to the people who are making the decisions.”
Dahmer was ahead of the curve when he partnered with Forstrong. The post-2008 era of passive investing and robo-advisors has forever changed the role of the advisor. Now advisors need to find a unique planning niche and communicate their value to clients while outsourcing the money management to a firm like Forstrong.
When Dahmer transitioned investment management to Forstrong, he had to define what he was doing to his clients. He believes most Canadians fail to fully understand what their advisor actually does, so his repositioning was a chance to communicate his value to clients. After he talked them through how he works with Forstrong and the benefit they would get from his advice and Forstrong’s investment management, Dahmer’s clients were on board.
Today, Dahmer believes the stock-picking advisor is going the way of the dodo. The forces of change since 2008 have altered the industry so fundamentally that within the next half decade, he thinks the advisors who got into the industry to play stock picker won’t be around anymore.
“There's no way they can survive with what technology is doing and what ETFs have done in growing the industry beyond the stock picker,” he says. “I'm at complete peace with that. In fact, I was I was quite eager and ready to give it up.”
