My advisory firm, Equius Partners, has offered an “asset class investing” approach to long-term investors since 1993. We were fortunate to be among the first fee-based fiduciary advisors to be approved by Dimensional Fund Advisors to use their funds to build client portfolios.
Being an evidence-based advisory firm in the midst of an industry dominated by evidence-deniers, it was critical for us to present the science behind indexing and asset class investing to potential clients. The power of markets over the myth of active management superiority, the importance of very broad diversification to eliminate unsystematic risk, the wealth destroying evidence against high (and unjustified) expenses and market timing, and the wealth enhancing (and risk mitigating) power of asset class diversification all had to be discussed. Most of this was, and still is, hard to accept for many investors used to the Wall Street and mass media perspective.
So, explaining efficient market theory, three- and five-factor research, correlation coefficients, Sharpe ratios, and so on using 30-slide PowerPoint decks wasn’t super effective for most clients and prospects. We had to get more creative.
I was inspired by Gene Fama, Jr., the son of Nobel Prize-winning academic Eugene Fama, and the marketing team at Dimensional Fund Advisors to develop simple yet very powerful graphics to explain the reasons for our approach. This led me to reexamine Dimensional’s well-regarded Matrix Book in a different light.
The Apple iPad was released a year or two earlier and I decided to design an iPad app that would make the Matrix Book more interactive. At the same time, I decided to replace all the numbers with “heat mapping”: shades of green for positive returns and shades of red for negative returns. I also decided to reorient the matrix so that the diagonal (yearly returns) slowed upward (something all stock images should do, right? :))
I launched the iPad app free on Apple’s platform and printed special matrix posters for my firm to hang on our office wall. After seeing the reactions we were getting from clients and prospects (honestly, it was stunning to finally see “light bulbs” going on in their brains), I decided to mount light boxes for four of our posters on the wall. The illumination went from figurative to literal and the results were pretty amazing.
Soon after, I made some presentations to Dimensional advisors in the US, Europe, Australia, and New Zealand on the app and the “investing images” and after many requests decided to print and send posters to advisors who wanted them. It wasn’t a business. I was losing money after app development, printing, shipping, and so on.
So I decided to create InteractFA to formally provide these tools to advisors for a very modest annual subscription fee ($295).
Here’s my motive: I want to spread the word of the many valuable benefits of asset class investing to more investors and I believe enlightened advisors (particularly those working with Dimensional) are the best conduit for this. And, I want to stop losing money doing it. I’m a free-market capitalist, after all.
So, I encourage you to subscribe to this service and share this knowledge more effectively with your clients and prospects. I would also appreciate it if you would n0t share login credentials with colleagues. I’m actively working on improving the service. On the drawing board is a far less expensive option for client/prospect handouts because I think they’re the bread and butter tools (a blog on this to come). And I want to launch a discussion board (similar to my old indexfunds.com site, now owned by IFA) so that we can all exchange ideas, wins, etc. to improve our communication effectiveness.
Please stay tuned. Patience is rewarded.