What Financial Success Looks Like

I started looking after these folks more than 10 years ago (I have been helping families manage their wealth and risk since 2000), they came to me with a little under $500,000 in non-registered and registered investments. They were a working couple with 3 kids and RESP's. They had their company benefit life insurance plan, they owned their home (likely valued then at about $350,000 to $400,000) with a reasonable mortgage.

They were not aggressive investors (stewards of what wealth they currently had and wanted to grow), but wanted, as most do, to have a comfortable retirement and some tax efficient method of leaving their kids some of their estate.

We (my team at the time at an independent investment company) set up a Wealth Forecast that included a Whole Life Insurance plan for their estate goals and to offer some diversification away from their investment portfolio strategy. Their retirement goals could ultimately be funded by their investments.

A couple of years into our relationship, along came the financial crisis.

I don't have all the history from this early time in our relationship (because the bank that ultimately bought the investment company we were with, made the assumption that they were the bank's client as opposed to my clients and would not release their history and files to me when I moved our business away from the bank), but I would suggest that they probably saw the value of their investment portfolio slip by about 15% in 2008 and were able to get it back to even by somewhere into early 2010.

When we moved back to an independent investment company in 2012 (from that bank) we started their investing history (from scratch) all over again. We were able to keep their history when we began the High Rock Private Client division in 2015, which looks like what you see here (about a 5 year history):

After fees, the average annual rate of return has been 7.78% over the last 5 years (Return on Investment from the above chart uses the net of fees IRR method).

You can see that there has been some volatility (mid 2014), but for the most part, we have been able to keep the growth (in green) to a relatively smooth up-slope. This is because we manage risk first and foremost.

We have the 4 year return per unit of risk chart for this client (because we don't yet have the 5 year monthly benchmark comparison data yet), but generally, you can see that we have been able to maximize return, relative to the risk that we have taken in this 60% equity, 40% fixed income, globally balanced portfolio: 

Under the Actual HR PC heading in the top table (and circled in green) is the compound annual average 4 year return (absolute return), the risk factor derived from the volatility of the investments (not circled) and the return per unit of risk, which is the compound return divided by the risk factor (also circled in green). By comparison a benchmark of 30% SP/TSX index, 30% ACWI ETF (global equity benchmark) and 40% XBB ETF (Canadian bond index) (circled in red) has both a lower absolute return, a higher risk factor and ultimately a lower return per unit of risk.

So, that is how we manage risk to get that smooth upward sloping level of compounding growth (back to the green in the monthly equity growth graph) for our client in this specific case, but also for our clients in general. 

Most importantly, this is how it relates back to the Wealth Forecast and the growth of their investable assets (yellow, grey and orange) that they will have to fund their retirement goals. 

And of course, the life insurance (blue) will provide tax free transfer of wealth to their beneficiaries.

Sweet success, without taking on extra risk. Good on these folks!

There is an alternative to what the banks and big investment advice firms are offering and we at High Rock are offering low cost, more fiduciarily responsible, full-service wealth and portfolio management.

We would love to help you reach your goals too!