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Time and time again, research shows us that the average investor under per forms the market. Psychological factors account for as much as 50% of this chronic investment return shortfall for average investors. It has been found that the average investor incorrectly guesses their timing of purchases one/third of the time. Finally, we find that the average investor rarely remains invested for a sufficiently long enough period to derive the benefits of the investment market.

Therefore we conclude that in most cases, finding an investment professional that you feel comfortable with is generally a wise move for the average investor.

External References:
“Why The Average Investor’s Investment Return Is So Low”

“Dalbar has been analyzing investor returns for over 20 years and indeed found greatly diminished returns – with the root causes being a much more complex set of factors.  For the 30 years ended December 31, 2015, the S&P 500 index produced an annual return of 10.35%, while the average equity mutual fund investor earned only 3.66%” https://globenewswire.com/news-release/2016/04/26/832952/0/en/Better-Investment-Recommendations-equals-Greater-Returns-DALBAR-Annual-Report-of-Investor-Returns-Says-Not-So.html

  1. Chart Below Source = Dalbar

Compensation – Fee Based vs. Commission Based

Fee Based advisors are legally bound to an ongoing fiduciary standard to offer completely independent, un-biased investment advice.  Oppositely, commission based advisors are not bound to same fiduciary standard.  We believe investment professionals who are compensated with commissions find it difficult to place client’s best interest’s first.  As such we believe retail investors are best-served in a fee-based arrangement.Cyr Financial References:

“Fee Based Relationship”
 “5 Topics to Discuss with your Investment Professional”

External References:
“The Labor Department’s fiduciary rule is aimed at stopping the $17 billion a year the government claims investors waste in exorbitant fees. The idea is that the regulation will stop advisers from putting their own interests in earning high commissions and fees over clients’ interests in obtaining the best investments at the lowest prices.” http://www.investmentnews.com/article/20160509/FEATURE/160509939/the-dol-fiduciary-rule-will-forever-change-financial-advice-and-the

“Commission vs. fee: How to pick a financial adviser right for you”

“What is the difference between fee-based advisors and commission-based advisors?”

“Is Your Financial Advisor a Fiduciary” – U.S. News and World Report”

True Independence – Registered Investment Advisor

All fee-based advisors charge their fees through a “Registered investment Advisor” (RIA).  RIA’s are entities, not individuals.  Most fee-based advisors do not have their own RIA and therefore must affiliate themselves with a large, national broker dealer RIA.  In the past, we used to work for these large broker-dealer RIA firms and in our experience, the situation was less than ideal for the client.  We found these large national RIA firms were an un-necessary middle man in the investment process, offering nothing except additional fees while stripping us of our independence. Today, Cyr Financial Inc. is proud to be a completely independent Registered Investment Advisor.

The following information (1) demonstrates this extra layer of costs and (2) gives you specific instructions on how to verify if an advisor is independent or working with a broker dealer.

Research performed by Daniel Bergstresser and Peter Tufano of the Harvard Business School and John Chalmers of the University of Oregon Business School finds the following in regards to mutual fund investing through brokers…

  • “Brokers fail to have substantial benefit”
  • “Funds sold by brokers underperform those sold through the direct channel, even though calculated on a pre-distribution-fee basis… underperformance varies from 0.23% to 2.55%.”
  • “We find no evidence that, in aggregate, brokers provide superior asset allocation advice that helps their investors time the market.”
  • “Brokers may also be compensated with indirect distribution fees… where mutual fund companies pay part of their management fee to brokers in the form of revenue sharing agreements”… i.e. a kick-back for selling their funds.  This finding illustrates why broker dealers are now required by law to disclose such agreements… unfortunately they are usually buried somewhere deep on their website…



To investigate whether a specific advisor, review the SEC’s website and investigate if they are independently working for you or working for someone else. You may be surprised who local advisors in your neighborhood are actually working for…

  • Step 2 – Enter an advisor’s last name and approximate zip code

  • Step 3 – Choose “Get Details” box of the advisor

  • Step 4 – Download the Detailed Report

  • Step 5 – Scroll down 3 or 4 pages to see who employs the advisor.  Virtually every time you will find that the advisor actually works for a major firm located hundreds of miles away… not for himself or for herself.

Above all else, clients want to see portfolio growth.  We believe our investment philosophy allows us to stand far above the rest. We believe all investment strategies fall into one of three investment styles… Active, Passive and Systematic.  We believe primarily in systemic investment themes. Below we review all three investment styles.

Active – Try to “beat” the market by selecting “better” investments

Based on our experience, we believe most investment professionals place their clients into mutual funds with an active approach in attempts to “out-do” the market.  However most mutual funds under-perform their stated benchmarks.  Therefore we believe most retail investment clients experience underperformance.  On top of the fees charged by the mutual funds, client performance can be further degraded by fees charged by the advisor.

Passive – Buy and Hold to “meet” the market

Since most active managers do not meet their benchmark, we reason that passive investing trumps active investing.  Passive investment vehicles are generally less expensive than active vehicles and can be obtained relatively easy in the market place without the use of an advisor.  And while advisors investing client assets in passive portfolios may not be adding much “portfolio alpha”, they do provide value to clients in other ways such as piece of mind, comfort, face to face interaction, planning, etc.

The vast majority of advisors place client assets into a combination of active and passive mutual funds and rarely watch, move or otherwise participate often in portfolio management. This typical scenario is deemed acceptable by the industry, where investors are paying both the mutual fund company fees AND advisor fees.  While this may be acceptable, we believe portfolios should do more.

Systematic – Quantitative, research-driven, disciplined, unemotional, evidence-based investing

In our opinion, systematic investing trumps active and passive strategies. Some of the best and most successful money managers follow time-tested, research based approaches to money management.  To that end, the most powerful investment phenomena is systematic momentum and trend-following investing. These evidence-based, methodologies promise high-conviction strategies built to beat behavioral bias.

Below is our hypothetical example of the three types of investors (Average investor, passive buy and hold investor, and the systematic, momentum based investor).  Active investors are NOT depicted in the hypothetical chart below.  However, based on the evidence provided herein we would assume the active investor experience would be the most volatile, showing the highest performance in some years and the lowest performance in others.  Additionally, based on the evidence provided herein, we believe the performance of the active investor would be between the Average investor and the passive buy & hold investor.


Click here to see our Dynamax series of quantitative, systematic investment strategies.

Investor real-returns are based on after-tax outcomes.  Most investment professionals are not CPA’s.  Most advisors frequently use the phrase “ask your CPA”.  We are CPA’s and manage the majority of our clients’ tax returns. We believe most investment advisors cannot competently explain the two most common “tax-alpha” strategies described below.  Further, we believe the clear majority do not have the tools or wherewithal to execute them as we do at Cyr Financial Inc.  Our research leads us to believe these techniques add 0.5% to 1.5% of additional real return in client portfolios over the long term.

Cyr Financial References:
5 Questions to Ask Your Investment Professional

External References:
Tax Alpha Strategy #1 – Tax Efficient Portfolio Allocation Strategies

Tax Alpha Strategy #2 – Tax Loss Harvesting

  1. Unless you feel very comfortable with investing, enlist the services of a financial advisor.
  1. Make sure to use the services of a fee-based advisor, not commission based.  If you are not sure, use the questions found on “5 Questions to Ask Your Investment Professional” to assist you.
  1. Understand who your advisor actually works for.  Use the SEC website to find out. True independence is hard to find.
  1. Understand which of the three styles makes the most sense to you and find an advisor who follows that style.  Don’t just accept an advisor when they tell you they follow a certain style, ask them some of the questions found on “5 Questions to Ask Your Investment Professional” to help assure yourself.
  1. The top combined income tax rates in the U.S. are over 40%.  Nothing beats down an 8% guaranteed interest payment than giving nearly half of it to the government.  It is important that your advisor understands taxes.  If an advisor is not a CPA, be sure to gain assurance that they understand the tax aspects of portfolio management and how they impact your taxes.  Use the questions found on “5 Questions to Ask Your Investment Professional” to assist you with these questions.

Contact Info

220 East High Street
Suite 102
Hennepin, IL 61327

Phone: (815) 925-7501
Fax: (815) 305-7396
Email: admin@cyrfinancial.net

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