Evidence-Based Wealth Management Our dedicated interview with PHILIPP OCHSNER, CFO and Elite Wealth Manager at IndexInvestor AG, profiles the Swiss wealth management firm with an investment methodology rooted in scientific evidence, supporting investors to better understand capital markets theory and make better decisions with their money. Executive Global sit down with Zurich’s foremost connoisseurs of evidenced-based wealth management. With the shift from defined benefit to defined contribution pension plans in the Western world, why is it increasingly more important to work with a competent wealth manager? Pension Plans are a great tool to save taxes PO because big tax cuts can be made. Also, it is a great tool to invest for the long term since the assets tend to stay many years in the pension fund and sometimes tax benefits can be prolonged even beyond the retirement age. We are pushing the boundaries in having developed solutions where doctors and entrepreneurs, whose income is big enough and have an own company, can set up an individual pension fund just for themselves, which we can manage evidence based in their best interest. A competent manager regarding pension funds, in my view, knows the details and possibilities of tax mitigation and has a solid, evidence based investment philosophy. In the long run, it matters substantially whether you have a good wealth manager, therefore making a choice of choosing the best wealth manager is very important. EG
of each wealth manager is dependent on a high degree of chance in the short run. Only in the long run, do we see who truly did a good job. I believe an investment philosophy based on evidence, low cost and broad diversification, are factors that make success much more probable. You remove your own forecasts and EG assessments from your investment methodology. What advantages does this present to clients? Investors underperform indexes by far and PO large. It mainly has to do with the emotions of “fear” and “greed”. In good times, everyone wants to join the party and in bad times, many sell their assets. That leads to buying when markets are high and selling when markets are low. This also happens to many ETF investors. These emotions generate an average loss compared with buy and hold strategies of several percentages per year. We avoid these mistakes by sticking to science and by staying invested at all times, thus having the highest expected returns and zero risks in missing the index returns.
In an era of negative and zero interest rate EG policy, what effective measures should retirees consider, pertaining to wealth management and estate planning? Long term investors and wealthy individuals PO have the advantage, in that they can invest over the long haul. They can substitute bonds with stocks, which have a far better long term outlook in terms of returns but also in terms of wealth protection, if set up and managed well.
Which asset classes do you think present the best opportunity for growth within the next five years? Stocks have as always, a higher expected return PO than bonds. Among stocks, “Small Cap” and “Value” stocks are expected to perform better. Value stocks are the low priced stock, measured by fundamental factors like “Market Value to Book Value” or “Profitability”, meaning with value stocks you get more book value and more profitability for what you pay for.
What fundamental characteristics would you say comprise a successful wealth manager in 2020? I believe in science, therefore I propose an PO evidence based approach. Do what has the best chance of working and avoid what has a bad chance of working. We know that markets cannot be predicted in the short term. Therefore the success
And with the rapidly changing nature of the global economy, where do you see some of the most exciting opportunities for Index Fund investing? Interestingly, value stocks are currently at an PO all time low. In 57 years of available data, value stocks have never been lower priced compared to growth stocks (Arnott et al, 2020). Because
• Productivity, Strategy, Profitability
valuations are unlikely to stay that far apart, it is very probable that the value stocks will do considerably better over the next few years. Also, value stocks are still impacted by the corona crisis, meaning they have recovered much less than the total market so far. What is the secret to your success, having consistently maintained profitability when investing for the last 13 years? We do not have a crystal ball. With PO IndexInvestor you can expect to have about 70% positive years and 30% negative years. Our magic is in connecting the values and goals of our clients to individual investment solutions, together with our Value Network consisting of selected specialists for renowned doctors and entrepreneurs in Switzerland, that maximise the probability to reach all that is important to them. EG
Tell us more about your book Protect Assets: Evidence and Practice? The book is written for important decision PO makers and is recommended by several finance professors. It summarises the best scientific studies we found on investing within the first ten years of IndexInvestor. It can be read in the same time like a newspaper giving you the key information necessary to empower you to make smart decisions about your money. It is available only in German: “Vermögen schützen: Evidenz und Praxis”. EG EG
For further information, please visit: www.indexinvestor.ch
Vermögen schützen: Evidenz und Praxis https://www.amazon.com/Vermögen-schützen-German-Philipp-Ochsner/dp/3734566851 Arnott et al, 2020 https://www.researchaffiliates.com/en_us/publications/articles/reports-of-values-death-may-be-greatly-exaggerated.html