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Smaller Advisors Have The Opportunity To Disrupt Competitors


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Changing regulations, advanced technologies, big data and big companies bent on domination are real threats to small advisors.

Small advisors are experiencing:

  • Decreasing Margins
  • Higher Costs
  • More Regulation
  • Higher Marketing Costs And Lower Returns
  • Intensive Competition
  • Greater Legal Risks
  • Inability To Use Large Platforms because of higher minimums

Larger companies have vast amounts of capital to cover technology costs including Artificial Intelligence to help mine marketing data and investment optimization. They have the ability to deal with regulation and the trained personnel to deal with all of the tasks that are required. Like Amazon, they are focused on market domination and can deliver services using automation and powerful internet-based platforms that a smaller firm cannot compete with. More importantly, they have brand recognition and big data to stay close to and persuade your potential client.

How Do You Position Yourself To Compete?

There are many ways firms compete. You may be an expert in a particular need not focused on by these large competitors. You may be able to out market them in your particular niche. But change is constant and for the advisor managing less than $100 million the outlook is not without clouds. It appears stormy weather is ahead and preparation is necessary.

New Management Techniques For Small Advisors Only

There are a few management techniques that you may employ that large advisors cannot execute properly because of their size. They are potentially wealth creating for you and for your qualified clients.

The entire investment management industry is focused on keeping up with or slightly beating the S&P 500 Index or another appropriate benchmark. The largest asset gatherers deliver benchmark type returns at a very low cost like ETFs and low cost index funds.

I believe a manager managing a relatively small amount of capital with the right training and today’s modern tools can beat index returns by a wide margin.

New Investment Tools

You may have immediate access to large option purchases by institutions with short term expiration dates and strike prices above current stock prices. These stocks may be bought for quick profits in seconds or minutes or bought after they pull back for a longer term trade. This service is available through trade-alerts.com and Benzinga.com.

A second information service allows you to trade the news, tradethenews.com, Benzinga Pro or thetradexchange.com are excellent fast news services designed for traders.

A third opportunity is to use a cloud-based scanner that follows 8000 U.S. stocks by the second. Scanning for new highs, high volume increases and technical patterns is extremely beneficial.

Trade-alerts.com offers these services. In addition it has an Artificial Intelligence system named “Holly” that is used to identify successful and repeatable patterns that are working best. Holly allows the strategies to automatically change as market conditions change. Holly is a fast learner. This one tool is a game-changing advantage and the cost is not excessive.

My Personal Experience

I have been an investment advisor for over 48 years. I have been an expert in stock and industry group cycles. I co-authored a study in 1978 entitled, “Non Random Profits”. This study’s logic has worked from 1936 until today. See nonrandomprofitsinfo.com. I have been an intermediate term investor throughout my career.

I was told that day trading and swing trading were for fools. I was told that 90% of investors using these techniques lost their capital. Day traders liquidate their positions each day while swing traders generally hold for 1 to four days.

The fact is 90% of new traders do lose their capital, but the successful traders make huge amounts of money over a long period of time. The difference is that successful traders devote the time and money necessary to learn their skill.

I hold the designation as a flight instructor although my full time profession is as an investment advisor. Once in a while the manufacturer of my light sport airplane asks me to train a very experienced pilot to fly my light airplane. Sometimes the pilot has a lifetime of experience flying airliners, jets or other general aviation airplanes. In these cases  their prior experiences make it difficult for them to fly my airplane. The pilot must learn to be humble and change his prior ways otherwise he will damage my airplane.

So it is with trading skills, investors like me with a lot of experience must be humble and teachable and learn the new skills or we will run out of capital.

It is difficult to learn these new skills by yourself. It helps to have a seasoned professional teach you.

Why Learn To Trade?

Why should you consider learning to trade?

You can make a good living from your own account alone.

You may be able to help your clients have outsized returns and protect them from declining markets.

How Can You Develop The Faith To Believe You Can Be Successful?

There are a few people at ragingbull.com as well as another trading group called warriortrading.com who have proven they can make a good living from trading a small amount of capital. These people manage their own accounts. They are not advisors.

Jason Bond and Kyle Dennis are the people I have been working with at ragingbull.com.

Jason Bond was a school teacher who gave up his profession to trade full time. Jason started with limited funds has made a great living and has accumulated a sizeable net worth. You can read more about Jason at jasonbondpicks.com.

Jason trained Kyle Dennis who started with only $15,000 and in a few short years built it to $3,000,000 after taxes. Kyle is a very young man who majored in Biotech. He then worked in real estate until he quit his job to be a full time trader. Kyle believes he can make a million in a year starting with only $25,000. This year after about two months starting with only $25,000 he has had a 300% gain in 53 trading days. $78,824 in profits. An average of $1487.58 per day, $7427.90 per week and $29,751.60 per month. I know that these results are true because I have been on line with him each day and in real time have monitored his results. You may read more about Kyle and his history at biotechbreakouts.com.

The Quest For Trading Profits Requires Great Effort

A Word of Warning

You cannot pay a professional especially one with a large following to teach you and guide you on each trade he makes.

People sign up to learn to trade, get text advice and try to follow the expert. This lazy way absolutely does not work. It is natural to try to do this. You know the expert is more savvy than you are, but it is a faulty plan.  Everyone tries to do this but the results are terrible. The trader buys and then you buy at a higher price. The trader sells and you sell at a lower price, but your cost basis is higher and you lose. It is even more dangerous if you have success because this practice is often not repeatable. I am no better than anyone else.  I lost 20% before I stopped this foolish practice.

You can learn the logic of proper technique and do it yourself once you have the knowledge and tools necessary.

My own problems were just like the pilots I have taught. My experience was a detriment to my success. The good news is that I learn fast. Once I became disciplined I started using these tools for my managed accounts with excellent success. I know this is only the beginning for me.

I did have a lot of issues until my computer systems were upgraded and properly set up. I needed all the services myself once I determined that following was foolish. The main issue once I was on the right track has been risk control. I had been used to taking 7 to 15% risk on a trade, now 1-2% is more the norm.

Day Trading And Swing Trading Are Not For Everyone

This type of trading and management is not for everyone. It requires constant attention to each asset owned. It requires a great many skills and investment knowledge. For those willing to learn and who have the right temperament, swing trading is more suited to the business of managing accounts than day trading.

The investment math shows that your trades will be profitable at best 50-60% of the time. Your trading plan must be constructed to accept one unit of risk for a potential three units of return.

The absolutely most important requirement is to manage risk on each and every trade. Even if experience allows you to know that a greater risk might generate a greater return over time, you must execute your plan to minimize loss and leave hope and belief to others.

The Benefits of Success Are Great

If you are successful in learning these skills larger advisors cannot compete with you. Clients will willingly pay a full sized fee for oversized returns and smaller draw downs especially in declining markets.

Regardless of account size there are excellent low cost brokers like Interactive Brokers LLC. that will accept your accounts and have platforms that allow you to trade multiple accounts with one order entry.

These opportunities did not exist 10 years ago. We did not have access to the information in seconds. We did not have cloud based scanners and AI based services. We could not easily trade worldwide at low cost. Options, futures, and worldwide access from your home or office with micro second executions are available to the small advisor or individual. This is truly an age where smaller can be better.

I have to admit I love the quest for excellence and true independence. Opportunities equivalent to what I used to find over a six month period are now found in days.

I am very excited about my future and I am glad that I did not dismiss the opportunity to learn even at my advanced age of 70.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.






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