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By William Hanley
National Post
FP Weekend Section
Lunch Money in Vancouver
Saturday, March 18, 2006
When it comes to investing, financial advisor Adrian Mastracci is not Mr. Excitement. And he's pleased to say as much. "I believe portfolios should not be exciting," he declares at our window table at Provence Marinaside across from the seawall in Vancouver's fashionable Yaletown. "The basic portfolio you're going to rely on shouldn't have too much excitement."
Adrian Mastracci, investment counsel at Vancouver’s
‘fee-only’ KCM Wealth Management, says,
“I'm very straightforward about it. I tell my clients there are three things we’re going to do.”
It's not that Mastracci, chief executive of KCM Wealth Management Inc., a fee-only investment counsel and advisory firm, is Mr. Dullsville. He's an engaging, energetic fellow who's animated in describing his approach. "I'm passionate about what I do. I think there's a right way and a wrong way.
"But one thing we're going to do is take your passion away," he says. "Save it for the special person in your life. Don't fall in love with your investments. They make horrible partners."
Provence Marinaside is an ideal partner for a condohood that has been conjured up in the past 10 years. The menu tips its chapeau to Provence and the Mediterranean, but the restaurant is very much here and now, vibrant Vancouver, 2006. It's all tile, glass, steel and well-turned-out people, who look to be working toward an endless lunch.
On a bright Tuesday, Mastracci starts his lunch by ordering a green salad -- organic, of course -- with artichoke tapenade crostini and Dijon balsamic vinaigrette. Though he's playing racquetball this evening and doesn't wish to give his opponents any extra edge, he goes for the wild mushroom ravioli with fresh tomato, garlic, white wine, butter and basil. For Lunch Money, having just flown in this morning on the red-eye from Honolulu and needing sustenance to get through a long day, it's the crispy calamari salad with red aioli and mixed greens. Then, it's the special -- the seafood en papillotte, which includes shrimp, scallop, fish fillets and potatoes baked in a paper envelope.
Over a glass of San Pellegrino sparkling water, Mastracci outlines his approach to investment management, an approach that is well-known to clients, media types and others who receive his online newsletter. "I'm very straightforward about it. I tell my clients there are three things we're going to do. And if you don't like these three things, don't hire me because you won't like it."
First, managing wealth is a long-term process, not an event, with goals going out five years and beyond. Second, a portfolio must be well-diversified with an appropriate asset mix. Third, large losses must be avoided because preserving capital is paramount.
"And if there's anything in there you don't like," he says, "someone else can be your financial advisor."
Mastracci, a native of Italy who grew up in St. Catharines, Ont., has more than 30 years in the business. He took an engineering degree at the General Motors Institute in Detroit but decided financial matters were his forte. After moving to Vancouver in the early 1970s, he earned an MBA at the University of British Columbia.
Today, he has under 50 clients, most of them with sizeable portfolios. His usual entry level is around $200,000 to $300,000, but he will make exceptions for those individuals and family groups with high savings potential. "There's a real variety of ways to become a client. You don't have to have so much capital.
"It doesn't go by the size of the account," he adds, "but by the minimum annual fee," which is near $5,000 plus GST.
Mastracci's low-cost, straightforward approach means clients' equity exposure is mostly to exchange-traded funds -- "safety in numbers" -- which may be unexciting but cuts the risk of loss. He tells prospective clients that if they were to invest $100,000 and the first outcome was an 80% return in the first year and a 50% loss in the second, and the second outcome was a 5% gain in each of those years, what would they take? "Most people take the first. But if you do the math, you lose money."
For clients he considers in the "growth" category, say 60% in stocks and 40% in fixed income, he aims conservatively for a 7% to 9% annual return net. With the buoyant markets of the past three years, that's been relatively easy. "But somewhere we have to put some of those gains away for the not-so-good years."
For clients with lower weightings in stocks, the annual return goal might be 5% to 6%.
Whatever the aims, Mastracci says stock market gains may be harder to come by after the three-year rally. He has been lightening up on equities, especially in the Canadian market. "We want to look at risk first, and return second," he says, returning to a familiar theme.
"I tell clients: 'You're not going to get excited about any one investment. I don't care how good it is, who's got it, what you think of it. We're not going to make it a big part of your portfolio.' "
As the buzz at Provence Marinaside subsides, we reflect that you could call that approach "Adrian's wall," an enduring view of how to build an enduring portfolio. "I can't predict where your portfolio is going to be a year from now," he says. "But I'm a lot more confident that five years from now, you're going to be ahead of the game."
The bill at Provence Marinaside comes to $67.25, including the mineral water, tax and tip. It's good value for good food and good service, with more than a dash of style.
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