F.A.Q. - by B/D & Investment Advisor Reps

1) Why should I sign up my clients to HCM's money management?

2) What is unique about HCM’s analysis?

3) Questions about technology most other advisors use.

 

1) Why should I sign up my clients to HCM’s money management?

Client centered representatives earn about 5 times more money than investment centered representatives. Why spend your valuable time managing your client's money. With HCM as a third party investment advisor (TPIA), your client stays your client and you get a new profit center with a portion of our fees shared back to you and your broker dealer, EVERY YEAR (see below).

HCM pays broker dealer and registered investment advisors up to 110 bp/year every year your client stays with us. The client does not pay a higher fee for solicitor obtained accounts.

How can I start to work with HCM as soon as possible? Talk to your broker dealer/registered investment advisor and request that HCM be contacted on your behalf. We work with approved broker dealers/registered investment advisors. If your broker dealer/registered investment advisor is not on our approved list, tell us the responsible corporate officer's name and contact information so we can obtain the agreements to begin paying you/your broker dealer/registered investment advisor right away.

What is your thought as to when you will contact HCM to be your third party investment advisor of choice?

2) What is unique about HCM’s analysis?

a) Unique HVI system. We think 95% of other money managers use readily available textbook methods of analysis and therefore bring nothing new to the table. Since 1970 we have been doing original market research. Our HVI system is an absolute performance system whereas nearly all other systems are relative strength. And we employ other computer systems that are original.

b) HCM’s HVI system is a universal system with no adjustable parameters in the model. Most other systems are empirical and eventually stop working. HVI, and absolute value indicator, is designed to work for any funds or indexes in any country index in any type of market. Can any other system claim this?

c) HCM has developed our own dynamic portfolio theory and invented the “dynamic frontier”. Our proprietary optimizer computes relevant dynamic long and market-neutral portfolios.

d) HCM computes our own statistics like alpha, beta, variance, correlation coefficient, and others, unlike nearly all other advisors who purchase them for the same few industry sources. We think the industry (stale) statistics are not useful for active portfolio management; rather they are limited to once-a-year re balancing for the buy-hold non strategy. This is the reason we compute our own statistics.

What are the most important features of working with a TPIA you consider while your are deciding?

3) Questions about technology most other advisors use:

Why is strategic (yearly or quarterly) asset allocation re balancing really a buy-and-hold non strategy? The financial community uses 3 to 20 year statistics to compute inputs needed for “modern portfolio theory” calculations. By using these long-term statistics, the result is really buy and hold and the portfolios composition changes very slowly. This is obvious when these portfolios continued to hold equities during the recent severe bear market of 2000-2003.

What is wrong with the seasonality strategy? The Seasonality strategy typically is invested only a fraction of year. Seasonality is 1970’s technology and will lag the indexes in strong up markets.

What is wrong with empirical trend following strategies? Most trend following strategies employ empirical numbers that have to be changed periodically to “re calibrate’ the models to different type of markets. Trend following technology has a lag and, in markets like 2004, the trends were hard to identify correctly. Thus these models may look good when re calibrated or changed, but may not be useful in the future.

What is wrong with strategies that employ the business cycle? Business cycle analysis is difficult and errors in cycle identification of 6 to 9 months are common. The response of various sectors to the business cycle always changes as new industries come and old one go. These uncertainties limit the usefulness of business cycle analysis.

What is wrong with equity and bond strategies that employ moving averages? These models are driven by lagging moving averages and may work in well-defined long term trending markets but will under-perform in flat choppy markets like 2004. The signal for moving average applies at ½ the moving average time. Thus, a 200-day moving average signal actually is applicable 100 days ago. One has to wait another 100 days in the future to find out the “signal” for today.

What is wrong with bond timing strategies? Bonds usually return inflation rates plus a little and are not competitive with equity returns over long time periods. This strategy is most valuable during bear markets when interest rates drop significantly; the strategy will under-perform equity indexes in bull markets.

HCM uses original strategies and gives you a high broker-dealer/investment advisor payout.

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