David Little has seen it all during his 33 years as a financial advisor. In that period, companies have come and gone, markets have soared and crashed, money has been made and lost – but through it all, his investment strategy has remained largely the same.
Like Warren Buffett, Little seeks out businesses with solid fundamentals that he can invest in for the long haul. It’s a strategy that has served him and his clients well, and proved especially lucrative in the aftermath of the first major crash of his career: Black Monday, 1987.
“The ’87 crash I can remember like it was yesterday,” Little says. “I had an older colleague tell me to get on the phone and tell every client I had that they had never seen a better opportunity to buy investments. That’s exactly what I did.”
Little, who received the Lifetime Achievement Award at the 2017 Wealth Professional
Awards, made his start in the business with North American Life in 1984 before moving on to Chancellor Consultants two years later. It was a very different time for advisors – one when the compensation model attracted many to the profession.
“The industry itself is totally different now,” Little says. “Back in the 1980s, we used to get a 9% commission, and everything was done through a large application form. Now I get about 75% of 1%.”
Then came the 1990s, when the mutual fund industry grew exponentially across Canada. It was a boom period for the advisory business, too, but this growth brought increased attention, first from the media and then the government.
“Our annual vacation in 1998 for the top advisors at Fortune Financial was in Hawaii, and the Globe and Mail
sent two reporters and a photographer,” Little recalls. “They were taking pictures of us on the beach, drinking by the pool, and while we were still down there, the paper had a front page article in the business section: ‘This is how your money is being spent by advisors.’ It didn’t show that we were actually in meetings for eight hours a day.”
The article provoked plenty of reaction, but Little believes one individual in particular was responsible for changing the perception of financial advisors, especially among lawmakers.
“Glorianne Stromberg wrote the most damaging report about how bad this industry was,” he says. “From that point on, there was a severe turn in the eyes of the regulators to improve things for clients.”
Regulation and compliance would become an even bigger factor for advisors after the financial crisis of 2008, and it has continued in that vein ever since. In Little’s opinion, it’s a major reason why the business struggles with recruitment and why many experienced advisors have decided to make their exit.
“In my opinion, the government has been anti-business and anti-advisor, and that is why the industry has lost so many people,” he says. “I literally know five guys in the last two weeks who have said they’re done and they are leaving. I was recently told the average age of an advisor in Canada is somewhere between 58 and 60.”
While Little clearly believes the regulators have been too quick to impose certain standards upon financial planners, one area where he sides with them is fees. The fee versus commission debate rages on, but Little is surprised it’s even still an issue.
“I was one of the first guys to go fee-based with Dundee,” he says. “It was 2003, and I did that to remove any confusion for a client that anything I did with their portfolio was to generate a commission. I have heard rumours that 60% to 70% of the industry is still transactional. It is just not good for clients.”
It’s a dilemma that is being facilitated by advisory firms themselves, he says, because advisors who generate higher commissions through sales are often rewarded over those who act in their clients’ best interests.
“One of the problems in the industry is the president’s clubs with all the major firms,” he says. “I have been within the top 25 in terms of revenue generation with my company, but I have never been in a president’s club since I went fee-based. Companies are still rewarding transactional advisors over fee-based, but I think that’s coming to an end.”
Meeting the legend
As a disciple of Warren Buffett, it’s not surprising that Little is a shareholder of Berkshire Hathaway, an arrangement that has brought him impressive returns over the years. It has also allowed him travel to Omaha to meet the world’s most revered investor in person at the Berkshire annual shareholders’ meeting, dubbed ‘Woodstock for Capitalists.’
“The main thing I took away from that is when he said a good investor should only be allowed to make 20 decisions in a lifetime on their investments,” Little says. “Once they have used up their 20, they are stuck with them. I think that is so true.”
As a philosophy, it isn’t exactly rocket science, but having the patience to hold an investment through market cycles is something most investors simply can’t manage.
“The average holding period for an investment back in the 1980s was something like five years,” Little says. “Now I believe it is less than four months. Money is more migratory today than it has ever been.”