What Our Clients Are Asking

Q4 | December 2019

Brightly lit microphone with dark, defocused audience in the background

Topic: Inside Nexus

James E. Houston CIM, FCSI

December 18, 2019

mage used with permission: iStock/RapidEye


Print & Share

Print

What Our Clients Are Asking

Q4 | December 2019

Throughout the year we have hosted a variety of client events from our Quarterly Investment Reviews, our Women & Wealth series, regular client portfolio reviews and of course, our Annual Client Presentation. Holding these events not only gives us valuable time to connect with attendees, but also gives us an opportunity to hear what’s on our clients’ minds.

The title of this year’s Annual Client Presentation was A Brave New World – The Rise of Artificial Intelligence. We began by describing what artificial intelligence (“AI”) is. Unlike computers and robots that automate a specific routine task, AI “applies computer systems to tasks that once required human intelligence”. In its simplest form, data is gathered, whether from people browsing the internet, or from cameras and sensors on self-driving cars. From this data, and a feedback loop which continually improves the computers’ ability to make correct predictions, actions are automatically initiated. Hence, when you Google search “Florida golf”, you are welcomed by ads to Florida golf resorts for weeks on end. And in the case of a self-driving car, it gets better and better at identifying obstructions in its way and applying appropriate braking and/or avoidance techniques.

We welcomed questions about AI and any other subject from those attending. We’ve highlighted three questions that came from our audience last month (and one that didn’t), that we feel may be of interest to our readers.

How is Nexus using AI in its investment process?

More and more, our investment team is being offered (at a price) analyses and research reports that are products of AI systems. Of note, there is a particularly persistent firm out of New York City that uses satellite imagery and AI to determine what photographs of Wal-Mart parking lots across the United States can tell us about consumer spending trends and its broader economic implications. We are judicious with our research dollars and feel that, in this case, the information about short term trends is not complementary to our long-term approach. But there may be a time (and price) when an AI-inspired piece of research will aid us in our investment decision process.

How is AI affecting Nexus and the investment management industry in Canada?

There has been a great deal of attention given of late to the rise of robo-advisors and investment products that are driven by AI and machine learning. Virtually all of these entrants arrived on the scene after the financial crisis of 2007/08. Would these systems have properly anticipated the “black swan” nature of the dramatic sell-off experienced at that time? Would they have properly responded to the absence of buyers in the market and backed off their algorithmic selling, or made it worse by hitting every bid in sight? We think that such strategies will require a full market cycle before they can be judged to be a success.

In terms of the competitive impact on Nexus, we feel that we provide more than just investment performance at a reasonable price. (And we believe that the convenience of making investment commitments on your phone while you’re waiting for the bus, is overvalued and misjudged.) At Nexus, along with the personal relationships, integrated financial planning and the high touch service that we share with our clients, we feel that our clients also value knowing that our hand is “on the rudder”, and that our disciplined investment approach has yielded solid performance for over 30 years.

With all of the turmoil that we are seeing in the United States, has it had a bearing on the allocations of Canadian, U.S. and global shares in the portfolios?

As “bottom-up” investment managers, we build a concentrated portfolio of quality stocks based on their company-specific characteristics and valuations. We do not allocate to specific geographies based on their geopolitical and economic outlook (assuming we could get that right). Keep in mind that the North American companies that we own, and are chosen by our in-house investment team, are, for the most part, very global in their scope and so derive revenues from around the world. The investment management team at JP Morgan that manages the holdings in our international funds similarly screen for quality characteristics in companies that, to a large extent, are not dependent only on their home market. While specific regions in the world may suffer unforeseeable slowdowns, the portfolios at Nexus purposely have broad geographic and sector diversification to reduce volatility.

So what question weren’t we asked this year? For the first time in the last three years, we weren’t asked once if we would be investing in cannabis stocks. Funny that.

If you weren’t able to attend our annual events this November, you can view a shortened version of the presentation (with our Nexus commentary) on our website by clicking here.

More Like This...

See another CRM2 blog post that may be of interest to you.

No posts found.

More Like This...

See another Foundations & Endowments blog post that may be of interest to you.

That Giving Feeling

Topic:
Foundations & Endowments, Tax Planning
Excerpt:
Summer is now a distant memory. In fact, a radio announcer declared only 77 days until Christmas. Ugh. It is usually in the last quarter of the year

More Like This...

See another Human Interest blog post that may be of interest to you.

What a World!

Topic:
Human Interest
Excerpt:
You don’t need to read a blog from your most trusted investment advisor to realize that 2020 might go down as one of the most notable and difficult

More Like This...

See another Inside Nexus blog post that may be of interest to you.

Swimming Naked

Topic:
Inside Nexus
Excerpt:
Warren Buffett has a wonderful line. “Only when the tide goes out do you discover who's been swimming naked.”

More Like This...

See another Investments blog post that may be of interest to you.

It’s a Topsy-Turvy Year: Investing During COVID

Topic:
Investments
Excerpt:
This year has been plenty weird. For starters, it feels like January was about five years ago… if you can remember it at all. Putting aside the health

More Like This...

See another Pearls of Wisdom blog post that may be of interest to you.

“Work, Work, Work, Work, Work, Work”

Topic:
Pearls of Wisdom
Excerpt:
This has been a busy year. I’ve had lots happening on the home front (a wedding!) and lots going on at the office (too long to list!) Managing work

More Like This...

See another Tax Planning blog post that may be of interest to you.

The (U.S.) Taxman Cometh

Topic:
Tax Planning
Excerpt:
Like the medical patient who expects to endure a fair bit of poking, probing and prodding from the doctor, clients of financial providers have had to

More Like This...

See another Wealth Planning blog post that may be of interest to you.

Estate Planning: Questions from our Virtual Chat

Topic:
Wealth Planning
Excerpt:
Helping clients with their estate planning is something we do here at Nexus. However, we are often involved in identifying the best tools for the

On a Side Note…

See another CRM2 Nexus Notes Quarterly article that may be of interest to you.

No posts found.

On a Side Note…

See another Foundations & Endowments Nexus Notes Quarterly article that may be of interest to you.

No posts found.

On a Side Note…

See another Human Interest Nexus Notes Quarterly article that may be of interest to you.

It’s About Time

Topic:
Human Interest
Excerpt:
Over the last 25 years, we have written frequently about time. In fact, in 2010, our annual client presentation carried the same title as this article

On a Side Note…

See another Inside Nexus Nexus Notes Quarterly article that may be of interest to you.

A Virtual Nexus Welcome

Topic:
Inside Nexus
Excerpt:
We are excited to welcome Preethi Khatri Chetri to Nexus.

On a Side Note…

See another Investments Nexus Notes Quarterly article that may be of interest to you.

Uncertainty… Who Needs It? Apparently, We Do.

Topic:
Investments
Excerpt:
It is not exactly a revelation to say that uncertainty contributes to stress. In “normal” times – take 2019, for example – three common sources of

On a Side Note…

See another Pearls of Wisdom Nexus Notes Quarterly article that may be of interest to you.

China’s Larger Role in the World; Immortality in a Test Tube

Topic:
Pearls of Wisdom
Excerpt:
Reading is one of the principal occupations in our profession. As we digest a wide range of material, interesting ideas and surprising facts – some

On a Side Note…

See another Tax Planning Nexus Notes Quarterly article that may be of interest to you.

The (U.S.) Taxman Cometh

Topic:
Tax Planning
Excerpt:
Like the medical patient who expects to endure a fair bit of poking, probing and prodding from the doctor, clients of financial providers have had to

On a Side Note…

See another Wealth Planning Nexus Notes Quarterly article that may be of interest to you.

From the Editor: Happy New *Planning* Year

Topic:
Wealth Planning
Excerpt:
As the weather cools and the leaves begin to change colour, it seems to me that fall is the more natural start of a new year compared to the start of