Why DA Davidson's wealth vice chairman still follows his dad's investment advice

As people across America pay tribute to their dads this weekend, one senior name in wealth management has been considering the impact that his own father has had on his career and investing.

Andrew Crowell is vice chairman of wealth management at DA Davidson, which acquired Crowell, Weedon, & Co. in 2013. His dad, Andrew Crowell Sr. was formerly head of the company, which was co-founded by his dad, Warren Crowell.  

Andrew Crowell has been telling InvestmentNews about the advice that his dad shared with him, that still rings true even after 26 years in the industry. One key phrase he learned is “money being like a bar of soap” speaking to the danger of overtrading, with the idea that like soap, the more you handle money, the smaller it gets.

“Over my nearly three decades in the industry, I have become convinced that trying to “time” the market is truly a fool’s errand.  Timing requires the investor to be correct twice – to know when to get out as well as when to get back in,” he says. “Numerous studies show that over a twenty-year period if you had sold during a downturn and missed only the 10 best trading days, your return would be about half of what it would have been had you stayed invested.”

Crowell added that it’s important to realize that it’s not what you make that matters but what you keep: “Overtrading can generate large capital gains taxes thereby eroding the total returns generated by simply staying invested for the long-term.   Nervous energy can be a great destroyer of wealth.”

However, early in his career there was one piece of advice that he initially resisted but has come to full appreciate: “Be wary and cautious of fancy new products and approaches that Wall Street develops and markets.”

Crowell says there is seemingly always a new approach or “little known secret” which the industry develops to sell more product.  

“Whereas innovation can be good and beneficial, at the end of the day the fundamentals haven’t really changed,” he says. “Buying quality investments at reasonable prices and giving them time to appreciate and grow over time so that eventually they can be sold at higher prices is the fundamental objective for most investors.  Complex products or black box trading strategies may in fact generate more returns for the issuer than the investor.  Make sure you know what you own.”

Like a father passing on wisdom to their child, Crowell and his team aim to keep their clients on the right path, specifically ensuring they focus on their long-term goals during times of market volatility.

“We know from history that 100% of the time, the S&P 500 index has climbed to new all-time highs after even severe market downturns,” he notes. “This isn’t luck but resilience.  Businesses and our economy are resilient and innovative, and they find out ways to move forward and grow their earnings.  If an investor has a well-drafted written financial plan, it can act as a roadmap showing how the intended financial destination can be reached without panicking.”

Increased longevity means that most retirees will see at least a few rough market downturns during the time of their life when they no longer have paychecks coming in, and Crowell says that a comprehensive financial plan anticipates times of volatility and helps the investor navigate and ride out the turbulence without sabotaging their long-term goals.

Asked how the investment and wealth management industry has changed since his father was practising, Crowell says technology is the big one.

“Instant messaging and direct access to the markets through online brokers and trading apps have made investors much more short-term minded and even impulsive,” he says. “All of this ‘noise’ fuels a sense of needing to do something.” 

“Certainly, if the investor was taking excessive risk there may be a reason to act, but most of the time the investor should just reassess whether the market movements have meaningfully deviated their portfolio from their asset allocation targets.  If they haven’t, then sitting tight is likely an appropriate strategy,” he adds. “However, if they have, using the volatility as a rebalancing opportunity can be a wise strategy. Typically, this does not mean large adjustments but rather tweaks to return to the target allocation.

Further says Crowell, if market volatility presents ‘sale prices’ on quality investments that the investor had on their shopping list, turbulent times might present buying opportunities.