Market insights and analysis

How dynamic, risk-managed investment solutions are performing in the current market environment

1st Quarter | 2021

Market insights and analysis

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Updates on how dynamic, risk-managed investment solutions are performing in the current market environment.

The “Easy Button” is for real

By Jerry Wagner

It seemed like magic. Push the little red button and it transformed your life. That was the message of an early 2000s marketing campaign from Staples.

I loved the thought of it. One touch, no further work or involvement, and your problems were solved.

It all began in 2005. Staples’ ad agency, McCann Erickson, created a spot for that year’s Super Bowl (XXXIX). A full-fledged media campaign followed that lasted for almost a decade.

The spots usually started with a difficult situation. Then, with a press of the magical “Easy Button,” voilà, the solution appeared. The first ad featured a young student looking for an answer to his math teacher’s question, a cowboy about to wrangle a raging bucking bronco, a surgeon about to perform a procedure for the first time, and (my personal favorite) a new dad facing his first diaper change of his newborn twins.

Every ad ended with a tagline that resonated with the audience: “Wouldn’t it be nice if there was an easy button for life?”

The ads proved so popular that viewers inundated the company with calls asking where they could get an Easy Button for their life. By October 2005, the company began selling its own real-life Easy Button that, when pressed, responded, “That was easy!”

Soon sales of the button topped $1.5 million, with the proceeds going to Boys and Girls Clubs of America. As proof of the eternal appeal of the Easy Button, they are still available at Staples today, 16 years after the concept surfaced in that 2005 Super Bowl ad.

Many of the early Staples ads tied the Easy Button to the wide assortment of products and the ease of shopping for them at Staples’ stores. Similarly, the predecessor of their Easy Button campaign had featured its own slogan: “Yeah, we’ve got that!”

Flexible Plan Investments (FPI) faced a similar problem. Even back in 2005, we had a wide assortment of strategies. Like Staples, we were proud of the fact that if someone needed a managed investment solution, we could usually say, “Yeah, we’ve got that!” Be it tactical or strategic, domestic or international, core or explore, ESG or alternative—“Yeah, we’ve got that!”

Over time, like Staples, we expanded our product line to meet more needs, going from scores of available strategies to over 100. And, like Staples, this left us with a similar problem—the paralysis of choice.

We all know that we can get bored when there is a lack of choice. Consumer freedom is often measured by the degree of choice available. But social psychologists tell us that too much choice can also be bad for us.

Psychologist Gregory Schwartz in his book “The Paradox of Choice” discusses this conundrum. He describes how having too much choice is a disincentive for consumers. A trip to a supermarket with over 175 salad dressing choices rendered a decision for his evening dinner impossible.

This can prove especially relevant in the virtual workplaces of today’s pandemic-limited businesses, as the Beyond Philosophy Blog relates:

Schwartz also discusses how technology has given us the ability to work anywhere, anytime. It is great to have that option in some ways, to give you the flexibility to be somewhere else but still be in contact with your work. But in other ways, this constant connection can create more choices and distract you from the choices you have already made. Potentially now, during your kid’s soccer game, you are constantly making a choice to take a call or send it to voicemail, to answer the email now or later, to reply to the text from your client or call them back later when the kids go to bed. Technology itself is creating a constant work environment that not only creates a new type of workaholic, but also distracts us from our lives with constant choices and decisions.

Too many choices for the investor can also cause a paralysis of choice

In their paper “How Much Choice is Too Much?: Contributions to 401(k) Retirement Plans,”  academics Gur Huberman, Sheena S. Iyengar, and Wei Jiang studied the behavior of more than 800,000 retirement plan participants. They found that the more investment choices that a retirement plan had, the less participation there was from the employees. Other studies have shown that less choice can also lead to lower fees and better investment outcomes.

Too many choices can also distract us from our other life choices. And by introducing a wide range of performance, they can create expectations that are too high to be consistently reached.

In other words, too many investment choices can lead to the paralysis of remaining in a money market or bond fund while the stock market is hitting new all-time highs in a 12-year bull market. It can consume all of our attention and time while researching all of the available options. It can cause us to pursue the “hot dot” strategy from firm to firm—always chasing performance but arriving too late to realize it.

At Flexible Plan, we also found that having so many strategies caused investors and their advisers to limit their choices. They would choose only one or two strategies that they could really get to know—or worse, not invest at all. The result was under-diversification when the financial market environment changed, or missing out on a year like 2020 when dynamic, risk-managed, tactical investing proved invaluable.

Our investor and financial adviser customers recognized the problem with too many strategies before we did. Early on, after we brought out one of the first (if not the first) multi-strategy investment platforms in 1998 (Strategic Solutions), our clients began clamoring for a turnkey strategy in which Flexible Plan chose the investment strategies for them.

Turnkey QFC strategies: Our “Easy Button” for an actively managed, multi-strategy portfolio

Today, our solution to this demand is our turnkey Quantified Fee Credit (QFC) strategies: QFC Multi-Strategy Core, QFC Multi-Strategy Explore, and QFC Fusion 2.0. You no longer need to choose from our over 100 dynamic, risk-managed strategies (or even our over 60 QFC strategies) in the hope that the chosen few will provide a portfolio that is diverse enough for every market environment.

Instead, with our turnkey strategies, we make the choices for you. Each of these turnkey strategies dynamically selects, monitors, and reallocates strategies in your portfolio.

And we don’t stop with just the initial choices. We also decide which strategies aren’t right for changing markets, drop those, and substitute new ones for you.

For example, in our QFC Multi-Strategy Core portfolios, we choose from our selection of different core strategies and regularly allocate a greater percentage to the better performers, taking into consideration return as well as volatility and how each strategy relates to the other. And if a new strategy is developed or an old strategy is no longer is effective, we can automatically take the appropriate action to choose a better portfolio. Our QFC Multi-Strategy Core portfolios are available in five suitability profiles: conservative, moderate, balanced, growth, and aggressive.

What’s the Easy Button for the explore portion of a portfolio?

Using the 12 different Quantified Funds, which are subadvised by Flexible Plan, we now can create QFC versions of dozens of our explore strategies just as we did for our core strategies. These employ the same methodology used in our many tactical and rotation strategies but use only our proprietary funds in implementing the strategy. However, with so many strategies to choose from, paralysis of choice is definitely possible.

Furthermore, these targeted explore strategies can fall victim to the same malady as any strategy. Different strategies work best in different market environments. No strategy works optimally in all environments. For that reason, in all investment portfolios, whether passive or actively managed, diversification is essential.

To that end, we decided to create the same managed diversification option that we crafted for our core strategies for our explore strategies. Today we offer four QFC Multi-Strategy Explore turnkey portfolios. Each starts with a collection of our strategies that match the portfolios’ objectives. Each then actively manages the selection of which strategies to employ at any given point in time during the ongoing, changing market cycle.

For example, our QFC Multi-Strategy Explore: Equity Trends turnkey strategy can combine investments drawn from our many trend-following stock strategies. The same concept is used for our other QFC Multi-Strategy Explore options: Low Volatility, Low Correlation, Special Equity, and Equity Trends. And each of these has a distinct risk profile that can be easily matched with a QFC Multi-Strategy Core portfolio.

By offering a choice of just five turnkey multi-strategy cores and just four turnkey multi-strategy explore options, financial advisers and their investors tell us that we have made life easier for them. The paralysis of choice is no longer a problem. And yet the freedom of choice in structuring a portfolio (60%–90% in a core plus 10%–40% in one or two explore options, for example) is preserved. The paradox of choice is no more at Flexible Plan.

The ultimate Easy Button solution

For those who want an even more complete turnkey experience, QFC Fusion 2.0 delivers a portfolio crafted from both core and explore strategies. Again, we choose which strategies, how much of each, and when to “hold ’em and when to fold ’em.” We review the holdings and make any appropriate changes every week for you.

With QFC Fusion 2.0, you only need to choose which of five suitability profiles best fits you. Not sure which to choose? Our suitability questionnaire can suggest what matches your expressed situation, goals, and values.

Easy risk management at a low cost

Because all of these turnkey strategies are QFC strategies, you automatically receive three levels of risk management:

  1. The dynamic risk management employed within the FPI-subadvised Quantified Funds used in each strategy.
  2. The active management between the funds required by the strategies themselves.
  3. The dynamic allocation employed among the core strategies by the turnkey strategy itself.

As the Easy Button ad campaign aged over the years, the focus shifted. In a 2008 interview with The New York Times, Shira Goodman, Staples’ executive vice president of marketing, revealed that the new spots were “more focused on price” than previously.

The QFC strategies also have evolved when it comes to price, now having our lowest advisory fee structure. For turnkey accounts as low as $100,000, the FPI portion of the billed advisory fee is zero, meaning clients will only be billed for their financial adviser’s normal fee. In other words, there is no separate fee charged for running the multiple strategies that are combined within the turnkey strategies or for managing the turnkey strategy portfolios. And this price structure can extend to even smaller associated QFC accounts if the household total of QFC accounts exceeds $150,000.

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With over 60 QFC strategies now available, advisers and their clients are free to create a customized portfolio of their choice. But for those seeking the Easy Button, our turnkey strategies fill the bill.



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