Evan Harp sat down with Core Planning's Suzanne Highet to discuss how investors can end up with exposures that don't make sense for them, her career journey, and how she makes sure her clients can sleep at night.
Evan Harp: When and how did your practice begin?
Suzanne Highet: This current iteration of my practice began in March 2023 when I joined Core Planning. I had been threatening to open a solo practice for a second time and really dreading the corporate management and compliance hurdles that that represented. But I also needed to work fairly independently. I happened upon Core Planning through the XY Planning Facebook group. It turned out to be sort of the best of both worlds. Core also permits my other line of business: consulting to other advisors on building their investment programs.
Harp: What is your investment philosophy?
Highet: I describe my investment philosophy, somewhat jokingly, as frumpy. What it really is, is backed by a lot of research and experience, reading industry publications and studies that are peer-reviewed research and journals, all the way down to stories with other advisors. Basically, “keep it cheap, focus on the asset allocation, and make sure it's behaviorally appropriate to the client.” Costs have been demonstrated to be a better predictor of returns than stock picking or which manager's name is on the fund or any of these ideas.
There's a study that is often miscited as saying that asset allocation drives 90% of returns. It's not that that's not true. It's that it was a very narrow study looking specifically at pensions and active versus passive management. Similar to a nutrition publication that says, “we did this one study and now we think everybody should eat six cups of tomato paste a day.” That's not necessarily a valid extraction or extrapolation from the data.
That being said, time and again, broad diversification and keeping it cheap are very important. Add to that “behaviorally appropriate for the client.” If my client can't sleep at night because of their investment portfolio, I haven't done my job. And if I can't keep them invested during periods of volatility and they jump out at the bottom of a rough market, I haven't done my job. So those are my three major tenets of investment philosophy.
I can go deeper on things. I can geek out on investments for longer than anybody wants to listen to me. Those are the biggies. And then, within that, where is there a place to get a little less passive so that it pays for itself in either improved risk profile or differentiated returns. And there are places where nobody's going to beat the market and I need to just keep it cheap and practical.
Harp: That all makes a lot of sense. What's something happening in the markets right now you think not enough people are paying attention to?
Highet: One thing I notice, and it's not unique to this moment, but it shows up in different ways, is people not sticking to their investment philosophy when there's a lot of noise out there or it's a rough market and getting yanked off track by the next bright shiny thing.
So, that could be crypto or that could be the Magnificent Seven or that could be a gold ETF. I remember when everybody just could not shut up about commodities in the mid-aughts and I'm sort of scratching my head knowing they're not appropriate for most investors. And then there was the real estate bubble and people who really had no business in real estate speculation or even buying a house yet were whipped up in the froth of “everybody's doing this, obviously I'll be wrong if I don't do it.” And I'm over here in the corner saying, “but that's neither consistent with your investment philosophy nor appropriate for your clients. So why are you doing it?”
I think at the moment, crypto is something that a lot of people put too much time and energy into relative to how much they understand it or how much of it they should be holding. It certainly is bright and shiny. And I think it will become important. But for the moment, it's not there yet, and most people shouldn't be messing with it.
When I hear questions like that, I'm thinking that people want an answer like, “you should really check out this stock,” or, “AI is overvalued”. I prefer to keep that broad asset allocation focus to the point that I'm boring. But it really works for my clients and it works for me.
I am not a good stock picker. What I'm going to do is be stalwart in my investment philosophy and help my clients by being stalwart on their behalf when they can't.
Harp: What's the biggest obstacle you had to overcome in your career, and how did you do it?
Highet: That would be launching my own practice a second time after launching it the first time and closing it down and becoming an employee again. Then having both the faith and the self-confidence to try again.
Harp: Who is another financial advisor that inspires you, and why?
Highet: There are so many. We have a great team at Core and there's a lot of really interesting folks here. But I'm going to say Lynden Cornett. She's a solo entrepreneur, and the name of her firm is Seagrass Financial. She is seemingly unflappably dedicated to her investment philosophy and process in a way that serves her practice and her clients, and that's hard to find. I have never caught her in a moment of self-doubt or wondering if she's doing the right thing. I've seen so many people do that in so many different careers.
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