The Investment Scientist

Meeting Allan Roth

Posted on: September 10, 2012

financial blogging

I was in Denver attending the Financial Blogger Conference (FinCon12), and I was thrilled to meet Allan Roth there.

If you don’t know Allan Roth, for the sake of your financial wellbeing, you should.

Allan is an hourly fee-only financial advisor practicing in Colorado Spring. He also writes an investment column for CBS MoneyWatch. Recently, Jason Zweig invited him to write a column in the Wall Street Journal as well.

For me, Allan is easily the most admirable figure in the whole financial sphere. If I were teenage girl, he would be my Justin Bieber. I have good reasons for my admiration:

  1. He charges for his services by the hour. This means he is making many times less than he could.
  2. He has an extraordinarily sound grasp of investment theory. Say “Fama French” to most financial advisors, and they would draw a blank – not Allan.
  3. He devotes a great deal of time educating the investor public with his columns.

We had a great conversation about investment and other things in life.

As far as investment approaches go, we have a lot in common. We both believe in simplicity, global diversification, and discipline. We have one disagreement – the extent to which one should tilt towards small cap value. I am a tilter; Allan is not.

Let me explain what the debate is about. Historically, small cap value has been the best performing stock class. There are two explanations for this phenomenon: risk or behavior.

The risk explanation says small cap value is riskier; therefore, it commands higher returns.

The behavioral explanation says that, controlling for risk, investors are (behaviorally) more drawn to big cap stocks and growth stocks, resulting in small cap value stocks having to pay a return premium to attract investors in market equilibrium.

If you believe in the risk explanation – as Allan does – there is no point in tilting toward small cap value since you are just taking more risk. If you believe in the behavioral explanation – as I do – you should tilt since that is the systematic way of taking advantage of the average investor’s investment (mis)behavior.

We did not settle the debate, but I got my adrenaline pumping talking about it. Afterward, my brain dumped dopamine into my bloodstream, causing me to feel high for the whole night.

Meeting Allan Roth was definitely the highlight of my trip.

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5 Responses to "Meeting Allan Roth"

I couldn’t agree more! He’s a rock star for fee-only advisers. At least you had a conversation — I was too self-conscious and tongue-tied to sound intelligent when I chatted with him at #FinCon12.

Rob, glad to meet you in CO. Thanks for commenting on my blog.

I comment on Allan’s blog a lot so we kinda know each other already, not that I am particularly intelligent.

Unfortunately I didn’t get to have an extended conversation with Allan, but it was exciting just to shake his hand and introduce myself. Rick Ferri was another guy there whom I admire.

And of course, it was great meeting you and everybody else. Hopefully I’ll see you again at Fincon13!

Same here. I was more than delighted to have met both of them in one event.

[…] why I love my job so much. I get to meet great people – last month it was Allan Roth; I get to help my clients make smart financial decisions; and I get to share my newly acquired […]

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Author

Michael Zhuang is principal of MZ Capital, a fee-only independent advisory firm based in Washington, DC. He is also a regular contributor to Morningstar Advisor and Physicians Practice. To explore a long-term wealth advisory relationship, schedule a discovery meeting (phone call) with him.



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