This week’s show starts off with Jason and Alex sharing what they are thankful for and what IDA will be doing as a give back to the community. “Wreaths Across America” a benefit that honors past veterans, by placing holiday wreaths onto their grave sites. The employees of Intelligence Driven Advisers and their families will be placing wreaths on over 400 veteran grave sites at the Fallbrook Masonic Cemetery in Fallbrook Ca. This patriotic gesture leads the conversation into respect for our country and the sacrifices that were made for the better of mankind and the ability to practice freedom of speech. After the introduction, Jason and Alex segue into discussing what it means for a financial firm to deliver value by introducing a Delivering Value Series. This week’s show focuses on rebalancing as a value add. Jason challenges listeners to ask their current advisers how they approach rebalancing their clients’ accounts, to see if they can eloquently explain the process or even have a process in place. Jason continues to explain the basics of rebalancing by using a simplified pie chart with two assets classes only, stocks and bonds. A portfolio made up of 50% stocks and 50% bonds as the initial investment.

Fast forward one year and reevaluate the weightings between stocks and bonds. In a positive stock growth year, the portfolio will be out of balance with stocks representing a higher percentage of the total portfolio, say 60%. A rebalance would be required to maintain the original intent of the portfolio (50/50). You would sell 10% of the stocks and with the proceeds buy bonds to rebalance back into a 50/50 portfolio. Alex challenges the thought by asking the question, why would you sell something that has been going up and buy something that has been performing poorly? Jason responds with how important it is to have a rebalance strategy. Yes, it may feel wrong to sell something that is performing well, but rebalancing a portfolio is a necessary ongoing task to maintain a properly balanced portfolio. It cannot be an emotional knee jerk reaction. A systematic approach is necessary and is probably worth on average 1-2% a year. Alex adds that it even ties into behavioral coaching because it can be such an emotional thing.

IDA can take an unemotional approach and have processes in place, but if this were his own money, it can be difficult to make decisions to buy and sell without letting your emotions get in the way. Jason reminds the listeners that all clients at IDA have discretionary trading in place. This means the firm trades all accounts on the client’s behalf. Jason continues by giving a more in-depth explanation of IDA’s proprietary rebalancing program called Tolerance Band Rebalancing a software that looks at each individual asset class separately and sets tolerance bands based on historical returns for each asset class. To properly execute this strategy, you must have discretion on all accounts under management. Alex adds that, within the industry, most assets are still traded as non-discretion which is highly inefficient. A non-discretion trade requires an advisor to contact the account owner and receive authorization prior to executing the trade.

Jason and Alex close this week’s show with wishing all listeners a Happy Thanksgiving and to be thankful for all we have here in America. Also wishing that all people reconcile their differences, whether it be politically or any other way.Please send questions to or call 877-707-8889.

In this show you will learn about:

  • Rebalancing
  • Tolerance Band Rebalancing Strategy
  • Discretionary / Non-Discretionary Trading