B.C. advisor sticks to fundamentals

(November 29, 2004) Bowen Island is a long way from Bay Street. And even though B.C. advisor Hans Merkelbach may be considered something of a rebel in the financial services industry, there’s no debating his success.

Merkelbach, who is 71, actually retired eight years ago but returned to the advice business in 1999 at his clients’ request. Since then, he’s published an annual report card on his performance — and the numbers are impressive.

According to his website, Merkelbach’s client accounts increased on average approximately 34% last year, and over 50 months, the average total return was about 110%. He realizes, of course, that market conditions can change quite quickly, and past performance is no guarantee of future returns.

“The secret is to do your homework and to know which fundamentals are important and are driving the financial markets,” Merkelbach explains. “I identified that quite early and this is why I have racked up these returns in a bear market.”

Merkelbach focuses on several sectors, based on each individual client’s risk tolerance. But in general, he’s been overweighing precious metals and resource funds.

Hans is particularly bullish on gold. “I’m 50% exposed to the gold sector, but that’s higher than most of my clients.” Currently, he has about 120 client accounts with assets of around $39 million.

“I do business with AGF because I like some of their funds, such as precious metals and resources,” he says. “I also like Mackenzie because of Fred Sturm, their resource manager. I like Eric Sprott and John Embry and Dynamic. Ned Goodman is an old pro at managing money.”

To balance things out, Merkelbach also uses bond funds, recently moving to real return bonds. “They’re indexed to inflation, which will soon start ramping up,” he expects.

While Merkelbach has no problem with asset allocation and diversification, he believes those concepts only make sense in a bull market.

“We’re still in a secular bear market, despite the recent run-up,” he thinks. “When the bear reasserts itself in 2005 and 2006, there are going to be a lot of unhappy investors out there.”

As for his annual report card, Merkelbach says it’s all about transparency. “If I was an investor, I’d want an advisor to show me his record. Take a few accounts and show me what you’ve done over the last five years.”

Filed by Doug Watt, Advisor.ca, doug.watt@advisor.rogers.com