Are the big banks really the safest place for your money?

In this episode of Tower Talk, Mark and Tarek are joined by special guest Isaac Unger — a business development consultant working with Tower in the agriculture and colony space — to tackle one of the most common questions they hear from farmers and colony members:

Why Tower over the banks? They dig into the numbers and don’t hold back:

📊 Tower vs. Big Bank balanced funds — a side-by-side performance comparison across multiple time periods that might just change how you think about where your money lives

📉 How Tower held up in the last major down year — because how you perform when markets get ugly matters just as much as the good times.

🐕 Drop the Dogs — Tower’s new monthly Momentum strategy and why it’s already turning heads

🌍 How Tower’s three-strategy framework manages risk — Momentum, Dividends, and Fundamental Indexing working together as one cohesive portfolio

📞 Curious about working with Tower? Reach out to Tarek or Mark anytime.

tarek.williams@towerasset.ca
403-952-9696

Full Transcript

Tarek (00:03)
Welcome to another episode of Tower Talk listeners. This is Tarek and Mark with you as always, but today we have a special guest, Isaac Unger. Isaac is a business development consultant that we’ve been working with at Tower for a few months. He’s been specifically focusing on agriculture, forests, and even more specifically, the colonies. Now, don’t let Isaac’s empty bookshelf behind you fool you. He’s very smart, he’s very capable. He just happened to move recently.

So, Isaac.

Mark (00:35)
The amount of information on his bookshelf doesn’t reflect the information in his head.

Tarek (00:41)
It does not. Thanks for your hard work, Isaac. We heard that in your conversations with some prospects and some clients that you had some questions that came up that you think would be interesting to discuss today.

Isaak (00:42)
not.

Mark (00:44)
Anyway.

Isaak (00:57)
Yeah, in my discussions with various different farmers and colony members, something that’s come up repeatedly is the topic of tower versus the banks, A traditional banking system that many of the farmers are working with. the question that has come up is, you know, why should I work with tower?

It seems that the banks are safer. I’d just be curious to see how you would respond to something like that. I’d love to hear your thoughts.

Mark (01:36)
Let me jump in there, Tarek, for a quick second. You’ve got some numbers that we talked about earlier today, so you’ve got some numbers prepped. And we’ll go to those in a minute because we need some evidence and proof of our thesis. But the banks kind of live on this idea that they are large, safe, and in fact, they like to almost present the, well, your money’s safe at the bank. I’m not sure it would be safe at Tower.

That’s kind of an interesting seed to put down. I don’t know that it captures the reality of what is going on and the question of is a person’s money more safe at a bank or not. I might argue that they’re probably equally safe or equally at risk in both of them because they’re investments in the market. Tarek, why don’t we prove a few things with numbers that you’ve put together a basket of bank type.

funds to compare with our returns and see what that starts at.

Tarek (02:40)
Absolutely. So what I did was I took a basket of eight balanced funds from big fund companies in Canada. I won’t name specific names, but you would all recognize the names for banks, fund companies that we’re all familiar with. And I took the average return balanced funds, you know, 60, 65 % equity, 30, 35 % fixed income. Okay. And then I compared them to comparable portfolios using powers strategies, right? Actual returns.

Though the combination of those strategies was simulated, Johnny Compliance wanted to make sure I stated that, actual returns in actual tower strategies. So I’d look back up to 10 years. In the last 12 months, balanced funds averaged, let’s say, 17 % at 16.98. And one of our portfolios did 19.9. That’s a 2.9 % outperformance. And then the other strategy,

of towers with similar asset allocation to 24.2%. So that’s a 7 % outperformance. Jump to three years. Bank funds did 11.8. One of our strategies did roughly similar, 11.8. The other one did 13.5, so 1.73 % outperformance. And then in a five-year range, the banks did 7.5. Tower strategies did 9.6 and 9.7%, so just over 2 % outperformance.

As you can see, the outperformance is actually getting pretty strong as we get to longer performance periods too, which is good. Because in any given year, you can’t tell what the market’s going to do and how a particular strategy is going to perform. But over time, we’ve consistently demonstrated outperformance, which we’re proud of.

Mark (04:28)
Isaac you were talking about some drawdown years, go there for a minute.

Isaak (04:32)
Yeah, I’d be curious, you know, we’ve looked at the positive years, but in the last 10 years, there’s been some down years. I’d be curious to see, you know, in terms of risk, when we’re thinking of risk, what did those years look like when you compare Tower to these different portfolios?

Mark (04:50)
Great question.

Tarek (04:50)
Yeah,

no, absolutely, because that’s the thing, right? You see returns that you like and you immediately think, hey, what’s the catch? I must be taking on more risk to get those returns. But we can look at the history here. The last negative calendar year in markets in Canada, United States, whatever, was 2022. The average among those

balanced funds was a negative 9.74 % return in 2022.

But our tower portfolios One did minus three point two percent and the other did minus three point nine percent Okay, so that’s a six and a half to five point eight percent out performance But in the negative year, so I really want to recap this We outperformed in the three five seven Excuse me, not three five five seven

five and 10, sorry, the longer term period. Yeah, three, five and 10. And in the negative year, we also outperformed. So the risk that you’re taking based on this analysis is not more. We actually did better in a negative year. I really wanted to emphasize that.

Mark (06:00)
Two,

Okay, can I jump in and talk about how our portfolios work together? Because what I want to do is encourage everyone to consider a little piece of different pieces. So we’ve got one that’s the momentum. You’ve heard us talk a lot about it. In the last six months, Tarek has come up with an idea. We’ve back tested it now. We’ve now tested it with real cash in my wife’s account, because we can afford to lose her money. And so now this month, we’re rolling it out for clients. It is

the new improved. But I’m going to let Tarek explain what that is. But this momentum is 12 stocks, concentrated portfolio by almost every definition in the investment industry. That is high risk. Period.

My only answer to that is the best way to manage risk is get a great return. Number two, we introduced 18 months ago, the dividend strategy. Again, 12 stocks, concentrated portfolio, by risk, by almost every definition, because it’s concentrated.

How do we manage the risk with 12 stocks and 12 stocks? One, these are completely different lists of stocks. We run long and extensive screens to identify what 12 stocks we want to buy. And then we run another ones for the dividend, trying to find high yield, good balance sheet, cashflow coverage on the dividend that they’re paying and no history of cutting the dividend. We had one stock that cut its dividend while it was in our portfolio, we hook it up.

And that did happen. The third strategy is our fundamental indexing, which we spent quite a bit of time talking about. Inside this portfolio are representations from the Canadian market, the US market, the European market, infrastructure, agriculture, water, third world debt, third world developing markets, which have some interesting returns and sometimes bad.

Commodities, yeah. Each one weighted differently to bring together a basket of the world. Now that is a very diversified strategy. So over here at one time I did count up the number of estimated securities that are hidden inside each of these positions and that some at that time came to 2200 stocks. So over here we got this large diversified portfolio, always liquid.

Tarek (08:28)
commodities.

Mark (08:56)
which is one way to manage risk. And then we’ve got these two higher concentration commitment type strategies. Okay, talk about the improvement that you suggested. One improvement we made it was this dividend strategy, bringing it in. And that was actually your idea too. I wish I came up with a good idea. I thought I’d keep talking because maybe you’ll come up with another good idea. We only have to have one a year.

Tarek (09:18)
Right? Yeah. I’m happy with that. But I think that innovation is important. The most recent one is this. The drop the dog. This is for the Canadian momentum. Mark said we’re changing the way we’re doing momentum. We used to change the names or run our screen quarterly and now we run it monthly, but only drop the worst performing four and we get the best performing four in. Right. And this is going to make in our opinion, this is going to make a huge difference because we’re not holding onto names that aren’t performing, aren’t doing what they’re supposed to be doing.

for any longer than we need to. 20 trading days, one month, you’re out. We don’t have any feelings about it. And then we get the new name in and we let it ride. That’s a strategy we’ve implemented, like Mark said, in the Lanes account. It did extremely well. We’ve now implemented it firm-wide. So that’s the new process. And we’re really excited about it. Dividend has done extremely well in the 18 or so months that it has been around. In fact,

I had a… I think it’s 40%. Yeah, I think it’s 40%.

Mark (10:17)
12 months

40. Don’t tell me.

Tarek (10:24)
Extremely well. I even sort of ran a portfolio with the dividend strategy in this comparison to the balanced funds. And in the one year that we had available, you 25 was the only full calendar year we had available, you know, adding that to the mix, improve the returns of the tower portfolio, you know, by two or 3%, just like that. And it just goes to show like that’ll be available.

for the foreseeable future. We just don’t have it available for the past to do the back test that I just did. But that is part of the mix now.

Mark (11:00)
Okay, you’ve been running, because Tarek is actually the one who holds the trigger on our portfolios, and he allows me to take a look over his shoulder. But you’ve been running Elaine’s with the monthly Drop the Dogs ad for new for six months.

Tarek (11:19)
I’ll wait that long to get up.

Mark (11:21)
Okay, yeah, that’s a question, not a statement. The question I’m asking is, how did it do in the Iran-Iraq explosion? What was February 28th?

Tarek (11:34)
Yeah, that’s right. They went to war on February 8th.

Mark (11:38)
How

did her strategy do in the month of March compared to the other momentum strategy? Our two moment.

Tarek (11:47)
really, really good question. so we can see here for the month of March, the old strategy was down. You know what, I don’t have for the month of March after the March 20th, just based on when we were doing a rebalance date. Okay, so it’s 30 days after March 20th. It was down, the old strategy was down 13 and a half percent. So really, really tough.

month for the old momentum strategy, the new one was only down 8.6. So that’s 5%, 4%, and a bit better return. And then over the entire time period, was that we ran the strategy side by side. I’m looking here. It looks like it was 7 % outperformance. 7 % and a half.

Mark (12:41)
And that’s an absolute number just between February 28 and whatever date. It’s not a number, it’s just clean…

I’m really excited about this new strategy. We’re now rolling it out for all clients,

Tarek (12:56)
Yes, yes we are. Roll that online.

Mark (12:59)
Even Isaac gets it in his.

Tarek (13:01)
He’s an Isaac’s got it. And, you know, I know we got to get going really quick. I do want to mention that Iran situation is is for the second. Your end situation is exactly the type of situation this drop the dogs works well for. Because as you can imagine, with Iran, that war starting, it changed. It changed what was driving returns and changed the regime. And now we were able to quickly say, OK, great. That’s fine. We don’t care. We’re going to get rid of the ones that don’t work anymore. And we’re adding the ones that do now.

And that’s the benefit. yeah. All right.

Isaak (13:34)
looking for risk management.

Mark (13:36)
Yeah, yeah, yeah, yeah. Back to the top. We’re looking at risk management. Innovation is a great way to manage risk. These screens, these discipline screens, great way to manage risk. Thirdly, diversifying across different completely complementary strategies is another great way to manage risk. We actually think we have a case to argue that we’re as good as the banks.

Maybe better. Love you guys. Thank you.