In my world I get to talk to a great many folks across a very broad cross-section of financial knowledge and literacy. Some of them have titles like Doctor because they have studied economics or behavioral finance (for quite some time and are recognized for the expertise that they have developed). Some are pure traders who rely on things like market momentum and other technical factors to assist them with their decision making and yet others have a Finance education (CFA) and do in-depth research on specific companies and are masters of understanding the "fundamentals" for finding value in a company in which they might invest.
My job, in a nutshell, is to listen, learn and bring a great deal of this information to my clients in terms that they might understand. Some folks may have a greater understanding than others. Some folks want to understand at different levels than others. Some just put their full faith in my/our ability to know what is right for them. I certainly do not take that lightly.
I do hear lots of commentary about what other advisors do (and don't do) because we are still growing our business and interviewing with plenty of prospective clients.
Lately, I have been hearing a lot about how (now that equity markets are up) folks are feeling better than they were at the beginning of 2016 (we seem to get a significantly higher number of in bound calls when equity markets are more volatile).
The common denominator of a large number of my conversations reveals that so many have a very limited grasp of how much risk they actually have in their respective portfolios.
Most advisors really don't want you to know.
If portfolios are rising in value, it is human nature to be less concerned (and you are less likely to be paying close attention). In fact, it should be the exact opposite. You want to be asking yourself (and your advisor): "what is the downside potential from here?" and "how well am I protected?".
If you get a "don't worry about it" type of response, your antennae should pop up.
Every investor should have a deep understanding of their risk profile: what happens when the market (relatively complacent at the moment, despite some potential for a shock) all of a sudden gets volatile. Because, as history has revealed, when things do turn ugly, advisors tend to vanish and that discussion may be difficult to come by.
As I asked in last night's client webinar: http://highrockcapital.ca/current-edition-of-the-weekly-webinar.html
Would you like your portfolio to look like this? (a new High Rock client's old portfolio, before High Rock):
or this? (an actual High Rock client)
(Over the exact same time period)
As I have said before, it is all about not losing sleep.
Remember that historical returns are in no way a guarantee of future returns, but at High Rock we work darn hard to get our clients the best possible risk-adjusted returns as we possibly can.
If you would like to receive this blog directly to your inbox...
Scott Tomenson,CIM Managing Partner, Chief Investment Strategist