An endowment cannot deplete whereas the portfolio of an 85 or 90 year old investor has more flexibility in this regard.
The takeaway for advisors is the need to make sure clients truly understand their time horizons and that their portfolios are being navigated toward their time horizon versus responding to short term events like a Green Mountain Coffee (NASDAQ:GMCR) popping 30% on a deal with Coca Cola (NYSE:KO) or a stretch of poor returns for emerging markets.
Whether anyone would manage the endowment differently makes for a fun discussion but the managers of the fund have isolated a strategy that they believe is the best path for the beneficiary of the endowment, the college, and have communicated why they believe this is the best path.
Advisors who take the time to do the same with their clients will have developed much stronger relationships with their clients and enhanced the sustainability of their practice.
This article was written by AdvisorShares ETF Strategist Roger Nusbaum.