ETF Trends
ETF Trends

What are the concerns you’re hearing these days from your clients?  If you’re like most financial advisors, those concerns probably include one or more of the following:

1.“I’m nervous that the bull market in stocks is well into its seventh year without a major correction, and I’m concerned that a severe downturn is just around the corner.  I’d like to avoid that, of course, but I can’t afford to miss the market gains if the bull market persists.”

2.“I’m annoyed that my portfolio, which is diversified according to your recommendations, has not been keeping pace with the broad equity market for several years now.”

3.“I need income from my portfolio, but I’m troubled by what I’m hearing about the prospects for fixed income investments in a rising interest rate environment.”

4.“I want a stable portfolio and I understand that that’s why you have me invested in so‐called alternatives, but I am very dissatisfied with their performance.”

You know that the first concern is a real problem, since you believe that equities represent the one truly essential component in virtually all your clients’ portfolios, and you agree that missing out on stock market appreciation may jeopardize the success of their financial plans.  You share your clients’ apprehension about the inevitable severe downturn, but you’re not comfortable responding by timing the markets — that’s not a true and reliable skill, and you feel it would be imprudent to make market‐timing bets with your clients’ hard‐earned assets.

With respect to the second concern, you’re probably feeling some fatigue continually explaining the long term benefits of asset allocation and broad portfolio diversification to your clients.  You still believe in those bedrock concepts, but you know that if we were to experience another market disruption on the scale of 2008‐2009, contagion across asset classes may again set in, and diversification will not protect your clients from harm.

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