No Dummy Can Crash Proof Client Portfolios | ETF Trends

Dear Advisor,

Investment markets have produced strong returns. But they also produce anxiety during uncertain times. Auour is here to help reduce that anxiety.

The volatility and the emotions it produces are the cost of markets’ historical solid returns. Those emotional swings are an incredibly tough pill to swallow and a big ask of your clients.

For your clients, these accounts aren’t just numbers on a spreadsheet. They are their child’s college fund, their chance to retire early, buy their first house, or maybe their second if they’re lucky.

Suffering through a significant loss and then waiting for the rebound is unacceptable for most of your clientele.

How do you tell your clients to stay in the market when it feels like they should run, or not get too greedy when it looks like the markets are never going to crash?

As financial advisors, you are not only responsible for helping your clients determine suitable portfolios for them. You also must help them fight against their worst instincts.

So how do you accomplish this? How do you rationalize with your client when it feels like their life is on the line?

We are glad you asked because that’s what we are here to talk about!

In the 80s, conversations were about telling clients that a healthy mix of stocks and bonds was enough to have a successful outcome. For the past 40 years, the conversation continued with a focus on adding more and more asset classes to the mix.

However, asset classes still tend to move together during times of market disruption, with experience showing that the traditional portfolio construction process may no longer be enough to reach your client’s goals. The process is changing.

Not only should your portfolio be diversified among asset classes, but also by the types of strategies implemented.

Advisors are moving towards a modern approach to portfolio construction that aims to combine the strengths of strategic and tactical allocators. Multiple perspectives. One common goal.

Markets continue to get more complicated, and the threats are not easily foreseen. As the pandemic and elevated inflation have shown, static diversification and market-following strategies are too rigid for our ever-changing world.

Consider your clients’ portfolios as a car that intends to navigate to a known destination. The strategic segment focuses on the optimal route to the goal—considering the various highways (asset classes) that can efficiently reach the desired endpoint. A strategic allocator acts as the GPS, determined to actively re-route as necessary.

However, routing your path does not guarantee a safe passage to the destination.

Obstacles can and do present themselves, and the unexpected should be expected.

That is where a sound tactical strategist can help.

Auour is a strategist that acts as the crash mitigation system. Cars have advanced to include anti-locking breaks, airbags, and lane detection systems.

Portfolios need to advance also to guard against market crashes.

Auour will not be able to avoid the crash altogether, but we will minimize its impact of it, providing a better chance that the client can arrive safely at their destination. We monitor the road ahead and bring awareness to obstacles along the way.

Risk comes in many different forms, with no one manager able to see them all. Utilizing the multi-strategy approach brings multiple perspectives to play and provides a more comfortable ride for your client.

We hope Auour will be a part of the journey

Joe Hosler
Auour Investments

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