Posts Tagged ‘Wsj’
Using credible experts to help clients stick to their plans
Wednesday, January 25th, 2012
Warren Buffett has said it only takes two things for investors to succeed — having a sound plan and sticking to it…and it’s the sticking to it part where most people struggle.
Along similar lines, the key for advisors in helping clients succeed is not developing the right plan, it’s putting in place strategies to help clients stick to the plan once it’s developed.
That’s typically not a big problem when people are making money and investors feel rewarded for being in markets.
But it’s a huge issue in times like these, when it’s easy for Canadians to become anxious and discouraged…to go to cash with their existing investments and stop making RRSP contributions.
In light of that, here’s a strategy that can help clients maintain confidence and stick to their plans.
Providing perspective
In my conversations with Canadian investors, almost all want to deal with advisors who are generally positive but at the same time provide a balanced perspective; so don’t fall into the perma-bull “don’t worry be happy” camp.
That’s why you can’t dismiss the issues that global economies and stock markets are facing.
And with many clients, you can’t rely on just your own opinion or your firm’s research — in times like these, it’s helpful to provide support from trusted, third party sources.
The leading voices in the valuation debate
That’s the reason that in early July I conducted video interviews with both Jeremy Siegel and Robert Shiller, the two leading voices on the market valuations, with a view to presenting both sides of the argument on market valuations.
Both Siegel and Shiller are highly credible — they each called the tech meltdown and take a fact-based approach to their analysis.
Here’s the link to a March Wall Street Journal front page story that highlighted these two academics as the leading voices in the undervalued vs. overvalued debate: http://online.wsj.com/article/SB10001424052748704706304575107492632567802.html
Using the videos with clients
Last week, videos of the interviews with Siegel and Shiller were posted to the Clientinsights.ca website.
There are a couple of ways to use these interviews.
One is to email clients the one that supports your point of view.
Alternatively, you might want to send clients not just the one you agree with but both videos — and then talk about the contrary case that has been presented.
By demonstrating that you’ve looked at the full gamut of views rather than telling just one side of story, your ultimate recommendation has more power.
So if you’re recommending clients stay fully invested, it’s important to show clients you’ve examined the negative case.
And if you’re cautious and recommending cash, it’s helpful to demonstrate that you’re not ignoring the optimistic voices.
Doing this entails a longer, more detailed conversation — but it’s this kind of conversation that helps clients stick to their plan at the inevitable time when the market goes against the stance you’ve taken.
To watch videos of two of the interviews with Jeremy Siegel, click here:
Why stocks are undervalued
Responding on market concerns:
And these interviews summarize Robert Shiller’s views on the market:
A cautious outlook for stocks:
The impact of consumer confidence:
To watch a dozen different interviews with Jeremy Siegel and Robert Shiller, go to www.clientinsights.ca.
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Tags: Academics, Balanced Perspective, Canadian Investors, Canadians, Conversations, Credible Experts, Global Economies, Happy Camp, Jeremy Siegel, Market Valuations, Meltdown, Party Sources, Perma, Place Strategies, Rrsp Contributions, Stock Markets, Video Interviews, Wall Street Journal, Warren Buffett, Wsj
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Why Investors are ”Mad as Hell” … and What You Can Do About It
Wednesday, August 24th, 2011
Last Friday, Jason Zweig of the Wall Street Journal Street Journal wrote about fear and anger as the two dominant attitudes of American investors today; fear about their future and anger at those they see as responsible for the latest crisis. His column depicts many investors as intensely disillusioned, summoning up the phrase “I’m mad as hell and I’m not going to take it any more” made famous in the 1976 Oscar-winning film, Network.
While these sentiments are more pronounced in the United States, Canadians have many of the same concerns. And these worries aren’t limited to just “do it yourself” or older investors or those with modest assets. They cut across a broad range of ages and asset levels.
Today’s investor psyche has fundamental implications that will require changes in how you interact with clients. Before getting into how to respond, let’s look at what’s driving today’s mindset.
Why investors are afraid
In his article, Zweig pointed to three things that cause fear among investors:
Their finances
In a recent survey, 73% of Americans said they “worried about money” during the previous day, up from 56% in March of 2009, when there was serious talk of a global meltdown and another depression. Indicative of this anxiety was a recent New York Times article on dollar stores which pointed to a “new consumerism” among the affluent, as households with incomes over $70,000 today make up almost 25% of dollar store customers and are the fastest growing segment of their shoppers.
Their future
Nearly 6 in 10 Americans say that the latest market downturn will limit the opportunities to pursue their future objectives. Only 11% say they have “strong or very strong control of their financial lives”, down from 17% in March of 2009.
The way ahead for the United States
Over half of Americans are moderately, or very fearful about the future of the United States. These fears aren’t new. Even before the events of 2008, surveys showed the current generation of Americans to be the first on record unsure about whether their children would be better off than they are.
Continued uncertainty about house prices and unemployment has only made these fears worse, and the downgrade of US debt and extensive media coverage about the deficit and debt ceiling have also contributed to this anxiety.
What makes people angry?
The survey found that 59% of Americans are moderately or very angry about the challenges facing the United States; but their anger goes beyond that, to real frustration with the way the financial industry operates today.
In his column, Zweig writes: “People seem to feel like bystanders at their own financial lives — almost as if they were spectators at a race track equally incapable of stopping an impending car crash and of tearing their eyes away from it.”
In a video interview accompanying the article, Zweig said that many investors feel victimized by a system rigged against them, constructed by policy makers, regulators, banks and Wall Street firms for their own benefit. More than at any time since the 1930s, investors feel the rules are tilted against them. This has contributed to a “buyer’s strike” on stocks. While existing holdings aren’t being sold, new money is staying on the sidelines, even in the face of record low returns on bonds and cash.
Rebuilding confidence
When it comes to their financial advisors, investors tend to be sceptical rather than angry. Even when investors like and respect their advisor, many say advisors oversold their ability to manage risk. Even “conservative” portfolios were hit harder than was seen as possible, both in 2008 and in the past cycle. Another widespread complaint is that advisors have been too slow to act in the face of changing developments.
Whether these complaints are fair is irrelevant; they are real in the minds of many investors. Given that reality and the extent to which the confidence of many clients has been shaken, here are some guidelines for conversations to address some of today’s client anxiety.
1. Make face to face meetings your priority
Many advisors rarely meet with clients; depending on your business model, there may be annual reviews, sometimes not even that.
Clients may be okay with this in normal times … but recognize that these are not normal times. For the period ahead, your top priority should be offering to meet with any clients who are anxious or want to discuss their portfolio. Even if a meeting can’t take place for three or four weeks, the fact that it has been scheduled will reduce some of the stress that clients feel.
2. Start by listening
With many investors, feeling genuinely listened to is the first step on the path to rebuilding trust. In his best seller The Seven Habits of Highly Effective People, Stephen Covey put it well: ” Seek first to understand, then to be understood.”
Start meetings with something as simple as “Markets have made many investors anxious; tell me how you’re feeling.” Encourage clients to talk about their concerns with follow up questions. The best way to engage clients is by getting them to open up about how they really feel.
3. Acknowledge today’s real challenges,- but don’t overstate them either
Straight talk helps build trust. That means being upfront about the real concerns for the economy; don’t sugar-coat the challenges around debt, unemployment and housing prices throughout the developed world.
At the same time, you need to provide positive perspectives that help balance all the bad news. Given the scepticism about stocks as an asset class, big picture conversations about price earnings multiples compared to historical levels won’t always do that. “Focus on the long term” and “remember that stocks outperform over time” have worn thin with many clients. Instead, hone in on the earnings and financial health of companies that clients know and have confidence in; Apple, Procter and Gamble and Shoppers Drug Mart are all good examples of familiar names that reassure clients.
4. Re-examine the role of investments that generate cash
Many investors have money in cash that should be invested to achieve long term goals. Provided that they don’t need access to the funds for some time, an approach that can increase client confidence and get money off the sidelines is to focus on investments that pay steady income of 3% to 5%;blue chip consumer staple, utility and telecom stocks that pay healthy dividends and investment grade bonds are examples.
Share the research showing the historical market outperformance by companies that consistently raise dividends, versus those that hold them steady or don’t pay dividends at all. When deploying cash into the market, discuss doing this in stages over the next year; Not only does this reduce the risk of investing just before a big drop, but it sends your client the message that you’re not in a hurry to get your hands on their money.
5. Have candid conversations about the price of risk aversion
Times like these truly test clients’ tolerance for volatility. A weekend Globe and Mail story on why investors need an investment policy statement is an example. In a sample IPS, a 46 year old woman can tolerate a loss of 10% but a decline beyond a one year period would concern her. It’s hard to see how that leads to an investment mix with any chance of providing a reasonable long term return. It may be that this investor would prefer to work an extra five or ten years rather than take more risk, but at the very least her advisor needs to be crystal clear about the implications of the choice she’s making.
These kinds of markets create the need to talk about the losses that investors can withstand and still sleep at night on the one hand and the true cost of avoiding mid-term losses on the other. In some cases, this conversation will result in adjusting the risk in portfolios down, in others clients will conclude that they need to change their view on how much volatility they can live with. While studies generally question the value of guaranteed products, sometimes the guarantees on segregated funds or guaranteed minimum withdrawal benefit solutions can make the difference in clients’ comfort with more volatile investments.
6. Revisit portfolios more often
A common complaint is that advisors are too passive and portfolios too static. Many investors feel they’re just sitting there,“taking it.” That’s especially true with investors who own mutual funds and other managed solutions, and are often unaware of changes to their portfolios.
During markets like those of late, clients want to feel that their portfolios are changing to take advantage of opportunities. A common complaint from clients; “If my investments made sense a year ago, given all that’s gone on, how’s it possible that exactly the same investments make sense today?” In response, make a commitment to update clients quarterly on what’s happening to markets and any changes in portfolios as a result.
7. Identify options to help clients control their financial future
Jason Zweig’s article talked about a number of things stressing investors today, but feeling that they don’t have control of their financial future has to be at the top of the list.
A good financial advisor’s most important role is to work with clients to create a financial path to their long-term objectives, in the process helping them understand the options and tradeoffs available to achieve their goals. That process can give clients a feeling that they have choices and at least some measure of control of their financial future. If your conversations with clients achieve nothing else, then the time invested will be well spent.
Winston Churchill once said: “The pessimist sees the difficulty in every opportunity. The optimist sees the opportunity in every difficulty.” Right now, many clients are overwhelmed by all the bad news surrounding them. Great financial advisors are emotional anchors for investors, keeping the highs from being too high, and the lows from being too low. By putting these steps in motion, you will provide balance and help clients recapture a sense of realistic optimism about their future.
Here are Jason Zweig’s article and video interview from last Friday’s Wall Street Journal.
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Tags: Affluent, American Investors, Asset Levels, Cause Fear, Consumerism, Dollar Store, Dollar Stores, Fastest Growing Segment, Fundamental Implications, Global Meltdown, Households With Incomes, Jason Zweig, Last Friday, Market Downturn, New York Times, Older Investors, Store Customers, Wall Street Journal, Wsj, York Times Article
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More Articles to Send Anxious Clients
Wednesday, July 14th, 2010
Last week’s post with articles to send nervous clients got a great response.
In light of that, here are more articles from this weekend’s Barron’s , New York Times and Wall Street Journal that might reassure anxious clients.
First, the Chief Investment Officer of Harris Private Bank in Chicago looks at valuation, the economy, liquidity, psychology and momentum to make a strong case for U.S. equities.
Barrons.com – For Stocks, the Signs Point Up
And the cover story in today’s Barron’s outlines how the highest quality stocks have lagged in the recent run up – but are positioned to outperform going forward.
Barrons.com – Quality Counts
A story in Saturday’s Wall Street Journal highlighted the first upturn in manufacturing in nine months – with no signs of accompanying inflation pressures.
WSJ.com – Industrial Output Climbs, While Prices Stay Steady
An article in last week’s New York Times reported on a positive outlook from the Federal Reserve Board.
BUSINESS / ECONOMY | August 13, 2009
Fed Views Recession as Near an End
And on Friday the New York Times also reported on positive indications for global trade.
BUSINESS / ECONOMY | August 15, 2009
Off the Charts: Hints of a Rebound in Global Trade
For more articles to email clients, every Wednesday Greenlightadvisor.com posts articles from the previous week to their website.
For last Wednesday’s articles, click here:
http://greenlightadvisor.com/advisor/?p=548
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Tags: August 15, Barron, Board Business, Business Economy, Chief Investment Officer, Email Clients, Federal Reserve, Federal Reserve Board, Global Trade Business, Inflation Pressures, Liquidity, New York Times, Nine Months, Positive Outlook, Private Bank, Quality Stocks, Recession, Upturn, Wall Street Journal, Wsj
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4 Articles to Send Nervous Clients
Tuesday, March 30th, 2010
Even with the market bounceback in 2009, many clients are still anxious, often stemming from negative media coverage of prospects for the economy and markets.
If you run into this, here are recent articles that might help calm nervous clients.
Emerging markets soar past their doubters
New York Times — Tuesday December 29
Jeremy Siegel on the Undervaluation in US equities
Advisor Perspectives — Tuesday December 29
The best is yet to come — the full benefits of technology are on their way
Wall Street Journal — Monday, December 28
The case for optimism on the economy
Wall Street Journal — Tuesday December 15
WSJ.com — Opinion: The Case for Optimism on the Economy
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Tags: Advertisement, Amp, Benefits Of Technology, Bounceback, December 28, December 29, Economy, Emc, Emerging Markets, Jeremy Siegel, Negative Media Coverage, New York Times, Nytimes, Optimism, Perspectives, Prospects, Recent Articles, Soar, Wall Street, Wall Street Journal, Wsj
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Articles You Can Send to Clients (July 15, 2009)
Friday, December 18th, 2009
As prefaced in today’s newsletter:
During this period of heightened requirements for communications to your clients, keeping in touch with your network of clients and prospects is critical. While there is no substitute for one-to-one meetings and phone calls, weekly or periodic emails are an effective way of staying visible and developing frank and open discussions with both clients and prospects.
Starting today, and every Wednesday from today, as a service to you, we will be sending a listing of 3–5 articles from high value sources (e.g., G&M, WSJ, NYTimes) that you may use to send to your clients and prospects as part of your communications strategy. We will also include some helpful prefacing notes that you may use as well.
Keep in touch, and , by the way, if and when you find useful articles, we would be extremely grateful for your submissions.
Below is this week’s selection of articles that you can send to clients.
Here are three articles that I thought you might find interesting which discuss the economic outlook of Lakshman Achuthan, one of the foremost economists in the US, the outlook for stocks from the Wizard of Wharton, Jeremy Siegel, and an article from the Wall Street Journal about the opportunity in income/dividend paying stocks (as a general heading).
The Recession is Over!
ECRI declares the recession over with the US economy tracking up to 2.4% in the third quarter…
http://www.slate.com/id/2222742/
Source: Slate.com/Washington Post
There is a great deal of skepticism about the economy, and many mixed offerings in terms of opinion on outlook. The Slate.com article, The Recession is Over!, discusses the contrasting view of Lakshman Achuthan, of ECRI (Economic Cycles Research Institute), one of the most highly regarded independent economists, known for a long list of accurate and prescient economic forecasts, who points out that three significant leading indicators are currently flashing green.
They’re (ECRI) the Spocks of the economic forecasting crowd—unemotional, uninvested in anything but the logic of what history and their dashboard tell them. “From our vantage point, every week and every month our call is getting stronger, not weaker, including over the last few weeks,” says Achuthan. “The recession is ending somewhere this summer.” In fact, it may already be over.
Jeremy Siegel: ‘The Market Will Stage Another Recovery’,
Knowledge@Wharton, June 24, 2009
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2267
Jeremy Siegel, Wharton School Professor, Director of Wisdom Tree ETFs and author of the investing classic, Stocks for the Long Run, says that now that the recession will not turn into a depression call stocks are poised for a recovery.
Siegel: Well, of course, we had a tremendous downturn from January to March, a plunge. And we’ve had recovery back to those January levels, basically. So year-to-date, we’re sort of even on the market. Actually, in Asia, we’re well above it. Markets are about 20% higher than the year-end. For the emerging markets and the Asian markets, there’s been a much better recovery, because there’s been a better economic recovery.
It’s always very hard to predict the stock market. It’s certainly taking a breather now. I maintain that if we can keep oil at the $70 level, and if interest rates on long-term bonds, 10-year bonds, don’t go much above 4%, the market will stage another recovery that could bring it up another 15% to 20% — really, by year-end. It’s hard to know exactly when that will take place. But I think people really see [that] the recovery is coming. Again, just like they were relieved that, “Oh, it’s not a depression, it looks like it’s ending,” [they see] we are getting some recovery. I think if the [price of oil] and interest rates … remain stable and low, we will put more money in stocks. There’s still over $4 trillion in money funds that are earning about 1% or less, which is not as attractive as rates that I believe could be moved into the market, once prospects of the recovery seem more certain.
********
Bright Outlook for Income Investors
July 4, 2009 — Wall Street Journal — By Tom Lauricella
Out of last year’s turmoil in markets a bright spot has emerged for investors looking for income — The payout on dividend-paying (or income-paying) stocks has gone up as a result of share prices falling further than payouts.
The main point of this article is that battered high quality dividend stocks as well as government bonds are now offering higher real rates of return as a result of inflation running at 2% or lower.
Yes, dividends may have plunged — but share prices have fallen further. Translation: The percentage payout of many dividend-paying stocks has actually gone up. Some traditional yield plays — such as utilities — look attractive. Bond funds, aside from U.S. government bond funds, offer other options.
And investors shouldn’t dwell too much on yields that seem low. What matters is how they compare to inflation.
“When investors see a yield of 4% or even 3.5%, it looks like a low-yield investment,” says Fran Kinniry, head of the investment strategy group at Vanguard Group. “But with inflation running at 2% or lower, the yields on fixed income or even equities aren’t that poor.”
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Tags: Communications Strategy, Dashboard, Dividend Paying Stocks, Dividend Stocks, Earnings, Economic Cycles, Economic Forecasting, Economic Forecasts, Economic Outlook, Economists, Income Dividend, Jeremy Siegel, Lakshman, Leading Indicators, Offerings, Open Discussions, Periodic Emails, Prospects, Recession, Skepticism, Slate, Spocks, Vantage Point, Wall Street Journal, Washington Post, Wharton, Wsj
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