More and more clients are taking their money and going home or at least seeking second opinions. Given the events of the past decade and a half, this should come as no surprise as investors have seen two equity collapses in 2000 and 2008. Even now, with stock markets meaningfully off their bottoms and many moving to multi year highs, the level of uneasiness is palatable. The reasons that investors are being driven away are numerous:
- Investors are psychologically scarred and afraid to get back into equities because of their recent experience.
- A series of booms and busts and poor returns across all asset classes have left investors burned out. Many are deciding that investing is not such a great deal after all.
- Recent scandals have left investors believing the game is rigged against them and have left them wondering why they should participate in such an environment.
- Many investors are out of the market as they de-leverage excess credit consumption and rebuild their personal balance sheets.
- The trendless economy and markets (as harped on by the media) has caused a range bound market that simply makes trading too challenging for many participants.
- The mutual fund industry’s cost structure has chased investors to lower priced vehicle such as ETFs, which to the uninitiated appear to be the answer to all their problems.
Certainly there are a lot of issues that can trump the value placed on an advisor’s work. Advisor services are often valuable, so if they charge fair value for their advice then clients are well rewarded. Working is being productive. By doing even a small amount of soul searching as to where you spend your time, there are many not-so-obvious time wasters. One of the best ways to efficiently manage your time is to outsource asset management responsibilities which frees time from personally designing asset allocation strategies, selecting investments and writing tickets.
There is limited benefit to a client having their money with multiple advisors and institutions. In fact, the opposite is true. Multiple advisors and institutions can create the illusion of diversification and security, create more complexity and could be problematic for heirs. Clients who consolidate their finances find that they make more money and their life is simpler. It is also very likely that there is less risk to their plan and a greater probability that they are on a track to achieve their goals.