Demand For Wealth Managers

On 05/27/2011, in Investment Strategies, by Jordan Wilson

Some interesting bits of information in this article from The Wall Street Journal.

First, it shows that individuals with over USD 1 million in bankable assets are increasing their use of professional asset managers. According to the article, 

“Only 47% of investors with $1 million to $5 million of investible assets want to take an active role in managing their investments, according the Chicago firm. That is down from 65% in 2010 and 69% in 2009.”

Increased volatility and negative returns in many investment markets may cause investors to see value in the services of professional wealth managers.

This is good news if you are, or are contemplating a career, as a wealth manager.

Second, the article suggests the current volatility will continue over the short to medium terms.

“… in Mr. Penney’s view, the storm isn’t over. He believes we are in the 11th year of a secular bear market—and the shortest secular bear on record lasted 17 years.”

While I am not certain that the current problems will continue for another 6 years – one would be a fool to look that far in the future given the immediate economic issues in Europe (especially Greece), the high U.S. deficits, the U.S. presidential election in 2012, etc – I am quite pessimistic over the short term.

As such, a shift in investment strategy “to a more tactical and defensive stance” is likely good advice.

I differ slightly in that I do not see a shift to defensive positions as mutually exclusive from a buy and hold approach. As we shall see when we discuss portfolio rebalancing, one can maintain an overall buy and hold system but alter it through specific tactics.

As well, a well diversified portfolio should have a suitable asset mix to provide protection against market downturns. As I have said before, this precludes an individual from fully participating in bull markets, but you receive some protection when the markets fall. And you will be able to sleep soundly at night with a diversified portfolio.


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