The Assisination of Asset Allocation

During the last 36 years the financial advisory profession has been in a state of continuous rapid evolution. What new clients want from advisors today is not that different from what they wanted 36 years ago. However, what is different are the tools they use and the way they present their information to clients. Sometimes as changes were taking place it felt like they were reinventing what financial planning was and who financial planners were.

It appears to me, that, although disguised as how to manage a client’s assets, most of these changes were more about how to sell products to clients. When the stock markets are on a bull market tear moving up, like those of the second half of the 1900s, anyone can pick good investments and everyone wants to become a financial advisor and rack in the profits. However, when stock markets are in a bear market free fall, like those of 1987, 1990, 2000, 2001, 2002, 2008 and 2009, very few planners have the knowledge and experience to protect their clients during these stock market free fall. Yet the stock markets do send warning signals. We simply need to understand and be willing to pay attention to what the markets are saying.

After the Credit Crisis and Economic Meltdown of 2008, naive investors should be assessing their performance and that of their financial advisor’s. Ask your financial advisor how they get paid and how long they have been in business? There is a time and a place for all types of financial advisors and ways advisors are paid. However, if they get paid the same whether you make money or lose money or have been in the business for less than 20 years, you may want to look even closer at your performance with that advisor.

The first decade of the 21st Century will not be over until the end of 2009; however, through December 31, 2008, the S&P 500 has lost a total of 32.9%, for an average annual rate of return of -4.4%. For every $100,000 invested January 1, 2000, investors would have $67,251 on December 31, 2008. The S&P 500 will need to have a return in excess of 41.7% in 2009 in order to avoid it becoming the worst investment decade on record. The normal asset allocation’s buy and hold has not worked during this decade. Has your financial advisor made you money during that period of time?

I am not saying you should become a day trader, but if you could detect, in advance, major meltdowns like 2008 wouldn’t you be better off to try and reduce or avoid their effects on your investments?

The majority of financial advisors, asset managers and wealth managers expected their clients to ride the 2008 markets down and then back up. I am not so sure that this is the best thing to do? I was warning clients about the coming recession in the fall of 2006 and took steps to limit client losses. This eBook is intended to:

1. Suggest that Modern Portfolio theory, asset allocation and buy and hold needs to be tweaked.
2. Show you how to foresee major market meltdowns.
3. Show you how to limit the major market meltdown’s effects on your investments.
4. When and how to get back into investments if you have gotten out.
5. How to find a financial advisor who can help you with this process.

About the author

Ted Feight, CFP®

I have been an asset, financial, life and wealth manager for 36 years. During that time the profession has been in a state of rapid evolution. What my core clients expect of me today is very different from what they expected 36 years ago When I started, clients were just beginning to invest and had little. Now many are near and or are retired, and have accumulated a great deal.
I believe I have given my clients peace of mind and comfort that occurs when they have had a trusted relationship with someone for many years. What keeps my clients coming back to us is not product, but the confidence that someone is looking out for their best interest, listening to what they are saying and serving as a partner in helping them get where they want to be. Who else has asked the questions about who they are, where do they want to go, and what drives them? I have been my clients' sounding board, confidant, coach, guru and in the end the stronger the relationship we have had, the greater were their successes. We do not always have the "Be your client's best friend" type of relationship but, in the end, I want to be their "go to" guy when they need questions answered or need help.


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