The industry is in desperate need of a wake-up call. Gimmicks and half-truths seem to be the most popular response to questions of value. Instead of learning from other service industries, advisors and their firms are burying their heads in the sand. Notwithstanding, the current health and economic crisis, we are at a crossroads on how professional, expert advice will be understood and sold in the future.
The democratization of investing has placed the value of a traditional financial advisor into question. The industry has responded by arguing price, access or performance are the most important differentiators for an investor to consider. I would submit that honesty is the single most important quality to look for when selecting an advisor.
Consider the foundation of the advisor/advisee relationship. The consumer of the advice is placing trust in the information provided by the individual giving the advice. It is a transaction whose only value is based on the accuracy of the advice given. This entire arrangement lends itself well to a fiduciary obligation and is a main point I traditionally raise when discussing the competing standards of care.
Beyond the obvious of doing right by clients, truth can be the most powerful sales tool an advisor has at their disposal. The ease of access to information has led to highly educated consumers. These are clients that know more and can ask better questions than ever before. This means expect to be fact checked on everything you say. Honesty and candor are rewarded as this same educated consumer can easily reconcile what you said and what they have read.
Kingsview Partners and all the Wealth Managers within our firm are dedicated to remaking the wealth management client experience. Direct, honest advice regardless of how uncomfortable the conversation – is the standard. Combining this client service ethic with the tools that offered by an independent firm, are what turn the solutions recommended into reality.
Kingsview Partners, through its subsidiaries provides comprehensive services to address a diverse set of client needs. Many advisors believe that joining an RIA will come at a sacrifice of most of their non advisory business lines. While of course there is a fair amount of nuance individually, for most, this simply is not the case. Independence is a cornerstone of best interest. Without competitive options to provide the tools necessary, captive advisors are serving the wrong master.
We cannot always be the smartest person in the room, offer the best performing portfolio, or make fantasy into reality. A sustainable service business is built on a transparent value proposition. The ability to meet and exceed expectations starts with the truth. Honesty is your best quality, use it liberally.
Kingsview is proud to announce that Partners Phil Williams and Joshua Kammerer have joined the firm on April 9, 2020. The addition of Phil and Joshua further cements Kingsview Partner’s presence in the great state of Indiana with this second location.
Phil has had a career spanning over two decades where he served clients at some of the industry’s largest firms. Joshua has held various positions within the financial services industry before joining Kingsview. The team most recently served their clients at Merrill Lynch Wealth Management in central Indiana where they managed over $100 million in client assets.
Phil and Joshua are excited to offer clients a fiduciary standard of care at their new office which is conveniently located just outside of Indianapolis. “Only well supported and prudent financial professionals will be prepared to face the changes this industry is experiencing… and the challenges facing our clients.” noted CEO Sean McGillivray. “Today, one thing is abundantly clear, an independent registered investment advisor is uniquely positioned to provide clients with comprehensive and actionable advice. Having Joshua and Phil as partners is a huge help in our mission to do better for clients and a great benefit to the people of Indiana.”
Joshua and Phil’s desire to put clients first is in perfect alignment with Kingsview’s client servicing ethic and independent platform. Their ongoing passion of finding ideal solutions to each client’s individual needs and assisting them in assuring those goals are met makes them uniquely qualified Wealth Manager Partnes who will carry on the firm’s mission to Elevate the Standard of Care.
Joshua and Phil will continue to deliver measured and personalized advice to clients, embracing the firm’s no-nonsense approach to advice, investment management and financial planning. “We are excited to have both Josh and Phil as partners and their deep experience will be a resource to clients,” noted Managing Director of Business Development Aaron Klemow. “Their approach puts the interest of clients first which will continue to advance our desire to transform the industry.”
The current situation is a unique one in that we are experiencing a medical emergency coupled with a market downturn.
Clients need advisor direction now more than ever. Advisors must be the steady hand as well as the expert that guides through these troubled times.
We are one day closer to getting back to normal. Advisors need to take this time to focus on client service and remaining present and calm.
Senior Vice President Paul Nolte, CFA®
As of 3/20/2020 there is still a lack of data and a ton of speculation.
Jobless claims jumped significantly this week.
Will not be able to synthesize data for the next 3-4 weeks, which is why the market has been acting as volatile as it has been.
At some point in the in the next 6 months to a year, we will return to what passes for “normal”.
Based on graph provided by S&P Dow Jones Indices, anything above a 12 P/E (S&P500), 5 years from now, returns will be in excess of the 5yr treasury.
This is the 6th time since the Great Depression in which we have seen the market drop in excess of 30%
Outside of the Great Depression, the average recovery rate to all time highs has been 5 years
Assuming that 5-year recovery stands, that means an annualized rate of return of 7.5% (equity only)
Should we recover back to all time highs in 3 years, that equates to an annualized return of 12.25% (equity only)
As bad as things look today, as long as we get through the summer months and get back to business as usual, we expect to see earnings and stock market returns pick up and begin to realize reasonable rates of return.
Chief Technical Analyst Buff Dormeier, CMT®
Fundamental data is being met with tremendous uncertainty.
Following the big institutions employing the sharpest minds leads to a clearer path.
Since testing previous resistance level of 2725 (S&P500) a few times last week, the market sliced though resistance level like “a hot knife through butter” and dropped another 10%
Most critical event was the trend of money flow, which turned negative as of last week.
Only have to go back to August of 2019 to see similar capital flow levels, but back to August of 2016 to experience similar price pull back.
Capital flows, although trending down and negative, indicate the “smart money” (large institutions) are waiting out the situation.
Patience is what the market is calling for
Advance Decline line is holding up and still above trend. This means market still has the liquidity, or fuel, to trend higher.
Fed is throwing everything they can at the market. If we take a step back and look at the strong economy we had coming into the market decline, the stimulus provided by the Fed can act as rocket fuel when the market rebounds and the cloud of uncertainty transfers to rays of hope. “Blink and you will likely miss the run up.”
Big money may be nibbling but have not stepped in yet.
TAKEAWAY – Be patient. Work in cash slowly until we have a clear sign from the larger institutions.
Managing Director – David Summer, CFA® Arkadios Capital
Illiquidity is the major driver if market dislocation.
Historically, municipal bonds are supposed to be more of a safe haven relative to corporate bonds.
10-year municipal bond began 2020 yielding 1.5%. By March 9th, .81% (AAA Muni). As of March 20th, AAA muni yielding ~2.9%. 43bps wider (spread) on the day and around 100bps wider (spread) over the last 3 days.
Why is this happening? LIQUIDUTY. Large amount of bonds being put to market (funds/ETFs/money managers) and nobody is on the other side to buy.
Banks are not doing a lot of buying and individuals are not buying due to net outflows. More bond sellers than buyers
For a buy and hold investor, there is opportunity to buy quality municipal bonds and corporate bonds at yield levels that we haven’t seen in years.
Hopefully the actions of the Federal Reserve will go a long way towards helping this liquidity situation. If they are successful, I think we will see bond bid/ask spreads narrowing, and bond ETF price discounts reduced.
Asset classes have dislocated from reality. Fundamentals and technicals are out the window and clients are looking for guidance from their advisor. These are the times that the value of a professional Wealth Manager will ultimately be most appreciated and have the largest positive impact on a client’s future. You must be present for your clients during this time.
Resist the urge to hypothesize on a game plan. The situation is fluid and long-term investors should ignore short term moves (regardless of the size and scale). The pricing mechanisms in the market are clearly broken short term which will provide future opportunity, but we should allow the crisis to unfold to get a better sense of the total economic impact.
Helping investors understand and quantify “crisis risk” is also important. We are in the 2nd and 3rd deviation of statistical data sets. This is the 5% of the non-quantifiable risk that all investors accept when allocating capital. This risk doesn’t destroy diversification, nor the prudent measures put in place when creating portfolios, but it does make investors act irrational when these events occur. Long-term investors should be reminded of this and the reason why we allocated to risk assets.
Beyond the portfolio, our advice should be a measured voice in a sea of noise. Be a steward of verified and reliable data effecting your clients. Do not engage in rumor or hysteria. We have a duty as fiduciaries to act in an impartial and prudent matter. This means helping clients make wise decisions both financially and personally.
Check in with your clients in the risk demographics (60 years and older) or anyone with a preexisting health condition. Make sure they have adequate resources (food, water and medicine) or have support to get these crucial items. We must help each other through this crisis, and I can think of no better person than their trusted advisor.
Other follow up ideas/strategies:
Providing clients an update on your office hours/sanitization procedures/staffing levels.
Make clients aware of online tools (custodian website access, Orion portal and Money Guide Pro planning).
Ensure clients who have recurring money movement instructions have sufficient cash to cover their individual needs.
Guide clients with margin or secured lines on potential calls or overdraft.
Give clients the opportunity to use the firm’s virtual meeting software as a way to replace in-person meetings and travel.
We are Wealth Managers, we provide so much more than investment advice. We are friends, coaches, clear minds and advocates for our clients. Let’s us continue to be that influence in our client’s lives.
