The Week When Advice Mattered

I like to say that a good financial advisor needs to wear three hats: Teacher, Bouncer, Friend.

Teaching their clients what they need to know about saving, investing, asset allocation and planning so that everyone is on the same page. Bouncing out bad ideas or keeping clients from allowing the wrong ideas to disrupt their plans. Being a friend because, all things being equal, no one will listen to someone they don’t like and it is the advisor’s job to be there for a client when a sounding board or a word of encouragement is needed most.

Most advisors are particularly good at wearing one or two of these hats. An elite advisor does all three, every day, for the people who’ve entrusted them with their life’s savings.

The lead-up to this election, between leaked tapes and hacked emails and FBI involvement and everything else has been historically chaotic. Without taking a particular side, I think it is fair to say that both sides have contributed to the sense of disorientation that we all feel. I’ve had a “WTF is even going on?” moment pretty much every week over the last 16 months.

And tomorrow…anything could happen. A clean victory for one party’s Presidential candidate followed by the usual concession speech. A contested victory with no concession. A split popular/ electoral vote. A violent outburst. A cyber attack on the media or the electoral machinery. Threats of lawsuits and impeachments and other forms of mass protest.

And the market reaction could be even more volatile. Bonds, stocks, the US dollar, foreign markets – everything is on the table.

How to prepare for the inconceivable?

From our perspective, it starts with understanding why you’re investing in the first place – a detailed financial plan with hard objectives and goals.

Then it requires a good sense of historical context – there’s no precedent for the specific issues of this election, but there is plenty of precedent for potentially unruly elections or binary events that shock the nation. Being armed with this, on background, will be helpful when deciding what to do, even if it leads to the conclusion of not doing anything at all.

Finally, a portfolio must be durable enough in terms of construction so that it can withstand whatever outcome we end up with. Searching for tactics in the heat of the moment will not suffice and, indeed, could even be incredibly detrimental. An advisor who’s built a portfolio for their clients complete with checks, balances, offsetting exposures and clear rules of operation in advance stands a chance at helping their investors survive the week. An advisor who is reactive and makes changes on the fly based on the desperation of inbound phone calls or the minute-by-minute horse race being called in the media is most certainly setting things up for a major mistake.

Advice doesn’t matter everyday. There are long stretches of time throughout any given year where it’s not particularly important. There are entire years in which good counsel is completely taken for granted.

This, on the other hand, is the sort of week where getting the right guidance could mean a great deal – financially and emotionally.

It’s the week when advice mattered.

 

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  1. Weekend Reading: Trump Edition commented on Nov 13

    […] is where a financial advisor comes in handy. As Josh Brown says, a good advisor needs to wear three hats: Teacher, bouncer, and […]