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Advisor Perspectives
Insights into the world of high- and ultra-high net worth investing
November 10, 2008- Vol 2, Issue 46
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Consumer spending is
undeniably the engine driving the US economy and, without a resurgence,
prospects for a recovery are dim. We speak with Craig Johnson, President Customer Growth Partners and a leading expert on
consumer spending and the retail industries, for his forecast on the most important sector of the
economy.
Developing strong relationships with
clients is not just about investment choices and fund performance.
Increasingly, it's about understanding critical interpersonal elements that
need to be addressed alongside portfolio-building strategies. A new white paper, from Janus Labs, shows
what it takes to create a 5-star client
experience.
Mark Kritzman of Windham Capital is rewriting conventional wisdom about risk and
diversification. His concept of "turbulence," a statistical
measure of volatility and correlation, allows managers to construct portfolios that are more resilient in
today's markets conditions.
We recap a panel discussion featuring four distinguished faculty members of
the Harvard Business School, who discuss the priorities
of the incoming Obama administration and how it should deal with the credit
crisis.
Behavioral finance has given
us the theory of motivated reasoning,
which says that winners spend less time contemplating their success than
losers spend pondering their misfortune. We look at new research in this area, and how it explains investor behavior.
We have three guest contributions:
Wirehouses are struggling as clients worry about the safety of their assets
and advisors look for independence. Collin Cohen, President of
NorthStar, offers his plan for how wirehouses
can avoid extinction.
Dave Banerjee of RND Resources looks at the changing regulatory environment and the
implications for advisors. He expects lawsuits to rise as portfolio
values fall, and provides guidance for implementing
proper compliance procedures.
Ron Surz provides an analysis of October performance and how styles, sectors, and regions fared during
one of the most difficult markets in history.
Lastly, we have a letter to the Editor and highlight some recent Advisor
Market Commentaries.
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Consumer Spending has Flat-Lined; When will
it Recover?
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Consumers stopped spending in mid-September, according to Craig Johnson, a
leading expert on the retail industry. Our interview with Johnson
examines the factors that affect consumer spending - energy prices, home
equity withdrawals, tax policies, and the structure of the retail industry
- and when the American consumer will start spending again.
Read the article
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Creating
a 5-Star Client Experience: A Practice Management Program from Janus Labs
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Janus Labs partnered with private wealth industry expert Russ Alan Prince
to quantify loyalty among wealthy investors. More than 900 affluent
investors were surveyed to better understand their actions and intentions
toward their primary advisors. The answers revealed surprising information
about affluent investors' expectations and the primary drivers of their
loyalty.
Read the article
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Portfolios
for Turbulent Times
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Traditionally, advisors have used software to navigate the efficient
frontier, based on estimates of risk (standard deviation) and return by
asset class. New research from Windham Capital shows that using a
statistical measure of turbulence can produce portfolios with better
risk-return profiles.
Read the article
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The
Obama Administration and the Credit Crisis
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On November
7, 2008, the Harvard
Business
School
hosted a panel discussion on the current financial crisis. Participants
shared their outlook on an Obama administration's impact on leadership, the
financial markets and real estate.
Read the article
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Measure
Twice, Invest Once: Motivated Reasoning and Behavioral Finance
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Convention wisdom is that winners accept their good fortune without undue
introspection, whereas losers disproportionately ponder their
failures. It follows that the additional time spent by losers
contemplating the reasons for their failure should lead to improvements in
their behavior. But new research suggests this is not case; losers
merely over- or under-react to new information, reinforcing or possibly
exaggerating their suboptimal behavior.
Read the Article
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Avoiding
the Path to Extinction: Wirehouses Must Empower Advisors to Keep Customers
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To address the problems they now face, Collin Cohen of NorthStar says
wirehouses can start by taking a hard look at how they attract and retain
staff and how they build a culture of holistic, quality service.
Cohen looks at how wirehouses can improve compensation structures, training
programs, and product strategy to avoid extinction.
Read the Article
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The
Unintended Consequences of a Regulated Environment
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Now that the election season has ended, legislators and regulators alike
will focus on fixing the financial crisis and not just talking about
it. They may begin proposing new rules and regulations to improve the
seemingly broken system. Financial advisors need to monitor these
proposals closely, as their very livelihoods will be impacted.
Compliance vendor Dave Banerjee describes a few regulatory areas that will
be addressed in the days, weeks, months, and years to come.
Read the Article
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Oktoberfist:
Digesting October's Sucker Punch
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We are experiencing the worst decade ever in stock market history, and it
just keeps deteriorating, says Ron Surz. Because of the 17% October loss,
the year 2008 could be legendary and could clinch the race for the worst
decade as well. We are now down 34% for the year-to-date, in an
inflationary environment that has increased 4% so far, so our real (net of
inflation loss) is 38%.
Read the Letters
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Letter
to the Editor and Highlights from Advisor Market Commentaries
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A reader comments on the economic analysis we have
published, suggesting that more attention should be paid to the issue of
unemployment.
Read the Letter
We highlight recent submissions to Advisor Market Commentaries:
Nouriel Roubini looks at the slate of programs proposed by the Obama
administration and their economic impact.
Read the Commentary
John Mauldin comments on the unemployment numbers, the statistical data
regarding economic recoveries, and the more general issue of deleveraging.
Read the Commentary
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Perspectives
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