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Portfolio Management Options | IFA Magazine November edition live

  • By Jason Stockwell

Hold your nerve – we live in interesting times

Making investment decisions on behalf of clients is never straightforward. Getting the right balance between a range of complementary asset classes over the long term so that the portfolio maximises the opportunities available whilst minimising the impact of volatility is a constant challenge for investment managers and advisers.

That job is somewhat easier in a rising market. Naturally, clients are more relaxed when they see the values of their portfolios rising. The greater use of wraps, platforms and technology has brought increased transparency to valuations. Clients can now see exactly what is going on in their portfolio at any given time. That’s all well and good when their investments are making money. It’s not so easy when things get more difficult and market volatility means investment values fall.

On that note, we’re now witnessing the latest market shakeout. After years of bull markets, October’s market falls, following concerns about the state of the global economy, have reminded us all of the value of having a diversified portfolio.

The B word

Steep declines in the US market earlier in the month led to waves of selling in the UK and across the globe. Asian stocks took a little longer to feel the full force of the negative winds. However, by late October, with further falls in US equities wiping out the gains for the year on the S&P 500 and the Dow Jones Industrial Average, Asian markets slumped. At the time of writing, Japan’s Nikkei 225 had sunk to a six-month low whilst Chinese and Hong Kong indices remained in bear market territory. The MSCI Asia Pacific index, a broad indicator of shares in the region, had fallen 20.3% from the year-to-date high set on 29 January. Those more technically-minded readers will of course have twigged that the 20% figure signals the words “bear market” – something we haven’t been used to using for some years now.

Whilst the latest bout of volatility is unlikely to have taken IFA Magazine readers by surprise, it reinforces the need for strong communication with clients. Even the most resilient are likely to need some reassurance from their financial planners and advisers during such times of volatility. They need a reminder that their investment portfolio has been designed for the long term and that the best course of action is to sit tight, and ride out any periods of volatility.

It’s certainly an interesting time for us to bring you this month’s special focus on portfolio management options, which you will find later in the magazine. Whether you outsource the investment management service for your clients or manage their portfolios in house, the current market conditions means a focus on keeping your nerve and reminding clients of the long term focus of financial planning is key.

What next?

No doubt, the question you will want answered is to know what will happen next. Sadly, I must report that the IFA Magazine crystal ball is a little cloudy at the moment. The International Monetary Fund has lowered its forecast for global growth this year and next, partly due to trade protectionism. With so much uncertainty on the horizon, investors and their advisers will need to remain vigilant and steadfast in their commitment to riding out the market troughs and waiting for the inevitable pick up in due course. Of course, on the plus side, those investors with significant cash balances are well placed to pick up some bargains as the shake out throws up some excellent opportunities. The old adage of “buy on weakness, sell on strength” has never been more salient.

Sue Whitbread

Editor, IFA Magazine

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