From the July 2008 issue of Investment Advisor • Subscribe!

Strength From Weakness

That which makes us strong is often our greatest weakness. That which provides us with our greatest advantage usually is our biggest handicap as well.

That which makes us strong is often our greatest weakness. That which provides us with our greatest advantage usually is our biggest handicap as well.

What has made this country great is the fact that our Founders eschewed the old ways, turning their backs on the Europe of privileged classes and established religions and hidebound traditions. Those Founders made things up as they went along (and took pains to temper the tendencies of the mob--Exhibit A in this Presidential election season being the electoral college), though they were all students of the Enlightenment which was forged in, well, Europe.

Unencumbered by the constraints of tradition, we built an uneven but in the end efficient, wealth building, market-based economy where pluck and risk-taking was rewarded, no matter your pedigree.

So what's the problem? The rest of the world has caught up. No less an authority than Alan Greenspan pointed out at the Pershing Insite conference in early June that "we have emerged in the last 50 years into a global environment." Yes, Dr. Greenspan said, "the world is turbulent," but argued that it "will need to stay that way to maintain the standard of living" enjoyed by the developed world, while acknowledging the "angst among those on the wrong side of creative destruction."

I would argue that globalization has now come to the provision of investment advice, to the profession of financial planning. It has come to your clients who may be American citizens but have homes in Tuscany, or are thinking of retiring to Costa Rica, or may have a spouse who is not an American citizen. The world grows smaller day by day.

During the Pershing conference I spoke to Chairman and CEO Rich Brueckner about this very issue. Having earlier spoken with Pershing Advisor Solutions CEO (and longtime IA columnist) Mark Tibergien who said one of PAS's differentiators in the custodian business was Pershing's global reach, I figured Brueckner would be comfortable with a global approach. I wasn't wrong. He provided me with some data from the Treasury Department showing that net purchases of long-term foreign securities by U.S. investors reached $270 billion in 2006 (in the 1990s it stayed pretty consistent at $100 billion/year). At the same time, the net purchase of U.S. securities by foreigners reached a record of $987 billion in 2006.

Clearly, the world has gotten smaller not only for Asian and European investors who appear to like U.S. securities, but many of your clients are investing in non-U.S. securities as well. "Just in the last 10 years alone," says Brueckner, "the world has changed," and Brueckner argues that overseas, the "financial services marketplace will evolve like it has in the U.S."

Our cover story this month by Melanie Waddell talks about that evolution overseas, but also how it will affect you who operate in the U.S. for an overwhelmingly American clientele. Our second feature by the indomitable Olivia Mellan relates ways that you can serve an increasingly diverse client base back home.

But use your American attitude to better serve your current clients and attract new clients. Use your intelligence and your networking connections to hone your intercontinental planning skills. Use that classic American approach to solving problems to solving your clients' international challenges. You both will profit.

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