Talking to Clients About Turmoil: Evensky, Cortazzo, Springer & More—a Slideshow

What leading advisors are saying to clients now about events in Japan and the Mideast

nyse floorDuring the markets and economic crisis of 2008-2009, research, and anecdotal evidence, revealed that the best advisors communicated often and in different ways with their clients. Their intent was to educate and commiserate, but the result was keeping clients invested in the market and reminding them that they had committed to a financial plan designed to protect their assets regardless of the fluctuations of the overall market and to help them reach their goals.

In the wake of the turmoil in the Mideast and the tragic earthquake, tsunami and nuclear plant crisis in Japan, the world’s third-largest economy, the AdvisorOne editorial team asked some leading advisors to share with their peers what they’re communicating to clients now, how they communicate, and what changes, if anything, they’re making to client portfolios.

We talked to Harold Evensky, Keith Springer, Mark Cortazzo, Mike Patton, Ben Warwick and others. Their thoughts and client communication strategies at this time of volatility are related on the pages following.

 

At times of crisis and market volatility, the best advisors reach out to their clients proactively. That’s the case with the five leading advisors that AdvisorOne editors contacted to hear what they’re telling clients now, and how.

HAROLD EVENSKY
Evensky & Katz

While there hasn’t been a spike in client calls in to his firm due to the crisis in Japan, reports Harold Evensky, founder of the RIA firm Evensky & Katz Wealth Management, he is reaching out to let them know that they “are monitoring” the unfolding situation in Japan and “talking to money managers to see what they are thinking.” 

Things are up in the air; until there’s a solution, or containment, there’s nothing to do. I don’t recommend changes in the portfolio,” he says. The firm abides by Evensky’s “five-year mantra” in which “everyone has plenty of liquidity built up,” for five years of expenses—because anything “less than a market cycle is not enough.” But for those clients who are feeling uneasy, they can lighten up short-term fixed-income positions, adding a bit more cash for “psychological liquidity.”

While clients are not calling for the most part, Evensky says, “The key is, that’s great—let’s get to them before they call us.” —Kate McBride

Read here a more complete version of Evensky’s thoughtson communicating with clients and portfolio building in crisis.

 

At times of crisis and market volatility, the best advisors reach out to their clients proactively. That’s the case with the five leading advisors that AdvisorOne editors contacted to hear what they’re telling clients now, and how.

KEITH SPRINGER
Springer Financial Advisors

When it comes to communicating with clients over any concerns they might have about the markets and the economy, or the impact of disasters like Japan or the turmoil in the Mideast, Springer says “I like to answer the question before it’s asked.”

Springer, the founder and president of the RIA firm Springer Financial Advisors in Sacramento, Calif., says he doesn’t “react to events unless they have a consequence,” and in his judgment, the events in Japan “will not have an effect on worldwide demand for goods and services; it won’t change.” 

In fact, Springer views the Japanese earthquake and its after-effects as positive for the Japanese economy, at least in the short run, while acknowledging the tragic nature of the events for the people of Japan. “Now they have an excuse for borrowing and spending,” he said in a Wednesday interview, referring to the Japanese government and its central bank.

In reaching out to regularly to clients through e-mail, Facebook and through his blog, Springer is informing clients that he’s “aware of what’s going on; that I have an opinion” on these economic and market events. “They know I’m not going to be perfect, but I’ll be damn close.” When informed that some advisors contacted for this article said they hadn’t reached out to their clients to educate or console over the recent events in Japan and the Mideast, he said that “most advisors are pretty much wimps; you don’t wake a sleeping dog.”

His conclusion on Japan? “It’s not the beginning of a stock market debacle like we had in 2008-2009.” —James J. Green

 

 

At times of crisis and market volatility, the best advisors reach out to their clients proactively. That’s the case with the five leading advisors that AdvisorOne editors contacted to hear what they’re telling clients now, and how.

MIKE PATTON
Integrity Wealth Management

Patton sends out a monthly newsletter to clients by e-mail that includes his take on the markets and the economy, but “at times like this, I communicate more often,” Patton said in an e-mail message on Tuesday.

Patton, who blogs for AdvisorOne weekly on practice management issues and writes regularly for Investment Advisor on his Road to Independence, sent out a message on Tuesday to clients of his RIA firm Integrity Wealth Management in Baton Rouge, La., whose title was timely and to the point: “Important News About Japan and Your Portfolio.”

From the conflicts in the Middle East to the state's budget crisis to the devastating earthquakes in Japan, there is no shortage of headline news. The story in Japan is very sad indeed. To compound the problem, Japan has been in an economic recessionary environment since shortly after its stock market bubble burst in 1989.

Japan did much the same as we did: they reduced interest rates and printed money (QE). When the printing was engaged, their market went up. However, when they stopped the presses, their market fell again.

The newsletter asks, “What may happen from here? Well, Japan will certainly need a lot of money to rebuild. This money could come from one of three places: donations, selling Japanese bonds, and/or printing money.” His conclusion: Printing money “is where Japan will find the money to rebuild.”

He concludes, “When an event such as this occurs, fear immediately grips the marketplace and the price of most everything declines. Then, after the fear subsides and people come back to rational thought, prices will rise again...in some sectors. In short, there will be great entry points for those looking to buy...again in certain areas.” —James J. Green

 

 

At times of crisis and market volatility, the best advisors reach out to their clients proactively. That’s the case with the five leading advisors that AdvisorOne editors contacted to hear what they’re telling clients now, and how.

BEN WARWICK
Aspen Partners
and QES

Warwick, the CIO of Aspen Partners and QES in Denver, says he has been “communicating lots more” with clients in the wake of the Japan disaster and the ongoing events in the Mideast. One of the ways he does communicate with clients is by informing them by e-mail each time he posts a blog on AdvisorOne, and he’s been blogging several times a week since these tragic events have been unfolding.

Moreover, Warwick, who also comments monthly to AdvisorOne readers through his index newsletter, Searching for Alpha, is writing a longer think-piece on these events  and how they “affect our investing style” that he will send to clients, and promises to share with AdvisorOne readers, by next week.

His blog from March 16 puts his thoughts succinctly:

  • The S&P 500 index is about 5.5% off its Feb. 19 high, which may potentially make the sell-off an opportunity to put more risk in the portfolio if the major indices continue to trade lower.
  • There should be improved economic growth due to the rebuilding in Japan, but it will not show up until Q3 or Q4 2011; infrastructure damage (especially to the power grid and transportation) must be stabilized first.

His posting concludes with the argument that “The most rational plan in our view is to let the selling take its course, with the mindset of rebalancing toward more risk-based valuation shifts and other factors. I think the adjustment process is days, not weeks, away from implementation.” —James J. Green

 

At times of crisis and market volatility, the best advisors reach out to their clients proactively. That’s the case with the five leading advisors that AdvisorOne editors contacted to hear what they’re telling clients now, and how.

JEREMY WELCH
Burton Enright Welch

Call it serendipity, but San Francisco-based Burton Enright Welch began underweighting Japan well before the onslaught of the latest crisis. It makes client conversations much easier, as the portfolio is inoculated from potential effects.

As a firm, we’re heavily diversified,” said Welch, one of the firm’s partners. “We were conservative on Japan before the crisis because they have a debt-to-GDP ratio that would embarrass Greece or Portugal. They have an aging population, so the spending can’t continue."

"They’ve gotten away with it until now because the country has a high savings rate. The 'we’re in this together' mentality meant that many citizens didn’t mind giving more to the government to foster spending. But with their approaching ‘age-wave’ that can’t continue. They’ll have to rein it in, and it will hurt.” —John Sullivan

 

At times of crisis and market volatility, the best advisors reach out to their clients proactively. That’s the case with the five leading advisors that AdvisorOne editors contacted to hear what they’re telling clients now, and how.

MARK CORTAZZO, Macro Consulting Group

“In 2008, when the entire world was down, diversification wasn’t a mitigating factor in downside protection,” says Cortazzo, senior partner with Parsippany, NJ-based MACRO Consulting. “But with this type of event driven issue, like with Russia in 1998 and the emerging market downturn, it’s a case when diversification works.”

MACRO Consulting was never all that bullish on Japan, so client conversations in the wake of the crisis haven’t been a serious issue (for instance, the firm is allocated to an Asia fund that excludes Japan).

Some companies will be hurt by the crisis; but Japan’s construction sector, obviously, will do very well,” Cortazzo says. “It an adaptive and vibrant culture, so despite its aging population and debt issues, they should come out of this okay.”

One area of concern however, is the country’s tendency towards secrecy and a lack of transparency, something currently illustrated in the handing of the nuclear reactor damage.

“As a foreign investor, that’s problematic,” Cortazzo says. “I can handle bad news. I can adjust and incorporate bad news, but I have to first know what it is. The uncertainty [this lack of transparency] creates is worse than any news that might come out of the country. The U.S endured a tremendous amount of bad news, but we largely ripped the bandage off and dealt with it. The result is a doubling of the S&P 500 in the quickest amount of time since its inception.” —John Sullivan

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(All main photos by The Associated Press)

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