“Communicate, communicate, communicate,” is the main advice to advisors that Aspiriant CEO Tim Kochis suggests to help advisors through the ups and downs of the current troubled markets and economy. He cites a Spectrem report finding that about one-third of millionaire investors have not been contacted by their advisors within the last month and some not since the economic crisis began. “That’s unbelievable to me,” he says. Kochis believes constant contact with clients–through e-mail, in-person meetings, individual telephone conversations, and conference calls–has significantly helped his firm stay ahead of the game. The conference calls in particular were a vital part of the communication process for Aspiriant. “We set up a time in advance for clients to call in and we made a few remarks and then opened it up to questions from clients,” he recalls. Though Kochis and his colleagues initiated mass callings like this once a quarter in “more normal times,” it wasn’t until now that more than a handful of clients would call in. “During this environment, we wanted to reach a large number of people in a short period of time, so we set up these types of calls–once in October and once in December.” The calls attracted 150 and 90 clients, respectively.
Managing Money Like It’s the 1930s
As the market upheaval of last year put a sizeable dent in most investors’ portfolios as well as advisors’ assets under management, Lou Stanasolovich of Legend Financial says that since October 9 of last year, the nadir of the market slide, his firm’s lower volatility portfolios “did extremely well.” In fact, he says, “we did not have negative returns until late July, so we missed the first 20% of the downturn.” Legend’s more aggressive portfolios experienced “some downturn,” he adds, “but it was not as bad as the stock market.”
In late September and early October of 2008, Stanasolovich says Legend began to field more and more calls from jittery clients about the market’s volatility. It was then that his firm decided to “manage the money as if we’re in the early 1930s,” he says. This meant shorting certain securities, particularly equities, and buying the highest rated bonds possible, he says, which were Ginnie Maes (because the raw yields on Ginnie Maes at the end of 2008 were 6.5%).
The firm also decided to “sit in cash and we liquidated a lot of equity exposure; in August we had liquidated international real estate positions, we were down probably about 25% on average.”
Those international real estate funds, he says, “ended up losing 60% to 70%, so we did a lot of liquidations; We got hit but it wasn’t nearly as bad as it eventually came had we not sold.”
To cope with the market upheaval, “we took bold moves and became more tactical than we’d ever been before. We felt we had to. We reduced the volatility on our portfolios across the board both on the upside and on the downside to the point where we don’t have very wide swings.”
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