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Portfolio > Asset Managers

How Things Are Changing

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Bill Crager has a unique vantage point from which to watch the investing mindset of advisors. As president and co-founder of Envestnet, which provides front- and back-office outsourcing and access to a host of SMA and other investing managers and vehicles, Crager sees what advisors want, what they need, and what they’re actually doing. “We see a growth in advisor-managed assets,” Crager says, in what Envestnet calls its “advisor-as-portfolio-manager program. They’re stepping in, taking over, and pushing the buttons more than the professional managers to take a more defensive stance rather than a long-term buy-and-hold perspective.”

But, he warns, “it gets tricky in trying to tactically manage this market. That’s where professional asset management will in this time be validated or not.”

Going forward, Crager says “the investor is going to have more of a capital preservation mindset versus a growth mindset.” How long will that last? Crager doesn’t pretend to know, though he points out that “when the market turns, everyone’s psychology will change.” Since, he says, investors “overestimate their tolerance for risk,” he believes it’s incumbent upon the industry to reevaluate the risk questionnaire process. He also wonders “What do one-, three-, and five-year returns mean as we exit the market, and what do we do about traditional market assumptions, and how will that impact asset allocation?”

All is not bleak, he argues. “In bad times comes innovation, so I think you’ll see some interesting portfolio theories crop up that will gain a foothold with a group of financial advisors who think that is the way to manage assets.”–James J. Green