I cannot imagine how difficult it must be to be a financial advisor still clinging to the old axioms of wealth management in our post-9/11 world. Talk about a losing battle.
It has been a couple of years since I called out those advisors who insisted on “stubbornly standing by their man(tra)” of buy and hold investing, the efficient frontier and MPT in the face of compellingly irrefutable evidence of their errancy.
Old-school RIAs continue to rally their recollections and romantically reminisce about the resolute investor of the 1990s. Boggled by the conflicted wisdom of John Bogle, equity investors were unflappably rope-a-dope-able—fervently embracing “stocks for the long haul,” despite the ruthless markdowns of Black Monday (’87), the Asian currency crisis (’97), Russia’s debt default (’98) and the 2000–2002 bear market. Investors kept coming back for more.
But no more. Investors are now adopting a “fool me a half a dozen times, shame on me” posture—particularly the HNW and family office clients. Having already endured the so-called “growth” stock bubble in 2000, a nearly 60% decline in the S&P from 2007 through March 2009 and the one-day 9% “flash crash” in May 2010, there is not only less wealth to be managed, there are also fewer wealthy investors willing to be manhandled by advisors who continue to ignore the new realities of the equities markets.
Even the younger investors are not buying it. Cash holdings are at their highest levels since the record in March 2009 and a BofA-Merrill Lynch survey in mid-August pegged 18–30 year olds with the highest cash position (30%) of any age group. So don’t count on new money to replace old money.