“The only consistency in this business is our clients’ inconsistency,” advisor Scott Campbell said in Chicago on Tuesday.
An outspoken group of top advisors convened in the Windy City to sound off on everything from the political climate to women as a niche market to retirement income and behavior, and more. The Curian Capital-sponsored event began with a discussion of the current bifurcated market—DJIA and S&P 500 at all-time highs coupled with record unemployment; skyrocketing energy production but little relief at the gas pump; domestic markets up one minute, foreign and emerging markets up the next.
How are they possibly managing through it?
“In the 30 years I’ve been in this business, I’ve always spent one hour on conference calls at a maximum,” Campbell (left), president and CEO of Columbus, Ohio-based Global Financial Partners, explained. “Not any more; now it’s much longer. I see them seizing upon the information in almost a cafeteria style according to their political opinions. There’s pessimism about the markets and the world in general that I don’t believe in, and I feel it’s my job to combat that.”
Commonwealth Financial Network-affiliated advisor Rex Rexroad rhetorically asked about the central value advisors add.
“Everyone needs a financial advisor. The demands of the advisor are great because often we serve clients not just as a financial guide, but as a family counselor, a guru of many topics and at times, even a pastor or priest,” Rexroad (right) said to laughter. “We provide leadership because they have to have a plan to deal with what they may face in the future. We’re a friend and counselor to our clients.”
Scott Holstein, president and CEO of Pennsylvania-based Prudent Wealth Management added that in 2008, “it was about ensuring clients didn’t panic and make bad decisions in a down market. Today, it’s about ensuring they aren’t overly enthusiastic and making bad decisions in up markets. I try to counsel them not to get too excited. We might be out of intensive care, but we’re still in the hospital.”
When asked about how they are appealing to the estimated 76 million-strong Gen Y demographic, Campbell noted that he’s teaching a course at Ohio State University to young people about debt.
“A lot of them will graduate and go out and have a good time, buy a car, still have student loans to pay and then they might buy a house with a mortgage,” he said. “They wake up at age 30 or 35 with $300,000 worth of debt and say, ‘Whoa, how the heck did I get here?’”
Advisor Bruce Woods of Woods Investment and Insurance Services in Lafayette, Calif., has also been offering pro bono advice on 401(k)s and 403(b)s. He mentioned that self-directed plan participants weren’t interested what he had to say prior to 2008, but there’s “sure interest now.” He added that he sees many clients investing according to information that came out during last year’s election, as well as the current political climate. Midwest Financial Group advisor Mark Miehe said he will simply ask members of Gen Y what it is they want from an advisor.
“They want text and mobile, and think email is too slow; they want an instant response,” according to Miehe. “As to the first question, about managing in such a volatile market, I just tell my clients I can’t predict what’s going to happen. I let them know that financial markets are a tool to improve their quality of life. Money without a satisfying quality of life just isn’t worth it. So it isn’t the ups and downs of the market that measures success, it’s their quality of life.”
Paul Orazio of Suffern, N.Y.-based Orazio Financial Services said that Gen Y’s expectations are much higher than those of previous generations, which has him both excited and concerned. He noted he’s spending an inordinate amount of time educating the demographic.
“The Greatest Generation understood and had respect for money,” Holstein (left) interjected. “The wasn’t the case with many baby boomers, and with Gen Y it’s even less so. They’re going to inherit a lot of money from their parents and grandparents, and they can’t go out on spending sprees. They have to respect it.”
Commonwealth’s Rexroad added that he’s drawn to the other side of the equation. He’s trying to get retirees through retirement with enough income, but notices that many want to set up accounts for their grandchildren.
“It’s not so much the children; they think they’ll be OK,” Rexroad said. “It’s really the grandchildren they want to provide for.”
“What they’re saying is they like their grandkids more than their kids,” Campbell quipped.
Miehe said he and his wife are worried the current and future political system will “suck out all the opportunity” for their grandchildren.
“I recently read a book about the [President] Johnson era,” Campbell countered. “The only difference between what they said then and what is said now is the date; just change the dates. They said the Woodstock generation wouldn’t amount to anything, and we didn’t have access to Wall Street with 401(k)s and such. But we grew up and continued the American Dream. We grew up and dealt with it and so will they. As advisors, we have a responsibility to combat the cynicism that’s out there, and we do that by giving them a plan.”
Orazio noted that it’s harder to do given the amount of “noise that’s out there, and added that clients want advisors to filter out the knowledge that pertains to them.
“Information isn’t knowledge,” Miehe said to general agreement. “In many instances, information causes more confusion.”
The conversation moved to regulation, and whether the current burden is too much or not enough. Given it was a roundtable of advisors, the answers were surprisingly diplomatic. “Regulators start out with good intentions, but end up hurting the investor,” Woods said. “I don’t think it makes the investor safer.”