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“…Bibbidi-bobbidi-boo, purple and white, orange and blue, bibbidi-bobbidi-boo!”
-Lyrics from the Disney movie, Cinderella
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Turning mice into horses and pumpkins into carriages is not easy. Over the years, fairy godmothers have gotten very good at this. These things should be left to professionals.
Your clients feel the same way. They understand that making magic with their investment portfolios is no easy task. They trust you to be the expert and exhibit an understanding of portfolio understanding and construction that goes beyond intuition and heuristic thinking. Rigorous analysis is required. Anything else is subject to risk factors, seen and unseen. Understanding the different risks embedded in your clients’ portfolios is essential to setting proper expectations.
Clients should understand all the risk factors their portfolios are exposed to. Research has well documented the existence of many factors contributing to expected return and volatility in portfolios. The usual suspects, value, size, momentum, quality, and beta are noteworthy. These factors share common characteristics, but mainly that they are persistent, intuitive and robust. They work and they make sense.
The naïve 60-40 portfolio is easy to explain in terms of the affiliated asset classes, but does your client understand those risk factors that lie beneath? That the volatility of a 60-40 portfolio is not proportional, or that any exposure to value will not do well during a downturn?
Being able to communicate an understandable story to your clients is important. But making sure clients understand what’s really driving their portfolio risk and return may at some point be even more important.
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SCI Highlights
Quarterly Re-Balance
The Salt Creek quarterly re-balance cycle will begin shortly. Last chance! If there are any cash management issues please let us know so we can make the appropriate adjustments before the rebalance.
No Grid Payouts!
Don’t forget… Management Fee’s do not go to grid. You keep 100% of the payout (after 40bps platform fee).
New SCI Advisor Portal
If you want a test drive of the new Salt Creek Advisor Portal, contact Bob Dunne for your login and to set up a demo time. Lot’s of new features for you to use:
• Model Performance
• My Contacts
• Add Contact
• Document Management
• Riskalyze
• eMoney
• Forms / Agreements
• Marketing Library
• Service Requests
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