Don’t Rely on a Groundhog to Predict the Weather – or the Markets

This Saturday, it will once again be time for one of America’s favorite past times: Waiting for Punxsutawney Phil to emerge from his little groundhog lair so his shadow can tell us if we’re going to suffer through additional weeks of winter or get an early reprieve from the polar winds.

And just as there is uncertainty around whether or not the groundhog will see his shadow, the markets are also going through an intense period of volatility and uncertainty.

But while Groundhog Day is a fun tradition, it would be a crazy method to use to predict real weather patterns.

With all the technology and well-backed research available at our fingertips to predict the weather, there’s no need to rely on little rodents for help.

So why do some advisors and investment gurus still try to time the market with almost the same kind of approach as relying on a groundhog’s shadow?

We never know what the markets will do, and it’s impossible to try to beat the market on a consistent basis. But it’s also important to recognize how market movements affect portfolio growth, and how by helping clients better understand and prepare for market influences you can better align client expectations with the realities of the market — creating a deeper relationship between you and your clients.

To Err is Human (and Groundhog)

When left up to their own devices – and plenty of CNBC headlines – the only thing that is predictable in investing is that client confidence will fluctuate with the markets. That’s because investors are human, complete with their own natural aversion to risk.

In terms of investing, this means clients naturally want to increase their portfolio risk during periods of peak performance when confidence is high – often missing the market upswing; and decrease their portfolio risk during periods of market volatility when investor confidence is low – often doing so after their portfolios already lost value.

Clients left to navigate these turbulent cycles alone will likely continue this “buy high, sell low” cycle. But, how do you get clients to listen and ultimately break this investment cycle?

With a process.

The ability to keep clients invested through up-markets, down-markets, and through the flow of countless news stories providing unsolicited advice is no longer solely dependent on having the right combination of stocks and bonds. It begins with a process – one that resonates with all investors through a variety of market types.

The process you share during your first client meeting and continue to share during subsequent meetings establishes trust essential for building a long term advisor-client relationship.

Are your clients positioned to adapt to all market environments? Or do you find that clients are left with questions when markets shift and emotions take over?

We’ve been helping advisors tell a story that resonates in all markets through a unique investment process that positions advisors to deliver on client expectations regardless of the market cycle. Here’s how:

How Orion Portfolio Solutions Three-Mandate Investment Process Can Help

The three-mandate process enables you to deliver a compelling story for all investor types through any market environment. By using a blend of the three different strategies (mandates), you can better diversify client portfolios – giving them clarity on risk management.

Each mandate includes investment managers with a different approach to managing risk in different market cycles so you can choose the best fit for each of your clients.

  1. Strategic Market Movement – strategists in this mandate optimize their portfolios utilizing traditional modern portfolio theory, with an expectation that their portfolio returns coincide with the movement of the market.
  2. Tactical Market Movement – strategists in this mandate are highly flexible and able to adjust for changing market conditions. Their active approach allows them to increase/decrease their exposure to Market Movement as their research dictates.
  3. Market Movement Diversifiers – strategists in this mandate are employed to disengage from Market Movement and provide new sources of potential return and risk. These tend to exhibit low correlation to the other mandates.

The process provides efficiency for your advisory firm with streamlined custodial capabilities and scalable technologies, so you can leave the investment management in the hands of investment manager experts and instead focus your time on educating and connecting with your clients.

Ready to see how the unique, yet client-friendly process can help your firm during volatile (and calm) markets? Click here to get in touch with our team.

If you have additional questions about what was featured in this blog post, please contact us to see how Orion Portfolio Solutions can support your business through all market cycles.

1090 – FTJFC – 2/1/2019