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Everyone Deserves a Second Chance

The first quarter of 2016 provides advisors with a significant opportunity to ready their process for the oncoming DOL standard. With equities having their poorest yearly start in history, then bouncing back with a vengeance, bonds defying most predictions and Gold being the leading asset (+14%) class for returns, the cyclical nature of the markets played out over 90 days rather than typical 5 years.

So what did we learn about our process, our clients and our readiness to meet higher standards? Do we have investments segmented, risk scored and monitored? Were we able to meet the concerns of clients in mid-February who asked “what is going on in my portfolio, or am I positioned properly?” Do we have scalable models so that our client base is not holding dissimilar strategies even though their risk level is the same?

The next client meeting should be about creating a scalable, manageable process which allows you and your staff the ability to meet with any client during any point in the market cycle and identify, based on their risk level, what is being done to mitigate or take advantage of the changes that will naturally occur. Whatever their emotional state is the process should be accommodating.

Our process, MMS is designed to deal with cycles. The segmenting into three distinct Mandates, each with their own role allows for clear conversations and client understanding. Looking at a possible combination of one Strategies from each Mandate during the first quarter, we can see how each played their role.

Mandate 1- A Strategic all equity strategy designed to capture both the ups and downs of global stock beta.

Mandate 2- A Tactical strategy designed to shift holdings between market betas.

Mandate 3- A Diversifier strategy designed to rely on alpha, not market beta, and potentially shield portfolios during turmoil.

Building portfolios with this theme, and communicating a consistent message of oversight and transparency, moves advisors into exactly what we understand to be the model the DOL is demanding. While there are many ways to meet this standard, we believe combining the portfolio construction process of MMS with the client friendly proposal, presentation material and portfolio monitoring capabilities, allows our advisors to be one step ahead of their competition.


SPY Chart is as of 4/1/2016.

The information, analysis, and opinions expressed herein are for general and educational purposes only. Nothing contained in this commentary is intended to constitute legal, tax, accounting, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. All investments carry a certain risk, and there is no assurance that an investment will provide positive performance over any period of time. An investor may experience loss of principal. Investment decisions should always be made based on the investor’s specific financial needs and objectives, goals, time horizon, and risk tolerance. The asset classes and/or investment strategies described may not be suitable for all investors and investors should consult with an investment advisor to determine the appropriate investment strategy. Orion Portfolio Solutions does not guarantee any minimum level of investment performance or success of any index portfolio or investment strategy.  Past performance is not indicative of future results. Indices are unmanaged and their returns assume reinvestment of dividends and do not reflect any fees or expenses. It is not possible to invest directly in an index.  Information obtained from third party sources are believed to be reliable but not guaranteed. Orion Portfolio Solutions makes no representation regarding the accuracy or completeness of information provided herein. All opinions and views constitute our judgments as of the date of writing and are subject to change at any time without notice.