Morningstar Advisor - February/March 2009 - (Page 11) Inbox Editor’s note: We asked advisors to tell us the biggest lessons they’ve learned from the financial crisis. I have learned two lessons, equally weighted: 1) If it seems too good to be real, follow your intuition; it is probably not real and extra conservative measures are warranted. 2) When times are good, don’t be afraid of taking gains and paying taxes; stay disciplined in rebalancing. Barbara Adamson Wetherby Asset Management, San Francisco The recent crisis highlights the need for experience and human judgment. Too often I fear advisors “buy the company line” that diversification, asset-allocation models, and no real tactical thinking will win out in the long run. Normally, they are excellent principles to follow. In times of extreme turbulence— whether it’s fear or greed that rule the day—correlation coefficients increase, the rules change, and behavioral issues determine the appropriate actions. Terry Deru Belsen Getty, Salt Lake City We’re seeing both employers and employees in need of education. Employers are looking for education to help mitigate their fiduciary risk and want employees to be reassured that retirement accounts are long-term investments and that making hasty decisions is the last thing they want to do in this environment. Tony Madera Gallagher Retirement Services, Scranton, PA You can’t spend enough time with your clients getting them to understand risk. We talked to our clients at length about financial markets and risk. I thought my clients understood that the reason we earn a risk premium in stocks is because we are taking risk. Why is it that we tell all our clients they need a fiveto 10-year time horizon to invest in stocks and then they are horrified to learn that I think they will have to wait five years or more to earn their money back? I don’t know exactly how, but I have to do a much better job preparing my clients for the next once-in-alifetime event that is bound to happen again in the next 10 years. Anthony Pace Lindberg & Ripple, Windsor, CT Patience—and that hype works equally well when markets are going up or when they are going down. Does it make any sense that a number of solid companies earning profits are trading below their book value per share? John Gotschall Coaching Financial Concepts, Chicago The biggest lesson that I have learned is the importance of a long-term strategy using both bonds and equities. Clients using both have substantially smaller losses in 2008 compared with people who took too much risk by investing only in equities. Arthur Gaither H&H Retirement Services, West Hartford, CT Regardless of the clients’ risk tolerance, we are likely to be more conservative in our allocation ranges for clients who are retirement age (less than 20-year investment horizon), favoring principal stability over growth potential. Grace Worley Worley Erhart-Graves Financial Advisors, Indianapolis E-mail your feedback, ideas, and viewpoints to magazine_editor@morningstar.com. Or write us at: Morningstar Advisor Magazine, 22 W. Washington St., Chicago IL 60602. MorningstarAdvisor.com 11 http://www.MorningstarAdvisor.com
For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.