Lessons Learned: Managing Wealth in Volatile Times

Over the past several weeks, we’ve had numerous conversations with clients and service partners regarding the current economic crisis. One consistent theme that has helped many gain a sense of balance and confidence in an otherwise turbulent environment is an understanding that economic reactions are not new. Certainly, the impetus – a global pandemic – is fairly unique. However, the markers of the financial reaction are still similar to past events. And the lessons learned from those events serve as guides for developing present-day strategies.

Of all the lessons learned, starting from our first day in business 30 years ago, the most important and impactful to the success of our clients is the value of strategic planning ahead of volatile times. We perform this planning at the individual client level before a single security is purchased. Throughout our history, we’ve navigated the dot-com bubble, Y2k, 9/11 terrorist attack, and the financial/housing crisis. Each of these market declines generated volatility based on the uncertainty of short-term events. In all cases, time proved to reveal the depth of the issue and a reasonable course to resolution. There’s no doubt that time will do the same for us today.

When designing a portfolio for each client, built to withstand the highs and lows of volatile economic and market conditions, we can draw on market volatility experiences from these recent past events and discuss with the client the psychological effects during the event. Then, when coordinated with a need for return and income, the resulting allocation and risk should be appropriate to get us through times like these without having to make a rash and emotional decision that could negatively impact the long-term plan.

Another lesson learned from previous events involves a strategy for making portfolio moves during the crisis. Our objective is to not only protect our client’s assets but also take advantage of opportunities. These tactical moves are often small and sometimes frequent, depending on market activity and outlook. Smaller and frequent moves, as opposed to more dramatic allocation changes, can increase the likelihood of successful market navigation and decrease the negative impacts of an incorrect market timing decision. Many times, a volatile market will include periods of both heightened pessimism and exuberance. The key is not getting caught up in either emotion, but instead, tuning out the noise and looking for true opportunities.

We know that this crisis, like the others before it, will end. When it does, we will look back and evaluate the tactical moves we made and add even more lessons to our experience for the next crisis.