A turbulent decade may have given investors a new perspective on planning, but area financial advisers say that’s not necessarily a negative.
After two bear markets in the past 10 years, investors who left the market are beginning to return, investors who remained are more conservative with their investments, and many are seeking out one-on-one professional advice from advisers.
That combination has put some firms on better ground than they’ve ever been.
At the end of May, Trust Company of the Ozarks had approximately $481 million in assets under management, compared to roughly $362 million during the market low of March 2009 and the company’s historic peak of $440 million in September 2008, said CEO and Senior Trust Counsel Dwight Rahmeyer.
Overland Park, Kan.-based The Mutual Fund Store LLC is also at its peak, with $5.5 billion in assets under management, up from $3 billion at the March 2009 market low and surpassing a previous peak of $4.5 billion in early 2008, said Terry Conner, senior managing partner and owner of the Mutual Fund Store’s Springfield office. Conner said his office manages about $140 million in assets, compared to roughly $125 million at the beginning of 2008 and $80 million at the market low in March 2009. (Editor’s note: In the interest of full disclosure, Conner’s office manages Springfield Business Journal’s 401(k) plan.)
The upward trend isn’t a surprise to Chad Page, president of the Springfield chapter of the National Association of Insurance and Financial Advisors.
“Whenever the market is in a turbulent time, people are seeking out advice,” said Page, who is training and recruiting manager for Mutual of Omaha’s Midwest territory.
Investors saw a 10-year period of volatility in the market, beginning with the downward spiral of the technology bust and the more recent financial bust of the past two years, said Jack Thurman, president of BKD Wealth Advisors LLC.
As a result, Thurman said, investors didn’t exit the market as much as they changed their thinking, looking “long-long-term” at their investments.
Long-term thinking Regardless of whether market frustration led to adviser changes, Thurman said few – if any – investors have been left unscathed by the downturn.
“Preservation of capital is much more present than grow, grow, grow,” Thurman said. “I don’t care who you are, this has been a humbling time period. Everyone lost some money in the past two years.”
Thurman said BKD Wealth Advisors’ total assets under management are approximately $1.5 billion, not far off the company’s October 2007 peak of $1.6 billion.
The firm’s clients pay sliding-scale fees based on assets under management, starting at a 1 percent annual fee for $1 million or less.
Andy Stewart, managing director of the Springfield office of Kansas-based Waddell & Reed Inc., said a down market can give clients a truer picture of their risk tolerance.
“Any time there’s an up market, it’s very easy to make money,” Stewart said. “Whenever there’s a down market, the goal is to protect what we’ve gained.”
Risk tolerance varies by client, and investment type, and historically, Conner said, long-term bonds average between 4 percent and 6 percent return on investment, and stocks tend to average between 8 percent to 12 percent returns.
“If you own a combination of both, it stands to reason that a range of returns should be between 7 percent and 9 percent,” said Conner, whose clients’ fees also are based on assets under management, with pay a sliding scale based on assets under management, with .225 percent assessed quarterly for $1 million in assets, he said.
“Most of my Springfield clients tend to have a risk tolerance somewhere between 5 percent and 7 percent,” he added.
Managing expectations The key to managing investor expectations is communicating with clients through the ups and downs of the market, these advisers said.
“It’s education, communication, and re-education,” Thurman said. “The world is always changing, and the market is not static. You have to go back and say, ‘Is this still comfortable?’”
For a comfortable fit, Stewart said, he always reviews asset allocation with clients and helps them to find a mix of investment opportunities that can best help them reach their goals within a timeframe they determine. Still, he pointed out, the market is cyclical.
“Just because you have the best performing asset class today, doesn’t mean it’s going to translate into the best for next year,” he said.
With every shift of the market, Trust Company of the Ozarks’ Rahmeyer said he goes back to his clients.
“That way, they know what we know and that we’re going to get them to their destination,” he said. “There may be a little turbulence, but we’re going to arrive.”[[In-content Ad]]