Bubble-Market Career Risk: Financial Advisors' Daily Digest

by: SA Gil Weinreich

Summary

Kevin Wilson is preparing his clients for “when the bad stuff finally happens,” but laments that greedy investors are prey to the manipulation of greedy advisors.

Danielle Park, CFA offers a humorous pictorial view of the career risk involved in keeping clients long only.

Evan Powers discusses the serious financial implications of cognitive decline, including the reality of LTC policies that the impaired allow to lapse precisely when they are finally needed.

The ever-eloquent Kevin Wilson has long argued that the evidence conclusively points to a dangerous bubble market, yet he feels that The Street is herding naïve investors into imprudent investments. Here's how he puts it:

"Wall Street and the average advisor cash in on their clients' human weaknesses, as usual, encouraging them to continue buying right at the top of the cycle. Maybe it's my age, but I find the relentless telling of market fairy tales by Wall Street, some other advisors, and the media, and their near-universal acceptance by thoughtless (greedy) investors, regardless of evidence, a bit off-putting."

Wilson then points to an oft-cited frustration among financial advisors and money managers generally: the career risk that comes from not doing what everybody else is doing. As Wilson puts it:

"Above average advisors…probably told their clients to cut their risks and move defensively when strong signs of the top (or signs of very asymmetric risk) appeared. And then although many took their advice, a surprisingly large number of clients either ignored the advice, or actually fired their advisor for not being aggressive enough."

Another contributor - Danielle Park, CFA - has a nifty chart that humorously describes this advisor career risk and what she calls "the long-only client's emotional cycle."

Of course, there are advisors who vehemently disagree with Wilson's approach and feel that the job of the "above-average advisor" is to manage these client emotions.

In either case, what's the advisor to do about client emotions and, well, career risk?

Herewith, a few additional links for advisors: