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:
- Cullen Roche argues for having an investment plan and sticking to it.
- Evan Powers discusses the serious financial implications of cognitive decline.
- UBS Wealth Management's global chief investment officer Mark Haefele offers his firm's risk-on perspective.
- Gary Gordon on the silliness of buying stocks solely because they yield more than bonds.
- U. of Chicago economist John Cochrane on how to raise GDP 10% and reduce inequality too.
- Heard of physical gold? Now some banks want to store bills rather than accept negative rates.