22 December 2015

Best of 2015: Wealth Management in an Extreme World

Posted In: Best Of

My word of the year for 2015 is “extreme.”

This applies to the real world, the business world, and the financial world. So it applies at least triply to private wealth management, where the task is to provide clients with intelligible returns in a world where consistency doesn’t come easy.

We can focus on the myriad challenges facing the business of private wealth management, but I hope you expect nothing less of me than to think of the clients first.

They don’t care how we make money. We’re in the business of giving them good outcomes, and they are beset by things to worry about.

Call it Daesh, ISIS, or The Islamic State, the bloodthirsty group went from a blip on the world’s radar to a sustained and growing concern this year.

Think of Paris. It has become harder to argue that the shrinking, flattening world will grow ever more peaceful. And our clients risk being overcome by fear. But the better part of wisdom is making good comparisons, as this first bit of recommended reading will teach you.

If you’re worried about geopolitical threats like ISIS and how they might ruin your clients’ lives, you’d do well to remember that we are alive at arguably the best time ever.

Homicides are sharply down in the past few hundred years. Literacy is sharply up. The world had no democracies in 1800 and now has more than 80. Indeed, the second recommendation of this roundup is an 832-page reminder that the world keeps getting better.

But for Whom?

Here in New York City, 57th Street is now called “Billionaires’ Row” after massive luxury skyscrapers were constructed recently. But the number of people on welfare is at a nine-year high.

That contradiction isn’t lost on many, and it isn’t without effect. It also isn’t just about money or something that can be dismissed by allusions to historical trends.

Experts in the management of wealth usually aren’t as familiar with the issues that come from the extreme absence of wealth. If that sounds like you, my third recommendation is really a must read. In The Divide: American Injustice in the Age of the Wealth Gap, Matt Taibbi tells the story of the toll inequality takes on our society with a strangely refreshing righteous indignation and a number of diligently reported, extremely compelling vignettes.

This is a necessary read not just because it illuminates the situation of the least fortunate in the United States. It also features extremely well-reported stories of well-known investors whose research processes overreached in a way that sure looks bad.

In other words, our industry plays the part of bad guy in this story. And it’s incumbent upon us to understand that allegation and conclusively refute it through our behavior.

Because weird stuff is happening. You can’t say “zirp” anymore. “The credit markets are softening and funding is tightening.” The excellent Jason Voss, CFA, has quite usefully identified a host of other issues. And Scott Krisiloff, CFA, adds more every week.

Whatever the issue, whatever the US Federal Reserve, does and whatever a barrel of oil is selling for, there is one thing that I am absolutely 100% certain of.

Our Clients Are Going to Need Us.

As long as there are people with money, there will be demand for advice about what to do with it.

But the supply of advice is seemingly infinite, undifferentiated, and a great deal of it can be provided at zero marginal cost. And if your competition was limited to just CFA Institute members, you’d still be in competition with more than 140,000 other people. And you should probably add at least one zero to that number to get to reality. Don’t forget about the competition coming from algorithms either.

Fortunately, we’re here for you. Below are some key stories from the past year that will help you get a handle on how to compete, succeed, and, most importantly, give your clients what they want in 2016 and beyond.

And never forget: We’ll be here to help you all along the way. Thank you for the time you spend with the Enterprising Investor. We’re hard at work to bring you even better analysis, even more contributors, and a better reading experience in the future.

Your Value Proposition

Your Understanding of the Key Trends in the Space

Tools for Manufacturing Intelligible Returns

“Dumb Alpha: The Ignoramus’s Guide to Asset Allocation“
“Portfolio Evaluation: Benchmarking for Success“
“Making Sense of Long-Term Returns“
“Risk Is the Dark Matter of Portfolio Management“
“The Diversification Dividend“

Books Worth Your Time

And a (Hopefully Unnecessary) Reminder Not to Forget Fun

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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

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About the Author(s)

Sloane Ortel

Sloane Ortel is the founder of Invest Vegan, an ethics-first registered investment adviser that manages distinctive discretionary portfolios of public equities on behalf of aligned individuals and institutions. Before establishing her own firm, she joined CFA Institute’s staff as a sophomore at Fordham University and spent close to a decade helping members adapt to a changing investment landscape as a collaborator, curator, and commentator. She is also a co-host of Free Money, a podcast for sustainability-oriented investors with a sense of humor.