You’ve heard the news. Interest rates are up. When financial advisors’ clients hear that, they think about mortgages and certificates of deposit. Advisors’ minds quickly drift to what a mess their bond portfolios are turning into.
At least, that’s where their minds should be going.
Because whether you use bond funds, bond SMAs, 60/40 or 40/60 allocations, or other types of balanced investment strategies for your clients, they have one thing in common: They may not be as good as they were for at least a decade.
You can rehash the same justifications about “asset allocation” and “diversification” that make different types of bonds part of the club, but this is not the past 40 years. It’s an environment where rates are not just rising, but they are doing so from some of the lowest levels in history.
That math is a problem, but it doesn’t have to be.
Alternatively, it can be the very best time of your career to gather assets. Because we are in an era where, if you like peanut butter and jelly, you’re going to have to live without the peanut butter for a while. Stocks will do what stocks do: Go up and down a lot, and ultimately outperform bonds. But unless your clients want the potential risk that comes with today’s nosebleed valuations and unstable political and economic climate, you’re going to need more than just a “long” stock portfolio.
Fortunately, there are a few ways to not only fight back, but win more assets in the process. If there were ever a time to feature the uniqueness of your asset management approach, this is it, if you can avoid standing still like many of your competitors.
