The financial markets and the U.S. government appear to be afflicted with acute schizophrenia.
But as people weigh their financial futures against true uncertainty, many wealth managers in Northwest Arkansas said they have faith the system will stabilize — eventually. They said the best action for a majority of investors is to simply wait. That is, if the investor can afford the luxury of time.
“Remain calm,” said Scott Alaniz, a chartered financial analyst and partner at Boston Mountain Money Management Inc. in Fayetteville. “We have faith in the financial system. It’s got warts but it’s the best in the world.”
The group said they’ve fielded more phone calls in recent weeks but the tone from clients has been one of concern rather than panic.
“We’ve had calls about getting in versus getting out,” said Kerry Watkins-Bradley, a CFA and the equity portfolio manager for Garrison Asset Management in Fayetteville.
Garrison manages money for institutional investors and high net worth individuals. The entry-level threshold is about $100,000 for individuals. The company has about $161.7 million under management.
Contrast that with Arvest Asset Management, which has retail locations, operates 89 offices in three states and has no true threshold for client assets.
“Panic selling? Surprisingly no,” said Mel Parks, CEO of AAM.
But “call volume has gone up and there is ’emotional panic,'” he said, which he classified as the feeling a client gets that things won’t work out. It’s not the same as selling panic, when action is taken to sell.
“Typically we try to make it outgoing calls, but money is an emotional decision for most people … that [call volume] is to be expected,” Parks said.
Parks attributes some of the lack of mass selling off to experienced clients who saw the tech bubble of 2001.
Calls went up because “people wanted confirmation from their adviser that they were doing the right thing,” he said.
In 2006, AAM had assets “between $5 billion and $6 billion” including its trust and brokerage segments.
Watkins-Bradley and two of her co-workers, James Bell, a CFA and portfolio manager, and Glenn Atkins, a CFA and fixed income portfolio manager, said there are four things most investors need to do right now:
• Assess their tolerance for risk.
• Understand what they own.
• Make sure they are diversified.
• If it’s reasonable, stay the course.
“‘Stay the course’ sounds cliché, but what is the alternative?” Atkins said.
If one sells off low now, it becomes much harder to make up losses later and hit one’s financial objective.
The trio point to the historical performance of stock markets, which, on average has been 10.4 percent per year since 1926, sans a few blips along the way.
Which brings up the ever-present flip side to money: time.
Bell said that Garrison’s clients are counseled on the front end that if they are going to need specific funds in the next five years, they should not put it into the markets, a notion echoed by many financial advisers.
Joe Chumbler, a CFA and partner with Alaniz at BMM, basically agreed with the Garrison crew.
Chumbler said BMM has “been defensive over the last year in about 50 percent cash.”
The two have been building a portfolio of 15 to 20 good stocks with a target of doubling the total portfolio’s value within six years.
“We weren’t making a market calls, we just found very few companies we wanted to invest in,” Chumbler said.
Chumbler and Alaniz stressed how important it is for investors to know what they’re invested in.
“It’s easy to panic if you don’t know what you own,” Alaniz said. That’s the reason the two have been methodically checking each company’s debt before they invest in it.
The Garrison team offered up a warning to people who might be thinking of jumping into the markets, be wary of profiteers and snakeoil salesmen.
“If it sounds too good to be true, it probably is,” Watkins-Bradley said.
Alaniz offered up one final piece of advice to investors: “Absolutely do not watch the talking heads on TV.”
“They are paid to generate ad dollars and not to give sound advice,” he said.