An opinion poll that is currently posted on Investment News asks advisors, “Do you think the market downturn has created a lost generation of investors?”
It is a thought-provoking question as investors of all ages (and ironically, of all risk tolerances) have seen portfolios reduced by as much as one half of their peak value. Have these investors lost a generation of opportunity that they can never recover?
The answers tallied thus far are as provocative as the question and may suggest a lost consciousness among many advisors. Surprisingly, approximately half of the respondents thus far disagreed with the notion of a lost generation of investors despite the fact that some of their own clients have incurred substantial losses that are not likely to be made up prior to retirement.
These advisors are naively optimistic, in denial or merely oblivious. Either way they are doing a disservice to their clients and their practice. By ignoring the mistakes of their recent past they are destined to repeat them. In the past dozen years they have seen several black swans with their own eyes yet they still manage assets as if all swans were white.
A slight majority of advisors are indeed aware of the irrevocable nature of some investor’s losses. As one advisor posted on the opinion poll’s comment boards with respect to a hypothetical 68 year-old investor losing half of their portfolio’s value;
“Based on the annualized returns of a 60/40 portfolio over the past 15 years (5.44%) it will take your client ~13 years to recover what he/she had 18 months ago, IF the annual average return was to resume at 5.44% tomorrow. IMHO it’s quite likely that John or Jane will NOT return. And if you use the 0.19% annualized that a 60/40 has returned over the past 10 years, try explaining to your former client that it will take more than 365 YEARS to get back to where he/she was.”
Advisors whose practices will prosper going forward are those (50%) that are revisiting the buy-and-hold, asset allocation and diversification models that have failed so miserably. Same old, same old will simply produce the same results.
Album: The Sly, Slick and Wicked, The Lost Generation, 1970
Popularity: 41% [?]
I guess some will look at the situation in which we find ourselves as a liability…while others (who will no dobut weather the storm and realize new levels of performance) see this as the land of opportunity. Though to see it, we first have to remove the blinders of complacency.
Unless advisers change their behavior the loss of a generation of investors is an underestimation – it maybe two. One survey I read states that 84% of women believe that financial products marketers don’t understand them.
According to a just released research report, Capturing the Hearts & Wallets™ of Peak Accumulators™, investors aged 28-52 feel very much alone as 54% find it “difficult” or “very difficult” to “find the right resources for getting help with financial questions.” Only 18% work primarily with a financial professional, such as a broker, registered investment adviser, insurance, banking, and mutual fund or on-line brokerage representative the report states.
This means a full 60% of the investment industry’s focus is concentrated on near- and post-retirees while 57 million households in the 28-52 population with more than $5.2 trillion in investable assets are ignored. Some estimates have the number at over 60% of the near- and post-retirees who haven’t been contacted by their adviser in the past 18 months.
Doesn’t bode well for the next generation of investors nor the one after that if advisers don’t change their ways.
Bruce–although I don’t know you personally, I do know who you are and I am pleased to see that you found your way to this blog. I appreciate your comments and I always find your blog (http://www.dbjassociates.com/) interesting…its a great resource for advisors. Thanks for your post…and stop by again!