• Al Townsend

Preparing for The Bear

One of the greatest challenges for investment professionals during an extended bull market is thinking about and preparing for the next inevitable downturn in the market cycle.  The result of not knowing how “sticky” assets are in client portfolios, along with not knowing how to retain and grow assets when the bear comes to visit is why many investment advisors and their firms experience dramatic swings in their AUM.   What can you do to prepare for the bear and effectively deal with client buying and selling behaviors in all phases of the market cycle?



Here are a few things to consider:

First you need to maintain a realistic perspective and make sure that you believe that the solutions you have provided to clients will perform as expected throughout a full market cycle.  Be prepared for how your portfolios will react in an extended bull market, rising interest rates, and the unwinding or continuation of QE around the world.  When these events happen, your clients will look to you to for guidance. It’s not a good time to be second guessing your own advice and investment strategy. 


Second, make sure that your clients understand and are prepared for the next phase of the market cycle.   Identify and communicate your key insights on what some of the probable outcomes will be for the investment strategies/portfolios you have recommended.  During times of uncertainty, expectations change that trigger emotions (behavior bias) that can cause clients to lose confidence and make devastatingly wrong decisions.

If you are not fully confident with any of the above, take immediate action to review/revise your investment and client communication strategy.  There’s no telling when we will see the bear raise its ugly head.  Fact is, by the time you read this, it may have already happened.

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