By Alec Rich and Andrew Foerch in Citywire, featuring Taylor H. Sutherland, CFP®, CIMA® AIF®, Director of Portfolio Strategy/ Senior Wealth Advisor at Halbert Hargrove
Despite jittery markets and a three-day selloff, advisors are refusing to panic and have urged their clients not to, either.
The tariff-induced pandemonium in the global stock markets continued Monday, with US equities crashing and spiking and crashing again on feverish uncertainty around the Trump administration’s plans.
For RIAs, the hair-trigger volatility and the possibility that Trump’s foreign trade policies could spark a prolonged downturn mean more than just frantic calls from anxious clients (although such worry is sure to be a primary side effect of the market mayhem). The selloff, should it continue, also threatens to put pressure on revenues for firms that collect asset-based fees.
So far, however, RIA executives say they aren’t in panic mode. And they’re working overtime to make sure clients aren’t, either.
‘We’re not batting an eye,’ said Andrew Altfest, president of $1.6bn Altfest Personal Wealth Management. ‘It’s no surprise that after years of bull market and higher valuations in the US in particular, that there’s a selloff. … It was already part of our planning.’
Altfest said his firm’s investment desk anticipated short-term economic weakness and prepared for last week’s tariff announcements by making portfolios more defensive. The firm went beyond diversification into bonds and international markets, he said, by reducing concentrations in technology and rotating into ‘stable cash flow companies’ across healthcare, utilities and hedged ETFs that use options to protect on the downside. Longer-term bonds and gold, too, have helped cushion the blow.
In terms of business health, Altfest estimated that his firm’s AUM is down less than 1% despite the market drop. ‘For more prudent, diversified defensive portfolios, it really hasn’t made a dent… it’s more of a correction in US stocks.’
Cresset CIO Jack Ablin echoed Altfest’s steady perspective, assuring that his roughly $60bn firm is ‘undaunted’ both in terms of portfolio management and practice management.
‘We just did an all-company meeting, and no, nothing’s changed. We’re pretty well-capitalized,’ Ablin said. ‘We’ve actually got a war chest of cash that we can use opportunistically to make purchases. On the investment side, particularly on the private side, we were kind of favoring credit over equity anyway … and we’ll probably continue to lean that way.’
Ablin said Cresset’s revenues are resilient given its diversified client portfolios and the selloff hasn’t done major damage, at least not yet.
‘Because we do own bonds and we own private markets, we estimate that our overall equity beta to our revenue is 0.3, 0.4, somewhere in there. Yes, it’s meaningful, but our business isn’t necessarily a long bet on the stock market,’ he said.
Still, clients are nervous, Ablin said. Even ultra-high net worth investors with comparatively less exposure to public equities are planning on tightening their pocketbooks in the near term: ‘They may have hundreds of millions of dollars and they still may cut back on [spending].’
Larry Sprung, the founder of Carson Partners affiliate RIA Mitlin Financial, said proactive client communications have helped stem potential panic.
‘We’ve only had maybe four or five phone calls. The families know that every Tuesday, like clockwork, they’re going to get our newsletter, which is going to give them our thoughts on what took place the previous week and what we think is coming. They know that if it’s something they really need to be concerned with, we’re going to give them a call personally.’
Altfest said his firm has ramped up its client communications for the same reason.
‘Just last week, we had two roundtables in our office for concerned clients. And then the day the tariffs were announced, we had a webinar for clients that afternoon,’ he said, adding that his firm is offering more stress testing projections to show clients that they can withstand a prolonged downturn in US equities. ‘You do this long enough, you know that this is where clients need to hear from you.’
On top of this week’s volatility, Altfest said some clients are growing increasingly concerned with Trump’s management of government benefits like social security and Medicare. It’s part of a trending distrust in institutions among American investors who fear for their ability to save for and fund their retirement, he said.
‘It’s not just markets being down … there are lots of fears out there,’ Altfest said. ‘Yesterday, we were investigating a new client that wanted nothing to do with US financial institutions and wanted to know how they can invest in assets out of the US, like real estate. These are conversations we’re having on an individual basis to give people more peace of mind.’
Sprung said Mitlin has begun spending time on tax loss harvesting, aiming to turn the selloff into a positive thing for clients come tax season.
‘This is an opportunity to take a look at portfolios and perhaps harvest some losses that might be embedded in those portfolios now to use to offset gains later in the year,’ he said.
Taylor Sutherland, a senior advisor and director of portfolio strategy at $3.5bn Halbert Hargrove, said the market gyration presents an opportunity for RIAs to earn their keep.
‘We [don’t] have to know the future, but we can at least be that counsel that can help [clients] make better decisions about their futures,’ he said. ‘This is what we get paid for, right? When markets are like this, to me, is when RIAs really show their value.’
