After a tumultuous week our misguided instinct is to call everyone and explain what happen and how we have a plan to fix it. Our clients and co-workers don’t expect perfection, they just need to know we care and are thinking about them.
When things go wrong in our personal life we seek refuge in our family. A good family will provide us with unconditional support and help us get back on our feet. When things go wrong in our financial life a fiduciary family is a good refuge. A fiduciary family has committed to providing advice that is in their client’s best interest. Unfortunately, other firms can seem like “Tiger Firms” that focus on results that oftentimes can be too self interested and can be at the expense of their clients. They have a definite answer to everything that often involves “working through it and toughening up.”
No definitive answer
We and our short news cycle often seek short and sweet explanations to complex problems. While last week’s volatility can easily be blamed on the inverse Volatility ETNs,there is more that needs to be examined to insure we don’t repeat Monday and Tuesday’s debacle. Let’s start with a better vetting mechanism for new products that, much like an IPO’s prospectus, details the risks. We should also work with Fiduciary advisors who will examine these products before recommending investment. Another important factor is the liquidity of the markets for these esoteric products. Hindsight is 20/20, but we must learn from catastrophic events and advisors and their clients need to examine how last week made them feel.
Swift market declines get attention and reinforce the fact that there is no free lunch. There were several warning signals about the short VIX ETN’s, but they were conveniently ignored. Clients and Advisors should not expect perfection and a photographic memory. A more realistic goal is to have factual conversations about the pros and cons of each investment strategy before we pull the trigger. These conversations won’t prevent mistakes, but they will serve as a point of reference if things go wrong.
People don’t expect perfection. They just need to know you care. Have you called your clients today? And while you are making calls you might want to call your parents too