"Seismic events leave path unclear" "Seismic events leave path unclear"

15 Dec 2016 Ken Davy

Looking back to this time last year, we were all aware that, following David Cameron's somewhat surprising overall victory in the General Election, we would have a referendum on Britain's membership of the European Union, and that in the US they would be voting for a new president.

Most people expected the UK to ‘remain’, and that common sense would prevail in the US with Donald Trump knocked out in the primaries; both expectations were wrong, and I believe the seismic events we have experienced this year are going to have a profound impact for decades to come.

In such an uncertain world, the challenge advisers face is what to say to clients who are themselves concerned.  The returns on cash are virtually zero and, with the threat of increased inflation, these concerns are only going to increase.  Do you choose equities or bonds? Where in the world do you invest?  Advisers already face these questions and they will only become more complex as the next few years progress.

We end 2016 with significantly greater uncertainty than we entered it, and I have very little idea what the outcome for any particular investment market will be.  

This is not a time for pretending that you know which funds to pick, or even which sector or market to be in.
In fact, if anyone does claim to know which markets to pick I would avoid them like the plague. Nonetheless, with returns on cash at such low levels, your clients are almost certainly going to enjoy better outcomes over time by being invested in real assets.

The key to success in such an uncertain world is to not to pretend to clients that you know which market or fund to pick, but rather to emphasise the benefits of a well-balanced and diverse portfolio. History tells us that advisers who ensure their clients have the benefit of a diverse portfolio will always triumph.  

Betting the farm on a particular investment almost always ends in tears.

The past year has seen a truly remarkable series of events, and created enormous uncertainty. For financial planners, these uncertain times also offer a fantastic opportunity to demonstrate to your clients the real value of sound financial planning and the importance of a varied and well balanced portfolio.  

Ken Davy is chairman of SimplyBiz Group


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