A November Reckoning

It is times like these that Uncle Joe and Aunty Marg walk into a financial planner’s office squabbling about whether Armageddon is upon us and what you, their adviser, is bloody doing. And so 2020 rolls on…some of your clients will want you to be Nostradamus, will expound some alt-right theory with you, debate with you that with rates at 0.10% will drastically inflate house prices, argue that QE is too big and wallow in how a Biden presidency win will be disastrous for their investments. Welcome to the next few years! And oh, you will be pushed into buying gold, bitcoin or both.

Meanwhile, you are now diligently working away on completing your triennial 120 hours of CPD training, up there with accountants, 120 hours and medical doctors, 150 hours but with an air of superiority over the lawyers, who do a meagre 30 hours ;-)

This article is a little self-indulgent on behalf of the profession. I don’t know of another industry that has to have the breadth of knowledge, empathy, insight and confidence bundled together across a wide spectrum of ideologies that live inside clients.

My loquacious monologue to my wife had me trying to explain this. I was going off on tangents no doubt mimicking some of your own clients. I have spoken with dozens of advisers in the last couple of weeks, and there has been both straightforward and fascinating dialogue coming from clients:

1. What will happen to those “businesses” that will lose JobKeeper and the talk of a jump back up in unemployment? In September, December and March?
2. How vulnerable are the banks to home loan deferrals if employment remains so high?
3. The vaccine will be a yearly flu shot and is predicted to have only mild efficacy. Surely we are in for a mighty shake in the equity markets? and;
4. What price for puts to protect my portfolio, with the VIX at 36, 3 times higher than before the pandemic (but half of their March numbers)

The historians of your clients will argue that 20% of banks failed during the Great Depression; the stock-market lost 89.2% of its value in 3 years and took a further 25 years to recover this loss; and unemployment rose steadily as conditions worsened, from 11.1% in 1929 peaking at 29% in 1932.

We are being fed a lot of theories on appropriate fiscal and monetary policy at the moment, and frankly, there are conflicting views on not only the appropriateness on how to execute such policies but also their impact on the economy. Famous bear commentators, like Carl Icahn, David Rosenberg, Nouriel Roubini and Harry Dent, have been getting a lot more airtime and feeding the fears of your clients. And who knows, after 10 years, they could be right.

So, as we wake up to the outcome of a Democratic win in the Presidential election and hope the United States doesn’t implode in riots, the one certainty is that an adviser’s job is to be the calm in an explosion of dangerous ideas.

Alternatively, if you have thrown in the towel and are exiting the industry in the twilight of your career, I hope you had a little nest-egg kicker by investing your hard-earned on the aptly named Twilight Payment in the Melbourne Cup.

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