E&F Advice & Administration
July 28, 2022
Evaluating Your Investment Advisor in Periods of Market Volatility
Global market volatility, geopolitical tensions and inflation concerns have caused vast economic uncertainty and ambiguity. Conditions have led to a notable shift in market returns, away from the high-growth, mega-cap U.S. market companies that have led market performance for several years. These conditions, in turn, have created significant stress for institutional investors that feel the need to take a closer look at their advisors — and at the diversification of their own portfolios. Following are several baseline questions you should consider when reevaluating your investment advisor.
Is my advisor looking ahead and thinking opportunistically?
Significant down-market events can provide long-term investors with opportunities for rebalancing portfolios — buying when markets are down. This, in turn, can enhance the potential for long-term growth while considering clients’ changing circumstances or cash flow needs. As investment advisors revise their long-term capital market assumptions to adjust to changing market valuations, a proactive investment advisor may take advantage of discounted prices and add to equities. Although the market as a whole may have difficulty seeing past the economic abyss that lies ahead, your advisor should be taking a broader view in pursuit of your long-term investment objectives.
Is your advisor engaging you in discussions about opportunities ahead? Or is the advisor focused solely on present day and recent past? Rebalancing strategies can be most beneficial when markets are dislocated, and a disciplined strategy can keep you on track in the pursuit of your investment objectives.
Special topics, such as spending policy analysis, investment policy review, mission-aligned investing strategies or consideration and/or expansion of private equity or hedge fund strategies should be part of ongoing conversations. Even in volatile markets, it is important that an advisor remains focused on educating your organization and aligning assets with the best long-term opportunities, suitable to your organization’s needs.
Has the portfolio strategy and performance been clearly communicated?
As new information emerges, it is important that your investment advisor provides clear rationale on investment strategy, rebalancing and how portfolio changes tie into the advisor’s overriding investment process.
Look for communications relevant to your organization. These materials can demonstrate the strength of the firm’s research and strategy function, which are critical for success beyond the current market cycle.
Does my advisor have a history of investing in infrastructure and talent during a downturn?
Stability means more than just a company’s financial health; it also encompasses a company’s ability to retain key employees. Starting in 2021, the U.S. has experienced what has been referred to as the “Great Resignation,” describing the elevated rate at which U.S. workers have quit their jobs amid strong labor demand and low unemployment. Investment advisors have not been immune to this turnover. It is worth asking your advisor about team turnover and evaluating whether that has caused any disruptions to your services.
Does my investment advisor display preparedness and stability?
Your investment advisor should have transparent and tested disaster recovery plans and promptly communicate these initiatives to ensure your understanding of how protocols might pivot. Importantly, these communications should provide reasonable confidence in the organization’s long-term stability. The COVID-19 pandemic was a prime example of the need for preparedness. In the days and weeks following the outbreak, did you receive detailed information regarding your advisor’s in-office disease prevention, electronic workflows and personnel and systems availability while working remotely? These were actions that would confirm your advisor has disaster recovery plans in place. Further, is your advisor well-capitalized for the long term, with ample resources to provide guidance for your best interest?
Glenmede: Strength for nonprofits in volatile markets
Strong investment management firms leverage market contractions to communicate with clients, strategically invest in infrastructure, apply their investment process and continue to invest in people and systems. At Glenmede, we believe our actions and initiatives in these areas continue to strengthen us as an independent, privately held organization that provides thoughtful investment, advisory and administrative services.
Retaining professionals is a key component of an investment advisor’s continued success. At Glenmede, we look at employee retention through three lenses: 1) recruiting the right individuals for the right jobs, including professionals at all stages of career development who excel in their area of focus and expertise; 2) inclusivity and community engagement; and 3) values-driven compensation. Making opportunistic investments in talent and infrastructure in difficult markets has been an advantage for our firm.
We also make regular investments in systems, technology and infrastructure, but we understand that our employees are Glenmede’s strongest and most important resource. The use of technology may enhance our offerings, but it will never be a substitute for the personal attention that clients expect from their investment advisor. In particular, technology and process improvements allow us to automate and speed up numerous behind-the-scenes operational functions as a means of improving service and raising productivity levels.
If your organization is interested in learning more about how Glenmede can help meet your needs in this volatile market environment, please email Glenmede’s Endowment & Foundation Management Team at EFSolutions@glenmede.com.
This presentation is intended to be an unconstrained review of matters of possible interest to Glenmede Trust Company clients and friends and is not intended as personalized investment advice. Advice is provided in light of a client’s applicable circumstances and may differ substantially from this presentation. Opinions or projections herein are based on information available at the time of publication and may change thereafter. Information obtained from third-party sources is assumed to be reliable, but accuracy is not guaranteed. Outcomes (including performance) may differ materially from expectations and projections noted herein due to various risks and uncertainties. Any reference to risk management or risk control does not imply that risk can be eliminated. All investments have risk. Clients are encouraged to discuss the applicability of any matter discussed herein with their Glenmede representative.