Going Digital Helps You Keep Your Clients On Track And Grow Your Business

Preparing to write this article, I found 119 articles on the death of the 60/40 portfolio, the comeback of the 60/40 portfolio or the “new” 60/40 portfolio. 

Then I stopped counting. In fairness, many of them were quite good. While this may seem like overkill, the reality is that the 60/40 portfolio, for many, is the goldilocks allocation of risk. And that is not a bad thing, but it is also not enough to guarantee success.   This note takes a more holistic view of key investing concepts. It also discusses how the investing platform you choose can help your clients achieve success.   We are going to look at the following:

  1. Aligning your investment portfolio with your ability to accept risk.
  2. Efficiently establishing and managing your portfolio
  3. Maintaining consistency with the management of your portfolio over the course of your investing life.

The 60/40 question masks the real issue, which is the importance of consistently maintaining appropriate exposure to equities over a long period of time. Decade after decade, this has shown to be a reliable way of creating wealth and staying ahead of inflation. So, we will say “yes” to the 60%, or there about, in equities. The 40% actually represents two things. Most importantly, it represents a strategy to dampen equity market volatility. This helps investors to avoid panicking and selling at the wrong time and, thus, missing out on equity returns. While it cannot be said for 2022, high quality bonds usually do a pretty good job on this front. 

Bonds of various stripes and colors also add income to a portfolio. Investors who need income have choices. They can either invest in assets that provide income, or they can sell a piece of their equity portfolio. The problem with selling stocks to provide income is twofold. First, selling equities will likely impact your long-term growth goals. The second issue is that your income needs are not suspended in a bear market. Therefore, you may be forced to sell your stocks just when you should be buying more. Given the increase in interest rates, bonds are now more effective at both providing income and keeping investors pointed in the right direction.

So, maintaining an appropriate risk assigned balance between stocks and bonds makes sense.  Expanding into diversifying asset classes, such as private debt, real estate and managed futures can also provide value for some investors.

So, whether it is 60/40, 50/50, 70/30, 60/30/10, the key is to make thoughtful, vetted investment decisions and, once again, 1. match your client’s portfolio risk to their risk tolerance, 2. Efficiently establish their portfolio, 3. Help them to be consistent over time. These rules are not new to financial advisors, but that does not mean that today’s investment platforms make them easy to implement. A digital wealth management platform helps you to accomplish these three goals.

  1. Work with a digital platform that has a built-in flexible risk tolerance questionnaire (RTQ) This allows you to easily monitor client risk tolerance and properly align client risk with portfolio risk. Flexibility is important because you know your business and clients better than anyone else and your voice and investment process should be reflected in the RTQ questions.
  2. The digital wealth management platform you use should create a seamless, frictionless experience when opening an account and putting money to work. The efficiency of the digital process should put hours back in your day.
  3. Your digital platform should also support high-quality third-party strategists, rep as pm, and home office model portfolios.
  4. Your platform should also digitally rebalance your portfolio in a low-cost tax efficient way so that you can maintain consistent risk exposure over time.

FusionIQ’s digital advice platform provides the efficiencies needed to help you improve client results and meet their goals. This in turn helps advisors and their organizations grow. These same efficiencies are lacking on many of today’s popular wealth management platforms which often only make a nod towards a true digital experience. FusionIQ also does this by lowering costs to the advisor and client, reducing time spent on client implementation and by providing high quality investment options. We currently work with some of the largest RIAs, IBDs and credit unions to help them meet their digital goals.

If you want to learn more about FusionIQ’s digital wealth management platform, please contact Peter Brittain or visit our website https://fusioniq.io/ .

John Guthery, CFA
FusionIQ CIO

John Guthery, CFA <br> Chief Investment Officer
John Guthery, CFA
Chief Investment Officer

John is a highly respected investment executive, bringing more than 27 years of experience to his role as Chief Investment Officer for FusionIQ. As CIO, John focuses on developing advisor platforms and business lines including finTAMP and Digital Model Marketplace. He also contributes to FusionIQ’s thought leadership and market analysis.

John’s extensive financial services background includes leading market research, due diligence and platform enhancements for top-tier wealth managers including LPL Financial, where he spent 19 years running product research, Park Avenue Securities, Voya Financial and WP Carey where he helped to design and manage public and private real estate funds and public BDCs.

jguthery@fusioniq.io | Connect on LinkedIn

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