My Inbox: More Risk, Please

This is purely anecdotal but the emails from clients started hitting my inbox late Friday night, “What are we going to do differently in 2012?”, “I want more risk” and “let’s put our cash to work…”

What’s interesting about these emails; They are from some of my most conservative (and concerned) clients in 2011. In October, many of them worried we “didn’t have enough cash”, and now two short (volatile) months later they are ready to burn the boats and push forward into the brave unknown like Christopher Columbus looking for returns on the back of a new year, Tabula rasa style.

In my reply to all of them, I kindly reminded them of the year we just had and the still unfinished business of the economy. I warned them of being short-term focused; With one client, in particular, they wanted to buy China one week and then the very next week wanted to sell everything.

I, of course, reminded them all of the issues with more risk taking in their portfolios, and then I reluctantly provided ideas trying to quantify the risks. I personally hate it when it comes to this, people are not really hardwired to move outside of their programming for risk. But that’s the career risk of an adviser, dancing a fine-line between enabler & overly-concerned parent.

Having said all of this, all of them still leapt at the chance for changes, namely “Yes — more risk, please.”

I have no idea how many other emails to investment advisers and financial advisors (and yes, there is a difference) are waiting in inboxes around the country right now, but if this is any indicator, it seems to me that after the last three years people are so starved for return (and presumably income) that they’re ready to do almost anything to get it, even if it means rowing their boats into shores riddled with ship wrecks.

So, Bon Voyage, everyone! Let 2012 begin.



10 thoughts on “My Inbox: More Risk, Please

  1. Pingback: Tuesday 7atSeven: tail risk timeout | Abnormal Returns

  2. Lavonne Kuykendall

    Hi Scott,
    This is interesting. What do you think is the trigger for folks suddenly wanting back in the market?

  3. Anonymous

    Hi Lavonne,

    I think it’s a few things: 1) retirement — investors are very hungry for return, especially boomers wedged into plans calling for bigger return needs 2) Short-term memory lapses, the October panic is now a distant memory. 3) New Normal — I think (and this is also anecdotal) a lot of people are tired of earning zero on cash, so anything (even bonds at historically inflated prices) is perceived as better than cash.

    But as I mentioned in the post, to completely discount a client’s wishes is tough because in the end it is a relationship — “But that’s the career risk of an adviser, dancing a fine-line between enabler & overly-concerned parent.”

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  5. Anonymous

    Josh Brown just highlighted how Financial Advisors HATE equities right now, so I wonder…. who’s dumb and who’s dumber?

  6. Oz

    Ahh the psychological effect of the new year.  Its absolutely remarkable isn’t it?  I think a lot can be put down to a shift from short-term focus to longer-term.  In November people were just focused on getting to Christmas without anything bad happening (like Greece telling Europe to shove it).  Now, with the assistance of guys like Bob Doll, people’s focus is on the whole next 12 months – sure, they’re told the problems remain but by next Christmas things will have worked out pretty good for the year…

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