6 ways 2021 changed the investing game for advisors | Financial advisers

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When looking to 2022, savvy financial advisers can learn a lesson from 2021. The past year has been marked by many new investment realities, including a deceptive stock market, disappointing bond performance and seemingly inflationary inflation. be anything but “transient”.

Here’s how 2021 has changed the investing game for advisors – and how they can advance those lessons into 2022.

The stock market dodged a bullet – but don’t count on it in 2022

The past year has perhaps resulted in one of the most deceptive stock markets in history.

The whole market has had a great year… for about the first four months. But since May, it is the case of a few who wear the greatest number. In fact, only four stocks accounted for 70% of the S&P 500’s return over the past six months.

It is not a narrow market. It’s an anorexic market. Combined with the recent collapse of many so-called stocks of memes and other popular items of 2020 and early 2021, the market appears less likely to skyrocket in 2022 than in early 2021.

It would be a bad time for Advisors to just remove that and activate the old “hang in there” charm. The coming year is uncertain, but this late 2021 congestion of so many market segments is somehow expected to continue into the new year. Like Harry Houdini, S&P 500 investors have escaped this year.

Next year? Don’t count on it.

ETFs gained popularity in 2021 and will continue in 2022

The rise of exchange-traded funds, or ETFs, has largely been a reflection of the fall of mutual funds. In fact, so far, global ETF inflows in 2021 have exceeded $ 1,000 billion, according to Morningstar data.

But although he has moved into the adviser’s field like a noisy new neighbor, it appears that the advisers’ clients know very little about ETFs. Much of the assets that ETFs attract are invested in a small number of simple vanilla type funds.

It feels like an opportunity for advisers to use 2022 to improve their ETF play and pick the most attractive pieces of the ETF puzzle to craft a personalized vision for clients.

Cryptocurrency Attracted to Clients and Advisors Will Need a Plan

Bitcoin, Ethereum, Dogecoin, and their cryptocurrency brethren can dive in price suddenly and forcefully, even on a weekend. Who knew? You probably did, but your customers may still be catching up.

In 2022, the opportunity is there to size this customer market and be the adult of the part. This market segment is not the first investment purported to change the world. Separate the hype from any real investment you see in crypto and blockchain, so they realize this is an area they can discuss with you.

Any asset can increase in price at any time. But there is a risk attached to everything. For cryptocurrency, this risk of loss is severe.

Bonds have lost their force – Prepare for a memorial service in 2022

Bond investing is not about to get more difficult for advisers and their clients. Instead, the role of bonds as an effective, reliable, long-term addition to your stock portfolio can quickly become obsolete.

The 10-year US Treasury bond has spent most of the past decade below a 3% yield, and inflation is accelerating. This means advisers may need to use a hacksaw for 60-40 portfolios. More specifically, they will have to rethink the 40% segment.

Simply moving 10% of that slice to stocks or alternatives will not solve the problem. Use tactical, hedging and liquidity strategies, along with the flexibility of the stock market and ETFs, to your advantage. If you don’t, you risk someone else telling your client how to do it.

For advisers, 2021 was sort of a grace period, as many clients haven’t noticed that bond yields are lower than what they’re paying you.

Once the Nasdaq and S&P 500 have moved closer to Earth since March 2020, customers may start to notice it quickly. Defeat them in this conversation, or you risk getting defensive on how to play defense in their wallet in 2022.

Robo Advising has grown in popularity, but automation alone won’t be enough in 2022

Throughout 2021, many companies have made the decision to offer more automated customer onboarding, model selection and allocation adjustments.

This is the good news. Now the bad news: it can lower your perceived value in their eyes.

Robotic portfolio management is a great technological innovation. However, if the resulting portfolio is just a robotic version of the same vanilla investing approach that companies took in the days of the two bull markets for stocks and bonds, this is a signal to stop. alarm for 2022.

Instead, strive for access to a combination of flexible and contemporary portfolio management techniques, yet delivered with all the modern convenience of robo-advisor technology.

Inflation problems intensified in 2021 – and they’re here to stay

US Federal Reserve Chairman Jerome Powell isn’t the only one who thinks calling inflation “transient” was a bit optimistic.

Financial advisory clients are also worried about it. They saw that they saw the evidence by eating, driving, or buying anything that requires raw materials.

Inflation is likely to be high until 2022. This should not shatter client portfolios. Advisors can look for ways to exploit it. But more importantly, advisers can learn the history of the higher prices, what’s causing them now, and why the hype might just be overestimated.

As with everything else investing in 2022, it’s critical to strike a balance between the potential for reward and the risk of major loss.

It’s easier to do when you have a game plan established and agreed upon with clients. Because transient can mean “not forever”, but it can also be like when your kids live at home after college, but end up staying a lot longer than expected.

This kind of transition can take a good plan and throw it off balance. Be sure to factor the inflation equivalent of that into your financial and portfolio planning, then take a deep breath and enjoy 2022.


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