TITLE

Staying the Course

AUTHOR(S)
McCarthy, Ed
PUB. DATE
February 2002
SOURCE
Journal of Financial Planning;Feb2002, Vol. 15 Issue 2, p42
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
The past 20 months or so would appear to have been an extraordinarily difficult time for financial advisors. The United States equity markets peaked in the spring of 2000 and the subsequent bear market decimated many investor's portfolios. It wasn't just the highflying Internet and dot-com stocks suffering, either. Through the 18 months ending in September 2001, the S&P 500 index showed a negative total return of roughly 29 percent. Bear markets have a direct financial impact on advisors whose incomes are based on the assets under management model. An advisory firm's costs do not drop in tandem with income; in fact, it's likely that most of its expenses will continue to increase. This is the downside of a predominately fixed-cost business: income reductions often flow straight through to the bottom line. Clients with diversified portfolios have lost less money than their growth-stock-only peers. Likewise, advisors whose clients diversified across asset classes experienced more modest revenue decreases. Finally, it seems this bear market has confirmed the value that advisors bring to their relationships with clients. INSET: Surviving the Bear.
ACCESSION #
6030740

 

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