By now, you’ve heard that to slow the spread of coronavirus, we should practice “social distancing.” This advice urges us to avoid gathering in groups of more than 10 people, avoid discretionary travel, shopping trips, or social visits and not to go out to restaurants or bars.
What if your investments have already been socially distanced by commoditized “Buy, Hold & Hope” portfolios designed for the masses?
Now, more than ever, we need a human advisor to help us determine what to do in an unprecedented world crisis; where governments are mandating the shutdown of more than 50% of our economy. The losses to portfolios have been severe, and until coronavirus works its way through the population, the probability of additional losses is high.
Over the last 10 years, the most popular investment strategy has been to buy the indexes as cheaply as you can. The rise of robo-advisors (human-less) exploded in popularity. Zero commission-free trading on DIY (do-it-yourself) platforms drove custodians to find revenue through covert methods, such as cash sweep accounts, securities lending and selling order flows to high-frequency trading firms.
The idea of never needing a human advisor captured the imagination of big financial firms dreaming of disintermediating a person with machine-learning, robo service teams and artificial intelligence. Billions have been spent in the pursuit of “portfolio social distancing.”
The ensuing potential chaos is still in front of us as the economy shuts down, unemployment claims skyrocket, and businesses battle with the uncertainty of closing their doors and then rebooting operations at a moment’s notice. Times like these REQUIRE a human financial advisor. Most importantly, a financial advisor that understands downside risks and how to navigate these troubled waters on behalf of their clients. Active investing will survive and thrive, but passive investing may be the one permanent casualty of this current crisis.
WE WILL SURVIVE THIS PANDEMIC TOGETHER!
See how the U.S and Canada pandemic preparedness ranks best in the world: