Financial advisors will need to adopt a new diversified investment gospel if they hope to restore their clients' somewhat shattered faith in the church of investing, a J.P. Morgan executive told advisors today.
If financial advisors hope to manage their clients through today's turbulent market times, they'll need to persuade clients to embrace asset diversification to balance their portfolio, J.P Morgan executive George Gatch told a nearly filled ballroom of advisors at the Morningstar Investor Conference in Chicago today.
"There's a total lack of balance out there," Gatch said. The imbalance is caused by investor behavior and what he called unprecedented flows of investment into fixed income, he said. "Investors seem to equate investing with gambling. They have begun to doubt the power of diversification," he said.
Gatch presented a chart of the major-and financially negative-milestones in the past 12 years, including 9/11, the 2008 market crash and the European debt crisis, that he said have cumulatively undermined investors' faith in the market.
"It's an incredibly challenging period of time filled with unpredictable uncertainties and volatile risks," Gatch said. "Quentin Tarentino couldn't have written a more disturbing script."
Gatch said advisors' mandate is to convince clients to embrace a new investment mantra: portfolio diversity. "Individual investors need guidance more than ever," he said. "There needs to be a more flexible, more dynamic approach to investing."
That "dynamic" investment approach, said Gatch, must include thinking more globally and considering multiple asset classes and income producing securities instead of fixed assets. "We have to be more forceful to diversify investors' portfolios than we ever have," he said.
-Jim McConville