"Limiting losses, even by one or two percentage points, can make a significant difference in the ultimate value of a portfolio, Crowe adds. "For investors looking for a smoother stock market ride, a managed volatility fund may be the right approach."
One veteran money manager points out that a "managed volatility" investment strategy isn't new. Bedda D'Angelo, president of Fiduciary Solutions, an RIA based in Durham, N.C., says CFPs and CFAs are required to learn about managing volatility.
"It's basic, like brushing your teeth in the morning," D'Angelo says. "Amateurs who lack experience, securities sales people who do not manage portfolios and college students are just now becoming aware of the concept of managing volatility."
D'Angelo says her clients need little convincing to embrace a strategy that manages volatility. "They are mature investors who have lived through many market cycles," D'Angelo says. "Once you have lived through a few bear markets, you already know it's how your portfolio performs when the market goes down that determines investment success. "
- Jim McConville
Patent-And Potential Hassles-Pending Over Wealthcare Case
An ongoing patent infringement lawsuit could impact how financial advisors provide advice to clients.
Richmond, Va.-based Wealthcare Capital Management, which serves individual investors, financial advisors and institutions, this summer filed suit against UBS for using what it contends are its own proprietary processes for financial planning including the popular software MoneyGuidePro. The two patented processes involved in the suit assess a client's long-term financial goals and then use a capital-market modeling technique to determine how these goals can be achieved.
The suit seeks monetary damages and an injunction banning UBS from using the financial advising systems in MoneyGuidePro.
Wealthcare sought patents for its work in 1998, and the U.S. Patent Office only recently granted Wealthcare two patents on its financial planning software.
David Loeper, Wealthcare's founder and chief investment officer, says the fact that the patent office issued the patents proves his system is unique and anyone using it should be paying his firm a licensing fee. If the patent is upheld, it could raise the cost of financial planning because of the fees that would be due to Wealthcare.
"What is interesting in this case is that one of the patents, on its face, is fairly broad," says Anthony J. Fitzpatrick, a lawyer who practices in the area of intellectual property litigation with a concentration on patent and trade secret matters with Duane Morris LLP in Boston. "That is what has financial planners worried."
The patent office takes into consideration what existed before the patent was applied for to determine whether something is patentable. The applicant has an obligation to disclose what existed and the patent office also does its own research, although the patent office is under extreme time constraints for the amount of research it can do and how much expertise it can develop in a given field.