Speaking yesterday at Financial Advisor's annual retirement symposium, noted commentator Nick Murray took the financial services industry to task for the way it responded to the 2008-2009 crisis.
"What have we been doing as an industry over the last five years?" Murray asked at a luncheon during the conference, which attracted more than 500 attendees. He was referring to the huge flow of funds into bonds and the growing popularity of alternative investments like private equity and a potpourri of long-short funds in a variety of asset classes.
When equities touched their lows in early 2009, it should have been a glaring signal to Wall Street that clients were facing a once- or twice-in-a-generation chance to buy stocks, many with generous yields surpassing fixed-income securities, that they could lock in for retirement. Yet many firms opted to emphasize other investment vehicles.
"I didn't know [at the time] how anybody didn't know that the best-performing asset class over the next five years" would be equities, Murray said.
Whatever the reason was doesn't matter. "Either nobody knew or nobody cared," Murray said. "Maybe they didn't want to sell them [equities]."
Murray didn't say it directly, but Wall Street almost certainly found it easier to sell "the miracle of hedge funds" and private equity. But he did note that the day before he spoke, Energy Future, a private equity buyout, filed the largest bankruptcy in the nation's history. Hedge funds may not have fared as badly, but most have trailed the major equity indexes by wide margins since the financial crisis.
The sad fact is that millions of Americans in or near retirement who bailed out of stocks in 2008 and 2009 locked in losses or gave up huge future gains. In doing so, they consigned themselves to a serious loss of purchasing power for decades to come, even if many are now tiptoeing back into equities at much higher prices. What Wall Street either allowed to happen, or actually aided and abetted, is likely to negatively influence retirement income and spending for a long time.
"People of my generation aren't going to hold equities through a 30-year retirement on their own," Murray said.
In addition to key note speakers such as Murray, the conference included panels on a wide variety of retirement topics, including how advisors can more effectively work with female clients, income-producing alternatives to bonds and how to clarify your value with retirement clients.