Editor's Rant - A Plea for Grown Up InvestingSubmitted by Financial Planning Hawaii on July 21st, 2016
Earlier this year in this newseltter, I called out a Royal Bank of Scotland research analyst, who, in the face of a hiccup in the stock market, declared from the top of his chicken-coop that the sky is falling and investors should “Sell Everything”. Last month, the Brexit debacle offered up a similarly nonsensical market call, this time by upstart robo-manager, Betterment. In response to the “market volatility” created by Britain’s vote to the leave the European Union, Betterment issued the following message to its clients:
“Given the magnitude of today’s news and the corresponding market reaction, we have elected to suspend trading during this initial period of increased volatility.”
Increased volatility??? The 500+ point intraday decline in the Dow represented a decline of around 2.6%. It obviously wasn’t a great day for the markets, but it wasn't apocalyptic either. The notion that a company that manages approximately $5 billion in client assets would freeze client accounts in reaction to mildly-worse-than-normal market volatility is surprising, and, as I noted to a reporter from Financial Planning magazine, strikes me as a sign of immaturity. I also do not think it is “okay” for a firm to prevent clients from having access to their money.
For my two cents, I have come to understand that the financial media will always fan the flames of hyperbole whenever the stock market goes down. Panic sells. I get that. What surprises me, however, is when large, respectable, professional asset managers react in similar fashion. As grown-up investors, market timing has no place in the planning paradigm.
Robo Adviser Betterment Stokes Concern Over Brexit Trading Halt (Wall Street Journal)
Securities offered through J.W. Cole Financial, Inc. (JWC) member FINRA/SIPC. Advisory services offered through Financial Planning Hawaii and J.W. Cole Advisors, Inc. (JWCA). Financial Planning Hawaii and JWC/JWCA are unaffiliated entities.