Ask yourself how much risk you can take with your wealth strategy, says J.P. Morgan adviser
Gregory S. Onken, managing director of OS Group at J.P. Morgan Securities in San Francisco, answered questions about wealth management from the Business Journal.
What difference does the age of a client make in what you suggest to them as an investment strategy?
Your investment portfolio should be aligned to your goals, which are often aligned to life milestones. If you need the money soon, such as for retirement income, maybe it should not be in as many stocks and vice versa. No matter their age, we find clients most often benefit from an endowment approach as it allows investors to develop a strategy that has the highest probability of success.
For example, clients at the start of their investing lifeline might be best weighted more heavily to core equity and long-term thematic investments for growth; clients who have been investing for most of their lives tend to have budgetary concerns for others such as charity or heirs, so we discuss assuring that those priorities are met along with growth.
How do you help a client determine what level of risk they are comfortable with when it comes to investing their money? Are there key questions you ask to assess that risk?
We measure risk from two perspectives: risk tolerance, which is one's attitude toward risk, and risk capacity, which is one's ability to take risks. It is essential that we know our clients and their families extremely well and act as a trusted partner, because we can help navigate through areas of concern.
We frequently discuss their lifestyle, spending, priorities and other areas beyond typical stocks and bonds to create a full picture portfolio. This allows us to mitigate risks and stay flexible.
With faster technology, algorithms to pick stocks and instantaneous investments, are clients making more frequent moves with their money, not being content to stay with investments for the long haul? What do you tell them if you consider this approach unwise?
We build portfolios designed to deliver longer-term goals, so our clients are not inclined to make short-term reactionary changes. We strive to be proactive in building investment portfolios so that our clients are in a position to respond, not react.
For example, we invested in bonds with adjustable or floating rate coupons before the last eight interest-rate hikes, but as our expectation that rates and valuations had peaked, we rotated into different structures. Our clients didn't need to react to rising rates because we had already designed it into their portfolios, and now they don't need to react to declining rates because that too has been incorporated.
Another strategy we use integrates both time and price to deploy capital into favored investments as opposed to the classic “dollar-cost-averaging” approach which only incorporates time intervals. Using this approach, if something we like drops in value, we have designed the capacity to invest more. This has served our clients well over time.
What mistakes do you see individual investors making in the current financial climate?
Timing is hard, and the temptation to sidestep downturns is relatable. But there is a large body of research to suggest that investors tend to jump the wrong way at the wrong time when emotions run high. So we help our clients meet their goals without having to react emotionally and open themselves up to potential mistakes; bonds, hedge funds and other diversifiers are designed to help weather volatility and keep portfolios balanced in the current financial climate.
What is your best advice on planning for a financially secure future?
Our advice is to determine your financial goals and stay disciplined in your approach to achieving them. We believe this can allow investors to stay in the market while avoiding pitfalls and staying aware of their full balance sheet.
