Investment volatility is normal; missed upside can dramatically cut returns, say North Bay wealth advisers

The "Follow This Story" feature will notify you when any articles related to this story are posted.

When you follow a story, the next time a related article is published — it could be days, weeks or months — you'll receive an email informing you of the update.

If you no longer want to follow a story, click the "Unfollow" link on that story. There's also an "Unfollow" link in every email notification we send you.

This tool is available only to subscribers; please make sure you're logged in if you want to follow a story.

Please note: This feature is available only to subscribers; make sure you're logged in if you want to follow a story.

Subscribe

Sonoma Wealth Management Group

Ivar Bolander, exectuve director, wealth adviser and senior investment management consultant

Rupa Jack, senior vice president, wealth adviser, family wealth director, portfolio management director and senior institutional consultant

Craig Franklin, senior vice president, wealth adviser and family wealth director.

3562 Round Barn Circle, first floor, Santa Rosa, CA 95403

707-524-1000; Napa 707-252-7177

Read more tips on and coverage of wealth management.

Ivar Bolander, Rupa Jack and Craig Franklin are senior adviser at Sonoma Wealth Management Group in Santa Rosa. They answered Business Journal questions about wealth management.

What difference does age of a client make in what you suggest to them as an investment strategy?

Typically people in their 20s are interested in objectives like paying off their student loans, starting a new job or starting a business, and starting to save. As they enter their 30s, their focus changes to things like getting married, starting a family, and starting to accumulate wealth. As they get closer to retirement their attention moves to retirement and cash flow planning, estate planning, and legacy planning. Each of these phases influences their financial plan and thus their investment strategy.

Clearly age is important, but equally important are other client factors such as the client objectives, income needs, asset levels, time horizon, risk tolerance and overall financial and estate planning goals. We have found there is no one size fits all or “formula” that defines an appropriate investment strategy. With thoughtful financial planning, it is possible to help clients identify the appropriate investment strategy given their age and objectives

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 ask key questions designed to help us understand the client’s attitude toward risk and return. Their answers help us consider an asset allocation strategy that best suits their long term investment objectives. But there is more to it.

We have a unique risk management solution that enables us to have a deeper understanding of client portfolios, helping us work with our clients to manage risk while proactively guiding their wealth. Our dynamic platform leverages state-of-the-art analytics to identify various elements of risk in client portfolios, down to the security level, and model the impact of potential adjustments, before portfolio changes are made.

We can show hypothetical performance based on factors and simulated market shocks such as a drop in the S&P 500 or historical scenarios such as the 2008 Financial Crisis. This allows us to pinpoint specific drivers of risk for client assets held here and away. Thus helping us provide more thoughtful advice on the client’s assets.

Using a suite of tools that include goal-specific analysis we are able to create a personalized wealth strategy that integrates the various aspects of our client financial life, including their investments and cash management needs, time horizon, and their attitude towards risk.

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 more these days? What do you tell them if you consider this approach unwise?

We are not seeing an increase in trade frequency due to faster technology or algorithms with our clients. That is because we help our client understand that “staying the course” in regards to a client’s financial plan rather than making frequent trades is a significant contributor to helping our clients move closer to attaining their goals.

Taking a longer-term perspective and not reacting instinctively to volatility can help preserve or enhance gains and minimize losses. For long-term equity investors, an investor’s time horizon is directly associated with the likelihood that a portfolio will experience positive returns.

Sonoma Wealth Management Group

Ivar Bolander, exectuve director, wealth adviser and senior investment management consultant

Rupa Jack, senior vice president, wealth adviser, family wealth director, portfolio management director and senior institutional consultant

Craig Franklin, senior vice president, wealth adviser and family wealth director.

3562 Round Barn Circle, first floor, Santa Rosa, CA 95403

707-524-1000; Napa 707-252-7177

Read more tips on and coverage of wealth management.

What mistakes do you see individual investors making in the current financial climate?

Attempting to market time is one of the biggest mistakes we see that happens in various financial climates. That is, moving to cash in difficult markets conditions and then not getting back in time to participate in the market recovery.

An investor who exited the market and subsequently missed just 10 of the best-performing days in the past 20 years would have lost out on more than half of the gains. Given the difficulty of market-timing, a far better course is to stay invested, with the knowledge that volatility is normal and that missed upside can dramatically cut into long-term returns.

What is your best advice on planning for a financially secure future?

We recommend that investors work with competent financial and estate planning professionals that can help them create a plan that is aimed at meeting their financial needs and attaining their goals.

This plan needs to be dynamic and monitored, reviewed, and if necessary, revised no less than annually. Portfolio construction should be consistent with client goals, yet maintains acceptable levels of risk. For a long-term investor, patience and risk management are essentials. But it is also important to differentiate patience from inattention. Maintaining a mix of investments delivering returns and risks consistent with a client’s needs requires timely adjustments, as many common occurrences within a portfolio serve to move it off its initial asset allocation.

A disciplined approach to rebalancing portfolios annually can create additional return and lower volatility versus never rebalancing or rebalancing during different time periods.

While investing for the long term requires patience, a disciplined approach to rebalancing can help create value beyond the cyclical trends of the market. A successful investing experience blends the ability to be patient and keep a long-term focus on goals while using discipline to maintain an appropriately allocated portfolio.

Show Comment

Our Network

Santa Rosa Press Democrat
Sonoma Index-Tribune
Petaluma Argus Courier
Sonoma Magazine
Bite Club Eats
La Prensa Sonoma
Emerald Report
Spirited Magazine