Advisors Focus on Clients Ahead of Trump Presidency
Donald Trump’s stated distaste for government regulation – particularly the Department of Labor’s rule to raise fiduciary standards in retirement planning and taxes generally – might not be the biggest determinant of the changing advisor landscape after Tuesday’s presidential election.
For Cory Krebs, an advisor and portfolio manager at CooksonPeirce Wealth Management in Pittsburgh, the most immediate and pressing concern for FAs following Trump’s victory doesn’t have much to do with policy or regulation at all. More importantly, he believes that soothing the fears of clients who were caught up in the emotions of an often bitter and negative presidential campaign is “job one” for most advisors.
“Irrespective of the outcome, this was such a polarizing election that we’re probably going to wind up spending a lot of time simply soothing the fears of half our client base,” says Krebs, an investment committee member for an indie RIA that manages nearly $1 billion.
Early Wednesday morning, he and his colleagues were busy fielding calls from anxious investors. After watching an 800-plus point overnight drop in the Dow Jones Industrial Average's futures, Krebs was relieved to see financial markets open relatively flat.
“Despite its divisive nature, this election isn’t shaping up to be a real game changer – we’re still going to be talking to our clients about the same basic investment themes as we were before November 8,” he says.
Still, Krebs is starting to alert investors to some pockets of stocks that might be “at play” once Trump moves into the oval office. One of those opportunities he plans to put on his clients’ radar is healthcare – particularly leading biotech and pharmaceutical providers.
“Clinton was viewed as an adversary to those industries, so we’re already beginning to see positive signs developing in many of these stocks early after the election,” Krebs says.
Alan Cohn, cofounder of Sage Financial Group in suburban Philadelphia, expects to focus much of his post-election duities on helping clients deal with heightened market volatility.
“Historically, markets tend to be most volatile leading up to a presidential election; then, over the next 100 to 200 days, things settle a little,” he says.
But clients are probably going to experience “above normal” volatility at least into early 2017, notes Cohn, whose firm manages more than $1.5 billion.
“So my role as an advisor is going to be part psychological counselor and part tactical investment manager,” he says.
Along those lines, the wealth management shop’s advisors say they’re taking a proactive stance in reaching out to clients.
Besides making individual calls and renewing conversations with long-time clients over the phone and setting up in-person meetings, Cohn sent out a lengthy email alert early Wednesday.
The electronic letter to clients sought to reinforce Sage Financial Group’s long-term investment strategies, he says. It also tried to prepare investors for the possibility of increased market turbulence in the short run.
At the same time, Cohn offered a reason for optimism: “When Congress and the sitting president are both from the same party, the stock market has on average performed fairly well.”
Advisor Tom Owens in Seattle is an unabashed fan of the DOL rule. The cofounder of Garde Capital is hopeful that Trump will find so much on his plate that he won’t focus on squashing efforts to raise fiduciary standards in retirement planning.
“Hopefully cooler heads will prevail and what’s good for this industry’s long-term future will get a boost once all of the election dust settles,” says Owens, whose firm manages more than $800 million. “Wall Street would have so much better of a reputation if its clients could be assured that their advisors were acting as true fiduciaries in every sense of the word.”
Doug Haws, a portfolio manager at Tom Johnson Investment Management in Oklahoma City, is also a supporter of the pending DOL rule.
But he adds that since “a lot of issues still need to be sorted out,” a “hard review” by Trump might lead to the possibility of making it “even better.”
“In the best-case scenario, he’ll look it over and push for more reforms, either by taking out parts of the DOL rule that don’t make as much sense or supporting new legislative initiatives,” says Haws, whose firm manages more than $1 billion.
Peter Mallouk, president of Leawood, Kans.-based Creative Planning, sees Trump as far more likely to pull back wealth management industry regulations.
The incoming President has gone on record as supporting an unwinding of sweeping financial industry reforms such as the Dodd-Frank Act. "And a close advisor to Trump has indicated that the president-elect has a strong distaste for the DOL rule,” Mallouk adds.
Within the coming year, the longtime advisor says he wouldn’t be surprised to see a White House-inspired pushback to implementation of the new rule, which is set to take effect in April. Full implementation is scheduled to stretch into early 2018.
“Reforming the DOL rule certainly isn’t going to be a big priority for Trump,” says Mallouk, whose firm manages about $22 billion. “But with his anti-regulation stance, at some point we could very well see momentum build to rollback fiduciary reforms over the course of 2017.”
Meanwhile, he’s relaying to clients that Trump’s election could prove helpful to investment sectors like energy and financial services.
Otherwise, Mallouk is preaching a message of patience and common sense when conversations with investors drift from strategic portfolio planning to politics.
“What markets hate is uncertainty,” he says. “As long as Trump can remain a stable and positive force for change, investors should be fine over the longer run.”