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Talking to Clients About Trump

By Thomas Coyle March 29, 2017

This article is the first of a two-part series. Part two will be published tomorrow.

For many financial advisors, U.S. President Donald Trump is a necessary topic of conversation with clients.

It’s not that all FAs are especially eager to share their opinions of the White House’s latest tenant. Rather, advisors tell us, Trump is hard to avoid in the context of long-term financial planning. They say the scope of his proposals – from renegotiating trade deals to pushing for renewed infrastructure and reducing taxes – stands to impact portfolios whether these initiatives succeed, fail or fizzle out.

Add to this already heady mixture of policy ideas a stated aversion to regulation, an apparent desire to rewrite the domestic- and foreign-policy playbooks, and signs of a potential scandal – “Kremlingate” – that, exaggerated or not, could cloud Trump’s tenure, and you’ve got a top-line talking point that’ll be with us for years, say advisors.

So we asked these practitioners what they’re telling clients about possible “Trump effects” on their investments and financial plans – good and bad.

For Jean Deighan, in common with other advisors we heard from, the main message for clients is stay focused.

“Stick with your asset allocation,” Deighan of Deighan Wealth Advisors in Bangor, Maine, tells clients. She also counsels them not to read too much into the “Trump rally” in stocks.

Since Trump’s election last fall, the S&P 500, a tracker for big-cap U.S. stocks, has – despite recent signs of weakness –gained about 11% in what’s already been a long bull run.

“But the stock market is a leading indicator, and this market has been skipping along on the idea life is going to be easier for corporations as a result of lower taxes and less regulation,” says Deighan, whose firm manages $184 million. “Short term, some of this may be deliverable; long term, who’s going to pay for all the promised new infrastructure?”

For Deighan, a likelier outcome for the U.S. economy isn’t a Trump economic miracle, but a continuation of the slow growth we’ve seen in recent years — hobbled, perhaps, by rising interest rates.

“It’s not a time for major shifts in asset allocation,” says Deighan. “You have to stay the course.”

For Leslie Beck of Compass Wealth Management, a by-the-hour planning firm in Wood-Ridge, N.J., the message to clients about Trump is rigidly fact based.

Leon LaBrecque

“I am trying to keep clients focused strictly on the impact policy changes may or may not have on their plans and their portfolios,” Beck tells FA-IQ. “For portfolios, it’s an emphasis on economic impact.” In this context, she says, “less corporate tax could potentially mean higher earnings, border tax could impact specific sectors, increased fiscal stimulus could mean higher inflation. From a planning standpoint: potential increase in healthcare costs pre/post retirement; changes in 401(k) and 529 plans, et cetera.”

Bottom line when it comes to Trump administration initiatives, Beck tells clients: ignore the rhetoric and “concentrate on the data.”

But Leon LaBrecque, managing partner of LJPR Financial Advisors in Troy, Mich., sees in Trump’s first year in office a period of unprecedented uncertainty.

The reason? Under Trump, all policy — from trade to deficits and from geopolitics to energy — is fully in play against a backdrop of rising interest rates.

Consequently LJPR, which manages about $700 million, is telling clients to prepare for inflation and market volatility as the new president’s policies succeed or fail — and to watch for satellite opportunities in areas like infrastructure buildout where Trump might get traction.

“The whole world has changed,” says LaBrecque. “We were playing checkers; now the game is chess.”