Standard & Poor's Downgrade Of U.S. Debt Proves You Can't Always Anticipate A Market Full Of Surprises

Saturday, August 06, 2011 10:23
Standard & Poor's Downgrade Of U.S. Debt Proves You Can't Always Anticipate A Market Full Of Surprises

Tags: client education

If you thought the credit crisis ended last Tuesday, Friday night's Treasury downgrade was probably a shock. The important thing now is to stay in front of your clients and on top of the news.

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I thought the fact that Congress avoided a default last week made an immediate downgrade unlikely.


And then when the global markets started tanking -- because Europe was sinking into its own morass -- I was pretty sure that Standard & Poor's wouldn't pull the trigger and make things worse.


They proved me wrong, and here we are.


Believe it or not, if you were even a tiny bit surprised by the downgrade or even just the timing, there's an opportunity here to confess that to your clients.


Nobody called the downgrade. That proves what you've been telling your clients for years: markets are unpredictable and there's always going to be shocks that none of us expected.


But since we've all known for awhile that a once-unthinkable downgrade was now possible, you presumably took steps to prepare client portfolios for that possibility.


Tell your clients what you did, in just a few words. No need to get technical unless you can explain why value gets a higher weighting now or how emerging markets bonds are providing a shield right now.


Just saying you fiddled with the allocations may be enough.


And if you didn't do anything because you're convinced this is a non-event, say that too. 


Either way, a lot of advisors -- arguably most advisors -- were holding off on issuing a statement on the debt ceiling debate while the soap opera was going on in Washington.


Once the deal was signed, the "problem" seemed solved, so everyone moved on to hold clients' hands during Thursday's meltdown.


Now the S&P news is on the table and all over the financial press, so there's really no excuse to hold off any more.


Get in front of your clients -- send an email, even just a few links -- and remind them that you're as on top of the situation as any human being can be.


That's all it takes!

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