Bring It On: Money Managers Prepped for Volatile Markets

Bring It On: Money Managers Prepped for Volatile Markets
Advisor: Anthony Consiglio, director and market executive of Merrill Lynch’s Valley Coast team. (Photo by Ringo Chiu)

Compared to the year and a half of solid downward trends that preceded it, money managers and their clients are now welcoming an ongoing period of high volatility with open arms.

“This year has been one worry after another – almost as if we constantly have to have them,” said Anthony Consiglio, director and market executive for Merrill Lynch’s Valley Coast team. “And they’re problems generated not through the market itself, but some external impact – the fight over the debt ceiling was the latest one, and then it was Silicon Valley Bank before that, and then inflation has been a problem all year.”

The recent financial hazards that panicked the market have, somewhat paradoxically, made it stronger, Consiglio said. He highlighted the downfall of major financial institutions like Silicon Valley Bank and First Republic Bank as an example, noting that even clients flush with cash and confidence just a year prior were calling in the wake of the crisis to ensure they were taking the right steps with their cash.

“The mobility of the money and the technology of the institutions made it easier (to navigate the banking crisis.) We didn’t have people standing outside a bank in a long line trying to get their money out,” said Consiglio. “It highlighted the clients’ need for education on their money.”

Once it became clear that the world was moving on from that particular banking crisis and that the sky wasn’t falling, clients felt assured about the foundational strengths of the banking and finance industries, Consiglio said. Investors are still on the lookout for the next big curveball, but over time are growing more confident about making the best of the ups and downs.

“I don’t see (recent bad news in the financial market) as a bad thing. As the market moves forward and grows in certain areas and all those worries are overcome, the market becomes stronger,” he said.

Grounded optimism

Ryan Parker, president and soon-to-be CEO of the West L.A.-based money management firm EP Wealth Advisors, said he’s been encouraging clients to feel more confident about the volatility while still keeping them grounded on the risks.

“We want them to keep a practical look at the risk in a period of high interest rates and higher inflation. We don’t want to sell our clients the dream, only to have to serve them the nightmare,” said Parker. “We don’t sell on fear; we don’t want people to do things because they’re afraid of what might happen if they don’t.”

He says his firm has continued to perform well, despite prolonged uncertainty and volatility, by keeping its eyes firmly set on its portfolio. That entails weekly meetings with his team to ensure their short-term strategic investments provide the best potential return for the client.

“From an overall environment standpoint, with high inflation, rising interest rates, geopolitical instability and so on, it’s important to remember that we are, first of all, a fiduciary. Our clients are better served with long-term financial plans, how you manage your taxes and maintain value,” said Parker. “We’re on the boring end of things – but it’s intentionally boring.”

Whether the goal is steady gains or seizing on moments of volatility, clients are reliably seeing progress in recent months, according to Jeff Sarti, chief executive of Calabasas-based financial advisory firm Morton Wealth.

“We take the longer-term approach. Whether there will be three or six or 12 more months of inflation, we may have some thoughts on that, but that’s ultimately crystal ball work and it could go in any direction,” said Sarti. “But we’re confident it’s going to be more volatile going forward than not.”’

Sarti said he and his colleagues have been concerned about inflationary risks for many years preceding its technical onset, which itself stems from policies established by the Fed in the wake of the 2008 financial crisis.

“A result of that cataclysmic event was that the Federal Reserve had to come to the rescue of the market. It’s understandable that that is what they did – that’s the whole purpose of the Federal Reserve, after all, and this was an emergency measure,” said Sarti. “That part makes sense, but it wasn’t a measure that was meant to be in place for 15-plus years … We didn’t know when the costs (associated with these policies) would create out-of-control inflation, exactly. But we knew it would.”

Khrysten Baltazar, portfolio management director for California Capital Management, said their team’s keeping to their light touch approach for the foreseeable future.

“Our portfolio strategy shifted to a more conservative tilt as interest rates were on the rise. We have positioned a higher concentration in vehicles such as money market funds to capture the rate hikes while reducing the volatility of the portfolio,” Baltazar said. “We are not looking to fight the Fed.”

LA shrugs off volatility

While national markets have been in turmoil, Consiglio said you likely wouldn’t know it from the healthy state of business in L.A., which has plugged along despite ups and downs.

“Business has been strong across Los Angeles this year, and we expect it to continue through the rest of the year as companies feel confident and prepared for market volatility,” Consiglio said. “As their revenues grow, we’re seeing an increased focus on investing, but they’re also engaging much more with financial advisors on a broader range of needs beyond just managing assets, such as lending and digital capabilities.”

Consiglio said that through a combination of economic unrest and post-Covid tech advances, his team is locally “seeing the financial advisor becoming a more critical day-to-day component of our clients’ lives.”

While LA businesses are still grappling with the toughest parts of the economic downturn, Parker said things at least appear to have stabilized.

“People are still grappling with higher inflation and a higher cost of living, on top of high interest rates, they have to make their money work a little harder. So it’s important to educate them on what that means,” Parker said. “I think what I’ve found over time regardless of net worth and sophistication or education of a client, educating them is imperative. You can’t take it for granted – you could have someone who is a UCLA professor and an economics (genius) who can’t translate that well to their own personal finances.”

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