Candid observations about alternative investments, practical advice on how to help clients overcome biases, politically incorrect observations from a veteran asset manager and the need for advisors to be a client’s “longevity partner” highlighted this year’s Strategy Forum presented by the Investment & Wealth Institute in New York City.

On the practice management side, the dynamics of working within teams, the complications of dealing with a hybrid work schedule, and issues around firm equity, bonuses and profit sharing were top of mind for wealth management attendees at this year’s conference, according to IWI chief executive officer Sean Walters.

Private markets and alternative investments, along with international opportunities are “by far” the sectors drawing the most attention from asset managers, according to Walters.

40-40-20 portfolio?
Accordingly, a session on “nontraditional investments” outside of public markets attracted one of the conference’s biggest crowds. Presenters at most sessions like this are usually long on hyperbole and short on candor, but Gregory Brousseau, managing director at Macquarie Asset Management, was the opposite.

The economics of successfully investing in alternative investments requires a steep learning curve and often involves taking a substantial illiquidity risk, Brousseau warned the audience.

Investors need to ask themselves if investing in a private market or other nontraditional assets brings a better return on a risk-adjusted basis, Brousseau said, arguing that it often does.

He also made the case that private companies are often more innovative than public ones; he suggested that advisors recommend a portfolio made up of 40 per cent publicly traded equities, 40 per cent fixed income, and 20 per cent nontraditional assets.

Biases
Perhaps the forum’s most practical advice came from Cornell University professor Suzanne Shu, who discussed how to help clients overcome biases.

Advisors should encourage clients to write down their predictions on how they expect an investment to perform to track accuracy to guard against overconfidence in the future, Shu said. “Humans aren’t good at predicting the future,” she noted, and need to be to be reminded that their beliefs are often not borne out by actual events.

Confirmation bias is well known, but Shu cautioned that advisors should also be on the lookout for biases such as availability, when items and events that are more easily imagined will be more available in memory than those that are bland, vague and less easily imagined and anchoring, when an initial but possibly less relevant piece of information is used as a starting point for later judgements. 

Advisors should use defaults to help clients pre-commit to certain outcomes and not be afraid to give feedback to challenge client choices or verify their reasoning, Shu said. She also recommended reading Why Smart People Make Big Money Mistakes, by Gary Belsky and Thomas Gilovich.
 

Politically incorrect asset manager
Curmudgeonly asset manager Bill Smead, chief investment officer for Smead Capital Management, proved to be one of the conference’s more controversial – and entertaining – speakers.

Investing in ESG portfolios is a “crappy business,” according to Smead, a staunch advocate of investing in companies extracting fossil fuels, including coal. And that was just for starters. 

Smead compared oil and gas companies to tobacco companies in their stock market heyday from approximately 1970 to 2010 as a compliment. Fossil fuel companies are “gushing free cash flow” and “it’s only going to get better” over the next 15 years, he maintained. Smead is not expected to be in attendance at the COP 28 Climate Change conference in Dubai.

The packed room of wealth managers gasped when Smead derided the current stock market levels as being supported by undeserved “financial euphoria” driven by 10 companies and predicted that the S&P 500 “will not make money over the next 10 years.”

Living longer
Making the case that financial advisors need to be “longevity partners” with their clients was the conference’s most theatrical speaker, Joseph Coughlin, director of the Massachusetts Institute of Technology’s AgeLab.

Cracking jokes and showing slides, Coughlin presented an array of statistics and trend lines demonstrating that the US population is simultaneously aging rapidly and living longer. Advisors need to keep in mind that “demography is destiny,” Coughlin said, noting that one study predicts that half of the children born in the 1990s will live to be at least 100 years old.

As financial planning and asset management become table stakes, Coughlin said, advisors need to help clients with age-related concerns such as housing and healthcare, and be prepared to offer aging clients with a wide range of service providers for lifestyle needs. 

Colony Wealth Management’s premium concierge service, “Curated by Colony” is a good example of a firm smartly catering to senior’s needs, Coughlin said. He also suggested such resources as agelab.mit.edu/plan, AGNES, the “Age Gain Now Empathy System,” and using a certified aging in place specialist.

Strong attendance among wealth managers at the Strategy Forum was of a piece with the fact that the Certified Private Wealth Advisor designation became the institute’s most popular certification for the first time this year, Walters said. 

“To stay competitive in the ultra-high net worth market you have to skill up,” he said.

(Editor's note: We will be covering T3, the industry's biggest tech conference, in January 2024. Stay tuned!)