Now is the time for a good financial adviser

I suspect there are a lot of people out there who are currently very glad they sought the services of a financial adviser. 

Now is the time to prove your worth, advice community.

While others are losing their heads, this is the moment that your skills should shine.

For a few years investors have been warning that the near 12-year bull run in equities would come to an end

As if the market was not feeling a tad weak anyway, and sentiment was fragile enough, along came an all-out stand-off between the Russians and the Saudis over the price of oil.

That is not a political spat you want to be in the middle of.

We may not have known it 10 days ago, but the bulk buying of loo roll and tinned peas was actually a symptom of something much more malign.

No, not the overriding fear that coronavirus was about to spread, but of financial contagion. 

The negative sentiment about how the country would cope was already giving jitters to the markets. So when the oil price plunged 20 per cent, that was enough to send everything into a meltdown. 

For a few years investors have been warning that the near 12-year bull run in equities would come to an end. No one thought it would happen like this, though.

Rather than the unrelenting run grinding to a halt because of wider economic uncertainty or weak fundamentals in corporates, it was something we never expected. 

The whole sell-off was met with the predictable panic from ordinary savers asking: what they should do. To which the answer is, at least from those who properly diversified or sought the help of an adviser: ‘this is what you planned for’.

This is why we all build a portfolio of investments, so do nothing.

I suspect that will prove difficult to those passive fund loyalists who may suddenly find themselves more exposed to the market than they intended.

The advice I heard the most was not to sell. A loss is not a loss unless you turn it into one. 

Shares have just got cheaper – and besides, now is the time to focus on the long term.

Advisers should be reminding clients that they are saving for the long term. That is not five years, nor even necessarily 10, but 20 or 30 years.

Anyone who began investing 35 years ago has invested through the Great Recession, Black Wednesday, the dotcom crash and they are still more than 1,800 per cent up even with today’s losses.

No one quite knows how long the market turmoil will last. Hopefully days like Monday March 9 will prove rare.

Most economists believe we are on the downward part of a market that looks ‘U’-shaped, but even they do not know how long this first bit will last before we turn the corner.

So this is why good advisers will be highlighting to clients that, actually, this unexpected turbulence was planned for.

If active managers and financial advisers cannot prove their worth when the rest of the market is falling apart – then really there is no hope.

What is the point of AR funds?

I have never seen the attraction of absolute return funds: they are just too complicated.

I understand the philosophy, and in a way I understand what gives them a place in the market. But I am a simple fellow, so when I print off the full list of holdings for one fund, and discover it runs to 34 pages and includes baffling currency hedges and derivatives, then I just cannot stomach it.

Not only that performance has been dire – at least in some funds. The worst is down 36 per cent in a year.

That really is some achievement, even when you have got a fund pumped full of short positions, and particularly considering the objective of the strategy.

No, absolute return funds are an expensive mess. Not for me, thank you.

Problems with unit trusts

The turmoil in the market once again highlights the liquidity and pricing issues that are problematic with unit trusts.

Anyone who wanted to sell on the day the market crashed would have got the price 24 or even 36 hours later.

In a dynamic investment world, that really is not acceptable for some investors.

Some fund managers blame this misconception on the platforms for promoting easy trading.

But really, it highlights the lumbering pace of change in the unit trust world.

James Coney is money editor of The Times and The Sunday Times. @jimconey