{"id":1853,"date":"2020-04-22T10:26:31","date_gmt":"2020-04-22T10:26:31","guid":{"rendered":"https:\/\/blog.certifiedfinancialguardian.com\/?p=1853"},"modified":"2020-04-22T10:56:42","modified_gmt":"2020-04-22T10:56:42","slug":"why-review-your-clients-asset-allocation-in-this-extended-covid-19-lockdown","status":"publish","type":"post","link":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/2020\/04\/22\/why-review-your-clients-asset-allocation-in-this-extended-covid-19-lockdown\/","title":{"rendered":"Why Review Your Client\u2019s Asset Allocation in This Extended COVID-19 Lockdown?"},"content":{"rendered":"\n

The entire world, as\nyou know, is in a damage-saving mode. When it comes to handling your clients\u2019\nhard-earned money your approach should be no different: Are you keeping track\nof investors\u2019 portfolio during the on-going Coronavirus or COVID-19 global pandemic<\/a>? Swing into action\nin the interest of their financial wellbeing. <\/p>\n\n\n\n

It is possible that\nin these depressive times, where we (India and many other countries) have not\nbeen seen much success in the containment of the deadly Coronavirus and hence\nthe lockdown has been extended, investors\/clients may be feeling nervous and financially\ninsecure. <\/p>\n\n\n\n

It is expected of you\nas their financial advisor or financial guardian to pragmatically counsel\nclients and handle their hard-earned money with care and prudence as you would\ndo with your own.<\/p>\n\n\n\n

Just as doctors and paramedical personnel are proactively and proficiently doing their job to fight COVID-19 with utmost prudence and diligence, be a financial doctor to investors\/clients. It would damage your client-relationship and business if you think, \u201cI\u2019ll address to investor\/client concerns when COVID-19 pandemic is over<\/em>\u201d. <\/p>\n\n\n\n

The fact is COVID-19\npandemic is far from over: the number of confirmed cases of COVID-19 and deaths\nare increasing by the day. And the markets too, as you know, have been panting\nfor breath; volatility has intensified like never before.<\/p>\n\n\n\n

Everyone — the\nMinistry of Finance and the Reserve Bank of India (RBI)<\/a> — are taking\nmeasures to combat COVID-19 pandemic to provide relief. On your part as a\nfinancial guardian, handle investors\/clients with empathy, care, diligence, and\nwith ethics being the foundation stone. Be transparent, do research, and render\nproficient advice. Investors\/clients look up to you for prudent counsel and handholding\nin the journey of wealth creation in these testing times.<\/p>\n\n\n\n

For the past few days, markets have been rallying on the hope of containment of COVID-19 and economic stimulus from the government, over and above what\u2019s already been announced. But it would be unwise to think that equity markets are out of the grip of bears. The fact is, bears are still running loose<\/a>. <\/p>\n\n\n\n

Table: Markets in a firm bear grip<\/em><\/strong><\/p>\n\n\n\n

\n
\n\n\t\n\t\t\n
\n \n Particulars<\/strong>\n <\/td>\n S&P BSE SENSEX<\/strong>\n <\/td>\n S&P BSE Mid-Cap<\/strong>\n <\/td>\n S&P BSE Small-Cap<\/strong>\n <\/td><\/tr>
\n All-time\n high (Dates)\n <\/td>\n 20-Jan-20\n <\/td>\n 09-Jan-18\n <\/td>\n 15-Jan-18\n <\/td><\/tr>
\n All-time\n high level (in points)\n <\/td>\n 42,273.87\n <\/td>\n 18,321.37\n <\/td>\n 20,183.45\n <\/td><\/tr>
\n  \n <\/td>\n  \n <\/td>\n  \n <\/td>\n  \n <\/td><\/tr>
\n Level\n as of Jan 1, 2020 (in points)\n <\/td>\n 41,306.02\n <\/td>\n 14,998.63\n <\/td>\n 13,786.69\n <\/td><\/tr>
\n Level\n as of April 20, 2020 (in points)\n <\/td>\n  31,648.00 \n <\/td>\n  11,798.83 \n <\/td>\n  10,886.91 \n <\/td><\/tr>
\n  \n <\/td>\n  \n <\/td>\n  \n <\/td>\n  \n <\/td><\/tr>
\n YTD\n Return (%)\n <\/td>\n -23.4%<\/span>\n <\/td>\n -21.3%<\/span>\n <\/td>\n -21.0%<\/span>\n <\/td><\/tr>
\n Correction\n since the all-time high (%)\n <\/td>\n -25.1%<\/span>\n <\/td>\n -35.6%<\/span>\n <\/td>\n -46.1%<\/span>\n <\/td>\n <\/tr>\n\t<\/tbody>\n<\/table>\n<\/div>\n<\/center>\n\n\n\n

Data as on April 20,\n2020
\n(Source: BSE, PersonalFN Research)<\/p>\n\n\n\n

It is possible that, soon after the stimulus 2.0 is announced and the\nlockdown is withdrawn completely, many companies will be able to truly assess\nhow bad they were hit by the pandemic. Further correction cannot be ruled and\nthe bottom is unknown.<\/p>\n\n\n\n

How to cope with that?<\/strong><\/p>\n\n\n\n

First and foremost, set realistic return expectations.\n<\/strong>If investors\/clients\nare keeping lofty or unrealistic expectations, tone them down. Explain to them\nrisk and return go hand-in-hand. <\/p>\n\n\n\n

A fact is, after the\nsharp correction witnessed by the Indian equity market, the earlier\ndouble-digit long-term average compounded annualised returns over 10-15 years,\nhave slipped into a single digit. We will, of course, bounce back, but the\nrecovery is likely to be slower because in all probability COVID-19 will be\nfollowed with a financial crisis (as credit risk has amplified<\/a>) and the risk of\nrecession looms large. <\/p>\n\n\n\n

Insist investors\/clients follow a prudent asset\nallocation model and review it periodically<\/strong>. If they haven\u2019t got it in place\nalready, set their asset allocation right. Now that the equities have witnessed\na sharp correction and volatility has intensified, reviewing, and resetting\nyour asset allocation is warranted. <\/p>\n\n\n\n

Use the Smart Asset Allocator online tool\navailable on the Certified Financial Guardian website<\/a> to review the investors\u2019\/clients\u2019 asset allocation as per his\/her risk\nprofile and goal.<\/p>\n\n\n\n

Under \u201casset allocation by risk profile\u201d, you\ncan determine a suitable asset allocation model taking into account the\ninvestors\u2019\/clients\u2019\u2026 <\/p>\n\n\n\n