Advisor: Why I’m adopting a cautious approach

Advisor: Why I’m adopting a cautious approach

Advisor: Why I’m adopting a cautious approach It seems as though the Trump factor has returned to the markets. On Wednesday, Canadian stocks climbed to a record high, joining a global rally on the back of the expectations that the new U.S. President will spur stronger global growth. But despite the rally, many investors remain unsure of what move to make next as the media noise reaches a cacophony. We sat down with financial advisor Christopher Dewdney to find out how he manages portfolios and clients in such market conditions.

“We’re living in a completely new environment and I think caution is the name of the game right now,” Dewdney says. “Although the market has priced in Trump, every day there is more news that has a major impact on the markets. When he comments about individual companies the market reacts. “Diversification is big for us, so the effects aren’t as substantial as they would be otherwise, but we are definitely taking a cautious approach going forward.”

In order to spread the current market risk, Dewdney has adopted a dollar cost averaging strategy with most of his clients. “We’ve been using the dollar cost averaging investment strategy previously, but we’ll be using it even more so going forward,” he says. “It’s helping us spread the risk out over a client’s investment period and take out volatility in the underlying price of the investment by using a systematic process. I’ve always been a fan of the technique. Historically, you typically end up with a lower average cost when you use dollar cost averaging. “

Although Dewdney describes himself as conservative by nature, he feels that a cautious approach is a necessity in the current markets. Dewdney uses conservative type investments and fixed income funds as his investment ‘base’.

“People argue that yield rates are so low with a fixed income or conservative profile, which is fair enough, but yields in both of those investment scenarios will be greater than the alternative of having money in your checking account,” he says. “You can still be fully invested. You can participate in the fixed income side of the market while slowly divesting into more of an equity style portfolio for the long- term. You can divest over a period that depends on your client’s tolerance and time horizon.”

Dewdney uses the current market uncertainty as a good opportunity to reach out and make contact with his clients. “It’s our duty to be proactive, but sometimes you might not be able to reach out to them before they reach out to you, especially when you have a larger number of clients,” he says. “But, the takeaway is that communication is key; people are concerned about their money.”

Dewdney encourages advisors to remain calm and stick to their fundamentals. “Be open to visiting the original strategy, but, for the most part, stick with the plan, be confident and be proactive in reaching out to your clients, whether that’s a phone call, a newsletter, or even an update to your website,” he says. “Today, more so than ever, clients not only demand that level of communication, but they expect it. People are more apt to discussing their financial situations with friends and colleagues, and if you’re the advisor they never hear from it’s not helping them and it’s definitely not helping you.”


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