PM is 'cautiously optimistic' about finding good returns in '22 while protecting against headwinds

Government liquidity and equity interest is buffering against debt, interest, and lockdown concerns

PM is 'cautiously optimistic' about finding good returns in '22 while protecting against headwinds

After a great holiday playing with his young sons, Josh Brown, Quintessence (Q) Wealth’s and ETF Capital Management’s portfolio manager, is cautiously optimistic about what 2022 will bring for his clients, especially after Q’s smooth transition with the client-focused reforms.

“I’m somewhat cautious given that my client base is almost exclusively retirees,” Brown told Wealth Professional, noting it’s hard to be overly bullish looking forward, especially given the new COVID variant. “I’ve definitely got some concerns about global debt and what happens with the pandemic going forward. At the same time, I’m looking at a market that’s awash with government liquidity. There’s tons of money out there. People are still buying a lot of equity.

“At this point, we’re somewhat positive on the year because of the liquidity out there, but we’re cautiously so because we deal with retirees and if that bubble popped, we want to make sure that we have some protection built in there,” he said, adding it will be an interesting year as they find the required returns. “We’re not expecting a runaway market. So, we’re really focusing more on the income side for a lot of clients and protecting it as best we can in case something goes wrong. But, given all the liquidity out there, chances are the market will go up by a bit this year. But, we want to be protected in case that doesn’t happen.”

Brown said the firm’s been adapting its suite for a couple of years and adding in options protection to capture the upside but also provide protection against any market downturns. In fact, Q spent the last half of 2021 working on getting its product shelf right for 2022, especially given there’s “bunch of headwinds going forward”. It’s aiming to help those preparing for, or in, retirement still earning five to seven per cent to grow their portfolios while protecting those against any more pandemic shutdowns, debt becoming an issue, or governments pulling back their support of the market too quickly. But, Brown was also cautiously optimistic that the U.S had learned its lessons from being “a little overzealous” in 2018, so should bring interest rates back slowly.

That’s the only caution he sees, however, since integrating Q’s client-focused reforms has gone smoothly.

“It was good timing because it coincided with us getting bigger and stronger,” said Brown, noting that Q was already replacing its software systems, so just integrated the know-your-product changes into those to formalize what it was already doing and provide the required reports. It’s still using all the product that meets its goals or creating its own to remain cost-competitive. But, now the team can update its vetted products in the centralized system to ensure they continue to comply and all of the firm’s partners can access the full suite.

Q was also building its own CRM system, so built the know-your-client requirements into it so clients receive the electronic document when they start the process. Brown then phones to assess the client’s risk level, so he said IT’s done a lot of work, but it’s been quite seamless for portfolio managers (pm).

“We always did our KYCs before the clients on-boarded, so we could give them the best recommendation possible,” he said. “So, I know one of the big changes for other firms was having to collect that information sooner, but we didn’t have that issue. So, our software system causes everybody to comply properly with these rules going forward.

“It’s been pretty easy for our PM team to integrate this, and it’s only going to help clients,” said Brown. “So, each pm can just deal with each client with zero fear of errors and we know we’re going to be able to please the regulator when we have to prove that we’re doing it their way.”