Time to ratchet down client expectations?

At least that’s the word from one of Canada’s largest pension funds.

Time to ratchet down client expectations?
At least that’s the word from one of Canada’s largest pension funds.
Caisse de dépôt et placement du Quebéc announced its 2014 financial results yesterday. This past year the Quebec pension plan delivered a 12 percent annual return and a four-real rolling return of 9.6 percent.
CEO Michael Sabia was more than pleased with its performance stating, “Our portfolio has shown its resilience in the face of increased volatility brought about by the collapse in oil prices, the continued decline in interest rates and the strong appreciation of the American dollar.”
In the past four years the Caisse has grown its net assets by almost 50 percent and while the second half of 2014 tested the pension’s resilience, it was still able to deliver above-average results for its pensioners.
The good times, however, are expected to end.
“We’re certainly not calling for a big correction,” said Sabia in his meeting with the press, “but it’s going to be increasingly difficult to replicate the kind of returns that we’ve seen everywhere since 2009.”
Roland Lescure, its chief investment officer, was more specific in his assessment calling for single-digit returns over the next five years, in stark contrast to the double-digit returns of the past five years. Certainly its equity investments, which gained 13.9 percent, won’t do nearly as well.
Some advisors WPs spoken to in recent weeks are of the same belief as the Caisse when it comes to the future performance of their clients’ accounts. Realistic advisors such as John DeGoey expect real returns of 4% over the long haul and they’re happy with that.
In December WP spoke with Raymond James advisor Kash Pashootan about managing expectations for clients in 2015. Heading into the new year he felt that the financial community wasn’t doing a good job keeping clients’ feet on the ground; nothing’s changed since then that would alter his opinion.
We’ve been on a long bull run that’s days away from entering its seventh year.
Overconfidence combined with a market rally that’s reasonably long in the tooth portends to a soft landing in the most positive scenario and a major correction in the most negative.
So, for those advisors who’re still partying like it’s 2010, yesterday’s news is proof positive that ratcheting down client expectations should be a priority in the weeks ahead.
Sure, things might continue going up, but it’s better to under promise and over deliver than the other way around.
Dial it down. The Caisse is.