Because dealing with people’s money is, by nature, an “angst-ridden” occupation, Wade Chessman, CFP®, decided well before 2008 that he would not let anxiety get the upper hand.
“Years ago, I decided to take a more tactical approach to clients’ investments,” said the President of Chessman Wealth Strategies in Dallas. “I find it more stressful to do nothing than to do something.”
In his opinion, “You can’t time the market, but you can adapt to it (because) the downside is not being able to be there when opportunity arises.”
Chessman and Sean Phillips, CFP® the firm’s Vice President of Wealth Management and Chief Compliance Officer, service about 180 clients, predominantly retirees and widowed or divorced women. While “too much exposure” could jeopardize the $92 million in AUM that clients like these cannot afford to lose, the market’s recent volatility makes it “important to have a disciplined approach— not just to buying, but also to selling,” he asserts. “Our approach is to buy and hold and sometimes sell in order to take risk off the table.”
Chessman has come to believe that a portfolio doesn’t always have to reflect the standard percentages of stocks and bonds. “Sometimes,” he notes, “we may have 0% in stocks.” Last August, for example, when the market was heading downward, Chessman began selling off equity positions and raising cash. As a result, most of the firm’s clients’ portfolios stayed flat, but their risk was reduced. “Taking a more definite position with portfolios certainly helped alleviate my anxiety,” he noted, “and most of my clients were satisfied with my approach.”
Although a recent client event drew unexpected numbers, clients “have not been freaked out. The calls I got were great calls,” says. “In fact, I had fewer calls than usual during the volatile period.”
Chessman’s approach may seem counter-intuitive, but these days he is hardly alone. According to a recent study of the increased use of alternative investments and tactical management by Jefferson National, today’s market turbulence has led a majority of the 500 advisors surveyed to become “more confident in the disciplined use of tactical management rather than relying only on buy and hold.” Compared to a similar survey the company conducted last year, growing numbers of advisors—roughly 3 to 1— are showing increasing confidence in tactical solutions. And more than three-fourths of advisors (75.5%) believe that active portfolio managers can outperform an index over the long term.
Although the strategy demands being alert to what’s going on in the markets, it doesn’t entail constant surveillance.
In fact, Chessman cautions his clients to avoid daily doses of market commentary:
“What helps me as an advisor is having a disciplined approach that takes emotions and the news out of it—not that they can be completely eliminated,” he adds. “But I tell my clients to try not to watch CNBC every day.
In fact, he can’t understand why some advisors at market watch on their office TV. “I would never do that!” he said, adding rhetorically, “What kind of message does that send?”
Chessman’s approach is to watch longer term trends.
“The point is to avoid the one- or two-day drops that cause clients—and us— a lot of anxiety. Having a more active, disciplined approach to investing makes me feel better
You can take action,” Chessman emphasizes. “To me, the real anxiety is the apathy these drops cause.”