Investment Considerations During COVID-19 ADISA Panel Discussion

Tuesday, May 5th, 2020 and is filed under AI Insight News

AI Insight’s Mike Kell, senior vice president – business development and program management, recently participated in an ADISA panel discussion regarding investment considerations during COVID-19. Panelists included moderator Lilian Morvay, principal and founder of Independent Broker Dealer Consortium, LLC (“IBDC”), along with Michael Schwartzberg, founding partner, Winget Spadafora & Schwartzberg; Gary Saretsky, founding partner, Saretsky Hart Michaels + Gould; Sheri Pontolillo, founder and director of InterWeb Insurance; and Bob Valker, managing director, Capital Forensics.

Following are some of the highlights of this discussion, including several helpful and actionable risk management best practices.

  • Arbitration claims increase in times of market dislocation. There’s no reason to think this time would be any different so its important to be prepared.
  • According to a recent Financial Advisor article, the Pandemic has driven 1 in 4 Americans to reach out to a financial advisor for the first time.
    • Being proactive with existing clients is especially important but there’s also a good opportunity for prospective clients as well to protect your own business.
    • Support your clients and your business by connecting people. For example, bring together a family you work with to put together a plan to support a specific cause or community need. This may allow you to talk with younger relatives, parents, or heirs. Neighbors may want to come together.
    • It’s a chance to lead and connect yourself with people around you. Positive for the community and business.
  • Best practices for market dislocations: Review all alternative products in your book and:
    • Understand exposures.
    • Take a hard look to ensure the proper due diligence was and is being done on an ongoing basis.
    • Documenting the due diligence.
    • Be aware of potential areas of risk (triage your risk) including but not limited to:
      • Concentration
      • Elderly clients with exposure to alts
    • Review the investment rationale, objectives, risk tolerance, paperwork, and ensure documentation is in place for all alternative investment decisions. Ensure that actions are backed up with verifiable data.
    • Ensure that you are taking the responsibility for analyzing your own business and knowing your risk. Don’t wait for attorney. Start now.
    • With more remote work, review your E&O insurance to ensure you are fully covered. Determine if cyber-security coverage is needed and that you have the appropriate technology in place.
  • Effective communication is critical, especially in times like this where there is fear and anxiety. Respond to the emotional concerns. Three suggestions for communications:
    • Get on the phone, call clients, do not avoid this. It’s not fun but silence will cause feelings to magnify. Acknowledgement helps to diffuse anxiety. In many ways, this market dislocation helps to highlight the benefit of alternatives and takes the argument against them away. It’s tougher to highlight alternatives when all market indexes are outperforming them. That’s not the case now.
    • Don’t wait to communicate, do it now, immediately.
    • Do it right. Listen to concerns but listen to what is not said. This is an amazing opportunity to really flesh out the true risk tolerance of clients and bring it to light. It might be painful, but it is helpful.
  • Phone calls are the best approach for communicating.
    • Texting is mostly prohibited and e-mail can be misinterpreted.
    • Phone calls are typically the best approach for communicating, and then confirm in writing or e-mail something verifiable from the conversation.
    • Firms may still have a small pocket of exposure in recent sales (ie: those who purchased them just prior to suspension), but big picture down the road this will be helpful.
    • Firms should have a documented rationale for suspensions or other offering actions.

Click here to watch the full replay.