When it comes to investing, there is never just one story. And if the S&P 500© had a book coming out next week, it would be titled “One strategist may not be getting the job done.”
Potomac has highlighted, for years, the importance of diversification amongst manager styles. As advisors put together a balanced portfolio for their clients, combining different manager strategies has become more critical than the traditional version of diversification our industry proclaims.
The recent market fall has prompted advisors to step back from their standard approach—scanning the myriad of strategists on a model marketplace or TAMP and choosing one without considering the most essential tool to build and preserve wealth—risk management.
While everyone has a different threshold, most portfolios weren’t built to withstand a catastrophic drawdown. When a client’s portfolio could drop by 40%-50%—well above most clients maximum drawdown tolerance—it may take years to rebuild those losses
So, of course, advisors turn to risk management during markets like these, aka us.
Potomac designed strategies to help limit devastating losses and TAMPs have taken notice.
We were already expanding rapidly within the Envestnet TAMP. Our recent addition to platforms like OPS (Orion Portfolio Solutions), one of the largest in the industry, Fidelity’s FMAX, and Amplify have reaffirmed advisors’ belief in our “conquer risk” philosophy.
Tenured expertise doesn’t go unnoticed, but it perhaps hits a visible spotlight when things go to sh*t.
Our ability to understand the movements of prices in the marketplace and ignore the news allows us to have the track record we do.
It’s a process that has grown the firm. Some might say it’s antiquated to have the same method for decades; however, if you don’t have a process and are taking the gut approach—good luck. You might as well go all-in on red and spin the roulette wheel.
The driving interest comes from the fact that because we have expertise in combining different manager strategies, allowing advisors to make it much easier to incorporate Potomac strategies into the portfolio mix and improve the overall client experience.
This, in addition to a process we call part of our OCIO services, is how we help advisors provide risk management to their clients and make business simple.
We review existing manager relationships and provide model combinations that may use many strategists that advisors are already using—they just didn’t have the tools to make the experience efficient.
For advisors, sometimes it takes markets like these to realize if they aren’t using risk management in portfolios for their clients then their business revenue could also decline by 40%-50% right along with the market.
If you haven’t had a successful experience with your strategists… try giving risk management a go.
Disclosure: This information is prepared for general information only and should not be considered as individual investment advice nor as a solicitation to buy or offer to sell any securities. This material does not constitute any representation as to the suitability or appropriateness of any investment advisory program or security. Please visit our FULL DISCLOSURE page.