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As financial markets continue to careen amid coronavirus-fueled uncertainty, investors are turning to their advisors more than ever for support. In our latest Office Hours, Addepar Alliance & Partnerships Specialist Michael Schwoerer discussed how to manage risk and liquidity in today's rapidly shifting landscape and what investment strategies advisors can expect to see in a post-COVID-19 world.
He was joined by Dr. Ashby Monk, Executive and Research Director of the Stanford Global Projects Center, as well as President and Co-Founder of Real Capital Innovation (RCI). Dr. Monk shared insight into how advisors can provide meaningful value to their clients by leveraging the power of advanced technology during periods of market volatility. You can learn more about Dr. Monk’s views in his latest book, The Technologized Investor.
Here are a few key takeaways from the webinar, in case you missed it:
The ability to stress test your client’s liquidity profile has never been more important
The coronavirus pandemic has made it very clear that advisors should be investing in technology that allows an overview of your clients’ entire liquidity profile. According to Dr. Monk, the ability to make projections and run scenarios about cash flows, liquidity and unfunded commitments is critical in managing the downside of this crisis. Advisors with this technological capability and an excellent gauge of a client's risk tolerance are in the best position for current and future market downturns.
New financial actors and strategies will emerge in the wake of the crisis
As a result of the 2008 financial crisis, we saw the emergence of new investment entities and strategies designed to address limits in the global system. Dr. Monk expects a comparable strategic shift in response to our current market landscape, with an integration-based approach at its core. In his opinion, the integration of alternative risk data such as ESG into an investor’s primary decision-making will be critical in managing risk in future market downturns. As this pandemic has demonstrated, it is becoming increasingly important for investors to integrate signals of future risks into current decision-making models in order to protect their portfolios when crisis strikes.
Dr. Ashby Monk“You need crises in order to drive change”
The future of investment decision-making will be data-driven
Advisors can leverage technology to integrate these risk signals and empower decision-making in periods of uncertainty. With a data-driven approach, you can run scenarios with different strategies and assumptions to build more resilient portfolios for your clients. According to Dr. Monk, advisors who are still living in a spreadsheet-world are simply not equipped to meet their clients’ needs in moments of market panic. Those armed with more sophisticated technology can stress test for the future and manage market risk exposure, even in times of crisis.
Use liquidity management software to identify future cash flow gaps
Our integration with RCI can help you manage the risk sensitivities of your clients’ ever-increasing illiquid portfolios. RCI’s software allows you to model multiple market scenarios through dynamic and highly customizable data overlays. With this technology at your fingertips, you can prepare for unpredictable market conditions and come out ahead of the storm.
Chris McPartlan, Vice President of Cherry Creek Family Offices“Our RCI + Addepar integration enables us to forecast cash balances and asset allocation - for near and long term time periods. This line of sight has been important for us when talking to clients. We’re able to execute scenario planning so that we make the best decisions around cash management and portfolio optimization”
As you continue to navigate this ever-changing landscape, please know that we’re here as a resource for you. Please let us know what you’d like to learn more about. You can get in touch with us at community@addepar.com or on Twitter and LinkedIn.