Financial advisors have the formidable task of devising resilient portfolios capable of weathering stormy market conditions.
The specter of rising interest rates and the resurgence of inflation further compounds this challenge, demanding a delicate balancing act to safeguard clients' financial well-being.
Amidst these trials, a noteworthy trend is emerging – a pronounced resurgence in the interest and allure of fixed-income investing. Could this be a potential beacon of stability and income amidst uncertainty?
In an interview with Action! magazine, Christophe Gauthron, CEO of Kwanti sheds some light on the discernible upswing in the appeal of fixed-income investments. Click on the video below to watch the full interview.
Transcript:
One of the biggest challenges facing advisors today is a trend that started last year and is still unfolding – the end of the bull market, rising interest rates and the return of inflation. This is still unfolding and I think advisors are struggling in different ways. First, there's less AUM (assets under management) and second, their clients are asking them what's going on, are you on top of this?
Because of this trend, there has been more interest in fixed income and, not surprisingly, because CDs treasuries are now yielding much more than before. There's been a shift into those instruments and every client portfolio has to be reviewed in light of this new trend, this new economic environment. So what can you do as an advisor? How do you talk to your clients about that? Well, you have to look at the portfolio positions properly in terms of risk and return. And for fixed income investment, you have to look at some metrics, and one of them, for example, the duration. Many advisors may be familiar with duration; if you're not, then you should really look into this because this is the key to understanding the risk in those instruments and building a proper portfolio for your clients.
One simple thing you can do – really understand that fixed income part of your portfolio – understand those two metrics, duration and credit quality. Fixed income is many, many numbers, of course, but those two are essential; you can go to a lot of websites that will provide us with information. Of course, our company, Kwanti, does a pretty good job of bringing this out and explaining this to you. What is the duration of your fixed-income portfolio? Are you comfortable watching this? Are you exposed to interest rate risk? Is your client too much exposed or not enough exposure? Based on this metric, it’s a simple thing to do.
Now credit quality is also important as you have the risk of default, and you have the confidence that your client is invested in the best possible way. And you have the confidence as an advisor that you're providing the best choice.