UBS and Wells Fargo advisors have logged long hours since election day trying to steer clients away from making investment decisions based on political sentiments, executives from the two wirehouses say.
“We are reminding clients, and have been for the last week, that partisan bias can be a dangerous thing,” Tom McLoughlin, head of Americas fixed income at UBS Global Wealth Management, said yesterday during a conference call with reporters.
In the past 48 hours, UBS advisors have been inundated with calls from clients from both sides of the political spectrum, McLoughlin said. Many of those clients want to make portfolio decisions based on either optimism or disappointment with the election outcome, and advisors have tried to dissuade them from doing so, he added.
UBS advisors’ approach involves reminding clients that investment strategies should be based on at least a three-year time frame, which has helped dispel some election-induced anxiety, McLoughlin said.
The majority of the 2,852 investors and 1,150 business owners surveyed by UBS from September 22 to October 12 said they planned to make portfolio allocation changes based on the election.
Historically, investors have not gotten good returns when they let their political leanings dictate their portfolios, UBS’ McLoughlin said.
“There's plenty of academic research to suggest that going into a risk-off posture just because the political party in which you're affiliated loses an election reduces your investment returns in subsequent years,” he said.
UBS financial advisors will likely have to cope with clients getting distracted by politics until early next year, since the runoff races in Georgia that will determine which party controls the U.S. Senate are scheduled for January 5, McLoughlin said.
“We expect that for the next six to eight weeks, we'll be spending a fair amount of time reminding people of the notion of partisan bias,” he said.
At Wells Fargo, advisors have turned to charts that show historic market data to help clients stay focused on the fundamentals of the economy, rather than their reactions to the election, according to Paul Christopher, head of global market strategy at Wells Fargo Investment Institute.
“FAs are feeling pressure right now — from clients who believe that we're going to hell in a handbasket and others who want to dance in the streets,” Christopher tells FA-IQ.
“Being a financial advisor obviously is a pretty empathetic kind of a job. But the important thing at this juncture is to separate that empathy a little bit from the facts of the market,” he adds.
A chart used by Wells Fargo advisors shows 75 years of market trends, marked with red and blue for when Democrats or Republicans held power, and aiming to show that historically stocks tended to rise in correlation with the overall performance of the economy, rather than which party’s candidate won the presidency, according to Christopher.
Before the election, Wells Fargo Investment Institute said it was best not to factor it into allocation recommendations and focus instead on dominant economic trends that were already in place. Wells Fargo Investment Institute is an RIA subsidiary of Wells Fargo Bank and serves clients of the company’s affiliate wealth and asset management businesses, including Wells Fargo Advisors, Private Wealth Management and Wells Fargo Asset Management.
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