When I first joined Palisades Hudson in 2008, my colleagues and our clients were only months away from facing a market atmosphere of widespread panic and pessimism.
The Great Recession had, with the benefit of hindsight, already begun; we could not know then whether it would last months or years. But we did know that it would not last forever, and we also knew that remaining true to our fundamentals — overseeing diversified portfolios, helping our clients stick to their long-term plans, and protecting capital — would serve us well, whatever happened next. In October 2008, we placed a full-page ad in a local publication urging our friends and neighbors to remain calm. Today, framed copies of that ad hang in our offices to remind us that even in bad times, bad reactions are not inevitable.
Beginning in 2009, investors enjoyed a long run of sunny skies — until 2020 and the years following, when we saw a return of menacing rumbles of thunder in the form of a global pandemic and then rising inflation. Regardless of the market climate, at Palisades Hudson our approach remains consistent and disciplined. Our long-term, low-turnover client base has benefited from that consistency.
Each of our clients’ portfolios are customized to the client’s personal financial goals and risk tolerance. One-size-fits-all approaches do not allow for the differences in life stage, temperament and circumstances that shape an effective investment strategy. Once we work with a client to develop his or her long-term investment approach, including a target asset allocation (a mixture of stocks, bonds, cash, etc.), we help the client stick to that plan. In practice, this means we never truly stop planning for a particular client. Investment management and financial planning are not “set it and forget it” endeavors. Rather, we remain focused on ongoing, comprehensive planning that adapts as a client’s life evolves, and that responds to changes in the tax, regulatory and global geopolitical landscapes.
Our investment approach combines tested academic principles and our own practical knowledge, drawn from years of managing client portfolios through a variety of market conditions. Most of our clients’ portfolios consist largely of diversified investment vehicles such as mutual funds and exchange traded funds. We also use private equity and other alternative investments where appropriate. We do everything we can to minimize fees and expenses, as well as taxes, since we know these can represent a significant drag on long-term investment returns.
The future is always uncertain. The good news is that we at Palisades Hudson don’t give much weight to future predictions; long-term investors don’t need to do so in order to be successful. Market timing is a bad bet. You have to be right not just once, but again and again.
A better approach has always been to focus on a long-term, disciplined, diversified asset allocation strategy. Such a strategy anticipates the ups and downs of the stock market over time; provides benefits of rebalancing to a target asset allocation; and is tailored to reduce the volatility of clients’ overall portfolios based on their personal risk tolerances and cash flow needs. Experiencing a portfolio decline is never enjoyable, but it is inevitable from time to time. Remaining disciplined and sticking to a plan has consistently yielded long-term success.
My colleagues and I measure our success in terms of our clients’ success. We are not salespeople; we receive compensation only from our clients, never as a result of the sale of investment products. We focus on building deep and long-term relationships with our clients, often assisting with many aspects of their financial affairs beyond investment management. Because our investment managers are also financial planners, we add value by viewing clients’ portfolios holistically as part of a comprehensive financial picture that includes tax, retirement planning, insurance and estate planning.
Palisades Hudson turned 30 the year I stepped into the CIO position. We have invested through many market environments: the dot-com bubble of the late-90s; the aftermath of the 9/11 terrorists attacks, and the subsequent wars in Afghanistan and Iraq; the Great Recession; and, most recently at this writing, the COVID-19 pandemic and the subsequent return of high inflation and higher interest rates. This is not to mention many political events and shifts in Washington, from major tax reform to presidential impeachments. The next 30 years are sure to bring their own surprises, but I have no doubt that we can offer both the experience and the knowledge to effectively navigate clients through them.
Investment managers don’t need to predict the future to be successful. Planning for an uncertain future is the prudent way forward. Whatever the future brings, we are prepared to help our clients reach their goals and enjoy what life has to offer.
If you have any questions, please feel free to contact me or one of our client service managers. We look forward to helping in any way that we can.