Asset allocation, cash flow main priorities for Richardson Wealth advisors
As markets spin due to the uncertainty caused by US President Donald Trump’s ever-changing tariff policies, investors are naturally concerned about the status of their assets.
But Andrew Feindel and Kyle Richie, senior wealth and investment advisors at Richardson Wealth, suggest a strong focus on asset allocation and client cash flow sets themselves and their clients up to weather a financial storm.
Feindel emphasizes the importance of personalized client communication, whether it be via phone or email, to ensure clients are well informed about their strategy during this period of extreme uncertainty. Having a pre-prepared plan for market downturns allows for smooth, confident communication with clients who may have a number of concerns, according to Feindel.
Keeping a close eye on client cash flow has remained a priority for Feindel and Richie regardless of the economic situation. Having a proactive cash flow plan has prevented any panic selling in today’s market downturn, according to Richie, who shields one to two years of clients’ living expenses from equity markets.
“The first thing that we protect whether markets are good or bad, is cash flow needs. For 12 to 24 months for clients, individual cash flow needs are not participating in this volatility whatsoever,” he said. “We effectively have 24 months in clients’ accounts where we can sell things that are either flat through this period, or very marginally down.”
During what could be a prolonged period of market turmoil, clients may need to pull some money out of their coffers for everyday expenses. Feindel says he ensures that clients can avoid the need to draw from their equities by focusing on alternatives, short term bonds and high interest accounts in their portfolios.
“This is where asset allocation is really important, going into this. If money is needed in the next few years, it’s important to make sure that money is safe,” Feindel said. “And safe doesn't mean the market, it means things like alternatives, short term bonds, high interest accounts.”
It is currently unclear whether the Canadian economy is in a recession, though Feindel says a careful, yet fearless approach will pay off in the long run. During the 2008 financial crisis, Richie remembers watching portfolios drop dramatically, creating panic among clients. But after a year, he and Feindel “looked like rockstars” due to their bold strategies during mass selloffs in the market.
“Maybe this isn't the bottom but if you fast forward one, two, three years out these are really good long-term buying opportunities,” Feindel said.
The emotional reaction from Trump’s tariffs has created a challenge for advisors, according to Richie, who says regular, targeted communication with clients helps keep emotion-based decision making at bay.
“Due to the process in which they're trying to implement these tariffs, people are feeling personally attacked,” he said. “From a business and market perspective, if you can keep your emotions at bay, you typically make more rational decisions. But people are very stressed.”
Business-owning clients have also faced acute challenges related to Trump’s tariffs according to Richie, who says uncertainty surrounding tariffs has paralyzed the operations of many of their clients’ businesses.
“From our business owner clients, particularly ones that have highly successful long-term businesses … if any significant portion of their businesses is import-export, the actual business activity is almost ground to a halt over the last couple of weeks,” he said.
Trump has walked back on his “Liberation Day” tariffs, implementing a 90-day pause on his sweeping global taxes, though has pushed forward with unprecedented tariffs on China. Feindel suggests that increasing Republican opposition to Trump’s unpredictable policies could result in further shifts.
“The people around him that do understand the economy, understand how businesses work. We're already seeing cracks, them slightly turning on him,” Feindel said. “Maybe that voice gets louder, because markets being down can create a recession. If capital stops being spent, then you can almost manufacture this yourself. It'll be interesting times, but that's also why I'm optimistic – hopefully cooler heads prevail.”
While the past two weeks have caused extreme turmoil, Richie points to the differences between today’s market situation with the COVID pandemic and the 2008 financial crash, where relief was not as easily applicable. He also points to US employment statistics, which currently sits at a healthy four per cent, compared to a 10 per cent peak in 2009 and a 14.8 per cent peak in 2020. This key difference suggests to Richie that Trump’s policy moves are political, not economic.
“Relief from this terrible tax policy could come in the form of a stroke of a pen, where in COVID and in all ’08 ’09, that was not on the table … It's more frustrating, but it's not as scary,” he said. “One of the issues that the US has had over the last few years is there are too many jobs relative to the people who are willing to take them. So I would argue that his cry of ‘all the US jobs have’ left is simply a political cry for political advancement. It is not an economic fact.”
The noise surrounding Trump’s tariff policy can deafening for Canadian investors and advisors, as the policies and their effect on Canadian markets continue to change day-by-day. But Richie suggests it is prudent to keep a close eye on domestic developments, as the upcoming federal election could drastically shift an economy that was slouching long before Trump came into office.
“Canadians need to be much more focused on what's going to happen in the election, and what the outcome of the election from Canada, on what we can do to strengthen our economy,” he said. “That is actually more important, because that has more of a lasting impact. We are economically broken in Canada, and we need a change.”
