Q. What were the key lessons you learned from the crisis?
A. The crisis certainly re-emphasized the tenets of diversification and re-balancing, both on the way up and on the way down, in the markets.
Before I got here in April 2009, Moneta was re-balancing, selling some bonds and buying equities. It was very hard. They lost a few clients over it. But our deal with clients was, it makes no sense to pay us if you're not taking our advice. So having that discipline with re-balancing was a key reminder of how important it is. Now we're doing a little re-balancing the other way — into bonds and international and emerging markets, which have not been doing well.
Another lesson we learned was that assets we thought were counter-correlated assets were not always so. So we've hired an alternatives expert and expanded our offering of alternatives, and now have 10% to 30% exposure, most of them "40 Act funds, managed futures, funds of hedge funds and some private equity.
In addition, I've learned you've got to really emphasize — in a strong way — that clients need to have conservative return estimates. We're using 5% to 6% returns for our retirement plans, and we use a healthy assumption for inflation and taxes. We see from a lot of clients that don't have reasonable expectations. That's a big thing that hopefully will come out of the correction — people shouldn't expect double-digit rates of return. Part of that is to be a bit skeptical, do your due diligence and not just listen to your buddies at the cocktail party.
Moneta Group LLC
— as told to Dan Jamieson