Are China trade tensions a concern among your clients?

The situation goes beyond tariff increases, so be ready to explain why China matters to the U.S. economy and investors

May 28, 2019 @ 2:20 pm

By Liz Skinner

Financial advisers need to be prepared to discuss China with clients, as the country will increasingly play a role in the global economy and will become more of an investment priority, according to a bonds expert.

"China matters a lot to the global economy," Janelle E. Woodward, head of fixed income at BMO Global Asset Management, told the InvestmentNews Women Adviser Summit in Chicago on May 16. "It's approximately one-third of the global economy."

In recent years, advisers' clients have become more concerned with and alert to upheaval resulting from geopolitical issues, she said. Ms. Woodward confirmed that conclusion when she asked the audience of about 200 advisers to raise their hands to show which concerns top clients' minds.

(More:U.S.-China is most defining relationship in the world)

The U.S.-China trade dispute has heated up, with President Donald J. Trump announcing he'll boost tariffs on $200 billion of Chinese goods from 10% to 25%. China has responded with its own tariff increases, and Chinese president Xi Jinping is reportedly considering further retaliation. The situation creates concerns beyond the immediate trade tensions, Ms. Woodward said.

"When it comes to China trade, what we are most worried about is the indirect impact, not the direct impact," she said in an interview. "What does it mean for business sentiment, consumer sentiment? What could escalation look like and how does that unknown translate into lower capital expenditures?"

(More:Trade-war threat presents opportunities for energy investments)

The direct impact of the announced tariffs on growth will be about 1% for China and 0.1% to 0.2% for the U.S., she said.

Ms. Woodward said one area of the fixed-income universe her firm likes going forward is investment-grade credit, in part because it is defensive in the context of the current economy.

Among the other sessions at the daylong summit, advisers received succession-planning guidance and tips for attracting more client assets. Another theme was the link between improving financial literacy and boosting diversity in the advice industry.

Improving financial literacy leads to more people knowing about the career of financial advice, which is especially important because there are not enough new people coming into the field, said Jennifer Bacarella, director of firm development at Sigma Financial Corp.

The Chicago event is the second of six Women Adviser Summits this year, with the remaining ones taking place in Denver, New York, Boston and San Francisco. The first Women Adviser Summit of 2019 was in Huntington Beach, Calif., in March.

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