Content provided by Joe Smith, CFA, Senior Market Strategist
Last month, I had the opportunity to participate at the annual NorthStar Summit in Nashville, Tennessee. The event allowed me to get to know more than 75 of the most successful advisors we partner with at CLS. As I did, I got a sense of what makes these individuals wonderful folks to work with. First, they all have a passion for what they do: empower their clients. Second, they provide a great amount of value by helping manage their clients’ expectations through good times and bad. Third, they are firm believers in the power of risk-budgeted portfolios.
Sitting on the plane back to Omaha and reflecting on the entire conference experience, I came to an interesting realization. What gets me excited about coming into work every day at CLS is very similar to what motivates our advisors: the ability to deliver an amazing client experience. The key to that client experience all comes down to the ability to manage risk and expectations on a consistent basis. Risk budgeting goes beyond helping me as a professional investor think about optimal portfolio positioning; it is an important tool our advisors leverage to keep clients’ expectations anchored in the short term, so they can achieve financial success in the long term.
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A client’s risk budget is derived from the client’s specific answers to CLS’s Confidential Client Profile questionnaire, which establishes the client’s financial goals, ability to handle risk, and overall investment time horizon. The individual client risk budget is expressed as a percentage of the risk of a well-diversified equity portfolio.