Wealth worries

More money has been lost trying to avoid bear markets than has been lost in any bear market, says Cassaday & Co. founder and CEO Stephan Cassaday.

“Declines are inevitable; they happen,” says Cassaday, whose McLean-based wealth management firm has $2.4 billion in assets under management, “but so are recoveries, and as long as you don’t need all your money at any one time and you leave your money alone and you let it percolate over long periods of time, you build wealth.”

Addressing client worries about the health of the current bull market is a major concern facing the nation’s top wealth management professionals, many of whom are located in Virginia and are recognized as such consistently, year after year by publications such as Barron’s and Forbes. It should come as no surprise that just six of Virginia’s top advisers collectively manage more than $40 billion in assets if one considers the fact that four of the nation’s top 10 wealthiest counties are located in Northern Virginia.

Jeffrey S. Grinspoon, managing director and partner at Vienna-based VWG Wealth Management, says his clients are “as focused on not losing money as they are on making money.”

The state’s wealth management industry leaders counsel their clients to take a diversified approach to their holdings as a potential way to weather any financial storms, including a possible end to the current bull market, which is the second-longest since World War II (exceeded only by the stock run-up in the 1990s).

In addition to stocks, “you should also own short-term bonds, you should own real estate, you should own precious metals. You should own investments in exponential technologies. You should own oil and gas. There are wide varieties of asset classes, not just stocks,” says Ric Edelman, founder and executive chairman of Fairfax-based Edelman Financial Services, which has $20 billion in assets under management.

However, the Virginia advisers  also are not certain that the end of the bull market is necessarily in sight or that it even will be that bad.

“There’s no rule that says that bull markets should run a certain amount of time. It’s natural for people to say, ‘Well, it’s been going for such a long time, it has to end at some point.’ [But] I’m open to the idea that that might not be true,” Cassaday says. “We’re telling clients we have no idea when the next market correction will occur. … It’s impossible to know those things — but it’s likely we will have some kind of change in the pattern. And I think it’s likely the change will be a sideways movement, a consolidation moment from which we can resume an uptrend.”

“Ignore the fact that this is the second-longest bull market in history,” Edelman says. “That’s not a terribly relevant data point, and the reason is that the circumstances of this bull market are very different from those in the past. … The fact that it has been nine years is not as significant as the fact that the rise has been slow and steady. It’s been the tortoise, not the hare. So you shouldn’t fear it. You shouldn’t be afraid merely because it’s been so long. Second, we have to remember as well that the decline that preceded it was extraordinarily deep. So, the deeper the hole, the longer you have to climb out of it. Part of the reason that this recovery has been so long is because the decline that preceded it was so deep.”

In addition to gauging the health of the market, wealth management advisers today are also more likely to be taking a broader view of their clients’ lives, counseling them on more than just financial goals for retirement. And with wealthy baby boomers and members of the silent generation entering their 70s and 80s and expecting to live longer, their planning is more likely to also involve their clients’ grown children and grandchildren.

“You have all these baby boomers who have aged. A lot of them have substantial wealth. They’re not necessarily the Kennedys and the Rockefellers, but they’re doing the same kind of thinking — they’re having generational thoughts,” says Joseph W. Montgomery, managing director of investments for Williamsburg-based The Optimal Service Group of Wells Fargo Advisors, which has more than $12 billion in assets under management. 

Extended life spans also make wealth planning more complex, involving setting goals such as paying for long-term care in the event of illness, Edelman points out, not to mention saving for college for children or grandchildren.

Like her peers, Dalal Salomon, CEO and founding partner of Richmond-based Salomon & Ludwin LLC, has been working with multigenerational clients for decades. She says that multigenerational planning is critical because “wealth-transition experts’ studies have shown 70 percent of families lose control of assets as well as experience loss of family harmony following the transition of an estate to the next generation.”

Some firms, such as Reston-based PagnatoKarp, try to help families surmount these problems by guiding them to write down their values and draft mission statements to help them identify mutual goals for wealth accumulation.

“The baby boomers are just getting older, and they’ve been such a big part of our population,” says PagnatoKarp founder and CEO Paul A. Pagnato. “Their children over the next 10 years will be inheriting approximately $10 trillion. That older generation has the bulk of wealth in our country, and it’s important for that transition of wealth to be successful.”