Change is the Only Constant

Beyond the recovery from COVID-19 and its lingering uncertainties, there are opportunities for financial advisors to help change the future of economics in America. Advisors Magazine talked to financial professionals around the country and here’s their take.

Change how companies report earnings.

Financial advisors regularly encourage their clients to use a lens focused on long-term performance when looking at how they invest in the stock market. Yet most of the time, an investor’s view is based on short-term snapshots such as quarterly earnings and performance reports.

Sumanta Biswas, a portfolio manager with Polaris Capital Management, LLC, in Boston Massachusetts, suggests a change in how financial companies provide potential investors with the economic information needed for decision-making purposes. He believes that quarterly earnings updates provide little useful information.

Sumanta Biswas“Company management makes strategic decisions that will hopefully dictate growth for years to come; they are typically not geared for the short term,” he told Advisors Magazine. “So, it is unfair to judge a company’s performance on a quarterly basis. We would advocate that companies disband quarterly guidance. Instead, companies should announce earning, performance, growth objective, management changes, etc. on a semi-annual or annual basis with more in-depth analysis and reporting benchmarks.”

The question of changing the frequency of earnings reports was addressed in August 2018 during a podcast by the Wharton School of the University of Pennsylvania. The August 27 edition of Knowledge@Wharton featured discussion of the notion after then President Trump announced ten days earlier via tweet that he asked the federal Securities and Exchange Commission to study whether a half-yearly reporting system made better economic sense.

The discussion, which featured Donald Langevoort, a law professor at Georgetown University in Washington, D.C., and David Zaring, a Wharton professor of legal studies and business ethics, was a divided one as the gentleman debated.

Langevoort argued that half-yearly reports could create an atmosphere where businesses are able to cover up mistakes.

“The idea that you’ve slowed down the cycle and (are not demanding) formal disclosure so often means more and more secrets are going to be floating around the company for a longer period of time, and that’s going to be tempting a lot of insider trading activity there,” he said.

Zaring, who also did not come out in support of disbanding quarterly reporting, did note that the idea of doing such comes in part from the fact that business executives are leery of the legal liabilities they are exposed to in signing off on quarterly-produced documentation. He said executives have complained bitterly regarding the requirement.

Langevoort also alluded to the idea that Trump, a businessman and not politician, was a conduit of what business wants.

“President Trump was just channeling what a lot of people in both politics and the business community want to see happen,” he said.

As of press time, quarterly reporting remains the requirement from the SEC.

Are older investors keeping too much in equities?

Traditional thought that investing in the stock market is the best bet toward securing a sizable nest egg for retirement is coming under scrutiny. The question is being asked if the investments of older Americans might not be centered in the correct categories once retirement comes along. The answer that seems to be dominating the conversation is that yes, perhaps too many older investors have too much money in stocks – or at the very least, in equities.

A 2019 survey by Fidelity documents that nearly a quarter of people invested in the stock market have more of that investment in equities than what is recommended by financial analysts. When looking at the investments of baby boomers only – the current generation headed into retirement and in need of dependable returns on investments – the percentage of those “too invested” in equities jumped to 38 percent.

Some PW 1financial advisors, including Philip H. Weiss, are sounding the alarm that older Americans are settled into investments that aren’t the best for them in retirement.

“There is no need to take on risk unnecessarily,” said Weiss, who is founder and principal of Apprise Wealth Management located in Phoenix, Maryland.

Older investors do not have the luxury of riding out stock market booms and busts the way younger investors do.

“When you’re younger, you can afford to take on more risk and invest more in stocks because you have more time for your investment portfolio to bounce back if it performs poorly,” wrote Christy Bieber, a personal finance writer with Motley Fool.

Brief clients on how the market has changed.

With change being the only constant, it is only reasonable to accept that the stock market of yesteryear is not the stock market of today. Yet, too many investing clients still view the stock market as they did when they entered the market 20 or 30 years ago.

That’s a big mistake, according to Betsy Moszeter, chief operating officer of Green Alpha Advisors, LLC, in Niwot, Colorado.

Betsy M Moszeter 72 dpi 1“The economy and stock market that exist today look and act nothing like what they did 10, 20 or 30 years ago,” Moszeter told Advisors Magazine, noting that new factors such as the global climate crisis, resource degradation, widening inequality, and human disease have emerged presenting economic burdens – but also investment opportunities for those willing to explore them properly. “As clients age and make decisions about achieving future goals, they need to be mindful that the variables and assumptions underling market behavior is dynamic.”

None of us have a crystal ball to tell us what the future holds. But being aware of potential changes can make up for that lack.

What are your thoughts on the topics discussed in this article? Let Advisors Magazine know by emailing us at This email address is being protected from spambots. You need JavaScript enabled to view it.


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