How wealth managers are trying to avoid another Lehman

How to protect against another Lehman

Jeremy Bedford, partner at Fulcrum Asset Management, discusses the growing trend of wealth managers protecting against a repeat of the market volatility that hurt their clients in the financial crisis.

Pain is a rarely used word in the lexicon of wealth management. The industry has invested heavily in risk analysis tools to establish the appetite for loss of investors and, in doing so, managers should now better gauge the pain threshold and the point at which clients will panic out of an investment. The difficulty with human psychology however, is we often react differently to how we are expected to behave when real losses bite.  In 2008, pain thresholds were dramatically crossed and panic inducing losses were reached. Many investors moved to cash when they had expected to be able t...