What You Don’t Know Will Hurt You

In times of financial market volatility, the saying, "What you don't know will hurt you," is an investor's worst nightmare. Just ask executives at already financially strapped pension funds who pursued high returns by investing in hedge funds that ultimately were burned by the subprime mortgage meltdown.

And worse still, the pension plan members were even more in the dark. Although investors thought their retirement dollars were safely tucked away in conservative investments, pension plans have been faced with a cash crunch of their own. Most pensions have a growing number of pensioners pulling on a pool of dollars that will run out sometime in the future unless much higher returns are found in the interim. As a result, pension plan members awoke to headlines about various state and city pension plans that lost billions of dollars after riskier-than-normal (especially for a pension plan) bets.

So now, all investors are asking more questions about their assets as they watch the subprime mortgage mess stretch into Q2 2008 (with no foreseeable end in sight). Economists are freely using the R word -- Recession; Federal Reserve chairman Ben Bernanke says small banks may collapse as a result of the credit crunch; and almost every piece of new economic data paints an increasingly dour picture. Jobless claims, GDP and housing prices all point in the wrong direction for market optimists. The only good news may be just spin -- the White House still denies the economy is in a recession. And Bernanke doesn't "anticipate" stagflation. Whew, (insert sarcasm here). I was beginning to get worried.

It's no wonder investors are continually checking portfolio values. Financial advisers often are the first to feel the heat from anxious investors. When times are good, investors often are content to wait for their monthly statements. But when the market is fluctuating wildly and the news is filled with depressing economic stories, it's no wonder they want to talk to a real, live person.

However, in many cases advisers are not equipped to answer clients' questions, since client data often is located in disparate systems. Firms have been working for years to break down business and data silos so wealth managers can get a complete customer view. Some have had more success than others. Those that have been successful always will have a slight competitive advantage over competitors that haven't been able to master customer data integration. And in times of market volatility, the well-integrated firm's competitive advantage is even greater.