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Wealth management – a lost decade for clients and managers
Wealth management clients are unhappy. They are unhappy because of poor to mediocre returns in their portfolios – portfolios that in many cases were built using opinions accepted as doctrine by wealth managers and financial planners; unhappy because seemingly flawless mathematical models that were applied to portfolio construction failed.

We will study some of the damage more closely and then offer some suggestions as to what might be the problem(s). Then we will offer what might be the beginning of an alternative approach to wealth management; an approach that might, at the least, more realistically set the expectations of wealth management clients.

Lost decade for U.S. dollar
The U.S. Dollar is bleeding green ink. By some estimates, the dollar lost around one third of its purchasing power from the end of 1999 through the end of 2009. If we go back and calculate the loss of purchasing power of the dollar from the year 1989 to 1999, the loss is again about one third. Compounded for the last two decades the total loss of purchasing power is around 70 percent; that means anyone holding dollars for the last 20 years has lost 70 percent of his wealth.
Lost decade for U.S. stocks
From 1999 to 2009 American Stock Portfolios performed miserably. A $1 investment in the S&P 500 on December 31, 1999, was worth 90 cents at the end of 2009 – that negative return includes dividend income for the period. In order to have the same purchasing power in 2009 that it had in 1999, the S&P would have had to gain around 40 percent in the period.

U.S. bonds returned better than stocks
From 1999 to 2009, for U.S. government bonds, $1 grew to nearly $2. When adjusted for inflation the $1 grew only to $1.66. Better than stocks but still not great.

Big decade for gold
In the same time period a $1 investment in gold grew to nearly $4, yet very few wealth management clients had gold in their portfolios. What happened?   More...
 
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