The Advisor Institute: Coach's Corner
Is your team harmonizing on market theses?

Practical messages intended to help you elevate the success of your practice.

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      By David RichmanNational Director, Eaton Vance Advisor Institute

      At the Advisor Institute, we are passionate about thoughtful thesis articulation. Not only do well-crafted theses help you capture referable moments when big "market memes" are swirling around, but they also help ensure team members are in harmony with their messaging and approaches to asset allocation.

      These days, we are finding considerable team tension emerging due to conflicting market views among senior team members. A team we recently coached has two senior partners. In the early days of COVID-19 in the United States, both senior partners aligned on their bearish views, but agreed the best course of action was to council clients to remain calm.

      The snapback market recovery was welcome by both partners, as clients are collectively breathing a huge sigh of relief. However, this is where things get interesting, as both have different views:

      • Senior Partner A does not believe in the rally and wants to start rebalancing clients to more conservative positioning
      • Senior Partner B believes a new bull market has begun and wants to reposition accordingly

      How can they reconcile this seemingly irreconcilable difference?

      For help, I reached out to one of my favorite market thinkers, Richard Bernstein, CEO and CIO of Richard Bernstein Advisors, LLC, to get his thinking about our current sharp rally in risk assets. Below are some excerpts from our far-reaching discussion:

      • "Never forget, markets don't move on good or bad, but on better or worse."
      • "The only thing that's certain is that there is going to be much more uncertainty."
      • "With today's level of uncertainty you can't be overly bullish or bearish."
      • "The data is changing more rapidly than we would have thought, but the black swan (COVID-19) is still swimming."

      Why might these thoughts help this team? If someone as thoughtful as Rich Bernstein is uncertain about where we go from here, I would suggest there is room for this team to offer their clients alternate theses. Since we live in a world of probabilities and scenario-building, your team needs to be able to articulate what you believe to be a prudent course of action based upon the scenario that you have ranked as having the highest probability. You might consider saying something such as:

      "This is our base-case scenario, but we are also closely monitoring a scenario on this side of the base case (Senior Partner A) and a scenario on the other side of the base case (Senior Partner B). If we see signals that suggest our base case is wrong, we will be able to pivot to a different scenario if we think that probability appears more likely."

      Bottom line: Be a conscious collaborator with your team to develop and articulate theses that represent your view, as well as the opposite of your view, with equal clarity.

      At the Advisor Institute, our goal is not to shape your opinion or provide investment advice, but rather to share this viewpoint as an example of what we believe to be a superb display of thesis articulation.