Planner Alpha: The Power Of Diversification, Advice In Trying Times

Forbes

17-07-2025

Amin Dabit, SVP, Traditional Wealth Planning, Edelman Financial Engines.
Tariffs. Inflation. Recession.
Every so often, these economic themes creep into the headlines, shocking investor portfolios. But rarely does this happen all at once as it has in 2025.
Yet, at our firm, clients have told us they are pleased with their nest eggs' resilience. Their satisfaction is no accident—it is the result of thoughtful, strategic planning. For financial planners, turbulent times are the Super Bowl equivalent of their profession, when their expertise, empathy and quality of advice truly shine.
We call this mindset Planner Alpha. Below, I will explore why financial advisors who take this holistic approach to planning tend to be better positioned to succeed for their clients.
The Importance Of Durable Portfolios
Crafting globally diversified, long-term investment strategies is now the industry gold standard—one our firm has long used. Such portfolios are designed to weather all market conditions and fund major life expenditures, such as a home purchase, education or retirement. Client portfolios generate real gains and losses—not theoretical returns. Great planners understand this dynamic and must constantly remind clients why their portfolios are allocated the way they are. I believe diversification remains the best way to safeguard your investments.
However, in the past decade, it was often difficult for planners to convince investors to stay the course when large cap U.S. equities were outperforming most other asset classes. Many considered holding assets outside of high-growth stocks a 'tax' on returns.
Recency bias obscures the fact that the U.S. hasn't always been the top-performing economy (download required) or stock market. Experienced planners have this data at the ready in moments of market upheaval.
As the 'Magnificent 7' stocks experience volatility at a higher rate than broader equity markets, once muted asset classes such as international equities and bonds can provide a ballast to smooth the ride and reinforce the reasoning behind clients' financial plans.
Owning The Rest Of The World
Though the U.S. equity market is the deepest and most liquid in the world, it's not the only one. Financial innovations of American depository receipts (ADRs) and exchange-traded funds (ETFs) have made foreign markets more easily investible—now featured prominently in advisor-managed portfolios.
Coming into 2025, blue-chip U.S. stocks carried high growth expectations. But no stock—or group of stocks—ascends forever, and the geopolitical landscape changed these expectations in just a few months.
On the contrary, other developed market economies—such as the U.K. and Europe—have long had lower multiples and growth expectations. But concerns over a changing international security framework have spurred fiscal stimulus and national defense spending in Europe, driving its equity markets to outperform the U.S.
At the same time, the U.S. dollar has come under pressure amid concerns about an economic slowdown and higher inflation expectations, leading to its decline against other currencies. Diversifying investments outside the U.S. helps mitigate this dollar risk.
While planners follow the markets on the surface, they rarely have time to conduct deep analysis on why markets might be moving the way they are. Planners can fill some of the information gaps around market moves for clients by using research tools and commentary from investment management colleagues.
The Power Of Yield
Holding shares in the corporate stalwarts of Europe and Japan offers another advantage: relatively high dividend yields (registration required). And U.S. Treasurys and high-grade U.S. corporate bonds are beginning to yield returns in line with historical averages. This has been a boon for financial planners and their clients, enabling more confident forecasts of future cash flows.
This contrasts with the zero interest-rate policy (ZIRP) era (2008 to 2021), when the Federal Reserve kept rates near zero to recover from the Great Financial Crisis. As the Fed hiked rates to address emerging inflation pressures, bond prices fell alongside equities, challenging their long-standing role as a defensive counterweight.
Investors who initiated new bond positions in the past two years, however, locked in higher starting yields, which are closely correlated with future returns. They also stand to gain from potential price appreciation if rates fall again.
While bonds have long provided stable yields, they now face competition from newly available offerings in private credit. Traditionally supported by institutional investors, private credit fund offerings have become more widely accessible to consumers and tend to have lower correlations to equities historically, offering greater opportunities for diversification. Since this product has different liquidity and risk profiles, planners need to collaborate closely with their investment management colleagues to determine whether these exposures are appropriate for client portfolios.
Planner Alpha In Action
In investment terms, 'alpha' means outperforming a benchmark such as the S&P 500. However, for financial planners, alpha transcends numbers: It's the tangible value they provide clients as they navigate through market conditions toward long-term success.
Planner Alpha comes in many forms:
• Managing expectations with the knowledge that even the most durable portfolios will experience drawdowns, some of which may be jarring.
• Preventing clients from reacting on emotion and making wholesale changes to their asset allocation based on unverified information or their own fear.
• Creating goals-based financial plans that clients can stick to regardless of economic or market environment.
• Demonstrating the value of holding assets across strategies and geographies, even when some asset classes underperform.
This mantra, 'own it all, all the time,' may not dazzle at cocktail parties, but it provides peace of mind for investors and their planners. Ultimately, we find that this approach is the best way for clients to reach their top objectives. As fiduciaries, it's our responsibility to act in our client's best interest, and creating goals-based plans specific to their needs is the best way to advocate for them and secure their financial future amid uncertainty. And, at the end of the day, isn't that what our mission as financial planners is all about?
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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