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EXCLUSIVE INTERVIEW: Clients Must Drop Investment Assumptions To Protect Wealth - Presidio Group

Tom Burroughes, Group Editor in San Francisco, 19 October 2012

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Wealthy individuals and their advisors must realize that volatility is not the same as risk and accept that market gyrations can be a price worth paying if it means avoiding permanent losses, says Presidio Group.

Wealthy individuals and their advisors must realize that volatility is not the same as risk and accept that some market gyrations are a price worth paying if it means avoiding permanent losses in the long run, according to Presidio Group.

It is a mistake for advisors – or their clients – to confuse volatility with risk, although this is a common assumption, Mark Palmer, managing director and head of wealth advisory at Presidio Group, told this publication during an interview at his offices in San Francisco.

“We have done a poor job as an industry in explaining to people what risk is – it is the risk of permanent loss of capital. People may have to take on more volatility to reduce risk of such a permanent loss,” Palmer, who has been at the firm for two years, said.

He also noted that there is a lot that wealth managers can learn from the endowment and retirement sectors in terms of how to think about long-term asset allocation, risk management and wealth structuring.

“There is no reason that a large family shouldn’t get the same approach that an endowment gets, albeit tailored to their own needs,” Palmer continued.

He warmed to the theme that the long-term perspective of clients in family offices and similar institutions has a great deal in common – with some caveats – with the retirement fund sector, for example. There is a need for more sharing of views and insights between such organizations, he said.

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