{"id":22905,"date":"2009-02-17T10:47:00","date_gmt":"2009-02-17T10:47:00","guid":{"rendered":"https:\/\/clusterfamilyoffice.com\/blog\/?p=399"},"modified":"2009-02-17T10:47:00","modified_gmt":"2009-02-17T10:47:00","slug":"consultas-de-toda-una-vida","status":"publish","type":"post","link":"https:\/\/clusterfamilyoffice.com\/en\/consultas-de-toda-una-vida\/","title":{"rendered":"A Lifetime of Consultations."},"content":{"rendered":"
So far in 2009, we have been receiving a significant number of enquiries via this blog which are very distressing from a Family Office\u2019s perspective. Whilst maintaining the necessary professional confidentiality, we can tell you that these are enquiries from desperate families seeking some guidance following a brutal drain on their life\u2019s savings.<\/div>\n
Portfolios held at various banks that were sold to them (and, worse still, held) as very safe fixed-income investments. As the ideal type of asset to safeguard the fruits of a lifetime\u2019s work, effort and savings. Those hardest hit consist of perpetual preference shares, including funds or portfolios of perpetuals, and run-of-the-mill securitisations from indecipherable pseudo-subsidiaries of other multinationals that lent their name for a day \u2013 or not even that. In many cases, these are what would be known as the infamous \u2018junk bonds\u2019 proper, some of which still, relatively and shamefully, retain their once-impressive ratings.<\/p>\n

\"\"<\/a>In fact, just a few years ago, these issues were traded indiscriminately in the same risk segment as senior debt maturing from multinational issuers. And this was relatively understandable, as neither the prices nor the creditworthiness of these issues had ever been affected. It\u2019s true that nobody could explain what lay behind those indecipherable, technical Anglo-Saxon names. But what the hell! After all, everyone was investing in indecipherable financial products! In fact, anyone who didn\u2019t was dismissed as an investment illiterate, becoming the butt of jokes amongst their social circle. and, above all, banking<\/span>.<\/p>\n

\"\"<\/a>It was unthinkable that this nebulous fixed-income product, created by financiers at the behest of investment speculators (a prescient article from June 2007<\/a>), could result in losses for their holders. After all, it was a fixed-income product. But we now know that it was only as \u2018fixed\u2019 as the profits of the underlying institutions (which we would never have imagined could falter), or as \u2018fixed\u2019 as a ninja\u2019s ability to pay their mortgage<\/a>. Who could have predicted that financial institutions (not just banks) would disappear or require massive bailouts; or that mortgage loans would be granted to insolvent households in a systematic, widespread and perverse manner? Of course, the credit rating agencies do not<\/a>, and back then they looked just like the Bible.<\/p>\n

It is not, therefore, a question of demonising those who sold those emissions a few years ago, when no one could have imagined that they might become worthless. They were marketed as safe because, at the time, no one could claim otherwise<\/span>. But from the summer of 2007 onwards, the financial world began to change. And those securities began to lose value, although we continued to view them as a safe product that simply offered more attractive prices. Since then, the situation regarding this type of security has changed radically, and along the way most of us have stopped viewing them as a safeguard, a safe asset, and now regard them as risky investments. This has been happening gradually, and the personal impact has depended on each individual\u2019s adaptability and agility in analysing and responding to this dramatic and ever-changing reality.<\/span> It is understandable that the reaction of advisers and bankers may have come later than would have been desirable, and that their supposed training and expertise may not have been sufficient to safeguard the bulk of their clients\u2019 assets. What is reprehensible, however, is that there are still advisers and\/or bankers today who continue to regard this type of investment as a safe fixed-income asset with which to protect wealth, without having adapted to the reality of the situation.<\/p>\n

\"\"<\/a>In this way, they are allowing, The Death of the Frog<\/a> of their clients, despite the fact that some of these securities have literally plummeted due to the very volatility of that market. And many have been unable to react, not out of mere incompetence but due to a lack of honesty with themselves and with their clients. The directives from the institutions they work for are, even today, to hold on to these investments and even buy more at ridiculous prices to make up for the losses. They have completely forgotten the origin and rationale behind these portfolios, which have long since ceased to be stable and secure and are now crumbling one after the other, sweeping away a lifetime\u2019s worth of savings and hard work.<\/p>\n

\"\"<\/a>The enquiries received would not be quite so dramatic if, just a few months ago, the managers and advisers of their respective portfolios had taken the bull by the horns. If they had explained that their clients\u2019 portfolio assets had, in these turbulent times of financial crash, become high-risk investments. It might even have been reasonable to attribute the blame to the financial collapse itself, thereby exonerating those advisers. And although clients would have criticised them for having given poor advice from the outset, the advisers\u2019 defences would have been supported by the exceptional circumstances of the systemic crisis and also by their professional integrity. But what really matters is that a greater proportion of clients\u2019 assets would have been saved (even though their returns would have fallen dramatically). Unfortunately, many professionals did not do this and preferred \u2013 and still prefer \u2013 to advise under the head-in-the-sand attitude<\/a> and, what is far worse, the marketability<\/span>.<\/p>\n

These issues, as high-risk investments, may represent another option for investors, but they must be aware of the risk of non-payment of interest or coupons, as well as the risk of a credit event or even default, and consequently their extremely high volatility and potential loss of value.<\/p>\n

\"\"<\/a>When it comes to issues by relatively sound banks, such as those proposed by Fernan2<\/a> o Llinares<\/a>, may represent an attractive investment, but they should never be used to safeguard a lifetime\u2019s savings. They have become high-risk investments, and as such they have their own following. Even the issues we are seeing in the portfolios featured in the enquiries we have received \u2013 despite the fact that most of the issuers currently have dubious creditworthiness \u2013 could also find a place in a portion of certain investors\u2019 portfolios. But the dramatic thing is that they continue to make up the bulk of these portfolios, which were originally designed to safeguard all<\/span> a family\u2019s assets and protect them from the risks of the stock market.<\/p>\n

You can well imagine the result: the savings of workers who, through a lifetime of hard work and sacrifice, have managed to accumulate hundreds of thousands (or even a million) euros, only to suffer losses of 60, 70 and even 80%. Savings which, now in their old age, have been lost without them ever having wanted to put them at risk.<\/span> Deficits that their managers and advisers have been unable or unwilling to cut in time, and which, even today, when one bond issue after another is failing to pay even the interest, they continue to justify with the slogan \u00abOnce all this is over, the exchange rate will recover<\/span>\u00abI repeat that It is not reprehensible that they recommended this type of RF a few years ago. But what is utterly unforgivable is that they were unwilling to respond courageously and honestly to products which, for many months now, have objectively ceased to be suitable for safeguarding assets. That, and nothing else, was their job.<\/span><\/p>\n

\"\"<\/a>It is also very difficult for us to have to open these families\u2019 eyes to the reality of the situation. They come to us with such desperate situations that they have led them to lose trust in the bank in which they have placed their faith and their assets all these years. They arrive for consultations in a state of panic, seeing that the balances in their investment portfolios are dwindling month after month. Yet they still want to believe what their bankers and advisers tell them, and cannot bring themselves to believe that their future has changed so radically at this stage in their lives, through no fault of their own. Obviously, there is also no guarantee that all these issues will be phased out one after the other, as some have already begun to be. Therefore The million-dollar question these families need to ask themselves is whether the current value of their portfolios is really vital to their lives<\/span>. If the current residual value of their savings is a risk they can afford to take in the hope of a potential recovery, perhaps they could hold on to some positions and keep their fingers crossed. But if losing the remaining value of your assets at current valuations (15 or 25% of what they were just a year ago) is a risk you cannot afford to take, you have no choice but to sell and protect your capital in line with current criteria.<\/p>\n

It has always been harder to face reality than to live in self-deception, but the consequences of failing to respond courageously to adversity often lead to terrible outcomes. A tragedy and an injustice.<\/div>","protected":false},"excerpt":{"rendered":"

En lo que llevamos de a\u00f1o 2009 estamos recibiendo a trav\u00e9s de este blog una cantidad significativa de consultas muy tristes desde el punto de vista de un Family Office. Guardando la confidencialidad profesional debida, os diremos que son consultas de familias desesperadas que claman algo de luz despu\u00e9s de una sangr\u00eda brutal en los […]<\/p>\n","protected":false},"author":6,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20],"tags":[],"class_list":["post-22905","post","type-post","status-publish","format-standard","hentry","category-sin-categorizar"],"_links":{"self":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/posts\/22905","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/comments?post=22905"}],"version-history":[{"count":0,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/posts\/22905\/revisions"}],"wp:attachment":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/media?parent=22905"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/categories?post=22905"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/tags?post=22905"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}