Matt Roddy is vice president and portfolio manager at Rockland Trust’s Investment Management Group at Rockland Trust, and is responsible for managing client portfolios, performing securities research, and setting investment policy. He has been in portfolio management for more than 15 years. Roddy is a CFA Charterholder, Certified Trust Financial Advisor and Chartered Alternative Investment Analyst. He is a graduate of the American Bankers Association Graduate Trust School at Emory University, and earned a bachelor’s degree in health policy and management from Providence College, where he remains an active member of the Boston Alumni Society.
PBN: How do you view you view your responsibility as a portfolio manager, in light of the complexity and volatility of the stock market and the varied involvement levels of your clients?
RODDY: As a portfolio manager, my position breaks down into three primary phases: discovery, implementation and continuous monitoring. First, my responsibility is to listen to my clients to identify, and in some cases prioritize, their goals while determining their true risk tolerance. Given this discovery, it is then incumbent on me to properly develop and implement an asset allocation plan. This is done by selecting quality investments that fit together into a portfolio that achieves their goals at the lowest level of risk possible. Following the implementation, I then continuously monitor the investments in the portfolio, while also regularly revisiting each client’s current situation. If anything in their life changes, like a birth or a new job, it often alters their goals or risk tolerance going forward. Simply put, if there are changes to their situation, there is often a need to make changes to the portfolio.
PBN: How do you find your clients react when there are extremes in the market?
RODDY: I have found that by doing our homework on the front end, appropriately determining a client’s risk tolerance, and staying in tune with that risk tolerance, my clients persevere through the tough times quite well. However, from 15 years of experience, I have learned there are outliers that do not always understand risk properly, and may only grasp it when a security or the market has a major negative price event. These clients are often easy to identify as they frequently talk in terms of timing the markets. We would typically shy away from working with someone who exhibits this type of behavior. I have learned these types of clients can take away attention from others who see and understand what we do and how we do it, to whom we want to give our undivided attention, especially during extremes in the market.
PBN: How do you respect your clients’ wishes, while maintaining a proper amount of control to ensure the client’s goals are met?
RODDY: Communication is the key to every successful portfolio relationship. While discretionary investing is not for everyone, it truly works for the majority of the population. We are extremely diligent in communicating with our clients. If we can get the light to go off and the nod of understanding on both sides of the table, then the marriage between advisor and client will be strong for many years. Each and every time we sit down with a client we listen carefully to ensure that we can deliver on what they are asking, while communicating clearly regarding what we expect to deliver. For instance, if we focus on growth investing, we, both advisor and client, need to understand the risk. Conversely, if we are focusing on income, while this also includes risk, the conversation will often tilt toward their expectation for current living expenses. If the advisor understands what the client wants and they understand what we can deliver, the advisor can maintain discretion and be much more efficient for all clients.
PBN: What’s your perspective on the market, in general? Do you see sectors that are dependable or a preferable choice for investing? Do you have any suggestions about what sectors to stay away from in the near-term, or the long-term?
RODDY: At Rockland Trust, we do not believe in trying to time the market, and that would also go for trying to time the sectors within the market. We believe that throughout the course of a full market cycle, the returns of the various sectors effectively become comparable with one another. This is due to the simple fact that there is an interconnectedness of the economy as a whole that will not allow one sector to dramatically outpace the others for an extended period of time. Historically, when this has happened, it has proven to be a bubble.
Due to the nature of the market cycle, we place equal weight in the 10 Sectors of the market with approximately 10 percent allocations in each sector within our portfolios. The strategy of equal weighting of the sectors within the portfolio has proven to be an effective way to reduce portfolio risk, while not inhibiting return. This is simply because each sector performs quite differently from one another during different parts of the economic cycle. This performance rotation creates strong diversification benefits, while preventing one area of the portfolio from becoming too big of a potential risk. For some perspective, consider when Technology reached 30 percent and Financials 22 percent of the S&P 500, respectively, before their crashes. Given these examples, index investing itself can in many ways leave portfolios prone to performance chasing, market timing and risk taking as bubbles appear in the market.
PBN: Are you finding any trends as a portfolio manager as to the types of clients who are seeking your advice, the amount of investment or the outlook of the investors?
RODDY: Given the fact that the stock market has been rising for four years and fixed income investments are yielding so little, we do have to guard against clients losing some perspective regarding market risk. While we are not seeing as much of the risk taking mentality we have seen in past bull markets, we are starting to see clients a bit more intent on investing for growth vs. income. In these conversations, we must determine who can and should be taking on market risk and to what degree. We remind clients now more than ever that the stock market will move in large percentages in both directions and they have to accept that for any amount they are willing to invest. While we do believe the outlook for stocks going forward is positive, the future is always uncertain. For an investor to be confident in a positive return, they must be committed to investing for the long term. The shorter the committed time frame for investing capital, the more uncertainty there will be in the outcome. Frequently our clients come to us because they may have learned difficult lessons in the past, and they want to work with professionals who understand these risks and are able to gauge the appropriate allocations to keep them on course going forward.
Rockland Trust’s Investment Management Group at Rockland Trust,