Evan Simonoff

There ’ s an undertow that ’ s keeping inflation more powerful than people realize , a leading advisor warns .

S LABOR AND SUPPLY SHORTAGES HASTEN THE DEMISE of globalization , there ’ s a giant sucking sound circulating through the world economy . People in both developed and emerging economies are watching their purchasing power shrink before their very eyes .

To get a read on what ’ s happening , Financial Advisor checked in with Tom Connelly , the president and chief investment officer of Versant Capital Management .

Financial advisors might think their typical clients , affluent Americans , are largely immune from the decline in global living standards . Connelly disagrees . Having spent nearly nine years chairing the investment committee of the $ 40 billion Arizona State Retirement System , the Phoenix-based advisor is an expert at matching financial assets and liabilities .

These days , ordinary Americans are forced to make difficult spending choices , so concern about the problems of the 3 % or 4 % of people with assets in the vicinity of $ 5 million sounds downright impolitic and irrelevant . Nonetheless , Connelly thinks many well-heeled clients are facing a higher level of lifestyle risk than they or most advisors realize . Clients should be “ worried about having enough money even if they have $ 5 million ,” depending , of course , on their lifestyle .

If inflation turns out to be more intractable than conventional wisdom holds , even those retirees living on portfolios with growing dividends plus fixed-income securities ( and who don ’ t need to consume much principal ) may “ not necessarily ” be secure if they lack the flexibility to cut personal spending . The problem is compounded by the fact that once-in- 40-years price instability is striking at precisely the same moment that a global wave of baby boomers are turning 65 .

Connelly sees his clients reacting in two different ways to the recent bout of inflation .

SEPTEMBER 2022 | FINANCIAL ADVISOR MAGAZINE | 17