Agriculture and food markets have evolved tremendously over the last 20 years. Technology has led to rapid innovation, and with that, global poverty and hunger have plummeted. This explosion in food production, while certainly wonderful for those facing food insecurity, has been built largely on the back of a comparatively fragile system. It relies on a handful of countries producing the lion’s share of food.
Even food production itself is reliant on fertilizers and synthesized nutrients making their way across the globe to where they need to be. As we previously noted, Russia and Ukraine have been major producers of wheat. Russia, specifically because of her natural gas reserves, is also a huge player in the global fertilizer industry. A disruption to wheat production is particularly alarming for Africa and the Middle East, but an increase in fertilizer costs affects every country on earth.
What Disruptions Mean for the Global Markets
Consumers should expect to see a significant rise in food prices over the summer and into the fall. There is no way, logistically, that anyone can play catchup on fertilizer production after Russia pulled their exports out of global markets (at least to “unfriendly” countries). Likewise, diesel, which most farm equipment runs on, has seen significant hikes leading to a “perfect storm” for exploding food prices.
Chart 1. Fertilizer prices at an all time high
What the Disruptions Mean for your Clients
This is both a difficult situation and an opportunity for you and your clients. Your clients may have the money to seize the day and invest in the agriculture sector. If so, they will most likely see a good return on investment in the short- and long-term. Unfortunately, for those clients who are living off their investments and/or a fixed income, rising food prices coupled with inflation across the board likely means revisiting cash flow planning.
As an independent financial advisor, it’s important to be able to speak to the current challenges facing the markets. Food is something we all rely on and by nature has quite a few variables. A poor growing season for the western hemisphere due to weather could compound the already looming problems. Modern agriculture requires a lot of inputs to create the cheap, abundant food that we’ve grown accustomed to. If a major disruption happens in this market, it will almost certainly have large-scale impacts that affect parallel, or even unrelated, sectors of the economy.
Of course, you already know that alarmism is never the answer to market fluctuations.The real question is: What is the best way to communicate the message you want to deliver to your clients?
1. Marketing – Do you have the right marketing tools and team to keep your clients informed while helping them remove behavior biases from their lives? There are a host of marketing tools available to advisor entrepreneurs. Check out the Marketing 5000 software map from chiefmartec.com
Chart 2: Marketing 5000 Technology Map
This is an absolutely overwhelming view of all the possibilities independent RIAs have to choose from. How do you know which tech to choose? How do you know if you can stay compliant with that software? How can you make sure you don’t waste your money?
2. Planning – Making sure you have planning tools that allow you to demonstrate different scenarios will allow you to properly advise your clients on their own financial journeys. As with marketing, financial planning software selection can be overwhelming. Although the choices are much more limited, the cost and time commitment are high.
While there aren’t nearly as many vendors to choose from as marketing, sitting through demos and understanding how you need to adjust your client acquisition and advising process with any new tool is significant.
Specialized Planning has even more choices for you to make. Often these selections need to layer on top of your traditional planning solution, which means your process to onboard and service clients will gain additional complexity, as you seek to give your clients clarity and a streamlined conversation.
From global food markets to advisor marketing and planning software, your attention as a financial advisor needs to remain on how best to serve your clients. If you need an assist on how to select, integrate and implement software and solutions that add alpha to your business, tru Independence is here to help.
