Investment brokers owe it to their customers to deliver some grim news, just as doctors sometimes must tell patients they have only six months to live, longtime bond investor Bill Gross told a roomful of financial advisors.
"Your clients are going to have to face a new reality," Gross said Wednesday at a Dana Point meeting sponsored by Janus Capital Group, where he has managed a bond fund since he bowed out late last September at Pacific Investment Management Co., the giant Newport Beach investment firm he co-founded.
After a decades-long rally in bonds and other assets often pumped up by central-bank stimulus efforts around the world, Gross said there wasn't a lot of upside left in financial markets.
For months now, he has been harping on a what he calls the "new normal."
"It's a low-earning world," he reiterated Wednesday, advising the advisors to tell their clients they would just have to save more money to achieve their financial goals.
The session with Janus clients took place at the Ritz-Carlton hotel on the bluffs above the Pacific Ocean.
The site is where Gross and his wife, Sue, were married, as he noted during a chat with CNBC's Brian Sullivan, who moderated a discussion between Gross and other Janus investment strategists.
In an interview with the Los Angeles Times, Gross, 71, passed on this advice for those approaching the conventional retirement age: "They should work longer – don't retire, if possible. They need to save more, if they can. And live frugally."
Young workers also should save more and invest in stocks, he said. "Back when we were in our 20s and 30s, most people that age didn't save. That won't work today. You need to set aside 10% to 15% and put it to work."
At Pimco, Gross oversaw desks trading every type of bond and collected the ones he liked best in a Total Return Fund, which he ran himself.
In the world of bond investing, where slight differences in performance are a big deal, the fund during several periods over the decades far outperformed most competitors as well as a benchmark fund, earning Gross accolades. Pimco Total Return earned nearly 14% in 1989 when most of the investment world was melting down.
Then came 2011 and a disastrous Gross bet that Treasury securities would tank, which proved misplaced. The fund earned just over 4% that year, compared with nearly 8% at its benchmark, the Barclays U.S. Aggregate Bond Trust.
That was followed by more years of uneven performance, and last year Gross clashed with colleagues, left Pimco under a cloud and took over a small unconstrained bond fund at Janus.
So far that fund has not done as well as either the benchmark or the Pimco fund. And though it takes years to form a fair judgment on bond investments, the deposed Pimco "bond king," as he was known, is keenly aware of the underperformance:
"I look at it every day and say: 'This has got to change.'"