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  • First Portfolio Review with New Financial Advisor

    Hello, dear wise ones who have been so incredibly helpful and informative! After the sale of a business and much resulting hemming and hawing, we invested a large pool of assets with an AUM advisory firm on January 1. Performance has not been so great so I asked to sit down and go over where we are: basic stuff like allocation and how they calculated that, what assumptions they are making about issues like how much risk we want and when we want to retire, and performance. I am not sure what else I should be looking for or asking about and am hoping you all might have some suggestions. Also wondering if 5 months is enough time to start evaluating how they are doing. Thanks so much!

  • #2
    I would think it would be the other way around where they are asking YOU the questions in order to do what's best for you. It also sounds like you have no idea what they're doing which is not great.

    Comment


    • #3
      I would be interested to know what you are invested in and by what standard or benchmark have you concluded that "performance has not been so great".

      And, yes, 5 months (!) is too soon to draw any meaningful conclusions. After a market cycle or two you should have a better idea.

      Comment


      • #4
        Unfortunately those are questions they should have asked you prior to becoming your advisor.
        Yes 5 months is too short.
        Questions:
        1. what is my asset allocation, why
        2. what are the fees, why
        3. how exactly do you get paid? Any commissions? what is the AUM fee? Is the AUM fee decreased as assets rise above certain levels? Loads?
        4. what triggers a change in asset allocation (AA)?
        5. How do you deal with market drops? tax loss harvesting?
        6. Where are my assets? IRA vs Roth IRA vs taxable and why?
        Many more. This stuff should have been explained and discussed and you educated/informed. A lot of this is on them, some is on you.

        Comment


        • #5
          You can post the portfolio if you want some meaningful comments.

          Comment


          • #6
            Curious why you chose an AUM financial planner/model if you have been spending much time in the WCI universe.

            Comment


            • #7
              5 months is sufficient to evaluate the "process". It seems like you don't have a good definition of the process the FA is using on your behalf. I have no clue what you wanted the advisor to provide. From that perspective, you will never be able to evaluate the performance either.

              https://www.whitecoatinvestor.com/ho...ncial-adviser/

              "It's important to understand what you want the adviser to provide. If you want him to provide financial planning services, make sure those are included. Some advisers are really only interested in asset management, which is fine, as long as you know what you're getting. If I were paying “full-price” I'd also expect some help with budgeting, cash flow, taxes, student loan management, insurance, retirement accounts for my employees, estate planning, asset protection, mortgages and refinancing, investment property management etc. Ideally, all of these services would be available under one roof for one clear price."

              Are you looking for low volatility with principal preservation? Or were you looking for S&P 500 tracking? The latter is 100% stock! Without defining "performance", there is nothing to evaluate. It is what it is. Fix that and get a plan for how that is going to be achieved. Note: Hitting targets is an absolute scale. Misses over and under indicate the process is not working.

              Comment


              • #8
                Originally posted by LIFEISBEAUTIFUL View Post
                Hello, dear wise ones who have been so incredibly helpful and informative! After the sale of a business and much resulting hemming and hawing, we invested a large pool of assets with an AUM advisory firm on January 1. Performance has not been so great so I asked to sit down and go over where we are: basic stuff like allocation and how they calculated that, what assumptions they are making about issues like how much risk we want and when we want to retire, and performance. I am not sure what else I should be looking for or asking about and am hoping you all might have some suggestions. Also wondering if 5 months is enough time to start evaluating how they are doing. Thanks so much!
                If you’re asking these questions AFTER an advisor has invested your money, you’re with the wrong advisor.

                Comment


                • #9
                  Originally posted by VagabondMD View Post
                  I would be interested to know what you are invested in and by what standard or benchmark have you concluded that "performance has not been so great".
                  Thanks for calling me out on that. I am not sure about evaluating performance, but I know the market has gone up quite a bit this year, and my holdings have not at all- but I understand that might be due to a variety of factors that have nothing to do with the adivsor's decisions.

                  Comment


                  • #10
                    Originally posted by Tangler View Post
                    Many more. This stuff should have been explained and discussed and you educated/informed. A lot of this is on them, some is on you.
                    You are entirely right. I was so focused on whether to use AUM or not that, once I made the decision, I convinced myself I could tune out for a few months. Trying to remedy that. Thanks for the great questions; will use them.

                    Comment


                    • #11
                      Originally posted by Tim View Post
                      5 months is sufficient to evaluate the "process". It seems like you don't have a good definition of the process the FA is using on your behalf. I have no clue what you wanted the advisor to provide. From that perspective, you will never be able to evaluate the performance either.

                      https://www.whitecoatinvestor.com/ho...ncial-adviser/

                      "It's important to understand what you want the adviser to provide. If you want him to provide financial planning services, make sure those are included. Some advisers are really only interested in asset management, which is fine, as long as you know what you're getting. If I were paying “full-price” I'd also expect some help with budgeting, cash flow, taxes, student loan management, insurance, retirement accounts for my employees, estate planning, asset protection, mortgages and refinancing, investment property management etc. Ideally, all of these services would be available under one roof for one clear price."

                      Are you looking for low volatility with principal preservation? Or were you looking for S&P 500 tracking? The latter is 100% stock! Without defining "performance", there is nothing to evaluate. It is what it is. Fix that and get a plan for how that is going to be achieved. Note: Hitting targets is an absolute scale. Misses over and under indicate the process is not working.
                      This is a really helpful response. I feel like the advisor is available to help with all these things, and it's been my fault that I have not availed myself of those services yet, but I will.

                      Comment


                      • #12
                        Originally posted by Bmac View Post
                        Curious why you chose an AUM financial planner/model if you have been spending much time in the WCI universe.
                        I can't tell you how much I deliberated. Eventually, the feedback really did seem to be 50/50. What ultimately sold me was a lower fee, the amount of the money, and my propsensity to act irrationally in a panic.

                        Comment


                        • #13
                          Originally posted by Hatton View Post
                          You can post the portfolio if you want some meaningful comments.
                          Will do after I get some more background in our meeting. Thanks for the great idea.

                          Comment


                          • #14
                            I think listing the investment choices, at least the percentage of allocations , might be more beneficial to understand your situation. I read somewhere that close to 90% of your returns are based upon asset allocation. Your portfolio may be preforming as expected if you predetermined a conservative portfolio.

                            Comment


                            • #15
                              5 months is too short of a time period to judge performance (whether that's someone managing their own investments or an advisor managing them). Any strategy can look good (or bad) over a period of time that can lead people to the wrong conclusion. This is true for managing a portfolio or an individual investment. Look at ARKK - up 152.82% and one of the best investment funds in 2020. Down 16.21% in 2021 and one of the worst performing funds. Is this a good or bad fund?

                              If you post the investments in your portfolio, you'll get feedback on the overall allocation/mix of investments. The bigger thing I'd want to focus on is the underlying philosophy, and if you agree with the approach, versus the returns over a short period of time. For instance, is the approach that they try and actively manage the portfolio (pick stocks, certain investment funds over time, time the market, add alternative investments, etc.) or is it more of a passive approach (use index funds, stay disciplined to an allocation, etc.).

                              Everyone has their own approach they buy into. Anyone can give you an explanation around performance and create a narrative that sounds compelling. Whereas having someone explain their approach is where I think you'll get a better feel for if you buy into it. I just think you'll be better off (and feel more confident) if you understand the way they are investing for you and why that's the best long-term approach.
                              Andrew Musbach, CFP® | Co-Founder & Financial Advisor at MD Wealth Management, LLC | Podcast Host - The Physician's Guide to Financial Wellness

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