In the realm of investment advice, value is defined by what you receive from your advisory relationship that meets or exceeds your expectations. For most clients, it has much less to do with pricing or investment performance, than it has to do with the fulfillment of promises and commitments made at the outset of the relationship. But the commitments will only have value if they are based on your stated needs and expectations.
You should expect your financial advisor to have in place a clearly defined process for working with you to develop and implement your investment strategy. You know you’ve found the right financial advisor when that process includes, at a minimum, these five elements:
Thoroughly Assess Your Financial Situation and Goals
The initial Discovery Meeting must consist of a thorough assessment of your current financial situation in light of your most important goals. It is here where you and your financial advisor must have a frank and in depth discussion of what you want to have happen now and in the future based on your values, beliefs, and priorities, all of which sets the course for developing and implementing your financial plan.
Establish Long-Term Investment Objectives
Having a clear understanding of your financial goals, your financial profile and your risk profile, your advisor should establish well-defined benchmarks which form the basis of your investment strategy. Your benchmarks determine the investment returns you need to generate and become the key measures of your progress towards your objectives.
Develop Your Asset Allocation Plan
With your benchmarks in place, your advisor should formulate an asset allocation strategy that reflects your risk/reward requirements. This involves identifying a mix of asset classes and securities or investment vehicles within those asset classes with the potential to generate the returns dictated by your benchmarks with an acceptable range of portfolio volatility.
Implement the Selected Strategy
With your asset allocation in place, the work begins on constructing your portfolio using select institutional asset class funds to achieve optimum diversification. Institutional asset class funds provide the best possible exposure across multiple sectors and geographic regions at the lowest cost.
Monitor and Rebalance Your Portfolio
With a sound investment strategy based exclusively on your personal benchmarks in place, there is little reason to track your investments daily, weekly or even monthly. Instead, you and your advisor should establish regular intervals when you meet to measure progress, and make adjustments to your plan based on any changes in circumstances. Your investment strategy should include an automatic trigger for rebalancing your portfolio on an annual basis to ensure your target allocation of assets remains intact.
One More Thing….
Your financial advisor should clearly explain and document the process and services to be provided to you and define both his and your responsibilities. The client-advisor relationship is defined in large part by the method of compensation, so the advisor should explain fully how they will be paid and by whom, and all potential conflicts of interest should be disclosed.
*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets.