When you go to a professional money manager the very first step in the interview process should be assessing your needs carefully, with regard to risk, reward, liquidity needs, tolerance for risk, process you’re currently using and how that is working for you and a process that would be acceptable to you and your family to use and then after that an Investment Policy Statement should be created. Now this all sounds very fancy and foreign to some but it is simply an asset allocation plan and process that is acceptable to you, your spouse and your advisor. And in times of panic and emotion like our 500point drop it is an excellent time to come back to the very beginning of the plan and read the IPS.
Here are some things to consider even if you are smart and responsible with your money. Can a professional manager help me to be less emotionally involved with my portfolio and keep me from making rash decisions about my money at the wrong time? Can an advisor help me to attain better and more consistent returns with less risk then I have been taking on my own? Spending tons of hours doing spreadsheets and planning is one thing, but am I pulling the trigger into the right plan, at the right time and making changes when needed?
I had a good friend who hired one of the top money managers in the southeast United States and she was up for the year 4%. The benchmark S&P and several other indexes had closed down for the one year period. So she said to me “But the manager only has me up 4% it is hardly worth hiring someone for that return.” And I said to her, “No he has prevented you from losing -15% if you had simply just thrown your money into an index fund.” The fee for an experienced professional is only an issue when there is no perceived value in the relationship. My friend did not perceive any value to her portfolio manager and I encouraged her to call him and discuss exactly the numbers she and I had discussed and go back to her Investment Policy Statement.
An investment in financial management provides peace of mind by ensuring your best odds of permanent wealth and comfort. This planned approach to success is the result of a multi-step process. You must:
Set achievable financial realistic goals.
Assess your current financial health by examining your assets, liabilities, income, insurance, taxes, investments and estate plan
Develop a realistic, comprehensive plan to meet your financial goals by addressing financial weaknesses and building on financial strengths
Put your plan into action and monitor its progress
Revise your plan to accommodate changing goals, changing personal circumstances, changing financial opportunities, and changing market and tax laws
The planning process requires skill, knowledge, due diligence, and discipline, but great reward makes it well worth the time and effort.
What will I get from a professional money manager or wealth advisor?
A financial professional provides the emotional discipline required to make sure plans are implemented. They do not have a crystal ball on their desks and they are not able to tell you where the next 1000 point run up in the market is going to occur but they are able to offer you experience and discipline and a sounding board for educated ideas about your investments.
Be sure to also check things out yourself with Advisors. Here are some good resources.
The FPA’s web site allows you to search by ZIP code for a certified financial planner (CFP) in a number of different specialties.
National Association of Personal Financial Advisors
Start by visiting the National Association of Securities Dealers. The NASD is like the DMV of financial advisors — always start there.
The NASD’s web site will tell you just about everything you could ever want to know about an advisor’s history, including where they went to school, their work history, and if there have been complaints filed against them.
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