Your investments: Your adviser as financial coordinator

While it used to be that investors chose to work with one adviser, or do it themselves, the recent economic crisis has changed that.

By AARON KATSMAN
December 11, 2013 22:57
4 minute read.
Palestinian money changes exchange money [file].

Palestinian money changers 370. (photo credit: REUTERS/Mohamad Torokman)

Your adviser as financial coordinator I recently met with a financially comfortable married couple who have investment accounts all over the world, with different managers looking after each separate account. At first glance, one would think that they were happy with their investments, but this is not the case.

During the meeting, they told me that they both grew up very poor and after working very hard to build up a family business, they sold it and made aliya with Nefesh b’Nefesh.

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This couple is now afraid of the possibility of war in the Middle East and its consequences on the global economy and all their hard-earned money. For this reason, they are looking for a relatively non-aggressive portfolio and exposure to non-US dollar currencies.

Upon reviewing all their different accounts, we found that they were 95 percent exposed to stocks, a proportion that is far too aggressive for what this couple is looking for. In addition, they had very little exposure to non-US-dollar investments.

You may think that their use of multiple money managers is excessive. Well, actually it has become more and more common.

While it used to be that investors chose to work with one adviser, or do it themselves, the recent economic crisis has changed that.

According to Cerulli Associates, a Boston-based research firm: “Among the entire advice-seeking universe, 27% of households use multiple advisers. Narrow that range to households with $2 million to $5 million to invest, and the percentage climbs to 35%. Among those with more than $5 million to invest, 58% use multiple advisers. In the last three years, the pace has accelerated, with the average number of adviser relationships per household climbing as investors who handled their own finances turned to advisers for the first time, and those already using advisors added to their stable.”

How could this happen?

When I asked the couple when they had last spoken to any one of their many managers, they responded that it was a few years ago. Yet over this time, their needs had drastically changed. When they had first opened their accounts, they were still living in the United States, earning high salaries. In this situation, they didn’t need all of their money immediately, and they wanted it to grow.

However, having moved to Israel and changed their lifestyle, their investments are no longer appropriate to their needs. By failing to remain in contact with their portfolio managers, they have found that their investments no longer serve their new situation.

With more and more investors choosing to use multiple financial advisers to manage their money, it’s become important for investors to have one adviser who oversees everything that is going on to make sure that the investor is investing in an efficient manner.

Financial adviser as CFO


The most effective solution to this problem is to use a local financial adviser. A financial adviser can be compared with a company’s chief financial officer (CFO), who is responsible for the entire financial situation of the business. When a client has various accounts around the world, a financial adviser will have a broader view of the situation in general. He will not just focus on one account, like a local investment manager, but will assess everything and see how the entire financial situation fits his client’s goals and needs.

One of the main advantages of working with a person who is local is that he will understand your personal situation and long-term goals best because he is part of the local culture and speaks your language.

Make a plan

Before you meet with an investment adviser, map out your financial goals. Going to the experts will help you decide how to invest your savings. But you should first have a firm grasp of your short- and long-term goals and needs.

How much income will you need to meet fixed expenses apart from any pension, Bituach Leumi or Social Security income? Do you have children or grandchildren to educate? Are your elderly parents in need of care? How is your own health? You need to determine your own budget needs and your ability to tolerate risk first, and then ask your adviser what kinds of investments would best fulfill these goals.

There is nothing wrong with using multiple managers.

Just make sure that you have a financial coordinator who will oversee all of your investments and help you become a successful investor.

The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc., or its affiliates.

[email protected] Aaron Katsman is a licensed financial professional in Israel and the United States who helps people with US investment accounts. He is the author of the book Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing.


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