Your Investments: Adviser, financial coordinator

After making it through the local elections, we can now turn our attention to what is truly important: next week’s Super Bowl.

January 24, 2013 02:46
4 minute read.
Super Bowl stadium, Indianapolis

Super Bowl stadium, Indianapolis_390. (photo credit: Lucy Nicholson/Reuters)


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After making it through the local elections, we can now turn our attention to what is truly important: next week’s Super Bowl. As is usually the case, the most important position on the field for the big game will be the quarterback (QB). For those not acquainted with American football, the quarterback is the player who coordinates the offense, making sure each player is in the right position and executes his particular assignment on offense.

While I love football, I’m not about to make my prediction for the big game; rather, I’ll make a comparison between the sport and your portfolio. With more and more investors choosing to use multiple financial advisers to manage their money, it’s become important to have one adviser who oversees everything that is going on to make sure you are investing in an efficient manner.

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 advisers added to their stable.”

Who is in charge?

The reason that more investors are using multiple advisers is because they want to hear different opinions. I have some high net-worth clients who send me information that another one of their managers sends them, and I can only assume that my opinions are relayed to their other advisers as well. In this way the clients can implement various investment strategies that suit the various opinions of their advisers.

Sounds good, no? In theory it’s not a bad way to go, and it’s basically a different style of diversification. Instead of one portfolio being diversified between various asset classes, you diversify with various advisers and their strategies. The problem is that each manager is doing their own thing, and no one ends up speaking to the client to see what the goals and needs are and if they are going to be changing. Ultimately the client ends up with a portfolio that may have been suitable 10 years ago, but it bears little relevance to his or her current financial situation.

This week I met with a lady who had money both in the US and here. She had two different managed Israeli accounts as well as two managed accounts in the US. She has one child left to marry off, and while she gives a bit of monthly help to her married children, most of this money is to supplement her pensions because she is stopping to work in March.

She showed me all the statements, and aside for many redundancies in the investments, she had a very aggressive portfolio. I asked her when the last time she received a call from one of her advisers, and she said she got a call wishing her a Happy Passover nine months ago but hasn’t received a call to discuss her investments in a few years. Due to the lack of communication, none of her managers new of her changed investment goals, and she ended up with a portfolio far too aggressive for her new situation.

Invest in a quarterback

The most effective solution to this problem is to have one adviser as the dedicated financial QB. When a client has multiple accounts, a financial coordinator will have a broader view of the situation in general. He will not just focus on one account but will assess everything and see how the entire financial situation fits his client’s goals and needs – and make sure that each manager is doing what they are supposed to be doing.

Ready, set, hike

Before meeting with your financial coordinator, define your goals and needs and make a list of your assets. Then your adviser can assess all your different investment accounts, property and any other assets to see if you are invested in a way that you can accomplish what you set out to do. He can also determine if you need to make changes to get your investments in line with your goals.

There is nothing wrong with using multiple managers. Just make sure that you have a financial coordinator that will oversee all of your investments and help you become a successful investor.

Aaron Katsman is a licensed financial adviser in Israel and the United States who helps people with US investment accounts.

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