Your Investments: Do you have multiple accounts? Get a financial quarterback

Instead of one portfolio being diversified between various asset classes, you diversify with various advisers and their strategies.

By AARON KATSMAN
November 12, 2014 22:57
3 minute read.
House and calculator [Illustrative].

House and calculator [Illustrative].. (photo credit: INGIMAGE)

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

While it used to be that investors chose to work with one adviser, or do it themselves, things have changed. According to Cerulli Associates, a Boston-based research firm: “Among the entire advice-seeking universe, 27 percent 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.”

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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. I can only assume that my opinions are relayed to their other advisers as well. In this way clients can implement various investment strategies that suit the various opinions of their advisers.

I would go so far as to say that it is an even better approach to 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 clients to see what their goals are and if they are going to be changing.

Ultimately the clients ends up with a portfolio that may have been suitable 10 years ago, but it bears little relevance to their current financial situation.



I recently met with a widow who had money both in the United States and in Israel. She had two different managed local Israeli accounts and two managed accounts in the US.

She has one child left to marry off (two are already married), and while she gives a bit of monthly help to her married children, most of this money is meant to supplement her pensions, as she is retiring at the end of December.

She showed me all the statements, and aside for many redundancies in the investments – she owned Johnson & Johnson in all four accounts – she had a very aggressive portfolio. She told me she had not received a call to discuss her investments in a few years. Due to the lack of communication, none of her managers knew about her changed investment goals, and she ended up with a portfolio far too aggressive for her new situation. It’s not the portfolio managers’ fault. They have a mandate in terms of risk levels, and then they invest with discretion. It’s not part of their job description to check in with a client.

Invest in a quarterback

The most effective solution to this problem is to have one adviser be the dedicated financial quarterback. 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. He will make sure that each manager is doing what they are supposed to be doing.

‘Hut hut 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 who will oversee all of your investments and help you achieve your financial goals.

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.

aaron@lighthousecapital.co.il


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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