Super Bowl finances: Do you have a financial quarterback?

Your Investments: The common denominator between the New York Giants and the New England Patriots is that they both have top-level QB’s running their offenses.

Money 311 (photo credit: Bloomberg)
Money 311
(photo credit: Bloomberg)
What does the Super Bowl have to do with your finances? Aside from spending a lot of money on food and drink to eat during the big game, it’s the need to have a good quarterback (QB). The common denominator between the New York Giants and the New England Patriots is that they both have top-level QB’s running their offenses.
With more and more investors choosing to use multiple financial advisers to manage their money, it’s become more important for investors to have one adviser that oversees everything that is going on to make sure that the investor is investing efficiently.
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 percent of households use multiple advisers.
Narrow that range to households with $2 million to $5m. to invest and the percentage climbs to 35%.
Among those with more than $5m. 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.
“In 2008, investors kept an average of 0.67 adviser relationships, and that figure climbed to 0.83 by 2011. The increase was more marked among high-net-worth clients. Households with more than $5m. to invest saw their adviser relationships grow to 2.25 this year, from 1.51 in 2008.”
No Communication
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 his other advisers, as well. In this way the client can implement various investment strategies that suit the various opinions of his 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, as often is, is not in the theory but in practice. Each manager is doing their own thing and no one ends up speaking to the client to see what the goals and needs of the client are, and if they are going to be changing. Ultimately the client ends up with a portfolio that may have been suitable for him 10 years ago, but bears little relevance to his current financial situation.
I recently met with a couple that made aliya three years ago. They had accounts with three separate managers.
When I asked the couple when they last spoke to any one of their managers, they responded that it was a few months after their aliya. 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.
They just wanted their money to grow. Now in Israel and with a changed lifestyle, they need to generate income to supplement their much lower salaries. Due to the lack of communication, none of their managers new of their changed investment goals, and they ended up with a portfolio far too aggressive for their new situation.
Financial adviser as QB
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 QB 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 makes sure that each manager is doing what they are supposed to be doing.
Hut Hut Hike
Before meeting with your financial QB, 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 QB that will oversee all of your investments and help you become a successful investor.
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Aaron Katsman is a licensed financial adviser in Israel and the United States who helps people with US investment accounts.