I received a referral last week for an investor who wanted a second opinion on her current portfolio. She stressed that she was quite comfortable with her current advisor but wanted to double check to make sure that her asset allocation was appropriate and that she was not paying too much in fees.
Her current advisor likes to use managed mutual funds.
Of course I said that I would be happy to help (because I really enjoy this part of my work: helping folks figure out how to maximize their returns, limit their risk and keep their costs low). However, I said that in order to do a proper assessment of her current situation, it would be important for me to have a greater understanding of what she was trying to accomplish with her investments and how that merged with her current financial situation.
So we have sent her a Wealth Forecast questionnaire which helps us to get a greater understanding of her current financial status. With that information and an understanding of what her goals and objectives are (as well as her tolerance for risk), we will create a forecast that will help us determine what her appropriate investment strategy (asset allocation) will be. When we review her current portfolio, we will have the appropriate information to determine if our proposed asset allocation aligns with what she currently has.
The Wealth Forecast (prepared by our Certified Financial Planner Professional) also will help her get a sense of how time and compounding will grow her wealth and what she can expect her retirement to look like and help determine if their might be a need for further estate planning. We look at the forecast as a "working model" that allows us to make adjustments as changes occur in a person (or family's) circumstances and allows us to determine if changes need to be made in their portfolio strategy.
In other words, to give her a proper second opinion, we need to have a good deal more information. This can require a little more effort on her part, but I said that there is no obligation to continue to work with us unless over the course of the assessment, we prove to be worthy of her business (our fees equal the satisfaction of having confidence in our service offering which might prove to be a better deal for her).
I thought it would be interesting to follow the process and progress of our analysis on this blog and report back on the results. (Of course, we will, as always, give our prospective client complete confidentiality).
So stay tuned!
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Scott Tomenson,CIM Managing Partner, Chief Investment Strategist