Have you ever asked your advisor what their investment portfolio looks like? Will they show you the holdings that they have in their portfolio?
If they are advising you to purchase certain securities (stocks, bonds, ETF's, mutual funds, etc.) for your portfolio, are they in turn doing the same for themselves?
I am not talking about the asset allocation, its easy for an advisor to say "sure, my portfolio is balanced".
But is she / he buying the exact same securities as she / he is recommending that you buy?
If not, why not?
More importantly, is it a conflict of interest if they are recommending securities to you (especially if there is a commission involved) that they in turn are not purchasing for themselves?
As a client, I think that you should have the right to know exactly how your advisor invests their money. That is true transparency.
At High Rock we invest in the same securities as our clients.
We have 3 models: Fixed Income, Global Equity and a Tactical (value oriented) model. Each of the models will contain securities that we determine represent appropriate percentage weightings that are relevant value for the current economic and financial market conditions.
As owners / managing partners, our money is invested in those models, as is our clients. So, our clients own the exact same securities that we do.
In fact, when we started the Private Client Division of High Rock Capital Management, we did so to invest our personal money with all the expertise that we had garnered over our combined 60 plus years of experience managing the risk that comes with investing.
Then we invited those who wished to share in this experience to invest alongside us, many followed and have shared in our success.
Each quarter, when we send out our quarterly performance reports, our clients receive a statement from Wychcrest Compliance Services (an Independent Review Committee) that reports directly back to them, informing them that we are invested in the same securities as they are and that we have no conflicts of interest.
We do not have to do that (it is not required by any regulatory organization), but we do because we think that it helps to maintain the trust. A trust that "takes years to build, seconds to break and forever to repair".
In the managing of clients wealth, trust is a key concept that many advisors take for granted.
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Scott Tomenson,CIM Managing Partner, Chief Investment Strategist