Many investors have unknowingly scattered their assets, resulting in no one person managing or fully understanding their entire situation, goals or dreams. Without comprehensive planning, there actually is no plan at all.
1. Improper Asset Allocation
Most investors have their assets dispersed with several advisors and several financial firms. No single advisor knows what the other is doing resulting in an uncoordinated portfolio. One advisor in firm A might be selling the very asset that an advisor in firm B is buying. Unless there is one coach reviewing the entire portfolio, then your money is not coordinated. Your asset allocation should always reflect your current position in life, your current goals, future, feelings and family characteristics. When your hard earned money is scattered to other advisors and institutions, you alone are left to properly manage your portfolio. Many individuals are not trained to monitor this correctly and consistently. Unfortunately, the overall plan suffers.
2. Improper Correlation Within Investments, Managers and Funds
Without saying, each investment needs to be excellent on its own. The investment, manager, or mutual fund needs to have a strong track record. You might be able to select quality investments. That’s not the problem. Where the breakdown occurs is knowing how these investments interrelate. This is nearly impossible to track when one advisor is doing one thing, and a different advisor is doing just the opposite. Let’s think about a recipe analogy. You might have the best ingredients to make your favorite dish. You might even have quality chefs at your beck and call, ready to make this dish for you. If you put all of these chefs in the same kitchen, but don’t let them know what the other is doing, a culinary disaster awaits. You can see that the likelihood of your dish coming out correctly is very low, no matter how good the ingredients were. Same is true with your investment portfolio.
3. Failure to Monitor the Consolidated Portfolio
You know life is not static. Life is constantly changing. Whether it’s your job, children, the economy, world events, new laws, unplanned expenses, your world constantly moves. Your entire portfolio needs to be dynamic as well. When market forces move, the properly managed portfolio needs to move with it. I am not talking about day-trading, but rebalancing when and where appropriate. Additionally, your goals, future, feelings and family characteristics are changing as well. Every day is either a day closer to your goals, or not. Having your assets scattered makes it nearly impossible to properly monitor your portfolio based on your changing life. With the technology and tools available, along with the new open architecture available at full service financial institutions, you are better off hiring one advisor to help you monitor your portfolio. This trusted advisor will coordinate all of your eggs and not put them in the same basket.
In conclusion, years ago, many firms were limited to the solutions they could individually bring to the client. Many had their own proprietary funds or investments, which may or may not have been in your best interest. Today, full service firms have an open architecture and are able to go out into the market place and bring any solution to you that is appropriate. For your strong consideration, only hire an advisor who can go anywhere in the marketplace without limitation!