By far, the hardest part of managing other people’s money is not just the research that goes into building a portfolio or picking the specific assets, but the psychology of how a client feels relative to the current marketplace and their specific goals, which are not always realistic. Of course, as a fiduciary, there is a lot of information needed from a client before recommending portfolio allocations and assets. We all wish we could easily fulfill most clients’ request to “just make money, but don’t lose a dime.” Unfortunately, as professionals, we realize that has never been possible, nor will it ever be. However, what I have learned is that the more education you provide a client about the complexity and nuances of investing, the better they become not only as investors but as clients.
Therefore, below are some thoughts you might want to implement with new clients or review with current ones.
1. Investment objectives—What are the client’s overall investment goals, dreams, abilities and portfolio structure—assuming they have one? Obviously it’s important to know if clients are high-net-worth clients, what kind of liquid net worth they have, what their income levels are, investing time horizon, retirement income needs, overall strategy, and even preconceived return assumptions. Without discussing this kind of in-depth information with a client, matching their goals and objectives to the portfolio construction can easily become misguided.
2. Investing principles—these are fundamental or general truth or law; sometimes they are an underlying theory or belief. What does the client…[sws_button class=”” size=”sws_btn_small” align=”sws_btn_align_right” href=”http://www.advisorone.com/2012/06/20/the-6-elements-of-portfolio-construction” target=”_blank” label=”Read The Article…” template=”sws_btn_dandelion” textcolor=”” bgcolor=”” bgcolorhover=”” glow=”sws_btn_glow”] [/sws_button]
Andy graduated from the University of Alabama-Birmingham with a B.S. degree in Accounting. He is a Registered Investment Advisor Representative of Money Management Services, Inc and holds the designations of CPA (Certified Public Accountant), AIF® (Accredited Investment Fiduciary), CTS™ (Certified Tax Specialist), and WMS (Wealth Management Specialist). As an advisor, Andrew specializes in comprehensive financial planning, estate tax planning, personal taxation planning, retirement income distribution planning, wealth accumulation, personalized portfolio management, and fiduciary investment management services.