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Mid-year Portfolio Review
Part 2: The Guiding Influence of a Professional
In a complex investment environment, where elevated volatility has dug in for the long run, many investors are looking for more than advice on where to invest. The role of many financial professionals has broadened from a portfolio growth quest to a way of preservation and multi-faceted guidance.
There are thousands of "financial professionals" eager to guide investors. From Registered Investment Advisors (RIA) to stock brokers, insurance agents to accountants, there are multiple resources available for investors in search of help or reassurance. These pros help investors define their goals. Then they develop a plan to reach those goals and encourage the investor to stay invested to achieve them.
But another great change has taken place.
A Holistic Approach
Given recent market turbulence, emphasis has been shifting from investment performance alone to protecting assets and distributing them over the lifetimes of the individuals involved — and their heirs. "A new category of financial advisors — wealth managers — has arisen," Guilfoil points out. "You call on these people to help protect core assets you need for the long term. You can always invest expendable money through a traditional investment-only broker, but you want a wealth manager to help keep your overall financial future, and your heirs' futures, secure."
Wealth managers take a "holistic" planning approach, looking at all aspects of a client's needs, including financial planning, estate planning and insurance as well as investments. Moreover, wealth managers play an advisory role.
"The wealth manager is the quarterback or relationship manager bringing together the right team," Guilfoil emphasizes. The team might include an insurance agent and an RIA or broker as well as a trust attorney and a CPA. A wealth manager may recommend some or all of these professionals. The wealth manager may also personally provide some or all of these services.
The value of a wealth manager, Guilfoil asserts, "is to help clients grow, protect and distribute wealth over their lifetime, and the lifetime of their heirs. Their job is to ensure clients stay on track with their plan. This is how goals are met."
Making the Right Match
You might find wealth managers at brokerage firms, insurance companies, RIAs and financial planners. They can be individuals within large corporations or solo practitioners.
The right one for you should be someone you easily relate to, preferably someone with a professional designation. A financial professional from the insurance side should be a Chartered Life Underwriter (CLU) or Chartered Financial Consultant (ChFC). A wealth manager might also be a Certified Financial Planner (CFP) and, from the strictly investment side, a Chartered Financial Analyst (CFA) or Certified Investment Management Consultant (CIMC). All these designations are supported by formal study and rigorous exams.
Evaluating someone prior to beginning a professional relationship should encompass questions like the following:
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- How did you evolve from your former position into a wealth manager?
- What is your wealth management philosophy — and what can you do for me?
- How do you engage with clients — what working process do you follow?
- How will you go forward once I've hired you?
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The answers should provide a solid comfort level based on the wealth manager's objectivity and willingness to communicate. "You want your wealth manager to be a trusted counselor — someone totally focused on what's best for you," Guilfoil states.
The Ultimate Question — Compensation
There are many ways financial professionals get paid. Wealth managers typically charge annual fees based on a percentage of assets under management. This helps them remain objective.
"Compensation for fee-based wealth managers is not dependent on whether a client buys or sells anything," says Guilfoil, "they can be perfectly comfortable advising you to stay the course or make no changes at all if that's the right thing to do."
What do you receive in return for an annual fee? After creating an initial plan and seeing that it's implemented, wealth managers typically meet with clients on a quarterly basis — and more often if required. This involves more than just an investment review. The wealth manager will constantly revise your plan based on your changing needs.
"The wealth managers we deal with at Russell typically lay out eight quarters worth of work after establishing a new client relationship," Guilfoil said. "Their tasks may include initiating with clients the updating of trusts and wills, reviewing beneficiary designations, planning college funding for children and grandchildren and revisiting investments, too."
Ideally, with a wealth managers' guidance, clients' thorough plans stay on course.
This is a publication of our parent, Frank Russell Company. It should not be construed as investment, legal, or tax advice. The contents are intended for general information purposes only, and you are urged to consult your own investment, legal, or tax advisor concerning your own situation and any specific investment questions you may have. For further information about these contents, please contact Russell Investments Canada Limited.
This article was first published on www.russell.com/us on June 26, 2003.
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Part I |
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