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How Do Wealth Managers Review Portfolios?

by Chris Cooper, Financial Planning Expert
April 15, 2017

Question: How Do Wealth Managers Review Portfolios?

Answer: There is no standards of practice in the investment advisory world, so there is no particular way or time that “wealth managers” (a euphemism which has no legal definition under State or Federal laws, and the term is no guarantee of whether or not a person who is a Registered Investment Advisor, or an insurance agent or registered representative of a broker/dealer) review or even manage portfolios.  

In my 35 years in this work, I have given testimony in courts numerous times against “wealth advisors” who did nothing more than buy and hold a bunch of index mutual funds, or put every dime a person has in annuities.   Empirically, many business professors at major universities have found that too much trading in a portfolio results in underperformance.  Some “passive” wealth managers merely “rebalance” the portfolio to keep an arbitrary amount of money in stocks verses bonds (such as 60-40).

Performance information from mutual funds gives distorted pictures of actual performance, and the same can be said for individual portfolio’s being managed for you.  What matters is how often YOU review your portfolio.   If you are constantly reviewing your investment holdings, and constantly calling your broker or wealth manager all the time, then you are not invested the way you should be (because it is making you hyper!)  Some investors talk themselves into taking on too much volatility  thinking they will outperform the stock markets, so this is more the fault of the investor than the wealth manager.

Generally, you should review your performance and holdings only one a year, any more often than that and you are probably gambling.

Chris Cooper is the owner and founder of Chris Cooper & Company, Inc., a fee-only financial planning firm for elderly persons and the owner and founder of ElderCare Advocates, Inc. a private geriatric care management and long term care consulting firm. As a California Licensed Professional Fiduciary, Chris can serve as  Conservator of the Person and Estate under court appointment,  as Agent under a Durable Power of Attorney for Financial matters and Health Care matters.

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