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Investor Information Articles

The Case for a Second Opinion on Your Investments:

fresh ideas

Many families hold their investments at several financial institutions, often losing track of their asset allocations and investment performance.  Other investors are unsure about the advice they are getting from their stockbroker or financial planner. Their investment recommendations do not seem to line up with current market conditions or other information the investor is getting from the financial press.

Rarely are individual investors seeking to get a second professional opinion on their investments from a seasoned investment manager. However, it is incumbent on each of us as investors to make sure our investments are consistent with our investment goals, are of the lowest risk for our expected return, and are aligned with economic and market conditions. One important way to assure ourselves we have the best possible investment mix is to consult with an independent investment advisor.

Commissioned stock brokers and financial planners may have conflicting motives for their investment recommendations. Or, you may feel your advisor is not spending enough time to assure proper asset allocations and the best possible performance in your accounts. As well, many smaller investors may feel they are getting little or no attention from their broker/planner at all.

Both investors with brokers and investors going it on their own need a second opinion on their investments from a consulting investment advisor with strong local references who can review their investments for:

  • Consistency with their investment goals.
  • Appropriate levels of risk.
  • The best quality stocks, bonds, mutual funds and exchange traded funds in their accounts.

After the review is completed investors should set a meeting with their current broker or planner to go over the results of the review, especially any areas of concern exposed by the consultant.

Areas of concern would include:

  • Asset allocations inconsistent with your investment goals.
  • Poor risk/return profile of investments.
  • Poor relative performance of investments.
  • Poor real return on investments.
  • High investment costs-commissions and hidden fees.

At the end of the review investors should ask their broker/planner to address each area of concern to their satisfaction. This may entail a solid plan to improve investment performance and/or reduce risk, or it may include specific ways that costs will be reduced.
In the end you may decide to look for another advisor. It’s worth the effort to interview at least three possible candidates.

I would recommend that an investor, no matter the size of her/his accounts should seek an investment manager who:

  • Believes that every client, big and small, should be given honest, independent, studied investment advice.
  • Believes that fees should be based on assets under management, not on transactions.
  • Believes that individual clients, big and small, should pay no more than large institutions for their investment advice and management.
  • After having fully reviewed your investment goals and experiences, will manage your accounts consistent with your goals and ability to take risk.
  • Will commit to communicating with you regularly, monthly at minimum, with a full review quarterly.

Investors Who are Managing Their Own Investments

For investors who are attempting to manage all their investment accounts themselves it is equally important to seek a second opinion on your investments and go through the review process above. As well, most families have multiple retirement and investment accounts at several institutions. This is a recipe for completely loosing track of all aspects of good portfolio management; proper asset allocation, proper risk/reward management and comparative returns.

My first recommendation is to consolidate accounts wherever possible. Secondly, be sure you have internet access to each account. Cutting down on paper statements mailed to your house or office will actually reduce confusion and that awful stack of unopened mail. Thirdly, consider using a financial information aggregation site where you can view all of your financial accounts with one screen view.

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