Service and Advice
Care - Perhaps the most important issue is that someone is there, to advise, to coach, to educate, to counsel and to guide you to get you to your goal. Investment advice and wealth management is a full time job. It cannot be "commoditized" by viewing it as a product such as stocks or bond picks.
The portfolio must be constantly monitored and rebalanced. If investment managers are utilized, those managers, as well, must be constantly monitored. While the choices are always the investor's, it falls to the advisor to help keep the client from making poor investment decisions. An advisor's role can range from manager to counselor and leader. For example, almost all clients are naturally conservative and want to avoid risk. But if, upon analyis of the investors situation, the choice of security today means sacrificing tomorrow, the client might opt to think differently.
To elaborate further, if an investor has a twenty year time horizon, the historical data is strongest for beating inflation in equities rather than bonds. Using Ibbotson Assoicates data from the 1999 Stocks, Bonds and Inflation Yearbook, we need only to turn to their twenty year rolling holding period returns. Starting in the year 1926 and proceeding to 1998, there are 54 seperate 20 year holding periods (e.g. 1926-1945, 1927-1946. etc.). In 32 out of 54 (59%) inflation was higher than the return for long-term govenment bonds. In equities there are no periods where inflation was higher. So if an investor's time horizon is twenty years, they should know that they would have had a hundred percent chance of beating inflation in equities, meaning both large and small company stocks. Put in this perspective, bonds, not equities, may be the risky investment.
While these choices are often emotional, the point is to aid investors in avoiding heuristic approaches, or mental shortcuts, to investment decisions. The case data, or the story one gets, may reveal an investor using rules of thumb such as when they get to a certain income level they must use individual securities, for example. But the base data, or actual research, may not bear this out. While we cannot force investors to make the best decisions, we can help to reframe them in such a way that they can see the larger picture.
The Ongoing Process.
Rebalancing.
Constant Money Manager Review.
Investor Meetings and Updates.
Each investor will be treated with confidentiality. Each investor will be examined individually and have recommendations based only on what is appropriate for them. Service and advice are how we work; the only important product to sell is care.
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