We Don’t Do Portfolio Reviews (And Why You Shouldn’t Fall For it)
It is a common tactic for Financial Advisors to offer a “portfolio review” in order to try and find a way in and win investments accounts.
They. Are. A. Scam.
Yes, this comes from a guy who makes his living managing investments for his clients.
Portfolio reviews are a scam.
Here’s why:
Hindsight is 20/20.
Here is a dirty secret about comparing investment performance:
If you give any competent Advisor your current portfolio and enough time, IT IS EASY to find portfolios that will beat your current Advisor’s in performance.
Easy. I can do this all day, every day.
There are thousands of investment options out there and finding something that beats even really good performing portfolios is not a strenuous task. So when an Advisor says that they want to do a free portfolio review for you, what they are really doing is displaying a scummy sales tactic to try to either scare or anger you into becoming a client.
Please don’t fall for the portfolio review scam.
Using this tactic should be a big red flag!
If an Advisor is trying to either scare you about how much money you left on the table from underperformance, or make you mad at your old Advisor (or worse yourself if you have self-managed until now), then you should run. This is a scummy endeavor. It is a pure sales maneuver.
You do not want a salesman as an Advisor.
While all Advisors are technically salesmen and -women - we have to be to get clients and survive - the best of us just the sale be the natural product of building a relationship and providing demonstrable value to our clients.
Good Financial Advisors don’t need sales tricks. Good Advisors lead with value.
Your Financial Plan determines your investments, not gimmicky sales tricks.
A good Advisor doesn’t worry about comparing old portfolios to future allocations. That’s because your needs as a client, and often your financial circumstances (every year closer to retirement, children, grandchildren, etc.) are changing. So whatever your portfolio is from this year often needs to be way different from last year.
Your individual, customized only to you Financial Plan determines your investment allocation.
How much risk can you take? How much are you willing to take?
How many years do you have to retirement?
How many years do you assume you will live in retirement?
How much of the money do you actually need for retirement?
What are your end goals for the money? Do you want to spend it all, or do you want to leave a lot to kids, grandkids, charity, etc.?
What are your future inflation assumptions?
How do we think the markets are going to perform over the short, medium and long term?
There are so many questions to answer, and they will drive assumptions used to build the portfolio of investments that makes sense for you.
Of course, within those bounds, the best performance (inclusive of costs for investments, which are often ignored in comparisons) should be chosen to help you meet your goals. But performance alone isn’t the driver for investment selection.
Don’t fall for the portfolio review scam.
Find an Financial Planner that understands your needs, and delivers value above and beyond the cost to hire them.
A good planner will educate you about your investments, and work with you to find the solution you need to achieve your financial goals.
Do you want a portfolio review? We don’t do them. But we can get you a solid investment plan!
All written content on this site is for information purposes only. Opinions expressed herein are solely those of Snowcap Financial, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to other parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.
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