“Questions for Two Point” is an ongoing series on our blog to answer commonly asked questions from clients, friends and the community. We will discuss topics to help people understand more and worry less about their investments and focus more on enjoying the things in their life that mean the most. What questions do you have about finance or investing? Submit questions here.
A fundamental question facing many people: How do I search for and evaluate a new investment manager for myself and my family? There is an interesting paradox associated with this search.
Typically, when an individual is ready to take that step, they have already reached a certain level of accomplishment in their life and career. They are accustomed to making decisions based on a strong set of skills and personal knowledge. Yet most people who are looking for new financial advisors are not financial professionals themselves. They may or may not enjoy dealing with money matters. They may feel greater or lesser degrees of skill in the financial arena. But very few are confident investment managers.
Which leads to the dilemma: how to select the right partner when you do not have the tools and information to fully judge the advisor’s capabilities? Given this choice involves your current and future net worth, the stakes can feel high.
What capabilities, perspectives or proof points may signal that you have found a person and firm you can trust, both relative to their integrity as well as financial performance?
A disciplined advisor has a mix of skills that are critical to get beyond talk and achieve the kind of consistent performance that helps clients meet their life goals.
It is challenging to take investment expertise and apply it to specific portfolios crafted for specific clients to meet specific personal goals. This is precisely what individuals should be seeking in a first-rate investment manager.
Bridging the gaps seems to be a challenge for many investment firms.
These gaps may take the form of technology or tools that are lacking to fully leverage financial market intelligence or operations. The gaps may be in the level of experience of the actual investment managers on the team. The gaps may be in those managers’ ability to translate investment ideas into actual execution, day in and day out. There is a level of business process engineering to do this work successfully, which requires a tremendous amount of discipline. There is also a mix of art and science in determining how one decision leads to the next, as well as in cultivating the kind of timing that will drive successful outcomes over time.
So how do you assess if you have found that right mix of investment prowess, human connection and concern, and the ability to shape portfolios that drive results? The first thing to do is ask. That is, ask for proof.
Here are specific questions to ask your potential advisor about their results and decisioning:
After you gain confidence in their ability to generate favorable investment results in the future, ask about specific changes they will make as your goals change over time. The last piece is to make sure you feel confident that they are truly listening to your concerns.
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