My wife and I have a portfolio that is scattered around a bunch of different places—a mutual fund company, a bank investment arm, an employer pension-matching plan plus stock options and a self-managed discount brokerage account. I am concerned about this. Even though I keep track of the total portfolio using a personal spreadsheet I wonder if I should consolidate all of it into one location.
PS. My wife won’t let me touch her portfolio with the mutual fund company.
As I mentioned in my prior post, Retirement savings in different places? Why it’s risky, there are a number of risks to having your portfolio scattered across a number of institutions and/or accounts.
Based on what you’ve told me, it sounds like the issue is only partly that your portfolio is scattered around. The bigger issue in my opinion is that you don’t have one clear investment plan with one person accountable to execute and track it. That person could be you but you’ll need to ramp up your involvement significantly. Or that person could be a financial adviser. In your case, it might be money well spent.
Here are the steps I recommend you take;
Interview financial advisers
I know you already have one through your bank’s investment arm. I’d start with him or her, but include others too – a mix of fee-based and fee-only. The questions I would ask are;
“Are you willing and able to develop an investment plan that takes into account my entire financial picture?”
Some advisers will only include assets that are housed with their company which is understandable given that that is the way fee-based and commission-based advisers are paid. But some are game to think holistically.
“As an adviser, what would you say you are accountable for?”
Are they accountable for the completion of the investment plan, for the performance of the portfolio, for ensuring that you do what you need to do to meet your goals? Some advisers take accountability very seriously, and others much less so, preferring to offer only advice which can be taken or discarded.
“How would compensation work?”
For fee-based advisers, the percentage charged typically goes down as the asset level goes up. For fee-only, it is a flat rate, but goes up with the complexity of the task.
“How do you work with highly-engaged clients?”
Some advisers love people like you, who follow the markets and trade their own stocks. And others don’t.
“How do you ensure that your recommendations are comparable to the benchmark indexes?”
Some advisors will try to focus you on absolute performance. But given the stats against active management, I’m a firm believer in looking at performance versus comparable benchmarks over time.
“What does one of your investment plans look like?” Have them show you an example to see if it will meet your needs.
Choose an adviser based on your criteria
Your criteria will likely be different from mine—but to give you an idea, the things I recommend people look for are;
- Delivers performance that meets the benchmark index over time.
- Communicates in a way that works for you.
- Provides solid advice and doesn’t just sell products.
- Understands and works on all your goals.
- Holds you accountable for achieving those goals.
Set expectations with your financial adviser
Unrealized expectations are one of the biggest sources of conflict between clients and their advisers. This is an opportunity for both of you to talk about how you want things to go. Have this conversation even if you stay with your current adviser.
- Investment plan: What does it include, how often will we revisit it? Etc.
- Review of results: How often will it occur and how will the performance information be generated given the various accounts?
- Accountability: When something goes awry—and it will—how are we going to handle it?
- Communication: How often will we communicate and by which method—phone, in person, email?
- Trading at the discount brokerage: What do we need to agree on in terms of parameters for the trading at the discount brokerage?
Bottom line: Have one investment plan and one person accountable to execute and track it. That is going to be the best way to ensure you avoid the risks of scattered portfolio and get the best results over time.
PS: I would respect your wife’s boundaries on her portfolio. But you might consider checking out the performance of the funds she holds and see how they stack up versus the benchmark index over time. She may be in great funds that have been doing well against the benchmark. Or she may be in funds that aren’t so great and you could help ensure that she’s in the best products her company offers.