Has your financial advisor contacted you lately? Although global stock markets (see:VT) have recovered from their earlier in the year losses, they could’ve revealed flaws with your investment portfolio’s design. Often, flaws that are camouflaged by rising markets are exposed and exploited in rocky markets.
Ultimately, advisors should take responsibility for the investment recommendations they make and the advice given should always conform to a person’s age, risk tolerance, and life circumstances. Sadly, some financial professionals – even those with years of experience and a handsome looking resume – don’t operate this way.
My latest Portfolio Report Card is for BR, a 79-year old widow from New Jersey, with a $1,585,000 investment account divided across an inherited IRA, family trust, and taxable brokerage account. She became concerned about her investments when her financial advisor abruptly resigned from her account and left her hanging.
After requesting a Report Card, BR informed me that generating income from her portfolio is the most crucial aspect of her investment plan. Nevertheless, she still described her investment strategy as the following: “Honestly, I leave it up to the advisor. I just need to pay off my mortgage, bills and my goal is to enjoy life without touching the principal.”
What kind of grade does BR’s investment portfolio get?
Cost
Cutting investment cost, commissions, and ongoing asset fees should be a priority for all investors. Why? Because the less you spend, the more you keep. How does BR do?
BR’s portfolio holds 17 ETFs, 6 individual stocks, and cash. Annual fund expenses on the ETFs range from 0.12% (low end) to 0.95% (high end) and the advisory fee of 0.95% pushes up the cost of this portfolio to just over $22,000 annually (including both fund and advisory fees).
The cost of BR’s portfolio is seven-times higher versus a blended benchmark of index ETFs matching her same asset mix.
