Robert Lloyd, CFA
Why Work With An Adviser?
· Better be wise by the misfortunes of others than by your own.
Aesop, Greek author of moral fables, The Lion, The Ass and The Fox Go Hunting.
Financial advisers seem completely unnecessary. After all, with index funds, discount brokers and free internet news sites, investing and making money should be easy. For those who are financial professionals, this may be true, but even for the pros, investing is never easy.
Most of us use doctors when we are sick, auto mechanics when we have car trouble, lawyers when we have legal problems or accountants when we have complex tax questions. Even though we recognize these professionals as subject experts, the financial professional is the one expert many try to live without. This can lead to expensive mistakes caused by lost opportunities or outright losses from bad investments.
In contrast, the wealthy almost always have an adviser, or in some cases, two advisers with different firms. For these investors, it is not a question of getting the lowest possible fee, but finding a trustworthy person and firm that meets their needs. The adviser is paid to guide the wealthy investor through the myriad choices into something suitable for their unique family situation. A good adviser helps the investor avoid big mistakes by utilizing best practices and avoiding the classic mistakes many investors make when managing their own money.
Here are some factors every investor should consider when evaluating an adviser and his firm:
Experience – age and work experience of the adviser.
How many total years has the adviser worked in the industry?
How many investment cycles has the adviser managed through?
Can the adviser relate to the needs of you, the client?
Expertise – specific skills needed as an investment professional.
Superior understanding of the characteristics, behavior and risk of different asset classes.
Extensive understanding of retirement planning, the investment process, asset allocation, investment selection, and the practical steps of managing a portfolio.
Sensitivity to the financial, regulatory, tax, and legal implications of investment decisions.
Credentials – education and certifications that confirm an individual’s knowledge and expertise.
Educational – college and graduate degrees with concentrations in finance, accounting or economics. Top schools are a plus.
Professional designations such as the Chartered Financial Analyst (CFA), Certified Financial Planner (CFP) or Certified Investment Management Analyst (CIMA).
Due diligence – ability of the firm or adviser to research sub-advisers.
Performance review and validation.
Financial soundness of the sub-adviser's firm.
Access to research covering stocks, bonds and markets.
Tracking and reporting – software systems to track and report performance in a timely manner.
Performance reported daily, monthly, quarterly and annually.
Comparison to relevant benchmarks.
Timely tax reporting and assistance in finding documents.
Financial planning and advice – retirement planning and estate guidance.
Retirement plan prepared as part of the investment process.
Estate and tax education with regards to accounts and general issues, but not formal legal or tax advice.
Service level – frequency and intensity of interaction with the advisory team.
Number of meetings per year: annual, quarterly, monthly.
Responsiveness and ability meet special requests.
Assistance with managing concentrated equity holdings.
Investment choices – spectrum of investment options available on the adviser's platform. Stocks, bonds, mutual funds and exchange traded funds are common.
Alternative investments such as limited partnerships that invest in private equity, hedge funds, or real estate investment trusts are helpful, but less common.
Great advisers are out there and they add tremendous value when planning and managing retirement. Give us a call to see if we can help you.
Robert Lloyd, CFA® is President and Chief Investment Officer of Lloyds Intrepid Wealth Management, and author of the book CENTRAL MARKETS. Since 1994, he has held positions as a trader, analyst, portfolio manager, and wealth manager while working at Invesco, CCM Opportunistic Advisors, and Merrill Lynch. In another life, he served 8 years in the U.S. Navy as a Naval Flight Officer flying in the S-3B Viking. For a complete resumé, visit his profile at LinkedIn.
Rob holds a BBA from the University of Notre Dame and an MBA from the University of Chicago.
Rob is a Chartered Financial Analyst.
Lloyds Intrepid LLC is doing business as Lloyds Intrepid Wealth Management. Lloyds Intrepid LLC offers investment advisory services in the State of Texas where registered and in other jurisdictions where exempted. Registration does not imply a certain level of skill or training. Lloyds Intrepid LLC and its advisers do not provide legal, tax or accounting advice. Lloyds Intrepid LLC formulates retirement plans, investment strategies, portfolio construction and investment due diligence for clients with signed investment advisory agreements with us. The information contained herein has been obtained from sources believed to be reliable, but the accuracy of the information cannot be guaranteed. All opinions and outlooks are subject to change.
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