- Investment strategies that are compatible with our principles. Our goal is to preserve wealth with our savings and investments. I would not be comfortable placing sizable amounts on hot sectors or a few stocks. We prefer to match market gains in a bull market and have lower losses during market declines. Basically, we wanted someone who would help maximize our gains without taking risks that would make us feel uncomfortable.
- Proven record through several market cycles. It's easy to make money when the market is rising. Successful investing is demonstrated when the market is in a downward trend or trading sideways, much like the current market. The senior member of the advisor team had been in the business since the 1980s. He had seen the downturns of 1987, 1990 and 2001. As a result, his team targets to minimize losses during declines.
- Access to a wide range of resources. Our advisor is part of a major financial firm. Thus, we have access to a wide range of resources on retirement, estate , tax and investment management. While our advisor is our primary contact, I feel we can get answers from other experts if needed.
- Stick to their strategy with minor adjustments. Our advisor has a portfolio allocation strategy (35% fixed income, 65% equities) which they tweak periodically depending on market conditions. I was impressed that our advisor chose not to over invest in the tech run up of the nineties, even when his clients wanted more exposure.
- Outlive us. I wanted advisor team who would be able to manage our investments into our nineties. Most important, I didn't want to have to choose an new advisor in the next 20 to 30 years. While the senior member is older than me, most of the team is younger than us. As a result, we will likely have the same advisor team all of our lives.
- Good value. Our benchmark for good value is the typical fee for a managed mutual fund, which I estimated at 1.5%. This metric usually eliminated advisors that invested in mutual funds, since they usually add a 0.5% management fee over the mutual fund fees.
Our advisor targets for a 1% fee for a 35% bond/65% stock portfolio, where the stocks investments are handled by well known portfolio managers. Since we have given our advisor only the equity portion of our savings, we pay a slightly higher fee of 1.25%.
Since the financial advisors I considered work with a number of employees and retirees from my company, I asked for references and contacted those that I knew. Finally, after choosing an advisor based on the above criteria and references, we put portion of taxable savings account with the advisor to test if we had made a good decision.
For more on Ideas You Can Use, check back every Tuesday for a new segment.
This is not financial advice. Please consult a professional advisor.
Copyright © 2008 Achievement Catalyst, LLC