Reader Q+A: Investment Management

Reader Jason is looking to have his portfolio managed and emailed me as follows:

I am looking for someone to help manage my qualified, non-qualified and 401K accounts. I have spoken with a financial planner who wants 1.15% of account value annually for assets under management. I am concerned about how much we will be paying long term for this.

I don’t have any experience and am looking for someone to help manage these accounts. Is this the right direction to go in or do you have any other recommendations?

I sure do have some thoughts and comments.

These days, I believe most investors considering such a move know that it is important to separate two important entities. That is the person managing your money should never be the same as the one holding your assets in trust and issuing your statements. The reason is clear; it is to avoid fraud a la “Bernie Madoff.”

That’s why all reputable advisors are affiliated with well known custodians, who handle the appropriate duties such as issuing trade confirmations and monthly and yearly statements. In such a set up, the advisor has merely a Limited Power of Attorney, but never access to your monies; just the way it should be.

Jason, you are asking the wrong questions. You need to familiarize yourself first with the planner’s investment approach and make sure that you are comfortable with it.

Of course, from my vantage point, the most important question you need to ask is “what is your exit strategy?” That is if you do not wish to see your portfolio fall off the cliff during bear markets.

Of course, if you do not mind that, and you think that markets always will come back, then that is your prerogative and you should go with it. However, I believe that as long as we are living in a Fed sponsored boom and bust economy, stepping aside with your portfolio every so often is not only smart but emotionally easier to handle.

What it comes down to in the end is a decision on which investment approach suits your risk profile best. Will it be following trends, such as I advocate, or will it be buy-and-hold, which is promoted by over 95% of those offering investment advice?

While my position on the topic is clear, it does not really matter in this case. What matters is how you feel about it; engage in some soul searching, talk to your better half or some friends who have gone this route, do some interviews and comparisons, and I am sure you will be able to align yourself with someone best suited for your needs.