Let’s assume we have addressed all of their security needs in terms of various coverages for liability, property protection, health insurance, long-term care, and life insurance. The key then is in developing a reliable income stream for retirement, growing their assets if their resources permit, and making sure their assets are not exposed to excessive risk.
I use several different money managers for different client needs. I think that active management brings diversity to portfolios and provides the opportunity to manage well in down markets. Most managers can perform pretty decently in bull markets; the real distinguishing factor I look for is how they have handled periods of market dislocation.
But there are many types of money managers I feel can be appropriate for our clients. So we need to use several different criteria as a firm to evaluate managers. It starts at our broker-dealer and whether a manager meets their vetting guidelines and is on the approved list. Number two, it just has to be a good fit from an executional standpoint, and I am very interested in the level of back-office support. The availability of sophisticated assistance in portfolio construction, combined with high service standards, is critically important.
The third factor is our assessment of the investment philosophies, systems, and models that a manager might use. And importantly, what is their structure around money management? One model might be strictly platform-based, where the money-management piece is outsourced to multiple managers. Another model could manage money inside, on a self-contained platform. This model would have its own managers and proprietary strategies.
There are also differences in the use of various asset classes, whether they use an index approach, the availability of leveraged strategies, and if they have the capability to use inverse positions. It is our responsibility as a client’s financial quarterback to make sure we are presenting the appropriate money-management options that best fit that client’s needs.
Disclosure: Registered representative of and securities offered through OneAmerica Securities Inc. Member FINRA, SIPC, a Registered Investment Advisor. 1433 NW 150th St., Edmond, OK 73013, (405) 348-8484. Insurance Representative of American United Life Insurance Company (AUL) and other insurance companies. Southwest Financial Advisory Group is not an affiliate of OneAmerica Securities or AUL and is not a broker-dealer or a Registered Investment Advisor.
This article was previously published in Proactive Advisor Magazine on January 14, 2016, in Volume 9, Issue 2.
Photography by David McNeese