Advisor Rankings - treat with Caution
Barron's Magazine regularly publishes a list of
Financial Advisors'. While this list covers only US-based advisors it
creates more questions than it answers. First of all it should be no surprise
that there is more than a hint of self-promotion as advisors apply to have
their performance reviewed by the magazine. While we value Barron's highly and
enjoy reading it for more than 45 years (We hope our age is not frightening
readers away) the editors are faced with a major problem when tackling the
question of actual investment performance - not performance as measured by
assets under management (or advice). The latter measure is used by Barron's as
a proxy for good performance - more assets should normally be a sign that the
advisor is doing a good job. But there are limitations to this imputed
correlation and investors would be well advised to have a look behind the
glitz and glamour of a good marketing presentation and have a close - and
impartial - look at the performance, risk and fee levels associated with any
investment advisor they entrust some part of their investment funds to. On a
closing note we can but admire the superhuman skills of some of the advisors
listed as they seem to be able to handle 1,000 and more accounts. In that
respect they really deserve a 'top' rating (Honi soit qui mal y pense,
as the Queen would say).
really want to invest in
When being offered any financial product investors should always make sure that they really understand them
and are not swayed by the sales pitch they get from a financial adviser. While
the inherent risks in any product should be the main consideration there is
also a need to have a good look at any fees associated with the product.
Model Portfolios - not perfect but better than
model portfolios by financial advisers may not be the best solution for
all investors they often are a better choice than alternative solutions that
are tailored to fit the particular needs of an investor. Asking about the past
performance of the model portfolio allows to compare the achievements of each
investment firm. After an investment has been made the investor can easily
compare the performance of the portfolio and benchmark it against
alternatives. If investors demand that their financial advisor contructs a
portfolio that is subject to many constraints (risk tolerance for example)
they will not be able to hold their advisor to account and properly measure
his investment performance.
How safe is your Money?
of major financial firms Lehman and MF Global have left a sour taste in the
mouth as supposedly segregated customer/client money was exposed to grave
risks or even lost. Banks may have
difficulty keeping track of a myriad of transactions that routinely cross
their busy desks but investors should be aware that securities they think they
own are nothing else but electronic digits in some distant computer.
What Returns can you expect from Stock Investments?
argue about the return that investors can expect to earn from investments in
common stock. Research studies cover a period of nearly 200 years but even in
the markets that have been subjected to the most careful analysis - the USA
and the UK - the results are
hotly disputed. But whatever the numbers may be - anything between 5 and
10 percent before inflation may be plausible - investing in shares is fraught
with high risks for the ordinary mortals. The stock market is to a large
extent a machine to enrich the selling insiders - current IPO plans are a good
example. The German Banker Fuerstenberg said nearly 100 years ago -
shareholders are stupid and insolent, stupid because they buy the shares in
the first place and insolent because they even expect a dividend. That said,
there are always great opportunities to profit from mistakes that 'Mr Market'
makes, but to profit from them you have to be 100pct dedicated to the stock
market game in order not to be fleeced.
WHY YOU MAY WANT TO TALK
yourself a few questions to find if Private Banking Advisory may be able to
help you managing your financial affairs:
Do you know what is in your Portfolio?
Do you understand all the risks that are in your Portfolio?
Do you have certainty that your Portfolio is managed with as little cost as
Do you think that your Portfolio was giving you the best possible performance?
If you cannot answer with
a clear YES to all these questions you may want to talk to us!
FUND MANAGER MONITORING
We monitor fund managers with respect to risk management,
performance reporting and direct and indirect fees they charge clients for
We assist our clients in the monitoring of the investment performance
achieved by their asset managers. Help is provided in the interpretation of
reports provided by the managers as well as in the setting of realistic
Performance cannot be properly interpreted without due regard to the risks
incurred during the investment process and we help our clients to
appreciate the risks that were taken in order to achieve the
reported investment returns.
Private Investors often are not familiar with all aspects of the
investment management industry or do not have the time to make
themselves familiar with all the disclosed and hidden fees that are
charged to an investment portfolio.
professionals who help run your company must be first class. The
professionals who run your private wealth for you must be even
classier." (Felix Dennis, How to get rich)