The Advisor Advantage: Does Your Advisor Bring These Benefits to Your Portfolio?

“Do I really need help—or can I handle wealth management on my own? What does an investment advisor do for their fee?” These are common questions that physicians ask. These questions are fundamental—as the decision of who you trust to manage your wealth will be one of the most important financial decisions you will ever make. Recent periods of volatility and economic uncertainty have affirmed the importance of this decision for many investors.

In our newest book Wealth Planning for the Modern Physician, we explore the positives and negatives of doing it yourself, when it comes to investing and wealth management. In this article, we address the value you should be getting if you decide to use an outside advisor. We focus on seven benefits—as they all make a quantifiable and qualitative impact on one’s ability to weather challenging times and achieve long-term financial success.

1. A Portfolio Designed to Match Your Risk Tolerance

Most physician investors have provided their advisors with an idea of their tolerance for risk in their portfolios. With age and a shortening retirement horizon, changes to career and family can dramatically affect an investor’s risk tolerance. Does your advisor periodically calculate the risk score of your current portfolio and compare it to your personal risk score? Nothing can take all the risk out of investing, but a thorough advisor will stress-test your portfolio in a variety of market scenarios and optimize asset allocation to match your risk tolerance, even if it has changed over time.

2. Tax-Savvy Portfolio Management

Many busy physicians focus primarily on portfolio performance, while overlooking the impact of taxes on their investment returns. The cost of federal and state income and capital gains taxes on a portfolio depends on many factors—the underlying investments, asset turnover, the structure in which the investments are held, the investor’s other income and state of residence.

A tax-savvy advisor understands the effects of current tax law on the assets in your portfolio and works to maximize your net after-tax return. Your advisor should implement tax harvesting strategies where applicable, coordinate the tax consequences of rebalancing, and allocate investments to optimize the tax diversification of your portfolio. This can be especially critical during market downturns, as the prospect of selling assets and incurring taxes on gains is especially painful when values have also dropped from previous highs.

3. Investment Allocation That Evolves with Your Goals

With thorough data on a wide range of investment options, your advisor can appropriately allocate funds for a custom-designed portfolio that evolves with you and your financial goals. Because asset values change, your advisor should regularly assess your portfolio to identify a drift from target allocations and take steps to rebalance as required.

4. Private Investment Opportunities

To offset the risk associated with market volatility, most advisors will recommend a portfolio that is diversified across a variety of asset classes. Traditional bonds are often used as a risk mitigation strategy for many investors; however, high-net-worth physicians may turn to their advisors seeking investment alternatives with returns that do not correlate with stocks or bonds. An advisor who is well-versed in alternative investments can offer investors a broad menu of options, including REITs, Commodities, Managed Futures and Private Equity, and review the risk and fees associated with each option. Some advisors can also provide access to vetted private non-traded alternatives to help investors maximize returns while reducing overall portfolio risk.

5. Transparent and Easy-to-Understand Reports

If reports from your investment advisor don’t paint a clear picture of your portfolio’s performance, then it becomes difficult to work with your advisor to make decisions regarding your financial future. Your reports should track net contributions and withdrawals, present a customized portfolio summary, and transparently show the performance of your portfolio, net of all fees.

6. A Comprehensive Financial Plan

In addition to providing investment recommendations, your advisor should work with you to develop a comprehensive financial plan that keeps your big picture in focus. A cash flow analysis, personal balance sheet, income projections, and goals for education and retirement are data that your advisor should gather to generate a dynamic plan that becomes your roadmap to guide the financial decisions you make for you and your family. As part of their wealth management services, your advisor should periodically review your financial plan and update it to incorporate any changes to your income, family situation, goals, and time horizon.

7. Total Wealth Management—Not Simply Investments

Does your advisor’s firm work only with investments, or is your advisor backed by a solid wealth management team? A multidisciplinary wealth management firm includes specialists in areas of expertise affecting your overall financial well-being. For example, attorneys can analyze each asset and make recommendations to improve protection and reduce the asset’s level of exposure to lawsuits and other risks. CPAs can review tax returns and suggest ways to reduce or defer tax liability, and insurance experts can review existing policies and present options that could reduce premiums and/or improve coverage. An advisor who can offer these areas of expertise within his or her firm is well-equipped to become your financial quarterback, a resource to handle your questions concerning any financial matter.

Achieve Your Long-Term Goals

The best advisors deliver significant benefits that can add both quantifiable and qualitative value to their clients’ portfolios. This advisor advantage can help you achieve your long-term financial goals by aligning your portfolio with your personal risk tolerance, focusing on your net after-tax return, and developing a strategic wealth management plan that evolves with you and your family.

To receive free print copies or ebook downloads of Wealth Planning for the Modern Physician or Wealth Management Made Simple, text AESMAG to 844-418-1212, or visit www.ojmbookstore.com and enter promotional code AESMAG at checkout.

Disclosure: OJM Group, LLC. (“OJM”) is an SEC registered investment adviser with its principal place of business in the State of Ohio. SEC registration does not constitute an endorsement of OJM by the SEC nor does it indicate that OJM has attained a particular level of skill or ability.  OJM and its representatives are in compliance with the current notice filing and registration requirements imposed upon registered investment advisers by those states in which OJM maintains clients. OJM may only transact business in those states in which it is registered or qualifies for an exemption or exclusion from registration requirements. For information pertaining to the registration status of OJM, please contact OJM or refer to the Investment Adviser Public Disclosure web site www.adviserinfo.sec.gov.

For additional information about OJM, including fees and services, send for our disclosure brochure as set forth on Form ADV using the contact information herein. Please read the disclosure statement carefully before you invest or send money.

This article contains general information that is not suitable for everyone. The information contained herein should not be construed as personalized legal or tax advice, or as a recommendation of any particular security or strategy. There is no guarantee that the views and opinions expressed in this article will be appropriate for your particular circumstances. Tax law changes frequently, accordingly information presented herein is subject to change without notice. You should seek professional tax and legal advice before implementing any strategy discussed herein.