“Would you benefit from an independent assessment?”  

Whether you have concerns or not, an independent assessment should never be looked upon as a negative step.  Independent assessments are open to any one of the following 3 groups of investors.

A decision as to whether you should ask for an assessment of your current wealth manager or wealth management proposals should be your decision and your decision alone.  

There are a number of warning signs that would help those in the first group to reassess whether they need an independent structural assessment and that may confirm to those in the second group that a professional assessment is warranted.

·         If your advisor does not provide a performance analysis of your investments. This does not mean letting you know how much you have gained or lost, but how much you have made relative to a comparable alternative.     

·         If your portfolio and wealth management advice is based only on the information you provided in the standard KYC (know your client form).  The KYC is often insufficient to properly construct, plan and manage a portfolio to meet financial needs over time.

·         If you received no written communication at the start of your relationship explaining why and how the portfolio was structured to meet your financial needs.

·         If you receive no ongoing communication from your manager regarding how the portfolio continues to meet your financial needs and how it has managed the risks to the ability of your assets to meet your needs.

·         If you have a number of different advisors each recommending products, transactions but not working together.

The reason is simple, if you do not know what is happening and why it is happening you will not know if your money is being managed properly.   

There are of course numerous secondary reasons for needing or considering an independent assessment and these are numerous. 

·         An advisor remunerated by commission and not by fees or a percentage of assets under management.   Much of the advice that individuals need and, much of the asset allocation of a portfolio is unlikely to result in a transaction.  Sellers of products and transactions may solve the problem through an unnecessary purchase.     

·         An advisor that sells you products as opposed to well structured portfolios.  A proper portfolio with cash, fixed interest securities and equities should be able to meet the vast majority of your financial needs.  Products often represent expensive and awkward solutions to relatively simple problems.

·         A client whose financial security has been adversely affected by market movements.   This does not mean clients that have poorly performing assets in their portfolio (all portfolios will have some assets that have not performed as well as others).  This means an individual that has had to cut back on what they had planned to spend from their investments because of adverse short term movements in markets and investments.

One of the biggest reasons why an individual may need an independent structural assessment of their wealth and asset management arrangements is that there is limited expertise in integrating the management of your assets to meet your financial needs over time.

You may have excellent portfolio managers (well able to select stocks and manage a portfolio of investments) and you may have professional financial planners.  But if one or the other is not taking responsibility for managing the actual relationship between financial needs and your assets your overall risk may be higher and your overall return may well be lower than it should be.

An independent structural assessment would assess how effectively the advisor is managing these relationships and provide guidance to both the individual and the advisor if necessary.

Further information on this can be found on the web page dealing with total asset, life cycle wealth management and the portfolio problem.

You will need to pay for an independent structural assessment of your wealth management arrangements.   If your manager is doing a perfect job, this will represent an additional cost to you, albeit a limited one since a professional consultant should be able to pick this up before any real work is done.

TAMRIS itself provides an initial assessment or opinion as to whether you need an independent structural analysis and/or other services.   If your advisor is doing a good job you will find out at this early stage, perhaps even earlier at the initial consultation.

Because an independent consultant is not managing a full time relationship its costs are smaller.  When compared to the costs of a transaction, annual management fees or commissions, or worse the long term effects of inappropriate advice, the cost if an independent assessment is of value to the individual.

The biggest problem individuals face is appreciating the true value of an assessment of existing managers or help with prospective managers. 

If you are unfortunate to have to resort to legal proceedings in the event of bad advice it is probably too late for a consultancy to be of practical benefit, with the exception of its expert opinion in the courts.  Additionally, the provision of an expert opinion in a legal case is often much more expensive than a structural assessment before the fact.

An independent structural assessment is not just a communication to the client. It is also a communication to the advisor.

Many individuals understandably want to avoid the detail of investment and portfolio management.  A structural assessment cannot avoid the detail, primarily because it is the detail comprising the structure or the lack of detail (investment and portfolio construction disciplines, systems, business processes, resources) that underlies the problem. 

Only by addressing the detail can an understanding of or, a solution to  the problem be achieved.

While a structural report should provide a summary as to the main weaknesses, detail is necessary to provide substantiated reasoning.  Otherwise, how will the advisor be able to respond and work towards a solution?

A report with little or no detail, a report that does not explain its rationale and that does not provide a structural assessment of a weakness, will be of little use to either the client or the advisor. 

If a client is looking for a simple assessment of what they need to do then they should be seeking a second opinion form an advisor.  They should be looking for a primary financial relationship and not an independent structural assessment. 

Simple assessments of what to do are effectively unsubstantiated recommendations and imply a primary client/advisor relationship where the provider of the assessment becomes responsible for the wealth and the asset management decision associated with the assessment. 

“The advisor is under performing, is charging you too much, does not know what they are doing and the portfolio is not properly diversified and is exposing you to too much risk.”   This is a simple assessment.       

However, when seeking an independent structural opinion the client has a decision to make.     Do they attempt to clearly understand the main issues in which case they will exercise control over the decision making process with the help of the independent consultant or do they defer to their advisor and their independent consultant to iterate towards a solution. 

Whatever the decision, the independent structural assessment brings greater accountability to the client and his or her primary advisor relationship and this, perhaps, is of the greatest value to the individual.