VOLUME 2, ISSUE 3: Keep Your Practice's Data Secure

Your Money

The Advisor Advantage

Seven benefits your financial advisor should bring to your portfolio.

Bob Peelman, CFP; and David B. Mandell, JD, MBA

Do I really need help, or can I handle wealth management on my own? What does an investment advisor do for the fee I pay? These are common questions that physicians often ask. We believe these questions are crucial, as the decision of whom you trust to manage your wealth will be one of the most important financial decisions you will ever make.

In this article, we address the value you should be getting if you decide to use an outside financial advisor. We focus on seven potential benefits of receiving sound advice, all of which can have quantifiable and qualitative consequences on your long-term financial success.

THE SEVEN BENEFITS OF A GOOD Advisor

1. A Portfolio That Evolves With You

Does your advisor research funds to identify the best options in each asset category? Only with thorough data on a wide range of investment options can your advisor 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 any drift from target allocations and take steps to rebalance as required.

2. A Portfolio Designed to Match Your Risk Tolerance

Most physician investors initially provide their advisors with an idea of their tolerance for risk in their portfolios. Age, a shortening retirement horizon, and 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 with 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 as it changes over time.

3. Portfolio Management With an Eye on Taxes

Many busy ophthalmologists focus primarily on portfolio performance, 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, including the underlying investments, asset turnover, the structure in which the investments are held, the investor’s other income, and state of residence.

The 10-year recovery of the US stock market has exacerbated this impact for investors in the top tax bracket. 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 when applicable, coordinate the tax consequences of rebalancing, and allocate investments to optimize the tax diversification of your portfolio.

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 an investment risk mitigation strategy; however, high-net-worth physicians, including ophthalmologists, may seek 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 real estate investment trusts, commodities, managed futures, and private equity, and review the risks and fees associated with each option. Some advisors can also provide access to vetted private nontraded alternatives to help investors maximize returns while reducing overall portfolio risk.

5. A Comprehensive Financial Plan

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 can be used to generate a dynamic plan, a road map to guide the financial decisions you make for you and your family. As part of your advisor’s wealth management services, he or she should periodically review your financial plan and update it to incorporate any changes to your income, family situation, goals, and time horizon.

6. A Clear Understanding of How You Are Doing

If reports from your investment advisor don’t paint a clear picture of your portfolio’s performance, it is a problem. 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.

7. Total Wealth Management, Not Simply Investments

Does your advisor’s firm work only with investments, or is he or she 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 reduce the asset’s level of exposure to lawsuits and other risks, certified public accountants 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 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 questions concerning any financial matter.

THE ADVISOR ADVANTAGE

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.

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OJM Group, LLC, is an SEC-registered investment adviser with its principal place of business in 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. 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.