How Our Wealth Managers Helped One New Client

NWIC_logo 4Here at Northwest, each new client brings their own unique financial situation. We wanted to share one in particular, and demonstrate how we are helping this client simplify his financial life, reduce risk, and reduce costs: Let’s call this client Joe.  You may find some or all of these issues familiar. If so, we encourage you to contact one of our Wealth Managers for a review of your portfolio.

When Joe came to us he had four IRA’s, managed by two different managers, who invested primarily in high cost mutual funds.  It’s one thing for a do-it-yourself investor to utilize active mutual funds, but we take issue with a financial adviser who charges fees to allocate (and trade) your assets in high-cost mutual funds. The other leverage Joe gives up with multiple IRA’s at different managers is the ability to reach break points with an adviser by combining IRA’s. The chart displays Joe’s current allocation.  The weighted average fee for the investments in his account was 0.77%.  In addition to the internal mutual fund fees, Joe has been paying around 2.00% to his investment advisers according to the current allocationstandard fee schedule provided by his advisers’ SEC filings. By properly reallocating Joe’s portfolios towards individual stocks and bonds (as well as some low-cost Exchange Traded Funds) we should be able to cut Joe’s fees by more than half.  Moral?  It pays to shop around.

After reviewing Joe’s financial situation, a face-to-face meeting, and a risk tolerance survey, we think Joe’s overall allocation is inappropriate and that his tolerance is somewhere between conservative and moderate. Joe’s current portfolio allocation (see chart) is too risky for his situation as made evident by the non-diversified real estate portion (one REIT holding) and sizeable investment in junk (high yield) bonds.  Moral? Monitor your allocation and risk level even if your portfolio is being managed by an investment adviser.

In the end, we will combine Joe’s accounts where possible, reduce his fees, and make an allocation more appropriate for his situation.


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