Don’t be the Dunce!
Did you know there is a formal definition of wealth management that goes well beyond your portfolio?
By Taylor K. Ranker II, CEO, Questmont Virtual Family Office
I love it, my industry loves to call itself wealth managers, but did you know there is a formal definition of wealth management that goes well beyond your portfolio?
When applying this formula: Wealth Management = Investment Consulting + Advance Planning + Relationship Management, fewer than 8% of advisors qualify.
What is advanced planning? This entails wealth enhancement or, more succinctly, mitigating your taxes. It also involves wealth transfer, which means getting the wealth you’ve sacrificed so much to obtain, to those you love. Another key component is wealth protection as in unjust lawsuits, creditors or even the spouses of your kids.
The final component is charitable giving, let’s make sure we magnify your gifts to the causes you love the most. Relationship management is usually the least covered. When was the last time your financial advisor organized a meeting that included your CPA, lawyer and insurance advisor and they discussed nothing but your concerns? That should be happening on a regular basis. Have they reviewed your tax returns, your wills and trusts, your business exit plan and valuation or asset protection plan lately!
Let’s address the “table stakes,” or a core part of wealth management, which is investment consulting and management. The basis of this is something we refer to as Behavioral Investment Counseling. The biggest danger to your portfolio may very well be you; not inflation, politics, interest rate increases or the crisis du jour. According to research firm DALBAR, the U.S. stock market returned 13.6%, annually, from 2009-2019. The problem is the average American investor only received a 9.4% return, an astounding 4.2% annual shortage. Maybe they needed a better tough love counselor, as opposed to a better portfolio.
A custom portfolio, designed with your goals and resources in mind, is the first step. Making sure that your plan is stress-tested, to see how it will withstand these financial storms, is the second. The stress test will see how your plan stands up, in historically diverse times. It will test against the Great Depression, WWII, Stagflation, The Great Recession … it even creates scenarios that haven’t happened before (I jokingly call these the zombie apocalypse scenarios, but COVID made that seem too realistic to be funny). Once you know that your plan and portfolio have survived the stress test, then whatever the media is fearmongering is irrelevant to you.
Humans have a short-term memory loss issue with market volatility. It happens all the time, yet people seem surprised it is happening or worried that it will be “different this time.” Every year the S&P 500 has an average pullback of approximately -14%. Every year! The reason is irrelevant. Brexit, Gulf Coast Oil Spill, Ebola, elections, pandemics, wars … there is always a reason and it is always “different this time.” Except it never is. Companies keep producing and consumers keep shopping, we eventually find our way out and the market rebounds.
At Questmont, we are known for working with successful business owners taking on, and attacking, their problems as if they were our own. We believe you deserve to squeeze the maximum out of your business and your life. Ask yourself “are you the dunce?” Has your advisor stress-tested your plan, recently? Are they a true wealth manager applying a formula and a system? What are you getting for what you are paying? Don’t you think you deserve more?
As CEO of Questmont Virtual Family Office, Taylor K. Ranker II, enjoys putting his 30+ years of experience to use by helping clients discover their life’s dreams and ambitions, then consulting with them on how to make them happen. Reach Taylor at email@example.com.