A New Year's Resolution: An Annual Portfolio Performance Review

Tuesday, 11 January 2011 Posted in SpringReef Insights

As the holiday season draws to a close and a new year commences, many of us look back on the past year and take stock of our lives, noting the areas in which we've excelled and those in which we may have fallen short. Undoubtedly, this is the source of many New Year's resolutions.

The state of one's finances must not be excluded from this year-end assessment.

An annual portfolio performance review with your financial advisor is a critical milestone in the investor-advisor relationship and essential to your financial well-being. While a review is probably as fun and exciting as your annual medical physical, it's certainly as essential.

Periodic reviews allow you to candidly assess the health of your finances, touch base with your advisor regarding changes in personal circumstances and objectives, and make adjustments to your short and long-term goals. Without these meetings, you may increase your level of risk and limit your future portfolio performance.

Great financial advisors - those who meet the highest standards of ethics and quality - welcome the opportunity to meet with clients and review performance. They generally use the year-end review to confront issues, solve problems, enhance plans and deepen relationships - both professional and personal. Less talented advisors use the reviews, if they use them at all, to draw attention towards accomplishments, gloss over issues and protect their position as your financial advisor.

If your advisor has not suggested a review in recent memory or cannot seem to find the time to meet, your solution is pretty simple - it's time to get a new advisor.

For those investors who do participate in performance reviews, now is the time to make sure your advisor has penciled you in to evaluate 2010 investment performance and to make a roadmap for the coming year. To ensure you get the maximum value for your time, let your advisor know ahead of time the topics you'd most like to cover. We suggest your advisor:

  1. Present you with your exact 2010 portfolio return
  2. Discuss the relative risk you assumed to achieve your return
  3. Evaluate your portfolio on a granular, asset-class level
  4. Review significant unrealized losses and provide a forward strategy for each
  5. Evaluate the potential impact of changes to your personal or financial situation
  6. Propose any appropriate changes to your asset allocation
  7. Discuss candidly your fees/commissions relative to industry norms
  8. Finalize your roadmap for 2011

You'll probably want to do some prep-work prior to your meeting. Look over your statements for investment activity or positions you want to discuss. Identify significant changes in your personal or financial situation that you feel comfortable discussing with your advisor - keep in mind, the more your advisor knows, the better positioned he or she is to help you. If you have multiple advisors, disclose any worrisome investments you have with them - this is a great time to get a second opinion.

Finally, it's always helpful to obtain a written summary of the meeting. An email or letter confirming important decisions and commitments for the future may prove extremely valuable down the road, limiting chances of misunderstandings and providing a way to periodically check your progress during the course of the year.

As is always the case for our clients and subscribers, should you have any questions regarding the year-end review process or have a concern regarding an investment matter from your assessment, please contact us at (240) 364-5770 or e-mail us at This email address is being protected from spambots. You need JavaScript enabled to view it.">This email address is being protected from spambots. You need JavaScript enabled to view it.. We're always happy to help.

Please feel free to contact us if you have any questions about our Insights pieces.

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