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:
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.