One of the valuable aspects of working with an investment advisor is often overlooked and ignored by clients. It's basic and straightforward relative to everything we do, but it has just as much impact and importance as some of the complex decisions that we address.
You'd be surprised how often a client comes to the table with an assumed net worth in their mind and how often that number unintentionally excludes meaningful chunks of their wealth. They'll almost always call up after things have been moving with the news that they found a stock certificate in a shoe box or a CD statement hidden in the bottom of their file drawer. Even the most sophisticated investors can accumulate accounts and stocks in a seemingly random fashion.
OK, so what's the solution? An Investment Plan.
And that is...? It's a documented set of rules for investing your new deposits, taking withdrawals, building your initial allocation, rebalancing as the markets move, and harvesting tax losses. It's an important part of every client's initial phase with our firm (as it is with many advisors). And, it serves as the foundation for many decisions that come up throughout the life of our relationship together.
Let's look at some specifics:
So, when a client asks where we'll place a large deposit that they intend to make, the answer depends on where their allocation stands relative to their investment plan. Anything that is underweighted gets a boost from the new funds. Likewise, if a withdrawal comes up, we'll start with anything that is overweighted in comparison to its target percentage. Most importantly, the daily fluctuations of the markets fade into the background. Their only relevance is in how frequently we might need to rebalance the portfolio back within its thresholds.
This isn't a complete list of investment plan features, but a highlight of the basics. And all of the benefits are thanks to having spent time documenting the customized plan in the early stages. Future decisions are hopefully met with confidence. Anxiety is a frequently mentioned emotion when discussing life before an investment plan and also the easiest to eliminate thereafter.