subject: Selecting The Right Broker To Manage Your Money [print this page] Most of you at some point or another have probably wanted nothing more than to storm into your brokers office and strangle him or her for the bad decisions made to your portfolio. It would be naive of me to think that my own clients' have never had these thoughts, however I am pleased to say that no one's attempted to strangle me yet. The point is that no matter how good your financial broker is, losses to your portfolio are inevitable. The markets go up as well as down and unless you have specifically instructed your broker to allocate 100% of your portfolio into guaranteed investments with zero risk, you're bound to lose money at some point.
The good news however is that you can take control of the situation at anytime throughout the process because it's YOUR money and you have a right to be as pro-active in the portfolio management process as possible. Your broker may be managing your money, but there will be times when you are going to have to manage your broker. If you feel that you've been let down by your financial broker then call him and tell him exactly how you feel about the situation. He will want to keep your business so if you let him know that you are not happy with the service provided, there's a very good chance that he will step up his game in order to keep it. Remember, you're the boss in this relationship and your broker works for you!
Let's take a step back for a minute and discuss how you can prevent yourself from entering into a bad relationship with your broker. Before making a decision on who you want managing your money, take the below points into consideration.
Select a broker based on how personal you want the relationship to be - If you need a phone call from your broker every couple of months with personalized updated reports on your financial situation then selecting a global conglomerate with hundreds of thousands of clients is probably not going to be the best fit for your needs. And as far as the banks are concerned, forget it! UBS private client division won't even talk to you unless you show up with $600,000. Now don't get me wrong. These companies are more than capable of producing computer generated reports that give you a snapshot of your current portfolio, but that's all you will get. If you want a close and personal relationship with your broker then you need to make sure he or she is capable of giving you that. Ask your broker how often you will be able to sit down with him to personally go through your portfolio. A good indication as to whether he can realistically give you the attention you need is by the number of clients he has as well as the support team he has servicing those clients. Have the broker walk you through his personal business model for managing client portfolios so you understand exactly what you're getting yourself into.
Go with the most qualified broker you can find - Sometimes being the biggest isn't always the best. Some of the most successful financial firms in the world only have a handful of brokers working for them, but their qualifications alone have put both the company and its clients' portfolios well into the green. Just like any organization would select the best employees they can possibly find to work for them, you should do the same when selecting a broker to manage your money. Top performers produce top results!
Make sure your broker is pro-active, not reactive! - Select a broker that will commit to switching you in and out of the markets accordingly without needing your permission every single time. This way there is no excuse for him or her to not do so (i.e "you were on holiday", "couldn't get a hold of you", etc...). If you find that you are constantly chasing your broker to switch your portfolio inline with major economic situations that affect market movement, it's probably time to switch firms.
Ask for historical performance figures The past is definitely not an indication of how your portfolio will perform in the future, however history does tend to repeat itself, and if your broker can't show you stable returns on the portfolio he is recommending, then you might want to consider working with someone else. Even if you ask him to run an x-ray analysis to show you what the past performance of the portfolio would have been, it's better than him showing you nothing at all.
Don't focus on the charges, focus on the service Let's be honest, you pay for what you get. How hard do you think your broker is going to work for you if he's not making that much money for managing your portfolio. After all if you want 10% per year and your broker shows you returns of 10% per year or more then does it really matter how much you are getting charged on top of that. Rather than getting too caught up in the charges, you should be focusing on how the broker is going to manage your portfolio in line with your risk profile. At the end of the day it doesn't matter how competitive the charges are, if your portfolio doesn't perform then the charging structure will be irrelevant.
Make your broker work for it The level of commitment your broker shows you prior to investing with him is a good indication that he will continue to work to keep your business long after you've opened the account. Test how far he will go for your business, challenge him, and make sure he proves to you that he's the man for the job.
Now that you know how to select the right broker to manage your money, make sure you are allowed the option to have as much or little involvement as possible in the management of your portfolio. Transparency is key and as long as you know exactly where your portfolio is headed at all times, you will be able to take control of the situation if and when your portfolio takes a sudden turn for the worse. If you have a weak appetite for risk, make sure your portfolio is made up primarily of money market funds, bonds, guaranteed income funds and cash. If you see anything out of the norm of low risk or you feel that something doesn't look right, contact your broker immediately and ask for an explanation. At the same time, if you've instructed him or her to go for 12% + growth per year, your portfolio should include stocks, mutual funds, alternatives and possibly futures and options. The point is pay attention to the trades your broker is executing on your behalf and if something doesn't look right then tackle the situation right away, NOT after you've lost money. By then it's too late.
The moral of the story here? Get more involved and manage the situation! You have the right to be as pro-active as you want with how your portfolio is being managed. Don't just expect your broker to call you once a month with an update on how your money is being managed. Although he might have every intention of maintaining a solid relationship with you, there are times where personally contacting every one of his clients is going to be impossible. If you haven't heard from him in over a few months and are nervous about the way things are going, then pay him a visit. Listen to what he has to say and if you feel good about the situation then excellent! However, if you feel that your portfolio has been neglected and are still unsatisfied with the way the relationship has turned out then switch brokers. Your brokers job is to make you money and if that's not happening it's time to take your business elsewhere.
Selecting The Right Broker To Manage Your Money
By: Matthew Clark
welcome to Insurances.net (https://www.insurances.net)
