As recent market events continue to demonstrate, the investment world has fundamentally changed. In this new era, high net worth investors have many questions and concerns about how to best preserve and grow their portfolios, yet may feel less confident and more skeptical than ever about taking any action.
At BNY Mellon Wealth Management, our confidential and proven process for financial risk analysis leverages our expertise and resources to identify how plans might be better positioned to address the challenges and opportunities that lie ahead.
In these reviews, our professionals have consistently found troubling issues, including hidden stock concentrations, unnecessary costs, portfolio risks, tax inefficiencies, and strategies that are not properly aligned to achieve the investor’s goals. By identifying these issues, we have helped investors get back on track, whether or not we were ultimately retained as wealth manager.
Lack of an overall portfolio picture – Our analysis findings often provide an investor’s first view of their total portfolio. By seeing the entire picture, there is a better chance of surfacing risks and leveraging opportunities.
Asset classes gone missing – We often find that entire asset classes are missing from an investor’s portfolio. Because asset classes and global markets will continue to behave unpredictably, it is more important than ever to diversify across these securities.
Following, or fleeing, a trend too late – One of the first tenets of successful investing is to have a long-term strategy and the discipline to stick with it.
Sector bets happening without investor’s knowledge – With inadequate rebalancing and lack of coordination across diverse strategies and accounts, it’s easy for a portfolio to suffer from overexposure in specific asset classes, sectors or holdings.
Not Enough — or too many — holdings – For many investors, diversification ends with asset classes, neglecting the benefits of sub-asset class, industry and sector diversification opportunities.
Unnecessary or unknown portfolio risk – Whether an incorrect balance between risk and reward, latent duplications in asset classes, sectors or holdings or incorrectly estimated future liabilities (taxes, healthcare, retirement, etc.), many investor portfolios carry more risk than the investor is aware of, or may need to take, to produce their desired results.
Little to no tax management – Active tax management in this environment of constant change is critical, but we often see portfolios where same-stock holdings are splintered across funds and accounts, limiting tax management.
Hidden Costs – Fund charges, manager overlays, embedded transaction charges and undisclosed lock ups unfortunately may not be clearly visible to an investor.
The truth is most investors’ portfolios did not handle the past years’ market volatility well and have not been changed to help navigate the challenges ahead
David Leger is senior sales director of BNY Mellon Wealth Management in Boston.