Before placing your holdings of securities under the supervision of a Portfolio Manager, it is a good idea to review the nature of such a relationship. If you choose not to use professional client advisor management, you should recognize that you are the portfolio manager of your investments. The items in this list are the responsibilities of the Portfolio Manager:
RESPONSIBILITY OF PORTFOLIO MANAGERS
Understand the client’s needs and listen to what the client states, relative to what the client means (semantics)
Define realistic investment objectives that can meet the client’s needs - based on agreed upon definitions
Establish the right mixture of assets
Develop well-reasoned, sensible investment policies designed to achieve the client’s realistic and specified long term investment objectives
Revise the portfolio to respond to changes in the marketplace and in the securities within the portfolio
Coordinate tax and cash flow planning, estate planning, and risk/reward planning
Revise the portfolio in response to changes in the client’s objectives or financial circumstances
ESTABLISH INVESTMENT ATTRIBUTES AND UNDERSTAND ASSET PERFORMANCE IN VARYING ECONOMIC SCENARIOS
Safety of principal
Safety of income
Safety of purchasing power
Appreciation potential
Consider the risk of portfolio depreciation
Tax avoidance or deferral
AVOID INVESTMENT MIS-MATCH BY ESTABLISHING INVESTMENT POLICIES AND PROCEDURES
Evaluating an investment manager’s policies:
Market timer
Has special knowledge or expertise
Plays specific stocks or groups
Undertakes variable strategies
Has an insightful long term philosophy
Real target: what is right for client, not “beat the market”
Client should define his or her emotional reactions to the inevitable short term volatility of the financial markets
Client should define his or her need for long term policies to achieve long term objectives or short term policies to cope with short term needs
How to take advantage of the strongest lever an investor can have - time
Determine timeframe against which an investor should measure the worth of his investment policy, and what rate of return should be expected
Do not get caught up in the bullishness or bearishness of the moment, as the basis for making decisions
WHAT TO LOOK FOR IN AN INVESTMENT
Manager capability and experience
Cost sharing arrangement
Structure of investment and what flexibility is offered
Substance, not pretty pictures, promises or endorsements
How the investment will react to economic changes over time
How it will be valued in the future
MAKE A SPECIFIC MODEL AND IMPLEMENT IT TO THE CLIENT’S SATISFACTION BASED ON ALL THE ABOVE
MONITOR THE EFFECTS OF ONGOING RESULTS, TO THE CLIENT’S GOALS
Establish an office procedure for inputting data
Understand the reports
Coordinate the portfolio with other software to project tax, cash flow, and financial statement growth
Compare performance to original expectations
Compare performance to standard indices
Evaluate the portfolio in light of client’s current needs and objectives
Evaluate investments in light of the future outlook for the economy and the investment
CHANGES, REPOSITIONING, AND REINFORCING RETURN
Maintain investment flexibility
Evaluate client’s needs and objectives periodically
