Am I getting the correct financial advice? Is my financial professional doing everything they should for the fee I am paying?” These are common questions that physician investors ask at any moment. Today, during the COVID-19 issue and the financial uncertainty that accompanies it, we believe these considerations are even more crucial. In fact, choosing someone to trust to manage your wealth will be one of the most significant financial decisions you will ever make, and these periods of uncertainty and volatility typically validate this.

Key Takeaways

Most investors have supplied their advisors with an indication of their risk tolerance in their portfolios

Most financial experts propose a diverse portfolio in order to mitigate the risk of market volatility.

1. A portfolio that evolves with you

Does your adviser research funds to uncover the greatest selections in each asset category? Only with complete data on a wide range of investment possibilities can your adviser effectively deploy funds for a custom-designed portfolio that evolves with you and your financial goals.

Because asset values change, your adviser should frequently examine your portfolio to identify a drift from target allocations and take steps to rebalance as appropriate.

2. A portfolio structured to match your genuine risk tolerance

Most investors have supplied their advisors with an indication of their risk tolerance in their portfolios. Often, a “risk profile” is established once at the commencement of the professional engagement.

It is crucial that one’s adviser periodically compute the risk score not only of the present portfolio but also of the clients themselves. Nothing can take all the danger out of investing, but a comprehensive advisor will stress-test your portfolio in a number of market situations and optimize asset allocation to fit your risk tolerance, even if it has changed over time.

4. Possibilities for private investment

Most financial experts propose a diverse portfolio in order to mitigate the risk of market volatility. High-net-worth investors may turn to their financial advisors in search of investment options that do not directly connect with the performance of the stock or bond markets.

There is a wide range of alternative investments that an advisor with expertise in these areas can introduce to customers. These assets include REITs (real estate investment trusts), commodities (managed futures), and private equity (private equity funds). Non-traded alternatives can also be offered by some financial advisors to help investors optimize returns while minimizing total portfolio risk.

5. Having a complete financial strategy as a perk

It’s important to have a thorough financial strategy in place with your advisor in addition to investment suggestions. In order to create a dynamic financial strategy for you and your family, your advisor should gather information such as a cash flow analysis, personal balance sheet, income predictions, and educational and retirement aspirations.

Your adviser should examine and update your financial plan on a regular basis to reflect any changes in your income, family status, goals, and time horizon as part of their wealth management services. As a result of COVID-19 and its influence on investment values and 2020 income, many physicians are doing financial model evaluations.

6. You’ll have a better idea of how you’re doing

It’s a red flag if your investment advisor’s reports don’t give you a clear picture of how your portfolio is doing. Net contributions and withdrawals, a tailored portfolio summary, and the performance of your portfolio, net of any fees, should all be included in your reports.

Tax-aware portfolio management is a key benefit

Many investors miss the influence of taxes on their investment returns because they focus solely on the performance of their portfolios. Investments, asset turnover, the structure in which they are kept and the investor’s other income and place of residence all have an impact on taxes paid on a portfolio’s returns.
When it comes to tax planning, a knowledgeable advisor knows how to take advantage of the current tax laws in order to optimize your net after-tax return. Rebalancing and allocating investments to maximize tax diversification should be coordinated by your advisor, and tax harvesting measures should be used when appropriate. Selling assets and paying taxes on gains can be especially difficult when prices have fallen dramatically from recent highs, which often occurs during market downturns.