[quote=Beagle]  Every client runs through it when they are signed up and we develop a risk analysis, develop goals, write up a plan of action and implement.  That's our job.  Selling someone 1,000 shares of IBM isn't going to cut it anymore. [/quote]

That sounds a great deal like financial planning to me. I don't know how you can say you do it for every client and then say you agree with skeedaddy.

[quote=skeedaddy]Mike: 

Since I cream the index consistently, and because its [S&P 500] components are headline makers, my clients feel comfortable participating in the space.

[/quote] <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

We have difference of opinion about what it takes to diversify a portfolio and what's an appropriate benchmark to measure relative performance. The S&P 500 is a small percentage of the equity market of the US, much less the entire world.

[quote=skeedaddy]Mike:

"I do continue to take issue with "financial planning" as a metric to target specific returns to meet future obligations as specified by a client. "[/quote]

[quote=skeedaddy]Mike: 

Since I cream the index consistently, and because its [S&P 500] components are headline makers, my clients feel comfortable participating in the space.

[/quote] <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

We have difference of opinion about what it takes to diversify a portfolio and what's an appropriate benchmark to measure relative performance. The S&P 500 is a small percentage of the equity market of the US, much less the entire world.

A plan doesn't target specific returns. What it does it determine the appropriate asset allocation that stands the best chance to achieve the goals (keeping with the client's tolerance for volatility). Over reasonable timeframes we can be fairly confident what the risk/reward profile of a give asset allocation is going to look like and a reasonable idea about what performance to expect.

You wouldn’t go off on vacation without a plan, why would a reasonable person not map out his financial future as well.

[quote=skeedaddy]Mike:

I do continue to take issue with "financial planning" as a metric to target
specific returns to meet future obligations as specified by a client. Since
no one can assure or predict portfolio results, I don't see how a canned
report can pre-position a client's assets to reach that objective. Even by
your own admission, often, an outside money managment firm with
billions under management fails to meet objectives, and must be
replaced.
[/quote]

Skee, as an earlier poster said, financial planning (properly done) is a PROCESS.  It doesn't end with whatever initial plan is designed. That process continues to evolve with each client as their situation and the investment/economic climate changes.  The asset allocation/investment portion of a plan will have a targeted overall return objective to meet the client's objective, taking into consideration their risk tolerance. 

I think of that targeted return as the client's "financial speed" (not a drug, but a rate of return).  For example, if a client's objective is to retire with "X" dollars of aftertax income in 20 years, and to do that (factoring in all new investable funds, etc. during the 20 years) they need to generate a total return of "Y" to grow their retirement funds; Y is the "speed" that needs to be achieved.  For some clients, Y may require a high degree of risk that they're not comfortable with.  So, they may have to do something like changing their objective (delay retirement, etc.) or reduce current expenses to increase investable dollars, and travel instead at a more comfortable "speed" of, say, 75% Y.  Other clients may currently be achieving returns of 2Y (well above the required "speed") and they're taking higher risk to do that.  If they're comfortable with that risk then they also may change their objectives -- a sooner retirement date, use investment assets to buy that retirement home at the beach now, make larger gifts to their children/grandchildren, etc.  Conversely, if they're not comfortable with that risk, then their investments can be repositioned to expose them to a much lower risk level, knowing that their objective can still be achieved and they'll sleep much better in the interim.

But, as time goes on, every review of their plan may well adjust that "speed" and/or their objectives depending upon how their financial situation and outside forces (inflation, market conditions, etc.) have changed.  My point being, Skee, that financial planning (as it relates to targeted investement returns) isn't just fixed on any one return target that a one-time 20 year cash flow analysis arrived at.  If someone practiced financial planning that way, then I'd have the same objections to it as you do.

In reading this thread I think the opinion differences are because you're coming from the view of a money manager focused on generating the best possible returns pursuant to the investment discipline you follow, while others are coming from the view of structuring investment portolios to meet the individual needs of clients.  There's no right or wrong to either; it's just a difference of how each is running their business.  You're quoting your YTD returns and thinking of going to a performance based compensation; that's classic money manager stuff.  I take a financial planning approach and couldn't even quote you a composite rate of return on my accounts because it's superfluous to what I do.  Some accounts have relatively high returns because that's what the asset allocation for some clients calls for (their "speed"), while other accounts have relatively low returns for the same reason.  Actually, my HNW clients (who theoretically can take the risk of going for high returns) are generally my more conservatively structured asset allocations.  They're not interested in meaningfully growing their assets any more; they're more concerned with protecting & preserving the wealth they already have.

So, in sum, unless I'm missing something there's no right or wrong here.  I think it's purely how each of us here are defining our role.  One may be a pure money manager & their clients love them because they're doing what they've been engaged to do -- get the highest possible return relative to their peers with the same investment discipline.  Others are taking a financial planning or asset allocation approach that's customized for each individual client's situation.

Duke:



It is truly refreshing to read such a thoughful and deliberate post as yours.

I’m having trouble framing a response as I am watching the Astros on their

way to the World Series.

Two on, two out, bottom of the ninth, and Pujols up to bat...

Oh what the heck, we all know the rest of the story.  Now it's back home to finish up the series.

[quote=Duke#1]

So, in sum, unless I'm missing something there's no right or wrong here.  I think it's purely how each of us here are defining our role.  One may be a pure money manager & their clients love them because they're doing what they've been engaged to do -- get the highest possible return relative to their peers with the same investment discipline.  Others are taking a financial planning or asset allocation approach that's customized for each individual client's situation.

[/quote]

In the end, clients tend to gravitate to people they identify with. Also, I

think your explanation was on point and eloquent. There really is no right or

wrong. If I had $5 million or $10 million or more in liquid assets, I’d

probably park it in munis and call it a day.

will you guys put 50k into wrap programs? Should I be messing with these low balls or just be using c shares and be done with it. I do get 1.5% for the wrap.

I typically put these accounts in my b/d’s discretionary asset allocation account.  Software identifies the allocation, investment management committee & MF research selects the funds, and it’s automatically rebalanced.   The client gets a great service and the accounts are pretty much on auto-pilot.  My primary time is spent keeping in communication with the clients to ensure nothing has changed in their situation that might affect their allocations, and hopefully to uncover other assets and/or referrals.