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Before I will sit down with an advisor I always ask if he/she would show me 5yrs of their personal investment statments. If they will not or can't provide them I will not waste anymore of their time. I figure that if I'm to let them choose how to invest my money I should know how they invest their

Jul 19, 2013 by Ray from Brea, CA in  |  Flag
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6 votes
Rich Winer Level 20

Ray, I would not show you five years of my personal investment statements. How I invest my money has no bearing on how I would recommend you invest yours. Your money should be invested in accordance with your personal financial situation, goals, risk tolerance and time horizon, not mine. When appropriate, I might also recommend specialized strategies to minimize taxes on distributions from your retirement savings and increase the magnitude and longevity of your estate, ideally over multiple generations. I would not hesitate to show you some (not all) of my current investment account statements to show you that I invest in the same investments and strategies I recommend and implement for my clients. I do eat my own cooking. That said, I don't necessarily invest in the exact same allocations as my clients due to differences in our ages, goal, risk tolerance, etc. Candidly, in 20 years, no one has ever asked to see my personal investment statements. Most of my clients come through referrals from clients, CPAs and estate planning attorneys. Most trust those referral sources enough that by the time they meet with me, they already want to work with me.

Comment   |  Flag   |  Jul 19, 2013 from Woodland Hills, CA

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Asking an advisor how his/her assets are invested is a great question, and is perfectly appropriate. Looking for actual statements is in my opinion, not appropriate. If you can't take his/her word for it, you shouldn't be working with him/her.

1 Comment   |  Flag   |  Jul 25, 2013 from Marshfield, MA
Rich Winer

Good point.

Flag |  Jul 25, 2013 near Woodland Hills, CA

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Ray, while I would not go through my personal financial statements with any of my clients, I do make sure to provide historical results of the managed portfolio(s) we will be utilizing in their account if they are interested in seeing that.

One option may be to find an advisor who has tracked the actual performance (net of fees) of their portfolios. Make sure the the performance information is the result of an actual investment in the portfolio and not back-testing if you do attempt to find an advisor who can provide this information to you. Also keep in mind that past performance is what it is (from the past) and is not an indication of things to come, necessarily.

Comment   |  Flag   |  Jul 22, 2013 from St. Louis, MO

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Hi Ray! Interesting question. Registered Investment Advisers maintain a record of securities holdings for access persons for five years. This is a regulatory requirement for auditors to use to help determine if trading improprieties have occurred, not an "open books" rule for clients and prospects. As Rich mentioned, how an advisors money is invested is not indicative of how your money should be invested. My funds are actually managed by another advisor, so I am completely hands-off, and do not necessarily mirror my recommendations for clients since our needs and financial situations are different. Looking at my statements would be irrelevant to any hiring decision.

A better question would be to ask the advisor about his/her investment philosophy. For example, I believe that the average investor can manage their own money and I generally recommend low-cost mutual funds and a buy-and-hold strategy for the long term. A different advisor may have the philosophy that their firm can create superior returns through a selective value stock trading model, which would mean your funds would be invested and traded very differently. Find someone with a philosophy that matches your risk tolerance and someone that you can connect with on a personal level, and start by investing a small amount if you have concerns. The trust you build will outweigh numbers on a piece of paper. Good luck to you!

Comment   |  Flag   |  Jul 22, 2013 from River Hills, SC

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I would not show my personal statements. I would be willing to show exactly how my money is invested. That is not a secret. However, at my firm we believe that a portfolio should consist of all invested monies. My wife's 401(k) is part of our overall portfolio, as well as our Roth IRAs, my Simple IRA, and our taxable account. I don't believe that it is appropriate for a prospective client or client to see the value of my wife's 401(k) (or the value of any of our accounts).

Comment   |  Flag   |  Jul 22, 2013 from Fresno, CA

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Ray, I assume you are wanting to know if I eat my own cooking. I do and I'm happy to show you the statements. Rich, however makes a host of good points and I agree with all of those points. In addition your portfolio will be unique due to its size. Some investment vehicles are not available in smaller accounts or not efficient because of transaction fees, etc. When the account was opened will also cause differences in the design. Mutual funds close to new or additional investment from time to time and we may need to select an alternative fund.

When selecting an advisor, most people are trying to answer two questions. Is the advisor competent and can I trust them. Eating your own cooking goes to the trust question. I think a line of questioning that may reveal more information for you about trust is to explore the advisor's compensation structure. The most competent and trustworthy advisor who practices in an environment where they are compensated based on priorities other than the client's, is not a good choice.

Comment   |  Flag   |  Jul 22, 2013 from Kingsport, TN

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Dushyant Pandit Level 17

Yes.

But I also agree with the comments of the other advisors, that your needs (and hence your portfolio) might be quite different than mine.

2 Comments   |  Flag   |  Jul 24, 2013 from Summit, NJ
Guy

I see nothing wrong with asking an advisor to provide evidence of their own personal success. After all, if they have not been financially successful with their own money, how can you expect them to help you? If you are shopping advisors, I would suggest you make this the last determinant. In other words, assess the other important factors - like personality, principles, skills and other subjective characteristics. Then, once you have selected the advisor who helps you feel comfortable and secure they know what they are doing, ask them to provide evidence of their own success. This may some in various forms - a financial statement, an income tax return, an account statement. If you need more, ask for more. But in the end, if you are not comfortable the advisor is going to help you, there is no point in asking to see their personal information. Hope this helps.

Flag |  Jul 28, 2013 near Irvine, CA
Rich Winer

Sorry, but that's ridiculous. What is your benchmark for "personal success"? Is it beating the S&P 500 over a full market cycle? Is it safe, conservative long-term growth? Is it generating tax-free income? Is it protecting and preserving the college savings for a child who is within two years of college? My goals and strategies for my own money have absolutely nothing to do with how you should invest yours. I have various buckets of money with different objectives and time horizons (i.e. retirement savings, college savings, money that could be needed within three to five years, etc.) and so do most people. Were I to show you five years of investment statements for all of my investments, would you (or a prospective client) be qualified to evaluate whether my results met my financial goals, whether I got lucky with a few investments, whether I followed a sound, disciplined strategy or whether I took excessive risks? The answer is NO! Additionally, wealthy, successful people are generally not seeking market-beating performance. They are generally more concerned with growing, protecting and preserving their money in a prudent, disciplined manner. Many older clients will actually be turned off by talk of investment strategies that have outperformed the markets and will think that the advisor is a big risk taker. I agree that Ray should look for an advisor based on personality, principles, skills and philosophy. I would stay clear of any advisor who shows anyone his tax return, financial statement, etc. Once again, I would show anyone HOW I invest my own money and emphasize the fact that I invest my own money in the same strategies that I employ for my clients. I would also show an account statement that shows that I do, in fact, own the same investments as my clients. But that's as far as I would go. In 20 years, no one has ever asked to see my investment statements or anything else. Once again, they come from satisfied clients, CPAs and estate planning attorneys... and those are the people to ask for a referral to a good advisor.

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Flag |  Jul 28, 2013 near Woodland Hills, CA

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3 votes
Peter C. Karp Level 20

Ray,

I do not have an issue showing my investment statements and reviewing the strategy and adjustments over the last few years. I will share this information to the right person under the right circumstances. I need to understand your investment goals, risk tolerance and investable assets. If you would like to discuss your specific situation you may contact me at 415-345-8185 or email peter@karpcapital.com.

Disclosure: The posted information is for informational purposes only. This message does not constitute an offer to sell or a solicitation of an offer to buy any security. All opinions and estimates constitute Karp Capital's judgment as of the date of the report and are subject to change without notice. Accordingly, no representation or warranty, expressed or otherwise, is made to, and no reliance should be placed on, the fairness, accuracy, completeness or timeliness of the information contained herein. Securities offered through Financial Telesis Inc., member SIPC/FINRA. Financial Telesis Inc. and Karp Capital Management are not affiliated companies.

Comment   |  Flag   |  Aug 27, 2013 from San Francisco, CA

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