Money and Business Quotes

A few years ago, we met a prospective client who came to our office because he wasn’t happy with the service he was getting from his existing financial advisor. He wanted to know how we would be different than the people he was already dealing with. As is our normal practice, we explained that before we could describe our service offering or make any portfolio recommendations, we first needed to have a complete picture of his financial affairs.

As we held our discovery session and summarized his net worth information the answer to his concerns became quite obvious. He had created seven different financial advisory relationships with a portfolio that was worth, in total, about $600,000. As a result, each advisor was responsible for less than $100,000. He complained that he never heard from these advisors except when they wanted to promote a certain investment. He had concerns about estate planning, market volatility, and succession planning for managing his financial affairs upon his demise, as his wife had no interest in financial matters. However since none of his advisors paid much attention to him, he was concerned that would never be able to find somebody he could trust. In fact, he had trouble trusting ANY company or advisor as he wanted to diversify to avoid losing money.

In our mind, the problem was obvious – his account size at each firm was well below their radar for optimal account minimums and so he was being ignored. What many investors don’t realize is the security of their portfolio has less to do with the firm they work with than their specific portfolio allocation. All wealth management firms in Canada belong to CIPF, the Canadian Investor Protection Fund which provides up to $1 million insurance protection. In addition, some firms operate in ‘client name format’ whereby the firm simply acts as an ‘agent’ not as a ‘principle’ in carrying out trades. In that type of advisory relationship, the firm does not actually hold any of the assets and must have the clients written authorization for every transaction. These firms do not require insurance coverage since they don’t hold client assets. Ultimately, the protection for an investor lies in the asset mixture and diversity of the actual securities themselves.

Consolidating accounts into one large portfolio will not only result in greater attention, it will also allow for economies of scale, that is the fee structure will be lower than regular retail accounts. Furthermore, by having one advisor instead of two, three or more, you have one unified direction for your financial strategy instead of competing recommendations from multiple advisors.

Once you find a competent financial advisor that you can trust, consolidating your financial affairs with one organization is not only logical, but less expensive as well.

John specializes in Private Client Wealth Management solutions for those within 10 years of retirement, as well as those already retired. A typical person seeking John’s guidance is somebody who has accumulated a portfolio of over $500,000 and wants a more personal, sophisticated, and comprehensive approach, than what is typically offered at banks and other financial planning firms. Among John’s client base are medical professionals, pharmacists, business owners, widows, lawyers, and accountants.

As fears of a debt crisis in the Eurozone converge with poor economic data from the US, investors turn away from volatile traditional investment assets such as equities and bonds, choosing instead to investigate a range of alternative investments that provide shelter for the value of capital, and are less affected by market ‘noise’.

Here are three alternative investment strategies that are proving popular with investors heading towards 2012.

• Coins and Stamps

Numismatic investment (investing in coins) and philatelic Investment (investing in stamps) is one area that is receiving an increased attention. As with many alternative investments, the value of rare coins and stamps is driven by supply and demand. The rarer an item, the greater the value, although with coin investing the value of the metal is also a considered factor in the value of the coin, such as is the case with gold coins for example.

Investing in stamps was popular in the 1970s, but the bubble burst and prices took many years to recover. Investing in stamps, as with any type of investment in collectibles, require in-depth knowledge and skill to identify and value the assets.

With coins, many gold coins are still considered to be legal tender in the UK, and therefore offer tax advantages with regard to capital gains tax.

• Timber Investments

Another of my current selection of alternative investments would be to invest in trees. As tress grow no matter what happens in the financial markets, investing in timber plantations, either directly or through an investment fund or timber business, provide the investor with growth whilst the performance of other assets may falter.

Returns from timber investments are three-fold; the majority of return comes from the tree growing into valuable timber over many years, also, the price per unit of timber (usually cubic metres) also rises, with many of the main indices in developed markets showing timber prices rising by around 6% per annum. Finally, in some cases investors may also profit from increases in the value of the land on which the plantation is established.

• Forex

The third and final of this small selection of alternative investments is Forex, or foreign exchange. This is a highly risky investment strategy, and can inv9ovle betting for or against the movement in value of one currency against another.

Investors may place their bet per unit of a rise or fall in value, and can easily lose more than the value of their original stake if the currency moves the wrong way.

So, there are a great many alternative investments to consider for the investor keen to divorce the performance of their portfolio from the performance of traditional markets.

According to recent research, institutional investors are holding up to 25% of their investment portfolios in alternatives in an effort to rebuild value lost after the recent economic crisis of 2008.