When it comes to investment strategy, you don't have to go it alone
Real estate and estate planning attorney Eleonora di Liscia had good reason to leave her former financial adviser: “They had a one-size-fits-all approach to investing,” says the solo practice attorney based in Skokie, Illinois.
“I didn’t have a person [to talk with], so it wasn’t hard to leave.”
Attorneys like di Liscia, without the time or expertise to invest on their own, might consider hiring a personal financial adviser. Di Liscia chose one who had been “thoroughly vetted previously by my friend, and so I hired him,” she says. The new adviser, retained two years ago, created a customized investment portfolio with low to medium risk, she says.
For high-quality financial planning, look for a certified financial planner or an adviser affiliated with a reputable financial services and investment firm. These professionals can recommend appropriate investments for a client’s age, financial circumstances, objectives and tolerance for risk, and they can continually monitor a client’s portfolio.
Dennis Skorewicz, a financial adviser with Edward Jones in Ponte Vedra Beach, Florida, develops an investor profile before advising a new client on investments.
“We first establish an investor’s needs and goals,” Skorewicz says. “What is the client’s income, debt, net worth? Also important is the client’s age,” he says, because a younger investor can afford to assume more risk since there’s a longer time to recover any losses that might occur.
When all the client information is accumulated and analyzed, Skorewicz designs a customized investment portfolio. He ensures that it is sufficiently diversified so it’s not too damaged in the event of a market sector downturn.
A typical investment portfolio might include mutual funds (a basket of various stocks in diversified market sectors), U.S. Treasury bonds, bank certificates of deposit and exchange-traded funds—a collection of stocks or bonds whose prices fluctuate in accord with the collective underlying value of holdings of the fund. ETFs can be traded on the stock market.
With investment options ranging from simple stocks and bonds to complex derivatives, Linda Leitz, a certified financial planner at It’s Not Just Money Inc., says, “Don’t invest in anything fancy.”
Leitz, based in Colorado Springs, Colorado, says that mutual funds and ETFs are good options. “Buy and hold is a good strategy. Buy when the market is low. When it goes up, take some profit and buy [U.S. Treasury] bonds or CDs to lock in those profits.”
As for the risk, both Skorewicz and Leitz say it involves more than just a decline in the value of an investment. A major risk is inflation, which reduces the purchasing power of the dollar. Interest rate activity either up or down also poses a risk in terms of bond and CD yields, mortgage rates, credit card rates, and the cost of borrowing money or financing the purchase of goods and services.
Financial planners and advisers are compensated in several ways. Leitz is paid on a fee-only, retainer basis and receives no compensation on commissions from the sale of investment products such as mutual funds. Others may charge an hourly rate or a percentage of the assets being managed. Skorewicz offers clients two methods of payment: fee-based and commission-based.
“I pay my adviser about $40 annually and a low percentage based on performance,” di Liscia says.
And is her adviser (who also handles the investment portfolio of her husband, Matt Keenan, an attorney running a separate criminal defense and school-law practice) worth the money?
He’s very helpful, she says, and his advice turned out to be profitable.
This article originally appeared in the February 2016 issue of the ABA Journal with this headline: “Financial Aid Abounds: When it comes to investment strategy, you don’t have to go it alone.”