If you’re like me, the start of a new year brings renewed motivation to embark on life-enriching endeavors such as developing healthier eating habits or better organizational skills. As each year blends into the next at an alarmingly faster pace, it’s easy to overlook some important details of investments and strategies that are designed to achieve your retirement or estate planning goals. That’s why I recommend that you annually examine your investment accounts using what I call my “CSI Portfolio Review.”
Optimistically, your investment portfolio doesn’t resemble a crime scene from the Emmy award-winning CSI television series. But if you annually subject your accounts to a tough scrutiny befitting a forensic investigation, your lifetime financial goals are much more likely to have a happy ending. To conduct my “CSI Portfolio Review,” all you have to remember is that, for our purposes, the “C” stands for Consolidate, “S” for Strengthen and “I” for Identify.
Consolidate: Bringing Everything Together
I’m always amazed at how many investors don’t have a cohesive, unified method for managing their assets. It’s common to find IRAs at various firms, 401(k) or other retirement accounts with former employers and investment accounts at several banks and brokers. This is often a recipe for neglect. Consolidating assets at one location can offer more effective, simplified solutions for overall portfolio evaluations, performance and tax reporting, advice and long-range planning.
With numerous monthly statements arriving from different providers, it’s easy to miss clues to problems such as incorrect account titling or weak portfolio design, not to mention the likelihood of losing focus on the “big picture.” Consolidating allows you to easily compare net overall returns to appropriate benchmarks. Management costs and fees may be lower due to the pricing advantages given to larger accounts. Also, retirement assets at former may benefit from increased investment choices and personalized advice if transferred to your IRA.
Strengthen: What’s Your Motive?
When viewed under a financial microscope, does each investment holding meaningfully contribute to your portfolio’s main plot? If not, review the story line behind your strategy and life goals, and like the CSI theme song, ask, “Who Are You?” If your motive for originally owning a particular investment no longer applies, either because now it looks out of place or its vital signs have flatlined, put a toe tag on it and move on. This is no time to hope that these weak links will come back to life.
If you’ve hired professionals to direct each of the holdings in your investment accounts, whether they are pooled investments or separately managed accounts, you should be able to identify each manager’s D.N.A. and determine what makes him or her unique. Do the managers complement rather than duplicate the other managers in your portfolio? They should.
Identify: Who Do You Love?
The last element of your forensic review may be one of the most important. If you don’t exhaust all of your assets during your lifetime (and you probably won’t), who will receive each portion of your estate? You’ve worked hard to build and preserve your assets, and I’m sure you want them passed on with minimum cost and taxation. Countless real-life stories chronicle how loved ones were inadvertently disinherited or left with greatly diminished distribution options because beneficiary designations were blank, incorrect or not updated to reflect current circumstances.
Highly advantageous strategies for passing assets to future generations, such as those found in Stretch IRAs, could be lost if primary and contingent beneficiary designations are not identified properly. If assets inadvertently go to your estate, probate court proceedings are public, costly and time-consuming for heirs. Get competent advice for designations on all of your retirement accounts, IRAs, annuities, life insurance policies and trusts, and review them annually or whenever there is a death, divorce or change in family circumstances.
The Evidence Will Speak to You
Conducting this annual “CSI Portfolio Review” may not be a quick process initially, but it will get easier and faster each year. You can go it alone, or a competent investment professional on your team can do most of the heavy lifting for you. Pay uncompromising attention to detail and let the evidence of your investigation guide your future decisions. Your portfolio will likely emerge stronger and more resilient than ever before. This is one episode of your life where a happy ending is preferred every time.
David Loeffler is a VP Investment Officer and Chartered Retirement Planning Counselor in Roseville, CA. As head of the Loeffler Investment Group of Wachovia Securities, he provides comprehensive financial solutions for affluent investors along with retirement plans and other advisory services for the business community. He can be reached at 916-787-1511 or online at davidloeffler.wbsec.com. Wachovia Securities, LLC, member NYSE/SIPC.
