I took this article out of the paper titled, Rich are rising our of the ashes wiser.

It talks about lessons learned over the last few years – first is that the world’s financial markets are much riskier than many envisioned.

With the upheaval of the markets many financial/investment advisors are attempting to get a better understanding of their clients’ risk tolerances with more thorough questioning and more calibrated risk profiles, while providing more portfolio options.

I love this analogy … a doctor won’t prescribe treatment without a complete medical profile, neither should an investment advisor.

Categorizing clients as either “conservative, moderate or aggressive” and placing them into one of three corresponding portfolio models just isn’t fine-tuned enough when stocks plunge by 50% and there is a gaping 15% return difference between the models.

The article says, “imagine a shoe store that only offered three sizes – it would soon be out of business”.

Today affluent investors want a strategic perspective on their portfolios that answers vital questions. How do all the pieces — the various asset classes and managers – work together? What is the downside of for my entire portfolio in another market freefall? These are examples of some of the questions an advisor will face.

Investors are demanding transparency. We have seen what greed, manipulation and exaggerating has brought us. The cost has been great. I feel that both sides need to take accountability and responsibility. People who “bought into” Madoff’s ponzi scheme were happy when they received a higher rate of return – higher than the market was bearing.

Advisors can use software and technology to keep their clients abreast of their portfolio mix and the results. They may need to do more research to provide specialized advice. Affluent investors are moving away from the single investment generalist and moving towards a team comprised of their portfolio manager, investment specialists and tax experts.

Personally, I work with a team of three people who offer different specialities.

Advisors listen up — your clients are speaking, especially the affluent ones!

I love Robert Kyosaki’s advice in his book, Rich Dad Poor Dad — interview your financial advisor. Ask as many questions as they do and find out how they are investing their own money. If they cannot control their own money you know that they will not be able to do much better with yours!

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