Looking Beyond The Numbers: The Role of Your Advisor

“There’s no dollar sign on a peace of mind, this I’ve come to know…” Zac Brown Band

There are many factors that go in to managing a portfolio. While quantitative factors lead the charge and are obviously important, there are a number of cognitive aspects. The ability to read and fully understand the whole picture is imperative, especially in this day and age. Each and every person – and hence, investor – is just like a fingerprint. No two are the same, and this needs to be incorporated in to the overall strategy via a tailor-made solution. More often than not, the role of investment advisor requires looking beyond the numbers.

A starting point is to fully understand what the purpose of the money is on both a short-term and long-term basis, as well as liquidity constraints, time horizon, tax consequences and legal and regulatory issues. While these can create an initial blueprint for the asset allocation, there are the soft factors to consider. One of the most important of these is to properly align one’s willingness to take on risk versus one’s ability to do so. At times, these factors can move in divergent directions and need to be united.

Willingness is defined as “the quality of or state of being prepared to do something, readiness;” while ability is defined as “the possession of the means or skill to do something.” An investor might have the ability to take on high levels of risk in their portfolio due to their long-term horizon, abundance of wealth and steady income streams. But that same investor might be a nervous wreck any time volatility takes over. And this goes the other way, where someone who should not be taking on significant risk, invests in a highly concentrated portfolio of high beta stocks. The role of an advisor is to align an investor’s willingness and ability to take on risk. It is a precise balancing act. This task can be an uphill battle that requires conviction, compassion and strength.

This year, particularly, has seen the wedge widen where some investors – those who were invested long term with the ability to withstand the market gyrations – retreated to cash in late March as the market was bottoming out. A significant number of these people missed out on the subsequent market rally. An adept investment advisor needs to constantly look at the blueprint that they developed with the investor and keep the portfolio moving in the right direction through the most volatile of markets.

Missing just ten days over a twenty-year period can result in a reduction in a portfolio’s value of more than fifty percent of the market’s appreciation when compared to those who stayed on track throughout the ups and downs. Like a house built for the long haul that prevails through hurricanes and storms, a portfolio should be built the same way.  Our role at ACM at is to assist our clients in setting, and adhering to, their short-term and long-term financial goals without undue reliance on emotions. This requires not only skill, but the ability to listen wisely and well.

ACM is a registered investment advisory firm with the United States Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training. All written content on this site is for information purposes only. Opinions expressed herein are solely those of ACM, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation. All investing involves risk, including the potential for loss of principal. There is no guarantee that any investment plan or strategy will be successful. ©ACM Wealth