My 2014 New Year’s ‘financial’ resolutions

By Dan Hallett, CFA, CFP on January 3rd, 2014

As the calendar turns to another year, I’ve wasted no time thinking about resolutions that will help improve your chances for successful wealth management and investment management in 2014 and beyond.  Even if you commit to just a few of these resolutions, you’ll be far better off in the new year.

  1. I will seek out investment advice from firms that act as fiduciaries thereby avoiding the conflict of interest so widespread in the financial services industry – I want to be certain that recommendations are entirely in my best interest.
  2. I will clarify my financial goals and ensure that my investment portfolio is no riskier than necessary – to achieve the rate of return required to achieve my financial goals.
  3. I will ask that my portfolio be well-diversified so that a portion of my portfolio is always in the best performing asset class and my entire portfolio is never in the worst performing asset class.
  4. I will ask for evidence that in designing my portfolio my advisor consider different risks, e.g., a stock market crash like what happened in 1929 and 2008, the risk of higher interest rates, currency risk, default risk, government intervention (as occurred when the income trust rules were changed in 2006) and double digit inflation like what occurred in the late 1970’s.
  5. I want to know that my advisors are following a disciplined rebalancing policy so that I lock in profits when markets are rising, I invest more in equities after they have fallen significantly in value, and I can be confident that I am always in the asset mix most appropriate to achieve my goals.
  6. I will insist on receiving performance reports which clearly show how my portfolio is performing compared to both absolute and relative return benchmarks.
  7. I will ask for evidence that my taxable portfolio is designed to minimize income tax while still being primarily designed to achieve my goals with the least possible amount of risk.
  8. I will consolidate and simplify my portfolio so that it is easy to understand and can quickly and easily be rebalanced when necessary. With the proper reports I expect to effectively manage my portfolio while spending no more than one hour per quarter.
  9. I will insist on transparency and a clear explanation of all fees and costs that are associated with my portfolio.
  10. I will follow a ‘stewardship’ approach which facilitates communication between my financial advisor, accountant, lawyer, estate planner and insurance agent so that all planning is done in a coordinated fashion.
  11. I will insist on having my financial advisor update my financial plan on an annual basis so that I always know whether or not I am on track to achieve my goals and so that I use my capital in a way that maximizes my happiness.
  12. I will simplify my affairs and put things in order so if that anything happens to me my heirs will be able to carry on without incurring huge costs and suffering through a great deal of stress.