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What's Your Benchmark?

| September 09, 2015
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Portfolio Strategy

For years Wall Street has been saying that investing is simple and that you should put your money into low cost index funds and let time do its job. The mentality is that investing is a commodity and that if everyone does the same thing there will be success for everyone. I have never really thought about clients as corn, wheat or soybeans. Natural gas, crude oil, silver or gold has never really crossed my mind when thinking about my clients and the construction of their portfolios and financial plans. However, the investment industry and "big money" want you to think you are indeed a commodity, through in your face marketing and diversionary tactics to get you to go along with the herd. 

As I think about our mission it hit me right in the face at a recent social function. A peer approached me and asked if I was beating the benchmark. Now if you know me… you know that I am an extremely competitive person that is very much convicted in what we do at our firm. So you know I wanted to have that debate. However, I went in a different direction. You see, growth investing is fun. It is exciting and I believe that we do a strong job in that space. However, I realize at a party people only talk about winners and investments with jazz avoiding the painful reality that risk presents. So I asked him “What’s your benchmark?”.  Of course, his benchmark is not what I see daily when working with my clients. Today’s retirees face an enormous obstacle of low interest rates that do not meet most client’s cash flow needs. We have an environment where certificates of deposits and government bonds pay a measly rate and dividend paying stocks that may have more risk at this stage of the economy than many clients would be willing to take. So in my response to my peer, I said, “You see I construct new benchmarks daily.” 

Now I know that sounds like a newly minted cliché. However, it is true. You are not commodities. Advice is not a commodity and every portfolio should be customized to the client’s particular needs. There is everything to consider from tax, risk, cash flow and more. Today’s retirees are looking for serious income solutions to meet their income goals at risk levels that are acceptable. So daily we create customized plans or their benchmark. So, if your portfolio is passive and relying on capital gains to meet your income needs, you may be viewed as silver and gold. Again, advice is not a commodity and neither are you as a client. Your advisor should be asking, “What’s your benchmark?”.

Scott A. Winslow, ChFC is a managing partner at Nabell Winslow Investments a regional investment and advisory firm. 

Securities and advisory services offered through Cetera Advisors LLC, member FINRA, SIPC. Cetera is under separate ownership from any other named entity. The information in this article is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult your legal or tax professional for specific information regarding your individual situation.

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