Clients often wonder what I do all day.
That might sound harsh but it's not. They assume I meet with clients, themselves and the other clients they assume I have. The reality is I can only hold so many meetings a day. So, what do I do the rest of the day?
Am I watching the markets and reading news stories? Am I monitoring their accounts? Am I creating paperwork and moving the planning process forward? Am I researching investment companies to make recommendations? Am I talking clients off the ledge on a bad market day? The answer to all of those questions is yes. I do all of those things and sometimes several on the same day.
But the bigger question is, "What is my actual role in the investment of their money?" It's not just me who is involved. There are several layers of professionals.
Recently, when meeting with a client who is a big football fan, I asked if I could use a football analogy to explain my role and the role of others in the management of his account.
I decided to use the Denver Broncos as my analogy team of choice. Sorry Boise State. But the real Broncos are from Denver. We lived in Colorado for almost 8 years prior to moving to Idaho. They're my team.
But your blue turf is pretty cool.
Let's start the analogy at the top: The client. The client is the owner of the team. When thinking about dollars that need to be invested, it's your money. You own the team and bear the ultimate responsibility to make decisions. You also have profit to hopefully gain and losses to hopefully avoid. You are the one pointing to your goal—retirement, buying a home, saving for college, starting a business, going to Germany for Oktoberfest.
As your financial planner, I play the role of the GM. The General Manager. I make most of the day to day decisions. I monitor the coaching staff and the players, but I don't necessarily make the starting lineup for Sunday's big game against the Raiders.
Boo. Hiss. Raiders.
The Coaching Staff are, what we in the financial industry call, Third-Party Money Managers or TPMMs. As the Team Owner you hire these money managers, based on my recommendations, to run your players on the field. The Head Coach might be a well-known money manager like Horizon Investments, The Pacific Financial Group, Brinker Capital or AssetMark. The assistant coaches will be the researchers, analysts, and portfolio managers who work for the TPMMs. These are the people who are researching what investments to use in the building of your portfolio. They buy and sell the stocks, bonds, mutual funds, and exchange traded funds (ETFs) that are actually used in your account.
These TPMMs are organizations that have vast numbers of people on their staff who watch markets constantly. They read news about the trade negotiations with China and decide if anything should be done.
The Players on the field are the individual stocks, bonds, mutual funds, ETFs, and TPMM strategy portfolios consisting of all of these. They are the ones that are working all day every market day. Some days are good days. Some days are bad days.
As much as I was a huge fan of Peyton Manning when he quarterbacked for the Broncos, he had some bad games. Anyone remember Super Bowl XLVIII against the Seahawks?
But overall, Peyton Manning had a great career. We want the Coaching Staff to focus on selecting good investments. Peyton Manning was a good investment for the Denver Broncos.
Good days and bad days in the market come. Regularly. We need to stay focused on good careers based on good decisions with good investments. And base all of those on the Team Owner's goals.
(For illustrative purposes only, not indicative of any particular investment or strategy. All investing involves risk including the potential for loss and there is no guarantee that any strategy will ultimately be successful.)
So what happens if our team starts losing? First, we don't panic.
We remember to leave the choosing of the players to the coaching staff. We—you as the Team Owner and me as the General Manager—generally don't pick and choose the individual players, aka investments.
As the General Manager, I may make a recommendation to fire the current Coaching Staff (the TPMM) and hire a new one. With big decisions like that I will make a recommendation to the Team Owner and get their approval before pulling the trigger on the change.
Or I might recommend to give the Coaching Staff a little more time as they are just having a bad season.
Or I might reassure the Team Owner that today was just a bad game and to instead focus on the season as a whole.
My job as the General Manager will continue to be monitoring the progress, and hopefully the success of the Coaching Staff, while keeping the Team Owner pointed in the right direction—toward their goals.
As a Team Owner you should have confidence in your General Manager and be empowered to make decisions based upon sound recommendations that are in your best interest. If you don't feel that way, you can always fire your General Manager and select a new one. Talk it through with them and see if it's just a bad year or if the Team Owner and the GM have developed major differences in how the team should be run.
Remember to focus on your team having a great career and don't let individual losses distract you from the team's goal. Volatility is normal. Your investments will always increase and decrease. You choose what to focus on. 5 days or 5 years.
As for the Denver Broncos 2019 season, I predict "Super Bowl, baby!"