Diversifying Your Portfolio With One Advisor

Published: November 3, 2016

It may seem counter-intuitive, but having one wealth advisor manage all your assets may be the best way to achieve effective portfolio diversification.  We believe portfolio diversification is important because it: 

  • Helps limit your downside risk from under-performance in an asset category, industry sector or holding
  • Helps smooth wide swings in your portfolio with a range of asset classes and prices that may behave differently from each other in different markets

 

Since asset allocation and diversification are so important, it might be natural to think that relying on multiple wealth management firms could be helpful as well. There are, however, significant risks to this approach. 

Not all wealth advisors believe in the same approach to investing. While each firm may invest in a range of equity and fixed income asset classes, the selections of one firm may not work well with the choices of another. In addition, just as selecting two managers for the same asset class can result in overlapping investments, selecting two wealth advisors can result in duplication of investments and asset classes. And even if riskier asset classes have been chosen prudently for diversification by one wealth advisor, not seeing the entire financial picture may mean a client is unknowingly overexposed to specialty investments or situations. Finally, when your situation changes, your wealth advisor should undertake a comprehensive review of your total asset allocation.  If some of your wealth advisors are not current on your circumstances, parts of your portfolio may not be in line with your current needs, objectives and risk profile. 

A single advisor, who believes in a diversified portfolio that balances your goals for capital preservation, growth and income while staying focused on your views of risk management, can help ensure that your asset allocation is appropriate and well managed. At Klingenstein Fields Advisors, we follow a disciplined approach to asset allocation and diversification to tailor your portfolio to your needs, while incorporating firm-wide asset allocation and investment policies. 

We begin by understanding your goals, objectives and risk tolerance, using these to develop a comprehensive plan that addresses your short- and long-term investment needs. Your current portfolio is evaluated relative to the plan to identify and address areas of potential opportunity and risk. Regular meetings with you will help us to review and adjust your plan and portfolio over time and in response to any shifts in your personal life or unexpected developments. 

Important Disclosures

This material is provided for informational or educational purposes only and should not be construed as investment, accounting, tax or legal advice. Always consult a financial, tax and/or legal professional regarding your specific situation. This communication is not intended as a recommendation or as investment advice of any kind. It is not provided in a fiduciary capacity and may not be relied upon for or in connection with the making of investment decisions. Nothing herein constitutes or should be construed as an offering of advisory services or an offer to sell or a solicitation to buy any securities or a recommendation to invest in any specific investment strategy. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future returns. The views expressed herein are as of a particular point in time and are subject to change without notice. The information and opinions presented herein are general in nature and have been obtained from, or are based on, sources believed by Klingenstein Fields Advisors (“KF Advisors’) to be reliable, but KF Advisors makes no representation as to their accuracy or completeness. Although the information provided is carefully reviewed, KF Advisors cannot be held responsible for any direct or incidental loss resulting from applying any of the information provided. KF Advisors represents two investment advisers registered with the Securities and Exchange Commission: Klingenstein, Fields & Co., L.P. and KF Group, LP. If you are a KF Advisors client, please remember that it remains your responsibility to advise KF Advisors, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.