No Two Investors are Alike

Robert Powell writes a great piece on Market Watch this morning about how advisors typically use model portfolios and “odds are high that if you’re planning for or living in retirement that this is not the right portfolio for you.”

Odds are high that if you go to an adviser to have your money managed he’ll put you in what’s called a model portfolio, typically labeled aggressive, conservative, moderate or some such term.

Odds also are high that if you’re planning for or living in retirement that this is not the right portfolio for you.

Model portfolios work for money managers and investment advisers, not so much for you.

I’ll explain. But first this disclosure: There are a at least two types of model portfolios, the kind that advisers create for the benefit of clients and the kind that institutions create, either as an investment objective such as target-date funds or fund of funds or a combination of separately management accounts.

In the case of the former, advisers will often herd their clients into model portfolios as a way to create efficiencies for their business. By putting all their clients into this or that model, it makes it easy for them to manage money, to rebalance portfolios and to increase their profit margins.

But the truth of the matter is that no one - preretiree, semiretiree, or retiree - is alike. Most have a set of unique circumstances and facts that would make it difficult if not impossible for them to be pigeonholed into this or that model portfolio.

The money quote here? That no two investors are alike. And we’re excited to be equipping investment advisors with the tools to capture client risk tolerance, and use that to select or personalize mathematically compatible portfolios for them.