Content area
Full Text
Asset allocation is an underpinning of financial planning, and clients need to be educated about exactly what it involves.
Asking the question, "Do you have to explain to your clients what asset allocation is?" produced some interesting answers.
David Doll, president of Kanaly Trust Company, a Houston-based financial services firm providing wealth management services for individuals, answers, "Yes and no. It is such a ubiquitous term, and so overused. I think most people come in with an understanding of it. And for us at Kanaly with clients we try and make sure that we have the same understanding as they have."
Michael Goodman, president of Wealthstream Advisors, a New York City financial planning and investment advisory firm that works with the accounting firm Citrin Cooperman & Company, sees it similarly. "There are two kinds of clients aware of asset allocation. One set wants it, and only has to be educated on exactly what it is. Then there are the clients who have heard the term but have no idea what it is." He adds, "The problem is, that most people don't know what asset allocation is even though they might think that they do. Clients think that is simply putting 10 percent in each of 10 different funds."
"Clients still don't really understand asset allocation. It has to be explained to them," is the response of Michael Ferman, partner in the St. Louis firm of Rubin, Brown, Gornstein & Co. and managing director of RBG Advisors, which is owned by the accounting firm's partners.
Connie Brezik, president of Asset Strategies, an investment advisory and financial planning firm, with offices in Casper, Wyo., Scottsdale, Ariz., Avon, Conn., and New York City, agrees. In her experience, "Some clients understand, but a lot more don't."
What Is It?
Brezik explains to clients having your assets diversified among different types of asset classes reduces risk. She tells them they "aren't going to hit the home run under this method, but accounts will grow very well." She spends time with clients focusing on the need to diversify with stocks and bonds, describing the differences between U.S. vs. international, growth vs. value, small vs. large cap, etc. She uses actual companies as examples and shows how a class, by...