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Reviewing Your Wealth Strategy


Now that you've gotten a handle the financial viability of your portfolio, it's time to undertake a broad strategic review in order to take stock of what has occurred over the past year.

In my last blog, I covered the importance of periodically measuring your portfolio’s performance to ensure it is delivering the kind of results you’ve planned for along with the appropriate level of risk. The next step is to undertake a broad strategic review of your portfolio, perhaps once a year depending on your situation.

At this point, we’ve already reviewed your portfolio to rebalance your target allocation, but this review is different. This one is designed to rethink both your financial plan and your portfolio design—which together comprise your entire wealth management strategy. It is the last step in the wealth management process, but think of it as the last phase of a continual cycle rather than the final end point. In a strategic review, you take stock of what has occurred over the course of the year, what has changed in your financial situation or your goals, what has changed in the market and what new products or services may be available. For example, perhaps there is a new way to invest in commodities that wasn’t available before. The point is, each year, new products and services come on line, some of which may make sense for your portfolio.

In terms of taking stock in your personal financial situation, ask yourself some questions. Have your goals changed? Has your time horizon changed? Has your risk tolerance changed? Has your job status or income changed? Has your family situation changed? Have you had a child/grandchild? Are you approaching retirement? Has your health changed? The answers to these questions are likely to impact how your portfolio design and financial plan look in the future.

Take stock of the market environment. What has changed? Can you stomach the market’s volatility? Have investment conditions changed here or overseas? Are there new products or services to consider? Have tax laws changed? Have the relationships between investments changed? For example, recently stocks and commodities have moved in tandem while historically they have not. The answers to all of these questions are likely to cause a change in plans for your asset mix, financial plan or both.

Once you’ve answered these questions, update the data and rerun your financial plan analysis. Is your safety net still in place, especially with regard to sufficient insurance coverage and emergency cash? Are you still saving adequately for retirement? Have you set aside sufficient money for income taxes? Do your estate documents still reflect your estate planning goals? Example: If you have children, do you have the proper guardians in place? Finally, with regard to your investments, do you need to redesign your portfolio? Do you want to use hedges to protect your downside? Should you consider alternative investments to enhance and diversify your portfolio?

Once all of these questions are answered, you can revisit the financial plan and portfolio design you created in the past and ensure that it is current. And you begin the cycle again, confident in the knowledge that your careful, regular attention to your financial plan and portfolio design will ultimately give you the best chance to achieve your life’s financial goals and objectives.

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Victor J. Dzau, MD, gives expert advice
Victor J. Dzau, MD, gives expert advice