advisor diversification

Almost weekly I speak with someone who believes diversification means using multiple financial advisory service firms to get a diversified portfolio. Upon further examination, I find that more often than not the exact opposite of this assumption is true. Let me explain.

Here is an example:

A person divides a $900,000 portfolio equally among three different financial advisory firms giving each one $300,000.

Each firm puts $150,000 in a 60/40 mix of stocks and bonds and $150,000 in an annuity.

None of the advisors consult with each other, therefore the individual is no more diversified by using three different firms than one. In this scenario, it would make much more sense for the individual to either have their $900,000 with one trusted qualified advisor who knows their complete financial situation, or have the three advisory firms work together to form a diversified portfolio.

So what could a diversified portfolio look like? Depending on an individual’s portfolio size, goals and objectives, risk tolerance and age it could include the following:

  1. Stocks (large, small, and mid-size companies divided among growth, value and blend which is nine categories of stocks) managed by qualified managers
  2. Bonds (short, intermediate, and long-term, high, medium and low grade rated, also nine categories) managed by qualified managers
  3. Real Estate Investment Trusts (this could include retail shopping centers, healthcare facilities, multifamily/apartments, office buildings, raw land, or almost any kind of improved property)
  4. Hard assets (precious metals: gold, silver, platinum etc)
  5. Annuities (fixed, fixed indexed and variable)
  6. BDC’s (Business Development Corporations) example: income from interest
  7. MLP’s (Master Limited Partnerships) example: income from oil and gas pipelines
  8. Managed Futures/Commodities
  9. Direct or indirect ownership in oil and gas production, including mineral rights interest
  10. Corporate Equipment Leasing for income
  11. Structured Certificates of Deposit
  12. Cash Value Life Insurance (whole, universal, indexed universal and variable universal life) for their competitive fixed rates and/or investment choices plus the numerous tax benefits

As you can see from the list above, there are many choices of investments to diversify a portfolio to minimize risk, as well as create non-correlation. You can use multiple financial advisory service firms to achieve such a diversified portfolio as the one above or one firm that holds the many licenses needed to handle all of the above assets. CIS Wealth Management Group, unlike a typical financial advisory firm, has the necessary licenses to offer all of them. We can help you with all of these choices as well as utilize fee based management, financial planning and wealth management to achieve your financial goals. For a no obligation phone, online, or office appointment call 830-609-6986 or email info@ciswealth.com.