Evaluating Financial Advisor Performance

[nydeidith]

Hope to get some advice and perspectives here. I appointed a fee based independent financial advisor last year to help me with investment and the annual review is coming up. Just wondering how do people normally go about evaluating the investment performance? what are the basis for comparison to judge whether the advisor is doing a good job? the portfolio has grown for sure but i am not sure how to judge whether the performance should be better or not. thanks for any advice/sharing especially if you also engage such advisors!

 

[Shiny Things]

Hey, this is actually a really good question, and there isn’t one clean answer unfortunately.

The broad answer is “would I have done better if I’d just bought an index fund?” - and “better” can be just a question of raw returns, or, more likely, returns vs volatility. Making 20% a year might sound great, but not if you’re enduring 50% swings in the value of your portfolio in the process.

The tricky bit, though, is which index fund you compare your advisor to - are you a more conservative investor? If so, maybe you compare your portfolio to a bond fund, or a 50/50 mix of bonds and Singapore stocks. If you’re more aggressive, maybe you compare your portfolio to a global stock fund.