As a high-net-worth individual, your financial success depends on the competence and diligence of your investment manager. But how can you tell if they’re truly delivering on their promises? Here are five red flags that might signal underperformance:
1. Consistent Underperformance Compared to Benchmarks: If your portfolio consistently lags behind relevant market benchmarks, it’s a cause for concern. While short-term fluctuations are normal, long-term underperformance might indicate your manager isn’t making the right choices.
2. Hidden or Excessive Fees: Fees can significantly eat into your returns over time. Be wary of managers who are not transparent about their fee structure or charge excessive fees that don’t seem justified by their performance.
3. Poor Communication and Lack of Transparency: A good investment manager should keep you informed about your portfolio’s performance, investment strategy, and any changes in the market. If you find communication infrequent or lacking in detail, it could be a sign of trouble.
4. High Turnover: Frequent buying and selling of assets can lead to higher transaction costs and potential tax implications. Unless your manager has a solid reason for high turnover, it might be a sign they are chasing short-term gains at your expense.
5. Ignoring Your Risk Tolerance: Your investment manager should tailor their strategy to your individual risk tolerance. If you feel they are taking on excessive risk or not aligning with your investment objectives, it’s time to have a serious conversation.
If you spot any of these red flags, it’s wise to seek a second opinion and consider whether your current investment manager is the right fit for you.
