3 Types of Portfolio Reviews and Why They Matter

Building and maintaining wealth is a journey. You start by taking the time to understand your needs and goals, and develop a plan and a portfolio that will help you realize them. But how do you make sure you stay on track?

Ongoing reviews are key to creating sustainable wealth. There are three types you need to understand—goals reviews, portfolio reviews, and policy reviews—and make sure you are receiving on a regular basis.

1.     Goals Review

A goals review gives both you and your advisor the opportunity to talk about the financial and lifestyle objectives you have that may impact your investment goals and strategies.

The first goals review takes place when we begin working with you. We use this time to get to know you and understand your needs, aspirations, and attitudes so we can construct a goals-based portfolio and establish benchmarks against which results can be measured.

During this process, you can expect to spend a lot of time talking about:

• Specific needs you have and goals you are trying to achieve.
• Your time horizons (short, medium, and long-term objectives).
• Past experiences with various forms of risk. How did you plan for and react to them? How have they shaped your perspective towards risk and uncertainty now?

Since goals and circumstances may change over time, we also conduct goals reviews on a quarterly basis as part of our ongoing review process. This allows us to capture any changes and, if necessary, modify your portfolio to keep pace with your evolving needs.

2.     Portfolio Review

This type of review focuses on determining how your portfolio is performing in relation to your stated goals and risk tolerances.

Typically, it addresses questions such as:

• Is your portfolio accomplishing what was expected?
• Are your short-term cash flow needs being met?
• Is your portfolio on track to meet your medium and long-term goal and aspirations?
• Is your portfolio behaving in an anticipated way?

When assessing your portfolio’s performance, it’s crucial you understand how it’s being measured.

In our industry, there is often a predisposition towards what’s known as relative or index-based benchmarking, which in essence measures the success of your portfolio against external indicators like the behaviour of the market or your peers. This approach can result in goal disconnect and lead to problems like depleted capital, exposure to excessive or uncomfortable amounts of risk, and missed funding requirements.

Goals-based benchmarking takes your actual goals into account and evaluates success based on whether or not your portfolio is enabling you to meet your short, medium, and long-term needs.

Watch our video to learn more about relative versus goals-based benchmarking.

3.     Policy Review

Policy reviews, which HighView conducts on at least an annual basis, typically cover:

• Changes to your portfolio’s structure, including any rebalancing your financial advisor feels may be prudent. Keep in mind that, although rebalancing can serve as an important risk management tool, it must be done using disciplined processes in order to be effective. Rebalancing too often can increase costs and prevent you from capturing the momentum of assets that are performing well, while not rebalancing often enough can expose you and your portfolio to excessive risk.
• Adjustments to your Investment Policy Statement (IPS) necessitated by modifications to your portfolio or shifts to your own needs, goals, timelines, and risk tolerances.

Building sustainable wealth requires determination and persistence. Reviews play a critical role in ensuring your portfolio continues to meet the needs for which it was designed, keeping you on track to achieving the long-term financial stability you seek.

HighView is an experienced portfolio management firm for affluent Canadian families and foundations. We would be happy to discuss our goals-based investment approach with you and your professional advisors.

You may also be interested in:

• Why Portfolio Monitoring Creates Sustainable Wealth
• Mitigating Volatility to Create Sustainable Family Wealth
• Due Diligence Can Distinguish Good from Bad Money Managers