Overexposed: The Realities Of Single Investment Manager Concentrations

In recent months, we’ve been introduced to several Financial Advisory Firms (ie: Insurance Advisors, Financial Planners, Accountants, etc.) who refer client business to various Investment Management firms.  Given the growing need for high quality, discretionary investment managers, we believe that this referral strategy is a great one for Financial Advisors to fully service their clients’ holistic financial needs. In our experience, though, two areas of risk in such a referral strategy are:

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1. The Financial Advisor not performing sufficient due diligence and ongoing monitoring of Investment Mangers.

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2. The Financial Advisor concentrating their referrals to single (or limited number of) proprietary Investment Managers.

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