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Are You Suffering From “Benchmark-itis”?

What is more important to you – beating a benchmark or another money manager, or reaching your personal financial goals?  Please read on to learn how adopting a “goals based” approach can help you avoid the curse of “benchmark-itis.”

Numerous studies show that most so-called “active” money managers – money managers who try and beat the market – rarely do so.  When their actual performance is compared against their “benchmark” (for example, the S&P 500), they come up short.

Despite this, money managers doggedly stick to a system that measures success in terms of benchmarks, and inundate their clients with benchmark statistics. Although they rarely win, most money managers keep trying to beat someone.

This approach does not serve clients well. Investments are just a tool – and only one of the available tools – to help clients reach their financial goals.  The real measure of success should be whether or not the client actually reaches their goals.  Put another way, the focus of success should be on how the client did, not on how the money manager did.

Does your wealth management suffer from “benchmark-tiis”?  Ask your self these questions:

  • Do you have a written Balance Sheet and Cash Flow Statement?
  • Do you have a concrete set of financial goals for the next 3, 5 and 10 years?
  • Have you evaluated whether your goals are realistic — in light of your resources and historical rates of return?
  • Have you done a detailed analysis of your current investments – to see if they are properly positioned to meet your goals?
  • At least once a year, do you re-visit your goals and your progress in meeting them?
  • Does your financial advisor spend more time talking about products and performance or helping you meet your goals.

If you have answered YES to any of these questions, you are at serious risk of not meeting your financial goals.  There is a better way.  By using a client-focused, “goals-based” approach, you are much more likely to meet your goals, and you will sleep better at night.