Keeping Portfolios in Stride With Clients’ Lives

Monish Verma of Vardhan Wealth Management helps clients grow with their financial plans.

  Investors should manage their portfolios for different phases of their lives, Monish Verma told etf.com for its ongoing Advisor Views series. 

The managing partner at Farmington Hills, Mich.-based Vardhan Wealth Management said that young professionals "need to be aggressive with...retirement plans" and "start investing with a trusted advisor," but should evaluate risk and adjust their strategies as they age.

Jeff Benjamin: How important is it to manage portfolios for different phases of your life?

Monish Verna: I feel that it is very important. First, when you are a young professional, you need to be aggressive with your work retirement plans and start investing with a trusted advisor that knows your needs and wishes. Once you enter your next phase of your life, like having a spouse or a family, you will have to evaluate your risk and see if you need to adjust the risk you are taking in the equity markets and perhaps look at alternatives that would fit your investment strategy. I would also present wills, college funding for young children and life insurance to protect your family.

JB: What phases are we talking about?

MV: The phases I talk about are the phase in life when you want to take on risk; you have time on your side so why not invest in the stock market in the US and abroad.

Once we have been in this phase for the first part of their career, I start to introduce the phase of producing income from their portfolio. This additional income could allow them to reinvest back into their portfolio or establish an additional income stream to supplement their lifestyle, pay insurance premiums, or acquire cash flowing real estate.

Multiple Income Sources

This phase teaches clients the importance of multiple sources of income.

The final phase I introduce to my clients is protection. Once they have enough, we want to review their risk and protect their portfolio on the downside. We can still grow and produce income, but I want them to do it prudently as we may be within a few years of their retirement goal.

JB: How extreme are the portfolio adjustments in the different phases?

MV: This really depends on the goals we established early on and the discipline the client brings to the table of saving and investing.

I usually don’t like to change the portfolio in extreme ways, that usually causes a lot of tax issues. I typically like to massage the portfolio every few years as it grows to get from one phase to the next.

Psychology and Investing

JB: How much of this is psychological?

MV: Usually, a fair amount of interaction with our clients has a psychological component to it.

Typically, we work with both spouses when we create the financial plan, estate plan and insurance plan. They usually both don’t come to the table with the same risk profile, sometimes when we have a really in-depth conversation, we find out that there may have been past experiences that cause them to want to be more aggressive or conservative than they need to be or want to be.

I find that part of our job is to educate them on what they need to know, not only what they would like to hear. Once we establish that trust early and can align both of their wishes to a functional plan, we can get more done. This really involves having both of the spouses included on at least the planning meetings if not all the review meetings as well.

JB: How do you align this strategy when working with a couple?

MV: When both spouses are open to taking an active involvement in their financial relationship, I believe we can get the plan in place faster and get the planning and review meeting to be more productive.

It all stems from the planning, risk assessment and actions we take from the planning. I find that if you engage both spouses, the relationship becomes much deeper.

And we usually get more referrals, and when one passes away, we continue the relationship with the survivor. Another interesting fact that happens is that if a divorce happens to occur, we have a deep relationship with both parties and usually keep both as clients.