Jonathan Clements, the founder and editor of HumbleDollar.com and former director of financial education for Citi Personal Wealth Management at Citigroup, once said, “The ability to control and spend your day doing what you want without worrying about money is at the core of financial freedom.”
As a financial advisor or wealth manager, one of your most important missions is to help your clients achieve this goal, whether that means retiring comfortably, sending their children to college, or preserving a multi-generational legacy. And one of the most important things you can do to help your clients achieve financial freedom is to rebalance their portfolios regularly.
But sometimes, portfolio rebalancing is a manual process that can be time-consuming and error prone. Innovative firms today use rebalancing and trading technology to help them streamline the process and make it more efficient, precise, and personalized.
Benefits of portfolio rebalancing
Portfolio rebalancing can help advisors to:
- Keep portfolios on track. As the market fluctuates, the asset allocation of a portfolio can drift. Rebalancing helps to bring the portfolio back in line with the investor’s risk tolerance and investment goals.
- Achieve long-term discipline. Financial freedom is often the result of consistent, disciplined, and strategic investing. Rebalancing enforces a disciplined approach by ensuring that portfolios align with clients’ initial investment strategy.
- Reduce risk. When one asset class experiences a decline, rebalancing can help offset some losses by selling parts of the asset class that have appreciated and buying more of the asset class that has declined.
- Improve returns. By selling high and buying low, rebalancing can help improve a portfolio’s overall returns.
- Keep clients’ emotions in check. When the market is volatile, it can be tempting for investors to make emotional investment decisions. Rebalancing can help to keep your clients’ emotions in check and prevent them from making rash decisions.
Rebalancing best practices
How often you should rebalance your clients’ portfolios depends on their circumstances. Some factors to consider are their risk tolerance, investment goals, and market volatility. Generally, rebalancing at least once a year is the norm. However, you may need to rebalance more often if the market is volatile and your clients’ risk tolerance changes or life events happen.
Here are some best practices for using portfolio rebalancing to help your clients achieve financial freedom:
- Explore the advantages of using model portfolios that can be personalized through rebalancing and trading, allowing you to focus more time on clients.
- Achieve mass portfolio modeling and customization at the household level to improve tax efficiencies, asset location preferences, personalized risk profiling, and holistic client conversations.
- Use a standardized rebalancing approach to accelerate speed and accuracy and ensure knowledge of clients’ needs and wants are memorialized within the system.
The technology imperative
Rebalancing and trading technology is crucial for any firm looking to help their clients achieve financial freedom. The essential components of a solution include a combination of portfolio monitoring, pre-trade and post-trade compliance, order management, tax-loss harvesting, and risk analysis to help you:
- Simplify complex rebalancing and trading
- Save time and effort by eliminating manual portfolio adjustments
- Personalize portfolios at scale so you can manage a larger client base
- Adapt investment strategies to life changes
- Build trust and confidence with compliance checks
- Future-proof your business with a cloud-based solution
Empowering clients toward financial freedom
Ultimately, the mission of financial advisors and wealth managers is to guide their clients toward financial freedom—a state where they can enjoy life without financial constraints. Rebalancing technology is a formidable ally in achieving this goal by consistently optimizing portfolios, managing risk, and adapting to changing circumstances. Learn more about how intelliflo redblack can help you to achieve your clients’ financial goals.