Another thing I enjoy as an RIA is the opportunity to be creative. Let me be clear: creativity without ethics carries with it the potential for abuse. However, being creative in an ethical manner brings the very best to the client. Here’s what I mean.
Technology may not be the Holy Grail, but it can be very helpful. Bill Gates once said, “The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.” I have long needed a tool to help me manage client assets efficiently. I’d like to describe one such tool I have recently created.
As a fiduciary, I am not held responsible so much for the returns I bring to clients as I am for the due diligence process I employ. If I have a well-crafted, well-thought-out process, then I have met this requirement.
To this end, I have created a fiduciary scorecard (I realize I’m not the first) which ranks each mutual fund according to a predetermined set of criteria. I’ve chosen five broad categories. They are risk, expenses, relative performance, stability, and style consistency. Each of these broad categories is broken down into subcategories. For example, one subcategory for risk is standard deviation. A subcategory for relative performance is a fund’s ranking within its appropriate category, such as large value, intermediate- term bond, etc.
All I have to do is copy and paste a few things and everything else is automated. The report is one or two pages depending on the number of funds. I will run this each month to monitor all funds I hold in my practice. I’m very excited about this! I’ll write more about it later.
Thanks for reading.