5 Small Portfolio Fixes That Make a Big Difference: Advisors’ Advice

Slideshow June 26, 2023 at 11:04 AM Share & Print

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Looking at clients holistically — taking in their big-picture needs, goals and personalities — may be key to successful financial advising. Sometimes, though, even a seemingly small recommendation can make a major difference to a client’s financial well-being.

Familiarity with relevant regulations and policies and how they might affect particular clients can lead to one change that enhances wealth by thousands or even millions of dollars.

Finding minor portfolio adjustments with a major impact is not just a helpful service for existing clients. Offering prospective clients a “second opinion” on their portfolio can be an effective way to persuade them to switch advisors, as Mitlin Financial founder Larry Sprung pointed out in a recent interview.

We asked advisors to tell us about a time they made a minor adjustment that made a big difference in a client’s portfolio. Check out the list for five of those changes. Some responses are edited for clarity.

Dinah Wisenberg Brin

NOT FOR REPRINT

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1. Knowing the Rules

I specialize in financial planning for federal employees. Federal Employees Retirement System employees get a 5% match in their Thrift Savings Plan only if they contribute 5% each pay period.

More times than I can count, people are front-loading the contributions, missing out on thousands of matching dollars. If they front-load, then every pay period that does not have a TSP contribution gets only the 1% auto match, not the other 4%.

I've seen clients’ accounts increase by thousands over a short period just because of this.

— Wes Battle, senior financial planner, Serving Those Who Serve

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2. Collaring Gains

I placed a costless collar on Peloton (PTON) for a client back in 2021. This allowed him to sell millions of dollars’ worth of PTON at $85 a share. Now PTON trades for almost 9 dollars a share. Also implemented this costless collar for a client with Snowflake (SNOW) at $300 a share, also in 2021. Snow now trades for $188 a share.

Both of these decisions helped save the different clients millions of dollars.

— Devin Pope, senior advisor, managing director, Nilsine Partners

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3. Cutting Fund Fees

Having spent 20 years in large wirehouse firms, I was familiar with their line of “active management is better than indexing” and “Vanguard was the devil.” I’m not kidding when I say that there was a disdain for low-cost solutions until that rhetoric could no longer fly and there was a change in tone in the early 2010s.

Nothing showcases this more than in 2013 when a client came to us with a large portion of their sizeable IRA in an S&P 500 fund. Not only was there a sales load, but internal expenses were 30 basis points when it could be had for three basis points. $1 million or 40% of the IRA was in this fund.

The fund originally sold to the client was an A-share BlackRock S&P 500 fund that the client paid a 2% sales load to get into and then 30 basis points [of] internal expenses. Once it came to us, it was just north of $1 million.

The fund was moved to the Vanguard S&P 500 (VOO) ETF at three basis points, which saved the client $2,700 of internal expenses per year just for this one holding.

We were able to make this change and a few others that saved the client thousands of dollars a year for just this simple change, and over 10 years, it’s been much more.

— Jeffrey Smith, managing partner, private wealth advisor, OWL Private Wealth Advisors

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4. Diversifying

A new client joined in 2021 with a legacy IRA that included over $250,000 in three small-cap stocks. We urged them to sell and diversify into our broader portfolio, which they did.

After selling, the three stocks dropped by 50% while the market portfolio had dropped by 10%. What seemed like a minor adjustment at the time shielded the client from $100,000 in losses.

— Noah Damsky, principal, Marina Wealth Advisors

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5. Shifting Into ETFs

A minor adjustment we made in a client’s portfolio was lowering the amount of bonds and fixed income in the account, and instead adding in 20% into buffered ETFs that offer downside buffer but have a cap on the growth. This benefited the client, and as we’re approaching a bull market, they’ve collected more of an upside than the bonds have rebuilt.

— Christopher J. Berry, founder, Castle Wealth Group

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