December 10, 2009 08:44 ET

End of the Year Triggers Emotional Desire to Review Investment Strategies

Sloan Wealth Management Advises Long Term Focus

DALLAS, TX--(Marketwire - December 10, 2009) - As the calendar closes in on the end of the year, many investors are wondering both, "What happened?" and "What should I do next?"

For Rick Lear, vice president of Sloan Wealth Management, these sorts of questions indicate the need for more communication throughout the year between a client and his or her investment advisor, as well as a long-term focus that isn't based on any one calendar year.

Lear and the team at Sloan Wealth Management work with high net worth individuals and their families, but what makes them different, he says, is a recognition that there is an emotional aspect to investing, a factor he calls "behavioral finance," driven by both calendars and emotions that can be wildly divergent among individual investors.

"People are always asking us 'What's the best thing to be doing with my money right now?,' but the reality is there is no one perfect answer to that question. So much of successful money management is driven by a long-term focus on the individual investor's goals, objectives, and emotional comfort level," Lear says.

"The four biggest concerns of our typical client are all more emotional than financial in nature. People want to be able to maintain their current lifestyle when they retire, they want to pass wealth on to their heirs, they don't want to lose money, and they are usually afraid of change. These are emotions that have to be addressed when developing a wealth management strategy," Lear says.

Addressing the emotional side of investing does not mean that Sloan Wealth Management is soft on the hard facts of the investment world. Quite the contrary, says firm founder and President Frank O. Sloan, himself an active member of both the Association for Investment Management and Research, and the Dallas Society of Financial Analysts.

"There is definitely a science to economic behavior and investing, and we use sophisticated proprietary processes that focus on navigating our client's wealth through both up and down cycles. Our investment strategy is anchored in Modern Portfolio Theory, which comes from the research of Nobel Prize-winning economist Harry Markowitz. We focus on long-term results and an appropriate balance between risk and rewards, and we monitor all the relevant factors that indicate the need to move money, while keeping focused at all times on our specific client's goals," he says.

"Those goals may involve trigger actions at times like the end of a year or the start of a new one, but those are primarily driven by tax law, not the investment landscape," Sloan says.

"At the end of the year, clients are looking at making investments in their retirement accounts, converting Roth IRAs, and positioning their portfolio for the next year. These types of decisions are driven by tax planning and cash flow needs as much as by what is happening in the markets," Sloan says.

The fact remains that the end of the year signals the emotional desire to review your investment strategy, asset allocation, and investment selection. Sloan says that, despite recent market gains, investors by and large are still very concerned about the troubled state of the finance industry, skeptical about product sales people, and concerned that all the rules, which they may not have clearly understood in the first place, have changed.

"Both resistance to change, or a client's emotional desire to do something radically different in light of a current market condition, are some of the biggest obstacles we face in educating our clients. Our wealth management strategies are based on a disciplined approach that plans for fluctuations in the market and recognizes that volatility will always exist. Rather than following the crowd in a move away from an underperforming asset, we recognize it, monitor it, and focus on balancing a portfolio," Sloan says.

"Thematic Rebalancing" is a term Sloan uses to describe the process the firm takes when research and study indicate a need to divert away from an existing portfolio strategy.

"We reject the automated models that many brokerage firms use. Those can be good in some situations but often cause changes to be made before necessary, leaving the investor to lose out on eventual gains. A rebalancing of asset classes is only done after careful evaluation and agreement among our entire team that a particular asset class needs to be underweighted or overweighted," Lear says.

"If your financial advisor is not talking to you about your emotions and feelings, there is a big piece being left out of your strategy," Lear says.

Sloan Wealth Management works with individuals, trusts, foundations, corporations, and associations that have a minimum portfolio value of $1 million. The firm is located in Dallas. For more information, visit www.sloanwm.com, or call 214 720 7500.