Martin, The Smart Financial Advisor

The subtitle of Bill Martin’s The Smart Financial Advisor (Harriman House, 2017) says it all: How Financial Advisors Can Thrive by Embracing Fintech and Goals-Based Investing. Martin, the chief investment officer at INTRUST Bank, beats the drum for goal-based investing since it has so many benefits, for both advisors and clients. For instance, it enables advisors to manage more of their clients’ wealth, it better matches assets and liabilities, it determines the optimal asset allocation, it minimizes taxes, and it increases an advisor’s value. He also advocates using fintech within a goals-based investing framework to efficiently manage, monitor, and report goal progress.

Most investors fall victim to a bevy of investing hazards. They react to external factors, fail to plan, quarantine their portfolios, mismanage risks, rely on alluring stories, ignore taxes, and focus on past performance. Advisors can address these hazards by adopting goals-based investing, identifying and prioritizing client goals, managing client wealth holistically, assessing risk comprehensively, determining the optimal mix of assets and constructing portfolios intelligently, utilizing tax-smart investment strategies, and tracking goal progress.

Goals-based investing is gaining traction among advisors and “finally appears positioned to become the new industry norm in managing wealth.” Historically, from the 1900s to the 1960s investors held concentrated stock portfolios and evaluated their stocks independently. From the 1960s to the 1980s Markowitz’s theory of portfolio selection became the guiding model, then from the 1980s through the 1990s strategic asset allocation took over. Employing Markowitz's model added value to investors' portfolios; strategic asset allocation added more value. Today, in part as a result of the findings of behavioral finance, goals-based investing is beginning to take center stage, and it is adding yet more value.

Martin explains the ins and outs of goals-based investing, step by step, element by element. Although he is writing for financial advisors, I consider his book a must-read for the DIY investor as well. Admittedly, it’s a lot harder for the individual investor to stay on track without the assistance of an advisor, but it’s virtually impossible without a viable, forward-looking plan. If you’re acting as your own advisor, you couldn’t ask for a clearer, more useful book than The Smart Financial Advisor.