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Should I diversify the number of advisors I work with to minimize risk and maximize my performance potential?

CTC | myCFO Michael Stritch, CFA ®, Managing Director

Chicago, IL Leading Wealth Advisor

Challenging conventional thinking: Investors are typically taught that diversification of portfolio assets is the prudent approach to preserving and growing wealth. Yet the majority of the families we serve appreciate that this tenet doesn’t necessarily apply at the advisory level. In other words, diversi-fying across multiple advisors without integrating their strategies may result in unintended consequences, includ-ing reduced access, heightened costs, greater risk and an overall increase in administration.

Reduced opportunity: Consider the following example: When wealth is allocated equally among three advisory firms, with each managing strategies in discrete silos, each firm has reduced capital available to build diversified portfolios. No portfolio may be large enough to be invested directly with many top-tier managers, particu-larly among alternatives, which typically require high-investment minimums. In such cases, clients may have to utilize fund of funds, reduce their number of separately managed accounts or use more “wrap-oriented” or potentially below-average solutions.

Using fund of funds vehicles, while appropriate in some cases, involves the loss of customization and may impose an additional fee layer not incurred when investing directly.

Higher costs: With limited excep-tions, using multiple advisors will almost certainly result in higher overall costs for the management of your wealth. In addition to the potential for reduced access noted above, which may neces-sitate the use of higher-cost investment solutions, another impact to families who divide their wealth among advisors is the loss of relationship pricing.

When assets are divided among advisors, the family’s wealth is sub-ject to each advisor’s stand-alone pricing structures. In contrast, when assets are aggregated with one advi-sor, a greater cost savings is generally achieved through breakpoint pricing and economies of scale, via a larger asset base.

Heightened risk: Another conse-quence of dividing assets among advi-sors is the potential for heightened risk from your potential loss of capital or the failure to achieve your goals.

Recommendations by advisors oper-ating independently can inadvertently lead to concentration of risk in a single asset class or security. Alternatively, recommendations by one advisor could ultimately hedge or neutralize another advisor’s recommendations, causing your portfolio’s risk profile to become more conservative than you want.

Also tied to heightened risk is the pursuit of high performance via the

proverbial “horse race.” If each advi-sor is to be judged solely by his or her performance, this strategy becomes fraught with potentially bad outcomes. For example, what risk parameters will be provided to ensure that each advisor doesn’t take outsized risk to achieve high performance? Is swing-ing for the fences to outperform one another the behavior you truly desire from each advisor?

Administrative headache: Finally, using multiple advisors will result in increased administrative complexity for your family. In addition to coordi-nating and communicating with sev-eral advisors via multiple phone calls, emails and face-to-face meetings, you will need to manage multiple state-ments, reports and reconciliations.

Our advice: So, what is a family to do, particularly when members are wary of entrusting their assets to one advisor? We have come to recognize that appointing a lead advisor offers families enhanced opportunities, sim-plicity, centralized risk management and administration and a lower cost structure. Our suggested approach does not imply that no other advi-sors/firms can be involved or play a part in the management of your wealth—just that there is a critical need for a quarterback and leader to oversee the effort.

By Michael Stritch

CTC | myCFO is the “brand” name delivering investment advisory services through CTC myCFO, LLC, an investment adviser registered with the U.S. Securities and Exchange Commission and a Commodity Trading Adviser registered with the Commodity Futures Trading Commission (“CFTC”), and a member of the National Futures Association (“NFA”); trust, deposit and loan products and services through BMO Harris Bank N.A., a national bank with trust powers; and trust services through BMO Delaware Trust Company, a Delaware limited purpose trust company. Family Office Services are not fiduciary services and are not subject to the Investment Advisors Act of 1940 or the rules promulgated thereunder. The information contained herein should not be construed as personalized investment advice, and should not be considered as a solicitation to buy or sell any security or engage in a particular investment strategy.

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“Our suggested approach does not imply that no other advisors/firms can be involved or play a part in the management of your wealth—just that there is a critical need for a quarterback and leader to oversee the effort.”—Michael Stritch

Financial Services Experience 15 years

Minimum Fee for Initial Meeting None required

Largest Client Net Worth $5 billion+

Number of clients335

Website www.ctcmycfo.com

Compensation Method Asset-based (investments), � xed and hourly fees

Primary Custodian for Investor Assets Multiple–please inquire

Professional Services Provided Planning, investment advisory, capital advisory, � duciary advisory and comprehensive family office services

Minimum Net Worth Requirement $100 million net worth (for planning services)$25 million in investable assets (for investment services)

Email michael.stritch@ctcmycfo.com

CTC | myCFO 111 West Monroe Street, 10E, Chicago, IL 60603 312.461.3184

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How to reach Michael Stritch

Please contact me by emailing michael.stritch@ctcmycfo.com, which allows me to easily and quickly respond. However, I welcome a phone conversation to learn more about the opportunity or issue, if an in-depth discussion warrants.

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Michael Stritch joined CTC | myCFO in 2013 and has over 15 years of experience in financial services, specializing in investment strategy and research. He is responsible for overseeing the delivery of investment advice to clients across the enterprise. Mr. Stritch is directly involved in the development and implementation of long-term investment policies, analysis of client portfolios and recommendations of appropriate portfolio allocations, as well as the evaluation and selection of investment managers. He received a BA in economics from Northwestern University in Evanston, Illinois, and an MBA with distinction in finance and decision sciences from the J.L. Kellogg Graduate School of Management at Northwestern University. He is a CFA® charterholder, member of the CFA® Society of Chicago, the CFA Institute and Chicago Quantitative Alliance.

About Michael Stritch

I enjoy running, reading and spending time with my three daughters.

MY HOBBIES ARE…

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CTC | myCFO is featured in Worth® 2015 Leading Wealth Advisors™, a special section in every edition of Worth® magazine. All persons and firms appearing in this section have completed questionnaires, have been vetted by an advisory group following submission by Worth®, and thereafter paid the standard fees to Worth® to be featured in this section. The information contained herein is for informational purposes, and although the list of advisors presented in this section is drawn from sources believed to be reliable and independently reviewed, the accuracy or completeness of this information is not guaranteed. No person or firm listed in this section should be construed as an endorsement by Worth®, and Worth® will not be responsible for the performance, acts or omissions of any such advisor. It should not be assumed that the past performance of any advisors featured in this special section will equal or be an indicator of future performance. Worth®, a Sandow Media publication, is a financial publisher and does not recommend or endorse investment, legal or tax advisors, investment strategies or particular investments. Those seeking specific investment advice should consider a qualified and licensed investment professional. Worth® is a registered trademark of Sandow Media LLC. See “About Us” for additional program details at http://www.worth.com/index.php/about-worth.

Michael Stritch, CFA® Managing Director

CTC | myCFO 111 West Monroe Street, 10E

Chicago, IL 60603Tel. 312.461.3184

michael.stritch@ctcmycfo.comwww.ctcmycfo.com