Are There Risks in Investing With a Single Firm?
Investment and operational risks merit further scrutiny.
Question: I'm in the process of getting ready to retire, and for simplicity's sake, I'd like to consolidate my investment assets with a single firm. But are there any risks to doing so?
Answer: The virtues of running a lean and mean portfolio apply no matter where you are in your investing life. First, you'll have fewer moving parts to oversee, freeing up time for activities other than monitoring your portfolio. You'll also be able to get more bang for your buck by stashing a higher percentage of your money in higher-conviction holdings.
But it's also prudent to explore whether there's a downside to having more (or even all) of your eggs in one basket. There are two key sets of risks to consider: first, whether investing with a single firm will expose your portfolio to undue risks from an investment standpoint because of a lack of diversification, and second, what would happen if the firm you invested with seized assets from client accounts. Would you have any recourse?
Christine Benz does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.