A Conversation With Michael Harding
President | Harding Financial Group
Published September 11, 2009
In addition to his role as president, Harding is a portfolio manager at the firm he founded in 2005. Harding Financial specializes in performance-based wealth management and customized investment strategies. Before launching the company, Harding, 32, spent eight years with investment firms Morgan Stanley and Merrill Lynch working on strategies for high-net-worth individuals and managing more than $160 million of client assets. The native of Worthington holds a degree in financial management from Ohio State University.
What are financial advisers doing to regain the trust of their client base? How long will it take?
There is a wide diversity of “advisers” and each has different levels of professional guidelines functioning as ethical safeguards. But rules alone cannot regulate ethical behavior. As a certified financial planner, I begin with ethical recommendations from the Certified Financial Planner Board of Standards, then build on that code of ethics using wealth management initiatives focused on guarding objectivity and maximizing transparency. We call it ethics-in-motion.
What is “ethics-in-motion?”
We put an array of ethical safeguards into motion. For example, client assets are held in the client’s name at third-party fiduciary Charles Schwab Institutional. And, we are independent and not captive to any bank, brokerage or insurance company. Clients have a choice of fee-only or performance-based wealth management.
How has the recession affected the importance of transparency in portfolio management?
Portfolio transparency should be established at the beginning of the client/advisor relationship. The recession exposed that investors didn’t know how much risk they were actually holding. Poor transparency also disguised hidden fees, costs and conflicts of interest, which reduce a portfolio manager’s objectivity and can lead to poor performance.
What is the confusion surrounding performance-based asset management these days?
The vast majority of “financial advisors” are not Registered Investment Advisers but registered sales reps whose job is to sell investment products for their respective firms. Thus they are not allowed to offer performance-based fees. The Securities & Exchange Commission allows an RIA to enter into a performance-fee arrangement with clients having a net worth of more than $1.5 million and who have at least $750,000 with the advisor.
How do you recommend clients invest their money during an economic recovery, based on current economic projections?
Conservatively, and with a well thought-out strategy. Most individuals coming into my office looking for a new adviser are using a failed buy & hold approach. We create a customized investment policy statement for clients.
It’s a living document summarizing each client’s investment portfolio strategy and serves as the touchstone for ongoing investment decisions. Each statement is written assurance the portfolio will be managed according to a mutually agreed upon strategy.
For those investors the existing recession caught off-guard, how can they protect themselves against another?
An adviser who failed to defend your portfolio during the recent downturn is unlikely to grow your portfolio when the market recovers. It’s your money. Find a proactive portfolio manager… look them in the eye, check credentials, and judge their transparency and objectivity. Trust must be earned.