Is Our Family Wealth Manager Leading Us Astray?

Navigating family finances can be a complex and sensitive issue, especially when trust plays a significant role. I find myself questioning whether our family’s wealth manager is truly acting in our best interests or if there’s something more insidious at play.

Wealth Manager Overview

Our wealth manager is not just a financial advisor; he’s a distant relative and a friend of my father’s, managing family assets since 2017. Currently, he holds a Senior Vice President position at a boutique wealth management firm. His strategies originally revolved around investing in mutual funds, ETFs, and stocks. However, in the wake of the COVID-19 pandemic, he introduced options trading into our portfolio, using portfolio securities as collateral to sell options.

At first, this approach seemed promising and yielded positive outcomes for approximately six months. Unfortunately, it appears that his positioning has since faltered, leading to troubling results.

Investment Strategies and Concerns

One of the more alarming aspects of our situation is the history of underperformance. He previously sold a hedge fund-equivalent investment to my grandfather, resulting in a significant loss of about 25%—a warning sign that should not be overlooked.

Throughout the course of his management, I observed that when positions threatened to expire in the money (ITM), his solution was to roll them over to future expirations, banking on the market to revert. While this tactic worked occasionally, it has also led to significant traps, particularly after the easing of geopolitical tensions surrounding Russia and Ukraine. The market rebounded, leaving him stuck in unfavorable positions.

Most concerning to me is his repetitive reliance on strangles as his sole trading strategy for options, revealing a lack of versatility and effective risk management. When faced with poor performance, his response has largely been to roll over positions that are “bleeding,” rather than employing a more robust strategy.

Financial Performance and Fees

Compounding these issues is the fact that his firm charges brokerage fees that are above the market average, and, since 2021, our accounts have been steadily declining. He has indicated that once we navigate the current turmoil, he will discontinue trading options. However, he has also introduced the idea of investing in mid and small-cap stocks, where his firm claims to have superior research capabilities.

My Background and Observations

As someone with a finance degree, coupled with qualifications such as the CFA and FRM, and experience in investment banking, I can’t help but