To truly understand bespoke in finance, the meaning of bespoke must become clear to you. Typically, bespoke refers to something that someone custom-makes or tailors for a specific person or animal. The word originally meant, “to arrange or order in advance.” And the bespoke items could be clothing, shoes, furniture, etc. So, as long as an item is unique and meant just for you, it falls under the bespoke category.
Therefore, in the financial world, a bespoke portfolio is an investment portfolio that has been designed to specifically fit your financial needs, desires, values, motivations and goals, no matter how unusual they are.
However, a bespoke portfolio may also cover bespoke securities, which are customized financial instruments that investors choose for themselves or investment portfolio managers choose for their clients based on their unique requirements. A good example is bespoke tranche opportunities.
What Is a Bespoke Tranche Opportunity (BTO)?
A bespoke tranche opportunity is a structured financial product, usually in the form of a collateralized debt obligation (CDO), backed by a pool of assets and loans.
Dealers tend to create these products, tailor them to suit the unique needs of a group of institutional investors and sell a tranche or customized portion to that particular group. The dealer will then hold other tranches and attempt to hedge against losses by using other lower-risk financial products.
To enjoy the benefits of a bespoke portfolio, which may include BTOs, you need a bespoke financial advisor. Such professionals will work with you to create an investment portfolio that suits your needs by providing advice and even actively managing your unique set of assets.
Bespoke Financial Planning Tips to Consider
Below are some useful tips to consider if you decide to create a bespoke portfolio as an investor.
1. Think About What You Want
First, you must think about what you want. What are your deepest needs and desires? Do you want to be rich? Are you looking for freedom so you can spend time with your loved ones? Are you interested in traveling around the world luxuriously?
You must understand your needs and wants before sharing them with others who can help you achieve them.
2. Choose the Correct Bespoke Financial Planner
You may want to consider fiduciary, fee-only planners. Such advisors are registered and have a fiduciary responsibility to work in your best interest.
Fee-only advisors don’t accept compensation for selling you financial products. Instead, they will get paid for financial advice, implementing your plans and helping you manage your bespoke portfolio.
Some planners may offer a free or subsidized discovery session, which may be in-person or via video conference. When any advisors on your shortlist offer such meetings, use them to determine who will be the right fit for you. Because a bespoke portfolio is personalized, whoever is helping you manage it should “get” you and all you are about.
3. Answer all Questions in Detail
When you reach out to a bespoke financial advisor, expect a lot of paperwork. You will need to answer many questions to provide information about what you need.
If you are like most people in the country, you probably hate talking about what you earn and own. But you cannot afford to withhold information from your investment advisor.
Be honest when answering and include all relevant details, such as how much risk you can tolerate, how many assets you own and how much debt you are struggling with.
And don’t be surprised if the questions venture into the personal territory. It is critical that you share your aspirations, dreams and personal goals because these details will help in the creation of your investor profile and investment portfolio.
4. Factor In the Costs
If you opt for a fee-only planner, remember that their fees may be hourly, a flat rate or a percentage of your assets. But due to that, they will not have conflicts of interest when helping you achieve your financial goals.
A traditional financial planner may charge about one percent of your assets on a sliding scale. Those who charge a flat rate may charge anywhere from $1,000 to $5,000 per year. And those opting for hourly rates may cost $100 to $400 per hour.
Therefore, be prepared for such fees. And consider whether you could partly manage a structured bespoke portfolio once it is set up to cut down on management fees.
5. Don’t Be Afraid of Adapting
If you are going to spend significant amounts of money creating and managing a bespoke portfolio, don’t be afraid of making changes when your circumstances change. For example, if your BTO is not working anymore, you can work on ways to get rid of it and choose low-risk securities.
Remember, your investment portfolio manager is meant to act on your behalf. Since they make more when you earn more, it is in their best interest to help you succeed. So, they should help you fine-tune your portfolio when the necessity arises.
Ignorance is not bliss where your money is concerned. So, feel free to ask questions at every phase of the financial planning and implementation process when you don’t understand something. It is best not to worry about what people’s impressions of you are. And keep track and monitor your portfolio even if someone is managing it for you.
I hold a BS in Computer Science and have been a freelance writer since 2011. When I am not writing, I enjoy reading, watching cooking and lifestyle shows, and fantasizing about world travels.