Individualized Investment/Financial Management Relationship
We see your investment and financial management needs as a personal enterprise, not a routine, cookie-cutter exercise. In that vein, we perceive our role to be the CFO of that enterprise. Competent professional financial management requires that we fully understand your concerns, objectives, and the significant events in your financial life. Thus, we place high value in regular communication– with information flowing in both directions. We pledge to invest the time to cultivate that level of communication and then to use it for more successful outcomes.
Strategic and Tactical Asset Allocation
Individual stock selection makes for good cocktail party conversation. However, institutional and other professional managers – the so-called “smart money” – manage by various forms of asset allocation in combination with tactical strategies to manage risk and optimize performance. Executed properly, asset allocation can be an effective risk management device and a significantly higher determinant of portfolio return.1
We manage six different model portfolios by asset allocation according to client risk tolerance and time horizon. By combining different classes of assets in each portfolio, we strive for effective diversification, designed to lower portfolio risk and raise expected returns. Then we actively manage the portfolios to readjust on systematic and tactical levels.
A significant responsibility is selecting from among the best products and managers that are available. We don’t just look at numbers. We meet and talk with fund managers as often as we can and we have an extensive network of relationships in the fund and investment banking industries that we draw on for information and access. We consider factors such as management tenure, depth of global research, and investment management process. This aspect of our approach is a key differentiator from what most of our clients have experienced at their banks and brokers.
Large losses are insidious to building financial security and independence. From 2000 to 2010, circumstances for large portfolio losses (i.e. greater than 25% declines, peak to trough) occurred no less than five times. It is reasonable to expect we have not seen the last of such market declines. Yet, for many of us, the solution is not in keeping our investable resources in cash. Our long-term security cannot afford the meager returns that cash investments yield.
We approach risk management proactively and use a multi-pronged approach. We construct portfolios across a range of six risk profiles and recommended time horizons. We use both traditional and alternative asset classes to populate the portfolios according to the risk tolerance of each client. We choose alternative asset classes based on specific statistical characteristics that are designed to lower portfolio risk. This aspect of our process provides a more effective means of building a truly diversified investment portfolio. Finally, we supplement our approach with tactical risk management strategies as the capital markets make them available to be exploited.
Transparent Fees / Avoiding Conflicts of Interest
We receive compensation solely from our clients because we work exclusively for our clients. We don’t work for a bank, brokerage, or insurance company. We have no incentives to use certain financial products over others, aside from our own determination that the product puts you in the best position to achieve your financial objectives. Our management incentives are aligned exclusively with the performance objectives of our clients. You can be certain that if we do the due diligence on a product and decide to use the product, it is because of expected performance and not fees or commissions.
Because we are performance and risk management driven, we are focused on cost control. We choose to invest in research, information and technology resources that enhance our capacity to make the best decisions for our clients. We have found that we can run tight expense controls without giving up access to world class investment products. When it comes to direct expenses, we look to pay the lowest management fees for the third party managers we hire – as, for example, through institutional level share classes.