It’s important to know a bit about the investment philosophy of those whom you trust to render financial advice and look-after of your assets. What are the underpinnings of your potential advisor’s techniques and service structure?
Goals Matter. Most of the time, we simply set very broad goals such as, “One day, I’d like to retire”. But goals need to have time and $dollar specificity.
Planning Matters. What do you want? Where do you want to go?
If you write it down, it will have a much greater chance of materializing. Planning – whether it’s creating a budget for your business or implementing a prudent investment plan to reach retirement – it is the cornerstone of wealth creation.
We believe in the power of planning, especially as it pertains to the investment management process. Our planning process is designed to help you identify your goals, focus and measure you goals with dollar specificity, and monitor the attainment of your goals while maintaining an appropriate level of risk for your personal situation.
Strategy – The Market is Your Ally, Not an Adversary!
Strategy Matters. How do you get there from here? Most financial advisors employ a strategy to attempt to “beat the market” by finding undervalued securities or attempt to “time the market” by strategizing about when to buy and sell. While this can be a winning game for Wall Street bankers, it’s generally a losing game for investors. Decades of academic research is undeniable clear about this.
We believe strongly in a “passive” approach to investing, giving every dollar in your portfolio a job to do by investing in an “asset class”. The word “passive” gets a bad rap sometimes. That’s not to say that we’re sitting on the sidelines. The evidence is clear – the odds for anyone to consistently pick the next Microsoft, Google, or Apple is very low. Some people do get lucky sometimes, but we would argue that if you did pick the next Google stock and won big-time, it was probably because of plain old luck and not any kind of skill that can be repeated year-after-year. The evidence is clear and the verdict has been read on “active” management.
Risk – Diversify! Diversify! Diversify!
“The essence of investment management is the management of risk, not the management of returns.” – Benjamin Graham, the father of value investing and widely known as a mentor to Warren Buffet.
The return that you achieve certainly matters, but the reality is that you have little control over the future return of your portfolio. Instead, risk can be measured and managed and should be evaluated carefully before you invest dollar-one. This can be accomplished by instead focusing on your “asset allocation”, or how much to invest and where. The question of “how much and where” (asset allocation) has been determined to be responsible for as much as 94% of the variation of returns in portfolios. Click here for way to-much-information on the subject. In other words, your portfolio’s future outcome will most likely be based on how it was allocated, or at least about 94% of the time!
That’s why we focus on your asset allocation.
This is not a new idea. “Divide your portions to seven, or even eight, for you do not know what misfortune may occur on the earth” Ecclesiastes 11:2.
Knowledge matters. All financial advisors are not created equal. Today there are around 650,000 people who call themselves financial advisors in one capacity or another. Yet, only about 72,000 (11%) are Certified Financial Planners – the gold standard for financial planners. Outside of credentialed financial planners, professional standards, if any, are splintered at best and the public is generally confused about what makes someone a “financial advisor”.
If planning is the foundation, knowledge is the cement that holds it all together. Knowledge is important. You want a financial advisor who has proven to have advanced level of understanding in tax, estate planning, investment theory, and retirement planning.
Cost matters. It’s a factor in which you have some degree of control (including our fee). That’s why we only utilize very low cost mutual funds and ETFs in our client’s portfolios, many of which are not generally available to the public at-large. Taxes are another important cost factor that should be woven into your plan.
Fiduciary Level of Care
When you visit your doctor, lawyer, accountant, or pharmacist, there is normally no question in your mind that these licensed professionals have a duty to act in your best interest. Unfortunately, that’s often not the case when you visit a financial professional, unless that professional is a Registered Investment Advisor who’s practice is a “fee only” investment advisor.
As Registered Investment Advisor is under a fiduciary standard of care for his or her clients. We are required to act in your best interest.