We understand that each client is unique and as a firm we are positioned to serve each client on an individual basis. Our process always starts with meeting you and getting to know you on a personal level. We want to know who you are, what your passions are, and what you want to see from your investment manager. We’ll talk about your short and long-term goals, your tax situation, and what types of accounts you have. We also learn about the assets you own that may not be in your portfolio- real estate, car or art collections, or incentive stock options to name a few. We’ll even ask if there are types of assets we should not buy for your account.
Next, we’ll assess your level of risk tolerance. Your risk tolerance is deeply personal and unique to you. Some of our clients are focused on growing their wealth and some clients are focused on keeping their wealth. We use an investment profile questionnaire to look at how you might react to volatility in the future, but also ask questions about how you handled volatility in the past. Your risk tolerance will change over time and we can make adjustments as these changes occur.
Finally, we’ll determine how you’d like to see the account managed. We work with both young professionals and high net worth clients and we understand that each client’s unique situation will play a role in determining the management style of the account. We have some clients who own very low-cost basis stock who are looking to minimize tax consequences and therefore keep trading to a minimum. We also have young clients who are looking for performance in a cost effective and diversified way. Our independence as a firm allows our strategy to be flexible and customized to each client.
We’ll use all this information to create a detailed Investment Policy Statement that outlines the parameters for your accounts. Our goal is to take the least amount of risk that allows each client to fulfill their goals. In everything we do, our goal is to understand the totality of your financial life to ensure we are truly working as fiduciaries and making the decisions that are in your best interests.
Portfolio selection depends on many factors, chief among them being the size, type of account, and risk tolerance. However, depending on your unique situation other factors may come into play.
For smaller accounts, where owning a wide range of stocks and bonds would be cost prohibitive, we have developed proprietary models of Exchange Traded Funds (ETFs) that provide broad diversification while keeping the costs low. The allocation to each ETF in our model portfolios is designed to approximate the market weight of that subset of the market. For example, our U.S. small cap allocation would typically be close to the market weight of US small cap stocks. However, we actively watch the market and the economy and holding a portfolio of ETFs allows us to adjust allocations if we feel a certain subset, asset class, or region of the world should be over or underweight.
For larger and more complex accounts, portfolios typically consist of individual US large cap stocks and individual laddered bonds. Our investment “style” is most accurately described as “Growth at a Reasonable Price” (GARP). This is a blend of the growth and value styles. It means that we look for companies that have good growth potential without taking on the risk often associated with companies that are excessively valued. We keep our portfolios diversified across all sectors of the market from tech to utilities, but we actively adjust the allocations to each sector over time if we feel a certain sector should be over or underweight.
There are numerous complexities associated with effectively managing a large and complex portfolio, so we take care to consider all the potential ramifications of our investment choices. For example, we would typically take less risk in an IRA knowing there would be no availability to write off a capital loss and instead look for income opportunities. Likewise, for a client who is in a high tax bracket, we may try to avoid dividend income in their taxable account and instead seek income through tax free municipal bonds. Depending on the specific type of sector or subsector exposure we are looking for, we also use no-load mutual funds and increasingly, ETFs. Typically, mutual funds and ETFs are used in larger accounts for broad diversification for that particular type of asset at a low cost. For example, we would not take on the risk of holding high yield bonds from just two companies, but we may hold a bond fund or ETF specializing in high yield debt.
Often, our clients with larger or more complex accounts have specific goals they are looking to fund or certain years where they know their spending will be higher. By creating laddered bond portfolios, we can provide a consistent income stream of coupon payments, a “lump sum” of maturing bonds, or some combination of the two. Furthermore, by holding real bonds rather than bond funds, we are able to reduce the carrying costs and reduce the risk of being underfunded for a goal should rates rise. Our accounts hold treasuries, corporate bonds, and municipal bonds (where appropriate).
Regardless of the size or complexity of your account, our role as a fiduciary means that we put ourselves in your shoes and make the decision that is in your best interest. We use our knowledge of who you are, what your risk tolerance is, and even your values to create a portfolio that is unique to you.
Monitoring– After the decisions have been made on how to invest the account, we keep a close eye on individual company news, the market, and the world economy to look for issues or trends that could disrupt the thesis on any of our positions. Adjustments are made as necessary, though we try to keep trading to a minimum.
Tax Loss Harvesting- At year end, we perform tax loss harvesting on all our taxable accounts to minimize potential tax burden.
Rebalancing- Accounts are rebalanced throughout the year when a position or asset class becomes too small or too large.
Our goal in the monitoring and maintenance phase is to keep clients on track with our initial investment plan. Part of this step involves behavior management. As we alluded to in the “gathering information” step, our goal is to create a plan that allows each client to minimize risk, but still achieve their goals. We are here as a partner for you to help keep you on track through the ups and downs in the market.
We are a fee-only firm unwavering in our promise to deliver a long-term financial strategy that will help guide your financial decisions and answer your financial questions. We want you to know where you stand and have a plan to get where you want to be.