Financial Legacy Management Financial Planning, Portfolio Management, Retirement Plan Management "The only financial resource you'll ever need" |
Portfolio Management Services
The second level of your financial pyramid is asset management. With a solid foundation,
you have the ability to pursue higher returns on your investment portfolio. Your
investment portfolio is the fun, exciting part of your finances. Like building a house,
although the foundation is the most critical part, most people want to spend all of their
time decorating or designing a unique house.
Our Philosophy
Expenses can decimate an investment portfolio. Some fees are necessary to receive
financial advice, but most people do not know all of the expenses that their portfolio is
being charged. For example, do you know what mutual fund sales loads, 12b-1 fees,
trading costs, mutual fund management expenses, and extra taxation costs as a result of
excessive trading that you pay annually. These fees can easily subtract 3% yearly from a
portfolio. Therefore, if your portfolio had an average return of 8%, you would only receive
around 5% after fees, expenses, and taxes. On a $100,000 portfolio, this would be the
difference between having $684,848 and $338,635 after 25 years.
Most of these excess fees are a result of advisors trying to find the next Microsoft or Dell.
The sad thing is, none of these extra fees have a positive relationship with investment
returns. As a matter of fact, a professional study was conducted and it found that 95% of
all investment returns can be explained by asset class selection (such as whether you
were in large-cap stocks, small-cap stocks, bonds, real estate, etc.). That means less than
5% of your returns are dependent on those expenses for which most people are
overpaying. We try to minimize expenses from trading or mutual funds; and we analyze the
tax consequences of any transactions that we make.
Our philosophy is different. We spend our time concerned with trying to find the right
asset class mix to maximize your return and minimize your risk. Our approach is based on
Nobel Prize winning research (not by us!) called modern portfolio theory, which states that
there is an efficient mix of assets for any given risk level. We spend our time on trying to
find the most efficient asset classes for your portfolio. We try to minimize expenses from
trading or mutual funds; and we analyze the tax consequences of any transactions that we
make.
We also focus on finding your appropriate risk level. Investment managers measure the
risk level that is appropriate for a client in two different ways: your willingness to take risk
and your ability to take risk. Your willingness to take risk is influenced by a lot of different
factors. This could include: parent’s feelings about money, personal experiences with
money, bad previous investment experiences, and lack of education about investing. A
good financial advisor will help to educate the investor and over time most investors will
become more comfortable with the process and increase their willingness to take risk.
Your ability to take risk can be gauged by analyzing your financial situation. The following
would all increase your ability to take risk: low levels of expenses to income, high level of
net worth, long investment horizon, low levels of debt, adequate emergency cash
reserves, proper amounts and kinds of insurance, and job security among others. Having
a good financial plan is like the having a strong foundation on a house. It will allow you to
build a more elaborate house, with more security in the long term nature of the project.
Financial planning will increase your ability to take risk.
It would be detrimental to invest at a level of risk higher than your ability or willingness.
This would surely lead to an increased chance that you will need or want to sell equities
during a down period.
After we have determined the correct risk level, we will develop an investment policy
statement (IPS) that will include any situations or tax considerations that are unique to
your portfolio and recommend an asset allocation. We look at providing an allocation for
all of your investment accounts, with consideration to the different tax consequences of
each, while maintaining focus on the entire portfolio. We consolidate all of your investment
accounts into our database management software. This allows us to provide you with an
overall picture of your investments. Asset management services will include:
All of our services are billed as a percentage of assets under management. Again, all
compensation comes from you. The fee will be drafted from your investment account at
the beginning of each quarter, based on market value of the investment assets at the end
of the previous quarter. The minimum fee for any quarter is $250. The fees will be
calculated as follows:
Advisory Fee Structure
1.0% on the first $1,000,000 of assets.
0.8% on assets over $1,000,000
To paraphrase Warren Buffett and Charlie Munger – The wise investors bet heavily
when the world offers them that opportunity. They bet big when they have the odds.
And the rest of the time, they don't. Wait for the FAT PITCH. You don't get paid for
activity. You get paid for being right
The second level of your financial pyramid is asset management. With a solid foundation,
you have the ability to pursue higher returns on your investment portfolio. Your
investment portfolio is the fun, exciting part of your finances. Like building a house,
although the foundation is the most critical part, most people want to spend all of their
time decorating or designing a unique house.
Our Philosophy
Expenses can decimate an investment portfolio. Some fees are necessary to receive
financial advice, but most people do not know all of the expenses that their portfolio is
being charged. For example, do you know what mutual fund sales loads, 12b-1 fees,
trading costs, mutual fund management expenses, and extra taxation costs as a result of
excessive trading that you pay annually. These fees can easily subtract 3% yearly from a
portfolio. Therefore, if your portfolio had an average return of 8%, you would only receive
around 5% after fees, expenses, and taxes. On a $100,000 portfolio, this would be the
difference between having $684,848 and $338,635 after 25 years.
Most of these excess fees are a result of advisors trying to find the next Microsoft or Dell.
The sad thing is, none of these extra fees have a positive relationship with investment
returns. As a matter of fact, a professional study was conducted and it found that 95% of
all investment returns can be explained by asset class selection (such as whether you
were in large-cap stocks, small-cap stocks, bonds, real estate, etc.). That means less than
5% of your returns are dependent on those expenses for which most people are
overpaying. We try to minimize expenses from trading or mutual funds; and we analyze the
tax consequences of any transactions that we make.
Our philosophy is different. We spend our time concerned with trying to find the right
asset class mix to maximize your return and minimize your risk. Our approach is based on
Nobel Prize winning research (not by us!) called modern portfolio theory, which states that
there is an efficient mix of assets for any given risk level. We spend our time on trying to
find the most efficient asset classes for your portfolio. We try to minimize expenses from
trading or mutual funds; and we analyze the tax consequences of any transactions that we
make.
We also focus on finding your appropriate risk level. Investment managers measure the
risk level that is appropriate for a client in two different ways: your willingness to take risk
and your ability to take risk. Your willingness to take risk is influenced by a lot of different
factors. This could include: parent’s feelings about money, personal experiences with
money, bad previous investment experiences, and lack of education about investing. A
good financial advisor will help to educate the investor and over time most investors will
become more comfortable with the process and increase their willingness to take risk.
Your ability to take risk can be gauged by analyzing your financial situation. The following
would all increase your ability to take risk: low levels of expenses to income, high level of
net worth, long investment horizon, low levels of debt, adequate emergency cash
reserves, proper amounts and kinds of insurance, and job security among others. Having
a good financial plan is like the having a strong foundation on a house. It will allow you to
build a more elaborate house, with more security in the long term nature of the project.
Financial planning will increase your ability to take risk.
It would be detrimental to invest at a level of risk higher than your ability or willingness.
This would surely lead to an increased chance that you will need or want to sell equities
during a down period.
After we have determined the correct risk level, we will develop an investment policy
statement (IPS) that will include any situations or tax considerations that are unique to
your portfolio and recommend an asset allocation. We look at providing an allocation for
all of your investment accounts, with consideration to the different tax consequences of
each, while maintaining focus on the entire portfolio. We consolidate all of your investment
accounts into our database management software. This allows us to provide you with an
overall picture of your investments. Asset management services will include:
- Quarterly Report on all assets and performance of entire portfolio
- IPS creation and updates when needed
- Investment Decisions and Due Diligence
- Yearly Client meeting
- Account Maintenance (opening accounts, wire transfers, etc.)
- Transfer any existing accounts to Fidelity
- Rebalancing your investment portfolio as you add cash or as the market fluctuates
- Tracking progress towards your goals
- Buying and selling assets as needed
- Setting up automatic investments/withdrawals from your investment accounts
All of our services are billed as a percentage of assets under management. Again, all
compensation comes from you. The fee will be drafted from your investment account at
the beginning of each quarter, based on market value of the investment assets at the end
of the previous quarter. The minimum fee for any quarter is $250. The fees will be
calculated as follows:
Advisory Fee Structure
1.0% on the first $1,000,000 of assets.
0.8% on assets over $1,000,000
To paraphrase Warren Buffett and Charlie Munger – The wise investors bet heavily
when the world offers them that opportunity. They bet big when they have the odds.
And the rest of the time, they don't. Wait for the FAT PITCH. You don't get paid for
activity. You get paid for being right
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