Our process is simple. We get to know you, your family and your other advisers. Input from attorneys, CPAs, insurance agents and Social Security consultants is all used to help us understand your goals and develop a plan to reach those goals. We meet with you and your other advisers to present our analysis and discuss our recommendations. Next we implement the recommendations and monitor your progress. We meet with you regularly to assess your progress toward your goals and when necessary we make adjustments to your plan. We are proactive as your situation and the environment changes. As tax, estate and social security laws change, we adjust your plan to take make sure you don’t make mistakes.
We believe that the way that we best help our clients is by first helping them to avoid making mistakes. Mistakes are expensive and we can save our clients a lot more money by avoiding a mistake than we can make them through market performance (not that performance isn’t important). If you retire too early, if a rollover isn’t completed properly, if beneficiaries are not chosen properly, if your portfolio has more risk than you’re willing to take, if you choose your Social Security benefit incorrectly are all mistakes that can cost you a lot of money.
While we downplay investment selection, we are very proud of how our portfolios have performed in both up markets and down. Our basic investment philosophy is based on Modern Portfolio Theory which was introduced by Harry Markowitz in 1952. This Nobel prize winning theory simply states that diversification helps us control the risk in a portfolio. We first start with the risk that you are willing to take and create a portfolio that maximizes the returns for that risk level. You can NOT reverse this equation (it’s a major mistake); you can’t say “I want 12% return so the standard deviation of the portfolio needs to be 33.” When you see the negative side of the 33 standard deviation is when you make the mistake: “Get me out of the market because I can’t sleep at night.” Getting out of the market is a mistake that will cost you in the long run.
Our investment selection philosophy is also pretty basic. We consider the following things when creating a portfolio for our clients:
- Long-term performance (3, 5 and 10 year)
- Manager tenor
- Expense ratio and total cost
- Turnover ratio (more important for non-tax deferred investments)
- R2 ( a measure of how true a manager stays to an asset class)