Our goal is to build client trust and understanding. We synthesize multiple-disciplined advice so clients can make reasoned choices about their finances and investments. In doing this, we are guided by enduring principles and are unencumbered by any proprietary product or institutional allegiance.
Independent Advice, Aligned Interests
The confusing nature of compensation often causes investors to wonder whose best interests their financial advisors have in mind. Doubt can become distrust when compensation comes by way of sales commissions or fees from recommended products. Without trust, clients often don't take action when they should, thereby inhibiting financial success.
To align client-advisor interests, we work as independent financial advisors, selecting the best products and companies from all that are available. We refuse commissions or compensation from any product or referral source and are paid only by client quarterly fees. This fee-only approach frees us to act solely in your interest and to build trust that is essential to a successful client-advisor relationship.
Integrated Expertise, Best Solutions
Significant financial decisions often have important tax, legal or other non-financial implications. For example, the best advice should be based on familiarity with a client's balance sheet, cash flow, tax profile and estate plan. Yet most clients of typical financial advisors find that they have to consult separately with tax, legal and other advisors, and manage integration of issues on their own.
We know you reach better financial decisions when you have the benefit of advice that crosses boundaries and reflects a reasoned balancing of different and sometimes conflicting issues. Our partners and associates have credentials and experience that include portfolio management, law, taxation, estate planning, insurance, startup situations, executive compensation plans and alternative investments. Using our diverse knowledge, we work as a team to bring you integrated advice and draw in the advice of your tax and legal advisors when necessary.
Guided by Enduring Principles
Many investors can't stay committed to long-term investing (which is fundamental to success) because they don't have a firm grasp of their financial resources, spending patterns, savings, borrowings, and financial goals and this causes anxiety. Other investors have trouble remaining in the markets because haphazard choices and a lack of knowledge prevent them from taking a deliberate, disciplined approach. Still other investors have unrealistic expectations and so exit the markets at inopportune times because they become disappointed or the volatility becomes emotionally unendurable.
The common denominator in investor failure is lack of understanding, which we seek to diminish through frequent and at times intensive contact with our clients. We remind clients that successful investing is built on a foundation of financial fitness, paired with reasonable expectations and fidelity to enduring principles. Our outreach, accessibility and disciplined annual review process reduce anxiety and help clients stay on course, despite the ever-present sirens of media hype, superstition, mythology, cocktail-party chatter and the dangerous effects these play on human emotions.
Once we have a developed a plan for you, the first step to achieving your financial personal best is to practice financial fitness. Through our financial planning work, we help you understand your financial needs, resources and goals, and encourage you to adopt sound practices, such as utilizing only reasonable amounts of debt and keeping income and expenses in proper proportion.
For many new clients, gaining an understanding of their cash flow is a critical objective. Clients need to understand their spending, how to keep it at a reasonable level and how their need for cash will be satisfied. We review income from employment, from private assets such as real estate and from their publicly-traded investment assets. This understanding is critical because the need for cash plays a large role in designing an investment portfolio. We also know that anxiety about the availability of cash exacerbates the challenges of managing emotional responses when financial markets are volatile.
Other key planning factors that influence portfolio construction include income tax mitigation strategies and, in specific instances, charitable and estate planning objectives.
For long-term investment success, as well as a productive, long-term client relationship, we need to share reasonable expectations with you about the potential rewards and risks of various investment strategies, particularly within the context of your individual situation and the market.
We are in the midst of a financial deleveraging process that we haven’t experienced since the Great Depression. The process is inhibiting economic growth and causing periods of marked volatility in financial markets. But recent financial history also has been punctuated by periods of remarkable euphoria, crisis, panic and related anxiety and complacency.
Consider the emerging markets, real estate and commodities bubbles (and subsequent bursting) of the past decade; the dot-com boom of the late 1990s and subsequent dramatic collapse of the broader markets in 2000, 2001 and 2002; the nearly unbroken bull market from 1982 to 2000; and the high inflation rates of the 1970s and ensuing high interest rates of the early 1980s. Each era brings its own challenges and requires a considered, disciplined response if an investor is to succeed. Navigation may require tactical adjustments, but strategic success requires a commitment to enduring principles understood in a seemingly new context. In some cases, the appropriate response may be counter-intuitive or require resistance to emotional responses.
The current crisis inspires two natural temptations. One is to believe that market declines can be avoided altogether because of stories in the press and those we hear word-of-mouth about “smart” investors who "went to cash." The temptation is to try and anticipate the next leg of decline (there is always another one!), sell in advance and buy back lower. Study after study shows that market timing is not a sustainable strategy.
The second temptation is to adopt a radically more defensive stance in preparation for a similar market crash. However, as many investment professionals have noted, it doesn't make sense for an investor with a long horizon to structure a portfolio to perform well in a period of financial crisis. Doing so would deny the investor the long-run returns that are necessary to support retirement spending and protect value against inflation.
We believe there are enduring principles that underlie every successful investor’s investment practices. They are sometimes difficult to keep in focus, given the noise of the financial press and pitches of financial product salespeople, but their value has been tested and proven time and again.
The principles include:
An investment policy is the foundation of any investment portfolio.
That policy will set the boundaries of allocation to major asset classes and be tailored to the client’s need for returns and ability to endure volatility. While the policy may or should evolve with the client’s experience and circumstances, departures from policy should be exceedingly rare.
The price of higher returns is volatility.
Those asset classes whose values fluctuate the least (such as Treasury bills) pay the lowest long-run returns. Nearly all investors need higher returns than those classes can offer, both to support spending and to defend against inflation.
Time is the investor’s friend.
Longer time horizons narrow the variability in returns for an asset class and make higher return classes (such as stocks, real estate, commodities) worthwhile. Consequently, investors holding those assets can expect to be "paid" in higher returns over long horizons, and can also expect intervening periods of decline. Investors naturally may want to flee markets during or after declines, but success requires managing these emotions to avoid locking in loss.
Diversification among asset classes reduces risk over time.
However, in the short term (such as the current crisis) many asset classes can be negatively or positively affected by events simultaneously. Even within a single asset class, practical investors diversify by manager investment style. Combined with a disciplined portfolio review, diversification gives investors the opportunity to rebalance among assets and thereby reposition toward better value.
Attempts to sell stocks in advance of a market decline and buy back later at a lower price are very risky and over time are destructive to client wealth.
Several studies show that investors consistently lose value by attempting to time their entrances and exits to the markets. Market timing will forever be a temptation because we hear stories of investors who claim to have done it in certain instances and the financial press is often focused on such simplistic questions as "Is this the time to buy [or sell] stocks?"
Financial innovation is a persistent feature of life in the financial markets, but is of limited utility.
The current crisis has demonstrated quite well that the lack of liquidity and transparency associated with many esoteric assets means that they must be used with great care and only for their intended purpose. In our experience, most financial innovation benefits the product seller more than the investor, meaning that open-mindedness should give way to skepticism if the overall benefit of an approach is not fairly clear.