We work through three phases of life style investing:
The first is accumulation, where we help a client based on their risk tolerance, and the goals in their Life Style Financial Plan. We are focused on growth and we look for opportunities to buy low and sell high with an emphasis on equities. Within five years of retirement, we start to transition into our retirement income phase.
The second phase is retirement income, where we transition our thought from accumulation to distribution. Our primary focus changes more to cash and bonds, so we can reduce volatility in our distribution accounts. We still have a secondary focus on growth and equities (buy low and sell high), depending on each client’s goals in their customized Life Style Financial Plan.
Then we transition into the clients’ third stage of preservation and wealth transfer or estate planning. This is the area that differs most for clients and ends up being the most customized.
We use third party institutional managers. We like third party managers because we feel it removes us from most of the “herd” mentality of fear and greed that hurts most investors in retail mutual funds. We use AssetMark as our main custodian and platform for third party managers. AssetMark provides around thirty different wealth managers each with multiple different strategies. Because of this platform, we can provide a mix of ETF’s, individual stocks, bonds and mutual funds.
There always seems to be an argument between financial advisors about whether an active management style (picking specific investments and usually at a higher cost), verses a passive investment style (picking an index that flows with the market and usually at a lower cost) is better. Because of the flexibility of AssetMark, we are able to have a combination of both. This allows us to reduce costs in certain areas, be more customized to a client’s Life Style Financial Plan, and make changes depending on the three phases: accumulation, retirement income, and wealth transfer. The majority of our client portfolios are in individual stocks for active management and ETFs. Some EFTs are actively managed and some are passively managed.
Every quarter I review performance of our universe of portfolios. I not only look at the main mix of portfolios that we use for our clients, but I also look at other portfolios for comparison and to learn more about how different portfolios perform in different markets and economies. For example, we track 5 asset mixes based on risk. We also track another 3 asset mixes that are tax efficient based on risk. Most asset mixes have a bench mark and about 6-9 portfolios. That means we are tracking about 60 different portfolios and only consider the top two in each asset mix to use with our clients. We also add in a specific client portfolio for each asset mix to see if the performance being recorded matches up with actual client performance after all fees. That brings us to about 70 different portfolios that we track and review each quarter.
II. Investment Management*
III. Financial Planning*