I believe....
…that my clients are best served by following a logical process for making prudent investment decisions based on my client’s Investment Policy Statement (i.e., my client’s general instructions to me regarding how the investment portfolio is to be managed). This process produces a customized written investment plan that incorporates the primary investment goals, the right amount of risk (not too little, not too much), the investment time horizon (when funds will actually be needed), taxes and the client’s personal situation.
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A written plan allows you to thoughtfully make investment decisions in advance instead of reacting to market events when anxiety can affect judgment.
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A written plan frees you from the anxiety of wondering “should I be doing something right now?” or “what should I do next?” The Peace of Mind a written plan provides may not be quantifiable but it is valuable.
…that my clients have a responsibility to themselves and to their family to take an active role in making investment decisions to the best of their ability. Investors should never abdicate responsibility and simply leave it up to the advisor to “do whatever you think is best.” Designing a realistic investment plan should be a collaborative effort with clearly defined roles for the client and the advisor.
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Making sound investment decisions is not rocket-science. An investment strategy does not have to be complicated to be effective.
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The average investor should be able to understand the fundamental reasons supporting any investment strategy. If not, then the problem is more likely to be the strategy or the advisor’s inability to explain the strategy than it is to be the fault of the client. Never invest in anything you don’t understand!
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It is the responsibility of the advisor to satisfactorily explain the reasoning supporting a recommendation or a particular strategy in order to allow clients to understand the pros and cons of alternative courses of action and make an informed decision.
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Expenses matter. Clients have a responsibility to ask the advisor about any and all fees and to assure themselves that they are receiving adequate value in return.
…that there are times when an investor needs the services of an expert and other times when he or she is more than capable of supervising their own investment plan.
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You need an expert to design a realistic, prudent investment strategy and investment plan that meets your requirements as specified in your Investment Policy Statement.
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You need an expert to guide you and help you avoid the “unknown, unknowns”, the “amateur mistakes” and other hidden dangers.
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You need an expert to provide objectivity, to give you a “reality check,” to dampen enthusiasm during good markets and overcome depression during bad markets.
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You need an expert to periodically perform a detailed review of your portfolio and evaluate results - not only how the portfolio has performed in absolute terms but how the portfolio should have performed (i.e., relative to the market as a whole) and whether the current strategy is helping you achieve your goals.
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You don’t need (and shouldn’t pay for) a manager to “watch” the portfolio in between regular portfolio reviews. The presumption is that by “watching” a portfolio you can avoid market declines or spot trouble in advance. The reality is that “watching” without a specific definition of what you are watching for and precisely what you are going to do when you see it, is a complete waste of time, energy and money. Knowing that unexpected events will occur is good policy. Believing that any advisor is going to foresee an unexpected event and protect you from it is wishful thinking.
…your advisor should not only possess professional expertise (as evidenced by education, experience and credentials) but also a genuine concern for you as an individual. Your advisor must be honest – not just in an ethical sense, but in terms of being truthful about what he can or cannot do for you. While no relationship is entirely without conflicts of interest, conflicts should be kept to a minimum and those that cannot be eliminated should be fully disclosed.
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Ideally your advisor should accept, in writing, a fiduciary responsibility i.e., a legal duty to act primarily for the client's benefit in matters connected with the undertaking and not for the fiduciary's own personal interest.
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An hourly rate is the most equitable way to pay for investment advice. Commissions and annual fees based on the value of your portfolio are not easily correlated to the actual work involved. Compensation based on hourly rates means that you pay for advice on a when-needed basis.
As an Accredited Investment Fiduciary®, compensated at an hourly rate, I have no financial incentive to recommend any specific investment product or strategy. This also allows me to recommend the most cost-effective investment vehicles which can save you a significant amount of money.