Step 1: Review Your Current Investments
I use fi360’s Proposal Report™ to compare your current holding to a portfolio developed from your risk tolerance. The review can Include all of your accounts: 401(k), IRA, 403(b), annuities, brokerage accounts, mutual funds, stocks, bonds.
- Executive Summary — Overview of the proposal, our firm, and the services we offer
- Holdings Summary — present the allocation of your proposed and current investments
- Style Analysis — by U.S. equity, international equity, and fixed income
- Portfolio Performance Analysis — compare the performance of your current and
- Fee Analysis— current vs. proposed
- Risk Tolerance Report
- Closing comments and items for your consideration
Step 2: Risk Tolerance
Psychologist Daniel Kahneman won the 2002 Nobel Prize in Economics for bringing to light that people hate to lose money more than they like to make money. Aversion to losses is one reason I ask you to measure your risk profile online at FinaMetrica. I would not want you to be holding a portfolio that is 80% stocks, which might lose 30% in a bad year, when your profile indicates that you would sell everything if it dropped even 5%.
For others, the opposite is true. You might need to take more risks to reach your financial goals. As you financial advisor, I need to alert you and give you options: take more risks, save more money, diversify your investments more, etc. Obviously, each client’s individual risk profile must be respected.
Step 3: Mutual Funds and Exchange Traded Funds (ETFs) Due Diligence
I screen 10,000+ funds down to a couple hundred eligible for use in your portfolio. The process screens for manager tenure, fees, performance, and style.
I cross-reference my results with fi360’s Fiduciary Score. That score is an easy-to-use use and easy-to-understand method for objectively comparing peer investments and determining their overall appropriateness.
It is a ready-made solution for due diligence that can help advisors show a careful investment choice and monitoring process.
Step 4: Account Size
$100,000 or Bigger
The client needs a minimum of $100,000. It can include just about any account: IRAs, 403bs, joint accounts, personal brokerage accounts, etc.
- The fee charged depends on the size of your account and the complexity of your wealth management but it is never greater than 1%.
- The accounts are primarily invested in mutual funds and exchange-traded-funds (ETFs). All the funds have passed my rigorous due diligence process.
- I design the portfolio to meet your goals consistent with how much risk you are comfortable taking.
- After the account is set up you receive monthly statements and you can follow your account online with CirStatements.
- We periodically meet to check the portfolio and to discuss performance and re-balancing and to check if you are on track to meet your goals.
If you don’t have $100,000 to invest
My job is to provide financial advice to all potential customers, so I am not one to turn away clients. Because my fee-based accounts require a minimum of $100,000 if you have less than this to invest I usually charge a commission or an hourly rate.
- However, I use the same due diligence process for building your portfolio. I use mutual funds and exchange-traded funds (ETFs) that have passed my due diligence process screening for low fees, historically competitive performance, low fund turnover, and long manager tenure.
- I work with all types of account registrations: IRAs, Roth IRAs, 403(b)s, SEPs, SIMPLES, 529 Plans, etc.
- After the portfolio is set up, you receive monthly or quarterly statements, and you can follow your account online at CirStatements. The custodian for the accounts will be either Pershing, a Bank of New York Mellon company or directly with the fund family.
- After we set up the account, periodically we meet to check if the portfolio is on track to achieve your goals and to review performance and discuss rebalancing.
Past performance is no guarantee of future results. All investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including total loss of principal. Diversification and asset allocation strategies do not assure profit or protect against loss.