With so many investment possibilities, how do you know what's best?
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
Registered with Cambridge Investment Research, Inc., an independent broker-dealer with over 3,000 Registered Representatives nationwide. Investment Adviser Representative at Cambridge Investment Research Advisors, Inc., a $44B RIA based in Fairfield, IA. I’ve held an industry securities registration for 26 years and am subject to SEC and FINRA oversight.
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.
The Institute of Business & Finance (IBF) recently awarded Financial Advisor Tim Hayes with the first nationally recognized mutual fund designation, CFS® (Certified Fund Specialist®)
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.
- Your account size and the complexity of your wealth management will determine fees, but it is never greater than 1%.
- The accounts are primarily invested in mutual funds and exchange-traded funds (ETFs). All funds have passed my rigorous due diligence process.
- I design the portfolio to meet your goals and ensure it is consistent with how much risk you are comfortable with 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, discuss performance and rebalancing, and confirm you are on track to achieve your goals.
- The custodian for the accounts will be Pershing, a Bank of New York Mellon.
If you don’t have $100,000 to invest
My fee-based accounts require a minimum of $100,000; if you have less than this amount 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 will receive monthly or quarterly statements. You can follow your account online at CirStatements.
- The custodian for the accounts will be Pershing, a Bank of New York Mellon company, or the fund family directly.
- Periodically, we will meet to check if the portfolio is on track, monitor performance, and discuss rebalancing.
Step 5: Level of Care
Many financial advisors are dual-registered—that is, they are a registered representative of a broker-dealer and an investment adviser representative of an investment advisor.
Each registration has their own requirements of the level of care. An investment advisor is a fiduciary. That means they owe the client a higher oath of loyalty. They must act in their best interest and disclose any conflicts of interest.
The Level of Care You Receive
Most of my business (90%) is as an investment adviser representative where I charge the client a level or flat fee usually based on the size of their portfolio.
Occasionally, I do receive commissions through my work as a registered representative. If the client has a smaller account such as a Roth IRA, 529 Plan, or a teacher saving in a 403(b) plan at work. Most of these clients end up paying less with a commission product. And maybe they do not need the same level of time as clients that are being charged an annual fee.
Registered Representatives are not fiduciaries. But they do have a standard of care required called suitability. The advice they offer must be suitable for a client based on the customer’s particular situation. However, they do not have to show their or their employer or broker-dealers conflicts of interest.
A Uniform Standard of Care
Under the 2010 Dodd-Frank Act, Congress directed the Securities and Exchange Commission (SEC) to study the need for establishing a new, uniform, a federal fiduciary standard of care for brokers and investment advisers.
The SEC recommended after the study that registered representatives adopt the same standard of care as investment advisors.
Having a uniform standard would make it easier for investors. As many are unaware that there are two standards and that the same financial advisor could be wearing both hats.
If that is not confusing enough, there is already a third standard.
This is a fiduciary adviser that fall under ERISA. They have the highest standards. Unlike investment advisors who can have conflicts as long as they get disclosed. A fiduciary adviser must cut all conflicts.
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.