Our core beliefs guide us.

What we believe about Personal Financial Planning...

We focus our planning efforts on your needs, wants, and wishes and resources.

In contrast to earning commissions on investments or other financial products you may purchase in implementing your plan, we are compensated directly by you, much as your attorney or CPA are. The "independence" section further discusses this core belief.

There are many "moving parts" at work in our personal and financial lives, and while we can influence much around us, we are best served by preparing to adapt to changes in the economy, tax laws, and family obligations.

In addition to a prudently deploying investment assets, the plan should "stress test" investment risk/return assumptions and simulate the unexpected loss of earnings or increased expenses. In this way, the effects of retiring later (or earlier!), working part-time during retirement, or increasing disability coverage, for example, can be evaluated.

Playing out scenarios enables more insightful decision-making and makes the plan more robust in the face of uncertainty.

Only you have ultimate control of your financial future. As such, you determine which recommendations made by your advisors will be implemented and by whom.

Our role is to help you make informed financial decisions consistent with your goals and facilitate their implementation.

If you are not actively engaged in monitoring the progress you are making, we are not fulfilling our role.

Your financial plan does not exist in a vacuum. It takes coordinated action to give it meaning, and will likely involve input from insurance, tax, legal, or other professionals.

Further, periodic plan reviews are often most effective when all your professional advisors are actively involved in the process.

What we believe about Investing...

An Investment Policy Statement (IPS) outlines the objectives, expectations, and constraints related to your investment portfolio and is an essential part of implementing your financial plan.

We believe free market prices quickly reflect all information relevant to the valuation of a security. Millions of investors throughout the world lay ready to pounce on any earnings announcement, regulatory filing, news item, or the release of economic data to make trading decisions.

And since the timing and content of such information are largely unpredictable, attempting to profit from short-term market swings is extremely risky and costly.

Stocks and bonds that offer higher average returns relative to the market almost always carry higher risk.

Understanding this relationship enables investors to strike a balance between their performance goals and the degree of uncertainty they can accept.

The most sensible way to seek higher expected returns is through broad diversification across many asset classes, industries, and geographical markets.

A well-diversified portfolio reduces its exposure to the sometimes severe fluctuations of individual securities.

Skillful portfolio management and smart, patient trading can produce significant cost savings over time. These savings accrue directly to an investor's return.

Our approach to planning is straightforward.

We believe that a broad-based financial plan, one that considers all your important goals and all of your available and anticipated resources, provides the best framework for making informed financial decisions. And creating a broad-based plan requires several important steps:

Begin with the end in mind.

While it seems quite obvious that the planning process should start with identifying your goals, there is much more to this important step. Once basic, aspirational, and legacy needs are identified, they must be analyzed and prioritized.

Each goal should be examined to determine whether a degree of partial attainment would be acceptable. For example, are you willing to delay retirement a year or two? Or send your daughter to a local college instead of your alma mater on the east coast? Hashing these issues out during the planning process allows us to more appropriately align and structure your portfolios to service these goals while also providing flexibility during the implementation and monitoring phases. Additionally, this type of priority-setting makes the plan more robust as it encounters future changes in your financial landscape.

For most of us, life involves tradeoffs and thinking these through beforehand reduces the anxiety of making important decisions down the road.

See where we are.

This step is quite mechanical, and it involves compiling details related to your existing:

  • Bank and investment accounts
  • Retirement accounts
  • Insurance coverage
  • Tax returns
  • Wills and trusts
  • Real property
  • Mortgages and other obligations
  • Salaries and pensions
  • Living expenses

Essentially, we gather information on anything which may affect your financial future.

Crunch the numbers.

This step is where much of the heavy lifting occurs. Based on our understanding of your goals and resources, we evaluate different scenarios incorporating:

  • various portfolios and risk characteristics,
  • financial products such as insurance and annuities,
  • timing of retirement plan distributions,
  • timing of filing for social security benefits,
  • effect of income taxes, and
  • other events applicable to your situation.
We have access to very capable tools which allow sophisticated modeling and simulation under varying assumptions. Of course, being able to churn out numbers is one thing, but what matters is being able to discuss with you the meaning behind the numbers.

This phase can be quite iterative, and there may be several drafts before we are satisfied that we have charted an appropriate course.

Establish the game plan.

Here we present to you actions that should be commenced to make your finances better support your overall goals.

Recommendations may address matters such as changing the composition of your investment portfolio, creating additional portfolio earmarked for specific needs, considering changes to your insurance coverage, or converting your traditional IRA to a Roth IRA.

An important part of presenting recommendations is organizing them into an implementation plan to get the next phase going.

Walk the talk.

Now we put the wheels in motion. We would typically serve as the coordinator of the implementation process, and will work with your attorney, CPA, insurance consultant, banker, retirement plan administrator/custodian, or anyone else called upon to assist. Of course, we stand ready to work with our asset managers to structure your portfolio.

But not all recommendations are implemented as a single task. Some may involve an on-going commitment to savings or funding an annual insurance premium.

Our mantra during this phase is "EXECUTE".

Navigate.

Now we proceed, confident but ALERT. This phase actually proceeds indefinitely, usually cycling through the analysis steps to determine whether adjustments are appropriate.

Typically, changes in family and employment situations, new tax laws, or unanticipated expenses prompt us to review what we're doing and where we're headed.

Extremely critical during this time is the on-going communication between client and planner so that necessary adjustments can be implemented proactively. You would have on-going access to our secure planning portal through which you can review all data related to your plan.

A structured investing approach.

Our approach to investing involves deploying portfolios with risk characteristics that are aligned with your goals. If you have a trusted investment advisor, we would gladly work with them. But our belief is that a structured approach involves building portfolios using asset classes as primary building blocks. We further believe the optimal way to incorporate asset class investing into a portfolio is to employ institutional asset class funds designed to efficiently capture the market rate of the asset class.

Institutional asset class funds, like those offered by Dimensional Fund Advisors, offer lower trading costs, lower turnover, and minimal style drift. There are many mutual funds and ETFs known as index funds that can provide a reasonable approximation of the performance of an asset class. The cost of these funds is also quite low compared to actively managed alternatives.

With this structured approach, the effects of the noise and confusion of the markets can be subdued by simplicity, prudence and confidence as you build a strong investment foundation for your future.

We believe there are five key concepts that play a vital role in the construction of portfolios tailored specifically to your goals and needs and each is discussed in the sections that follow:

Accept market efficiency.

In 1965, University of Chicago economics professor, Eugene Fama, developed The Efficient Markets Hypothesis which states that current securities prices rapidly reflect all available information and expectations. This means active investment management cannot consistently add value through security selection and market timing due to the inherent unpredictability of the markets. Even highly-experienced mutual fund managers have difficulty consistently beating market benchmarks (such as indexes), especially after increased trading costs and management fees are considered.

While efficient, the financial markets are not always rational. Nevertheless, while everything seems so obvious in hindsight, trying to reap financial rewards by placing bets on short-term anticipated market swings or seemingly undervalued stocks can be quite hazardous in the long run. It just makes sense to structure your portfolio to participate in the expected long-term returns of the capital markets.

Take risks worh taking.

Markets can be chaotic, but over time they have shown a strong relationship between risk and reward. This means that the compensation for taking on increased levels of risk is the potential to earn greater returns. According to Professors Eugene Fama and Ken French,1 decades of financial research identifies six dimensions of higher expected returns in global capital markets:

  • Equities
    • Market - risk/return premium for stocks vs. bonds
    • Company Size - risk/return premium for small vs large companies
    • Relative Price - risk/return premium for value vs. growth companies
    • Profitability - risk/return premium for high vs. low profitability companies
  • Fixed Income
    • Term - risk/return premium for longer vs shorter maturity bonds
    • Credit - risk/return premium for lower vs higher credit quality bonds

Fama and French believe that the higher expected returns in these dimensions represent risks worth taking in extracting gains from the financial markets over time and portfolios should be constructed around these dimensions.

While exposing your portfolio to these risks may result in commensurately higher returns, investors should minimize or avoid investing funds needed within five years.


1 Cross Section of Expected Stock Returns, Eugene F. Fama and Kenneth R. French, Journal of Finance 47 (1992)

Effectively diversify.

Diversification does not guarantee a profit or protect against a loss. What it tends to do, however, is reduce portfolio volatility that results from adverse events affecting a specific company, industry, region, or sector of the market. We believe there are three primary ways to effectively diversify your portfolio:

  1. Combine Multiple Asset Classes that have historically experienced dissimilar return patterns across various financial and economic environments.

  2. Diversify Globally - more than 50% of global stock market value is non- U.S., and international stock markets as a whole have historically experienced dissimilar return patterns to the U.S. We must be mindful, however, that foreign securities do involve additional risks including currency exchange rate fluctuations, taxes and different accounting and financial reporting methods.

  3. Invest in Thousands of Securities to limit portfolio losses by reducing company-specific risk. We believe that institutional asset class funds managed based on the specific characteristics of the asset class, as opposed to a commercial index, best enable effective diversification.

The important point here is that merely having many different securities in your portfolio will not necessarily provide the benefits of diversification. Effectively diversified portfolios result from a deliberate, structured investment process.

Exercise patience and discipline.

Keeping your head about you while seemingly all others are losing theirs requires tremendous resolve. We humans seem to be wired to insist on doing something, anything, in response to uncontrollable events. But see how our emotions often lead us to "buy high and sell low"...

Most successful investors are guided by an investment policy and stay focused on the long term to enjoy the returns the capital markets provide instead of impatiently speculating. We review your portfolio with you regularly and make adjustments depending on changes in your circumstances. Your portfolio rebalanced periodically to keep it aligned with risk and return expectations.

Above all, don't go it alone. We can help you stay on track and focused on your long-term goals.