What exactly is the managed account arrangement?
First, we discuss goals, strategy, risk tolerance, and overall financial planning considerations.
Then, based on these parameters, we select an investment strategy that suits clients’ needs.
Clients open brokerage accounts for us to manage based on these parameters (individual, joint, IRA, trust, etc). Upon request, we provide full-service assistance to our clients in opening brokerage accounts and transferring assets.
Once accounts are open and funded, we place trades in the accounts and monitor investment portfolios on an ongoing basis.
Custodian? Discretion? Fiduciary? What do these words mean?
A custodian is a big firm that holds, safeguards, and keeps track of the value of your assets, such as a bank or brokerage firm. Our managed account clients have a choice of two custodians: Interactive Brokers or Schwab.
Discretion is the permission to place trades in client accounts based on an overall strategy without obtaining prior approval for each individual trade. As an advisory firm, we have discretion over investments in client accounts.
A fiduciary is someone who puts clients’ best interests first. People who sell insurance, annuities, mutual funds, hedge funds, and all manner of gimmicky financial products are compensated for their sales regardless of whether you win or lose. Someone who has a bag of goods to sell you is a salesperson, not a fiduciary. We are paid to gather, protect, and grow assets—nothing more, nothing less.
What is the difference between passive management and active management and which is right for me?
We offer both passive management and active management strategies. There is a time and place for both.
Our passive management strategies are designed for long-term investors who want maximum simplicity in their investments and the lowest possible fee. With our guidance, clients tailor how aggressive they want to be, ranging from 100% stock market to 100% fixed income—and anywhere in between (e.g. a traditional 60/40 portfolio). Our passive management offering is a highly intelligent, cost-effective way to do traditional wealth management with an advisor. We can’t control the crazy market swings, but we can engineer portfolios intelligently to deliver a better, more cost-effective version of what brand-name firms are offering—just without the pretense and high fees.
Our active management strategies are designed for investors who are looking for smoother, more consistent returns year in and year out, in spite of the often wild gyrations of financial markets. Aiming for a respectable return while minimizing how much the portfolio value swings around is known in financial jargon as “risk-adjusted returns.” Leaning on Sam Benen’s experience as a trader and portfolio manager in the hedge fund industry, we charge a higher fee and use more complex trading techniques to try to meet this objective.
You can create an income stream for ongoing life expenses
True financial independence is having enough savings so that you can invest in income-generating securities and simply live off the interest without touching the principal.
We can set you up with a portfolio of income-generating securities and a schedule of automatic withdrawals from your account.
A cash replacement option
As an intelligent alternative to a low-yielding savings account, we can do cash replacement accounts for liquid savings and “rainy day funds.”
We invest in short-term securities and aim for a modest return with ultra-low risk.
If there are specific, known cash needs in advance (e.g. a down payment on a house next year, a tax bill due in April), we can duration-match the portfolio to meet upcoming withdrawals.
Utilize the margin facility
Your brokerage account can serve as a line of credit that you can access at any time for any reason.
With a margin account, you can withdraw money from your account without having to sell securities first. The value of the securities in the account acts as collateral for a secured loan that the broker can issue without a pre-approval process.
What if I want financial advice but not a managed account?
We can be a helpful resource to you for a wide range of financial decisions. In a pure consulting arrangement, with no assets directly under our management, you schedule time with us to analyze your financial situation and make recommendations.