Our financial planning investment process is very client-centric and reflects our fiduciary responsibility to place our clients’ interests ahead of our own. Typically our clients have complex wealth management needs and a cookie-cutter formulaic approach to their asset allocation is not appropriate.
The more we know about our clients, the better we are able to advise them. We ask a series of questions to learn about personal and family circumstances, cash flow needs, long-term objectives, and wealth transfer and charitable intentions. We will discuss risk tolerance, income tax issues, and personal preferences and biases. Importantly, we also want to know what you want to do with your wealth. All of this combined information creates a basis for an informed discussion about asset allocation.
We begin by listening. The Capital Management group created its integrated risk process that identifies, classifies, analyses & quantifies the financial impact of various risks involved in running an individual, family, or business. It is a tool that recognizes the potential threats to the business’s objectives and allows management to make informed decisions on the appropriate course of action, be it to mitigate, transfer or allocate capital to the risk. Risk management is a fundamental business practice and, for it to be truly effective, a company must ensure that risk management is embedded within its culture.
Our investment process includes a significant amount of time on the front end learning about a client’s specific needs and circumstances – cash flow requirements, time horizon, risk tolerance, tax issues and other illiquid holdings, often real estate, private equity or a family business. The end result is a customized asset allocation that ensures each client’s portfolio is structured to meet their long-term goals. Getting to this result requires a process that can be broadly broken down in to two parts – strategy development and implementation with individual steps outlined below:
Investment Strategy Development, Construction, & Implementation Objectives
The creation of a perfectly-tailored asset allocation requires both art and science. Our science is based upon Modern Portfolio Theory. Allocations are ultimately determined by our beliefs regarding each asset class, macro-economic variables, investment fundamentals, and most importantly, our knowledge of the client’s circumstances. The results are allocations are customized and reflective of each individual client’s desired risk and return parameters rather than a “black box” approach or cookie-cutter modeling.
Then, we work with the client to draft an Investment Policy Statement (IPS) to document the plan for the portfolio. The IPS is the “business plan” for the portfolio; it provides the framework for all future investment decisions. It is tailored to each client’s unique needs and circumstances and addresses cash flow needs and expectations, risk tolerance, time horizon, income tax issues, and asset allocation.
It is important to note that the transfer and implementation of a client portfolio can be a complex, multi-step process, particularly in the case of a family with multiple entities, investments, custodians, and varying levels of investment liquidity. We take extreme care to consider important factors such as tax consequences, opportunity cost, and market exposure when transferring client portfolios under our supervision. We present a dollar-cost-averaging plan to the client prior to initiating the transfer process which maps the plan and timing of the implementation. In some cases, implementation may be relatively quick and in others it may be done over months or even years.
To view a sample IPS, please contact us directly.
Measure and Review Performance
We evaluate the investment portfolio and review a client’s financial circumstances on an ongoing basis. We use our comprehensive quarterly performance report to help gauge the progress of the plan and the value each manager is adding to the investment portfolio. The report illustrates the total portfolio performance in comparison to a customized benchmark for the allocation, and it measures each manager against an appropriate benchmark and peer group. As a routine part of this review, we discuss and determine whether rebalancing the portfolio is warranted, which takes into consideration any tactical changes we may recommend.