Successful investing is a key component in any financial plan. Accordingly, investment management is included in the retainer service.
Investment management includes the following services:
Quarterly review and rebalancing of managed accounts
Assistance on managing employee retirement accounts - 401(k), 403(b), etc.
Strategic stock option planning
Year-end investment tax planning
Annual reports and revisiting of the Investment Strategy
Investment success requires the systematic and disciplined implementation of a consistent investment philosophy. Our process for helping you determine the best discipline for your circumstances includes:
Development of an Investment Policy Statement
Your Investment Policy Statement (IPS) acts as an investment roadmap. This document lays out your investment objectives, and your path to achieving those objectives.
Through a process of assessing your risk tolerance and portfolio performance requirements, we work with you to devise an IPS which suits your particular situation and lays out our strategy for building and maintaining an appropriate investment portfolio.
The IPS includes:
Asset Allocation: the most efficient mix of foreign and domestic stocks and bonds for your situation.
Maximum acceptable risk
Acceptable asset classes
Frequency of review and rebalancing parameters
Access to Low-Cost Institutional Funds
BDFP utilizes the low-cost, pure asset class mutual funds of Dimensional Fund Advisors (DFA). Because these funds are not made available to individual investors, DFA is able to keep "emotional investors" out of their funds and therefore keep their expenses very low. Additionally, DFA offers passively managed index-like portfolios with precise asset class characteristics, as opposed to the majority of index funds which tend to bunch around the large cap growth characteristics of the S&P 500 index. This institutional pricing and DFA’s pure asset class index funds combined with well-constructed, diversified portfolios and a disciplined investment strategy provide for low-cost, less volatile investment returns. From 1973-2003, DFA's fully diversified equity portfolios outperformed the S&P 500 by 3.64% per year with slightly lower risk as measured by standard deviation. But more importantly, in down markets, these portfolios outperform and preserve capital far better than many other alternatives due to the true diversification these funds provide. Over time, losing less in down-market years results in much better compounding of returns.
For more about DFA, see Dimensional Fund Advisors.
Monitoring and Reporting
While you will receive monthly account statements from your account custodian, we also provide you with quarterly rebalancing reports and annual comprehensive reports including the portfolio’s performance and tax information.
Over time, your portfolio's allocation as laid out in your IPS will drift away naturally from its targets, requiring us to make adjustments in order to keep your investment plan on track. Disciplined rebalancing is a crucial part of the success of any investment strategy; therefore, your accounts are reviewed and rebalanced on a quarterly basis, whenever your account receives a large influx of cash, or if there is a significant change to your financial circumstances.
In addition to ongoing asset management and annual comprehensive financial plan reviews, the retainer structure means that we are always available to answer any other financial questions as they arise, at no additional cost to you.
Sample questions might be:
Can I afford to take a vacation with my family?
Should I refinance my mortgage?
My parents may need to retire prematurely. How can I help them?
These are just a few examples of questions that come up in the course of life. As your financial planner, our objective is to always help you make the best financial choices, given all the options available to you.