We begin by listening. 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. This creates a basis for an informed discussion about asset allocation.

We believe the creation of an asset allocation requires both art and science. The science is based upon Modern Portfolio Theory. Allocations are ultimately determined by our beliefs regarding each asset class and our knowledge of the client’s circumstances. As a result, allocations are more appropriate and reflective of a client’s desired risk and return parameters rather than strictly following a “black box” approach.

Once the asset allocation is determined, the Investment Policy Statement (IPS) is drafted to document the plan for the portfolio. The IPS is tailored to our clients’ unique needs and circumstances. It addresses cash flow needs and expectations, risk tolerance, time horizon, income tax issues, and asset allocation. It also identifies the criteria we will use to select and evaluate managers. The IPS is the “business plan” for the portfolio – it provides the framework for all future investment decisions. This is why after reviewing and approving the policy, as well as any future changes, we ask the client to sign it. Then both of us are clear on the intended path.

To view a Sample IPS, click here

After we have prepared and signed the Investment Policy Statement, we will select the investment managers through which we will implement the components of the investment plan. We utilize only third-party managers that we recommend as a result of our rigorous due diligence process. We receive no compensation from those we select, eliminating any conflict of interest. Once the managers have been selected for the client portfolio, we will then implement the plan.

For more information on our manager research process click here.

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.

To read our article on the Importance of Rebalancing, click here