Financial Planning and Investment Philosophy

The Financial Planning and Investment Philosophy:

We believe the most likely way to ensure success in achieving one's financial goals is to develop a  holistic or comprehensive plan that attempts to understand and "connect all the pieces of one's financial life."  We believe it is important to understand what the investor is trying to achieve, their time horizon, available resources, and their level of commitment to achieving the goal before making any recommendations.  The various different pieces of one's financial life can and usually do have an impact on the other pieces. For example one's income, expenses, level of debt and estate value help to determine the need for life insurance.  A comprehensive plan that takes into account "all the pieces" allows professional advisors to work in coordination with the investor towards achieving the end goals. As "life happens" and as the economy, markets or tax environment changes, the plan will need to be occasionally updated. 

Understanding Our Client's Needs

In working with our clients we seek to understand their goals and then go about the task of quantifying them.  How much will they need to retire with dignity, send kids to college, or pay for end of life issues like home health care or possibly a nursing home?  Should they make plans to retire at age 65 or if their health remains good should they work until age 70?  What do they plan on doing in retirement and how will this impact their finances?  Are they planning on spending considerable time working with a charity volunteering time and perhaps money or will they be relocating to golf community in Flordia, maybe both?

Achieving success in any financial goal requires a commitment in three areas:

First a commitment to saving and investing versus spending. If the goal is truly important, than current spending must be curtailed and committed to a sensible and consistent investment and debt reduction plan. Unnecessary debt is a huge obstacle to achieving financial independence.  Recent events in the past decade like the housing bubble, run away credit card debt, and the issuance of debt instruments by local, state and the Federal government has demonstrated the need to reexamine the use of credit in all areas of our society. 

And second, a commitment to being patient and working your plan. Successful investing requires patience and a long term perspective. The markets can be very volatile over short and some times long periods of time. Having discipline to stick to a well thought out investment plan through the ups and downs of the market is critical to achieving success.

And lastly, using common sense and time tested investment strategies to achieve desired investment results is critical.  Investors throughout history have thrown common sense to the wind to invest in fads of the time. Whether it was dot.coms in the late 90’s or tulip bulbs in Europe in the 17th century. We also try to understand investor behavior and offer our advice based on this understanding.  We try to help our clients navigate through the treacherous waters of Greed and Fear. Of course the only long-term solution to this problem is to first recognize that humans are both greedy and fearful at the same time and to counteract those emotional swings through education and a disciplined, common sense approach.

Modern Portfolio Theory, Asset Allocation and building an Investment Portfolio

We generally believe that Modern Portfolio Theory provides the best opportunity for investors to achieve their long term investment goals. However at times tactical investments can provide opportunities provided by short to intermediate term market conditions. These opportunities can be offensive or defensive in nature. We rely on numerous trusted sources, with proven track records, aligned with the goals of our clients in making any recommendations. We monitor not only specific investments and prevailing market conditions but also the changing needs of our clients as we work in helping them achieve their long term goals. We believe that a consultative process helps to achieve the desired goals of our clients rather than selling any specific product.

We believe that there are generally four areas to consider when building an investment portfolio for clients.

First, Risk Management. This would include having sufficient cash investments to pay for living expenses and emergencies needed for at least six to twelve months in current market conditions. This area would also include areas like life insurance, disability insurance and any other protective measure to ensure existing assets and ability to meet short term needs that may arise.

Second, Income. For clients at or near retirement emphasis will be placed on identifying investments that will provide sufficient income to meet living expenses without the need to sell shares within the investment portfolio. Under current market conditions the ability to harvest gains from a rising market for income purposes is not available. Under current market conditions selling shares to generate income greatly reduces the portfolios ability to grow and generate future income.

Third, Modern Portfolio Theory or also know as Asset Allocation. We believe that long term a significant portion of a clients portfolio needs to be invested using this process. Through diligent screening of investment managers a portfolio of proven managers can be selected to properly diversify a clients portfolio, reducing market volatility while achieving the long term desired investment return.

And last, Tactical Investments. From time to time the markets becomes irrational. Sometimes these irrational markets create short term opportunities or short term negative consequences to a portfolio. In times of stress some clients might benefit by having a more conservative portfolio, especially if their investments are primarily used for generating income. For investors with longer term investment goals market stress might create historic investments opportunities that should be considered.

Summary

By understanding the client's needs, we help to develop a well thought out financial plan.  We build this plan by working with the client's other professional advisors like their CPA or estate planning attorney.  If no such relationships exist or if circumstances require a specialist, we will provide referrals to additional professionals with whom we have previously worked.