Wealth Management

Our relationship begins with the planning process. You and your financial advisor collaborate on your financial and personal goals, and build a plan to achieve them. As part of this plan, we get a deeper understanding of your risk tolerance, which includes your ability (quantitative) and willingness (qualitative) to take risk. A thorough understanding of both your goals and risk tolerance should be the building block of your investment portfolio.

Some investors buy and hold their investments for a very long time while others are in and out of the markets, attempting to time the ups and downs. Our process sits in the middle of these polar opposite philosophies. We create an asset allocation framework that will allow for long-term diversified returns but also be flexible in the short-term to take advantage of dislocations and opportunities that we see in markets. These adjustments can take place within both equity and fixed income portfolios.

Once we have the targeted asset allocation, we go through the daunting task of filtering down from over 16,000 investment companies (mutual funds, ETFs, UITs, and closed-end funds). Investors who do this on their own are tasked with deciding whether to use active strategies, or passive index funds. They also must decide whether to use individual stocks, mutual funds, or exchange traded funds (ETFs).

As part of this process, the Investment Committee goes through a 3-Phase process to screen down and ultimately select the strategies within our portfolios. From start to finish, this process typically takes anywhere from 1-3 months. The first part of the process is more quantitative, focusing on screening out undesired strategies that don’t meet minimum requirements across several criteria. Some examples of these criteria are risk-adjusted return, information ratio, expense ratio, manager tenure, assets in strategy, and up/down capture ratios. During this first phase, we target a final list of 10-15 strategies.

In the second phase, we internally take a deeper dive into the quantitative information for each strategy and some qualitative aspects. Some things we’re reviewing in this phase are underlying portfolio holdings, stated objectives, risk-adjusted returns across several time periods, and factor evaluation. By focusing on a smaller set of names, we can narrow our focus list to 5-6 strategies to make the final cut.

The final phase is more qualitative in nature. We speak with a portfolio manager or specialist from each team we’re considering. Our goal is to learn about the things the numbers won’t tell us, such as the people, process, and philosophy behind the strategy. This is the most important step, in our view, as its imperative that we’re completely comfortable with the team and their decision-making process. This final phase will give us our final decision.

Once the underlying allocations and investments are selected, our job is only just beginning. We must maintain constant oversight on both economic conditions and our underlying strategies. Our Investment Committee meets weekly to discuss both and those discussions often lead to eventual strategy changes. As economic conditions and market valuations change, we consider changes to our underlying asset allocation. Over time, we evaluate the performance and risk of all managers, and if persistent underperformance occurs or if a key personnel leaves, we put the strategy under review and restart our selection process. This process finishes where it started, back at the financial planning process. You and your financial advisor will continue to work to ensure the portfolio still aligns with your risk tolerance and ultimately your long-term goals.