investment management approach

We work together to create a diversified portfolio designed to meet your financial goals and reflect your values. As a Prudent Fiduciary:

• We emphasize asset allocation because we believe that asset allocation is the most reliable and manageable indicator of long-term performance and volatility.
• We use diversification to eliminate as much risk as possible for any given range of expected returns. We combine different asset classes, investment styles, and managers to reduce overall portfolio volatility.

See below for details on the ‘Prudent Fiduciary’ investment management approach.

Socially Responsible Investing
Socially conscious investors seek to secure their own financial futures while investing in enterprises that contribute to a clean, healthy environment, treat people fairly, embrace equal opportunity, and produce safe and useful products.

We believe that taking a sustainable and responsible approach to investing is another way to manage and reduce long-term portfolio risk. Our approach helps focus portfolio holdings on companies of the future – companies working in more sustainable industries, companies whose executive teams have demonstrated a commitment to accountability and ethical practices.

Passive Management
Decades of academic research indicate that passively managed funds provide a low-cost yet effective investment process. A recent 2008 paper describes a study of 2,076 actively managed funds during the thirty-two-year period from 1975 to 2006. It found that only 0.6% of all active funds outperformed stock market indices. This demonstrates that what is important is asset allocation-not  picking specific securities (Source: False Discoveries in Mutual Fund Performance: Measuring Luck in Estimated Alphas by Laurent Barras, Olivier Scaillet, and Russ Wermers. http://tinyurl.com/cldy9b).

For clients who choose this strategy we provide low-cost institutional-class shares managed by some of the largest and most respected names in the financial world.

Financial Planning
A financial plan integrates a financial mission, goals and objectives into one cohesive plan that allocates resources consistently and continuously. The most important benefit is that goals identified and planned for are far more likely to be achieved.

Financially successful individuals—not necessarily wealthy, but those who meet their financial goals—tend to do more financial planning to prepare themselves for the inevitable fluctuations in their internal and external environments. Conversely, individuals who are not as financially successful tend to underestimate the value of planning, and may attribute their lack of success to uncontrollable factors such as the economy, or just bad luck.

A “Prudent Fiduciary” Investment Management Approach
A Financial Advisor held to a Fiduciary Standard occupies a position of special trust and confidence when working with a client. As a fiduciary, we act with undivided loyalty to our clients. This includes disclosure of how we are to be compensated and any corresponding conflicts of interest.

The following is adapted from an article by W. Scott Simon, “The 12 Days of Christmas of a Modern Prudent Fiduciary” http://tinyurl.com/b6p9o7

1. According to Nobel laureate Harry Markowitz, the father of modern portfolio theory, the fundamental problem faced by all investors is that any investment decisions they arrive at are made under conditions of uncertainty.
2. The “central consideration” of fiduciaries under the Uniform Prudent Investor Act (UPIA) and the Employee Retirement Income Security Act (ERISA) is to determine the trade-off between risk and return in a portfolio.
3. The relevant unit to which fiduciaries must pay attention is the investment portfolio, not the individual components that comprise a portfolio.
4. Investment prudence, according to standards of modern fiduciary investing, is measured by process. The prudence of fiduciary investment decisions and actions is tested not by the investment performance of a portfolio but by the soundness of the decision-making process that led to the performance.
5. Focusing solely on return – as most active investors that are stock pickers, market timers and track record investors attempting to beat the market are trying to do – violates the “central consideration” of all modern prudent fiduciaries: to determine the tradeoff between risk and return in a portfolio.
6. It’s silly to think that active investors can achieve investment returns superior to that of the market when any investment return is nothing more than a random variable and therefore subject to inherent uncertainty, over which no one has any control. Focusing solely on return is directly opposite of how standards of modern fiduciary investing define prudence: in terms of fiduciary conduct not portfolio performance.
7. Broad diversification of the risk in a portfolio increases return. To enhance that return, diversification should occur at two levels: both across (i.e., horizontally) the asset classes that comprise the portfolio and within (i.e., vertically) each such asset class.
8. The certain, intelligent management of investment costs and taxes (for taxable investors), and risk (through broad diversification) goes much further in generating increased return than the uncertainty of stock picking, market timing and track record investing.
9. Fiduciary conduct cannot be judged with 20/20 hindsight. Looking backward is not permitted. Section 8 of the UPIA states: “Compliance with the prudent investor rule is determined in light of the facts and circumstances existing at the time of a trustee’s decision or action and not by hindsight.” Equally, fiduciaries aren’t expected to be able to forecast which financial markets and/or which investments comprising those markets will perform well or poorly. Since a fiduciary is not required to accurately predict future events, it cannot be an insurer of portfolio performance. Looking forward is not required.