The Fiduciary Financial Partners approach to portfolio management is grounded in academic research, and driven by the assets and liabilities of the client – not the sales menu of a Wall Street firm or the hyperactive “breaking news” cycles of financial entertainment media. By focusing on portfolio structure within the context of a fiduciary financial plan and ongoing monitoring, FFP helps clients not only stay on track to meet financial goals, but also provides perspective during inevitable “fear and greed” market cycles.
FFP portfolio management services help clients focus on the five real drivers of investor success.
The groundbreaking 1986 study, The Determinants of Portfolio Performance concluded that asset allocation determines more than 90% of a portfolios return and variability. By contrast, security selection and market timing mean very little to long-term portfolio growth.
Active vs. passive decision
Another key consideration is, “should I be in the market or out of the market?” A buy-and-hold strategy is far superior to the market timing approach, provided you are diversified. Market timers attempt to predict the future direction of market prices and place a bet accordingly. We believe it is impossible to predict when the best or worst days will occur.
Sources of risk
Investing is about risk. We should invest where we get paid to take risk:
Stocks, not bonds. This sounds obvious, but after the Great Financial Crisis, the whole world is involved in a search for yield. Buy stocks for growth, and bonds for stability.
- Small companies vs. large companies. Small companies and value companies return more over time because they are more risky.
- Value vs. growth companies. Risk and return are related, the more risk that we take, the more return we make. This is not true at all times, but the entire world of investment products is really trying to sell you on two things – making you more money and exposing you to less risk.
- Term factor. It does not pay to buy long-term bonds.
- Credit factor. It does not pay to buy risky bonds. You CAN make decent money buying junk bonds at the right time. However, for the risk that you are taking, you might as well buy stocks.
Market timing and financial entertainment media are white noise can distract us from what matters most – long-term portfolio performance. This means that trading too often subtracts from our return, but it does not mean that we should ignore our portfolios. The portfolio allocations need to be driven by personal factors, such as cash flow needs and risk tolerance. We use market volatility to our benefit. Rebalancing our portfolios to conform to our target allocation is as simple as selling high, and buying low.
Unfortunately, human nature always tells people to do the opposite. When stocks appreciate, it makes sense to rebalance portfolios — sell stocks and buy bonds — to the allocation that matches the investor’s objectives. This may sound simple in theory, but in difficult times when stocks are down, buying more stocks is very difficult for the individual investor. FFP’s approach offers the ability to invest in a disciplined fashion, leaving emotion out of the process.
You should not even consider hiring a financial advisor who does not display their fees for the whole world to see. This subject is too important to ignore. Fees are a big barrier to quality financial planning that will grow your portfolio — and there has been too much confusion about fees among consumers of financial planning for far too long.
Before you engage us for your financial planning, we are required to describe our brokerage and custody fees and fund expenses so you will know how much you are charged and by whom for the independent financial advisory services we provide. The tale below outlines how we are compensated for our advisory services.
Our fees for comprehensive portfolio management are billed on a pro-rata annualized basis monthly in arrears. Please refer to our full explanation of Fees and Compensation in our Form ADV II.
FEE SCHEDULE: Comprehensive Portfolio Management