Frequently Asked Questions
Please click the questions below to discover the answers.
How are you compensated?
Where does an advisor provide the most value?
- Minimizing fees – For example, very similar investment/insurance vehicles are available at very different costs. One of our jobs is to ensure that clients get the most appropriate vehicle at the lowest cost.
- Maximizing market returns – This does not mean beating the market. It does, however, mean that we help clients obtain the returns they deserve. We do this by minimizing investment fees, maximizing tax-efficiency, regularly rebalancing, maintaining diversification, and stopping clients from making mistakes. Avoiding buying into market tops and/or selling at market bottoms can have a far more positive impact on life-time realized investment returns than anything else. In September of 2016, Vanguard Funds research* concluded that advisors who use an approach that addresses the areas mentioned above "can add about 3% in net returns" for their clients on average each year. However, in our experience this potential value comes in spurts and not each year.
- Financial planning / tax-planning strategies - This may include Roth Conversions that build wealth, or Social Security collection strategies that result in collecting more than you would have otherwise. We feel this is where the most quantifiable value is provided to clients. Like investing, tax planning opportunities do not present themselves consistently. Instead they appear intermittently over the years based upon client circumstances, and changes in tax law. This is why we feel on-going financial and tax planning is so vital.
* Putting a value on your value: Quantifying Vanguard Advisor's Alpha by Kinniry, Jaconetti, DiJoseph, Zibering, and Bennyhoff (Sept 2016)
What is your investment philosophy?
The most important aspect of an investment philosophy is having one that you can stick with. It is easy to stick with one that is well-defined, disciplined, and uses common sense. An investment philosophy should never be based upon ever changing market outlooks. While markets change constantly, good advice rarely does. Our philosophy is driven by the following key beliefs:
- We believe that markets work. All known information (and varying degrees of irrational investor emotion) is already reflected in prices. As new information becomes known, security prices instantly adjust. While this creates volatility, it also means that markets are working as they incorporate new information into prices. Once you accept that markets work, then you can accept that there is nothing you know (or anyone else knows) that the markets don't already know. Then, you can take a long-term view and tune out the daily noise.
- We focus our clients attention on controllable factors that matter (i.e., risk control) and away from uncontrollable distractions (e.g., direction of interest rates).
We remain focused on strategies that have high odds of successful outcomes; no longshots.
We understand that global diversification is key to managing risk and participating in global growth.
We realize investment costs must be kept low; this will keep your returns higher.
We know risk and return are directly related. There is no free lunch.
- We know that the "perfect" portfolio, fund, stratey, guru, or investment manager does not exist. Investors should give up this elusive quest for perfection.
As a result of sticking to an investment philosophy, we feel our clients should end up with far better realized-lifetime-returns than most investors who have no disciplined strategy. Becoming crystal clear about what you believe and what type of investor you are will allow you to sit back and enjoy life without the constant frustration / worry / anxiety / questioning felt by those without a strong investment philosophy.
The best way to learn more about our investment philosophy is to request a copy of our free audio download titled, Investment Success.
What do I need for the first meeting?
1. A letter listing the items to bring to our meeting (such as investment statements, pension estimates, and tax returns).
2. Some forms to complete asking about your income, expenses, liabilities, and real estate.
3. Directions to our office.
Simply bring the requested items to our meeting. However, we realize that like most people, your financial life probably isn't in perfect order already. Therefore, if you can't find everything requested, or if you don't complete the forms, that is ok. Simply bring what you have and we will sort through it, and after our meeting, we will develop a final list of items we still need.
The initial conference meeting generally lasts about an hour and a half.
What can I expect as a full service Wealth Management client?
A close working relationship - We are confident that throughout the years or decades we work together, you will never find another personal financial advisor who'll care more about you and your family, or who'll be more deeply committed to the realization of your financial goals.
Are your fees competitive?
At Mallard, the fee for our Investment Management program on a portfolio of the same size is 0.75%, or $7,500/year.
Our full-service Wealth Management program fee is 0.85%, plus a flat annual retainer fee. For example, if the retainer fee were $2,000/year, then the total fee would be $10,500 ($8,500+$2,000). This equates to 1.05% of investable assets. This is not only 20%-24% lower than the average fee, but we include comprehensive services with this program including tax preparation, and estate related planning.
What is a Registered Investment Advisor?
Why is it so hard to differentiate between financial advisors?
Most professionals — doctors, lawyers, even hairdressers – have to meet strict requirements before they can practice. But almost anyone can call themselves a "financial advisor" - even if they are primarily an insurance salesperson, tax-preparer, stock broker, or attorney. In fact, Cerulli Associates, a leading industry research firm, revealed that only 38% of those calling themselves financial planners actually had financial planning focused practices! Therefore, it is very important to determine what the advisor actually does (as opposed to what they call themselves).
Also, the terminology is confusing. For example, the term "fee-based" can confuse clients into believing they are working for a fee-only advisor. A fee-based advisor however earns fees and commissions. We are fee-only, and therefore never receive commissions or other compensation from anyone other than our clients.
Finally, and very importantly, advisors provide a wide variety of services, yet pricing is generally in a narrow range. Therefore, it is important to know exactly what services are being provided for the fee. Fees may be similar across firms, but the depth and breadth of services rarely is similar.
The best method of comparing financial advisors is to use the following PDF: Comparing Different Advisors.pdf
Why is being a comprehensive advisor so important?
Does this sound familiar?• You go to a broker for investment advice,
• an insurance agent to buy insurance,
• an accountant for tax preparation,
• an attorney for estate planning, and
• a financial planner for a retirement plan.
Are your fees deductible?
Fees can be wholly or partially deducted on one or more of the following: Schedule C (small business). Schedule E (real estate), and/or Schedule A (anyone). If you don't have fees related to a business or a piece of real estate, they would then be deductible on Schedule A to the extent that they (and other miscellaneous itemized deductions) are greater than 2% of your adjusted gross income. In other words, they will be deductible depending on your type/amount of income and the amount of your total deductible expenses. For many clients, a portion of the fee is deductible resulting in the Federal & State taxing authorities essentially subsidizing a portion of our fee (via a lower tax bill). We will give you an estimate of the tax-cost savings at the time of our initial appointment.
How much does a stand-alone financial plan cost?
For more details regarding our stand-alone plan, see our Comprehensive Financial Plan page.