We believe that our strength and all facets of “wealth management” stem from financial planning. By putting an emphasis on financial planning, we give ourselves the ability to see the entire picture with more clarity enabling us to give prudent investment, tax, insurance, and legacy planning guidance.
Each member of our firm has a unique area of expertise, and we believe that a team-based approach is the most prudent way to work on behalf of our clients. However, we do expand our “roster” with outside trusted professionals if we feel that they can add value.
We are firm believers that there should be one professional that leads the charge, and we typical prefer that our investment advisors fall into that role to ensure efficient facilitation of advice.
As a privately-owned firm, we don’t work for anyone other than our clients, and in their best interest always.
The biggest advantage of our business model is the flexibility to incorporate a tax practice within our investment advisory business. This allows us to bring together the two most important components of wealth management and the ability to add additional value.
Our biggest disadvantage is that in order to maintain the highest quality of service to our clients, we are limited to the number of families we’re able to work with.
Conflicts of interest generally do not exist, but if one were to arise, it would be fully disclosed. The most common scenarios are related to commission-based insurance products. However, and because our financial planning process is objective, no product will ever be recommended unless we’ve determined it to be in your best interest.
Assets are never physically held directly with us. Although we are custodian agnostic, we primarily work with Fidelity Investments.
Our investment advisor relationship can be terminated at any time and be either party. If we were to part ways, you would be able to ACAT (transfer in kind) the assets to another custodian, or leave them with Fidelity, and simply remove us from the account. Liquidation is not necessary.
We are fortunate to have not had a data breach, but data compromises can happen to anyone. What’s most important is that we have invested in the highest level of security to protect it and work with a third-party provider to ensure ongoing security.
Client communication is on the client by client basis. At minimum, we prefer to meet three (3) times a year:
- Tax Return Preparation and Review (February 1st – April 15th)
- Mid-Year Review: (July 1st – August 30th)
- Year-End Planning: (October 1st – Mid-December)
Additionally, we want to meet more frequently during certain life events (i.e. job loss/change, retirement, passing of a loved one)
Finally, it should be noted that once we enter an investment advisor agreement, a client can call a meeting at any time.
Accounts held at Fidelity: You will receive a monthly statement and can access the account at any time on-line.
Insurance contracts: You will receive a statement annually on the anniversary date of the initiation of the contract.
Client Portal: We hold all information pertaining to your relationship with the firm in our client portal that clients have online access to. We currently use industry leader eMoney.
- Performance Report (specific to accounts held at Fidelity): We prepare these reports bi-annually through our reporting software, and we can customize these to your liking.
- Net-worth statement: We generally provide this anytime we meet. It enables clients to see their entire financial position on one document.
- Estate Plan Analysis: Annually, during year-end reviews.
- Additional reports upon request:
- Retirement analysis
- Cash flow projections
- Insurance vs. Investing Comparison
- Portfolio analysis
- Investment risk assessment
The biggest event of our year is our annual pie day, held on the Tuesday before Thanksgiving every year. This is well attended, and clients always have the opportunity to engage with one another.
INVESTING PHILOSOPHY AND APPROACH
We believe that our value is added from several services that we provide on an ongoing basis. We summed this up in our Value of Advice piece where you can find additional information.
Both, as we firmly believe the following are three (3) most important things in wealth management:
- Asset Allocation: 90% of investment returns are based on asset allocation, and not individual stock selection, or market timing. All our portfolios are professionally managed and monitored to ensure clients are properly diversified, and within their risk parameters on an ongoing basis.
- Timing of Withdrawals: A major component of our financial planning process is understanding when assets will be withdrawn. This is important as we tend to pair back risk as we get closer to the withdrawal date as we simply don’t have time to recover if that date coincides with a market downturn.
- Tax Management: On average, proper tax management can benefit a portfolio by 0.75 – 1%. The primary drivers within our tax management process is asset location (understanding what investment to hold within accounts based on tax classification), investment income tax mitigation, and tax harvesting. For a better understanding please visit the Value of Advice link listed above.
Our body of work, and not one specific part of our process is what will be reflected in the value we add to our clients.
We use modern portfolio theory as a general guideline to investment management. At the most simplistic level, this ensures the right mix of investments are in our investment portfolios to optimize returns per unit of risk. What makes us different is our ability to minimize investment tax liability, and tailor the associated risk based on expected portfolio withdrawal dates.
We are agnostic to the type of investment vehicles, and focus on the following criteria:
- Internal expense ratio
- Commission free
- Tax efficiency
- Manager tenure
- Style consistency
We primarily focus on goals-based planning bespoke to each family that we’re working on behalf of. We encourage every client to allow us to create a financial plan for them during our onboarding process, and this service is inclusive in our fee for assets under our management. Part of our process is leaving flexibility for change, and for that reason we meet 2-3 times per annum and can update the plan at any given time if a change is deemed necessary.
We integrate the following tax planning strategies for client accounts:
- Dividend tax analysis: there are multiple dividend tax classifications, and we determine which is most advantageous based on our assessment of each tax situation.
- Tax-loss harvesting: as described above, this is the process of advantageously selling off securities at a loss, while subsequently reinvesting to a similar security, enabling us to apply the loss to future tax obligations while staying fully invested.
- Charitable gifting: if there’s an organization near and dear to your heart, we’ll help optimize the tax benefits of donations.
- Legacy planning: an estimated 35 – 45% of wealth is inherited vs. earned, and for that reason, we focus a lot on taxes within our legacy planning process to ensure we’re optimal for your heirs.
We believe that at the core of financial advice is the ability to understand and give tax guidance. For this reason, we prefer to prepare our clients annual tax returns, and have a CPA on staff to provide year-round tax related guidance.
Yes, and because these are complex strategies, we review each situation internally to determine the next best steps. We prefer to keep the work in-house. However, we will refer to an outside professional and hold a joint meeting if necessary.
FEES AND EXPENSES
We do not have arrangements outside of our listed fees – by staying within the boundaries of our pricing guide, it ensures that we’re impartial to clients, and allows us to maintain the highest level of service while remaining profitable as a firm.
Tax preparation: to cover the cost of E&O insurance, our tax software and seasonal employees, we do charge a nominal fee to our financial clients for tax preparation. We charge $100 for a standard tax return (this includes state and federal as well as e-filing services), and $135 if you itemize. You can find the full version of our tax service here: Lakeshore Tax Consulting – Services and Pricing