Capital Preservation and Planned Growth

The firm’s investment philosophy focuses on capital preservation and long term investment growth. Central to the investment philosophy is the recognition that risk is too often underappreciated and misunderstood.

It has been the recurring mistake of investment industry to focus on the potential upside without recognizing the potential damage not only to an investment portfolio, but to a client’s overall financial situation. This imbalance of return vs. risk is often complicated by inherent conflicts of interest. We recognize that investment professionals can be optimistic and recommend investments when their only downside is less revenue on managed assets while the real downside to a client is a significant reduction in net worth and the disruption of future plans. Too often simplistic model portfolios are applied to client situations that should require customized and specific requirements. The same separate account structure used for hundreds of clients seldom is effective. Especially when investment duration and tax considerations are factored.

Our clients come to us with significant wealth that sometimes has been earned by taking great risk. They turn to us for stability and to steward these assets across generations. We honor that trust by designing and executing investment programs that seek to protect capital while meeting both short term and long-term objectives. Our goal is to achieve enhanced risk adjusted net returns that meet the goals of our clients.

Our Process.

To execute investment and wealth management solutions for our clients, we utilize a four-phase process:

1. Comprehensive Assessment
2. Plan Development
3. Plan Implementation
4. Consultative Communication & Reporting

1. Comprehensive Assessment:

We begin by developing an accurate picture of the client’s balance sheet. This reflects existing investments, significant assets including concentrated positions, real estate holdings, current and projected tax liabilities and also anticipated cash flows. With this financial picture, we can make initial recommendations on the current asset allocation, the risk & return profile of the overall balance sheet and specific accounts, tax sensitivity, risk management and structuring, and overall financial management. In some cases we are hired to provide this assessment to review the progress of existing investment managers and financial advisors. The assessment often uncovers unintended risks as well as significant variances between what the client believes and what the financial picture reflects.

Regardless of the engagement, this is a necessary and vital step in the financial advisory process. We avoid formulistic questionnaires in favor of iterative dialog that is substantive and client-specific. Our assessment isn’t simply to comply with “suitability requirements”. It is to establish an understanding of the client’s situation that often the client lacks. It also results in an understanding of client objectives and provides our client with an understanding of risk. By reviewing the portfolio against the expected objectives, we can more readily assess the likelihood that the client’s goals will be achieved.

2. Plan Development:

We work with our clients to develop an investment plan that optimizes wealth in light of the client’s specific objectives and constraints. Just as goals can be multiple and complex, restrictions are varied and typically include SEC and shareholder restrictions, structuring and situs issues, tax considerations, net worth concentration, and client biases and experiences. Asset allocation and investment is driven not only by our market view but also by client specific variables and the nature of the entities we are managing. We consider these specifics in light of our assumptions regarding the expected return, volatility, and correlations of asset classes. We then simulate ending wealth values and probabilities of success. The result is a powerful means of assessing the risks of the structured portfolios.

For each client portfolio, we develop and execute an Investment Policy Statement that formalizes expectations. These guidelines provide structure, discipline and accountability to the investment program while allowing for some degree of flexibility.

3. Implementation:

We use an institutional investment process applied to each specific high net worth investor. Our investment discipline is policy-driven and is comparable to that used for an endowment. We acknowledge that the overall policy decisions are key to controlling risk and expected returns. While we favor passive investment for most assets classes, we will not ignore market conditions and volatility. And while we recognize the failure of market timing, we may tactically underweight portfolios in response to risk. As recent periods have shown, a mechanistic approach to portfolio investment can often expose clients to risks that outweigh the potential for returns.

Our investment portfolios reflect broad diversification with calculated correlations among asset classes. The objective is to implement the client’s planned portfolio across diverse asset classes in a manner that will provide specific benchmark performance against measureable risk. Client assets are invested in institutional investments that are typically not available to individual investors. Current and prospective managers undergo a rigorous quantitative and qualitative review. Because we are independent and because we are not compensated in any manner by investment managers, we can maintain our objectivity and our flexibility to retain or discontinue investment managers and firms. At all times and consistent with all of our business partners, we will only work with managers that are aligned with our client-centric focus and that exemplify the highest levels of professionalism and integrity.

In addition to investments in the core equity and fixed income asset classes, we recognize that certain advantages and risk controls are possible with appropriate investments in alternative investments, real estate, venture, private equity and commodities. As with any investment plan, the inclusion of non-traditional assets is a function of the client’s circumstances, tolerances, and goals.

4. Consultative Communication & Reporting:

Our communication is not limited to quarterly reviews. We believe our role as trusted financial advisors is fostered through constant and effective communications. The level of communication is set by the expectations of the client, not by us. For investment management, we believe in accountability and provide reporting that reflects a level of detail necessary for analysis of risk-adjusted returns. Our AIMR-compliant reporting system provides information and a level of analysis that is far beyond customary brokerage account statements. We also have the ability to provide a level of customization for client portfolios based on meaningful account aggregation. Additionally, we can include transaction, cash flow and tax-related information in a format customized to client specifications. Our regular reporting serves as a feedback loop that informs the entire wealth management process.