Part of Wealth Advisory
We manage your investments in accordance with your plan.
That sentence is the whole job, and it means more than it sounds like. Managing money in accordance with your plan means doing the best we can to earn the most return for the amount of risk that's right for you. It also means the benchmark isn't the S&P 500. Sometimes your investments should earn more than that index. Sometimes they should intentionally earn less. It depends on what you actually want out of your life, what assets there are to make it happen, the taxes, and how long each dollar has before you'll need it.
Two filters every dollar goes through
So the real answer to "what does investment management mean here" is a description of the process.
Anything you've set aside that you won't spend in the next couple of years should probably be invested, with a few exceptions. Before we decide how, each dollar goes through two filters.
The first filter is your own risk tolerance. Think of it as a spectrum, not an on-off switch. The more risk you take, the more return you can expect over time, and there are an infinite number of places to stand between the two ends. Landing in the wrong place costs you either way. Too far toward risk and a market downswing scares you into pulling money out at the worst moment. Too far toward caution and you're leaving return on the table, usually for nothing more than a lack of precision. Turn the dial up a little and the same money earns more without keeping you up at night. Finding your spot on that spectrum is the first thing we do together.
The second filter is time horizon: how long these dollars have to live before they're used for something. For someone twenty-five years from retirement, this one's simple. Everything is for retirement and the horizon is as long as it gets. Close to retirement, and in it, it gets nuanced. Some of the money will be spent next spring, some next fall, and some has thirty more years to live. Those dollars can't all be invested the same way.
The tax plan bends this second filter too. If we're doing Roth conversions, we may hold certain assets in place because we're going to pay the conversion tax bill out of other assets, and that changes the horizon on those other assets. This is why the investments get decided at the same table as the plan and the taxes. Pull any one of them out of the room and the other two get worse.
Then the actual managing begins
Once every dollar has been through both filters, there's a second layer of work: managing the underlying investments to earn the best return we can for the risk each portion is allowed to take.
Picture your portfolio as something you can zoom in on. Zoomed all the way out, there's the allocation layer: large-cap U.S. stocks, mid-cap, small-cap, international developed markets, emerging markets, and so on, each with a job. Zoom in on any slice and you're looking at how that slice is actually invested, and there are a few layers to go before you reach the individual funds.
Most of those slices are invested through low-cost index funds. That's a strong bias of ours, because in most asset classes the index is very hard to beat and paying to try isn't worth it. A few asset classes are different. In U.S. small-cap and emerging markets, for example, there's more room for a skilled manager to outperform the index, so we tend to lean toward active management there and hire a strategist for that portion. We don't pay for strategists everywhere. We pay for them where they earn it.
One layer above all of that sits the judgment call that's ours as your advisor: slight tilts. A little overweight to one asset class, a little underweight to another, based on what's happening in the world. Never a bet on the market's direction, and never a reason to abandon the allocation. Small, deliberate leans inside the plan.
Put those layers together and you have an investment thesis for your money, and an ongoing strategy that updates so it's always doing the job it was built to do.
What it costs, and where it sits
Investment management is part of Wealth Advisory, the ongoing relationship that continues after The Keystone Method. The fee is 1.00% a year on the first $2 million of managed assets, with lower rates above that, or $5,000 a year, whichever is larger. That one fee covers the planning, the strategy, and the investment management together. If an advisor manages your money today, Wealth Advisory replaces that fee. It's separate from the expense ratios inside the funds themselves. The full schedule is on the pricing page.
The decisions about your investments get made inside The Keystone Method, at the same table as the plan and the taxes, and the management continues through Wealth Advisory from there.
Accounts are opened in your name. Securities are offered through Cambridge Investment Research, Inc., a broker-dealer, and advisory services are offered through Cambridge Investment Research Advisors, Inc., a Registered Investment Adviser. Cambridge and Talley Wealth are not affiliated.
Before you decide
Questions people ask.
Bring the rest to the Explore Call.
Why isn't the S&P 500 the benchmark?
Because the S&P 500 is one asset class, large U.S. companies, and your money has more jobs than that. A portfolio built for income next spring should not look like an index fund, and a portfolio for a thirty-year horizon may reasonably hold more risk than the index does. The benchmark is whether the money is doing what the plan needs it to do.
What about money I'll need in the next couple of years?
That money mostly shouldn't be invested, or should be invested very conservatively. The time-horizon filter is exactly the tool for it. Near-term dollars are held where a bad year in the market can't reach them.
Do you pick stocks?
No. We choose the allocation, choose how each slice is invested, hire an active strategist where one earns their keep, and apply slight tilts. Individual stock picking isn't part of the job.
Can you manage my 401(k) where I work?
Generally not while you're still contributing to it. We plan around it, and it comes into management when you leave or retire. See retirement planning for how the pieces fit.
Does the $5,000 minimum come on top of the 1.00%?
No. Your fee for the year is the larger of the two, so the minimum only matters below roughly $500,000 in managed assets.
The next conversation
Where to start
An Explore Call. Fifteen minutes, by phone, with the question that's on your mind and nothing else.