Wealth and Investment Management
Maybe you have retirement accounts or brokerage accounts; or maybe you don’t know where to start. These assets are the tools to build wealth with, but if not invested properly, could ruin your financial plan. That’s where our wealth management, through our investment management, can help you.
What is Wealth Management?
Wealth Management is a financial planning service that looks at all aspects of your finances. A major mistake people make with their money is to look at each financial issue in isolation, not considering that a decision in one area can affect their finances in another. Wealth Management breaks down these silos and helps optimize all your financial decisions so you get the most out of your hard-earned money.
These are examples of the key planning projects we help you with in Wealth Management. For example, saving for your child’s college is an important goal, but needs to be balanced against how much you’re saving for retirement. Also, choosing your corporate benefits wisely often depends on your tax situation. As you encounter a decision point in one financial area, our job is to help you make that decision, considerate of your other important financial goals.
Who Needs a Wealth Manager?
The genuine answer is that every family needs a Wealth Manager. In our experience, we’ve found that three types of clients get particular value out of Wealth Management.
High Income Earners: If your family’s income is high, whether you’re a business owner or in Corporate America, our experience is that the tax complexity becomes a bigger issue as your income increases. Getting enough retirement savings into tax-advantaged accounts becomes more difficult and your insurance and estate planning needs move beyond the basic strategies that most families use. Wealth Management helps you optimize your finances as your financial situation becomes more complex.
Near Retirees: If you’re nearing retirement, you’re soon going to be switching from a savings mindset to a spending mindset. All those retirement savings and benefits that you’ve stashed away are now going to be used. It’s important to be thoughtful about how you draw on those resources in retirement. With Wealth Management, we help you implement a retirement income plan so you can sleep well at night knowing how you’re going to cover your daily living expenses. We’ll also help you optimize your retirement strategy with an eye towards keeping your taxes in check.
Corporate Executives: Much like High Income Earners, Corporate Executives find their financial life becomes more complex as they move up the ranks within their company. New financial incentives, such as stock-based compensation and deferred compensation, become available to you and have the potential to become powerful tools for building wealth. Our Wealth Management service will help you decipher your company’s often-complex benefits packages. With our services, you can be confident that you’re taking full advantage of what’s offered to you.
What Services Does a Wealth Manager Provide?
The chart above shows you some of the major planning services a wealth manager provides. We can break these down into three broad categories:
Goal Planning: You and your family have goals. Being able to sustain your lifestyle into retirement is often a big one. But depending on your life stage, you might have other goals, such as sending kids to college, buying a second home, or setting an annual travel budget while in retirement. We help you put real numbers on these goals and then create savings strategies to achieve them. Investment Management is a key part of successful goal planning.
Tax Planning: It’s often said that, “the tax tail wags the dog.” Since we do tax-planning in-house, we know how taxes can affect your financial planning strategies. All of our recommendations are informed through a tax lens, with the goal of minimizing your tax liability, so more of your money can get put to work for you.
Risk Management: Protecting you and your family from a catastrophic financial event is an oft-forgotten piece of your financial puzzle. At various points in your life, you’ll need life insurance or umbrella insurance to protect against those events. We also analyze your existing home, auto, and health insurance coverage to make sure you have the protection you need and aren’t overpaying for insurance.
Why Do You Need a Wealth Manager?
Everyone knows people are busy. Especially if you have kids at home. Given the multiple parts of your financial life and inherent complexity with many financial topics, it’s normal for people to ignore their finances until they have to.
We firmly believe that having a Wealth Manager at your side on an ongoing basis adds value to your family. While you’re busy taking care of your family and growing your career, we work in the background to make sure we optimize your financial plan at all times. If tax laws change – as they often do – we’re there to adjust your plan to keep up with these changes.
In short, a Wealth Manager provides a valuable service not only in dollars and cents terms, but emotionally as well. No longer will you be left wondering if you’re maximizing the value of your financial opportunities.
What is Investment Management?
An important part of your Wealth Management plan is getting the most out of your savings for future goals. That’s where Investment Management plays an important role.
Investment Management seeks to maximize the value of your investments within the constraints of your financial goals and risk tolerance. Achieving growth in the value of your investments not only helps your money keep its purchasing power above inflation, but compound growth over long periods of time can also help you achieve your goals faster.
Our Investment Management philosophy involves all the factors you see below. Each one is important, and each factor informs the other factors.
The same philosophy that guides Wealth Management – maximizing the value of your financial future – guides Investment Management as well. Taxes and fund fee expenses can act as long-term drags on your investment value. In choosing a well-diversified investment portfolio, we always monitor expenses and make sure we place those investments in the right type of account, whether it’s a taxable account or tax-deferred IRA.
Who Needs an Investment Management?
Investing your money is a lot easier and less expensive, especially in the last two decades. Gone are the days when you need to buy your investments through a broker. So why does anyone need professional Investment Management these days?
While the process of opening accounts and investing has gotten easier, getting the most out of your investments takes time and some level of expertise. Here are common problems we find when we analyze a new client’s investments.
They’re not well diversified. In today’s day and age, we find investors gravitate towards the same investments. For example, the 2010-2020 period was marked by very strong performance from large growth stocks. Today, many clients have a lot of investment exposure to this one asset class. And while it’s worked for the last 10 years, the 2000-2010 experience saw these same stocks underperform the rest of the market by a wide margin, hurt by the bursting of the Tech Bubble of 2000 and the Great Financial Crisis of 2008.
Tax-inefficient Investments in Taxable Accounts. Taxes are a “silent killer” of investment performance. Unfortunately, many people have tax-inefficient investments – such as actively managed mutual funds – in taxable investment accounts. Each year, these funds distribute dividends and sometimes very large capital gains, which creates a tax drag on your portfolio.
Investment Funds With High Underlying Fees. Back in the 1990s and early 2000s, mutual funds were all the rage. And some of them did well to outperform the broader market. But outperforming has become more difficult over time, yet their expense ratios – what you’re paying for them to outperform – haven’t come down. Sometimes these expenses can equal up to 1.00% of the investment you have in the fund. In a world where the long-term average growth rate for stocks is around 9%, taking 1% out for investment fees can add up if you’re not getting other benefits.
Not Rebalancing Investments Regularly. The problem we see here is directly related to the fact that most people don’t spend the time they should managing their investments. Portfolios may drift higher or lower with the market. What was once a sound investment mix has either become too aggressive or too conservative. This is especially important for people nearing retirement. They will need to scale back investment risk increases closer their retirement date.
Trying to get all these factors “right” isn’t easy. That’s why having an Investment Manager at your side is so important.
What Services does Investment Management Include?
At Financial Design Studio, we have a rigorous investment management process that ensures we’re achieving all your important goals: diversification, tax-efficiency, expense efficiency, and regular rebalancing. We do these services on an ongoing basis.
Long periods of quiet trading with low volatility have marked markets in recent years, as they grind to new highs. But sharp, short-lasting corrections have interrupted these lulls. These can take investors by surprise, such as what we saw in March 2020.
An Investment Manager who has the systems and processes in place to adjust quickly to changing market conditions can help create value for your investments. Not only that, a good Investment Manager will spend time with you keeping your emotions in check during those volatile market periods.
Wealth and Investment Management Services: Ongoing Services to Help You Achieve Your Goals
The Wealth and Investment Services outlined above work best when we’re working with clients on an ongoing basis. That’s why we offer one complete service package that covers both services. Our goal with every client is that they’re getting the best they can out of their finances. Ongoing client relationships make this possible.
For the busy family, having a Wealth and Investment Manager can be like having a landscaper. Sure, you could cut the lawn and pull weeds yourself. But that would be time-consuming, and it probably wouldn’t look nearly as nice compared to paying a professional to do it. There’s enough on your plate as it is. Let us help you manage one of the most important parts of your future.
Ready to take the next step?
Schedule a quick call with our financial advisors.