When asked about Wealth Management, many people first think about asset allocation and maximizing the return on their investments. But there are so many more aspects beyond this obvious association. Here are some common investment themes:
- Investing for growth: Growing the portfolio, especially keeping after-tax returns in mind
- Investing for income: Using your investments to create a steady and long-lasting income stream
- Investing with constraints: Investing successfully, while respecting specific external boundaries
- Account consolidation: Combining investment accounts for cost-savings and simplification
- Trading as a service: Implementing trading strategies based on client input
The diversity of these themes show that successful wealth management is a highly individualized process. Before deciding on an investment strategy, it is essential to understand the investment objective and tax situation, the account size and future cash flows, the time horizon, and the client's risk level.
To adequately capture a client's needs, wants, and wishes, we recommend preceding wealth management with financial planning to quantify the likelihood of reaching your goals. As part of this process, we can identify potential financial gaps, or estimate when you can retire comfortably. We wrote a detailed walk-through of a financial planning session in a separate post.
The conclusions from the financial planning process define many of the parameters of your future investment objective. However, your personal circumstances and preferences will always play an equally important role. In the following, we revisit some common investment themes to illustrate this further.
Investing for Growth
One of the most common investment themes is investing for growth, often referred to as asset management. Typical clients are still 15+ years away from retirement and are accumulating wealth in a combination of taxable and retirement accounts.
Clients differ in the percentage of their wealth held in taxable and tax-deferred accounts, which has important implications on the methods we can use to manage the investments.
Further, many clients have financial goals on their way to retirement. Possible goals include a new home or funding their children's college education. These financial goals define the investment horizon, and with that, the level of risk these clients can assume with their investments.
Typical investments for growth have a large percentage of assets invested in the stock market, which is not always a smooth ride. We described our findings of what to expect when investing in stocks in a separate post.
In any case, we continuously monitor the markets as well as your accounts and rebalance your portfolio as required. We track your returns and confirm that we are still following your financial plan. And if circumstances change, we suggest adjustments to your investment policy.
Investing for Income
Once our clients have reached their retirement, the investment theme changes dramatically. During retirement, the primary concern shifts from accumulating wealth to creating a steady income stream. This income should allow for a comfortable lifestyle without depleting your savings too quickly.
The biggest fear during retirement is that of outliving your savings. This possibility is tightly linked to investment volatility. We wrote about the effect of volatility on your retirement in a separate post.
Consequently, retirement portfolios are very risk-averse and typically have a large percentage of assets invested in bonds. To learn more about bonds, read our post on investing in bonds.
Investing with Constraints
In many cases, clients have constraints regarding the investments they can or like to make. One example is an existing asset allocation, which cannot be changed. This allocation may include employer stock option grants, or holdings of illiquid assets, e.g., investments in real estate. Another example is a client seeking to combine investment objectives with non-financial goals. These goals might include the desire to invest in socially responsible ways or avoiding certain companies or industry sectors.
As investment advisors, we need to develop an investment policy that embraces any existing investments and builds a complementing policy around these to achieve the client's investment objective.
Over the years, some clients end up with many different investment and retirement accounts: a brokerage account or two, 401 (k) retirement accounts from numerous employers, individual IRAs or Roth IRAs. There are many reasons to consolidate these accounts as much as possible. Many of these accounts charge a monthly fee, which we should avoid, if possible. Further, the larger account sizes after consolidating the accounts allow us to implement investment strategies more efficiently.
As part of our wealth management, we are happy to advise how to streamline your account structure best and help with the process.
Trading as a Service
Some clients come to us with particular ideas regarding their investment objectives. For example, clients might want to implement a rule-based investment strategy, which they have developed themselves, taken from a book, or a market-timing service. However, these clients might not have the time or infrastructure to execute these strategies themselves.
At Bertram Solutions, we are uniquely positioned to address this need. Thanks to our proprietary infrastructure, we can execute quantitative trading strategies with daily rebalancing. Like with all other clients, we hold client assets at an independent custodian, and trade on behalf of our clients using a limited power of attorney.
The investment themes outlined above are only simple examples of the wealth management services we offer. It is essential to recognize that successful wealth management is not a one-time event but an ongoing process. Further, clients typically need a combination of wealth management and financial planning services.
Regardless of your specific needs, we pride ourselves in our data-driven approach to investment advice. We conduct our and independent research to provide you with highly individualized guidance.
At Bertram Solutions, we are here to help. We understand that as life happens, your investment policy might need adjustments as well. Therefore, we review each client's financial plan and investment policy at least once a year. Read more about the circle of financial advice in a previous post.
We hope this post provided you with a helpful overview of our approach and services. Please contact us to learn more.