Benefits of Professional Management

A comprehensive approach to investment management has been shown to improve client returns by 3% net of fees, according to research by Vanguard, Morningstar, and others. The benefit of professional management isn’t that we can ‘pick the right investments,’ however. It’s that we can:

• Structure and adjust your portfolio in response to changes in markets, the global economy, tax law, and your goals

• Better manage tax implications based on your tax situation this year and our projections of your future taxes

• Be a sounding board to help you avoid mistakes and make better decisions

• Handle the busy work so you can have a life

Your life trumps your money

The goal isn’t to have you die with the most money. The goal is to allow you to maximize your spending over retirement without risking running out of money. Advice is always given based on how it aligns with your values, your purpose, and the life you want to build — not based on maximizing account balances. If you investing for a specific goal, we’ll be the first to ‘push’ you to spend the money when the time comes to enjoy it. Including during retirement helping you responsibly front-load spending during the years when you are healthier and able to spend more.

Based in academic research

We look to unbiased academic research to form the models and the assumptions used to construct portfolios. For example, multiple studies have demonstrated small cap stocks outperform large cap stocks over the long-term, so client portfolios are weighted a little more heavily in small stocks. And academic research has consistently demonstrated technical analysis doesn’t work so we don’t engage in it (more than one Nobel-prize winning economists have called technical analysis “voodoo”)

The U.S. isn’t the center of the universe

Exposure to global economies in your portfolio are based on the proportion of the world economy each sector makes up. So while the US is currently approximately 60% of the global economy and therefore 60% of the stock exposure in client portfolios, when that changes your portfolios will adjust with the new reality. (The same holds true proportionally for other economies).

Statistics guide decisions

While statistics can’t predict the future, it does provide a powerful tool for modeling probabilistic outcomes to then make decisions from those models. This isn’t unique to investing and it works incredibly well in all sciences. We use statistical models to construct portfolios and mange plans including Monte Carlo analysis to calculate thousands of possible futures based on historical data to provide a probabilistic range of outcomes, correlation analysis to lower the risk of the overall portfolio, and stress-test analysis to measures the impact of changes in 8 core risk areas (such as 1% higher inflation or a 20% increase in healthcare costs).

For retirees we also use this analysis to annually adjust spending in retirement to spend the maximum responsible amount to achieve your goals. The actual spending amount is determined through a discussion of both the math and your evolving life goals, rather than blindly following the math.

Asset classes over assets

We develop our models and the portfolios based on asset classes rather than individual companies. While I think Apple is a great company, I have no idea of whether scandals are hidden in their closet or if they will even be around in 20 years. But the asset class large US companies, which Apple belongs to, will always exist (so long as there is an economy anyway). So structuring the portfolio based on asset classes provides more sustainability and stability for the portfolios and allows for statistical models based on factors which are permanent — or at least as permanent as we can expect.

Investing in Your Business takes priority

As with most things, investing for business owners is very different than it is for the average person or family. Your business is likely the single best investment opportunity you have, and not just because of the potential for outsized returns. Your business also provides your income, you exert more control over your business than any other investment, and you have the opportunity to understand and manage risk better than most other investments. Your business also represents the greatest risk to your wealth.

For business owners investing becomes more about protecting your assets than building your wealth. And any protection strategies must always be measured against the need to reinvest into the business to maintain stability and growth.

**Note: Outperformance of managed investment accounts is not based on Purposeful SP client historical return data but on independent research of best practices of investment management and their impact on client outcomes. Clients will not see annual outperformance verses an index; rather, research finds comprehensive advisors over long periods can increase net after-tax retirement income and portfolio performance verses non-advised portfolios due to advanced financial planning strategies with benefits derived from tax savings, threshold-based rebalancing, withdrawal strategies, asset allocation, targeting total return, avoiding behavioral mistakes during market volatility, and other factors. Vanguard Research [Advisor Alpha; 2016 - Updated 2018]. Morningstar Research [Alpha, Beta, and now Gamma; 2013]