Investment Advice versus Investment Management 🤔

Tell Me More: Investment Management

With investment management, I’ll do all the heavy lifting for you: account opening, transfers and roll-overs, trade execution, ongoing monitoring and rebalancing. You’ll be informed and involved to the extent you want to be, but you can be pretty hands off and rest assured there is very low chance of any missteps or delays in implementation of your investment plan.

I – and the team of investment professionals I work with – will actively monitor both your portfolio as well as the underlying funds in which your portfolio is invested.

You’ll also be invested in what I believe are best-in-class, evidence-based investment funds. These funds monitor and put into practice the findings coming out of academic research into finance and markets. The funds which I use are those offered by Dimensional Fund Advisors.

While still highly diversified, market-weighted funds at their core, these funds implement what I believe are small yet meaningful enhancements. I also typically use funds which employ environmentally sustainable and socially responsible investment philosophies.

These funds are not easily available to DIY or retail investors (which is what you and I are) and are not available as part of the Investment Advice offering.

Investment Management May be Right for You if…

• You want access to what I believe are be best-in-class, evidence-based investment funds, implementing the best ideas coming out of academia.
• Having environmentally sustainable and socially responsible aligned investments is important to you.
• You don’t want to spend time navigating through how to buy, sell and periodically rebalance your portfolio.
• You want to minimize the chance of any missteps or delay – and in the unlikely event something goes sideways, you want the comfort of knowing professionals will handle the situation.

What about Pricing?

The annual fee for Investment Management services is 0.70% of the investments I manage for you (”assets under management” or “AUM”).

You may also hear 0.70% referred to as 70 basis points or “bps” (pronounced bips).

Why is it so Expensive?

While 0.70% – or 70 bps – of course isn’t free, it’s meaningfully lower than the industry standard 1.0% annual fee.

I believe it’s a fair fee for the work performed, the ease and security it provides you – as well as the sophistication of investment philosophy implementation.

Will There be a Positive ROI? 📈

Will your net (e.g. after all fees) investment performance be better with my Investment Management services than they would be if you self-managed your investments with my Investment Advice services?

That’s not a question I can answer definitively because that would require predicting the future – which is impossible.

That said, there is research suggesting investors who use financial advisors experience better performance (colloquially known as “advisor alpha”) than those who don’t.

Personally, we also have our own financial advisor who manages our investments. We pay him just under 1.0% of the assets he manages on our behalf – and he uses the same Dimensional Fund Advisors family of funds that I do with my clients.

I truly believe that having a neutral professional involved in our personal finances is quite likely to help us achieve superior long-term results. Still not a guarantee, but I do feel pretty strongly this is a smart approach for most people – including me and my husband!

Tell Me More: Investment Advice

Investment Advice is included as part of the financial planning process and the financial advisory fee that you’re paying.

What I’ll Do

I will formulate specific recommendations in terms of what types of accounts to use, how much to invest through each of those accounts and the actual investment funds to hold in them.

What You’ll be Responsible For

The actual account opening, placing of trades (buying and selling) and periodic rebalancing will be up to you.

This means you are a self-managed or DIY investor. In the finance industry, this is sometimes known as a “retail” investor – in contrast to institutional investors.

Vanguard Focus

For this DIY or self-managed investing, I am most familiar with Vanguard – both as a financial institution to hold your accounts and as a fund manager whose mutual funds and ETFs you’ll invest in.

While there are good options out there other than Vanguard, it’s impossible for me – or anyone really – to stay on top of all the possible options. For that reason, my recommendations will principally be Vanguard accounts and funds.

Non-Vanguard Options

Should you want to use funds other than Vanguard funds (or hold your accounts elsewhere), I will help you make an initial assessment of the appropriateness of a financial institution and select funds that reasonably approximate the Vanguard funds I would otherwise suggest you hold.

However, I will not monitor your non-Vanguard financial institution or non-Vanguard funds, except for an annual check-up.

You can always turn to me for any questions; however trade execution, rebalancing and monitoring will ultimately be up to you.

Investment Advice May be Right for You if…

• You are eager to learn how to manage your own investments and don’t mind investing some time and effort (with my guidance, of course!)
• You feel confident, you’ll be able to consistently engage with your investments, rebalancing as necessary and maintaining a certain level of awareness of any changes that might take place at the funds in which you’re invested.
• You’re comfortable knowing that small missteps might occur. You understand they are unlikely to be irreparable and that small mistakes are part of how we learn new skills.
• Simple, market-weight portfolios feel like a good fit to you. These portfolios will mirror the entire market, are low cost and tax efficient – all critical elements of a prudent investment strategy.
• You’re on board with using Vanguard funds and holding your accounts at Vanguard – or are confident in your ability to monitor non-Vanguard accounts and funds.
• Sustainability, Environment and Socially Responsible aligned investments are not essential for you.