7 Ways to Raise Your Expectations

Are you completely happy with your portfolio and investment professional?  Or are you stuck in the 20th century model where they make, you buy, whether it fits or not? Despite all the positive changes happening in the investment industry, many providers have been slow to give investors the options, transparency and value they deserve. To all those investors, we have one message:  RAISE YOUR EXPECTATIONS.

What it means to expect more

Reduce my costs. Expense ratios – the overhead investors pay on actively managed funds — average more than 100 basis points (1 percent). By contrast, the average diversified Osbon Capital portfolio has an expense ratio of 17 basis points (.17 percent). Our advice is: get more and pay less.

Reduce my costs more. The Osbon Capital investment advisory fee declines with individual asset size. Makes sense, since it doesn’t cost twice as much to manage $10 million than $5 million. A sure way to boost your returns is to cut costs, our own included. Fair is fair.

Produce more money, not more taxes. Another surefire way to boost your returns is to pay less in taxes. There are many ways to do this. Your advisor should take advantage of as many as possible. All it takes is attention to detail, discipline and planning. In general you should expect, through tax efficiency and tax loss harvesting, to keep more than 90 percent of your pre-tax gain.

Put my money in the right places. Accounts are different: use them. Sort investments by tax treatment into personal, IRA and Roth accounts. Tax generating investments with interest and dividends go into tax-deferred accounts. Assets held for appreciation go into personal accounts to be held “forever” and tax-efficiently rebalanced. Vanguard estimates that getting this asset location right adds up to an additional 75 basis points to your bottom line each year.

Give me what I need, not what you sell. If you are being pitched to own the investment firm’s proprietary products, that’s a sure sign you’re in a high cost, quota-driven sales shop, with lots of mouths dining at your table. I know, I use to run one. Raise your expectations and go bespoke. Work with a fee-only independent advisor who earns no commissions, rebates, kickbacks – nothing. That’s your money. Require investment strategies that are custom tailored to you

Show me the numbers. This one is so easy! Require performance reporting on all your assets regardless of location or manager. All the data is out there and you should have it. Don’t let your advisor tell you otherwise.  Call us if you want to see how it is done.

Treat my portfolio as a whole. Clients often show us portfolios that have been treated as a bunch of separate “buckets,” all managed independently. Buckets may work for slop, but for your hard-earned money, you should expect one unified portfolio managed to your big picture goals. Require that all your investments are designed to work together. No stray actors.

Do your portfolio, investment products, manager and investment information measure up to these higher expectations? Not sure? Let us know. We’d be happy to discuss these 7 essential criteria with you.

– John Osbon