We strongly believe that much of the effort put forth by industry professionals to time the market, use tactical asset allocation, and engage in securities analysis is time poorly spent. There is a tremendous amount of research that shows that markets are highly efficient, which means looking for mispricings in securities markets is costly and largely counterproductive. Therefore, we avoid such activity and teach our clients to do the same.

We tailor the asset allocation to the client’s specific needs. There are many factors involved, such as risk capacity, tolerance, time horizon, tax treatment, income needs, available asset classes, and many more. There is no such thing as a “one size fits all” investing plan in our view. Our client’s circumstances are the most important factor in determining asset selection and mix.

As people become more successful, they often reach increasing levels of complexity in their lives. They know what they know, but also realize that there’s a lot that they know they don’t know. They can learn this information, but that leaves an even larger—and more important— third category: the things they don’t know that they don’t know. Information is always changing in financial markets, and research is forever evolving regarding investment strategy. On top of that, tax laws go through significant changes on a regular basis as leadership changes take place in Washington. Keeping up with the changes and how to respond to them is a full-time job. Investors also struggle with their own instincts and emotional biases that—studies show— lead them to get returns that have been significantly below market returns throughout time. While major portfolio changes are rarely called for, a properly managed portfolio will require regular ongoing maintenance throughout the course of a year—It is not a part-time job. Investors typically have access only to the retail investments offered by big fund companies. By working with a professional, they can get access to potentially lower cost options with the ability to implement Nobel-Prize winning research. This research has shown that there are certain factors of investing which determine where most returns come from. Few investors are aware that this research exists, let alone know how to apply it.

Some people want to avoid the education and just have us manage their retirement savings. While we appreciate their trust in us, we strongly advise against blind trust. Investing in capital (stock and bond) markets is very different than other areas of our lives where we seek assistance and guidance. In some industries we are more able to trust an advisor because of the high standards education required to enter the field. In the medical world, for example, the education and practice requirements required to become a physician are rigorous, and most are familiar with the Hippocratic Oath that is still widely used to define ethical practice. When someone has M.D. after their name, you generally trust them. There is no such uniform standard in the financial industry. In fact, most practitioners in the financial field have no formal training in financial planning. At Paul Winkler, Inc., we require the advisors who run our offices to obtain either the Chartered Financial Consultant, or Certified Financial Planner professional designation. In addition to that, they also typically hold other specialized designations and have continuing education requirements. While I believe holding this standard is important and goes a long way to giving the investor a good degree of comfort that they are in good hands, there is still one element that makes blind trust problematic—the investing process itself. How do I know my mechanic did their job right? My car drives off the lot! For most professions, there’s a straightforward way of knowing if the job was done properly. It isn’t as simple with investing. My investment portfolio may be designed using all the latest academic research on investing, and hold funds that perform as expected, yet still experience negative returns. If I don’t understand how markets work and the logic behind portfolio design, then I would likely conclude that something is wrong. This might lead me to make changes at the worst time and sabotage the portfolio. Education helps prevent this chain of events. And this coaching process is not overwhelming for investors. My team and I have been teaching classes to investors for over twenty years, and we find that it’s easy for people to understand what they need to know to become comfortable with the investing process. Once you do, you can start to relax about money.

Cost can be a significant factor in a successful investing outcome. Unnecessary expenses can create drag on portfolio performance and jeopardize an investor’s future goals. However, investors must guard against myopically focusing only on expenses. Some of the lowest long-term returning areas of the market are also the least expensive to manage. There are also strategies that funds use to cut costs that can negatively affect returns. In fact, some funds are marketed as having no management fees whatsoever. But it would be naïve to think that the industry has decided start charging nothing for their services. We do spend a significant amount of time in the education process helping people understand what types of expenses are necessary and when expenses can and should be avoided. This is another benefit of working with a fee-only investment firm. Since we don’t receive compensation from investment providers, we are free to talk openly about the issue of expenses and help guide you to appropriate alternatives.

There are no formal guidelines on how often a client can meet with their advisor—it really depends on your unique situation. Since strategies such as market timing and tactical asset allocation (a form of market timing) are typically counterproductive, we don’t meet to discuss things like the most recent events in Washington, China, or the latest war. When I decide to get in or out of stocks, I am simply selling or buying from someone who has the same information I do. That means one of us will likely be wrong. We also won’t call you with “A new opportunity,” these are often a ruse to get you to generate new commissions for the adviser. Instead, meetings focus on investment coaching and financial planning. There will be more meetings at first as we take you through the coaching process and build a financial plan. After that, meetings come up on an as-needed basis, but we like to meet at least once a year to stay up to date with your ever-changing financial situation. Common events creating a need to update the plan are workplace benefits changes, a job change, a death in the family, or any event with financial consequences. Meetings typically become more frequent as retirement looms on the horizon. Someone getting close to retiring may actually have semi-annual or even quarterly meetings to prepare for that life transition.

A custodian is very important in the investing process. Most will remember the sad saga of Bernie Madoff who bilked investors out of billions of dollars. One of the biggest reasons that investors lost all that money was that there was no custodian involved. Investors wrote checks payable to Bernie Madoff—a disaster waiting to happen. At Paul Winkler, Inc., we are not affiliated with any one custodial firm and only recommend well-known entities. We use firms that can hold the funds that we recommend and make sure that their services and fees are competitive. In fact, we believe that competition keeps the custodians competitive.