Bulldog Financial Planning (BFP) recognizes that adding money to the market is not going to be the right recommendation for every client. The BFP Fiduciary process includes a suitability review that is designed to identify the risk profile for each individual client and evaluate alternatives.
Here are a few of the basics and a bit more about handling the conflict of interest when offering Managed Accounts.
1) Do you have a safety fund?
Typically a safety fund has around 6 months of expenses saved to allow flexibility for market volatility.
2) What is the time horizon for your goal(s)?
Shorter term goals, where you plan to have money available in the near future, are not typically appropriate to have invested in the market.
3) What alternatives are available?
Modern investment theory tells us that investors will seek out the highest returns for the least amount of risk. This is an important concept when evaluating alternatives for your money. Investing presents a number of risks such as-
Systemic Risks:
a- Purchasing Power Risk
b- Reinvestment Risk
c- Interest Rate Risk
d- General Market Risk
e- Exchange Rate Risk
Non-Systemic Risks:
f- Business Risk
g- Financial Risk
h- Default Risk
i- Political Risk
j- Investment Manager Risk
k- Liquidity and Marketability Risk
l- Tax Risk
A great example is recommending an investment like a series I bond. These outperformed the equity market over a six month period while offering guaranteed principal. These are purchased and held outside of a managed account.
This is not a blanket recommendation to go invest 100% of your money into series I bonds. Equities have historically outperformed inflation rates over the long term and the rate on Series I bonds resets.
4) Does every client need discretionary investment management? (a managed account)
The answer is 'no'. This is an individual's decision that needs to be made with advice from a fiduciary, like BFP, that places client interests first with every recommendation. This means reviewing each individual's financial information, goals, family circumstances, existing assets, and level of comfort, availability, or interest in handling the day to day of managing their investments.
Assets under management are not required to receive hourly financial planning from BFP. As a fee only financial planning company and wealth management advisor, BFP provides hourly planning to clients seeking a second opinion, occasional or periodic advice. This makes financial planning from a wealth management advisor, who has fewer conflicts of interest, accessible to clients.
Bulldog Financial Planning does provide discretionary Managed Accounts and Wealth Management Accounts because of the expertise including investments, the market, RMDs, gifting strategies, and retirement planning with social security. These services are provided for a simple cost effective managed account expense or wealth management expense.
Suitable clients that decide to create a BFP Managed Account or BFP Wealth Management Accounts have direct access to their portfolio manager who will manage their investments and wealth management strategies in alignment with their goals. . . not to a fund/etf prospectus.
Each client has their own individual investment policy statement where they can define social responsibility and we work to develop their subjective risk profile which goes further into depth than a quick survey.
Is your financial advisor a fiduciary? Ask him/her how they manage their conflicts of interest on a month to month, quarterly, or annual basis. In particular, how they manage their time vs their sales goals or bonus incentives. Are they offering you fee free financial planning?
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