cREATING INvESTmENT INcOmE WITh TRANSPARENcYThe repair of our client’s portfolio began with lowering his risk by
changing his investment strategy. We advised him to move his mutual
funds to a transparent, wholesale portfolio that eliminated the fees to an
intermediary, and by doing so, saved the client about 2/3 of his former
investment costs. Next, we lowered his maximum downside significant-
ly and shortened the duration on his bond portfolio from 30-year bonds
to 10-year or less bond maturities. We advised him that he was paying
considerable tax on gains inside his mutual funds, and we recommended
ways to make his portfolio more tax efficient. Finally, we found our cli-
ent a retirement income annuity with a similar income and death benefit
as his variable annuities, but with less expense – a 1% fee down from a
4% fee – and less risk.
Why do we take so much time to educate and protect our clients? We
do so because we have seen relatives and friend’s parents suddenly lose
half of their retirement in years like 2008, and we want to keep others
from having to give up on their retirement plans.
We consider it our professional duty to share our vision of transparent
investing and the ways transparency can benefit investors. Transparency
begins with the right analysis, by asking the right questions. Through
experience, we have noted four key elements of a secure and success-
ful investment plan: (1) risk and appraisal analysis to determine hidden
risks and costs, (2) establishing transparent investment goals, (3) devel-
oping a transparent income plan and (4) transparent communications.
We encourage investors to use our guide and help to achieve better re-
sults and to safeguard their retirement.
keY one: RIsk AnD APPRAIsAl AnAlYsIsAfter asking yourself the above questions, it is time for a risk analysis
to determine the potential risk of the current portfolio. Nine times out
of ten, the actual risk is not what an investor thought it was. A fiduciary
advisor must investigate the investments the client has and what risk the
client THINKS they are taking. If they think they have invested conser-
vatively, but their actual potential risk is 20-30% loss in a year, that is
not a conservative investor. If a client’s risk is too great, the first step is
to minimize the risk with a redesign of the client’s portfolio. The second
step is a cost or appraisal analysis of their portfolio with emphasis on the
mutual funds. The hidden costs of mutual funds can be 2-3 times higher