1. Behavior Management: We have collectively reviewed hundreds of thousands of portfolios over the years; the single biggest problem almost always comes down to the investor’s own bad behavior. About 90% of the investment and portfolio related issues we encounter are due to: a) lack of discipline; b) cognitive error; c) emotional factors; or some combination of these 3 issues.
We have developed an expertise in investor behavioral issues. Many of the things we do are designed to address them. Our investment process is built with a substantial behavioral component designed to avoid the major disasters that make “Buy & Hold” so difficult to endure. It is by design intended to allow you to leave the bulk of your money fully invested during draw downs and volatility.
2. Communication / Understanding: Investment-related noise can derail even the most disciplined investor. We help clients understand this and screen out that noise through communications that focuses on process over outcomes.
At Cleartree we spend a lot of time making sure our clients can separate fact from noise. It is much easier to stick with a long-term plan when you are not constantly distracted by nonsensical memes. Getting these lessons presented to you in a variety of formats consistently over time goes a long way towards preventing the random nonsense that tends to derail investors.
3. Financial Plan + Updates: We integrate portfolio management into financial planning from the beginning. It is not an afterthought, but rather, a key part of how we work with clients. In fact, we have our team begin the planning process with prospective clients before they even become clients as we believe it is a key step to ensuring a comfortable and seamless financial future.
The plan not only helps our clients know if they are on track to meet their financial goals it also helps to eliminate some of the worst investor behaviors we encounter. Having a frame of reference beyond market swings is enormously helpful.
4. Cost-effective Implementation: We think hard about how to remove costs from our investments. We utilize index low expense transaction free funds for many of our positions and invest in the most tax efficient way possible. When we consider replacing a fund, the change in cost is always a major (but not exclusive) factor in the process.
5. Constant Monitoring/Updates: We constantly review portfolios to assess that it is doing what it is supposed to. Our review process ensures that every client’s portfolio is monitored on a regular and systematic basis and use of the same investments for all clients ensures we are always up to date on every position.
Individuals often find that doing this by themselves to be very challenging. It is time consuming, it is boring, and most of the time, nothing new happens. Separating what is merely noise from genuine issues is very difficult. We have developed specific parameters for when we will suggest a change in portfolios. It always involves changes in clients’ circumstances, and never comes as a response to market conditions.
6. Professional Network: Our experience in working with clients who have similar needs to yours means we have a deep network to tap into. These are the professionals who can assist you at various points in your financial cycle.
7. Portfolio Re-balancing: Our approach is a simple rules-based process that we have optimized to maximize returns and reduce costs, while taking on no additional risks. This is one of the rare “free lunches” in investing.
8. Tax Management / Tax Loss Harvesting: We have a dedicated process focusing on continually managing tax consequences of execution and portfolio management. It is not an afterthought, but built into many different parts of our process, from our fees to regular re-balancing. The net result is lower total cost to the investor.
9. Spending Strategy (withdrawal): This is a widely overlooked aspect of the financial plan: We advise clients on when to take Social Security and when to stop working. We plot out how much they can afford to draw from their account each month.
People spend so much time saving and investing that they can lose touch with the purpose of their portfolio. Managing the withdrawal portion of an investment life cycle is a key aspect of what we do for clients.
This is a partial list of the major ways we provide value to clients. There are many other small details that also create value; these tend to be specific and personal to each investor. It comes from creating value for clients as a key aspect of our corporate culture and philosophy.
