Managing investment portfolios and providing unbiased advice is the largest part of our business. We take discretion over client accounts and manage the assets in accordance with the client’s risk tolerance and desired asset allocation.
P&A offers four different portfolio management styles, each one customized to the individual client’s preferences. Below is a brief description of each style and who they might appeal to.
Custom Equity accounts are typically invested 100% in stocks using individual securities, exchange-traded funds (ETFs) and mutual funds. From time to time, fixed income investments (bonds) may be introduced to the account at the discretion of the Investment Committee.
In order to use individual equities, we have found a minimum of $250,000 devoted to stocks is necessary to achieve adequate diversification. A time horizon of at least five years is also recommended. Our fee schedule for a Custom Equity account begins at 1% of assets per year, with the first breakpoint occurring at $1 million. In addition to our fee, clients pay trading commissions to their custodian (currently $8.95 per trade at Charles Schwab if you take electronic statements and confirms, otherwise $19.95), which typically results in a total expense ratio of 1.04% to 1.08% on a $500,000 account.
Custom Equity accounts appeal to those investors who like owning individual companies as opposed to mutual funds. They are also popular for clients who want to control their tax exposure as much as possible. Clients who have large blocks of stock from a current or previous employer also find our Custom Equity accounts to be friendly. P&A is willing to exempt highly appreciated large blocks of stock from our fee until these securities are sold.
Fixed Income Accounts
Fixed Income Accounts are our most conservative, emphasizing current income as well as preservation of capital. These accounts are subject to the same fee structure as Custom Equity accounts.
Many investors like to own individual bonds because they have a stated maturity date and coupon, meaning they know when they’ll be repaid and how much income they’ll be earning. P&A customizes bond holdings to a client’s tax situation, using municipal bonds for investors seeking tax-free income.
It is not unusual for us to be hired by clients that have existing fixed income portfolios. P&A is willing to exempt previously owned bonds from our fee until they mature or are sold, at which point those dollars would become subject to our fee.
OInvestors who want to see mostly individual stocks and bonds in their account should be interested in a Balanced Account, our most popular offering. An asset allocation tailored to each client’s risk tolerance and time horizon determines the mix of stocks and bonds in an account. Popular ratios are 75% stocks, 25% bonds, as well as 60% stocks and 40% bonds.
We use individual bonds in our larger Balanced Accounts and bond mutual funds in our smaller ones. This management style falls under the same fee schedule as Custom Equity.
Mutual Fund Accounts
Our Mutual Fund discipline was born out of a need to achieve proper diversification for accounts falling under our Custom Equity minimum. Over time we have grown to use this management style even for seven-figure portfolios. P&A employs model portfolios as well as custom management techniques for our Mutual Fund accounts. These accounts are rebalanced at least twice a year.
Investors who plan on frequent deposits or withdrawals to their account are good candidates for a Mutual Fund account. P&A uses only no-load and no transaction fee mutual funds in our rebalance accounts. Our model portfolios are centered around the use of index mutual funds, which carry very low expense ratios. Accounts with at least 75% of their assets invested in mutual funds are eligible for our Mutual Fund fee schedule, which starts at 0.75% of assets per year. Adding in the expense ratio of the mutual funds used in these portfolios and the total cost to a Mutual Fund Account investor is typically between 1% and 1.25%.
Our clients have access to thousands of no-load and no transaction fee mutual funds from a variety of well known fund families. In addition, we have access to many institutional-level funds for our clients.
If you would like further information on how we manage client portfolios, please contact us.