What is RiskSmart and how do I attain it?

The Realistic Truth

This industry, the wealth management and financial services world, is overly complicated on purpose. Yes there are areas where expertise is necessary, but the layers of complexity, hidden interests, and high fees aren’t and should not be the factors that are determining your risk taking.

We believe risk shouldn’t be informed by your need to hit a financial target to make up for high fees. Unnecessary risk increases uncertainty.

What the real-ist experts at WealthFactor know and teach is these 4 simple keys to success:

• Do not overpay - avoid unnecessary layers (those should be reserved for pastries, not wealth services) and 0.18-0.68% is MUCH more reasonable than the industry  average of 1%
• Safeguard your assets - use an independent custodian and a fiduciary advisor (because independence is freedom)
• Have a plan - for your wealth, your legacy, and your investments (consider nothing in isolation)
• Stick to the plan - work with only servant-hearted stewards of your wealth (afterall, you built your wealth and now is the time to shepherd it well)
  
  

Let's Be RiskSmart About It

At WealthFactor, we believe having a plan and sticking to it tends to be more important than portfolio specifics, however, through intelligent processes and integrated systems we offer optimized solutions for each client (nothing cookie cutter here!).

Our pursuit of efficiency allows us to charge just 0.35% and leads to reducing forced risk taking often seen across the industry. This idea of “high costs force increased risk” is at the core of our investment philosophy we call RiskSmart.

When building a client portfolio, we utilize evidence-based investing with indexes as the primary starting point. Our systems allow for client-level optimizations for things like yield, taxes, social responsibility, or exposure exclusions. Excluding positions can be useful for clients with large real estate holdings or employer stock options.

Without getting into the weeds too much, we say all of this to explain that we tirelessly think about risk and how we can best minimize it in our pursuit of achieving each client’s unique objectives.

Our RiskSmart philosophy includes three component parts which address your portfolio, your fee exposure, and your tax exposure - all areas where the industry has failed you and where WealthFactor is helping you thrive.

PortfolioSmart

Just like it’s nearly impossible to beat the house in Vegas, so is beating the market on Wall Street, according to investment history. So when it comes to achieving your investment goals we believe it's more about what you should avoid versus what you should do.

Thanks to passive investing, building a diverse investment portfolio is now free or nearly-free. But most financial advisors are primarily salespeople positioned as an “expert” and backed by a massive marketing budget and historical expectations. The result - underperformance, higher fees, and increased risk.

PortfolioSmart is one of the three components of our RiskSmart approach to investing and it has two parts:

Avoiding Complexity

You can’t avoid complexity if you’re playing the game of utilizing multiple custodians and money managers, timing investment buys and sells, and riding the wave of esoteric investment strategies. This complicated approach requires more resources to manage, which means increased cost, and therefore a need for increased risk to make up for it.

Avoiding Layers

You can’t avoid layers and potential confusion if your advisor is trying to pick and time funds that are picking and timing securities - with a middleman you will lose. Each layer makes it more challenging to understand what is really going on and to isolate issues, leading to a reduced probability of success.

FeeSmart

Investing is only hard if you make it hard. The industry makes it hard because of their high fees. Investors should not pay 1% especially when their advisor is outsourcing the work!

Here’s the deal - building a broadly diversified buy-and-hold portfolio of stocks is not complex. It only becomes complex when we insert active decision-makers and layers of management. The investment management world has been in a race to near zero fees for years and yet investment advisors are still charging their clients 1% or more.

WealthFactor is built differently, offering a more efficient way to invest. We charge just 0.68% on the first $2m and 0.38% from $2-8m and 0.18% thereafter* for our services and use direct indexing instead of funds whenever it makes sense to do so. We NEVER, never use mutual funds. We know first hand that they are grossly inefficient from both a fee and tax perspective.

The bottom line is this - we believe you shouldn’t overpay and that this industry doesn’t need to be so complex.

TaxSmart

Efficient tax management is under-appreciated by the investment industry and yet constructing a portfolio with taxes in mind may be one of the most significant ways an investor can improve their overall performance.

Many investment products, like mutual funds, are incredibly inefficient from a tax standpoint - your tax situation isn’t being considered by fund managers when buying and selling throughout the year AND new shareholders can be liable for gains in the fund that accrued before their investment. PLUS, other investor’s redemptions can trigger taxes you’ll owe. See what we mean?! This isn’t TaxSmart.

We build client-specific portfolios designed with after-tax returns in mind. It’s a simple idea that makes a big difference.