RiskSmart Webinar Replay

RiskSmart Guide to investing in Lake Oswego

Good afternoon and welcome. Today I'll be going through WealthFactor's RiskSmart approach to investing. Before I get too far in a few words for compliance purposes, this call is for informational purposes only and may be recorded. statements made during this call are the opinions of the speaker and are subject to risk and uncertainty some of which are significant in scope. And by their very nature beyond the control of WealthFactor. There can be no assurances such statements will prove to be accurate and actual results in future events could differ in a material way from said statements. My name is Bill Woodruff, I've created WealthFactor to help investors avoid unnecessary risk and overpaying for financial advice. I've been investing for over 20 years and spent time in a variety of investment capacities, both at small local


firms and also as a managing director at a publicly traded asset manager.


Well factor is a Lake Oswego based registered investment advisor. We do customized investment plan based advice services, building and managing index based portfolios, primarily comprised of stocks and bonds. we tailor those specifically for each of our clients. We leverage technology for the benefit of clients, enabling us to charge just 2.35% for our services. risks. Smart Investing is the philosophy we utilize in building and managing portfolios. It's comprised of three parts. Being portfolio smart, fee smart, and tax smart. The average advisor is forced into complexities and risks because of their high fees.


Through low fees, simple index based investing, and tax optimization, we believe risk can be minimized in the pursuit of successful investment outcomes. We believe that industry is failing its clients largely leveraging technology for the benefit of their margins, rather than minimizing risks for clients. The number of layers of management we see can be staggering. It's not uncommon to have a brokerage bank or ra provide services to an individual advisor that then outsources the investing to funds or other investment managers. It's also possible that a turnkey asset management platform is being used to deal with all of these moving parts and the complexity involved. We believe layers of management will likely force total fees higher and lead to increase risk. The first


Part of RiskSmart Investing is being portfolio smart. This part is a reference to the structure of how you receive the investment services, and is about avoiding inefficiency. investors should avoid concentration, layers of management, and complex structures and investment strategies. These unnecessary elements will increase costs which lead to increased fees. The next part of being RiskSmart is being fee smart. high fees are more than just a slow steady bleed on performance. 1% is a common industry fee. However, once you get past a certain level of of assets, the total dollars you'll pay over time become staggering and delinked from the value being added. An investor with 1 million would pay $10,000 a year or 100,000 over the course.


10 years in fees. More importantly though, is the effect high fees have on risk taking. In the example here on the right, we can start to see why this occurs. Currently the yield on the 10 year Treasury is approximately point seven 5%. If you work with an advisor that charges you 1% and they outsource their investing to a fund that charges point two 5%. The potential net of fees yield is negative. This forces investment advisors to pick riskier investments when they build portfolios. Having an investment plan in a disciplined, emotionless steward to implement that plan can be very valuable. However, I believe that that value gets eroded at some point when fees get too high, as risks are forced to increase. Here's another practical example. This graph plots return on the y axis and risk on the x axis


This has being simplified for visualization purposes high fees will likely lead to two portfolio elements for most investors, a portfolio that has bond with lesser quality on average, and a higher target positioning and stocks. These increase risks lead to unnecessary downside. Unnecessary downside increases the chance that emotional investing mistakes are made. None of this helps investors achieve their targeted outcomes. Lastly, and perhaps counter to general perception tax may be the single greatest portfolio area that an advisor can add value. At wall factor we specialize in an investment methodology called direct indexing. With this we can avoid in some cases using funds to build index based and diverse portfolios. This significantly increases the control we have in managing for tax.


For our clients, this allows us to defer gains intentionally or even actively harvest losses trying to reduce tax liability. The example here is where we're contrasting, potentially building a portfolio using individual securities and having three or maybe even 400 unique tax decisions and then therefore opportunities versus an investor that uses a single fund who would only have one they either sell the fund or they don't RiskSmart Investing is built to help investors. Avoid pain premium fees for generic and basic advice, helping investors avoid unnecessary risk.

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