After we’ve agreed on your portfolio’s design and investment selection, we implement the Target Portfolio in a cost- and tax-efficient manner.
We continue to use our ACTION plan in the management of your portfolio.
- Rebalance the stock-bond ratio to the Target Portfolio based on certain tolerances
- Rebalance individual asset classes to the Target Portfolio based on certain tolerances
- Adjust the Target Portfolio based on market movement, portfolio value, timelines and updated goals
- Update the Target Portfolio based on new research and investment products
- Monitor fund costs and trading costs to ensure efficiency
- Review current tax exposure (taxable income, capital gains) of the portfolio vs. your tax tolerance
- Review taxable accounts for tax-deductible losses
- Update asset location as needed
- Take advantage of tax-deferred and tax-free accounts when possible
- Review contributions to make sure you’re hitting your savings goals in the Retirement Plan
- Use contributions to rebalance to the Target Portfolio
- Use contributions to shift the Target Portfolio over time
- Strategies for larger contributions (from stock options, inheritance, etc.)
- Review retirement income distributions vs. our Retirement Plan, and for withdrawal rate sustainability
- Review our Portfolio Income Buffer (CD / bond ladder) to ensure adequate cash (not too much or too little)
- Adjust distributions as necessary
- Manage taxes / withholdings on withdrawals
- Use distributions to rebalance to the Target Portfolio
- Provide long-term guidance and perspective
- Listen and provide short-term support (proactively check in with you regarding the markets and how you are feeling)
- Provide advisory letters that discuss the markets and other news
- Periodic reviews and performance reports to keep you updated
We provide a client portal where you can review your accounts, allocation, investments and performance.
Custodian / Account Set-Up
A lot of advisors do not like to have the following uncomfortable conversation, but we feel it helps prospective clients understand the relationship better.
How much control will you have over my money?
Most people are concerned about “custody” even if that’s not the term that comes to mind. They are aware that people can be ripped off by hedge funds (Bernie Madoff, etc.) and Ponzi schemes and may be weary of working with an advisor. If your advisor wants custody of your assets, they are asking for full control and discretion of their investment accounts. We highly recommend against this. Fortunately, most advisors try to avoid having custody, as it is a regulatory and liability minefield.
Advisors who work for Edward Jones, Morgan Stanley etc. use their employing firm as the custodian. Independent advisors, like Blue Water, usually work with one of the larger independent brokerage firms (Fidelity, Schwab, TD Ameritrade) to handle custody of their client accounts and assets.
We have been using TD Ameritrade as our preferred custodian for over 15 years. Your accounts and assets would be held at TD Ameritrade, which still gives you control of your accounts. Blue Water would be set-up as the advisor on your accounts with limited power of attorney privileges to:
- Talk to a service team about your accounts
- Place trades in your accounts
- Help facilitate account contributions and distributions
- Deduct our quarterly advisory fees
So you can place trades in my accounts?
Yes, but there should be no surprises. When your money has transferred into your accounts and you’ve agreed to our implementation plan, we’ll place the initial trades to implement the portfolio. Going forward, we have an agreement with most people to discuss trades before executing them.
I understand being able to see my accounts and place trades, but you can take money out of them too?
Yes, but it’s very restricted. We work with a lot of retirees who depend on portfolio withdrawals, so our ability to help facilitate those distributions is important and simplifies things for retirees.
Distribution checks can only go to your name and address of record. Distribution electronic transfers can only be sent to accounts you’ve set up in advance. We can’t call TD Ameritrade and request a check or transfer of $50,000 from your account to ourselves.
Advisory fees are calculated and deducted each quarter. TD Ameritrade monitors and places limits on these as well, so again, we can’t tell TD Ameritrade to deduct $50,000 from your account as an advisory fee.
Remember, as an investment advisor, we are subject to periodic random regulatory audits. We have no interest in going to jail for theft, fraud, etc.
OK, but what if I decide not to work with you anymore?
There are no long-term contracts. Our relationship can be terminated at any time. We’d be removed as advisor, but your accounts could either stay at TD Ameritrade or transferred elsewhere. You would just pay a pro-rata share of the quarterly advisory fee since we bill in arrears (after the work is complete).