Personal Wealth Coach
The Personal Wealth Coach (“TPWC”) is an independent, fee-based, registered investment adviser. As a registered investment adviser, TPWC, its members, and employees must be Fiduciaries. In more easily understood terms it means that we are obligated under the law and dedicated professionally to:
- Operate solely in our clients’ best interests. Whenever possible we avoid conflicts of interest, but if there are conflicts we disclose them clearly, both verbally and in writing.
- Provide “best-execution” which is to say that we will make every reasonable attempt to find the least expensive way to purchase investments on your behalf.
- Use only investment types and methods which have proven to be effective over a long period of time.
- Only receive compensation in the form of fully-disclosed fees rather than from hidden payments made by an investment vendor.
We take that a step further as a part of our internal philosophy.
We design portfolios and give investment advice and management that are:
• Specifically tailored to each individual investor.
In practice that means that we design and manage each client’s portfolio according to that specific client’s goals, objectives, and concerns. Many advisers design and manage a small set of funds into which they place all of their clients’ investments. While that makes for a lot less work on the adviser’s part, it means that if you have specific needs or restrictions you are just out of luck! If you have an employer sponsored retirement plan on which you wish to have advice or management, we will adjust our work to accommodate the specific funds and asset classes available to you. As free from non-systemic risk as we can make them.
There are two basic types of risk in a portfolio. The first and perhaps least visible is the type of risk called non-systemic risk. Non-systemic risk is the risk that you could lose all or most of your money due to the failure or insolvency of some institution, organization, or person to which you have entrusted your money. Fortunately for us that problem was addressed very well in the Investment Company act of 1940. The “IAA of ’40” states that funds which follow the provisions of that law have their assets exempt from the liabilities of any of the associated entities. That means that if the custodian, the adviser, the transfer agent, or any other organization or person associated with your account were to go out of business or encounter large liabilities, your money could not be touched to pay their debts.
Here at TPWC we use only investments which are registered under the IAA of ’40 or are backed by the United States Government, one of its agencies or insured by the Federal Deposit Insurance Corporation (“FDIC”). Additionally, we do not have access to or ever take possession of your money or your investments other than to deduct management fees (with your written permission).
In 1952 a University of Chicago doctoral candidate named Harry Markowitz wrote his thesis and named it Portfolio Selection. In March of that year it was published in The Journal of Finance. Thirty-eight years later he received the Nobel Prize in Economics for what he had discovered.
In essence he proposed that by using what was then a new classification he called asset classes an investor could use historic data to plot the best possible course into the future for a portfolio. He concluded that if one had a thoroughly diversified portfolio of stocks and bonds, then the risk incurred by that portfolio was simply market variance, the risk of a significant decline in the reported value of the total portfolio.
His research revealed that by using asset classes instead of individual securities or even sectors of the market, a pattern of historically repeating movements revealed themselves. The exact time of any given movement was not predictable but by combining asset classes that tended not to move in the same direction together, the overall variance, or risk of loss could be limited. He also found that the higher the return an investor desired, the greater the variance, or potential for temporary market losses, would be. He called his discovery Mean Variance Optimization. If an investor used the Markowitz formulas, then the portfolio that was selected would carry the least possible risk into the future for any given rate of return.
Unfortunately, determining the ideally optimized asset allocation for any portfolio is a very long and expensive process, or at least it was in 1952. Even by 1998, in his book Against the Gods, The Remarkable History of Risk, Peter Bernstein noted that while Markowitz had developed the only predictive investment theory, it was impractical for most investors because the computer time alone for a single optimization cost $5,000!
The good news is that today, more than a decade into the 21st century, the computing power available to put on a desk is far greater than the best main-frame “super-computers” had available to them in 1998. As a result we are able to create optimized portfolios for each individual investor using proprietary software we developed here at The Personal Wealth Coach based on Harry Markowitz’s original paper.
We have gathered over 400 months of performance for 23 asset classes, and by applying Dr. Markowitz’s calculations to that data as well as applying other principles that have proven to be effective over decades of market experience, we believe we have the ability to reduce the market risk associated with any achievable rate of return to the lowest level that can reasonably be achieved.
We, then focus on providing our clients with the asset allocation and investment selection to give them the lowest market risk for any given rate of return or the best rate of return for any given level of market risk. We base that allocation on the individual goals and objectives of each investor. Our objective is to provide the best path to achieving each of our clients’ specific goals and objectives with the least risk we can achieve.
We believe that by putting our clients and their portfolios first, by working hard to minimize costs, by using historically successful methods, and by selecting the best managers available to manage each asset class, we can give our clients the best opportunity to achieve their goals.
In short, we strive to provide the best objective advice and portfolio management as well as to be there when you need us so that we can do the best possible job of creating wealth for our clients, and in doing so bring success to our business.