We seek to provide you with consistent, competitive investment returns over time by capitalizing on a range of financial opportunities. We measure your capacity to handle risk and avoid speculative investment choices. We pursue your investment goals with diversification, disciplined management and sophisticated market selection. We rely on the best available academic information and advice about investing. We avoid the conventional wisdom of Wall Street, because it is usually wrong or misleading.
The typical financial planner, stock broker, or insurance agent is not necessarily a fiduciary or trusted advisor.
A fiduciary is obligated in all situations to put the interests of the client before their own and to avoid all potential conflicts of interests between themselves and the advice that they give to their clients. Fiduciaries can not accept commissions, finder?s fees, soft dollar compensation or "special gifts". Denver Money Manager is a fiduciary, and a fee-only advisor.
Most other advisors function as a conduit to facilitate their clients investment requests, sell investment products, and tell clients what they want to hear. A fiduciary is required to understand the client and function as both a consultant to and educator of the client.
Functioning as a Trusted Advisor and Fiduciary involves:
-
Using a consultative process to establish close relationships with clients - This is done to gain a detailed understanding of the client's personal and financial goals.
-
Offering customized choices and solutions designed to fit each client's needs - These interrelated solutions can include financial planning, investment management, estate analysis, tax planning, and insurance evaluation.
-
Delivering those solutions in close consultation with clients - A Trusted Advisor works closely with clients on an ongoing basis to identify and reassess needs and find the appropriate solutions.
Most advisors are trained to sell financial products rather than provide consultative services. Transactional advisors tend to have short-term relationships with customers. Fiduciaries are interested in long-term relationships.
The following tenets are the keys to our investment approach:
Asset Allocation
Our philosophy is grounded in modern portfolio theory and asset allocation theory (Brinson, Beebower and Hood, 1986). Modern portfolio theory, which won a Nobel Prize in economics for Harry Markowitz in 1990, demonstrates that there is a relationship between risk and return and when non-correlating assets are added to a portfolio, a higher portfolio risk-adjusted return is attained. Asset allocation theory identifies three sources of return: asset allocation, security selection and timing. The asset allocation decision is shown to be, by far, the largest determinant of variation in returns. Therefore, we concentrate efforts on the total portfolio composition and how assets are allocated.
Controlling Cost
We believe the cost to invest is critical in portfolio construction. Portfolios are constructed by combining low-cost, globally diversified, tax-efficient, passively-managed structured asset classes much like index mutual funds.
Indexing/Passive Management
The focus of modern portfolio theory is on diversifying investments across multiple asset classes. Gaining access to these asset classes is most effectively done using tools such a ultra-low cost index funds or passively managed asset class funds. These types of funds provide effective representation of asset classes, are offered to the marketplace at very low costs and tend to be very tax-efficient. We track several hundred passively managed funds and evaluate the appropriateness of each in terms of how it represents a market and how it is constructed.
Managing Risk
We pay particular attention to managing risk in portfolios. Two primary measures that we review are volatility and downside risk. We measure these for individual asset classes and for the overall diversified portfolio. Decisions to add new asset classes are based on how they impact the overall portfolio?s expected return, volatility and downside risk.
Impact of Taxes
We construct portfolios to minimize the impact of taxes. We consider the differences between types of accounts that a client may hold: taxable, tax-deferred retirement vehicle, tax advantaged charitable trusts, grantor trusts, generation skipping trusts and foundations. Each of these accounts may have different tax considerations. The location of assets within the different accounts, therefore, makes a significant difference in long-term wealth accumulation.
Individually Designed Portfolios
We construct a portfolio unique to your individual needs rather than mold your needs to a pre-formed package. Your tolerance of risk, as well as your need for return, is conscientiously considered in our design. Ongoing management takes into account the client?s specific cash flow and taxation issues.