Q & A
- WHAT IS THE WEALTH MANAGEMENT SERVICE (WMS)
- WHAT IS YOUR GENERAL INVESTMENT PHILOSOPHY?
- WHAT IS THE MOST IMPORTANT ELEMENT OF PORTFOLIO CONSTRUCTION?
- ONCE YOU HAVE A SUITABLE ALLOCATION, WHAT’S THE NEXT STEP?
- WHAT ABOUT PORTFOLIO PERFORMANCE?
- WHAT ARE THE DRAWBACKS OF THIS APPROACH?
- DO YOU BELIEVE IN MARKET TIMING?
- WOULD YOUR STRATEGY CHANGE IN THE EVENT OF A SIGNIFICANT MARKET DECLINE?
- DO YOU HAVE MODEL PORTFOLIOS AN INVESTOR MAY WISH TO CONSIDER?
- WHAT TYPE OF INVESTMENTS DO YOU ADVISE ON?
- WHAT IS THE MOST IMPORTANT VALUE YOU ADD WHEN YOU MANAGE CLIENT’S FUNDS?
- HOW DO YOUR CLIENTS KNOW WHAT THEIR RATE OF RETURN IS?
- WHERE ARE THE ACCOUNTS HELD?
- HOW DO I PAY YOUR FEE?
- DOES CHARLES SCHWAB ASSESS FEES?
- WHO DO I CALL IF I NEED INFORMATION ON MY ACCOUNT?
- HOW LIQUID WOULD MY ACCOUNT BE?
- WILL YOU WORK WITH MY ACCOUNTANT OR ATTORNEY?
- WHAT IF I AM LOCATED OUT OF YOUR IMMEDIATE AREA?
- HOW DO I BECOME A WEALTH MANAGEMENT CLIENT?
WHAT IS THE WEALTH MANAGEMENT SERVICE (WMS)?
The WMS is designed for investors who are seeking financial peace of mind and professional supervision of a minimum of $1,000,000 of their investment assets.
Financial planning is always part of our process and is generally accomplished prior to our implementation and supervision of client portfolios. We provide a full range of financial planning services for initial planning as well as include ongoing financial planning for all Wealth Management clients.
The WMS service starts out with an identification of a client’s risk constraints and return objectives. When an understanding of these two areas has been developed, draft portfolio asset allocations will be recommended. In reviewing portfolio allocations, today’s investor must realize that asset allocation has as much to do with successful results as does individual stock and bond selections. Historically stocks have outpaced most other investments over the long term including bonds, certificates of deposits, and U.S. Government securities. However, asset returns among different categories rarely move in complete tandem.
Langer Wealth Management uses asset allocation to help investors distribute portfolio holdings among stocks, bond, and cash to achieve the dual investment objectives of a competitive total return along with reduced portfolio volatility.
There are five primary steps, which must be taken to achieve investment goals.
- Identify Risk Tolerance and Return Expectations: Determining where you want to go and how you want to get there is the crucial first step. Our dialogue and questionnaires will enable us to construct a portfolio aligned with your personal investment objectives.
- Research and Analysis: We access some of the finest research and analysis anywhere far exceeding the level of fund analysis most investors have access to. Often our research involves information on management views through manager interviews and sharing of resources with other respected advisory firms throughout the country.
- Implementation: We simplify and handle all the paperwork needed to start. An account will be opened in your name at Charles Schwab & Company. All purchases and sales are handled through your personal account.
- Monitor: Global, political and economic events are constantly impacting the performance of your portfolio. We have no control over these events and generally rely on portfolio allocation as well as continuous communication with you regarding your objectives to control portfolio risks. In that regard, we review accounts quarterly to ensure compliance to the client’s stated investment policy.
- Report and Review: You receive timely trade confirms and monthly statements from Charles Schwab. In addition, we provide concise quarterly report detailing allocation percentages, current and historic returns. Additionally, we publish a quarterly newsletter.
We invite you to explore how Langer Wealth Management can provide the specialized benefit of confidential investor services and secure portfolio management. We are confident that you will discover as others have, that certain fundamental principles serve as the foundation of this firm, namely:
Individual Attention
Professional Research
Integrity and Experience
To help investors deal with the challenges of choosing an experienced and competent firm to deal with their investments, Langer Wealth Management, LLC has formulated the following investment advisory questions and answers designed to help you understand why we believe our WMS service is the number one choice for cost conscious investors who are seeking a “hands-on” personalized level of service.
WHAT IS YOUR GENERAL INVESTMENT PHILOSOPHY?
To help investors deal with the challenges of choosing an experienced and competent firm to deal with their investments, Langer Wealth Management, LLC has formulated the following investment advisory questions and answers designed to help you understand why we believe our WMS service is the number one choice for cost conscious investors who are seeking a “hands-on” personalized level of service.
First – to protect principal from unnecessary investment risk and long term inflation. Our philosophy is guided by the fundamental belief that investing should be done in view of the total financial picture, the client’s goals and time parameters. We believe that the majority of returns are driven by the security markets and specifically by asset allocation decisions made during portfolio design.
Our investment goal is not to beat a particular index – it’s to meet or exceed each client’s required or targeted rate of return. We aim to get you the returns you need to meet your financial goals over the long term.
Langer Wealth Management’s investment philosophy is based on Modern Portfolio Theory (MPT). MPT is derived from rigorous, on-going research by the world’s leading academic financial economists. We are convinced that this approach is the right choice for investors. Implementing our disciplined, long-term-investment strategy not only is sensible and logical, but is cost effective to develop and maintain, and is in your best interests.
Available evidence overwhelmingly shows that there is little advantage in attempting to either time markets, or select individual issues. Such efforts most often result in additional cost, additional risk, and lower returns over time. In addition, there is no evidence to suggest that past superior performance of a fund or manager has any value in predicting the future performance of the manager. Accordingly, Langer Wealth Management shows a strong preference for passively managed index funds wherever available for most asset classes in the plan.
There are several reason why we use index funds to implement our asset class strategies:
- "active" money managers consistently fail to beat unmanaged indexes
- there is no way to know in advance which managers will beat their relevant indexes
- active managers and actively-managed mutual funds are subject to significant style drift
- the expense ratios for active funds are much higher than those of index funds
- index funds are more tax-efficient than actively-managed funds
Of course, selecting the right index funds and the most appropriate mix of the funds is critical since these decisions are likely to determine more of the long term results of a portfolio than individual stock selection or market timing.
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WHAT IS THE MOST IMPORTANT ELEMENT OF PORTFOLIO CONSTRUCTION?
The design effort is the most important—even more important than selecting top funds. It’s like building a house. We would rather have a well designed home using mediocre subcontractors that vice versa. If the wrong balance between fixed (stable value) and growth (variable value) investments is chosen within a given time frame and volatility tolerance, the portfolio will have a high probability of not delivering adequate results. For instance, if an investor is 80% in fixed income and only 20% in stocks, the return may not overcome the ravages of inflation on the fixed income portion.
Each client will agree on a specific investment policy, which will be the governing force over how his or her portfolio is put together. Therefore, we spend considerable time with clients in order to develop a sense of their cash flow and total return requirements as well as their ability to weather the normal risks of investing. The client is given the opportunity to complete detailed investment questionnaires to help clarify their investment experiences and expectations so we may jointly concur on a suitable portfolio allocation.
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ONCE YOU HAVE A SUITABLE ALLOCATION, WHAT’S THE NEXT STEP?
Primarily low cost, no-load, "index" mutual funds are used as the building blocks of implementing the portfolio. Funds are selected which best represent each of the asset classes targeted in our investment plan. We consider expense ratios, diversification, and investment style. Funds which drift from their management style, or fail to remain fully invested will not be tolerated.
Over time, any investment plan will become distorted as one class outperforms others. Periodic re-balancing maintains the original risk-reward target for the plan. Because re-balancing enforces a buy low, sell high approach, it results in a positive performance gain over time.
Occasionally it may be necessary for us to replace a fund that fails to meet our rigid standards. The use of no-load funds, and low transaction fees makes this practically painless.
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'WHAT ABOUT PORTFOLIO PERFORMANCE?
Performance is driven by the portfolio balance. We remind clients where their portfolio balance is and why. If they come to us with the expectation that we are going to beat the market on a pure performance basis, they should look elsewhere. We offer a better relationship between the return they want and the risk they are trying to mitigate. The breadth of our diversification is the best way to mitigate the risks investors face when they invest in a manner expected to outpace inflation.
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WHAT ARE THE DRAWBACKS OF THIS APPROACH?
We will have protected the portfolio against some risks that never occurred. We’ll under perform in relation to portfolios that did not hedge against those risks when markets are rising. On the other hand, when securities markets are declining, we post better returns because of our asset allocation hedging as well as our multi-mutual fund portfolio approach. We’ll never win the jackpot because we will never place all of a portfolio on the “red-dot” – we diversify away that possibility.
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DO YOU BELIEVE IN MARKET TIMING?
We do not believe that market timing is possible. If it were possible to time markets, there would be no reason to diversify investments. Why put money in under performing asset categories if you could successfully predict which categories will be the poorest performing and which ones the best. Unfortunately, it is impossible to make such predictions.
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WOULD YOUR STRATEGY CHANGE IN THE EVENT OF A SIGNIFICANT MARKET DECLINE?
Our strategy is predicated on the historical correlation disparity between domestic and foreign markets and stocks versus bonds. By building a well-diversified account, we hope to provide a cushion for the inevitable periodic retrenching of the financial markets. A long-term investment time horizon has historically produced positive results in spite of periodic declines. The greater danger to long-term returns is being out of the market when it rises rather then being in the market when it declines.
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DO YOU HAVE MODEL PORTFOLIOS AN INVESTOR MAY WISH TO CONSIDER?
We use portfolio models reflecting conservative to aggressive investment attitudes to help the investor understand performance and risk differentials of different allocations. These models are then individualized according to specific requirements of the client.
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WHAT TYPE OF INVESTMENTS DO YOU ADVISE ON?
We advise primarily on mutual funds, stocks traded on the major exchanges, taxable and tax free bonds, annuities, and certificates of deposit. Generally a client’s money is placed in a combination of institutional no-load mutual funds. Index funds are the lowest cost, lowest risk, and lowest tax cost solution to reliably capture the performance of the world's markets.
Using institutional class index funds to provide a broad global diversification, we can effectively and economically provide exposure to most traded securities of the world's attractive markets. The total cost executing our strategy cost is remarkably low, in many cases less than the cost of true no-load mutual funds. But, cost is only one of the benefits of a relationship with Langer Wealth Management.
A key advantage to using our firm is the access to institutional funds, like those of Dimensional Fund Advisors (DFA). DFA is a respected leader in structuring investment portfolios for institutional accounts including corporations, pension and profit sharing plans, charitable organizations, labor unions and governmental entities. To maintain quality, its no-load mutual funds are not available to the general public, retail brokers or most other investment advisors. But, through Langer Wealth Management you gain access to these institutional funds.
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WHAT IS THE MOST IMPORTANT VALUE YOU ADD WHEN YOU MANAGE CLIENT’S FUNDS?
It is the financial planning side of the service that offers the highest value to the client. Helping them realize their long-term goals by staying committed to their plan is infinitely more valuable than any one-investment recommendation.
Further value is added by helping the clients avoid doing something to derail their overall asset allocation strategy for the long term and keeping their portfolio positions in the most suitable investments given their goals, age, and time constraints. That’s especially important in rough markets when clients are tempted to bail out. It may also be true in strong bull markets, when clients want to become overly aggressive.
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HOW DO YOUR CLIENTS KNOW WHAT THEIR RATE OF RETURN IS?
We report on all asset management accounts quarterly. The returns are specific for individual accounts and vary depending on allocation and type of investments used. We feel it is very important that clients know how their investments are performing. Returns are dependent on a number of variables including whether the client chooses to be aggressive or conservative. Other factors are economic and market conditions.
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WHERE ARE THE ACCOUNTS HELD?
Accounts are generally held at the discount broker of Charles Schwab who issues monthly statements and provides custodial services. Charles Schwab, a leading discount broker, houses millions of dollars in accounts managed by fee only financial advisors. They provide these services through an institutional department and, consequently, we are able to purchase our security positions through institutional traders. As a result, we have access to mutual funds available only to registered investment advisors as well as Schwab’s retail funds.
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HOW DO I PAY YOUR FEE?
Our fee is billed on a quarterly basis and is generally withdrawn out of each client’s account. This service is convenient and when accounts are IRAs or other retirement programs, the fees are paid with pre-tax dollars. Upon request, a client may pay us directly.
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DOES CHARLES SCHWAB ASSESS FEES?
All accounts are held at Schwab without charge including IRA accounts. Schwab does assess discounted transaction fees on stocks and bonds. We have negotiated, on behalf of our clients, a discount on any mutual fund transaction fees they may access. Langer Wealth Management does not receive any money from Schwab as a result of their service fees.
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WHO DO I CALL IF I NEED INFORMATION ON MY ACCOUNT?
If you have any questions, you may call our office during normal business hours and generally reach us. If we are not immediately available, we do check messages frequently and attempt to call every client back within 24 hours. In case of an urgent need, you may contact Charles Schwab directly at 1-800-515-2157.
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HOW LIQUID WOULD MY ACCOUNT BE?
Accounts are always liquid but are subject to market value fluctuations.
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WILL YOU WORK WITH MY ACCOUNTANT OR ATTORNEY?
Yes. If you have other professional advisors with whom you work closely, we will be glad to meet them to ensure we have a full understanding of your financial circumstances.
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WHAT IF I AM LOCATED OUT OF YOUR IMMEDIATE AREA?
We have many accounts throughout North Carolina as well as other states. We can service these accounts efficiently and effectively through our advisory relationship with Charles Schwab. Client meetings can take place by telephone or in person.
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HOW DO I BECOME A WEALTH MANAGEMENT CLIENT?
Make an appointment for a personal consultation by calling (910) 256-6521 or e-mailing us at info@langerwealth.com. During this meeting, we will discuss your current financial situation, your long-term financial goals, your goals for retirement, your investment experience, and other special needs as surface. After we determine if our firm is right for you, we initiate an asset management agreement and start the financial planning and asset supervision process.
At the end of the planning process, an account or accounts, as appropriate, will be established with Charles Schwab and funded through direct deposit of cash or transfer of securities from other brokerage accounts and/or retirement programs. We then start the implementation process, which may be accomplished over a period of months or immediately depending on the state of the financial markets and the economy.
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