True customization of a client’s investment accounts is often promised but seldom delivered by the big investment advisory firms, banks and brokers. Typically, a big firm will have five or six basic investment models that they use, ranging from 100% bonds to 100% stocks, with typical mixes in between of 65% bonds/35% stocks, 50% bonds/50% stocks, and 35% bonds/65% stocks. After the mix between stocks and bonds is established, a big firm will normally have model portfolios in which they invest your money. For example, one big trust department in Cincinnati runs a 30 stock model, a 50 stock model and a 100 stock model. If you want something different, you can’t get it.
In contrast, Labrador Investments first reviews your investment requirements along the following dimensions:
- Return Requirements: For example, if you are retired and depending on the portfolio to meet your lifestyle needs, a good question to ask is: “How much must the portfolio earn to allow you a comfortable income?”
- Risk Tolerance: For any investor, a good question to ask is: “How much money am I willing to lose before I can’t sleep at night?
- Taxes: Is the portfolio subject to tax, or is the account a tax-advantaged Individual Retirement Account (IRA)? This can affect the types of bonds purchased in your account.
- Time Horizon: Are you investing just for yourself, or are you planning to leave assets to your heirs?
- Liquidity Needs: How much money must the investors set aside for emergencies, upcoming large purchases (new home, new car, boat, major repairs on a home, medical expenses?
- Legal Issues: Is this a trust subject to legal limits on the investment options? Is this an IRA portfolio where the client is over the age of 70 ½ and subject to Minimum Required Distributions?
- Other Unique Needs and Circumstances: The specifics of this dimension can vary widely, and is only limited by a client’s imagination. For example:
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- Some clients have special needs children who have above-average medical expenses.
- Some clients may have college funding may be a primary goal.
- Some clients desire to avoid investing in so-called “sin” stocks such as companies that sell tobacco and liquor.
- Some clients worry about having enough money to provide for in-home nursing care or funding nursing home expenses.
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