Investment Management

GFM’s approach to investment management emphasizes the tight integration of investing with financial planning; this is because for most people investing is a means, not an end, to achieve goals which are best reflected in a financial plan. Accordingly, each client’s investment strategy is developed optimally by stress-testing alternative investment strategies within the context of that client’s unique financial circumstances and, during implementation, investment performance is monitored in light of client goals codified in the financial plan.

GFM’s investment process involves these key steps, consistent with investment fiduciary practice, in constructing individualized, very low-cost and globally diversified portfolios based upon modern portfolio theory and practice:

Knowing the client’s unique financial situation and goals
Appropriately diversifying assets to the specific risk/return profile of each client
Preparing a specific investment policy statement
Using prudent experts to invest funds pursuant to the client’s investment policy statement
Accounting for and controlling investment expenses
Continuously measuring performance relative to goals as well as taking corrective action
Avoiding conflicts of interest and prohibited transactions

Investment Management Options

	Grossman Financial Management	Self (DIY)	Stock Broker
Process
Investment Plan Quality and Thoroughness	high	low	low
Continuous Management of Investments to Plan	yes	unlikely	no
Manage Your Investments at Any Broker/Custodian You Select	yes	yes	no
Personalized and Attentive Service	high	24/7	medium
Standards of Accredited Investment Fiduciary	yes	no	no
Compensated by Client Only	yes	n/a	no
Reporting Quality
Measure Investment Performance	high	poor	medium
Measure Performance Relative to Markets	high	poor	poor
Measure Performance Relative to Client’s Goals	high	poor	poor
Accounting of Investment Expenses	high	poor	poor
Financial Planning Integration
Standards of Certified Financial Planner	yes	no	unlikely
Investment & Financial Plans Integrated	yes	no	no
Investment & Financial Plans Updated	yes	no	no
Coordination with Client’s Tax, Legal & other Advisors	yes	no	unlikely

Investment Management Services: Value Estimates & Indicators

The following are estimates or indicators of the potential value of investment management services on annual investment returns. The sources of the estimates are publications from Vanguard, Morningstar, John C. Bogle, Standard and Poor’s, The White House Council of Economic Advisors, and others; links to the sources are provided.

Investment management, behavioral coaching up to 1.5%

https://advisors.vanguard.com/iwe/pdf/ISGQVAA.pdf?cbdForceDomain=true

http://corporate.morningstar.com/euconf3/presentations/David%20Blanchett,%20Morningstar.pdf

https://corp.financialengines.com/employers/FinancialEngines-2014-Help-Report.pdf

Tax, efficient asset location up to 0.8%

https://advisors.vanguard.com/iwe/pdf/ISGQVAA.pdf?cbdForceDomain=true

http://corporate.morningstar.com/euconf3/presentations/David%20Blanchett,%20Morningstar.pdf

Rebalancing portfolio systematically up to 0.4%

https://advisors.vanguard.com/iwe/pdf/ISGQVAA.pdf?cbdForceDomain=true

http://corporate.morningstar.com/euconf3/presentations/David%20Blanchett,%20Morningstar.pdf

Tax, harvesting up to 0.3%

https://www.betterment.com/resources/research/tax-loss-harvesting-white-paper/

http://corporate.morningstar.com/euconf3/presentations/David%20Blanchett,%20Morningstar.pdf

Tax, withdrawal order up to 0.8%

https://advisors.vanguard.com/iwe/pdf/ISGQVAA.pdf?cbdForceDomain=true

http://corporate.morningstar.com/euconf3/presentations/David%20Blanchett,%20Morningstar.pdf

Not “conflicted advice” – avoid underperformance up to -1.0%

https://web.archive.org/web/20170103183948/http://www.whitehouse.gov/sites/default/files/docs/cea_coi_report_final.pdf

Inexpensive investment vehicles – avoid costs up to -1.1%

https://web.archive.org/web/20170103183948/http://www.whitehouse.gov/sites/default/files/docs/cea_coi_report_final.pdf

Investment Timing – avoid underperformance up to -0.8% to – 2.3%

The Clash of Cultures: Investment vs. Speculation, John C. Bogle, 2013

“The Arithmetic of “All-In” Investment Expenses”, Financial Analysts Journal, Jan-Feb 2014

http://www.morningstar.com/advisor/t/70540275/mind-the-gap-why-investors-lag-funds.htm

http://news.morningstar.com/articlenet/article.aspx?id=637022

https://advisors.vanguard.com/iwe/pdf/ISGIDX.pdf?cbdForceDomain=true

http://us.spindices.com/resource-center/thought-leadership/spiva/

https://advisors.vanguard.com/iwe/pdf/ISGQVAA.pdf?cbdForceDomain=true

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2560434 “Timing Poorly: A Guide to Generating Poor Returns While Investing in Successful Strategies”; Jason Hsu, Brett W. Myer, Ryan Whitby, July 2014