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| Frequently Asked Questions |
Who should consider your services?
People who believe that a diversified portfolio of stocks and bonds of established companies worldwide offer the potential for consistent growth and dependable income over the long term. People who don’t have the time, experience or interest in selecting and managing their own investments. People who agree with my investment strategy of using no-load funds and indexes rather than individual securities and are prepared for the inevitable fluctuations in all security markets.
What is your track record?
This is the probably most common question any advisor is asked. Because I have a wide variety of clients with different size portfolios and different investment objectives there isn’t a single track record. Since I only use no-load mutual funds and ETF’s I can provide potential investors with a list of the portfolios I would buy for them at the current time with their performance records over different time periods.
What is your background and experience?
I graduated from the University of Puget Sound in 1969 with a degree in business. After graduation I served in Viet Nam as an officer in the Marine Corps. I have been in the securities business for over 30 years since 1974 when I started with Dean Witter & Co. in Seattle. In 1977 I joined Foster & Marshall Inc., a Seattle based brokerage firm, to become the branch manager of their new office in Mount Vernon, Washington. In 1983 the firm was bought by Shearson/Lehman Brothers (now Smith Barney). I continued to manage this branch until 1988 when I joined the new brokerage firm of Ragen MacKenzie to manage their new branches in Mount Vernon and Anacortes. In 1991 I became a branch manager with an independent broker/dealer and founded the branch office that I maintain today, and, as a separate business, founded Performance Tracking Inc., a registered investment advisor.
Why do you feel that the Performance Tracking process is the best way to select managers?
Because there are always huge differences in the performance of funds within the same market sectors over the same time period. I’m sure if you talked to any fund manager they could make a very convincing case why their investment strategy was the best but the facts show that only a relatively few funds actually deliver on their promises. It is the frequently quoted that most actively managed funds perform worse than a simple unmanaged index. In my monthly rankings I have highlighted an index within each sector since 1991 and, based on this research, I believe that this statement is true. But, there are also a lot of great funds with low expenses and consistently strong performance compared not only to their sectors index but to all the other managers within their sector. These are the funds I search for every month. To screen the thousands of funds available to all investors and to separate the best funds from the losers I need facts that are common to all funds. As far as I am concerned the following 2 facts are the most important considerations when selecting investments.
1. How has the fund actually performed for investors over different time periods compared to as many other managers as possible within their same market sector?
2. How much does the fund charge investors each year to manage their investments?
Performance and expenses are really the only two things all funds have in common so every month I update performance facts over different time periods for hundreds of funds then compare each funds expenses and rank them within their respective sectors. Over the years this ranking process has proven to be a very effective way to build portfolios initially and it has also been the best way I have found to manage these portfolios over time.
For example: A fund may have significant changes that may not be disclosed to investors in a timely manner. Fund managers frequently change firms just like star athletes change teams and this can dramatically alter a fund's strategy and performance. No one can predict how a change like this will affect a fund but my ranking process will show when significant changes have had a negative impact on the funds relative performance to the point where it is obvious that the fund should be exchanged into a stronger position. Without all these facts and rankings it would be very difficult for any investor to make these critical decisions on their own. My investors know that since I have absolutely no incentive to buy or hold any fund and that all my decisions are based solely on my research that I will manage their investments exactly as I would if it were my own money. In fact, this is how I manage my own retirement accounts and the accounts of all family members that invest with me.
Why do you “Cap” your management fee?
Because it isn’t fair to charge some investors more for exactly the same services simply because they have larger portfolios. The process I use to select investments is the same regardless of the amount of money invested. The overall diversification of an account and the size of the individual positions will vary with each investor, but the underlying research and account management is the same for all of my clients and I believe this is true for all advisors. Unfortunately, virtually all advisory firms charge investors based on the size of the account rather than the amount of actual work required to manage the portfolio. For example: If an advisor charges an annual fee of 2% of assets a $50,000 account will pay $1,000 a year while a $500,000 account pays $10,000 a year for what I believe are essentially the same services. In my opinion, there is no where near enough additional work required by any advisor to justify the additional $9,000 fee. These unrestricted asset based fees are never in the best interest of the investor and I have never seen anything that suggests higher advisory fees result in better performance for investor’s, in fact, lower fees are one of the most direct ways to improve performance.
Do you offer financial planning services?
No. My business is investment management not financial planning. In my opinion, for most people, financial planning is simply common sense. Live within a budget. Save regularly for big future events like education and retirement expenses. Be sure you have wills, powers of attorney and other legal and estate documents up to date. Be sure you have appropriate insurance coverage. In many cases I feel that people who call themselves financial planners are simply using the term as a gateway to sell expensive investment and insurance products with high commissions and very little follow through. In most cases I don’t think adding the extra expense of a “financial planner” as a middleman makes any sense. If you need legal advice go to a good attorney that specializes in the area where you need help. If you need tax or insurance advice find a good local CPA or insurance agent. If you feel you need a written financial plan go to certified financial planner who works for a flat fee and doesn’t also try to sell you high cost investments. And, of course, if you need investment advice find a registered investment advisor with experience that has a long term strategy you agree with and puts a cap on their management fee.
Why should I work with you rather than a larger firm?
Today, especially in the investment business, it doesn’t matter where someone works. Computers and the Internet allow everyone instant access to the same information especially in the area of mutual fund research. Investors should understand that all brokers and advisors work in much the same way regardless of the size of their firm. The big brokerage firms offer a very wide range of investment products with everything from traditional stocks and bonds to options, commodities, derivatives, currencies, insurance and even mortgages. Since it’s impossible for anyone to be an expert in all these areas most experienced advisors focus on the services that are most important to them. In their specialty they rely on the resources within their firm or elsewhere that can best help them serve their clients. In my case, because I specialize in independent no-load mutual funds, the resources of a big brokerage firm that sells their own proprietary funds wouldn’t be much help. I rely on independent sources for the facts I need to make my own investment decisions.
Exactly what fees will I be charged?
First, all investors should understand that all no-load mutual funds and index funds have their own fees for research and portfolio management. Even though investors don’t see these fees deducted from their accounts they are an expense that has a significant effect on their total return. A key part of the Performance Tracking investment process is to identify funds with low management fees.
The Performance Tracking management fee is deducted from accounts at the end of each quarter after services have been provided and investors receive an itemized billing report. The fee, for building portfolios, tracking performance, managing the positions and reporting results to investors every month is a flat $50 a month for accounts larger than $60,000. There is absolutely no management fee charged on assets in an account above the $60,000 asset cap. To accommodate accounts below this level the management fee for these clients is discounted to 1% of assets annually (minimum $20 per month).In addition, positions in individual stocks or bonds that investors select and manage themselves are excluded from the fee calculation if the account value is less than $60,000.
Other operational fees include: A custodial fee for TD Ameritrade Institutional of $18.75 per quarter regardless of the size of the account. A transaction fee to buy or sell (regardless of the value of the trade) of $10 if the transaction is part of a block trade (a buy or sell of the same position, at the same time for more than one account) or $25 for separate trades for only one account and for non-mutual fund transactions (certificates of deposit, stocks, bonds etc). $30 to transfer out positions in kind (maximum $75). $10 to overnight or wire money and $25 for check return or stop payment. The custodian TD Ameritrade Institutional reserves the right to change its fees and to charge fees for extraordinary services.
What reports will I receive to track my progress? Performance Tracking clients are sent investment summary reports monthly not quarterly like most advisory firms. These reports show the overall diversification of the account and exactly how each investment has performed. Since there is no guaranteed return with growth investments these monthly updates are critical to help investors understand how their investments are performing. I believe that investors who clearly understand how their money is being managed are much more comfortable with the inevitable fluctuations in the stock and bond markets. Investors will also receive additional monthly statements from the custodian TD Ameritrade Institutional that show all account activity.
Do you recommend individual securities?
No, as a registered investment advisor through Performance Tracking Inc., I only recommend no-load mutual funds and exchange traded funds.
If I want to close my account will I have to pay a penalty?
There are no surrender charges or penalties to close any Performance Tracking account. The management fee is prorated for the number of days the account is open.
How frequently are there trades in an account? It depends on the type of account. Accounts with a higher percent of growth positions will probably have more trades than accounts with mostly income positions. It is important to understand that Performance Tracking is not a market timing strategy so accounts will always be fully invested and broadly diversified across domestic and international markets. Typically there will be less than ten trades a year in an account.
What is the minimum Investment to open an account?
The minimum is $20,000. I have waived this minimum in the past for multiple family accounts or by request on a case-by-case basis.
Do you manage 401-k plans?
I can manage 401-k assets if the plan is a pooled account where everyone owns a percent of one portfolio. If the plan has separate accounts for each participant I could manage an individual’s account if the plan allowed for separate custodians. Because of the record keeping headaches, this option is rare. I do manage these assets after they have been rolled from a 401-k into an IRA.
Can you manage my IRA that is now held at another firm?
Yes, managing IRA rollovers is a big part of my business. However, the assets must be transferred to our custodian. I will prepare the paperwork for your signature to order a direct transfer.
Can I receive monthly income from my account?
Yes. Checks in any amount can be sent to investors that require monthly income. Typically these accounts are more heavily invested in bond investments that produce income but it is not uncommon to have these accounts diversified for growth and simply maintain enough in the money market to cover the monthly payments.
How often do you review my investments? I review all positions monthly when I receive the updated facts for performance and expenses. Investors receive their performance updates around the 20th of the month.
Can I get funds out of my account quickly in case of emergency?
Investments can be sold the same day if instructions are received before 10:00am pacific time. In custodian accounts a check will usually be sent the following day. Retirement accounts require a signed distribution form that must be sent to the investor and returned before payment. Typically, depending on the mail, payment is received within two weeks.
Do you contact me before making trades in my account? No, Performance Tracking accounts are discretionary and I make all trades in accordance with a disciplined strategy based on my research. There simply isn’t enough time to call and explain each trade to every investor.
Can duplicate statements be sent to my accountant?
Yes and your accountant can also receive any year-end statements with tax information.
How do I pay your fee?
Performance Tracking fees are deducted from your account at the end of each quarter after services have been provided and all investors receive a detailed summary of these fees.
Is my account guaranteed?
I offer certificates of deposit that are guaranteed like any bank CD and Treasury securities are backed by the government at maturity but there is no way to insure against market losses. The custodian, TD Ameritrade Institutional is insured against any possible loss of the physical securities that they hold. All checks that I receive must be made payable directly to the custodian. I am regulated by the Financial Industry Regulatory Authority (FINRA), the U.S. Securities and Exchange Commission (SEC) and the Washington State Department of Financial Institutions.
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| This web site is in no way a solicitation or offer to sell securities or investment advisory services except where applicable, in states where we are registered or where an exemption or exclusion from such registration exists. Advisory services offered through Performance Tracking Inc., A Registered Investment Advisor. |
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© 2007 Performance Tracking, Inc. All Rights Reserved. |
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