Case Study 3:
Existing client made an Investment with PNC Investments, his business bank, as they were after him to use their investment services as he was such an Important Client. Client met with their PNC advisors and went through the process of understanding risk and wound up with a portfolio that was essentially a 60/40 Stock Bond Portfolio. This is your typical portfolio that JUST ABOUT EVERYONE wind sup with. The client invested $50k initially and another $50k to bring the total deposit to the account to $100k.
The client made ZERO additions or withdrawals once the account reached $100k and the made NO REQUESTS of the advisor for any special treatment or adjustments to their recommendations.
Client shared his latest quarterly report from PNC which encompassed the prior 3 YEAR period. During the 3 year period of 4/1/21 through 4/1/24, the S&P500 Index rose a cumulative 36.91% including dividends. Adjusting for the split deposits by the client, we estimate that the cash flow of the account would have created an adjusted index return of approximately 25% over that same period.
Now we would NEVER expect that a 60/40 portfolio would ever come close to matching the S&P500 index and accordingly we would expect the portfolio to have achieved a CUMULATIVE return of approximately 65% of the S&P500 return or +/- 16.25%.
The quarterly report that the CLIENT sheepishly presented us tells the whole story:
CLIENT Time Weighted Rate of Return (TWRR) NET OF ALL FEES, WAS ….. 0.08%
Yes, that is 8 basis points or .08 percent. For a 3 year period where the market went up 25%
We at Smart Structure are REALISTS, we don’t expect perfection from anyone and therefore only report the facts as we see them. Therefore when the Client sheepishly shared his quarterly report with us, we merely said “WE TOLD YOU SO” .
This would be funny in an of itself, but the kicker, especially to the client was this: AFTER they hounded him for additional business and, when he finally spoke with them to express his displeasure at such a paltry performance over such a long time, they hung up and sent this letter.
You can add whatever adjective you’d like to describe this.
Now PNC is NO DIFFERENT than any other of the big advisory firms. Don’t think I’m singling them out. They ALL sell the same “One Size Fits All” solution.
Case Study 2:
Mid 60’s retiring Husband and Wife. Assets totaling 4+ Million in various brokerage account, retirement plans. Sold business and had an additional lump sum of 2.5M to integrate into overall portfolio.
Husband was hands on and looking for intelligent solution for their overall plan understanding the need to recreate am income stream to replace their income from their business.
Their existing portfolio’s were split between Schwab and Fidelity and their retirement plan was from their business and was at John Hancock. The “Advisors” from Schwab and Fidelity and the broker who handled the retirement plan all made pitches pushing various asset allocation portfolios extolling the importance of consolidation and risk avoidance. The overall fees between all three groups varied between .80% and 1.25% plus internal expense ratios. Their “Risk Level’s” graded out to be “Moderate” (of course they were moderate, everyone grades out as moderate).
So three nice proposals, nice people, all the proposals were basically mirror images of each other. All pushed dollar cost their lump sum into their overall mix over 12-24 months.
Simple, Boilerplate, when reviewed against each other, they were essentially rubber stamps of each other. Client’s had wills and trusts that were prepared more than 10 years ago. They did not have any advanced estate planning.
Client was looking for a solution to create an appropriate financial plan that they could execute and build upon as they moved through retirement and their retirement future became more clear.
Summary: $100k in 2 different banks, $4.4 M in 2 brokerages RIA fees ~ $40k, Exp Ratios ~ $26k
Total spent physically ~ $40k (jumping to $69k w additional lump sum),
Total hidden fees ~ $26k (jumping to $42k w additional lump sum).
Total fees: $66k-111k.
Legal and Accounting fees paid through business.
Give a man a fish, he eats for a day,
TEACH a man to fish, he eats for a lifetime!
SMART STRUCTURE SOLUTION: Case Study 2
We walked client through the detailed information from Portfolio Visualizer which quantified their existing portfolio holdings, expenses, performance EXACTLY and IMPARTIALLY. This illustrated that the client portfolios were very similar, had overlap of more than 58% of holdings.
Their cost structures were normal to the industry with the brokerages offering “Live Advisors” for additional fees over standard “Robo- advisors”.
What we pointed out the the client was that everyone was pushing the same basic solution for their investments and charging full fees for an off the shelf solution. We explained to client that we enable them to choose the EXACT solution that meets THEIR requirements. When using the model, Clients chose to limit their losses to a fixed % of their overall portfolio therefore THEY’D NEVER WORRY ABOUT BAD MARKETS ruining their portfolios and possibly affecting their retirement. Once max risk is defined, the combination of assets to create portfolio is invested across all of their existing brokerage accounts, although they did roll the Hancock 401k into a Fidelity rollover IRA. Client implemented full investing, not dollar cost averaging, for portfolio when explaining the SSIM Solution.
Upon seeing the SSIM model output, the Client’s comment was; “so, I win when the market goes up, i won’t go down as much when it goes down, I have a defined worst case scenario for my my portfolio, which lasts for multiple years without any changes. So now instead of fearing downturns, I should look forward to them to get greedy?!” Client NOW UNDERSTANDS how SSIM works!
SUMMARY: Saved the client $100k+ in fees annually. Boosted return dramatically, lowered risks, provided consolidated reporting and educational services with Vault for Estate Plan and annual tax forms.
Savings created annually was directed to both a Client’s new tax attorney for review and execution of proper documents that maximize current estate planning opportunities - all documents held w Attorney AND in Client’s portal. Savings was also directed to former business accountant to continue to handle client’s ongoing tax accounting needs. All accounting documents ALSO warehoused in portal.
ALL FEES WERE PAID FROM THE SAVINGS VS TRADTITIONAL BROKERAGE FIRMS.
Client now has an understandable financial plan, at a fixed cost, buttressed by the inclusion of the estate planning and tax documents which are NOW at client’s fingertips at any time.
WE TAUGHT THIS CLIENT HOW TO FISH!!
THEY USE OURSERVICES SO THEY CAN CONTINUE TO UNDERSTAND, CONTROL AND IMPLEMENT THEIR INVESTMENT SOLUTIONS AND ESTATE PLAN. THIS ENSURES THAT THEIR ASSETS ARE PROPERLY TITLED TO MATCH THEIR ESTATE PLAN TO IT WILL BE EXECUTED AS PER THEIR WISHES!
NO MORE GUESSING! NO MORE OVERPAYING!
Case study 1:
Recently divorced woman aged 50, with 3 grown children. She is a Full Time Employee with a 401k through her employer, and $525k split equally between an IRA account and a Brokerage account at Merrill Lynch and Checking accounts at a local bank. These accounts were acquired through the years with advisors recommended by family members.
The allocation of the assets were 10% in savings account at the bank and the 2 brokerage accounts (taxable and non taxable) were allocated very similarly. The taxable account was fully invested in a 60/40 portfolio made up of “A” and “C” share mutual funds. The IRA portfolio was in the same exact allocation using ALL ETF’s. The portfolio was charged a management fee of 1% on top of the internal expenses of the portfolio’s. Client was paying her accountant $700 per year for 3 tax returns (her and 2 college age children) and had no estate plan in place.
Client didn’t understand what they owned, didn’t understand what they needed to do to move toward retirement and was unaware of the current portfolio’s returns, potential risks, Investment advisory fees or internal expenses. Client had NEVER received any portfolio summary analysis showing costs, performance, risk etc.
Upon analysis of her portfolio’s historical performance using “Portfolio Visualizer” we quantified and explained the past performance and risk of the existing portfolio including the internal and external expenses.
Summary: $50k in bank, $500k invested, exp ratio fees $3.3k, RIA Fee $5k Tax prep fee $700.
Total fees spent physically = $5.7k, internal “hidden fees” expenses $3.3k = total exp $9k
SMART STRUCTURE SOLUTION: Case Study 1
We walked client through the detailed information from Portfolio Visualizer which quantified the portfolio holdings, expenses, performance EXACTLY and IMPARTIALLY. This illustrated that the client portfolios were virtually exact copies of each other, provided no additional risk protection and 2 separate cost structures (ETF v A & C share mutual funds).
Upon analysis, client used our Smart Structured Investment Model and chose her maximum loss percentage for the OVERALL which then displayed the proper overall allocation to then be implement in her taxable and non taxable accounts to ensure a smooth glidepath toward her retirement.
Client consolidated her investment portfolios at Fidelity (after viewing Schwab, Fidelity and IBKR - she chose HER preference). Client lowered her “rainy day Fund at local bank to $5k and moved balance to Fidelity Brokerage account to maximize short term interest rate difference with full liquidity. SSIM allocation solution was split between taxable and non taxable accounts according to clients short/mid term goals taking into account tax treatment of assets. All assets ALWAYS FULLY LIQUID. This solved all of the client needs for use and liquidity.
Client has experienced portfolio returns in excess of S&P500 index with a small percentage of her assets at risk. Her portfolios have been rebalanced to ensure long term cap gains for taxable accounts and to limit risk exposure whenever possible.
Client used the “FUNGIBILTY” of the SSIM Model to withdraw funds to purchase a new car. Shockingly to her, the withdrawal of 6% of the principal value of her entire portfolio had a NEGLIGIBLE impact on her overall return and only affected anything until her next periodic rebalance.
Using our web interface provided through “Right Capital” client can see her entire portfolio summarized daily, has created and executed and stored copies of her estate plan (done through Legal Zoom), and has used online tax services to process her 3 simple tax returns (all were w-2 employees with no complications) also now on file at website. Client has also included her Life Insurance and Prop Casualty insurance in her documentation. The site shows full up to date info regarding assets, taxes, estate planning issues etc.
SUMMARY: Savings of $6k annually, Boosted return dramatically, lowered risks, provided consolidated reporting and educational services with Vault for Estate Plan and annual tax forms.
We guided the client through this entire process, teaching them learn HOW and WHY things work!
NOW she is an educated consumer and is in charge of her financial life!