SF Portfolio Strategies are our comprehensive approach for disciplined investing. In an effort to minimize costs and generate better performance, the program provides for a sophisticated, automated and technology-based experience.
To get started, investors complete our Investor Profile Questionnaire online. Based on those answers, one of our twelve globally, diversified portfolios will be recommended. The firm has designed each allocation and carefully selected the individual portfolio holdings. Portfolios are monitored daily and the firm will make adjustments, as necessary. Through changes in market values or additional deposits, client portfolios are automatically rebalanced. (For taxable accounts of greater than $50,000, tax loss harvesting is an optional benefit for increased tax-efficiency.)
The program includes one simple fee for investment advice, portfolio management, custody and trading; there are no commissions or transaction fees. We offer a dedicated online portal and mobile app supported by the strength of one of the industry’s leading custodians (based on RIA assets in custody) —- Charles Schwab.
To learn more about the program and to find out whether it would be an appropriate strategy for you, please contact us for a confidential, a no-cost conversation.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk. Rebalancing a portfolio may cause investors to incur tax liabilities and does not assure a profit or protect against a loss. No strategy assures success or protects against loss.
The Sign-Up Process
The process is straightforward. First, you work with the advisory and service team to determine if the program is suitable for your portfolio. If so, they will direct you to the website and provide our “key” to allow you to get started. While the sign-up and on boarding process was designed to be completely client-directed, a member of our firm can walk you through the process from start to finish. We can help you get invested in three simple steps.
1. Answer 12 questions to help us determine your risk profile.
2. Review your recommended portfolio.
3. Complete the simple enrollment process.
The Investor Profile Questionnaire (“IPQ”)
The first step in sign-up process is our robust questionnaire. The IPQ is a key component of the SF Portfolio Strategies program. It is a tool to assess clients’ Risk Capacity and Risk Willingness so that we can map each client to one of our customized, recommended portfolios. Investors will answer the 12 straightforward questions about their goals, time horizon and risk profile. The investor client will then receive our portfolio recommendation consistent with their answers to the IPQ.
The IPQ enhances the scope of traditional risk tolerance questionnaires by distinguishing between two separate risk scores: Risk Capacity and Risk Willingness. These two risk dimensions are generally independent of each other, so gaining insight into each helps provide a greater understanding of the client’s risk profile. Risk tolerance questionnaires have traditionally tended to focus solely on Risk Capacity, which provides important objective insight into a client’s ability to absorb risk within their portfolio.
However, it is our view that understanding Risk Capacity is not sufficient because a investor’s attitude toward risk is also important. Behavioral questions that focus on Risk Willingness help to provide insight into how investors tend to behave in practice rather than in theory. Insights into behavioral tendencies such as loss aversion are built into the IPQ, taking into account research showing that people typically place greater importance on investment losses than on investment gains. What our IPQ measures:
1) The ability (or capacity) to take risk — Five questions capture factual information used to calculate a Risk Capacity score. Risk Capacity is based on factual information about a client’s investment objective, initial investment amount and time horizon.
2) The willingness to take risk and attitude toward risk — Six questions collect information about the client’s behavioral attitude toward risk and five of the six are used to calculate a Risk Willingness score. Risk Willingness indicates how willing a client is to accept investment risk in terms of volatility of investment returns as well as the probability of loss.
Open Your Account
Upon completion of the Investor Profile Questionnaire and learning the recommended SF Portfolio Strategy, you will be able to continue with the sign-up process by opening an account. (At this time, the only account types that are allowable are for individuals Joint accounts, Trusts, Traditional and Roth IRA's.)
For current clients (or new clients with an existing relationship with Charles Schwab), you will enjoy an abbreviated account opening process. For your convenience, your new account forms will be pre-populated. You will simply need to review the information, update your data as necessary and acknowledge the creation of a new account.
For clients who are new to Summit Financial Advisors and do not have an existing relationship with Charles Schwab, you will be able to open a new account entirely online. You can expect to provide the usual account opening information and, in the case of a retirement account, details about your beneficiaries. After a series of acknowledgments and digital signatures, you will be assigned a new account number.
Finally, the online sign-up process also allows for funding the account. You can arrange to deposit a mobile check, transfer cash from another account at Schwab or arrange for a transfer of cash and/or securities from another firm. Again, while the program was designed to be client-directed, at any point in the process our service team can assist you.
All your portfolio information is at your fingertips, whether you’re on your desktop or mobile device. The Mobile App is available for both Android and iOS.
To learn more about the program and to find out whether it would be an appropriate strategy for you, please contact us to a no cost or obligation conversation.
Rebalancing is the disciplined process of buying or selling securities within an asset class to bring it back to its target weighting based on a investor’s strategic asset allocation. A systematic process for rebalancing helps to mitigate portfolio risk by not allowing the asset classes to drift too far from their target allocations.
With any portfolio, natural market fluctuations increase and decrease the value of some of your holdings, causing your asset allocation to stray from its target. When that happens, it’s time to rebalance by buying underweight and selling overweight asset classes.
SF Portfolio Strategies uses a drift tolerance of 2 percentage points relative to the targeted weighting for each asset class to keep portfolios aligned with their strategic allocation over time. On a daily basis, the algorithm checks to determine if asset class weights remain within the drift tolerance and implements rebalancing trades when the drift tolerance has been exceeded. A consistent drift tolerance of 2 percentage points across all asset classes was selected for several reasons. This drift tolerance was found to keep the portfolio’s strategic allocation consistent over time while not constantly trading the portfolio in response to every small deviation from targeted asset class weights.
Tax Loss Harvesting
One of the most effective tools for offsetting investment-related taxes is tax-loss harvesting. Tax-loss harvesting is the process of selling a security at a loss, and using the proceeds to purchase a similar but not “substantially identical” security. The tax-loss harvesting process allows client portfolios to retain a similar market exposure while generating tax deductions for federal income tax purposes that can be used to offset recognized capital gains and up to $3,000 of ordinary income a year.
SF Portfolio Strategies seeks to reduce the investor’s net federal income tax burden within the program by capturing tax-deductible capital losses (in taxable accounts only). To prevent portfolios from selling every loss and constantly switching between instruments, a potential loss must exceed a threshold of 0.5% of the total portfolio value before it will be sold for tax-loss harvesting purposes.
Rebalancing and tax-loss harvesting thresholds are checked on a daily basis and implemented as needed. When trades occur, the algorithm follows a set of rules to net out both types of trades. The algorithm was designed based on historical data to estimate its efficacy in different market conditions.