How It Works

We can help you gain control of your financial life with a range of customized services and online tools that will organize everything from budgeting, taxes and insurance needs to planning, investments and goal setting.

Helping you identify and prioritize your goals is step one for us. Periodic reviews and consistent encouragement, to help you stay on course and achieve your goals, is step two through infinity.

We understand your finances are personal and important decisions can be emotional. Our goal is to provide objective advice and guidance, backed by research and time-tested strategies, when you need it most. We promise transparency and full-disclosure of our costs and compensation.

Life happens. While no one can predict with 100 percent certainty what lies ahead, we can help you create a flexible financial plan that can enable you to proactively manage life’s hills and valleys.

Knowledge is a two-way street. We’ll strive first to understand your background, philosophy, needs, objectives and concerns to develop a personal plan for your unique situation. Then we’ll provide you with the necessary resources to help you understand your options and make confident decisions.

We’re in this together. Because we strive to develop a long-term relationship based on mutual respect, your success becomes our success. We’re committed to working collaboratively with you and on your behalf.

To understand you and your needs, we obtain qualitative and quantitative information; and we explain why this information is necessary to the process. Examples of qualitative (or subjective) information include your health, life expectancy, family circumstances, values, attitudes, expectations, earnings potential, risk tolerance, goals, needs, priorities, and current course of action. Examples of quantitative (or objective) information include your age, dependents, other professional advisors, income, expenses, cash flow, savings, assets, liabilities, available resources, liquidity, taxes, employee/government benefits, insurance, estate plans, retirement benefits, and capacity for risk. We analyze all this, and address with you any area with incomplete information.

We’ll help you identify goals and explain the potential effect that selecting a particular goal may have on other goals. This discussion is based on reasonable assumptions and estimates. These may include life expectancy, inflation rates, tax rates, and investment returns, among other factors. Then we’ll work with you in selecting and prioritizing your goals.

We analyze your current course of action, including its material advantages and disadvantages, and its potential for meeting your goals. Where appropriate, we also explore the advantages and disadvantages of one or more potential alternative courses of action, and how each integrates the relevant elements your personal and financial circumstances.

From the potential courses of action, we select one or more recommendations designed to maximize the potential for meeting your goals. This may mean continuing with your current approach, taking a different course, or a combination of elements. For each recommendation, we consider: the assumptions and estimates used; the basis for making the recommendation; the anticipated effects; how it integrates relevant elements of your circumstances; the timing and priority of each recommendation; and whether each is independent or tied with another recommendation.

The next step is presenting you with our recommendations and the information considered when developing them.

We will then discuss with you and establish whether we will have implementation responsibilities should you choose to move forward with the plan. One of our key roles will be to communicate implementation of the financial plan with you and any relevant third parties. Implementation includes identifying, analyzing, and selecting actions, products and services. In doing so, we consider a number of things, including: the anticipated effectiveness of each action, product or service is expected to be; and the advantages and disadvantage of each relative to reasonable alternatives. We will then make recommendations for next steps and keep you informed as we put those steps into action.

We will establish whether you would like us to have the responsibility of monitoring and updating your plan. If you would, we will outline which actions, products, and services will be our responsibility, as well as how and when we will monitor them. It will also be your responsibility to inform us of any material changes to your life and information. At appropriate intervals, we will review and analyze your progress, obtain additional information, and update your goals and our recommendations as needed. This will be a collaborative process between client and planner. We will update this process in accordance with the CFP® Practice Standards.

Modern Portfolio Theory was first documented in 1952 by Harry Markowitz, who later won a Nobel Prize in Economics for his work. The theory helps quantify risk and has become widely accepted by Institutional Investment Managers during the past 50 years.

Diversification is more than simply dispersing one’s “eggs” into many baskets. Modern Portfolio Theory explains the benefits of portfolio diversification and demonstrates quantitatively why and how it works to reduce risk.

Markowitz was also the first to establish the concept of an efficient portfolio. An efficient portfolio is one that has the smallest attainable portfolio risk for a given level of expected return (or the largest expected return for a given level of risk).

It’s important to maintain a diversified portfolio, especially in challenging economic times. That means keeping an appropriate balance of your investments in the stock market.

A sound investment strategy includes a well-diversified portfolio of stocks and other securities. A common pitfall among investors is the urge to commit a disproportionate percentage of funds to an individual stock (because you inherited the shares from your grandfather, for example) or to try to cash in on certain stocks or industries that may seem hot at the moment (such as defense industry stocks during wartime). Rather than becoming married to individual stocks, investors should commit to an investment strategy that helps them to pick and choose investments and get out when appropriate.

Progress toward your long-term goal is more important than short-term performance. Maintaining a diversified portfolio consistent with your financial plan will bolster that progress, according to analysis of Morningstar data by the Schwab Center for Financial Research (SCFR). Charting an investment of $100,000 in a diversified moderate-allocation model from 1998 to 2020, SCFR found that as markets went up and down, a long-term investor who stuck to his or her plan would have been rewarded.

Source: Schwab Center for Financial Research with data from Morningstar. The chart illustrates the growth of $100,000 invested in the Schwab Moderate Allocation Model. The asset allocation plan is weighted averages of the performance of the indexes used to represent each asset class in the plans and are rebalanced annually. Returns include reinvestment of dividends and interest. The indexes representing each asset class are S&P 500 Index (large-cap stocks), Russell 2000 Index (small-cap stocks), MSCI EAFE Net of Taxes (international stocks), Bloomberg Barclays U.S. Aggregate Index (bonds), and FTSE U.S. 3-Month Treasury Bill Index (cash investments). The Moderate allocation is 35% large-cap stocks, 10% small-cap stocks, 15% international stocks, 35% bonds, and 5% cash investments. Past performance is no indication of future results. Indexes are unmanaged, do not incur fees and expenses, and cannot be invested in directly. This chart represents a hypothetical investment and is for illustrative purposes only.

Diversification means more than simply dispersing one’s “eggs” into many baskets. The goal is to balance risk and return within your portfolio of investments. The best way to reach that balance is through strategic asset allocation based on modern portfolio theory.

Modern portfolio theory explains the benefits of portfolio diversification and demonstrates quantitatively why and how it works to reduce risk. First documented in 1952 by Harry Markowitz, who later won a Nobel Prize in Economics for his work, the theory has become widely accepted by institutional investment managers during the past 50 years. Markowitz was also the first to establish the concept of an efficient portfolio. Simply put, if efficient is defined as more output for less input, then an efficient portfolio can be defined as more return for less risk.

So what does all this mean, exactly? Keeping in mind that it’s called modern portfolio theory and not modern portfolio absolute fact, there are ways you can apply this concept to your investment plan.

Begin by infusing as much “fact” into your plan as possible. How old are you? When do you want to retire? What lifestyle do you currently enjoy (measured by monthly expenditures)? From these facts, you can derive additional facts – such as your retirement lifestyle goal, the amount of capital required and consequently your required rate of return.

Next, begin applying theory. Markowitz suggests rate of return can be predicted based on the type (or asset class) of an investment. The risk of an investment can become an objective measure by calculating the standard deviation of its past returns. The standard deviation is a statistical calculation that will tell us the likely range of possible returns compared to the average return. In simple terms, you might have an investment that averages 10 percent return with a standard deviation of 8 percent. In this example, most returns will range between 2 percent and 18 percent in any given year.

By analyzing expected returns and corresponding risk for each asset class, we can begin to determine if the required return for your plan is achievable. We can also determine the likelihood of meeting that return. Further, by combining multiple asset classes into your portfolio, we can further reduce your risk, while maintaining expected return. Thus, the portfolio becomes more efficient.

Standard deviation is a statistic that measures the dispersion of a dataset relative to its mean and is calculated as the square root of the variance. The standard deviation is calculated as the square root of variance by determining each data point's deviation relative to the mean.

The planning process becomes subjective at this point, as we work to assess whether you can tolerate the level of risk (standard deviation, uncertainty) required to meet the expected return. Do not minimize the importance of assessing your risk tolerance. Risk assessment is the most important, and most difficult, step. Since sticking to your plan is the biggest determinant of success, it’s critical that you choose a plan that you will keep. Taking on too much risk results in anxiety, stress, sleepless nights and ultimately abandonment (and subsequently, failure) of the plan.

Again, bring as many facts into the equation as possible. How did you react to past market losses? Did you sell out, feel anxiety, experience regret? How readily can you replace your portfolio, or where are you in your wealth building cycle – creation, accumulation, preservation, depletion? And how important is your objective? Are you willing to take additional investment risk that may result in the delay of retirement five years if you don’t achieve the expected return?

After assessing risk, you must then determine if the expected return in the investments that you are considering with your corresponding risk will meet your needs. If not, it’s back to the beginning, to re-evaluate your financial needs and goals.

Once you’ve established the best plan for your needs, stick with it – but don’t neglect it. Your portfolio can get out of shape over time, due to the outperformance or underperformance of various asset classes and industry sectors. Your personal circumstances also can change over time (marriage, children, divorce, job change, large purchases/sales, inheritance, etc.), which impacts your overall financial plan.

Periodic reviews of your plan and rebalancing of your investment portfolio are essential to your long-term financial success. According to FINRA, effective performance evaluation is a middle ground between “set it and forget it” and incessant monitoring. An annual review can keep you engaged in your plan while tracking the progress of your investment goals. Meanwhile, your Perspective advisor evaluates your portfolio monthly and keeps you apprised of changes.