WHAT SERVICES DO YOU OFFER?
We offer investment management, tax planning, retirement planning (including Social Security income strategies), general financial planning, estate and tax planning, education planning, business coaching, and general life advice. We coordinate with your tax and legal counsel when appropriate, and we stand ready to provide conflict-free referrals for areas beyond our expertise should you wish.
We can add value by
- Developing an appropriate, diversified asset allocation
- Helping clients avoid behaviorally-driven investment mistakes
- Adjusting portfolios to take advantage of opportunities or avoid over-priced sectors
- Rebalancing portfolios in an attempt to control risk
- Locating assets and instruments in tax-advantaged vehicles
- Coordinating wealth transfer strategies for multi-generational families
WHAT IS YOUR FEE SCHEDULE?
North Forty Two charges between 75-95 basis points (0.75%-0.95%) of client assets.
- Under $1 million, clients pay 95 basis points.
- Between $1 million and $2 million, clients pay 85 basis points.
- Over $2 million, clients pay 75 basis points.
- Over $5 million, our fees are negotiable.
In a unique and beneficial twist, for simplicity, all assets are charged at the fee of the last dollar under advisement, so a client with $2 million pays considerably less than a client with $1,999,999 ($15,000 vs. $17,000). We want our clients to be able to calculate exactly what they are paying on the back of an envelope, without having to account for pricing tiers (X percentage on the first million, Y percentage on the next Z dollars, etc.)
According to advisoryhq.com, the average fee for a $1.5 million account is 99 basis points, 96 basis points for a $2 million account, and 88 basis points for a $5 million account, exclusive of the internal costs of the investment instruments. Our fees compare quite favorably on both the advisory side and in terms of the costs of the investments themselves.
WHAT IS YOUR ACCOUNT MINIMUM?
Our stated account minimum is $250,000. At that level, our 95 basis point fee translates into an annual advisory cost of $2375.
WHAT ARE YOUR CONFLICTS OF INTEREST?
As a fiduciary, we are legally responsible to act in the best interests of our clients. We have operated under a strict fiduciary standard since the establishment of the firm in 1998, under which we are paid directly by our clients and not compensated for selling investment products or by receiving any sort of revenue sharing from investment product purveyors.
This is a much more stringent standard than that of the typical suitability standard to which the vast majority of financial advisors and stockbrokers cling in the pursuit of profits at the potential expense of their clients. Our twenty-five years of adherence to the fiduciary standard affords better protection for our select group of individual and institutional clients.
WHAT IS YOUR INVESTMENT PHILOSOPHY, AND WHAT INVESTMENT VEHICLES DO YOU USE?
We utilize individual securities as the bedrock for our client portfolios. Perhaps 60% of a typical asset allocation might be invested in individual stocks. This diversified basket of stocks is selected after rigorous fundamental analysis, and those positions are entered into or exited using both technical analysis and macroeconomic analysis as an overlay. We implement active tax management strategies to limit liabilities and harvest losses within taxable accounts, potentially adding returns.
We generally favor growth at a reasonable price, also looking for income generators and out-of-favor stocks. Fundamentals matter, and we constantly review scores of financial valuation metrics.
We generally avoid using mutual funds. Mutual funds carry high costs of ownership and are generally inefficient from a tax management standpoint. Additionally, many mutual funds tend to be tightly tethered to a particular benchmark, and we can gain less expensive exposure to a desired index elsewhere. We believe that if you are paying us a fee, you should not also be paying someone else a sizably unequal fee. This is a key differentiator for us.
We use exchange-traded funds for benchmark exposures and for access to markets that are more difficult to exploit using individual securities. ETFs may constitute 30% of a typical portfolio. Using these tools allows us to minimize the frictional, often hidden, costs of a diversified portfolio that are borne by the individual investor.
In using both individual stocks and bonds and ETFs, we are using both active and passive investment strategies. We believe both approaches are important in delivering net-of-tax, net-of-fee results over a full market cycle
HOW DO YOU HANDLE CASH?
We use cash as a tactical asset allocation tool to potentially increase performance in down markets and to provide a volatility stabilizer without resorting to expensive, complex, and risky financial instruments to do the same. By way of example, in 2008 we were fortunate to have 40% cash positions for our typical client, which provided some insulation from the global correction. While this may be a unique and outlying example, our goal is to provide acceptable risk-adjusted returns over an extended market cycle, which may be up to ten years in duration. Our more normal cash exposure is between 10%-25%.
HOW OFTEN DO YOU COMMUNICATE WITH CLIENTS?
- We proactively reach out to clients as needed and both welcome and encourage our clients to reach out to us as circumstances change or with questions.
- On a regular schedule, our clients receive detailed account statements from Charles Schwab. On a less frequent schedule, clients may receive more tailored statements from North Forty Two.
- We also maintain a presence on social media and encourage our clients to read our material should they be interested.
- In addition, we maintain a client vault to share and store pertinent documents in a safe, encrypted electronic environment.
HOW ARE MY ASSETS SAFEGUARDED?
Funds are held in custody at Charles Schwab, a leading custodian for over 13,000 registered investment advisors with assets of $3.6 trillion.