What Is a Fee Only Wealth Management Firm – and 7 Other Common Questions

Financial Freedom is a fee only wealth management firm. This is a huge benefit for any investor, but many don’t know what that means. So, I thought I’d answer this question along with a few other common questions we hear from investors.

If you have a question that is not answered here, contact us and we’d be happy to talk with you.

Question 1: What is a fee only wealth management firm? 

Because we value our clients’ success at Financial Freedom, we chose to structure our company as a fee-only wealth management firm. What this means for our clients is:

• We do not accept any commissions or compensation from third parties.
• We will always provide independent and objective recommendations.
• We are your strongest financial advocates. Our retainer agreements are developed after getting to know your wealth management objectives and the scope of our work together. As a fee-only firm, you can rest assured that our team always has your best interests in mind.

Ready to discuss your financial future? Contact Financial Freedom to see how we can help.

Question 2: What is the investment objective of Financial Freedom’s asset allocation and investment management program? 

Our objective is to create wealth in excess of inflation by investing in individual common stocks, exchange traded funds, bonds and top performing no-load/low-load mutual funds. A client’s asset allocation needs to fit their risk profile and their overall “sleep comfort level.” We also believe that the fees charged by an investment professional should be viewed by the client as an investment and not as an expense to the portfolio.

Question 3: What does “investment affiliation” mean?

As a fee only wealth management firm, Financial Freedom does not physically hold or take custody of your money. Instead, your money is held by a custodian that is in the business of safeguarding investor money. This provides an important additional layer of protection and reporting for your money.

Financial Freedom is a member of the Fidelity Investments Institutional Wealth Services Group. This means that we have access to a full range of equities and fixed-income securities, including more than 4,000 no-load/low-load mutual funds. Fidelity offers a wonderfully open platform that allows us to buy almost any investment available, not just Fidelity funds. In fact, our clients normally own more non-Fidelity funds than Fidelity funds.

As a client, investors will have their own individual Fidelity account. As Financial Freedom manages their assets, we first seek our client’s approval before making any changes to their portfolio.

Being affiliated with Fidelity also allows our clients to enjoy all the user-friendly features of the company’s technology platform.

Question 4: How will you minimize my risk?

Financial Freedom utilizes the Morningstar Rating System to ensure that we maximize return while minimizing risk. This system allows us to analyze and track the risk-adjusted performance of each fund that we use. Morningstar provides monthly performance updates on more than 15,000 mutual funds. We also use the Morningstar performance averages to evaluate Financial Freedom’s annual investment return performance for each of our client portfolios.

Question 5: What is your plan for asset allocation? 

This is a two-part response.

Strategic: We allocate assets between equities, fixed income and cash (money market funds). These allocations are based on the client’s age and financial objectives, and are adjusted based on changes in our clients’ tolerance for market risk, the economy and opportunities in the stock market.

Tactical: We allocate using various classes of assets, such as large cap, small cap, mid cap, international, natural resources/energy, real estate, health care, financials, technology and others.

Question 6: How do you diversify an investor’s portfolio? 

To diversify your portfolio and further reduce risk, Financial Freedom will allocate your assets between a number of asset classes, using individual stocks, bonds and no-load/low-load mutual funds.

Financial Freedom has access to, and will utilize funds from, some of the country’s most successful no-load/low-load mutual funds.

Question 7: How will I know what’s going on with my account? 

Our clients receive reports and management information in a variety of ways.

First, Fidelity provides monthly reports, which detail exactly where your money is invested and how your portfolio is performing. Fidelity will also provide all year-end tax statements.

In addition to Fidelity’s reporting, clients have 24/7 immediate online access to their accounts and their investments.

Financial Freedom also provides analysis, reports and management information as appropriate.

As a fee only wealth management firm, we do not earn, nor accept, any commissions. Our only source of revenue is from the fees received from financial planning and investment management. Financial Freedom fee schedules and estimated costs are available here.

Question 8: What is the most important factor in determining investment returns? 

Asset allocation is how you divide your assets up among broad types of securities, for example, stocks, bonds and cash. This conclusion was reached after analyzing the impact that stock selection, market timing and asset allocation had on total investment returns.

Financial Freedom’s approach to investing is to decide on the appropriate asset allocation first, and then select the specific stocks, bonds and mutual funds that will allow us to implement the allocation. We also need to make sure that the asset allocation is consistent with the client’s risk tolerance levels – are they comfortable? Can they sleep at night? We also look at the projected investment returns and ensure they will allow the client to achieve the life goals and objectives that have been established.

We also believe that analyzing a client’s asset allocation is an ongoing part of our investment management program. The reason for this is quite simple: Things change. Life goals and objectives may change and require more or less income. Tolerance for investment risk may change. A client may wish to reduce portfolio volatility (control risk).

If you would like to discuss Financial Freedom’s Asset Allocation and Investment Management program in detail, contact us and we will set up a time for us to meet.