Allocation Advisory Services
Our firm has partnered with Folio Institutional® to provide allocation advisory services focused on fundamentally sound investing for the long-term. Folio Institutional® is a division of Folio fn, Investments, Inc. They are a leading investment solutions and financial technology company that provides an integrated brokerage and custodial platform. With a Folio Client account through CWS, we provide a low cost brokerage solution and access to top quality market research (powered by quote media) to help you stay on top of your investments with us!
We charge a 0.90% fee for the first $250,000 in assets under management. We have breakpoints for larger asset amounts. Contact us at firstname.lastname@example.org for details on larger investments.
Our allocation advisory services are designed to offer distinct advantages to provide a competitive edge, such as:
1. Our firm utilizes Dimensional Fund Advisors mutual funds in an effort to gain an edge over the competition.
Dimensional Fund Advisors believes in implementing academic finance research into the investing space. They believe in the power of markets to be informationally efficient. Once we accept that the markets drive information into prices efficiently, then we can be free to focus on other areas where we can add value.
This notion runs contrary to that of purely active investing, where the investor seeks to take advantage of perceived market inefficiencies. Active style investing requires a belief that markets are inherently inefficient and that they can be systematically beaten on a consistent basis for excessive profits. In reality, when comparing active vs. passive management, the results are far from clear on active management’s ability to consistently outperform passive management.
We recommend viewing the persistence scorecards released by S&P Dow Jones Indices. Here is the one from December 2016. The scorecard is released twice per year and tracks the consistency of top active mutual fund performers over time. Read more about the scorecard in the notes section below.
When analyzing the results demonstrated by the scorecard and comparing them to Dimensional’s financial science based approach, we believe that investing based on the science rather than a notion of purely active investing has a higher likelihood of meeting your long-term needs.
For an explanation of Dimensional’s strategy, see our notes section for more details.
We firmly believe that Dimensional mutual funds are onto something when they forgo a purely active investing style in favor of financial science based investing in their funds. Hence, all mutual funds in our allocation advisory services universe are Dimensional mutual funds. Dimensional mutual funds can only be bought into through approved financial advisors such as ourselves. Join us, and see how investing using financial science instead of active management can give you the opportunity to add value to your portfolios over the long run!
2. Our firm diversifies our allocation advisory services across asset classes backed by sound macroeconomic fundamentals.
These portfolios are designed to provide long-term growth while taking volatility concerns into account based on individual risk tolerance. We avoid investments that don’t provide a strong enough return potential to justify their risk and stick to assets that have a historical track record for growth and stability. With a portfolio from CWS’s allocation advisory services, you can feel confident that you have investments backed by strong economic and fundamental analysis.
3. Our partnership with Folio Institutional® allows us to provide an extremely competitive pricing structure for brokerage services.
With a $100 annual fee for investing up to $40,000 and commission free window trading, our service at Folio is extremely competitive.
Here’s how window trading works. Twice a day, at 11am and 2pm, Folio takes all of its trading orders and executes them en masse in a “window”. Because your trades are bundled together with everyone else’s trades, Folio strives to attain the best possible execution price for your trades and does so without charging you a commission for your window trade.
Want your trade executed on your terms? Not a problem! Folio charges $3.95 per trade for market, limit, stop, and stop-limit orders not executed during one of its windows. For people who want to trade commission free, the window is available. For people who want to trade on their own terms, trading costs less than $4 per trade!
4. There are three types of advisory firms based on how they get paid for handling securities and/or financial products.
Fee only advisory firms never earn commission for selling securities or financial products. Fee based firms primarily do not earn commissions on securities and financial products but sometimes do. Commission based firms earn commissions on securities and financial products as part of their business model.
Our firm is, has always been, and always will be a “fee only” fiduciary advisory firm. We never earn commissions on any securities sales or financial products. We are held to the fiduciary standard of client care and would not have it any other way. When picking the advisers looking after your financial life, consider a firm born and raised with a fiduciary culture like ours.
What is S&P Dow Jones Indices?
Taken from their “Our Mission” Page:
“As the world's largest resource for index-based innovation, data and research our mission is to bring independent, transparent and cost effective solutions to the global investment community. S&P Dow Jones Indices is at the forefront of index change and innovation. Our goal is to continue to anticipate and respond to how our clients see global investment opportunities.”
Essentially, S&P Dow Jones Indices is a division of S&P Global that focuses on data collection and research regarding benchmarks for investment (aka indices). This firm is one of the premier players in the industry in this regard.
Can you describe the S&P Dow Jones Indices Persistence Scorecard?
Taken from the scorecard’s “ABOUT THE PERSISTENCE SCORECARD” section:
“The phrase “past performance is not an indicator of future outcomes” (or some variation thereof) can be found in the fine print of most mutual fund literature. Yet, due to either force of habit or conviction, investors and advisors consider past performance and related metrics to be important factors in fund selection. So does past performance really matter?
To answer this question on a continuous basis, the S&P Persistence Scorecard, released twice per year, tracks the consistency of top performers over yearly consecutive periods and measures performance persistence through transition matrices. As in our widely followed SPIVA® Scorecards, the University of Chicago’s Center for Research in Security Prices (CRSP) Survivorship Bias Free Mutual Fund Database serves as our underlying data source.
S&P Dow Jones Indices is one of the world’s leading index providers, maintaining a wide variety of investable and benchmark indices to meet an array of investor needs. Our Global Research & Design team is dedicated to conducting unbiased, in-depth analysis on a broad range of topics and issues facing investors in today’s marketplace. This scorecard highlights performance persistence over three and five-year consecutive 12-month periods and two non-overlapping three- and five-year periods.”
What does this scorecard conclude about active vs. passive management?
The key question to answer is, “can active managers deliver above-average returns consistently over multiple periods?” CWS’s answer to that question is not with active management, and the scorecard explains why.
Taken from the “SUMMARY OF RESULTS” section:
“According to the S&P Persistence Scorecard, relatively few funds can consistently stay at the top. Out of 641 domestic equity funds that were in the top quartile as of March 2014, only 7.33% managed to stay in the top quartile at the end of March 2016. Furthermore, 8.5% of the large-cap funds, 3.26% of the mid-cap funds, and 0.68% of the small-cap funds remained in the top quartile.”
In other words, it is very difficult for active managers to deliver above-average returns consistently over multiple periods.
Okay CWS, point taken. Then why should we use you to manage our money?
The approach Dimensional takes “targets” passive investing based on financial data science. This approach is different from traditional active investing, but is also not strictly passive investing. Our firm’s robo-platform has allocated Dimensional funds in different ways to match target investor profiles. Dimensional funds can only be bought through approved financial advisors to ensure that all investors have a guiding hand. With our allocations targeted to meet your needs and mutual funds backed by financial data science, we believe that we are equipping you with the best chance for success.
How does Dimensional potentially add value for you?
Dimensional gets their name from the academically proven “higher expected returns characteristics” also known as dimensions that are found in the Fama-French model. The original Fama-French model contains three factors and the model was recently expanded to contain five factors. The two new factors break down one of the original three factors in greater detail.
The original three factor model measures the effects of the capital asset pricing model (market volatility) alongside small capitalization stocks and value stocks. Beta, SMB (small minus big), HML (high minus low book to market ratio) are the three factors here.
- Beta is volatility in the market. It is used in the capital asset pricing model to determine expected return of a given investment. In other words, beta describes how much the price of a given investment goes up and down.
- SMB, or small minus big, is the difference between a firm with a small market capitalization and a firm with large market capitalization. In other words, SMB describes the difference in return over time between a small firm and a big firm. This makes intuitive sense. After all, smaller firms have more room to grow than larger firms do.
- HML, or high minus low, describes the concept of how much the market inflates the price of a firm’s assets. Firms with prices in the market that are not overly inflated have more room to grow than firms with overly inflated prices. This makes intuitive sense on average because firms with lower inflated prices have more room to grow their prices than firms with already high prices do.
The new five factor model adds a profitability and an investment factor to the mix. RMW (robust minus weak profitability) and CMA (conservative minus aggressive investment into the firm) are the new factors here. These two factors are considered breakdowns of the HML factor. In other words, profitability and investment explain the significance of the value stock factor. Here is what we mean by this:
- RMW, or robust minus weak profitability, tells us that firms that are profitable do better than firms that aren’t profitable over time. You may be thinking, “duh”. Great! Tilting our investments towards firms that demonstrate profitability is a big part of Dimensional’s weighing strategy that you can probably appreciate.
- CMA, or conservative minus aggressive investment, is a bit less intuitive. Essentially, firms that are more careful with how they invest tend to outperform those that spend wildly. One may think that firms that invest aggressively would outperform those that don’t, but the science shows that firms with more conservative investment profiles tend to outperform.
Hopefully, this explanation can help clarify some of the science behind our platform’s investment strategy. If you have further questions, email us at email@example.com