- Fixed Fee Pricing
- Financial Planning
- Employer Plans
- About Clarity
The Importance of an Investment Policy Statement
An Investment Policy Statement (IPS) describes the investment philosophies and investment management procedures to be utilized in consideration of your long-term goals. The principal reason for developing a customized investment policy and for putting it in writing is to enable you and us to protect your portfolio from ad hoc revisions of a sound long-term policy. Without an investment policy, in times of market turmoil, clients are often inclined to make impromptu investment decisions that are inconsistent with prudent investment management principles. An IPS is intended to provide a well thought out framework from which sound investment decisions can be made. At Clarity, each client receives a customized IPS based on their time horizon, liquidity needs, risk tolerance, tax situation, and other special circumstances.
How much investment risk do you need to take?
Investing begins by determining how much investment risk you should be taking to achieve your financial goals. Too much risk (which we see more often than not) may lead to the undesirable situation of selling after the market has plummeted. Too little risk may mean missing out on returns that could have been yours for the taking. It is also important to understand that not all risks carry an expected return (e.g., a concentrated stock position in a single company). Your fiduciary wealth advisor will create a personalized asset allocation combined with a well-defined financial plan to maximize the probability of achieving your goals.
Take Our Free Risk Assessment
Clarity 60/40 Portfolio. Weighted expense ratio of 0.22%.
Our Personal Risk Assessment will match you to one of our many low-cost, globally diversified investment portfolios. There are 20 questions based on your personal financial situation and elements of Behavioral Finance as it relates to investors. The assessment should take no longer than 5-10 minutes to complete.
Anytime a person makes a decision to invest or save money, he or she has probably formulated an expectation of how much they will get back at some time in the future. For most people, the expectation is that they will receive more than what they put in after a period of time. Some people will expect to get back no less than what they put it in, while others are willing to accept less back for the higher expectation of a greater return on their money. The difference in these attitudes and expectations is rooted in each individual’s tolerance for risk.
While it may be a prudent action for people to invest their money with the assurance that they will receive 100% of their principal back, it comes with the expectation that the return on their money will be somewhat lower than if they had no such assurance. This is the cause and effect of a zero or low risk tolerance when investing. For people seeking a higher return on their money, they must be willing to accept a commensurate amount of risk.
Investors also need to be aware that risk presents itself in several different forms and that consideration should be given to striking the right balance and proper diversification through a mix of investments that can mitigate the overall risks of their money at work.
Investing Costs are Important!
When it comes to investing, the more you pay in advisory fees and fund expenses, the less you keep.
The Advisor's Fee: This is the dollar amount you pay a financial advisor to manage your assets. If the advisor charges an asset-based fee (e.g. 1%) ask her to calculate the dollar amount you will pay before committing to investment management and planning services. The asset-based fee should be clearly stated in your advisor's written Client Agreement. Compare the asset-based fee with Clarity's low-fixed fees.
Sales Commissions: Fees that are associated with buying or selling a commission-based mutual fund (A, B, or C share classes) or an annuity. Have the advisor list all commissions associated with your investments. As your fiduciary, we do not offer investments with sales commissions. Fee-based and commissioned advisors do.
Expense Ratio: This is the annual underlying cost of the mutual fund, variable annuity, or exchange-traded fund (ETF) you purchase or own. ALL mutual funds, variable annuities and ETFs have expense ratios. Again, ask your advisor to provide you with the expense ratios for your investments and compare them with our low-cost investment options.
Trading Cost: The cost to buy or sell a no sales commission (no-load) mutual fund, ETF or stock.
12b-1 Fees: These are the hidden fees embedded in some mutual funds (B and C share classes), also known as "kickbacks" since the financial advisor receives these additional fees as a kickback for selling you the fund. Ask about 12b-1 fees in the investments an advisor is recommending.