Value Added Services
Because Castle Investment Advisors® is fee-only, we add value to our clients' portfolios and investment assets by offering competitive fees. We monitor expense ratios, portfolio managers and investment risk. We help strategically diversify our clients' assets and create a comprehensive financial blueprint to monitor their investments and make well-informed, financial decisions. Being a fee-only financial advisory firm also eliminates any conflicts of interest encountered by other types of firms. We also coordinate our efforts with our clients' attorneys and accountants and update their investment information daily on a secure website we provide for the convenience of our clients.
While bank trust departments and some advisory firms may charge between 1 and 1.5 percent to manage their clients' assets, we manage them for less than 1 percent. If you are doing business with a brokerage firm, they typically earn a management fee and receive commission for transactions. We do not.
We sometimes use individual investment managers, and sometimes well-managed, no-load mutual funds. Mutual funds need to be reviewed carefully before choosing one. For our clients' benefit, we want to eliminate any commissions paid on A shares, B shares, C shares and other variations. Whenever possible, we want to eliminate all 12-(B)1 expenses. Working diligently to find the best managers available with the lowest expense ratios is another way we work to reduce costs for our clients. By saving 20 or 30 basis points in expenses each year, we can save them thousands of dollars over a five to 10 year period.
If a particular mutual fund is chosen for a client account, the main reason for its choice is because the manager has an excellent three, five, or ten year track record. When the manager leaves the company, it might be necessary to quickly change the investment. Monitoring managers for the mutual funds and the managers of the individual accounts is important in protecting our clients and reducing risk.
Over time, individual investment managers and managers for mutual funds may change their investment philosophy, or perhaps one sector of the economy becomes inflated. For example, in 1998 and 1999, high technology stocks were grossly overpriced. If something like this happens, we want to be sure you are protected. We all want the stock market to rise in value, but it should be done at a rate that is justified by the American and world economies. If something increases in value at a faster pace, risk is increased. This should be monitored, and we want to reduce risk when necessary.
Most clients are interested in a safe investment program that protects their assets over the long term and provides diversification and safety. By allocating investment assets among different types of stock and taxable and tax-free municipal bonds, we are able to give our clients the comfort level they seek.
Allocation of investments, monitoring and reallocation from time to time is an important function of Castle Investment Advisors® . This is true for personal investment accounts, as well as IRAs, 401(k)s and special accounts set up for children, grandchildren, charities and perhaps others. Coordinating the many accounts into one well-planned allocation for the family is an important benefit to many clients.
Comprehensive Financial Blueprint
Through experience, we have learned that clients normally have numerous investment accounts. There may be several personal investments that the husband or wife has in his or her name, or jointly. In addition, there are probably two or three IRA accounts, and possibly two 401(k) or profit-sharing accounts. It is important that all the accounts be viewed as "one." If you examine each account individually, you might not see any large problem. However, when all accounts are viewed collectively, it may then be obvious that there is too much money in large cap or small cap stocks. There may be too many taxable bonds in the personal accounts that produce taxable interest to the client.
A comprehensive overview of the accounts is one way Castle Investment Advisors can provide more protection and better wealth management for our clients.
Many years ago, Castle Investment Advisors® made a conscious decision to not create our own "in-house" products. It is important for our clients to know that CIA looks at the entire realm of investment products to put together a mixture of investment ideas to best fit each client's personal needs. There are hundreds of investment managers from which to choose, and there are thousands of mutual funds, and of course thousands of individual stocks on the market. There are many taxable and tax-free bonds that all brokerage firms make available for review.
By being independent, we have the ability to work with any brokerage firm, mutual fund and any investment manager to provide clients with the best combination of ideas to meet their goals.
Monitor Account Titles
This topic may seem insignificant, but it can become very important. Should personal investment accounts be in the husband's name, wife's name, joint name, tenants-in-common, or should accounts be owned by a trust? Over five to ten years, it typically becomes necessary to move assets, or move an account, from one spouse to the other. As estate tax laws change, it is important to monitor ownership of all personal investment accounts to minimize estate taxes as much as possible.
Coordinate with CPAs
Each year we work with clients and their accountants to be certain we understand their income tax situation. We need to know each client's tax bracket for ordinary income. We also need to know about any charitable contributions, taxable interest and dividends and tax free interest from municipal bonds. We also coordinate with their CPA during the year in case an important tax question comes up. For example, if a block of stock is sold, what is the basis and capital gains tax? If there is a stock loss, can it be used this year or next to offset any possible capital gains?
At the end of the year, we supply CPAs with all important information on each investment account for our clients so they can accurately prepare tax returns.
Each day we download the previous day's transactions for our clients' accounts. The computer records are updated daily so that if our clients call with a request for their latest account information, we are able to access it quickly. By doing daily downloads, we are also able to check to be sure all dividends are reported properly and that stock splits, mergers and bond maturities show up appropriately in their accounts.
Maintaining the tax basis for our clients' assets is becoming an important function. Starting this year (2010), the traditional step-up in basis on assets when someone dies is no longer available. In the past, if a person inherited a piece of real estate or stock from their parents, the basis in the asset was increased to the date of death. This will no longer happen. Due to the changes in tax laws, it is imperative that we work closely with our clients to maintain the basis for their investment and other financial assets.