How We Manage Your Investments at Financial Consulate

When you hand your retirement savings to an advisory firm, one of the first things you want to know is who is making the investment decisions. Not a software platform. A person, or in our case, a team.

In our latest video, Mike McCarthy sits down with Chris O’Shea, our chief investment officer, to answer questions everyone should ask (but most never do) before they hand over their savings:

• Who at Financial Consulate picks the investments in my portfolio, and how many people have a say?
• What does the team look for before anything goes in, and what gets something taken back out?
• How often does the investment team meet to challenge each other’s ideas?
• What happens on the days the headlines turn ugly?

If you are within five years of retirement and want to understand how your investments would be handled here, request a free copy of our book, The Financial Physical®.

Transcript

Today I’m sitting down with Chris O’Shea, our chief investment officer at Financial Consulate. And to ask you just that, Chris, so welcome, thank you. Morning, thanks, great to be with you.

So, Chris, clients who come to work with us- who exactly at Financial Consulate is managing their money? That’s a great question. Yeah, so we have five of us; we’re all advisors. It’s Drew Tignanelli, Roger Bair, Alec Sunners, Jackson Courtney, and me.

What Financial Consulate Looks for When Selecting Investments

And when we decide on what investments are going to be in the portfolio, what are we actually looking for? What are you guys looking for? You know, when our clients come to us, first and foremost, they’ve already made the decision that I don’t wanna just have my money sitting in bank accounts that are solid, they guarantee principal, but they’re not earning a lot. So right away, they know that there’s some risk involved.

What we do then is we put together a portfolio that is a balanced, diversified approach for each sector. So we look at stocks, bonds, and alternatives, which is a little wider net, and we have different criteria for each of those asset types.

What Diversification Means in an Investment Portfolio

And you talked about a bunch of different asset types. A lot of things I hear about, talked about, is diversification. What does diversification mean? Yeah, diversification is key for us because we don’t believe in making bets because we believe that the less bets we make, the more beneficial outcomes there are for our clients.

And the added piece to that is that there’s less fluctuations. The fluctuations are modulated to an extent. So it keeps them on staying with the strategy over time because as we know, there’s critical and volatile times where portfolios drop in value significantly.

So a diversified approach means that at any one time, there’s gonna be things in a portfolio that are working and things that are not working. So if we’re all on one side, then the volatility is gonna be greater. And then for our clients, then they’re gonna be worried more.

And we want them, so the less bets, less worry approach, and it’s gonna provide them better outcomes, not just as they stay with the program, is that over time, the way we’re diversified is gonna give them better returns.

How Financial Consulate Monitors Investments and Portfolio Changes

Once investments are in place, how do you know when something needs to change? That’s a great point.

We monitor the securities on a daily basis. And then quarterly, we have formal reviews. And oftentimes what happens is that we find new opportunities. So we find something better. Roger loves to say, and it’s a great adage for us, we’re looking to upgrade the portfolio. So when we find something new, like the ETFs, what we call them now, they’ve been around for 25, actually they’ve been around for 30 some years, but there’s a 2.0 version or a 3.0 version, depending on your perspective of them.

And we’re employing some of these because they give less taxes and less fees along the way. Sometimes it’s a strategy that we’re employing has become super popular and it’s changed the nature of it because so many people have piled into it. At times we’ve had to remove ourselves from that and deploy the money in another vehicle.

How Often the Financial Consulate Investment Team Meets

So Chris, a little while ago, you talked about what a large team we have and each of those team members is constantly doing their own research. But when it comes to monitoring, is there somewhat of a rhythm to when you guys are looking at investments when you’re meeting? So we’re meeting at least once a week as a team, but oftentimes we’re meeting maybe two times or three times because we’re meeting with the providers of the investments that we’re using. So either ones that we’re considering or because we consider a lot because anyone can come to the table and we’ve got the 13 total advisors and we meet a couple of times a month and there’s communication going back and forth where they’re feeding, it feeds the whole process.

Ideas can come from wherever. So for us, the adage is that the best ideas win out. So as a team, we’re meeting at least weekly and we’re challenging each other with ideas.

And then over time, sometimes if we like something new, it takes maybe six months before we’ve really hashed it out and come to what we think is a settled conclusion. Yeah, absolutely.

How the Investment Team Responds to Market Volatility

One of the things that I think drives somebody to look for a financial advisor is kind of the stress they see from the news when markets get rocky and clients feel the urge to do something. What’s the investment team doing?

So at that point, we’re talking to any client who needs it, but we’ve done all of our work upfront because we’ve set up the portfolios ahead of time to weather those times of volatility and the headline impact in a way such that our goal is when markets are declining, that our portfolios are declining a little less. That’s the goal. That’s how they’re set up.

So in times of stress, we’ve already done the hard work. Now we’re looking to just reap the benefits of that.

Why Investment Decisions Are Not Based on Every Market Headline

So when you guys are doing all that investment research and meeting with the teams, it’s not like every time there’s a new headline, you’re going in to try to decide what change to make, right?

That’s correct. When the headlines come out, we among ourselves are just realizing and trying to encourage our clients that more so nowadays, headlines are just trying to get attention. So they don’t necessarily even point to what’s actually going on. Most people on that particular day have no idea what’s going on.

Markets are doing things that are really hard to discern. Yeah, absolutely. It makes me, you’re the one being interviewed here, but it makes me think of Drew Tignanelli, our founder, and something that he always says is that whatever the news says, however bad it seems, and however much anyone can point out and say, this has never happened before.

Well, that’s the same case with everything bad that ever happened before. It has never happened before.

A Team-Based Approach to Managing Client Investments

Well, Chris, I really appreciate you taking the time to talk about how we manage investments.

This wasn’t meant to be an in-depth examination of every process and technical tool we use, every software provider and research provider we have, just an overview. Because one of the things people looking for a financial advisor need to know, when you come to someone like a group like us or our group, your money isn’t just sitting there. It’s not just one of these things where we put it all on a bunch of portfolios that are preset and let it go.

It’s not a thing where we outsource the whole process to Schwab or some other institution. It’s our team choosing those investments. And then it’s also our team who is not reacting to the news, managing those investments, and instead looking for longer-term trends. And it is our team. There is definitely not one person here. It is not one advisor.

Even if a client works with an advisor, it is the entire team working together to hopefully work toward the best outcomes for clients.

Learn More About Financial Consulate’s Approach

So if you know somebody who might be interested in our approach to things, one of the great first steps is introducing them by virtue of our book, The Financial Physical. If anybody would like a free copy of that book, we’re certainly happy to send it out.

And thank you very much, Chris. Great to be with you, Mike.