Wealth Management - Overview
“Wealthy is a person who…”
How you finish that statement will shape the way you live and determine the strategies you will implement to help you achieve your goals.
Your Long-Term Financial Goals and Peace of Mind
In virtually every situation, how successful you are at investing has a profound influence on your lifetime cash flow. Whether saving for retirement, creating education funds, or establishing a charitable trust, all of our clients have long-term financial goals. We take the time to develop an overall view of your unique financial situation and create a realistic plan to achieve your goals and peace of mind.
We Can Guide You
We can guide you through the tough decision-making processes in regards to your wealth management and work with you on those strategies to help you reach your goals. The first and most important thing we do is listen. We assist you in quantifying your hopes and dreams and in determining your tolerance for various types of risk.
Our Personalized Touch
Our clients want to work with someone who takes their individual circumstances into account when giving them advice. We are a small firm using a team approach to get to know each client personally. If you require a personalized touch McMill CPAs & Advisors would welcome the opportunity to assist you with your investment efforts.
We are pleased to provide world-class investment services to you and your family and friends.
Wealth Management - Who We Are
We Are Wealth Managers not just Investment Advisors
McMill CPAs & Advisors specialize in financial planning, which includes investing, but also incorporates budgeting, taxes, insurance, mortgages, trusts, wills, etc.
If all you are looking for is someone to handle your investing you just want an investment advisor, but if you want an advisor that can help you with your complete financial picture you are looking for a wealth manager.
We can offer you extensive financial planning. We are full-time professionals with specialized education and years of experience in investing and solving various financial issues.
We Are Wealth Managers and CPAs Who Use Passive Asset Class Management
We are an independent, fee-only, extensive investment advisory firm that specializes in managing portfolios structured around tax-efficient passive asset class investment strategies supported by a Nobel prize-winning investment philosophy.
In addition to our fee-only structure, having a full staff of Certified Public Accountants puts us in the enviable position of being able to fully consider the tax ramifications of every investment decision. As a result, estate and tax planning don’t become an afterthought to the financial planning process; they become an integral part of it.
We Are a Select Group of Advisors
McMill CPAs & Advisors is specifically qualified to provide access to the Dimensional family of no-load funds. These funds are not available directly to most individuals, but are limited to institutional investors and a select group of advisors like McMill CPAs & Advisors. We also make use of index funds and selected Exchange Traded Funds (ETF's) as well as global fixed-income portfolios.
We Are a Registered Investment Advisor with a Fiduciary Role
McMill CPAs & Advisors is proud to be a Registered Investment Advisor. Federal and state law requires that Registered Investment Advisors are held to a Fiduciary Standard. This law requires that an advisor act solely in the best interest of the client, even if that interest is in conflict with the advisor’s financial interest. As a Fiduciary we are:
- Pleased to occupy a position of special trust and confidence when working with a client;
- Required to act with undivided loyalty to the client;
- Required to disclose how we are to be compensated and share any corresponding conflicts of interest.
Wealth Management - Our Pledge to YOU
We pledge to:
- Listen to you and care about your family
- Determine just how much it will take to make your financial dreams a reality
- Help you make a lifetime investment plan which reasonably assures the achievement of your goals
- Fund your plan with the right kind of asset classes
- Support you so you never lose faith in the plan, regardless of what the market does
- Offer you a complete portfolio of unbiased solutions
- Never make you feel unreasonably pressured to do anything
- Be your financial doctor
Families will be more successful at achieving and preserving wealth
with the help of a caring and competent financial advisor
than by trying to do it themselves.
We will design your portfolio and provide the discipline to achieve
consistent long-term returns while reducing risks.
Wealth Management - Advantages
Top 10 Advantages
- Academic Nobel Prize - Winning Investment Approach - Used to manage portfolios and allows to have continued access to this academic research
- Access to Institutional No-Load Passive Asset Class Funds
- Fully Diversified - Mutual funds that do not include style drift, making construction of a fully diversified portfolio based upon the asset classes much more efficient. (This is very important because 94% of investment results come from asset class selection and not market timing or security selection.)
- Account Rebalancing - Takes advantage of market fluctuations.
- Income Taxes to a Minimum - By managing portfolios and tax-managed funds will be used when appropriate.
- Tax Efficient Focus – With valuable tax and estate-planning ideas.
- Minimal Fees and Never Locked In - No front-end loads or commissions; no A shares; no back-end loads or surrender fees and no 12b1 “marketing fees”.
- Fee-only Investment Management - Investment industry recognizes as less conflict of interest. There is no incentive to buy and sell to gain a commission.
- Regular Communication and State-of-the-Art reporting
- Trusted-advisor Relationship – Most importantly we are dedicated to your financial future. (Based on the Dalbar Study, disciplined investing can help you get approximately three times more than the average equity investor has made over the last twenty years.)
Wealth Management - Investment Philosophy
McMill CPAs & Advisors strongly believes that Modern Portfolio Theory (MPT) and passive asset class investing is the best way for us to develop prudent, long-term portfolios for our clients.
Structured Investment Philosophy
McMill CPAs & Advisors offers a structured investment approach that integrates academic research and the experience of leading institutional managers.
Unique Implementation of Modern Portfolio Theory
We believe in Modern Portfolio Theory
and have access to high-quality institutional investment firms with a unique implementation of this theory into an entire diversified family of mutual funds. Each fund captures the return behavior of an entire asset class, letting us accurately diversify client's investments across multiple assets classes-precisely incorporating the level of risk with which each investor is comfortable. Asset class investing is a systematic, global allocation of your portfolio.
Passive Asset Class Management Approach
As you familiarize yourself with McMill CPAs & Advisors, you will quickly notice our strong focus on implementing this passive asset class management approach as the best investment strategy. Other advantages of this approach include:
Importance of Passive Asset Class Investment Approach
- Lower Costs - Passive asset class funds traditionally have lower operating expenses and transaction costs (and thus higher expected returns) than do comparable actively managed funds;
- Lower portfolio turnover – Our turnover is roughly 12%, while the industry average is almost 70%;
- Greater tax efficiency - Passive asset class funds have relatively low turnover, so less of your annual return is consumed by taxes;
- Broad diversification/risk reduction – Our typical portfolio may include over 14,000 stocks, while the industry average is around 2,000 stocks;
- Long-term perspective – No HOT money, which is money that moves in and out of investments frequently. We manage wealth with a long-term perspective in mind.
- Control of asset allocation – Concentrating on staying diversified captures 94% of the results;
- Passive asset class funds - Capture separate dimensions of worldwide returns;
- Academic research – Points to the importance of asset class selection, not market timing or security selection.
(Being Broadly Diversified)
At McMill CPAs & Advisors, we are strong advocates of the passive asset class investment approach. We are convinced that a passive investment approach, which emphasizes broad diversification and market returns in a controlled risk, low cost, tax efficient environment is the right answer for individuals as well as institutional investors.
The following graph demonstrates that asset class selection
, not market timing or security selection, is the most important determinant
of how well a portfolio performs.
Flaws of Market Timing
Market timing is the shifting of portfolio assets in and out of the market or between asset classes and involves actively buying and selling those stocks that are believed to be mispriced so to capitalize on price corrections. We believe that markets are efficient and quickly and accurately reflect available information so it would be very unlikely that a manager could find a mispriced stock. The flaws of market timing can be demonstrated by removing the effects of the best trading days in the market as shown below.
Flaws of Stock Selection
| How could anyone predict when those few "best days" will occur?
|2,023 Trading Days
|Minus 10 Best Days
|Minus 20 Best Days
|Minus 30 Best Days
|Minus 40 Best Days
|Source: John D. Stowe, A Market Timing Myth. Journal of Investing, Winter 2000. Performance is historical and does not guarantee future results. Information from sources deemed reliable, but its accuracy cannot be guaranteed.
*CRSP value-weighted index with dividends reinvested. Compound annual returns assume a 1% transaction cost per portfolio turnover.
Stock selection is the finding of “underpriced” companies or industries. It is best to demonstrate the inability to pick a winning stock combination by showing the following data from the Bogle Financial Center and Lipper, Inc., who studied the performance of 851 US equity mutual funds for two consecutive four-year periods.
|Rankings of Top Ten Funds in one Four-year Period, Compared to Rankings in Next Four-year Period
|US funds*, total annual returns, %
|Top Ten in:
||Same Funds in:
|*With assets over $100m at end-1996 (851 funds)
|Source: Bogle Financial Center, Lipper Inc.
It is one thing to say that past performance is no guarantee of future results, but this data demonstrates that this year’s winners may be next year’s biggest losers. The chart above illustrates that the #1 annual return fund from 1996-1999 ended number 841st out of 851 total funds in the subsequent 4-year period. In fact the best ranking for the previous top ten funds was 790th.
This information drives home the fact that the most important way NOT to pick funds is to look at short-term (five years or less) performance.
A Better Way to Pick Funds
The graph below illustrates returns of the distinct asset classes in showing the growth of a $1. The optimum portfolio would capture a particular “dimension” of each of these broad asset classes within a globally diversified portfolio.
View Sources and Descriptions
Notice how holding bonds and CDs can be hazardous to your financial health due to inflation and taxes. You can also see that the growth of a $1 for small cap value greatly exceeds the S&P 500 (large cap).
Diversify Across Asset Classes
Modern Portfolio Theory (MPT) is founded on the idea that for every level of risk there is an optimum portfolio strategy that results in the maximum return for that level of risk. To achieve this optimum risk/return portfolio, investor’s should diversify across asset classes. By following this diversification method, MPT holds that you not only reduce the risk in a portfolio, but also increase the return of the portfolio.
We have found that this approach is translated best by Dimensional Fund Advisors into an array of mutual funds, each of which is rigorously designed to capture a particular “dimension” of asset class within a globally diversified portfolio. For more information about Dimensional see our preferred funds.
To understand why McMill CPAs & Advisors allies itself with advisors who counsel this type of structured investment approach, click the related links below.
Wealth Management - Services
- Assess Your Needs and Risk Tolerance – We begin by getting to know you during a thorough planning meeting where we talk about your investment objectives, your liquidity and income needs, and your time horizon. We do not use canned checklists, but spend our time together getting to know you and what your wealth management will involve.
- Design Your Portfolio – Considering your needs and risk tolerance we will develop a portfolio that fits you and your wealth management needs.
- Manage and Monitor Your Portfolio – We rebalance as necessary to keep your portfolio within the parameters we designed above.
- Review Your Portfolio – We meet with you one on one to evaluate your portfolio progress and any additional wealth management needs you may have.
- Produce State of the Art Reporting – So you are kept informed about the continued progress of your portfolio.
To best complement McMill CPAs & Advisors services we team up with attorneys specializing in estate planning. As your CPA/advisor we will gladly work with your attorney in coordinating your estate plan and making sure that you have the most tax efficient estate plan possible. The hassles and red tape associated with estate planning can be daunting, but you don't need to do it alone. Our team is waiting to assist you through every step of the process.
Wealth Management - Preferred Funds
Dimensional Fund Advisors (DFA)
Our range of investment programs is enhanced by our relationship with Dimensional Fund Advisors Inc., a premier institutional investment management firm with more than $150 billion assets under management. Individual investors must use a financial advisor to have access to these unique institutional funds.
Dimensional is our primary but not exclusive source for building our balanced portfolio models and implementing a passively managed investment strategy.
Founded in 1981 and serving primarily institutional investors, Dimensional is guided by an abiding belief in financial science and the efficiency of capital markets. They see markets as an ally, not an adversary.
Unique Investment Philosophy
McMill CPAs & Advisors prescribes to a unique investment philosophy established by Dimensional Fund Advisors.
It does not involve actively picking stocks or passively tracking commercial indexes, but structures broadly diversified portfolios along the dimensions of risk and return identified by academic research.
The strategy seeks to capture the returns of broad asset classes rather than individual securities, like traditional passive managers. However, unlike index fund managers who mimic commercial benchmarks, Dimensional defines their own asset classes.
Index fund managers are forced to pay excessive trading costs whenever their arbitrary benchmark changes its composition. The investor pays these tracking costs in reduced performance. Because this strategy focuses on broad factors rather than a specific list of securities, their funds can reduce these costs by being patient and waiting for trading opportunities that add value.
Independent Fee-Only Financial Advisors
Dimensional forms relationships with independent fee-only financial advisors like McMill CPAs & Advisors, who share their views about how capital markets work and how best to provide clients with a successful investment experience.
McMill CPAs & Advisors, as your investment advisor, does not receive compensation from Dimensional for using its funds. You, as an investor, are also not under any obligation to invest in Dimensional funds if they do not best meet your particular investment needs.
Wealth Management - Resources
Take a look at some of the theories and studies that have shaped our investment approach.