Investment Management
What is the BKFi Investment Philosophy?
BKFi believes that markets are efficient. That means that they quickly reflect publicly available information - essentially instantly. And that taking an active approach to investing - like picking stocks or actively managed mutual funds - will likely not add much, if any, value over the long-term. However, the frequent buying and selling required of an active investment strategy tends to rack up trading fees and taxes, which can take a bite out of investors' growth over time.
With this in mind, we’re advocates of Strategic Asset Allocation. Strategic Asset Allocation involves setting high-level targets for various asset classes that reflect our investment worldview and rebalancing back to those targets periodically. Our approach is rooted in building a portfolio that looks like the world we live in - comprising stocks and bonds, both domestic and foreign, companies large and small, and both developed and developing markets.
We believe that a globally diversified portfolio, constructed of thousands of companies, dozens of countries, that’s aligned with your financial plan, tax situation, and any equity compensation strategy is the best way to help clients achieve their ideal life.
What's different about BKFi from other firms?
You’re probably well aware that we’re not exactly like the other guys… we march to the beat of our own drum. So while there’s a lot of value we can provide, it’s important to ask what makes us different. Yes, I know, we’re down-to-earth, tech-forward, and we don’t pay attention to distracting headlines. But what else?
We think the BKFi difference is in our holistic approach to investing. Making sure that your investment strategy is aligned with your tax strategy, your stock options plan, and your financial independence plan. Having all the pieces work together is key to ensuring the efficiency of your financial plan.
How do we add value?
Diversification and Risk Management: Our portfolios are globally diversified and built to align with your risk tolerance and timeline for needing the funds. We use multiple asset classes – companies large and small, in the US and abroad, emerging and developing markets, and a mix of stocks and bonds.
Low Cost Investments: We primarily use low cost ETFs to construct portfolios. No commissions, product sales, and ETFs trade without any transaction fees.
Tax Focused Investing: We keep taxes in mind at every turn because unlike most asset managers we actually understand how taxes work because we prepare your tax return. There’s no game of telephone between your financial advisor and your accountant.
Tax Loss Harvesting: We review your existing investments to minimize taxes on portfolio implementation and conversation. We watch for market dips and we consistently review portfolios with taxes in mind. Studies have shown that this can add 0.20% - 0.60% annually to your bottom line.
Asset Location: Building a diversified portfolio is step one. Buying those assets in the right accounts is step two. We build portfolios aimed at maximizing your long-term bottom-line and minimizing your long-term tax bill. We’ll target high growth assets like Emerging Markets in your Roth accounts, US Bonds in 401(k)’s, and Stocks and Municipal bonds in Brokerage accounts. Studies show this to add up to 0.75% annually to your bottom line.
Rebalancing: The foundation of a truly diversified portfolio is a mix of assets that don’t move together in tandem. Over time, your allocation will drift from its target and the risk level of your portfolio will shift. With that in mind, we’ll rebalance routinely with taxes in mind to keep you on track. Studies show that this can add 0.35% - 0.44% annually and help reduce your risk.
Behavioral Management and Opportunity Cost: If you’re panicked when the market starts acting up, we’ll help make sure that reason and objectivity drive decisions instead of emotion. If you’re in the middle of a rolling liquidity event, we’ll work with you to find out how much we need to budget for taxes and then get the rest invested ASAP. We understand that time in the market is much more important than timing the market.
What are the fees for investment management?
Transparency is one of our core values and a key reason why we put our investment management fees in writing for anyone to see. Our fee structure is tiered by asset level and listed below. As fee-only planners, our only compensation comes from our clients. This means we don’t have any hidden financial incentives or commissions that many advisors have to put their clients in certain investment products.
We also integrate our financial planning and investment management fees together. For clients with managed portfolios over $500,000, we reduce their monthly planning fee by 50% after the first year as a client. For clients with managed portfolios over $5 million, the monthly planning fee is fully eliminated.
Here are a few examples to help illustrate the costs:
Cher and Dionne have a portfolio of $1.5M. Their annual investment management fee is $12,500 (0.90% on the first $1M and 0.70% on the next $500,000). After their first year as a client, their monthly retainer fee is reduced by 50%.
Denny and Izzy have a portfolio of $400,000. Their annual investment management fee is $3,600 pulled directly from their investment accounts.