|
Q: What does The Lam Group
do?
A: The Lam Group, Inc. is an independent,
fee-only, Registered Investment Advisor (RIA) located in Lake Oswego,
OR. We specialize in providing investment advisory and management
services for taxable high-net worth individuals, foundations, endowments
and select institutions.
Our investment services are focused on the
design, construction and management of investment portfolios
specifically tailored to the return objectives and risk tolerances of
our clients. Our investment philosophy is based on explicit asset
allocation planning, investment manager research and selection,
and the minimization of taxes and transaction costs.
The actual management of investment accounts is
driven by each client’s investment policy statement, formulated
with the client prior to investment implementation. It is this
investment policy statement that sets the objectives and risk parameters
for the portfolio, as well as defining the types of asset classes and
investment vehicles to be used.
Q: Why is being an
independent
registered investment advisor important?
A: Being an independent advisor means The Lam Group
accepts no fees or commissions from any brokers or mutual fund
companies.
Our sole source of compensation is paid by our
clients. This compensation arrangement ensures we give objective
advice and make impartial investment decisions. A large part
of the value we add to the investment process is our ability to measure
and understand investment performance and to “strip away” all the
marketing expenses, emotion and hype from the investment decision.
Extraneous marketing fees imbedded in mutual fund expenses and emotional
investment decisions based on media hype can be detrimental to the
performance of investment portfolios.
Q: What is The Lam Group’s
investment philosophy?
A: The cornerstone of
The Lam Group’s investment philosophy is disciplined asset allocation. A
well-defined asset allocation strategy is essential to constructing a
diversified portfolio that will optimize investment returns and minimize
portfolio risk.
Academic studies have shown that for long-term
investors, asset class selection in the context of disciplined asset
allocation is the most important determinate of investment portfolio
performance. The contribution to investment portfolio performance can be
broken down as follows:
Asset class selection 94%
Security selection 4%
Market timing 2%
The Lam Group focuses much of its efforts on
educating its clients as to the importance of asset class selection in
the context of disciplined asset allocation planning and portfolio
rebalancing. It is important to remember that the concept of diversification
can only decrease portfolio risk and increase portfolio return to the
degree the asset classes included in the portfolio have low
relative correlation return characteristics.
We devote substantial resources to researching
investment managers and analyzing fund returns in the context of asset
class performance, their relative correlations, and overall suitability.
Finally, we diligently look for ways to minimize our client’s costs
and expenses by using the most efficient asset class investments and
focus on minimizing our client’s portfolio taxes by staying aware of
tax-loss and gain harvesting opportunities.
Q: What is your
fee structure?
A: With regard to investment management fees, it
is important for investors to know what they are paying for. Our
philosophy on fees is: pay for management, not for marketing.
At The Lam Group, our clients are paying for our:
Approach: Our asset allocation expertise and knowledge
Process: Our investment manager
research and performance measurement analysis
(our ability to peel away the marketing and hype)
Execution:
Our access to lower cost,
institutional-class mutual fund families such as:
Dimensional Fund Advisors (DFA), Pacific Investment Management (PIMCO),
and others
The annual investment
advisory or management fee The Lam Group charges depend on the
complexity and size of the portfolio(s) managed. Included in our fee are
the development of a portfolio investment policy and an individualized
long-term asset allocation plan, and the use (in most asset classes) of
tax-efficient, passive investment products to
construct an investment portfolio with risk and return characteristics
consistent with a client’s investment horizon and risk tolerance.
Our standard fee for
investment management services is 1% of assets under management (AUM)
for portfolios of $1 million or less. This fee is negotiable downward
for larger portfolios. We can aggregate our fees for families with
multiple accounts or for family offices. At this time, our new client
portfolio minimum is $5 million.
Q: How do
your fees compare to those of other investment managers, brokers, or
financial planners?
A: It is likely our aggregate fee is equal to, or
lower than what many potential clients are already paying every year to their current brokers, investment managers, financial planners or mutual
fund companies. At The Lam Group, we believe it
is important for investors to be educated on what the investment fees
they are being charged are for. Our clients are paying for an investment
approach, a research and analytical process, and effective execution in
the management of an individual investment portfolio.
As our approach employs the use of lower-cost,
passively-managed asset class strategies, our portfolios are not subject
to the higher expenses of actively managed funds, nor do they suffer
from any imbedded marketing fees and/or sales charges that are
commonplace in many retail-class mutual funds.
The majority of mutual
funds utilized by The Lam Group are passive asset class strategies that
have significantly lower annual expenses (by 25bps to 100bps) than other
actively managed mutual funds in the same asset class categories. In the
long run, few actively managed mutual funds outperform the appropriate
passively managed strategy. Also, in most asset class categories, we
have access to the institutional-class of certain mutual fund families
that can also have lower expenses and better historical performance than
retail-class funds.
At a minimum, by using The Lam Group’s investment
approach, process and execution, all non-investment related marketing
fees are minimized or eliminated. This is
important because marketing-related fees, expenses and/or sales loads
have nothing to do with the actual management or performance of an
investment portfolio or mutual fund; these fees go directly to salesmen
and brokers, and pay for non-investment related fund marketing expenses
(such as advertisements and fancy lunches). The fees paid to The
Lam Group are for investment management, not for marketing expenses.
A final note regarding our fees: explicitly paid
investment management fees can be tax-deductible. Implicitly paid
investment expenses, such as imbedded mutual fund expenses, are not
tax-deductible.
Q: What is your track
record?
A: All portfolios constructed and managed by The
Lam Group are designed for an individual client’s specific risk
tolerances, income requirements and investment horizon.
Our value added is
in the design of a client-specific asset allocation plan, the research
and selection of the most efficient and appropriate asset class
investments for a client’s specific investment policy, and the
monitoring and annual rebalancing of the portfolio to optimize return,
manage risk and minimize taxes.
As different clients
have different goals, risk profiles and investment horizons, it is not
useful to publish a track record of specifically managed portfolios. For
the majority of the asset classes included in our managed portfolios,
The Lam Group utilizes the institutional-classes of mutual funds managed
by Dimensional Fund Advisors (DFA), and Pacific Investment Management (PIMCO),
as well as some of the Vanguard Group's index and tax-managed funds.
The performance of
our managed investment portfolios will generally reflect the return of a
strategically determined, risk-adjusted combination of a range of
specifically chosen asset classes, which are rebalanced and tax-loss
harvested annually.
Q:
How
does one become a client of The Lam Group?
A: Aside from having investable long-term assets
of $5 million or more, the
prerequisite for becoming a client is a belief in, or at least a
willingness to understand passive investment management in the context
of a disciplined asset allocation strategy.
Nelson J. Lam
The Lam Group, Inc.
June 5, 2007
Disclaimer:
Past performance is no guarantee of future results.
No part of this publication may be reproduced in any form, or referred
to in any other publication, without express written permission. This
article contains the current opinions of The Lam Group, Inc. and is
subject to change without notice. This article is distributed for
educational purposes only and does not represent a recommendation of any
particular security, strategy, or investment product. Sources of the
information above are said to be reliable but not guaranteed.
|
