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Q: Why
did you start The Lam Group?
A:
I started The Lam Group for one reason: I couldn’t find an
investment manager who met my personal needs with regard to my own
portfolio.
My goal was to hire an investment
manager who had a realistic understanding of risk and return, and who
was sufficiently knowledgeable about the investment business to be able
to separate the marketing issues from the investment issues.
Additionally, I wanted a manager who was independent and fee-only, so I
could be confident that the investment recommendations and the
investments themselves were being made for my benefit alone and that the
manager was not receiving any other compensation to include specific
investments in my portfolio.
After an extensive search, I discovered
there was no investment firm, mutual fund company, or broker that could
adequately meet my portfolio management needs, especially given my own
professional experience in the investment industry. I had spent most of
my professional career (over 12 years) on Wall Street working with
institutional investors and had acquired an extensive knowledge of all
investment products and portfolio management styles. I was disappointed
that most of the professionals and investment firms that claimed to
specialize in private clients were less knowledgeable and/or had less
investment experience than I did. In my search, I found there was too
much marketing and not enough substance from an investment standpoint.
It became clear that if I could not find a manager acceptable for
myself, other individuals and families might
feel similarly frustrated.. The Lam Group was
born.
The Lam Group provides its clients with: an educated and realistic
understanding of risk/return, an in-depth knowledge of how the
investment business works, an independent firm that provides
objective advice and that makes
impartial
investment decisions, and offers affordable services in a fee-only
format.
Our
growth and the interest in our young firm indicate our approach fills a
need in the investment management services market for private clients
with both taxable and tax-deferred portfolios.
Q:
Who
is the typical client of The Lam Group?
A:
Our typical clients are successful individuals and families with
both taxable and tax-deferred investment portfolios in need of the sort
of objective, thoughtful investment advice and management services we
provide.
Generally, our clients include
hard-working professionals, retired individuals, families and family
offices who do not have the time, the inclination, the interest and/or
in-depth investment knowledge to manage their own portfolios. What our
clients have in common is an understanding that proper portfolio
management is an important, time-intensive endeavor that requires a
disciplined investment strategy to make suitable asset class allocations
from a risk tolerance standpoint, and ongoing asset class research to
separate the marketing, hype, and emotion from the investment decision
process.
While some people prefer to handle their
own investment portfolios, for busy people with personal, family and
professional time commitments, hiring a fee-only professional investment
manager can be beneficial in the same way a licensed physician can be
useful with health/medical problems, an experienced attorney can be with
legal issues, or a trained pilot can be when it comes to air
transportation.
Investing without a solid
understanding of risk and its relationship to return, or without an awareness of the importance of diversification using
asset classes with low correlation can be detrimental to long-term
investment performance
.
The ramifications of investing without
proper training, education and impartial advice can be great. Newspapers
and business periodicals are full of stories of investors who have had
bad experiences either managing their own portfolios, or entrusting
their portfolios to investment managers or brokers who were
commission-based. Generally, the investors we accept as clients are
intelligent people who know they need help managing their investments.
Q: How
is The Lam Group different from other investment
managers, advisors and/or brokers?
A:
The Lam Group is different in several important ways:
Focus on Asset Allocation
We focus on asset allocation as we believe (and academic studies have
shown) it is the most important determinant of long-term portfolio
performance. Properly
diversified portfolios behave very differently from the individual
assets classes in them, in much the same way that a cake tastes
different from the individual ingredients of flour, butter, and sugar.
This means the portfolios we design utilize multiple asset classes that
can include exposures to domestic and international equities
(across all capitalization classes), US dollar and non-dollar
denominated investment-grade bonds (across all product classes
and maturities), as well as other asset classes such as Real Estate
Investment Trusts (REITs), Treasury Inflation Protected
Securities (TIPS) and commodities to achieve a diversified portfolio with return
and risk characteristics consistent with a client’s investment policy.
We also concentrate on optimally
allocating asset classes across a client’s taxable vs. tax-deferred
(401K and IRA) accounts within an aggregate investment portfolio.
Investment Approach
Our approach to constructing investment portfolios includes
educating our clients on the relationship between risk and return,
developing a basic understanding of the importance of diversification
with asset classes that have low relative correlation, managing
portfolio tax issues, and dispelling many of the heavily-marketed and
self-serving notions presented by the investment management industry
today. Extensive
investment manager research and performance measurement experience give
The Lam Group a unique ability to “peel away" the marketing and the hype
from the investment decision-making process.
Since we focus primarily on portfolio asset
allocation, The Lam Group does not pick individual stocks (with the
exception of some ETFs) or try to time the market. Unlike most investment
managers, we do not manage investments within only one asset class (i.e.
just stocks, or just bonds). All of our investment portfolios are designed to include an
optimal mix
of global equities, bonds (including TIPS), REITs, commodities and cash, with the relative proportions
and specific asset class sub-categories dependent upon the client’s
risk profile and investment horizon.
For our clients, fund expenses and taxes
are not theoretical issues; they are significant detriments to long-term
investment performance. We have access to the lowest cost, most
tax-efficient mutual fund investments to give our clients the purest
exposures within the specific asset classes that fit their investment
policies. To minimize fund expenses and maximize tax-efficiency, we
often use passive-managed asset class investments such as those offered
by Dimensional Fund Advisors (www.dfaus.com).
Additionally, our investment management
services include disciplined rebalancing of our client’s portfolios to
achieve and/or maintain their investment policy weightings, as well as
strategically harvesting portfolio gains and losses on an ongoing basis
to maximize tax-efficiency.
Compensation Structure:
Objectivity and independence are two of the most important
considerations when choosing an investment manager. The Lam Group is an
independent advisor and, as a consequence, accepts no fees or commissions
from any brokers or mutual fund companies. Our sole compensation is paid
annually by our clients and is fee-only in nature. This compensation
arrangement ensures we give objective advice and make
impartial investment decisions.
When working with firms that are not
independent or whose compensation is transaction-based, it is often
shocking to compare the commission-laden investment products being
“sold” by these “professionals” to the investment products that
have no imbedded fees, commissions or prizes that are available to be
purchased within the same asset class. Our clients know whom they
pay, what they are paying for, and how much they are paying.
Q:
What
is your relationship with Dimensional
Fund Advisors?
A:
Dimensional Fund Advisors (DFA) is a mutual fund company located
in Austin, TX and is the leader in passively managed investment
strategies for a broad range of asset classes. The firm was founded in
1981 and has over $180 billion under management.
DFA works with a select group of RIAs
whose investment philosophies are consistent with the diversification
via asset allocation approach and the belief in the benefits of
passively managed investments. To work with DFA, an RIA must undergo
a rigorous approval process that requires an in-depth interview, an
extensive application and a multi-day presentation at their headquarters
in Austin.
The Lam Group is a DFA-approved
registered investment advisor and has access to all the DFA mutual
funds. While part of our value is our access to the DFA platform,
it is important to note that The Lam Group receives absolutely no
compensation from DFA to use its mutual funds and that the relationship
between our firm's is entirely independent.
DFA primarily manages money for large institutions as the costs of dealing with the retail
investing public are too high. They do not have the overhead of highly
staffed phone call centers or multi-media marketing campaigns. The money
they save on not having these cost centers is passed to their investors.
As a result, DFA's fund expenses are some of the lowest in the
mutual fund industry.
DFA’s strengths in the equity asset
class (both domestically and internationally) are in their
cost-effective, passively managed strategies with particular focus in
the small cap and value investment styles. DFA also has passive
approaches to the fixed income and REIT asset classes. The Firm’s
passive investment approach is based on extensive research by leading
academics, economists, and Nobel Prize Laureates.
Q:
What
else should a potential client know about The Lam Group?
A:
The Lam Group was founded to manage the investment portfolios of
private clients and to focus on the specific needs of the taxable high-net worth investor. We are a small firm with an exclusive number of
clients who share our belief in a
disciplined asset allocation approach and appreciate the personal and highly-customized nature of our services.
Our asset class and investment manager
research and performance measurement analysis are performed with extreme
care as we use this research not only for our client’s investments,
but for our own personal portfolios as well. Our Chief Investment
Officer performs all of our investment research and analysis, so there
is no part of the investment evaluation process that is "passed off " to a
junior staffer or analyst as is common at larger firms. The specific
asset class investments we make for our clients are generally the same
we actually buy for our own personal portfolios.
Our marketing efforts are limited to
word-of-mouth recommendations, our quarterly newsletter and our
website (www.thelamgroup.com).
We have no ambition to be a large firm, and our asset allocation approach
is not for everyone. Our goal is to be a great investment advisory and
management firm that specializes in the unique needs of taxable high-net
worth investors, and to have a limited number of clients who share our
investment philosophy.
Nelson J. Lam
The Lam Group, Inc.
November 4, 2005 (updated in 2010)
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.
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