When we build an investment portfolio for a client, the work doesn’t stop once the investments are selected.
Every quarter, our team conducts a formal review of the funds and portfolios we manage. It’s one of those things that happens behind the scenes at SMB Financial Strategies, and while clients don’t need to know every technical detail of the process, we think it’s important for you to understand what we’re doing on your behalf.
Reviewing the Investments
As part of our quarterly review, we use Fi360, an investment analysis and due diligence tool, to evaluate the funds we use across client portfolios.
The Fi360 Fiduciary Score® compares an investment against its peers using a set of quantitative due diligence criteria selected to reflect prudent fiduciary management. The analysis considers factors including the investment’s track records, manager tenure, assets under management, expenses, investment style, risk-adjusted performance and returns over multiple time periods.
All of that sounds technical, but the questions we’re trying to answer are actually pretty straightforward:
How is the investment performing? We look at performance over multiple time periods and compare it with appropriate peers.
How much risk is being taken to achieve those returns? Performance alone doesn’t tell the whole story. We also look at risk-adjusted measures to understand the relationship between risk and return.
What does it cost? Expenses matter. We evaluate whether the cost of an investment remains reasonable relative to comparable options.
Is it still doing what we hired it to do? We look at whether an investment continues to follow its stated strategy and remains consistent with the role it was selected to play within a portfolio.
Essentially, we’re asking a simple question: Does this investment still deserve a place in our clients’ portfolios?
After completing our review, investments generally fall into one of three categories:
Keep: Investments that continue to meet our standards.
Watch: Investments that warrant closer monitoring.
Replace: Investments we believe no longer meet our criteria and should be replaced.
Looking at the Bigger Picture
Our quarterly investment review goes beyond individual investments. We also review our investment models as a whole and consider what is happening across the markets and economy. Interest rates, inflation, economic growth, market valuations and other conditions can change the relative risks and opportunities across the different areas of the market.
Each quarter, we discuss what we’re seeing and whether we believe any changes to our portfolio allocations are warranted. That doesn’t mean reacting to every headline or trying to predict what the market will do next. Our investment decisions remain grounded in our long-term philosophy.
And sometimes, after doing all of that work, we decide to make no changes at all. That doesn’t mean nothing happened. It means we reviewed the investments, evaluated the portfolios, considered the current environment and determined that staying the course was the best decision.
The Work Happening Behind the Scenes
There is a lot that goes into managing someone’s financial life that clients may never see. It’s part of the value of having an advisory team. We spend our time monitoring funds, analyzing markets and determining whether something in your portfolio needs attention so you can focus on the people, work and priorities that matter most to you.
Our quarterly investment review is just one example of the work happening between client meetings. Much of this work happens behind the scenes, but we want you to understand what we’re doing on your behalf. And ultimately, it’s all being done in support of the financial plan we’ve built together.
What Happens to Your Investments Between Our Meetings?
