+ Investment Strategy
At RCL Advisors, we take the time to assist our clients in developing an investment strategy designed to meet their specific objectives, needs, and preferences. We start by understanding who the client is and what they want to achieve. We identify personal financial planning objectives including return requirements and risk tolerance. A client’s investment constraints such as liquidity needs, time horizon, tax concerns, and legal issues are also considered.
We strive to develop a close relationship with each of our clients to see the world through their eyes and make recommendations to achieve their objectives accordingly. We begin this process through in-depth discussions, evaluating appropriate factors, and asking questions. Such as:
• What are your financial responsibilities?
• What are your current and future cash flow sources and needs?
• How do you feel about risk?
• What do you want to leave to your heirs?
• Do you have charitable intentions?
We conduct a comprehensive review of the client’s current investments and assess where and how their current plans falls short. We share data concerning historical and anticipated asset class performance and correlations as well as different hypothetical allocations. We do this to enable clients to understand their portfolio return and risk expectations. A fully customized strategy is then chosen by the client from a position of knowledge and personal preference, as opposed to a line-up of products.
+ Portfolio Construction
Once the investment strategy process is completed, we review the specific securities the client holds in their portfolio and assess the pros and cons of making recommended changes. We take into consideration current and future income taxes and fees. We also focus on constructing a portfolio to maximize wealth net of fees and taxes.
RCL has developed a unique and proprietary process that goes beyond traditional asset allocation. Our process acknowledges the macro forces that drive investment performance and the possible range of outcomes in varying economic environments. We structure portfolios within 4 main segments as illustrated below:
• Capital Preservation - Provide stability and generate requisite income
• Capital Appreciation - Generate returns to fund long-term financial goals
• Non-traditional Diversification - Manage risk through investment in areas/markets with lowly correlated sources of return
• Inflation Hedge - Protect from unexpected changes in market environment
Clients can benefit from this portfolio construction process in two ways:
• They are better prepared for multiple market environments, which seem more the norm than the exception in today’s investment world.
• They have a better understanding about the purpose of their investments in light of their portfolio objectives This keeps them committed to their investment strategy and lessens emotional decisions, even in the most turbulent market time periods.
+ Portfolio Implementation & Monitoring
Our client’s portfolios receive the access to RCL’s best thinking and benefits. No single firm delivers the best insights or manages every top investment option. That’s why RCL offers a truly open architecture platform that emphasizes expert manager selection and ongoing due diligence to help deliver a high-quality, robust solution set.
MANAGER SELECTION & DUE DILIGENCE
Top-tier managers are identified using leading industry research. Internally, we then select and monitor managers through an exacting process. These selections are continually monitored and evaluated using tools accessed through strategic alliances with leading financial institutions (i.e., asset allocation models, capital market forecasts, manager and mutual fund research databases). Maintaining due diligence is a part of our internal investment committee process. This process allows us to continually assess the investment solutions that we’ve recommended and to make changes in a disciplined manner as needed. Through the combination of industry leading research and our dedicated investment committee process, our clients can be certain that their investments are well vetted and continuously monitored. We strive to build client’s investments that are appropriate for their roles in the overall portfolio.
ACHIEVING TAX EFFICIENCY
Implementing and rebalancing portfolios are critical components in the investment process. Since most of our clients are subject to the top tax bracket, we utilize a very thoughtful process that is focused on achieving optimal after-tax results. Because of our independence, we have the ability to work existing portfolios towards our best ideas in a timely or patient fashion depending on the tax consequences. This is unlike many competitors who will not or cannot hold certain securities and require new clients into forced sales of existing holdings. This can create a huge tax burden during the initial implementation of a portfolio. Once a portfolio is implemented through disciplined rebalancing of the portfolio, we work to build quality and progress towards achieving client goals in a tax efficient manner. RCL remains dedicated to implementing changes, taxing efficiently, and minimizing cost effectively. In addition, we actively adjust plans for portfolio issues, changing circumstances, family events, and new opportunities. By paying attention to the impacts of terminations, year-end distributions, and charitable gifting, we are always focused on creating the most tax-effective strategies for implementing and rebalancing over the entire horizon of our clients’ investment portfolios. No one knows this better than the three founding partners of RCL who all worked at top accounting firm Ernst & Young prior to founding RCL.
Clients desire to see the results of their overall portfolio on a regular basis. In general, most clients desire to view the “net-of-fee” performance of their overall portfolio and find unbiased solutions from an impartial perspective. By working with a top, independent performance provider, our clients can be satisfied that all reported results come from an unbiased source which we have no control in the reporting of any of the numbers. The last thing that a client wants is to have their consultant reporting the results “in-house” which could provide a natural conflict of interest. In terms of content, we have always chosen to have the provider of reporting services outline all results net of fees. In addition, we have worked with them to create the content that our clients are shown. This allows our clients to receive a robust amount of pertinent data to facilitate understanding of overall portfolio results and the results of their solutions relative to their respective benchmarks. Unlike many firms that can only report on assets under their control, we are able to aggregate into our performance reporting system any accounts that our clients desire to have incorporated. This is a benefit from a results perspective and from a strategic perspective as it allows us and the client to better implement a holistic strategy. In addition our clients are able to view their performance and overall portfolio on a daily basis relevant to their benchmarks through our website.
+ Compensation Planning
Executive compensation plans can be complicated and, consequently, require a thorough understanding of their terms to enable the executive to maximize their benefits. We not only commit to the thorough review of our clients’ compensation programs, but also frequently work with them and their attorneys to negotiate employment contracts to meet their needs. In addition, we routinely review our clients’ employee benefits to identify any needed changes and assist them in understanding the impact of the changes on their financial situations as well as making decisions to take full advantage of them.
For many corporate executives, the stock awards issued by their employer accounts for a large part of their overall wealth. Whether they are options, restricted stock, or other stock awards, the investment and tax implications can have a significant impact on their overall wealth. We have vast experience in analyzing both non-qualified and incentive stock options and the impact that exercising them has on our client’s income taxes and wealth management. Developing option exercise strategies allows us to help our clients manage their taxes as well as their overall investment strategy in a prudent manner given the amount they have concentrated in their company stock. We take into account the Alternative Minimum Tax, cash flow, and portfolio risks while adhering to a client’s ownership desires and/or any ownership requirements.
+ Trust & Estate Planning
We regularly summarize and discuss the provisions of our clients’ estate plans to identify any changes that need to be made to their Wills and other estate planning documents, beneficiary designations, and/or asset ownership to enable them to achieve their desires. To the extent that any changes are needed, we assist our clients in working with their attorneys to get the revisions implemented efficiently and effectively. In addition, we routinely quantify, for applicable clients, the amount of assets we believe they could prudently transfer to their heirs and/or charity as well as regularly identify opportunities to maximize the tax-free transfer of their portfolio assets to meet their objectives.
+ Philanthropic Planning
We assist clients in achieving their philanthropic goals in a tax-efficient manner. We welcome the opportunity to assist clients because we know that our work enables our clients to maximize the amount of assets that get transferred to charity. We assist clients in understanding the pros and cons of using the various available strategies and work with them to implement the chosen solution(s) in a manner that creates benefits for both the client and charity. The types of strategies we consider include, but are not limited to, the following:
• Gifts of appreciated securities
• IRA distributions during life and at death
• Charitable lead trusts
• Charitable remainder trusts
• Donor advised funds
• Private foundations
+ Cash & Debt Management
To us, “Job #1” is making sure our clients have the cash they need when they need it. We routinely work with our clients to help them establish and implement plans for their portfolio withdrawals and/or deposits with a focus on maximizing their wealth. We are also happy to assist clients in identifying and/or working effectively with bookkeepers and/or personal bankers to adhere to personal goals.
Many of our clients use leverage to maximize their wealth. We are happy to assist those clients in securing debt that will cost them the least amount in after-tax dollars. We routinely negotiate more favorable interest rates and loan terms for our clients than they can secure on their own. In addition, we understand the impact of the complicated income tax rules associated with different types of debt and use this knowledge to assist clients in selecting debt opportunities with tax advantages. We also work with clients as needed to assist them in maintaining the records required to maximize the income tax benefits of their loans.
Proper cash and debt management provides our clients with the opportunity to minimize their interest costs, net of taxes, maximize their portfolio return, and avoid the stress of inadequate liquidity.
+ Income Tax Planning
In managing our clients’ wealth, we recognize that it is what clients keep after taxes that really matters. That is why we focus so much time and effort in making sure clients’ portfolios are as tax-efficient as possible. We do this by being proactive in tax loss harvesting throughout the tax year and making sure tax inefficient asset classes are held only in tax advantaged accounts. We remain available to work with our clients’ tax accountants to identify and implement planning strategies that will help minimize their tax liabilities. We help clients determine if they should convert regular IRAs to Roth IRAs and work with their accountants to determine the impact of changing domiciles from one state to another and, if so, assist the clients in implementing these strategies. Our clients can also count on us to assist them in effectively communicating the tax information their accountants need to efficiently prepare their income tax returns each year.
+ Retirement Planning
“Retirement” means different things to different people. For some, it is having the ability to stop working completely and making sure that their desired standard of living can be sustained throughout their life expectancy. For others, retirement means just slowing down in terms of work, with no intention of ever stopping. Regardless of the objective, we work with our clients to help them reach their financial goals while preparing for the unforeseen risks that many retirees face. We take into account all of our clients’ financial assets and income sources as part of a cohesive strategy aimed at meeting their retirement goals.
Maximizing company benefits, managing real estate, income tax planning, and risk budgeting are just some of the variables that come into play when planning for retirement. Considering the potential impact of the risks each retiree faces while planning for their retirement is critical, including issues such as longevity, inflation, the cost of assisted living, etc. We understand that the decisions made today will have a significant impact on the ability to sustain the desired lifestyle later in life, so we spend a considerable amount of time and effort to get it right.
+ Risk Management
Because of our holistic approach to managing our client’s wealth, we seek to uncover every potential risk our clients face. For example, we strive to assist clients in managing their risks associated with owning property. We also strategize wealth in a way that retains the risks that make sense given their cash flow capabilities and transfer the risks that are cost effective given their level of wealth. Reviewing our clients’ property and casualty insurance coverage is a critical service we provide to identify potential gaps in their coverage and/or inadequate liability coverage which could result in significant losses. We also work with our clients’ insurance agents in an effort to verify that their coverage is both appropriate and as productive as possible from a premium perspective.
Generally, we don’t view life insurance as a cost-effective investment solution that should be owned by everybody. However, we recognize that life insurance can play a role in meeting specific goals. We work with our clients in assessing their overall wealth management needs and, if life insurance helps achieve some of those goals, we work with their insurance agents to find an appropriate insurance solution. We are happy to get quotes from one or two other agents to enable our clients to easily identify other comparable solutions and make informed decisions. For existing policies, we are happy to analyze the policies’ in-force illustrations, making sure they are performing as expected and, if not, look for an alternative solution.
If requested, we can also review our client’s health insurance needs and assist them in understanding the pros and cons of various employee benefits. This includes the advantages of participating in Health Savings Accounts, if a high-deductible plan is appropriate. We are also happy to assist our clients in reviewing and analyzing non-employer insurance opportunities as well as the potential benefits of long-term care insurance in an effort to help our clients get the coverage they need throughout retirement.
Because our clients’ interests are our only interests, we are not compensated for any solutions we recommend. This means we are often able to identify lower-cost insurance solutions to help our clients minimize the cost of these products.
*Please note: RCL does not serve as an attorney, accountant or insurance agent. RCL does not prepare estate planning documents, provide tax opinions or prepare tax returns, nor does it sell insurance products.