Asset Management


Risk management begins with an analysis of the client themselves. Both the client and the adviser need to understand what the client risk profile is and what it represents. Our client risk analysis creates a profile number from 1 - 50. This is a ranking based on an evaluation of a client’s risk tolerance (appetite). Discovery of this is only the beginning of the risk management process, how you use the number and how it relates to the goals you set and the likelihood of achieving them because of the number are just part of the overall management challenge. The only way you can know if your risk profile number is going to work for your goals, is to load all the parameters into a simulator and take a look. This is what we do. So let’s dig into this a little deeper, so you can get a feeling of what we do. 

Risk Appetite is incredibly difficult to extrapolate and pinpoint because of its inherently subjective nature. Since clients often have no idea what their appetites should be or how to answer hypothetical questions, they usually end up choosing something in the middle or what they think makes them look good, rendering the exercise moot. This is similar to how most people portray to their doctor they’re a lot healthier and lead a better lifestyle than they actually do, as they want to look good when, possibly their are deep rooted problems.  

The other issue is varying definitions of what exactly is considered risky. What I think is moderate in risk, you might deem extremely risky. Similarly, it has been clearly documented and researched that individuals’ appetite for risk can change dramatically over time, driven by news or market sentiment. 

There is a vast and visceral difference between saying you are willing to see your portfolio down 20 percent and actually waking up to that reality one morning. While a theoretical loss is easier to swallow, until you are faced with the harsh reality of a major loss, you are not fully aware of what you can truly stomach. So, any questionnaire that pointblank asks a client what they are willing to lose is inherently doing the client a disservice and overestimating his risk appetite. Furthermore, the majority of questionnaires, while well-intentioned, are difficult for clients to thoughtfully answer.

Questionnaires and risk profiling tools need to begin to explore the long-neglected area of risk capacity, or the client’s ability to take risk given their unique Human Capital Factors. These factors such as: who the client is, their family, where they live and work, and what they are trying to accomplish, all need to be assessed and translated so this holistic picture can be matched with financial products that suit the specific client’s very unique needs.

For instance, young men and women need to consider their financial futures and how factors like family planning may affect their finances and salary potential. Similarly, professionals living in Silicon Valley working in tech need to understand how their industry, and where they live, affects their investments and how they may need to avoid excess exposure to one sector: tech.

This is about understanding how stress events will affect the performance of a product or portfolio of products, it is not about knowing the timing of the stress events or even what the event will be like in detail. Understanding how a product performs in comparison to like type alternative product during the stress and comparison test events and the optimization of portfolios is what risk awareness brings to the end user.


Stress testing allows the adviser / analyst to specify different scenarios and measure how events may impact the product or portfolios return during those scenarios. Stress testing tools are forward-looking tools, that avoids look ahead bias. Stress testing tools are widely accepted by the capital markets (institutions).

This is a perfect set of tools for improving product and portfolio construction decision making, combining the client risk profile and risk capacity with their human capital factors. My observation has been that very few cases exist where the clients risk, portfolio risk, and human capital factors are in sync. 


Assets under advisement is a fee based service. The fee is based on the total assets we advise to. The assets may be held at custodians other then our primary custodian Interactive Brokers. We use an investment policy statement (IPS) which is part of the investment advisory contract (IAC). If client want us to advise them on asset allocations, we use our risk management and asset allocation tools. It is required that a full planning workup be completed before we will provide assets under advisement services The fees are assessed in arrears monthly based on the following table:

Asset under money management 1.25% net of asset under advisement fee if applied (includes appropriate AUA fee) 

Planning is a fee based service. Plans begin at $1500 and can be as high as $50,000 depending on the complexity, however, if you use our assets under management or money management service this fee is offset by those fees, and or if you purchase an insurance or annuity product the commission from those investments offset this fee.


We have a proprietary money management process that runs on our MANTRALPHA system. The process is autonomous, and trades large capitalized equities. The process can be long or short any of the constituents that make up the basket for the strategy. A client must be an asset under advisement client to qualify to become a money management client. The fees we charge for money management are in addition to the fees for assets under management. A separate money management contract is used for these products and it requires trading authorization for the assets.


All products are available for direct investment into a managed account at Interactive Brokers. Interactive Brokers is a registered Broker Dealer and Custodian. 

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