Finding an investment manager for your assets can feel like a lot of work, but it’s important enough to take the time, ask appropriate questions, and feel comfortable with the style and direction of each prospective advisor. There are many approaches to creating an investment management strategy, though most employee advisors will have very similar strategies due to their training and the preferences of their firms.

As a fully independent, fiduciary investment management advisor, our approach at nVest has evolved over the years (and continues to do so). Layering new research, back-testing our financial planning and investment management strategies, and honoring proven principles is all a part of how we invest for our clients. Below, we’ll explain the biggest parts of our philosophy, why we believe they matter, and how this differs from many other firms out there.

1.First, we aim to do no harm in our investment management approach.

We all love investment gains – that’s why we are invested in the first place! But we must always keep in mind that in order to “ramp up” investing returns, you must also increase the risk. Investing is a sliding scale of risk and reward: the greater the potential for gains, the greater the risk of loss or volatility must be. Anyone who tells you that you can separate risk and return (getting you outsized gains with little to no investment management risk) is either being dishonest, or doesn’t know what they’re talking about.

This is where disciplined investment management becomes essential. It’s also important to remember that all investing has risk. So-called “safe” investments like a money market fund, for instance, may have little to no risk of daily price fluctuations, but carry significant risk that your money won’t grow fast enough to outpace inflation (so it’s “safe” day-to-day, but able to buy less and less each year).

Understanding Risk Before Reward

Our investing philosophy starts with an acknowledgement of the real harm unexpected risks (or risks that are mismatched with your objectives) can have on your experience as an investor. That’s why we start with a thorough discussion with you to understand what you are trying to accomplish, by when. This includes a scientific assessment of your risk tolerance (your comfort seeing volatility affect your account values every day), a look at your liquidity and income needs, and how your invested funds might be attached to future goals.  From this onboarding experience, we craft what is formally called an Investment Policy Statement, but it’s basically a set of guideposts for us to use going forward.

Risk Mitigation is a fundamental part of our investment management strategy creation. While no one can promise that current or past performance of an investment will predict its future with 100% accuracy, we look at a number of metrics before finalizing one of our investment models (see below) or your customized strategy. There is nothing haphazard about our approach – our strategies are assessed for risk/reward characteristics in both short-term and long-term time frames (including the time frame you are investing for), is optimized using analytic software, and monitored regularly for consistency.

The aim is to bring on enough risk to accomplish your goals, but not more than what is needed. We’re not seeking gains at any price; if that’s you, seek a different advisor. Our clients want to accomplish their dreams and goals, and our job is to make sure their investments, as well as the rest of their financial life, aligns to reach those objectives.

2.Most of our clients elect to use models instead of custom investment management strategies.

Although we definitely do have clients using custom investment management strategies for unique circumstances (or just due to personal preference to explore an approach or investing style), the vast majority of our clients don’t want the hassle of keeping up on markets or individual assets, and their objectives are capably met by using one of our investing models.

A model is just a pre-created strategy that can be useful for many clients who have the same basic objectives and time horizons. Since we work with so many working-age families and small business owners, this tends to be true for many of our clients. Most of us are facing common challenges and have common reasons that we’re investing (for retirement, to fund a child’s college, to purchase a home, etc.).

Most of our clients are also not wanting to have to constantly make decisions about what and when to invest, so using a model that is appropriate for their needs, and then managing your money using discretionary trading authority (if you grant it to us), reduces your need to constantly keep watch on your investments.

Why Investment Management Models Work for Most Clients

We like investment management models for a number of reasons. First, because a model can be employed hundreds of times for different client accounts, models tend to be better researched and monitored more closely than custom portfolios. The ability to use them in accounts of most any size is also a benefit – smaller accounts are able to tap into the exact same strategies larger investors may be benefitting from.

We also get “buying power” when we use models, because we are buying more of the investments each time, often enabling better pricing for all clients. And when the time comes to make changes to the model, all clients are affected simultaneously, regardless of account size. This helps us treat all of our clients fairly and impartially.

Not every client elects to use a model (though most do). For example, some clients choose to employ a model for part of their assets and we create a custom strategy for the rest. Others opt for full customization. That choice is yours to make, with our guidance.

3.We keep investing costs low.

There are no product sales at nVest Advisors. As a result, there are no products or investment management strategies that we will ever recommend that come loaded with sales charges or hidden costs that pay us commissions and add to your investing costs. In fact, because we collect a fee for managing your account that is based on the size of your account, the only motivation your advisor has is the same as yours – to grow your assets!

Even a 1% fee buried down in your mutual funds (often showing up as management and 12b-1 fees) can take tens of thousands of dollars out of your pocket over 20 or 30 years of investing. What this means in practical terms is that your advisor needs to keep your investing costs as low as possible. So, we create our models and strategies employing quality investments with minimal fees (and never use a fund or investment with embedded commission or marketing fees).

It’s important to note that we’re not saying all investing fees can or even should be avoided. What we are saying is that we expect the investment to be able to justify its fees and provide value above and beyond those premiums. For example, if we were investing in an emerging-market large-company stock fund, the fund may have additional costs because of the needed expertise in that part of the world, and incur currency exchange costs as investments flow over and profits flow back. As fiduciaries, as long as we feel the benefit that the fund provides outweighs its expenses, we will consider using it.

4.We believe in being nonpartisan, data-dependent, and rules-based.

There is a tendency in the business world of late to always feel the need to take a position on divisive political or social issues, and to “take a side” on heated online arguments, which we feel is irrelevant to the management of your money in the broader economy. Your goals will extend far beyond the current social media debate, and your retirement account doesn’t care who is President. What your investments do need, is just for things to go right in the economy so they can grow.

This idea of reducing emotional and social bias in our decision making is at the core of a field of study called Behavioral Finance. It is the science of human interaction with money, and how we often mess things up by acting emotionally or applying any number of all-too-human biases in our personal financial decisions.  At nVest, our job is to be aware of, and take steps to eliminate, those biases in both ourselves and in our clients.

We therefore adopt an ongoing service model that is based on some timeless money principles, trading and valuation rules, and on economic and company data. We largely ignore social media hype, “guru” recommendations, alleged magic trading formulas, etc. This, at times, might make us appear to be going in a different direction than other advisors, but our aim is to protect your assets from losses all-too-common in the frenzy of chasing fads in the stock market. Our approach is sober, goal-focused, and unemotional.

Are we a good fit for your investing needs?

There is obviously more to our investing philosophy than what this article provides, which is why it’s important for you to sit with our team and explore whether your approach and ours is compatible and harmonious. Are we a good fit for you? Only some time spent in conversation will be able to tell.

Schedule a complimentary Q&A session with our team today. It’ll cost you nothing but a little time, and there won’t be any pressure to decide right away – that’s our promise.