Investment Planning and Implementation Process

July 01, 2020
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All clients will have an initial financial plan or investment policy statement on file which details the goals and objectives for the current investment strategy and ongoing management of the portfolio(s) custodied at LPL Financial

 Initial Financial Plan

The financial plan will detail the need for short-term and long-term cash needs from the portfolio.  As a result of this process, an acceptable target rate of return will be validated by the advisor and client as a net of fee return that will compliment savings/spending strategies pre and post retirement:

An investment policy statement will be created to document the net of fee rate of return and portfolio objectives relative to each client’s stated goal after completion of the initial financial planning process

A risk profile questionnaire may also be used to help clients understand potential volatility and risk that may be assumed with the agreed upon rate of return

Risk profile questionnaire and volatility assessment will be conducted with LPL’s proprietary software AdvisoryWorld

If clients feel the current or projected volatility is unacceptable (potential loss over a given timeframe relative to upside potential), then revisions will be made to reallocate the portfolio and may initiate changes to the savings rate pre-retirement and/or projected spending post retirement


Clients will have the option to work with the advisor on a discretionary and non-discretionary basis for implementation of their portfolios


Managed model portfolios offered through LPL Financial, when appropriate, will be recommended by the advisor to clients and ongoing management will be performed at the discretion of the selected third-party manager


Advisor will work with client to construct a unique portfolio based on financial plan/investment policy statement/risk profile questionnaire

Verbal authorizations must be obtained by the client prior to any recommended changes made by the advisor in the portfolio

Asset Allocation

For non-discretionary implementation, equity and fixed income weightings will be based on model allocations provided by LPL Research

Broad asset classes will be used for building non-discretionary portfolios

Large cap US Equity

Mid cap US Equity

Small cap US Equity

Large cap International Equity

Small/Emerging International Equity

Short-Term Fixed Income

Intermediate-Term Fixed Income

Long-Term Fixed Income

US and international equity allocations will be reviewed based on recommended weightings from LPL Research

Advisor will review investments that hold international companies or have large revenue exposure to overseas operations

  • companies with this exposure are sometimes held but not easily identifiable in a US only ETF or mutual fund-steps will be taken to try and reduce unnecessary overlap and exposure to international equities

Equity positions in the portfolio will be split between strategies that focus on the growth in the price of the equity and growth in the dividend of the equity

Fixed income allocations in the non-discretionary portfolios will be based on recommended portfolio allocation from LPL Research

The primary objective of fixed income holdings will be to limit downside volatility with a secondary focus to enhance interest income

Non-discretionary portfolios will focus primarily on total return-a blend of interest, dividends and price appreciation in the investment to pursue a target, net of fee return over a full market cycle

Asset Selection

Asset selection for non-discretionary portfolios will be implemented from LPL Research’s recommended mutual funds and approved Non-Transaction ETFs

For qualified accounts, both mutual funds and ETFs will be considered

Larger capital gains distributions from mutual funds can potentially make them unfavorable in a taxable account if clients desire opportunities in tax-loss harvesting

Active mutual funds may provide risk reduction against volatility in fixed income funds and upside potential in mid/small US strategies

Expense ratios will be compared prior to implementation – all else being equal in asset class and strategy- the investment with the lower expense ratio will be selected

Volatility will be considered prior to selection-both equity and fixed income investments may have the same asset class categorization but different holdings within the portfolio or a lack of liquidity that may yield unexpected volatility in a particular asset class

If clients inherit or want to continue to hold individual equity positions, an overlap analysis will be conducted to work towards limiting concentration of the portfolio in one (1) equity to 2-5% of the total portfolio combined across all accounts held at LPL Financial

Ongoing Monitoring

For discretionary and non-discretionary portfolios, LPL Research and financial software will be used to monitor and communicate with clients on the progress of their portfolios

Advisor will rely on market commentary and insight provided by LPL Research to implement changes to the portfolio

Annual portfolio allocation changes

  • A 10% +/- deviation from broad asset class allocation compared to LPL Research’s portfolio model will prompt a discussion with the client about rebalancing to target percentage weighting
  • Manager changes-change in management, internal fee or strategy will initiate potential change in investment vehicle/strategy
  • Macro-economic changes on both equity and fixed income sectors

Equity sector weightings will be reviewed in portfolios and compared to S&P 500 sector weightings and LPL Research’s Global Portfolio Strategy outlook – if the portfolio’s sector weighting is over 30% in one sector of overall equity position across all portfolios held at LPL Financial, the advisor will discuss a potential shift with the client  a rebalance to closer mirror the S&P 500 sector weightings

Fixed income sector weightings will be reviewed based on LPL Research’s Global Portfolio Strategy outlook-changes may be made if over 30% of a fixed income’s holding is allocated to a sector that is deemed negative by LPL Research’s Global Strategy outlook

Portfolio Review Software

  • Goal based rates of return will be assessed, net of advisor fee, over a full market cycle of 5-7 years and compared to LPL Research’s respective benchmarks
  • Individual asset performance will be compared to respective benchmark
  • Lipper scoring system will be reviewed annually on all investment positions to determine suitability relative to performance, expense ratio and volatility to peer group

 Financial Planning Software

  • Actual and projected net of fee portfolio return and values will be evaluated annually to project potential growth pre-retirement and supplementation
  • Overlap analysis will be conducted annually to determine if assets are still positioned with stated investment objective


 Annually, clients will be presented with an executive summary outlining goals for their portfolio

 Pertinent details will describe portfolio objective and performance relative to other strategies implemented in the financial plan

 Budgeting-savings strategies into portfolio if cash flow is positive for the year and potential unexpected needs over next 12 months

 Insurance-guaranteed income and, in many scenarios, ordinary income tax-free distributions to beneficiaries to compliment existing and projected portfolio goals

 Tax Planning-tax efficiency of investments and opportunity for tax loss harvesting

 Education Planning-will portfolio supplementing education funding outside of a tax favorable education savings vehicle

 Estate Planning-are asset protected or positioned to help reduce taxes and expenses during wealth transfer process

Special Requests

Advisor has the technology available and may also combine accounts that are not held at LPL to monitor the client’s overall asset allocation

The investment policy statement must state that outside accounts will be considered for a comprehensive review of the asset allocation and risk assessment of the portfolio

Ongoing monitoring of outside accounts will also be available to ensure allocation remains consistent with client’s stated goals and objectives across all accounts

The advisor will not be responsible for monitoring performance on accounts held away from LPL Financial


An investment in Exchange Traded Funds (ETF), structured as a mutual fund or unit investment trust, involves the risk of losing money and should be considered as part of an overall program, not a complete investment program. An investment in ETFs involves additional risks such as not diversified, price volatility, competitive industry pressure, international political and economic developments, possible trading halts, and index tracking errors.

All investing includes risk including loss of principal. No strategy assures success or protects against loss. Asset allocation does not protect against market risk.