Safe Harbor has entered into a relationship with First Ascent Asset Management of Denver, Colorado which will provide our clients with a professionally managed balanced and diversified portfolio for an exceptionally low $500 per year fixed management fee. This is an excellent opportunity to have the best of both worlds--investment consultation and planning with Safe Harbor and implementation and management by First Ascent--with no duplication of costs.
As you can read about on their website, http://firstascentam.com/, First Ascent offers Safe Harbor clients portfolios with stock/bond allocations that are appropriate for three different risk levels: conservative, moderate and growth-oriented. They share our belief in the use of low-cost passive index funds as the foundation of their portfolios in a “core plus satellite” approach. The “core” of each portfolio provides very broad diversification among global securities markets. Each core consists of low-cost investments, such as index funds or exchange-traded funds (ETFs), that track domestic or international stock or bond markets. The core will represent between 50% and 100% of each portfolio.
First Ascent may also use what are referred to as “satellites” in a portfolio that may consist of actively managed investments like mutual funds, or passively managed, index-tracking investments like index funds or ETFs. For example, they might add an actively managed mutual fund as a satellite because of their assessment of the skill of its manager, or they might add an ETF to gain exposure to an asset class not represented in the core. First Ascent uses a rigorous evaluation process to assess whether to add a satellite to their portfolios and they will only add a satellite if they believe it will improve the portfolio’s long-term performance. First Ascent will review the composition and allocation of each portfolio at least monthly and the portfolios are rebalanced annually, generally in coordination with Safe Harbor after we consult with our clients.
In addition to having different portfolios for different risk tolerance levels, First Ascent also has crafted portfolios for taxable accounts that offer greater tax efficiency to reduce as much as possible the tax bill from interest, dividends, and capital gains generated by the investments. Further, consistent with the Safe Harbor approach to taxable accounts, First Ascent seeks to minimize transaction costs and the impact of taxes for taxable accounts by limiting trading in these portfolios to circumstances where they a high degree of conviction that it will contribute positively to the portfolio’s long-term performance.
Why do we think this is a beneficial program for our clients?
As our clients know, Safe Harbor has chosen a practice model in which we do not manage client assets for a percentage fee based on assets under management. Since we advocate a generally passive approach to investing there is not really a lot of "management" for our client portfolios and we can't justify a fee based on services that we are not providing to the client. Rather we help our clients manage their own money. We analyze a client's current investments, risk tolerance, time horizons, and goals, and make recommendations on changing current investments or starting a new investment plan, either in a retirement account or a taxable account. We recommend the use of low-cost, generally passively managed funds such as index funds, with some active or semi-actively managed funds, particularly bond funds, to maximize performance. But under our practice model we stop short of implementing our recommendations for our clients and leave it to the clients to take the next step. We have had some of our clients seek assistance with implementation and this is where we see the First Ascent relationship serving a critical complementary role to the services provided by Safe Harbor.
For those clients who want to take advantage of First Ascent's managed portfolios, Safe Harbor will do the preliminary analysis and make recommendations from the First Ascent portfolios that are suitable for the clients' goals, risk tolerance, and time horizon. We assist the client with the account paperwork for First Ascent, which includes the use of TD Ameritrade Institutional (our partner custodian as well) for account custody, and make the hand-off to First Ascent for account establishment and funding. Once in place, Safe Harbor clients will work with us on a semi-annual or annual basis to review account performance and assess the need for actions to rebalance the portfolio -- a fancy way to say that we will bring the portfolio back to where the client is comfortable in terms of stock to bond ratios.
The bottom line. We think this relationship provides an opportunity for our clients to get a full-service investment program at extremely reasonable costs based not on asset values, but rather on the effort the investment team provides to the client. One way to think about this is the relationship between your primary care physician and a specialist he or she refers you to for certain issues. You still rely on your primary care physician for your overall health care needs but use the specialist for their particular expertise in a coordinated effort with your doctor. And, like a doctor, neither Safe Harbor nor First Ascent will charge the client for work done by the other team. While not the right fit for all Safe Harbor clients, we believe that many will appreciate the opportunity to get professional investment management at an exceptional cost while maintaining a relationship with your "primary care" financial advising team here at Safe Harbor. We encourage you to ask us about this program.