FAQs

An RIA is a person or firm that provides advice on investments. Generally, an RIA is required to be registered with the Securities and Exchange Commission (SEC) if they manage assets in excess of $100mm. Advisors under this threshold are required to be registered with their state. Walter & Keenan has been SEC-registered since 1982. RIA’s are required to file a form ADV annually with the SEC. This form is a public record and describes the firms background and business practices along with any disciplinary issues involving the advisor.

The primary difference is that an RIA is required by law to act as a fiduciary on behalf of its clients whereas a broker-dealer is not. The only way to ensure that the recommendation you receive is 100% unbiased and based solely on your best interest is to work with an RIA. As a fiduciary, an RIA is legally obligated to offer financial and investment advice that is based on your best interest – not on his/her compensation.

The Investment Advisors Act of 1940 is specific in defining what a fiduciary means. Simply stated, an investment advisor must act in the best interest of its client at all times. This includes the principles of ‘duty of care’ and ‘duty of loyalty’ to clients and to place the client’s interests ahead of the advisor’s. An RIA is also required to make sure its advice is made using accurate and complete information and that any trade is executed with the best combination of low cost and efficient execution.

These are two of the most important strategies for the success of our investment approach. Diversification has been described as the only “free lunch” on Wall Street. The idea is that by combining uncorrelated assets in a portfolio that an investor gets the benefit of reduced risk (meaning lower volatility of returns) with no reduction in returns over time. If portfolio positions do not move together, their fluctuations are bound to offset one another over a full market cycle. Rebalancing is another critical risk control to ensure that your portfolio doesn’t become overly dependent on the success or failure of any one asset class or investment style.

Put in the simplest of terms, private equity is capital that is invested by owners in securities that are not publicly traded or listed. Many common examples of private equity include buyout funds as well as venture capital and turnaround (or distressed) investments.  There are certainly many multiple times more private companies than there are public companies. However, given the risks with the limited disclosure that is typically involved with investing in private companies, the SEC limits this opportunity set to “accredited investors” in most circumstances. Given the illiquid nature of this kind of investing it is only appropriate for those investors who can afford to lock up their capital for years at a time.  Experience has shown that the returns of investing in the private markets has the potential to exceed that from investing in public markets over time. Access is typically constrained for the very best managers. We have been investing in private equity for many years and would be delighted to help you better understand the risks and rewards of these strategies.

After a lifetime of planning and wealth accumulation for your family, a proper estate plan will help you to protect your loved ones when you can no longer do so. By taking control of this process you get to determine who receives your assets. Without any planning, the courts will decide who gets what. This is a process that can typically take many years and substantial fees to resolve. Even the most basic planning can protect your family and save your heirs substantial taxes as well. We can help you to address the five essential components to any successful plan:

1. Who will make financial and healthcare decisions on my behalf when/if I am no longer able to do so?
2. How do I want my assets to be divided at my passing?
3. What are the most tax efficient strategies to passing along my wealth in a way that minimized taxes and protects my family’s wealth?
4. How can I best achieve my philanthropic goals and what is the most appropriate legal structure to accomplish them?
5. When and how should I involve my family in the estate planning process?

Investment management refers to the buying and selling of securities within a portfolio. As an investment manager we will help you with asset allocation decisions and help to determine what percentage of your portfolio should be in growth investments (such as stocks) and what percentage should be in income producing assets (such as bonds). This is at the core of all that we do – but it is not all that we do for you. As a comprehensive wealth management firm we work on long-term strategies that consider all aspects of your financial life. Many of our client conversations cover a much broader range of financial services including:

• Financial planning
• Tax planning
• Education planning
• Trust and estate planning
• Insurance
• Retirement planning
• Charitable giving
• Business succession

Both entities are established to accomplish a “charitable” purpose as that term is understood under IRS rules. A private foundation is generally established by an individual or a family and does not seek funding from the public. Foundations will use these funds to make grants to other charitable organizations. In exchange for permitting family (or other insider) control of the organization, a private foundation is generally required to spend at least 5% of the market value of its portfolio each year. There are also significant restrictions and reporting requirements for continued operation as a private foundation. An endowment generally solicits broad public support for a particular charitable purpose – for example, a university or hospital. The funds are in an endowment have no minimum spending requirement if a public support test is met. Other types of charitable funds are vehicles such as donor advised funds and Charitable Remainder Trusts as well as Gift Annuities. We would be delighted to discuss the features of each in order to help you meet your charitable goals.

The SEC defines family offices under the Dodd-Frank Wall Street Reform and Consumer Protection Act as “entities established by wealthy families to manage their wealth and provide other services to family members, such as tax and estate planning services.” Family offices are typically exempt from registration under the Investment Advisers Act of 1940 as long as:

• They provide investment advice only to “family clients”
• Is wholly owned by the family client and is exclusively controlled by family members and/or family entities
• Does not hold itself out to the public as an investment advisor

The 2017 Global Family Office Report, as prepared by UBS and Campden Research, stated that the average operating cost for a family office is about 1.13%. For example, if a family had $50M in AUM, it would cost them approximately $565,000/year to manage a family office.

Family offices typically work for one family unit, starting with the business owner and extending to the second and third generations. Family offices can exist much longer than that, but it is typical to last approximately three generations with all the generations working with the family office. The number of employees a family office employs is largely dependent on sophistication (amount of services managed in house as well as type of software and technology used) as well as the amount of assets under management. Typical services can include: investment management, asset management, money and cash flow management, financial planning, tax planning and preparation, trust services, estate planning, foundation and charitable giving management, legacy planning, concierge services, tangible asset management (boats, planes, cars, homes, etc.), accounting and bookkeeping services, etc. Depending on how the office or services provided to the office are structured, many of the investment management discretion is not regulated by the SEC.