Looking Behind the Curtain
Issue 28: August 2021
I received a lot of positive feedback about my last newsletter. I appreciate all the kind words.
As my business grows, I am having more and more conversations with people outside my immediate network. A common question I get asked is why should I work with you? Or what makes SCP unique? I’m going to use this newsletter and a follow up one next week to explain why what I am building at SCP can’t be and won’t be duplicated by other advisors.
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The biggest thing that makes SCP unique is my structure. Unlike other advisors, I don’t outsource active investments to third parties. Instead, I developed, built, and maintain the Spring City Fund to give every investor access to an active investment strategy managed by me. Additionally, I launched a passive strategy, the Keystone Fund, meant to provide a low-cost, tax-efficient portfolio providing diversified exposure to the broader stock markets.
As you can see there is a direct link between every investment decision (made by me) and my investors. This provides a level of communication and transparency about portfolio performance and allocation that can’t be duplicated by other advisors.
To understand why, let’s see what a typical investment relationship looks like.
As you can see the structure in a traditional advisor relationship has multiple layers between you and the actual investment decision. In reality you are two steps removed from anyone making a decision that impacts your portfolio. You outsource your investments to an Advisor who in turn outsources the investing to another party. Your Advisor likely has no direct access to these fund managers. That type of access is limited to Advisors managing billions of AUM.
Why does this matter for you? Transparency.
I keep every investor abreast of changes in the portfolio. This ranges from lengthy research reports on individual stocks to short blurbs about thoughts on the markets when things are going good AND bad. This level of transparency can’t be duplicated by other advisors because they aren’t making these decisions. All they can do is tell you what they think the person they hired to do the investing is thinking. Pretty convoluted if you ask me.
Furthermore, hiring a third party to manage the active investments allows the Advisor to blame someone else when when your portfolio underperforms. The paramount word being when because every strategy will underperform the market for some period of time. They can simply fire the manager the client didn’t like and invest their money in another strategy. The logic being this reduces the probability the client will fire the advisor.
At SCP I accept that risk. I hope that I always exceed my investors expectations in terms of communication and performance. In reality, I recognize there will be periods of time when our investments underperform the market and our own expectations. During such periods I make sure to elevate my level of communication to keep everyone abreast of the portfolio and my general thoughts. Every investor has a detailed understanding of our investments and my strategy. My hope is that during these periods the trust we have built proves more valuable than a temporary decline in their portfolio.
I’m going to continue with this theme in next weeks newsletter where I talk about how working with SCP can save you money compared to other advisors!
In the interim, if you want to chat, please reach out! I am serious. I am happy to talk to anyone about a financial question big or small they may have.