A Note Regarding Stewardship

Created: 18 January 2013 Written by Steve Kallesser

A great deal has been written regarding environmental stewardship in recent years, and we thought we would take a moment to discuss the context of “stewardship” as it is properly applied to financial matters. “Stewardship” generally invokes the concept of prudently managing something that is not your own, or something for the benefit of another. In environmental terms, stewardship usually refers to the proper management of natural resources in the context of those natural resources being granted by God for each successive generation (or, in secular terms, in the context of those natural resources being necessary for successive generations).

As a registered investment adviser, High Road Financial Advisors, LLC is required to act in a fiduciary capacity to its clients. To act in a fiduciary manner, all decisions must be made with the best interests of the client in mind. Frankly, we would have this no other way. Yet, stewardship is something considerably larger, and we felt it important to elaborate on how we view High Road as a good steward. We do this in 4 points:

—We tailor portfolios that are good fits for our clients. We take into account your risk tolerance, your objectives, your investment time horizon, your investment knowledge, and for some, even your personality and religious and social beliefs. Although we cannot control market prices, by having suitable investments across different categories we strive to ensure that when markets move – and they will – our clients are able to stomach the volatility.

—We know the companies who issue the securities that we recommend. Unless specifically instructed by our clients, we will not invest in mutual funds or ETF’s. (Although for those just getting started in investing may benefit from such investing, we have seen too many investment advisors who simply hand off investment management to others and have only a limited understanding of the underlying securities within these investment products.) We strongly believe that being invested in the right companies pays off (that goes for bonds as well as stocks). We read each quarterly and annual report. We track a variety of different metrics for each recommended company over time. We read what other securities analysts are writing to double-check our work. All of this is done to ensure that if an opportunity presents itself, that we are able to act swiftly on behalf of our clients.

—We believe that the easiest step to helping our clients make money is to not let excessive fees erode their accounts. When evaluating money managers, try counting up all of the various fees charged: management fees, 12b-1 fees, separate managed account fees, fees associated with the purchase and sale of securities, etc. Unfortunately, any number of managers may charge 2 to 3 percent per year of assets under management once each and every fee has been added up. High Road’s fees are 0.75%/year, with discounts available for larger accounts.

—We eat our own cooking. There’s no better cure to excessive risk-taking than to have stewards investing in the same securities as their clients. Once we feel that we understand a company’s stability and true value well enough, our final step is to ask whether we would purchase it for ourselves. Most often, we own what our clients own and if stock or bond prices drop, we feel the pain as well!

We at High Road hope that our clients view us as good stewards for their investments. Each day we remind ourselves that our clients come first, and that the sole reason for operating is to invest prudently for our clients’ benefit. If you are interested in learning more about the High Road advantage, contact us today .

(High Road uses E-Trade Financial as the custodian of its clients’ funds. All client assets are held in accounts at E-Trade under the client’s name. High Road does not have custody or discretion over client funds.)