Choosing a Financial Advisor

Frequently Asked Questions

Why how you choose an independent financial adviser may be the most important decision you make?

The financial services area continues to become more complex in every way. More investment choices, more players, faster speed of markets, more volatility. When you make a decision to put a professional advisor on your side, start by making sure he is really on your side. Whether you are preparing to retire and your retirement rollover represents everything you have, or if you have accumulated resources you want to invest into the stock markets, your decision as to who to trust must be made with wisdom. It will determine most of your success or failure.

Why should my independent financial adviser be a fiduciary?

fi•du•ci•ary — an independent financial adviser held to a Fiduciary Standard occupies a special trust and confidence when working with a client. As a fiduciary, the financial advisor is required to act with undivided loyalty to the client. This includes disclosure of how the financial advisor is to be compensated and any corresponding conflicts of interest.

A fiduciary is simply someone who represents your interests, even above their own interests. You can see why this is important when you must grant an advisor limited discretion to act on your behalf. You want to be certain that investment decisions made for you are not only suitable for you, but are truly in your first and best interest.

Not every kind of financial advisor accepts fiduciary duty. Some (brokers, for example) are held only to the standard of suitability of the investment for someone in your circumstances. The introduction of compensation by commission also introduces a conflict with acting in your best interest first and foremost. As such, brokers are not fiduciaries. Rhoads Lucca Capital gladly accepts and holds to the highest standard of ethics in the financial services industry — Fiduciary Duty to act in the interest of our clients, even above our self-interests.

If you wonder whether fiduciary duty is a higher standard than the suitability standard that brokers are under, simply as a broker whether his company will sign a letter stating they accept fiduciary duty. It won’t happen, sadly.

How hard is it to find a independent financial adviser that is also a fiduciary?

Unfortunately, harder than you might think. Fiduciary advisors make up less than 10% of the financial services industry! This means that 90% of financial advisors do not have a legal duty to put your interests first, even above their own interests. Most investors are shocked to learn this.

Cerulli Associates, a Boston firm that studies the financial industry, recently calculated that approximately 250,000 people throughout the U.S. call themselves financial advisors (there is no legal standard for calling yourself a financial advisor). Of those, 232,000 are sales people who work for their firm, not you. Only 23,000 are registered investment advisors (also known as fiduciary advisors).

Sales reps selling insurance, mutual funds or other financial products are most likely not fiduciaries. Registered Investment Advisors and Investment Advisor Representatives are fiduciaries.

Does Rhoads Lucca accept Fiduciary Duty to its clients?

Absolutely.

Just what does it mean to be a fiduciary and deal fairly with clients?

This has been discussed since 1940, when the Investment Advisors Act became law and placed Registered Investment Advisors under fiduciary responsibility. The definition of this term has been used in a variety of ways over the decades. Further, most investors do not understand the differences between the suitability standard brokers are under and true fiduciary duty that Registered Investment Advisors are held to.

Recently, the Committee for the Fiduciary Standard developed a five point statement of principles delineating what it means to deal fairly with a client. Here they are:

2. Act with prudence — that is, with the skill, care, diligence and good judgment of a professional;

3. Do not mislead clients; provide conspicuous, full and fair disclosure of all important facts;

4. Avoid conflicts of interest; and

5. Fully disclose and fairly manage unavoidable conflicts of interest in the client’s favor.

Rather than wait for the industry to formalize these requirements, we accept these now, as a minimum standard of what it means to put your interests first.

How much experience should independent financial advisors have before I consider hiring the firm?

Experience matters more than most people know. Here’s why.

The future may not mirror the past, but it is certainly an echo of the past. When you wrestle with choosing someone to advise you, think about the depth of experience they have accumulated. No one puts an untested person in a position of leadership — certainly not over your life savings.

During the darkest hours of the correction of 2009, we received phone calls from other financial advisors who turned to us for insight as to what was happening and what they should do with their client’s investments. In fact, the Market Comments piece we put out weekly is read by other financial advisors throughout the country.

How much experience should you use as a guide? More is better. We suggest 10 years minimum. Ideally, you will find someone who has worked through a full market cycle and through a severe bear market. Please note that hiring an inexperienced advisor who works for a firm that has been around for decades is not the same as hiring experience. The wisdom earned through experience is what will see you through future trouble spots in the markets. And you will pass through trouble spots over the years.

In the final analysis, you are paying a wealth advisor for their experience or you are paying an inexperienced advisor to learn with your money. Credentials do not give you experience or wisdom. Only living through dramatic market conditions over many years can give you the depth of experience to be prepared for the future. There is no shortcut to preparation.

How long has Rhoads Lucca Capital been in business?

For more than 30 years, Rhoads Lucca Capital has been serving clients. This goes back to the end of the deep recession, spans the roaring bull market years of the 1980’s, includes the dramatic events of the 1987 stock market crash, the tragedy of 9/11, the Great Bear Market of 2000-2009, wars, currency crisis’, etc. Through it all, day by day, we’ve stood by our clients and safely guided them toward their future.

How experienced are John Rhoads and Dave Lucca?

Together, John Rhoads and Dave Lucca bring +50 years of investment management experience to the table to guide our clients.

What is the minimum size portfolio you accept?

$250,000 is the minimum portfolio size that will receive value from working together with us. Less than this and we will suggest you consider becoming an investor in the mutual fund we advise.

From here, we have the resources to work with account sizes into the tens of millions. Beyond that, we work with an alliance of like-minded financial advisors to ensure that the large client’s interests are very well represented across a spectrum of strategies. The depth of relationships with the best independent financial advisory firms in the industry is also an asset we bring to the table.

Do you work with clients located outside of Texas?

Yes, the majority of Rhoads Lucca Capital clients live outside of Texas. At last count, we have clients in 45 states and several other countries.

How do you work with clients that are not local?

We are easily able to use technology as well as occasional face to face visits to work with clients anywhere in the world. Through the effective use of phone conferences, fax and email, we are able to address your concerns and questions. Interestingly, even though we live in a time of developing technology, just picking up the phone to talk together is the most satisfying to us all.

How does Rhoads Lucca Capital make money?

Who has custody of my money when I hire you to manage it?

Rhoads Lucca Capital never physically has possession or access to your money.

Your funds are held at Schwab Institutional, in an account that is registered in your name and Social Security number or tax ID, in the case of trust accounts.

Schwab Institutional is one of the nations leading providers of custodial, operational and trading services for Registered Investment Advisory firms, with assets of more than $525 billion. All cash accounts at Schwab Institutional are guaranteed by FDIC insurance, up to Federal limits.

When you give us limited discretionary authority as investment advisors, it allows us only to move your funds from one investment to another inside your account — never to move it from the account. In the case of airline pilots, your 401k account does not change in any way. Again, you are simply authorizing us to manage your funds within your 401k account.

Additionally, you will have around the clock access to your current account status via www.schwaballiance.com, a service of Schwab Institutional.

Will I be able to see my investments online whenever I want?

Absolutely. You will be able to view your account online whenever you wish. In fact, we would like you to check your account regularly. But don’t change your investments yourself once you’ve hired us. That would work against your long-term goals. Relax! You’ve hired a professional team.

If I hire you as my retirement investment advisor, how will I receive regular paychecks from my account to live on during my retirement?

We will work with you to determine the amount of your monthly paycheck and it will be deposited directly into your bank account. For most people, this is the same procedure their employer used to deposit their paychecks.

The amount of your paycheck can be changed by you. Just call and we’ll help make the change for you.

Do you guarantee any rate of return for my investments?

No. It is illegal for a Registered Investment Advisory firm to guarantee returns. Instead, we devote a full-time effort in creating and executing investment strategies that we believe will help our clients reach their goals.

How will I know you have made changes to my account and how will I keep up with the progress of my investments?

You will receive an easy to read investment statement directly from us every month. In addition to this, you will also receive regular account statements from Charles Schwab or from your 401k Plan Provider. We also welcome your phone calls whenever you have questions or concerns.

How often will I receive reports about the progress of my investments?

All of your funds are held in your name at Charles Schwab or at the custodian of your 401k Plan. When we make a trade in your portfolio, a confirmation will be sent to you directly by the custodian. Rhoads Lucca Capital also prepares and sends monthly statements to you summarizing all activity in your account — including the deduction of our fee. In the case of 401k account management, quarterly statements are prepared by Rhoads Lucca Capital.

How often do you review my personal account?

What services do you provide for your clients?

RLC’s core service is our investment management service.

In addition to superior money management, we include the following services for every client:

1. Helping you identify your investment goals and needs.

2. Helping you choose a RLC portfolio model that has the appropriate level of risk and return for you.

3. Researching, selecting, buying, selling and monitoring the investments in your account.

4. Handling administrative and paperwork services for your account(s).

5. Delivering easy-to-understand account statements every month that clearly show where your money is invested right now, and the market value of your account as of the day the statement was produced.

6. Sharing communications with you about our current view of what is happening in the market and where it it headed.

7. Answering your questions and concerns about your total financial life.

8. Producing end of the year tax reports and schedules for you to use in filing your income taxes.

9. Meeting with you in person or by phone to review your account.

10. Working with your tax preparer or attorney (with your permission) to answer questions and provide information as needed.

Am I locked-in? Are there termination penalties, if I decide to do something different with my money in the future?

No. There are no barriers to exit a relationship with Rhoads Lucca Capital. The relationship can be ended at any time by written notice. There are no forced liquidations, termination fees, back-end loads, redemption fees or other charges associated with the termination of an advisory relationship with our firm. The custodian, Schwab Institutional may have normal transfer charges, if you are moving your funds to another custodian.

We charge a simple annual fee that is pro-rated by month or quarter (in the case of 401k account management). You will only ever pay for the advice and management you have already received — never in advance, like commission based salespeople. This also gives you complete flexibility when planning your future.

My question isn’t in the list above. How can I get an answer?

Please email your question to us at information@rhoadslucca.com, including all relevant information. If you need immediate assistance, please call us can at 888.895.1212 or 214.373.9771