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Moving Away From Self-Directed Investing Thumbnail

Moving Away From Self-Directed Investing

The case studies presented are real descriptions of actual client relationships. We have protected the identity of the clients by changing names and locations. Given that many of our clients experience similar life events, the case studies are designed to depict the value proposition Simon Quick Advisors brings to the table. Each family we work with is unique. There is no “cookie cutter” set of solutions. We bring our full set of resources to the table to solve, educate, implement, and monitor.


Mr. Shepherd is a successful businessman with interests in manufacturing, real estate, and service businesses. Over the past 25 years, he amassed a significant amount of liquid wealth spread across a wide variety of investment managers and brokerage firms. Investments were made on the recommendation of friends, brokers, and other financial professionals. As his accounts grew in size, he recognized that he needed someone to conduct more thorough due diligence on his current and prospective investment managers, advise him on the proper balance for the portfolio and organize investment information into a consolidated statement. His accountant introduced him to Simon Quick Advisors.

Key Issues to Solve

• Mr. Shepherd had long-standing relationships with many investment managers and brokerage firms. No evaluation framework was in place.

• There were over ten sub-accounts in place including personal accounts, trusts, family limited partnerships, retirement accounts, and corporate funds. While there was a broad objective for each pool of capital, there was no stated objective for each distinct entity.

• Some relationships had been in place for five years or longer. There was little ongoing dialogue with the investment managers.

• Custody was not centralized. It was difficult to keep track of statements, confirmations, and cash movements. No checks or balances were in place.

Our Approach

Simon Quick was retained as an investment consultant for the Shepherd family. Our role included initial and ongoing manager due diligence, advice on asset allocation and best practices, manager search and selection, performance reporting, and portfolio accounting. We are paid a fixed quarterly fee for our services.

The first step in the process was to set up due diligence meetings with each of the underlying managers. Our primary goal was to understand how many units of risk our client was taking for each unit of return being delivered back to them. Through our quantitative analysis, we examined three core risks: drawdown risk, correlation risk, and volatility risk. Our qualitative due diligence involved face-to-face meetings with each of the equity and alternative managers, meeting key personnel, gaining an understanding of the investment process and the repeatability of that process, and evaluating operational risk, among other issues. The fixed income portion of the portfolio had been self-directed through several brokerage relationships. We examined asset allocation across the broad spectrum of sub accounts. We examined asset location in order to evaluate if the most tax-efficient managers and strategies were in the taxable entities and the most tax inefficient investments were in tax-exempt entities (IRAs, pension funds, etc.). We compiled a detailed report for our client that included the following recommendations:

• Simon Quick Advisors suggested the elimination of hedge fund of funds from the portfolio, replacing the alternative allocation with a customized portfolio of hedge fund managers across a variety of styles. This removed leveraged managers from the mix and saved our client over $100,000 in fees per annum.

• While keeping some of the incumbent equity funds, we reduced concentration substantially by spreading out the portfolio to a wider variety of managers, focusing on market capitalization, growth versus value and domestic versus international allocations. We renegotiated fees with existing managers. We eliminated managers with high correlations to their benchmark as we felt that paying fees to a closet index fund made little investment sense.

• We aggregated the fixed income portfolios and sent them to one of our core managers for evaluation, focusing on credit quality and interest rate risk. We urged our client to have these portfolios professionally and actively managed. We helped to select two firms to take responsibility for this process.

• We brought forth suggestions for rebalancing the portfolios for tax efficiency. Managers were “relocated” to minimize the potential tax impact on our client.

• We publish a quarterly consolidated statement for our client, capturing performance data from each custodian. Simon Quick aggregates performance for the portfolio as a whole and also breaks it down to each sub-account.

• We provide full portfolio accounting services to Mr. Shepherd, tracking each transaction, interest payments, dividend, cash movement, and realized and unrealized capital gains and losses.

• We meet periodically to discuss asset allocation, rebalancing, the performance of each manager and the ongoing due diligence findings of the Simon Quick research team.

When the job of investment manager research became too big for one or two people to handle Mr. Shepherd leveraged our investment research team to support his family office needs. By creating this arrangement Mr. Shepherd was able to spend more time playing with his grandchildren and less time sourcing and researching investment managers, something that our investment research team is happy to do!

Please Note: The above hypothetical case study is offered to illustrate the benefits that Simon Quick Advisors’ customized approach can provide. Please note that actual client experience could vary, and there can be no assurance that Simon Quick Advisors will be able to deliver the same type of results referenced in the case study. The scope of any financial planning and consulting services to be provided depends upon the terms of the engagement, and the specific request and needs of the client. Simon Quick Advisors does not serve as an attorney or insurance agent. Simon Quick Advisors does not prepare estate-planning documents or sell insurance products.