|
Q: What does The Lam Group
do?
A: The Lam Group, Inc. is an
independent, fee-only, Registered Investment Advisor (RIA)
located in Lake Oswego, OR. We specialize in providing
investment advisory and management services for taxable
high-net worth individuals, foundations, endowments and
select institutions.
Our investment services are focused on the design,
construction and management of investment portfolios
specifically tailored to the return objectives and risk
tolerances of our clients. Our investment philosophy is
based on explicit asset allocation planning, investment
manager research and selection, and the minimization of
taxes and transaction costs.
The actual management of investment accounts is driven by
each client’s investment policy statement, formulated with
the client prior to investment implementation. It is this
investment policy statement that sets the objectives and
risk parameters for the portfolio, as well as defining the
types of asset classes and investment vehicles to be used.
Q: Why is being an
independent registered
investment advisor important?
A: Being an independent advisor means
The Lam Group accepts no fees or commissions from any
brokers or mutual fund companies.
Our sole source of compensation is paid by our clients.
This compensation arrangement ensures we give objective
advice and make impartial investment decisions. A large
part of the value we add to the investment process is our
ability to measure and understand investment performance
and to “strip away” all the marketing expenses, emotion
and hype from the investment decision. Extraneous
marketing fees imbedded in mutual fund expenses and
emotional investment decisions based on media hype can be
detrimental to the performance of investment portfolios.
Q: What is The Lam Group’s
investment philosophy?
A: The cornerstone of The Lam Group’s
investment philosophy is disciplined asset allocation. A
well-defined asset allocation strategy is essential to
constructing a diversified portfolio that will optimize
investment returns and minimize portfolio risk.
Academic studies have shown that for long-term investors,
asset class selection in the context of disciplined asset
allocation is the most important determinate of investment
portfolio performance. The contribution to investment
portfolio performance can be broken down as follows:
|
|
Asset class selection
|
94% |
| |
Security selection |
4% |
| |
Market timing |
2% |
The Lam Group focuses much of its efforts on educating
its clients as to the importance of asset class selection
in the context of disciplined asset allocation planning
and portfolio rebalancing. It is important to remember
that the concept of diversification can only decrease
portfolio risk and increase portfolio return to the degree
the asset classes included in the portfolio have low
relative correlation return characteristics.
We devote substantial resources to researching investment
managers and analyzing fund returns in the context of
asset class performance, their relative correlations, and
overall suitability. Finally, we diligently look for ways
to minimize our client’s costs and expenses by using the
most efficient asset class investments and focus on
minimizing our client’s portfolio taxes by staying aware
of tax-loss and gain harvesting opportunities.
Q: What is your fee
structure?
A: With regard to investment management
fees, it is important for investors to know what they are
paying for. Our philosophy on fees is: pay for management,
not for marketing.
At The Lam Group, our clients are paying for our:
|
|
Approach: |
Our asset allocation expertise
and knowledge |
| |
Process: |
Our investment manager
research and performance measurement analysis
(our ability to peel away the marketing and hype) |
| |
Execution:
|
Our access to lower cost,
institutional-class mutual fund families such as:
Dimensional Fund Advisors (DFA), Pacific Investment
Management (PIMCO), and others |
The annual investment advisory or management fee The
Lam Group charges depend on the complexity and size of the
portfolio(s) managed. Included in our fee are the
development of a portfolio investment policy and an
individualized long-term asset allocation plan, and the
use (in most asset classes) of tax-efficient, passive
investment products to construct an investment portfolio
with risk and return characteristics consistent with a
client’s investment horizon and risk tolerance.
Our standard fee for investment management services is 1%
of assets under management (AUM) for portfolios of $1
million or less. This fee is negotiable downward for
larger portfolios. We can aggregate our fees for families
with multiple accounts or for family offices. At this
time, our new client portfolio minimum is $2 million.
Q: How do your fees
compare to those of other investment
managers, brokers, or financial planners?
A: It is likely our aggregate fee is
equal to, if not lower than what many potential clients
are already paying every year to their current brokers,
investment managers, financial planners or mutual fund
companies. At The Lam Group, we believe it is important
for investors to be educated on what the investment fees
they are being charged are for. Our clients are paying for
an investment approach, a research and analytical process,
and effective execution in the management of an individual
investment portfolio.
As our approach employs the use of lower-cost,
passively-managed asset class strategies, our portfolios
are not subject to the higher expenses of actively-managed
funds, nor do they suffer from any imbedded marketing fees
and/or sales charges that are commonplace in many
retail-class mutual funds.
The majority of mutual funds utilized by The Lam Group are
passive asset class strategies that have significantly
lower annual expenses (by 25bps to 100bps) than other
actively-managed mutual funds in the same asset class
categories. In the long run, few actively-managed mutual
funds outperform the appropriate passively-managed
strategy. Also, in most asset class categories, we have
access to the institutional-class of certain mutual fund
families that can also have lower expenses and better
historical performance than retail-class funds.
At a minimum, by using The Lam Group’s investment
approach, process and execution, all non-investment
related marketing fees are minimized or eliminated. This
is important because marketing-related fees, expenses
and/or sales loads have nothing to do with the actual
management or performance of an investment portfolio or
mutual fund; these fees go directly to salesmen and
brokers, and pay for non-investment related fund marketing
expenses (such as advertisements and fancy lunches). The
fees paid to The Lam Group are for investment management,
not for marketing expenses.
A final note regarding our fees: explicitly-paid
investment management fees can be tax-deductible.
Implicitly-paid investment expenses, such as imbedded
mutual fund expenses, are not tax-deductible.
Q: What is your track
record?
A: All portfolios constructed and
managed by The Lam Group are designed for an individual
client’s specific risk tolerances, income requirements and
investment horizon.
Our value added is in the design of a client-specific
asset allocation plan, the research and selection of the
most efficient and appropriate asset class investments for
a client’s specific investment policy, and the monitoring
and annual rebalancing of the portfolio to optimize
return, manage risk and minimize taxes.
As different clients have different goals, risk profiles
and investment horizons, it is not useful to publish a
track record of specifically-managed portfolios. For the
majority of the asset classes included in our managed
portfolios, The Lam Group utilizes the
institutional-classes of mutual funds managed by
Dimensional Fund Advisors (DFA), and Pacific Investment
Management (PIMCO), as well as some of the Vanguard
Group's index and tax-managed funds.
The performance of our managed investment portfolios will
generally reflect the return of a strategically
determined, risk-adjusted combination of a range of
specifically chosen asset classes, which are rebalanced
and tax-loss harvested annually.
Q: How does one
become a client of The Lam Group?
A: Aside from having investable
long-term assets of $2 million or more, the prerequisite
for becoming a client is a belief in, or at least a
willingness to understand passive investment management in
the context of a disciplined asset allocation strategy.
Nelson J. Lam
The Lam Group, Inc.
June 5, 2007 (updated in 2010)
Click here
for a PDF copy of these Frequently Asked Questions
Disclaimer: Past performance is no guarantee of
future results. No part of this publication may be
reproduced in any form, or referred to in any other
publication, without express written permission. This
article contains the current opinions of The Lam Group,
Inc. and is subject to change without notice. This article
is distributed for educational purposes only and does not
represent a recommendation of any particular security,
strategy, or investment product. Sources of the
information above are said to be reliable but not
guaranteed. |
