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Q: Why did you
start The Lam Group?
A: I started The Lam Group for one
reason: I couldn’t find an investment manager who met my
personal needs with regard to my own portfolio.
My goal was to hire an investment manager who had a
realistic understanding of risk and return, and who was
sufficiently knowledgeable about the investment business
to be able to separate the marketing issues from the
investment issues. Additionally, I wanted a manager who
was independent and fee-only, so I could be confident that
the investment recommendations and the investments
themselves were being made for my benefit alone and that
the manager was not receiving any other compensation to
include specific investments in my portfolio.
After an extensive search, I discovered there was no
investment firm, mutual fund company, or broker that could
adequately meet my portfolio management needs, especially
given my own professional experience in the investment
industry. I had spent most of my professional career (over
12 years) on Wall Street working with institutional
investors and had acquired an extensive knowledge of all
investment products and portfolio management styles. I was
disappointed that most of the professionals and investment
firms that claimed to specialize in private clients were
less knowledgeable and/or had less investment experience
than I did. In my search, I found there was too much
marketing and not enough substance from an investment
standpoint. It became clear that if I could not find a
manager acceptable for myself, other individuals and
families might feel similarly frustrated.. The Lam Group
was born.
The Lam Group provides its clients with: an educated and
realistic understanding of risk/return, an in-depth
knowledge of how the investment business works, an
independent firm that provides objective advice and
that makes impartial investment decisions, and
offers affordable services in a fee-only format.
Our growth and the interest in our young firm indicate our
approach fills a need in the investment management
services market for private clients with both taxable and
tax-deferred portfolios.
Q: Who is the
typical client of The Lam Group?
A: Our typical clients are successful
individuals and families with both taxable and
tax-deferred investment portfolios in need of the sort of
objective, thoughtful investment advice and management
services we provide.
Generally, our clients include hard-working professionals,
retired individuals, families and family offices who do
not have the time, the inclination, the interest and/or
in-depth investment knowledge to manage their own
portfolios. What our clients have in common is an
understanding that proper portfolio management is an
important, time-intensive endeavor that requires a
disciplined investment strategy to make suitable asset
class allocations from a risk tolerance standpoint, and
ongoing asset class research to separate the marketing,
hype, and emotion from the investment decision process.
While some people prefer to handle their own investment
portfolios, for busy people with personal, family and
professional time commitments, hiring a fee-only
professional investment manager can be beneficial in the
same way a licensed physician can be useful with
health/medical problems, an experienced attorney can be
with legal issues, or a trained pilot can be when it comes
to air transportation.
Investing without a solid understanding of risk and its
relationship to return, or without an awareness of the
importance of diversification using asset classes with low
correlation can be detrimental to long-term investment
performance .
The ramifications of investing without proper training,
education and impartial advice can be great. Newspapers
and business periodicals are full of stories of investors
who have had bad experiences either managing their own
portfolios, or entrusting their portfolios to investment
managers or brokers who were commission-based.
Generally, the investors we accept as clients are
intelligent people who know they need help managing their
investments.
Q: How is The Lam Group
different from other investment
managers, advisors and/or brokers?
A: The Lam Group is different in several
important ways:
Focus on Asset Allocation
We focus on asset allocation as we believe (and academic
studies have shown) it is the most important determinant
of long-term portfolio performance. Properly diversified
portfolios behave very differently from the individual
assets classes in them, in much the same way that a cake
tastes different from the individual ingredients of flour,
butter, and sugar. This means the portfolios we design
utilize multiple asset classes that can include exposures
to domestic and international equities (across all
capitalization classes), US dollar and non-dollar
denominated investment-grade bonds (across all product
classes and maturities), as well as other asset classes
such as Real Estate Investment Trusts (REITs), Treasury
Inflation Protected Securities (TIPS) and commodities to
achieve a diversified portfolio with return and risk
characteristics consistent with a client’s investment
policy.
We also concentrate on optimally allocating asset classes
across a client’s taxable vs. tax-deferred (401K and IRA)
accounts within an aggregate investment portfolio.
Investment Approach
Our approach to constructing investment portfolios
includes educating our clients on the relationship between
risk and return, developing a basic understanding of the
importance of diversification with asset classes that have
low relative correlation, managing portfolio tax issues,
and dispelling many of the heavily-marketed and
self-serving notions presented by the investment
management industry today. Extensive investment manager
research and performance measurement experience give The
Lam Group a unique ability to “peel away" the marketing
and the hype from the investment decision-making process.
Since we focus primarily on portfolio asset allocation,
The Lam Group does not pick individual stocks (with the
exception of some ETFs) or try to time the market. Unlike
most investment managers, we do not manage investments
within only one asset class (i.e. just stocks, or just
bonds). All of our investment portfolios are designed to
include an optimal mix of global equities, bonds
(including TIPS), REITs, commodities and cash, with the
relative proportions and specific asset class
sub-categories dependent upon the client’s risk profile
and investment horizon.
For our clients, fund expenses and taxes are not
theoretical issues; they are significant detriments to
long-term investment performance. We have access to the
lowest cost, most tax-efficient mutual fund investments to
give our clients the purest exposures within the specific
asset classes that fit their investment policies. To
minimize fund expenses and maximize tax-efficiency, we
often use passive-managed asset class investments such as
those offered by Dimensional Fund Advisors (www.dfaus.com).
Additionally, our investment management services include
disciplined rebalancing of our client’s portfolios to
achieve and/or maintain their investment policy
weightings, as well as strategically harvesting portfolio
gains and losses on an ongoing basis to maximize
tax-efficiency.
Compensation Structure:
Objectivity and independence are two of the most important
considerations when choosing an investment manager. The
Lam Group is an independent advisor and, as a consequence,
accepts no fees or commissions from any brokers or mutual
fund companies. Our sole compensation is paid annually by
our clients and is fee-only in nature. This compensation
arrangement ensures we give objective advice and make
impartial investment decisions.
When working with firms that are not independent or whose
compensation is transaction-based, it is often shocking to
compare the commission-laden investment products being
“sold” by these “professionals” to the investment products
that have no imbedded fees, commissions or prizes that are
available to be purchased within the same asset class. Our
clients know whom they pay, what they are paying for, and
how much they are paying.
Q: What is your relationship with
Dimensional Fund Advisors?
A: Dimensional Fund Advisors (DFA) is a
mutual fund company located in Austin, TX and is the
leader in passively managed investment strategies for a
broad range of asset classes. The firm was founded in 1981
and has over $180 billion under management.
DFA works with a select group of RIAs whose investment
philosophies are consistent with the diversification
via asset allocation approach and the belief in the
benefits of passively managed investments. To work
with DFA, an RIA must undergo a rigorous approval process
that requires an in-depth interview, an extensive
application and a multi-day presentation at their
headquarters in Austin.
The Lam Group is a DFA-approved registered investment
advisor and has access to all the DFA mutual funds. While
part of our value is our access to the DFA platform, it
is important to note that The Lam Group receives
absolutely no compensation from DFA to use its mutual
funds and that the relationship between our firm's is
entirely independent.
DFA primarily manages money for large institutions as the
costs of dealing with the retail investing public are too
high. They do not have the overhead of highly staffed
phone call centers or multi-media marketing campaigns. The
money they save on not having these cost centers is passed
to their investors. As a result, DFA's fund expenses are
some of the lowest in the mutual fund industry.
DFA’s strengths in the equity asset class (both
domestically and internationally) are in their
cost-effective, passively managed strategies with
particular focus in the small cap and value investment
styles. DFA also has passive approaches to the fixed
income and REIT asset classes. The Firm’s passive
investment approach is based on extensive research by
leading academics, economists, and Nobel Prize Laureates.
Q: What else
should a potential client know about The Lam Group?
A: The Lam Group was founded to manage
the investment portfolios of private clients and to focus
on the specific needs of the taxable high-net worth
investor. We are a small firm with an exclusive number of
clients who share our belief in a disciplined asset
allocation approach and appreciate the personal and
highly-customized nature of our services.
Our asset class and investment manager research and
performance measurement analysis are performed with
extreme care as we use this research not only for our
client’s investments, but for our own personal portfolios
as well. Our Chief Investment Officer performs all of our
investment research and analysis, so there is no part of
the investment evaluation process that is "passed off " to
a junior staffer or analyst as is common at larger firms.
The specific asset class investments we make for our
clients are generally the same we actually buy for our own
personal portfolios.
Our marketing efforts are limited to word-of-mouth
recommendations, our quarterly newsletter and our website
(www.thelamgroup.com).
We have no ambition to be a large firm, and our asset
allocation approach is not for everyone. Our goal is to be
a great investment advisory and management firm that
specializes in the unique needs of taxable high-net worth
investors, and to have a limited number of clients who
share our investment philosophy.
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.
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