Frequently Asked Questions

 

About the Firm

  • What do you do?
  • What makes you different from other firms?
  • What are your backgrounds and qualifications?
  • Have you ever been subject to any disciplinary actions or other regulatory events?
  • What is your relationship with Girard Securities?

Investing Approach

  • What is your approach to investing?
  • Isn't it true that active managers can't beat index funds?
  • How have your managed accounts performed?
  • Do you buy individual stocks or funds?
  • Do you tailor account allocations to individual clients' situations, needs, risk tolerance, etc.?
  • Do you personally invest like your clients do?

Investment Account Details

  • Who holds the money?
  • Do you pool client funds or keep everything in separate accounts?
  • What protections are in place for investors?
  • Will I get account statements?
  • Will I be able to view my accounts online?

Working with PCA

  • Do you offer financial planning?
  • What are your fees?
  • What are your minimum investments?
  • What types of accounts can you manage?
  • Can you work with clients who live out of state?
  • Do you communicate with investment clients on an ongoing basis?
  • I'm interested in having PCA manage my investments — what are the next steps?

Please feel free to contact us if this list leaves any questions unanswered.

 


 

About the Firm


What do you do?

We actively manage over $150 million in separate investment accounts for individuals, companies, and trusts.

We also offer comprehensive financial planning — including retirement planning, college planning, estate strategy, insurance, and general advice on all things financial — as a free service to our investment clients.


What makes you different from other firms?

We differ from the typical financial advisory firm in a number of ways:

  • We are able to focus on long-term results. This is a very big deal, because staying patient and focused on the long term are some of the most important — arguably the most important — components of a successful investment strategy.

    Unfortunately, these traits are rare in the financial industry, and for that matter among investors in general. The data conclusively shows that investors on the whole are very focused on the recent past, tending strongly to “chase returns” — to invest in what’s recently done well and shun what hasn’t. This tendency is amplified in the financial industry, where money managers are judged (and, in most cases, compensated) on shorter-term performance, rendering long-term focus a serious business risk. The end result is an industry very much focused on the short term and prone to chasing returns without regard to value or long-term prospects.

    Fortunately, we are a small and independent firm with the ability and willingness to focus on the long term. We do this because we truly believe that it’s in the best interest of our clients.

  • We are conscious of value and risk. The existence of investment bubbles, among other things, shows that investments’ prices can at times become very detached from their fundamentals. Despite this, much of the industry is still built around the “efficient market hypothesis,” which dictates that market prices are always “correct” and that investors should disregard valuation. This approach often has people piling into overpriced investments without regard for the risk of long term or permanent loss. (It’s no coincidence that this philosophy makes it very easy to justify the return-chasing behavior described in the prior section).

    In contrast, we believe that markets are routinely mispriced, and that focusing on valuations is an excellent way to enhance returns while reducing the risk of long-lasting losses.

  • We are not salespeople. Much of the financial industry revolves around selling people on the latest and greatest investment fads, often in the form of high-fee “products.” We don’t try to sell to clients and we don’t put any pressure on them. We give them honest advice that we believe in, and encourage them to make informed decisions. Our fee structure aligns our interest with those of the clients.


What are your backgrounds and qualifications?

Please see the About page for background on the staff at PCA.


Have you ever been subject to any disciplinary actions, customer disputes, or other regulatory events?

No. Honesty, integrity, and the welfare of our clients are extremely important to us and we have a clean bill of regulatory health to show for it. Of course, we don't expect anyone to take our word for it, so we encourage you to use the BrokerCheck feature at the website of FINRA, the regulatory agency that governs financial advisors. From the BrokerCheck site, you can run Broker searches for PCA's partners, John Matthew Simon and Richard Esteban Toscano.


What is your relationship with Girard Securities?

Girard Securities, Inc. is a Broker/Dealer and Registered Investment Advisor. They deal with the "back office" aspects of running a financial advisory business. This includes most of the regulatory compliance tasks (of which there are an enormous amount), accounting, keeping all investment- or planning-related forms and processes up to date, and various other tasks. Allowing Girard to handle all of this stuff frees up our time to focus on what is most important: talking to our clients and managing their investments.

We work with Girard Securities because it is a customer-focused firm run by very honest people who can meet all our needs while allowing us to be entirely autonomous in terms of the investment strategies we choose to follow.


Investing Approach


What is your approach to investing?

Please see this overview of our investment approach for a big picture guide to our philosophy. Some thoughts on more specific topics may be found on the Commentary page.


Isn't it true that active managers can't beat index funds?

It's true that most active investment managers fail to outperform the market index after fees are taken into account. Individual investors, on average, fare even worse. In our view, though, this isn't because it can't be done, but because most investors simply don't do what's required to outperform the market.

There is a very strong tendency for investors — and this includes professional investment managers — to "chase returns." People buy what's been going up, and sell what's been going down. This is a natural human instinct, and it plays right into both our emotions and the incentive structure of the financial industry. Unfortunately, it also results in poor investment returns, at least over the long term, because it entails buying the most expensive assets while shunning or selling the cheapest ones.

There is actually plenty of evidence, both from academic research and in the existence of longtime outperforming money managers, that it is possible to beat the market over the long term. But this requires fighting those return-chasing instincts and focusing on what has worked over time. This includes varying investment posture to have more exposure when markets are cheap and less when they are expensive, focusing on (often unpopular) investments that are cheap and priced for good or great returns, and steering clear of trendy and overpriced investments that are likely to lead to poor returns.

This is called "value investing," and while it's the opposite of what the typical active investor does, it's exactly what we do. It requires work, discipline, and a lot of patience, but over time, the evidence has shown that it does work. More details can be found in this brief slideshow summarizing our investment approach.


How have your managed accounts performed?

Please see our investment performance track record, which measures the performance of the average account in our Moderate Asset Allocation Strategy since we started keeping track in 2004.


Do you buy individual stocks or funds?


Our investment approach is based on determining how an investment should be priced based on its fundamentals. We feel that this is much more reliably determined at the asset class level than at the individual security level, so we tend to seek out asset class-level exposure. For this reason, we primarily use mutual funds or ETFs.

An additional benefit of this philosophy is that we get increased diversification, and diversification is a good thing (as long as you are not diversifying into overpriced assets).

We often utilize passive, low-fee instruments when they provide the exposure we are looking for, but we also use actively managed funds if we feel that there is a compelling reason to do so. In either case, we are very sensitive to fund expenses, and are primarily concerned with maximizing risk-adjusted returns after all fees.


Do you tailor account allocations to individual clients' situations, needs, risk tolerance, etc.?

Yes. We determine a risk profile for each client based on goals, timelines, liquidity needs, and psychological risk tolerance. Other factors such as outside investments or asset class preferences may also come into play. Clients are encouraged to keep us up to date if their situation has changed in a manner that might impact their risk profile.


Do you personally invest in the same instruments as your clients?

Yes. We (the partners at PCA) invest the vast majority of our personal investable money into exactly the same things we are buying for our clients.


Investment Account Details


Who holds the money?

The managed brokerage accounts are typically held at National Financial Services (NFS), which is owned by Fidelity, and the direct mutual fund accounts are generally held at Franklin-Templeton Investments. Both firms are huge, established, and highly regarded. For more information see the NFS and Franklin Templeton websites.


Do you pool client funds or keep everything in separate accounts?

Each client has their own separate account(s) in their own names or in the names of their trusts or businesses.


What protections are in place for investors?

Girard and NFS are both members of the SIPC. SIPC offers protection in the case of brokerage firm financial troubles of up to $500,000 per customer (of which $250,000 can be cash). More information about this protection can be found at the SIPC website.

Additionally, NFS — where the investment accounts are actually held — has taken out extra private insurance with Lloyd's of London to cover investors beyond the SIPC limits to an aggregate loss level of up to $1 billion .

Mutual fund companies like Franklin-Templeton are not part of the SIPC. However, such companies keep fund assets at a separate custodian company, so trouble at the mutual fund management company should not impact the custodian's assets.


Will I get account statements?

Yes. Clients receive statements at least quarterly, possibly more often depending on account type and activity.


Will I be able to view my accounts online?

Yes. Clients have access to an online account monitoring website where they can view account holdings, activity, and performance on a daily basis.


Working with PCA


Do you offer financial planning?

Yes, we offer comprehensive financial planning as a free service to our investment clients.

What are your fees?

Fees differ depending on account size and type, but they are generally below the industry average for actively managed accounts.

What are your minimum investments?

Our minimum household investment is $50,000.

What types of accounts can you manage?

We can manage many account types, including:

  • Individual, joint, or trust investment accounts
  • Traditional IRAs
  • Rollover IRAs
  • Roth IRAs
  • SEP IRAs
  • Simple IRAs
  • Individual-Ks
  • 403Bs
  • 529 College Savings Plans
  • Coverdell Education Savings Accounts

We cannot manage active employer-sponsored 401Ks or Thrift Savings Plan accounts, but we can convert former employers' plans into rollover IRAs that we can manage.

Can you work with clients who live out of state?

Yes; we have many out-of-state (as well as in-state but distant) clients with whom we communicate solely via phone and email. We are perfectly comfortable with this approach so long as the client is comfortable as well.

Do you communicate with investment clients on an ongoing basis?

Yes. We feel strongly that it's important for long-term oriented value investors to have a firm understanding of why they own what they own. This helps to prevent the emotionally-driven mistakes that plague so many investors, such as panicking out of a perfectly good investment during a downturn, or feeling compelled to chase into popular but overpriced investments.

We send clients detailed quarterly letters in which we discuss what's going on in markets, how we are invested, and why. The letters often touch on other topics of interest, such financial planning issues or the local real estate market. We also write more detailed articles on this website from time to time.

We are always happy to answer any other questions clients might have about the investments or their own financial situations.

I'm interested in having PCA manage my investments — what are the next steps?

If you think you might be interested in working with us, please contact us to let us know what your situation is and how you think we might help. If there appears to be a good fit, we can set up a meeting by phone or at our office.