Please feel free to contact us if this list leaves any questions unanswered.
What do you do, exactly?
Our primary business is to actively manage separate investment accounts for individuals, companies, and trusts. How we go about doing so is the subject of many of the questions on this FAQ list.
We also offer comprehensive financial planning as an additional service to our investment clients. This includes retirement planning, estate strategy, insurance (life, health, long-term care, and disability), and general advice on all things financial.
What makes you different from other firms?
In our experience, the vast majority of investment advisors end up with investments that are remarkably similar to one another and, by no coincidence, to the major stock market indices. We take quite a different approach. To put it very briefly, we combine the independence and rigor of traditional value investing with a heavy focus on global economic and monetary trends. The end results are investment allocations that are very different from those of the typical index-hugger, and ones that we think will provide our clients with superior long-term returns while exposing them to less risk.
Our investing philosophy is by far our biggest differentiator, but there are others as well. We have a fairly unusual breadth of expertise and knowledge -- in addition to investing, we have expertise in many aspects of financial planning, housing market analysis, mortgages, and real estate transactions.
Another rather huge distinction from the rest of the selling-centric financial advisory industry is that we are terrible salespeople. We'd much rather research financial markets than attend networking events any day of the week, and we cringe at the idea of putting pressure on people or otherwise being "salesy." Instead, we focus on helping people make informed decisions and we hope that our successful and uniquely sensible investing approach will do the selling for us.
Who are you?
Please see the About page for more info about us.
What is your relationship with Girard Securities?
Girard Securities, Inc. is a Broker/Dealer and Registered Investment Advisor. They deal with the, shall we say, less exciting 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 setting up agreements with third parties such as clearing firms, mutual fund companies, and private placements so that we may offer these services and investments to our clients. Allowing Girard to handle all of this stuff frees up our time to focus on what is most important: investment research and client interaction.
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. To find out more, you can visit Girard's website or search for Girard Securities, Inc. in FINRA's BrokerCheck application. (For more about BrokerCheck please see the qualifications section of this page)
In the broadest sense, we are value investors. This means that we seek to buy assets we think are being undervalued by the market and to patiently hold onto those assets until their value is recognized. Similarly, we seek to avoid risks that we think are being underestimated by the market. Our opinions as to what is valuable and what is risky are based on fundamental analysis and our own extensive research into global economic and monetary trends.
This focus on macro trends is something that distinguishes us from most value investors, who tend to focus more exclusively on traditional valuation "metrics" while foregoing big-picture macroeconomic analysis. The year 2008 highlighted the perils of that approach, and during this time of continued disorder in the global money and credit systems, we think macro analysis is more important than ever.
One of our big advantages is our focus on long-term results. Fundamentals and valuations offer little predictive value in the short term but they are highly predictive of long-term returns. Fortunately for us, most investors both professional and amateur are chasing short-term returns, thus presenting numerous opportunities for patient and forward-looking investors to find good values while avoiding undue risk.
What are your current investment strategies and thoughts regarding the financial markets?
We could write about this for pages -- and we have. We've written many articles regarding the state of the financial markets and potential investing strategies. You can also evaluate our past analytical track record by reviewing the older articles (which are unchanged from their original form, and which go back to January 2007 when we began posting commentary articles on the site).
If you are looking for some fairly representative "big picture" articles, we recommend A Financial Market Roadmap (to see that we had a fairly good handle on what was to come when that article was written in early 2007) and The US Government Will Not Choose Deflation (to get our in-depth analytical take on the crucial topics of inflation and deflation).
Isn't it true that it's impossible for active managers to beat index funds?
No, this is not true. There is indeed plenty of evidence showing that the majority of actively managed mutual funds are unable to beat a simple index fund over time. We agree completely with this conclusion. But this is because most mutual funds chase short-term returns and "hug" the indexes. They end up owning the same stocks as the indexes but they incur higher fees than the index funds, so they are destined to underperform.
However, it is a huge mistake to misinterpret these results as proof that active managers cannot beat the indexes. As a matter of fact, skilled practitioners of the value investing style have an excellent track record of beating the market indexes over long time periods. In brief, the reason is that the approach of buying the whole market at any given time ignores fundamentals and valuations -- which, as we noted above, are predictive of long-term returns. By heeding the crucial information provided by valuations, value investors can avoid a lot of risk even while garnering superior long-term returns.
In the Commentary section we've done some interesting analysis on the ability of valuations to predict long-term returns.
How have your managed account performed?
Please see the investment performance track record for our PCA Global Allocation Strategy Composite, which comprises the portfolios of all discretionary clients who fit into our “moderate growth” risk profile (which is the vast majority of them).
PCA has been verified as GIPS® compliant by Ashland Partners & Co. LLP.Do you buy individual stocks or funds?
We mostly use mutual funds and ETFs (exchange-traded funds), though we've ventured into individual stocks and closed-end funds on occasion.
Our efforts are focused on top-down investment analysis, meaning that we spend most of our time analyzing fundamentals, valuations, and economic factors in order to determine prospective risk and return at the asset class level. (We use "asset class" broadly here, referring to the traditional definition -- stocks vs. bonds vs. commodities and so on -- as well as stock market sectors, country stock or bond markets, etc.).
We prefer the top-down approach for the following reasons:
Do you tailor account allocations to individual clients' situations, needs, risk tolerance, etc.?
Yes. We arrive at an account allocation for each client based on a discussion with each client about their goals, timelines, other investment holdings, and personal feelings on risk tolerance and specific asset classes. Clients are encouraged to keep us up to date if their situation has changed in a manner that might necessitate a new investment posture.
As it happens, most of our clients end up owning a fairly similar set of investments. The percentages may change, in that we will dial down the more volatile investments for conservative or shorter-term investors and vice-versa, but the general themes are the same. This is because the risk-reward profile of the investments we tend to like are typically appropriate for most investors.
Do you personally invest in the same instruments as your clients?
Yes. We (the partners at PCA) invest the vast majority of our personal investible wealth into exactly the same things we are buying for our clients. The percentages might not always be the same, mostly because we have a higher tolerance for volatility with our own money than we do for client money, but the overall strategy and the specific investment instruments are the same.
What are your backgrounds and qualifications?
Please see the About page for details about our background and qualifications.
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.
Once you're into BrokerCheck you can do a Broker search for PCA's active partners, John Matthew Simon and Richard Esteban Toscano, and you will see that we are free of customer disputes, disciplinary actions, or regulatory events. You can also do a Brokerage Firm search for Girard Securities, Inc. to see that our broker/dealer Girard also has a record free of disciplinary actions or other regulatory events.
How many clients do you have?
We have about 750 client households and businesses, for whom we manage a total of over $150 million.
Can you provide client testimonials?
Unfortunately, the SEC strictly prohibits testimonials.
Who holds the money?
The managed brokerage accounts (see the fee question below for more info on the different accounts types) are typically held at NFS, which is owned by Fidelity, and the direct mutual fund accounts are 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 get paper statements mailed at least quarterly, or monthly if there was activity in the account in a given month.
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.
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.
What are your minimum investments?
We require a minimum household investment of $100,000.
What types of accounts can you manage?
We can manage many account types, including:
For businesses or independent contractors, we can also set up and manage employer-sponsored retirement options such as:
We cannot manage active employer-sponsored 401Ks (unless we have set them up ourselves) or Thrift Savings Plan accounts, but we can convert former employers' plans into rollover IRAs that we can manage.
We can manage accounts on behalf of individuals, companies, and trusts.
Do you communicate with investment clients on an ongoing basis?
An important facet of a long-term, value-based investing strategy is to thoroughly understand and have confidence in one's investment themes. This helps to prevent one from panicking out of a perfectly sound long-term investment during a temporary correction or feeling compelled to chase the latest investment fads.
For this reason, it's very important to us that our clients understand what we are doing and why. In addition to the articles on this website, we send quarterly letters to our clients describing our thoughts on the current market situation and the strategies that we are employing.
We are additionally always happy to answer any questions that aren't covered by the articles and letters or to discuss any changes to or questions about our clients' financial situations.
I'm interested in a managed investment account, financial planning, or one of your other services -- what now?
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.