Caves & Associates offers financial planning and investment advisory services designed to preserve and protect our clients’ assets and grow their net worth.Our process considers the key variables that affect their financial situation and incorporates their personal goals, money values, lifestyle, risk tolerance, and family considerations to create an individualized plan.
All services begin with in-depth conversations to identify planning issues and spot opportunities and techniques that will help you succeed. Each client’s family and financial situation is then analyzed to formulate tax efficient strategies to manage wealth accumulation, cash flow, debt, taxes, and risk, and to establish retirement and estate transfer plans. For business owners, we add consulting regarding such matters as fringe benefits, key employee retentions, and business transitions.
Every client must have a written investment policy or “blueprint” for their money management. The information gathered during our meetings and conversations provides the basis to formulate a draft investment policy for your investment portfolio. Clients then amend the policy and ultimately ratify it before portfolio construction begins. Your investment policy identifies risk/reward relationships, ability to handle market volatility, and expected results; specifies your strategic asset allocation and constraints; and identifies tax considerations and liquidity and cash distribution needs. After policy ratification, we recommend specific investments by account for implementation of policy goals and allocation strategy. Finally, we assist with brokerage paperwork and trading, as needed.
A Caves & Associates portfolio is globally diversified, value-oriented, and partly hedged. We seek tax-efficiency and low transaction and management fees. Our investment approach is customized for each client and focuses on risk-adjusted returns across a broad range of market conditions. It is only a slight stretch to say that we plan for the worst and hope for the best.
- Globally diversified stocks from both developed countries and emerging markets
- Short and intermediate term government, municipal, and high quality corporate U.S. bonds
- Non-U.S. bonds from developed countries and emerging markets, high yield bonds, and floating rate/bank loan bonds
- REIT’s and foreign real estate, natural resources, and commodities
- Hedged strategies employing long-short portfolios, convertibles and merger arbitrage, absolute return, and covered call and put option writing
Your portfolio requires and deserves at least a minimum of on-going advisory and supervision services to achieve success. Like a garden, your portfolio will need continued care to grow as planned. Our services reflect the goal of keeping professional fees at a minimum, while arranging adequate management services to achieve long-run goals and maintain confidence along the way. The suggested service includes:
- Continuous monitoring of mutual funds and replacement with higher rated funds if deemed appropriate,
- Semi-annual asset class rebalancing actions, as appropriate, in light of your investment policies and strategic allocation goals, and
- Presentation of a graph with your rebalancing report showing trends of portfolio values.
Our monitoring and rebalancing service provides our “all you really need” care. Your portfolio is rebalanced periodically and mutual funds are continuously monitored and replaced as needed. In the process, we check that a) investments are properly allocated between accounts to maximize tax efficiency, b) capital gains in taxable accounts are offset with tax-loss harvesting whenever possible, and c) transaction and ownership costs are controlled to maximize after-cost, after-tax portfolio returns.
Sophisticated investment performance reporting and evaluation are available for the limited circumstances where required by labor law or of utmost importance to the investor. However, we rarely recommend these services because they are costly and focus attention on short-term volatility. Asset allocation is a long-term strategy, and portfolio rebalancing generally calls for buying one’s losers and selling one’s winners.
Financial planning complements our core portfolio supervisory services. Specific subjects might include planning for retirement, college, taxes, and insurance protection. Event-based needs include marriage, divorce, widowhood, inheritance, and employer early retirement offers. For business owners, we address key-employee retention, fringe benefits for the owner and employees, company-sponsored retirement plans, and business transition and sale. Regular reviews of changes to your personal and financial situation help to measure your progress toward achieving your goals and ensure your plan is updated accordingly. Main services are described below.
Capital Adequacy and Retirement Planning
Our capital adequacy for retirement analysis will help determine how prepared you are, or will be, for retirement. We prefer a workshop, “roll-up your sleeves” approach individualized for each client. We consider income from reliable income streams such as pensions, social security, rental property, and investments as well as expenses for routine living expenses, taxes, and other planned expenditures and test for sensitivity to changes in tax brackets and investment rates.
Cash Needs and Reserves Planning
A substantial risk to wealth accumulation is the forced sale of risky long-term investment assets at cyclical, yet unpredictable, market lows. Our reserves planning service evaluates over an appropriate time frame the amount of cash and cash equivalents needed for contingencies, planned large non-recurring expenditures, and your future living expenses not funded by reliable income sources. Having the right amount of cash reserves provides peace of mind and allows you to continue portfolio withdrawals for planned expenses while markets, and your investments, recover. We also provide guidance on the timing of reserves generation or replenishment based on past market returns, your asset allocation, and your life stage.
IRA Distribution Planning
Our IRA distribution service evaluates the order of distribution from tax-deferred IRA’s, Roth IRA’s, and non-retirement accounts to minimize taxes and maximize long-term wealth accumulation for you, your heirs, or charitable beneficiaries. “Stretch” IRA strategies are implemented, as appropriate. Techniques are available for distribution before age 59½, as needed.
Decrease in the number of accounts and financial institutions simplifies and eases administration, encourages proper focus on the portfolio as a whole, and usually decreases costs.
Education Planning and College Funding
Our capital adequacy analysis can be applied for other long-term savings needs, too. College savings for children and grandchildren is one example. In addition, we recommend specific investments within state-sponsored, Section 529 college savings plans to gain tax advantage and maximize expected returns at the appropriate risk level for the age of the student.
Estate Planning, Family Protection, and Gifting to Family and Charities
In addition to advising on your investments, we can coordinate tax, legal, insurance, and personal issues to protect you and your family in the event of a work disability, major medical challenge, death, catastrophic damage to real and personal property, or liability for your acts. In sports parlance, risk management provides the defense to preserve wealth whereas investment planning and tax-advantaged strategies are the offense to accumulate wealth.
Estate planning addresses mainly wealth transfer during your lifetime and later, but also includes minimizing estate taxes, avoiding probate, timing of gifts to children and other loved ones, charitable gifts and trusts, and long-term dynasty trusts. We have expertise on many of these subjects and work with tax, legal, and insurance professionals to help you make informed decisions, implement the necessary paperwork, and manage your wealth more effectively.