To find an in depth article for each step, just click on the “Pasadena Financial Planners Sitemap” link at the top of this page and look for the articles numbered from 6 to 10. Note that you can reach us by using the contact form below. Please enjoy reading this article. Thank you!

6 – Personal Investment Strategy

Given the extremely large number and variety of available securities, investors need a rational basis to select among them. Without rational selection criteria and a good understanding of which factors are more or less likely to increase risk-adjusted returns, investors will make poor decisions based on false assumptions.

We will begin with the presumption that portfolio investment strategy would focus on broad-based, market oriented financial investments that can be acquired economically and held inexpensively in your portfolio for an extended period. We will provide a set of recommended investment vehicles and percentage allocations including a recommended minimum number of investment positions within each particular area. Consideration will be given to domestic versus international, value versus growth, small versus large capitalization, and other investment vehicles that may move the portfolio away from a broad market orientation. Of course, investment cost and tax implications will heavily influence these recommendations.

Consideration will be given to your existing investment portfolio to determine what parts should remain and what should change. We will discuss a transitional plan for those parts that we recommend to change, and our recommendations will consider the cost and tax implications of making such changes. When appropriate, recommendations will also address adjustments that counterbalance any financial concentration that you may have elsewhere in your portfolio.

7 – Investment Management Fees

Even with optimal investment strategies, there is still substantial room to improve upon net investment performance through continued and vigilant focus on controlling investment costs and tax realization. The investment fees extracted by the financial securities industry are grossly excessive. Excessive costs imposed on “retail investors” have increased substantially during the past several decades on both a total cost and a percentage of returns basis.

At the same time industry deregulation, market innovation, and increased competition have provided many new and useful mechanisms for investors to manage their assets in a much more cost- and tax-efficient manner. It is not hard to cut your investment costs, but you have to be conscientious and vigilant. I will help you to become an extremely cost-conscious investor, and I will help you to remove all those hands that may currently be in your family’s financial wallet.

For your current asset holdings and for new investments we will model details of taxation and investment expenses in the projections. Recommendations will be provided which are designed to reduce investment costs, to reduce and defer tax recognition, and to shift tax realization toward lower tax rates.

Recommendations for new investment will focus on very low cost, passively managed investment vehicles. A very wide variety of very low cost cash, fixed income, and equity investments are available through low cost channels, and there is no reason to purchase more expensive vehicles that are not expected to provide any better return or risk reduction.

8 – Insurance Risk Management

The world is fraught with numerous potential risks – financial and otherwise. Insurance can be purchased for a wide variety of situations, but the issue is always value and affordability. Many people could spend all their investable capital on insurance and have nothing left to invest and build a financial cushion for the future. Therefore, we can discuss a budget for insurance expenses and your preferences for risks you are willing to bear and risks you wish to ensure.

While value, affordability, risk exposure, and risk tolerance should affect insurance purchase decisions, insurance is often sold and purchased emotionally. The issue is where to set a rational rather than emotional balance between expected risk and return.

9 – Efficiency of Personal Investing Strategies

Time in life is the most precious and perishable asset that a person has. It should be spent enjoyably and efficiently. Scientific investment strategies that rely on relatively efficient financial markets allow people to minimize their time commitment to personal financial planning and personal investment management. Yet, on average, you can still expect to obtain optimal risk-adjusted portfolio returns that are near the market’s return

We recommend an annual review of your personal finance and investment plan on approximately the anniversary of your initial plan. At that time we will update your personal financial planning model and recommend any appropriate changes. In the interim, we can work together to implement recommendations that you accept and to perform other financial planning services that you want.

10 – Independent Investment Counselors and Financial Advisors

Pick financial planning and registered investment advisors solely to obtain objective and high quality advice. Specific investment advice is potentially of high quality, if it is carefully customized to your particular needs and is given by an adviser who is very knowledgeable, highly competent, and completely independent. If you agree with the advice being given, then buy the recommended financial products through the most inexpensive channel possible.

We do comprehensive personal financial planning exclusively. We do not sell securities and do not hold assets in custody. We do not sell insurance, nor do we provide accounting services or legal advice. However, as part of our business development and networking efforts we make efforts to become acquainted with high quality professionals who can provide specialized assistance. In developing a plan for you, part of our focus will be on providing you with recommendations on how to acquire appropriate professional services both easily and economically.

See: Personal Financial Planning Pasadena CA >>>

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Larry Russell, Managing Director

MBA – Stanford University, MA – Brandeis University, and BS – M.I.T.

Lawrence Russell and Company Pasadena, California 91103

(626) 399-9579

A California Registered Investment Adviser — Certificate 133101

KNOWLEDGE — OBJECTIVITY — HONESTY — DILIGENCE — SATISFACTION

A truly independent financial planner and fee only investment advisor

(Concerning my compensation, I perform services solely on a hourly fee or fixed fee for services basis, and only under a contract agreed upon with you. You do not have to pay any form of asset fee. Furthermore, to avoid all conflicts-of-interest, I do not accept compensation or commissions of any kind from the financial industry.)

Start a conversation today — Send a message using this contact form

Pasadena Financial Planning

Benefit from the best fee only investment advisor helping for those in the West Los Angeles area, including Altadena, Arcadia, Baldwin Park, Burbank, Eagle Rock, Glendale, Glendora, Hollywood, Irwindale, La Canada Flintridge, and Pasadena.

Pick financial advisers and investment advisers solely to obtain objective and high quality financial advice. Specific financial counsel and investment counsel is potentially of high quality, only if it is carefully customized to your particular needs and only if it is given by an adviser who is independent, knowledgeable, and competent. If you agree with the advice being given, then buy the recommended securities and other financial products through the most inexpensive channels possible.

This is one of the “10 Steps in the Right Direction” that make up The Pasadena Financial Planner‘s personal financial planning and personal investment management process. For a summary of these ten steps, see Family Financial Planning. To find an in-depth article for each step, just click the Sitemap link at the top of this page. Also, you can reach us by using the contact form below, and you can subscribe to Financial Planning Software. Please enjoy reading this article. Thank you!

The only reliable way to ensure the potential objectivity of any financial planning advisor or investment counselor is to pay directly for the adviser’s services, after investigating the adviser’s background, competence, and work ethic.

There are no shortcuts. “Free” advice is NEVER free. In fact, free advice is usually far more expensive than the advice that you receive from an advisor whom you pay directly. When you choose to obtain “free” advice, in lieu of paying fixed hourly services or a fixed fee for a planning project, the long term costs to you can be horrendously high. However, these huge costs are largely hidden and that is why this industry game of “free” financial advice keeps going on.

Advice that is contingent on any expectation that you will purchase products through your financial counselor or adviser is subject to a major conflict of interest. Financial advisers, who are not paid directly by you, must instead derive their compensation from commissions and other fees paid by the financial services industry. By following “free” financial recommendations, you are much more likely to pay a significantly higher price over the long term.

“Free” investment and other financial advice can become incredibly expensive advice – not just because of the high commissions and high visible and hidden costs. In addition, you may end up buying inferior financial products, because the free recommendations lead you to buy financial products that were not the best for your needs and that are not the best products available.

If you take the “free” advice of financial advisors and investment counselors who are paid by the financial services industry, you are more likely to achieve inferior long term investment returns.

For example, many people pay investment front end sales loads for advice that seems free. Industry representatives willingly tell you that their advice is both free and good. Advice paid by the financial services industry is neither free nor necessarily good. You just end up paying a financial sales rep to sell to you and in the process perhaps to confuse or mislead you about the facts.

The industry argument is that the advice is free and that you only have to pay, if you do follow the good advice that is given so freely. Well, sales loads and good financial advice are a contradiction in terms. For example, industry-paid financial advisors do not get paid to push better investment index mutual funds with the lowest costs and the best future prospects.

Much better advice can be found, when you look of it. If you buy and hold very low cost, low turnover, and broadly diversified passive index mutual funds, you are more likely to get better net long term total returns after taxes, fees, and other costs are taken into consideration. (See this article on our sister website, Best No Load Mutual Funds. It is entitled: “Best Noload Mutual Funds.”)

Unfortunately, when you follow this kind of “free” investment advice, it often leads you to pay a sales load, which compensates your adviser and his firm. When you pay a front end sales load, your initial assets are lower, which obscures the huge long term cost of the load itself. In addition, the mutual funds that are recommended tend to carry more expensive management expense ratios and higher hidden investment portfolio trading costs.

Furthermore, a 12b1 fee gets tacked on every year. With a 12b-1 fee, the same investment counselor who gave you the “free” advice will get paid over time to stick around and sell you more of the same. (See this article on our sister website, The Skilled Investor. It is entitled: “Investment Sales Loads” and “Returns lost to investment sales loads.”)

Financial sales loads, excessive asset fees, high cost active investment strategies, and a myriad of other suboptimal financial industry strategies and products typically bleed 1/4 to 1/3 of the typical individual investor’s portfolio annually. This waste compounds year after year after year, until individuals and their families get smart and realize that “free” is not really free and that “just of percent or two” has a huge cumulative negative impact on their financial welfare. (See this article and another dozen Investment Performance Improvement on our sister website, The Skilled Investor. It is entitled: “Excessive Investment Costs.”)

A financial advisor or investment counselor who has a conflict of interest can be very dangerous to your long term personal finance interests.

Many industry-paid advisers are ethical and helpful. However, the reputations of ethical advisers are tainted by others who are just salespeople who masquerade as advisers. Furthermore, even industry paid advisors face a career-long struggle to be independent of financial industry influences. They must spend their careers balancing the best interests of their clients against the interests of the financial companies that employ them. They must weight continuously the best interests of their clients against their own personal financial interests, paychecks, and bonuses.

Think about the continuing dilemma that an ethical person faces, when they are paid by the financial services industry and not their clients. Training programs for industry compensated financial advisors and investment advisors focus on selling, selling, and more selling. These people are classified as “producers” by the industry, because that is what they do. They produce revenue and profits for their companies. These revenues and profits come from you. (See this article on our sister blog, The Skilled Investor’s Personal Finance Blog. It is entitled: “The Financial Services Industry is Still the Largest S&P 500 Sector – Even after the Collapse of its Stock Values.”)

When a financial advisor is not independent of the financial services industry, you can never be certain whether you are getting the best advice or just falling for the latest financial sales pitch.

Once an ethical and newly minted financial counselor emerges from a financial industry training program and starts a financial sales career, the pressure to produce is constant. His compensation program will provide incentives to take more and more from his clients and will pressure him to pull in more and more assets to manage.

His company will constantly pressure him to perform and produce more revenue. If you have any doubt about this, you should investigate the financial incentives that are offered to retail financial advisors and investment counselors. The financial sales and marketing programs are designed to drive higher revenues and higher profits. Again, you are the source of these higher revenues and profits. (See this article on our sister website, The Skilled Investor, entitled: The Securities Industry Calls Marketing and Selling – “Advising”)

Now, think about the not-so-ethical financial advisor who is paid by the industry and thinks first about his or her paycheck and bonus, before taking care of your personal financial interests. You do not stand a chance. In the name of supposed “innovation” the financial industry has introduced so many new products and services that they greatly confuse the personal financial planning and management process. In and of itself, financial product innovation can be a good thing. However, large problems arise when this flood of new and expense financial products combines with not-so-ethical advisors and the marketing and sales culture of the financial services industry.

US financial services industry regulation is minimal at best. When a loose regulatory environment is combined with not-so-ethical financial advisors and investment counselors, almost anything goes. Most financial consumers are confused and outgunned. If industry sales reps can push expensive, high compensation products into the “retail” financial consumer channel, they will. There is little to stop them from emptying the wallets of naive retail financial consumers and individual investors.

You have to seek out and find independent financial advisors and independent financial counselors proactively. Most of the financial counselors who will actively approach you are industry paid “financial consultants.” They just want to add your financial assets to their “book of business.”

When control of your assets is the primary objective, where will your best interests fit into the picture? You should never have to waste your time and emotion second-guessing your advisor’s motivations. Often, self-interested advisors are well trained, and their sales presentations are sophisticated and polished. It may be a challenge to tell whether the advice given is in your best interests or whether it serves the financial interests of your adviser and the company he represents.

If you become more knowledgeable about how the personal finance advisory industry works, you can better assess the quality of the financial and investment advice that you receive.

The links below will lead you to over 30 personal financial planning articles related to finding, selecting, and working with a financial advisor or investment counselor. These financial advisor and investment counselor articles can also help you to avoid the many problems associated with financial and investment frauds and scams.

• Preparing to interview a financial planner or investment advisor
• Does it matter how financial planners and investment advisors are paid?
• Regulation of financial planners and investment advisors – Introduction
• Avoiding financial planning and investment advisor frauds and scams – Overview
• Are Your Best Interests the Same as the Financial Services Industry?

Note that these objective personal finance articles about finding a financial adviser or investment counselor are published on our sister website, The Skilled Investor. All articles on The Skilled Investor are written by the same author who researches and writes the articles for The Pasadena Financial Planner. (See: About The Skilled Investor.)

All materials on The Pasadena Financial Planner website and on The Skilled Investor website have been researched, written, and published independently. To ensure objectivity, no compensation of any kind has been paid by any third party to influence the editorial content of either The Pasadena Financial Planner website or The Skilled Investor website.

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See: Fee Only Financial Planner Pasadena CA >>>

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Larry Russell, Managing Director

MBA – Stanford University, MA – Brandeis University, and BS – M.I.T.

Lawrence Russell and Company Pasadena, California 91103

(626) 399-9579

A California Registered Investment Adviser — Certificate 133101

KNOWLEDGE — OBJECTIVITY — HONESTY — DILIGENCE — SATISFACTION

A truly independent financial planner and fee only investment advisor

(Concerning my compensation, I provide financial planning services only on a hourly fee or fixed fee for service basis, and only under a contract that we would agree upon. You do not have to pay any form of asset fee. In addition, to avoid any conflict-of-interest, I never accept commissions or compensation of any type from the financial services industry.)

Start a conversation today — Send a message using this contact form

Pasadena Investment Advisors

Use the services of the best independent investment counselor for people who live in and around the Pasadena, West Los Angeles and San Gabriel Valley area, including the cities of Altadena, Alhambra, Altadena, Arcadia, Burbank, Eagle Rock, Glendale, Glendora, La Canada Flintridge, La Crescenta, Monrovia, Montrose, South Pasadena, Sunland, Temple City, Tujunga, Toluca Lake, and Walnut.

This is one of the “10 Steps in the Right Direction” that make up the Pasadena Financial Planner‘s personal financial planning and personal investment management process. For a summary of these ten steps, see “Your Family Financial Planning.” To find an in-depth article for each step, just click the Sitemap link at the top of this page. Also, you can reach us by using the contact form below, and you can subscribe to our Family Financial Planning Blogs. Please enjoy reading this article. Thank you!

This ten-step optimal financial planning and investment management efficiency process envisions time-efficiency throughout all its phases.

When pursuing optimal financial planning and investing strategies and controlling your costs and capital gains taxes, you also need to establish a time-efficient system to monitor, adjust, and adhere to your financial plan. You need to control and limit the time that you spend on your financial planning, and you need to focus your planning efforts on the most effective activities.

Furthermore, since time is always money, you need to ensure that the financial advisors and investment counselors that you hire are also efficient. They need to deliver tangible value and do it quickly and efficiently. Obviously, you should also carefully monitor them and ensure that their recommendations are optimal and in your best interests.

Post-Financial Crisis Notes Concerning:

Investing Strategies

Note: The best personal financial planning and investment practices are enduring and would not vary due to any financial crisis. The detailed article below was written before the recent credit crunch, and it doesn’t need to be revised. In light of the financial crisis, however, the update comments in this box emphasize the enduring wisdom of this original article.

Perhaps the most overlooked aspect of personal investment management is the incredible waste of time. Do-it-yourself individual investors and/or their high cost active professional investment managers demonstrably tend to under-perform passive index benchmarks — especially as the time period increases. Many people waste a large part of their lives implementing investment strategies that have no reliable expectation of doing them any good. Alternatively, they pay active professional fund managers excessive fees to do the same dance with poor results, as well.

With investing less is more. On average over time, people are exposed to less risk and get better net investment results after investing costs and taxes are considered, when they invest in a globally diversified, passive index fund portfolio that they (or their advisers) do not keep changing. Less is more when you buy and hold and hold and hold a portfolio with an asset allocation that is appropriate for your investment risk tolerance. The financial research literature repeatedly demonstrates this. The only reasons why the active management “debate” never seems to be settled is that those who make money off of other people’s money keep telling people to do something rather than do nothing. Doing something always costs more, but there is so much volatility in securities prices that there will always appear to be short-term winners who seemingly have skill, when in fact superior results are far more likely to just be short-term dumb luck.

The foregoing does not explicitly measure the time-efficiency of individual investor investing activities. With professional investors, you can evaluate investment performance over time relative to incremental costs and taxes. When this is done in careful investment research studies, investment professionals tend not to look so professional or so valuable after all. However, individual investors tend to be more atrocious investment managers when the do it themselves.

Without the details, do-it-yourself individual investors make all sorts of investment errors. (See the links in this article.) The result is usually either no benefit or negative results for the effort expended. No sane person would work for an employer who paid them a zero dollar or negative hourly wage, but millions of amateur investors do this to themselves. They keep fooling themselves, because few ever bother to compare their results carefully against a low-cost, fully passive, and totally hands off index fund investment strategy. People waste huge amounts of time and get negative results that they never realize. Do yourself a favor and fire yourself as an investment manager of your own portfolio. Adopt a low-cost, globally diversified, direct purchase, index investment fund strategy and then leave it alone. Instead, spend your time doing something else that you really do enjoy doing. By the way, it is quite likely that by not wasting your time to under-perform a passive index fund portfolio, you will instead actually be paying yourself to do something that you enjoy doing far more than amateur investing.

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Personal financial planning and investing is a lifelong process and not a one-time exercise. Personal situations and financial requirements change, as do the economy and the financial markets. Investment plans need to evolve. By establishing optimal practices at the outset, you can reduce your financial planning and investment management time and get on with other things you might prefer to do.

Scientifically valid financial management and investing strategies often are more time efficient, largely because they are consistently passive rather than active in nature.

For example, given the recommendation in Step 4 to use a Global Investment Diversification strategy, it is questionable whether the vast majority of individual investors should own any common stocks or individual bonds directly. Instead, they can achieve similar expected returns with lower risk by owning index mutual funds or exchange-traded funds (ETFs). The superiority of broadly diversified index mutual fund and ETF based investing for individual investors is broadly established in the financial research literature. Therefore, you should question why any financial advisor, who supposedly is operating in your best interests, would recommend that you hold an under-diversified portfolio.

Note that, in your quest for personal financial planning and investment management efficiency, you also should have a very strong preference for advisors who will only charge you hourly fees or fixed project fees. Then, at least you have a much better chance of evaluating the scope the assistance and tracking the real costs of the efforts that go into advising you. You will be able to control your advisory costs more directly, and you will not have to tolerate advisory hand waving just to justify continuing high fees and asset sharing arrangements. (See these articles: ” Cost Control and Investment Performance Improvement“, which are published on our sister website, The Skilled Investor.)

With financial services, which inevitably are very costly, less is most often more. This is particularly true given the predominant financial services industry business models that view “retail” clients as revenue and profit centers. When you in fact pay “free” advisors by letting someone else pay them, your best interests are at great risk. When you repeatedly pay a percentage of your valuable assets for financial and investment management services, you let someone feed continuously in your trough. Furthermore, with these repeated percent of assets fees, there often is no meaningful connection between what you pay and the value of what you get in return. Financial services industry fees are horrendously high, so you should protect yourself.

A side benefit of choosing index mutual fund and ETF fund-based investments is to be more time efficient. Index mutual funds and exchange-traded funds require far less personal attention.

Most individuals are poor portfolio managers. For the great majority of investors, portfolio self-management yields inferior risk-adjusted results. (See this article: What is the cost to individual investors of sub-optimal diversification?, which is published on our sister website, The Skilled Investor.)

Managing a well-diversified, passive index-based portfolio of individual securities is a task that professional portfolio money managers can manage much more economically. Not owning individual securities means that individual investors do not have to keep up with and decide on a myriad of minutia about dozens or hundreds of companies.

When you finally figure out that active investment management strategies just enrich the financial services industry at your expense, you will quickly abandon them.

Then, it should become incredibly obvious to you that you should turn the index portfolio management task over to professional index mutual fund and ETF managers. The most cost effective multi-billion dollar index investment funds can be managed very efficiently by just a couple of skilled traders.

Monitoring and adjusting your investment plan requires a periodic commitment of your time, but that commitment can be modest. If you choose optimal investment strategies and properly automate your financial tracking and periodic investing to the degree possible, then spending more time on personal finance becomes a matter of choice and not a necessity.

Despite the great importance of financial planning and investment programs, people have lives to live, work to attend to, and family and friends to love and play with.

Financial and investment planning should not and does not have to impose an excessive time burden. Unless financial planning and investing is an enjoyable hobby, which it is to some, there is a significant personal cost to spending time on personal finances. It is important to calculate one’s “effective hourly wage” for the time spent on investment management and to ensure that this hourly wage remains high.

See these financial planning and investment management personal efficiency articles about the value of your time, which are also published on our sister website, The Skilled Investor:

• Investment Opportunity Cost
• Scientific Investment Strategies
• Value-added Investing
• Investment Time

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See: Pasadena Financial Advisors >>>

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Larry Russell, Managing Director

MBA – Stanford University, MA – Brandeis University, and BS – M.I.T.

Lawrence Russell and Company Pasadena, California 91103

(626) 399-9579

A California Registered Investment Adviser — Certificate 133101

KNOWLEDGE — OBJECTIVITY — HONESTY — DILIGENCE — SATISFACTION

A truly independent financial planner and fee only investment advisor

(Regarding compensation, I charge solely on a fixed fee or hourly fee for services basis, under a contract that we agree upon. You will not have to pay any asset fees. In addition, in the interest of avoiding any conflict-of-interest, I never accept commissions or compensation of any kind from the financial services industry.)

Start a conversation today — Send a message using this contact form

Financial Planners Pasadena California

Benefit from the best fee only financial planner. Most of our customers are in the San Gabriel Valley, including La Canada Flintridge, Alhambra, Altadena, Burbank, Glendale, Arcadia, Azusa, Baldwin Hills, and Pasadena.

As you move your cash, bond, and stock financial assets into lower cost, more broadly diversified investment mutual funds and/or ETFs, you should also consider how to “locate” your investment asset allocation with respect to more optimal taxation. This article will also discuss some ideas about where and how to hold your cash assets and how to make emergency cash available. (Note that you can reach us by using the contact form below.)

First, we presume that you have already properly assessed your investment risk tolerance. Using knowledge of your investment risk tolerance, we also presume that you have decided upon an appropriate asset allocation across the primary cash, bond, and stock asset classes. Then, the next question is how you will split your cash assets, fixed income assets, and equity assets between your taxable retirement investment accounts and your tax-advantaged retirement investment accounts, including traditional IRAs, Roth IRAs, traditional 401ks, Roth 401ks, and other such tax-advantaged retirement accounts.

Post-Credit Crisis Notes Concerning:

Asset Allocation Strategies

NOTE: The best individual financial planning practices are durable and should not change due to economic or securities market cycles or crises. This article was written before the credit crunch crisis, but requires no changes. The additional comments in this box emphasize the enduring wisdom of the original, detailed tax optimization discussion that follows.

You and your family’s particular tolerance of or aversion to investment risk drives your long-term asset allocation strategy and your exposure to asset classes with different expected risk and return characteristics. In addition, the differential tax characteristics of various asset classes and the different treatment of taxable investment accounts versus tax-advantaged retirement investment accounts creates valuable opportunities to optimize your overall investment portfolio returns from an after-tax point-of-view.

As long as short-term capital gains tax rates and long-term capital gains tax rates differ and as long as the taxation of returns on certain types of investment securities differs, e.g. taxable bonds versus municipal bonds, then there will be opportunities to pay lower taxes overall related to your total investment portfolio. Merely by holding certain types of assets in certain types of accounts, you can reduce your overall tax payments and thus increase the value of your retained investment portfolio over time. The financial crisis has not affected the logic of this article. However, changes in tax law and in the differential tax treatment of capital assets and account taxability over time can change the long-term value of your effort to optimize your personal asset allocation from a “tax location” perspective.

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Deciding which investment assets to hold in various types of taxable investment accounts versus tax-advantaged or tax-deferred retirement accounts is known as the “asset location” decision.

There can be substantial confusion on the part of individual investors and many investment advisors as to the best location for assets from the standpoint of taxation over the long-term. Simply put, in deciding on your investment asset location, the question is whether you should hold your stocks, bonds, and/or cash in taxable and/or tax-advantaged retirement accounts. To summarize the investment research literature, the academic consensus is that you should prefer to hold your stock or equity assets in your taxable accounts and you should prefer to hold your cash and fixed income assets in your tax-advantaged accounts.

The primary reason for this is that long-term federal capital gains tax rates historically have been substantially lower than short-term capital gains tax rates and ordinary income tax rates. Even though stocks tend to appreciate more quickly than bonds, taxation on equities can often be deferred for a very long time. In addition, when capital gains taxes must be recognized on equity asset transactions, very often these gains will be subject to lower federal long-term capital gains tax rates.

[Note, of course, we also hope that you intend to lower investment fees significantly, if you have not done so already. You can invest your equity, bond, and cash assets in very broadly diversified, passively managed index mutual funds and index ETFs with very low costs, very low turnover, and very low taxes, as well.]

Fixed income / bond assets and cash money assets usually yield income that must be recognized regularly and must be paid at generally higher ordinary income tax rates.

Including inflation which has averaged 3% annually, stocks have returned about 10% per year over the past 80 years. Alternatively, expressed in real dollars or constant purchasing power dollars without inflation included, this means that stocks have yielded about 7% annually over the long-term. For these many decades, high grade longer duration corporate bonds have yielded about 5.5% to 6% including inflation and about 2.5% to 3% without inflation. Cash has yielded somewhat short of 4% with inflation and somewhat less than 1% in real terms without inflation. (For more information about long-term financial asset returns, see these Market Risk Premiums articles published on our sister website, The Skilled Investor.)

For bonds, only a small part, if any, of longer duration fixed income yields are in the form of capital gains, which could be subject to more favorable long term capital gains tax rates. Cash does not generate favorable long-term capital gains at all. Despite the lower yields of bonds and cash, their income is usually continuous and taxable in the short-term. Particularly if you have a relatively high combined state and federal marginal income tax rate, you can lose a substantial part of your bond and cash income to taxation without the tax shelter provided by tax-advantaged retirement plans.

In contrast, even though equities have substantially higher yields, a substantial proportion of these returns can be deferred, which avoids near term taxation. Furthermore, if properly managed, most often these taxable equity returns can be taxed at lower federal long-term capital gains tax rates, when needed.

Combined, these factors mean you can net more after taxes by holding your equities investment assets in taxable accounts and by holding you bond and cash assets in tax deferred retirement accounts.

In the research studies that were mentioned above, investigators analyzed a wide range of portfolios with different asset allocations and different asset tax locations. The objective of these studies was to determine what is optimal from a tax location standpoint, and uniformly they reached the general conclusion to put equity assets subject to long-term capital gains into taxable accounts and bond or fixed income assets into tax-advantaged accounts.

Cash and cash equivalents, which tend to earn less than bonds are “located” in the middle from a tax location or tax optimization standpoint. If your particular asset allocation would me that any cash or bond assets would be held in your taxable accounts, the assets should be cash assets, because their taxable yields are usually lower than bonds. (See the related section below about cash holding entitled “Emergency cash management and your allocation of cash assets to tax-advantaged retirement accounts.”)

Your asset allocation and the total amount of assets you have in taxable versus tax-advantaged accounts combined with your asset allocation will determine whether some of your cash, bond, and/or equity assets end up being held “less optimally” from a taxation standpoint in taxable or tax-advantaged accounts.

To be clear, however, the research demonstrates that the asset allocation decision dominates the tax location decision. This means that you do not change your asset allocation decision, because of tax considerations. Instead, you hold to your asset allocation despite tax considerations. (Note, however, there may be alternative investment vehicles that address particular needs. For example, persons with very high federal, state, and local marginal income tax rates and a relatively high allocation toward bonds may find that their bonds would fill their tax-advantaged accounts and overflows into their taxable accounts. When this happens, they might benefit from holding municipal bonds rather than taxable bonds.)

Obviously, over time your assets in taxable versus tax-advantaged accounts may grow at differential rates. In addition, over time you might decide to change your asset allocation between asset classes. However, asset allocations tend to be relatively stable because they are tied to your relative investment risk tolerance, which tends to be more stable. Therefore you preferred asset allocation percentages do not have to change over time, although they may.

As time goes on, you may need to make rebalancing adjustments to maintain your asset allocation within the percentages and tolerances that you wish to maintain. This might cause some shifts in the which asset classes are held in accounts with different taxability. Nevertheless, your asset allocation decision still would drive everything.

An example of how the personal asset allocation and asset location decisions are combined

Your asset allocation decisions and your asset location decisions can be mapped onto a line that goes from 0% to 100%. First, total the cash, bond, and stock financial assets that you hold in your taxable and tax advantaged accounts, and then determine the proportions that are in taxable accounts or tax-advantaged retirement accounts.

In this example, assume that you presently hold 60% of your total cash, bond, and stock financial assets in taxable accounts. In addition, assume that 30% of your total assets are held in traditional tax-advantaged accounts, and that 10% of your total assets are held in Roth tax-advantaged accounts.

Using the 0% to 100% line illustrated in the graphic below, mark the range from 0% to 60% as your taxable assets. Mark 60% to 70% as your Roth tax-advantaged retirement assets. Finally, mark 70% to 100% as your traditional tax-deferred retirement assets. (Below, we will discuss why we have chosen to place your Roth retirement assets before your traditional tax-deferred retirement assets, as you move up this line.)

Next, on this same line we will overlay your asset allocation. Let us assume that you have chosen an overall asset allocation of 70% to stocks and equity assets, 20% to bonds and fixed income assets, and 10% to cash and cash equivalents. Along this 0% to 100% line, your individual stocks, equity mutual funds, and stock ETF assets would be assigned to the left hand side of this line or from 0% to up 70%.

Because bonds tend to be higher yielding than your cash, you would always assign your fixed income assets to the right hand side of this line. Since you have decided that you want to have a 20% bond asset allocation, then your bonds would fill in the range from 80% to 100%. Finally, your cash would fill in the space in the middle that remains between equities and bonds. In this case, you cash would be “located” from 70% to 80% along this line.

Now, what is the result? Of your 70% allocation to equities, 60 percentage points would fill up your taxable accounts entirely and the remaining 10 percentage points would overflow into your tax-advantaged retirement accounts. In particular, your 10 percentage point overflow of equities would be invested in your Roth retirement accounts. Therefore, in this example, all of your Roth account assets would be equities, since 10% of your total assets currently are equities.

For the remaining 30% of your total assets, which are traditional tax-advantaged assets in the 70% to 100% range of this line, these would be where you put your bonds and cash. Therefore, your 20% fixed income asset allocation and your 10% cash asset allocation would be held in your traditional tax-advantaged retirement accounts.

Why would equities be allocated into Roth retirement accounts versus into traditional tax-advantaged retirement accounts.

If your equity asset allocation is sufficiently high that some of your equity assets would be held in tax-advantaged accounts, then they would be invested in Roth accounts, if you have Roth account assets. Because equity assets historically have appreciated more quickly than bonds or cash, it is preferable for your stock assets to be in Roth accounts, which would not be subject to future taxation. Since traditional tax-advantaged accounts eventually would be taxed at ordinary income tax rates, you would prefer that these accounts would grow more slowly, while you would prefer that your Roth accounts would grow more quickly in relative terms.

Also, note one caveat about the example presented above. If your asset allocation and/or taxable versus retirement asset proportions were different and your equities do not entirely fill your Roth accounts, then you would fill the remainder of your Roth accounts with your bond assets rather than your cash assets. This is simply because you would prefer to have higher growth fixed income financial assets in your Roth accounts versus slower growing cash assets.

In addition to normal differences in investment asset class growth rates, there are some other personal estate planning reasons that could favor placing higher growth assets into Roth retirement accounts.

Roth retirement accounts have some very significant advantages over traditional tax-advantaged accounts for estate planning purposes. If a family’s financial model indicates that there is a good possibility that they will still have some tax-advantaged account assets at death, then those should be Roth tax-advantaged account assets, whenever possible.

US tax laws and IRS regulations require mandatory withdrawals from traditional retirement accounts after age 70 and 1/2. These mandatory withdrawals might be adequate to meet your expense needs in retirement without having to touch your Roth retirement account assets. During your retirement, your Roth accounts would not have mandatory withdrawal requirements. (Obviously, in retirement you would still have the option to withdraw either traditional retirement account assets and/or Roth retirement assets.)

Furthermore, your Roth accounts could be inherited by your children, and these inherited Roth assets could also grow tax free within the inherited Roth account over the expected life of the child. During your child’s life there would be certain mandatory withdrawal requirements that apply to them and taxes would apply to these mandatory withdrawals. This means, for example, that a child inheriting a Roth account at age 40 could perhaps enjoy another 50 years of tax-free investment growth with an income stream along the way from the mandatory taxable withdrawals. Traditional tax-advantaged retirement accounts do not provide these very significant estate planning benefits.

Emergency cash management and your allocation of cash assets to tax-advantaged retirement accounts.

Some people become concerned, if their combined asset allocation decision and asset location decision means that all their cash would be held more optimally from a tax standpoint in their tax-advantaged retirement accounts versus in their taxable accounts. Furthermore, some people also may be concerned about how much cash to hold in a taxable account for “emergency” purposes, despite whether such taxable cash holdings are less optimal from a tax location standpoint.

Often these emergency cash and tax issues are of lesser importance than they would seem at first. A decision can be made simply to keep “X” expense months of cash in a taxable account and to pay the taxes, even though this allocation might less than optimal from a tax savings standpoint. In addition, real estate lines of credit or other unused and available debt lines can be taken into consideration, which perhaps might reduce the amount of emergency cash that one desires to hold in taxable accounts.

By way of example, if your monthly expenses were $6,000, you might want to hold 6 months cash or $36,000 in a taxable savings account. Assuming that you could earn the average historical pre-tax return of 4% annual interest rate on these $36,000 dollars, your taxable savings account would yield $1,440 in additional taxable income. If your total marginal federal income tax rate and state income tax rate was 26%, then you would pay about $375 more in federal and state income taxes annually to hold this cash in a taxable account versus in a tax-deferred retirement account.

To optimize your asset tax location, you could invest your cash in a tax deferred retirement accounts and use off-setting transactions to raise cash money for emergencies.

If you did happen to have a major financial emergency, you could make some offsetting transactions to free up the needed emergency cash from your retirement accounts. In effect, cash can be “moved” out of your tax-deferred accounts when needed by selling taxable equity assets for the cash that was required and then “replacing” those assets in your retirement accounts. You would replace the assets that you sold in you taxable accounts by buying similar assets in tax-advantaged retirement accounts using the cash that you held in your tax-advantaged accounts.

Of course, these offsetting transactions could trigger capital gains tax recognition related to your equity asset sales from your taxable account sales. Over the long-term, the affects usually are quite small particularly since true emergencies consuming significant amounts of cash are relatively rare. Of course, you also might need to make overall adjustments to your asset allocation, given the emergency use of the cash. Furthermore, be aware of IRS wash sale tax rules that might apply, if you buy substantially identical investments in tax-advantaged retirement accounts, when you also sell them in taxable accounts.

Finally, concerning a smaller cash emergency fund, you still might chose to hold some amount of cash in a taxable account for ready access — perhaps a few thousand dollars or more. There could be other benefits to doing this. You may find a bank that will arrange for your savings account cash (earning reasonable interest we hope) to act as over-draft protection to your linked checking account. With such an arrangement the higher taxes associated with holding a small amount of emergency cash in taxable accounts might be offset sometimes by preventing those nasty overdraft events, when you make a mistake and bank charges mount rapidly.

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See: Pasadena Investment Advisors >>>

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Larry Russell, Managing Director

MBA – Stanford University, MA – Brandeis University, and BS – M.I.T.

Lawrence Russell and Company Pasadena, California 91103

(626) 399-9579

A California Registered Investment Adviser — Certificate 133101

KNOWLEDGE — OBJECTIVITY — HONESTY — DILIGENCE — SATISFACTION

A truly independent financial planner and fee only investment advisor

Start a conversation today — Send a message using this contact form

Financial Advisors in Pasadena California

(Regarding compensation, I work solely on a fixed fee or hourly fee for services basis, and solely under a contract that we agree upon. You do not have to pay any form of asset fee. Furthermore, to avoid all conflicts-of-interest, I never accept compensation or commissions of any type from the financial services industry.)

Get help from the top independent financial adviser helping Southern California clients in Burbank, Eagle Rock, Glendale, Montrose, Rosemead, San Dimas, San Gabriel, Silver Lake, La Crescenta, Monrovia, Pasadena, and other cities.

This is one of the “10 Steps in the Right Direction” that make up The Pasadena Financial Planner‘s personal financial planning and personal investment management process. For a summary of these ten steps, see “Your Family Financial Planning.” To find an in-depth article for each step, just click the Pasadena Financial Planning Services Sitemap link at the top of this page. Also, you can reach us by using the contact form below. Please enjoy reading this article. Thank you!

You can significantly improve your net risk-adjusted investment returns by lowering your investment fees and taxes. Cut your investment expenses and capital gains taxes to the bone!

This very important financial planning step focuses on investors’ net or realized investment returns, after investment costs, fees, and capital gains taxes are taken into account. Net investment returns are those investment returns that individual investors could actually spend on themselves and their families.

Post-Financial Crisis Commentary Concerning:

Investment Strategy and Investment Expenses

NOTE: The best personal financial planning rules endure and shouldn’t vary due to financial crisis or market cycles. The article below was written several years ago and requires no revisions. Given the subsequent credit crisis that we have suffered through, these more recent comments in this colored box were written simply to emphasize the enduring wisdom of the detailed original discussion that follows.

Cutting your investment costs to the bone has been, is, and always will be the single most reliable method for individual investors to increase their long-term net investment returns. The financial crisis did nothing to knock investment cost cutting out of this number one effectiveness position for individual investors. Investment cost cutting is always the first and best lever to use to improve long-term net portfolio returns. If anything, the dot com securities market implosion and the several years subsequent credit crunch crisis gave investors two more opportunities to become aware of the corrosiveness of excessive investment costs.

There is no other investment indicator that is as reliable as lower costs in producing better net investment performance. Unless you make a point of slapping them away, so many little silk and woolen hands will stay in your investment wallet and keep taking “a little bit” here and “a little bit” there in terms of:
1) sales loads to pay brokers and advisors who induce you to buy investments with higher costs;
2) ongoing 12b-1 sales fees that pick your pocket year after year;
3) higher fund management fees to pay for active management activities that inevitably fall short of passive benchmarks — especially as the time period increases;
4) higher portfolio churning and turnover which leads to higher hidden costs;
5) high percent-of-assets advisory fees that compound costs, because advisors try to beat-the-market to justify their fees — inevitably falling short over time on average; and
6) a myriad of other one-time and recurring industry fees that bleed away value related to your taxable retirement asset accounts.

Millions of individual investors have started paying attention to investment costs. This has been demonstrated by massive investment asset shifts from higher cost to lower cost investment vehicles in recent years. When securities market values stagnate, people inevitably begin to look more at reducing their costs to improve their net returns. But, the truth is that they always have been looking for the lowest cost investments — and they always should in the future. There is no credible evidence that professional investors can pick winners that do well enough to overcome their higher costs. Over and over again, the investment research literature has demonstrated the opposite: The less you pay in investment expense, the more you keep!

If you have not already done so, it is time for you to wake up about investment costs. Net investment performance short-term and long-term is a zero sum game across all investors. Long-term the global securities markets tend to reflect the value of the global economic development and growth that underlies the markets. Over the long run, securities markets act as an allocation mechanism to distribute this underlying economic value to debt holders and to enterprise shareholders. Along the way, if you keep giving away some of your ownership share to the industry through higher investment costs, that long-term economic value will just end up somebody else’s pocket. While the financial industry attempts valiantly to minimize and obscure the effects of their unjustified investment costs, the corrosive is always there, damaging your family’s long-term welfare. If you own assets, then you are a profit center for the industry. Get real. There is no “partnership” between the industry and individual investors.

(By the way, the number two investment return improvement lever for individual investors is tax-aware investing, including optimization of long-term capital gains, maximum use of tax-advantaged retirement accounts, and optimal investment “tax location” decisions regarding their asset allocation. See other articles in the Sitemap)

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EACH AND EVERY YEAR, the average individual investor spends about 2% to 3% of their TOTAL investment portfolio ASSETS on excessive investment management fees, unnecessarily high securities trading costs, unjustifiably high investment custody fees, and completely avoidable usually short-term capital gains investment taxes. Where do you think a lot of those multi-billion dollar Wall Street broker bonus payments are coming from? Directly or indirectly from your taxable financial assets and retirement financial assets is the answer. In aggregate, brokers don’t add value. Some clients seem to win on occasion, but most just keep losing, while the brokerage house always takes its cut of the action. (See: “Excessive Investment Costs are a huge problem for individual investors” published on our sister website, The Skilled Investor.)

These wasted investment costs mean that the average individual investor typically gives away between 1/4 and 1/3 of his or her annual investment returns to the securities and financial services industry. In aggregate across all individual investors, these investors will get nothing in return.

Well, that is not entirely true. In exchange for paying more to engage in high tax and high cost active investment management strategies, participating investors will be taken on a much wilder investment roller coaster. Unpredictably, active investors may experience more dramatic ups and downs. On average, in addition, they will suffer inferior investment performance due excessive investment costs and unnecessary capital gains tax payments.

The cumulative long-term impact on personal investment portfolios is simply staggering. Across all investors, these excessive costs are a complete waste. In fact, excessive investment expenses are simply an incredible wealth transfer to the securities and financial services industry. The associated and unnecessary capital gains taxes are just a wealth transfer from individuals to the government.

It is difficult to identify another industry that charges so much and promises so much to their customers, and yet ends up delivering so little in terms of added-value to their customers. Until individual investors wake up to the fact that they are paying far more than is necessary for so little in return, they are far more likely to have dramatically diminished investment portfolio assets during their lifetimes.

For more information about the value of reducing your investment expenses and controlling your capital gains taxes, see these articles on “Cost Control and Investment Performance Improvement,” which are published on our sister website, The Skilled Investor.

Human greed, personal investment ignorance, financial advisor compensation incentives, and the securities industry’s beat-the-market sales mantra are far too strong and too well-aligned for investment performance chasing by individual investors ever to end.

Unfortunately, The Pasadena Financial Planner has no expectation that the causes of excessive investment costs and wasted capital gains taxes will ever change. This beat-the-market investment management shell game rubbish will continue as long as individuals believe that they can get better risk-adjusted performance than the other guy does at no real cost to themselves. Naive investors will continue to use superior historical performance as a false indicator of what will happen in the future. They will be continually be disappointed, but only if they ever bother to check their results against the net investment yield of a low cost, low tax passive index investment strategy.

Naive individual investors, often abetted by their financial advisors, will continually pay excessive fees to investment money managers whom they hope will beat the securities markets for them. Yet, investment research studies indicate that there are no reliable ways for individual investors to identify, before the fact, superior active investment managers from within the crowd of mutual fund money managers.

The excessive management fees that are charged across the industry virtually guarantee that individual investors will not be able to hire money managers at a profit. The average mutual fund management expense ratio is about two times higher that the apparent value-added of the average investment fund money manager.

In addition, these excessive management expense ratios still do not include the much higher portfolio trading costs and higher capital gains taxes that go along with an actively managed mutual fund. Furthermore, most high cost actively managed mutual funds are sold through financial advisors who add no value in the selection process. Nevertheless, these investment counselors will still charge you a front-end sales load or a back-end sales load and will also add an annual 12b1 fee on top of the management expense ratio. What a deal!

Particularly during the last two decades of the 20th century, the fees extracted by the financial securities industry have increased substantially on both a total and a percentage of returns basis. What has the value-added been? In aggregate, the value has been negative. Furthermore, as a bonus, unwitting participants in active investment management strategies experienced a much wilder investment ride and took greater investment risks than were necessary.

Total mutual fund expenses and mutual fund management expense ratios have not decreased. To cut your investment fund costs, you have to do it yourself.

If you pay attention to the statements of mutual fund industry trade groups, you may hear claims that mutual fund investment fees have come down (slightly) as a percentage of investor’s assets during the last couple decades. However, what the fund industry fails to explain is that almost all of the new mutual funds that it keeps introducing have higher than average management expense ratios. If the mutual fund industry could get you to pay higher investment expense ratios, it would and it does when it can.

The mutual fund industry does this by launching numerous new mutual funds with high expense ratios. Then, after the fact, the mutual fund industry only promotes new funds and old funds that happened to have done well. The mutual fund industry knows that nothing sells better than the implication that superior past performance, as displayed in performance charts and with 4-star ratings and 5-star ratings, will continue. While this very selective marketing process hints that superior past performance will continue into the future, the legal small print always tells you not to count on it. For more information about the problems associated with immature mutual funds, see this article “Choose Mature Noload Mutual Funds” published on our sister website, Best No Load Mutual Funds.

Even though it is just a chimera, the mutual fund industry is counting on individual investors to extrapolate superior past performance into the future. The mutual fund industry and its supposedly “independent” financial advisors, who only promote mutual funds with sales loads and four stars and five stars, both know that these funds are easier to sell to naive investors. The fee revenues are too good to do anything else instead, such as educate investors not to extrapolate past performance. For more information about selective mutual fund marketing, see this article “How Morningstar Ratings for Mutual Funds Are Used As a Marketing Tool” published on our sister website, The Skilled Investor.

Note that the mutual fund industry will not dispute the fact that the total amount of fees that they collect has risen many times over. Invested assets have increased many times over due to investor savings and new investments and to investment asset growth and appreciation. When you charge people a percentage of their appreciating assets, then total industry fees have to go up in proportion, as well.

Percent of asset fees are a revenue and profit gravy train for the financial services industry. However, you might want to stop and ask why the industry deserves a percentage of your assets each and every year. They are YOUR assets, are they not? Why just give them away without getting incremental value in return?

Mutual fund management expense ratios have only come down because some investors have shifted their assets into low cost noload mutual funds.

If you looked more carefully at the numbers, you would find that mutual industry claims of reduced management expense ratio percentages are based on aggregate data across all types of mutual funds. These aggregate data combine both: a) the much higher costs of actively managed mutual funds with sales loads and b) the much lower costs of no load index mutual funds. The primary reason why the average mutual fund expense ratio has come down in the past, albeit only slightly, is that a substantial minority of all individual investors has gotten smarter about excessive investment costs.

More cost-conscious individual investors and certain of their more helpful financial advisors and some more cost conscious institutional investors have been redirecting increasing proportions of investment assets under their control into lower cost funds. These transfers of assets into lower cost no load mutual funds pulls down the overall management expense ratio percentage for all mutual funds.

Furthermore, returns on low cost, no load index mutual funds have been better on average than actively managed funds. Therefore, these noload mutual fund assets have appreciated more rapidly. Low cost no load mutual fund assets will also tend to be greater, because an investor’s full dollar gets invested into a noload mutual fund. Sales loads siphon away about a nickel of each dollar at the outset to pay the financial adviser through a sales load. These sales loads diminish the total amount of actively managed investment fund assets compared to noload mutual funds.

Therefore, the actions of some investors to seek lower costs have held down the growth of management expense ratio percentages and other costs. The mutual fund industry did not cause the average mutual fund investment expense ratio to come down (ever so slightly). They have been trying to push up your costs – and their revenues and profits in the process.

If you start taking investment cost cutting much more seriously, you will not be alone. The industry will not do it for you. You have to lower your investment costs yourself.

Management expense ratios and trading costs are also excessive for exchange-traded funds (ETFs).

Concerning exchange-traded funds (EFTs), you may hear the argument that ETF management expense ratios are lower than mutual fund management expenses. This is another false industry comparison. Due to the structure of ETFs, virtually all exchange-traded funds are passive index funds. Unfortunately, newer exchange traded funds that have been introduced to the securities markets increasingly have carried higher management fees and have tracked narrower and more esoteric indexes. This ETF Balkanization defeats the important goal of achieving a broadly diversified portfolio economically.

As a quick summary, here is why almost all ETFs are passively managed index funds. Since the composition of an ETF’s portfolios is known daily, an actively managed exchange-traded fund’s strategy would be exposed and would be gamed by other market participants. That is why it took until 2008 for just a few somewhat actively managed exchange-traded funds came to the market. On the contrary, actively managed mutual fund portfolios are not known to other market participants in real-time. Therefore, actively managed mutual funds can pursue their investment strategies without other professional traders knowing their strategy and trading against them.

Since ETFs are almost all passively managed index funds, then their management expense ratios and all other expenses should be compared with very low cost passive index alternatives – both mutual funds and ETFs. When you look at the management expense ratios of most ETFs you find that there almost always is a much lower cost index mutual fund or ETF that you could purchase instead.

Furthermore, since ETFs are traded on securities exchanges much more easily than mutual funds, the daily volume of ETF trading has exploded, when compared to total assets that are invested in ETFs. Mutual funds, which get priced once daily, are traded excessively by some performance chasing investors, but the amount of these trades is no where near the volume for ETFs. Furthermore, due to the mutual fund trading scandals early in this century, restrictions have been placed on short-term mutual fund trading, which occurs at the expense of longer-term mutual fund investors.

If you do not buy and hold very low cost, broadly diversified ETFs, you can easily drive up your costs through excessive brokerage fees.

ETF brokerage fees are far more likely to sink investors’ returns, than investors’ clever trading bets are to increase their exchange-traded fund returns. If you decide to invest in ETFs, you should understand the real danger of excessive exchange-traded fund trading. Only a small portion of ETFs are very low cost and are broadly diversified. The rest of these ETFs are just high priced index funds that focus on narrower and narrower securities market segments.

The more you trade ETFs, the worse you are likely to do. Remember that exchange traded funds are a brokerage industry response to the mutual fund industry. ETFs have allowed securities brokers to capture some investor assets that otherwise would have be invested in traditional mutual funds.

With a few notable exceptions, most mutual fund companies try to push up their fees by implying that their actively managed funds will beat the market. In aggregate this claim is false, and the more you spend the less you are likely to get. In the same vein, brokers selling ETFs may point to lower ETF management expense ratios and the supposed superior tax efficiency of ETFs.

However, most ETFs still have excessive expense ratios and carry the heavy added burden of brokerage trading fees. Excessive trading can easily negate any supposed ETF tax advantages. ETFs only make sense as an alternative to mutual funds, if you buy only very low cost, broadly diversified ETFs from a discount broker, and then you hold them for the long-term without trading

To obtain better net investment returns, individual investors must carefully control both visible investment management fees and more hidden investment trading costs and associated capital gains taxes.

At the same time that investment management fees and costs were rising dramatically, industry deregulation, market innovation, and increased competition provided many new and useful low cost investment fund mechanisms for investors to manage their assets in a far more cost-efficient and tax-efficient manner. Just because most other individual investors and their financial advisors seem not to have a clue about optimal investment strategies does not mean that you need to be clueless, as well. You do not have to play this game. You will not be alone, if you decide to stop listening to the siren song of superior returns and then cut your costs to the bone so that you actually have a better chance of really obtaining superior returns.

Adopting investment strategies based on scientific finance is the first part of investment cost and investment tax reduction. Low cost, passive index fund investment strategies are inherently more cost-efficient and far less risky. This is not surprising, because a fundamental goal of investment research has been to discover those strategies which maximize personal economic welfare on a risk-adjusted returns basis. It is time to pay attention to this research and to stop listening to the securities industry’s siren songs about superior investment returns.

Individuals can adopt very low cost passive index investment strategies and avoid the charade of paying much more to get inferior investment results. Furthermore, when you stop playing this game, you also stop exposing yourself to many unnecessary and uncompensated investment risks along the way. In addition, you save a lot of your valuable time. For more information about why passive investment strategies are advantageous, see this article “Passive individual investors are “free riders” who benefit from the higher costs of active traders” published on our sister website, The Skilled Investor.

The conflicts of interest between individual investors and the financial services industry continually threaten the investment portfolios of individuals and their families.

Focusing on investment cost reduction can also draw your attention to the potentially very negative personal financial impacts of biased and sub-optimal advice. The financial services industry offers products and services for investors to buy at prices that include the market value of the investment securities plus the costs and profits related to the sale and transaction. Often the true cost of the industry’s markup is obscured or hidden.

Investors need to understand that their interactions with the financial markets through these industry intermediaries are a “zero-sum game.” In and of itself, the securities industry does not create any value for you. Of course, the markets serve extremely valuable price setting and capital allocation functions within the global economy. Nevertheless, the competition between professional investors largely drives and achieves these important capital allocations functions.

Before investment costs and capital gains taxes are considered, at best, the securities markets are a “zero sum” game from the point-of-view of the interests of individual investors.

I say “at best,” because the demonstrated naivete and mistakes in personal investment management of millions of individual investors, makes it likely that their involvement in the securities markets is already a slightly “negative sum” game even before they pay such high investment fees and costs. However, when excessive “retail investor” costs and taxes are considered, then a significant portion of investors’ potential returns are simply swept away by the financial securities industry.

Particularly with the abnormally high market returns of equities-based securities during the last two decades of the 20th century, many investors became very lax about managing their investment costs and capital gains tax realization. Double digit returns made costs seem like “just few percent” and not very important. Following the dot-com stock market crash and the deflating of the equity securities asset bubble, many investors need to make cost cutting and investment tax reduction a much higher priority.

The most effective strategy you have to improve your investment returns is to cut you investment costs and investment taxes down to the bare minimum. Once you commit to this mission across your lifetime, you may discover another financial miracle. When you refuse to pay more than the bare minimum needed to buy very broadly diversified investment funds, then financial advisors who add no value will figure out that you are not an easy mark and move on. Then, you might actually have a better chance of finding a financial advisor who will provide advice that is actually in your best interests!

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See: Financial Planning Consultants in Pasadena California >>>

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Larry Russell, Managing Director

MBA – Stanford University, MA – Brandeis University, and BS – M.I.T.

Lawrence Russell and Company Pasadena, California 91103

(626) 399-9579

A California Registered Investment Adviser — Certificate 133101

KNOWLEDGE — OBJECTIVITY — HONESTY — DILIGENCE — SATISFACTION

A truly independent financial planner and fee only investment advisor

(Concerning my compensation, I perform services solely on a fixed fee or hourly fee for services basis, and only under a contract that would be agreed upon with you. You do not have to pay any form of asset fee. Furthermore, to avoid any conflict-of-interest, I do not accept compensation or commissions of any kind from the industry.)

Start a conversation today — Send a message using this contact form

Investment Advisors in Pasadena California

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(Note that you can reach us by using the contact form below.)

Using hundreds of thousands of what the securities industry calls “producer” employees, the brokerage industry sells investment products and services to clients for transactional fees, asset holding charges, and many other more or less visible investment costs. Governed by the Securities and Exchange Act of 1934, as amended, the legal standard of client care by these brokers is the “suitability” of an investment to a client. However, there is huge latitude in what a suitable investment is and how much it can cost a client.

From the brokerage industry’s perspective, the wealthier the client is the better. Greater assets yield more revenue and higher profit per hour spent with clients. For example, Morgan Stanley’s 2007 compensation plan for their personnel serving retail clients eliminated all compensation for household accounts below $50,000, and it reduced compensation on household accounts under $75,000, unless these client accounts were being charged a percent of assets fee. Clearly, the message to Morgan Stanley sales personnel was and is to chase wealthier fish. Similar messages are given to broker producer employees in all brokerage firms across the industry.

Post-Credit Crisis Notes Concerning:

Financial Planning Fees

NOTE: Best individual financial planning and investment practices persist and shouldn’t vary because of financial crisis. The detailed article below was published before the financial and requires little updating. Given the more recent financial crisis, the update comments in this box were authored more recently to emphasize the enduring wisdom contained in the detailed original article below.

As the financial crisis arose and subsided, those who occupied many of the musical chairs of the financial industry changed. However, the financial incentives and compensation practices of the industry changed hardly at all. Since increasing industry concentration had never been challenged before the financial crisis, we were all faced with the “too-big-to-fail” conundrum. The professional — supposedly “smart money” — financial industry created a toxic financial environment for everyone, but they just “had” to be bailed out by taxpayers, so that all of our houses would not burn to the ground collectively.

Subsequently, little if anything has changed — even with passage of Wall Street reform act in 2010. Before most of the country had realized just how persistently bad things would become in the general economy, the securities markets turned around in anticipation of future improvements. And, huge Wall Street bonuses started all over again. Yet, it was the taxpayer bailout money that keep the financial industry and the general economy away from the precipice of another great depression. Thus, financial market expectations rose off of extremely pessimistic depression expectations, allowing the industry to restore its profitablity and fat paychecks.

Concerning how the financial advisory industry deals with the “retail public,” which is discussed in this article, little has changed. If anything the industry’s pursuit of the rich has intensified, while services to the middle class have declined. In summary, if you don’t have substantial investable assets, then expect little attention and overly expensive commissioned products. If you do have substantial investable assets, then hold on to your wallet with both hands! You will be asked to pay a substantial percentage of your assets year after year with no reliable assurance that these fees will improve your welfare in the long-term.

Most registered investment advisor compensation is proportional to client assets — the more assets you have the better for your financial adviser

Another large segment of the financial services industry that serves the public consists of about 100,000 independent investment advisor consultants, who are regulated at the federal and/or state levels. Governed by the Investment Advisers Act of 1940, as amended, and by state laws, these advisors have a seemingly more stringent standard of client care. However, again there is huge latitude in what constitutes minimally acceptable advisor service quality and how much advisory services will cost a client.

Most registered investment advisors deliver services that are charged as a percent of client assets under management. However, often many of these same advisors obtain additional revenues from the securities and insurance industry, when they sell commissioned financial products to their clients.

The wealthier the registered investment advisor’s client is, the better it is for the advisory practice. The greater the client assets under management, the more total revenue for the advisory firm and the higher the client service profit per hour will be.

The economics of the financial consulting industry create a mad dash to catch the wealthy

Whether served by a broker or by an independent financial advisor, if an individual wants personal professional attention, that individual must already have substantial assets that can generate revenue to compensate the advisor. If clients are to be given personalized attention and the valuable time of the advisor, each client must generate several thousand dollars in fees annually one way or another.

The math is simple. For example, if average client servicing requires 20 hours of attention yearly and a profitable hourly rate is $150 per hour, then the required average revenue per client is $3,000 per year. If $3,000/per year is the client revenue minimum for a practice, then the client needs to have $300,000, if the fee is 1% of assets per year. The lower the assets, then the higher the percentage necessarily must be.

Since clients usually balk at much higher percentage fees, the revenue requirements of advisory practices mean that people with less assets will not get personalized services. Clearly, the vast majority of Americans do not fit the industry’s economic profile of a profitable advisory client.

This is why there is so much effort to obscure and hide the true financial and investment costs that clients actually pay. The more the true cost can be hidden and the services promoted as supposedly “free,” then the easier it is to profit from the client, while probably not serving his best interests.

The Pasadena Financial Planner breaks out of this chase-the-rich compensation model

My financial and retirement planning services will be valuable and cost-effective to you. My financial consultant fees will be reasonable, clearly understood, and determined in advance. I can provide you with comprehensive, reasonably priced financial, investment, and retirement planning services on an hourly, fixed fee, or retainer basis. I never charge any fees in relationship to your assets.

For a better understanding of how I operate see: Financial Planning in Pasadena

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See: Independent Pasadena Financial Advisor >>>

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Larry Russell, Managing Director

MBA – Stanford University, MA – Brandeis University, and BS – M.I.T.

Lawrence Russell and Company Pasadena, California 91103

(626) 399-9579

A California Registered Investment Adviser — Certificate 133101

KNOWLEDGE — OBJECTIVITY — HONESTY — DILIGENCE — SATISFACTION

A truly independent financial planner and fee only investment advisor

(Regarding how I am compensated, I perform services only on a hourly fee or fixed fee for services basis, and only under a contract that we agree upon. You do not have to pay any asset fees. In addition, to avoid any conflict-of-interest, I never accept compensation or commissions of any type from the industry.)

Start a conversation today — Send a message using this contact form

Pasadena Financial Advisors

Find the best independent financial planner for those living in the San Gabriel Valley, including Arcadia, Baldwin Park, Burbank, Covina, Diamond Bar, Glendale, Duarte, La Canada Flintridge, West Los Angeles, and Pasadena.

(Note that you can reach me by using the contact form below.)

During my 20+ year Silicon Valley business management career, I had saved and invested according to the financial principles that I had learned at the Stanford Business School in the early 1980s. (See: Pasadena Financial Planner) Retiring in 2001, I began a systematic reading of the academic literature about personal financial planning and personal family investing.

As I searched the web, university libraries, and on-line scholarly paper repositories, I was impressed by how much very useful personal financial planning information was scattered around the academic world. It seemed to me that many individuals and families were starved for just this kind of objective financial and investment information. At the same time, people were drowning in a sea of self-interested securities and financial services industry sales pitches that pushed overly expensive and unnecessarily risky investment products, with expected returns that were much more likely to be inferior due to these high investment costs.

Information from the financial media and financial services industry is superficial and biased.

The financial media and the securities industry generate a deluge of information, but leave individuals with very little systematic or durable understanding of which are the best financial planner practices, and which practices are likely to be inferior. Faced with all this finance and investment “noise,” individuals are hard pressed to understand what is true and what financial and investment claims have or have not been verified. Without valid guideposts to screen out all the noise and self-interested hype, individuals cannot reasonably be expected to plan a proper course for their lifetime financial affairs.

Scientific financial planning information is very useful to individuals for personal financial planning and investing.

As I returned to my academic and research roots, I began to read finance and investment journals, to visit finance professors’ websites, and to search the Internet for publications and working papers. After my first year of almost full-time reading, clarity began to emerge. By the middle of 2003, I was convinced that I understood more efficient and scientifically verifiable pathways for individuals to optimize their financial planning and investment strategies.

Since then, I have collected and organized over 25,000 electronic documents related to personal finance and investing. I have read thousands of research paper abstracts and over 1,000 seminal financial and investment papers in their excruciating economic and statistical details.

Nevertheless, academic research papers are not written for individuals, but rather for other academics and for highly trained financial industry research professionals. Furthermore, useful information is dispersed in a sea of less useful research information not focused on personal financial planning. Moreover, these research papers contain the obscure vocabulary of economic and statistical research — not breezy reading at all! To make some of this information more accessible, I have written hundreds of articles and published them for free on various financial websites.

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See: Financial Planner Pasadena CA >>>

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Larry Russell, Managing Director

MBA – Stanford University, MA – Brandeis University, and BS – M.I.T.

Lawrence Russell and Company Pasadena, California 91103

(626) 399-9579

A California Registered Investment Adviser — Certificate 133101

KNOWLEDGE — OBJECTIVITY — HONESTY — DILIGENCE — SATISFACTION

A truly independent financial planner and fee only investment advisor

(Regarding compensation, I provide financial planning services solely on a fixed fee or hourly fee for services basis, and only under a contract that we agree upon. You do not have to pay any asset fees. In addition, in the interest of avoiding any conflict-of-interest, I do not accept compensation or commissions of any type from the financial industry.)

Start a conversation today — Send a message using this contact form

Pasadena Financial Advisors

Find the best independent investment advisor for money conscious people in Pasadena, Altadena, Arcadia, Baldwin Park, Burbank, Eagle Rock, Glendale, La Canada Flintridge, La Crescenta, and other surrounding cities.

<<< Pasadena Financial Planner Background Part 1: Pasadena Financial Planning

(Note that you can reach me by using the contact form below.)

Receiving my Stanford MBA in 1982, I moved a few miles south to begin my corporate career in Silicon Valley. For most of my twenty-five plus years after Stanford, I have managed strategic business and corporate initiatives for technology companies. Analytically oriented management positions in these corporations sharpened my financial and business judgment. I first joined Hewlett-Packard’s computer systems division, where I led business development and marketing initiatives. After seven years at HP, I was Director of Product Marketing at IntelliCorp, an AI software company, and then I moved on to Sun Microsystems.

At Sun Microsystems from 1991 to 1999, I acquired rights for Sun to numerous product lines from independent technology companies via negotiated licensing arrangements. As Director of Corporate Development during my last four years at Sun, I oversaw merger and acquisition projects and evaluated innumerable external investment proposals that were made to Sun’s executive committee members.

Bitten by the startup bug in 1999, I co-founded Codexa Corporation in Altadena, California. Codexa provided advanced information services to Wall Street securities industry professionals. My co-founder and MIT roommate, Dave Leinweber, had been managing about $6 billion of institutional equity with highly quantitative methods at First Quadrant in Pasadena. Look here for chapter summaries of his recent book, Nerds on Wall Street, published by Wiley. Most individual investors do not have a clue about the techology behind Wall Street professional trading — if they did, then some of them might not do all the silly stock trading, options trading, currency trading, day trading, etc. that they do to fritter away foolishly some of their hard-earned assets, while wasting their valuable time.

Solving the Internet on-line trading and investment management information challenge

Dave believed that the flood of financial information across the web had greatly changed the nature of the securities markets. Together, we founded Codexa Corporation and set out to develop a technological solution to gain some control of this information explosion. Our primary objective was to harvest, filter, and display semantic trading and investment management information on traders’ workstations in real-time.

We developed Codexa’s information service provider business plan, hired the management team, and raised an $8M Series A venture round. The company secured $2M in initial revenues from major Wall Street investment and trading clients. As Codexa’s EVP and CFO, I managed the finance, business development, accounting, human resources, legal, and real estate functions. Then, the stock market collapsed and our paying Wall Street clients simply evaporated. It did not matter that we succeeded in developing a robust and extensible technology. The clients who had been supporting our early technology development efforts disappeared as Wall Street’s revenues collapsed and tens of thousands of people in the securities industry lost their jobs.

Our business stradded both the faltering financial securities industry and the plummeting high technology industry. When these industries collapsed, so did Codexa. We had to let fifty very skilled software technology people go. Subsequently, I had the privilege to learn about the corporate bankruptcy process, which had never been high on my list of career interests. Except for a subsequent six-month consulting arrangement as the interim president of a Caltech startup during its formation, very little new was happening in the technology economy after the crash in Southern California. Therefore, I retired at the ripe middle age of 50, just as I was receiving my first solicitations in the mail from AARP.

With the dot com stock market collapse, the high tech industry in the U.S. lost roughly 225,000 positions and the securities industry lost approximately 75,000 positions. It was financially devastating for many affected families, and even those who remained employed found a very significant deterioration in the quality of work life and a great increase in stress.

While the economic fallout from the market crash could have been a lot worse to the broader economy, it was and still is devastating to many in the high tech industry. (And, you could easily perceive that historically low, post-dot-com-crash interest rates coupled with good old greed and lax regulation of mortgage brokers, resellers, and derivatives hucksters have lead us to the broader real estate and credit crisis of 2007/8/9 and counting — just a delayed reaction to the false “cure” for the dot com crash.)

I quickly concluded that the dot com economic downturn was so severe from a new employment opportunities standpoint, that it is not even worth looking. I decided to wait it out. This was a great blessing in disguise, that I did not recognize at the time.

Comprehensive financial planning advice based upon objective financial research

As an involuntarily retired 50-year-old, I still had the start-up bug. Instead of heading for the golf course, I decided to do some in depth investment research and to catch up on new developments since I studied finance at Stanford.

I started Lawrence Russell and Company, and I began to publish The Skilled Investor. I wrote and published hundreds of objective personal financial planning and investment articles on the Internet. I now have a family of free and objective financial information websites written entirely by myself that help to meet the informational needs of individuals around the world who are managing their own financial and investment affairs.

My firm also became a Registered Investment Adviser in the state of California (Certificate #133101). I passed the Series 65 “Uniform Investment Adviser Law Examination” administered for the North American Securities Administrators Association (NASAA) by the Financial Industry Regulatory Authority (FINRA). I hung out my virtual shingle.

I designed and developed VeriPlan, which I dubbed “Your Personal Financial Lifecycle Planner.” I did an indepth, multi-year study of the scientific finance and investment literature to find out what personal financial planning and investing strategies and tactics really do and do not work.

In short, I am having tremendous fun developing financial planning software, writing financial planning articles, and offering comprehensive financial planning services to families in the Greater Pasadena California, West Los Angeles, Gendale, and San Gabriel Valley areas of Southern California.

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See: Financial Planning in Pasadena CA >>>

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Larry Russell, Managing Director

MBA – Stanford University, MA – Brandeis University, and BS – M.I.T.

Lawrence Russell and Company Pasadena, California 91103

(626) 399-9579

A California Registered Investment Adviser — Certificate 133101

KNOWLEDGE — OBJECTIVITY — HONESTY — DILIGENCE — SATISFACTION

A truly independent financial planner and fee only investment advisor

(Concerning my compensation, I perform services only on a fixed fee or hourly fee for services basis, and only under a contract that we agree upon. I do not charge any form of asset fee. Furthermore, to avoid any conflict-of-interest, I do not accept commissions or compensation of any type from the financial services industry.)

Start a conversation today — Send a message using this contact form

Financial Planner Pasadena CA

Get comprehensive financial planning services from the best personal financial advisor serving clients in the Pasadena area, including these cities: Altadena, Arcadia, Burbank, Eagle Rock, Glendale, La Canada Flintridge, La Crescenta, and Monrovia.

(Note that you can reach me by using the contact form below.)

The Pasadena Financial Planner (Larry Russell) is an experienced business executive with a background in corporate business management, technology start-ups, financial modeling, investment management, economics, statistics, taxation, and accounting. This article provides the biography of the Pasadena Financial Planner and explains how his expertise in comprehensive financial planning and investment management has developed over his career.

The Analytical Education of the Pasadena Financial Planner

The Pasadena Financial Planner is me, Larry Russell. I grew up in a rather small town in the Midwest. I was 6’ 6” tall by age 16, and my pants were always too short. In 1970, I left for college on a Greyhound bus with one box and two suitcases. I arrived in Cambridge, Massachusetts to study at MIT.

As a child growing up in the America’s endless rural heartland in the 1950s and 60s, I lacked a genuine appreciation for the word “metropolitan.” I did not realize that the edge of one “town” near Boston was not a field or pasture, but just another crowded suburb. A modern Paul Revere would have been stuck in traffic all the way to Lexington and Concord. And, the British Army would have been way back in that traffic jam.

At freshmen orientation in MIT’s old gymnasium, various university dignitaries welcomed the incoming freshmen. One gentleman gave us the “look-to-your-left-look-to-your-right-one-of-you-won’t-be-here-in-four-years” speech. I got the point and decided that I would still be there in four years, and I was. While MIT’s core science and math curriculum was a required rite of passage that I still value over three decades later, I found studying human behavior to be much more interesting.

I studied politics and economics and picked up a BS from MIT and later an MA from Brandeis University. After Brandeis, I embarked upon a career in social science research. First, I conducted survey research and performed statistical analyses of corporate employee benefit programs at the private, non-profit National Manpower Institute in Washington, D.C. Then, I moved to Northern California to join the Institute for the Future, a think tank in Menlo Park that built automated economic, demographic, and technological models to explore scenarios about the future.

An early understanding of the strengths and limitations of future-oriented financial planning tools

The Institute for the Future provided opportunities for me to apply my econometric, statistical, and political education to supposedly predictive, automated modeling projects. We used sophisticated projection methods to develop long range planning scenarios for Fortune 100 clients that incorporated financial, econometric, demographic, and technological factors.

Through my work experience at the Institute for the Future, I became convinced that the future is fundamentally unpredictable from the standpoint of forecasting reliably any specifics about the future. I came to realize through experience that the quality and comprehensiveness of any analytical projection model and its associated data will significantly affect the forecasting model’s usefulness in developing insights about what might happen in the future.

I also learned to appreciate the value of comprehensive and automated scenario planning. While any specifics about the future cannot be predicted reliably, computer modeling permits the evaluation of a range of internally consistent future projection scenarios. (And, when it comes to planning your personal lifetime finances, such a rigorous projection modeling approach is a heck of a lot better than relying upon uninformed, random guessing!)

While I did not expect my experience at the Institute for the Future to be useful 30 years later, the insights I gained have strongly shaped my approach to delivering comprehensive personal financial planning and investment services to clients. During the past several years, I designed and developed VeriPlan, which is a comprehensive, automated personal lifecycle financial planning application.

I use VeriPlan with clients who want to develop a comprehensive picture of their financial affairs projected across their lifetimes. In addition, for do-it-yourselfers, I have also made VeriPlan available for licensing through one of my other websites, Financial Planning Software. Individuals can buy a copy of VeriPlan for a very modest fee and do their own lifecyle personal financial planning, if the have the time and energy it takes to enter their data and do their own planning.

In designing VeriPlan, I knew that this Financial Software Tool must enable detailed modeling and rapid development of lifecycle scenarios in a highly personalized financial context. Over the last several decades, computer resources have vastly increased. The average PC today can handle the intensive computational demands of VeriPlan and still produce results instantly after any change is made to a family’s financial projection model. Thirty years ago you had to line up with all the other nerds to use some hulking room-sized computer in a distant building. You had only one chance to run your program correctly, before you went to the back of the line to restart the cycle.

Most days that I worked at the Institute for the Future, I peddled my bicycle across the Stanford University campus and huffed and puffed up Sand Hill Road. The Institute for the Future was nestled in the foothills along with all the venture capital firms that made Sand Hill Road famous.

My commute became much easier when I stopped halfway to attend Stanford Business School starting in 1980. At Stanford Business School, I developed expertise in business management and increased my knowledge of economics, finance, and investments.

Continue to Part 2 of this biography: Pasadena California Financial Planner >>>

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Larry Russell, Managing Director

MBA – Stanford University, MA – Brandeis University, and BS – M.I.T.

Lawrence Russell and Company Pasadena, California 91103

(626) 399-9579

A California Registered Investment Adviser — Certificate 133101

KNOWLEDGE — OBJECTIVITY — HONESTY — DILIGENCE — SATISFACTION

A truly independent financial planner and fee only investment advisor

(Regarding how I am compensated, I provide financial planning services only on a fixed fee or hourly fee for service basis, and only under a contract agreed upon with you. You do not have to pay any form of asset fee. Furthermore, in the interest of avoiding any conflict-of-interest, I do not accept commissions or compensation of any kind from the financial services industry.)

Start a conversation today — Send a message using this contact form

Financial Planner in Pasadena California

Serving clients throughout the greater Pasadena, California area including these cities: Altadena, Glendale, La Canada, Pasadena, Pomona, Rancho La Tuna Canyon, San Gabriel, San Marino, South Pasadena, Sunland, and Tujunga.

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Also, see: Pasadena CA Financial Planning >>>

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This website has been researched, written, and published independently. To ensure objectivity, no compensation of any kind has been paid by any third party to influence the editorial content of this website. All articles on this website were written by the Pasadena Financial Planner.

Do you want reasonably priced, comprehensive financial planning services from a responsive fee only investment advisor and personal financial planner?

My financial and retirement planning services will be valuable and cost-effective to you. My financial consultant fees will be reasonable, clearly understood, and determined in advance. I can provide you with comprehensive, reasonably priced financial, investment, and retirement planning services on an hourly, fixed fee, or retainer basis.

When delivering my financial planning and investment advisory services, I will never tolerate any conflict of interest. No financial industry incentives will ever interfere with my development of an optimal long-term financial plan for you. My recommendations will focus exclusively on your family’s financial interests.

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Larry Russell, Managing Director

MBA – Stanford University, MA – Brandeis University, and BS – M.I.T.

Lawrence Russell and Company Pasadena, California 91103

(626) 399-9579

A California Registered Investment Adviser — Certificate 133101

KNOWLEDGE — OBJECTIVITY — HONESTY — DILIGENCE — SATISFACTION

Start a conversation today — Send a message using this contact form

Pasadena Financial Advisor

The best personal financial planner for people who live in the San Gabriel Valley, including those who live in or near Alhambra, Altadena, Arcadia, Azusa, Baldwin Hills, Burbank, Duarte, Eagle Rock, El Monte, Glendale, La Canada Flintridge, La Crescenta, La Tuna Canyon, Los Feliz, Monrovia, Montrose, North Hollywood, Pasadena, San Gabriel, South Pasadena, Sunland, Studio City, Sun Valley, Temple City, Toluca Lake, Tujunga, West Los Angeles, and West Toluca Lake.

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About this Website — DISCLAIMER:

This site is a financial publication of general and regular circulation, and all the information contained on this website is solely for informational and educational purposes related to your individual, personal, private, and non-commercial use. Furthermore, in no way does this site constitute or provide investment advice under the laws and regulations of the United States of America and its various States or of any other country in the world. This site does not collect any specific information on the investment situation of any reader, and this site does not render any advice on the basis of any readers’ specific financial or investment situation. In no way does this site constitute a solicitation or offer to sell securities or investment advisory services, as defined under any securities law in the world. This website’s articles may report on published research and may also express opinions. Information in research studies has not been verified. There could be errors with this information and in the opinions that are expressed. It is solely your responsibility to verify all information before investing. All trademarks and service marks are the properties of their respective owners.

You are hereby notified that Lawrence Russell and Company is a registered investment adviser in the State of California. As an entirely separate part of its business from this website, Lawrence Russell and Company provides comprehensive, independent, and individually customized financial planning and investment advisory services to clients solely through signed fee-only contracts. These personalized advisory services are only available through individually negotiated contracts, which must be signed by both parties. These customized advisory contracts specify the scope of services, deliverables, and fees. Your use of any information on this website will not establish an advisory relationship of any kind with Lawrence Russell and Company.