Our Investment Philosophy

In the information age, we believe markets are the most effective pricing mechanism. The markets ability to process endless amounts of data results in the most accurate current pricing. In financial circles this thought process is referred to as the Efficient Market Hypothesis. Academic studies continually show how difficult and expensive it is to correctly time both the purchase and sale of an investment. We do believe in long-term mark returns. Our investment philosophy is based on proven academic research and focuses on factors we can control.

  1. Cost: We only use the institutional fund share class, which means no on-going retail fees or sales commissions. Since fees are a known drag on investment returns, we implement with funds and securities that are well below the current industry rate.
  2. Taxes: For individual investors, taxes are often the area where strategic planning can pay off the most. We evaluate how to accumulate wealth in different phases of your career. We, also, consider which type investments are optimal for each type of account. We will outline a strategic distribution strategy to mitigate taxes for investors in the distribution phase of life. In taxable accounts, we always assess the tax consequence of each transaction.
  3. Flexibility: We will build a nimble investment profile that can take advantage of the ever-changing investment and tax landscape. Liquidity is one of the largest investment premiums and we want to create that premium in your own life.
  4. Allocation: The quickest and easiest way to reduce risk is with proper diversification. We will build a portfolio that focuses on long-term investment premiums. These include: equity vs. bond premium, small vs. large company premium, and the value vs. growth premium. We are not attempting to beat the market, rather buy into the market as optimally as possible.
  5. Risk: An investment potential risk is what allows the investment to produce its return. We strive to ensure investment risk is properly compensated. This risk and reward balance is often expressed using the Efficient Frontier curve. We will work together to discover where on the risk/reward pendulum best suits your needs.
  6. Emotions: Keeping them in check. The financial media plays on your emotions. It is vital to avoid getting caught up in the latest “Buy Gold!” headline or fall victim to a “this time it’s different” bell ringer. Chasing investment returns and headlines is the quickest way not to achieve those returns!
  7. Ego: Accepting that we are not the next great market prognosticator frees us from tired and outdated investment logic. We are able to avoid false positives and subsequent confirmation bias, as well as other investor fallacies that will inevitably hinder long-term success.

Let’s build a plan and begin changing this recent Dalbar study highlighting the gap between individual investor performance and market returns. Harness the power financial markets with respect to your own personal life, career, and goals to achieve true financial security and independence.

Implement Your Investment Plan

Scaling Independence clients can choose how to implement their investment plan.

Assisted Self-Directed
The do-it-yourself model is a great for individuals that are starting to invest and use their curiosity to learn more about personal finance. It can also work well for young to mid-career earners that need directional guidance, and have most of their wealth in a qualified account (401k, 403b, TSP, or Roth IRA).

It is often in a client’s best interest to utilize the benefits of their employer sponsored retirement plans. One of the perks of being an independent firm is we can advise on these plans without needing to take custody. We assist clients on which plans to utilize, investment selections, contribution amounts, and the Roth vs. Traditional quandary.

In-House Wealth Management
We offer full service wealth management, which provides our clients access to a complete range of investment choices. This includes access to the institutional fund share class at any dollar amount!

Wealth management includes more detailed implementation with added portfolio monitoring and maintenance. We are able to monitor all of the portfolio minutia and execute specific transactions when assets are held by our custodian. These issues arise more frequently in taxable investment accounts, major life events, and when individuals need to use their portfolio for income.

As life evolves, many investors look to partner with a professional to ease the burden. This tends to occur when one or all three arise:

  1. Time: Investors no longer have the necessary time to keep up with their investment. They would rather spend their time with their family, forwarding their career, or enjoying more leisure activities.
  2. Complexity: You may reach a point where your wealth management needs require professional guidance.
  3. Willingness: The intrigue of managing your investment wanes and the motivation to keep up on all the interconnected decisions diminishes.

Scaling Independence, LLC was structured to handle either choice and allows for seamless transition between the two.

Investment Selection

We recognize we do not have the resources to evaluate every detail of the entire investment marketplace. Thus, we have partnered with Dimensional Fund Advisors. Dimensional’s investment philosophy and vision closely aligns with our own and is built on academic research out of the University of Chicago.

Dimensional Funds are efficiently managed with the long-term investor in mind. Therefore, their funds are not directly available to individual investors. Dimensional is able to offer truly professionally managed funds by excluding retail investors and limiting which institutions can utilize their funds. This results in lower internal cost and appreciable long-term performance for the investor. We are not captive to Dimensional Funds and we utilize many other funds and strategies for our clients. We craft portfolios around each investors circumstances and our investment philosophy.

How do asset management fees work?

Assets under management, often referred to as AUM, describes the total market value of investments administered by a financial advisory firm. That figure is used to calculate both the advisory fee and the embedded fee.

1) The advisory fee is compensation for the investment implementation, on-going management, and strategic advice. 2) The embedded fees are the hidden fees most consumers do not realize they are being charged to hold an investment product each year since they are masked in the form of lower investment returns.

Fee Comparison:
(According to a 2014 Cerulli1 report and a 2015 Study by Personal Capital2)

Screen Shot 2016-01-04 at 3.17.58 PMIn the end investors pay for the advice and guidance they receive, and our goal is to be transparent in the process.

I don’t live in Missouri or Illinois. Can we still work together?

Absolutely. If you think Scaling Independence is right for you, we will utilize technology to build your financial plan and develop a trusting relationship. There are countless ways to communicate virtually in today’s world.

Will you prepare my taxes?

No. We provide proactive tax planning, and work in conjunction with your CPA or tax professional to ensure strategic decisions are recorded properly.

Will you help find me the other professionals?

Yes. We are committed to locating qualified CPAs, attorneys, real estate agents, bankers, and insurance agents to help you address your complex financial needs. Many service professionals are highly specialized, and we will identify those best suited to work with you.

When can I end my partnership with Scaling Independence?

Anytime. We do not believe in long term contracts. If you are not satisfied with our services, we encourage you to provide feedback and let us know how to remedy the situation.

Why did you name your firm Scaling Independence?

Scaling is the entrepreneurial term for growing a sustainable, growing, and profitable business. The goal for our clients is to achieve Financial Independence through the scaling of one’s own human capital and financial assets. Scaling Independence.

What is this Financial Independence you keep referencing?

We are not in the business of making assumptions about your financial goals. All of our clients have unique stories and dreams that should be addressed individually. Our job at Scaling Independence is to ensure you have the financial stability and knowledge to make your goals a reality, whatever they may be.