Despite a rocky start in July, your portfolio has fully recovered, as evidenced in the chart below. The one year returns are as strong as any period during the past five years. As I’ve said many times, you simply cannot predict the markets, and this quick recovery is a very welcome surprise! While large U.S. stocks (represented by the S&P 500 Index) did pretty well this year, the international asset classes still have the highest 1 year, 3 year, and 5 year returns of any asset class. Also, bond returns were much stronger this year. Our diversification strategy has continued to be extremely profitable. The following chart shows the recent performance of many DFA funds (representing different asset classes) compared to the S&P 500 Index:
Market Returns for the period ending September 30, 2007
|DFA Fund / Index||1 Year Return||3 Year Return*||5 Year Return*|
|S&P 500 Index||16.44||13.14||15.45|
|DFA U.S. Large Value||11.05||15.14||18.11|
|DFA U.S. Micro Cap||11.55||13.20||20.40|
|DFA U.S. Small Cap Value||7.80||13.85||22.21|
|DFA Real Estate (REITs)||3.64||18.91||21.25|
|DFA Int’l Large||25.44||22.99||22.87|
|DFA Int’l Large Value||28.24||27.47||29.42|
|DFA International Small||26.01||25.45||29.30|
|DFA Int’l Small Value||26.33||27.63||32.27|
|DFA Emerging Markets||54.43||37.98||27.64|
|DFA 2-Year Global Bonds||4.92||3.40||2.76|
|DFA 5-Year Global Bonds||4.92||3.29||3.32|
*Note: Returns for periods greater than 1 year are annualized. Top 3 returns are in bold.
Next, I have some important thoughts to share with you about Keystone Financial Planning’s strategic direction and several changes that I would like to make. While attending a recent DFA conference in Santa Monica, I realized that I need to ensure that KFP has the right business model and infrastructure to service you for many years to come.
While most of you view me as young and invincible (hahaha), there is still that very small chance that I could “get hit by a bus” and die unexpectedly. Although I currently have a plan in place for you to work with another advisor if this were to happen, I believe that a better solution is to build a larger firm that would continue on if I were to die. As most of you know, I’ve never really wanted to build a huge firm with thousands of clients, and that is still the case. Nevertheless, I’ve decided that I will need to add at least one partner (or senior advisor) and several support persons if I want to create a basic infrastructure that will outlast me. I believe that this is very important to provide you with the best possible service.
Consequently, I am taking a very critical look at KFP’s processes, infrastructure, and fees. In order to remain profitable as I grow, it is very important that my services are priced correctly. At the DFA conference, I had an opportunity to evaluate and compare my service offering to other similar firms (who also use DFA funds). Many of these firms do not offer comprehensive financial planning, and yet, they still charge fees that are comparable or higher than the fees that I charge for both asset management and financial planning services.
After careful reflection, I have decided that I will need to start charging hourly for financial planning advice. Since each client has very different needs for financial planning, I feel that charging hourly will encourage you to utilize the services that you value the most. Several sections of the annual review will continue to be offered at no additional charge (such as updating your goals or reviewing your investments), but I will probably charge an hourly fee to update the actual plan or to do a tax projection. For most of my existing clients, the additional cost for hourly financial planning will be minor since I have already developed robust financial plans that we’ve fine-tuned several times.
Before I finalize anything, I would like to get your feedback on KFP’s services and the annual review process. I have included a “Client Satisfaction Survey” for you to complete and return in the envelope provided. You are free to include your name or to return it anonymously. I truly value your input, so please take a few minutes to share it with me. If you would prefer to share your feedback in person or by telephone, please contact me directly.
Thank you for your continued trust and confidence. I look forward to working with you for many years to come.
About Christopher Jones
Christopher Jones is the Founder and President of Sparrow Wealth Management, a fee-only financial planning and investment management firm. Before entering the investment field, Chris was a management consultant for Deloitte Monitor. He graduated summa cum laude from Brigham Young University with a B.S. in Economics and a minor in Business Management.