disciplinedIQ Investment Advisory Process


  Home

  Investors vs Advisors

  DisciplinedIQ Process

  Management Principles
   Fiduciary Responsibility
   Independent Thinking
   Fee-based Compensation
   Disciplined Monitoring
   Risk-based Allocation
   Sensible Simplicity

  Investment Committee

  Contact An Advisor

  Access Your Account

Disciplined Monitoring

While investors feel comfortable their investment advisors make “prudent” decisions for them, very few advisors are able to provide specific support for their investment decisions. More specifically, they are generally not able to provide specific details of their consistent use of evaluation criteria when selecting from the broad universe of investment options available today. In fact, many firms do not even offer a broad universe of investment options but have rather established "preferred" or proprietary investment options limiting the choices to their advisors and investors. While these firms may have access to additional choices, other firm incentives and biases limit the use of these choices.

The disciplinedIQ Answer:

Simply put, we evaluate each quarter the following specific criteria* when evaluating investment options for initial purchase as well as for continued ownership in investor portfolios:

Organizational Criteria:
  Inception Date: Must have at least a 3 year track history.
  Manager Tenure: Must have at least a 2 year track history.
  Assets: Must have at least 75 million under management.
Style Criteria:
  Composition – Allocation to its primary asset class should be at least 80%.
  Style – The investment's current style box should match the peer group.
Expense Criteria:
  Prospectus Net Expense Ratio – Must place in the top 75% of peer group.
Risk Criteria:
  Alpha Coefficient – Must place in the top 50% of its peer group.
  Sharpe Ratio – Must place in the top 50% of its peer group.
Performance Criteria:
  1 Year Return – Must place in the top 50% of its peer group.
  3 Year Return – Must place in the top 50% of its peer group.
  5 Year Return – Must place in the top 50% of its peer group.

Each investment option is evaluated based on these criteria, and a simple scoring methodology is used to create a composite score which is used to compare each investment option with others in their peer groups. The disciplinedIQ process will only select for new purchases investment options that score within the top quartile of their peer groups. If a currently-used investment option falls out of the top quartile for two successive calendar quarters the investment option is replaced.

The result of this evaluation process is the ability to select highly ranked investment options in all asset classes selected for use. A comparison to more traditional methods is the graphic below where a specific investment company may have some investment options that "pass" our evaluation criteria, some marginal "watch list", and some "failing" investments in their offering list. Most investment companies do not even offer investments in all asset classes as in those listed as "not available" in this example.

For maximum transparency to this process, we provide a monthly criteria evaluation report to each investor detailingthe performance of their investments based on each of these criteria. This report clearly illustrates whether each investment meets or fails each of the eleven criteria in an easy-to-read format. Using this method, investors always know why investment options have been selected for use in the portfolio as well as why investment options have either been maintained or removed from the portfolio.

This disciplined investment selection and monitoring process helps us determine which investment options we should own. It is then the "Investor Quotient" risk-based allocation process which helps us flexibly manage portfolio risk.

It is important to note that no strategy can assure investment return or protection against loss of principle.

*Click on the sample report for supplemental definitions of the evaluation criteria.

Next>> "Investor Quotient" Flexible Risk-based Investment Allocation

Securities and advisory services offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC. (Privacy)
The LPL Financial registered representatives associated with this site may only discuss and/or transact securities business with residents of the following states: AK, AZ, CA, CO, CT, FL, ID, KS, MD, MA, MI, MS, MO, MT, NV, NM, NY, NC, ND, OH, OR, SD, TX, UT, VA, and WA.
©2013, Waypoint Wealth Management. All Rights Reserved.