We believe strongly that applying a financial planning process of delineating long term goals, time horizons, risk tolerance, tax exposure and liquidity needs, the five building blocks of a strong financial plan, greatly increases the probability of developing a sound investment plan that will enable all parties to reach their goals as efficiently as possible. This process, with client driven inputs, allows for a direct, honest exchange of information and education, further deepening the client advisor relationship and generating more customized portfolios that have a higher probability of achieving the desired results.
- A financial planning approach is used to develop an investment plan that will define the following:
- Goals with appropriate time horizons
- Liquidity needs for a 1 – 5 year time horizon, reviewed annually
- Risk tolerance – Based on an attitudinal questionnaire and the client’s past investing history and financial planning experience
- Tax Profile
- Prior to committing any assets to the financial markets, budgeting and insurance needs are reviewed in relation to retirement, homeownership, college funding and charitable goals.
- Fund portfolios are diversified by major asset classes such as domestic and international stocks, bonds and cash. Portfolios are further diversified by style of management with growth and value investing being the most prevalent. Concentrated positions will be avoided to improve the diversification profile and reduce the probability of making behavioral mistakes in down markets. Many family investment plans fail and family goals become more challenging to achieve during down markets. Individual stock positions will be limited to a maximum of 25% of the portfolio, given their greater risk profile.
The financial planning process also allows for educational opportunities for clients to interact with the management team and share values and information to improve the probability of reaching their family goals and establish an efficient working relationship.
Regular portfolio reviews are conducted throughout the year with the frequency depending on the needs of the client and type of account selected. Further communication is fostered via an annual meeting.
Risk is measured by standard deviation. Standard deviation is the variability of returns around the average return.
Diversification and Asset Allocation does not ensure a profit or guarantee protection against a loss.
Davenport & Company is a financial services firm and does not provide tax or legal advice. Please consult your professional accounting or legal advisors prior to acting on any information provided by us that may have an effect in these areas.