Walnut Hill Wealth Management’s investment perspective is grounded over 20 years of experience in alternative investments as both a Big-4 accounting firm CPA and in various roles, including Managing Director, at one of the world’s largest, oldest, and best-known hedge funds. These years of valuable experience consistently taught me how hard it is to beat the market – or in industry jargon, “generate alpha.”
WHWM is not a hedge fund, and we do not intend to provide alpha in the traditional sense of the word. Our wealth management strategies are the result of over two decades of experience and learning, and our core value is to practice in our client’s best interests. We focus on helping you define and reach your short-, medium- and long-term goals, not on beating benchmarks. Our measure of success is the likelihood that your resources will meet all future needs and goals based on estimates of future market conditions and your personal circumstances and preferences.
Lead with Financial Planning
Historically the financial advising and investment business, when applied to the individual market, was driven by sales, where decisions were often made in the best interests of the firm or service provider rather than the client. Financial advisors tended to focus on investment management, and if a client was meaningful enough, they might throw financial planning at no extra charge. As a result, meetings with clients mostly centered around market commentary, investment performance and why they did or didn’t “beat the market."
According to S&P’s SPIVA Scorecard, a robust, widely referenced study that compares active funds vs. their appropriate benchmarks on a semiannual basis, the majority of active managers tend to underperform their benchmark most of the time, and this underperformance rate also tends to increase as time horizons increase. The study does go on to say that there are periods when active management outperforms for certain categories, but the outperformance doesn’t tend to persist or happen in subsequent periods.
The behavioral side of wealth management and investing is not talked about enough, but it is integral to helping you reach your financial goals. That's why at WHWM, instead of focusing on investment outperformance being the value add to clients, we lead with solid comprehensive financial planning. Our fee structure intentionally charges for planning separately so it’s clear we take, and want our clients to take, the plan seriously. From our perspective, financial risk can be defined as not having enough future resources to meet your financial goals. By working together to develop a comprehensive financial plan and providing accountability to stick to it, we are proactively addressing that risk and improving the chance you will meet your financial goals.
WHWM’s Investment Philosophy
Our investment philosophy is based on the principals of Modern Portfolio Theory, which states that markets are efficient over long periods of time and that investors’ long-term returns are mostly determined by asset allocation not market timing or stock picking. To us, this means investing broadly and globally in diversified portfolios, principally using passively managed asset class mutual funds and ETFs. We believe equities (stocks) are the primary means for outpacing inflation in the long run and fixed income (bonds) lower portfolio volatility. Along the way, we seek to reduce investment and tax costs where possible.
As previously mentioned, we do not look to add alpha in the traditional sense (active management outperformance), however we do believe there are other ways to add meaningful value such as tax loss harvesting, thoughtful asset location, periodically rebalancing portfolios, handling concentrated positions and withdrawal strategies to name a few. Furthermore, we believe we add significant value by helping clients maintain a disciplined approach, in good and bad markets to overcome the behavior gap – the difference between the higher returns that investments tend to organically produce, and the lower returns investors earn because of their own behavior. This includes talking you off the ledge when the markets go down 30% due to a pandemic, or when your friends are all going to cash because the government can’t agree on increasing the federal deficit.
Customizing Investment Strategies for Individual Needs
Our relationship with our clients is managed with the individual or family as the focus rather than a one-size-fits-all financial model. Our investment process is done in partnership with our clients and is informed by your comprehensive financial plan. We strive to build a relationship of mutual trust and respect, where open dialogue and questions are encouraged.
We will work with you based on your specific goals to construct a portfolio around any existing concentrated/alternative positions to balance out your overall risk. Perhaps you hold a bunch of company stock, real estate, or alternative investments. These can all be great opportunities but also frequently include increased investment risk (due to leverage), concentration risk (due to a relatively undiversified portfolio), and often limited liquidity. We can help you to a certain extent with the due diligence and administrative burden of these private investments, keeping in mind the unique risk factors they present and your goals, risk tolerance and risk capacity.
Let WHWM Work for You
At WHWM we can help you maintain your focus on what really matters by concentrating on long-term goals rather than beating benchmarks, holding the course in good and bad markets through investing broadly and globally, and reducing investment and tax costs where possible. Along the way, we will not charge you commissions, referral fees, markups on investments, or any other source of income that might generate a conflict of interest. Get started on achieving your financial goals. Schedule your complimentary, no-obligation 30-minute consultation with WHWM today.
Walnut Hill Wealth Management, LLC (“WHWM”) is a registered investment advisor offering advisory services in the State of Texas and in other jurisdictions where exempt. The information provided is as of the date indicated and subject to change.
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