Investment Management is at the very heart of what we do here at Gilliland Investment Management. But before the first stock or bond is purchased, we first need to meet with you to discuss your goals, risk tolerance, investment time horizon, and cash flow needs. You also need to read our Advisor’s Brochure, the document that describes how we operate. I also want to explain how doing business with us is different from doing business with a broker.

A registered investment advisory (RIA) firm is different from a brokerage firm. When I started this firm, I investigated the differences and decided that establishing an independent, fee-only, registered investment advisory firm would be the best model for you, the client. Some of the advantages are:

1. As a registered investment advisory (RIA) firm we take fiduciary responsibility for the assets you ask us to manage, something a brokerage firm does not do.
2. As a fee-only RIA firm, we never receive a commission for any security we purchase or sell for your portfolio. Because of this, I’m free to use any of the thousands of securities that exist in the investment universe to build the portfolio that is best for you. For example, if I buy a mutual fund for a client’s portfolio, I always buy a no-load mutual fund. Keeping your costs down improves my performance, which helps us both.
3. Because I’m a fee-only RIA who doesn’t work on commission, I have no pressure coming from anyone to make a sale. I don’t spend all day on a phone trying to get people to buy or sell securities. I spend most of my time researching investments and managing client portfolios and discussing this with clients.
4. As a fee-only RIA firm, I am paid a percentage of assets under management. If I’m charging you 1% a year to manage your portfolio, the only way I can make more is to make your portfolio grow. If it doesn’t, I will make less. This aligns my interests with yours. I believe all financial advisors should operate this way.

Are there disadvantages to doing business with a financial advisor organized as a fee-only RIA?

Yes, there are a few, but I believe they are more than outweighed by the advantages.

1. Doing business with a RIA involves more paperwork at the beginning of the relationship. All RIA firms are required to provide you with their Advisor’s Brochure, a 10 to 20 page document that describes how they do business and their fee schedule. Brokerage firms do not have to do this. Disclosing how we do business is actually a good thing, but it is different, and something you may not have ever done before.
2. RIA firms are required to have written contracts with all clients. Brokerage firms do not. This is partly due to the fact that brokers have different rules to which they must adhere, but it is also partly due to the fact that RIAs take fiduciary responsibility for clients’ accounts. Also, once you hire me to be your portfolio manager, I will begin buying and selling securities to build the kind of portfolio you want and need. I am not required to call you before each buy or sell. That’s important, and a big reason for the contract.
3. We use a third party custodian to hold our clients’ assets. After signing a contract, we will assist you in establishing accounts with our custodian (currently, Fidelity Investments). We will then assist you in transferring your investments to your new account(s) at Fidelity. We believe that having a third party custodian is an important protection for clients (we believe all advisors should have third party custodians), so this isn’t really a disadvantage. However, it is more paperwork at the beginning of the relationship to establish your new accounts and transfer your investment over to your new accounts.

After the initial consultations and all the paperwork is done, we can begin the process of building your portfolio. A portfolio designed to generate income will be completely different from a portfolio designed for growth, or a balanced portfolio. We want you to be comfortable with the portfolio we going to build for you and we want to build a portfolio that will help you achieve your financial goals.

Typically, I build individual stocks for the equity portion of your portfolio and bond funds (both open ended and closed end funds) for the fixed income of your portfolio. Clients who are invested in our income portfolio may have all bond funds, while clients who want a growth portfolio may be invested all in stocks. However, for most clients, a balanced portfolio is the best solution, where some percentage of the portfolio will be allocated to stocks and some percentage will be allocated to bond funds. I will also diversify portfolios further by using Real Estate Investment Trusts (REITs) and commodity funds. Occasionally, I may hedge portfolios with securities that go up in value when the market is correcting.

At the end of each quarter, you will receive reports (via mail or email, your choice) showing you the performance of your account(s) along with my quarterly report and an invoice showing how your quarterly management fee was calculated. Fidelity will mail (or email) statements to you each month.

Please contact us or give us call if this sounds like the kind of investment management you’ve been looking for.