Thank you for visiting. For the past twelve years, we have helped our clients reach their financial goals by integrating investment management with financial planning in the areas of tax, estate, retirement, and Social Security planning. Our investment approach is based on our belief that low-cost, broadly diversified index funds will, over the long-term, offer investors the best chance to obtain market returns in a tax-efficient manner.
Our approach to investment management and financial planning is based on the following three guidelines.
All investment and financial planning advice must be objective and always and solely in the client's best interest. We are a fiduciary, and all investment and financial planning recommendations we make are governed by the fiduciary standard. We do not earn commissions from the sale of products. We are compensated by our clients solely in the form of an annual advisory fee. .
Investment-related fees can have a large impact on overall returns. One of the key determinants of investment success is the overall percentage of fees paid by the investor. These fees can include advisory fees, which are often a percentage of the client's assets under management (AUM), and may also include underlying fees for any mutual or other funds that the investor may own. Such fees are generally known as "expense ratios". Even fairly modest-sounding investment fees can reduce long-term returns by forty percent over a thirty-year time-frame. For example, $500,000 will, with an annual return of 7%, grow to $3.8M over a 30-year period, while that same $500,000 will, at 5.5% annual growth only grow to $2.5M over that same period. In other words, this difference between a 7% annual return and a 5.5% annual return produced a difference of $1.3M in total investment returns over a thirty-year period. And that $1.3M difference is the equivalent of 40% of the total investment profits in this example. There is a very strong correlation between investment fees and investment performance.
Investment success is only one part of financial success. While pre-tax investment returns are certainly important, making good decisions in areas such as tax, retirement, estate and Social Security planning will help achieve a more important goal - that of maximizing after-tax returns. When working with our clients, we consider questions such as how investments should be allocated among taxable, IRA, Roth, or other types of account in the most tax-efficient manner, as well as how to determine the order that these accounts should be drawn down in retirement in any particular year. Or when it makes the most sense, tax-wise, to realize capital gains, or execute Roth conversions. We assist our clients in determining the most optimal Social Security claiming strategy. And with other decisions that impact investments and financial decisions. Taken together, well-considered decisions in these areas can provide investors with as much or more value as sound investment management can.
To find out if we can be of service, please contact us.
Madrone Investment Advisory, LLC, is a Registered Investment Advisor based in San Rafael, Calif.