Taylor Capital Management

Frequently Asked Questions

What is the benefit of a fee-only advisor?

Professionals in our industry are typically compensated with fees, commissions, or both.  Fee-only advisors do not sell financial products, instead they provide their professional services for a fee.  Clients of fee-only advisors do not need to be concerned about the potential conflicts-of-interest inherent in other types of compensation. 

Although the majority of commission-only or fee-plus-commission advisors are honorable and look out for their clients' best interest, we believe fee-only compensation is fairer, more transparent, and most closely aligns the client's and advisor's interests.  Since we are not paid to sell investments, our only compensation comes from the fees we charge for asset management or planning.  We do not work for a brokerage firm, bank or insurance company.  We work exclusively for, and are paid directly by our clients.  We have no conflicts-of-interest.  Our clients are constantly able to assess the value of our services relative to the fees we charge for those services.

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What types of insurance & protection is available for my securities account?

Brokerage accounts are protected by the Securities Investor Protection Corporation (SIPC) for securities and cash in the event of broker-dealer failure. This protection does not cover fluctuations in or losses related to the market value of your securities. The SIPC provides up to $500,000 of protection for clients’ accounts held in each separate capacity such as joint tenant or sole owner, with a limit of $100,000 for claims of uninvested cash balances. More information about SIPC coverage is available at www.sipc.org.  Also, our preferred custodian, Pershing Advisor Solutions provides additional insurance protection for accounts greater than $500,000 through Lloyd's of London at no additional cost to our clients.

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Do you have a minimum account or fee?

Our firm is committed to providing a high level of service and maintaining a select number of clients.  As a result, our typical minimum investment account is $250,000.   While there can be exceptions to this minimum, we only accept client relationships where we feel we can provide significant value and be compensated accordingly.  Our planning and consulting services are not tied to account size and our fees depend on the scope of the engagement. 

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Will you work with my attorney, CPA, insurance agent or other professional advisors?

We will help you assess your current needs and complement what is being provided by other advisors. We do not  provide legal or tax advice or sell insurance products. However, we do provide planning and an objective viewpoint in these areas to help our clients through the complex issues that they face. Our clients appreciate a team approach and feel they can make better decisions when they have consensus among their advisors.

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What are the keys to financial success?

Unfortunately, there is no magic formula to financial success.  It is usually the result of hard work and a disciplined investment strategy.  Some components of that strategy would include:

            1.    Possessing a long-term outlook
            2.    Avoiding debt
            3.    Learning to live on less than you make
            4.    Having a written, measurable plan
            5.    Utilizing a professional advisor
            6.    Being pro-active, not re-active (avoiding impulsive decisions)
            7.    Keeping investment related costs at a minimum
            8.    Avoiding the Loser's Game

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What is the "Loser's Game" to which you commonly refer?

The loser's game is a flawed mindset perpetuated by many in the financial services industry, and embraced by many investors, that "beating the market"  should be an investor's primary goal.  Let's take this to the extreme. In 2008 the S&P 500 fell by 38%.  If you lost "only" 35% you would have beaten the market by 3%, an incredibly large margin historically.  How can the loss of 35% help anyone achieve their financial goals?  If your focus is on your performance relative to some impersonal index you are looking in the wrong direction.  Successful investors are goal focused, have a written plan which they can monitor through time, and portfolios designed to help them achieve those goals with the least possible risk. This is diametrically opposed to a relative performance based mindset.

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What are some common mistakes investors make?

One of the biggest mistakes an investor can make is to give in to an emotional impulse in re-action to market conditions. This is either due to fear or euphoria; often at exactly the wrong time.  If you take too much risk at a cyclical top or pull your money out at a cyclical bottom it may make it impossible to ever recover.  Investors make other mistakes including over-concentrating in a single security, refusing to take a loss, refusing to sell a stock due to taxes and becoming “married” to an idea.  Additionally, many investors chase the "hot dot", assuming that last years' winner will be a repeat performance.

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Why should I buy stocks given the risk of loss?

Common stocks represent ownership in publicly traded companies.  The price of publicly traded companies will fluctuate daily and periodically suffer substantial declines due to bear market conditions or company specific events.  Additionally, as with any equity investment, there is no guarantee that you will get an expected return on your investment or that you won't lose money.  Why then would anyone want to submit themselves to this roller-coaster with no guarantees?   

Simply put, wealth has historically been created by the owners of companies.  Companies create the products and services that our world's economies demand and will often (not always) make a profit from their business activities.  As companies' revenue and profits increase they become more valuable to investors.  Apart from their profit potential, many companies acquire real estate and other assets they use to operate their various business enterprises.  These "real" assets have value which is also reflected in a company's stock price.

If you consider the historical record, you will see that U.S. large company stocks have generated a compound annualized return of 9.81% for the 84 year period from 12/31/1925 - 12/31/2009.  After adjusting for the negative impact of inflation the net return is 6.60%.  When you compare this inflation-adjusted return to other investments like U.S. Government bonds, bank CDs and U.S. T-bills, the answer becomes much more obvious.  A diversified portfolio of common stocks has generated a substantially higher inflation-adjusted return than other asset classes.  Once you back out taxes, the case for equity ownership becomes even more compelling. 

Your particular allocation to common stocks will depend on a number of factors such as your goals, age, income and liquidity needs, and risk policy among other things.   This is all part of the process required to develop your personalized Asset Allocation Policy.

* Data provided by Ibbotson Associates. Past performance can never guarantee future results. 

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How do I determine my risk policy?

Your risk policy is a combination of your risk capacity and risk tolerance.  Risk capacity refers to your ability to take risk which is related to your age and financial circumstances.  Risk tolerance is your risk comfort-level.  Many investors may not know their true risk tolerance, or, as is more often the case, their risk tolerance changes in response to their most recent investment experience.  You may have a high risk capacity but a low risk tolerance.  Because of our many years' experience working with all types of investors, TCM can help you determine your risk policy.

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When is the best time & what are the best sectors in which to invest?

As we refute the "timing and selection" culture, we will not engage in self-destructive pursuits that take our focus off the more relevant practices of asset allocation, diversification, re-balancing and planning.  Investors who actually believe they can consistently time the market or who are perpetually searching for the next great investment  will be forever frustrated.  Financial advisors who tell their clients they can time the market or consistently identify the best performing investments are, at best, naive, or at worst, intentionally mis-representing their capabilities to win business.

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