Investment Planning

Investment Planning

Investment Portfolio Review
Cornerstone Wealth Management is nationally recognized for its delivery of independent, comprehensive financial planning. This essential work goes beyond traditional investment planning services. 
Cornerstone Wealth Management is nationally recognized for its delivery of independent, comprehensive financial planning. This essential work goes beyond traditional investment planning services. 
Investment Portfolio Review

Portfolio Review

A portfolio review is a comprehensive assessment of all assets you own, how they compare to other options you may consider, and their anticipated contribution to your retirement picture. A portfolio review should include all investments, including holdings often missed by other advisors like directly held real estate investments, partnerships, and other non-traditional assets.

Over the decades, mass media and traditional financial services have conditioned clients that investment planning is the same as financial planning. This narrowed perspective misses the impact of investments on the bigger picture of a client’s financial condition. When this happens, there is a lack of coordination in planning. This approach often results in decisions and outcomes contrary to what investors seek. It could trigger higher taxes, greater portfolio risk, and loss in potential long-term value in a retirement plan.

Cornerstone’s approach to portfolio review is unique. We consider in your plan all assets, including alternative investments like directly held real estate and partnerships. Our more complete portfolio review approach can help individuals and families with a balanced, tax-efficient, and more appropriate investment experience during your retirement years.


Monte Carlo Analysis

The term Monte Carlo can create an image of fun, excitement, and wealth. A Monte Carlo analysis from a financial planning perspective is among the most critical metrics in determining success in retirement. If you are like other pre and current retirees, one of the most important questions you will have is, “Will I be Ok? Will I run out of money in retirement?”  

The problem with online retirement forecasts and other simple planning tools is, most all assume that investment growth is linear – at the same rate each year. That whatever the assumed growth rate is selected, it will happen like clockwork. As you know, this is not true. Each investment year brings its highs and lows. There have never been two years with the same performance outcome in the history of the stock, bond, and real estate markets. The idea of projecting linear growth will provide a false sense of security in retirement.

Enter Cornerstone and our use of Monte Carlo. When investors ask about the chances of running out of money in retirement, they are indirectly asking, “what is my chance of success in retirement? 90%? 75%?” Unlike the simple planning tools, Monte Carlo does not assume straight-line performance over the balance of your retirement. Instead, Monte Carlo looks back at historical returns, considers 1,000 different potential outcomes, and calculates a single number that represents your likelihood of success. Statistically, a retiree will have a high probability of success in realizing that outcome.

If you become a new client at Cornerstone, we will calculate your Monte Carlo number to benchmark your current potential outcome. We will identify coordination gaps and areas for improvement to your current plan and measure our recommendations in these areas by comparing Monte Carlo numbers during our work together. If we get to 80% to 90% probability of success in a plan, we consider this a solid plan. The Monte Carlo for many Cornerstone clients is 100%, due in part to changes they made due to our work together.

Monte Carlo can be fun, exciting, and represent wealth. At Cornerstone, it is also one of the most important measurements we review for your retirement picture.


Risk-Reward Analysis

A risk-reward analysis is a process of matching an investor’s capacity to handle market uncertainty and potential outcomes with an allocation that is appropriate for them. Everyone’s risk profile is different. There is nothing wrong with being a conservative investor, an aggressive investor, or for most, somewhere in the middle.

The challenge is, most investor’s actual investment allocation does not match up with their risk profile. An improper investment allocation is common with many people we meet for the first time. The consequences of not catching or addressing this can be critical. Having more than needed in cash or too much in stocks can undermine your retirement goals.

Most advisors or online brokers use a single took to measure risk-reward. Some don’t use any.

At Cornerstone, we have an interdisciplinary approach to identify your unique risk-reward profile. First, we use a patented tool that identifies a unique risk number for each investor. Because couples will often have different risk numbers, understanding each investor rather than selecting one or the other to use in planning results in a better investor experience. This patented risk number survey will take less than ten minutes to complete. After we get the results, we will discuss how that risk number lines up with your assessment of the outcome, retirement performance requirements, and your capacity to manage the emotional highs and lows of investing. As circumstances change, we will revisit your risk-reward style to ensure that your risk number and investment allocation are in alignment.

To learn more about your risk number, take advantage of our Free Analysis offer.


Asset allocation

You have probably heard the advice, “don’t put all of your eggs in one basket.” Asset allocation better defined this advice by answering the questions, “If I shouldn’t put all of your eggs in one basket, then how many baskets should I have? And how many eggs in each basket?”

All investments fall into one of several “asset classes.” Some asset classes consist of large-company stocks (also known as equities). Many of these companies you have heard of, and you might even buy their products. Others consist of small-company stocks. And then there are thousands of traded stocks in the middle. Some of these companies focus on delivering dividends (income) to investors. Others will reinvest earnings back into the company and focus on growing the stock value. Bonds (also known as fixed investments) have more flavors than stocks and have historically been less volatile. When you add alternative investment options like real estate, debt, commodities, you have more investment options to consider.

With so many options, the question becomes, “how do you choose which is right for your long-term financial independence?”  

Cornerstone believes that one of the fundamentals of a good investment and retirement plan is proper asset allocation. Our comprehensive work with clients includes reviewing and making recommendations on the right amount of stocks, bonds, and alternatives to hold in a portfolio.

Cornerstone also believes that our clients should have options. Whereas firms like Fidelity, Vanguard, and others promote their investment products at the expense of outside investment options, we do not have a dog in the race. Cornerstone is independent and does not own financial products. Our experience is that clients prefer to have options and work with advisors who don’t sell their company’s products.


Research and selection

Investment selection is as much art as science and involves considerably more resources than having access to internet tools or following a newsletter. If a day trader panics, has a rough day, or cannot consistently deliver results, what is at stake? For many, their financial independence becomes murky.

Cornerstone does not promote itself as stock pickers. We don’t promise to beat the S&P 500 index. That is because very few people belong 100% invested in the S&P 500. For example, there are more tax-efficient strategies in drawing income for retirement than the S&P 500. And very few people can stomach the volatility of the S&P500.

Through our LPL Research team, Cornerstone has direct, unlimited access to a nationally recognized group of experience research and investment selection professionals. Our research department has a deep bench and is often quoted in the national, business, and finance press.

Because each client’s retirement goals and income needs are different, we do not use a cookie-cutter approach to asset allocation. After all, cookies get eaten. Cornerstone designs a portfolio to each client’s needs. A customized portfolio is especially important when planning for retirement income.


Portfolio Management

Portfolio management is the ongoing stewardship of your investment accounts. As CERTIFIED FINANCIAL PLANNERS™, our relationship with you and your accounts is fiduciary. A fiduciary relationship means that you and your plan’s best interest is put before anything else in our work together.

Without proper portfolio management, what begins as a good investment plan will weaken over time. Changes in circumstances, market environments, and tax law will chip away at the sharpness of your original plan. Neglect can hurt your financial independence.

The portfolio management process involves many of the areas addressed under Investment Planning and will integrate other aspects of our work together. Portfolio Management starts with articulating your goals and needs and understanding your different accounts’ contributions to your retirement plan. Portfolio management further integrates your risk-reward profile, asset allocation, and investment selection.

Portfolio management considers account types (retirement accounts, taxable accounts, cash reserves), the impact of taxes, and managing investment fees. These different but related pieces are brought together under one umbrella and monitored over time. Outcomes are memorialized with ongoing reporting, and the portfolio itself is subject to changes based on our clients’ needs and goals.

In the long term, portfolio management is the backbone of good investment planning and financial independence success.


Monitoring and reporting

Investment monitoring and reporting are to retirement what regular doctors’ visits are to your health. If you add relationships with family/friends, you have the three areas most people care about in retirement. A healthy investment experience includes regular updates and reporting, and education on what happened since the last review and why.

When we meet prospective clients for the first time, most know little about their investments. They cannot explain their investment approach or how funds were selected. This lack of awareness causes your allocation to shift over time, resulting in an imbalanced portfolio. The consequence could be less capital and income for your retirement.

Our experience at Cornerstone is that clients want to be aware of what they hold and why. Being informed helps create greater confidence in retirement. That is because reviews include discussing what has changed in their lives, modifying their plan as needed, and a better connection with their investments and retirement.



Fewer products in financial services are as maligned, oversold, and yet as misunderstood and underused as annuities. But what should matter to you is, can an annuity strengthen your financial position?

The answer is always; it is case-by-case.

In its classic use, an annuity is an exchange of investor capital for a stream of income. The income is often guaranteed to the life of the annuitant and usually a surviving spouse. Under this definition, an annuity feels to a retiree like a pension. Retirees love pensions. These same people avoid annuities, mostly because they have heard that using an annuity is not appropriate for anyone. This is explained by being told that annuities are costly and generate a high commission to the selling agent.

At Cornerstone, we find that annuities are very appropriate for less than 20% of our clients representing less than 30% of the assets under our care. In these cases, annuities have reduced capital gains taxes while our clients are working, offer guaranteed income through retirement, and have saved millions of dollars in ordinary taxes when used in defined benefit plans. Yes, millions of dollars. By contrast, if an annuity were not used as a part of the investment and tax strategy, these clients’ retirement picture would be less certain. By this standard, annuities are misunderstood and underused.

For the other 80% of our clients, the use of annuities is unnecessary. In many of these cases, there is no need to explore.

So, the question that matters to you remains; will an annuity strengthen your financial position? We will be able to give you a clear answer when we better understand your financial condition. But here is one certainty: If your friend, colleague, or financial advisors argues against annuities without knowing about the details of your financial situation (risk-reward, liquidity, income, tax bracket, etc.), you will not have the advantaged of an unbiased opinion. Friends, colleagues and many advisors are well intended. But they don’t have the credentials and experience to provide you with a balanced assessment.

Where did annuities get the reputation of being a bad idea? Like many industries, financial services have a share of opportunistic or narrowly or poorly trained people. Indeed, there are annuity products that we don’t recommend that offer a higher payout to the sales agent. This does not help the annuity industry or retirees.

For the record, Cornerstone gets paid the same rate for annuities as we do for fee-only investment accounts we recommend.

In summary, annuities are a terrific strategy for some retirement and income plans. For most retirees, not so much. At Cornerstone, you will have the advantage of a balanced assessment on this often maligned, oversold, misunderstood, and sometimes underused product.


Alternative Investments

Alternative investments are products that are usually non-correlated to the stock or bond market. Non-correlation means that when stocks skyrocket one year, alternatives will not necessarily follow. And when stocks suffer significant losses another year, alternative investments are not likely to follow. Because of this non-correlation, the use of alternative investments in a stock and bond portfolio can reduce volatility in an investment plan.

Alternative investments include a variety of asset classes. The most popular is real estate, which includes real estate investment trusts (REITs). REITs are funds that hold commercial real estate, like office, warehouse and industrial, multifamily (apartment complexes), retail, and hospitality. Other types of alternative investments include mortgage and corporate debt, private equity, and commodities.

The challenge for most investors is, many advisors are not licensed and credentialed to offer these products. As a result, they are not made available to many investors who could benefit from non-correlation and diversification. Like annuities, alternative investments are sometimes underexplained and underused. A good example is REITs. Some advisors who focus purely on stocks and bonds have unflattering stories about REITS and recommend against their use. Sometimes, their firms do not offer these, or they are not licensed to recommend them. So, the unflattering stories support their circumstances. But looking back at 20 years from 1999 to 2019, REITs outperformed stocks, bonds, and many other asset classes. This 20-year lookback does not mean that REITS will outperform again. It does mean that clients who did not own REITs during that period because of an advisor’s recommendation missed out on the opportunity for growth, non-correlation, and diversification.

At Cornerstone, being independent and properly credentialed on these products means that we can talk with our clients about alternative investments. We recommend alternative investments judiciously. Less than 10% of the investments Cornerstone manage are in alternative investments. For our clients who own alternative investments, it continues to provide them with a buffer from stocks and bonds and delivers tax-efficient dividends that many stocks cannot.

Tax-advantaged Investing

Not all investments are taxed the same. Some offer tax shelter that exempts 20% to 40% of the income from being taxed. Some are taxed at a lower dividend rate. And others are not taxed at all. 

Since investments are taxed differently, the measurement that helps determine what investors keep in their pockets is the return after personal taxes are paid. 

In this instance, an investment with a lower gross return can deliver a higher return after taxes. This advantage becomes critical for those in retirement and drawing income from their accounts.

The challenge is that most investors and advisors measure only gross performance as an indication of success. This single measurement can result in lower spendable income for retirees.

At Cornerstone, we understand the impact of taxes inside a portfolio and retirement income. We are not swinging for the fences. Instead, we are seeking to score as many runs for our clients as possible. 

For investors who are already generating a high income from real estate they own, tax-advantaged investing can reduce their tax profile. 

For others who may be entirely dependent on funding retirement income with social security, taxable, and retirement accounts, we help with an income distribution strategy that seeks to generate higher usable income. 

Drawing from different accounts to coordinate a lower personal tax is called “tax-bracket management.”

If you would like to manage taxes before and into retirement, Cornerstone can help with that.

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Cornerstone Wealth Management is recognized for its delivery of independent, comprehensive financial planning. This essential work goes beyond traditional investment planning.

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