Behind the scenes services of NI advisors

By Andy Loving

Over the past year or so, NI advisors have been working together on a project that will save many of our clients—that means many of you reading this newsletter—a substantial amount of money. This project is only one of the several “quiet,” behind-the-scenes services that your advisor may be providing you that you may not be aware of. So let’s look together at a few of those quiet services.

NI advisors have been building institutional shares into many client portfolios. With significantly lower management fees and expenses, institutional shares are usually reserved for large institutions that can buy large blocks of shares. At Charles Schwab, NI can now aggregate the purchases of all 12 advisors to meet those high minimums and buy the institutional shares that carry lower expenses. The institutional shares of about 16 mutual funds (probably more to come) that NI advisors use carry expense ratios that run 19% to 54% lower than retail shares. In a period of lower returns, these lower expenses are even more important. NI’s largest institutional share position of almost $7 million is in the affordable housing bond fund, CRA Qualified fund. Both Calvert Funds and Pax World Funds have three funds each in the group of sixteen.

Clients have to pay small transaction fees to buy or sell institutional shares, but NI examined the specific account sizes and types, the amount held in a single mutual fund, and how long we expect to hold that fund to optimize the savings for clients.  For example, it may not make sense to hold institutional shares in smaller accounts.

As of now, almost one-third, or $40 million, of NI-managed assets are in these institutional shares, saving NI clients approximately $125,000 in fees each year.

Our behind-the-scenes services do not end there.  When you transfer assets to NI, certain mutual funds, like Vanguard and Fidelity, charge transaction fees upon liquidation if shares are transferred to Schwab in-kind and then liquidated.  But if they are liquidated before they are transferred, no liquidation fees are charged, which could save the client several hundred dollars in transaction fees.  This attention to detail takes some research and time but it saves the client real money.

When appropriate, your advisor uses year-end tax loss harvesting in non-retirement accounts.  This is usually done in years when markets have been down and mutual funds or stocks are showing losses.  By selling and taking losses and reinvesting the proceeds in similar funds or stocks, the client can recover part of their losses in tax savings by offsetting regular taxable income.  Sometimes a similar thing can be done when mutual funds have capital gains distributions by the same kind of selective selling.  Of course, advisors consider any transaction fees when performing this tax loss selling.

Other services focus on client impact and satisfaction. For example, the Calvert Community Investment Notes held in many client accounts can be targeted to support specific work of the Calvert Foundation to provide capital to poor people and poor communities.  Interested in affordable housing?  You can target your note to Habitat for Humanity.  People who want to invest in microfinance can target groups like Oikocredit.  Support for groups that combine environmental impact and economic empowerment is done through a target called Green Strategies to Fight Poverty.  And people who especially want to help women can target through WIN WIN:  Women Investing in Women Initiative. If you are interesting in targeting, just ask your advisor about it.

These are just a few of the examples of “quiet” actions that your NI advisor may be taking that save you money or make your money impact areas of your specific interest.  Feel free to ask your advisor about these and other things that are particular to your personal situation.  NI advisors may not be able to control markets, but we can sometimes improve your financial returns or social impact simply by taking the time to provide one or more of these often un-noticed services.

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Andy Loving

Welcome to my archive of newsletter articles and blog posts. For more information on my service offerings, please go to my advisor webpage.

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