Portfolio Options and Fees

Dear Clients and Potential Clients:

In order for a financial adviser to help you position your assets and navigate through this tough economic and market environment, it takes a team of experts with varied talents and track records. Moreover, this team must eliminate as many conflicts of interest, such as earning commissions on trades, to avoid biased recommendations. In my opinion, a financial adviser or asset manager should be on the same side of the fence as the investor, which means when the account decreases in value the asset manager should get a pay cut; likewise, when the asset manager does a great job at increasing account values they should get a pay raise. This is why Humboldt Financial, LLC provides investment advice on a “fee-only” basis and has an incentive to continuously improve the investment selection process.

Here are the two platforms available to clients:

1. Fully Managed Portfolios
2. General Clients

I developed the Fully Managed Portfolios below by integrating my knowledge and experience with the expertise of equity research companies who provide daily investment advice for bull, bear, and neutral market conditions.
Here are the seven managed portfolios to choose from:

• Total Return Portfolio (PFF004) – We seek a positive return each year regardless of the market direction (up, down, or sideways). This portfolio will use ETFs (long, but no ultra ETFs) and can be 100% long to 100% cash or a combination in between. Suitable for IRAs. Conservative Risk.

• Moderate Portfolio w/ Risk Management (PFF012) – This portfolio will use defensive cash positions, ETFs (long and limited inverse positions, but no ultra ETFs). Suitable for IRAs. Medium Risk.

• Market Plus w/ Risk Management (FAA006) – This is very similar to the Moderate Portfolio, but includes, ultra ETFs, long stock positions with covered calls (options). This account trades more frequently and its objective is to beat the S&P 500. Suitable for IRAs. High Risk.

• Paired Trades (PFF022, FAA004) – This account uses long and short trades paired against each other. Margin is required to short ETFs and stocks, but we will do our best not to be leveraged above the initial investment. Medium Risk.

• Active & Leveraged Portfolio (PFF020) – Active trading of ETFs and stocks (long and short), options, and leverage with margin for maximum growth. High Risk.

• Humboldt Green (HF0215) – For the socially conscientious investor, this account will invest in mutual funds, ETFs, options, and stocks that are considered socially responsible. Suitable for IRAs. Medium Risk.

• Satellite – $50,000 minimum investment. This option is good if you want to incorporate higher risk into any of the above portfolios to create a more diversified “core & explore” allocation with less volatility and added return. This is a sophisticated and complex portfolio developed by money managers who manage money managers. This account is held and billed out of house. Suitable for IRAs. High Risk.

I may add an Options-Only account and Custom Account in the future.


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Fees for Assets Under Management**+

$0 - $24,999
$60/hr for individual investment advice

$25,000 - $49,999
$100 per month

$50,000 - $99,999
2.25% per year

$100,000 - $249,999
2.00% per year

$250,000 - $499,999
1.75% per year

$500,000 - $999,999
1.50% per year

$1,000,000 - $2,499,999
1.25% per year

$2,500,000 - $4,999,999
1.00% per year

Above $5,000,000
0.75% per year

** The above fees do not include trade commissions. We receive NO part of these commissions. Even though these commissions are slightly higher than discount houses, the services offered at TradePMR will more than compensate for the commissions.
+ The above fees exclude the Satellite portfolio, which is managed and billed by another Registered Investment Adviser.

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General Clients – $75 per month paid in advance at $300 for four months or $100 monthly.
These options are for the trader who has the time and interest to place their own trades and would like access to our trade alerts on the BUY and SELL side for ONE of the above portfolios (excluding the Satellite). You can access trades to additional portfolios for $50 per portfolio per month. Trade alerts arrive via email within two hours.

Security – Humboldt Financial, LLC does not hold your money, nor can we access it. We can only execute your trades through TradePMR. Your account statements and all reporting will come from TradePMR. The SIPC insurance on general accounts also fall under TradePMR as does the additional account insurance they have through Lloyd’s of London.


Let me know which accounts you are interested in and send feedback if you have comments or questions.

Does your financial adviser work for a B/D?

As I transitioned from being an employed financial adviser to an independent financial adviser in 2007, I thought I was free of the "conflict of interest" beast eating clients and me alive. Not so.

Although this article is geared towards industry professionals, it is a great resource for understanding what the differences are between B/Ds and RIAs.

I pulled this snippet from Michael Patton's article I referred to above. "An RIA is required to adhere to a fiduciary standard which is defined at uslegal.com as: A fiduciary duty is an obligation to act in the best interest of another party...A fiduciary obligation exists whenever the relationship with the client involves a special trust, confidence and reliance on the fiduciary to exercise his discretion or expertise in acting for the client...A person acting in a fiduciary capacity is held to a high standard of honesty and full disclosure in regard to the client and must not obtain a personal benefit at the expense of the client."

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Managed Portfolios Status: I have two IRA portfolios completed.

As I worked late into the evening last night constructing managed portfolios, I couldn't help but get excited over what you are about to experience. You will have such a tremendous edge over a friend or family member who has money managed by ABC Wirehouse or XYZ Independent...these platforms typically limit who an adviser may work with, the technology used, and the speed at which information reaches clients.

As a business consultant, developing and delivering a high-level money management platform to clients with as little as $25,000-$50,000; not $100,000, $500,000, or even $1,000,000 or more is spectacular.

Continuous Improvement

I finally had to pull myself out of bed at 2am this morning so I could get out what's on my mind. Hopefully I do not have too many typos...its dark and the only light here illuminating my keyboard is my laptop monitor.

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My work on developing managed portfolios and the associated fee structures will hopefully be completed by mid next week. As I am sure you can appreciate, the development of these portfolios is a large task and even upon their completion, the evolution and continued improvement upon them will be a never ending process.

While working as an quality auditor for a professional audio manufacturing company years ago, the initial process for my audits was to set aside a number of samples of a finished product and perform a cosmetic (outside) and functional (inside) inspection. When these audits exposed a reoccurrance of cosmetic or functional problems, it was then my job to document my findings and pass the data on to the product manager. From here, the product manager would find out who was associated with the mistake and tell them to stop making it. Because machines did not assemble the majority of the finished product, human error was inevitably going to happen over and over despite a slap on the wrist...or even worse, writing someone up for...well, being human. It was a ridiculous way to control our product quality and minimize employee mistakes. What could we do?

Japan is well-known for having efficient manufacturing processes and some of it has to do with how they collect data from the employees who work on the assembly line, for example, and implement "mistake-proofing" mechanisms in order to prevent human error from becoming an quality issue. This is called, "Poka-Yoke" and was one strategy we trained the mechanical engineers, product managers, and employees to implement.

Another Japanese manufacturing process we implemented was "Kaizen", which means continuous improvement. While this philosophy sounds like a no-brainer, believe it or not, continuous improvement is not an easy task to implement in work and/or life. And if it is implemented, how do you effectively track that a change did in fact result in an improvement? The short answer is that data must be continuously compiled and analyzed. If analysis proves that something is wrong and needs tweaking, then it is time to brainstorm with those involved to come up with an idea that will fix the issue. This process should continue forever until perfection is achieved.

So how does my background in Poka-Yoke and Kaizen relate to managed portfolios? In a nutshell, I wanted to convey that these processes I helped implement in a manufacturing environment will also be utilized in my managed portfolios. I want the managers and research teams, investment choices, tools, strategies, etc. to improve with time. I want your assets to age like a fine wine where the taste gets better and the price tag goes up.

Another question I may get is why I will only have 5-6 managed portfolios. I'll address that so everyone understands why this is so important.

Nearly all financial advisers have custom portfolios for each client. Sounds great at first, right? In reality this creates a significant disadvantage to both the client and adviser. Here's why: if an adviser is managing 300, 500, or maybe 700 portfolios, how the heck can one adviser keep track of all that data to make continuous improvements and help each client effectively manager their assets? It is nearly impossible.

I had a lunch meeting this week with a local financial adviser who explained how she struggles with this issue. Unfortunately, due to the inflexible nature of her broker-dealer and business platform, her best solution is to put clients into what are typically known as "Fund-of-Funds" mutual funds. These funds are put together by [open-end] mutual fund companies to diversify investors' money [according to risk tolerance]. These funds are great for an adviser (or investor) who doesn't have the time to personally manage the money, or better yet, if they don't know how to manage various investment options, mutual fund managers will do it for you. Now an investor only has to buy one mutual fund if they want a "diversified" conservative portfolio, for example. Sounds good, right? Well there are pros and cons to these open-end mutual funds...but to get back to my point, this adviser and her clients hope that the managers managing these fund-of-funds are doing an excellent job at it. The huge issue is not with these particular funds, it is the inherent inflexible natural of open-end mutual funds. If you own a mutual fund read the objective of that mutual fund next time the prospectus arrives in the mail. Avoid the tendency to recycle it just this one time. The objective you read is the "box" the mutual fund manager(s) must confine themselves. If the manager wants to change the objective it must have the approval of the fund family and get shareholder approval through a proxy vote. This could take awhile...and is one reason why many open-end mutual funds are suffering terribly in this market environment. Luckily, some entrepreneurial money managers decide to move on to start hedge funds, or to become RIAs, so they can manage assets in an environment that stimulates creativity, has unlimited flexibility, and continuously improves.

This is extremely important to understand because most mutual funds are only set up to (hopefully) give an investor a positive return when the market is in an upward trend. Unless you've been sitting on the beaches of the Bahamas for two years straight without a newspaper, the Internet, or human interaction, you've noticed that the stock market is not in an upward trend. This is why most investors who are mostly in mutual funds are suffering badly.

My solution is to offer clients investment strategies that include the input and expertise of multiple money managers and researchers in order to give clients an edge well beyond buying individual stocks or mutual funds.

So, the intent of these portfolios is not to put clients in a box and limit flexibility. The true purpose for the managed portfolios is to have a streamlined process for various levels of risk tolerance so we can navigate swiftly and effectively through this market environment and make continuous improvements along the way.

New Client and Potential Client Q&A

There have been a lot of questions about my new Managed Accounts, TradePMR and my Services. While I specialize in coordinating and managing personal “advisory councils” and financial planning, I spend the majority of my time managing portfolios.

For ethical reasons and my fiduciary responsibility to clients, I do not receive any commissions on trades or residual revenue from mutual fund companies. Furthermore, your account will stay under your control at TradePMR, with all the protection and services of TradePMR. I simply execute all your trades through TradePMR.

Humboldt Financial’s platform now utilizes other RIA’s who manage money managers [kudos for those who ask questions about what this means] and investment research teams independent of TradePMR, Sterne Agee, and me. If you haven’t already guessed, managing portfolios in this market environment really takes a team effort and the use of various tools and investments. It has taken me several years to assemble and integrate this team of professionals. What I have developed are very high level money management strategies while keeping costs minimized.

Stay tuned for descriptions of managed portfolio options and the associated fee structure...

A Walk Through Matthew's Park (1976-Present)

Hello Everyone,

First of all, thank you for visiting my blog. Having a platform like this has been on my “To Do” list for way too long and I'm happy that it has finally come to fruition. The goal here is to provide a place for open communications on things I feel are important to convey about my business, information on the market and economy, and to hear feedback from you. After reading a few of my posts, you should start to get a better sense of who I am and what I stand for, where I experience difficulties (yes, it may be hard to believe, but I work in a difficult industry), and of course give mention to successes along the way.

My Background

I spent my preteen years growing up around Yosemite National Park, CA, but as the late 1980s became a struggle for my parents to make a living in a faltering economy, we relocated to Seattle, WA where jobs were in abundance. I would spend the next 19 years living in the Seattle area and it was a blast. I was lucky enough to live in Seattle during a time when the Seattle music scene was taking the world by storm. I attended shows small shows where Nirvana, The Presidents of the United States of America, Mudhoney, Soundgarden, and the Foo Fighters played. (If you have not heard of these bands, don’t worry, I won’t judge you for being under-cultured.)

Ultimately, I wanted to have fun on stage like the bands I would go see, so I took up playing the drums and played in a few bands and actually got pretty good. As I neared the end of high school, I began to enjoy the audio engineering, or recording arts, aspect of the industry and earned an Associate degree in Audio Engineering in the late 1990s.

After college, I worked for an electronics manufacturing company where I was most proud of helping develop process improvement programs that saved the company over $250,000 each year in production waste and mistakes. I loved my job and the people I worked with but the job was outsourced to China in 2003. I wasn’t disappointed one bit because I took the opportunity to earn a B.S. in Business Administration. I simply loved the business and finance portion of my job and wanted to continue a career in business.

During my time in college, I also took up day trading and gained an infatuation with a simple financial planning software program developed my Microsoft called Money. I would run scenario after scenario to see how little tweaks would affect my wealth 40 years in the future. I was hooked. I kept very close track of our income and expenses and constantly ran reports for my wife to review. I would show her how her continued 4.3% monthly increase in Starbucks spending would affect her retirement savings in 2044. As you can probably tell, the response was not positive like I had expected, so kept most reports to myself and studied them intently. I was so enthusiastic with my new hobby that it rubbed off on friends and family and they wanted me to look over what they had going for them. I enjoyed the consulting work so much that I helped everyone who wanted help for free. I couldn’t imaging getting paid for something I enjoyed doing so much. Well that mindset changed when I began scouting financial advisory companies that I thought were a good fit for my growth as a financial planner.

It was a strange time to seek a career in finance because many finance companies were on the search for great advisors, so I felt like I was actually interviewing the companies to see if it was a good fit for me rather than I a good fit for them. All in all, it came down to my top three: Edward Jones, AXA Advisors, and Ameriprise Financial (a spinoff of American Express Financial Advisers). I decided to go with Ameriprise because they had one of the best training platforms in the financial services industry and focused on comprehensive financial planning, not "stockbrokering". (In fact, according to a book I thumbed through a few times in the Ameriprise lunch room on the history of Ameriprise—a topic for another post—Ameriprise would lose some of its best advisers to its competitors because competitors would wait for Ameriprise to train them, then recruit them.)

Moreover, I liked how the focus was around professional development and financial planning, but ultimately disliked writing financial plans for the purpose of selling proprietary products like variable universal life insurance. To me it seemed to be a huge conflict of interest when we could only sell their insurance products. Things may have changed now, but during my time there in 2005-2007 I experienced that conflict of interest over and over.

There was also a lack of focus on educating financial advisors around more sophisticated asset management and financial planning strategies that would help people navigate through difficult times like these…and I know this continues to be a weakness of theirs because I occasionally call some of my old buddies to talk about our respective businesses and the strategies advisors continue to use with their clients and feel reassured that my decision to leave Ameriprise was truly for the better. They still sell the same stuff and most advisers still lack in-depth knowledge of the markets, and alternative financial planning strategies. Okay enough with Ameriprise. It was a great company to start with and good for clients who are new to financial planning and need help.

During my stint at Ameriprise, my wife and I had our first child and we knew very little about taking care of a baby. I took a month or so off of work to get a handle on baby raising and went back to my two hour daily commute a changed man…which the commute wasn’t a huge issue before we had a baby; but after several months of leaving home before my daughter got up and getting home when she was already in bed for the night, I realized my job and commute wasn't worth missing out on my daughters first few years of life. I began to ponder what it would be like to work as an independent financial advisor. On the bright side, the commute gave me the opportunity to come up with better ways of serving clients, being with my family more, and of course that Northwest brewery tour I’ve always dreamed of going on.

I kept my options wide open and ended up locating a financial adviser position in Arcata, CA of all places. Where the heck was Arcata my wife and I first asked each other? Well we located it on the map and realized that it was only two hours north of where my father lives in Mendocino County. “Oh, we love that area of the CA coast,” we both shouted. So, I responded to the job posting, but did not plan to drive down for an interview due to the 650 mile drive. Soon thereafter though I received an email from my father telling me that my grandfather had passed away and the viewing was in Willits, CA. I immediately made the trek down to Willits to pay my respects and be with my father for a few weeks. On my way back home I stopped by the Raymond James office in Arcata to meet with the owner, Hans Overturf, for a face-to-face interview. The interview went well and my 10 hour drive back up to Seattle was full of excitement. My wife and I discussed the pros and cons of relocating, starting a financial planning practice from scratch in an area I knew absolutely no one...and decided to go for it. It sounded adventurous to us. So we rented out our home and officially relocated in early May 2007.

Adventurous was an understatement...

I got off to a quick start by taking a lot of folks out to lunch to explain the differences between financial advisers and financial planners, but after taking over 200 people out to lunch, I realized that seminars may serve as a less expensive and more productive means of educating people in Humboldt County and working for them as their financial adviser. The three seminars over my 20 months with Hans worked well (and I enjoy public speaking).

Admittedly, cold-calling is not my forte, so I spent more time in the community developing strong relationships with business owners, individuals and families, and other professionals in my industry. If you are a fan of being cold-called and believe I am crazy for not calling you out of the blue, then I apologize for not calling. My hard-sell training at Ameriprise doesn't work with Humboldt residents and thankfully, because I hate pushy sales myself too.

Ultimately, my decision to focus on building public relations first resulted in a much slower process for building a financial practice, but did improve our overall public image. Unfortunately the stigma from events stemming from Hans' involvement with the Redwood Lodge in Del Norte County was too much to overcome. I started to get question after question about his involvement in the Redwood Lodge from prospects. In time, I think my growing disconnect from Hans and a growing concern for my and Hans' clients, led me to where I am now.

I wanted to provide a level of business and financial services not found in Humboldt County or anywhere along the North Coast, so I had to go out and start my own financial services firm. Although the process started in late November 2008, I officially become a Registered Investment Adviser (RIA)with the State of California on January 20th, 2009. This move came from five months of interviewing other RIAs and my own research regarding the significant benefits to working as a fee-only financial adviser. I am very excited because it is no doubt the choice best suited for my clients, future clients, and the overall future expansion of my practice. I am now able to reduce client portfolio costs, expand technology, add nearly 150 years of independent equity research experience, and develop personal advisory councils for clients who require more complex financial solutions. I am now working with managed portfolios, writing financial plans, as well as writing business plans for people who want to start or expand a business. For dental professionals, I have a team of professionals who specialize in finance, tax, law, psychology, and technical writing who will help with setting up a pension plan, transitioning a practice to a new associate, or help avoid the "tax spiral".

And to think all this is available here in Humboldt County.


End Note

...If you are interested in learning about the reason why Hans Overturf had to transition from Raymond James to Sterne Agee by December 31, 2008, please contact Raymond James directly. I can answer some of your questions, but it's best if you contact Raymond James. If you have concern about your accounts now held at Sterne Agee or Raymond James, again please call Raymond James' compliance department. If you need the phone number email me or call 415-391-6800. I apologize, but the details are not appropriate for this blog due to the many people involved and the need to protect all the affected parties...