Investment Management & Investment Consulting

Personalized Investment Solutions:

Legend Financial Advisors, Inc.,^® (Legend) investment management services include designing dynamic, creative and personalized investment strategies for individuals, business entities, retirement plans as well as non-profit organizations.  Legend is a Fee-Only, Fiduciary U.S. Securities and Exchange Commission Registered Investment Advisory firm.

Initial Investment Process:

Investment portfolios are developed to attempt to fit client’s long-term desired return goals and appetite for risk.

A client with a Legend advisor’s assistance, will determine an appropriate mix of investment risk and return, upon completion of their personal risk assessment also known as their Personal Risk Score. Once an appropriate mix of investment risk and return is agreed upon, Legend’s advisory team will then develop an investment portfolio strategy to address the client’s needs and long-term goals.

Client Education:

Legend believes that education is vital to the investment process. Legend is dedicated to helping each client learn about different asset classes and how they relate to market volatility, time horizons and investment performance.

Investment Portfolio Strategy:

Legend will propose investment portfolio strategies to be directly managed for a client’s personal assets as well as IRA-type accounts specific to the client’s situation.

For an individual’s self-directed employer retirement plan assets, such as 401(k)s, 403(b)s, and 457 plans, Legend can be retained to create personalized portfolio strategies upon which it can consult (provide investment guidance) and/or potentially manage directly.

Investment Market Research:

Legend performs wide-ranging research on the financial markets and the underlying securities. Emphasis is placed on investment strategy types that have a goal of producing better risk-adjusted returns (higher than normal returns for the amount of risk taken).

Legend Utilizes Many Sources Of Research, Including But Not Limited To:

1. Numerous investment management organizations and research services including:
   1. Morningstar, inc.
   2. Bloomberg Professional Service
   3. Zacks Investment Research
   4. Ford Equity Research
   5. Thomson Financial First Call
   6. Standard & Poor’s ratings services
   7. Other web-based investment research services
2. Numerous investment newsletters, periodicals, research publications, professional journals, and webcasts
3. Portfolio manager interviews

Investment Securities Research:

Legend performs extensive research on a wide range of securities that can be used to structure investment portfolios including:

1. Open-end mutual funds
2. Exchange-traded funds (ETFs) and exchange-traded notes (ETNs)
3. Closed-end mutual funds
4. Domestic and international stocks (including exchange-listed and over-the-counter securities)
5. Master limited partnerships (MLPs)
6. Preferred securities
7. Alternative investments – where possible

To research such a large quantity of securities, many investment software screening tools are utilized from leading investment organizations that were mentioned above to complete the quantitative analysis portion of the securities research process.  Legend’s advisory team then performs the qualitative analysis where necessary to select the investment securities to be utilized within investment portfolios.

Minimizing Securities’ Investment Management Costs:

Legend strives to seek out cost-effective securities, where possible, when selecting open-end mutual funds (institutional share classes are generally, the lowest cost mutual fund share class.), exchange-traded funds and notes and closed-end mutual funds without sacrificing performance.  This effort reduces the total cost of investing to the client. Other costs are addressed in the sections below (click here).

In addition, Legend manages individual stock portfolios which eliminates the management costs of mutual funds and ETFs.  Please note, there may be nominal trading costs charged by some custodians (where assets are held).

Investment Portfolio Construction:

When constructing portfolios that do not own individual securities (ex. stocks), Legend’s investment process incorporates low-cost securities, where possible.  These securities are allocated and traded in an income tax-efficient manner, where possible, when the opportunities are available.

These low-cost investments can include open-end mutual funds (institutional share classes when available) as well as exchange-traded funds and/or notes when appropriate (assuming performance is not sacrificed).  Other securities including individual equities, closed-end mutual funds, preferred stocks, and master limited partnerships may also be utilized depending upon the portfolio strategy desired by the client.

Legend’s focus on minimizing investment management costs will reduce the total cost of investing to the client which can increase investment returns.

Ongoing Investment Management:

Legend utilizes its many investment resources to determine appropriate positioning of investments, for each portfolio strategy, to attempt to take advantage of financial market opportunities, as they arise.  Legend analyzes several sophisticated economic and investment monitoring tools including several charts and graphs.  These tools support the positioning of each investment type, while striving to maximize investment opportunities and if possible, minimize losses.  Portfolio adjustments are made on a discretionary basis, when appropriate.

Tax-Efficient Investing:

When managing a portfolio, Legend focuses on income tax-efficiency, where possible.  However, Legend does not let the income tax tail wag the investment dog (income taxes should not drive decisions about selling securities).  Nevertheless, Legend focuses on improving income tax-efficiency as described below:

1. Securities With Favorable Income Taxation: 
   This category includes securities that are tax-exempt (municipal bonds) or tax-favored (capital gains-oriented).  One example of diving deeper into income taxation issues would be that Legend may utilize equity-oriented exchange-traded funds and/or notes that are typically more income tax-efficient than equity-oriented open-end mutual funds assuming performance is similar for both types of investment vehicles.
2. Asset Placement: 
   An individual’s investments that are income-tax inefficient are placed tax-efficiently in tax-deferred and/or tax-exempt type accounts such as IRA-type accounts, Roth IRAs and Health Savings Accounts (HSAs), versus taxable accounts.  For example, taxable interest-generating investments may be placed inside of IRAs or Roth IRAs to avoid taxation.  Capital gains-type investments, which are tax-favored, may be placed in taxable-type accounts if there are no additional monies available within IRAs or Roth IRAs.
3. Income Tax-Efficient Trading: 
   Securities, when sold, are traded in an income tax-efficient manner, where possible.  If a security has been purchased multiple times at different time periods (commonly referred to as “trade lots”) Legend will attempt to match trade lots with losses against those securities with gains.  This minimizes capital gains taxation and, consequently, income taxes.

4. Tax-Loss Harvesting: 
   Tax-loss harvesting (also known as income tax-loss harvesting), is a strategic method of taking investment losses to offset income.  Tax-loss harvesting enables investors that own investments outside of tax-sheltered accounts such as 401(k)s, 403(b)s, 401(a)s, 457 type plans, pension and profit-sharing plans and individual retirement accounts (IRAs), Roth IRAs, etc. to use investments with losses to offset realized gains of taxable investments.  Total net losses (capital gains are offset against capital losses.  The result is either a net capital loss or a net capital gain.) of up to $3,000.00 annually can be offset against ordinary income such as salaries.  Lower investment income often means lower income taxes. 

   Other personalized investment portfolios can be developed around the client’s existing holdings that have high income tax ramifications, if sold.
   
   Tax-loss harvesting is a sound investment practice.  How well it works depends upon an investor’s individual circumstances.  Income tax-loss harvesting benefits realized by any investor depends on their portfolio and their specific state and federal income tax rates that apply to them.

Legend’s focus on income tax minimization may reduce the total cost of investing to the client.

Minimizing Securities Trading Costs:

1. Institutional Custodian and Trading Costs: 
   Legend utilizes an institutional custodian to minimize trading costs.
2. Cost Of Trading Mutual Funds: 
   Legend trades mutual funds typically at $24.00 or less, while some mutual funds are known as no transaction fee (NTF) funds.
3. Cost Effective Methods Of Trading Exchange-Traded Securities: 
   Legend typically trades ETFs and ETNs with limit orders to secure pricing as close to the net asset value (NAV) of the funds as possible.
4. Utilizing Limit Orders When Trading Individual Equities: 
   Legend also utilizes limit orders when trading individual equities (stocks) that have low volumes to prevent paying premiums or selling at discounts.

Legend’s goal is to focus on reducing trading costs to the client.

Performance Reporting:

Legend offers easy-to-read and understandable portfolio performance reporting.  Quarterly meetings/webcasts/conference calls are offered to each client to discuss portfolio performance and composition.  (See the section below entitled Frequency of client contact/advisor availability for more information.)

Monthly account statements, daily securities valuations and online access from custodians are also available via Legend’s website in the Clients Only section.

Income Tax Reporting:

In terms of income tax reporting, Legend calculates the cost basis of all securities purchased as well as transferred in, assuming the client can provide a transaction history of all pre-existing securities prior to transfer.

Form 1099s are provided by the custodian to the client for any taxable event that has occurred in the prior year.

Interim realized and/or unrealized gain and loss reports for income tax planning purposes are available upon request.

Frequency Of Client Contact/Advisor Availability:

Clients may call Legend’s advisory team as often as they deem necessary. In terms of frequency of contact, at least quarterly discussions and/or meetings/webcasts/conference calls are offered to each client to discuss portfolio performance, portfolio construction, changes in investment risk tolerance level, a review of client goals as well as any other matter that is of importance.

Investment Management Fees:

Legend charges a fee for discretionary investment management services only that is recalculated quarterly.  The fee will be charged as a percentage of investment assets under management.  For more information regarding Legend’s investment management/consulting fees, please visit the Investment Management/Consulting Fees section of the website.

Investment Consulting Services:

Clients often have securities, retirement plans [ex. 401(k), 403(b), 457 or 457 (b) plans and deferred compensation plans], variable annuities, 529 plans and other educational accounts that cannot be placed directly under management at one of Legend’s preferred custodians.  In this instance, Legend can be retained to provide investment consulting services (investment guidance) on how to invest the above-mentioned account types.  In most cases, Legend can also assist the client in implementing any recommended securities trades, if so desired.  In many of these instances, Legend can offer the client electronic performance reporting if the underlying account offers such connectivity.

Investment Consulting Fees:

Investment consulting fees are periodically recalculated based upon the same schedule as that of the investment management service.  The fee is paid quarterly.  In addition, multiple portfolios including those that are discretionarily managed can be included under a single fee.

This service could also include accounts and/or investments that are difficult to value except for once per year, such as retirement plan balances of the individual client(s) and/or variable annuities, or could possibly be aggregated with accounts not held at one or more of Legend’s preferred custodians.

Furthermore, Legend may not have discretionary authority over those assets held at custodians other than Legend’s preferred custodians [ex. an employer’s 401(k) plan] in which case, Legend will advise the client as to how these assets are to be positioned and traded and the client will need to implement the trade. Legend can assist the client with this process.