Wealth Management for Individuals
Questions To Ask an Advisor
To help you in your search for the right partner for your investments, we’ve prepared a list of questions to ask each advisor that you speak with. Below are our answers to each question to help you evaluate how DCM may be able to meet your financial needs.
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What You Can Expect From Us
- Are you always a fiduciary, and will you state that in writing?
- How do you disclose your conflicts of interest?
- Do you focus solely on investment management, or do you also advise on taxes, estates and retirement, budgeting and debt management, and insurance?
- Do you believe in technical analysis or market timing?
- Do you believe you can outperform the market?
- How often do you trade?
- How do you report investment performance?
- Which professional credentials do you have, and what are their requirements?
- After inflation, taxes and fees, what is a reasonable estimated return on my portfolio over the long term?
- Who manages your money?
- Can you list the number of clients you currently serve, as I expect you to have enough time to give my portfolio the attention it deserves?
- What is your investment philosophy?
Any time Donaldson Capital Management (DCM) recommends that a client or prospective client move their assets to DCM from another firm or retirement savings plan, DCM stands to benefit from the future fees that will be earned on that account. We control this conflict by fully disclosing it and providing a clear explanation to the client or prospect of why we believe it is in their best interest. Clients and prospects are free to accept or reject our explanation and can choose any investment advisor they prefer.
Another potential conflict of interest is that DCM employees trade the same securities in their personal accounts that are also traded in client accounts. DCM controls this potential conflict of interest by prohibiting any employee from trading on information that is not publicly available. Employees are also prohibited from buying any security just prior to a block trade. Block trades are when a security is either bought or sold for multiple client accounts at one time as part of a single transaction.
DCM is required annually to file registration forms with the SEC in which potential conflicts of interest must be disclosed. This form, known as the ADV Part 2, is publicly available at https://www.adviserinfo.sec.gov/. Please refer to the ADV for a complete and up-to-date disclosure of our potential conflicts of interest.
Outside of investment management, we also provide comprehensive financial planning services, including cash flow and debt management, tax planning, estate planning, retirement and income planning, investment planning, risk management and insurance planning, and education planning.
The basis for our investment decisions is fundamental, however, we do realize there is significant academic research that confirms that stocks tend to have inertia, especially over 6-12 month periods. So, while it certainly does not dictate which stocks we buy or sell, technical analysis can help us determine the timing of those decisions.
Our Rising Dividend Cornerstone™ strategy has historically matched the return of the S&P 500 index with less volatility. However, our focus is not on outperforming the market. Our goal is to meet your specific investment objectives: Security, Income, and Growth. By focusing on those three objectives, we believe we are better suited to meet your needs today and in the future instead of betting on speculative investment to try and "beat" the market.
We have several different strategies, each with their own turnover characteristics.
In general, our strategies seek to own large, well-established businesses that grow their earnings, cash flows, and dividends over the long-term. In an ideal world, we would buy a business and hold it forever.
However, that doesn’t always work out. As new opportunities arise, we will make changes to stay within your investment objectives. Extremely overvalued positions, or fundamental changes in the business or economy mandate that we move away from a particular stock.
Turnover also varies based on individual client needs, which include taxes. If you have concerns about turnover or taxes generated by trades, let us know. We will work with you to optimize your portfolio goals with your tax situation.
We report total return after all expenses (market appreciation + income – fees and expenses).
DCM has 14 Certified Financial Planners (CFP®) on staff, 3 Certified Public Accountants (CPA), and 2 Chartered Financial Analysts (CFA®). Our Investment Policy Committee is supported by a Certified Business Economist® (CBE). We also have 2 Accredited Investment Fiduciary (AIF®) designees, one Chartered Retirement Plan Specialist (CRPS®), 3 Chartered Retirement Planning Counselors (CRPC®), and 2 Chartered Financial Consultants (ChFC®). In addition, most of our Client Service Managers are Financial Paraplanner Qualified Professionals™ (FPQP™).
Upon request, we would be glad to provide a list of educational requirements for each of the referenced certifications. In total, our Investment Advisors have over 300 years of experience as financial and investment advisors.
Unfortunately, there is no way to know for sure what stocks and bonds will return in the future. And, as the early 2020s have shown us, inflation isn’t predictable, either. Taxes are more certain, although they depend on your specific situation.
While past performance doesn’t predict future results, we can use history to make some reasonable estimations. A balanced portfolio of stocks and bonds has returned an average annual return between 5% and 14% per year over rolling 20-year periods since 1950 with an average of 8.7%.
If we assume inflation matches the Fed’s long-term target of 2%, taxes erode about 20%, and all-in management fees of 1%, a reasonable expectation for long-term real returns would be between 4 and 6%.
Of course, past performance is not indicative of future results, and all investments carry some level of risk. Your specific situation may vary, and it's always a good idea to consult with a financial advisor to tailor a strategy that suits your individual needs, which includes your unique tax situation and risk tolerance.
We do. DCM follows a “model portfolio” approach. That is, we have one portfolio for each of our investment strategies that is used as the model for every client following that same strategy. The model portfolios do not have any client funds in them. Each model portfolio is managed directly by our Investment Policy Committee (IPC). Consisting of all Senior Portfolio Managers and Research Analysts, the IPC continuously reviews and evaluates a wide array of investment research, global economic data, company filings and news, trends and outlooks in politics, industry, culture, and technology. The IPC members then use that information to debate and determine which stocks and bonds would be the best for each model portfolio. Decisions to add or remove a security from a model require each such decision be justified with objective data, defended in front of the IPC, and then voted for by a majority of the committee.
On an ongoing basis, every client portfolio under the responsibility of each Investment Advisor is periodically compared to the appropriate model. Based upon that comparison, changes (trades) are made in each portfolio to bring it as close to its model as possible, after allowing for client-specific requirements or requests that necessitate variation from the model. In other words, we have no independent operators here, no “market cowboys”. Every client’s assets are managed by the best collective judgment of the entire IPC. You should not be able to tell which Investment Advisor is managing a particular portfolio by examining its makeup. Each portfolio for a particular strategy should be the same, again after allowing for client-specific requests or requirements.
However, the buck stops with your Investment Advisor. They are directly and personally responsible for both managing the investment of your assets according to the models, being intimately familiar with each client’s needs, preferences, and other matters requiring the usually slight changes from the model for that client, and finally for providing and/or obtaining the financial advice that you need.
Many of us at DCM subscribe to the same methodology and invest our own personal assets in the same strategies as our clients.
On an ongoing basis, every client portfolio under the responsibility of each Portfolio Manager is periodically compared to the appropriate model. Based upon that comparison, changes (trades) are made in each portfolio to bring it as close to its model as possible, after allowing for client-specific requirements or requests that necessitate variation from the model. In other words, we have no independent operators here, no “market cowboys”. Every client’s assets are managed by the best collective judgment of the entire IPC. You should not be able to tell which Portfolio Manager is managing a particular portfolio by examining its makeup. Each portfolio for a particular strategy should be the same, again after allowing for client-specific requests or requirements.
However, the buck stops with your Investment Advisor. He or she is directly and personally responsible for managing the investment of your assets according to the models; being intimately familiar with each client’s needs, preferences and other matters requiring the usually slight changes from the model for that client; and finally for providing and/or obtaining the financial advice that you need.
Many of us at DCM subscribe to the same methodology and invest our own personal assets in the same strategies as those of our clients.
We carefully monitor the workload for each of our advisors to be sure that they have time to give the best possible service to every one of our clients.
Your advisory team will include multiple people serving your account, which ensures that someone will always be available to meet with you and take care of your portfolio. We also have dedicated investment and trading teams that review our strategies and accounts on a regular basis.
In total, we serve about 1,450 individual and institutional clients. The average number of clients served by each advisor is 63 as of Aug. 9, 2023.
In the unlikely event you are unable to get in touch with someone on your advisory team, we also have a dedicated Client Services team that can help you with account questions. We also have several advisory teams that can help you if you have specific investment-related questions.
All of us at DCM believe it is our responsibility to take care of our clients. Anytime you talk to someone at DCM, they will be able to either help you with what you need or find someone who can.
We prioritize Security of principal, Income to minimize volatility risk, and Growth to avoid the effects of inflation. We pursue those priorities by investing in the individual common stocks of financially strong companies with long histories of consistently increasing dividends, as well as investment grade bonds and preferred stocks. We are long-term investors, and do not engage in speculative buying and selling, use of derivative securities, or so-called alternative assets.
What You Can Expect to Pay
Most people think the advisory fee is all they are paying for, but often, that is not the case. There are many ways in which advisors may be charging you fees, and it’s important to consider the all-in cost of investing.
To get a transparent look into exactly what an advisor’s services will cost, we’ve prepared the following questions for you. To view our fee structure, click here.
- Does anybody else ever pay you to advise me and, if so, do you earn more to recommend certain products or services?
- Do you participate in any sales contests or award programs creating incentives to favor particular vendors?
- Will you itemize all your fees and expenses in writing?
- Are your fees negotiable?
- Will you consider charging by the hour or retainer instead of an annual fee based on my assets?
- Do you earn fees as advisor to a private fund or other investments that you may recommend to clients?
- Do you pay referral fees to generate new clients?
- Do you earn fees for referring clients to specialists like estate attorneys or insurance agents?
- What management fees are charged by you and/or your firm? Is there more than one level of fee? (e.g. active vs passive management)
- Are there any transaction charges?
- Are there one-time sales charges and ongoing commissions on securities or annuities you or your firm will be paid?
- Are there any commissions your company will be paid?
- Are there expense fees charged by any mutual funds or ETFs you recommend?
- Are there sales charges for any mutual funds: up-front (A shares), backend (B shares), and ongoing (C shares)?
- Do you charge early redemption fees?
- Do you charge for financial planning services?
- Do you charge per-hour rates or flat fees for working with my tax accountant, etc.?
- Do you charge trustee and/or custodial fees?
- Are there any expenses not listed here that I might have overlooked?
No. As fiduciaries, we always advocate for your best interests, independently and objectively. We will never recommend a product or service that doesn’t seek to benefit you financially, nor will we receive compensation incentives for doing so.
No. Investing on behalf of our clients’ interests isn’t a game. We take the business of investing seriously, and your best interests are our priority.
Yes, each quarter you will get a packet with an itemized list of fees and expenses. You will always know exactly how much you are paying and how that was calculated.
We have a one fee bundled billing structure, which is based on the market value of the portfolios we manage for you. We believe our all-in fee structure provides superior value. According to a study from Bob Veres’ Inside Information1, the average true all-in cost for financial advisors is higher than the average fee of a DCM client, at every level of AUM.
The fee covers all investment management services and advice, trading costs, held away asset advice, and comprehensive financial planning, and notary public services. Any and all financial advisory services that we offer are included in the fee.
We do not utilize investment vehicles, such as mutual funds, which often carry additional expenses for the investor. However, we do use Exchange Traded Funds (ETFs) with minimal fees.
As referenced in our ADV, which can be found at https://www.adviserinfo.sec.gov/, we do have other billing structures for special circumstances. Custom pricing is also available for accounts larger than $10 million.
 Bob Veres Inside Information; 2017 Planning Profession Fee Survey; http://www.bobveres.com/
Advisors who charge by the hour may have less incentive to be efficient in managing your account or providing advice. Advisors who charge a fixed annual fee have an incentive to spend as little time as possible working with you or on your account. Charging an annual fee based on your assets ensures that our firm is rewarded when you are rewarded, by increasing the market value of your portfolio.
Virtually all our clients have come to DCM from unpaid client referrals.
We do have a single solicitor agreement with whom we have a written referral agreement. This is the only such agreement we have, and DCM has no intention of entering into any future agreements. In any instance where this applies, the referral fee is not an extra fee incurred by the client.
Whoever referred you to us did so because they were confident in the quality of our services and advice. We do our best to not risk the credibility of their recommendation and your decision to entrust your assets to our care.
We charge only one fee based on the market value of the portfolios we manage for you. The fee varies by total asset value, declining in rate as your asset value grows. If other members of your family are also clients, we combine the value of all family members’ assets when determining the fee rate for every family member. That lowers the fee rate for all. The average fee for our more than 1,000 clients is less than 1.0%. We do charge a minimum fee of $4,500 that covers any and all financial advisory services we offer. Our fees only increase in dollar amounts if the market value of your assets grows. If the market value drops (e.g. during a recession) our fee amount would also drop.
DCM pays the transaction charges for the purchase and sale of stocks in your account. Bonds, on the other hand, are purchased one of two ways.
For DCM clients who qualify for and have signed a “Prime Brokerage” trading agreement with their custodian, DCM can purchase fixed income securities from any broker or dealer and allocate these securities to client accounts through the custodian Prime Broker platform. The prime broker platform broadens DCM’s market for bond purchases and creates more negotiation power when buying bonds for those clients. When DCM uses Prime Brokerage to allocate bonds from another broker or dealer, the custodian will assess a fixed transaction cost for these bond purchases of $20. These transaction costs are the responsibility of the client and are paid at the time of execution.
For DCM clients that do not qualify or have not signed a “Prime Brokerage” trading agreement, DCM must purchase and allocate all bonds through the custodian bond desk. In instances when the custodian does not own the bonds that DCM wants to purchase for a client, DCM will direct the custodian bond desk to buy the bonds from a different broker or dealer. We call this a “Directed” trade. In these instances, the custodian bond desk will take a variable fee that is built into the cost of the bond for purchasing and allocating the bonds. However, this is not a separate fee.
Portfolio Managers at DCM are compensated only through a base salary and a percentage of the management fee from the client assets that they manage. DCM Portfolio Managers are paid no commissions on financial transactions or products.
Donaldson Capital Management receives no commission on financial transactions or products.
Our primary investment strategies invest only in individual securities. Because of the scarcity of attractive bonds in today’s low interest rate environment, we do occasionally use bond Exchange Traded Funds (ETFs) with annual expense charges of approximately 0.25%. If new or existing clients transfer previously-owned ETFs or mutual funds to our management, we will liquidate those holdings as quickly as is appropriate, in accordance with the client’s taxable gains sensitivity.
Occasionally we use ETFs, primarily for short periods to tax-manage capital gains and losses near year-end. The fees charged by ETFs are generally a small fraction of what mutual funds charge. Those small charges are paid by the client.
We do not invest in mutual funds or bond funds, so in effect there are no up-front, backend, or ongoing sales charges.
We do not invest in CDs, mutual funds, bond funds, or annuities. Therefore, we charge no early redemption fees.
All our planning services are free of any separate charge. The single management fee described in Item 1 covers all services that we provide to our clients.
We routinely help our clients with financial planning, and often work alongside their tax accountant, estate attorney, and other advisors as an objective and informed financial professional with a fiduciary responsibility to put the interests of our clients before all other interests. We do not charge extra fees to work with third party advisors, as described above.
Neither DCM nor the primary custodians we partner with charge custodial fees. Any trustee fees you pay would only be charged by third party, corporate trustees, should you employ one.
Certain segments of our clientele have accounts at Folio Investments, Inc. These clients are charged an annual maintenance fee of $25 for any Individual Retirement Account.