January-February 2011 | PROFITABLE POSITION

Matt Repass, CRFA, RFC



With a new year upon us, Matt Repass asks three essential investment questions. The answers, if you do not know them, could surprise... even shock you.

Written By: | Photographer: Stephen Cherry

Many of our clients here on Delmarva are successful business owners. And there is
a common thread to their good fortune. Now, you might be saying to yourself, “Yeah, the common thread is profit,” and while this is certainly true, we need to take a step back to look at the elements that get them to that profitable state. To reach a healthy level of
profitability, the common thread these successful business owners share is their keen awareness of managing costs or overhead expenses. It’s really rather simple: Reduce your overhead; increase your profit! Additionally, no business can determine its profit if it doesn’t know its costs. This simple fact is an absolute for business success.

In my two-plus decades as an investment advisor, I’m still struck by the paradox of how many people — business owners included — who, fully aware of this critical element of business success, fail to apply the same logic to their personal investing. Don’t get me wrong, what you invest in is important, as are the methods, the philosophy and the goals, but the plain and simple truth is, if you don’t know how much it costs to operate your investment portfolio, you have no way of knowing what your profit, or
returns, are each year, period.

For years I have conducted educational workshops on retirement planning as a method to introduce myself to potential new clients. These educational workshops even have a simple homework assignment I ask each attendee to complete before coming in to meet with me. This three-question assignment is very simple; however, it manages to stump almost all who attempt its completion.

1. Do you know the fee and expenses you are paying to manage your money? (i.e., commissions, mutual fund expenses, 12b 1 fees, deferred sales charges, trading fees or advisory fees)

2. Do you know the returns on your money?

3. Do you know the allocations of your money?

In my opinion, having a satisfying and rewarding investment experience cannot occur without my client being completely aware of all the costs of doing business. I pledge to anyone who walks through our doors, whether they do business with us or not, that they will be fully aware of the costs of investing at PKS before we conduct any business whatsoever. Why are the costs of investing so critical? By simply reducing your investment portfolio expenses by 40% to 60% over your 30-year career or 30-year retirement, you will increase your spendable money by 82%!

Offer a business owner an idea or product that will help them reduce their overhead by 40% to 60%, and they will certainly be all ears — knowing that such a reduction in costs go directly to increasing the “bottom line” or profit. Before thinking about the next great
investment, hot stock or top fund to get you higher returns, why not focus on cutting your overhead costs first?

I strongly encourage you to answer the three questions. If you find you are like most, meaning unable to answer all three, I then have only one more question for you. Why? If you are serious about your money and serious about starting 2011 on the right financial foot, perhaps getting the answers to these questions would be a profitable place to start.

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