Frequently Asked Questions
Where do my assets sit?
It would not be appropriate to custody our clients' assets at North Berkeley as we do not have the resources to effectively do so; as with literally all independent firms of our type, this is outsourced to an entity with the scale and capacity to provide safe, secure, and technically advanced services. We use Pershing Advisor Solutions, LLC, an affiliate of Pershing, LLC. Pershing Advisor Solutions specializes in serving the needs of clients like ours and investment advisory firms of our type, size, and scale. Pershing, LLC, is the industry's largest clearing provider, with a track record of over 70 years, and $952 billion in assets under custody and administration. Pershing's parent company, BNY Mellon Corporation, is the oldest continuously operating financial institution in the United States. In our view, BNY Mellon is quite conservatively run and well-capitalized.
Where do I go to get information about my assets?
Can I go online to see them?
Once your assets are under management by North Berkeley and custodied at Pershing, you will be able to go online at any time with appropriate levels of security to look at your portfolio, call up past statements, and look up certain tax and other documents. You will also be able to view account statements and other documents electronically in secure fashion to eliminate some of the investment-related paperwork that comes to your house.
Can you manage my 401k or other employer retirement account?
Yes, we do manage our client's retirement accounts, working with the investment options they are provided and integrating these choices into the overall portfolio.
Can you help me with:
Refinancing my mortgage?
Finding a tax preparer?
Doing a will or trust?
Getting life insurance?
Yes. We have specific understandings of the important components of these areas of planning that require outside professional help. We have developed an extensive network of professionals that specialize in these areas, and recommend that our clients work with them or a professional they already have a relationship with. Regardless of who you work with, we shepherd the process from intention to execution.
Can I receive my statements electronically?
You may choose to receive most of your investment communications electronically.
The financial services industry is highly regulated and trade confirmations and other disclosures are mandatory. Much of what you receive may seem redundant, but it was legislated in order to protect investors who don't always have good communication or access to an investment advisor. Sometimes this paperwork that comes from the custodian is confusing and not clear. The industry we work in is such that a high degree of caution and protection is in place for you, the investor, even if it is not well explained. Because there is a lot at stake with taking care of your money, we think this level of caution is appropriate. And, you can always call us or bring things in that you don't understand. We will be happy to explain them to you.
How do I know you are not like Bernie Madoff?
The Madoff operation, which we wrote to our clients about at the time that it happened, was highly secretive and highly centralized. We have built our business to be open and transparent. Madoff's clients' money was custodied with him – there was no third party where the assets sat, and his firm produced fictitious account statements. Our clients receive account statements every month from Pershing Advisor Solutions, LLC, a completely separate entity. Madoff reported fictitious performance on investments his clients held. Our performance reporting starts at the custodian, Pershing Advisor Solutions, LLC, runs through another third party system at Morningstar (also an independent entity), before it is printed out by North Berkeley for distribution to clients.
In addition, Madoff reported that he was invested in some things that are commonly understood, such as stocks, and other more esoteric investments that his clients didn't necessarily understand. At North Berkeley, most investments in client portfolios are made through mutual funds. There is a large quantity of public information available about them, third party research is extensively available on them, they report their holdings to regulatory authorities on a regular basis, and they are independently governed by boards separate from the investment management firms that run them. These are all characteristics that are opposite from the way that Madoff ran his operation.
Why do you use mutual funds? Can't I go buy those myself?
We focus on quality of investment management and affordability of that quality. We think that the quality of the handful of management teams we choose through mutual funds is as high as the most exclusive of investment vehicles. In addition, mutual funds are generally much more affordable than other vehicles, such as hedge funds or separately managed accounts.
In addition, we have access to mutual funds that you wouldn't otherwise have or that you would pay more money to buy in instances other than through our firm. At times, an investor buying on their own is charged up to 5% ‘front load' or sales commission for mutual funds that waive that fee for us, in recognition that you are working with an advisor. We are happy to buy load funds with the load waived or no-load funds – we get to disregard a cost decision that becomes irrelevant and focus on quality of the investment manager.
Also, there are times when certain mutual funds close to the public and no longer accept new investors; however some of those times because of the previous relationship we have had with the mutual fund and its managers we have retained access to that fund or to that manager's fund lineup for our clients old and new.
Finally, many mutual funds will allow us access to an institutional share class where the management fee charged to shareholders is materially lower.
Do you work on commission?
No. We are compensated for the work we do for you by the investment management fee you pay us each quarter.
Mutual funds charge me fees too, don't they?
Mutual funds charge their own management fees that are taken out of the mutual fund investment value before the mutual fund's price is reflected in the financial press or on your monthly account statements or quarterly portfolio reports. This is the case for index funds as well as actively managed funds. When index investors claim that their investments are cheaper, they are absolutely correct – often by a factor of as much as 4-5x cheaper. North Berkeley portfolios tend to have an average mutual fund management fee of between 0.5% per year and 1.3% per year, depending on the fund, for an average cost of about 0.8% per year, depending on the portfolio. This is in addition to the investment management fee you pay to North Berkeley. We think of this cost as the cost of having a portfolio with the characteristics we seek, and has the overall goal including all of these fees to get you to your target return that is past inflation, taxes, and all fees.
Why not buy index-based investments? Index investors don't have a chance to independently assess buying good businesses at sale prices. This alone we think is worth more than the difference in costs between index mutual funds and actively managed value-oriented mutual funds. Index investors buy a broad basket of an asset class or a part of an asset class, and then have to put up with whatever the index hands them, which from time to time is incredibly negative volatility of the kind we saw in 2000-2002 and 2008-2009. While it is true that over time passive index investing has been quite effective in terms of the return that it offers, it's the case that people aren't ordinarily wired to be able to tolerate the volatility of index investing. Studies show that individual investors don't tend to hang on to investments like an index at all times; they tend to buy high and sell low. Although more expensive than indices, we think that actively managed value investments that tactically allocate assets are worth the extra cost, and their performance net of fees is competitive with a blend of index funds - or better.
What about when you retire? Will I have to find someone else?
We are consciously building our team so that we will have the capacity to continue the firm past the current principals' retirements. We aim to grow gradually and bring on new partners over time, and to slowly sell them shares of the business. After investing so much into getting to know us and having us take care of their financial and investment matters over a long period of time, we want clients to have continuity and be able to count on North Berkeley Investment Partners for a long time.