Frequently Asked Questions

Anthony B. Carr, CPA, CFP, owner of Carr Wealth Management, answers a few common questions that those interested in receiving financial advice often ask: 

Are you a Fiduciary?

Yes. I've been under the fiduciary rule since becoming a Certified Public Accountant in 1987. Carr Wealth Management, LLC is a Registered Investment Advisory firm licensed in California. RIA's are required to be fiduciaries. See Fiduciary page.

Are you independent?

Yes. As a small business owner in the ultra-competitive financial industry, I must assure my clients that I am always working in their best interests, and I truly feel the only way of accomplishing that is to remain free of any ties and obligations, which include being employed by, any company which sells proprietary products. I’ve always felt that working in my client’s best interests was compromised if I worked at a company that sells proprietary products and competed with other producers to win trips and awards. I know where that money is coming from.

 How are you compensated?

I charge an hourly fee of $150 per hour for financial planning services. I have no agreements with proprietary product-selling companies and receive no commissions from outside third parties. Planning fees may be waived if clients become investment management clients.

What areas do you offer services in?

We focus on areas we consider to be the main areas of asset management - the growth, distribution, preservation, and protection of assets. We can help those who need advice in just one area or help develop a more comprehensive plan. 

Who is your typical client? 

Anyone who has set financial goals for themselves and would like help reaching those goals can qualify as a client. Those who are in, or close to, retirement, usually require more help since they face more issues in more areas. Younger individuals tend to be more interested in the growth and protection of their assets while those in retirement may also need help with their income distribution and family transfer issues as well.

What is the process  to help clients with their financial planning needs?

We begin with a no-charge initial consultation that will reveal which areas the client is looking to get help with and if we are a good fit to help them. Then specific information is gathered to help with creating a thorough financial plan which identifies pre-retirement and post-retirement income sources, current assets and investments, and most importantly, financial goals. Once a plan is implemented, monitoring the plan requires regular “check-ups” to determine if any major changes have been made to client financial circumstances. 

 If Investment advice is needed, we will help with allocating investments based on client objectives and their risk tolerance (see investment FAQ's below).

What type of issues do new retirees face?

New retirees face a balancing act between all the main areas of asset management – the growth, distribution, preservation, and protection of their assets. They are nearing or at the end of the accumulation phase, where higher risk tolerances and greater potential returns could be afforded due to longer time horizons and lower liquidity concerns. Now that they’ve reached or will soon be reaching retirement, their risk factors begin changing – their income may be reduced, sometimes significantly; their sources of income may have varying tax consequences; time horizons grow shorter, and inflation and liquidity concerns become greater. Meanwhile, they keep an eye on asset preservation as family transfer goals become increasingly important, along with ensuring they have sufficient assets in the event they live beyond their life expectancies.

Which companies do you work with?

The brokerage company that Carr Wealth Management, LLC uses as custodian of client funds and to process transactions with is the institutional side of TD Ameritrade, which provide the institutional platform to independent Registered Investment Advisors. TD Ameritrade neither sells products nor offers services to the general public. TD Ameritrade is a member of the Securities Investor Protection Corporation (SIPC). For details, please visit sipc.org. TD Ameritrade offers Innovative technology, outstanding client service, seamless account integration, and a breadth of products and services.

Carr Wealth Management mainly uses only two investment or mutual fund companies for client investments - Vanguard and Dimensional Fund Advisors. Both companies have an investment philosophy that specializes in providing low-cost, well-diversified, and tax-efficient mutual funds designed to achieve long-term capital appreciation.

What type of investments does Carr Wealth Management use?

The company predominantly uses publicly traded investments listed on all major exchanges; they're considered liquid investments that can be converted into cash within days if needed. The investments are predominately low-cost, institutional, and well-diversified mutual funds, the same type of funds that some major pension plans and endowment funds use; they're constructed using risk and return principles rather than employing timing strategies or speculation. The company doesn't participate in private equity investments, hedge funds, variable or index annuities, or any other type of investments considered too costly and complicated. An important principle the company adheres to is that "the more complicated an investment is, the less it probably benefits the investor."

What is your fee structure?

The total investment costs include managing the investments and the investment cost. The investments are predominately institutional mutual funds, the same type of funds that large pension plans have access to – their costs, on average, are approximately 1% lower than the retail funds that most investors use. My compensation is derived from a fee-only structure that eliminates commissions and provides a working incentive for my clients to invest efficiently. Higher expenses mean lower returns; over the long term, those lower returns can produce accumulated balances that fall dramatically below what is available through a more efficient strategy. See Fee Schedule.

What is the Company’s investment philosophy?

Carr Wealth Management, LLC investment philosophy has remained the same since I began managing investments in 1999. Coming from the public account industry, I gravitated toward an investment philosophy backed by academic evidence. Fortunately, there was an overwhelming evidence supporting the theory that markets are efficient and trying to outperform the markets is a counter productive strategy. I believe compounded growth is the most powerful investment strategy and ineffective strategies and excessive costs are hindrances to maximizing investment returns. Taking advantage of the market's historical process of rewarding long-term discipline is best accomplished through low-cost, well-diversified, and tax-efficient investments. Our objective for our clients is to "let the market work for you."

What is meant by “letting the market working for you?”

We’ve been conditioned to believe that almost anything can be accomplished through hard work and effort. That may be true, but trying to outsmart the market isn’t one of those things. Because of the size of the market and the number of highly skilled investment professionals competing in the market, it’s impractical to think it’s possible to outsmart the market. And there’s overwhelming evidence to support that it’s not only impractical but also counter-productive. Instead, by harnessing the market’s power, we put its collective knowledge to work for us instead of against us.

Do you consider yourself and active or passive investment manager?

I never much preferred the term "passive" when labeling the distinct management styles of active v. passive investing. Instead, I would label the different management styles as "transaction-oriented" versus "goal-oriented" investing. A different investment strategy may be needed if family circumstances change, but otherwise, we remain disciplined with our allocations and rebalance when necessary. Disciplined, or long-term investing, is more oriented toward attaining your goals. Short-term investing, or active management, is more transaction-oriented to earn above-market returns with consistent buying and selling of securities. There is overwhelming evidence to support that active management strategies have historically underperformed passive management strategies because of the additional costs.

What is Active Management?

What is Passive Management?

Are you advocating a “buy and hold” strategy?

Not necessarily; being committed to holding on to an investment come rain or shine may be an effective way to lower transaction costs, but it’s possible to expand and improve upon that cost advantage. A client’s investment strategies will be tied to their objectives, so unless factors affecting their goals change and thus create a need to change their investment allocations, we try to remain disciplined for the long term, rebalance when necessary, and let the markets work for us rather than against us.

What is the difference between investing and speculating?

Investments are an outlay of money in hopes of achieving future returns, whereas speculation is an outlay of money in hopes of attaining short-term or immediate returns. Speculation is a zero-sum game, meaning somebody's gains will equal someone else's losses. Success with this strategy depends on the 50/50 chance of being on the right side of the transaction and overcoming the additional costs and possible taxes. Disciplined investing takes advantage of the market's historical and logical process of rewarding investors with returns that match their level of risk tolerance. Typically, the longer the time horizon is, the greater the potential for favorable investment returns, as investors with long time horizons are more likely to withstand short-term market volatility.

Why is discipline so hard to adopt for investors?

Separating emotions from sound investment decisions is the primary reason discipline is difficult to maintain, but the investment environment we live in today makes it increasingly challenging to stay disciplined. A multi-billion dollar industry has vested interests in promoting more active strategies. Financial magazines, newspapers, so-called experts on television shows, and the constant news updates on various media outlets are all geared to invoke actions based on investor emotions, which can cause investors to engage in ineffective, counter-productive strategies.

How do you explain Warren Buffet?

Mr. Buffet identifies companies that he feels he can directly impact the value of. At his disposal, of course, is the means to place himself among the major decision-makers about what direction the company is headed. We, as individual investors, don’t have that luxury. Mr. Buffet is actually an ardent supporter of a more disciplined approach for individual investors.

Are target funds used for client portfolio's?

Target funds can help investors identify an appropriate time horizon for their investments through funds with pre-determined asset allocations, but there are other factors to consider in determining a proper investment allocation. Many people may have the same time horizon for their investments, but their financial goals, liquidity needs, and personal views about risk usually differ from everybody else’s. Considering all the factors may result in discovering that the investment composition in the target fund may not be suitable for a client’s unique situation.

Do you allocate clients portfolio's into alternative investments to stocks and bonds as well?

Deciding which alternatives to stocks and bonds that would make sense to own in a portfolio requires evaluating the investment not just by itself, but rather how the inclusion of the investment impacts an overall portfolio. Ideally, we’re trying to utilize the power of diversification by adding investments which can increase overall returns without significantly increasing overall risk, or reduce overall risk without sacrificing total returns. There are several alternative investments available but ultimately it’s the client’s unique financial situation which will dictate what’s best for them. Please contact me if you would like to discuss.

How can we be sure the market will produce long-term returns? This time it’s different!

Think about the last 25 years, we’ve had the dotcom boom and bust, the horrific events of 9/11, the great recession of 2008, and the unprecedented global impact caused by the COVID 19 pandemic. But through all those events, the twenty-five annualized return for the total US stock market ending December 31, 2022, was 8.3%¹. Let’s go back an additional 25 years which includes the Vietnam War, the oil embargo of the 70’s, the Iran hostage crisis, and the double digit interest rates and inflation in the 80’s. The annualized return for the past fifty-years was also 10.5%¹

¹ Center For Research and Security Prices (CSRP 1-10 Index).

How is academic research used in your investment selections?

The use of scientific or academic evidence has evolved in the financial world since the 1950s. Since then, academic research has significantly contributed to helping investors identify a more efficient way to invest. It’s given us evidence identifying the type of risks that investors are compensated for and which investments contain those risks. Research has also shown us the powerful diversification effects of combining riskier assets with less risky assets in a portfolio, which can achieve higher returns without significantly increasing risk. Academic research has shown us that the markets are so much larger, more efficient, and smarter than anyone of us is individually, and it’s proved that active management, or the practice of trying to outsmart the market, is a counterproductive strategy.

What is up with all these Robot investment alternatives?

Staying away from high fees and excessive trading are steps in the right direction for investors using automated strategies. However, a qualified advisor can more efficiently consolidate the many areas of financial planning in which people need the most help - including the growth, distribution, preservation, and protection of their assets. Then creating, implementing, and monitoring a well-designed plan tailored to each client's unique needs requires skills that I feel are not adequately accessible with automated strategies. But the most prominent problem investors will face with computerized systems is the same problem they face with non-automated systems: the lack of discipline to stay the course during inevitable market declines.

Please review our website for more information on our planning and investment management services. I hope the above questions and answers provide you with sufficient information to schedule a consultation to determine if our firm can help you with your planning goals.  Our first priority is helping you take care of yourself and your family. We want to learn more about your personal situation, identify your dreams and goals, and understand your tolerance for risk. Long-term relationships that encourage open and honest communication have been the cornerstone of my foundation of success.