SMS Financial

Investment Philosophy

At SMS Financial, we have a core principle for investment management: meet the needs of the client.

We start from the concept that a client is constrained by both a minimum level of required return on his or her investment and a maximum level of acceptable risk. At SMS Financial, we work with our clients to identify goals and to quantify the required return and the maximum risk. Required rate of return is usually given by an annual percentage rate. Risk tolerance is often condensed into a percentage also, but one called standard deviation. Standard deviation is a statistical measure that describes a range above and below a target value where the actual value is probable to hit.

The goal of our management strategy is to understand and embrace the needs and goals of the client, and use our tools and experience to present the client with a wealth management solution that meets or exceeds their needs. By putting numbers to both minimum return and maximum risk, we can use either one as a goal for the portfolio, and optimize the other against that goal.

Summary of Our Portfolio Strategies:

  • Develop an Advisory Relationship
  • Write an Investment Policy Statement for each portfolio
  • Use both strategic and tactical asset allocation to minimize risk and maximize returns
  • Charge competitive fees
  • Provide competitive results

The Advisory Relationship                      

We have a core belief that an investor ought to understand where his or her money is being invested, and that the best way to develop that understanding is in relationship with a trusted advisor. With an advisory account, SMS Financial performs research and due diligence on the recommended investments for our offered portfolios. We then present that information to the client, offering analysis of the risks and potential rewards for each investment. Upon examining this information, the client can decide if he or she wants to implement our suggestions, and we take the action approved by the client.

Written Investment Policy Statement

In the portfolio planning process we discuss goals, realistic exceptions, and time horizons and decide with each client what sort of risk and return are needed. From this discussion SMS Financial will create an Investment Policy Statement (IPS). This document is a written statement of the portfolio’s purposes, the methods to be used in meeting those purposes, and the standards against which the portfolio must be compared. The purpose of an IPS is so that the client and SMS Financial both agree on a guide for the portfolio in design, implementation, and monitoring. The IPS that we build for a particular portfolio will be as simple or as complex as the portfolio merits.

Asset allocation to minimize risk and maximize returns

The first step in disciplined investing is asset allocation, which is the process of finding a mix of investments that matches the client’s needs for a risk ceiling and a return floor. Reacting emotionally to the market leads to selling low or buying high, either of which hinders the growth of your portfolio. We at SMS Financial have found that the discipline of asset allocation prevents such costly mistakes. Over the course of changing economic cycles, asset allocation is one of the most significant factors influencing portfolio performance. Asset allocation doesn’t eliminate risk, but it can smooth out the returns you get through the ups and downs of each asset category.

Strategic and Tactical Strategies

Asset allocation can be done in two different ways: assets can be placed to replicate a market index, such as the S&P500, or an investment manager can seek to exceed the risk-adjusted return of an index by placing assets in a non-indexed manner. In the context of the overall portfolio, the former is called passive investment or strategic asset allocation, the latter is called active investment or tactical asset allocation. At SMS Financial, we believe that the markets are largely efficient, which leads to investing most of a client’s portfolio in a strategic allocation. We do, however, often see areas of opportunistic investing, such as in business cycles or economic events, in which case we may place assets tactically to take advantage of such movements.

Competitive fees and results

At SMS Financial, we believe that most financial advisors &investment managers charge their clients too much money for too little service. We want to be different by offering better service than other advisors for an equal or smaller fee given the size of a client’s assets under management. We want to be clear and honest about our charges with our clients and prospects: if there is ever any question about how our fees are structured, we encourage questions and open communications.


The SMS Financial LLC site has been designed for informational purposes only. We reserve the right to make modifications at any time, without notice. No information contained on the site constitutes investment advice. Your use of this information does not constitute a client relationship. Past performance does not guarantee future results.

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