Frequently Asked Questions

COMMONLY ASKED QUESTIONS

QUESTIONS THAT YOU SHOULD BE ASKING YOUR ADVISOR

Here are some questions that you probably should be asking but maybe haven’t thought of yet.

COMMONLY ASKED QUESTIONS

What is an Exchange Traded Fund (ETF)?

In its simplest form, an ETF is a mutual fund that trades like a stock. An ETF is a diversified basket of stocks designed to mirror the movement of a stated index. For example, the SPY is an ETF designed to mirror the movement of the S&P 500.

There are two benefits ETFs have over mutual funds. First, is the ability to buy and sell them throughout the trading day. Open end mutual funds offer just an end of day price even if the trade is placed early in the morning.
Second, the expense ratio (internal management fee charged to run the fund) typically is much lower for ETFs than with mutual funds. The average expense ratio and fees for a mutual fund is around 0.99% while the average expense ratio for an ETF is approximately 0.5% (according to the Investment Company Institute 2009 survey).

What do you mean by a Sell Discipline?

Fabian Wealth Strategies implements a sell discipline on every position in your portfolio. Whether it is an individual stock that has been in your portfolio for decades or a newly purchased ETF, we believe it is imperative to have a clearly defined sell discipline on every position.

There are several types of sell disciplines that could be used. First, if a security’s price moves below a moving average like the 50-day or 200-day moving average, this could be a reason to sell. Second, a specific sell price off the security’s high point could be used as well.

Keep in mind, the sell discipline will never get you out of a position at its peak. However, if used properly, it should increase the likelihood of avoiding catastrophic losses.

Why doesn’t Fabian recommend individual stocks?

We believe there is a simple path to building wealth and a difficult path. Both are doable, however, when it comes to sticking with an investment plan over the long-term, we believe following a simple path increases the likelihood of not only remaining true to the plan when it goes through challenging times, it also can enable you to put a greater amount of your serious money to work.

In our opinion, investing in stocks is the difficult path. When picking stocks, you have to be right twice: pick the right sector…and then pick the right stock. It also takes a lot more time researching and monitoring these businesses.

We believe the simple path is with Exchange Traded Funds (ETFs) and mutual funds. These give you instant diversification as well as easy access to both sectors and international markets.

Where is your clients’ money domiciled?

We recommend Fidelity Investments as the custodian of your account assets. They provide our clients with third-party record keeping, low transaction costs, excellent reporting, and the stability of a privately held brokerage platform.

Can I watch what Fabian is doing with my money?

When your accounts are at Fidelity, they are in your name with direct access at all times. The accounts can be monitored daily at fidelity.com. In addition, you will receive monthly account statements from Fidelity that show you the positions in your account and any transactions that took place.

Our limited power of attorney allows us the ability to place buy and sell orders on your behalf. It is your money…in your name…at all times.

What type of communication do we receive as a client?

At our firm, communication with clients is a top priority. That is why we offer annual portfolio reviews, quarterly check-up calls from our advisors, regular teleseminars to keep you up to speed with our thoughts on the market, and an exclusive management memo that is mailed to you each month. In addition, we send all of our clients monthly performance reports so that you can review the progress of your account and we email you any time we make a change to our portfolio allocations.

When it comes to your management agreement…

What is “Limited Power of Attorney?”

This allows us the ability to implement our investment plan on your behalf. We have the “power” to place buy and sell orders on your behalf. In essence we have an additional window on your account at Fidelity. In addition, the limited power of attorney allows us to debit management fees from your account should you choose this option.

Am I locked into a set period of time as a managed client?

There is no set period of time. Our investment advisory agreement requires 30 day written notice upon cancellation…and there is never any direct cost from Fabian Wealth Strategies to cancel.

What is the minimum account size you accept, and the management fees?

$250,000 is the minimum account size we manage in aggregate. In order to reach the minimum, multiple accounts can be opened on you and your family’s behalf. They can be comprised of personal and retirement accounts.

Our management fee ranges between 1.00% to 2.00%, depending on asset size, model portfolio, and other guidelines. Our fees can be negotiable.

Are there any other fees we will have to pay?

Whether we use Exchange Traded Funds or mutual funds, they have their own internal management fees which are a part of the expense ratio. These come directly out of the ETFs/mutual funds and are paid by you. Please consult the funds prsospectus for additional information on fees. In addition, Fidelity charges transaction fees when we trade on your behalf. These are also paid by you.

What is the first step in becoming a Fabian Wealth Strategies client?

Give our office a call toll free at (800) 391-1118 or click here to contact us and say you would like to get the process started to become a client. We will send you the necessary paperwork and explain to you the information needed in order to have us manage your assets.

QUESTIONS THAT YOU SHOULD BE ASKING YOUR ADVISOR

What is the advisor’s sell discipline?

Our Answer: You should receive a specific sell strategy with every position in your portfolio. It could be a stop-loss, moving average, some other technical indicators. The key is to understand exactly what the discipline is.

Other Advisor Answer: We are in it for the long term and we follow a diversified portfolio using buy and hold. These diversification tools can reduce your losses overall during Bear markets.

What are all the fees charged on my portfolio?

Our Answer: Clear portfolio management fee, low transaction fees, and low fund expense ratios.

Warning signs: Avoid conflict of interests like 12b-1 fees (fees the mutual fund families compensate advisors for using their funds), surrender penalties on variable annuities, high transaction fees.

Am I locked into a certain amount of time…and are there any cancellation penalties?

Our Answer: The contract can be terminated at any time with 30 days written notice, and no cancellation fees are charged.

Warning signs: If there are any fees to terminate, there is a high likelihood you will feel locked into staying in the bad advice just to avoid additional fees. There should never be any fees to cancel a management contract.