BlackRock Interview with Michael Howard

| November 21, 2016
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Emery Howard Portfolio Management was founded in 1991 by Michael K. Howard in his pursuit of building a practice focused on helping clients meet financial goals through a sound investing strategy. Since then, the San Francisco/Peninsula-based firm has grown to a team of professionals managing more than $800 million in assets.

Q: What is the history of Emery Howard?

Michael Howard: Emery Howard actually dates back to 1969, when Doug Emery started managing investment portfolios on a fee-only basis, utilizing no-load mutual funds. he was truly a pioneer. I began my financial career working in the family office of Bechtel investments, a San Francisco construction and engineering firm. I then started my own financial planning practice in 1987 before partnering with Doug in 1991.

Doug and I shared a similar philosophy of using no-load mutual funds as the primary investments for our portfolios. our clients appreciated our cost-effective approach and the business flourished. Markets change and new investment opportunities present themselves all the time, but our mission and values continue to be the foundation that guides our decisions.

Q: What is Emery Howard’s mission?

MH: Quite simply, our mission is to help individuals, businesses and organizations realize their financial goals through sound financial practices. We do this based on our investment cornerstones of research, analysis and objectivity.

We accept great responsibility when clients select us to manage their portfolios. as a result, we do not make any investment recommendations until we’ve considered each client’s unique goals, risk tolerance and tax situation.

Q: Describe your firm’s services.

MH: We provide comprehensive investment advisory services. We also focus on financial planning, including risk analysis, tax planning, income and expense budgeting. these services are best suited for affluent clients with complex financial needs. We earn a fee for our overall advisory services and never earn a commission based just on transactions.

Q: What are your firm’s greatest strengths?

MH: Our team approach and our service model are our greatest strengths. While every client has a dedicated advisor at Emery Howard as their key contact, each client is also supported by a team of experts with an in-depth knowledge and understanding of the client’s total financial picture.

Our team is also 100% dedicated to providing our clients with premium service. managing one’s finances can be daunting even under the best circumstances, so our focus is to help clients achieve their financial goals, while easing the complexities along the way.

Q: How do you continue to evolve and enhance your business?

MH: We are constantly innovating to best serve our clients at Emery Howard, and have our history to prove it. For example, we used no-load funds when the investment industry was dominated by heavily “loaded” or commission funds. We were early adopters, utilizing institutional class mutual funds and exchange traded funds, also known as ETFs, when neither was widely used. in particular, the adoption of ETF usage has been phenomenal.

Q: What is your investment process for new clients?

MH: Our process is dynamic. First, we uncover and confirm each client’s financial objectives, analyze their resources and help them understand their tolerance for risk. We then construct a customized portfolio designed specifically to achieve their goals. these portfolios are reviewed constantly, and monitored and rebalanced to maintain target percentages in each asset class.

We keep all of our clients informed by providing quarterly portfolio reports, economic and investment analyses, and expert commentary.

Q: What investments do you favor for client portfolios?

MH: Overall, we tend to favor ETFs. In addition to being more cost-effective investments than mutual funds, ETFs offer us an innovative way to access breadth and depth in asset classes we favor. By access, I mean that ETFs provide exposure to countries or companies that were previously difficult to invest in, such as emerging markets, global infrastructure and natural resources. Additionally, due to their unique structure, ETFs generally provide our clients with more tax-efficient portfolios.

We continue to use and explore opportunities with active managers on a very select basis. In general, we tend to use active managers for asset classes that are inefficient. Inefficient markets can provide highly skilled managers with the opportunity to exploit those inefficiencies and add value.

Q: What is Emery Howard’s competitive advantage?

MH: Within our industry, the essential ingredients for success are the perspective and discipline that come from experience, which our team has. there is no classroom that can compete with the knowledge our team has earned by managing portfolios for 25 plus years...during some of the greatest bull and bear markets of all time.

We also believe our strategic global asset allocation model is another key competitive advantage that differentiates us from the investment landscape. for each client, we first construct a portfolio diversified across multiple asset classes participating in investment opportunities all across the globe. We then optimize these portfolios based on diversification, return expectations and complementing equity, fixed income and alternative asset classes. Within each asset class, we combine index products, such as ETFs, and active managers to deliver what we believe to be the most cost-efficient and effective investment solution available.

Q: In your opinion, what are some of the greatest challenges facing individual investors?

MH: Investors today live in an age of instant information, which is both a blessing and a curse. digesting the onslaught of information available—and knowing when to act and when not to—is one of the greatest challenges for investors of our time.

This ever-changing investment landscape contributes to much of the volatility we experience in the financial markets, where the news of the day seems to range from themes of recovery to themes of another recession.

Q: How do you assist your clients to handle market volatility?

MH: First and foremost, we prepare clients for volatility before they invest. We educate them on the historical volatility of capital markets and illustrate the effects by using Monte Carlo simulations. Quite often, our clients’ investment expectations and risk tolerance evolve as a result of gaining a better understanding of potential outcomes.

The more appetite a client has for greater risk, the more likely the portfolio will have increased volatility. While volatility is still disconcerting to our clients, a properly diversified portfolio can and does help our clients remain disciplined through the market cycle. looking beyond the short term is critical for long-term success.

Lastly, we counsel clients to focus their attention on healthy spending and savings habits that they can control, rather than the performance of the markets, which they can’t.

Q: How do you continue to grow your practice?

MH: Satisfied clients have been our greatest source of new business, referring friends, family and colleagues. in fact, we are particularly proud of the fact that much of our clientele spans generations within families. We have also developed excellent working relationships with our clients’ other professional advisors, such as estate attorneys and CPAs, both of whom have also been a great source of referrals

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