Implementing the Investment Plan Pt. 2: How to Access and Store these Assets?

The Practical Steps

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Now that we’ve covered what investment solutions we can allocate our savings towards and how to manage them, let's tackle how we go about finding, purchasing, and holding them.

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Accessing and Storing Assets: An Example

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Let’s go back to a property as an anecdote. When you own a property, you are usually given a physical Title Deed document issued by a government entity that is housed by you somewhere securely as proof of ownership. This document, however, isn’t the only proof of ownership, as there would commonly be a government ledger also confirming and protecting that ownership. Your ownership in Bonds, Equities, Mutual Funds, and Exchange Traded Funds (which we’ll collectively refer to as Financial Securities) are also registered by trusted government bodies that validate and protect your legal ownership; however, instead of having a physical title deed that can be lost or difficult to trade/sell/buy, Financial Securities rely on digital deeds which are held with professional custodians to document your ownership.

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To clarify this scenario further, let’s use another hypothetical anecdote imagining an affluent individual, Noah, who is buying and storing a large amount of Art as his wealth management strategy and connecting this to the world of owning Financial Securities. Please note that we do not think this is an optimal way to manage your wealth in its entirety, given that it is a non-productive real asset.

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Distributor and Moving Company

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Noah is always looking to buy new pieces of Art and has an eye for the best pieces. He needs a wide range of access to different sellers through reputable brokers in the market and direct relationships with dealers as well. Having this access and ability to buy/sell through these relationships, Noah also relies on a professionally insured moving company and legal administrator to finalize his deals and move the art from the sellers' storage to his own. He ensures that this process is as secure as possible.

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In the world of Financial Securities, this is the role of the Broker/Dealer through clearing systems. Financial Securities exist in various places, financial exchanges like the New York Stock Exchange, or directly through various financial providers like Blackrock or Franklin Templeton. Having a strong broker/dealer to give you access to different assets and ensuring a secure trade through the right clearing system to your custodian is essential. Therefore the reputability of your Broker/Dealer, their processes, and their regulatory oversight is also crucial.

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Storage Unit

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Noah already has a large amount of valuable Art and would like to store it somewhere safe and secure. He keeps his display items at home but stores everything else in a storage facility. Noah looks to deal only with the best storage facility where he can place his items, knowing that the storage provider would never even think of entering or committing any crimes. He ensures that the storage facility is credible and invests significantly in security and oversight.

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In the world of Financial Securities, this is the role of the Custodian. A professional custodian is the entity that houses your assets for administrative purposes and ensures a high level of security and oversight. When choosing your custodian, you want to ensure you are dealing with the highest credibility, where they are subject to continuous oversight by a strong regulatory body. You own the assets, but the custodian, similar to the storage facility in the example, only provides safekeeping and administration.

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Financial Advisory Firm

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The world of Arts and Collectibles is massive, and Noah knows to rely on the best advice when assessing the value of various pieces and even in selecting the storage facility and brokers. Noah deals with a very strong advisor specializing in the world of Art so that he protects himself from wrong decisions but also places himself in the best place to get the best decisions done.

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The financial industry is no different and even more crucial. A good financial advisor can assist you with everything from the foundations of investing to developing a financial plan to meet your objectives, advising on the custodian, and choosing where to access your securities from. Although it comes with a cost, the benefits of a good financial advisor outweigh the costs. Read here for more on our thoughts on the matter.

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Platform: Visibility & Inventory Management

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Noah likes to keep tabs on what he owns regarding his inventory and how he organizes the viewership of the same. He employs a professional inventory management company to organize his storage unit in a way that is easy to assess: they set up cameras and an app for him to constantly monitor or check up on his assets. This company goes as far as integrating the ability for Noah to view the inventory on his personal computer with the estimated value of each piece. They also arrange a contract with the broker/dealers he works with so that he can interact with them all from the comfort of his office computer.

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This is the digital platform from which you should be able to view your investments and net wealth from the comfort of your home. A digital platform can be as basic as a login to view your financial assets, to one that is more intuitive and custom to exactly what you are looking for, holistic wealth management.

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Conclusion

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In summary, when deciding on how to implement your plan, you can judge this implementation by asking who is the service provider for each of these four unique services and judging their caliber against the same.

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Summary and Closing Statement: Foundations

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As we draw our foundational series to a close, we reflect on the insightful journey we embarked on together, hoping that it has enriched your understanding of investing.

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We initiated our journey by emphasizing the necessity of mastering the basics when dealing with a multifaceted subject such as investing. Gradually, we cleared the frequent confusion between Trading and Investing, illustrating that our focus is primarily on the fundamental principles of Investing, rather than Trading.

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Further, we delved into the mechanisms of holding wealth through lending or owning tangible assets. We deep-dived into the specifics of bonds and equities, shedding light on Islamic investing for those with such restrictions.

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Equipped with this foundational knowledge, we explored the diverse forms of risk and highlighted how volatility often serves as the price one pays for anticipated returns. We consolidated our learnings to challenge the common 'cash is king' perspective and underlined the significance of investing. Bringing all these insights together, we formulated a practical Asset Allocation guide.

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Transitioning from theoretical understanding to practical implementation, we discussed actualizing and executing an effective investment strategy.

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We intend to share this series to set you on the path to successful investing. As seasoned financial advisors, we've observed many individuals deplete their hard-earned savings due to mismanagement or misguided advice. We hope this series equips you with a solid foundation for making informed decisions and fostering the right approach to achieving your financial goals.