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Investment Management Proposal

Prepared For:

Lutheran Church Charities

March 2018

The pyramid above is meant to illustrate the steps that must be taken when considering an investment strategy. We believe that the foundation must always be to know the purpose of the investment.

We assume the investment purpose of Lutheran Church Charities is to steward their funds well by attaining greater long-term returns than offered in a bank account while also limiting the risk taken and providing liquidity for when the ministry has an opportunity.

Invest in the Market

Invest in the Market encompasses three beliefs about how markets work and how to capture long term returns.

  • We believe in the Efficient Market Hypothesis – stock prices are accurate based on all known facts.
  • We believe in Diversification – this will help smooth out returns and helps avoid chasing performance.
  • We don’t believe in Market Timing – correctly predicting short-term market movements with any consistency is impossible and can be dangerous to try.

A more detailed explanation can be found at: https://gf-wealth.com/invest-in-the-market

Manage Emotions

Anyone who has been invested in the stock market for any length of time has probably felt the euphoria when stock markets are hitting new highs and the despair felt near market bottoms.

It is at times like these that those emotions lead to a desire to change the portfolio — whether chasing a hot stock or sector or selling your stocks while you wait for things to “calm down.”

We believe one of our most important roles is to remind you of the portfolio that was crafted specifically to meet your goals and is well-suited for your needs.

A more detailed explanation can be found at: https://gf-wealth.com/manage-emotions

Proper Implementation

Building upon the prior principles, a properly-implemented investment strategy will be based upon academic research about the markets and expected returns. This results in a portfolio that emphasizes areas of the market with higher expected long-term return potential.

The approach is similar to indexing, given the emphasis on keeping expenses as low as possible and having low turnover to limit trading costs, yet it is not limited to securities within a commercially-defined index. It is a fundamentally different approach than conventional, “active” investment management as there is no attempt to identify “mispriced” securities, or any reliance upon forecasts of “undervalued” securities or sectors of the market.

A more detailed explanation can be found at: https://gf-wealth.com/proper-implementation

Proposal Details

Asset Allocation

We recommend a 60% stock and 40% bond allocation. This allocation will provide growth opportunities, while also having a sizable holding in bonds. We believe that the risk taken in a portfolio should largely be through the stock holdings. Therefore, the bond portion will be mostly investment grade, with targeted positions in high yield bonds.

Portfolio Holdings

The stock holdings will be accomplished through Dimensional Fund Advisors mutual funds. The highlights on why we utilize Dimensional Funds include:

  • Commitment to Financial Science – Dimensional has a close connection with academia, constantly looking at the latest research.
  • Beyond Indexing – Dimensional believes that index investments are too mechanical. They take this approach and add some judgement, based upon theoretical and empirical research.
  • Low Cost, Low Turnover – Dimensional understands that keeping costs low means better returns.

Dimensional does offer socially responsible funds, if the board prefers.

A more detailed explanation of Dimensional, including videos produced by Dimensional, can be found at: https://gf-wealth.com/why-dimensional

Fees

Our cost for managing the investments of non-profits, including assistance for donors who wish to donate appreciated securities, is 0.75% of the account, billed quarterly. For reference, our normal fee schedule can be found at https://gf-wealth.com/what-we-do/cost-overview

Firm Detail

With over thirty-five years of investment and financial planning experience, Guillaume & Freckman is committed to providing you with personal, professional, and valuable financial planning and investment management services.

As independent financial advisors we have the choice of whom to partner with. Currently we partner with LPL Financial as our custodian (they hold the accounts and execute the back-office work on investment accounts). We partner with Private Advisor Group to provide the compliance and supervision of our office.

LPL Financial is the second largest independent broker-dealer in the United States with more than 14,000 financial advisors and over $500 billion in advisory and brokerage assets.

Private Advisor Group is a Registered Investment Advisor with over 600-member advisors.

A more detailed explanation can be found at: https://gf-wealth.com/blog/who-are-lpl-financial-and-private-advisor-group

 

Core Values

The core values of Guillaume & Freckman are the essence of who we are as a company. These values will not change and we will not compromise what they stand for.

Practice Stewardship – Embrace Contentment

Cultivate Trust – Develop Long-Term Relationships

Invest in the Market – Do Not Attempt to Predict it

Be Strategic – Utilize Sophisticated Planning with Efficient Implementation

Grow Constantly – Commit to an Expanding Expertise

A more detailed explanation can be found at: https://gf-wealth.com/about/core-values

Biographies

Eric M. Freckman, CFP®, is the Managing Partner of Guillaume & Freckman Inc. He has 17 years of experience in the financial planning industry and holds a bachelor’s degree in business from Taylor University in Upland Indiana. Eric has maintained his CERTIFIED FINANCIAL PLANNER™ designation since 2003.

Eric and his wife Jen live in Rolling Meadows with their 4 kids. Olivia is 8, Josiah is 6, Cade is 3 and Kaylee was adopted at birth in July 2016. Eric and Jen are also very involved in their local church. They currently lead a small group for newly married couples and previously did youth ministry for 14 years. They also had a great experience with Safe Families and have had over 10 kids stay in their home for up to six months.





Michael T. McKevitt, CFP®, is the Director of Financial Planning for Guillaume & Freckman Inc. He has 9 years of experience in the financial planning industry and holds a bachelor’s degree in business from Taylor University in Upland Indiana. Mike has maintained his CERTIFIED FINANCIAL PLANNER™ designation since 20 12.

Mike lives in Wheaton with his wife, Whitney, and their three children – Dylan, Cameron and Sadie. When he isn’t chasing his kids around, he can be found working on a project in their house or yard. Mike and Whitney are active in their church, lead a small group for young families and serve on the board of a local non-profit.





As a CERTIFIED FINANCIAL PLANNER™ professionals, Eric and Mike abide by the CFP Board’s code of ethics.


Attachments

Portfolio Analysis

DFEOX Fact Sheet

DFQTX Fact Sheet

DFIEX Fact Sheet

DFCEX Fact Sheet

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