Consuelo Mack is a long time fan of Professor Burton Malkiel and Dr. Charles Ellis. In fact, she had both of them on her show several times. So naturally, she was intrigued when Burt and Charley joined the Rebalance team and took a central role leading the firm’s Investment Committee and helping to design and monitor the firm’s retirement portfolios. These two legendary financial thought leaders are very sought after by financial services companies, university endowments, and pension plans.
What is so special about Rebalance? Ms. Mack decided to dedicate a 30-minute episode to how the firm is part of a new generation of investment advisory companies that leverage technology and innovative business models to provide consumers with fundamentally more attractive and lower-cost retirement investing options.
In this segment, Mitch Tuchman explains how Rebalance’s approach to rebalancing provides clients with peace of mind:
Consuelo Mack: This week on Wealthtrack, putting your retirement portfolio on autopilot. Financial thought leader Burton Malkiel has teamed up with online investment advisory pioneer Mitch Tuchman to offer retirement portfolios of low-cost index funds that automatically rebalance. Why they believe the combination will lead to smooth retirement landings is next on Consuelo Mack Wealthtrack.
Mitch Tuchman: We’ve only made one modestly significant change to the portfolios in several years. So, it’s not like we sit around and change percentages. We made a decision to boot out the aggregate bond index for an intermediate high-grade corporate bond index. We’re not making changes, but we do rebalance, so that’s to your question.
Consuelo Mack: And how often does that happen, it depends on the markets?
Mitch Tuchman: Well, it’s both actually.
Consuelo Mack: Right, right.
Mitch Tuchman: So we do a calendar rebalancing every year for all the clients.
Consuelo Mack: At the end of the year or …
Mitch Tuchman: Well, if you are not taking distributions, we have clients that are over 70 who are taking distributions, that happens in November like clockwork. If you are not taking distributions, that happens about right now like clockwork because people are contributing to their IRAs. So, we do a calendar rebalancing for everybody, depending upon whether you are distributing.
Consuelo Mack: Right.
Mitch Tuchman: And then second there is usually a volatility rebalancing and that happens because the markets begin to ebb and flow and things get dicey and sometimes the allocations move past a threshold and when they do that, alarm bells are triggered and it’s time to do a rebalancing for most all the clients, and that’s what we do. The important thing about rebalancing is that it always answers the question for the client – well, what are you guys going to do when you think the markets are going down, what are you going to do when you think the markets are going up, what are you going to do, what are you going to do? And that helps clients understand that we’re not sitting around with a crystal ball predicting the future, going which way is the wind blowing and trying to make a guess. That we have a process, and the process is the process, and it’s why large endowments and foundations get great returns. They run under a process. And knowing there is a process helps our clients feel that these guys are not going to make wild guesses, there’s no cowboys, and it really gets down to peace of mind for the clients.