Frequently Asked Questions

• Q: What is a Registered Investment Advisor?

  A: Phase Two Capital is an independent Registered Investment Advisor (RIA) firm. RIAs are distinct from brokers in ways that are critical to clients.

  RIAs provide financial and investment advice, with a legal requirement—known as a fiduciary responsibility—to put clients’ interests first. Brokers, by contrast, are salespeople: They earn sales commissions based on the products their clients buy.

  The sales-commission model has been widely criticized for engendering conflicts of interest. It’s important to be aware that brokers now typically call themselves “advisors” or “consultants,” clouding the fact that they are salespeople.

  RIAs are regulated by the U.S. Securities and Exchange Commission and/or the states in which they conduct business. Brokers, who far outnumber true advisors, are regulated by FINRA, their own industry group.

  Q: What is a fee-only financial advisor?

  A: Fee-only financial advisors, such as Phase Two Capital, make up a very small percentage of the advisor community. As the name suggests, fee-based advisors do not accept any commissions or compensation based on product sales. Instead, they provide advice in return for fees paid directly by clients. Fee arrangements may include hourly fees, retainer fees, or a fixed percentage of the assets under management.

  Regardless of the arrangement, fee-only advisors are free from the financial conflicts of interest that are prevalent elsewhere in the industry. We strongly believe that the fee-only model empowers advisors to deliver the most objective financial guidance possible. An important note: Fee-only advisors are not to be confused with “fee-based” advisors, who are free to charge either fees or commissions.

  Q: Can a fee-only financial advisor save me money?

  A: Yes. Investors commonly pay more for investments such as mutual funds than they would pay for the services of a fee-only advisor. Mutual-fund fees can take many forms, often adding up quietly over time. Fee-only financial advisors such as Phase Two Capital use a completely transparent compensation model: Our clients understand exactly what they are paying for the services they receive.

  Q. How is my privacy protected?

  A: Phase Two Capital fully complies with all privacy laws pertaining to our industry. We do not release information to any party not specifically named on your account (other than legal and regulatory authorities) unless we receive your explicit permission to do so. Once a year, our clients receive a copy of our privacy policy, which details exactly how we protect your information.

• Q: Do you serve non-local clients?

  A: We serve clients throughout the United States. We often travel to visit our clients, and we use telephone and computer communications for meetings that do not take place in person. Furthermore, sensitive client information can be shared between client and advisor through our high-security online portal at any time.

  Q: What is your investment approach?

  A: Our approach is firmly grounded in each client’s specific situation and goals. Investing for a clearly defined long-term objective—such as funding college or a comfortable retirement—helps to create the focus and discipline that are vital for success.

  Each of our investment portfolios is different, because each of our clients is different. In constructing our portfolios, we eschew shortcuts and fads, relying instead on the proven principals of Modern Portfolio Theory as laid out by Nobel laureates such as Harry Markowitz, Merton Miller and William Sharpe. This knowledge helps us to harness markets’ rewards and avoid their pitfalls to the greatest extent possible.

  Finally, while portfolio appreciation is important, what really matters is the amount of money that you keep. Thus, we use low-cost vehicles such as institutional-grade mutual funds and exchange-traded funds. And we employ tax-management strategies to preserve as much of your wealth as possible.

  Q: How do you handle market downturns?

  A: The market’s history is full of ups and downs, many of them quite sharp. Over the long term, however, the market has rewarded patient investors. We educate our clients about the importance of remaining disciplined during market turbulence. And we don’t put funds that our clients may need in the short term into long-term investments. Knowing that they have adequate liquidity to ride out market turbulence helps our clients to remain focused on long-term strategy.

  Q: What are your fees?

  A: As an independent, fee-only advisor firm, Phase Two Capital charges competitive, transparent fees. Our fees are based on assets under management, according to the following scale:

  Up to $2,000,000                                     1.00%
  $2,000,000 to $5,000,000                 0.75%
  Amounts Over $5,000,000                 0.50%

  Q: Who will have access to the money in my account?

  A: Phase Two Capital has no direct access to our clients’ money. All funds in client accounts are held at Charles Schwab, one of the financial industry’s premier third-party custodians.

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