Investment Process
Investment Process
Creating Models
LIS has established six investment models that range from Ultra Conservative to Aggressive. The risk range of each model spans specific boundaries that correspond with the risk tolerance score obtained through Riskalyze. Within each model, there are asset allocation ranges that have been created for equities, fixed income, sectors, and other asset classes to give each model allocation guidelines in order to keep risk levels consistent.
Using approved products lists, LIS screens out investments that do not meet certain criteria as suitable investments. From these approved funds, LIS uses Morningstar Advisor Work Station (AWS) to screen for funds that meet the desired objective. This process is done on a quarterly basis to assure funds continue to meet the desired objective. These holdings are based on research with a 90-180 day outlook.
Model Assignment
Clients investing with LIS will be assigned to a model to create a more effective review and monitoring process. Each client will be assigned to one of the six models based on their risk tolerance and time horizon. The client's risk score (obtained from Riskalyze) will be matched with the appropriate range of a model. Once a client opens and funds an LIS managed account, the account will be traded to the appropriate model within two business days.
Review Process
LIS implements different review frequencies, each of which have unique objectives. Daily reviews are designed to monitor for seismic shifts from the previous day that could indicate a shift in the trends of the markets using Morningstar. In monthly reviews, LIS looks at fund rating, model returns, possible holding changes, fund turnover, and any fund management changes. These monthly meetings are held on the first Monday of every month. Quarterly meetings are designed for in-depth investigation. Morningstar AWS is used to see if any funds have undergone significant changes since they were initially used in each model. This review also includes meetings with our economic teams to see if any changes have occurred since the previous quarter.
Notes and any model changes that occur as a result of these reviews are documented on the server at Legacy Financial Group as well as on the Office 365 server. Also documented is any due diligence that has been performed.
Block Trading
If any changes are deemed necessary because of a review meeting, LIS will block trade any models that are affected by these changes. As a result of the permission that has been granted by the client via the Advisory Agreement, LIS will trade all accounts that have been assigned to a model that has been earmarked for change.