The RIA Advantage
Historically, individuals with money to invest in the stock and bond markets did so through a traditional stockbroker at a large investment house. The stockbroker would call the client to make them aware of an investment opportunity and leave the final decision to the client, regardless of the level of the client’s investment expertise. Once the trade had been executed, the broker would have no incentive to follow up on it.
A Registered Investment Advisor is a firm that, for compensation, is engaged in the act of providing advice, making recommendations, issuing reports or furnishing analyses on securities, either directly or through publications. It has a fiduciary duty to its clients, which means it is legally obligated to act in the client's best interest.
Cove Capital uses an outside custodian. Client assets are held at an unaffiliated firm that is a licensed broker and, as such, client accounts are insured by the SIPC. Clients receive brokerage statements showing asset valuations independently.
Individualized Asset Management. We work closely with you to make holistic investment decisions based on your goals, age, risk tolerance, financial situation, tax status and unique circumstances. For example, when you invest in a mutual fund, assets are bought and sold for all holders regardless of their individual tax circumstances. At Cove Capital we take into account your individual situation.
Straightforward fee structure. Our fee structure is simple and transparent. An RIA collects its fees over time so it has a great incentive to provide continuous service and client attention as the relationship continues on.
Fiduciary Duty
A Registered Investment Advisor is held to the ‘Fiduciary Standard’ as defined under the US Investment Advisers Act of 1940. This requires Investment Advisors to serve in a client’s best interest with regard to; financial status, tax status, investment objectives, risk tolerance and unique circumstances.
A non-fiduciary stockbroker follows only the ‘Suitability Standard’, which does not require a stockbroker to place the interests of its clients ahead of its own. Under the non-fiduciary suitability standard, a stockbroker need provide only ‘suitable advice’ to its clients – even if the stockbroker knows that the advice is not the best advice.
A Registered Investment Advisor must follow the ‘Trust Standard’ – the highest known in law – which requires it to place the interests of its clients ahead of its own and fulfill critical fiduciary duties of trust and confidence. Under the fiduciary trust standard, a Registered Investment Advisor must provide its ‘best advice’ to a client.
Even if a non-fiduciary stockbroker wanted to follow the trust standard of law and become a fiduciary to its clients, it cannot do so because of the contract it has with its broker-dealer. Such contracts require the stockbroker to place the interests of the broker-dealer before the interests of the stockbroker’s clients. A stockbroker, then, owes fiduciary duties only to its broker-dealer – not to its investment clients. A Registered Investment Advisor owes fiduciary duties only to its investment clients.
We are proud to uphold the standards of our Fiduciary Duty.
Personal Investment Report
At the beginning of the relationship we develop a report and evaluation based on our Investment Policy Statement, which clearly states the client’s expectations and risk profile. It is based on the client’s liquidity needs, return goals, tax bracket, stage of life and risk tolerance. We update this report as often as necessary. Each client’s portfolio is customized based on their needs and can be set up to meet certain return targets. Portfolios can be set up with any specified asset class mixture and can exclude any particular industries based on client preference. No two portfolios are the same but we will suggest allocations based on aggressive, growth or conservative expectations and then customize them to suit individual needs.
Discretion
We work on a discretionary basis, meaning we do not contact the client for approval before making an investment decision, providing the decision is in line with the client’s Personal Investment Report and the trade is considered appropriate for the client. We are always available, and strongly encourage, clients to contact us with any questions or to discuss our thinking on a certain investment.
Custody
All accounts are held at Interactive Brokers and are SIPC insured. Interactive Brokers sends monthly statements and all annual tax forms. We do not have access to client account passwords nor the ability to withdraw any of their assets. All statements are sent out by Interactive Brokers and all securities and portfolios are valued independently by Interactive Brokers. Cove Capital Management trades through their Advisor Platform and we deduct our quarterly fee through it.
