Frequently Asked Questions
How much does Wellesley Investment Advisors charge to manage my money?
WIA is a fee-only advisor. That means that our clients pay our fees and we do not sell products or accept commissions from other parties – we work for you. Our fees are based on a percentage of funds under management. The percentage varies based on the amount of money we are managing. The exact percentages are spelled out in our investment advisory agreement with you. Fees are calculated quarterly, in advance, and are withdrawn directly from your account.
How safe are my investments with Wellesley Investment Advisors?
The bonds that we buy for you are held at an independent, publicly traded custodian. Your accounts are in your name and you retain full control over your funds at all times. As part of our agreement with you, you grant us a Limited Power of Attorney, with investment discretion, to trade securities on your behalf. This means that we make trades and investment decisions for you, pursuant to our strategy and your objectives. Our relationship with you is discretionary, which means we do not call you before we buy or sell. Our office monitors the securities in your accounts daily, and we reconcile our records to those of your custodian. Your personal advisor meets with you periodically to review your progress.
Who is actually managing my money?
Greg Miller, CPA is a co-founder of our firm and is the architect of our strategy. He is also the primary portfolio manager. Greg, along with Michael Miller and several others comprise the investment management team and share responsibility for investment selection for all portfolios. They are supported by our research and trading team who help them conduct research and execute trades in the most efficient manner possible. Each individual account at our firm has a team of professionals monitoring everything from cash needs, transfers, daily transactions, and performance reporting. Beyond that, one professional from our private client group is assigned to your account. This person is dedicated to making sure that we understand your risk tolerance and objectives, and making sure that you understand your holdings and your performance. We will meet with you periodically to review performance and make sure we are doing the best possible job for you.
What risks should an investor consider?
There is no such thing as investing without risk. Every investment carries some risk.
Your account is subject to fluctuations due to many factors, including: market fluctuations, interest rate changes, and company specific risks. Bonds also carry default risk – the risk that the issuer will be unable to pay its debt. We focus on limiting that risk, and on minimizing volatility, but you should be prepared for your portfolio to rise and fall to a certain extent, especially over short periods, and during times of broad market uncertainty.
Convertible bonds have the ability to outperform both stocks and bonds over long periods of time. We encourage all our clients to focus on appropriate time frames for evaluating their investments. We believe the best evaluation period includes both a bull and bear market – five to seven years. Our goal is to do well over those complete market cycles. We utilize puts and short- to medium-term maturities to provide a “floor” for your investments whenever possible, but your securities will be valued at market, and will vary day to day and month to month. We discuss risk tolerance with you when you become a client, and on an ongoing basis. If you believe your goals or risk tolerance have changed, please discuss this with your advisor.
How many bonds are in my portfolio and how diversified is it?
Each account is different, but generally we will purchase approximately 30-35 convertible bonds for you. These companies will typically include large cap, mid cap, small cap, and be diversified across many different sectors.
We also place a portion of your funds in the convertible bond fund that we manage. We believe that including the convertible bond fund as part of your portfolio is an important and beneficial component of the service we provide for you, and doing so can offer you greater liquidity, flexibility, and diversification.
How do you purchase the bonds for my portfolio?
When you open your account with us, you sign a form granting us permission to “shop” your bond purchases and sales. Your account is at your custodian, but we will very often trade bonds with major bond trading desks on Wall Street to get the best pricing and execution for you. This is part of our fiduciary responsibility to you. The trade settles back at your custodial broker seamlessly. We are able to do this because of our buying power with these trading desks.
Are these bonds IPOs or purchased on the secondary market?
Almost all of our purchases for your account will be bonds trading on the secondary market.
How long does it take to get my account fully invested?
This can vary anywhere from two to six weeks from the time we have clear funds to invest. We invest in a disciplined manner, sometimes taking a little extra time to make sure we are getting the best possible pricing and bonds that meet your investment objectives.
Why haven’t I heard of convertible bonds before now? Are they new?
Convertible bonds were first issued by the railroads in the late 1800s, so they are not new at all. However, the convertible bond market is largely the domain of institutional investors like pension plans and investment advisors like WIA. We are pleased to offer this strategy to our private clients.
What do you think is going to happen next with the market?
At Wellesley Investment Advisors, we don’t pretend to have a crystal ball. We believe that no one can predict what the markets will do tomorrow or next week. Accordingly, our strategy is designed to seek upside performance while limiting risk to principal where possible. We like to stay prepared for whatever the markets bring.