Frequently Asked Questions About AFM

We get asked lots of questions about our company. If you have a question about us, you may find the answer right here. If you don't find it, we'll answer it! Just use our Contact Us page to ask your question, and we'll get back to you as soon as we can.

Q. Are you stock brokers?

A. No, we are money managers. We do the analysis, we choose the investments, but we do not actually make the stock purchases ourselves. Instead we direct a discount broker to make the trades on your behalf. This keeps the transaction fees very low, and keeps us focused on the most important thing: making money for our clients.

Q. How much money will I make if I use your services?

A. When you are investing in a bank savings account, they can promise you a particular rate of return. When you are dealing with stocks, bonds and mutual funds, there is an element of risk involved and no one can promise you a certain rate of return. If you are being promised very high rates of return in stocks, options or commodities, the people you are dealing with may be dishonest. Returns from stock market investing can vary widely, depending on the type of investments, level of risk, and (of course) the action of the overall market. Contact us if you'd like to get some idea of our historical returns.

Q. Why use a portfolio manager?

A. A portfolio manager (or investment manager or money manager) provides professional, personal management of your investments. Their one and only job is to watch over the assets of their clients. Very often even if a client has the knowledge, experience and investment tools needed to do their own investing, they'll hire a portfolio manager just because they don't have the time needed to watch over their investments.

Q. How do I know my money is safe with AFM?

A. There are two levels of protection. First, we do not take possession of any of your funds. They are held by an independent third party in an account under your name. Second, all securities in the account are insured by the custodian up to $150 million (cash is insured up to $250,000). There are no worries about whether your money will be there tomorrow morning.

Q. Why should I choose AFM instead of some other company?

A. There are four reasons why AFM might be the right money management firm for you.

First, our fee structure is very affordable. Our maximum fee is 1.2% of the assets under management, per year.

Second, we operate as a fee-only firm. We do not accept commissions of any kind from any company.

Third, we are completely independent. We have no axes to grind, no products to sell. We are only working in your best interest to make your money grow, and to protect your assets from taxes and inflation.

And fourth, we use a 'value oriented' investing method. Our job is not to chase the high flying stocks everyone else is after. Instead, we look for undiscovered hidden values that have a good chance to make money, while reducing the risk to our clients.

Q. Does AFM invest its clients in mutual funds?

A. Generally we do not, though there are occasional exceptions. The reason that we do not is very simple: we think it's unfair to our clients. In a mutual fund, you are paying a management fee to the fund manager out of the money invested. If we invested you in mutual funds, you'd also have to pay us a management fee. We think this doubling up of fees is very unfair to the client. Instead we build a 'custom mutual fund' of individual stocks and bonds for our clients. That way, you only pay one low management fee.

Q. How is AFM compensated for investing my money for me?

A. AFM is a fee-only investment advisor. That means we accept no commissions or payments of any kind from other companies. Instead we charge 1.2% (or less) of the assets under management per year. Why is this a good thing? Well, someone who earns their fees through commissions can double their fee income by getting you to trade more frequently (even if your investments were losing you money). But in order for us to double our fee, we have to double your money. Our interest and yours are exactly aligned: we both want to grow your money.

Annual fee calculation is based on the highest month-end balance during the quarter to ensure a lower fee. For families with multiple accounts, the sum of the highest month-end balances for each account will be used to calculate a lower fee. For example, if the fee calculated for each of the three months was 0.97%, 0.98%, and 0.99%, a 0.97% fee will be applied to all family accounts for all three months.

The fees are usually deducted directly from the account on a quarterly basis at the end of the quarter. For large accounts our fee can drop down to as low as 0.6% annually (see the About AFM page for a table of rates).

Q. How much money do I need to have to start investing with AFM?

A. Because we do not use mutual funds, we need to be able to buy a diversified portfolio of stocks and bonds for each client. This requires an investment of approximately $75,000, which is why that is our minimum account balance.

Q. Do you only take clients from California?

A. We are registered as Investment Advisors in California, but we can accept clients from anywhere in the world.

Q. How do I know that AFM won't "churn" my accounts?

A. When a broker or portfolio manager rapidly buys and sells securities in your account, that's called "churning". It generates lots of commissions for the broker, but not much profit for the client. Remember, we work on a fee-only basis. We don't make money from commissions, only by growing your account. It's not in our best interest to churn your account. We want to keep the transaction costs low, just like you do.


"Judge a man by his questions, rather than by his answers." -- Voltaire

If you have a question about our services that you don't see answered here, please feel free to Contact Us.