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Wealth management 101

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There are not many people who know the ins and outs of wealth management better than Jeff Cohen and Randy Siller, who run Rye Brook-based family wealth advisory firm Siller and Cohen L.L.C.

Siller and Cohen has been in business for 25 years, and features a wide range of services and people with investment knowledge, including certified public accountants (CPAs), financial planners and certified investment management analysts (CIMAs).

“We consider ourselves a service-oriented business,” Cohen said. “Along with wealth management, we do comprehensive planning, estate planning and business planning, among others.”

A key component to successful wealth management is being involved in both active and passive investing. According to investopedia.com, active investing is trying to beat the market over a period of time, while passive investing involves diversifying your funds into a broad array of markets.

“We strongly believe in both,” Cohen said. “We believe that when we do active investing, we can beat the indexes, if not, we invest in the indexes.”

Siller said that they usually have a mix of active and passive investment mangers, and it all depends whether they have the opportunity to outperform the market.

“We have a relationship, we have to be selective,” Cohen said.

Siller and Cohen works with Dimensional Fund Advisors to get access to the best mutual funds on the market for its clients. It also looks at indexes when deciding whether to buy or sell stock. The firm waits for strategic times to invest, not selling or buying a stock when everyone else is doing the same.

“We look at alternate investments as well absolute return,” said Cohen, a certified financial planner. “We want to make money no matter what it is; we try to lower the risks.”

Siller said that his clients recovered quickly after the stock market crash in 2008 because of the diversification of their investments and sound tactical management.

“It was a great offset to clients when we mixed up their portfolio,” Siller said. “We made some significant money with managed futures.”

The firm also uses absolute return managers who use short selling, leverage and a high portfolio turnover to get a return on their investment.

“An absolute return manager does well when the markets are volatile,” Siller, a CPA and CIMA, said. “They have the ability to turn money in an up, down and sideways market.”

An example Siller gave is if a person wanted to invest in Home Depot because they believed it would outperform Lowe’s, they would sell Lowe’s short and buy Home Depot, needing only Home Depot to make more than Lowe’s to make money.

Even though by selling Lowe’s short the investor loses money, they make up the difference and then some with Home Depot. A good absolute return manager doesn’t need the market to do well for their client to do well.

“We need to be there when the markets are hit hard,” Siller said. “Asset allocation and absolute return are critical to smooth out the ride for our client. Everything we do is client centric. It’s all about the client. Clients need to be taken into account, first, last and always.”

When working with a client, Siller and Cohen go over their financial needs, financial goals, and their tax situation and produce a model for them.

“We give our client an X-ray of where they are and what their issues are,” Siller said. “We educate clients about the markets and find out their risk tolerance. We focus on the downside first before we get our client to make a final decision.”

Instead of using straight line analysis that assumes the markets will improve 6 to 7 percent a year, Siller and Cohen use Monte Carlo analysis. Monte Carlo takes into account that the markets go up and down and move in different manners.

“It gives you a realistic answer as to what the odds are of reaching financial independence,” Siller said. “It allows you to develop more of a successful plan and it works.”

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