500 Newport Center Drive, Suite 500
Newport Beach, CA 92660
Phone: (949) 721-2330
Fax: (949) 721-0734
February 2009 
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Behind the Scenes at the Tarbox Group
The Tarbox Group team prides itself on providing exemplary service to the firm’s clients – both in investing client assets and in providing comprehensive and objective wealth management services. Often our clients ask us what it takes, behind the scenes, to make it all happen. We queried every member of the team and thought we would share their responses.
Laura -- President
My job is leading and managing the firm. This includes responsibility for building our team and setting the parameters for implementation of our investment philosophy.
I try to make sure I get out and see the big picture. I want to know where things are going and what matters and how it might impact our clients’ lives. I read a wide variety of things - not all of them financial. Sometimes I think I get my best insights from an article in The New Yorker or an historical novel I may be reading.
I make an effort to talk to business owners and workers across the economic and geographic spectrums. When I am getting my car washed, I talk to the owner about how business is going. When I travel, especially internationally, I am always interested in the economic landscape and how it is changing. (Some may call it shopping, but I call it “market research”!) It is always enlightening to hear about our clients’ recent travels and impressions of places they have visited.
There are several organizations and groups I’m involved with – non-profits, book groups, and professional groups. One of the most valuable has been my “CIFA” group. CIFA stands for Council of Independent Financial Advisors, and this peer group has been like an advisory board for my business. All members are founders of their own firms, and together the 13 of us manage over $10 billion in client assets. We’ve been meeting for 12 years and we share best practices, investment ideas, research and resources.
One of the specific knowledge areas for which I am primarily responsible within the firm is life and other insurance. I try to keep up with what’s going on in the field and stay up on tax changes, case law affecting insurance, and product resources. I’ve served as an expert witness on several insurance and annuity cases. I think I can offer a valuable, objective perspective since we do not sell any insurance products, though I held a life insurance license for over 20 years.
Mark – Vice President, Investment Team Member
All of us at Tarbox wear many hats. One of my tasks is managing our relationships with and tracking many of our outside money managers. To do this we use both the art and science of investing. On the art side, we are diligent in talking to our managers in order to gather information that helps us in making buy/sell/hold decisions. This year, we have reached out to virtually all of our active managers to answer several questions:
· What is your opinion of the current market environment? How will the market respond going forward? How are you positioning your investments in relation to your thoughts? What asset classes/sectors look attractive to you? While every manager has a different opinion on the market turmoil and has different market predictions, we have little patience for managers who are making rash decisions or are not following a disciplined investment approach.
· Is cash flowing in or out of your fund? How is this impacting the portfolio? Because managing large cash outflows creates a huge headwind even for the most experienced managers, we gather these numbers long before they are available in the required disclosure documents.
· What taxable distributions are you expecting for this year? When will they occur? Taxable distribution information is invaluable in the strategic tax planning in our client accounts.
On the science side, we watch manager performance on a day-to-day basis to identify quantitative "issues" such as:
· How does performance compare to a passive index? How is performance compared to its peers? There are a number of other investments available. If we lose confidence in the long-term quality of an investment, we'll look elsewhere.
· Is the fund acting as we expect? Is the fund capturing the market upside on those up days? We set expectations for the aggressiveness of every portfolio holding. If our expectations are not met (say if a more conservative holding is performing worse than its more aggressive peers on down days), we'll formally review the fund to determine what's going on.
At the end of these steps we determine if we should be buying/selling/holding each investment. Despite the work, 95% of the decisions result in no action.
Mike – Managing Director
As Mark notes above, we all wear several hats. In addition to overseeing the day-to-day operations of the firm, I manage the individual bond ladders in client portfolios. As a member of the investment team, my focus is fixed income holdings. You can often find me sitting at the Bloomberg terminal looking at individual municipal and corporate bonds. I also stay current on stock option planning and estate planning strategies by way of webcasts, conferences, and continuing education credit programs.
Managing Director tasks include leading the search for new hires, negotiating contracts and rental agreements, and helping Laura make budgeting decisions. I also spend a good bit of time chatting with various attorneys and other professionals on client-specific issues, which obviously serves our clients and helps us maintain our professional referral list.
Estelle – Vice President, Director of Operations
Estelle posts all transactions, prices, and new securities from the prior day's activities. She reconciles the portfolio assets within our reporting software including stock reorganizations and mergers. Constant attention is needed to keep the system accurate for quarterly client reporting and tax reporting. She works closely with Schwab's Institutional team on many portfolios issues including wires, new accounts, transfers, periodic distributions, and cash management. Proactive measurements are taken to ensure that all operational actions posted to Schwab have been acted upon promptly and accurately.
Estelle also manages the firm’s internal operations including accounts receivable, accounts payable, human resources, and payroll.
Marty – Director of Financial Planning
I look at clients' overall financial situations with an eye for identifying planning opportunities. This includes reviewing tax returns and preparing tax projections to look for potential tax savings, as well as running long-term net worth and cash flow projections to link clients' investment portfolios to their ability to meet their spending needs. In addition to these functions, I'm also involved in the firm's investment committee, where high-level investment decisions are made, and I continue to help with investment reporting.