A REGISTERED INVESTMENT ADVISORY COMPANY
CENTURY CAPITAL, LLC
Executive Summary
| This document contains confidential and proprietary information owned exclusively by CENTURY CAPITAL, LLC. This is a summary business plan. It does not imply an
offering of securities.
Century Capital, LLC is a Registered Investment Adviser founded to provide financial planning and asset management services to individuals and businesses. The principals of James Erickson & Co., P.S., a Bellevue Washington certified public accounting firm, control the Company. Clients are provided independent representation via fee only services. By receiving compensation only from clients, the firm’s success is dependent upon meeting client’s expectations. Century Capital, LLC delivers professional investment advisory services individually tailored for each client to achieve optimal after fee, after tax performance within an acceptable risk tolerance. Client’s investment strategies are designed to meet the goals and objectives identified through the development of their investment profile.
The traditional investment adviser continues to
operate under the umbrella of a large national brokerage firm. The adviser is
compensated by a portion of the commissions generated based on the number and
size of trades in customer accounts and in some cases, undisclosed fees and
incentives that may be in conflict with the clients best interest. This
structure is fundamentally flawed due to the lack of synergy between the
clients & the advisors goals. While more contemporary arrangements provide asset fee
based alternatives to align the customer and advisor’s interests, many of
the traditional incentive systems remain intact. Century Capital, LLC accepts fee
only compensation from clients; no other compensation or incentives are
accepted. The principals of Century Capital, LLC are CPA’s with a minimum of ten years experience in providing tax, retirement, estate and business planning services. The firm was setup in response to client demand for more comprehensive financial planning solutions including asset management, performance measurement and tax reporting services. Providing asset management services in-house insures complete follow through of client investment goals.
Century Capital, LLC, is a Washington limited liability company located in Bellevue, Washington; the company's legal address is: 2025 112th Avenue N.E., Suite 100 The company's members elected to operate as a limited liability company to provide the most flexible operating structure available to reward its employees. This structure allows the Company to align the interests of owners, strategic partners and employees by way of incentive equity sharing arrangements.
The management team consists of CPA’s with extensive individual and family owned business financial planning experience. In-House
Management (see the attached individual
biographies for more detail)
Numerous investment industry studies indicate that paying higher asset management fees rarely results in higher returns to investors. This outcome is especially prevalent for clients with portfolios under $1 million. Factors such as asset allocation, tax efficiency, individualized plans and lower fees tend to have a much greater impact on investment returns. Consequently, investors who pay asset management fees or commissions to financial advisers solely in exchange for security selection may not be getting their money’s worth. In Burton Malkiel’s book, A Random Walk Down Wallstreet he convincing argued that less than 10% of money managers are able to outperform unmanaged market indices. A study by Ira Weiss, an accounting professor at Columbia Business School covering 1961-1997 determined that mutual fund managers on average-- under performed the S&P 500 index by 1.4% a year. By coincidence, current average fund expenses are about 1.4%. The study included adjustments to eliminate the impact of factors such as risk and market capitalization. If brokers and professional money managers cannot outperform the indices, why should investors pay them 1%-5% plus annual fees? Investors would be better served by directing those fees toward developing and maintaining individual comprehensive investment plans, designed to maximize after tax investment returns, meet individual goals and reduce burdensome reporting and accounting functions. In other words, they should receive individualized service that is most likely to add value to their overall wealth.
Numerous studies (including one by Malkiel) have concluded that the likelihood of anyone being able to consistently forecast future market movements is remote - to none. The Dow Jones Investment Adviser October 1998 issue reported that even fabled money manager Peter Lynch’s incredible run from 1973 to 1986 can be explained as much by statistical odds-- as any special skill. In 1973 when Peter began managing the Magellan Fund, there was a 3% chance that his fund would be the fifteen-year leader by outperforming the S&P index. It may well have been that the Magellan fund beat the odds. While we’re not suggesting Peter Lynch’s success was plain luck, it certainly could have been a significant factor. In order for Mr. Lynch to attain his tremendous record, he also had to skillfully manage the funds investments. First, Mr. Lynch avoided trying to time the market. He acknowledged his inability to predict market movements and therefore sought to keep Magellan’s excess cash fully invested in equities. Second, he maintained a diversified portfolio of 1500 stocks. With 1500 stocks in the Magellan Fund, how much impact do you think individual security selection could have on the funds performance? Third, he tried to maintain low turnover (minimized trading). This reduced trading costs and by selecting a better than average number of winners, or avoiding a few losers, he provided the fund with an opportunity to be a leader. Peter Lynch recognized his limitations-- he managed those factors he knew he could control (diversification and turnover) and avoided managing factors he could not control (market timing). Our firm uses a similar investment philosophy. We manage the factors within our control: risk, diversification, turnover, fees and taxes. We avoid emphasis on timing the market, market forecasting and the latest “hot stock or fund”. A recent mutual fund study of historically top performing mutual funds indicates that these funds tended to revert back to the averages and were eventually replaced by previous under achievers. This supports the theory that above average performance may have more do to with the law of averages than brilliant money management. More recently, the unmanaged S&P 500 index has consistently outperformed more than 90% of all money managers. Consequently, investors are likely to be disappointed if they expect to out perform the S&P index by selecting a mutual fund; there is only a small chance they will be able to select that one out of ten fund manager that can beat the index. In the face of such overwhelming odds, why do so many investors continue to chase the winner’s circle to find next years hottest star? The likely answer is that when it comes to investing, people let their emotions win over a disciplined and rational judgement. Some buy into the latest high profile stock or fund when the smart money is cashing out-- or get nervous and sell just before the bottom when the disciplined investor is buying. Others seek recognition for their fabulous insight-- betting on WizBang.Com while sweeping aside their losses in GoSouth.Com. Century Capital, LLC’s strategy focuses on managing those factors within our sphere of control while more importantly, recognizing and avoiding the temptation to manage uncontrollable factors. We cannot forecast stock market levels over the next year but we can determine with a high degree of accuracy what fees, taxes and to a lessor extent, the amount of risk your portfolio will incur. Furthermore, we can guide your investment plan to insure you set realistic financial goals.
Common sense suggests that as the volume of assets under management increases, the average management fee should decrease due to economies of scale. Since 1984, the size of actively managed no load funds have increased by a staggering 3200%. Considering this growth, investors might expect mutual fund operating expenses to have significantly declined relative to assets under management. Morningstar reported that since 1984, the average annual fund expense fell by less than 10%. Perhaps this lack of indulgence by money managers explains the recent trend in lower WEB trading costs and popularity of the Vanguard Family of low cost mutual funds. The following chart demonstrates the average annual fees & turnover in the universe of funds covered by Morningstar. The funds are presented by investment objective along with a comparable fund from The Vanguard Group.
We believe that maintaining low costs are important since higher costs raise the performance hurdle managers must meet in order to out perform industry indexes. Compounding these costs over many years largely explains why the average money manager rarely outperforms unmanaged index returns. Investors may dismiss fee issues since fees are generally deducted before reported returns and may be hidden in the legalese. Like fund managers, we report client returns net of fees. However, we fully disclose our fees up front. Our strategy is to provide individualized service at about the same or lower overall cost to clients as the average fund. For example, if you combine our annual fee with the transaction costs and any fund expenses you incur under our management, it should total about 1.4%. For most clients, their total costs will not increase and often will decrease with our management style. Clients receive additional savings through our emphasis on minimizing the tax impact of investment returns. By reducing turnover, implementing tax free and tax deferred pension plans, using deferred exchange tools and most importantly, managing your portfolio with your specific tax situation in mind we can maximize your after tax, after fee returns.
Although we don’t speculate with market timing, we can and do project the impact of taxes on future returns. Our experience in providing tax planning consultation provides us with a unique ability to achieve attractive after tax returns. The chart below demonstrates that even “tax managed” mutual funds have trouble living up to advertised claims. We use a combination of index funds and stocks to maximize after-tax returns for our client portfolios.
We deliver our expertise using the following model: · We meet with our clients to develop an understanding of their specific circumstances and goals. · We develop an investment profile that seeks to achieve those goals. We often consider the clients entire estate in developing the profile that will guide our investment decisions. The profile provides a set of standards we use in managing the portfolio. For example, the profile may state we will invest 20%-30% of assets in high quality short-term fixed income securities. The profile is largely based on meeting performance goals without exceeding the client’s acceptable level of risk. · We’ll setup a discretionary account with a broker to hold client assets. A discretionary account allows us to manage client assets without obtaining the clients permission for each individual trade. Using our asset allocation modeling system, we prepare a recommended portfolio and begin to implement our recommendations. · We provide high level quarterly performance reports that track your portfolios performance and illustrate our progress in accomplishing the stated goals. Appropriate adjustments applied to our strategies as client goals change or as market conditions demand.
World population will increase by 50% by the year 2050. The over age 65 crowd will grow by 132%. Life expectancies continue to increase leading to a tremendous increase in the amount of funds necessary to support retirees. Yet U.S. savings rates continue to shrink and Social Security is projected to go in the red by 2032. Our society needs help building their personal wealth safety net. (1) · Banks & insurance companies control nearly 75% of all deposits.(1) Independent private money managers control only a small portion of the balance. This provides a huge pool of dollars in under performing accounts available for conversion to private money managers. · Washington State is home to 10 billionaires and the Seattle area is home to 74,000 households with net worth exceeding $1 million, excluding home values.(2) · Washington attracted $459 million of venture capital in the first 6 months of 1999 or 4.4% of the U.S. venture capital market. (2) · Our core market is located in the Seattle metropolitan area , the capital of the Pacific Northwest’s High Technology sector. (1) Stephan Liemberg, CEO, Liemberg & LeClair
Century Capital, LLC's target market includes King County residents of all ages with at least $300,000 of investment assets. Emphasis is placed on closely held business owners and high technology executives. Individuals with estate tax exposure, those in high tax brackets and those close to retirement age are prime candidates. Since our program involves closely monitoring our client’s financial affairs, we generally seek to provide tax & consulting services to all asset management clients.
The principal business risks that Century Capital, LLC, faces as it pursues the fee only investment management market is the potential that it may not be able to grow quickly enough. There are a number of firms aggressively pursuing this market that have considerably greater resources. With so many players entering this market, there is likely to be significant pressure to lower fees and increase service levels. Considering the time intensive nature of providing individualized service, the Company may be unable attract or retain attractive employees and customers in face of well-financed competitors. The investment industry has become increasingly dynamic. At this juncture, it has probably seen a greater impact from the internet revolution than any other industry. We will be challenged to keep ahead of technological developments that will allow us to remain competitive while providing clients with access to the latest technology. While our size presents many challenges, we have successfully used it to our advantage in the accounting market and have already surpassed our targets in the asset management arena.
Financial Plan,
Capital Requirements & Investor Return [Provided with financing requests only]
Century Capital, LLC, will provide a comprehensive financial solution to existing CPA firm clients as well as draw in new customers who demand a turnkey approach to their financial affairs. By providing an objective and disciplined approach to independent investment advisory services, the Company will create long-term relationships to protect and enhance client’s wealth.
SCOTT MOSER, CPA, MST
Mr. Moser has managed the tax & consulting department for James Erickson & Company, a Bellevue, Washington, certified public accounting firm for the past 10 years. His practice emphasis includes personal financial planning, structuring complex tax transactions, counseling startup companies primarily in the high tech hardware & software industry as well as service based organizations. Other significant consulting experience includes computer system design & implementation and litigation support. He is a member of the American Society of Certified Public Accountants, Washington Society of Certified Public Accountants, WSCPA Financial Planning Committee, Board of Director, International Watersports League in addition to other professional & civic organizations. At Safeway Stores, Inc. Mr. Moser’s 13-year career included five years in store management. He completed Northwestern University’s Kellogg School of Management Program and was a driving force behind the management information systems team that introduced personal computers into Safeway’s retail stores. Mr. Moser earned his Master of Science degree in Taxation from Golden Gate University in 1991. He received his Bachelor of Science degree in Accounting from Central Washington University. He majored in business administration & economics at the University of Washington. Mr. Moser is 40 years old, married with two children and has lived in Kirkland, Washington, for the past 13 years. Personal Financial Planning Experience While the concept of electronic trading may seem new, Mr. Moser completed his first electronic trade through a “discount broker” in 1985. He has been providing tax, retirement & estate planning services to tax clients since 1986. In 1998 he completed the Series 24 (Broker Dealer) and Series 66 (Registered Representative) examinations to become a Registered Investment Adviser and began providing discretionary asset management services to clients. Mr. Moser represents clients by providing independent investment advisory services through Century Capital, LLC. |
